Gelum Resources Ltd. — Interim / Quarterly Report 2022

Sep 30, 2021

Gelum Resources Ltd. (formerly Gelum Capital Ltd.) Condensed Interim Financial Statements For the three months ended July 31, 2021

Unaudited – Prepared by Management (Expressed in Canadian Dollars)

NOTICE OF NO AUDITOR REVIEW

UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

NOTICE OF NO AUDITOR REVIEW OF CONDENSED INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the condensed interim financial statements, they must be accompanied by a notice indicating that the condensed interim financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed interim financial statements of Gelum Resources Ltd. (formerly Gelum Capital Ltd.) (the “Company”) have been prepared by and are the responsibility of the Company’s management. The unaudited condensed interim financial statements are prepared in accordance with International Financial Reporting Standards and reflect management’s best estimates and judgment based on information currently available.

The Company’s independent auditor has not performed a review of these condensed interim financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of condensed interim financial statements by an entity’s auditor.

September 29, 2021

Gelum Resources Ltd. (formerly Gelum Capital Ltd.)

Condensed Interim Statements of Financial Position

Unaudited – Prepared by Management

Gelum Resources Ltd. (formerly Gelum Capital Ltd.) Condensed Interim Statements of Financial Position Unaudited – Prepared by Management
As at July 31, 2021 and April 30, 2021
		July 31,	April	30,
		2021	2021
	Note	$	$
Assets
Current assets
Cash		704,411		4,799
Receivables	3	15,351		10,463
		719,762		15,262
Non-current assets
Prepaid exploration expenditures	4	43,117		4,000
Exploration and evaluation assets	4	70,000		70,000
		113,117		74,000
Total assets		832,879		89,262
Liabilities and shareholders' equity (deficit)
Current liabilities
Accounts payable and accrued liabilities		78,983		73,839
Accounts payable to related parties	8	53,117		32,738
Loan payable	10	38,182		32,076
		170,282	138,653
Non-current liabilities
Convertible note	5,8	-	263,651
Total liabilities		170,282	402,304
Shareholders' equity (deficit)
Share capital	6	8,885,862	7,800,194
Shares to be issued	8	29,200		34,200
Reserves	6	5,694,919	5,607,766
Equity portion of convertible note	5	-		75,459
Deficit		(13,947,384)	(13,830,661)
Total shareholders' equity (deficit)		662,597	(313,042)
Total liabilities and shareholders' equity (deficit)		832,879		89,262
Nature of operations and going concern	1
Events after the reporting period	12

Approved on behalf of the Board of Directors on September 29, 2021:

“Robert Kopple” Director “Hendrik Van Alphen” Director

5

The accompanying notes are an integral part of these condensed interim financial statements.

Gelum Resources Ltd. (formerly Gelum Capital Ltd.)

Condensed Interim Statements of Changes in Shareholders’ Equity (Deficit)

Unaudited – Prepared by Management

For the three months ended July 31, 2021 and July 31, 2020

					Equity portion		Total
	Number	Share	Shares to		of convertible		shareholders'
	of shares	capital	be issued	Reserves	note	Deficit	equity (deficit)
	#	$	$	$	$	$	$
May 1, 2020	4,727,433	7,245,232	29,200	5,588,580	75,459	(13,665,033)	(726,562)
Loss and comprehensivelossfor the period	-	-	-	-	-	(17,785)	(17,785)
July31, 2020	4,727,433	7,245,232	29,200	5,588,580	75,459	(13,682,818)	(744,347)
May 1, 2021	10,277,054	7,800,194	34,200	5,607,766	75,459	(13,830,661)	(313,042)
Common share units - convertible note	5,380,274	269,014	-	80,507	(75,459)	-	274,062
Private placement units issued	8,450,000	845,000	(5,000)	-	-	-	840,000
Share issuance costs - cash	-	(21,700)	-	-	-	-	(21,700)
Share issuance costs - finders' warrants	-	(6,646)	-	6,646	-	-	-
Loss and comprehensivelossfor the period	-	-	-	-	-	(116,723)	(116,723)
July 31, 2021	24,107,328	8,885,862	29,200	5,694,919	**- **	(13,947,384)	662,597

6

The accompanying notes are an integral part of these condensed interim financial statements.

Gelum Resources Ltd. (formerly Gelum Capital Ltd.)

Condensed Interim Statements of Loss and Comprehensive Loss

Unaudited – Prepared by Management

For the three months ended July 31, 2021 and July 31, 2020

		July	31,	July 31,
		2021		2020
	Note	$		$
Expenses
Accretion expense	5,10		11,192	5,248
Consultingexpense	8		30,000	-
General and administrative expenses	8		12,108	7,496
Office expenses	8		4,056	-
Propertyinvestigation	8		6,344	-
Professional fees	8		38,018	-
Transfer agent and filing fees			9,679	-
Loss from operating expenses		(111,397)		(12,744)
Interest expense	5		(5,326)	(5,041)
Loss and comprehensive loss for theperiod		(116,723)		(17,785)
Loss per share
Weighted average number of common shares outstanding
- Basic #	7	13,908,521		7,602,883
- Diluted #	7	13,908,521		7,602,883
Basic loss per share $	7		(0.01)	(0.00)
Diluted loss per share $	7		(0.01)	(0.00)

7

The accompanying notes are an integral part of these condensed interim financial statements.

Gelum Resources Ltd. (formerly Gelum Capital Ltd.)

Condensed Interim Statements of Cash Flows

Unaudited – Prepared by Management

For the three months ended July 31, 2021 and July 31, 2020

		July 31,	July 31,
		2021	2020
	Note	$	$
Operating activities
Loss and comprehensive loss for theperiod		(116,723)	(17,785)
Adjustments for:
Accretion expense		11,192	5,248
Accrued interest on loan payable		1,271	5,041
Accrued interest on convertible note		4,055	-
Net change in non-cash working capital items	9	20,634	461
		(79,571)	(7,035)
Financing activities
Private placement proceeds, net share issuance costs		818,300	-
		818,300	-
Investing activities
Prepaid exploration expenditures		(39,117)	-
		(39,117)	-
Increase (decrease) in cash		699,612	(7,035)
Cash, beginning of period		4,799	9,288
Cash, end ofperiod		704,411	2,253
Supplemental cash flow information	9

8

The accompanying notes are an integral part of these condensed interim financial statements.

Gelum Resources Ltd. (formerly Gelum Capital Ltd.)

Notes to the Condensed Interim Financial Statements

Unaudited – Prepared by Management

For the three months ended July 31, 2021 and July 31, 2020

1. Nature of operations and going concern

Gelum Resources Ltd. (formerly Gelum Capital Ltd.) (the “Company”) was incorporated under the laws of the province of British Columbia on June 8, 1987. The principal address and registered and records office is located at Suite, 400 – 725 Granville Street, Vancouver, BC, V7Y 1G5. The Company trades under the symbol “JEM” on the Canadian Securities Exchange (“CSE”). Effective September 24, 2021, the Company changed is name to Gelum Resources Ltd.

The Company’s principal business activity is the acquisition, exploration and evaluation of mineral properties. The Company will be exploring its mineral property interests and has not yet determined whether they contain mineral reserves that are economically recoverable. The Company's continuing operations and the underlying value and recoverability of the amounts shown for mineral property interests are entirely dependent upon the existence of economically recoverable mineral reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of the mineral property interests, obtaining the necessary permits to mine, and on future profitable production or proceeds from the disposition or option of the mineral property interests. The carrying amounts of mineral properties are based on costs incurred to date, and do not necessarily represent present or future values.

The Company’s condensed interim financial statements (the “financial statements”) as at and for the three months ended July 31, 2021 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has a net and comprehensive loss of $116,723 for the three months ended July 31, 2021 and has a working capital surplus of $549,480 at July 31, 2021.

As at July 31, 2021, the Company had cash of $704,411 to settle liabilities of $170,282. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. If the Company is unable to raise additional capital in the immediate future, management expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures or cease operations. Management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.

2. Significant accounting policies

(a) Basis of presentation

These financial statements have been prepared in conformity with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, using the same accounting policies as detailed in the Company‘s annual audited financial statements for the year ended April 30, 2020, and do not include all the information required for full annual financial statements in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board ("IASB") and interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"). It is suggested that these financial statements be read in conjunction with the annual audited consolidated financial statements.

These financial statements have been prepared on an historical cost basis, except for financial instruments which are classified as fair value through profit or loss (“FVTPL”). In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

All amounts on these financial statements are presented in Canadian dollars which is the functional currency of the Company.

9

Gelum Resources Ltd. (formerly Gelum Capital Ltd.) Notes to the Condensed Interim Financial Statements Unaudited – Prepared by Management

For the three months ended July 31, 2021 and July 31, 2020

2. Significant accounting policies (continued)

(b) Significant accounting policies

Except as set out below, the accounting policies, estimates and critical judgments, methods of computation and presentation applied in these financial statements are consistent with those of the most recent annual audited consolidated financial statements and are those the Company expects to adopt in its financial statements for the year ended April 30, 2021. Accordingly, these financial statements should be read in conjunction with the Company’s most recent annual audited financial statements.

3. Receivables

Receivable consist of the following:

Receivables Receivable consist of the following:
	July 31,	April 30,
	2021	2021
	$	$
Sales tax recoverable	15,351	10,463
	15,351	10,463

4. Exploration and evaluation assets

Exploration and evaluation assets consist of the following:

	April	30, 2021	Acqusition and	Exploration and	July 31,
			assessments	evaluation	2021
		$	$	$	$
Eldorado		70,000	-	-	70,000
		70,000	-	-	70,000

Eldorado project

The Eldorado Gold Property (the “Property”) is located within the Bralorne-Bridge River Gold District in south-central British Columbia. On March 24, 2021 (the “Effective Date”) the Company entered into an option agreement to acquire 50% ownership interest in and to the Property and form a joint venture with the optionor in respect of the Property, with the ability of the Company to acquire an additional 30% interest in the Property.

The Company can earn the 50% options by making the following cash payments and share issuances:

• a) $50,000 and 200,000 shares within five days of the Effective Date (completed);

• b) $50,000 and 200,000 shares within six months of the Effective Date; (completed September 20, 2021)

• c) $75,000 and 400,000 shares on the first anniversary of the Effective Date;

• d) $125,000 and 800,000 shares on the second anniversary of the Effective Date; and

• e) $300,000 and 1,200,000 shares on the third anniversary of the Effective Date.

10

Gelum Resources Ltd. (formerly Gelum Capital Ltd.) Notes to the Condensed Interim Financial Statements

Unaudited – Prepared by Management

For the three months ended July 31, 2021 and July 31, 2020

4. Exploration and evaluation assets (continued)

Eldorado project (continued)

The Company is required to perform exploration activities on the Property and shall incur the following minimum qualified expenditures per year:

• a) $500,000 minimum qualified expenditures by the first anniversary of the Effective Date;

• b) $750,000 minimum qualified expenditures by the second anniversary of the Effective Date; and

• c) $1,000,000 minimum qualified expenditures by the third anniversary of the Effective Date.

The option to earn an additional 30% will require the following cash payments, share issuances and minimum qualified expenditures as follows:

• a) $400,000 cash payment, 1,400,000 shares and further $1,000,000 in qualified expenditures by the fourth anniversary of the Effective Date; and

• b) $400,000 cash payment, 1,000,000 shares and further $1,000,000 in qualified expenditures by the fifth anniversary of the Effective Date.

Upon the optionor reducing its interest in the Property to below 15%, the optionor will be converted to a 4.0% net smelter returns royalty (“NSR”). The Company will retain the right to buy back up to 3.0% NSR by payment of $1,000,000 per each 1.0%.

During the three month period ended July 31, 2021, the Company entered into a purchase agreement to acquire the Roxey claims. The claims are contiguous to the Eldorado Gold Property within the Bralorne-Bridge River Gold District in south-central British Columbia. In order to acquire a 100% right, title and interest in and to the mineral claims, the Company issued 4,000,000 common subsequently on August 12, 2021 (note 12).

5. Convertible note

On October 14, 2017, the Company issued a convertible note with a principal face value of $200,000 to two Directors of the Company. The convertible note bears interest at the rate of 10% per annum, payable annually and has a maturity date of five years from the date of issuance. When the Company consolidated its share capital on a 20:1 basis effective July 30, 2018 the conversion price of the notes became $1.00 and the exercise price of any warrants issuable on conversion of the notes became $1.20.

On August 31, 2019, the Company amended the terms of the convertible note such that the principal amount of the notes was convertible into units of the Company at $0.05 per unit, with each unit comprised of one common share and one share purchase warrant exercisable into a further share at $0.06 per common share (for one year from the date of issuance of the warrant, subject to the latest exercise date being the maturity date).

The Company´s convertible note is broken down as follows:

Proceeds received, net of transaction costs Allocated to equity portion Allocated to liability portion Liability portion, beginning Accretion expense for the period/year Accrued interest Liability portion, ending	July 31, 2021 April 30, 2021 $ $ 195,045 195,045 (75,459) (75,459)
	119,586 119,586 263,261 215,852 6,357 27,077 4,055 20,992
	273,673 263,261

On July 13, 2021, the Company issued 5,380,274 units on conversion of $200,000 principal and $69,014 of accrued interest of the convertible note. Each unit consists of one common share of the Company and one share purchase warrant exercisable at $0.06 for one year from the date of conversion.

11

Gelum Resources Ltd. (formerly Gelum Capital Ltd.)

Notes to the Condensed Interim Financial Statements

Unaudited – Prepared by Management

For the three months ended July 31, 2021 and July 31, 2020

6. Share capital

The authorized share capital of the Company consists of unlimited common shares without par value and unlimited preferred shares without par value. All issued shares are fully paid.

Transactions for the issue of share capital during the three months ended July 31, 2021:

• a) On July 22, 2021, the Company closed a non-brokered private placement of 8,450,000 units at $0.10 per unit (the “Offering”) for gross proceeds of $845,000. Each unit consisted of one common share in the capital of the Company and two separate one-half (1/2) of one common share purchase warrants (a “1/2 Warrant A” and a “1/2 Warrant B”) and, respectively, each whole warrant, a “Warrant A” and a “Warrant B”, and collectively the “Warrants”.

Each whole Warrant A entitles the holder to purchase one common share in the capital of the Company at an exercise price of $0.25 per share for a period of 24 months from issuance and, each whole Warrant B entitles the holder to purchase one common share in the capital of the Company at an exercise price of $0.50 per share for a period of 24 months from issuance. No value was attributed to the warrant component of the units issued

The Offering closed in three separate tranches, issuing 3,350,000 units on June 28, 2021, 5,000,000 units on July 6, 2021 and 100,000 units on July 14, 2021. The Company paid finders’ fees of $21,700 and issued 217,000 finders’ warrants exercisable at a price of $0.25 until June 28, 2021. The fair value of the finders’ warrants was determined to be $6,646 using the Black-Scholes option pricing model with the following inputs: i) exercise price: $0.25; ii) share price: $0.10; iii) term: 2 years; iv) volatility: 100%; v) discount rate: 0.44%.

• b) On July 13, 2021, the Company completed the conversion of convertible notes by issuing 5,380,274 units. Each unit consists of one common share of the Company and one share purchase warrant exercisable at $0.06 for one year from the date of conversion. No value was attributed to the warrant component of the units issued. No gain or loss was recognized on conversion.

Transactions for the issue of share capital during the three months July 31, 2020:

There were no transactions for the issue of share capital during the three months ended July 31, 2020.

Stock options

On December 19, 2016, the Company adopted a formal Stock Option Plan (the “Option Plan”). Under the Option Plan, the exercise price of each option must not be less than the greater of the closing market price of the underlying securities on (a) the trading day prior to the date of grant and (b) the date of the grant of the stock options. The options can be granted for a maximum term of five years. The maximum number of options that can be issued may not exceed 10% of the issued and outstanding common share capital. The options vest at the discretion of the Board of Directors. The terms of the existing stock options remain in accordance with the stock option plan in place at the time the options were granted.

12

Gelum Resources Ltd. (formerly Gelum Capital Ltd.)

Notes to the Condensed Interim Financial Statements

Unaudited – Prepared by Management

For the three months ended July 31, 2021 and July 31, 2020

6. Share capital (continued)

Stock options (continued)

A summary of the status of the Company’s stock options as at July 31, 2021 and April 30, 2021, and changes during the year/period then ended is as follows:

	Period ended	Period ended	Year	ended
	July 31, 2021		April 30, 2021
		Weighted average		Weighted average
	Options	exercise price	Options	exercise price
	#	$	#	$
Options outstanding, beginning of period/year	250,000	1.00	250,000	1.00
Cancelled	(100,000)	1.00		-
Options outstanding, end ofperiod/year	150,000	1.00	250,000	1.00

As at July 31, 2021, the Company has stock options outstanding and exercisable as follows:

Options	Options	Exercise
outstanding	exercisable	price	Expiry date
#	#	$
150,000	150,000	1.00	June 9, 2022
150,000	150,000

The following table summarizes information about the stock options outstanding as at July 31, 2021:

Number of	Weighted	Weighted
Options	average	average
Outstanding	remaining life	exercise price
#	(years)	$
150,000	0.86	1.00

No stock options were granted during the three months ended July 31, 2021 or July 31, 2020.

Warrants

A summary of the status of the Company’s warrants as at July 31, 2021 and April 30, 2021, and changes during the year/period then ended is as follows:

	Period ended	Period ended	Year	Year	ended
	July 31, 2021		April	30, 2021
		Weighted average			Weighted average
	Warrants	exercise price	Warrants		exercise price
	#	$	#		$
Warrants outstanding, beginning of period/year	-	-		-	-
Issued	14,597,280	0.25		-	-
Warrants outstanding, end ofperiod/year	14,597,280	0.25		-	-

13

Gelum Resources Ltd. (formerly Gelum Capital Ltd.) Notes to the Condensed Interim Financial Statements Unaudited – Prepared by Management

For the three months ended July 31, 2021 and July 31, 2020

6. Share capital (continued)

Warrants (continued)

As at July 31, 2021, the Company has warrants outstanding and exercisable as follows:

Warrants	Warrants	Exercise
outstanding	exercisable	price	Expiry date
#	#	$
500,000	500,000	0.10	April 6, 2022
5,380,274	5,380,274	0.06	July 13, 2022
1,700,000	1,700,000	0.25	June 25, 2023
1,700,000	1,700,000	0.50	June 25, 2023
2,500,003	2,500,003	0.25	July 6, 2023
2,500,003	2,500,003	0.50	July 6, 2023
50,000	50,000	0.25	July 14, 2023
50,000	50,000	0.50	July 14, 2023
217,000	217,000	0.25	June 25, 2023
14,597,280	14,597,280

The following table summarizes information about the warrants outstanding as at July 31, 2021:

Number of	Weighted	Weighted
Warrants	average	average
Outstanding	remaining life	exercise price
#	(years)	$
14,597,280	1.52	0.25

7. Loss per share

The calculation of basic and diluted loss per share for the three months ended July 31, 2021 was based on the loss attributable to common shareholders of $116,723 (2020 - $17,785) and a weighted average number of common shares outstanding of 13,908,521 (2020 – 7,602,883).

All options and warrants were excluded from the diluted weighted average number of common shares calculation, as their effect would have been anti-dilutive.

14

Gelum Resources Ltd. (formerly Gelum Capital Ltd.)

Notes to the Condensed Interim Financial Statements

Unaudited – Prepared by Management

For the three months ended July 31, 2021 and July 31, 2020

8. Related party payables and transactions

No stock options were granted to related parties during the three months ended July 31, 2021 or July 31, 2020.

The Company transacted with the following related parties:

• (a) Stephen Brohman is the Company’s CFO. He is a principal of Donaldson Brohman Martin CPA Inc. (“DBM CPA”) and Oakside Advisory Ltd. (“Oakside”) both firms in which he has significant influence. DBM CPA and Oakside provide the Company with accounting services.

• (b) Shares to be issued include incentive bonus payable to compensate the former Chief Executive officer payable in 36,500 common shares at a price of $0.80 per share. The issue has been pending since 2016.

• (c) On October 14, 2017, convertible notes were issued to two directors, Hendrik Van Alphen and Robert Kopple (Note 5).

• (d) Marla Ritchie is the Company’s Corporate secretary and Hendrik Van Alphen is the Company’s Director. They share control of Marval Office Management Ltd., (“Marval”) in which they have significant influence. Marval provides office administration services to the Company on a shared cost basis.

• (e) David Smith is the Company’s President and Interim Chief Executive Officer. He is the spouse to the owner of Lucas Investments Ltd. (“Lucas”), a company in which he has significant influence.

The aggregate value of transactions and outstanding balances with key management personnel and Directors and entities over which they have control or significant influence were as follows:

	Transactions	Transactions	Balances	Balances
	3 months ended	3 months ended	outstanding	outstanding
	July 31,	July 31,	July 31,	April 30,
	2021	2020	2021	2021
	$	$	$	$
DBM CPA	5,000	2,000	31,700	26,700
Marval	19,548	-	9,929	-
Lucas	13,500	-	10,500	-
Hendrik Van Alphen	-	-	388	6,038
MarlaRitchie	7,500	-	600	-
	45,548	2,000	53,117	32,738

All related party balances are unsecured and are due upon demand without interest.

The transactions with the key management personnel and Directors are included in operating expenses as follows:

• (a) Professional fees

• Includes the accounting services of Company’s CFO, Stephen Brohman, charged to the Company by DBM; and

• Includes the corporate secretary services of Marla Ritchie.

• (b) General and administrative expenses, office expenses and property investigation - Includes the administrative services charged to the Company by Marval.

• (c) Consulting expense and share issuance costs

• Includes the services charged to the Company by Lucas.

15

Gelum Resources Ltd. (formerly Gelum Capital Ltd.)

Notes to the Condensed Interim Financial Statements

Unaudited – Prepared by Management

For the three months ended July 31, 2021 and July 31, 2020

9. Supplemental cash flow information

Changes in non-cash operating working capital during the three months ended July 31, 2021 and July 31, 2020 were comprised of the following:

	July 31,	July 31,
	2021	2020
	$	$
Receivable	(4,888)	(248)
Accounts payable and accrued liabilities	(27,595)	(1,291)
Accounts payable to related parties	53,117	2,000
Net change	20,634	461

The Company incurred non-cash financing activities during the three months ended July 31, 2021 and April 30, 2021 as follows:

s follows:
	July	31,	July 31,
	2021		2020
	$		$
Non-cash financing activities:
Conversion of convertible notes - reserves		80,507		-
Conversion of convertible notes - settlement	(269,014)			-
Conversion of convertible notes - equity portion of convertible note		(75,459)		-
Shareissuance costs- finders' warrants		6,646		-
	(257,320)			-

During the year three months ended July 31, 2021 and July 31, 2020, no non-cash investing activities were incurred and no amounts were paid on account of interest or income taxes.

10. Loan Payable

On April 6, 2021 ("Effective Date"), the Company entered into an unsecured Promissory Note (the “Loan”) with an arm’s length party, whereby the Company received an amount of $50,000. The Loan bears interest at 8% annually and is due on April 6, 2022 (the “Maturity Date”). As further consideration for providing the loan, the Company issued 500,000 common share purchase warrants (the “Bonus Warrants”) on April 6, 2021. Each Bonus Warrant is exercisable into one common share at a price equal to $0.10 per share for a period of 12 months from the Effective Date. The fair value of the Bonus Warrants was determined to be $19,186 using the Black-Scholes option pricing model with the following inputs: i) exercise price: $0.10; ii) share price: $0.10; iii) term: 1 year; iv) volatility: 100%; v) discount rate: 0.26%. The fair value of the Bonus Warrants will be treated as a transaction costs and accreted to the loan over up to the Maturity Date.

As at July 31, 2021, the Company recorded $4,835 (2020 - $nil) of accretion expense and $1,271 (2020 - $nil) of interest expense in connection with the Loan and Bonus Warrants transaction costs.

16

Gelum Resources Ltd. (formerly Gelum Capital Ltd.) Notes to the Condensed Interim Financial Statements

Unaudited – Prepared by Management

For the three months ended July 31, 2021 and July 31, 2020

11. Financial risk management

Capital management

The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of underlying assets. In order to maintain or adjust its capital structure, the Company may issue new shares, purchase shares for cancellation pursuant to normal course issuer bids or make special distributions to shareholders. The Company is not subject to any externally imposed capital requirements and does not presently utilize any quantitative measures to monitor its capital. The Company’s capital structure as at July 31, 2021 is comprised of shareholders’ equity (deficit) of $662,597 (April 30, 2021 - $313,042).

The Company currently has no source of revenues. In order to fund future projects and pay for administrative costs, the Company will spend its existing working capital and raise additional funds as needed. The Company's ability to continue as a going concern on a long-term basis and realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation is primarily dependent upon its ability to borrow or raise additional financing from equity markets.

Financial instruments - fair value

The Company’s financial instruments consist of cash, accounts payable and accrued liabilities, accounts payable to related parties and loan payable.

The carrying value of accounts payable and accrued liabilities and accounts payable to related parties approximates their fair value because of the short-term nature of these instruments.

The loan payable is presented on an amortized cost basis and will be accreted to its face value at their effective interest rates, over the term to maturity.

Financial instruments measured at fair value on the condensed interim statement of financial position are summarized into the following fair value hierarchy levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Financial instruments - risk

The Company’s financial instruments are exposed to certain financial risks, including credit risk, interest rate risk, market risk, and liquidity risk.

a) Credit risk

The Company is exposed to credit risk by holding cash and receivables. This risk is minimized by holding the funds in Canadian banks and credit unions or with Canadian governments. The Company has minimal accounts receivable exposure, and its refundable tax credits are due from the Canadian government.

b) Interest rate risk

The Company is exposed to interest rate risk because of fluctuating interest rates. Fluctuations in market rates do not have a significant impact on the Company’s operations due to the short term to maturity and no penalty cashable feature of its cash. For the three months ended July 31, 2021 every 1% fluctuation in interest rates up or down would have an insignificant impact.

c) Liquidity risk

Liquidity risk is the risk that the Company is unable to meet its financial obligations as they come due. The Company manages this risk by careful management of its working capital to ensure its expenditures will not exceed available resources.

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Gelum Resources Ltd. (formerly Gelum Capital Ltd.)

Notes to the Condensed Interim Financial Statements

Unaudited – Prepared by Management

For the three months ended July 31, 2021 and July 31, 2020

12. Events after the reporting period

• a) On August 31, 2021, the Company completed a non-brokered private placement offering of 1,100,000 units at a price of $0.10 per unit raising aggregate gross proceeds of $110,000. Each unit consists of one Common Share and two separate one-half (1/2) of one common share purchase warrants (a “1/2 Warrant A” and a “1/2 Warrant B” and, respectively, each whole warrant, a “Warrant A” and a “Warrant B”, and collectively the “Warrants”). Each whole Warrant A entitles the holder to purchase one Common Share at an exercise price of $0.25 per share for a period of 24 months from issuance, and each whole Warrant B entitles the holder to purchase one Common Share at an exercise price of $0.50 per share for a period of 24 months from issuance. Further, in the event the closing price of the Company’s Common Shares on the CSE is equal to or greater than $0.35 for the Warrant As and $0.65 for the Warrant Bs, for a minimum of ten consecutive trading days a notice of acceleration is provided in accordance with the terms of the Warrants. Finder’s fees were paid pursuant to the closing consisting of a cash commission of 7% of the gross proceeds raised and 76,650 finder’s warrants with each such warrant entitling the holder thereof to purchase one Common Share at an exercise price of $0.25 per share for a period of 24 months.

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