Royal Helium Ltd.

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022

Royal Helium Ltd. Condensed Interim Consolidated Statements of Financial Position (Expressed in Canadian dollars) (Unaudited)

September 30, 2022	December 31, 2021
ASSETS Current Cash and cash equivalents (note 5) $ 2,514,220 Accounts receivable 274,062 Prepaid 833,830	$ 10,413,553 318,597 286,624
Total current assets 3,622,112	11,018,774
Non-current Environmental deposit (note 9) 101,550 Exploration and evaluation assets (note 6) 45,592,241 Property, plant and equipment (note 7) 40,079	- 18,412,963 -
Total assets $ 49,355,982	$ 29,431,737
LIABILITES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities (notes 8 and 16) $ 4,574,540	$ 4,611,914
Non-current Decommissioning liability (note 9) 387,708	203,333
Total liabilities $ 4,962,248	$ 4,815,247
Shareholders’ Equity Share capital (note 10) $ 68,056,479 Contributed surplus 8,852,578 Deficit (32,515,323)	$ 47,415,565 7,970,545 (30,769,620)
Total shareholders’ equity 44,393,734	24,616,490
Total liabilities and shareholders’equity $ 49,355,982	$ 29,431,737

Contingencies and commitments (notes 6 and 15) Subsequent events (note 19) Capital management (note 17 )

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

Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Expressed in Canadian dollars) (Unaudited)

	For the three months ended September 30, 2022 2021	For the three months ended September 30, 2022 2021	For the nine months ended September 30,
	2022		2022 2021
Operating costs and expenses General and administrative (note 14) Loss on sale of royalty credits (note 6) Gain on shares for debt	$ 788,263 190,000 -	$ 1,890,055 - -	$ 1,555,703 $ 4,674,582 190,000 - - (4,175)
Net loss before undernoted items Interest income	(978,263) -	(1,890,055) 19,069	(1,745,703) (4,670,407) - 19,069

Net loss and comprehensive loss for the period	$ (978,263)	$ (1,870,986)	$ (1,745,703) $ (4,651,338)

Basic and diluted loss per share (note 13)	$ (0.01)	$ (0.01)	$ (0.01) $ (0.04)

Weighted average number of shares outstanding - Basic and diluted (note 13)	191,992,095	141,990,367	159,195,489 116,838,847

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

Royal Helium Ltd. Condensed Interim Consolidated Statements of Cash Flows (Expressed in Canadian dollars) (Unaudited)

For the nine months ended September 30, 2022	2021
CASH FLOWS FROM OPERATING ACTIVITIES Loss for the period $ (1,745,703) Items not affecting cash: Share-based payments (note 14) - Accretion (note 9) 6,519 Loss on sale of royalty credits (note 6) 190,000 Gain on shares for debt - Changes in non-cash working capital (note 18) 62,133	$ (4,651,338) 3,557,550 - - (4,175) (686,937)
Net cash used in operating activities (1,487,051)	(1,784,900)
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds - financing - Proceeds - warrant exercise - Proceeds - stock option exercise (note 10) 142,100 Share issuance costs (note 10) (1,681)	17,250,000 2,094,316 88,000 (1,525,222)
Net cash provided by financing activities 140,419	17,907,094
CASH FLOWS FROM INVESTING ACTIVITIES Additions to exploration and evaluation assets (note 6) (3,832,496) Additions to property, plant and equipment (note 7) (3,074) Environmental deposit (note 9) (101,550) Cash acquired in asset acquisition (note 4) 31,364 Changes in non-cash working capital (note 18) (2,646,945)	(10,212,547) - - - 2,107,464
Net cash used in investing activities (6,552,701)	(8,105,083)
Change in cash (7,899,333) Cash, beginning of period 10,413,553	8,017,111 5,856,878
Cash, end of period $ 2,514,220	$ 13,873,989

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

Royal Helium Ltd. Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (Expressed in Canadian dollars) (Unaudited)

				Total
	Share	Contributed		Shareholders’
	Capital	Surplus	Deficit	Equity
Balance as at December 31, 2020	$ 30,484,589	$ 3,280,796	$ (25,643,349)	$ 8,122,036
Share issuance – financing	17,250,000	-	-	17,250,000
Share issuance – warrant exercise	2,094,316	-	-	2,094,316
Share issuance – stock option exercise	174,600	(86,600)	-	88,000
Shares issued for debt	41,025	-	-	41,025
Share issuance costs	(1,525,223)	-	-	(1,525,223)
Issuance - broker warrants	(1,209,915)	1,209,915	-	-
Share based compensation	-	3,557,550	-	3,557,550
Net loss for theperiod	-	-	(4,651,338)	(4,651,338)
Balance as at September 30, 2021	$ 47,309,392	$ 7,961,661	$ (30,294,687)	$ 24,976,366

Balance as at December 31, 2021	$ 47,415,565	$ 7,970,545	$ (30,769,620)	$ 24,616,490
Share issuance – stock option exercise (note 10)	205,086	(62,986)	-	142,100
Share issuance – acquisition (note 10)	20,437,509	-	-	20,437,509
Stock option issuance – acquisition (note 11)	-	26,771	-	26,771
Warrant issuance – acquisition (note 12)	-	400,318	-	400,318
Broker warrant issuance – acquisition (note 12)	-	517,930	-	517,930
Share issuance costs (note 10)	(1,681)	-	-	(1,681)
Net loss for theperiod	-	-	(1,745,703)	(1,745,703)
Balance as at September 30, 2022	$ 68,056,479	$ 8,852,578	$ (32,515,323)	$ 44,393,734

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

Royal Helium Ltd. Notes to the Condensed Interim Consolidated Financial Statements As at September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 (Expressed in Canadian dollars) (Unaudited)

1. NATURE AND CONTINUANCE OF OPERATIONS

Royal Helium Ltd. (the “Company” or “RHL”) (formerly RHC Capital Corporation) is focused on primary helium production from its helium leases and permits in Saskatchewan, Canada. On February 27, 2017, the Company began trading on the NEX board of the TSX Venture Exchange ("TSX-V") under the trading symbol “RHC.H”. On July 25, 2017, the Company resumed trading on the TSX-V under the trading symbol “RHC”. The address of its registered office is 224 4[th] Avenue South, Suite 602, Saskatoon, Saskatchewan, S7K 5M5. The Company was incorporated under the laws of the Province of Ontario on August 15, 2008 and continued into the Province of Saskatchewan on May 1, 2019.

2. BASIS OF PREPARATION

These unaudited condensed interim consolidated financial statements present the Company’s financial results of operations and financial position under International Financial Reporting Standards (“IFRS”) as at September 30, 2022 and for the three and nine months ended September 30, 2022, including the 2021 comparative period. The unaudited condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34: Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”).

These unaudited condensed interim consolidated financial statements have been prepared following the same IFRS accounting policies and methods of computation as disclosed in the annual audited consolidated financial statements for the year ended December 31, 2021, except as noted below. Certain information and disclosures normally required to be included in the notes to the annual audited consolidated financial statements have been condensed, omitted or have been disclosed on an annual basis only. Accordingly, these unaudited condensed interim consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and the notes thereto for the year ended December 31, 2021.

RHL’s unaudited condensed interim consolidated financial statements are prepared on a historical cost basis, except for certain financial and non-financial assets and liabilities which have been measured at fair value. The Company’s unaudited condensed interim consolidated financial statements include the accounts of RHL together with its wholly owned subsidiaries, Royal Helium Exploration Limited ("RHEL"), Imperial Helium Corp (“IHC”) and 2239090 Alberta Ltd (‘AltaCo”) and are expressed in Canadian dollars, unless otherwise stated.

The condensed interim consolidated financial statements of the Corporation for the three and nine month periods ended September 30, 2022 were authorized for issuance by the Corporation’s board of directors on November 29, 2022.

3. MANAGEMENT'S CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of unaudited condensed interim consolidated requires management to use judgment in applying its accounting policies and estimates and assumptions about the future. Estimates and other judgments are continuously evaluated and are based on management's experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. The following discusses the most significant accounting judgments and estimates that the Company has made in the preparation of the unaudited condensed interim consolidated financial statements:

Key Estimates

Decommissioning liabilities

The Company is required to provide for decommissioning liabilities. The Company must estimate these costs in accordance with existing laws, contracts and other policies. The estimate of future costs involves a number of estimates relating to timing, type of costs and associated contract negotiations, and review of potential methods and technical advancements. Furthermore, due to uncertainties concerning environmental remediation, the ultimate cost of the Company's decommissioning liability could differ from amounts provided. The estimate of the Company's obligation is subject to change due to amendments to applicable laws and regulations and as new information concerning the Company's operations become available.

The Company is not able to determine the impact on its financial position, if any, of environmental laws and regulations that may be enacted in the future.

Taxation

Tax provisions are based on enacted or substantively enacted laws. Changes in those laws could affect amounts recognized in profit or loss both in the period of change, which would include any impact on cumulative provisions, and in future periods. Deferred tax assets, if any, are recognized only to the extent it is considered probable that those assets will be recoverable. This involves an assessment of when those deferred tax assets are likely to reverse.

Share-based payments

The Company has a variety of share-based payments to employees, directors, consultants and contractors as well as share-based payments issued as consideration for acquisitions. When share-based awards are granted, the Company measures the fair value of each award and recognizes the amount as expense over the vesting period. Management makes a variety of assumptions in calculating the fair value of share-based payments. Management uses the Black-Scholes option pricing model in determining the fair value of its share-based payments. Application of the option pricing model requires estimates in expected dividend yields, expected volatility of the underlying assets based on past volatility experienced and the expected life of the award granted. These estimates may ultimately be different from the estimates initially made, resulting in an overstatement or understatement of net loss.

Critical Judgments

Impairment of non-financial assets

The Company’s fair value measurement with respect to the carrying amount of non-financial assets is based on numerous assumptions and may differ significantly from actual fair values. The fair values are based, in part, on certain factors that may be partially or totally outside of the Company’s control. This evaluation involves a comparison of the estimated fair values of non-financial assets to their carrying values. The Company’s fair value estimates are based on numerous assumptions. The fair value estimates may differ from actual fair values and these differences may be significant and could have a material impact on the Company's financial position and result of operations. Assets are reviewed for an indication of impairment at each reporting date. This determination requires significant judgment. Factors which could trigger an impairment review include, but are not limited to, significant negative industry or economic trends, interruptions in exploration and evaluation activities and a significant drop in helium prices.

Exploration and evaluation (“E&E”) assets

The application of the Company's accounting policy for E&E requires management to make certain judgments as to future events and circumstances as to whether economic quantities of reserves have been found in assessing economic and technical feasibility.

Deferred income taxes

Judgments are made by management to determine the likelihood of whether deferred income tax assets at the end of the reporting period will be realized from future taxable income. To the extent that assumptions regarding future profitability change, there can be an increase or decrease in the amounts recognized in respect of deferred tax assets as well as the amounts recognized in earnings or loss in the period in which the change occurs.

4. STEVEVILLE ACQUISITION

On July 22, 2022, the Company completed an acquisition of Imperial Helium Corp. (“the Acquisition”) of certain helium properties located in Southern Alberta (the Steveville Assets”). The Acquisition was completed for total non-cash consideration of $21,382,528 as further outlined below. The common shares have been ascribed a fair value of $0.32 per common share issued, as determined based on the Company's closing share price on July 22, 2022.

The Company incurred transaction costs of $408,827 in fees and commissions, which were capitalized to exploration and evaluation assets.

The transaction has been accounted for as an asset acquisition.

The purchase price, based on management's estimates of fair values, is as follows:

Net assets acquired:	Steveville Acquisition
Cash and cash equivalents	$ 31,364
Accounts receivables	122,196
Prepaid	42,176
Exploration and evaluation assets	23,538,631
Property, plant and equipment	37,005
Accounts payables and accrued liabilities	(1,801,500)
Decommissioning liability	(178,517)
Net assets acquired	$ 21,791,355
Consideration
Common shares (63,867,217 at $0.32 per share)	$ 20,437,509
Replacement stock options (note 10)	26,771
Replacement warrants (note 12)	400,318
Replacement broker options (note 12)	517,930
Transaction costs-cash	408,827
Total consideration paid	$ 21,791,355

5. CASH AND CASH EQUIVALENTS

	September 30,	December 31,
	2022	2021
Cash at bank and on hand	$ 2,514,220	$ 10,413,553

Royal Helium Ltd.

Notes to the Condensed Interim Consolidated Financial Statements

As at September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 (Expressed in Canadian dollars) (Unaudited)

6. EXPLORATION AND EVALUATION ASSETS

	Balance as at	Balance as at												Balance as at
		January 1,	Acquisition /									Other		December 31,
		2021		Renewals	Consultants			Drilling		Geophysics		Exploration		2021
Bengough/ Ogema	$	1,821,854	$	-	$	50,750	$	3,811,177	$	646,621	$	80,620	$	6,411,022
Cadillac		66,931		-		1,000		-		-		10,000		77,931
Climax		517,393		152,401		140,411		10,698,046		41,590		64,297		11,614,138
Coronach		5,000		-		-		-		-		20,000		25,000
Creelman		5,000		-		-		-		-		20,000		25,000
Francis		-		-		-		-		-		2,446		2,446
Midale		5,000		-		-		-		-		15,135		20,135
Val Marie		93,405		-		1,000		-		-		15,000		109,405
Weyburn		5,000		-		1,000		-		118,860		3,026		127,886
	$	2,519,583	$	152,401	$	194,161	$	14,509,223	$	807,071	$	230,524	$	18,412,963
	Balance as at													Balance as at
		January 1,	Acquisition /									Other		September 30,
		2022		Renewals	Consultants			Drilling		Geophysics		Exploration		2022
Bengough/ Ogema	$	6,411,022	$	-	$	14,593	$	557,999	$	4,636	$	51,203	$	7,039,453
Cadillac		77,931		3,151		9,000		-		-		30,813		120,895
Climax		11,614,138		7,313		231,741		389,263		942,465		(1,792,981)		11,391,939
Coronach		25,000		-		-		-		-		952		25,952
Creelman		25,000		-		-		-		-		-		25,000
Francis		2,446		-		-		-		-		33,491		35,937
Midale		20,135		-		-		-		-		10,664		30,799
Minton		-		1,214		3,000		-		-		-		4,214
Steveville		-		23,538,631		254,231		-		-		-		23,792,862
Val Marie		109,405		-		108,621		2,314,072		373,983		60,959		2,967,040
Weyburn		127,886		-		-		-		-		30,264		158,150
	$	18,412,963	$	23,550,309	$	621,186	$	3,261,334	$	1,321,084	$(1,574,635)		$	45,592,241

Included in other exploration costs for the Climax project is a reduction of $14,919 (December 31, 2021 - $125,469) and for the Ogema project is a reduction of $11,879 (December 31, 2021 - $77,864) and for the Val Marie project is an increase of $26,137 (December 31, 2021 - $nil) which is related to the estimated decommissioning liability (note 9).

On September 28, 2022, the Saskatchewan government issued $1,791,187 royalty credits to the Company, of which $1,790,000 were sold on September 29, 2022 for $1,600,000 to a third party Saskatchewan oil company. The credits were received in relation to the Climax Hydraulic stimulation program as previously approved under the Saskatchewan Petroleum Innovation Incentive (“SPII”) program. The Company has reduced other exploration costs for the Climax project for the $1,791,187 (December 31, 2021 - $nil) royalty credits received and recorded $190,000 loss on sale of royalty credits (December 31, 2021 - $nil). At September 30, 2022 the remaining $1,187 royalty tax credits are recorded in accounts receivable.

The Company holds helium exploration permits and helium leases over land in Saskatchewan and Alberta. The Company has annual lease expenditure commitments of approximately $50,000 and annual permit expenditure commitments as follows: 2022 - $284,271, 2023 - $457,117, 2024 - $547,569 and 2025 - $583,382.

7. PROPERTY, PLANT AND EQUIPMENT

	Computer
	Hardware
Cost
Balance, December 31, 2021	$ -
Additions – Steveville acquisition (note 4)	37,005
Additions	3,074
Balance, September 30, 2022	$ 40,079

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	September 30,	December 31,	December 31,
	2022		2021
Accounts payable	$ 4,344,385	$	4,593,014
Accruals and others	230,155		18,900
	$4,574,540	$	4,611,914

9. DECOMMISSIONING LIABILITIES

	September 30,	September 30,	December 31,	December 31,
		2022		2021
Balance, beginning of period	$	203,333	$	-
Additions – Steveville acquisition (note 4)		178,517		-
Additions		26,137		203,333
Change in inflation and discount rate		(26,798)		-
Accretion		6,519		-
Balance, end of period	$	387,708	$	203,333

The total of the decommissioning liabilities are estimated based on the Company’s net ownership interest in all the wells, the estimated costs to reclaim and abandon the wells and facilities and the estimated timing of the costs to be incurred in future periods. Management of the Company has estimated that based on their net ownership interest, the total undiscounted cash flows required to settle the obligations will be $430,086. The obligations have been discounted using a risk free rate of 3.14% (December 31, 2021 - 1.68%) and an inflation rate of 1.78% (December 31, 2021 - 1.82%) per year. Most of these obligations are not expected to be paid until approximately 10 years in the future and will be funded from general Company resources at that time.

As September 30, 2022, the Company has a $101,550 deposit held by the Saskatchewan government for future site reclamation.

Royal Helium Ltd.

Notes to the Condensed Interim Consolidated Financial Statements As at September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 (Expressed in Canadian dollars) (Unaudited)

10. SHARE CAPITAL AND EQUITY RESERVES

Authorized share capital - the authorized share capital consists of an unlimited number of common shares.

Changes in issued share capital are as follows:

	Number of
	common shares		Amount
Balance, December 31, 2020	89,830,934		30,484,589
Share issuance – bought deal	34,500,000		17,250,000
Share issuance – warrant exercise	17,737,761		2,139,816
Share issuance – broker warrant exercise	275,625		109,582
Share issuance – stock option exercise	200,000		174,600
Share issuance – share for debt	77,406		41,025
Fair value allocation – broker warrants	-		(1,255,800)
Share issue costs	-		(1,528,247)
Balance, December 31, 2021	142,621,726		47,415,565
Share issuance – Steveville acquisition (note 4)	63,867,217		20,437,509
Share issuance – stock option exercise	515,600		205,086
Share issue costs	-		(1,681)
Balance, September 30, 2022	207,004,543	$	68,056,479

On June 8, 2021, the Company closed a bought deal financing of 34,500,000 units at a price of $0.50 per unit for gross proceeds of $17,250,000. Each unit consisted of one common share and one half of one common share purchase warrant, each whole warrant exercisable at $0.75 for a 24 month period. The Company paid $1,528,247 cash finder’s fees and other expenses and issued 2,415,000 broker warrants. The broker warrants are exercisable into units at $0.50 per unit, with each unit comprised of one common share and one half of one common share purchase warrant, each whole warrant exercisable at $0.75 for a 24 month period from the closing date of the financing (see note 12).

On July 22, 2022, the Company closed the Steveville acquisition and issued 63,867,217 common shares valued at $0.32 per common share (see note 4).

Royal Helium Ltd.

11. STOCK OPTIONS

On February 3, 2017, the shareholders of the Company approved a stock option plan, pursuant to which, the Company may issue up to a number of options that is 10% of the outstanding common shares of the Company to employees, directors and officers.

The following table reflects the continuity of stock options for the years presented:

	Number of	Weighted average
	stock options	exercise price
Balance, December 31, 2020	2,800,000	$ 0.23
Issued	4,800,000	0.44
Issued	2,850,000	0.60
Exercised	(200,000)	0.44
Balance, December 31, 2021	10,250,000	0.43
Issued – Steveville acquisition (note 4)	552,600	0.33
Issued – Steveville acquisition (note 4)	3,653,300	0.41
Exercised	(245,600)	0.33
Exercised	(270,000)	0.23
Expired	(307,000)	0.33
Expired	(3,653,300)	0.41
Exercisable, September 30, 2022	9,980,000	$ 0.43

As at September 30, 2022, 9,980,000 (December 31, 2021 – 10,250,000) options were issued and outstanding and exercisable with a weighted average remaining life of 3.29 years (December 31, 2021 – 4.03).

On January 11, 2021, the Company granted 4,800,000 stock options, of the total options granted 3,500,000 were granted to directors and officers with the balance issued to consultants of the Company. The options have an exercise price of $0.44, expire January 11, 2026 and vest immediately. The grant date fair value of the options was estimated using the Black-Scholes pricing model with the following weighted average assumptions: share price of $0.44, expected yield of 0%, expected volatility of 216% based on the historical volatility of the Company, risk free rate of 0.38% and an expected life of 5 years, which resulted in a fair value of $0.433 per option.

On July 2, 2021, the Company granted 2,850,000 stock options, of the total options granted 1,750,000 were granted to directors and officers with the balance issued to consultants of the Company. The options have an exercise price of $0.60, expire July 2, 2026 and vest immediately. The grant date fair value of the options was estimated using the Black-Scholes pricing model with the following weighted average assumptions: share price of $0.53, expected yield of 0%, expected volatility of 209% based on the historical volatility of the Company, risk free rate of 0.86% and an expected life of 5 years, which resulted in a fair value of $0.519 per option.

On July 22, 2022, the Company granted 552,600 replacement stock options as part of the consideration for the acquisition of Steveville Acquisition (see note 4). The options have an exercise price of $0.33, expire August 21, 2022 and vest immediately. The grant date fair value of the options was estimated using the BlackScholes pricing model with the following weighted average assumptions: share price of $0.32, expected yield of 0%, expected volatility of 72% based on the historical volatility of the Company, risk free rate of 3.07% and an expected life of 30 days, which resulted in a fair value of $0.022 per option. During the period, 245,600 options were exercised, the remaining 307,000 expired unexercised.

On July 22, 2022, the Company granted 3,653,300 replacement stock options as part of the consideration for the acquisition of Steveville Acquisition (see note 4). The options have an exercise price of $0.41, expire August 21, 2022 and vest immediately. The grant date fair value of the options was estimated using the BlackScholes pricing model with the following weighted average assumptions: share price of $0.32, expected yield of 0%, expected volatility of 72% based on the historical volatility of the Company, risk free rate of 3.07% and an expected life of 30 days, which resulted in a fair value of $0.004 per option. The options expired unexercised.

12. WARRANTS AND BROKER WARRANTS

The following table reflects the continuity of warrants for the years presented:

	Number of	Weighted Average
	warrants	Exercise Price
Balance, December 31, 2020	28,507,272	$ 0.21
Issued	17,250,000	0.75
Exercised	(14,530,000)	0.07
Exercised	(3,207,761)	0.35
Balance December 31, 2021	28,019,511	0.60
Issued – Steveville acquisition (note 4)	546,460	0.41
Issued–Steveville acquisition (note 4)	17,217,440	0.61
Balance, September 30, 2022	45,783,411	$ 0.60

As of September 30, 2022, 45,783,411 (December 31, 2021 – 28,019,511) warrants were issued and outstanding with a weighted average remaining life of 0.55 years (December 31, 2021 – 1.26).

On July 22, 2022, the Company issued 546,460 replacement warrants. The warrants have an exercise price of $0.41, expire with a range of January 18, 2023 to March 15, 2023. The issue date fair value of the warrants was estimated using the Black-Scholes pricing model with the following weighted average assumptions: share price of $0.32, expected yield of 0%, expected volatility range of 65.43% to 72.29% based on the historical volatility of the Company, risk free rate of 3.07% and an expected life range of 0.49 to 0.65 years, which resulted in a fair value range of $0.038 to $0.041 per warrant (see note 4).

On July 22, 2022, the Company issued 17,217,440 replacement warrants as part of the consideration for the acquisition of Steveville Acquisition (see note 4). The warrants have an exercise price of $0.61, expire with a range of May 18, 2023 to November 8, 2023. The issue date fair value of the warrants was estimated using the Black-Scholes pricing model with the following weighted average assumptions: share price of $0.32, expected yield of 0%, expected volatility range of 67.51% to 73.21% based on the historical volatility of the Company, risk free rate of 3.07% and an expected life range of 0.82 to 1.30 years, which resulted in a fair value range of $0.022 to $0.047 per warrant.

The following table reflects the continuity of broker warrants for the years presented:

	Number of	Weighted Average
	warrants	Exercise Price
Balance, December 31, 2020	1,837,500	$ 0.22
Issued	2,415,000	0.50
Exercised	(183,750)	0.22
Balance, December 31, 2021	4,068,750	0.39
Issued–Steveville acquisition (note 4)	1,752,724	0.41
Balance, September 30, 2022	5,821,474	$ 0.39

As of September 30, 2022, 5,821,474 (December 31, 2021 – 4,068,750) warrants were issued and outstanding with a weighted average remaining life of 0.54 years (December 31, 2021 – 1.25 years).

On June 8, 2021, the Company issued broker warrants upon closing of a bought deal financing. The broker warrants are exercisable into units at $0.50 per unit, with each unit comprised of one common share and one half of one common share purchase warrant, each whole warrant exercisable at $0.75 for a 24 month period. The fair value of the warrants was estimated using the Black-Scholes pricing model with the following weighted average assumptions: share price of $0.60, expected yield of 0%, expected volatility of 205% based on the historical volatility of the Company, risk free rate of 0.32% and an expected life of 2 years. The fair value of the broker units were $1,255,800.

On July 22, 2022, the Company issued 1,752,724 replacement broker warrants as part of the consideration for the acquisition of Steveville Acquisition (see note 4). The broker warrants are exercisable into units at $0.41 per unit, with each unit comprised on once common share and one half of one common share purchase warrant, each whole warrant exercisable at $0.61 for a 24 month period, expire May 17, 2023. The issue date fair value of the warrants was estimated using the Black-Scholes pricing model with the following weighted average assumptions: share price of $0.32, expected yield of 0%, expected volatility of 62.42% based on the historical volatility of the Company, risk free rate of 3.07% and an expected life of 0.82 years. The fair value of the broker units were $517,930.

13. NET LOSS PER COMMON SHARE

The calculation of basic and diluted loss per share for the three and nine month periods ended September 30, 2022, was based on the loss attributable to common shareholders of $978,263 and $1,745,703 respectively. (September 30, 2021 - $1,870,986 and $4,651,338) and the weighted average number of common shares outstanding of 191,992,095 and 159,195,489 for the three and nine months periods ended September 30, 2022 respectively. (September 30, 2021 – 141,990,367 and 116,838,847).

During the periods ended September 30, 2022 and 2021, all outstanding options and warrants were antidilutive and were therefore excluded from the diluted loss per share calculation.

Royal Helium Ltd.

14. GENERAL AND ADMINISTRATIVE

		Nine months ended Sept. 30,
		2022 2021
Audit and accounting General office and other Investor relations and marketing Legal and professional Share-based compensation	$ 38,540 $ 1,500 327,843 156,638 217,950 248,530 203,930 4,237 - 1,479,150	$ 116,579 $ 22,920 637,987 395,693 588,728 681,439 212,409 16,980 - 3,557,550
Total general and administrative	$ 788,263 $ 1,890,055	$ 1,555,703 $ 4,674,582

15. CONTINGENCIES AND COMMITMENTS

Contracts

The Company is party to certain management consulting contracts. Upon termination of these contracts, the Company will be required to make payments of $45,000 pursuant to the terms of these contracts. The Company also committed to a payment of $195,000 on the completion of a financing pursuant to a consulting agreement. As a triggering event has not taken place as at September 30, 2022, these amounts have not been recorded in these condensed interim consolidated financial statements.

Environmental contingencies

The Company’s exploration and evaluation activities are subject to various federal and provincial laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company conducts its operations so as to protect public health and the environment and believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.

Property expenditure commitments

See note 6.

Legal matters

From time to time, the Company is named as a party to claims or involved in proceedings, including legal, regulatory and tax related, in the ordinary course of its business. While the outcome of these matters may not be estimable at period end, the Company makes provisions, where possible, for the estimated outcome of such claims or proceedings. Should a loss result from the resolution of any claims or proceedings that differs from these estimates, the difference will be accounted for as a charge to net loss in that period.

Novel coronavirus

The Company’s operations could be significantly adversely affected by the effects of a widespread global outbreak of a contagious disease, including the recent outbreak of respiratory illness caused by COVID-19. The Company cannot accurately predict the impact COVID-19 will have on its operations and the ability of others to meet their obligations with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations, which has had no impact on the company to date.

16. RELATED PARTY TRANSACTIONS

The following table summarizes transactions with key management personnel:

Nine months ended September 30,			2022		2021
Consulting fees – management	$		252,000	$	205,000
Director fees			91,667		-
Total	$		343,667	$	205,000

Nine months ended September 30,			2022		2021
Short term benefits		$	343,667		$ 205,000
Share based compensation			-		2,345,900
Total		$	343,667		$2,550,900

As at September 30, 2022, the Company had $163,667 (December 31, 2021 – $5,250), included in accounts payable and accrued liabilities, owing to its key management personnel and directors. Such amounts are unsecured, non-interest bearing, with no fixed terms of repayment.

The Company has an agreement for office space and related services for a monthly fixed fee of $4,000 (2021 - $2,000), with another company that has common management and directors. The Company incurred $36,000 in 2022 (2021 – $18,000) in respect of this agreement and had $nil (2021 – $nil), included in accounts payable and accrued liabilities as at September 30, 2022.

17. FINANCIAL INSTRUMENTS

Financial risks factors

The Company's activities expose it to a variety of financial risks: market risk (including currency risk), credit risk and liquidity risk. Risk management is carried out by management under policies approved by the Board of Directors. The Company's overall risk management program seeks to minimize potential adverse effects on the Company's financial performance.

(a) Market risk

Foreign exchange risk

Foreign exchange risk arises when assets or liabilities are denominated in a currency that is not the entity's functional currency. The Company does not hedge foreign currency exposures. All of the operating assets were located in Canada and majority of the Company's liabilities were also settled in Canada, therefore the Company does not have any significant foreign currency risk.

(b) Credit risk

The maximum exposure to credit risk for deposits approximates the amount recognized as cash, accounts receivable, and environmental deposit in the unaudited condensed interim consolidated statements of financial position. Bank deposits are held with reputable Banks, therefore credit risk is low. The Company does not hold any collateral as security. Accounts receivable are all considered current and primarily relate to GST.

(c) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company's financial liabilities comprise accounts payable and accrued liabilities which are due within 30 days.

The Company mitigates liquidity risk by planning its project expenditures in advance of undertaking significant commitments. The Company anticipates that it will continue to have adequate liquidity to fund its financial liabilities through its future cash flows.

The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at September 30, 2022, the Company had a cash balance of $2,514,220 (December 31, 2021 - $10,413,553) to settle current liabilities of $4,574,540 (December 31, 2021 - $4,611,914). The Company successfully raised equity subsequent to the period end (Note 19), which will allow the Company to manage immediate operating and capital requirements.

The Company has also entered into a purchase order for the manufacture of the Steveville processing facility with milestone payments of $2,569,740 on award of contract (paid October 2022), $2,569,740 procurement of long lead items (paid October 2022), $2,569,740 (estimated payment December 2022), $2,569,740 (estimated payment January 2023), $1,713,160 (estimated payment February 2023), $1,713,160 (estimated payment March 2023), $1,713,160 (estimated payment April 2023), and $1,713,160 upon completion. This purchase order will require the Company to identify additional sources of capital to fund the payments required under the contract. Although, the Company has identified and entered into a term sheet for potential debt financing of up to US $20 million, with US $10 million being funded on potential closing, there can be no assurance that the Company will be able to reach a final definitive agreement. If this debt financing is not completed the Company would be required to find alternative sources of capital, to which there is no guarantee, to fund the purchase order and ultimate development of the assets to generate cash flows from operations.

(d) Commodity price risk

The Company is exposed to price risk with respect to commodity prices. Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. The Company closely monitors commodity prices, as it relates to helium to determine the appropriate course of action to be taken by the Company.

Capital management

The Company defines the capital that it manages as its working capital. The Company's objectives when managing capital are to manage its business in an effective manner with the goal of increasing the value of its assets. The Company regularly monitors its available capital and, as necessary, adjusts to changing economic circumstances and the risk characteristics of the underlying assets. In order to maintain or adjust capital requirements, the Company may consider the issuance of new shares, the entry into joint venture arrangements or farm-out agreements, or engage in debt financing.

There were no changes in the Company's approach to capital management during the periods ended September 30, 2022 and 2021.

The Company is not subject to any capital requirements imposed by a lending institution or regulatory body, other than Policy 2.5 of the TSX-V which requires adequate working capital or financial resources of the greater of (i) $50,000 and (ii) an amount required in order to maintain operations and cover general and administrative expenses for a period of 6 months. As of September 30, 2022, the Company believes it was in compliance with Policy 2.5.

The business of exploring for helium involves a high degree of risk and there can be no assurance that planned exploration and evaluation programs will result in profitable helium operations. The continuance of the Company is dependent upon the discovery of economically recoverable reserves in the underlying helium claims and the ability of the Company to obtain necessary financing to complete the development and future profitable production, or alternatively, upon disposition of such property at a profit. Changes in future conditions could require material write downs of the carrying values of the Company's assets.

18. SUPPLEMENTAL CASH FLOW INFORMATION

	September 30, 2022	September 30, 2022	September	30, 2021
Change in non-cash working capital:
Accounts receivable	$	167,918	$	(172,971)
Prepaid		(505,029)		(380,059)
Accounts payable and accrued liabilities		(2,247,701)		1,928,357
	$	(2,584,812)	$	1,375,327
Allocated to:
Operating	$	62,133	$	(686,937)
Financing		-		-
Investing		(2,646,945)		2,107,464
	$	(2,584,812)	$	1,375,327

19. SUBSEQUENT EVENTS

On October 7, 2022, the Company issued a purchase order for the manufacture of the Steveville processing facility. Under the terms of the agreement, the Company is committed to make milestone payments of $2,569,740 on award of contract (paid October 2022), $2,569,740 procurement of long lead items (paid October 2022), $2,569,740 (estimated payment December 2022), $2,569,740 (estimated payment January 2023), $1,713,160 (estimated February 2023), $1,713,160 (estimated payment March 2023), $1,713,160 (estimated payment April 2023), and $1,713,160 upon completion. If the Company is in breach of the purchase order, the manufacturer may suspend performance with 10 days written notice, and may resume work after the breach has been rectified, if the manufacturer has not terminated the purchase order. Work under the Purchase Order may resume, and any schedule with respect to the work and compensation shall be adjusted to account for the period of suspension plus any other reasonable time and expense necessary for the manufacturer to resume performance, including any expenses incurred, which are directly attributable to the suspension.

In the event of termination of the purchase order for any reason, all unpaid costs incurred to the date of termination are due within 30 days. Cost include but are not limited to demobilization, reassignment of personnel, associated overhead costs and all other expenses directly resulting from the termination.

On October 13, 2022, the Company closed a bought deal financing of 27,912,982 units at a price of $0.26 per unit for gross proceeds of $7,257,375. Each unit consisted of one common share and one common share purchase warrant, each whole warrant exercisable at $0.32 for a 36 month period. The Company paid $523,115 cash finder’s fees and other expenses and issued 1,674,779 broker warrants. The broker warrants are exercisable into units at $0.26 per unit, with each unit comprised of one common share and one common share purchase warrant, each whole warrant exercisable at $0.32 for a 36 month period from the closing date of the financing.

On October 19, 2022, the Company closed the remaining overallotment from the October 13, 2022 bought deal financing of 3,050,768 units at a price of $0.26 per unit for gross proceeds of $793,200. Each unit consisted of one common share and one common share purchase warrant, each whole warrant exercisable at $0.32 for a 36 month period. The Company paid $47,592 cash finder’s fees and other expenses and issued 183,046 broker warrants. The broker warrants are exercisable into units at $0.26 per unit, with each unit comprised of one common share and one common share purchase warrant, each whole warrant exercisable at $0.32 for a 36 month period from the closing date of the financing.

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Royal Helium Ltd. — Interim / Quarterly Report 2022

47169_rns_2022-11-29_83d58916-bac7-4871-b36c-87073e266ffd.pdf

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Royal Helium Ltd. Condensed Interim Consolidated Statements of Financial Position (Expressed in Canadian dollars) (Unaudited)

Royal Helium Ltd.

1. NATURE AND CONTINUANCE OF OPERATIONS

2. BASIS OF PREPARATION

3. MANAGEMENT'S CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Key Estimates

Decommissioning liabilities

Taxation

Share-based payments

Critical Judgments

Impairment of non-financial assets

Exploration and evaluation (“E&E”) assets

Deferred income taxes

4. STEVEVILLE ACQUISITION

5. CASH AND CASH EQUIVALENTS

Royal Helium Ltd.

6. EXPLORATION AND EVALUATION ASSETS

7. PROPERTY, PLANT AND EQUIPMENT

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

9. DECOMMISSIONING LIABILITIES

10. SHARE CAPITAL AND EQUITY RESERVES

11. STOCK OPTIONS

12. WARRANTS AND BROKER WARRANTS

13. NET LOSS PER COMMON SHARE

Royal Helium Ltd.

14. GENERAL AND ADMINISTRATIVE

15. CONTINGENCIES AND COMMITMENTS

Contracts

Environmental contingencies

Property expenditure commitments

Legal matters

Novel coronavirus

16. RELATED PARTY TRANSACTIONS

17. FINANCIAL INSTRUMENTS

Financial risks factors

(a) Market risk

(b) Credit risk

(c) Liquidity risk

(d) Commodity price risk

Capital management

18. SUPPLEMENTAL CASH FLOW INFORMATION

19.

SUBSEQUENT EVENTS

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Royal Helium Ltd. Interim / Quarterly Report 2022