Usha Resources Ltd. — Interim / Quarterly Report 2023

Mar 1, 2023

USHA RESOURCES LTD.

CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)

DECEMBER 31, 2022

USHA RESOURCES LTD. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in Canadian Dollars) (Unaudited) AS AT

	December 31, 2022	March 31, 2022
ASSETS Current Cash Receivables Prepaid expenses Exploration and evaluation assets(Note 4)	1,023,062 $ 166,028 890,376 2,079,466 2,226,681 4,306,147 $	1,170,795 $ 20,763 206,837
		1,398,395 988,645
		2,387,040 $
LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities Shareholders' equity Share capital (Note 5) Share subscriptions (Note 5b) Reserves (Note 5c) Deficit	126,369 $ 7,317,359 - 461,087 (3,598,668) 4,179,778 4,306,147 $	90,510 $ 3,658,645 34,000 294,382 (1,690,497)
		2,296,530
		2,387,040 $

Nature and continuance of operations (Note 1) Subsequent events (Note 9)

Approved and authorized for issue by the Board of Directors on March 01, 2023:

“Navin Varshney” Director Navin Varshney	“Deepak Varshney” Director Deepak Varshney

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

USHA RESOURCES LTD.

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Expressed in Canadian Dollars) (Unaudited)

	Three months ended December 31, 2022	Three months ended December 31, 2021	Nine months ended December 31, 2022	Nine months ended December 31, 2021
EXPENSES Consulting fees (Note 6) Insurance Office and miscellaneous Professional fees (Note 6) Regulatory and filing fees Rent and administration charges (Note 6) Share-based payments (Note 5c) Transfer agent fees Travel and entertainment Foreign exchange loss Interest Income Other Income Loss and comprehensive loss for theperiod	321,754 $ 3,450 15,169 27,344 1,500 16,500 127,988 700 9,501 523,906 2,629 (9,199) - 517,336 $	142,589 $ 2,891 11,951 23,094 4,368 15,000 73,493 1,335 2,687 277,408 - - - 277,408 $	1,475,896 $ 9,850 41,612 86,880 30,646 49,000 278,723 700 15,975 1,989,282 5,902 - (9,225) 1,985,959 $	381,974 $ 8,641 17,505 47,012 21,818 30,000 141,134 4,064 9,246
				661,394 57 - - 661,451 $
Basic and diluted lossper common share	0.01 $	0.02 $	0.06 $	0.04 $
Weighted average number of common shares outstanding - basic and diluted	35,469,311	17,750,753	32,762,108	15,558,968

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

USHA RESOURCES LTD. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Expressed in Canadian Dollars) (Unaudited)

Share Capital (Note 5)

	Shares	Amount	Reserves	Share Subscriptions	Deficit	Total Shareholders’ Equity
Balance, March 31, 2021 Shares issued for stock options exercised (Note 5c) Reserve transferred for exercise of share options (Note 5c) Private placement (Note 5b) Share-based payments (Note 5c) Share issue costs (Note 5b) Warrants exercised (Note 5d) Loss and comprehensive loss for the period Balance,December 31,2021	15,079,270 70,000 - 3,414,335 - - 4,582,000 - 23,145,605	1,727,455 $ 14,000 14,069 1,024,300 - (71,809) 950,630 - 3,658,645 $	120,800 $ - (14,069) - 141,134 25,797 - - 273,662 $	- $ - - - - - - - - $	(748,057) $ - - - - - - (661,451) (1,409,508) $	1,100,198 $ - 14,000 - 1,024,300 141,134 (46,012) 950,630 (661,451)
						2,522,799 $
Balance, March 31, 2022 Private placement (Note 5b) Shares issued for mineral claims (Note 5b) Share-based payments (Note 5c) Share issue costs (Note 5b) Stock options cancelled (Note 5c) Shares issued for stock options exercised (Note 5c) Reserve transferred for exercise of share options (Note 5c) Loss and comprehensive loss for the year Balance,December 31,2022	23,145,605 9,651,338 2,423,095 - - - 432,700 - 35,652,738	3,658,645 $ 2,895,401 728,419 - (116,017) - 86,540 64,371 - 7,317,359 $	294,382 - - 278,723 30,141 (77,788) (64,371) - 461,087 $	34,000 $ (34,000) - - - - - - $	(1,690,497) - - - - 77,788 (1,985,959) (3,598,668) $	2,296,530 $ 2,861,401 728,419 278,723 (85,876) - 86,540 - (1,985,959)
						4,179,778 $

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

USHA RESOURCES LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in Canadian Dollars) (Unaudited)

	Nine months ended December 31, 2022	Nine months ended December 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES Loss and comprehensive loss for the period Adjustment for item not involving cash: Share-based payments Changes in non-cash working capital items: (Increase) decrease in accounts receivable (Increase) decrease in prepaid expenses Increase in accounts payable and accruals Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Exploration and evaluation assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Share issue costs Reserves Share subscriptions Proceeds from the issuance of share capital Net cash provided (used) in financing activities Increase (decrease) in cash for the period Cash, beginning of period Cash, end ofperiod	(1,977,369) $ 278,723 (145,265) (683,539) 35,859 (2,491,591) (509,617) (509,617) (85,876) (72,961) (34,000) 3,046,312 2,853,475 (147,733) 1,170,795 1,023,062 $	(661,451) $ - (3,351) (56,397) 9,732
		(711,467)
		(34,605)
		(34,605)
		(63,509) 144,563 - 2,002,999
		2,084,053
		1,337,981 221,758
		1,559,739 $
Cashpaid during theperiod for interest	- $	- $
Cashpaid during theperiod for income taxes	- $	- $

Supplemental information:

During the nine months ended December 31, 2022, the Company issued 9,651,338 common shares pursuant to the non-brokered private placement at a price of $0.30 per share, warrants valued at $30,142 as finders’ fees on a private placement and 2,423,095 common shares valued at $728,419 pursuant to the Jackpot Lake agreement with Ares Strategic Mining Inc, the Company issued 432,700 common shares valued at $86,540 for stock options exercised. (Note 5).

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

USHA RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars) (Unaudited)

1. NATURE AND CONTINUANCE OF OPERATIONS

Usha Resources Ltd. (the "Company") was incorporated as a private company by Certificate of Incorporation issued pursuant to the provisions of the Business Corporations Act on February 26, 2018. The Company was classified as a Capital Pool Company as defined in the TSX Venture Exchange (“TSX-V”) Policy 2.4 and its Qualifying Transaction was approved by the regulatory authorities during the year ended March 31, 2020 (Note 4).

The Company is listed for trading on the TSX Venture Exchange (“TSX-V”) under the symbol USHA.V, the OTCQB Exchange under the symbol USHAF and the Frankfurt Stock Exchange under the symbol JO0. The Company’s head office address is 1575 Kamloops Street, Vancouver BC, V5K 3W1, Canada. The registered and records office address is Bentall 5, 1008 – 550 Burrard Street, Vancouver, BC, V6C 2B5, Canada.

The Company's business is to acquire and explore interests in mineral properties located in North America and its portfolio includes Jackpot Lake, a lithium project in Nevada; Nicobat, a nickel-copper-cobalt project in Ontario; and Lost Basin, a gold-copper project in Arizona.

The Company’s exploration and evaluation properties are at the exploration stage. The business of exploring for minerals and mining involves a high degree of risk. Few properties that are explored are ultimately developed into producing mines. Major expenses may be required to establish ore reserves, to develop metallurgical processes, to acquire construction and operating permits and to construct mining and processing facilities.

Although the Company has taken steps to verify title to the properties on which it is conducting exploration and in which it has an interest, in accordance with industry standards for the current stage of operations of such properties, these procedures do not guarantee the Company's title. Property title may be subject to government licensing requirements or regulations, unregistered prior agreements, unregistered claims, aboriginal claims, and noncompliance with regulatory and environmental requirements. The Company’s assets may also be subject to increases in taxes and royalties, renegotiation of contracts, political uncertainty and currency exchange fluctuations and restrictions.

These unaudited interim consolidated financial statements are presented in Canadian dollars, which is the functional currency of the Company and its subsidiaries.

These unaudited interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. While the Company has been successful in obtaining its required financing in the past, there is no assurance that such financing will be available or be available on favourable terms. An inability to raise additional financing may impact the future assessment of the Company as a going concern. The financial statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations. These material uncertainties may cast significant doubt upon the Company’s ability 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, however, the Company does note that its fundraising abilities were impacted due to lockdowns and other measures implemented to address the coronavirus.

2. BASIS OF PREPARATION

These unaudited interim consolidated financial statements have been prepared using accounting policies consistent with IFRS issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”) and follow the same accounting policies and methods of application as the Company’s March 31, 2022 annual audited financial statements, unless otherwise noted. These

USHA RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars) (Unaudited)

interim consolidated financial statements do not include all the information required for full annual financial statements and accordingly, they should be read in conjunction with the Company’s most recent annual statements.

These interim consolidated financial statements have been prepared on a historical cost basis, except for financial instruments classified as financial instruments at fair value through profit and loss, which are stated at their fair value. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of interim consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these judgments, estimates and assumptions could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in future periods.

The information about significant areas of judgment considered by management in preparing the financial statements is as follows:

• i) The carrying value and the recoverability of exploration and evaluation assets included in the statements of financial position. The cost model is utilized and the value of the exploration and evaluation assets is based on the expenditures incurred. At every reporting period, management assesses the potential impairment which involves assessing whether or not facts or circumstances exist that suggest the carrying amount exceeds the recoverable amount.

• ii) The inputs used in calculating the fair value for share-based payments expense included in profit or loss and share-based share issuance costs included in shareholders’ equity. The share-based payments expense is estimated using the Black-Scholes options-pricing model as measured on the grant date to estimate the fair value of stock options. This model involves the input of highly subjective assumptions, including the expected price volatility of the Company’s common shares, the expected life of the options, and the estimated forfeiture rate.

• iii) The valuation of shares issued in non-cash transactions. Generally, the valuation of non-cash transactions is based on the value of the goods or services received. When this cannot be determined, it is based on the fair value of the non-cash consideration. When non-cash transactions are entered into with employees and those providing similar services, the non-cash transactions are measured at the fair value of the consideration given up using market prices.

• iv) Deferred tax assets are recognized in respect of tax losses and other temporary differences to the extent it is probable that taxable income will be available against which the losses can be utilized. Judgment is required to determine the amount of deferred tax assets that can be recognized based upon the likely timing and level of future taxable income together with future tax planning strategies.

4. EXPLORATION AND EVALUATION ASSETS

The Company incurred expenditures on the properties as follows:

USHA RESOURCES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars) (Unaudited)

		Nicobat,		Lost Basin,		Jackpot Lake,
Acquisition Costs		Ontario		Arizona		Nevada		Total
Balance, March 31, 2020	$	150,000	$	-	$	-	$	150,000
Lease payment		-		34,592		-		34,592
Issuance of common shares		95,000		200,000		-		295,000
Balance,March 31,2021		245,000		234,592		-		479,592
Leasepayment		-		31,988		-		31,988
Balance,March 31,2022		245,000		266,580		-		511,580
Issuance of common shares		-		-		728,419		728,419
Cash consideration		-		-		75,000		75,000
Leasepayment		-		32,581		-		32,581
Balance,September 30,2022		245,000		299,161		803,419		1,347,580
Exploration Expenditures:
Balance, March 31, 2020		11,568		-		-		11,568
Consulting fees		-		13,629		-		13,629
Geological consulting and reports		32,350		45,056		-		77,406
Field Expenses		9,357		76,785		-		86,142
Assay Sampling		23,313		24,113		-		47,426
Exploration equipment		-		9,638		-		9,638
Legal fees for acquisition		-		14,294		-		14,294
Drilling Expenses		197,229		-		-		197,229
Titles Claims Fees		2,073		-		-		2,073
Total costs,March 31,2021		275,890		183,515		-		459,405
Consulting fees		-		5,289		-		5,289
Geological consulting and reports		-		1,105		-		1,105
Field Expenses		728		9,632		-		10,360
Assay Sampling		-		94		-		94
Titles Claims Fees		812		-		-		812
Balance,March 31,2022		277,430		199,635		-		477,065
Consulting fees		3,744		-		-		3,744
Exploration advances		-		-		60,667		60,667
Geological consulting and reports		1,800		-		17,621		19,421
Field Expenses		154		48		-		202
Assay Sampling		-		2,869		-		2,869
Staking						34,069		34,069
DrillingExpenses		-		-		281,064		281,064
Balance,December 30,2022		283,128		202,552		393,421		879,101
Total costs	$	528,128	$	501,713	$	1,196,840	$	2,226,681

Title to exploration and evaluation assets

Title to exploration and evaluation assets involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral properties. The Company has investigated title to all of its mineral properties and, to the best of its knowledge, title to all of its properties is in good standing.

USHA RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars) (Unaudited)

The Company has three exploration assets:

Nicobat property, Ontario, Canada

The Company’s first project was acquired as part of its Qualifying Transaction. The Company acquired an initial 51% interest during fiscal 2020 in consideration for 1,500,000 common shares valued at $150,000. During fiscal 2021 the Company increased its interest by 34% through the issuance of an additional 500,000 common shares of the Company valued at $95,000, bringing its total interest to 85%. The property is subject to a 2% net smelter returns royalty of which 1.5% can be repurchased for USD$2,000,000 until the end of the five-year period commencing from the date the property is put into commercial production.

On May 10, 2022, the Company entered into an arrangement agreement (the “Arrangement”) with its wholly-owned subsidiary, Formation Metals Inc. (“Formation Metals” or “FMI”), to transfer the Nicobat property to FMI. Under the terms of the Arrangement, USHA shareholders will be issued one (1) share of FMC with respect to every five (5) shares of USHA owned on the share distribution record date (the “Share Distribution Record Date”), which will be predetermined by USHA’s Board of Directors. Holders of USHA options and warrants, who exercise their options and/or warrants before the Share Distribution Record Date, will also be entitled to receive one (1) share of FMI with respect to every five (5) shares of USHA.

Lost Basin property, Arizona, USA

The Company entered into a binding Letter of Intent (“LOI”) with AJA Mining LLC and Gold Basin Mining EXP LLC (collectively, the “Optionors”) on June 3, 2020, whereby the Optionors granted the Company the option to acquire a 100% interest in certain mineral claims located in Arizona. Pursuant to the agreement, the Company issued 1,000,000 common shares valued at $200,000 in fiscal 2021. The Company is required to make annual lease payments of US$25,000, and within three years make a final payment of US$3,000,000.

On July 15, 2022, pursuant to the terms of the binding LOI with AJA Mining, LLC, the Company advanced US$25,000 converted into Canadian $32,581 to the AJA Mining, LLC towards the annual lease payment of the in 133 mineral claims in an interest-free loan.

Jackpot Lake, Nevada, USA

On May 2, 2022, the Company received approval from the TSX-V for its mineral property option agreement with Ares Strategic Mining Inc. (the “Vendor”) to acquire a 100% interest in 140 mineral claims located in Jackpot Lake, Clark County, Nevada for total consideration of $75,000 cash and $950,000 in shares over a 12-month period. The Company completed its first payment of $75,000 cash and issued 1,678,062 common shares to the Vendor on May 2, 2022.

On September 14, 2022, the Company issued 745,033 common shares valued at $225,000 pursuant to the Jackpot Lake agreement with Ares Strategic Mining Inc. as the second payment under the option agreement.

Jackpot Lake Lithium Brine Property is located within Clark County, 35 kilometres northeast of Las Vegas, Nevada, and is comprised of 140 mineral claims that total 2,800 acres (approximately 11.3 km[2] ).

5. SHARE CAPITAL

a) Authorized:

Unlimited common shares with no par value and unlimited preferred shares with no par value.

b) Issued:

During the nine months ended December 31, 2022, the Company issued 9,651,338 Units pursuant to a non-brokered private placement at a price of $0.30 per Unit, and 2,423,095 common shares valued at $728,419 pursuant to the

USHA RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars) (Unaudited)

Jackpot Lake agreement with Ares Strategic Mining Inc, and 432,700 common shares valued at $86,540 for stock options exercised. The Company also granted warrants to acquire 286,247 common shares exercisable at $0.45 for two years as finders’ fees on the private placement. The warrants were valued at $30,142 using the Black-Scholes option pricing model assuming a life expectancy of two years, a risk-free interest rate of 2.96%, a forfeiture rate of nil, and volatility of 76.02%

Each Unit issued pursuant to the non-brokered private placement consisted of one common share and one-half of one transferable share purchase warrant with each whole warrant exercisable at $0.45 per share for a period of two (2) years from the date of closing, provided that in the event that the closing price of the Company’s Shares on the TSXV (or such other exchange on which the Company’s Shares may become traded) is $0.75 or greater per share during any thirty (30) consecutive trading day period at any time subsequent to four months and one day after the closing date, the warrants will expire at 4:00 p.m. on the 30th day after the date on which the Company provides notice of such accelerated expiry. No value was attributed to the warrant component of the units.

During the year ended March 31, 2022, the Company issued 8,066,335 common shares pursuant to the private placement, exercise of warrants and stock option as stated below:

• i) 3,414,335 shares were issued in a non-brokered private placement at a price of $0.30 per share. ii) 320,000 warrants were exercised at a price of $0.19 per share.

• iii) 3,007,000 warrants were exercised at a price of $0.19 per share.

• iv) 1,200,000 warrants were exercised at a price of $0.26 per share.

• v) 5,000 warrants were exercised at a price of $0.30 per share.

• vi) 50,000 stock options were exercised at a price of $0.10 per share. vii) 70,000 stock options were exercised at a price of $0.20 per share.

During the year ended March 31, 2021, the Company issued 500,000 common shares valued at $95,000 pursuant to the Emerald Lake agreement and issued 1,000,000 common shares valued at $200,000 pursuant to the agreement with AJA Mining LLC and Gold Basin Mining EXP LLC (Note 4).

During the year ended March 31, 2021, the Company issued 200,000 common shares for proceeds of $20,000 pursuant to the exercise of agent’s warrants.

On October 21, 2020, the Company closed the first tranche of the Company's non-brokered private placement, issuing an aggregate of 2,065,830 non-flow through units at $0.20 per unit raising gross proceeds of $413,166. On November 23, 2020, the Company closed the second tranche of the Company's non-brokered private placement, issuing an aggregate of 100,000 non-flow through units at $0.20 per unit raising gross proceeds of $20,000. On December 2, 2020, the Company closed the final tranche of its non-brokered private placement, issuing an aggregate of 499,440 units at $0.20 per unit and 487,000 flow through units at $0.25 per flow through unit raising gross proceeds of $221,638. During the year ended March 31, 2021, the Company recorded shares issuance costs in the amount of $4,061.

Each non-flow through unit consists of one common share and one-half of one transferable share purchase warrant. Each warrant is exercisable to purchase one warrant share of the Company at $0.30 per warrant share for a period of two years from the date of issuance of the units, provided that in the event that the closing price of the Company’s shares on the TSX Venture Exchange (or such other exchange on which the Company’s shares may become traded) is $0.75 or greater per share during any thirty (30) consecutive trading day period at any time subsequent to four months and one day after the closing date, the warrants will expire at 4:00 p.m. on the 30th day after the date on which the Company provides notice of such accelerated expiry to the holders of the warrants. No value was attributed to the warrant component of the units.

The Company calculates the tax effect of any premium related to the issuance of flow-through shares by reviewing the value of corresponding common shares and warrants issued in connection with the issuance. As a result, the Company recognized a premium of $24,350 as a flow-through premium liability on the issuance of the flow-through shares.

USHA RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars) (Unaudited)

As at December 31, 2022, there were nil (2021: 990,000) shares in escrow.

• c) Stock options

The Company maintains a Stock Option Plan (the “Plan”) under which it is authorized to grant stock options to executive officers, directors, employees, and consultants. Under the Plan, the number of options that may be issued is limited to no more than 10% of the Company’s issued and outstanding shares immediately prior to the grant.

The exercise price of each stock option shall equal the market price of the Company's shares, less any applicable discount, as calculated on the date of grant. The options can be granted for a maximum term of five years and vest at the discretion of the Board of Directors. The Company approved the stock option plan during the year ended March 31, 2019. The Company approved the grant to directors and officers of stock options to purchase 420,000 common shares exercisable at $0.10 per share expiring five years from the date of grant (until October 12, 2023).

During the nine months ended December 31, 2022, the Company granted 250,000 incentive stock options vesting as to ¼ every three months from the date of grant over a period of not less than 12 months, the Company granted 100,000 incentive stock options with a fair value of $12,540 using the Black-Scholes option pricing model assuming a life expectancy of two years, a risk free interest rate of 2.37%, a forfeiture rate of nil, and volatility of 74.96%, the Company granted 50,000 incentive stock options with a fair value of $5,588 using the Black-Scholes option pricing model assuming a life expectancy of two years, a risk free interest rate of 2.52%, a forfeiture rate of nil, and volatility of 75.14%, the Company granted 471,000 incentive stock options with a fair value of $56,986 using the Black-Scholes option pricing model assuming a life expectancy of two years, a risk free interest rate of 2.67%, a forfeiture rate of nil, and volatility of 75.96%, the Company granted 437,000 incentive stock options with a fair value of $56,846 using the Black-Scholes pricing model assuming a life expectancy of two years, a risk free interest rate of 2.55%, a forfeiture rate of nil, and volatility of 75.90%, the Company granted 30,000 incentive stock options with a fair value of $3,501 using the Black-Scholes pricing model assuming a life expectancy of two years, a risk free interest rate of 3.79%, a forfeiture rate of nil, and volatility of 77.24%, the Company granted 50,000 incentive stock options with a fair value of $5,496 using the Black-Scholes pricing model assuming a life expectancy of two years, a risk free interest rate of 3.89%, a forfeiture rate of nil, and volatility of 77.67%, the Company granted 1,150,000 incentive stock options with a fair value of $118,234 using the Black-Scholes pricing model assuming a life expectancy of two years, a risk free interest rate of 4.06%, a forfeiture rate of nil, and volatility of 71.42%. The Company expensed $268,969 as sharebased compensation for stock options.

During the nine months ended December 31, 2022, 432,700 outstanding stock options valued at $86,540 were exercised. The corresponding amount of $64,371 was transferred from reserves to share capital.

During the nine months ended December 31, 2022, 71,000 of the outstanding stock options were cancelled. The corresponding amount of $8,590 was transferred from reserves to deficit.

During the nine months ended December 31, 2022, 350,000 of the outstanding stock options were expired. The corresponding amount of $69,198 was transferred from reserves to deficit.

		Number	Weighted Average Exercise Price
Outstanding, March 31, 2020 Granted Outstanding, March 31, 2021 Granted Exercised Outstanding, March 31, 2022 Granted Exercised Cancelled		420,000 652,700 1,072,700 885,227 (120,000) 1,837,927 2,538,000 (432,000) (71,000)	$ 0.10 0.21 0.17 0.26 0.16 0.21 0.30 0.20 0.285

USHA RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars) (Unaudited)

Expired Outstanding, December 31, 2022	(350,000) 3,522,927	0.29 0.25

The following stock options were outstanding and exercisable as at December 31, 2022:

	Number of	Number of			Remaining
	options	options	Exercise		contractual
	outstanding	exercisable	Price	Expiry Date	life (years)
Options	370,000	370,000	$0.10	October 12, 2023	0.78
Options	250,000	250,000	$0.20	September 17, 2025	2.72
Options	185,227	185,227	$0.20	July 5, 2026	3.51
Options	25,000	25,000	$0.335	October 7, 2026	3.77
Options	50,000	50,000	$0.355	November 11, 2026	3.87
Options	75,000	75,000	$0.290	January 7, 2024	1.02
Options	100,000	100,000	$0.310	February 9, 2024	1.11
Options	250,000	250,000	$0.375	April 4, 2024	1.26
Options	100,000	100,000	$0.300	April 5, 2024	1.26
Options	50,000	50,000	$0.300	April 19, 2024	1.30
Options	400,000	400,000	$0.285	May 10, 2024	1.36
Options	437,000	437,000	$0.29	May 27, 2024	1.41
Options	30,000	30,000	$0.30	September 16, 2024	1.71
Options	50,000	50,000	$0.25	September 27, 2024	1.74
Options	1,150,000	1,150,000	$0.25	December 30, 2024	2.00

d) Warrants

As at December 31, 2022, the Company had 8,547,536 warrants outstanding.

A summary of changes in outstanding warrants is as follows:

	Warrants outstanding Weighted Average Exercise Price 4,727,000 $ 0.20 1,588,735 0.31 (200,000) 0.10 6,115,735 $ 0.23 1,851,904 0.45 (4,532,000) 0.21 3,435,639 $ 0.38 5,111,897 0.45 8,547,536 $ 0.42
Outstanding and exercisable at March 31, 2020 Warrants issued Warrants exercised Outstanding and exercisable at March 31, 2021 Warrants issued Warrants exercised Outstanding and exercisable at March 31, 2022 Warrants issued Outstanding and exercisable at December 31, 2022

The following warrants were outstanding at December 31, 2022:

	Number of	Exercise
	Shares	Price	Expiry Date
Warrants:
Agent’s warrants	5,250	$ 0.30	October 21, 2023
Agent’s warrants	2,100	0.30	December 2, 2023
Agent’s warrants	5,250	0.35	December 2, 2023

USHA RESOURCES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars) (Unaudited)

Agent’s warrants	134,237	0.45	November 12, 2023
Agent’s warrants	10,500	0.45	December 17, 2023
Agent’s warrants	49,200	0.45	April 1, 2024
Agent’s warrants	75,800	0.45	May 13, 2024
Agent’s warrants	114,800	0.45	May 17, 2024
Agent’s warrants	46,427	0.45	June 14, 2024
Non-flow through warrants	1,032,915	0.30	October 21, 2023
Non-flow through warrants	50,000	0.30	November 23, 2023
Flow-through warrants	243,500	0.35	December 2, 2023
Non-flow through warrants	244,720	0.30	December 2, 2023
Non-flow through warrants	1,483,834	0.45	November 12, 2023
Non-flow through warrants	223,333	0.45	December 17, 2023
Non-flow through warrants	384,667	0.45	April 1, 2024
Non-flow through warrants	1,467,499	0.45	May 13, 2024
Non-flow through warrants	717,500	0.45	May 17, 2024
Non-flow through warrants	2,256,004	0.45	June 14, 2024

6. RELATED PARTY TRANSACTIONS

The aggregate amount of expenditures paid or payable to key management personnel consisting of directors, former directors or companies with common directors was as follows:

Name of the	Company’s Name	Nature of	Three months		Three months
Key management personnel		Transaction	ended		ended
			December 31,	December 31,
			2022		2021
Deepak Varshney, CEO	Castello Q Development	Consulting	$ 45,000	$	24,000
	Corporation	fees
Navin Varshney, Director	N.K.V. Engineering &	Rent and	16,500		15,000
	Consulting Ltd	administration
		charges
Khalid Naeem, CFO	KN Consulting Inc./Aterna	Accounting	7,500		5,060
	Advisors Inc.	fees

• a) Accounts payable included $31,500 (2021: $9,260) owed to directors and officers of the Company for operating expenses paid on behalf of the Company during the Nine months ended December 31, 2022.

7. FINANCIAL INSTRUMENTS

Fair value

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

• Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

• Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

• Level 3 – Inputs that are not based on observable market data.

Cash is carried at fair value using a level 1 fair value measurement. The recorded values of receivables and accounts payable and accrued liabilities approximate their fair values due to their short term to maturity.

USHA RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars) (Unaudited)

Financial risk management

The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below.

Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company limits its exposure to credit risk by placing its cash with a major financial institution. Management feels that the Company’s credit risk with respect to cash is remote.

Interest rate risk

The Company is exposed to interest rate risk to the extent that the cash maintained at the financial institutions is subject to a floating rate of interest. The interest rate risk on cash is not considered significant.

Liquidity risk

All of the Company’s financial liabilities are classified as current and are anticipated to mature within the next fiscal year. The Company intends to settle these with funds from its positive working capital position.

Foreign currency risk

Currency risk is the risk that the fair value or future cash flows from a financial instrument will fluctuate due to changes in foreign exchange rates. As at December 31, 2022, the Company did not have any financial instruments denominated in foreign currencies and considers foreign currency risk to be insignificant.

Price risk

Equity price risk is defined as the potential adverse impact on the Company’s earnings due to movements in individual equity prices or general movements in the level of the stock market. The Company closely monitors individual equity movements and the stock market to determine the appropriate course of action to be taken by the Company.

8.

CAPITAL MANAGEMENT

Capital is comprised of all the components of the Company’s shareholders’ equity as at December 31, 2022, the Company’s shareholders’ equity was $4,179,778 and there was no long-term debt outstanding. The Company manages its capital structure to maximize its financial flexibility adjusting it in response to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. The Company does not presently utilize any quantitative measures to monitor its capital. Management reviews its capital management approach on an ongoing basis and believes that this approach is reasonable given the relative size of the Company. The Company is not subject to any externally imposed capital requirements or debt covenants. There were no changes in the Company’s approach to capital management during the nine months ended December 31, 2022.

9.

SUBSEQUENT EVENTS

On January 10, 2023, the Company announced that it had obtained the final order from the Supreme Court of British Columbia approving the previously announced proposed spin-out of the Company’s wholly owned-subsidiary, FMI, through Arrangement between USHA and FMI. The Company will proceed with completing closing conditions of the Arrangement, including seeking final approval of the Arrangement by the TSXV. The Arrangement cannot be completed until these conditions have been met.

Upon completion of the Arrangement and the share exchange pursuant to the Arrangement, each USHA Shareholder will receive one (1) common share of FMI with respect to every five (5) common shares of USHA held on the Share

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars) (Unaudited)

USHA RESOURCES LTD.

Distribution Record Date. For example, upon completion of the Arrangement, for each 10,000 common shares of USHA owned on the Share Distribution Record Date, the USHA Shareholder will own 2,000 common shares of FMI. USHA Shareholders will continue to own the same number of USHA common shares as they did on the Share Distribution Record Date.

On February 7, 2023, the Company announced that it had completed the first drill hole of its maiden drill program at its Jackpot Lake project. The Company provided further updates on drilling throughout February 2023.