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

FORTEM RESOURCES INC.

CONSOLIDATED CONDENSED INTERIM STATEMENTS OF STOCKHOLDERS’ EQUITY

(Expressed in US dollars - Unaudited)

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

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

1. NATURE AND CONTINUANCE OF OPERATIONS

Fortem Resources Inc. (the “Company”) was incorporated in the State of Nevada on July 9, 2004. The Company focuses its business efforts on the acquisition, exploration, and development of oil and gas properties.

The accompanying consolidated condensed interim financial statements have been prepared assuming the Company will continue as a going concern. As of August 31,November 30, 2018, the Company has not achieved profitable operations, has incurred losses in developing its business, and further losses are anticipated. The Company has an accumulated deficit of $38,208,214.$38,575,102.

The Company has restated its August 31,November 30, 2018 consolidated condensed interim financial statements as disclosed in Note 18.19.

The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and pay its liabilities when they come due. To date, the Company has funded operations through the issuance of capital stock and debt. Management plans to continue raising additional funds through equity or debt financings and loans from directors. There is no certainty that further funding will be available as needed. These factors raise substantial doubt about the ability of the Company to continue operating as a going concern. The ability of the Company to continue its operations as a going concern is dependent upon its ability to raise sufficient new capital to fund its operating commitments and ongoing losses and ultimately on generating profitable operations. The consolidated condensed interim financial statements do not include any adjustments to be recorded to assets or liabilities that might be necessary should the Company be unable to continue as a going concern.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited consolidated condensed interim financial statements of the Company have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). They do not include all information and footnotes required by GAAP for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements from the year ended February 28, 2018 included in the Company’s Annual Report on Form 10-K filed with the SEC. The unaudited consolidated condensed interim financial statements should be read in conjunction with those financial statements included in the 10-K report. In the opinion of management, all adjustments considered necessary for fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the sixnine months ended August 31,November 30, 2018 are not necessarily indicative of the results that may be expected for the year ending February 28, 2019.

Basis of consolidation

These consolidated condensed interim financial statements include the accounts of the Company and its wholly owned subsidiaries, Colony Energy, LLC, (“Colony”) Black Dragon Energy, LLC, (“Black Dragon”) Rolling Rock Resources, LLC (“Rolling Rock”) and City of Gold, LLC (“City of Gold”). All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated upon consolidation.

Basic and Diluted Loss per Share

Basic earnings or loss per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income (loss) by the weighted-average of all potentially dilutive shares of the common stock that were outstanding during the years presented. There were 3,050,0002,750,000 (February 28, 2018 - 5,323,698) potentially dilutive securities excluded from the calculation of diluted loss per share as their effect would be anti-dilutive.

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Basic and Diluted Loss per Share (continued)

The treasury stock method is used in calculating diluted EPS for potentially dilutive stock options and share purchase warrants, which assumes that any proceeds received from the exercise of in-the-money stock options and share purchase warrants, would be used to purchase common shares at the average market price for the period.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these financial statements relate to carrying values of oil and gas properties and investments, the assumptions used to record asset retirement obligations, the assumptions used to determine the fair value of derivative financial assets and liabilities, and valuation of share-based payments.

Recent Accounting Pronouncements

Other recent accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future financial position, results of operations or cash flows.

3. LOANS RECEIVABLE FROM RELATED PARTY

During the year ended February 28, 2018, the Company advanced unsecured loans of $99,135 (AUD$125,000) to a company related by virtue of a common director and significant shareholder.officer. The loans bear interest at 10% per annum and mature between April and June 2019.annum. The total amount receivable at August 31,November 30, 2018, including accrued interest is $108,830$106,150 (February 28, 2018 - $97,422).

4. INVESTMENT IN ASIA PACIFIC MINING LTD.

In April 2017, a binding financing and option agreement (the “Agreement”) was assigned to the Company where the Company subscribed a total of 2,930,259 units in the capital of Asia Pacific Mining Limited (“Asia Pacific”) at a total cost of $1,500,000, which represents approximately 7.5% of the issued and outstanding shares of Asia Pacific immediately after the financing. Asia Pacific is a private company registered in Hong Kong and the principal activities of Asia Pacific are exploration and mining in Myanmar (Note 7) and investment holding. Each unit consisted of one common share and one share purchase warrant which will entitle the holder of each warrant to acquire an additional share of Asia Pacific at an exercise price of $0.5119 per share during the term equal to the greater of two years from the closing of additional financing of Asia Pacific according to the terms of the Agreement or 18 months from the receipts of all necessary permits to carry out the exploration program.

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

5. EQUIPMENT

6. OIL AND GAS PROPERTIES, FULL COST METHOD

Compeer Property

The Compeer Property is located in Alberta, Canada. The Company has $43,462$42,846 (February 28, 2018 - $43,961) in bonds held with the Alberta Energy Regulator for its oil and gas properties.

Godin Property

On March 31, 2017, the Company entered into a petroleum, natural gas and general rights conveyance agreement to acquire a 100% interest in and to certain petroleum, natural gas and general rights, including Alberta Crown Petroleum and Oil Leases in the Godin area of Northern Alberta.

In addition, the vendor is entitled to receive certain milestone payments from the Company in the aggregate amount up to $210,000 as follows:

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

6. OIL AND GAS PROPERTIES, FULL COST METHOD (continued)

Godin Property (continued)

If the Company fails to make timely payment of any of the milestone payments, and does not remedy such failure within 30 days of receipt of written notice from the vendor, the vendor may elect either of the following:

In November 2017, the Company issued 30,000 shares at a value of $60,000 to settle the milestone payments of $60,000. TheDuring the period ended November 30, 2018, the Company is obligated to issue 3,000,000issued 1,000,000 common shares to one of the vendors of Colony which holds rights in the Godin Property.Property and is obligated to issue 2,000,000 common shares to one of the vendors.

Black Dragon Property

In March 2017, the Company entered into a purchase and sale agreement (the “Black Dragon PSA”), subsequently amended, to acquire a 75% working interest in and to certain leases, hydrocarbons, wells, agreements, equipment, surface rights agreements and assignable permits at an 80% net revenue interest located in the Moenkopi formation of the Carbon and Emery Counties, Utah (the “Black Dragon Property”). In August 2017 and May 2019, the Company entered into an amendment to the Black Dragon PSA (the “Black Dragon Amendment”), which amended the terms of the Black Dragon PSA. Under the Black Dragon Amendment, the Company is required to pay the vendor cash consideration totaling $3,900,000 (the “Black Dragon Cash Consideration”) based upon the following schedule:

In addition to revising the Black Dragon Cash Consideration as set out above, the Company has agreed to: (a) issue 250,000 common shares of the Company to the vendor on or prior to September 1, 2017 (issued at a value of $625,000); and (b) pay the vendor an additional $25,000 every sixty days commencing September 1, 2017 ($175,000200,000 paid) until such time as the Black Dragon Cash Consideration is paid in full. Furthermore, as part of the May 2019 amendment, the Company is required to issue 300,000 shares of the Company to the vendor.

Within 10 business days after the later of the Company paying the Black Dragon Cash Consideration in full or the Company meeting in full its carry obligation, the vendor will convey to the Company an undivided 75% of the Vendor’s right, title and interest in and to the assets, at an 80% Net Revenue Interest in the assets.

On August 16, 2018, the Company entered into a third amendment to purchase and sale agreement (the “Black Dragon Third Amendment”), which amended the terms of the Black Dragon PSA. The Black Dragon Third Amendment has the effect of postponing the balance of the Black Dragon Cash Consideration relating to the Black Dragon Property under the Black Dragon PSA from September 1, 2018 to October 1, 2019.

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

6. OIL AND GAS PROPERTIES, FULL COST METHOD (continued)

Black Dragon Property (continued)

Carry Obligation

As per the terms of the Black Dragon PSA, and in addition to the Black Dragon Cash Consideration, the Company is required to pay all costs and expenses incurred on the assets with respect to any and all exploration, development and production during the carry period. The “Carry Period” continues until the later of either (i) the date that the Company pays the full Black Dragon Cash Consideration set out above or (ii) the date that the Company pays all costs and expenses for the drilling, logging, testing and completion of two new wells, each well with a horizontal leg extending at least 2,000 feet in the target zone within the Moenkopi formation (the “Two Obligation Wells”). The Company is required to drill to completion or cause to be drilled to completion (or plugging and abandonment) the Two Obligation Wells on or before May 1, 2020, failing which, the Company’s right to earn any assignment in and to the assets will terminate immediately. For each vertical well drilled to 200 feet below the top of the Kaibab formation through completion (or plugging or abandonment) within a Federal Unit, the obligation deadline will be amended to the later of (i) the current obligation deadline or (ii) 6 months from the date the rig that drilled such vertical well to total depth has been removed from the wellsite.

Rolling Rock Property

In March 2017, the Company entered into a purchase and sale agreement (the “Rolling Rock PSA”), subsequently amended, to acquire a 75% working interest in and to certain leases, hydrocarbons, wells, agreements, equipment, surface rights agreements and assignable permits at an 80% net revenue interest located in the Mancos formation in the Southern Uinta Basin, Utah (the “Rolling Rock Property”). In August 2017 and May 2019, the Company entered into an amendment to the Rolling Rock PSA (the “Rolling Rock Amendment”), which amended the terms of the Rolling Rock PSA. Under the Rolling Rock Amendment, the Company is required to pay the vendor cash consideration totaling $5,400,000 (the “Rolling Rock Cash Consideration”) based upon the following schedule:

In addition to revising the Rolling Rock Cash Consideration as set out above, the Company has agreed to: (a) cause the Company to issue 250,000 common shares of the Company to the vendor on or prior to September 1, 2017 (issued at a value of $625,000); and (b) pay the vendor an additional $25,000 every sixty days commencing September 1, 2017 ($175,000200,000 paid) until such time as the Rolling Rock Cash Consideration and the Workover Funds are paid in full. Furthermore, as part of the May 2019 amendment, the Company is required to issue 300,000 shares of the Company to the vendor

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

6. OIL AND GAS PROPERTIES, FULL COST METHOD (continued)

Rolling Rock Property (continued)vendor.

Within 10 business days after the later of the Company paying the Rolling Rock Cash Consideration in full or the Company meeting in full its carry obligation, the vendor agrees to convey to the Company an undivided 75% of the vendor’s right, title and interest in and to the Leases, or a 80% net revenue interest in the Leases. Notwithstanding this transfer, within 10 business days after the later of payment of $300,000 on or before May 1, 2020 (which amount is in addition to the deposit and included in the Rolling Rock Cash Consideration set out above) and the replacement of the vendor’s bonds on or before July 1, 2019, the vendor agrees to convey to the Company an undivided 75% of the vendor’s right, title and interest in and to the Cisco Dome leases and related assets. However, if the Company fails to timely meet any of its obligations under the Rolling Rock PSA, after having taken assignment of the Cisco Dome leases and assets, then, if the vendor elects in its sole discretion, the Company is required to reassign the Cisco Dome leases and assets to the vendor without any additional encumbrances.

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

For the three and nine months ended November 30, 2018

(Expressed in US dollars – Unaudited)

6. OIL AND GAS PROPERTIES, FULL COST METHOD (continued)

Rolling Rock Property (continued)

Carry Obligation

As per the terms of the Rolling Rock PSA, and in addition to the Rolling Rock Cash Consideration, the Company is required to pay all costs and expenses incurred on the Leases with respect to any and all exploration, development and production during the carry period. The “Carry Period” continues until the later of either (i) the date that the Company pays the full Rolling Rock Cash Consideration set out above or (ii) the date that the Company pays all costs and expenses for the drilling, logging, testing and completion of three new wells in each of the three Federal Units, each well with a horizontal leg extending at least 1,000 feet in the target zone within the Mancos formation (the “Three Obligation Wells”). The Company is required to drill to completion or cause to be drilled to completion (or plugging and abandonment) the Three Obligation Wells on or before May 1, 2020, failing which, the Company’s right to earn any assignment in and to the Leases will terminate immediately. For each vertical well drilled to the top of the Dakota formation through completion (or plugging or abandonment) within a Federal Unit, the obligation deadline will be amended to the later of (i) the current obligation deadline or (ii) 6 months from the date the rig that drilled such vertical well to total depth has been removed from the wellsite.

The obligation well in the Grand Mancos Unit will be a vertical well drilled to a depth sufficient to test the Granite Walsh formation within such Federal Unit. For this well, completion (or plugging and abandonment) is expected to take place no later than 2 months after the rig that drilled to total depth has been removed from the wellsite and for a period of 6 months after completion of this obligation well (or plugging and abandonment), and the Company will have the exclusive option to purchase an additional 25% of the vendor’s right, title and interest in and to the leases with respect to the Granite Walsh formation within the boundary of the Grand Mancos Unit for an additional payment of $10,000,000.

7. RIGHTS TO THE ACQUISITION OF MINERAL EXPLORATION PROJECT

In connection to the acquisition of City of Gold, LLC in fiscal 2018, the Company owns the right to an option agreement. Under the option agreement, the vendors have agreed to grant to the Company an option (the “Option”) to purchase 100% of the ownership interest in a wholly owned subsidiary of Asia Pacific (Note 4) (the “Project Subsidiary”) which, in turn, owns 100% of the rights to the City of Gold mineral exploration project located in Myanmar.

The Company will be granted the Option upon satisfaction of the following:

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

7. RIGHTS TO THE ACQUISITION OF MINERAL EXPLORATION PROJECT (continued)

Upon the closing of the Final Funding Tranche, the Company will have earned the Option.

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

For the three and nine months ended November 30, 2018

(Expressed in US dollars – Unaudited)

7. RIGHTS TO THE ACQUISITION OF MINERAL EXPLORATION PROJECT (continued)

Once it has exercised the Option, the Company may, at its discretion, require Asia Pacific to transfer the Project Subsidiary to another Canadian publicly listed company to be selected by the Company (“Acquisition Co”) (if the Project Subsidiary is not transferred to another Canadian publicly listed company, Acquisition Co means the Company) for an exercise price consisting of $7,000,000 in cash and thirty percent of the issued and outstanding share capital of Acquisition Co (calculated on a fully diluted basis, excluding up to 10% in stock options, but including shares Acquisition Co may have issued in order to raise the exercise price of $7,000,000 and an additional $5,000,000 in working capital). Half of the cash portion of the exercise price must be paid upon exercise of the Option; the balance is to be paid on the first anniversary of the exercise and is to be evidenced by a one-year secured term note. Although the Company has the right to select Acquisition Co., it must select a Canadian publicly listed company that meets certain criteria – at exercise of the Option, Acquisition Co must have less than $100,000 in liabilities and $5,000,000 or more in working capital and Asia Pacific will have the right to nominate 30% of its directors.

During the year ended February 28, 2018, in connection with the acquisition of City of Gold, LLC, the Company allocated $39,530,234 to the rights to the acquisition of mineral exploration project. During fiscal 2018, theThe Company determined that there were impairment indicators and wrote down the rights to $1. As a result, the Company recorded an impairment of rights to the mineral exploration project of $39,530,233 and a deferred tax liability recovery of $9,500,000, for a net write off of $30,030,233.$9,500,000.

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

9. RELATED PARTY TRANSACTIONS

Due toto/from related parties consist of the following:

As at August 31,November 30, 2018, the Company made prepayments of $150,000$90,000 (February 28, 2018 - $nil) to an officer and director of the Company for future management fees, pursuant to a consulting agreement, which is included in prepaid expenses.

As at August 31,November 30, 2018, the Company had $nil (February 28, 2018 - $500,000) in note obligations owing to a company with a common director. The note payable was unsecured, with an interest of 10% per annum and due on or before January 18, 2019. In March 2018, the Company repaid the principal balance of $500,000 owed on this note. As at August 31,November 30, 2018, the Company has an accrued interest balance of $57,261 (February 28, 2018 - $55,753). During the sixnine months end August 31,November 30, 2018, the advance payable was forgiven and the Company recorded a gain of settlement of debt of $4,058.

Amounts due to/from related parties are unsecured with no specific terms of repayment.

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

10. NOTE PAYABLE

As at August 31,November 30, 2018, the Company had $19,942 (February 28, 2018 - $19,942) in short term note obligations. The note payable is unsecured, non-interest bearing and payable upon demand.

11. ADVANCE PAYABLE

As at August 31,November 30, 2018, the Company had $nil (February 28, 2018 - $4,058) due to a related party. A $60,000 advance payable was unsecured, non-interest bearing and payable upon demand (Note 6). During the sixnine months end August 31,November 30, 2018, the advance payable was forgiven and the Company recorded a gain of settlement of debt of $4,058.

During the nine months ended November 30, 2018, the Company received an advance of $100,000 (C$130,000). As at November 30, 2018, the Company had $100,000 (February 28, 2018 - $nil) due to a third party. The long term advance payable was unsecured, with an interest of 10% per annum and due on or before August 31, 2020.

12. ASSET RETIREMENT OBLIGATION

The Company’s asset retirement obligation relates to the Compeer Property. The asset retirement obligation was estimated based on the Company’s understanding of its requirements to reclaim currently disturbed areas. Significant reclamation and closure activities include land rehabilitation, water, removal of building and well facilities and tailings reclamation. The undiscounted estimate of this liability was $38,300$37,590 (February 28, 2018 - $39,035) reflecting payments commencing in 2024. This estimate was adjusted for an inflation rate of 2.00% and then discounted at a rate of 10.00% for a net present value of $28,153$28,979 (February 28, 2018 - $28,352) as at August 31,November 30, 2018.

13. SHARE CAPITAL

The Company issued common shares as follows:

SixNine months ended August 31,November 30, 2018

In March 2018, the Company issued 1,273,698 shares in relation to the exercise of 1,273,698 warrants for total proceeds of $509,479.

In July 2018, the Company issued 1,000,000 shares in relation to the exercise of 1,000,000 warrants for total proceeds of $400,000.

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

For the three and nine months ended November 30, 2018

(Expressed in US dollars – Unaudited)

13. SHARE CAPITAL (continued)

Nine months ended November 30, 2018 (continued)

In October 2018, the Company issued 1,000,000 shares with a value of $1,800,000 for obligation to issue shares in connection to the acquisition of Colony.

In November 2018, the Company issued 300,000 shares in relation to the exercise of 300,000 options for total proceeds of $30,000.

During the sixnine months ended August 31,November 30, 2018, the Company issued 625,000 common shares for total gross proceeds of $1,250,000 pursuant to a private placement.

Year ended February 28, 2018

In April 2017, the Company issued 21,000,000 shares with a fair value of $37,800,000 in connection to the acquisition of Colony.

In April 2017, the Company issued 20,000,000 shares with a fair value of $38,000,000 in connection to the acquisition of Black Dragon.

In April 2017, the Company issued 20,000,000 shares with a fair value of $39,000,000 in connection to the acquisition of Rolling Rock.

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

13. SHARE CAPITAL (continued)

Year ended February 28, 2018 (continued)

In May 2017, the Company issued 15,000,000 shares with a fair value of $30,000,000 in connection to the acquisition of City of Gold.

In September 2017, the Company issued 250,000 shares with a fair value of $625,000 in connection to the Black Dragon Property (Note 6).

In September 2017, the Company issued 250,000 shares with a fair value of $625,000 in connection to the Rolling Rock Property (Note 6).

In November 2017, the Company issued 30,000 shares with a fair value of $60,000 to settle an advance payable of $60,000 in connection to the Godin property (Note 3)6).

In December 2017, the Company issued 400,000 shares with a value of $720,000 for obligation to issue shares. In addition, the Company issued 7,760 shares with a fair value of $15,632 to settle accounts payable of $15,632.

In December 2017, the Company issued 800,000 shares in relation to the exercise of 800,000 warrants for total proceeds of $480,000. As at February 28, 2018, $200,000 are recorded as share subscriptions receivable and received by the Company in March 2018.

During the year ended February 28, 2018, the Company issued 2,597,142 common shares for total gross proceeds of $1,805,000 pursuant to private placements. The Company paid a total of $105,200 in finder’s fees in connection with the private placements of equity financings.

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

For the three and nine months ended November 30, 2018

(Expressed in US dollars – Unaudited)

13. SHARE CAPITAL (continued)

Warrants

Below is a summary of the common share purchase warrant transactions:

A summary of the common share purchase warrants outstanding and exercisable at August 31,November 30, 2018 is as follows:

* Warrants exercised subsequent to the period end

** Warrants expiry date postponed due to trading blackout

The weighted average exercise price is $0.40 and weighted average life of the warrants is 0.700.45 years.

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

13. SHARE CAPITAL (continued)

Stock Options

The Company’s Stock Option Plan allows a maximum 9,777,115 shares to be reserved for issuance under the plan. Options granted under the plan may not have a term exceeding 10 years and vesting provisions are at the discretion of the Board of Directors.

Below is a summary of the common share purchase warrant transactions:

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

For the three and nine months ended November 30, 2018

(Expressed in US dollars – Unaudited)

13. SHARE CAPITAL (continued)

Stock Options (continued)

A summary of the stock options outstanding and exercisable at August 31,November 30, 2018 is as follows:

As at August 31,November 30, 2018, the remaining contractual life of the stock options outstanding was 2.181.93 years.

The aggregate intrinsic value in the proceeding table represents the total intrinsic value, based on the Company’s closing stock price of $3.49$2.42 per share as of August 31,November 30, 2018.

14. DERIVATIVE FINANCIAL LIABILITIES - WARRANTS

The derivative financial liabilities related to warrants resulted from the difference in currencies of the warrants (US$) and the functional currency of the Company (formerly C$). As at March 1, 2017, the Company changed its functional currency to the US dollar as a result of US dollar financings at which time the derivative was re-measured and derecognized.

15. PROPOSED TRANSACTION

In September 2018, the Company entered into an asset purchase agreement (the “Agreement”) with a major Canadian oil and gas company to purchase a 100% working interest in three oil leases in north central Alberta, Canada (the “Transaction”).

As consideration for the oil leases, the Company has agreed to pay a purchase price of C$3,000,000 plus applicable taxes, $152,306 (C$200,000) of which was paid as an initial deposit upon the execution of the Agreement. Subsequent to November 30, 2018, the Company and the vendor entered into various extension agreements whereby the closing date of the Transaction was extended to a date on or before November 19, 2019 and a total deposit of $379,894 (C$500,000) was paid.

16. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT

The estimated fair values for financial instruments are determined based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair value of cash, receivable, deposit, loan receivable from related party, due from related parties, investment in Asia Pacific Mining Ltd, accounts payable and accrued liabilities, amounts due to related parties, related party loan payable, advance payable and note payable approximate their carrying value due to the short-term nature of those instruments.

ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and

Level 3 – Unobservable inputs that are supported by little or no market activity, therefor requiring an entity to develop its own assumptions about the assumption that market participants would use in pricing.

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

For the three and nine months ended November 30, 2018

(Expressed in US dollars – Unaudited)

16. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT (continued)

The Company had certain level 3 assets required to be recorded at fair value on a recurring basis in accordance with US GAAP as at August 31,November 30, 2018. As at August 31,November 30, 2018, the Company’s Level 3 assets consist of shares and warrants of a private company. The resulting level 3 assets have no active market and are required to be measured at their fair value each reporting period based on information that is unobservable. As at August 31,November 30, 2018, the fair value of the level 3 assets was equal to $1,500,000 with their fair value based on the price paid to acquire the investment.

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

16.17. SEGMENTED INFORMATION

The Company has one operating segment, being the acquisition and exploration of oil and gas properties. Geographic information is as follows:

17.18. SUBSEQUENT EVENTS

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

18.19. CORRECTION OF ERRORS IN PREVIOUSLY ISSUED FINANCIAL STATEMENTS

The Company’s previously issued financial statements have been restated to reflect the correction of errors relating to the valuation of shares issued in connection to the acquisitions of Colony Energy, LLC, Black Dragon Energy, LLC, Rolling Rock Resources, LLC, and City of Gold, LLC (collectively, “the LLCs”) during the sixnine months ended August 31,November 30, 2017. These shares should have been reported using the fair value of the shares on the date it was issued. This restatement was announced in the Company’s current report on Form 8-K filed on July 15, 2019. In addition, the Company determined there were impairment indicators and wrote down the rights to the mineral exploration project to $1. As a result, the Company recorded an impairment of rights to the mineral exploration project of $39,530,233 and a deferred tax liability recovery of $9,500,000, for a net write off of $30,030,233.$9,500,000.

The Company had measured the above acquisitions based on the par value of the shares issued to acquire the LLCs. The Company has determined that its common shares issued are traded in an active market and should have been recorded based on the quoted market price of the shares on the date it was issued. Therefore, the Company has revised its accounting to record the transactions based on the fair value of the shares issued.

The derivative financial liabilities related to warrants resulted from the difference in currencies of the warrants (US$) and the functional currency of the Company (formerly C$). As at March 1, 2017, the Company changed its functional currency to the US dollar at which time the derivative was re-measured and derecognized. However, the Company continued to calculate the loss on fair value adjustment of derivative financial liabilities during the six months ended August 31, 2017.

The correction of the error is presented in the Company’s consolidated condensed interim balance sheet as at August 31,November 30, 2018 as follows:

No changes were made to the Company’s consolidated condensed interim statements of operations and statements of cashflows for the three and sixnine months ended August 31,November 30, 2018.

The correction of the error is presented in the Company’s consolidated condensed interim balance sheet as at February 28, 2018 as follows:

FORTEM RESOURCES INC.

NOTES TO CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

18.19. CORRECTION OF ERRORS IN PREVIOUSLY ISSUED FINANCIAL STATEMENTS (continued)

The correction of the error is presented in the Company’s consolidated condensed interim statements of operations for the three and sixnine months ended August 31,November 30, 2017 as follows:

The correction of the error is presented in the Company’s consolidated condensed interim statements of cashflows for the sixnine months ended August 31,November 30, 2017 as follows: