Frontier Nuclear & Minerals Inc F-1/A, filed Oct 27, 2021
Frontier Nuclear & Minerals Inc. (FNUC)
As filed with the Securities and Exchange Commission on October 27, 2021
Registration No. 333-254755
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 5 TO
FORM
F-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
SNOW LAKE RESOURCES LTD.
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s Name into English)
| Manitoba, Canada | 1099 | Not Applicable | ||
| (State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
242 Hargrave Street, #1700
Winnipeg, Manitoba R3C 0V1 Canada
info@snowlakeresources.com
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Cogency Global Inc.
122 East 42nd Street, 18th Floor
New York, NY 10168
(800)221-0102
(Names, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
| Louis A. Bevilacqua, Esq. | Mitchell Nussbaum, Esq. | |
| Bevilacqua PLLC | Norwood P. Beveridge, Esq. | |
| 1050 Connecticut Avenue, NW, Suite 500 | Loeb & Loeb LLP | |
| Washington, DC 20036 | 345 Park Avenue | |
| (202) 869-0888 | New York, NY 10154 | |
| (212) 407-4000 |
Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement the same offering. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth company ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
| Title of each class of securities to be registered | Proposed maximum aggregate offering price(1) | Amount of registration fee | ||||||
| Common Shares, no par value(2)(3) | $ | 23,000,000 | $ | 2,509.30 | (4) | |||
| (1) | There is no current market for the securities or price at which the shares are being offered. Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. |
| (2) | Includes common shares that may be purchased by the underwriters pursuant to their over-allotment option. |
| (3) | Pursuant to Rule 416 under the Securities Act of 1933, as amended, there is also being registered hereby such indeterminate number of additional common shares of the registrant as may be issued or issuable because of share splits, share dividends, share distributions, and similar transactions. |
| (4) | Previously paid. |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION | DATED OCTOBER 27, 2021 |
2,857,143 Common Shares
Snow Lake Resources Ltd.
This is the initial public offering of our common shares. We anticipate that the initial public offering price will be between US$6.50 and US$7.50 per share. We are offering 2,857,143 common shares, assuming an initial public offering price of US$7.00 per share (which is the midpoint of the estimated range of the initial public offering price).
Currently, no public market exists for our common shares. In connection with this offering, we have filed an application to list our common shares under the symbol “LITM” on the Nasdaq Capital Market. We believe that upon the completion of this offering, we will meet the standards for listing on the Nasdaq Capital Market.
We are an “emerging growth company,” as that term is used in the Jumpstart Our Business Startups Act of 2012, and as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary—Implications of Being an Emerging Growth Company.”
We expect be a “controlled company” under the rules of the Nasdaq Stock Market, immediately after consummation of this offering and we expect to avail ourselves of the corporate governance exemptions afforded to a “controlled company” under the rules of Nasdaq. See “Risk Factors—Risks Related to Our Common Shares and this Offering.”
Investing in our common shares involves a high degree of risk. See “Risk Factors” beginning on page 11 of this prospectus for a discussion of information that should be considered in connection with an investment in our common shares.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
| Per Share | Total | |||||||
| Initial public offering price | US$ | US$ | ||||||
| Underwriting discounts and commissions(1) | US$ | US$ | ||||||
| Proceeds to us, before expenses | US$ | US$ | ||||||
| (1) | Underwriting discounts and commissions do not include a non-accountable expense allowance equal to 1.0% of the initial public offering price payable to the underwriters. We refer you to “Underwriting” beginning on page 107 for additional information regarding underwriters’ compensation. |
We have granted a 45 day option to the representative of the underwriters to purchase up to an additional 428,571 common shares at the public offering price less the underwriting discount and commissions.
The underwriters expect to deliver the common shares to purchasers on or about , 2021.
ThinkEquity
The date of this prospectus is , 2021
TABLE OF CONTENTS
You should rely only on the information contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. Neither we, nor the underwriters have authorized anyone to provide you with different information. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus, or any free writing prospectus, as the case may be, or any sale of common shares.
For investors outside the United States: Neither we, nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the common shares and the distribution of this prospectus outside the United States.
This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, you are cautioned not to give undue weight to this information.
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SCIENTIFIC AND TECHNICAL INFORMATION
Cautionary Note Regarding Presentation of Mineral Reserve and Mineral Resource Estimates
The U.S. Securities and Exchange Commission, or the SEC, adopted final rules in 2018 to amend and modernize the mineral property disclosure requirements for issuers whose securities are registered with the SEC under the U.S. Securities Act of 1933, as amended, or the Securities Act, or the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act. These amendments, which we refer to as the SEC Mining Modernization Rules, became effective February 25, 2019, with compliance, following a transition period, required for the first fiscal year beginning on or after January 1, 2021. Under the SEC Mining Modernization Rules, following the transition period, the historical property disclosure requirements for mining registrants included in SEC Industry Guide 7 has been rescinded and replaced with disclosure requirements in subpart 1300 of SEC Regulation S-K, or S-K 1300. Domestic companies and foreign private issuers that file reports with the SEC are now required to disclose mineral resources, mineral reserves, and material exploration results for material mining operations in accordance with S-K 1300.
As a Canadian foreign private issuer that is not eligible to file reports with the SEC pursuant to the multi-jurisdictional disclosure system, we are required to provide disclosure on our mineral properties under the SEC Mining Modernization Rules beginning with our fiscal year starting July 1, 2021. We provide that disclosure in this prospectus.
As a result of the adoption of the SEC Mining Modernization Rules, the SEC now recognizes estimates of “measured mineral resources,” “indicated mineral resources” and “inferred mineral resources.” In addition, the SEC has amended its definitions of “proven mineral reserves” and “probable mineral reserves” to be “substantially similar” to the corresponding definitions under the CIM Standards that are required under NI 43-101. Information regarding inferred mineral resources contained or referenced in this prospectus now complies with the SEC disclosure guidelines adopted under the SEC Mining Modernization Rules as codified in S-K 1300 and should be comparable to similar information made public by other companies that report in accordance with U.S. or Canadian standards.
We are still in the exploration stage and our planned commercial operations have not commenced. There is currently no commercial production at our Thompson Brothers Lithium Project sites, which we refer to herein as the TBL property. We have completed a technical report that, we believe, is in compliance with the SEC’s new S-K 1300 disclosure rules. We have not yet completed a preliminary economic Assessment, or PEA, or started a preliminary feasibility study, or PFS, of the TBL property. As such, our TBL property’s’ estimated proven or probable mineral reserves, expected mine life and lithium pricing cannot be determined at this time as the feasibility studies, drilling and pit design optimizations have not yet been undertaken.
Competent Person Statement
Some scientific and technical information contained herein with respect to the Thompson Brothers Lithium Project is derived from the report titled “Technical Report Summary and Resource Estimate, Thompson Brothers Lithium Project, Snow Lake Area, Herb Lake Mining Division, Manitoba, Canada” prepared for us with an effective date of June 7, 2021. We refer to this report herein as our S-K 1300 Report or our S-K 1300 compliant indicated and inferred mineral resource report. Canmine Consultants and Nuterra Geoscience have approved and verified the scientific and technical information related to the Thompson Brothers Lithium Project contained in the S-K 1300 Report and reproduced in this prospectus.
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GLOSSARY OF MINING TERMS
The following is a glossary of certain mining terms that may be used in this prospectus.
| Ag | Silver. |
| Alluvial | A placer formed by the action of running water, as in a stream channel or alluvial fan; also said of the valuable mineral (e.g. gold or diamond) associated with an alluvial placer. |
| Assay | A metallurgical analysis used to determine the quantity (or grade) of various metals in a sample. |
| Au | Gold. |
| Claim | A mining right that grants a holder the exclusive right to search and develop any mineral substance within a given area. |
|
CIM |
The Canadian Institute of Mining, Metallurgy and Petroleum. |
| CIM Standards | The CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by CIM Council from time to time. |
| Concentrate | A clean product recovered in flotation, which has been upgraded sufficiently for downstream processing or sale. |
| Core drilling | A specifically designed hollow drill, known as a core drill, is used to remove a cylinder of material from the drill hole, much like a hole saw. The material left inside the drill bit is referred to as the core. In mineral exploration, cores removed from the core drill may be several hundred to several thousand feet in length. |
| Cu | Copper. |
|
Competent Person |
A Competent Person is a minerals industry professional responsible for the preparation and/or signing off reports on exploration results and mineral resources and reserves estimates and who is accountable for the prepared reports. A Competent Person has a minimum of five years’ relevant experience in the style of mineralization or type of deposit under consideration and in the activity which that person is undertaking. A Competent Person must hold acceptable qualification titles as listed in all Reporting Codes and Reporting Standards (NRO Recognized Professional Organizations with enforceable disciplinary processes including the powers to suspend or expel a member) and thus is recognized by governments, stock exchanges, international entities and regulators. |
| Cut-off grade | When determining economically viable mineral reserves, the lowest grade of mineralized material that can be mined and processed at a profit. |
| Deposit | An informal term for an accumulation of mineralization or other valuable earth material of any origin. |
| Dilational structure | Structures composed of mechanisms whose only degree of freedom corresponds to dilation. |
| Drift | A horizontal or nearly horizontal underground opening driven along a vein to gain access to the deposit. |
| Dyke | A long and relatively thin body of igneous rock that, while in the molten state, intruded a fissure in older rocks. |
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|
En-echelon |
Structures within rock caused by noncoaxial shear. |
| Exploration | Prospecting, sampling, mapping, diamond drilling and other work involved in searching for ore. |
| Flotation | A milling process in which valuable mineral particles are induced to become attached to bubbles and float as others sink. |
| FS | A Feasibility Study is a comprehensive technical and economic study of the selected development option for a mineral project that includes appropriately detailed assessments of applicable Modifying Factors together with any other relevant operational factors and detailed financial analysis that are necessary to demonstrate, at the time of reporting, that extraction is reasonably justified (economically mineable). The results of the study may reasonably serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project. The confidence level of the study will be higher than that of a Pre-Feasibility Study. |
| Grade | Term used to indicate the concentration of an economically desirable mineral or element in its host rock as a function of its relative mass. With gold, this term may be expressed as grams per tonne (g/t) or ounces per tonne (opt). |
| Greywacke | A variety of sandstone generally characterized by its hardness, dark color, and poorly sorted angular grains of quartz, feldspar, and small rock fragments set in a compact, clay-fine matrix. |
| Ha | Hectare - An area totaling 10,000 square meters or 2.47 acres. |
| Indicated Mineral Resource | Part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. |
| Inferred Mineral Resource | Part of a mineral resource for which quantity and grade or quality can be estimated on the basis of limited geological evidence and sampling and reasonably implied, but not verified, geological and grade continuity. |
| Km | Kilometre(s). Equal to 0.62 miles. |
| kMT | Kilo metric tonne. |
| LCE | Lithium Carbonate Equivalent - Trade in lithium is largely centered around key lithium raw materials and chemicals such as spodumene concentrate, lithium carbonate and lithium hydroxide, which vary significantly in their lithium content. To normalize this varied lithium content data, market participants will often also report data in terms of a “lithium carbonate equivalent,” or “LCE.” |
| Lithologic | The character of a rock formation, a rock formation having a particular set of characteristics. |
| M | Metre(s). Equal to 3.28 feet. |
| Mafic | Igneous rocks composed mostly of dark, iron- and magnesium-rich minerals. |
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|
Massive |
Said of a mineral deposit, especially of sulfides, characterized by a great concentration of mineralization in one place, as opposed to a disseminated or vein-like deposit. |
| Measured Mineral Resource | Part of a Mineral Resource for which quantity, grade or quality, densities, shape, physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity. |
| Metallurgy | The science and art of separating metals and metallic minerals from their ores by mechanical and chemical processes. |
| Mineral | A naturally occurring homogeneous substance having definite physical properties and chemical composition and, if formed under favorable conditions, a definite crystal form. |
| Mineral Deposit | A mass of naturally occurring mineral material, e.g. metal ores or nonmetallic minerals, usually of economic value, without regard to mode of origin. |
| Mineralization | A natural occurrence in rocks or soil of one or more yielding minerals or metals. |
| Mineral Project | The term “mineral project” means any exploration, development or production activity, including a royalty or similar interest in these activities, in respect of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base, precious and rare metals, coal, and industrial minerals. |
| Mineral Reserve | The economically mineable part of a Measured and/or Indicated Mineral Resource. |
| Mineral Resource | A concentration or occurrence of diamonds, natural, solid, inorganic or fossilized organic material including base and precious metals, coal and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. |
| Net Smelter Royalty | The aggregate proceeds received from time to time from any arm’s length smelter or other arm’s length purchaser from the sale of any ores, concentrates, metals or other material of commercial value, net of expenses. |
| Modifying Factors | Considerations used to convert Mineral Resources to Mineral Reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors. |
| Mt | Metric tonne. Metric measurement of weight equivalent to 1,000 kilograms or 2,204.6 pounds. |
| NI 43-101 | National Instrument 43-101 is a national instrument for the Standards of Disclosure for Mineral Projects within Canada. The Instrument is a codified set of rules and guidelines for reporting and displaying information related to mineral properties owned by, or explored by, companies which report these results on stock exchanges within Canada. issuers that are subject to Canadian securities laws. This includes Canadian entities as well as foreign-owned mining entities who have securities that trade on stock exchanges or Over The Counter (OTC) markets overseen by the Canadian Securities Administrators (CSA), even if they only trade on Over The Counter (OTC) derivatives or other instrumented securities. |
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|
Ore |
Mineralized material that can be extracted and processed at a profit. |
| Ounce | A measure of weight in gold and other precious metals, correctly troy ounces, which weigh 31.2 grams as distinct from an imperial ounce which weigh 28.4 grams. |
| PEA | Preliminary economic assessment. A study, other than a pre-feasibility or feasibility study, that includes an economic analysis of the potential viability of mineral resources. |
| Pegmatite | An igneous rock, formed by slow crystallization at high temperature and pressure at depth, and exhibiting large interlocking crystals usually greater in size than 2.5 cm (1 in). |
| PFS | Preliminary feasibility study. A Preliminary Feasibility Study is a comprehensive study of a range of options for the technical and economic viability of a mineral project that has advanced to a stage where a preferred mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, is established and an effective method of mineral processing is determined. It includes a financial analysis based on reasonable assumptions on the Modifying Factors and the evaluation of any other relevant factors which are sufficient for a Qualified Person, acting reasonably, to determine if all or part of the Mineral Resource may be converted to a Mineral Reserve at the time of reporting. A Pre-Feasibility Study is at a lower confidence level than a Feasibility Study. |
| Probable Mineral Reserve | The mineable part of an indicated, and in some circumstances, a Measured Mineral Resource. The confidence in the Modifying Factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve. |
| Proven Mineral Reserve | The term “proven mineral reserve” is the economically mineable part of a Measured Mineral Resource. A Proven Mineral Reserve implies a high degree of confidence in the Modifying Factors. |
| Qualified Person | An individual who is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development, production activities and project assessment, or any combination thereof, including experience relevant to the subject matter of the project or report and is a member in good standing of a self-regulating organization. |
| Reclamation | Restoration of mined land to original contour, use, or condition where possible. |
| Spodumene | A pyroxene mineral consisting of lithium aluminium inosilicate, LiAl(SiO3)2, and is a source of lithium. |
| Sedimentary | Said of rock formed at the Earth’s surface from solid particles, whether mineral or organic, which have been moved from their position of origin and re-deposited, or chemically precipitated. |
| Strike | The direction, or bearing from true north, of a vein or rock formation measure on a horizontal surface. |
| Tenement | A mineral claim. |
| Tonne | A metric ton of 1,000 kilograms (2,205 pounds). |
| μm | Micrometer. |
| Zn | Zinc. |
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This summary highlights selected information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before deciding whether to invest in our common shares. You should carefully read the entire prospectus, including the risks associated with an investment in our company discussed in the “Risk Factors” section of this prospectus, before making an investment decision. Some of the statements in this prospectus are forward-looking statements. See the section titled “Cautionary Statement Regarding Forward-Looking Statements.”
In this prospectus, “we,” “us,” “our,” “our company,” “Snow Lake” and similar references refer to Snow Lake Resources Ltd. and its consolidated subsidiaries.
Our Company
Our Mission
Snow Lake is committed to being the first fully renewable energy powered electric mine in the world that can deliver a completely traceable, conflict free, net zero carbon, battery grade lithium to the electric vehicle, or EV, consumer market. We aspire to not only set the standard for responsible lithium battery manufacturing but we intend to be the first lithium producer in the world to achieve Certified B Corporation status in the process. As a Certified B Corporation (defined on page 3), we would hope to participate in accelerating the global culture shift to redefine success in business and help to build a more inclusive and sustainable economy.
Overview
We are an exploration stage mining company engaged in lithium exploration in the province of Manitoba, Canada.
On March 7, 2019, we and Nova Minerals, our parent company, entered into a share sale agreement, whereby, as part of a group restructuring, we acquired all of the outstanding capital stock of Thompson Bros (Lithium) Pty Ltd., a wholly owned subsidiary of Nova Minerals and owner of the Thompson Brothers Lithium Project discussed below.
Our primary focus is currently conducting exploration for lithium at our 100% owned Thompson Brothers Lithium Project. See “Business – Our Mineral Project – Thompson Brothers Lithium Project.” Our objective is to develop a world-class lithium mine in Manitoba and to become the first fully energy renewable lithium hydroxide producer in North America, strategically located to supply the U.S. “Auto Alley,” from Michigan to the southern United States, and the European battery market via our nearby access to the Hudson Bay Railway and the Port of Churchill. With our commitment to the environment, corporate social responsibility and sustainability, we aim to derive substantial revenues from the sale of lithium hydroxide to the growing EV and battery storage markets in the U.S. and abroad. With access to renewable energy produced in Manitoba, we expect to become the first supplier in North America of lithium mined exclusively with the benefit of power produced from fully sustainable, local sources.
The Historical Setting for the Growth of Lithium Demand
The unprecedented prosperity of the 20th century is very much attributable to the discovery of oil in Western Pennsylvania in the mid-1800s and the subsequent invention of the internal combustion engine. The symbiotic relationship between oil and the internal combustion engine has been the underpinning of world economic growth, expansion and, most importantly, the empowerment of millions of people to whom mobility and freedom have become a way of life. The interstate highways that flourished in the United States over the past century have enabled commercial fluidity across the globe that capitalized exponentially on the gilded age of rail.
Until recently, a world without oil and the internal combustion engine was inconceivable and environmentalists protesting the high price being paid for our economic way of life, were brandished unrealistic luddites. The paradox of environmental sensitivity and the irreversible progress of a polluting population seemed permanently juxtaposed, until it wasn’t.
Today, we have reached the confluence where economic reality and social responsibility can finally meet. Thanks to technological innovation, through the development of the lithium battery we can now create an electric fleet of vehicles that not only delivers luxury and economy but is also ecologically friendly to our planet. We are now on the precipice of the next great economic age - preceded by the steam engine, the railroad, the combustion engine and the internet, we are now ready to be catapulted into the electric age. With the advent of the lithium battery, no longer will we have to rely on fossil fuel to power our economy or our cars as we embark into the next great age and, more importantly, we can limit and ultimately reverse the damage caused to our planet by the rapid economic expansion of the past century.
The Coming Commodity Supercycle and Growth in Lithium Demand
From our perspective, indications suggest that we are currently on the verge of a commodity supercycle fueled by pent up demand, infrastructure spending and post-COVID-19 economic exuberance. We expect that lithium, in particular, will benefit not only from a general rise in commodity demand but, specifically, from what we see as the tipping point for vehicle fleet electrification.
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We believe that the journey now to the full electrification of our global automobile fleet has begun. Demand for EVs is being driven by conscious consumers who take the threat of global warming seriously and who have forced a universal commitment from the manufacturing industry to produce cars to match their environmentally conservative outlook. During the coming years, the achievement of this fleet conversion will be the primary challenge for the worldwide automobile industry and the determining factor will not be design or engineering, but batteries. Batteries will be the fuel and gold of the 21st century. Based on today’s predictions of the trajectory of future EV growth, the world will not have sufficient battery capacity to match growing demand. Today’s global fleet of approximately 1.4 billion automobiles includes 10 million plug in electric vehicles, an increase from only one million such EVs in 2015. Extrapolating the growth trajectory of EV demand, we believe that current industrial infrastructure is not scaled sufficiently to meet the coming demand.
Lithium is the key mineral ingredient in the power storage component of the EV revolution and the global demand growth curve for lithium consumption over the next decade is expected to be exponential. While normal commodity cycles are affected by incremental and organic growth, it is only once in a century that we witness new, previously nonexistent demand grow to accommodate a new economic, social and cultural reality.
We believe that current global lithium production cannot cover a fraction of the projected exponential growth anticipated in the coming EV growth cycle and we intend to position our company to become a significant lithium supplier to the North American automotive industry and beyond.
The table below shows the expected increase in lithium consumption through 2025.
As can be seen in this table, the leading driver for the growth in lithium consumption has been, and will continue to be, battery production for EVs. Fortune Business Insights has predicted that the EV market will exhibit a CAGR of 21.1% during the period from 2019 to 20261
Today, a large portion of the global lithium output is mined in diverse global locations such as Australia and Chile, transported great distances, primarily to China, for processing and then shipped again, back to the North American automobile industry. This is not a sustainable model and will not provide the necessary environmental or geopolitical comfort that will be required to electrify the global fleet of automobiles.
| 1 | https://www.globenewswire.com/news-release/2020/05/15/2034346/0/en/Electric-Vehicle-EV-Market-to-Rise-at-21-1- CAGR-till-2026-Product-Innovations-are-Leading-to-Wider-Adoption-says-Fortune-Business-Insights.html |
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Our Corporate Strategy
Recently, EV auto makers have begun to face consumer scrutiny relating to the sourcing of materials, including lithium, that go into the makeup of electric vehicles. Additionally, in recent years, pressure has begun to be placed on EV auto makers by consumers and investors demanding that environmental, sustainability and governance, or ESG, standards be met in exchange for their investment dollars.
Extracting a natural resource to meet demand in an age old fashion similar to how other commodities are mined is not our approach. Today’s environmentally conscious consumers no longer want to be willfully ignorant of the sourcing and impact of the raw materials that are part of their everyday lives. Today’s conscious consumers of electric vehicles will not be satisfied by a pollution free means of transportation if the means to deliver that environmentally friendly car involve dubious mining ethics, pollutive extraction and processing, long distance logistics and general environmental damage in the process. It is understandable that consumers and investors who wish to see a sustainable future through EVs and sustainable lithium batteries would also care that their production does not put the environment, and their future, at unnecessary risk.
Snow Lake is committed to being the first, fully renewable energy powered electric mine in the world that can deliver fully traceable, conflict free, net zero carbon, battery grade lithium to the electric vehicle consumer market. We intend not only to set the standard for responsible battery manufacturing but also to become the first lithium producer in the world to achieve Certified B Corporation status in the process.
We intend to achieve our environmental, sustainability and governance friendly strategy through utilization and operation of the following initiatives and resources:
| ● | We have entered into a memorandum of understanding, or MOU, with Meglab Electronique Inc. for Meglab’s delivery to us of the first all electric lithium mine in the world. We have also entered into a MOU with CentrePort Canada Inc. to have CentrePort as the potential location to build our hydroxide plant. In April 2021, we entered into a MOU with IMG Investitions- und Marketinggesellschaft Sachsen-Anhalt mbH, the economic development agency for the state of Saxony-Anhalt, to consider investment in a lithium hydroxide plant in the Saxony-Anhalt region for final processing. We cannot guarantee, however, that the above nonbinding MOUs will lead to definitive agreements. |
| ● | Power to operate our future lithium mine is expected to be supplied by Manitoba Hydro on a 97% renewable basis; |
| ● | We are currently identifying sites within Manitoba for hydroxide processing of spodumene that will be powered by renewable energy sources; |
| ● | The Arctic Gateway Group’s Hudson Bay Railway lines are located within 30 kilometers of our TBL property will connect our lithium mining operations to the North American auto industry with a minimum carbon footprint, with total mine to manufacturer distance of less than 1,000 miles; and |
| ● | We intend to apply for “B Corporation” certification reflecting our corporate dedication to standards of social sustainability, environmental performance, accountability and transparency. A “Certified B Corporation” is a business that meets the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. We have begun the preliminary process to become a “pending” B corporation and expect to formally apply for B Corporation status approximately one year after we complete this offering and ramp up our operations. There can be no assurance at this time that we will receive “pending” B corporation status, that we will be able to apply for full B Corporation status within the time frame referenced above or that we will be successful in achieving B Corporation status. |
These factors will give us a competitive edge and first mover status in delivering a fully verifiable, environmentally friendly product to a rapid growth market that is consumer driven to demand a new level of transparency and responsibility.
Practical Steps
We have launched our PEA, which will include in depth metallurgy analysis, resource definition, engineering assessment and ore sorting optimization, among other studies, during the third calendar quarter of 2021. During the third or fourth quarter of 2021 we are planning to begin an additional drilling program to further expand our existing resource and a mag drone survey that will be partially financed by a grant from the Manitoba Government. In 2022 we intend to initiate our PFS with additional drilling exploration programs on the TBL property to survey historic drilling holes from Sherritt Gordon’s lithium discoveries more than 50 years ago, the records of which are intact. Also, we are beginning our environmental studies process during the later part of 2021 and sometime in 2022 we will begin the permitting for the start of our future mining operations. We are confident that we will confirm the historic mineralization assessments on the TBL property and be in a position to launch our mining operations during 2023.
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The Thompson Brothers Lithium Project
Our 100% owned Thompson Brothers Lithium Project consists of 38 contiguous mineral claims located on Crown land near Snow Lake, central Manitoba, Canada. We refer to this property as the Thompson Brothers Lithium property, or the TBL property. The TBL property encompasses two lithium-rich spodumene pegmatite clusters known as the Thompson Brothers and Sherritt Gordon, or SG, pegmatite dykes. A preliminary exploration program was conducted during 2017/2018 with respect to the Thompson Brothers dyke resulting in an S-K 1300 compliant updated estimate dated June 9, 2021 of an Indicated Resource of 9,082,600 tonnes of lithium bearing ore grading 1.00% Li2O, for 91,200 Li2O tonnes, and an Inferred Resource of 1,967,900 tonnes of lithium bearing ore grading 0.98% Li2O, for 19,300 Li2O tonnes. Further drilling will be required to determine whether the TBL property contains proven or probable mineral reserves, and then we will have to engage in economic modeling and analysis to determine the economic viability of the project. We expect that if the S-K 1300 compliant numbers are confirmed as probable or proven resources, a fully functioning lithium mine could provide 8 to10 years of producing 160k tonnes per annum of 6% lithium ore concentrate.
Our Opportunity
Our Thompson Brothers Lithium Project is strategically located in Manitoba, Canada, ideally situated to economically deliver mined and processed lithium products to the EV battery industry serving North America’s “Auto Alley” from Michigan to the southern United States. With direct rail access running north to the Port of Churchill, which supplies access to Europe by ship, we expect to be able to economically deliver our future lithium output to the markets of Europe as well. Preliminary exploration of our TBL property indicates a substantial S-K 1300 compliant indicated and inferred resource of lithium ore, and we have only explored 5% of the TBL property. We expect to prove this indicated and inferred resource in the near future through further exploration and technical analysis and reporting, although we can provide no guarantee that our indicated and inferred resource will be confirmed as proven or probable. With expected to be proven mineral resources and our prime location, and assuming we can raise the required capital (although this cannot be assured), successfully complete our preliminary economic assessment and preliminary feasibility study, obtain the required permitting and build a mine and ore concentrator, we expect to be able to produce economically significant amounts of marketable lithium ore concentrate in a socially responsible and environmentally friendly way utilizing renewable energy to power our mining operations. Assuming our successful execution of the required exploration and development steps and operating in accordance with our ESG corporate principals, we expect to be in a strong position to be able to exploit, through offtake agreements with OEM manufacturers, the anticipated rising demand for lithium hydroxide to meet the burgeoning needs of the EV battery and related markets in North America and beyond.
Our Competitive Strengths
We believe that the following competitive strengths contribute to our success and differentiate us from our competitors:
| ● | Our initial metallurgical test work yielded a spodumene concentrate grading 6.37% Li2O and our preliminary flotation tests indicate that a spodumene concentrate with +6.0% Li2O may be readily produced from the deposit. These preliminary findings suggest that our TBL property might contain lithium resources meeting industry and market specifications. For a discussion of this historical metallurgical test work, see “Business – Historical Mineral Processing and Metalurigcal Testing” below. |
| ● | Our TBL property is large, and we believe it is host to valuable lithium resources in commercial quantities. |
| ● | Access to Manitoba produced 97%+ renewable energy is expected to enable us to become the first supplier in North America of lithium mined exclusively with the benefit of fully renewable sources of energy. |
| ● | No significant technical challenges related to exploration and development of the deposits have been identified. |
| ● | We are strategically located in the North American market. |
| ● | Our operations are located in an exceptional mining friendly jurisdiction with excellent mining infrastructure. |
| ● | We have an experienced management team. |
| ● | The combination of the benefits of mining under a fully renewable energy ecosystem, location in a mining friendly jurisdiction, and strategic proximity to the major US EV manufacturing markets should make us an attractive source for offtake agreements with lithium battery and/or EV manufacturers who will need to secure their raw material supplies. |
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Our Growth Strategies
We have developed a strategic plan for further exploration and development of the TBL property that includes the following milestones:
| ● | Complete resource update in accordance with the SEC’s new Mining Modernization Rules (field work completed) to expand and upgrade from Inferred to Indicated Resources. |
| ● | Complete Preliminary Economic Assessment, or PEA, study (began in the second quarter of 2021) to be followed by a Preliminary Feasibility Study, or PFS. |
| ● | Complete next stage of resource exploration drilling leading to resource upgrade to the Measured from Indicated level. |
| ● | Continue exploration of the TB1 dyke, which currently makes up our S-K 1300 compliant resource, to expand our known resource at this location. |
| ● | Restart exploration drilling at the Sherritt Gordon pegmatite dykes where preliminary exploration in the 1940s identified near surface spodumene deposits. Although no SG resources are included in our S-K 1300 compliant indicated and inferred mineral resource report, we expect that additional exploration of the SG dykes will result in the discovery of JORC reportable resources. |
| ● | Continue exploration of additional prospects located on our TBL property could add additional tonnage through further drilling. We also intend to explore for extensions to the existing mineral resources and other potential mineralization within the TBL property. |
Our Risks and Challenges
Our prospects should be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by similar companies. Our ability to realize our business objectives and execute our strategies is subject to risks and uncertainties, including, among others, the following:
Risks Related to Our Business and Industry
Risks and uncertainties related to our business and industry include, but are not limited to, the following:
| ● | We have a limited operating history and have not yet generated any revenues; | |
| ● | Our financial statements have been prepared on a going concern basis and our financial status creates a doubt whether we will continue as a going concern; | |
| ● | If we do not obtain additional financing, our business may be at risk or execution of our business plan may be delayed; | |
| ● | The coronavirus pandemic may cause a material adverse effect on our business; | |
| ● | All of our business activities are now in the exploration stage and there can be no assurance that our exploration efforts will result in the commercial development of lithium hydroxide; | |
| ● | Our mineral resources described in our most recent S-K 1300 compliant indicated and inferred mineral resource report are only estimates and no assurance can be given that the anticipated tonnages and grades will be achieved, or that the indicated level of recovery will be realized. Although S-K 1300 compliant, there has been insufficient drilling on the TBL property to qualify our inferred resource under the SEC’s new Mining Modernization Rules. Further drilling will be required to determine whether the TBL property contains proven or probable mineral reserves and there can be no assurance that we will be successful in our efforts to prove our resource; |
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| ● | Mineral exploration and development are subject to extraordinary operating risks. We currently do not insure against these risks. In the event of a cave-in or similar occurrence, our liability may exceed our resources, which could have an adverse impact on us; | |
| ● | Our business operations are exposed to a high degree of risk associated with the mining industry; | |
| ● | We may not be able to obtain or renew licenses or permits that are necessary to our operations; | |
| ● | Our TBL Property may face indigenous land claims; | |
| ● | Volatility in lithium prices and lithium demand may make it commercially unfeasible for us to develop our Thompson Bros Lithium Project; | |
| ● | There can be no guarantee that our interest in the TBL property is free from any title defects; | |
| ● | Our mining operations are dependent on the adequate and timely supply of water, electricity or other power supply, chemicals and other critical supplies; | |
| ● | We currently report our financial results under IFRS, which differs in certain significant respect from U.S. generally accepted accounting principles; | |
| ● | Our directors and officers are engaged in other business activities and accordingly may not devote sufficient time to our business affairs, which may affect our ability to conduct operations and generate revenue; and | |
| ● | In the event that key personnel leave our company, we would be harmed since we are heavily dependent upon them for all aspects of our activities. |
Risks Related to This Offering and Ownership of Our Common Shares
Risks and uncertainties related to this offering and our Common Shares include, but are not limited to, the following:
| ● | We have considerable discretion as to the use of the net proceeds from this offering and we may use these proceeds in ways with which you may not agree; | |
| ● | If through additional drilling we are not able to prove our resource according to the SEC’s new Mining Modernization Rules, your investment in our common shares could become worthless; | |
| ● | You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions against us or our management named in the prospectus based on foreign laws; | |
| ● | We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies; | |
| ● | As a foreign private issuer, we are permitted to rely on exemptions from certain Nasdaq corporate governance standards applicable to domestic U.S. issuers. This may afford less protection to holders of our shares; | |
| ● | Our parent company will own a majority of our outstanding common shares after this offering. As a result, it will have the ability to approve all matters submitted to our shareholders for approval; and | |
| ● | Future issuances of debt securities, which would rank senior to our common shares upon our bankruptcy or liquidation, and future issuances of preferred shares, which could rank senior to our common shares for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common shares. |
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In addition, we face other risks and uncertainties that may materially affect our business prospects, financial condition, and results of operations. You should consider the risks discussed in “Risk Factors” and elsewhere in this prospectus before investing in our common shares.
Our Corporate Structure
We were incorporated in the Province of Manitoba, Canada under The Corporations Act (Manitoba), or MCA, on May 25, 2018 by our parent company Nova Minerals Limited. Prior to this offering, Nova Minerals owned approximately 74% of our outstanding common shares. Nova Minerals has agreed to lock up its holdings of our common shares for a period of 180 days from the date of effectiveness of the registration statement of which this prospectus forms a part.
We have three wholly owned subsidiaries, Snow Lake Exploration Ltd., or Snow Lake Exploration, Snow Lake Crowduck Ltd., or Snow Lake Crowduck, and Thompson Bros (Lithium) PTY Ltd. (formerly Manitoba Minerals Pty Ltd), or Thompson Bros. Through a series of agreements between 2016 to 2019 we acquired a 100% interest in the TBL property. Our subsidiary, Thompson Bros, which owned our 20 Block A claims before they were transferred to Snow Lake Crowduck, has been deregistered in Australia and Manitoba.
Corporate Information
Our corporate address is 242 Hargrave St #1700, Winnipeg, MB R3C 0V1 Canada. Our company email address is info@snowlakeresources.com.
Our registered office is located at 242 Hargrave St #1700, Winnipeg, MB R3C 0V1 Canada.
Our agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, N.Y. 10168.
Our website can be found at https://snowlakeresources.com. The information contained on our website is not a part of this prospectus, nor is such content incorporated by reference herein, and should not be relied upon in determining whether to make an investment in our common shares.
Implications of Being an Emerging Growth Company
Upon the completion of this offering, we will qualify as an “emerging growth company” under the Jumpstart Our Business Act of 2012, as amended, or the JOBS Act. As a result, we will be permitted to, and intend to, rely on exemptions from certain disclosure requirements. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year during which we have total annual gross revenues of at least US$1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (iii) the date on which we have, during the preceding three year period, issued more than US$1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act, which could occur if the market value of our common shares that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.
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Implications of Being a Foreign Private Issuer
Once the registration statement of which this prospectus is a part is declared effective by the SEC, we will become subject to the information reporting requirements of the Exchange Act that are applicable to “foreign private issuers,” and under those requirements we will file certain reports with the SEC. As a foreign private issuer, we will not be subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. Under the Exchange Act, we will be subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, although we report our financial results on a quarterly basis, we will not be required to issue quarterly reports, proxy statements that comply with the requirements applicable to U.S. domestic reporting companies, or individual executive compensation information that is as detailed as that required of U.S. domestic reporting companies. We also will have four months after the end of each fiscal year to file our annual reports with the SEC and we will not be required to file current reports as frequently or promptly as U.S. domestic reporting companies. We also present our financial statements pursuant to International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, instead of pursuant to U.S. generally accepted accounting principles. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions in our equity securities and from the short-swing profit liability provisions contained in Section 16 of the Exchange Act. As a foreign private issuer, we will also not be subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. In addition, as a foreign private issuer, we will be permitted, and intend to follow certain home country corporate governance practices instead of those otherwise required under the listing rules of Nasdaq for domestic U.S. issuers. These exemptions and leniencies will reduce the frequency and scope of information and protections available to you in comparison to those applicable to a U.S. domestic reporting companies.
Notes on Prospectus Presentation
Numerical figures included in this prospectus have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them. Certain market data and other statistical information contained in this prospectus are based on information from independent industry organizations, publications, surveys and forecasts. Some market data and statistical information contained in this prospectus are also based on management’s estimates and calculations, which are derived from our review and interpretation of the independent sources listed above, our internal research and our knowledge of the Canadian mining industry. While we believe such information is reliable, we have not independently verified any third-party information and our internal data has not been verified by any independent source.
Our reporting currency and our functional currency is Canadian dollar. This prospectus contains translations of Canadian dollars into U.S. dollars at specific rates solely for the convenience of the reader. Unless otherwise noted, all translations from Canadian dollars into U.S. dollars in this prospectus were made at a rate of C$1.2404 per US$1.00, the noon buying rate as set forth in the H.10 statistical release of the U.S. Federal Reserve Board in effect as of June 30, 2021. On October 15, 2021, the noon buying rate for Canadian dollar was C$1.2387 per US$1.00. We make no representation that the Canadian dollar or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Canadian dollar, as the case may be, at any particular rate or at all.
All references in the prospectus to “U.S. dollars,” “dollars,” “US$” and “$” are to the legal currency of the United States and all references to “C$” are to the legal currency of Canada.
Annual Meeting of Shareholders
On September 17, 2021, we held our Annual Meeting of Shareholders via video conference on September 17, 2021 at 3:00 pm (EDT). A total of 10,740,424 (post consolidation) Class A common shares representing 82.5% of the aggregate shares outstanding and eligible to vote and constituting a quorum were represented in person or by valid proxies at the annual meeting.
The Shareholders of the Company approved the special resolutions to increase the range of number of Directors of our Company set out in Box 3 of the Articles of Incorporation from 1 to 5, to 1 to 9. In addition, the shareholders voted in favor of the 1-for-5 Reverse Split (as defined below). The share capital of our Company was streamlined by deleting each of the Class B Common, Class C Common, Class D Common, Class B Preference and Class C Preference classes of shares, and renaming the Class A Common and Class A Preference shares as common shares and preference shares, respectively. David Delaney and Allan David Engel were each elected as independent directors of our Company to serve until the next annual meeting of shareholders. De Visser Gray LLP were appointed as auditors of our Company until the next annual meeting of shareholders.
The Company filed the Articles of Amendment with the Companies Office, Province of Manitoba, on October 7, 2021.
On October 14, 2021, David Delaney submitted his resignation as a director of the Company and the directors appointed Hadassah Slater as an independent director of our Company to serve until the next annual meeting of shareholders.
Share Consolidation (a “Reverse Split”)
On October 7, 2021, we effectuated a one-for-five reverse stock split of our common shares, or the Reverse Split. The Reverse Split combined each five of our common shares into one common share. Fractional shares will not be issued to any existing shareholder in connection with the Reverse Split, but the Company will purchase from each existing shareholder the right to such fractional share that would have been issued, at a price based on the initial public offering price. The right to fractional shares which the Company will purchase resulting from the Reverse Split, in the aggregate, is less than ten (10) common shares. The historical audited financial statements included elsewhere in this prospectus have been adjusted for the Reverse Split. Unless otherwise indicated, all other share and per share data in this prospectus have been retroactively adjusted, where applicable, to reflect the Reverse Split as if it had occurred as at the June 30, 2019 fiscal year end. References to “post-consolidation” below are references to the number of our common shares after giving effect to this share consolidation.
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The Offering
| Shares offered | 2,857,143 common shares, assuming an initial public offering price of US$7.00 per share (which is the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus) | |
| Common shares outstanding immediately before the offering | 13,010,176 (post-consolidation and subject to rounding of fractional shares) common shares. | |
| Common shares outstanding immediately after the offering | 15,867,319 common shares (or 16,295,890 common shares if the underwriters exercise the over-allotment option in full). | |
| Over-allotment option | We have granted to the underwriters a 45-day option to purchase from us up to an additional 15% of the common shares sold in the offering (428,571 additional shares, assuming an initial public offering price of US$7 per share (which is the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus)). at the initial public offering price, less the underwriting discounts and commissions. | |
| Use of proceeds | We expect to receive net proceeds of approximately US$18.31 million from this offering, assuming an initial public offering price of US$7 per share (which is the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus) and no exercise of the underwriters’ over-allotment option, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We plan to use the net proceeds of this offering for resource development activities including additional exploratory drilling, the preparation of a PEA, other technical studies and reports, possible strategic project acquisitions, and marketing and general corporate purposes. See “Use of Proceeds” for more information on the use of proceeds. | |
| Risk factors | Investing in our common shares involves a high degree of risk and purchasers of our common shares may lose part or all of their investment. See “Risk Factors” for a discussion of factors you should carefully consider before deciding to invest in our common shares. | |
| Lock-up | We, all of our directors and officers and all of our shareholders have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any of our common shares or securities convertible into or exercisable or exchangeable for our common shares for a period of (i) 180 days after the closing of this offering in the case of our company, (ii) 12 months after the date of this prospectus in the case of our directors and officers, and (iii) 180 days after the date of this prospectus in the case of our shareholders, including our majority owner, Nova Minerals. See “Underwriting” for more information. | |
| Proposed trading market and symbol | In connection with this offering, we have filed an application to list our common shares under the symbol “LITM” on the Nasdaq Capital Market. |
The number of common shares outstanding immediately following this offering is based on 13,010,176 (post-consolidation and subject to rounding of fractional shares) shares outstanding as of October 27, 2021 and excludes (on a post-consolidation basis and subject to rounding of fractional shares, as applicable):
| ● | 820,000 common shares issuable upon the exercise of outstanding options under our Amended and Restated Stock Option Plan at a weighted average exercise price of C$2.50 (approximately US$2.02) per share; |
| ● | 1,586,732 additional common shares that are reserved for future issuance under our Amended and Restated Stock Option Plan; |
| ● | 864,525 common shares issuable upon the exercise of outstanding warrants at a weighted average exercise price of C$1.55 (approximately US$1.25) per share; |
| ● | 240,000 common shares reserved for issuance under a restricted stock award agreement with our Chief Executive Officer, Philip Gross; |
| ● | Approximately 868,298 common shares issuable upon the conversion of outstanding convertible debentures; and |
| ● | up to 142,857 common shares issuable upon exercise of the representative’s warrants issued in connection with this offering. |
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Summary Consolidated Financial Information
The following selected historical financial information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in the prospectus and the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.
The following summary consolidated financial data as of June 30, 2021 and 2020. This information is derived from our audited consolidated financial statements and our interim six-month consolidated financial statements included elsewhere in this prospectus.
Our financial statements are prepared and presented in accordance with IFRS. Our historical results for any period are not necessarily indicative of our future performance.
| Years Ended June 30, | ||||||||||||
| 2020 | 2021 | 2021 | ||||||||||
| Statements of Loss Data | C$ | C$ | US$ | |||||||||
| Total operating expenses | (247,364 | ) | (595,598 | ) | (480,166 | ) | ||||||
| Total other income (loss) | 65,248 | 43,162 | 34,797 | |||||||||
| Net loss | (182,116 | ) | (552,436 | ) | (445,369 | ) | ||||||
| Net loss per share – basic and diluted | (0.01 | ) | (0.04 | ) | (0.03 | ) | ||||||
| Weighted average shares outstanding – basic and diluted | 13,007,995 | 13,008,669 | 13,008,669 | |||||||||
| As of June 30, | ||||||||||||
| 2020 | 2021 | 2021 | ||||||||||
| Statements of Financial Position Data | C$ | C$ | US$ | |||||||||
| Cash | 143,089 | 318,844 | 257,049 | |||||||||
| Current assets | 154,480 | 397,461 | 320,430 | |||||||||
| Total assets | 5,551,359 | 6,127,685 | 4,940,088 | |||||||||
| Current liabilities | 343,734 | 1,374,819 | 1,108,367 | |||||||||
| Total liabilities | 343,734 | 1,374,819 | 1,108,367 | |||||||||
| Shareholders’ equity | 5,207,625 | 4,752,866 | 3,831,720 | |||||||||
| Total liabilities and shareholders’ equity | 5,551,359 | 6,127,685 | 4,940,088 | |||||||||
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An investment in our common shares involves a high degree of risk. You should carefully consider the following risk factors, together with the other information contained in this prospectus, before purchasing our common shares. We have listed below (not necessarily in order of importance or probability of occurrence) what we believe to be the most significant risk factors applicable to us, but they do not constitute all of the risks that may be applicable to us. Any of the following factors could harm our business, financial condition, results of operations or prospects, and could result in a partial or complete loss of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section titled “Cautionary Statement Regarding Forward-Looking Statements.”
Risks Related to Our Business and Industry
We have a limited operating history and have not yet generated any revenues.
Our limited operating history makes evaluating our business and future prospects difficult, and may increase the risk of your investment. We were formed in May 2018 and we have not yet begun commercial production of lithium hydroxide. To date, we have no revenues. We are in the exploration stage of our development with the potential to establish commercial operations still an unknown. We intend to proceed with the development of the TBL property through to economic studies such as PEAs and PFSs and, provided the results are positive, through to mine development. We intend in the longer term to derive substantial revenues from becoming a strategic supplier of battery-grade lithium hydroxide to the growing electric vehicle and battery storage markets. Our company is in the exploration stage, and we do not expect to start generating revenues until the fourth quarter of 2024, at the earliest. Our planned exploration and development of mineral resources, primarily lithium, will require significant investment prior to commercial introduction and may never be successfully developed or commercially successful.
Our financial statements have been prepared on a going concern basis and our financial status creates a doubt whether we will continue as a going concern.
Our financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary course of business. Our future operations are dependent upon the identification and successful completion of equity or debt financing and the achievement of profitable operations at an indeterminate time in the future. There can be no assurances that we will be successful in completing an equity or debt financing or in achieving or maintaining profitability. The financial statements do not give effect to any adjustments relating to the carrying values and classification of assets and liabilities that would be necessary should we be unable to continue as a going concern.
If we do not obtain additional financing, our business may be at risk or execution of our business plan may be delayed.
We have limited assets upon which to commence our business operations and to rely otherwise. As of June 30, 2021, we had cash of C$318,844 (approximately US$ 257,049). With only these funds, we will need to seek additional funds in the future through equity or debt financings, or strategic alliances with third parties, either alone or in combination with equity financings to complete our lithium exploration initiative. Additional funding will be needed to implement our business plan that includes various expenses such as continuing our mining exploration program, legal, operational set-up, general and administrative, marketing, employee salaries and other related start-up expenses. Obtaining additional funding will be subject to various factors, including general market conditions, investor acceptance of our business plan and ongoing results from our exploration efforts. These financings could result in substantial dilution to the holders of our common shares, or require contractual or other restrictions on our operations or on alternatives that may be available to us. If we raise additional funds by issuing debt securities, these debt securities could impose significant restrictions on our operations. Any such required financing may not be available in amounts or on terms acceptable to us, and the failure to procure such required financing could have a material and adverse effect on our business, financial condition and results of operations, or threaten our ability to continue as a going concern.
We may not be able to acquire additional funds on acceptable terms, or at all. If we are unable to raise adequate funds, we may have to delay, reduce the scope of or eliminate some or all of our planned exploration programs. If we do not have, or are not able to obtain, sufficient funds, we may be required to delay further exploration, development or commercialization of our expected mineral resources, if and when verified. We also may have to reduce the resources devoted to our mining efforts or cease operations. Any of these factors could harm our operating results.
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The coronavirus pandemic may cause a material adverse effect on our business.
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. The virus has since spread to more than 150 countries. On March 11, 2020, the World Health Organization declared the outbreak a pandemic. On March 11, 2020, the federal government of Canada announced a $1 billion package to help Canadians through the health crisis. To date, there have been a large number of temporary business closures, quarantines and a general reduction in consumer activity in Canada.
As a result of the measures adopted by the Province of Manitoba and the federal government of Canada, certain of our mining exploration activities have been delayed. The access to investor capital as well as a 14-day quarantine when travelling into the Province of Manitoba have discouraged us from engaging in certain exploration activities in the near term. As a result of these unexpected delays, we are placing our focus on completing lab work and technical report writing using the field data that we have previously compiled. We expect to get back to our “boots on the ground” work such as core sampling and test drilling later in the fall and winter of 2021.
The spread of the virus in many countries continues to adversely impact global economic activity and has contributed to significant volatility and negative pressure in financial markets and supply chains. The pandemic has had, and could have a significantly greater, material adverse effect on the Canadian economy as a whole, as well as the local economy where we conduct our operations. The pandemic has resulted, and may continue to result for an extended period, in significant disruption of global financial markets, which may reduce our ability to access capital in the future, which could negatively affect our liquidity.
If the current pace of the pandemic cannot be slowed and the spread of the virus is not contained, our business operations could be further delayed or interrupted. We expect that government and health authorities may announce new or extend existing restrictions, which could require us to make further adjustments to our operations in order to comply with any such restrictions. We may also experience limitations in employee resources. In addition, our operations could be disrupted if any of our employees were suspected of having the virus, which could require quarantine of some or all such employees or closure of our facilities for disinfection. We may also delay or reduce certain capital spending and related projects until the travel and logistical impacts of the pandemic are lifted, which will delay the completion of such projects. The duration of any business disruption cannot be reasonably estimated at this time but may materially affect our ability to operate our business and result in additional costs.
The extent to which the pandemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this prospectus, including new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic and the current financial, economic and capital markets environment, and future developments in the global lithium mining and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows.
Our business is subject to operational risks that are generally outside of our control and could adversely affect our business.
Mineral mining sites, like the sites where our TBL property is located, by their nature are subject to many operational risks and factors that are generally outside of our control and could adversely affect our business, operating results and cash flows. These operational risks and factors include the following:
| ● | unanticipated ground and water conditions; |
| ● | adverse claims to water rights and shortages of water to which we have rights; |
| ● | adjacent land ownership that results in constraints on current or future operations; |
| ● | geological problems, including earthquakes and other natural disasters; |
| ● | metallurgical and other processing problems; |
| ● | the occurrence of unusual weather or operating conditions and other force majeure events; |
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| ● | lower than expected ore grades or recovery rates; |
| ● | accidents; |
| ● | delays in the receipt of or failure to receive necessary government permits; |
| ● | the results of litigation, including appeals of agency decisions; |
| ● | uncertainty of exploration and development; |
| ● | delays in transportation; |
| ● | interruption of energy supply; |
| ● | labor disputes; |
| ● | inability to obtain satisfactory insurance coverage; and |
| ● | the failure of equipment or processes to operate in accordance with specifications or expectations. |
Any one or more of these factors or other risks could cause us not to realize the anticipated benefits of an acquisition of properties or companies and could have a material adverse effect on our financial condition.
All of our business activities are now in the exploration stage and there can be no assurance that our exploration efforts will result in the commercial development of lithium hydroxide.
All of our operations are at the exploration stage and there is no guarantee that any such activity will result in commercial production of lithium mineral deposits. Very limited drilling has been conducted on our TBL property to date, which makes the extrapolation of an S-K 1300 compliant indicated or inferred resource to an S-K 1300 probable or proven reserve and to commercial viability impossible without further drilling. We intend to engage in that additional exploratory drilling with proceeds from this offering but we can provide no assurance of future success from our planned additional drilling program. The exploration for lithium deposits involves significant risks which even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of an ore body may result in substantial rewards, few properties which are explored are ultimately developed into producing mines. Major expenses may be required to locate and establish proven mineral reserves, to develop metallurgical processes and to construct mining and processing facilities at a particular site. It is impossible to ensure that the exploration programs planned by us or any future development programs will result in a profitable commercial mining operation. There is no assurance that our mineral exploration activities will result in any discoveries of commercial quantities of lithium. There is also no assurance that, even if commercial quantities of ore are discovered, a mineral property will be brought into commercial production. Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are: the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metal prices which are highly cyclical; and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted. Our long-term profitability will be in part directly related to the cost and success of our exploration programs and any subsequent development programs.
Our mineral resources or reserves may be significantly lower than expected.
We are in the exploration stage and our planned principal operations have not commenced. There is currently no commercial production on the TBL property and we have not yet completed a preliminary economic assessment or a preliminary feasibility study. As such, our estimated proven or probable mineral reserves, expected mine life and lithium pricing cannot be determined as the exploration program, drilling, economic assessment and feasibility studies and pit (or mine) design optimizations have not yet been undertaken, and the actual mineral reserves may be significantly lower than expected. You should not rely on the S-K 1300 compliant technical report, PEAs or PFSs, if and when completed and published, as indications that we will have successful commercial operations in the future. Even if we prove reserves on the TBL property, we cannot guarantee that we will be able to develop and market them, or that such production will be profitable.
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The estimation of lithium reserves is not an exact science and depends upon a number of subjective factors. Any indicated or inferred resource figures presented in this prospectus are estimates from the written reports of technical personnel and mining consultants who were contracted to assess the mining prospects. Resource estimates are a function of geological and engineering analyses that require us to forecast production costs, recoveries, and metals prices. The accuracy of such estimates depends on the quality of available data and of engineering and geological interpretation, judgment, and experience. Estimated indicated or inferred lithium resources may not be upgraded to indicated or measured or to probable or proved reserves, and any reserves may not be realized in actual production and our operating results may be negatively affected by inaccurate estimates. Additionally, resource estimates do not determine the economics of a mining project and, although we have begun to prepare a preliminary economic assessment, even once the PEA is produced we cannot guarantee that it will reflect positive economics for our mining resources or that we will be able to execute our plans to create an economically viable mining operation.
Our mineral resources described in our most recent S-K 1300 compliant indicated and inferred mineral resource report are only estimates and no assurance can be given that the anticipated tonnages and grades will be achieved, or that the indicated level of recovery will be realized.
We intend to continue exploration on our TBL property and we may or may not acquire additional interests in other mineral properties. The search for mineral deposits as a business is extremely risky. We can provide investors with no assurance that exploration on our current properties, or any other property that we may acquire, will establish that any commercially exploitable quantities of mineral deposits exist. Additional potential problems may prevent us from discovering any mineral deposits. These potential problems include unanticipated problems relating to exploration and additional costs and expenses that may exceed current estimates. If we are unable to establish the presence of viable lithium mineral deposits on our properties, our ability to fund future exploration activities will be impeded, we will not be able to operate profitably and investors may lose all of their investment in our company.
We have no history of mineral production.
We are an exploration stage company and we have no history of mining or refining mineral products from our properties. As such, any future revenues and profits are uncertain. There can be no assurance that our Thompson Brothers Lithium Project will be successfully placed into production, produce minerals in commercial quantities or otherwise generate operating earnings. Advancing projects from the exploration stage into development and commercial production requires significant capital and time and will be subject to further technical studies, permitting requirements and construction of mines, processing plants, roads and related works and infrastructure. We will continue to incur losses until mining-related operations successfully reach commercial production levels and generate sufficient revenue to fund continuing operations. There is no certainty that we will generate revenue from any source, operate profitably or provide a return on investment in the future.
Lithium mining and production is relatively new to the Province of Manitoba and the Snow Lake area.
If and when our lithium resources on the TBL property are proven, we intend to work towards entering the production stage of our operations. We will not use diesel or gasoline fuel for any of our mining, sorting and concentrating activities. This means that the sorting and concentrating of, and the production of our spodumene lithium into a lithium hydroxide will be conducted through a fully electrified process not using any fossil fuels to generate the electrical power needed to run our operations. Lithium mining has occurred at the Tanco mine located north east of Winnipeg, but the mining and processing of lithium ore has not previously been undertaken in or near the Snow Lake region of Manitoba. Locating the necessary experts and work force that are familiar with and trained in this particular mining process may be a challenge and our success may be hindered by the lack of historical familiarity with the processes and challenges faced in lithium mining and production.
Mineral exploration and development are subject to extraordinary operating risks. We currently do not insure against these risks. In the event of a cave-in or similar occurrence, our liability may exceed our resources, which could have an adverse impact on us.
Exploration and mining operations generally involve a degree of risk. Our operations are subject to all of the hazards and risks normally encountered in the exploration, development and production of rare earth metals, including, without limitation, unusual and unexpected geologic formations, seismic activity, rock bursts, cave-ins, flooding and other conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction of, mines and other producing facilities, personal injury or loss of life and damage to property and environmental damage, all of which may result in possible legal liability. Although we expect that adequate precautions to minimize risk will be taken, mining operations are subject to hazards such as fire, rock falls, geo-mechanical issues, equipment failure or failure of retaining dams around tailings disposal areas which may result in environmental pollution and consequent liability. The occurrence of any of these events could result in a prolonged interruption of our operations that would have a material adverse effect on our business, financial condition, results of operations and prospects.
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The exploration for and development of mineral deposits involves significant risks, which even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of a mineral deposit may result in substantial rewards, few properties that are explored are ultimately developed into producing mines. Major expenses may be required to locate and establish mineral resources and reserves, to develop metallurgical processes and to construct mining and processing facilities and infrastructure at a particular site. It is impossible to ensure that the exploration or development programs planned by us will result in a profitable commercial mining operation. Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are: the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metal prices that are highly cyclical, and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in our company not receiving an adequate return on invested capital. There is no certainty that the expenditures made towards the search and evaluation of mineral deposits will result in the discovery of mineral resources or the development of commercial quantities of mineral reserves.
Our development projects have no operating history upon which to base estimates of future capital and operating costs. Mineral resource and reserve estimates and estimates of operating costs are, to a large extent, based upon the interpretation of geologic data obtained from drill holes and other sampling techniques, and feasibility studies, which derive estimates of capital and operating costs based upon anticipated tonnage and grades to be mined and processed, ground conditions, the configuration of the deposit, expected recovery rates of minerals from ore, estimated operating costs, and other factors. As a result, actual production, cash operating costs and economic returns could differ significantly from those estimated.
There are numerous risks associated with the development of the TBL property.
Our future success will largely depend upon our ability to successfully explore, develop and manage the TBL property. In particular, our success is dependent upon management’s ability to implement our strategy, to develop the project and to maintain ongoing lithium production from the mines that we expect to develop.
Development of the TBL property could be delayed, experience interruptions, incur increased costs or be unable to complete due to a number of factors, including but not limited to:
| ● | changes in the regulatory environment including environmental compliance requirements; |
| ● | non-performance by third party consultants and contractors; |
| ● | inability to attract and retain a sufficient number of qualified workers; |
| ● | unforeseen escalation in anticipated costs of exploration and development, or delays in construction, or adverse currency movements resulting in insufficient funds being available to complete planned exploration and development; |
| ● | increases in extraction costs including energy, material and labor costs; |
| ● | lack of availability of mining equipment and other exploration services; |
| ● | shortages or delays in obtaining critical mining and processing equipment; |
| ● | catastrophic events such as fires, storms or explosions; |
| ● | the breakdown or failure of equipment or processes; |
| ● | construction, procurement and/or performance of the processing plant and ancillary operations falling below expected levels of output or efficiency; |
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| ● | civil unrest in and/or around the mine site and supply routes, which would adversely affect the community support of our operations; |
| ● | changes to anticipated levels of taxes and imposed royalties; and/or |
| ● | a material and prolonged deterioration in lithium market conditions, resulting in material price erosion. |
It is not uncommon for new mining developments to experience these factors during their exploration or development stages or during construction, commissioning and production start-up, or indeed for such projects to fail as a result of one or more of these factors occurring to a material extent. There can be no assurance that we will complete the various stages of exploration and development necessary in order to achieve our strategy in the timeframe pre-determined by us or at all. Any of these factors may have a material adverse effect on our business, results of operations and activities, financial condition and prospects.
Changes in technology and future demand may result in an adverse effect on our results of operation.
Currently lithium is a key metal used in batteries, including those used in electric vehicles. However, the technology pertaining to batteries, electric vehicles and energy creation and storage is changing rapidly and there is no assurance lithium will continue to be used to the same degree as it is now, or that it will be used at all. Any decline in the use of lithium ion batteries or technologies utilizing such batteries may result in a material and adverse effect on our future profitability, results of operation and financial condition.
Our business operations are exposed to a high degree of risk associated with the mining industry.
Our business operations are exposed to a high degree of risk inherent in the mining sector. Risks which may occur during the exploration and development of mineral resources include environmental hazards, industrial accidents, equipment failure, import/customs delays, shortage or delays in installing and commissioning plant and equipment, metallurgical and other processing problems, seismic activity, unusual or unexpected formations, formation pressures, rock bursts, wall failure, cave ins or slides, burst dam banks, flooding, fires, explosions, power outages, opposition with respect to mining activities from individuals, communities, governmental agencies and non-governmental organizations, interruption to or the increase in costs of services, cave-ins and interruption due to inclement or hazardous weather conditions.
Commencement of mining can also reveal mineralization or geologic formations, including higher than expected content of other minerals that can be difficult to separate from rare earth metals, which can result in unexpectedly low recovery rates.
Such occurrences could cause damage to, or destruction of properties, personal injury or death, environmental damage, pollution, delays, increased production costs, monetary losses and potential legal liabilities. Moreover, these factors may result in a mineral deposit, which has been mined profitably in the past to become unprofitable. They are also applicable to sites not yet in production and to expanded operations. Successful mining operations will be reliant upon the availability of processing and refining facilities and secure transportation infrastructure at the rate of duty over which we may have limited or no control. Any liabilities that we incur for these risks and hazards could be significant and the costs of rectifying the hazard may exceed our asset value.
Infrastructure required to carry on our business may be affected by unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure.
Exploitation of the TBL property will depend to a significant degree on adequate infrastructure. In the course of developing our expected operations, assuming our exploration efforts will be successful, we may need to construct and support the construction of infrastructure, which includes permanent gas pipelines, water supplies, power, transport and logistics services which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure or any failure or unavailability in such infrastructure could materially adversely affect our operations, financial condition and results of operations.
We may receive negative conclusions from further economic assessments.
The net proceeds from this offering will be used to, among other things, fund the preparation of a preliminary economic assessment with a possible preliminary feasibility study on the TBL property and for the continuation of the exploration work to establish the economic potential of the TBL property. Until such time as any further economic assessment is concluded, uncertainty will exist as to the economic viability of the TBL property. In the event that any further economic assessments have negative conclusions, investors may lose some or all of their investment.
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We may not be able to obtain or renew licenses or permits that are necessary to our operations.
In the ordinary course of business, we will be required to obtain and renew governmental licenses or permits for exploration, development, construction and commencement of mining at the TBL property. Obtaining or renewing the necessary governmental licenses or permits is a complex and time-consuming process involving public hearings and costly undertakings on the part of our company. The duration and success of our efforts to obtain and renew licenses or permits are contingent upon many variables not within our control, including the interpretation of applicable requirements implemented by the licensing and/or permitting authorities. We may not be able to obtain or renew licenses or permits that are necessary to our operations, including, without limitation, an exploitation license, or the cost to obtain or renew licenses or permits may exceed what we believe we can recover from the TBL property. Any unexpected delays or costs associated with the licensing or permitting process could delay the development or impede the operation of a mine, which could adversely impact our operations and profitability.
The TBL property may face indigenous land claims
The TBL property may now or in the future be the subject of indigenous land claims. The legal nature of land claims is a matter of considerable complexity. The impact of any such claim on our ownership interest in the TBL property cannot be predicted with any degree of certainty and no assurance can be given that a broad recognition of indigenous rights in the area in which the TBL property is located, by way of a negotiated settlement or judicial pronouncement, would not have an adverse effect on our operations. Even in the absence of such recognition, we may at some point be required to negotiate with and seek the approval of holders of such interests in order to facilitate exploration and development work on the TBL property, there is no assurance that we will be able to establish a practical working relationship with the indigenous groups in the area which would allow is to ultimately develop the TBL property.
Volatility in lithium prices and lithium demand may make it commercially unfeasible for us to develop our Thompson Bros Lithium Project.
The development of our Thompson Brothers Lithium Project is dependent on the continued growth of the lithium market, and the continued increased demand for lithium chemicals by emerging producers of electric vehicles and other users of lithium-ion batteries. These producers and the related technologies are still under development and a continued sustained increase in demand is not certain. To the extent that such demand does not manifest itself, and the lithium market does not continue to grow, or existing producers increase supply to satisfy this demand, then our ability to develop our Thompson Brothers Lithium Project will be adversely affected. Our lithium exploration and development activities may be significantly adversely affected by volatility in the price of lithium. Mineral prices fluctuate widely and are affected by numerous factors beyond our control such as global and regional supply and demand, interest rates, exchange rates, inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, and the political and economic conditions of mineral-producing countries throughout the world. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in our lithium activities not producing an adequate return on invested capital to be profitable or viable.
There can be no guarantee that our interest in the TBL property is free from any title defects.
We have taken all reasonable steps to ensure it has proper title to the TBL property. However, there can be no guarantee that our interest in the TBL property is free from any title defects, as title to mineral rights involves certain intrinsic risks due to the potential problems arising from the unclear conveyance history characteristic of many mining projects. There is also the risk that material contracts between us and relevant government authorities will be substantially modified to the detriment of us or be revoked. There can be no assurance that our rights and title interests will not be challenged or impugned by third parties.
Our mining operations are dependent on the adequate and timely supply of water, electricity or other power supply, chemicals and other critical supplies.
Our exploration programs are dependent on the adequate and timely supply of water, electricity or other power supply, chemicals and other critical supplies. If we are unable to obtain the requisite critical supplies in time and at commercially acceptable prices or if there are significant disruptions in the supply of electricity, water or other inputs to the mine site, our business performance and results of operations may experience material adverse effects.
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We may experience an inability to attract or retain qualified personnel.
Our success depends to a large degree upon our ability to attract, retain and train key management personnel, as well as other technical personnel. If we are not successful in retaining or attracting such personnel, our business may be adversely affected. Furthermore, the loss of our key management personnel could materially and adversely affect our business and operations.
As our business becomes more established, it will also be required to recruit additional qualified key financial, administrative, operations and marketing personnel. There will be no guarantee that we will be able to attract and keep such qualified personnel and if we are not successful, it could have a material and adverse effect on our business and results from operations.
Failure to comply with federal, provincial and/or local laws and regulations could adversely affect our business.
Our mining operations are subject to various laws and regulations governing exploration, development, production, taxes, labor standards and occupational health, mine safety, protection of endangered and protected species, toxic substances and explosives use, reclamation, exports, price controls, waste disposal and use, water use, forestry, land claims of local people, and other matters. This includes periodic review and inspection of the TBL property that may be conducted by applicable regulatory authorities.
Although the exploration activities on the TBL property have been and, we expect, will continue to be carried out in accordance with all applicable laws and regulations, there is no guarantee that new laws and regulations will not be enacted or that existing laws and regulations will not be applied in a way which could limit or curtail exploration or in the future, production. New laws and regulations or amendments to current laws and regulations governing the operations and activities of mining or more stringent implementation of existing laws and regulations could have a material adverse effect on us and cause increases in capital expenditures costs, or reduction in levels of exploration, development and/or production.
Failure to comply with applicable laws and regulations, even if inadvertent, may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. We may also be required to reimburse any parties affected by loss or damage caused by our mining activities and may have civil or criminal fines and/or penalties imposed against us for infringement of applicable laws or regulations.
Failure to comply with environmental regulation could adversely affect our business.
All phases of our operations with respect to the TBL property will be subject to environmental regulation. Environmental legislation involves strict standards and may entail increased scrutiny, fines and penalties for non-compliance, stringent environmental assessments of proposed projects and a high degree of responsibility for companies and their officers, directors and employees. Changes in environmental regulation, if any, may adversely impact our operations and future potential profitability. In addition, environmental hazards may exist on the TBL property that are currently unknown. We may be liable for losses associated with such hazards, or may be forced to undertake extensive remedial cleanup action or to pay for governmental remedial cleanup actions, even in cases where such hazards have been caused by previous or existing owners or operators of the properties, or by the past or present owners of adjacent properties or by natural conditions. The costs of such cleanup actions may have a material adverse impact on our operations and future potential profitability.
Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations and, in particular, environmental laws.
We currently report our financial results under IFRS, which differs in certain significant respect from U.S. generally accepted accounting principles.
We report our financial statements under IFRS. There have been and there may in the future be certain significant differences between IFRS and United States generally accepted accounting principles, or U.S. GAAP, including differences related to revenue recognition, intangible assets, share-based compensation expense, income tax and earnings per share. As a result, our financial information and reported earnings for historical or future periods could be significantly different if they were prepared in accordance with U.S. GAAP. In addition, we do not intend to provide a reconciliation between IFRS and U.S. GAAP unless it is required under applicable law. As a result, you may not be able to meaningfully compare our financial statements under IFRS with those companies that prepare financial statements under U.S. GAAP.
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Our assets and operations are subject to economic, geopolitical and other uncertainties.
Economic, geopolitical and other uncertainties may negatively affect our business. Economic conditions globally are beyond our control. In addition, the outbreak of hostilities and armed conflicts between countries can create geopolitical uncertainties that may affect both local and global economies. Downturns in the economy or geopolitical uncertainties may cause future customers to delay or cancel projects, reduce their overall capital or operating budgets or reduce or cancel orders which could have a material adverse effect on our business, results of operations and financial condition.
Our operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency remittance, income taxes, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. Failure to comply strictly with applicable laws, regulations and local practices relating to mineral rights, could result in loss, reduction or expropriation of entitlements.
In addition, the financial markets can experience significant price and value fluctuations that can affect the market prices of equity securities and other companies in ways that are unrelated to the operating performance of these companies. Broad market fluctuations, as well as economic conditions generally, may adversely affect the market price of our common shares.
As we face intense competition in the mineral exploration and exploitation industry, there can be no assurance that we will be able to compete effectively with other companies.
The mining industry, and the lithium mining sector in particular, is very competitive. our competition is from larger, established mining companies with greater liquidity, greater access to credit and other financial resources, newer or more efficient equipment, lower cost structures, more effective risk management policies and procedures and/or a greater ability than us to withstand losses. Our competitors may be able to respond more quickly to new laws or regulations or emerging technologies, or devote greater resources to the expansion or efficiency of their operations than we can. In addition, current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties. Accordingly, it is possible that new competitors or alliances among current and new competitors may emerge and gain significant market share to our detriment.
As a result of this competition, we may have to compete for financing and be unable to acquire financing on terms we consider acceptable. we may also have to compete with the other mining companies for the recruitment and retention of qualified managerial and technical employees. If we are unable to successfully compete for financing or for qualified employees or we may not be able to compete successfully against current and future competitors, and any failure to do so could have a material adverse effect on our business, financial condition, results of operations and future prospects as well as our exploration programs may be slowed down or suspended, which may cause us to cease operations as a company.
Our executive officers are engaged in other business activities and, accordingly, may not devote sufficient time to our business affairs, which may affect our ability to conduct operations.
Our executive officers are engaged as consultants under independent contractor agreements rather than as employees and, as such, they have been involved in other business activities. Our Chief Operating Officer is also engaged in the exploration program of our majority owner, Nova Minerals, and our Chief Executive Officer and our Vice President, Corporate Development each have consulting clients in addition to working for us. Although we expect that as our business operations ramp up our executive officers will devote substantially all of their time to our business, as a result of the other business endeavors that they are currently engaged in, our executive officers may not be able to devote sufficient time to our business affairs, which may negatively affect our ability to conduct our ongoing operations. In addition, management of our company may be periodically interrupted or delayed as a result of these officers’ other business interests.
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We may be subject to potential conflicts of interest.
We may be subject to potential conflicts of interests, as certain directors of our company are, and may continue to be, engaged in the mining industry through their participation in corporations, partnerships or joint ventures, which are potential competitors of our company. Situations may arise in connection with potential acquisitions in investments where the other interests of these directors and officers may conflict with the interests of our company. Our directors and officers with conflicts of interest will be subject to the procedures set out in the related Canadian law and regulations.
We may not meet cost estimates.
A change in the timing of any projected cash flows due to capital funding or, once in production, production shortfalls or labor disruptions would result in delays in receipt of such cash flows and in using such cash to fund operating activities and, as applicable, reduce debt levels. This could result in additional loans to finance capital expenditures in the future.
The level of capital and operating cost estimates which are used for determining and obtaining financing and other purposes are based on certain assumptions and are fundamentally subject to considerable uncertainties. It is very likely that actual results for the TBL property will differ from our current projections, estimates and assumptions, and these differences may be significant. Moreover, experience from actual mining may identify new or unexpected conditions that could decrease operational activities, and/or increase capital and/or operating costs above, the current estimates. If actual results are less favorable than we currently estimate, our business, results from operations, financial condition and liquidity could be materially adversely affected.
We may pursue opportunities to acquire complementary businesses, which could dilute our shareholders’ ownership interests, incur expenditure and have uncertain returns.
We may seek to expand through future acquisitions of either companies or properties, however, there can be no assurance that we will locate attractive acquisition candidates, or that we will be able to acquire such candidates on economically acceptable terms, if at all, or that we will not be restricted from completing acquisitions pursuant to contractual arrangements. Future acquisitions may require us to expend significant amounts of cash, resulting in our inability to use these funds for other business or may involve significant issuances of equity. Future acquisitions may also require substantial management time commitments, and the negotiation of potential acquisitions and the integration of acquired operations could disrupt our business by diverting management and employees’ attention away from day-to-day operations. The difficulties of integration may be increased by the necessity of coordinating geographically diverse organizations, integrating personnel with disparate backgrounds and combining different corporate cultures.
Any future acquisition involves potential risks, including, among other things: (i) mistaken assumptions and incorrect expectations about mineral properties, mineral resources and costs; (ii) an inability to successfully integrate any operation our company acquires; (iii) an inability to recruit, hire, train or retain qualified personnel to manage and operate the operations acquired; (iv) the assumption of unknown liabilities; (v) limitations on rights to indemnity from the seller; (vi) mistaken assumptions about the overall cost of equity or debt; (vii) unforeseen difficulties operating acquired projects, which may be in geographic areas new to us; and (viii) the loss of key employees and/or key relationships at the acquired project.
At times, future acquisition candidates may have liabilities or adverse operating issues that we may fail to discover through due diligence prior to the acquisition. If we consummate any future acquisitions with unanticipated liabilities or that fails to meet expectations, our business, results of operations, cash flows or financial condition may be materially adversely affected. The potential impairment or complete write-off of goodwill and other intangible assets related to any such acquisition may reduce our overall earnings and could negatively affect our balance sheet.
Legal proceedings may arise from time to time in the course of our business.
Legal proceedings may arise from time to time in the course of our business. Such litigation may be brought from time to time in the future against us. Defense and settlement costs of legal claims can be substantial, even with respect to claims that have no merit. Other than as disclosed elsewhere in this prospectus, we are not currently subject to material litigation nor have we received an indication that any material claims are forthcoming. However, due to the inherent uncertainty of the litigation process, we could become involved in material legal claims or other proceedings with other parties in the future. The results of litigation or any other proceedings cannot be predicted with certainty. The cost of defending such claims may take away from management’s time and effort and if we are incapable of resolving such disputes favorably, the resultant litigation could have a material adverse impact on our financial condition, cash flow and results from operation.
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Land reclamation requirements may be burdensome.
Land reclamation requirements are generally imposed on companies with mining operations or mineral exploration companies in order to minimize long term effects of land disturbance. Reclamation may include requirements to control dispersion of potentially deleterious effluents or reasonably re-establish pre-disturbance land forms and vegetation. In order to carry out reclamation obligations imposed on us in connection with exploration, potential development and production activities, we must allocate financial resources that might otherwise be spent on exploration and development programs. If we are required to carry out unanticipated reclamation work, our financial position could be adversely affected.
In the event that key personnel leave our company, we would be harmed since we are heavily dependent upon them for all aspects of our activities.
We are heavily dependent on our officers and directors, the loss of whom could have, in the short-term, a negative impact on our ability to conduct our activities and could cause additional costs from a delay in the exploration and development of our TBL property.
The obligations associated with being a public company will require significant resources and management attention, and we will incur increased costs as a result of becoming a public company.
As a public company, we will face increased legal, accounting, administrative and other costs and expenses that we have not incurred as a private company, and we expect to incur additional costs related to operating as a public company. After the completion of this offering, we will be subject to the reporting requirements of the Exchange Act, which requires that we file annual and other reports with respect to our business and financial condition, as well as the rules and regulations implemented by the SEC, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Public Company Accounting Oversight Board, and the listing requirements of Nasdaq (if our common shares are approved for listing), each of which imposes additional reporting and other obligations on public companies. As a public company, we will be required to, among other things:
| ● | prepare and file annual and other reports in compliance with the federal securities laws; |
| ● | expand the roles and duties of our board of directors and committees thereof and management; |
| ● | hire additional financial and accounting personnel and other experienced accounting and finance staff with the expertise to address complex accounting matters applicable to public companies; |
| ● | institute more comprehensive financial reporting and disclosure compliance procedures; |
| ● | involve and retain, to a greater degree, outside counsel and accountants to assist us with the activities listed above; |
| ● | build and maintain an investor relations function; |
| ● | establish new internal policies, including those relating to trading in our securities and disclosure controls and procedures; |
| ● | comply with the initial listing and maintenance requirements of Nasdaq; and |
| ● | comply with the Sarbanes-Oxley Act. |
We expect these rules and regulations, and any future changes in laws, regulations and standards relating to corporate governance and public disclosure, which have created uncertainty for public companies, to increase legal and financial compliance costs and make some activities more time consuming and costly. These laws, regulations and standards are subject to varying interpretations, in many cases, due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Our investment in compliance with existing and evolving regulatory requirements will result in increased administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities, which could have a material adverse effect on our business, financial condition and results of operations.
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We also expect that being a public company will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These increased costs may require us to divert a significant amount of money that we could otherwise use to expand our business and achieve our strategic objectives.
Risks Related to This Offering and Ownership of Our Common Shares
There has been no public market for our common shares prior to this offering, and an active market in which investors can resell their shares may not develop.
Prior to this offering, there has been no public market for our common shares. In connection with this offering, we have filed an application to list our common shares under the symbol “LITM” on the Nasdaq Capital Market. There is no guarantee that Nasdaq or any other exchange or quotation system, will permit our common shares to be listed and traded.
Even if our common shares are approved for listing on the Nasdaq Capital Market a liquid public market for our common shares may not develop. The initial public offering price for our common shares has been determined by negotiation between us and the underwriters based upon several factors, including prevailing market conditions, our historical performance, estimates of our business potential and earnings prospects, and the market valuations of similar companies. The price at which the common shares are traded after this offering may decline below the initial public offering price, meaning that you may experience a decrease in the value of your common shares regardless of our operating performance or prospects.
The market price of our common shares may fluctuate, and you could lose all or part of your investment.
After this offering, the market price for our common shares is likely to be volatile, in part because our shares have not been traded publicly. In addition, the market price of our common shares may fluctuate significantly in response to several factors, most of which we cannot control, including:
| ● | actual or anticipated variations in our operating results; |
| ● | increases in market interest rates that lead investors of our common shares to demand a higher investment return; |
| ● | changes in earnings estimates; |
| ● | changes in market valuations of similar companies; |
| ● | actions or announcements by our competitors; |
| ● | adverse market reaction to any increased indebtedness we may incur in the future; |
| ● | additions or departures of key personnel; |
| ● | actions by shareholders; |
| ● | speculation in the media, online forums, or investment community; and |
| ● | our intentions and ability to list our common shares on the Nasdaq Capital Market and our subsequent ability to maintain such listing. |
The public offering price of our common shares has been determined by negotiations between us and the underwriters based upon many factors and may not be indicative of prices that will prevail following the closing of this offering. Volatility in the market price of our common shares may prevent investors from being able to sell their common shares at or above the initial public offering price. As a result, you may suffer a loss on your investment.
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We may not be able to satisfy listing requirements of the Nasdaq Capital Market or obtain or maintain a listing of our common shares.
If our common shares are listed on the Nasdaq Capital Market we must meet certain financial and liquidity criteria to maintain such listing. If we violate Nasdaq listing requirements, our common shares may be delisted. If we fail to meet any of Nasdaq’s listing standards, our common shares may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common shares may materially impair our shareholders’ ability to buy and sell our common shares and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common shares. The delisting of our common shares could significantly impair our ability to raise capital and the value of your investment.
We have considerable discretion as to the use of the net proceeds from this offering and we may use these proceeds in ways with which you may not agree.
We intend to the proceeds from this offering for resource development activities including, possibly, strategic project acquisitions, technical studies and reports, marketing and general corporate purposes. However, we have considerable discretion in the application of the proceeds. You will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. The net proceeds may be used for corporate or other purposes with which you do not agree or that do not improve our profitability or increase our share price. The net proceeds from this offering may also be placed in investments that do not produce income or that lose value. Please see “Use of Proceeds” below for more information.
You will experience immediate and substantial dilution as a result of this offering.
As of June 30, 2021, our net tangible book value was approximately US$3,831,720, or approximately US$0.29 per share. Since the effective price per share of our common shares being offered in this offering is substantially higher than the net tangible book value per share, you will suffer substantial dilution with respect to the net tangible book value of the common shares you purchase in this offering. Based on the assumed public offering price of US$7 per share being sold in this offering, which is the midpoint of the estimated offering range set forth on the cover page of this prospectus, and our net tangible book value per share as of June 30, 2021, if you purchase shares in this offering, you will suffer immediate and substantial dilution of US$1.4 per share (or US$1.53 per share if the underwriters exercise the over-allotment option in full) with respect to the net tangible book value of the common shares. See the section titled “Dilution” for a more detailed discussion of the dilution you will incur if you purchase shares in this offering.
We do not expect to declare or pay dividends in the foreseeable future.
We do not expect to declare or pay dividends in the foreseeable future, as we anticipate that we will invest future earnings in the development and growth of our business. Therefore, holders of our common shares will not receive any return on their investment unless they sell their securities, and holders may be unable to sell their securities on favorable terms or at all.
If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common shares could be negatively affected.
Any trading market for our common shares may be influenced in part by any research reports that securities industry analysts publish about us. We do not currently have and may never obtain research coverage by securities industry analysts. If no securities industry analysts commence coverage of us, the market price and market trading volume of our common shares could be negatively affected. In the event we are covered by analysts, and one or more of such analysts downgrade our shares, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market trading volume of our common shares could be negatively affected.
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You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions against us or our management named in the prospectus based on foreign laws.
We are incorporated in the Province of Manitoba, Canada under The Corporations Act (Manitoba). We conduct our operations outside the United States and substantially all of our assets are located outside the United States. In addition, a majority of our directors and executive officers and the experts named in this prospectus reside outside the United States, and a significant amount of their assets are located outside the United States. As a result, service of process upon such persons may be difficult or impossible to effect within the United States. Furthermore, because a substantial portion of our assets, and substantially all the assets of our directors and officers and the Canadian experts named herein, are located outside of the United States, any judgment obtained in the United States, including a judgment based upon the civil liability provisions of United States federal securities laws, against us or any of such persons may not be collectible within the United States. In Canada, provincial and territorial reciprocal enforcement of judgments legislation sets out the procedure for registering foreign judgments and this procedure varies depending on the province or territory of the enforcing court. If a foreign judgment originates from a jurisdiction not captured by the applicable provincial or territorial reciprocal enforcement of judgments or enforcement of foreign judgments legislation, the foreign judgment may be capable of enforcement at common law and the party seeking to enforce the foreign judgment must commence new proceedings in the domestic or enforcing court. For more information regarding the relevant laws of Canada, see “Enforceability of Civil Liabilities.”
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.
Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:
| ● | the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; |
| ● | the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; |
| ● | the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and |
| ● | the selective disclosure rules by issuers of material nonpublic information under Regulation FD. |
Upon the completion of this offering, we will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of Nasdaq Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.
We will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies and our shareholders could receive less information than they might expect to receive from more mature public companies.
Upon the completion of this offering, we will qualify as an “emerging growth company” under the JOBS Act. As a result, we will be permitted to, and intend to, rely on exemptions from certain disclosure requirements. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year during which we have total annual gross revenues of at least US$1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (iii) the date on which we have, during the preceding three year period, issued more than US$1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act, which could occur if the market value of our common shares that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.
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Because we will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies, our shareholders could receive less information than they might expect to receive from more mature public companies. We cannot predict if investors will find our common shares less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our common shares.
As a foreign private issuer, we are permitted to rely on exemptions from certain Nasdaq corporate governance standards applicable to domestic U.S. issuers. This may afford less protection to holders of our shares.
We are exempted from certain corporate governance requirements of Nasdaq by virtue of being a foreign private issuer. As a foreign private issuer, we are permitted to follow the governance practices of our home country in lieu of certain corporate governance requirements of Nasdaq. As result, the standards applicable to us are considerably different than the standards applied to domestic U.S. issuers. For instance, we are not required to:
| ● | have a majority of the board be independent (although all of the members of the audit committee must be independent under the Exchange Act); |
| ● | have a compensation committee and a nominating committee to be comprised solely of “independent directors”; or |
| ● | hold an annual meeting of shareholders no later than one year after the end of our fiscal year. |
Although we do not currently intend to rely these “home country” exemptions, we may rely on some of these exemptions in the future. As a result, our shareholders may not be provided with the benefits of certain corporate governance requirements of Nasdaq.
Our parent company will own a majority of our outstanding common shares after this offering. As a result, it will have the ability to approve all matters submitted to our shareholders for approval.
Our parent company, Nova Minerals Limited will own approximately 60.5% of our outstanding common shares following this offering, or approximately 58.9% if the underwriters exercise the over-allotment option in full. It therefore may have the ability to approve all matters submitted to our shareholders for approval including:
| ● | election of our board of directors; |
| ● | removal of any of our directors; |
| ● | any amendments to our certificate or articles of incorporation; and |
| ● | adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us. |
In addition, this concentration of ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our share price or prevent our shareholders from realizing a premium over our share price.
As a “controlled company” under the rules of Nasdaq, we intend to exempt our company from certain corporate governance requirements that could have an adverse effect on our public shareholders.
Under Nasdaq’s rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including, without limitation (i) the requirement that a majority of the board of directors consist of independent directors, (ii) the requirement that the compensation of our officers be determined or recommended to our board of directors by a compensation committee that is comprised solely of independent directors, and (iii) the requirement that director nominees be selected or recommended to the board of directors by a majority of independent directors or a nominating committee comprised solely of independent directors. Currently, we expect to rely on the “controlled company” exemption after this offering. Because we expect to elect to rely on the “controlled company” exemption, a majority of the members of our board of directors might not be independent directors and our nominating and corporate governance and compensation committees might not consist entirely of independent directors. Our status as a controlled company could cause our common shares to look less attractive to certain investors or otherwise harm our trading price.
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Future issuances of our common shares or securities convertible into, or exercisable or exchangeable for, our common shares, or the expiration of lock-up agreements that restrict the issuance of new common shares or the trading of outstanding common shares, could cause the market price of our common shares to decline and would result in the dilution of your holdings.
Future issuances of our common shares or securities convertible into, or exercisable or exchangeable for, our common shares, or the expiration of lock-up agreements that restrict the issuance of new common shares or the trading of outstanding common shares, could cause the market price of our common shares to decline. We cannot predict the effect, if any, of future issuances of our securities, or the future expirations of lock-up agreements, on the price of our common shares. In all events, future issuances of our common shares would result in the dilution of your holdings. In addition, the perception that new issuances of our securities could occur, or the perception that locked-up parties will sell their securities when the lock-ups expire, could adversely affect the market price of our common shares. In connection with this offering, we will enter into a lock-up agreement that prevents us, subject to certain exceptions, from offering additional shares for up to 180 days after the closing of this offering, as further described in the section titled “Underwriting.” In addition to any adverse effects that may arise upon the expiration of these lock-up agreements, the lock-up provisions in these agreements may be waived, at any time and without notice. If the restrictions under the lock-up agreements are waived, our common shares may become available for resale, subject to applicable law, including without notice, which could reduce the market price for our common shares.
Future issuances of debt securities, which would rank senior to our common shares upon our bankruptcy or liquidation, and future issuances of preferred shares, which could rank senior to our common shares for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common shares.
In the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common shares. Moreover, if we issue preferred shares, the holders of such preferred shares could be entitled to preferences over holders of common shares in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue debt or preferred shares in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of our common shares must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our common shares.
There is a risk that we will be a passive foreign investment company for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. investors in our shares.
In general, a non-U.S. corporation is a passive foreign investment company, or PFIC, for any taxable year in which (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. For purposes of the above calculations, a non-U.S. corporation that owns at least 25% by value of the shares of another corporation is treated as if it held its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive income generally includes dividends, interest, rents, royalties and certain gains. Cash is a passive asset for these purposes.
Based on the expected composition of our income and assets and the value of our assets, including goodwill, which is based on the expected price of the shares in this offering, we do not expect to be a PFIC for our current taxable year. However, the proper application of the PFIC rules to a company with a business such as ours is not entirely clear. Because the proper characterization of certain components of our income and assets is not entirely clear, because we will hold a substantial amount of cash following this offering, and because our PFIC status for any taxable year will depend on the composition of our income and assets and the value of our assets from time to time (which may be determined, in part, by reference to the market price of our shares, which could be volatile), there can be no assurance that we will not be a PFIC for our current taxable year or any future taxable year.
If we were a PFIC for any taxable year during which a U.S. investor holds shares, certain adverse U.S. federal income tax consequences could apply to such U.S. investor. See “Material United States and Canadian Income Tax Considerations—U.S. Federal Income Taxation Considerations—Passive Foreign Investment Company Consequences” for additional information.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. The forward-looking statements are contained principally in, but not limited to, the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
| ● | our goals and strategies; |
| ● | expectations regarding revenue, expenses and operations; |
| ● | our having sufficient working capital and be able to secure additional funding necessary for the continued exploration of our property interests; |
| ● | expectations regarding the potential mineralization, geological merit and economic feasibility of our projects; |
| ● | expectations regarding exploration results at the Thompson Brothers Lithium Project; |
| ● | mineral exploration and exploration program cost estimates; |
| ● | expectations regarding any environmental issues that may affect planned or future exploration programs and the potential impact of complying with existing and proposed environmental laws and regulations; |
| ● | receipt and timing of exploration permits and other third-party approvals; |
| ● | government regulation of mineral exploration and development operations; |
| ● | expectations regarding any social or local community issues that may affected planned or future exploration and development programs; and |
| ● | key personnel continuing their employment with us. |
In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the heading “Risk Factors” and elsewhere in this prospectus. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.
This prospectus also contains certain data and information, which we obtained from various government and private publications. Although we believe that the publications and reports are reliable, we have not independently verified the data. Statistical data in these publications includes projections that are based on a number of assumptions. If any one or more of the assumptions underlying the market data is later found to be incorrect, actual results may differ from the projections based on these assumptions.
The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Although we will become a public company after this offering and have ongoing disclosure obligations under United States federal securities laws, we do not intend to update or otherwise revise the forward-looking statements in this prospectus, whether as a result of new information, future events or otherwise.
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After deducting the estimated underwriters’ commissions and offering expenses payable by us, we expect to receive net proceeds of approximately US$18.31 million from this offering (or approximately US$21.09 million if the underwriters exercise the over-allotment option in full), based on an assumed public offering price of US$7.00 per share, which is the midpoint of the estimated offering range set forth on the cover page of this prospectus.
We plan to use the net proceeds of this offering as follows:
| ● | 52% of the net proceeds (approximately US$9.52 million) for resource development activities such as drilling, soil sampling, as well as potential project acquisition; |
| ● | 20% of the net proceeds (approximately US$3.66 million) for technical studies and reports such as preliminary economic assessment, preliminary feasibility study, resource modelling and/or technical reports such as an S-K 1300 compliant report; |
| ● | 11% of the net proceeds (approximately US$2.01 million) for corporate purposes such as salaries, office, public company fees, audit fees, director and officer insurance premium payments or other similar uses; and |
| ● | 17% of the net proceeds (approximately US$3.11 million) as general corporate expenses. This would include items such as the cost of acquiring capital, underwriting discounts and commissions and attorneys’ fees, environmental, sustainability and governance (ESG) initiatives, and marketing and promotional efforts. |
Each US$1.00 increase or decrease in the assumed initial public offering price of US$7.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase the net proceeds that we receive from this offering by approximately US$2.64 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions payable by us.
The foregoing represents our current intentions to use and allocate the net proceeds of this offering based upon our present plans and business conditions. Our management, however, will have broad discretion in the way that we use the net proceeds of this offering. Pending the final application of the net proceeds of this offering, we intend to invest the net proceeds of this offering in short-term, interest-bearing, investment-grade securities. See “Risk Factors—Risks Related to This Offering and Ownership of Our Common Shares—We have considerable discretion as to the use of the net proceeds from this offering and we may use these proceeds in ways with which you may not agree.”
Pending our use of the net proceeds from this offering, we may invest the net proceeds in a variety of capital preservation investments, including short-term, investment grade, interest bearing instruments and U.S. government securities.
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We have never declared or paid cash dividends on our common shares. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends on our common shares in the near future. We may also enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our common shares. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant. Further, under the terms of the MCA, we are prohibited from declaring or paying a dividend if our board has reasonable grounds for believing that we are, or would after the payment be, unable to pay our liabilities as they become due, or the realizable value of our assets would thereby be less than the aggregate of our liabilities and stated capital. See also “Risk Factors— Risks Related to This Offering and Ownership of Our Common Shares—We do not expect to declare or pay dividends in the foreseeable future.”
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The following table sets forth our cash and capitalization as of June 30, 2021:
| ● | on an actual basis; and |
| ● | on a pro forma basis to reflect the sale of 2,857,143 common shares by us in this offering at an assumed price to the public of US$7.00 per share, which is the midpoint of the estimated offering range set forth on the cover page of this prospectus, resulting in net proceeds to us of US$18.31 million after deducting (i) underwriter commissions of US$1.5 million and (ii) our estimated other offering expenses of US$189,960. |
The pro forma information below is illustrative only and our capitalization following the completion of this offering is subject to adjustment based on the initial public offering price of our common shares and other terms of this offering determined at pricing. You should read this table together with our financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
| Actual | As adjusted | |||||||||||||||
| C$ | US$ | C$ | US$ | |||||||||||||
| Cash | 318,844 | 257,049 | 23,030,569 | 18,567,050 | ||||||||||||
| Total long-term obligations | - | - | - | - | ||||||||||||
| Shareholders’ equity: | ||||||||||||||||
| Share capital | 5,750,252 | 4,635,805 | 28,461,977 | 22,945,806 | ||||||||||||
| Reserves | 1,274,138 | 1,027,199 | 1,274,138 | 1,027,199 | ||||||||||||
| Deficit | (2,271,524 | ) | (1,831,283 | ) | (2,271,524 | ) | (1,831,283 | ) | ||||||||
| Total shareholder’s equity | 4,752,866 | 3,831,720 | 27,464,591 | 22,141,721 | ||||||||||||
| Total capitalization | 4,752,866 | 3,831,720 | 27,464,591 | 22,141,721 | ||||||||||||
If the underwriters exercise the over-allotment option in full, each of our as adjusted cash, share capital, total shareholders’ equity and total capitalization would be US$21,342,089, US$25,720,845, US$24,916,760, US$24,916,760, respectively.
Each US$1.00 increase or decrease in the assumed offering price per share of US$7.00, assuming no change in the number of shares to be sold, would increase or decrease the net proceeds that we receive in this offering and each of total shareholders’ equity and total capitalization by approximately US$2,642,858 and US$2,642,858, respectively, if the underwriters exercise the over-allotment option in full), after deducting (i) estimated underwriter commissions and (ii) offering expenses, in each case, payable by us.
The table above excludes (on a post-consolidation basis and subject to rounding of fractional shares, as applicable) the following shares:
| ● | 820,000 common shares issuable upon the exercise of outstanding options under our Amended and Restated Stock Option Plan at a weighted average exercise price of C$2.50 (approximately US$2.02) per share; |
| ● | 1,586,732 additional common shares that are reserved for future issuance under our Amended and Restated Stock Option Plan; |
| ● | 864,525 common shares issuable upon the exercise of outstanding warrants at a weighted average exercise price of C$1.55 (approximately US$1.25) per share; |
| ● | 240,000 common shares reserved for issuance under a restricted stock award agreement with our Chief Executive Officer, Philip Gross; |
| ● | Approximately 868,298 common shares issuable upon the conversion of outstanding convertible debentures; and |
| ● | up to 142,857 common shares issuable upon exercise of the representative’s warrants issued in connection with this offering. |
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If you invest in our common shares, your interest will be diluted to the extent of the difference between the initial public offering price per common share and our net tangible book value per common share after this offering. Dilution results from the fact that the assumed initial public offering price per common share is substantially in excess of the net tangible book value per common share attributable to the existing shareholders for our presently outstanding common shares.
Our net tangible book value was approximately US$3,831,720, or approximately US$0.29 per common share, as of June 30, 2021. Our net tangible book value represents the amount of our total consolidated tangible assets (which is calculated by subtracting deferred tax assets from our total consolidated assets), less the amount of our total consolidated liabilities. Dilution is determined by subtracting net tangible book value per share after giving effect to this offering.
After giving effect to our sale of 2,857,143 common shares in this offering at an assumed initial public offering price of US$7.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value as of June 30, 2021 would have been approximately US$22,141,720, or approximately US$1.40 per share. This amount represents an immediate increase in pro forma net tangible book value of US$1.01 per share to existing shareholders and an immediate dilution in pro forma net tangible book value of US$5.60 per share to purchasers of our common shares in this offering, as illustrated in the following table.
| Assumed initial public offering price per common share | US$ | 7.00 | ||||
| Net tangible book value per common share at June 30, 2021 | US$ | 0.29 | ||||
| Pro forma net tangible book value per common share after this offering | US$ | 1.40 | ||||
| Increase in net tangible book value per common share to the existing shareholders | US$ | 1.10 | ||||
| Dilution in net tangible book value per common share to new investors in this offering | US$ | 5.60 | ||||
If the underwriters exercise their over-allotment option in full, the pro forma as adjusted net tangible book value per common share, as adjusted to give effect to this offering, would be US$1.53 per share, and the dilution in pro forma net tangible book value per share to new investors purchasing common shares in this offering would be US$5.47 per share.
A $1.00 increase (decrease) in the assumed public offering price of US$7.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma net tangible book value after giving effect to the offering by US$2.6 million, the net tangible book value per common share after giving effect to this offering by US$0.16 per common share and the dilution in net tangible book value per common share to new investors in this offering by US$0.84 per common share, assuming no change to the number of common shares offered by us as set forth on the cover page of this prospectus, no exercise of over-allotment option and after deducting underwriting commissions and estimated offering expenses payable by us.
The pro forma information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our common shares and other terms of this offering determined at pricing.
The following tables summarize the differences between our existing shareholders and the new investors with respect to the number of common shares purchased from us in this offering, the total consideration paid and the average price per common share paid at an assumed initial public offering price of US$7.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and before deducting estimated underwriting discounts and commissions and estimated offering expenses (assuming no exercise of the over-allotment option). As the table shows, new investors purchasing shares in this offering may in certain circumstances pay an average price per share substantially higher than the average price per share paid by our existing shareholders.
Share Purchased (post-consolidation) |
Total Consideration | Average | ||||||||||||||||||||||
| Number | % | Amount | % | Price Per Share | ||||||||||||||||||||
| Existing shareholders | 13,010,176 | 82 | % | US$ | 4,635,805 | 18,82 | % | US$ | 0.36 | |||||||||||||||
| New investors | 2,857,143 | 18 | % | US$ | 20,000,000 | 81.18 | % | US$ | 7.00 | |||||||||||||||
| Total | 15,867,319 | 100 | % | US$ | 24,635,805 | 100 | % | US$ | 1.55 | |||||||||||||||
The table above excludes (on a post-consolidation basis and subject to rounding of fractional shares, as applicable) the following shares:
| ● | 820,000 common shares issuable upon the exercise of outstanding options under our Amended and Restated Stock Option Plan at a weighted average exercise price of C$2.50 (approximately US$2.02) per share; |
| ● | 1,586,732 additional common shares that are reserved for future issuance under our Amended and Restated Stock Option Plan; |
| ● | 864,525 common shares issuable upon the exercise of outstanding warrants at a weighted average exercise price of C$1.55 (approximately US$1.25) per share; |
| ● | 240,000 common shares reserved for issuance under a restricted stock award agreement with our Chief Executive Officer, Philip Gross; |
| ● | Approximately 868,298 common shares issuable upon the conversion of outstanding convertible debentures; and |
| ● | up to 142,857 common shares issuable upon exercise of the representative’s warrants issued in connection with this offering. |
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SELECTED CONSOLIDATED FINANCIAL DATA
The following selected historical financial information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in the prospectus and the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.
The following summary consolidated financial data as of June 30, 2021 and 2020. This information is derived from our audited consolidated financial statements and our interim six-month consolidated financial statements included elsewhere in this prospectus.
Our financial statements are prepared and presented in accordance with IFRS. Our historical results for any period are not necessarily indicative of our future performance.
| Years Ended June 30, | ||||||||||||
| 2020 | 2021 | 2021 | ||||||||||
| Statements of Loss Data | C$ | C$ | US$ | |||||||||
| Total operating expenses | (247,364 | ) | (595,598 | ) | (480,166 | ) | ||||||
| Total other income (loss) | 65,248 | 43,162 | 34,797 | |||||||||
| Net loss | (182,116 | ) | (552,436 | ) | (445,369 | ) | ||||||
| Net loss per share – basic and diluted | (0.01 | ) | (0.04 | ) | (0.03 | ) | ||||||
| Weighted average shares outstanding – basic and diluted | 13,007,995 | 13,008,669 | 13,008,669 | |||||||||
| As of June 30, | ||||||||||||
| 2020 | 2021 | 2021 | ||||||||||
| Statements of Financial Position Data | C$ | C$ | US$ | |||||||||
| Cash | 143,089 | 318,844 | 257,049 | |||||||||
| Current assets | 154,480 | 397,461 | 320,430 | |||||||||
| Total assets | 5,551,359 | 6,127,685 | 4,940,088 | |||||||||
| Current liabilities | 343,734 | 1,374,819 | 1,108,367 | |||||||||
| Total liabilities | 343,734 | 1,374,819 | 1,108,367 | |||||||||
| Shareholders’ equity | 5,207,625 | 4,752,866 | 3,831,720 | |||||||||
| Total liabilities and shareholders’ equity | 5,551,359 | 6,127,685 | 4,940,088 | |||||||||
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this prospectus. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly in the sections titled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”
The audited consolidated financial statements for the years ended June 30, 2021 and 2020 are prepared pursuant to IFRS and in accordance with the standards of the U.S. Public Company Accounting Oversight Board. As permitted by the rules of the SEC for foreign private issuers, we do not reconcile our financial statements to U.S. generally accepted accounting principles. PCAOB
The management’s discussion and analysis of the financial condition and results of operations (“MD&A”) of the Company for the year ended June 30, 2021, and its financial position as of the same date, should be read in conjunction with the Company’s audited consolidated financial statements as at June 30, 2021(“F2021”), including the notes thereto. The comparative reporting period is the year ended June 30, 2020 (“F2020”).
All figures are in Canadian dollars, unless otherwise noted.
Cautionary Note Regarding Forward-looking Information and Statements:
This MD&A may contain forward-looking statements that are based on the Company’s expectations, estimates and projections regarding its business and the economic environment in which it operates. These statements speak only as of the date on which they are made, and there are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. Examples of some of the specific risks associated with the operations of the Company are set out below under “Risk Factors”. Actual outcomes and results may differ materially from those expressed in these forward-looking statements and readers should not place undue reliance on such statements.
Certain information included in this management’s discussion and analysis may constitute forward-looking information within the meaning of securities laws. In some cases, forward-looking information can be identified by the use of terms such as “may”, “will”, “should”, “expect”, “believe”, “plan”, “scheduled”, “intend”, “estimate”, “forecast”, “predict”, “potential”, “continue”, “anticipate” or other similar expressions concerning matters that are not historical facts. Forward-looking information may relate to management’s future outlook and anticipated events or results, and may include statements or information regarding the future plans or prospects of the Company. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Although the Company believes that its expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements.
For expansion of certain risks and uncertainties that could contribute to a difference in results, please review those risks listed under the heading “Risks Factors” in this MD&A. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Forward-looking statements are not guaranteeing future performance and there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof and the Company takes no responsibility to update them or to revise them to reflect new events or circumstances, except as required by law.
The condensed interim unaudited consolidated financial statements for the six-months ended December 31, 2020 and 2019 are prepared pursuant to IFRS. As permitted by the rules of the SEC for foreign private issuers, we do not reconcile our financial statements to U.S. generally accepted accounting principles.
Overview
We are an exploration stage mining company engaged in lithium exploration in the province of Manitoba, Canada. Our primary focus is currently conducting exploration for lithium at our 100% owned Thompson Brothers Lithium Project. See “Business – Our Mineral Project – Thompson Brothers Lithium Project.” Our objective is to develop a world-class lithium mine in the jurisdictionally friendly Canadian province of Manitoba and to become the first fully renewable lithium hydroxide producer in North America, strategically located to supply the U.S. “Auto Alley” and the European battery market via our nearby access to the Hudson Bay Railway and the Port of Churchill. With our commitment to the environment, corporate social responsibility and sustainability, we aim in the longer term to derive substantial revenues from the sale of lithium hydroxide to the growing electric vehicle and stationary (e.g., residential, utility and industrial) battery storage markets in the U.S. and abroad. With access to renewable energy produced in Manitoba, we expect to become the first supplier in North America of lithium mined exclusively with the benefit of power produced from fully sustainable, local sources.
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Overall Performance
| I. | Principal business and corporate history |
We were incorporated under the Canada Business Corporations Act on May 25, 2018. The corporate and principal place of business is 242 Hargrave St #1700, Winnipeg, MB R3C 0V1 Canada. The Company is a Canadian natural resource exploration company engaged in the exploration and development of mineral resources through the subsidiaries:
| i. | Snow Lake Exploration Ltd. |
| ii. | Snow Lake (Crowduck) Ltd. |
In this registration statement, Snow Lake and the subsidiaries it controlled are referred to as “the Group”.
On March 7, 2019, we and Nova Minerals Ltd. entered into a share sale agreement (the “Agreement”), whereby we acquired all 100,000,000 of the issued and outstanding shares of Thompson Bros (Lithium) Pty Ltd (“Thompson Bros”), formerly Manitoba Minerals Pty Ltd. (“Manitoba Minerals”), a wholly owned subsidiary of Nova Minerals Ltd. as part of a group restructuring. Subsequently, on February 9, 2021, Thompson Bros was dissolved.
Our primary focus is currently conducting exploration for lithium at our 100% owned Thompson Brothers Lithium Project. Our objective is to develop a world-class lithium mine in the jurisdictionally friendly Canadian province of Manitoba and to become the first fully renewable lithium hydroxide producer in North America, strategically located to supply the U.S. “Auto Alley” and the European battery market via our nearby access to the Hudson Bay Railway and the Port of Churchill. With our commitment to the environment, corporate social responsibility and sustainability, we aim in the longer term to derive substantial revenues from the sale of lithium hydroxide to the growing electric vehicle and stationery (e.g., residential, utility and industrial) battery storage markets in the U.S. and abroad. With access to renewable energy produced in Manitoba, we expect to become the first supplier in North America of lithium mined exclusively with the benefit of power produced from fully sustainable, local sources.
Recent Developments
Impact of Coronavirus Pandemic
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. The virus has since spread to over 150 countries. On March 11, 2020, the World Health Organization declared the outbreak a pandemic. On March 11, 2020, the federal government of Canada announced a $1 billion package to help Canadians through the health crisis. To date, there have been a large number of temporary business closures, quarantines and a general reduction in consumer activity in Canada.
As a result of the measures adopted by the Province of Manitoba and the federal government of Canada, certain of our mining exploration activities have been delayed. The access to investor capital as well as a 14-day quarantine when travelling into the Province of Manitoba have discouraged us from engaging in some exploration activities in the near term. As a result of these unexpected delays, we are placing our focus on completing lab work and technical report writing using the field data that we have previously compiled. We currently expect to get back to our “boots on the ground” work such as core sampling and test drilling later in the fall and winter of 2021, subject to future public safety orders and recommendations that may be issued by the Province of Manitoba and the federal government of Canada.
We have taken steps to take care of our employees, including providing the ability for employees to work remotely and implementing strategies to support appropriate social distancing techniques for those employees who are not able to work remotely. We have also taken precautions with regard to employee, facility and office hygiene as well as implementing significant travel restrictions. We are also assessing our business continuity plans for all business units in the context of the pandemic. This is a rapidly evolving situation, and we will continue to monitor and mitigate developments affecting our workforce, our suppliers, our customers, and the public at large to the extent we are able to do so. We have and will continue to carefully review all rules, regulations, and orders and responding accordingly.
The spread of the virus in many countries continues to adversely impact global economic activity and has contributed to significant volatility and negative pressure in financial markets and supply chains. The pandemic has had, and could have a significantly greater, material adverse effect on the Canadian economy as a whole, as well as the local economy where we conduct our operations. The pandemic has resulted, and may continue to result for an extended period, in significant disruption of global financial markets, which may reduce our ability to access capital in the future, which could negatively affect our liquidity.
If the current pace of the pandemic cannot be slowed and the spread of the virus is not contained, our business operations could be further delayed or interrupted. We expect that government and health authorities may announce new or extend existing restrictions, which could require us to make further adjustments to our operations in order to comply with any such restrictions. We may also experience limitations in employee resources. In addition, our operations could be disrupted if any of our employees were suspected of having the virus, which could require quarantine of some or all such employees or closure of our facilities for disinfection. We may also delay or reduce certain capital spending and related projects until the travel and logistical impacts of the pandemic are lifted, which will delay the completion of such projects. The duration of any business disruption cannot be reasonably estimated at this time but may materially affect our ability to operate our business and result in additional costs.
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The extent to which the pandemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this prospectus, including new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic and the current financial, economic and capital markets environment, and future developments in the global supply chain and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows.
Emerging Growth Company
Upon the completion of this offering, we will qualify as an “emerging growth company” under the JOBS Act. As a result, we will be permitted to, and intend to, rely on exemptions from certain disclosure requirements. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year during which we have total annual gross revenues of at least US$1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (iii) the date on which we have, during the preceding three year period, issued more than US$1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act, which could occur if the market value of our common shares that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.
Results of Operations
Comparison of the years ended June 30, 2021 and 2020
For the year ended June 30, 2021, the Company had not yet placed any of its mineral properties into production, the Company incurred a net loss of $552,436 (June 30, 2020 - $182,116). As of June 30, 2021, the Company had a deficit (accumulated losses) of $2,271,524 (June 30, 2020 - $1,719,088) and current liabilities in excess of current assets of $977,358 (June 30, 2020 – $189,254). There is no certainty that additional financing at terms that are acceptable to the Company will be available, and an inability to obtain financing would have a direct impact on the Company’s ability to continue as a going concern.
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The following table sets forth key components of our results of operations during the years ended June 30, 2021 and 2020.
| Years ended June 30, | 2021 | 2020 | Increase / (Decrease) | |||||||||||||||||
| C$ | US$ | C$ | C$ | US$ | ||||||||||||||||
| Expenses | ||||||||||||||||||||
| Bank fees and interest | 2,084 | 1,680 | 2,669 | (585 | ) | (472 | ) | |||||||||||||
| Consulting fees | 34,399 | 27,732 | 43,255 | (8,856 | ) | (7,140 | ) | |||||||||||||
| Director and officer consulting fees | 200,858 | 161,930 | 118,700 | 82,158 | 66,235 | |||||||||||||||
| General and administrative | 8,254 | 6,654 | 20,626 | (12,372 | ) | (9,974 | ) | |||||||||||||
| Interest expense and accretion | 140,264 | 113,080 | - | 140,264 | 113,080 | |||||||||||||||
| Amortization of transaction cost | 13,284 | 10,709 | - | 13,284 | 10,709 | |||||||||||||||
| Professional fees | 174,211 | 140,447 | 57,272 | 116,939 | 94,275 | |||||||||||||||
| Transfer agent and regulatory fees | 22,244 | 17,933 | 3,885 | 18,359 | 14,801 | |||||||||||||||
| Travel expenses | - | - | 957 | (957 | ) | (772 | ) | |||||||||||||
| (595,598 | ) | (480,166 | ) | (247,364 | ) | (348,234 | ) | (280,743 | ) | |||||||||||
| Other income (loss) | - | - | - | - | - | |||||||||||||||
| Foreign currency gain (loss) | (254 | ) | (205 | ) | (6,001 | ) | 5,747 | 4,633 | ||||||||||||
| Gain on change in fair value of derivative liability | 32,676 | 26,343 | - | 32,676 | 26,343 | |||||||||||||||
| Recovery of accounts payable | 10,740 | 8,658 | - | 10,740 | 8,658 | |||||||||||||||
| Recovery of flow through share liability | - | - | 71,249 | (71,249 | ) | (57,440 | ) | |||||||||||||
| Income (loss) and comprehensive income (loss) for the period | (552,436 | ) | (445,369 | ) | (182,116 | ) | (370,320 | ) | (298,549 | ) | ||||||||||
Revenues. We have not generated any revenues to date and do not anticipate generating any revenues until the fourth quarter of 2023, at the earliest.
Consulting fees: Consulting fees include the fees that we pay to our third-party consultants, including professional accounting services, taxation, and other related support. Our consulting fees marginally decreased during the year ended June 30, 2021, when compared to the year ended June 30, 2020, due to the rationalization of certain services obtained during fiscal 2021.
Director and officer consulting fees: Directors and officers fees increased by C$82,158 (USD$66,235) resulting from an increase in CFO fees of C$5,000, an increase in CEO fees of approximately C$54,000 and the creation on December 2021 of the new VP Corporate Development position representing for fiscal 2021 an expense of C$23,000.
General and administrative: The reduction in general and administrative fees of C$12,372 (US$9,974) is mainly due to an increase in tax related fees for approximately C$8,000, a reduction in general office expenses by approximately $9,000, a decrease in insurances by approximately C$6,000 and a reduction in other general expenses related to Thomson Bros approximately C$4,000.
Professional fees. Professional fees include the fees that we pay to professional advisors, such as our legal counsel. Our professional fees increased by C$116,939 (USD$94,275), resulting from an increase in audit related fees for approximately C$41,000 and legal fees that increased by C$75,000. Both increases are mainly related to additional services associated with the listing of the Company.
Transfer agent and regulatory fees. Transfer agent and regulatory fees increased by C$18,359 (US$14,801) resulting from an increase in transfer agent fees of approximately C$20,000, services that we did not have during F2020, and a decrease in share registry fees of approximately C$2,000.
Foreign currency (loss) gain. For the year ended June 30, 2021, we incurred a foreign currency translation gain of C$32,676 (US$26,343), as compared to a foreign currency translation loss of C$ Nil for the comparative period.
Recovery of flow through share liability. As the Company did not have any flow-through share liability outstanding during F2021, no recovery was recorded. For the year ended June 30, 2020, the Company incurred a recovery of flow through share liability of C$71,249 (US$57,440). Flow-through share arrangements involve resource expenditure deductions for income tax purposes which are renounced to purchasers of common shares in accordance with income tax legislation. Each flow-through share entitles the holder to a 100% tax deduction in respect of qualifying Canadian exploration expenses. The value of the flow-through share liability was determined using the residual value method, after determining the fair value of the common shares and common shares purchase warrants issued in our December 2018 private placement financing. During the six months ended December 31, 2020, we satisfied all of our flow-through obligations and recognized a recovery on the statement of loss and comprehensive loss for the full amount of the flow-through share liability.
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Convertible debenture
In February 2021, the Company issued convertible debt (the “Debentures”) for a total of C$865,263 (US$697,356). The Debentures were sold at an original issue discount of approximately 5% for proceeds of $805,000 (US$648,984), and included a conversion feature to convert the Debenture into common shares of the Company. The Company also granted the holders of the Debentures 361,098 warrants to purchase Common Shares.
If convertible debt is convertible to equity at a variable conversion rate, where the quantity of shares or units into which the debt is convertible varies based on changes in variables affecting calculation of the conversion price, the value of the conversion component is first calculated and classified as a derivative liability, with the residual value allocated to the loan liability component, which is recognized as a liability and, where applicable, to warrants issued to debenture holders, which are recognized in reserves. Subsequent to initial recognition, the liability component of a convertible debenture is measured at
The Company determined the fair value of the conversion feature component upon initial recognition was C$442,589 (US$356,812). The residual $362,411 (US$292,173) value of the $805,000 net proceeds received was allocated on a pro-rata basis between the debt component ($271,642 – US$218,995) and the warrants component ($90,769 – US$73,159) based on their relative fair values. The Company recognized $101,565 (US$81,881) of accretion expense relating to accreting the debt component of the Debentures up to their principal value and $38,699 (US$31,199) of cash interest payable.
The Company recognized C$32,676 (US$ 26,343) as a gain in the fair value of the conversion feature of the derivative liability, representing the change in fair value from inception to June 30, 2021.
Loss and comprehensive loss. As a result of the cumulative effect of the factors described above, we had a loss and comprehensive loss of C$552,436 (US$445,369) for the year ended June 30, 2021, as compared to C$182,116 for the year ended June 30, 2020, an increase of C$370,320 (US$298,549).
Liquidity and Capital Resources
As of June 30, 2021, we had not yet placed any of our mineral properties into production and we had cash in the amount of C$318,844 (US$257,049), a deficit (accumulated losses) of C$2,271,524 (US$1,831,283) and current liabilities in excess of current assets of C$977,358 (US$787,938). These conditions indicate a material uncertainty that may cast significant doubt on our ability to continue as a going concern. Therefore, the report of our auditors on our audited consolidated financial statements for the fiscal year ended June 30, 2021 contains a going concern qualification. Our audited consolidated financial statements do not reflect the adjustments to the carrying values and classifications of assets and liabilities that would be necessary if we were unable to realize our assets and settle our liabilities as a going concern in the normal course of operations. Such adjustments could be material.
We have depended on loans, both from related and unrelated parties, and sales of equity securities to conduct operations. Unless and until we commence material operations and achieve material revenues, we will remain dependent on financings to continue our operations.
Anticipated Cash Requirements
We are planning to begin a two-phase exploration program that will include resource definition drilling of the TB-1 pegmatite as well as exploration drilling of the SG pegmatite cluster target.
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As part of our planned phase 1 program, we intend to complete a stripping, mapping and sampling program on the SG pegmatite cluster in preparation for a phase 2 drilling program. Our preliminary cost estimate to complete phase 1 is C$250,000 (approximately US$201,548).
We are also planning a phase 2, 10,400 m drilling program to expand the dimensions of the TB-1 pegmatite and define the deposit in more detail. We will also begin developing an initial permitting plan and conduct additional metallurgical test work. We will complete a preliminary economic assessment report for the project. Will also plan to prospect the TBL property in phase 2. Our current cost estimate to complete phase 2 is C$3,000,000 (approximately US$2,418,575).
We note that the cost estimates for our two-phase planned exploration program are only estimates and, as such, they are subject to change as we move forward to carry out the budgeted exploration activities.
Please see “Business—Our Mineral Project–Thompson Brothers Lithium Project—Exploration Plan for TBL Property” for more details regarding these phases.
We estimate our minimum operating expenses and working capital requirements for the next 12-month period to be as follows:
| Expense | Estimated Amount | |||||||
| C$ | US$ | |||||||
| Exploration | 2,418,575 | 3,000,000 | ||||||
| Consulting fees | 2,015,479 | 2,500,000 | ||||||
| Professional fees | 604,644 | 750,000 | ||||||
| Travel expenses | 161,238 | 200,000 | ||||||
| General and administrative expenses | 282,167 | 350,000 | ||||||
| Transfer agent and regulatory fees | 3,870 | 4,800 | ||||||
| Bank fees and interest | 1,612 | 2,000 | ||||||
| Total Operating Expenses | 5,487,585 | 6,806,800 | ||||||
If we do not raise any additional funds, we will not have enough working capital to follow our projected costs for the next 12-month period. Under such circumstances, we anticipate that exploration expenses would be reduced significantly, as we would only pay the minimum costs to keep our properties in good standing, and generally reduce our overhead costs. Specifically, under such circumstances we would reduce our consulting fees, professional fees, travel expenses and general and administrative expenses.
We plan to raise our required funds primarily through this offering and future sales of our equity securities. Under such circumstances, there is no assurance that we will be able to obtain further funds required for our continued working capital requirements. Any issuance of our equity securities in the near future may result in substantial dilution to our existing shareholders.
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Summary of Cash Flow
Comparison of Years Ended June 30, 2020 and 2019
The following table provides detailed information about our net cash flow for all financial statement periods presented in this prospectus.
| Years Ended June 30, | ||||||||||||
| 2021 | 2020 | |||||||||||
| C$ | US$ | C$ | ||||||||||
| Net cash used in operating activities | (363,476 | ) | (293,031 | ) | (257,981 | ) | ||||||
| Net cash used in investing activities | (270,652 | ) | (218,197 | ) | (196,928 | ) | ||||||
| Net cash provided by (used in) financing activities | 809,883 | 652,921 | (1,001 | ) | ||||||||
| Net increase (decrease) in cash | 175,755 | 141,692 | (455,910 | ) | ||||||||
| Cash, beginning of year | 143,089 | 115,357 | 598,999 | |||||||||
| Cash, end of year | 318,844 | 257,049 | 143,089 | |||||||||
Our net cash used in operating activities was C$363,476 (US$293,031) for the year ended June 30, 2021, as compared C$257,981 for the year ended June 30, 2020.
For the year ended June 30, 2021, our net loss of C$552,436 (US$445,369), and an increase in accounts payable of C$136,339 (US$109,915), an increase in accounts payable to related parties of C$61,694 (US$49,737) offset by increases in prepaids and deposits of C$67,179 (US$54,159), were the primary drivers of the net cash used in operating activities. Other non-cash items also affecting operating activities included interest expense and accretion and amortization of transaction costs related to the convertible debentures of $153,548 (US$123,789) and a gain on change in the fair value of derivative liabilities of C$32,676 (US$26,343).
Our net cash used in investing activities was C$270,652 (US$218,197) for the year ended June 30, 2021, as compared to C$196,928 for the year ended June 30, 2020. Our net cash used in investing activities for the year ended June 30, 2021 and 2020 consisted entirely of payments for the exploration and evaluation of assets.
Our net cash provided by financing activities was C$809,883 (US$652,921) for the year ended June 30, 2021, as compared to C$1,001 net cash used in financing activities for the year ended June 30, 2020. Our net cash used in financing activities for the year ended June 30, 2020 consisted of payments for a loan from Nova Minerals Ltd. of C$1,114, offset by proceeds from the exercise of warrants of C$113, while our net cash provided by financing activities for the year ended June 30, 2020 consisted of proceeds from the issuance of convertible debentures for $805,000 (US$648,984) and proceeds from the exercise of options of C$4,883 (US$3,937).
Please see “Description of Share Capital—History of Securities Issuances” for a description of our recent private placements of securities.
Related Party Transactions
The following schedule describes the amounts payable to related parties as of June 30, 2021:
| C$ | ||||
| Accounts payable to officers & directors | 43,240 | |||
| Due to Nova Minerals Ltd. | 236,402 | |||
| 279,642 | ||||
On March 8, 2019, we entered into a deed of assignment of debt with Nova Minerals Ltd. and Thompson Bros to facilitate the reassignment of the related party loan from Nova Minerals Ltd. to our company. Thereby, we are now a party to an amount owing from Thompson Bros of C$1,519,013 (approximately US$1,115,773) as of June 30, 2020. In consideration for the assignment, we issued one of our common shares to Nova Minerals Ltd. The related party loan is non-interest bearing and with no fixed repayment date or terms.
As of June 30, 2021 and 2020, we had C$236,402 (approximately US$190,585) and C$205,648 (approximately US$165,792), respectively, due to our parent company, Nova Minerals Ltd. This money was lent to us by Nova Minerals Ltd. to fund our startup as well as ongoing accounting, legal and general corporate costs.
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Debenture Sales
In February 2021, the Company issued convertible debt (the “Debentures”) for a total of $865,263 (approximately US$697,568) (the “Subscribed Amount”). The Debentures were sold at an original issue discount of approximately 5% for proceeds of $805,000 (approximately US$648,984), net of a $15,000 (approximately US$12,093) cash commission.
Under the terms of the Agreement, the Subscribed Amount plus interest accrued, at a rate which should be the higher of (i) 12% per annum or (ii) Wall Street Prime Rate (currently approximately 3.3%) + 7%, is convertible, at the option of the Debenture holder, into common shares of the Company at a price that is the lesser of (i) C$1.25 (approximately US$1.01) per share or (ii) a 20% discount to the price of a Liquidity Transaction (defined below). The conversion feature expires (the “Expiry Date”) on the earlier of twenty-four months from execution, or the closing of a registered public offering (the “Liquidity Transaction”).
In the event of a default, interest accrues at the lesser of (i) 24% per annum or (ii) the maximum legally authorized rate. The Company has the right to repay the note prior to maturity at 110% of the then outstanding principal and interest. The Company must provide 30 days’ notice and the Lender shall have the right to convert prior to the 30-day notice expiration.
The remaining undiscounted principal balance outstanding of the Debentures as at June 30, 2021 was $865,263 (US$ 697,568).
Contractual Obligations commitments and contingencies
As of June 30, 2021 and 2020 we had C$236,402 (approximately US$190,585) and C$205,648 (approximately US$165,792), respectively, due to our parent company, Nova Minerals. This money was lent to us by Nova Minerals to fund our startup as well as ongoing accounting, legal and general corporate costs. This loan is non-interest bearing and with no fixed repayment date or terms.
The Company only undiscounted liabilities are accounts payable and accrued liabilities and amounts due to related parties, which are due within one year and as at June 30, 2021 totaled $541,767 (US$436,768) (June 30, 2020 – $125,786).
On December 2, 2020, the Company entered into a consulting agreement with its CEO, cancellable on three-months’ notice. As part of his remuneration package, the Company’s CEO is entitled to the following compensation:
| ● | US$15,000 signing fee; | |
| ● | US$10,000 retainer per month; and | |
| ● | 240,000 Restricted Shares Units, to be awarded upon the achievement of the following targets: | |
| o | 50,000 Restricted Share Units (“performance Shares”) to be awarded on completion of a preliminary economic assessment of Thompson Brothers Lithium property; | |
| o | 70,000 Restricted Share Units to be awarded upon increasing the Thompson Brothers Lithium resource to above 12Mt lithium at or above 1% Li20 and at or above a cutoff grade of 0.4% Li20; | |
| o | 120,000 Restricted Share Units to be awarded upon successful IPO. |
Except as indicated above, at June 30, 2021, we did not have other long-term debt obligations, capital (finance) lease obligations, operating lease obligations, purchase obligations or other long-term liabilities reflected on our statements of financial position.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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Quantitative and Qualitative Disclosures about Market Risk
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign exchange rates as well as, to a lesser extent, inflation.
Interest Rate Risk
We are exposed to market risks in the ordinary course of our business. Our cash and short-term investments include cash in readily available checking accounts and guaranteed investment certificates. These securities are not dependent on interest rate fluctuations that may cause the principal amount of these assets to fluctuate.
Foreign Currency Exchange Risk
The majority of our cash flows, financial assets and liabilities are denominated in Canadian dollars, which is our functional and reporting currency. We are exposed to financial risk related to the fluctuation of foreign exchange rates and the degree of volatility of those rates. Currency risk is limited to the proportion of our business transactions denominated in currencies other than the Canadian dollar, primarily for capital expenditures, debt and various operating expenses such as salaries and professional fees. We also purchase property, plant and equipment in Canadian dollars. We do not currently use derivative financial instruments to reduce our foreign exchange exposure and management does not believe our current exposure to currency risk to be significant.
We estimate that we will receive net proceeds of approximately US$18.31 million in this offering, based upon an assumed initial public offering price of US$7 per share, which is the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus, assuming no exercise of the over-allotment option and after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. Assuming that we convert the full amount of the net proceeds from this offering into Canadian dollars, a 10.0% appreciation of the U.S. dollar against the Canadian dollar, from the exchange rate of C$1.2404 per US$1.00 as of June 30, 2021 to a rate of C$1.36444 per US$1.00, will result in an increase of approximately C$2,210,393 in our net proceeds from this offering. Conversely, a 10.0% depreciation of the U.S. dollar against the Canadian dollar, from the exchange rate of C$1.2404 per US$1.00 as of June 30, 2021 to a rate of C$1.49754 for $1.00, will result in a decrease of C$2,210,393 in our net proceeds from this offering.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.
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Critical Accounting Policies
The following discussion relates to critical accounting policies for our company. The preparation of financial statements in conformity with IFRS requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements:
| (a) | Foreign currency translation |
The financial statements of the Company are prepared in its functional currency, determined on the basis of the primary economic environment in which the entity operates. Given that operations are in Canada, the presentation and functional currency of the Company is the Canadian dollar.
Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing at the transaction dates. At each reporting date, monetary items denominated in foreign currencies are translated into the entity’s functional currency at the then prevailing rates and non-monetary items measured at historical cost are translated into the entity’s functional currency at rates in effect at the date the transaction took place.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are included in the statements of loss and comprehensive loss for the period in which they arise.
| (b) | Current and non-current classification |
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the consolidated entity’s normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
| (c) | Cash |
Cash consist of cash on hand, and deposits held with banks.
| (d) | Exploration and evaluation assets |
Title to exploration and evaluation assets including mineral properties 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 historical characteristic of many properties. The Company has investigated title to all its mineral properties and, to the best of its knowledge title to all its properties are in good standing.
The Company accounts for exploration and evaluation assets in accordance with IFRS 6 – Exploration for and evaluation of mineral properties (“IFRS 6”). Once the legal right to explore a property has been acquired, costs directly related to exploration and evaluation are recognized and capitalized, in addition to the acquisition costs. These expenditures include but are not limited to acquiring licenses, researching and analyzing existing exploration data, conducting geological studies, exploration drilling and sampling and payments made to contractors and consultants in connection with the exploration and evaluation of the property. Costs not directly attributable to exploration and evaluation activities, including general administrative overhead costs, are expensed in the year in which they occur.
Acquisition costs incurred in obtaining legal right to explore a mineral property are deferred until the legal right is granted and thereon reclassified to mineral properties. Transaction costs incurred in acquiring an asset are deferred until the transaction is completed and then included in the purchase price of the asset acquired.
When a project is deemed to no longer have commercially viable prospects to the Company, exploration and evaluation expenditures in respect of that project are deemed to be impaired. As a result, those exploration and evaluation expenditure costs, in excess of the estimated recoverable amount, are written off to the statement of loss and comprehensive loss.
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The Company assesses exploration and evaluation assets for impairment when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use.
Once the technical feasibility and commercial viability of extracting the mineral resource has been determined, the property is considered a mine under development. Exploration and evaluation assets are also tested for impairment before the assets are transferred to development properties.
As the Company currently has no operational income, any incidental revenues earned in connection with exploration activities are applied as a reduction to capitalized exploration costs.
| (e) | Provisions |
Provisions are recorded when a present legal or constructive obligation exists as a result of past events where it is probable that an outflow of resources embodying economic benefit will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.
| (f) | Impairment of assets |
At each reporting date, the Company reviews the carrying amounts of its assets to determine whether there are any indicators of impairment. If any such indicator exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any.
Where the asset does not generate cash inflows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit (“CGU”) to which the asset belongs. Any intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired. An asset’s recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value, using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or CGU is estimated to be less than it carrying amount, the carrying amount is reduced to the recoverable amount and an impairment loss is recognized immediately in the statement of loss and comprehensive loss. Where an impairment subsequently reverses, the carrying amount is increased to the revised estimate of recoverable amount but only to the extent that this does not exceed the carrying value that would have been determined if no impairment had previously been recognized. A reversal of impairment is recognized in the statement of loss and comprehensive loss.
| (g) | Impairment of non-financial assets |
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.
| (h) | Trade and other payables |
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their short-term nature, they are measured at amortised cost and are not discounted. The amounts are unsecured.
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| (i) | Convertible debt |
If convertible debt can be converted to equity at a fixed conversion rate at the option of the holder, the liability component of convertible debentures is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The conversion component is initially valued at fair value based on generally accepted valuation techniques, with the residual value of the convertible debt allocated to loan liability and warrant components. Subsequent to initial recognition, the liability component of a convertible debenture is measured at amortized cost using the effective interest method and accreted to face value over the term of the convertible debenture.
If convertible debt is convertible to equity at a variable conversion rate, where the quantity of shares or units into which the debt is convertible varies based on changes in variables affecting calculation of the conversion price, the value of the conversion component is first calculated and classified as a derivative liability, with the residual value allocated to the loan liability component, which is recognized as a liability and, where applicable, to warrants issued to debenture holders, which are recognized in reserves. Subsequent to initial recognition, the liability component of a convertible debenture is measured at amortized cost using the effective interest method and accreted to face value over the terms of the convertible debenture. The conversion component of the convertible debentures is remeasured to fair value at the end of each reporting period using the Black Scholes valuation model, with gains or losses on remeasurement recognized in income and loss.
Any difference between the proceeds (net of transaction costs) and the redemption value is recognized as an adjustment to accretion expense over the period of the borrowings using the effective interest method.
Convertible debt is classified as current liability unless the Company has an unconditional right to defer settlement of the liability, or a portion of the liability, for at least 12 months after the reporting date.
| (j) | Share capital |
Common shares are classified as share capital. Costs directly attributable to the issue of common shares are recognized as a deduction from share capital, net of any tax effects.
| (k) | Warrants |
Share purchase warrants are classified as a component of equity. Share purchase warrants issued along with shares in an equity unit financing are measured using the residual approach, whereby the fair value of the warrant is determined after deducting the fair value of the shares from the unit price less applicable financing costs. Share purchase warrants issued for broker/financing compensation, are recognized at the fair value using the Black-Scholes option pricing model at the date of issue. Share purchase warrants are initially recorded as a part of warrant reserves in equity at the recognized fair value. Upon exercise of the share purchase warrants the previously recognized fair value of the warrants exercised is reallocated to share capital from warrant reserves. The proceeds generated from the payment of the exercise price are also allocated to share capital.
| (l) | Flow-through shares |
Proceeds received from the issuance of flow-through shares are restricted to be used only for Canadian resource property exploration expenditures within a two-year period. The portion of the proceeds received but not yet expended at the end of the year is disclosed separately.
The issuance of flow-through common shares results in the tax deductibility of the qualifying resource expenditures funded from the proceeds of the sales of such common shares being transferred to the purchasers of the shares. On the issuance of such shares, the Company bifurcates the flow-through shares into a flow-through share premium, equal to the estimated fair value of the premium that investors pay for the flow-through tax feature, which is recognized as a liability, and equity values of share capital and/or warrants. As the related exploration expenditures are incurred, the Company derecognizes the premium liability and recognizes the related recovery.
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| (m) | Income taxes |
Income tax reported in the statement of loss and comprehensive loss for the period presented comprises current and deferred income tax. Income tax is recognized in the statement of loss and comprehensive loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.
Current income tax for each taxable entity in the Company is based on the local taxable income at the local statutory tax rate enacted or substantively enacted at the reporting date, and includes any adjustments to tax payable or recoverable with regards to previous periods.
Deferred income tax is determined using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred income tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using the expected future tax rates enacted or substantively enacted at the reporting date.
A deferred income tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred income tax assets and liabilities are offset only when there is a legally enforceable right to set off current tax assets against current tax liabilities, when they relate to income taxes levied by the same taxation authority and the Company intends to settle its tax assets and liabilities on a net basis.
| (n) | Financial instruments |
The following are the Company’s accounting policies under IFRS 9:
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless, an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, it’s carrying value is written off.
Impairment of financial assets
The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the consolidated entity’s assessment at the end of each reporting period as to whether the financial instrument’s credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset’s lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.
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Financial assets at amortized cost
Financial assets at amortized cost are initially recognized at fair value and subsequently carried at amortized cost less any impairment. They are classified as current assets or non-current assets based on their maturity date. Gains and losses on derecognition of financial assets classified amortized cost are recognized in profit or loss.
Financial liabilities
Where the fair value option is taken for financial liabilities, the part of a fair value change relating to the Company’s own credit risk is recorded in other comprehensive income rather than in profit or loss, unless this creates an accounting mismatch. Financial liabilities are recognized initially at fair value, net of transaction costs incurred, and are subsequently measured at amortized cost. Any difference between the amounts originally received, net of transaction costs, and the redemption value is recognized in profit and loss over the period to maturity using the effective interest method.
| (o) | Loss per share |
Basic loss per share is calculated by dividing the net loss available to common shareholders by the weighted average number of shares outstanding during the reporting period. The diluted loss per share is calculated by dividing the net loss available to common shareholders by the weighted average number of shares outstanding on a diluted basis. The weighted average number of shares outstanding on a diluted basis takes into account the additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options were exercised and that the proceeds from such exercises were used to acquire common stock at the average market price during the reporting period.
| (p) | Comprehensive loss |
Other comprehensive loss is the change in net assets arising from transactions and other events and circumstances from non-owner sources. Comprehensive loss comprises net loss and other comprehensive loss. Foreign currency translation differences arising on translation of foreign subsidiaries in functional currencies other than the reporting currency would also be included in other comprehensive loss.
| (q) | Changes in accounting policies |
Leases
In January 2016, the IASB published a new accounting standard, IFRS 16 - Leases (“IFRS 16”) which supersedes IAS 17 - Leases. IFRS 16 specifies how to recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, unless the lease term is 12 months or less or the underlying asset has a low value.
The Company adopted IFRS 16 effective July 1, 2019. As the Company does not have any material lease agreements, the adoption of this standard did not materially impact the financial statements.
| (r) | Accounting standards issued but not yet effective |
There are no accounting standards issued but not yet effective that are expected to have a material impact on the financial statements.
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CORPORATE HISTORY AND STRUCTURE
Our Corporate History
We were incorporated in the Province of Manitoba, Canada under The Corporations Act (Manitoba) on May 25, 2018. We have three wholly owned subsidiaries, Snow Lake Exploration, Snow Lake Crowduck and Thompson Bros (formerly Manitoba Minerals Pty Ltd).
Snow Lake Exploration was incorporated by us on May 25, 2018 in Manitoba, Canada. Snow Lake Exploration is an operating company formed to conduct the exploration and development of mineral resources.
Snow Lake Crowduck was incorporated by us on May 25, 2018 in Manitoba, Canada. Snow Lake Crowduck is an asset holding company and holds all of the ownership interests in 20 mineral claims of Block A and 18 mineral claims of Block B on the TBL property.
Thompson Bros was incorporated by our parent company, Nova Minerals, on May 11, 2016 under the name Manitoba Minerals Pty Ltd., or MMPL, in Melbourne, Australia. On March 8, 2019, we acquired all of the outstanding common shares of Thompson Bros from Nova Minerals by agreeing to exchange with Nova Minerals 47,999,900 of our common shares for all of the issued common shares of Thompson Bros. On July 14, 2019, we changed the name of MMPL to Thompson Bros. The 20 Block A claims held by Thompson Bros have been transferred to Snow Lake Crowduck. Thompson Bros has been deregistered in Australia and Manitoba.
Our Claims History
On April 21, 2016, an agreement between Strider Resources Ltd, or Strider Resources, and Ashburton Ventures Inc., or Ashburton Ventures (now known as Progressive Planet Solutions Inc., or PPSL), was entered into pursuant to which Ashburton Ventures acquired the right to earn up to a 100% interest in the TBL property then owned by Strider Resources and consisting, at that time, of the 20 Block A claims, subject to a 2% net smelter royalty payable to Strider Resources, by meeting certain cash and share requirements to Strider Resources and certain expenditure requirements on the TBL property exploration project.
On September 26, 2016, Ashburton Ventures entered into an agreement with MMPL (now known as Thompson Bros) pursuant to which MMPL acquired the right to earn up to a 95% interest in the TBL property, subject to the 2% net smelter royalty payable to Strider Resources, by funding the option requirements of Ashburton Ventures in its agreement with Strider Resources of April 21, 2016. This agreement was amended on April 12, 2017, to reduce the maximum MMPL could earn to an 80% interest in the TBL property.
In the fall of 2016, to meet the expenditure requirements of the previously mentioned agreements, a modest program of prospecting and soil sampling was completed on the TBL property, followed by a five hole (1,007 m) drill program on the TBL property.
In March to April of 2018, Snow Lake Crowduck staked the 18 Block B claims.
On November 14, 2018, PPSL entered into a separate agreement with us pursuant to which we agreed to purchase the remaining 20% interest in the TBL property from PPSL, subject to the 2% net smelter royalty payable to Strider Resources, in exchange for 2,400,000 (post consolidation) of our common shares. 300,000 (post consolidation) of these shares were issued to Strider Resources.
On November 15, 2018, an agreement among Strider Resources, PPSL and us was entered into to enable us to purchase of 100% of the TBL property from Strider Resources.
On March 8, 2019, as amended on April 1, 2019, we entered into an agreement with Nova Minerals and MMPL to purchase MMPL from Nova Minerals in exchange for 9,599,980 of our common shares.
On April 12, 2019 we fulfilled our contractual obligations with Strider Resources and exercised our option to acquire the 100% ownership interest in the TBL Property, subject to the 2% net smelter royalty payable to Strider Resources, 80% of which was in the name of MMPL at that time. In consideration of this acquisition, we issued 2,100,000 (post consolidation) of our common shares to PPSL and 300,000 (post consolidation) shares Strider Resources.
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On February 11, 2020 we purchased from Thompson Bros (formerly MMPL) the 80% interest in the TBL property held by Thompson Bros. After this transaction, we owned 100% of the TBL property interest.
On February 25, 2020 we transferred our 100% interest in the TBL property to our wholly owned subsidiary, Snow Lake (Crowduck) Ltd. This interest remains subject to a 2% net smelter royalty payable to Strider Resources.
On May 22, 2020, we changed the recordation of the TBL property claims so that the entire TBL property made up of 38 claims covering 5596 hectares of land became registered in the name of Snow Lake (Crowduck) Ltd. Claim credits that we were entitled to were used to extend the expiry of all of the TBL property claims to 2023 and beyond.
From May 21, 2021 through June 9, 2021 an additional 22 claims covering 3,187 hectares of land were staked by Snow Lake (Crowduck) Ltd. The status of these claims is pending with the Manitoba Department of Agriculture and Resource Development and until the claims are deemed to be active by the Manitoba Department of Agriculture and Resource Development they could be cancelled, rejected or otherwise not become the property of Snow lake (Crowduck) Ltd. If all of the new the claims which were staked are successfully included in our claim package, the entire land package would total of 60 claims covering 8,783 hectares.
To date, we have invested a limited amount of capital in the Thompson Brothers Lithium Project and historical drilling on the TBL property has been limited as well. To prove our lithium resource on the TBL property, we will need to engage in a drilling program that will require additional capital expenditure. We expect that this offering will provide us with the funds needed to complete our planned exploration drilling program, to generate the required data to prove our resources. We cannot provide any assurance, however, that we will be able to raise the required capital, through this offering or otherwise, on terms acceptable to us, if at all.
Our Corporate Structure
The chart below presents our corporate structure:
Thompson Bros (Lithium) Pty Ltd. has been deregistered in Australia and Manitoba.
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Information included in this prospectus relating to our industry consists of estimates based on reports compiled by professional third-party organizations and analysts, data from external sources, our knowledge of the industry in which we operate, and our own calculations based on such information. While we have compiled, extracted, and reproduced industry data from external sources, including third-party, industry, or general publications, we have not independently verified the data. Similarly, while we believe our management estimates to be reasonable, they have not been verified by any independent sources. Forecasts and other forward-looking information with respect to industry and ranking are subject to the same qualifications and additional uncertainties regarding the other forward-looking statements in this prospectus.
Market Overview
Mining accounts for a significant portion of Canada’s economy. Natural Resources Canada2 pegged domestic mineral production at C$47 billion (approximately US$37.89 billion) in 2018. Canada’s mining and exploration companies are also important players in the international mining industry. Manitoba hosts the historic Tanco mine, which sits atop the world-class Tanco lithium-cesium-tantalum deposit and is located at Bernic Lake. The Tanco pegmatite was first discovered in the 1920s and ultimately developed into a large deposit of spodumene, one of the primary minerals mined for its lithium content. While the Tanco mine first opened in 1969 as a tantalum operation, it was not until the 1980s that it began mining spodumene as a pyroceramic. In fact, one of the major uses of the Tanco spodumene was as an ingredient in Corningware cookware3.
Historically, the Tanco mine’s production focused on spodumene for industrial use with minimal focus on lithium production. With the advent and growth of lithium battery-powered cars, interest has developed in the Tanco mine region in the search for, and exploration of, lithium-rich spodumene deposits.
Lithium-bearing pegmatites occur across the Province of Manitoba including in areas such as Snow Lake, Red Sucker Lake, Gods Lake and Cross Lake, all hosting known pegmatite lithium deposits. The emergence of the Electronic vehicle, or EV, market has spurred investment and mining interest in Manitoba for lithium exploration activity with New Age Metals, Grid Metals, and Snow Lake’s neighbor Far Resources being a few of the mining companies exploring for lithium in Manitoba.
Lithium Production – Supply, Demand and Price Trends
Lithium prices almost tripled between mid-2015 and mid-2018 as the world’s fleet of electric vehicles hit 5 million and the auto industry began to become concerned regarding the supply of raw materials. As can be seen in the lithium spot price charts below, from mid-2018 through the beginning of 2021, lithium prices declined steadily. Recently, lithium prices have begun to rise again, we believe, reflecting an increase in demand for battery powered vehicles.
| 2 | https://www.nrcan.gc.ca/our-natural-resources/minerals-mining/minerals-metals-facts/minerals-and-the-economy/20529 |
| 3 | https://investingnews.com/daily/resource-investing/battery-metals-investing/lithium-investing/manitoba-a-little-known-source-of-lithium/ |
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Source: Fastmarkets
In 2019, the world consumed approximately 315,000 tonnes of lithium carbonate equivalent, or LCE, a 21% increase from the 261,000 tonnes consumed in 2018, according to the December 2019 Resources and Energy Report on Lithium from the Australian government4. World lithium production is estimated to have grown to 470,000 tonnes in 2019, up 18% from 20185. In 2019, oversupply in the lithium market caused a significant pull back on price. At the end of 2018/beginning of 2019, Fastmarkets reported 99.5% lithium carbonate battery-grade spot prices, CIF China, Japan & Korea, of US$13,000-$15,000 per tonne6. In 2019, prices declined throughout the year. In June 2019, Fastmarkets reported 99.5% lithium carbonate battery-grade spot prices, CIF China, Japan & Korea, of US$11,000-$12,500 per tonne7, and by the end of December 2019, prices of US$8,000-$9,500 per tonne were reported8. The 99.5% lithium carbonate battery-grade spot prices for Europe and the U.S. were reported at US$10,000-$11,500 per tonne9.
Lithium prices plummeted in 2019, as a result of oversupply in the market and a slowdown in EV growth. This oversupply was attributed, primarily, to a number of new spodumene mines entering production in Australia. In China, in June 2019, the government cut subsidies for New Energy Vehicles, or NEVs, in half, by as much as 25,000 yuan (US$3,600) per vehicle10. Chinese NEV sales then began falling in July 2019 resulting in a reduction in NEV sales by 47% in October compared with the same month in the previous year11. These changes caused lithium consumers to hold back on purchases.
| 4 | https://publications.industry.gov.au/publications/resourcesandenergyquarterlydecember2019/documents/Resources-and-Energy-Quarterly-December-2019-Lithium.pdf |
| 5 | Ibid |
| 6 | https://www.metalbulletin.com/Article/3851378/GLOBAL-LITHIUM-WRAP-Chinese-lithium-prices-stable-ahead-of-year-end- other-regional-markets-flat.html |
| 7 | https://seekingalpha.com/article/4272099-lithium-miners-news-month-june-2019 |
| 8 | https://www.metalbulletin.com/Article/3914427/GLOBAL-LITHIUM-WRAP-Lunar-New-Year-production-logistics-halts-slow- Asian-market-activity.html |
| 9 | Ibid |
| 10 | https://www.cnbc.com/2019/06/19/china-subsidy-cuts-for-electric-carmakers-could-lead-to-consolidation.html and https://www.bloomberg.com/news/articles/2019-11-08/china-is-considering-cutting-electric-car-subsidies-again |
| 11 | https://stockhead.com.au/resources/tim-treadgold-lithium-stocks-close-to-the-bottom-its-time-to-revisit-a-sold-down-sector/ |
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As lithium prices declined, high cost, marginal producers began to cut production and halt expansion plans. For example, in August 2019, Albemarle Corporation announced it would delay construction plans for approximately 125,000 tonnes of additional lithium processing capacity due to the effect of oversupply on lithium prices12. Pilbara Minerals postponed stage two and three expansion plans at its Pilgangoora lithium-tantalum project in Western Australia that were projected to result in the production of an additional 7.5 million tonnes of lithium ore a year13.
In November 2019, Albemarle and Mineral Resources put their Wodgina project into care and maintenance indefinitely14. Albemarle indicatd that the Wodgina mine would remain idle until demand for spodumene warranted a re-start15. Nemaska Lithium suspended operations in October 2019 at its Whabouchi lithium mine and applied for creditor protection in December 2019, thus removing planned production of 37,000 tonnes of LiOH and 205,000 tonnes of lithium concentrate from the market16. In In 2020, the outlook for lithium pricing continued to be bearish with commentators such as Morgan Stanley expecting lithium prices to fall further or to at least be stable in 2021 and 202217. January 2020, Galaxy Resources announced that in response to market conditions, it had reviewed operations at Mount Cattlin facility, resulting in a reduction in operations by approximately 60%18.
We expect that the reduction in lithium production from the cutbacks referenced above will work through the lithium supply chain resulting in a reduction in lithium stockpile levels and an increase in lithium pricing and demand.
The chart below shows the 2019 percentage breakdown of lithium demand by category of use.
Source: Roskill19
As can be seen in this chart, in 2019, rechargeable batteries accounted for 54% of total lithium demand, consisting almost entirely of Li-ion battery technology. Though the rise of hybrid and electric vehicle sales leading up to 2020 brought expectations of increased demand for lithium compounds, falling EV sales in the second half of 2019 in China, the largest market for EVs, and a global reduction in EV sales in 2020, caused by the onset of the COVID-19 pandemic and related lockdowns, halted lithium demand growth, impacting demand from both battery and industrial applications. Countering this 2019 and early 2020 decrease in lithium demand, James Jeary of CRU Group noted that “The main surprise in the lithium market this year [2020] was on the demand side,” he told INN20 during a January 2021 interview. “EV sales were hugely resilient, particularly in Europe. Even in China, the recovery of sales in H2 after a sluggish H1 has been very strong.”
| 12 | https://uk.reuters.com/article/us-albemarle-results/albemarle-to-delay-construction-plans-for-125000-tonnes-of-lithium- processing-idUKKCN1UY1QS |
| 13 | https://www.asx.com.au/asxpdf/20190501/pdf/444qxyxr97r2h0.pdf |
| 14 | https://www.afr.com/companies/mining/minres-reaps-us1-3-billion-for-stake-in-mothballed-lithium-mine-20191101-p536h2 |
| 15 | Ibid. |
| 16 | https://www.nemaskalithium.com/en/investors/press-releases/2019/53f0e3be-0d29-475e-b37f-7090e58ede31/ |
| 17 | https://www.spglobal.com/platts/en/market-insights/latest-news/metals/110819-lithium-producers-paint-gloomy-picture-for-2020 |
| 18 | https://www.reuters.com/article/galaxy-rsrcs-output/australias-galaxy-resources-to-slash-output-at-flagship-lithium-mine-in- 2020-idUSL4N29S077 |
| 19 | https://roskill.com/market-report/lithium/ |
| 20 | https://investingnews.com/daily/resource-investing/battery-metals-investing/lithium-investing/lithium-outlook/ |
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Increasing Lithium Demand
According to FastMarkets.com (see table above), demand for battery grade lithium is now expected to almost triple by 2025 to more than 850 thousand metric tonnes. The recent decline and cutbacks in upstream investment, however, could result in the market undersupply during the next few years. We believe that it is clear that investment needs to be made in lithium mining now to meet the upcoming expected increase in demand. Fastmarkets predicts the need for 16 new lithium mines of average size to go online prior to 2025. Roskill maintains the view that future refined lithium supply will remain tight, with a period of sustained supply deficit in the mid-2020s21 It is our understanding that further additions to lithium production capacity for mined and refined lithium products will be required to keep pace with demand growth, led by battery applications.
Demand for lithium is increasing outside of the EV market. According to the India Brand Equity Foundation22, electronics manufacturing is expected to grow at an annual rate of 30% between 2020 to 2025. Lithium primary cell batteries are central units in many consumer electronics goods. Major manufacturers in the primary battery market include Hitachi Maxell, Ultralife, Energizer, FDK Corporation, Tadiran, Vitzrocell, EVE Energy, Panasonic, SAFT, Varta, Duracell, EnerSys Ltd., Gp Batteries, Excell Battery Co., and Bren-tronics. The global lithium primary batteries market is expected to grow from $11.28 Billion in 2020 to $12.24 Billion in 2021 at a compound annual growth rate (CAGR) of 8.5%.23 The table below shows the expected growth of the consumer electronics lithium battery market in USD billions from 2020 to 202524.
The expectation of strong demand growth in the lithium market and related higher raw material prices has led some market participants to look at the economic viability of recycling to solve the projected lithium supply shortage. The table below presents a projection of the compound annual growth rate for the value of raw materials present in Li-ion batteries available for recycling.
| 21 | https://menafn.com/1101724172/Lithium-Primary-Batteries-Industry-Driven-By-Increasing-Demand-For-Consumer-Electronics |
| 22 | https://menafn.com/1101724172/Lithium-Primary-Batteries-Industry-Driven-By-Increasing-Demand-For-Consumer-Electronics |
| 23 | https://menafn.com/1101724172/Lithium-Primary-Batteries-Industry-Driven-By-Increasing-Demand-For-Consumer-Electronics |
| 24 | https://menafn.com/1101724172/Lithium-Primary-Batteries-Industry-Driven-By-Increasing-Demand-For-Consumer-Electronics |
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Source: Engineering.com25
Roskill’s longer term scenarios show strong growth for lithium demand over the coming decade; Roskill forecasts demand to exceed 1.0Mt LCE in 2027, with growth in excess of 18% per year to 203026.
We believe that the long-term outlook for lithium products remains strong. In research by Signumbox published in April 2019 and commissioned by Deutsche Lithium for their feasibility study, SignumBox indicated that it anticipated a global annual demand for lithium chemicals to reach approximately 1,700,000 tonnes of LCE by 2037, equating to an average annual growth rate of approximately 11.5% over the next 20 years27. A key theme at the Fastmarkets’ 11th Lithium Supply and Markets Conference (June 11, 2019) was that global lithium demand could outpace supply in the coming years, with the number of new projects expected to fall short of expected production amid doubts on capital availability and low lithium prices28.
Key Market Growth Drivers - EVs
Although Lithium has multiple industrial and consumer electronics applications, the most prominent application is battery production. Future lithium demand is heavily linked to future EV production. We believe that a robust U.S. climate change policy agenda that includes plans to facilitate the ramping up of EV production and government-mandated targets for EV market penetration is a positive catalyst for further growth in lithium demand.
As can be seen in the chart on page 2 above, the leading driver for the growth in lithium consumption has been battery production. Future lithium demand is heavily linked to future EV production. The majority of lithium production and downstream EV battery supply is currently based in China. We believe that with governments seeking to prevent supply line bottlenecks and shortages due to geopolitical or other factors, there will be increasing demand for local, i.e., U.S. and Canadian, lithium production. We also believe that climate change policy agendas as well as government mandated targets for EV market penetration will be positive catalysts for a growth in lithium demand over the coming years.
| 25 | https://www.engineering.com/story/the-whos-who-of-lithium-ion-battery-recycling |
| 26 | https://www.greencarcongress.com/2020/11/20201125-roskill.html |
| 27 | http://www.deutschelithium.de/wp-content/uploads/2019/06/NI43-101-Zinnwald_Feasibility-Study_Summary.pdf |
| 28 | https://www.indmin.com/Article/3878594/LITHIUM-CONF-Lithium-demand-could-outpace-supply-due-to-low-prices-few-projects.html |
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Due to serious issues surrounding global warming, we believe that it has become imperative to implement energy transformation. The Paris Agreement between counties around the world is an effort to collaborate on this transformation. It is estimated that to maintain the global temperature rise within 1.5 degrees, the consumption of electric energy as a renewable energy source will rise from 24 percent to 86 percent by 205029.This means that the EV industry should flourish in the coming years. Countries around the world have already formulated plans to support this change. For example, Japan and Germany have set plans to ban gas operated vehicles by the year 2050. It is estimated that global sales of new energy-efficient passenger vehicles are expected to reach 12 million in 2025, and the compound growth rate will reach 32.5% from 2019 to 2025. By 2030, the number of EVs on the road is expected to rise to 125 million30.
Annual global EV sales by market. (Source: Bloomberg New Energy Finance.)
| 29 | https://www.engineering.com/story/the-whos-who-of-lithium-ion-battery-recycling |
| 30 | Ibid. |
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Government Growth Drivers for the Lithium Battery Market
The primary drivers of this forecasted growth in EV sales, as demonstrated in the table below, are expected to be government policies (particularly in China), new regulations (particularly in Europe), and steadily increasing consumer adoption, as evidenced by a wider availability of EV models being produced by original equipment manufacturers, or OEMs.
Source: Livant IPO filing31
Governments have instituted incentives and other subsidies to support the development of EVs by automotive OEMs and to increase consumer adoption of EVs.
After entering commercial markets in the first half of the last decade, electric car sales have soared. Only about 17,000 electric cars were on the world’s roads in 2010. By 2019, that number had grown to 7.2 million EVs, 47% of which were in China. 32 The Chinese government has declared that the electric vehicle industry is of strategic importance over the long term. The “new energy” vehicle industry is one of ten industries targeted as a key effort to further the Chinese government’s “Made in China” initiative by 2025. In addition to China, several other countries have also announced plans to phase out and eventually replace internal combustion engine, or ICE, vehicles with EV models. Countries such as France, Norway, and the UK have all set dates for these bans, with Norway’s being the most aggressive, as all new car sales in Norway must be zero emissions (battery EV or fuel cell) by 2025.33
| 31 | https://www.sec.gov/Archives/edgar/data/1742924/000119312518258208/d603292ds1.htm |
| 32 | https://www.iea.org/reports/global-ev-outlook-2020 |
| 33 | https://www.forbes.com/sites/pikeresearch/2020/11/04/ice-bans-begin-to-take-shape-in-the-us/?sh=52a3b5273e17 |
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To meet these target dates, governments will need to provide assistance to the EV industry, in general, and to the lithium mining sector, in particular, by supportive actions such as removing red tape for new mining projects. Some projects are already seeing such support as American Lithium announced receipt in March 2021 of a grant to support the development of a lithium hydroxide plant in Nevada34. E3 Metals Corp, an Alberta, Canada based lithium exploration company, announced a Canadian federal government grant for expanded lithium extraction technology research with the University of Alberta.35
We believe the growth in the EV market worlwide has been aided by various incentive programs extended by the national governments to both automakers and consumers. In the graphic below, for example, government of Singapore is advertising their program to encourage EV adoption by offering incentives to consumers.
In September 2017, China issued a New Energy Vehicles (including BEVs and PHEVs) credit mandate, which became effective in 2019, and in 2018, the Chinese government adjusted its subsidy policy to favor BEVs that offer longer driving ranges. Additionally, federal tax credit incentives in the United States of up to $7,500 have also been made available for persons buying certain hybrid and all-electric cars.36
| 34 | https://thedeepdive.ca/american-lithium-receives-us-government-grant-for-lithium-processing-plant. |
| 35 | https://www.juniorminingnetwork.com/junior-miner-news/press-releases/2147-tsx-venture/etmc/44999-e3-metals-receives-federal-government-grant-for-expanded-lithium-extraction-technology-research-with-the-university-of-alberta.html |
| 36 | https://electrek.co/2021/03/03/which-electric-vehicles-still-qualify-for-us-federal-tax-credit/ |
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In response to the changing government policies and incentives favoring EVs, various OEMs have announced plans to expand EV production lines in the future. The chart below summarizes EV production plans from many major OEMs.
Source: Livant IPO filing37
In addition to expanding their offering of EV models, automotive OEMs are focused on improving total energy density and reducing weight in batteries to increase the driving range of EVs. To achieve these improvements, EV battery manufacturers are increasingly using high nickel content cathode materials that contain less cobalt and more nickel, while the lithium content remains largely unchanged.
High nickel content cathode technologies include lithium nickel-cobalt-aluminum oxide, or NCA, and lithium nickel-manganese-cobalt oxide containing 80% nickel, or NMC 811. NCA cathodes are already used in leading EV models, and automotive OEMs’ roadmaps for new EV models indicate an increasing transition to NMC 811 style batteries. Due to the underlying chemistry, battery-grade lithium hydroxide, the type of lithium we expect to mine, is required in the manufacturing of high nickel content cathode material, whereas lithium carbonate, produced from lithium brine, is used in lower energy density EV battery applications.
| 37 | Ibid. |
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Ideal Location
The Thompson Brothers Lithium Project is ideally located in North America’s “Auto Alley.” With the Hudson Bay Railway having a railhead 30 km from our project, the TBL property has access to means of transportation to bring our lithium product north to the Port of Churchill, for shipment to Europe, or South to Auto Alley. The map below shows the extended reach of CN’s rail lines into the US Auto Alley.
Additionally, Manitoba is a green province, with 97%38 of electricity derived from renewable sources. This offers the potential to have a nearly net zero mine and production plant producing renewable products.
CN’s network of rail lines. Source: CN website
If one compares the map above to the map of the North American auto industry below, it can be seen that Snow Lake’s Thompson Brothers Lithium Project is strategically situated to access and address this market.
U.S “AutoAlley”.
Source: Global Infrastructure Connectivity Alliance39
| 38 | https://www.hydro.mb.ca/your_home/electric_vehicles/ |
| 39 | https://www.gica.global/initiative/north-americas-super-corridor-coalition-nasco |
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The maps below present a more detailed depiction of the location of U.S. automotive plants, primarily in the “Auto Alley.”
Source: MarkLines – Automotive Industry Portal
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Overview
We are an emerging lithium chemicals and exploration company focused on the development of our 100% owned Thompson Brothers Lithium property, or the TBL property, in the historic and preeminent mining center of Snow Lake, Manitoba, Canada. Our goal is to become a strategic supplier of battery-grade lithium hydroxide to the growing electric vehicle battery and battery storage markets. Our primary asset is the TBL property, which consists of 38 contiguous mining claims located 20 km from Snow Lake, Manitoba. To capitalize on the fast-growing lithium market, our main focus is to monetize the resources and reserves held in the TBL property. This property has an S-K 1300 compliant indicated and inferred mineral resource estimate of approximately 11.1 million tonnes of lithium bearing ore consisting of an Indicated Resource of 9,082,600 tonnes of lithium bearing ore grading 1.00% Li2O, for 91,200 Li2O tonnes, and an Inferred Resource of 1,967,900 tonnes of lithium bearing ore grading 0.98% Li2O, for 19,300 Li2O tonnes.
The Thompson Bros Lithium Project is ideally located in the Province of Manitoba, Canada, where 97% of the electrical energy supply is from hydro- electric renewable sources. The region of Snow Lake, where the TBL Property is situated, is mining friendly, and the Hudson Bay Railway runs within 30km of the TBL property. The Hudson Bay rail runs north to the Port of Churchill which supplies access to Europe by ship, or south to the EV manufacturing markets in Michigan and the southern US. we intend to be the first producer of battery grade lithium in North America using fully renewable sources of energy to power all of our future mining operations. Our belief is that investors and customers will demand ethically mined commodities created through the use of renewable energy sources enabling the ecologically friendly development of the electric vehicle market as a viable alternative to ICE powered vehicles. We intend to be a leader in these efforts and our TBL property’s location provides for that unique opportunity.
We are in the process of exploring our TBL property expecting that following a planned two-phase exploration program we will be in a position to move towards the development of our mineral resources, and, ultimately to the establishing of commercial operations. We are planning to complete a preliminary economic assessment, or PEA, which we have already begun, in the coming months. The PEA will then be expanded into a preliminary feasibility study, or PFS, which will be used to seek additional funding for the development of the TBL property. The studies will review the test work, process design, vendor furnished equipment packages and other mine development requirements as well as cost estimates for the possible development of a commercial spodumene floatation plant. In addition, the studies will examine permitting and potential environmental issues for the proposed floatation plant locations as well as operational expenditures and capital expenditures, which will be inputted into a general economic model.
We engage in our exploration of lithium mineral resources through two subsidiaries: Snow Lake Exploration and Snow Lake Crowduck. Snow Lake Exploration is our operating company and Snow Lake Crowduck is our asset holding company. The TBL property is located in north central Manitoba, measuring about 15 km by 6 km, comprises 38 contiguous mineral claims covering 5,596 hectares (approximately 13,828 acres) and straddles Crowduck Bay at the northeastern end of Lake Wekusko. The property includes two blocks of claims that we own. Block A comprises 20 contiguous mineral claims, covering 2,277 hectares (approximately 5626.59 acres). Block B comprises 18 contiguous mineral claims covering 3,319 hectares (approximately 8,201.43 acres). The Block B claims were staked by Snow Lake Crowduck in March and April of 2018 and, along with the Block A claims, are 100% owned by Snow Lake Crowduck. Our subsidiary, Thompson Bros, which owned our 20 Block A claims before they were transferred to Snow Lake Crowduck, has been deregistered in Australia and Manitoba.
Our Exploration Target – Thompson Brothers Lithium Project – Indicated and Inferred Resources
On June 3, 2021, our parent company, Nova Minerals, announced the existence of an S-K 1300 compliant indicated and inferred lithium mineral resource at our Thompson Brothers Lithium Project in central Manitoba, Canada. The main features of this resource, as reflected in the table below, can be characterized as follows:
| ● | An S-K 1300 compliant indicated and inferred mineral resource estimate of approximately 11.1 million tonnes of lithium bearing ore consisting of an Indicated Resource of 9,082,600 tonnes of lithium bearing ore grading 1.00% Li2O, for 91,200 Li2O tonnes, and an Inferred Resource of 1,967,900 tonnes of lithium bearing ore grading 0.98% Li2O, for 19,300 Li2O tonnes. |
| ● | The indicated and inferred resource is entirely from a single high grade lithium bearing spodumene pegmatite dyke partially outcropping at surface. |
| ● | The indicated and inferred resource covers less than 5% of the TBL property area. |
We note that the ranges of potential tonnage and grade (or quality) of the lithium resource at our Thompson Brothers Lithium Project are conceptual in nature. We have conducted insufficient exploration of our Thompson Brothers Lithium Project to estimate a mineral resource (i.e., a concentration or occurrence of material of economic interest in or on the Earth’s crust in such form, grade or quality, and quantity that there are reasonable prospects for economic extraction), and it is uncertain whether further exploration will result in the estimation of a mineral resource. Our Thompson Brothers Lithium Project exploration target, therefore, does not represent, and should not be construed to be, an estimate of a mineral resource or a mineral reserve.
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Thompson Brothers Project Indicated and Inferred Resource
| Cut-Off 0.3 Li2O% | Tonnes (t) | Grade Li2O% | Li2O tonnes | |||||||||
| Indicated | 9,082,600 | 1.00 | 91,200 | |||||||||
| Inferred | 1,967,900 | 0.98 | 19,300 | |||||||||
Our lithium resource is comprised entirely from one spodumene pegmatite dyke (the TB1 Dyke) as defined by our 2017/2018 drill programs with approximately 4,800 meters drilled during that period. This main dyke is close to additional lithium bearing mineralization that is as yet undefined and does not comprise part of the existing resource. The resource remains open at depth and along strike in both the north and south directions which will be among targets for the next phase of drilling.
Estimation was conducted only within the mineralized pegmatite with internal and external waste excluded as identified by hard boundaries. Interpretation occurred on a two dimensional sectional basis then combined to form a three dimensional volume model of the in-situ pegmatite dyke. No waste material in the host country rock was estimated.
The resource was estimated using Micromine software with an inverse distance squared interpolation method due to insufficient data available to suit variography and kriging.
The resultant resource is classified as containing both indicated and inferred resource in accordance with S-K 1300 when taking into consideration, data density, deposit geometry, likely extensions and possible interpretation alternatives. A sufficient number of holes required to provide more than an indicated category confidence in the Thompson Bros resource have not been drilled. We have not completed any economic modelling or reporting and, therefore, the available, historical drilling information is considered early stage, and the risk of the failure of additional drilling to provide confirmation of our indicated and inferred resource is great. To date, a limited amount of capital has been invested in the Thompson Brothers Lithium Project and the future success of the project will rely heavily on the availability of additional capital which may not be available to us on favorable terms, if at all. Future capital investment in us may result in dilution of your investment in our ordinary shares and a failure to confirm our resource may result in a failure of our business and the complete loss of your investment.
Geology and Interpretation
The dyke in the Thompson Brothers Project has been modelled as an intrusion into a pebble metaconglomerate/greywacke group of host sediments. The dyke has been interpreted as sub vertical, dipping between 2.5° – 8.5° towards 130° azimuth. The strike of the body has minor variations around a general trend azimuth of 040° and an interpreted plunge of 5° to the north based on visual trends seen from the assays. The dyke carries both mineralized and unmineralized pegmatite as identified by the presence of spodumene as the lithium bearing mineral. Spodumene is considered the most important lithium ore mineral due to its high lithium content. Only the lithium bearing pegmatite has been modelled in this instance which extends for a total length of 1,012 m ranging in true thickness from a maximum of 18 m to a minimum of 1.8 m however, mineralization has not been closed off either at depth or to the north or south of the drilled area.
The dyke is generally orientated between 20° and 40° offset from the apparent foliation in the surrounding country rock and there is outcropping evidence of additional mineralized and unmineralized pegmatite in the area that is yet to be defined in terms of size and or orientation.
Drilling
All holes were drilled with diamond providing NQ sized core. The total number of meters drilled during our 2017/2018 exploration program was 4804.92 m from 24 holes with a maximum depth of 371 m. Holes were drilled at varying angles to allow multiple intersections and multiple holes to be drilled from single drill locations to minimize earthworks and clearing.
Sampling
Core was logged by professional consulting geologists and sampled on a geological basis. Sample lengths were typically 1 m intervals but some samples were as small as 0.14 m or as large as 1.75 m. Core was halved with a diamond saw and placed into plastic sample bags for delivery to SRC Geoanalytical Laboratories in Saskatoon, Canada for sample preparation and analysis. QA/QC sampling consisted of the regular insertion of blanks, reject duplicates, and Certified Reference Standards within each 20 sample batch.
Sample Analysis
Core samples were crushed to better than 70% -2 mm and a 1 kg split was pulverized to better than 85% passing 75μm. All samples were analyzed using SRC procedure code ICP1 using total and partial digestions and ICP analysis. SRC uses Internal QA/QC procedures to monitor the accuracy and precision of their work.
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Estimation Methodology
Estimation was conducted in Micromine software with parent cell dimensions of 1 m across strike, 25 m along strike and 5 m vertically to account for the vertically dipping narrow mineralization geometry and the sparse data availability nominally around 110 m vertically between intercepts and 100 m horizontally along strike. Sub-celling was used along the deposit margins to honor the interpreted wireframes. Deposit orientations were measured manually on screen and assigned within the estimation parameters.
Samples were composited to 1 m length weighted intervals with any residual added to the end of the intersection. No high grade cuts were deemed necessary due to the lack of any significant outliers although a 0.5% Li2O grade was used as a minimum basis for interpretation.
Li2O was estimated using an orientated inverse distance squared method along with discretization of 2x2x2 to avoid overly localized estimates. The model was interpolated with a single mineralization domain but conducted systematically due to minor variation in structural orientations within the dyke. The primary search ellipse radius used 120 m along strike, 2 m across strike and 120 m vertically oriented to the azimuth, dip and plunge of the respective structural orientations identified. A secondary search of 240 m x 8 m x 240 m was used to fill any remaining empty cells after the primary search.
A density factor of 2.75t/m3 was used for reporting of tonnes based on documented averages for pegmatite globally and a recent resource report from FAR Resources for their Zoro Lithium project located approximately 3km west of the TBL property.
Both statistical and visual validation methods were conducted prior to final reporting.
Cut-off Grades
CIM Definition Standards for a Mineral Resource as a “concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality that there are reasonable prospect for eventual economic extraction.” In our case, a cut-off grade of 0.3% Li2O was used for resource reporting. This 0.3% Li2O cut-off grade was used to measure our resources as, according to our S-K 1300 Report, that is a reasonable grade necessary to cover estimated production costs in accordance with the following criteria (in US dollars):
| 6% Li2O Concentrate Price | $600 / per tonne | |||
| Mining Cost/ton | $ | 20 | ||
| Extraction Recovery | 80 | % | ||
| Processing Cost/tonne | $32 – to 6% Li2O | |||
| Concentrate Haulage/ton | $ | 88 |
Classification
The resource is classified entirely as a combination of indicated and inferred in accordance with the S-K 1300 when taking into consideration, data density, deposit geometry, likely extensions and possible interpretation alternatives.
Other Modifying Factors
A preliminary metallurgical test was conducted to determine possible concentrate grade recoverable from the Thompson Bros deposit. The test returned a concentrate grade of 6.37% Li2O from a composite sample of 1.4% Li2O indicating the potential to make a commercial product from the Thompson Bros pegmatite. No engineering studies have been conducted however, given the sub vertical nature of the deposit, underground mining is anticipated to be the method of extraction.
Location and Description of TBL Property
The TBL property is located in north central Manitoba, approximately 20 km (12.4 miles)_east of the mining community of Snow Lake.
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The TBL property measures approximately 15 km by 6 km, comprises 38 contiguous mineral claims covering 5,596 hectares (approximately 13,828 acres) and straddles Crowduck Bay at the northeastern end of Lake Wekusko. The property is centered on UTM coordinates 455,000 E 6,080,000 N (NAD83, Zone 14) and lies within the National Topographic System map sheet 63JSE13. The property includes 2 blocks of claims which we own. The map below shows an outline of our claims area as well as a proposed pipeline route to the nearest rail road junction.
Snow Lake is located some 684 km north of Winnipeg, a 7-hour (700 km) drive on well maintained, paved roadways. Daily flights are available from Winnipeg to both Flin Flon and Thompson. Flin Flon is a 2 hour (200 km) drive west on paved highway to Snow Lake. Thompson is a 2.5 hour (260 km) drive northeast from Snow Lake on paved highway.
The TBL property is located in the Churchill geological province at the eastern end of the Flin Flon Belt. The Flin Flon Belt (1.92-1.88 Ga) is one of the largest Proterozoic volcanic-hosted massive sulphide districts in the world. The east-trending Flin Flon Volcanic Belt (230 X 50 km) is interpreted to be remnant of a Paleoproterozoic orogenic mountain belt which developed as new ocean basin and arc crust interacted with Archean rocks of the Hearne and Superior cratonnes along complex convergent plate boundaries.
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The TBL property is bisected by the regional Crowduck Bay Fault. The rocks on the eastern side of this fault consist of folded Missi Group sandstones (greywackes) and conglomerates, part of the Eastern Missi Block. To the west, across the fault, the property is underlain by plutonic rocks intruding turbidites of the Burntwood Group, part of the Wekusko Lake Block.
There are two main clusters of spodumene-bearing pegmatite dykes on the property known as the Thompson Brothers and Sherritt Gordon lithium pegmatites. These dyke clusters occur on either side of the Crowduck Bay Fault. The dykes are all tabular in form, but each cluster has a distinct orientation. Additional north-northeast trending pegmatite dykes have been mapped along the Crowduck Bay Fault corridor towards the north.
Thompson Brothers Lithium Pegmatites
The Thompson Brothers dykes are located on the east shore of Grass River linking Wekusko Lake with Crowduck Bay. Here, three mineralized dykes, the TB-1, 2 and 3, intrude Missi Group pebble to cobble conglomerates and greywackes. The Thompson Brothers dykes were drilled by Thompson Brothers in 2017 and 2018.
Dyke TB-1 strikes 040° and dips about 85o SE. The Thompson Brothers deposit has been drill tested over a 1Km strike and to a vertical depth of 1/2 Km. The deposit averages 7 to 10m in true width. The mineralized dyke remains open to depth and along strike. Dyke TB-2 occurs to the north of TB-1 has been traced for about 400 m along strike. Based on limited drilling, dyke TB-2 is up to 2.8 m thick and its orientation is interpreted to be sub-parallel to dyke TB-1. Dyke TB-2 could represent the faulted northern extension of dyke TB-1 or an en-echelon, dilational structure. Dyke TB-2 remains open along strike to the north and to depth. Dyke TB-3 is located about 250 m to the northwest of dykes TB-1 and 2. TB-3 has been traced for about 150 m along strike. The TB-3 pegmatite is up to 2.0 m thick, strikes 040° and dips about 080° towards the northwest. In general, the Thompson Brothers dykes appear concordant with the northeast-trending foliation and strata.
Sherritt Gordon Lithium Pegmatites
On April 10, 2018, we announced the discovery of a second pegmatite cluster on the TBL property. As part of our compilation of historical data, our consulting geologists discovered details on a cluster of spodumene-bearing pegmatite dykes located about 2 km southwest of the recently drilled Thompson Brothers pegmatite. This cluster, known as the Sherritt Gordon pegmatites, intrudes the outermost quartz diorite phase of the Rex Lake Pluton and was traced about 600 m along strike by Sherritt Gordon Mines Limited in the 1940s. Dyke SG-1 ranges from 1.5 to 5 m in width and dips 80o to the southwest. Dyke SG-2 is thinner and located about 70 m to the northeast of SG-1 and dips 50o – 70o southwest.
The Sherritt Gordon, or SG, dykes intrude the outermost quart diorite phase of the compositional zoned Rex Lake Pluton on the west side of the Grassy River narrows. Both dykes display some pinch and swell structures along strike, as well as slight changes in strike. Dyke SG-1 has been traced for about 500 meters, striking 1200 and dipping 800 to the southwest. Dyke SG-1 ranges from 10 cm to 5 meters in width and splits into 3 thinner subparallel dykes at its southeastern end. Dyke SG-2 has been traced for almost 400 m, striking parallel to SG-1 at about 70 m towards the east. The dyke dips 500-700 to the southwest and its width varies between 1.5 cm and 4 meters. The SG-1 pegmatite has been drill tested to a depth of 50 meters and remains open. If both dykes continue to depth, they could merge or intersect at a depth of about 160 meters.
A third outcropping pegmatite dyke (Grassy River pegmatite) is located about 150 meters south of the SG dykes. Here, three spodumene bearing outcrops have been mapped more than a 150 m strike length, trending east.
History of TBL Property and Exploration Status
No records documenting the original discovery of lithium enriched pegmatite dykes on the TBL property have been located. Since the early 1940s various portions of the current TBL property have been explored by several companies. Certain target areas on the TBL property have been known as the “Sherritt Gordon Property,” the “Violet Property” and the “Strider Lithium Property.” The TBL property has recently been renamed to acknowledge the contribution of the Thompson brothers who worked the TBL property early in its history.
The highlights of the exploration history are summarized as follows:
In 1942, Sherritt Gordon Mines drilled and cored 20 holes (632 meters), testing one of 2 spodumene bearing pegmatite dykes on the east side of the narrows linking Wekusko Lake to Crowduck Bay. These dykes were originally staked in 1931 by Peer Kobar.
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In 1956, Combined Developments Ltd. explored parts of the property. The area was prospected, mapped and 26 cored drill holes were completed on the TB-1 pegmatite (2,356 meters).
From 1976 until 1987, the Thompson brothers explored part of the property. They completed several trenches and sampling. In 1978, they cored their first drill hole to a depth of 28.2 meters in 1979, hole #1 was deepened to 58.6 meters. In 1981, the Thompson brothers cored their second drill hole. Hole #2 was drilled to a depth of 61 meters.
In 1989, Lakefield Research metallurgical test work produced a spodumene concentrate from a sample taken from a trench on claim ADD 13. The assay head grade of the rock sample was 2.93% Li2O. The resulting concentrate was 5.19% Li2O.
In 1995, minor trenching and sampling of the TB-1 dyke was completed by Strider Resources. In 1996, a 1,600-meter by 400-meter grid was cut by Strider Resources with lines spaced at 50 meter intervals. In 1997, a three-hole drill program, totaling 930 meters, was completed.
In April 2016, Ashburton Ventures (now known as Progressive Planet Solutions Inc.) optioned the TBL property, at that time consisting of the 20 Block A claims, from Strider Resources and entered into an option financing agreement with Thompson Bros (then known as Manitoba Minerals PTY Ltd.), at that time Nova Minerals’s wholly-owned subsidiary. Through financing provided by MMPL, parts of the property were prospected, and an attempt was made to locate the historical drill holes. Nine surface samples of pegmatite were assayed. In the fall of 2016, a modest program of prospecting and soil sampling was completed. In the winter of 2017, five drill holes targeting the TB-1 pegmatite totaling 1,007 meters were cored.
In March and April 2018, Snow Lake Crowduck staked an additional 18 (Block B) mineral claims (3,319 hectares, approximately 8,201.43 acres) contiguous with the original TBL property (20 claims, 2,277 hectares, approximately 5626.59 acres).
During the winter of 2018, Thompson Bros (then MMPL) cored 19 drill holes totaling 3,798 meters focusing on the Block A, Thompson brothers pegmatite cluster. Drill sections and plans were prepared, and interpretations of the geology and mineralization were completed. A project data base was created and a model for the deposit has been developed.
In July 2021, we completed an S-K 1300 compliant resource estimate of an Indicated Resource of 9,082,600 tonnes of lithium bearing ore grading 1.00% Li2O, for 91,200 Li2O tonnes, and an Inferred Resource of 1,967,900 tonnes of lithium bearing ore grading 0.98% Li2O, for 19,300 Li2O tonnes. This S-K 1300 Report was prepared by Canmine Consultants and Nuterra Geoscience, each of whom served as Qualified Persons as that term is defined in S-K 1300. This estimate was prepared taking into consideration data density, deposit geometry, likely extensions and interpretive alternatives. A density factor of 2.70 t/m3 was used. Surpac version 6.4.1 was the software used to create the geological model and to estimate the resources. As indicated elsewhere in this prospectus, assuming we raise the necessary funds in this offering, we intend to proceed with a two-phase exploration program on the TBL property including the completion of a PEA.
Historical Mineral Processing and Metallurgical Testing
The Saskatchewan Research Council (SRC) completed a preliminary metallurgical testing program on the Thompson Brother Lithium Project (Xia, L. and Adeoye, A., 2018). The primary objective of this preliminary testing program was to produce a spodumene concentrate with +6.0 % Li2O.
Test work was completed on a 55 kg composite sample of 67 individual assay reject samples crushed to -2.0 mm (10 mesh) received from SRC Geoanalytical Laboratories. All of the 67 individual assay rejects were combined and homogenized to create a composite feed sample. A head assay sample was taken from the homogenized composite sample for ICP analysis. The ICP analysis OLD indicated that the composite graded 1.43% Li2O.
The composite sample was ground to 100% passing 300 μm before being classified into two fractions: coarse fraction (53-300 μm) and fine fraction (-53 μm). Before flotation, de-sliming and magnetic separation were performed to minimize the interference of ultra fines (-38 μm) and magnetic (iron) materials on the flotation.
Preliminary flotation tests indicated that a spodumene concentrate with +6.0 % Li2O could be readily produced from the samples provided. The flotation process included one stage mica flotation, one stage spodumene rougher flotation, and five stages of cleaner flotations. H2SO4 was used to adjust the flotation pH in mica flotation. ArmacHT was used as the mica collector. Oleic acid was used as the spodumene collector. Vanofroth was used as the frother in all flotations. The reagent conditioning and dosages were not optimized.
Good spodumene concentrate can be produced from both coarse fraction (53-300 μm) and fine fraction (38-53 μm). A 43.3 % coarse recovery and a 22.9 % fine flotation recovery were achieved with concentrate grade of 6.35 % Li2O and 6.37% Li2O, respectively. A total 1905.5 g coarse spodumene concentrate with 6.35 % Li2O and 377.9 g fine spodumene concentrate with 6.37 % Li2O were produced. Mass balance and flotation optimization were not considered.
Xia and Adeoye recommend a second stage of test work including:
| ● | Detailed mineralogy analysis including mineral association, liberation, grain size, etc.; |
| ● | Comminution test to determine crushing index and mill work index; |
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| ● | Pre-concentration test to increase the feed grade such as sorting, gravity separation and magnetic separation; |
| ● | Flotation tests to determine the optimal reagent scheme and to maximize the Li2O recovery; |
| ● | Locked cycle flotation tests to validate the flotation performance and to establish mass balance; and, |
| ● | Further hydrometallurgical testing to produce better grade Li2CO3. |
Currently, more advanced metallurgical testing is being conducted. We cannot be sure, however, when new test results will be available or what they will show.
Ownership of the TBL Property
The TBL property comprises 38 contiguous mineral claims, covering 5,596 hectares (approximately 13,828 acres), which have been grouped as Block A and Block B based on historical ownership and development.
Below is a list of the claim names, numbers, areas ownership and expiry dates. All claims are registered with the Manitoba Mineral Resources Division (Formerly the Mines Branch) which, as of October 23, 2019, is a division of the Manitoba Department of Agriculture and Resource Development (ARD). Property surface rights are held by the Crown.
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Block A comprises 20 contiguous mineral claims, covering 2,277 hectares (approximately 5626.59 acres) and is 100 % owned by our wholly-owned subsidiary Snow Lake Crowduck.
| Map # | Claim Name | Claim # | Area (ha) | Registered Holder | Map Sheet | Recorded | Expires | |||||||
| A1 | ADD 13 | P2818F | 16 | Snow Lake Crowduck | 63J13SE | 1994-09-07 | 2030-11-29 | |||||||
| A2 | ADD 1052 | MB1052 | 235 | Snow Lake Crowduck | 63J13SE | 2001-07-03 | 2030-09-18 | |||||||
| A3 | ADD 1053 | MB1053 | 83 | Snow Lake Crowduck | 63J13SE | 2001-07-03 | 2030-09-18 | |||||||
| A4 | ADD 3033 | P3033F | 32 | Snow Lake Crowduck | 63J13SE | 1995-03-28 | 2030-06-20 | |||||||
| A5 | ADD 3035 | P3035F | 53 | Snow Lake Crowduck | 63J13SE | 1995-03-28 | 2030-06-20 | |||||||
| A6 | ADD 3203 | P3203F | 82 | Snow Lake Crowduck | 63J13SE | 1995-08-18 | 2030-11-10 | |||||||
| A7 | ADD 49853 | W49853 | 32 | Snow Lake Crowduck | 63J13SE | 1996-03-24 | 2030-06-21 | |||||||
| A8 | ADD 6301 | MB6301 | 110 | Snow Lake Crowduck | 63J13SE | 2006-02-25 | 2030-05-23 | |||||||
| A9 | ADD 6303 | MB6303 | 180 | Snow Lake Crowduck | 63J13SE | 2008-02-23 | 2030-05-16 | |||||||
| A10 | ADD 6305 | MB6305 | 224 | Snow Lake Crowduck | 63J13NE | 2009-02-08 | 2030-04-11 | |||||||
| A11 | THOMPSON # 2 | P7463B | 21 | Snow Lake Crowduck | 63J13SE | 1964-11-04 | 2030-01-04 | |||||||
| A12 | THOMPSON #3 | P7464B | 21 | Snow Lake Crowduck | 63J13SE | 1964-11-04 | 2030-01-04 | |||||||
| A13 | THOMPSON # 6 | W47380 | 16 | Snow Lake Crowduck | 63J13SE | 1982-06-18 | 2030-09-06 | |||||||
| A14 | THOMPSON # 7 | W47378 | 16 | Snow Lake Crowduck | 63J13SE | 1982-06-18 | 2030-09-06 | |||||||
| A15 | CRO 5735 | MB5735 | 216 | Snow Lake Crowduck | 63J13SE | 2010-01-18 | 2030-04-11 | |||||||
| A16 | CRO 5736 | MB5736 | 202 | Snow Lake Crowduck | 63J13SE | 2010-01-13 | 2030-04-11 | |||||||
| A17 | CRO 5737 | MB5737 | 250 | Snow Lake Crowduck | 63J13SE | 2010-01-14 | 2030-04-11 | |||||||
| A18 | ADD 9830 | MB9830 | 40 | Snow Lake Crowduck | 63J13NE | 2018-03-06 | 2030-05-05 | |||||||
| A19 | BAZ-12130 | MR12130 | 192 | Snow Lake Crowduck | 63J13NE | 2017-12-05 | 2030-02-03 | |||||||
| A20 | BAZ-12132 | MR12132 | 256 | Snow Lake Crowduck | 63J13NE | 2017-12-05 | 2031-02-03 |
Block B comprises 18 contiguous mineral claims, covering 3,319 hectares and is 100% owned by Snow Lake Crowduck. These claims were staked in March and April of 2018 to cover several pegmatite dyke occurrences to the west and north of the original Block A claim group.
| Map # | Claim Name | Claim # | Area (ha) | Registered Holder | Map Sheet | Recorded | Expires | |||||||
| B1 | TBL 001 | MB13493 | 256 | Snow Lake Crowduck | 63J13SE | 2018-04-01 | 2023-06-05 | |||||||
| B2 | TBL 002 | MB13494 | 243 | Snow Lake Crowduck | 63J13SE | 2018-04-01 | 2023-06-05 | |||||||
| B3 | TBL 003 | MB13495 | 78 | Snow Lake Crowduck | 63J13SE | 2018-04-05 | 2023-06-05 | |||||||
| B4 | TBL 004 | MB13496 | 151 | Snow Lake Crowduck | 63J13SE | 2018-04-05 | 2023-06-05 | |||||||
| B5 | TBL 005 | MB13497 | 67 | Snow Lake Crowduck | 63J13SE | 2018-04-01 | 2023-06-05 | |||||||
| B6 | TBL 006 | MB13498 | 230 | Snow Lake Crowduck | 63J13SE | 2018-04-02 | 2023-06-05 | |||||||
| B7 | TBL 007 | MB13499 | 185 | Snow Lake Crowduck | 63J13SE | 2018-04-05 | 2023-06-05 | |||||||
| B8 | TBL 008 | MB13500 | 78 | Snow Lake Crowduck | 63J13SE | 2018-03-30 | 2023-06-05 | |||||||
| B9 | TBL 009 | MB13501 | 206 | Snow Lake Crowduck | 63J13SE | 2018-04-02 | 2023-06-05 | |||||||
| B10 | TBL 010 | MB13502 | 173 | Snow Lake Crowduck | 63J13SE | 2018-03-30 | 2023-06-05 | |||||||
| B11 | TBL 011 | MB13503 | 72 | Snow Lake Crowduck | 63J13SE | 2018-03-30 | 2023-06-05 | |||||||
| B12 | TBL 012 | MB13504 | 250 | Snow Lake Crowduck | 63J13SE | 2018-04-03 | 2023-06-05 | |||||||
| B13 | TBL 013 | MB13505 | 237 | Snow Lake Crowduck | 63J13SE | 2018-04-05 | 2023-06-05 | |||||||
| B14 | TBL 014 | MB13506 | 121 | Snow Lake Crowduck | 63J13SE | 2018-03-30 | 2023-06-05 | |||||||
| B15 | TBL 015 | MB13507 | 256 | Snow Lake Crowduck | 63J13SE | 2018-04-04 | 2023-06-05 | |||||||
| B16 | TBL 016 | MB13508 | 220 | Snow Lake Crowduck | 63J13SE | 2018-04-03 | 2023-06-05 | |||||||
| B17 | TBL 017 | MB13509 | 240 | Snow Lake Crowduck | 63J13SE | 2018-04-03 | 2023-06-05 | |||||||
| B18 | TBL 018 | MB13510 | 256 | Snow Lake Crowduck | 63J13SE | 2018-04-04 | 2023-06-05 |
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Permitting in Manitoba
All mineral claims in good standing on Crown land in Manitoba are entitled to be explored without any permitting, except as indicated below. All mineral exploration programs in Manitoba require work permits for timber removal, shoreland alteration and road construction that are issued annually by the provincial Department of Conservation and Climate. For more intrusive explorations, such as line cutting (using chain saws), overburden stripping, blasting and/or diamond drilling, a work permit granted under Section 7(1)(c) of The Crown Lands Act or Section 23 (1) of The Wildfires Act, Province of Manitoba would be required. Permits address conditions for exploration that must be adhered to in a given work area based on the planned exploration activities.
The type and duration of the camp infrastructure required for exploration also dictates the type of permit required in Manitoba. Temporary camps established for less than one year are covered by a work permit, whereas a separate permit issued by the Manitoba Department of Labor - Fire Commissioners Office is required for exploration camps on Crown land established for periods longer than one year.
For advance exploration and exploitation (aka mining) we will need to engage in consultations with government officials to determine our permit requirements. The permitting process will be covered in the scope of our PEA.
Thompson Bros obtained the permits required to complete the 2018 exploration drilling program. There are no current environmental liabilities with respect to historical exploration and the 2018 drilling program was completed in accordance with industry best practices.
Currently, because we are not engaged in any active exploration programs, we do not need any exploration or exploitation permits from the Manitoba government.
Climate, Local Resources, Infrastructure and Physiography
Climate
The Snow Lake region is marked by short, cool summers and long, cold winters. The region has a sub-humid high boreal climate.
The mean summer temperature is 12.5°C (54.5°F ) and the mean winter temperature is -18.5°C (-1.3°F ). The temperatures are highest on average in July, at around 17.0°C. January is the coldest month, averaging -23.3°C. The mean annual temperature is approximately -2.5°C. The area is generally clear of snow cover between the beginning of June and the end of September.
The mean annual precipitation is about 450 mm, 35% as snow. The least amount of precipitation occurs in February, averaging 16 mm. The most rainfall occurs in July, averaging 74 mm. Average monthly winds for the area range from 10 km/hr to 13 km/hr, with 40% of the winds originating from the NW, NE or N. Exploration activities can be carried out all year around.
Local vegetation consists of closed stands of black spruce and jack pine, with lesser aspen, white birch, white spruce and balsam fir. Permafrost may occur locally in organic deposits. Wildlife includes moose, black bear, lynx, wolf, barren-ground caribou, beaver, muskrat, snowshoe hare and red-backed vole. Bird species include raven, common loon, spruce grouse, bald eagle, grey jay, hawk owl and waterfowl, including ducks and geese.
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Local Resources
Snow Lake is the closest community to the property. Snow Lake had a permanent resident population of 899 in 2016 and has 498 private dwellings. There are two small residential subdivisions located on Wekusko Lake along Highway 392, as well as cottages at Herb Lake and Cotes Landings. There are also a small number of seasonal remote cabins located on Wekusko Lake. The Wekusko Falls Provincial Park (88 ha) is located on the east side of Wekusko Lake and offers camping. The Wekusko Falls Lodge provides accommodations and meals.
Snow Lake is an established mining community and has the infrastructure in place to support exploration and mining operations in the region. Services include a health facility staffed with two doctors, an ambulance, a fire truck, a 3-person RCMP detachment, an RBC bank branch, grocery and hardware stores, two hotels/motels, three service stations, a kindergarten to grade 12 school, a hockey arena, a five-sheet curling rink and a nine-hole golf course. A small-craft charter service operates out of the community of Snow Lake, where small planes and helicopters can be chartered. There is a 1,100 m by 20 m municipal gravel airstrip located approximately 8.5 km northwest of the TBL property. The nearest rail access is at the Wekusko siding, approximately 65 km southeast of the TBL property.
The nearest larger population centres include Flin Flon (208 km) and Thompson (260 km), both accessible by paved highway. Flin Flon, with a population of 7,000, is a nearby provincial regional government centre and a major service and supply centre for the region. The nearest full-service commercial airport is located at Baker’s Narrows, near Flin Flon. The nearest international airport is located in Winnipeg.
The Snow Lake region has a history of virtually continuous production from a series of base and precious metal mines since 1949. Hudbay Minerals Inc., or Hudbay, currently operates the Lalor gold mine, located about 8 km west of Snow Lake. Hudbay also operates a 2,700 tonne per day zinc and copper concentrator in Snow Lake.
Infrastructure
Gridding, trenching, stripping and road building in the target areas on the TBL property, we expect, should be easily accomplished. Ample water is available for drilling purposes.
There are no permanent or temporary structures on the TBL property, and we have not established any exploration infrastructure on the property.
The area of the TBL property is sufficiently large to host a mining operation. A power line traverses the southern extremity of the property. The valley located directly east of the property could serve as a potential tailing storage area. Winter access roads to the property can be used for hauling purposes.
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Physiography
The TBL property is located along the southern edge of the Precambrian Shield within the Wekusko Eco-district, Churchill River Upland Eco-region, Boreal Shield Eco-zone.
The property straddles Crowduck Bay at the northeastern end of Lake Wekusko. Wekusko Lake is a large, shallow body of water covering an area of approximately 25 km long by 3 to 10 km wide. Crowduck Bay is part of a long (12 km) narrow channel leading to the Grass River that continues towards the northeast. Most of the shoreline of Crowduck Bay is flanked by steep, 15 to 20 m slopes. The lake elevation is approximately 257.5 m above sea level and the highest topographical point on the Property is approximately 305 m above sea level. Most ridges and low-lying areas trend towards the northeast.
The dominant soils are well to excessively drained dystic brunisols that have developed on shallow, sandy and stony veneers of water-worked glacial till overlying bedrock. Significant areas consist of peat-filled depressions with very poorly drained Typic and Terric Fibrisolic and Mesisolic Organic soils overlying loamy to clayey glaciolacustrine sediments.
Geological Setting and Mineralization
Regional Geological Setting
The TBL property is located in the Churchill geological province at the eastern end of the Flin Flon Belt. The Flin Flon Belt (1.92-1.88 Ga) is one of the largest Proterozoic volcanic-hosted massive sulphide districts in the world. More than 118.7 Mt have been mined from 25 distinct deposits and a further 64.3 Mt are contained in 43 sub-economic or pre-production deposits.
The east-trending Flin Flon Volcanic Belt (230 X 50 km) is interpreted to be remnant of a Paleoproterozoic orogenic mountain belt, which developed as new ocean basin and arc crust interacted with Archean rocks of the Hearne and Superior cratonnes along complex convergent plate boundaries. To the north of the Flin Flon belt lies the east-trending Kisseynew Sedimentary Gneiss Belt. Located to the south of the Flin Flon belt are the flat-lying Paleozoic rocks of the Western Canada Sedimentary Basin.
Local Geological Setting and Lithium Mineralization
The bedrock geology to the east of Wekusko Lake consists of several fault-bounded blocks of juvenile ocean floor, arc related volcanic rocks and fluvial–alluvial and turbiditic sedimentary rocks. The Western Missi Block is bounded by the Crowduck Bay fault to the east and the Herb Lake Fault the west and the strata are folded into a tight syncline. The Missi Group rocks (1.85-1.83 Ga), are dominantly sedimentary, but do contain rare, thin units of interbedded felsic volcanic rocks. The sedimentary rocks consist of polymictic conglomerates, greywackes and sandstones interpreted to have been deposited in an alluvial-fluvial environment. Across the Herb Lake Fault towards the southeast, the Herb Lake Block consists of a folded sequence of mafic to felsic volcanic rocks. Basalts dominate in the core of the fold, with basaltic andesites and andesites becoming more prevalent as the contact with the felsic volcanic rocks is approached. The Herb Lake Volcanic Assemblage is intruded by quartz porphyritic granites, which are themselves cut by the faults bounding the Herb Lake Block. To the northeast, the North Roberts Lake Block is characterized by mafic volcanic rocks (1.92-1.87) interpreted as ocean floor. Towards the west, across the Crowduck Bay Fault, the Central Wekusko Block consists of sedimentary strata dominated by turbidites of the Burntwood Group (1.85-1.84 Ga) and intruded by plutonic rocks.
To the east of Wekusko Lake there are three main clusters of spodumene-bearing pegmatite dykes known as the Thompson Brothers, Sherritt Gordon and Zoro pegmatites. The Thompson Brothers and Sherritt Gordon pegmatites both occur on the TBL property. The Zoro pegmatites are located about 5 km east of the TBL property and are not part of the property. The Zoro property is being explored by Far Resources Ltd. Commonalities in mineralogy, textures and form exist between all 3 dyke clusters; however, they each occur in separate fault bounded crustal blocks, intrude different host lithologies and have different orientations. All 3 dyke clusters are interpreted to have been emplaced into fracture systems during the latest regional D5 structural event recognized in the area.
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Property Geology and Lithium Mineralization
The TBL property is bisected by the regional Crowduck Bay Fault. The rocks on the eastern side of this fault consist of folded Missi Group sandstones (greywackes) and conglomerates, part of the Eastern Missi Block. To the west, across the fault, the Property is underlain by plutonic rocks intruding turbidites of the Burntwood Group, part of the Wekusko Lake Block.
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The Thompson Brothers and Sherritt Gordon spodumene bearing, lithium-enriched pegmatite dyke clusters occur on either side of the Crowduck Bay Fault. The dykes are all tabular in form, but each cluster has a distinct orientation. Additional north-northeasterly trending pegmatite dykes have been mapped along the Crowduck Bay fault corridor towards the north.
Mineralogy
No detailed mineralogical studies have been completed by us. Cerny et al., (1980) reports that the mineralogy of the Thompson Brothers and Sherritt Gordon pegmatite clusters are similar and composed of spodumene, quartz, microcline, with lesser muscovite, biotite, garnet, beryl and apatite. Modal spodumene abundance ranges between 10 and 20% and commonly occurs as large, well formed, columnar crystals raging between 1 and 35 cm in length. The spodumene crystals are commonly in planar alignment and may be oriented obliquely to the dyke contacts. These textures have been interpreted to be the result of continuous crystallization in slowly opening fractures.
Thompson Brothers (TB) Dykes
The TBL property spodumene-bearing dykes are located on the east shore of Grass River linking Wekusko lake with Crowduck Bay. Here, three mineralized dykes, the TB-1, 2 and 3, intrude Missi Group pebble to cobble conglomerates and greywackes. The Thompson Bros spodumene-bearing lithium rich dykes were drilled by Thompson Bros (formerly MMPL)/Nova Minerals in 2017 and 2018.
Pegmatite TB-1 is illustrated in plan, longitudinal section and cross-section. The TB-1 dyke has been intersected by 24 recent drill holes. Dyke TB-1 strikes 040° and dips about 85o SE. The Thompson Brothers deposit has been drill tested over a 1Km strike and to a vertical depth of 1/2 Km. The deposit averages 7 to 10m in true width. Dyke TB-1 has two drill intercepts at a vertical depth of about 350 m. The mineralized dyke remains open to depth and along strike to the north and south. The Li2O grades are typically consistent across the width of the dyke; however, locally, the chilled margins of the dyke fall below the cut-off grade of 0.30 % Li2O.
Dyke TB-2 occurs to the north of TB-1 has been traced for about 400 m along strike. This dyke has not been located in surface outcrops. Based on limited drilling, dyke TB-2 is up to 2.8 m thick and its orientation is interpreted to be sub-parallel to dyke TB-1. Dyke TB-3 is located about 250 m to the northwest of dykes TB-1 and 2. TB-3 has been traced for about 150 m along strike. The TB-3 pegmatite is up to 2.0 m thick, strikes 040° and dips about 080° towards the northwest.
All the TBL property dykes are sub-parallel to the northeast-trending foliation and strata in general. Dyke TB-2 could represent the faulted northern extension of dyke TB-1 or an en-echelon, dilational structure. Dyke TB-2 remains open along strike to the north and to depth.
Anomalous concentrations of Ba, Be, Ce, Cu, Nb, Nd, Sn, and Ta are locally present in the chilled marginal phase of the TB-1 pegmatite.
Bannatyne (1985) noted 2 additional spodumene bearing pegmatites about 500 m south of the TBL-1. Both dykes are exposed along the steep east shore of Grass River Narrows. These dykes have not been mapped or sampled to date.
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Sherritt Gordon (SG) Dykes
The Sherritt Gordon dykes intrude the outermost quart diorite phase of the compositional zoned Rex Lake Pluton on the west side of the Grassy River narrows. Both dykes display some pinch and swell structures along strike, as well as slight changes in strike.
Dyke SG-1 has been traced for about 500 m, striking 1200 and dipping 800 SW. Dyke SG-1 ranges from 10 cm to 5 m in width and splits into 3 thinner subparallel dykes at its southeastern end. Dyke SG-1 is asymmetric, with the grain size increasing to the hanging-wall contact, and some accumulation of the spodumene, quartz and blocky K-feldspar along this contact.
Dyke SG-2 has been traced for almost 400 m, striking parallel to SG-1 at about 70 m towards the east. The dyke dips 500-700 SW and its width ranges between 1.5 cm and 4 m. Dyke SG-2 seems to be homogeneous in mineral distribution, and it shows only some coarsening of grain size inwards.
In 1942, the SG-1 pegmatite was drill tested by Sherritt Gordon Mines Limited (now known as Sherritt Inc.). Some 21 shallow drill holes were cored (632 m). Rather than reporting assays for lithium, results in the historical drill logs are reported in “Gravitational Determination Percent Spodumene” which are qualitative in nature and should not be relied upon. The historical drilling results yielded average estimated spodumene contents ranging from 7.22 – 31.9% over widths ranging from 1.52 - 5.79 m. One 2018 reconnaissance grab sample from the SG-1 dyke graded 2.15 % Li2O. The SG-1 pegmatite was drill tested to a depth of 50 m and remains open to depth.
The Sherritt Gordon pegmatites are interpreted to have intruded sub-parallel late stage, en-echelon fractures that were subsequently deformed and locally displaced. If both dykes continue to depth, they could merge or intersect at a depth of about 160 m.
A third outcropping pegmatite dyke was discovered in during field reconnaissance in 2018. The Grassy River pegmatite is located about 150 m south of the Sherritt Gordon dykes. Here, three spodumene bearing outcrops were mapped over a 150 m strike length, trending east. One grab sample from the Grassy River dyke graded 3.78 % Li2O.
An additional spodumene bearing pegmatite dyke is located about 1.5 km to the south of the Sherritt Gordon occurrence. This dyke occurs about 1 km south of our claim boundary and is not part of the TBL property.
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Exploration Plan for TBL Property
We are planning to engage in a two-phase exploration program that will include resource definition drilling of the TB-1 pegmatite as well as exploration drilling of the SG pegmatite cluster targets. The details of our proposed exploration program are as follows
Phase 1
As part of our planned phase 1 program, we intend to complete a stripping, mapping and sampling program on the SG pegmatite cluster in preparation for a phase 2 drilling program. Our preliminary cost estimate to complete phase 1 is C$250,000 (approximately US$ 201,548).
Phase 2
We are also planning a phase 2, 10,400 m drilling program is recommended to expand the dimensions of the TB-1 pegmatite and define the deposit in more detail. We expect that an estimated nine holes (3,150 m) of core drilling would be required to complete further definition drilling on the core of the deposit using 100 m hole spacings. An additional seven holes (4,000 m) would be required to expand the drill coverage on the TB-1 pegmatite to a vertical depth of 500 m over a targeted strike length of 1,200 m utilizing 200 m hole spacings. Where the TB-1 pegmatite outcrops at surface, nine large diameter, shallow holes (50 m) would be drilled at 50 m centres. The SG-1 and SG-2 pegmatites would be stripped and sampled where possible. An estimated 24 holes (2,800 m) would be allocated for initial testing of the SG pegmatites. We would also begin developing an initial permitting plan and conduct additional metallurgical test work. We would complete a new resource estimate in accordance with S-K 1300 as well as a PEA report for the project.
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We also intend to continue to prospect the TBL property, focusing on the Crowduck Bay Fault corridor, lithologic contacts and the nose of the synclinal fold structure to the north. We plan to sample the various outcrops of spodumene bearing pegmatite dykes in that area and to strip, map and sample targets yielding anomalous Li2O concentrations. Our current, preliminary cost estimate to complete phase 2 is C$3,000,000 (approximately US$2,418,575).
We intend to proceed with our two-phase exploration program subject to raising sufficient funds in this offering. We can provide no assurance at this time. however, that we will be successful in obtaining the required funds to undertake this exploration program in whole or in part.
Our Competitive Strengths
We believe that the following competitive strengths contribute to our success and differentiate us from our competitors:
| ● | Our initial metallurgical test work has yielded a spodumene concentrate grading 6.37% Li2O. Initial metallurgical test work demonstrates the TBL property can produce a concentrate material of 6.37% Li2O using standard metallurgical laboratory test techniques. Spodumene concentrates were achieved with concentrate grade of 6.37% Li2O, indicating the likelihood that industry relevant amounts of concentrate can be produced. We expect that if these inferred numbers are confirmed as probable or proven resources, a fully functioning lithium mine could provide 8 to10 years of producing 160k tonnes per annum of 6% lithium ore concentrate. |
| ● | Our TBL property is large and, we believe, is host to valuable lithium resources. Our TBL property comprises 5,596 hectares (approximately 13,828 acres) and is host to the TB-1 spodumene bearing, lithium-enriched pegmatite dykes and other targets that could potentially contribute to a future lithium resource. Our TBL property hosts several identified spodumene pegmatite dykes with high-grade lithium found to date. With only 5% of the TBL property explored, we believe that there are many additional lithium bearing pegmatites on the YBL property yet to be explored. |
| ● | Historic flotation tests indicate that a spodumene concentrate with +6.0% Li2O may be readily produced from the deposit. We announced in 2018 outstanding new high-grade drill results at the TBL property, with release of the complete data set from the recent phase of drilling. The results confirm a high-grade and consistent lithium bearing pegmatite dyke in the TBL property that appears open at depth and along strike at both ends. Additional dykes were also identified and require further follow up expected as part of the next field program as weather conditions permit. |
| ● | No significant technical challenges related to exploration and development of the deposits have been identified. We expect, although we cannot guarantee, that our drill hole database for holes TBL 1 – 28 and their interpretation will be used to support the planning of future drilling programs. No significant technical challenges related to exploration and development of these deposits have been identified to date |
| ● | We are strategically located in the North American market. Our TBL property is located in proximity to major downstream lithium processing facilities as well as to major US battery customers including General Motors, BMW, Nissan, Mercedes and Tesla automobile manufactures. With Snow Lake’s access to the Hudson Bay railway just 30 km from the TBL property, our project is strategically located close to the CN rail lines to deliver lithium product to the entire Auto Alley market. |
| ● | Experienced management team. We believe that our management team’s experience, knowledge and vision in the mining industry will enable us to achieve growth. Our management team consists of a finance expert holding senior positions in both listed and private entities across a diverse range of investment disciplines, a mining engineering technician who has worked in the mineral exploration industry for more than 20 years with many years of experience in construction and project management in the mining industry. |
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Our Growth Strategies
We have developed a strategic plan for further exploration and development of the project that includes the following milestones:
| ● | Complete Preliminary Economic Assessment study. We have commenced a PEA on the TBL property. This represents the next step in the process of moving from exploration towards the potential to establish commercial operations. The PEA will then be expanded into a preliminary feasibility study which will be used to seek funding for the development of the TBL project. The studies will review the test work, process design, vendor furnished equipment packages and preliminary design in addition to cost estimates for the development of a commercial spodumene floatation plant. |
| ● | Complete next stage of resource exploration drilling leading to resource upgrade to the Measured from Indicated level and the discovery of new mineralization resources. Our principal short term objective is to implement our Phase 1 exploration program. We also intend to continue drilling to provide sufficient data to be able to upgrade our indicated resources to measured resources, to add additional tonnage through further walk up drilling and to explore for extensions to the existing mineral resources and other potential mineralization within the TBL property. |
Marketing and Advertising
We intend to sell the lithium hydroxide that we expect to produce to electric vehicle manufacturers and stationary battery storage partners. This is in line with the wider industry requirements for battery-grade lithium chemicals, where users typically require long-term supply contracts. It is our belief that the customer will drive the need for near net zero production of lithium in the near future. We therefore feel our company is perfectly situated in the province of Mantoba that generates 96% of its energy from Hydroelectric, and 3% from wind. This provides Snow Lake an opportunity to have a near net zero production facility which could demand a premium to other dirtier producers.
Our Customers
Major OEM battery manufacturers as well as Electric Vehicle Manufacturers would be the primary US battery customers. These include General Motors, BMW, Nissan, Mercedes, Jaguar and Tesla automobile manufactures among others. We believe that, assuming we prove our lithium resources and proceed to build and operate a functioning lithium ore mining and processing facility, we will be well positioned to be a supplier of choice to these OEMs, based on the competitive economics enabled by our well situated geographical location, renewable energy sources, and mining friendly government regime.
Competition
We face intense competition in the mineral exploration and exploitation industry on an international, national and local level. We compete with other mining and exploration companies, many of which possess greater financial resources and technical facilities than we do, in connection with the exploration and mining of suitable properties and in connection with the engagement of qualified personnel. The lithium exploration and mining industry is fragmented, and we are a very small participant in this sector. Many of our competitors explore for a variety of minerals and control many different properties around the world. Many of them have been in business longer than we have and have established more strategic partnerships and relationships and have greater financial accessibility than we have. We believe that we can mitigate these factors through the We are also subject to competition from other large national and international mining companies such as Sayona Mining Limited and Core Lithium Ltd.
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Intellectual Property
We do not have any registered intellectual property rights.
Facilities
Our corporate address is 242 Hargrave St #1700, Winnipeg, MB R3C 0V1 Canada. Currently, we no not maintain any office or operational facilities other than an on-site storage facility for our core samples, which we lease at a nominal fee. We believe that we will be able to obtain adequate facilities, principally through leasing, to accommodate our future expansion plans.
Employees
We do not have any employees at this time.
Currently, all of our executive officers and advisers work for us as independent contractors under consulting agreements. These agreements typically include a confidentiality covenant that requires consultants to protect our confidential information during their engagement with us. In addition, these consulting agreements include typical non-compete clauses that prohibit the consultants from entering into competitive employment relationships while they are working for us.
Insurance
We currently insure our directors and officers through Nova Minerals’s D&O insurance policy. We currently do not insure against mine exploration and development risks.
Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
Government Regulation
Our business is subject a variety of laws and regulations applicable to companies conducting business in the mining industry. In Canada, mining law is divided between the federal and provincial governments. Ownership of lands and minerals generally belongs to the province in which they are located. Within the Province of Manitoba, mining activity is regulated by the Department of Agriculture and Resource Development and is governed primarily by provisions of The Mines and Minerals Act (Manitoba) together with its accompanying regulations and guidelines. The provinces have jurisdiction over mineral exploration, development, conservation and management. The federal government shares jurisdiction with the provinces on some related matters (taxation and the environment) and has exclusive jurisdiction over areas such as exports and foreign investment controls. Federal and provincial legislation affecting mining activities tends to fall into two main categories: (a) private matters of title and taxation; and (b) economic, social and environmental policies.
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Directors and Executive Officers
The following table sets forth certain information regarding our directors and executive officers.
| NAME | AGE | POSITION | ||
| Philip Gross | 49 | Chief Executive Officer and Director | ||
| Mario Miranda | 65 | Chief Financial Officer | ||
| Dale Schultz(1) | 54 | Director and VP of Resource Development | ||
| Derek Knight(1) | 39 | Chief Operating Officer and Secretary | ||
| Brian Youngs | 69 | Vice President, Exploration | ||
| Louie Simens | 38 | Chairman of the Board | ||
| Nachum Labkowski | 35 | Independent Director | ||
| Hadassah Slater | 38 | Independent Director | ||
| Allan David Engel | 55 | Independent Director |
| (1) | Effective as of October 20, 2021, Dale Schultz resigned as the Secretary and Chief Operating Officer of our Company and Derek Knight resigned as the Vice President, Corporate Development of our Company. Effective as of the same day, the board of directors of the Company appointed Derek Knight as the Secretary and Chief Operating Officer of our Company and appointed Dale Schultz as the VP of Resource Development of our Company. |
Philip Gross. Mr. Gross has served as our Chief Executive Officer and as a member of our board of directors since January 2021. Mr. Gross has more than two decades of experience in the resource and mining sector as an active investor and a hands on participant. He has worked extensively in both the physical and financial aspects of the sector and has extensive mining experience including as CEO of an OTC listed mid-tier gold producer. Mr. Gross has previously worked for some of the largest global commodities supply chain management firms. His commodity repertoire ranges across the spectrum of metals, mining and agriculture with a heavy focus on project development and execution. During the past five years as CIO of Temple Asset Management, Philip has been active in a variety of resource strategies working together with hedge funds and family wealth funds, including relating to gold mines in Brazil, iron ore in Chile, cocoa in Ecuador and cashews in Nigeria.
Mario Miranda. Mr. Miranda has served as our Chief Financial Officer since February 25, 2021. Mr. Miranda has been a Canadian Chartered Professional Accountant since 1993, specializing in restructuring, turn-arounds and start-up operations in the natural resources and energy industries. Since June 2000, Mr. Miranda has been the president of Finterra Consulting Inc., a management consulting company that provides chief financial officer services to companies in the natural resources and energy industry. Since March 2020, Mr. Mirandas has served as the Chief Financial Officer of New Stratus Energy Inc, a TSXV-listed oil and gas developer with operations in Latin America. From 2011 to 2019, he was the Chief Financial Officer of Alexandria Minerals Corp. (TSX-V), a mining exploration company with projects in Northern Quebec. From 2009 to present, he has been the Chief Financial Officer of Alturas Minerals Corp. (TSX-V, BVL), a Canadian based mining corporation engaged in the exploration of mineral projects in in Southern Peru and Chile. From 2007 to 2009 Mr. Miranda served as the interim Director of Financial Reporting and Budgeting for Kinross Gold Corp. (NYSE, TSE) a leading world gold producer with operations in the Americas, West Africa and Russia. Fluent in English, Spanish and French, his background and experience has helped to integrate the needs of many North American publicly traded companies with operations in Canada, the United States, Latin America and the Caribbean. He attained his Bachelor degree in Economics from Concordia University (1986), a Graduate Diploma in Public Accounting from McGill University (1991) and a Master of Finance degree from - Queens University (2018).
Dale Schultz - Mr. Schultz has served as our VP of Resource Development since October 20, 2021 and as a member of our board of directors since December 2019. Mr. Schultz served as our Chief Operating Officer and Secretary from December 2019 to October 20, 2021. From 2019 Mr. Schultz also managed the exploration program on the Estelle project in Alaska for Nova Minerals Limited. From 2018 through 2019, he completed field mapping and sampling of the Temagami green stone belt for Temagami Gold Inc. and Progenitor Metals Corp. Between 2017 and 2018, Mr. Schultz managed a 4000m diamond drill campaign on the TBL property (now owned by Snow Lake Resources) for the previous operator, Nova Minerals Limited. From 2016 to 2017 while working for Cobalt Power, he logged core in the Northern Ontario Cobalt Mining Camp. Mr. Schultz has 30 years of exploration and mining experience through roles at Echo Bay Lupin Mine in the Summer of 1986 and 1987, Claude Resources Seabee Mine from March of 1992 to April 1995, Battle Mountain’s Hemlo Camp and Kori Kollo Mine from May of 1995 to April of 2000, and TVX New Britannia Mine, in Snow Lake, Manitoba, from December of 2002 to January 2004. Mr. Schultz has also provided geological consulting services in South and Central America and Asia, and is currently the Principle Geologist with DJS Consulting. He is a graduate of the University of Saskatchewan with a B.Sc. and M.Sc. in Geological Sciences and is a member of the Engineers and Geoscientists of Manitoba.
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Derek Knight. Mr. Knight has served as our Chief Operating Officer and Secretary since October 20, 2021. Mr. Knight served as our Chief Executive officer from November 28, 2018 until December 2, 2020, on which date he was appointed as our Vice President, Corporate Development. He resigned as the Vice President, Corporate Development of our Company on October 20, 2021. Prior to joining our company, Mr. Knight was Chief Operating Officer and Vice-President of Operations at Progressive Planet Solutions Inc. from June 2018 to November 2018, and Vice President of operations at thus company from March 2018 to June 2018. During this time, he was instrumental in the transaction transferring the TBL property to our company. From April 2017 through February 2018, he held the role of Maintenance Planner and Continuous Improvement Lead at Unilever, and from February 2016 until April 2017, Mr. Knight managed the investments for his family office, on a full time basis. Since May 2003, Mr. Knight has also held various roles with UA Local 67, Plumbers, Steamfitters and Welders where his responsibilities included project management, supervisory, planning, project execution, and continuous improvement. Mr. Knight holds several professional trade licenses and has extensive experience working in large industrial environments in senior executive operating roles. He participated in the Power Engineering Program of Studies at Mohawk College of Applied Arts & Technology in 2003 and the Advanced Plumbing program in 2007, in Ontario, Canada. In 2019, Mr. knight completed the Canadian Securities Course of the Canadian Securities Institute.
Brian Youngs. Mr. Youngs joined our company in January 2018 and has served as our Vice President of Exploration since November 2018. Mr. Youngs has more than 25 years of experience in mining exploration. In a number of private and publicly traded junior mining companies, including Randsburg International Gold Corp. from May 2003 to June 2005, Wabana Exploration Inc. from 1999 to 2001 and Meegwich Consultants from 1996 to 2003. He has worked throughout Canada and internationally, as senior airborne geophysics technician with Geotech Ltd. Inc., from June 2008 to December 2017. Mr. Youngs graduated from Northern College – Haileybury School of Mines, Mining Engineering Technician program and is a member of the Ontario Association of Certified Engineering Technicians and Technologists. He has also received a GIS Specialist Diploma from Sault College and a Computer Graphics Design Diploma from Sheridan College..
Louie Simens. Mr. Simens has been the Chairman of our board of directors since December 2020, and a Director since November 2018. From 2016 Mr. Simens has been the Managing Director of a private construction company. Mr. Simens joined the Nova Minerals Ltd board of directors in December 2017. He has extensive experience in micro-cap equities and start-up investing, as well as in corporate restructuring, due diligence and mergers and acquisitions, where he utilizes his knowledge of corporate governance and project management. Mr. Simens has a successful track record spanning more than a decade in owning and operating contracting businesses, both in civil and building construction. Mr. Simens is currently director of his family construction group, and the executive director of Nova Minerals Ltd. Since 2020. He has served as Non-Executive Chairman of Torian Resources Ltd, and during his time at Torian Resources, Mr. Simens was instrumental in the company’s recapitalization and turnaround.
Nachum Labkowski. Mr. Labkowski has served as a member of our board of directors since November 2018. He is currently the Chief Executive Officer and principal investor in Halevi Enterprises, a private equity firm which Mr. Labkowski founded in 2010 that holds equity in more than 30 private companies and invests in real estate worldwide. Mr. Labkowski’s unique approach to investing has provided significant returns from those companies he has invested in to date.
Hadassah Slater. Ms. Slater has served as a member of our board of directors since October 2021. Ms. Slater brings with her 10 years of leadership experience as President of the Board of Directors for a large Canadian non-for-profit company. Ms. Slater has created a $33 million dollar non-profit center in Toronto, Canada using various government and private charitable funds and grants. From August 2017 to present, she has been the President of the Board of Directors at Kayla’s Children Center, a non-profit organization that aims at creating opportunities for children with disabilities by offering therapy, education and adapted recreation. Her latest project created an endowment fund for this non-for-profit with plans of future exponential growth. From April 2011 to August 2017, Ms. Slater worked as the President of Board of Directors for Project Aim Programs, which is a summer camp and year round respite program for children with disabilities. Her experience in strategic business direction, employee leadership, government lobbying, and investor relations is valuable. Ms. Slater studied for her Master’s in Business Administration in an international program at Bar Ilan University from 2006 to 2007.
Allan David Engel. Mr. Engel has served as a member of our board of directors since September 2021. Mr. Engel has three decades experience in managing investments on behalf of private and family trusts in the United Kingdom, Europe and Israel. He holds a Diploma in Law from KT College, Jerusalem, Israel, where he studied from 1984 to 1988. Since 2014 he has built up a portfolio of investments in the UK concentrating mainly on real estate, but also publishing and broadcast media. From February 2014 to date, he has been employed by Daymar (London) as Chief Operating Officer, where his duties include acquiring and managing a portfolio of commercial real estate investments on behalf of private and corporate clients.
No family relationship exists between any of our directors and executive officers. There are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any person referred to above was selected as a director or member of senior management.
Board of Directors
Nasdaq’s listing rules generally require that a majority of an issuer’s board of directors must consist of independent directors. Our board of directors currently consists of six (6) directors, Philip Gross, Dale Schultz, Louie Simens, Nachum Labkowski, Hadassah Slater and Allan David Engel. Three (3) of whom, Mr. Labkowski, Ms. Slater and Mr. Engel are independent within the meaning of Nasdaq’s rules. We intend to enter into independent director agreements with Hadassah Slater and Allan David Engel. As a result of these appointments, our board of directors will consist of six (6) directors, three (3) of whom will be independent within the meaning of the Nasdaq’s rules.
A director is not required to hold any shares in our company to qualify to serve as a director. Our board of directors may exercise all the powers of our company to borrow money, mortgage or charge its undertaking, property and uncalled capital, and to issue debentures, bonds and other securities, subject to applicable stock exchange limitations, if any, whenever money is borrowed or as security for any debt, liability or obligation of our company or of any third-party.
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Board Committees
We have already established a standing audit committee and a compensation committee of our board of directors. Immediately prior to, and subject to, the closing of this offering, we intend to establish a nominating and corporate governance committee of our board of directors. We intend to adopt a charter for each of the three committees. Each committee’s members and functions are described below.
Audit Committee
Our audit committee consists of Nachum Labkowski, Hadassah Slater and Allan David Engel, each of whom satisfies the “independence” requirements of Rule 10A-3 under the Exchange Act and Rule5605(c)(2) of the Nasdaq Marketplace Rules. Nachum Labkowski will serve as chairman of the audit committee. Our board has determined that Nachum Labkowski qualifies as an “audit committee financial expert.” The audit committee will oversee our accounting and financial reporting processes and the audits of the financial statements of our company.
The audit committee will be responsible for, among other things: (i) retaining and overseeing our independent accountants; (ii) assisting the board in its oversight of the integrity of our financial statements, the qualifications, independence and performance of our independent auditors and our compliance with legal and regulatory requirements; (iii) reviewing and approving the plan and scope of the internal and external audit; (iv) pre-approving any audit and non-audit services provided by our independent auditors; (v) approving the fees to be paid to our independent auditors; (vi) reviewing with our chief executive officer and chief financial officer and independent auditors the adequacy and effectiveness of our internal controls; (vii) reviewing hedging transactions; and (viii) reviewing and assessing annually the audit committee’s performance and the adequacy of its charter.
Compensation Committee
Our compensation committee consists of Allan David Engel, Hadassah Slater, Philip Gross and Louie Simens. Allan David Engel and Hadassah Slater satisfy the “independence” requirements of Rule 10A-3 under the Exchange Act and Rule 5605(c)(2) of the Nasdaq Marketplace Rules. Louie Simens will serve as chairman of the compensation committee. The compensation committee will assist the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers.
The compensation committee will be responsible for, among other things: (i) reviewing and approving the remuneration of our executive officers; (ii) making recommendations to the board regarding the compensation of our independent directors; (iii) making recommendations to the board regarding equity-based and incentive compensation plans, policies and programs; and (iv) reviewing and assessing annually the compensation committee’s performance and the adequacy of its charter.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee consists of Allan David Engel, Hadassah Slater, Philip Gross and Nachum Labkowski. Nachum Labkowski will serve as chairman of the nominating and corporate governance committee. The nominating and corporate governance committee will assist the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees.
The nominating and corporate governance committee will be responsible for, among other things: (i) identifying and evaluating individuals qualified to become members of the board by reviewing nominees for election to the board submitted by shareholders and recommending to the board director nominees for each annual meeting of shareholders and for election to fill any vacancies on the board; (ii) advising the board with respect to board organization, desired qualifications of board members, the membership, function, operation, structure and composition of committees (including any committee authority to delegate to subcommittees), and self-evaluation and policies; (iii) advising on matters relating to corporate governance and monitoring developments in the law and practice of corporate governance; (iv) overseeing compliance with the our code of ethics; and (v) approving any related party transactions.
The nominating and corporate governance committee’s methods for identifying candidates for election to our board of directors will include the solicitation of ideas for possible candidates from a number of sources - members of our board of directors, our executives, individuals personally known to the members of our board of directors, and other research. The nominating and corporate governance committee may also, from time-to-time, retain one or more third-party search firms to identify suitable candidates.
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In making director recommendations, the nominating and corporate governance committee may consider some or all of the following factors: (i) the candidate’s judgment, skill, experience with other organizations of comparable purpose, complexity and size, and subject to similar legal restrictions and oversight; (ii) the interplay of the candidate’s experience with the experience of other board members; (iii) the extent to which the candidate would be a desirable addition to the board and any committee thereof; (iv) whether or not the person has any relationships that might impair his or her independence; and (v) the candidate’s ability to contribute to the effective management of our company, taking into account the needs of our company and such factors as the individual’s experience, perspective, skills and knowledge of the industry in which we operate.
Duties of Directors
Under Canadian law, directors have fiduciary obligations to our company. Under the MCA, directors, when exercising the powers and discharging their duties, must act honestly and in good faith with a view to the best interests of our company and exercise the care, diligence and skill that a reasonably prudent individual would exercise in comparable circumstances.
Under Manitoba corporate law, the MCA imposes specific statutory liabilities on directors of corporations in certain situations. In certain circumstances, directors can be held liable, for example, for the authorization of share issues for a consideration other than money at less than fair market value, or for all debts not exceeding six months’ wages payable to each of the employees for services performed for the corporation while they are directors, or for the payment of a dividend if there were reasonable grounds for believing that the corporation is, or would after the payment be, unable to pay its liabilities as they become due, or the realizable value of the corporation’s assets would thereby be less than the aggregate of its liabilities and stated capital. Under numerous other provisions in federal and provincial statutes, directors may also face personal liability for, among other things, environmental offences, source deductions from payrolls, and tax remittances. Corporate directors have a number of defenses to legal actions in which it is alleged that they have breached their statutory or fiduciary duties, including:
| ● | dissenting from a resolution passed or action taken at a board meeting, which may relieve the director of any liability for the results of that decision; |
| ● | raising a “good faith reliance” defense to an accusation of breach of a fiduciary duty, whereby the director is entitled to rely in good faith on financial statements or reports made by an officer of the corporation, the corporation’s auditor, or by other professionals, such as a lawyer, an accountant, or an engineer; and |
| ● | availing themselves of a due diligence defense that permits directors to avoid a number of statutory liabilities, including breach of fiduciary duty, where the directors exercise the same degree of care, diligence and skill as a reasonably prudent person in comparable circumstances. |
Conflicts of Interest
There are potential conflicts of interest to which the directors, officers, insiders and promoters of our company will be subject in connection with the operations of our company. Some of the directors, officers, insiders and promoters are engaged in and will continue to be engaged in corporations or businesses which may be in competition with the business of our company. Accordingly, situations may arise where the directors, officers, insiders and promoters will be in direct competition with our company. The directors and officers of our company have a fiduciary obligation to act in the best interests of our company, avoid conflicts of interest and to disclose to all other board members any relevant information about potential conflicts. They have the same obligations to the other companies in respect of which they act as directors and officers. Discharge by the directors and officers of their obligations to our company may result in a breach of their obligations to the other companies, and in certain circumstances this could expose our company to liability to those companies. Similarly, discharge by the directors and officers of their obligations to the other companies could result in a breach of their obligation to act in the best interests of our company. Such conflicting legal obligations may expose our company to liability to others and impair our ability to achieve our business objectives. All of the directors or officers of our company have entered into non-competition or non-disclosure agreements with our company. Conflicts, if any, will be subject to the procedures and remedies as provided under the MCA and applicable securities laws, regulations and policies.
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Terms of Directors and Officers
Our officers are appointed by and serve at the discretion of our board of directors. Unless the shareholders, by ordinary resolution, elect directors to hold office for a term expiring later than the close of the next annual meeting of shareholders, the term of office of a director upon election or appointment, subject to Section 103 of the MCA, shall cease at the close of the first annual meeting of shareholders following his or her election or appointment, provided that if no directors are elected at such annual meeting, he or she shall continue in office until his or her successor is elected or appointed. The following persons are disqualified by the MCA from being a director of the Company: (i) anyone who is less than 18 years of age; (ii) a person who is not an individual; and (iii) a person who has the status of a bankrupt.
Employment and Indemnification Agreements
The Company has entered into consulting agreements with Philip Gross, Dale Schultz, Derek Knight and Brian Youngs. Our executive officers will be employed as independent contractors. Either party to an executive consulting agreement may terminate the agreement for any reason, at any time, with ninety (90) days’ prior written notice and the parties to an agreement may otherwise terminate an agreement at a date specified in writing by them. Additionally, we may terminate an executive consulting agreement in our sole discretion at any time provided we pay the contractor 90 days’ compensation.
Each executive officer has agreed to hold, both during and after the employment agreement expires or is earlier terminated, in strict confidence and not to use or disclose to any person, corporation or other entity without written consent, any confidential information. In addition, certain of our executive officers, including our Chief Executive Officer, Philip Gross, have agreed to be bound by non-competition and non-solicitation restrictions set forth in their agreements.
Although as independent contractors our executive officers have been involved in other business activities, we expect that as our business operations ramp up our executive officers will devote substantially all of their time to our business operations.
We expect to enter into indemnification agreements with our directors and executive officers, pursuant to which we will agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director or officer.
Compensation of Directors and Officers
Currently, there are no requirements for disclosure of the compensation of officers and directors on an individual basis for our most recently completed fiscal year under Canadian law. For the fiscal year ended June 30, 2020 and June 30, 2021, we paid aggregate cash compensation of C$100,500 (approximately US$81,022) and C$200,858 (approximately US$161,930), respectively, to our directors and executive officers as a group. We did not pay any other cash compensation or benefits in kind to our directors and executive officers. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers. Our board of directors may determine compensation to be paid to the directors and the executive officers. The compensation committee will assist the directors in reviewing and approving the compensation structure for the directors and the executive officers. For information regarding share awards granted to our directors and executive officers, see “—Stock Option Plan.”
Promptly following the closing of this Offering, we plan to pay aggregate cash compensation of US$144,000 and US$820,000 per fiscal year, respectively, to our directors and executive officers as a group.
Our 2019 Stock Option Plan and Amended and Restated Stock Option Plan
On May 1, 2019, we established the Snow Lake Resources Ltd. Stock Option Plan, or the Plan. The purpose of the Plan is to grant stock options, or Options, to encourage eligible persons to remain with our Company and to attract new directors, officers, employees and consultants. The aggregate number of common shares that may be reserved for issuance pursuant to Options under the Plan shall not exceed 10% of the outstanding common shares at the time of the granting of Options, less the aggregate number of common shares then reserved for issuance pursuant to any other share compensation arrangement. As of the date of this prospectus, 1,301,018 (post-consolidation) of our common shares are reserved for issuance under the Plan, as 13,010,176 (post-consolidation) of our common shares are currently issued and outstanding, and 1,586,732 (post-consolidation) of our common shares remain available for grant under the Plan, net of 820,000 (post-consolidation) of our common shares reserved under Options currently outstanding.
We adopted an Amended Restated Stock Option Plan on October 26, 2021 to increase the maximum amount of common shares reserved for issuance under the Plan from 1,301,018 to 2,406,732. Promptly following the closing of this Offering, we plan to grant a total of 1,269,386 options under the amended plan that will have an exercise price that is equal to the price per share at which units are sold in this Offering. After that, 317,346 common shares would remain available for grant under the amended plan.
The following summary briefly describes the principal features of the Plan and is qualified in its entirety by reference to the full text of the Plan.
Award that may be granted include only Incentive Stock Options. These Options shall only be granted to Eligible Persons. “Eligible Person” means a Director, Officer, Employee or Consultant, and includes an issuer all the voting securities of which are owned by Eligible Persons. An Eligible Person may receive Options on more than one occasion and may receive separate Options, with differing terms, on any one or more occasions.
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Stock options give the option holder the right to acquire from us a designated number of common shares at a purchase price that is fixed upon the grant of the option. The exercise price shall not be lower than the greater of the closing market prices of the underlying securities on: (a) the trading day prior to the date of grant of the Options; and (b) the date of grant of the Options.
All of the permissible types of awards under the Plan are described in more detail as follows:
Purposes of Plan: The purpose of the Plan is to advance the interests of our Company, through the grant of Options, by providing an incentive mechanism to foster the interest of Eligible Persons in the success of our Company and our Affiliates; encouraging Eligible Persons to remain with our Company; and attracting new directors, officers, employees and consultants.
Administration of the Plan: The Plan is currently administered by the Board of Directors, or the Board. The Board shall have the authority to determine the Eligible Persons to whom Options are granted, to grant such Options, and to determine any terms and conditions, limitations and restrictions in respect of any particular Option grant, including but not limited to the nature and duration of the restrictions, if any, to be imposed upon the acquisition, sale or other disposition of common shares acquired upon exercise of the Option, and the nature of the events and the duration of the period, if any, in which any Participant’s rights in respect of an Option or common shares acquired upon exercise of an Option may be forfeited; and to interpret the terms of the Plan, to make all such determinations and take all such other actions in connection with the implementation, operation and administration of the Plan, and to adopt, amend and rescind such administrative guidelines and other rules and regulations relating to the Plan. The Board’s interpretations, determinations, guidelines, rules and regulations shall be conclusive and binding upon our Company, Eligible Persons, Participants and all other persons.
Eligible Persons: A director, officer, employee or consultant, and includes an issuer all the voting securities of which are owned by Eligible Persons.
Shares Available Under the Plan: The aggregate number of common shares that may be reserved for issuance pursuant to Options under the Plan shall not exceed 10% of the outstanding common shares at the time of the granting of Options, less the aggregate number of common shares then reserved for issuance pursuant to any other share compensation arrangement. As of the date of this prospectus, 1,301,018 (post-consolidation) of our common shares are reserved for issuance under the Plan, as 13,010,176 (post-consolidation) of our common shares are currently issued and outstanding, and 1,586,732 (post-consolidation) of our common shares remain available for grant under the Plan, net of 820,000 (post-consolidation) of our common shares reserved under Options currently outstanding.
Stock Options:
General. Subject to the provisions of the Plan, the Board has the authority to determine all grants of stock options. That determination will include: (i) the number of shares subject to any option; (ii) the exercise price per share; (iii) the expiration date of the option; (iv) the manner, time and date of permitted exercise; (v) other restrictions, if any, on the option or the shares underlying the option; and (vi) any other terms and conditions as the administrator may determine. No fractional common shares shall be reserved for issuance under the Plan and the Board may determine the manner in which an Option, insofar as it relates to the acquisition of a fractional Common Share, shall be treated.
Option Price. Our Company must not grant Options with an exercise price lower than the greater of the closing market prices of the underlying securities on: (a) the trading day prior to the date of grant of the Options; and (b) the date of grant of the Options.
Exercise of Options. An option may be exercised only in accordance with the terms and conditions for the option agreement as established by the administrator at the time of the grant. The option must be exercised by notice to us, accompanied by payment of the exercise price. Payments may be made in cash or, at the option of the administrator, by actual or constructive delivery of shares of Common Stock to the holder of the option based upon the fair market value of the shares on the date of exercise.
Expiration of Options. if not previously exercised, an Option will expire on the expiration date established by the administrator at the time of grant. In the case of stock options, such term cannot exceed ten years.
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Blackout Period. The expiration date of an Option shall automatically extend if such expiration date falls within a period, or the blackout period, during which our company prohibits Optionees from exercising their Options to the extent that: (i) the blackout period is formally imposed by our company pursuant to its internal trading policies as a result of the bona fide existence of undisclosed material information. For greater certainty, in the absence of our company formally imposing a blackout period, the expiration date of any Options will not be automatically extended in any circumstances; (ii) the blackout period must expire upon the general disclosure of the undisclosed material information. The expiration date of the affected Options can be extended to no later than ten business days after the expiry of the blackout period; and (iii) the automatic extension of an Optionee’s Options will not be permitted where the Optionee or our company is subject to a cease trade order (or similar order under securities laws) in respect of our common shares.
Vesting Schedule. Options shall vest as determined by the Board. Options that may be granted to Eligible Persons performing investor relations activities shall vest over a minimum of 12 months with no more than 1/4 of such Options vesting in any three month period.
No Rights as a Shareholder. Nothing in the Plan or any Option shall confer upon a Participant any rights as a shareholder of our company with respect to any of the common shares underlying an Option unless and until such Participant shall have become the holder of such common shares upon exercise of such Option in accordance with the terms of the Plan.
Amendment, Suspension and Termination. The Board may amend, subject to the approval of any regulatory authority whose approval is required, suspend or terminate the Plan or any portion thereof. No such amendment, suspension or termination shall alter or impair any outstanding unexercised Options or any rights without the consent of the Participant holding such outstanding Options. If the Plan is suspended or terminated, the provisions of the Plan and any administrative guidelines, rules and regulations relating to the Plan shall continue in effect for the duration of such time as any Option remains outstanding.
Non-Assignability. Options may not be assigned or transferred.
Governing Law. The Plan, all Option Agreements, the grant and exercise of Options thereunder, and the sale, issuance and delivery of common shares thereunder upon exercise of Options are governed by the laws of the Province of Manitoba and the federal laws of Canada. The Courts of the Province of Manitoba shall have the exclusive jurisdiction to hear and decide any disputes or other matters arising under the Plan.
Other Material Provisions: Every Option shall be evidenced by an Option Agreement executed by us and the Participant, which shall, if the participant is an employee, consultant or management company employee, contain a representation and warranty by us and such Participant. In the event of changes in our outstanding common shares by reason of any share consolidation or split, reclassification or other capital reorganization, or a stock dividend, arrangement, amalgamation, merger or combination, or any other change to, event affecting, exchange of or corporate change or transaction affecting the common shares, the Board shall make, as it shall deem advisable and subject to the requisite approval of the relevant regulatory authorities, appropriate substitution and/or adjustment in: (i) the number and kind of shares or other securities or property reserved or to be allotted for issuance pursuant to the Plan; (ii) the number and kind of shares or other securities or property reserved or to be allotted for issuance pursuant to any outstanding unexercised Options, and in the exercise price for such shares or other securities or property; and (iii) the vesting of any Options.
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The following table sets forth certain information with respect to the beneficial ownership of our common shares as of October 27, 2021 for (i) each of our executive officers and directors; (ii) all of our executive officers and directors as a group; and (iii) each other shareholder known by us to be the beneficial owner of more than 5% of our outstanding common shares. The following table assumes that the underwriters have not exercised the over-allotment option.
Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any common shares that such person or any member of such group has the right to acquire within sixty (60) days of October 27, 2021. For purposes of computing the percentage of outstanding shares held by each person or group of persons named above, any shares that such person or persons has the right to acquire within sixty (60) days of October 27, 2021 are deemed to be outstanding for such person, but not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership by any person.
| Common Shares Beneficially Owned Prior to this Offering (post-consolidation)(1) | Common Shares Beneficially Owned After this Offering (post-consolidation)(2) | |||||||||||||||
| Name of Beneficial Owner | Shares | % | Shares | % | ||||||||||||
| Philip Gross, Chief Executive Officer and Director(3) | 120,000 | * | 120,000 | * | ||||||||||||
| Mario Miranda, Chief Financial Officer | 0 | 0 | % | 0 | 0 | % | ||||||||||
| Dale Schultz, VP of Resource Development and Director(4) | 172,000 | 1.31 | % | 172,000 | 1.08 | % | ||||||||||
| Derek Knight, Chief Operating Officer(5) | 906,024 | 6.85 | % | 906,024 | 5.71 | % | ||||||||||
| Brian Youngs, Vice President, Exploration(6) | 72,000 | * | 72,000 | * | ||||||||||||
| Louie Simens, Chairman of the Board(7) | 141,800 | 1.10 | % | 141,800 | * | |||||||||||
| Nachum Labkowski, Director(8) | 160,000 | 1.22 | % | 160,000 | 1.01 | % | ||||||||||
| Hadassah Slater | 0 | 0 | % | 0 | 0 | % | ||||||||||
| Allan David Engel | 0 | 0 | % | 0 | 0 | % | ||||||||||
| All executive officers and directors (9 persons) | 1,571,824 | 12.08 | % | 1,571,824 | 9.91 | % | ||||||||||
| Nova Minerals Limited(9) | 9,600,000 | 73.80 | % | 9,600,000 | 60.50 | % | ||||||||||
| 2789501 Ontario Inc.(10) | 1,333,333 | 10.25 | % | 1,333,333 | 8.40 | % | ||||||||||
| * | Less than 1% |
| (1) | Based on 13,010,176 (post-consolidation and subject to rounding of fractional shares) common shares issued and outstanding as of October 27, 2021. |
| (2) | Based on 15,867,319 (post-consolidation and subject to rounding of fractional shares) common shares issued and outstanding after this offering (assuming no exercise of the over-allotment option) and based on an assumed public offering price of $7.00 per share, which is the midpoint of the estimated offering range set forth on the cover page of this prospectus. |
| (3) | Consists of 120,000 (post-consolidation) restricted shares that would be issued to Mr. Gross upon completion of this offering. Does not include 120,000 (post-consolidation) restricted shares that would be issued to Mr. Gross upon our meeting of certain milestones. |
| (4) | Consists of 8,000 (post-consolidation) common shares, warrants for the purchase of 4,000 (post-consolidation) common shares exercisable within 60 days and options for the purchase of 160,000 (post-consolidation) common shares exercisable within 60 days. |
| (5) | Consists of 681,738 (post-consolidation) common shares, warrants for the purchase of 84,286 (post-consolidation) common shares exercisable within 60 days and options for the purchase of 140,000 (post-consolidation) common shares exercisable within 60 days. |
| (6) | Consists of 8,000 (post-consolidation) common shares, warrants for the purchase of 4,000 (post-consolidation) common shares exercisable within 60 days and options for the purchase of 60,000 (post-consolidation) common shares exercisable within 60 days. |
| (7) | Consists of 1,200 (post-consolidation) common shares, warrants for the purchase of 600 (post-consolidation) common shares exercisable within 60 days and options for the purchase of 140,000 (post-consolidation) common shares exercisable within 60 days. The shares, warrants and options are held directly by Benjamin Discretionary Trust. Mr. Simens is one of several beneficiaries of the Benjamin Discretionary Trust. He does not have any voting or investment power over the securities held by it. His Spouse is the sole Director of the trust. |
| (8) | Consists of options for the purchase of 160,000 (post-consolidation) common shares exercisable within 60 days. |
| (9) | Christopher Gerteisen is the Chief Executive Officer of Nova Minerals Limited and has voting and investment power over the securities held by it. Mr. Gerteisen disclaims beneficial ownership of the shares held by Nova Minerals Limited except to the extent of his pecuniary interest, if any, in such shares. |
| (10) | Includes 993,333 (post-consolidation) common shares that was purchased from Progressive Planet Solutions Inc. under an option that expired on May 11, 2021. Chaim D. Berger is the sole director of 2789501 Ontario Inc. and has voting and investment power over the securities held by it. Mr. Berger disclaims beneficial ownership of the shares held by 2789501 Ontario Inc. except to the extent of his pecuniary interest, if any, in such shares. |
None of our major shareholders have different voting rights from other shareholders. As noted in the table above, Nova Minerals holds approximately 74% of our outstanding common shares. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
See “Description of Share Capital—History of Securities Issuances” for historical changes in our shareholding.
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In addition to the compensation arrangements discussed under “Management,” the following is a description of the material terms of those transactions with related parties to which we are party and which we are required to disclose pursuant to the disclosure rules of the SEC.
As of June 30, 2021 and 2020, we had C$236,402 (approximately US$190,585) and C$205,648 (approximately US$165,792), respectively, due to our parent company, Nova Minerals. This money was lent to us by Nova Minerals to fund our startup as well as ongoing accounting, legal and general corporate costs.
On March 8, 2019, we entered into a deed of assignment of debt with Nova Minerals and Thompson Bros to facilitate the reassignment of the related party loan from Nova Minerals to our company. Thereby, we are now a party to an amount owing from Thompson Bros amounting to C$1,519,013 (approximately US$1,224,615). In consideration for the assignment, we issued one of our common shares to Nova Minerals. The related party loan is non-interest bearing and with no fixed repayment date or terms.
Nova Minerals, our largest shareholder, will be advancing us approximately $250,000 at a nominal interest rate, which funds we will use to make our first premium payment for our directors’ and officers’ insurance. We expect to repay this amount at or around the closing of this offering.
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General
The following is a description of the material terms of our share capital as set forth in our articles of incorporation, as amended, and as further amended in connection with this offering, and certain related sections of the Corporations Act (Manitoba). For more detailed information, please see our articles of incorporation and amendments thereto, which are filed as exhibits to the registration statement of which this prospectus forms a part.
As of October 27, 2021, we had 13,010,176 (post-consolidation and subject to rounding of fractional shares) common shares issued and outstanding, which were held by approximately 168 shareholders of record.
Upon closing of this offering, based upon shares outstanding as of October 27, 2021, our share capital will consist of an unlimited number of common shares, no par value per share, of which 15,867,319 (post-consolidation and subject to rounding of fractional shares) will be issued and outstanding (or 19,153,041 (post-consolidation and subject to rounding of fractional shares) if the underwriters exercise the over-allotment option in full), and an unlimited number of preferred shares, issuable in series, no par value per share, none of which will be issued and outstanding.
Share Capital
Common Shares
Our articles of incorporation, as amended by our articles of amendment on October 7, 2021, deleted all references to our Class A, Class B, Class C and Class D common shares and all of our outstanding Class A common shares were reclassified as common shares. There are no Class B, Class C or Class D common shares issued and outstanding.
Under our amended articles of incorporation, the holders of our common shares are entitled to one vote for each share held at any meeting of the shareholders. Subject to the prior rights of the holders of our preferred shares, the holders of our common shares are entitled to receive dividends as and when declared by our board of directors. See “Dividend Policy.” Subject to the prior payment to the holders of our preferred shares, in the event of our liquidation, dissolution or winding-up or other distribution of our assets among our shareholders, the holders of our common shares are entitled to share pro rata in the distribution of the balance of our assets. Holders of common shares have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to our common shares. There are no provision in our amended articles requiring holders of common shares to contribute additional capital, or permitting or restricting the issuance of additional securities or any other material restrictions. The rights, preferences and privileges of the holders of common shares will be subject to, and may be adversely affected by, the rights of the holders of any series of preferred shares that we may designate in the future.
Preferred Shares
Our articles of incorporation, as amended by our articles of amendment on October 7, 2021, deleted all references to our Class A, Class B and Class C preferred shares. Under our amended articles of incorporation, we are authorized to issue, without shareholder approval, an unlimited number of preferred shares, issuable in one or more series, and, subject to the provisions of the MCA, having such designations, rights, privileges, restrictions and conditions, including dividend and voting rights, as our board of directors may determine, and such rights and privileges, including dividend and voting rights, may be superior to those of the common shares. The issuance of preferred shares, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of our company and might adversely affect the market price of our common shares and the voting and other rights of the holders of common shares. We have no current plans to issue any preferred shares.
Warrants
See “—History of Securities Issuances” below for a description of the warrants that we have issued in connection with our private placements.
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Options
We have granted to employees, consultants and directors options to purchase 820,000 (post-consolidation) common shares under our 2019 stock option plan and we currently have 1,586,732 (post-consolidation) remaining options available for issuance under our amended and restated stock option plan adopted on October 26, 2021. See “Management—Stock Option Plan.”
History of Securities Issuances
Upon our incorporation, on May 25, 2018, we issued 100 common shares to our parent company, Nova Minerals, for a total purchase price of C$1.00 (approximately US$0.81).
On November 29, 2018, we closed a private placement financing, pursuant to which we issued 800,000 (post-consolidation) units at a price of C$1.25 (approximately US$1.01) per unit for aggregate gross proceeds of C$1,000,000 (approximately US$734,538). Each unit is comprised of one common share and a warrant for the purchase of one-half of one (1/2) common share at an exercise price of C$1.50 (approximately US$1.21) per whole common share. The warrants may be exercised at any time until the earlier of (i) five years after the date of issuance or (ii) two years from the completion of a liquidity transaction, which is defined as a business combination with a public company pursuant to a reverse take-over, merger, amalgamation, arrangement, take-over bid, insider bid, reorganization, joint venture, sale or exchange of assets or similar transaction, or an initial public offering. We also issued warrants for the purchase of 32,000 (post-consolidation) common shares to the broker. This warrant has an exercise price of C$1.25 (approximately US$1.01) and may also be exercised at any time until the earlier of (i) five years after the date of issuance or (ii) two years from the completion of a liquidity transaction.
On December 31, 2018, we closed a private placement financing, pursuant to which we issued 142,856 (post-consolidation and subject to fractional share rounding) units at a price of C$1.75 (approximately US$1.41) per unit for aggregate gross proceeds of C$250,000 (approximately US$201,548). Each unit is comprised of one common share and a warrant for the purchase of one-half of one (1/2) common share at an exercise price of C$2.25 (approximately US$1.81) per whole common share. The warrants may be exercised at any time until the earlier of (i) five years after the date of issuance or (ii) two years from the completion of a liquidity transaction (as defined above). If, following the closing of this offering, the closing price of our common shares is equal to or greater than C$0.75 for any 20 consecutive trading days, we may, upon providing written notice to the holders of these warrants, accelerate the expiry date of the warrants to the date that is 30 days following the date of such written notice.
On March 8, 2019, we issued 9,599,980 (post-consolidation) common shares to Nova Minerals in connection with our acquisition from Nova Minerals of all of the common shares of Thompson Bros. See “Corporate History and Structure” for more information regarding this transaction.
On March 15, 2019, we closed a private placement financing, pursuant to which we issued 65,100 (post-consolidation and subject to rounding of fractional shares) units at a price of C$1.75 (approximately US$1.41) per unit for aggregate gross proceeds of C$113,938 (approximately US$91,856). Each unit is comprised of one common share and a warrant for the purchase of one-half of one (1/2) common share at an exercise price of C$2.25 (approximately US$1.81) per whole share. These warrants may be exercised at any time until March 15, 2021.
On March 28, 2019, we issued one common share to Nova Minerals in relation to the intercompany loan re-assignment described under “Related Party Transactions” above.
On April 12, 2019, we issued 2,100,000 (post-consolidation) common shares to Progressive Planet and 300,000 (post-consolidation) common shares to Strider Resources in connection with our acquisition of the TBL property. See “Corporate History and Structure” for more information regarding this transaction.
On May 25, 2019, we issued to certain of our officers and directors options to acquire 1,040,000 (post-consolidation) of our common shares. Some of those options have since been terminated; options to purchase 820,000 (post-consolidation) of our common shares remain outstanding. Each option provides the option holder the right to purchase one of our common shares until May 24, 2023, as an exercise price of C$2.50 per share.
On February 11, 2020, we issued 50 (post-consolidation) common shares on the exercise of a warrant for proceeds of C$113 (approximately US$91).
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On January 1, 2021, Philip Gross became our Chief Executive Officer. Under our consulting agreement with Mr. Gross, we agreed to issue to him up to 240,000 (post-consolidation) of our restricted ordinary shares under the following conditions: (i) 50,000 (post-consolidation) restricted share units are to be awarded to Mr. Gross on completion of a preliminary economic assessment of the TBL property, (ii) 70,000 (post-consolidation) restricted share units to be awarded upon increasing the TBL property lithium resource to above 12Mt lithium at or above 1% Li20 and at or above a cut-off grade of 0.4% Li20; and (iii) 120,000 (post-consolidation) restricted share units to be awarded upon the completion of our initial public offering.
On February 8, 2021, we conducted an initial closing of a private placement offering of our unsecured convertible debentures in which we sold C$470,000 (approximately $378,910) in principal amount of the convertible debentures. On February 22, 2021, we conducted a second and final closing of this offering in which we sold C$350,000 (approximately $282,167) in principal amount of the convertible debentures. The convertible debentures, which were issued with an original issue discount of 5%, bear interest on the unpaid principal amount at a rate equal to the greater of 12% per annum, and (ii) the WSJ prime rate plus 7%, calculated and added to the principal amount annually, payable in cash in arrears on the maturity date. The convertible debenture matures on the earlier of (i) December 23, 2022, (ii) the date that we complete a public offering, and (iii) such earlier date as the principal amount of the debentures may become due, subject to and in accordance with the terms, conditions and provisions of the debentures, subject to extension upon mutual agreement of the parties. The convertible debentures entitle the purchasers to receive warrants to purchase a number of our common shares equal to 50% of the number of our common shares issuable upon conversion of the convertible debentures. Each warrant will entitle the holder to purchase our common shares at an exercise price of C$1.50 (approximately $1.21) per share and will expire on the earlier of five years from the date of Issuance and two years after the closing of this Offering. Pursuant to the terms and conditions of section 6(h) of the debenture subscription agreement, the debenture holder has the registration rights that would require us to include the debentures, common shares, and warrants (i) not previously sold or transferred by the debenture holder; or (ii) not otherwise able to be freely sold by the debenture holder in this offering. Pursuant to section 15 of the debenture, the debenture holder also has participation rights to subscribe for and purchase the securities offered in this offering, at the initial public offering price, up to an amount of the Common Shares equal to the debenture holder’s principal amount. We received written waivers dated October 26, 2021 from all of the debenture holders under which the debenture holders agreed to waive notice rights, registration rights and participation rights under the subscription agreements for debentures and unsecured convertible debentures dated December 2020 and February 2021, respectively. In addition, we expect to receive the written election of each of the debenture holders to convert such debenture into our common shares at a price that is the lesser of (i) C$1.25 (approximately US$1.01) per share or (ii) a 20% discount to the price at which we sell securities in this offering upon the closing of this offering.
Between March 10, 2021 and March 15, 2021, we issued 2,170 (post-consolidation) of our common shares upon the exercise of outstanding warrants for proceeds to us of C$4,882 (approximately US$3,936).
Limitation of Liability and Indemnification of Directors and Officers
Under the MCA, we may indemnify our current or former directors or officers or another individual who acts or acted at our request as a director or officer, or an individual acting in a similar capacity, of another entity which the Company is or was a shareholder or creditor of, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of his or her association with us or another entity. The MCA also provides that we may also advance moneys to a director, officer or other individual for costs, charges and expenses reasonably incurred in connection with such a proceeding; provided that such individual shall repay the moneys if the individual does not fulfill the conditions described below.
However, indemnification is prohibited under the MCA unless the individual:
| ● | acted honestly and in good faith with a view to our best interests, or the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at our request; and |
| ● | in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the individual had reasonable grounds for believing that his or her conduct was lawful; |
Our bylaws require us to indemnify each of our current or former directors and officers and each individual who acts or acted at our request as a director or officer of another entity which the Company is or was a shareholder or creditor of, as well as their respective heirs and successors, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by them in respect of any civil, criminal or administrative action or proceeding to which they were made a party by reason of being or having been a director or officer, except as may be prohibited by the MCA.
We have entered into indemnity agreements with our directors and our executive officers which provide, among other things, that we will indemnify our directors and executive officers to the fullest extent permitted by law from and against all liabilities, costs, charges and expenses incurred as a result of our directors and executive officers actions in the exercise of their duties as a director or officer; provided that, we shall not indemnify such individuals if, among other things, they did not act honestly and in good faith with a view to our best interests and, in the case of a criminal or penal action, the individuals did not have reasonable grounds for believing that their conduct was lawful.
At present, we are not aware of any pending or threatened litigation or proceeding involving any of our directors, officers, employees or agents in which indemnification would be required or permitted.
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Material differences between Manitoba Corporate Law and Delaware General Corporation Law
Our corporate affairs are governed by our articles of incorporation and bylaws and the provisions of the MCA. The MCA differs from the various state laws applicable to U.S. corporations and their stockholders. The following is a summary of the material differences between the MCA and the Delaware General Corporation Law, or DGCL. This summary is qualified in its entirety by reference to the DGCL, the MCA and our governing corporate instruments.
Number and Election of Directors
Under the DGCL, the board of directors must consist of at least one number. The number of directors shall be fixed by the bylaws of the corporation, unless the certificate of incorporation fixes the number of directors, in which case a change in the number of directors shall only be made by an amendment of the certificate of incorporation. Under the DGCL, directors are elected at annual stockholder meetings by a plurality vote of the stockholders, unless a shareholder-adopted bylaw prescribes a different required vote.
Under the MCA, the board of directors must consist of at least three members, at least two of whom shall not be officers or employees of us or our affiliates, so long as Liminal remains a “distributing corporation” for purposes of the MCA, which includes a corporation whose securities are listed on a recognized stock exchange, in or outside Canada. Under the MCA, the shareholders of a corporation elect directors by ordinary resolution at each annual meeting of shareholders at which such an election is required.
Director Qualifications
Delaware law does not have director residency requirements comparable to those of the MCA. Delaware law permits a corporation to prescribe qualifications for directors under its certificate of incorporation or bylaws.
Under the MCA, a director is not required to hold a share in our capital as qualification for his or her office but must be qualified as required by the MCA to become, act or continue to act as a director. The MCA provides that the following persons are disqualified from being a director of a corporation: (i) a person who is less than 18 years of age; (ii) a person who is of unsound mind and has been so found by a court in Canada or elsewhere; (iii) a person who is not an individual; and (iv) a person who has the status of a bankrupt. Further, the MCA provides that at least 25% of the directors of the company must be resident Canadians, or at least one of the directors if the company has less than four directors.
Vacancies on the Board of Directors
Under the DGCL, vacancies and newly created directorships resulting from an increase in the authorized number of directors, may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.
Under the MCA, vacancies that exist on the board of directors may be filled by the board of directors if the remaining directors constitute a quorum, unless the vacancy results from an increase in the number or in the minimum or maximum number of directors or a failure to elect the number or minimum number of directors provided for in the articles, in which case, or if the remaining directors do not constitute a quorum, the remaining directors shall call a meeting of shareholders to fill the vacancy.
Transactions with Directors and Officers
The DGCL generally provides that no transaction between a corporation and one or more of its directors or officers, or between a corporation and any other corporation or other organization in which one or more of its directors or officers, are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee which authorizes the transaction, or solely because any such director’s or officer’s votes are counted for such purpose, if (i) the material facts as to the director’s or officer’s interest and as to the transaction are known to the board of directors or the committee, and the board or committee in good faith authorizes the transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (ii) the material facts as to the director’s or officer’s interest and as to the transaction are disclosed or are known to the stockholders entitled to vote thereon, and the transaction is specifically approved in good faith by vote of the stockholders; or (iii) the transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee or the stockholders.
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The MCA requires that a director or officer of a corporation who is: (i) a party to a contract or transaction or proposed contract or transaction with the corporation; or (ii) a director or an officer, a person acting in a similar capacity, of a party to a contract or transaction or proposed contract or transaction, or (iii) has a material interest in, any person who is a party to a contract or transaction or proposed contract or transaction with the corporation, shall disclose in writing to the corporation or request to have entered in the minutes of meetings of directors (or committees of directors) the nature and extent of his or her interest. An interested director is prohibited from attending the part of the meeting during which the contract or transaction is discussed and is prohibited from voting on a resolution to approve the contract or transaction except in specific circumstances, such as a contract or transaction relating primarily to his or her remuneration as a director, a contract or transaction for indemnification or liability insurance of the director, or a contract or transaction with an affiliate of the corporation.
If a director or officer does not disclose his or her interest in accordance with the MCA, or (in the case of a director) votes in respect of a resolution on a contract or transaction in which he or she is interested contrary to the MCA, the corporation or a shareholder may ask the court to set aside the contract or transaction, according to the conditions the court sees fit. However, if a director or officer has disclosed his or her interest in accordance with the MCA and the contract or transaction was reasonable and fair to the corporation at the time it was approved by the directors, the contract or transaction is not invalid by reason only of the interest of the director or officer or that the director is present at or is counted to determine the presence of a quorum at the meeting of directors that authorized the contract or transaction.
Limitation on Liability of Directors
The DGCL permits a corporation to include a provision in its certificate of incorporation eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for a breach of the director’s fiduciary duty as a director, except for liability: (i) for breach of the director’s duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law; (iii) under Section 174 of the DGCL which concerns unlawful payment of dividends, stock purchases or redemptions; or (iv) for any transaction from which the director derived an improper personal benefit.
The MCA does not permit the limitation of a director’s liability as the DGCL does. However, the MCA provides that the corporation may indemnify directors and officers against liabilities incurred in the course of their duties and may purchase and maintain insurance against any liability incurred by the individual in their capacity as a director or officer. Further, the MCA provides that an officer or director is entitled to indemnity from a corporation in respect of all costs, charges and expenses reasonably incurred by him or her in connection with the defence of any civil, criminal or administrative action or proceeding to which he or she is made a party by reason of being or having been a director or officer of the corporation, if the person seeking indemnity (i) was substantially successful on the merits in his or her defence of the action or proceeding, and (ii) he or she acted honestly and in good faith with a view to the best interest of the corporation, and in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he or she had reasonable grounds for believing that his or her conduct was lawful. A director may also limit his liability by having his dissent entered into the minutes in respect of a decision or, by resigning from the board.
Call and Notice of Shareholder Meetings
Under Delaware law, unless otherwise provided in the certificate of incorporation or bylaws, written notice of any meeting of the stockholders must be given to each stockholder entitled to vote at the meeting not less than ten nor more than 60 days before the date of the meeting and shall specify the place, date, hour, and purpose or purposes of the meeting.
Under the DGCL, an annual or special stockholder meeting is held on such date, at such time and at such place as may be designated by the board of directors or any other person authorized to call such meeting under the corporation’s certificate of incorporation or bylaws. If an annual meeting for election of directors is not held on the date designated or an action by written consent to elect directors in lieu of an annual meeting has not been taken within 30 days after the date designated for the annual meeting, or if no date has been designated, for a period of 13 months after the later of the last annual meeting or the last action by written consent to elect directors in lieu of an annual meeting, the Delaware Court of Chancery may summarily order a meeting to be held upon the application of any stockholder or director.
Under the MCA, written notice of the shareholders must be given to each shareholder entitled to vote at the meeting not less than twenty-one nor more than fifty days before the date of the meeting and shall specify the place, date, hour and purpose or purposes of the meeting. Notice of a meeting of shareholders at which special business is to be transacted must state (a) the nature of that business in sufficient detail to permit the shareholder to form a reasoned judgment thereon, and (b) the text of any special resolution to be submitted to the meeting.
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Under the MCA, an annual meeting of shareholders must be held no later than fifteen months after holding the last preceding annual meeting but no later than six months after the end of the corporation’s preceding financial year. Under the MCA, the directors of a corporation may call a special meeting at any time. A corporation may apply to the court for an order extending the time for calling an annual meeting.
In addition, holders of not less than five percent of the issued shares of a corporation that carry the right to vote at a meeting sought to be held may requisition the directors to call a meeting of shareholders for the purposes stated in the requisition.
Shareholder Action by Written Consent
Under the DGCL, a majority of the stockholders of a corporation may act by written consent without a meeting unless such action is prohibited by the corporation’s certificate of incorporation.
Under the MCA, a written resolution signed by all the shareholders of a corporation who would have been entitled to vote on the resolution at a meeting is effective to approve the resolution.
Shareholder Nominations and Proposals
Under the MCA, a shareholder entitled to vote at a shareholders’ meeting may submit a shareholder proposal relating to matters which the shareholder wishes to propose and discuss at a shareholders’ meeting and, subject to certain exceptions, such shareholder’s compliance with the prescribed time periods and other requirements of the MCA pertaining to shareholder proposals, the corporation is required to include such proposal in the information circular pertaining to the meeting for which it solicits proxies. Notice of such a proposal must be provided to the corporation at least 90 days before the anniversary date of the last annual shareholders’ meeting.
In addition, the MCA requires that any shareholder proposal that includes nominations for the election of directors must be signed by one or more holders of shares representing in the aggregate not less than five percent of the shares or five percent of the shares of a class or series of shares of the corporation entitled to vote at the meeting to which the proposal is to be presented.
The DGCL does not have a comparable provision.
Amendment of Governing Instrument
Generally, under the DGCL, the affirmative vote of the holders of a majority of the outstanding stock entitled to vote is required to approve a proposed amendment to the certificate of incorporation, following the adoption of the amendment by the board of directors of the corporation, provided that the certificate of incorporation may provide for a greater vote. Under the DGCL, holders of outstanding shares of a class or series are entitled to vote separately on an amendment to the certificate of incorporation if the amendment would have certain consequences, including changes that adversely affect the rights and preferences of such class or series.
Under the DGCL, after a corporation has received any payment for any of its stock, the power to adopt, amend or repeal bylaws shall be vested in the stockholders entitled to vote; provided, however, that any corporation nay, in its certificate of incorporation, provide that bylaws may be adopted, amended or repealed by the board of directors. The fact that such power has been conferred upon the board of directors shall not divest the stockholders of the power nor limit their power to adopt, amend or repeal the bylaws.
Under the MCA, amendments to the articles of incorporation generally require the approval of not less than two-thirds of the votes cast by shareholders entitled to vote on the resolution. Specified amendments may also require the approval of other classes of shares. If the amendment is of a nature affecting a particular class or series in a manner requiring a separate class or series vote, that class or series is entitled to vote on the amendment whether or not it otherwise carries the right to vote.
Under the MCA, the directors may, by resolution, make, amend or repeal any bylaws that regulate the business or affairs of a corporation and they must submit the bylaw, amendment or repeal to the shareholders at the next meeting of shareholders, and the shareholders may confirm, reject or amend the bylaw, amendment or repeal.
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Votes on Mergers, Consolidations and Sales of Assets
The DGCL provides that, unless otherwise provided in the certificate of incorporation or bylaws, the adoption of a merger agreement requires the approval of a majority of the outstanding stock of the corporation entitled to vote thereon.
Under the MCA, certain extraordinary corporate actions, such as amalgamations (other than with certain affiliated corporations), continuances and sales, leases or exchanges of the property of a corporation if as a result of such alienation the corporation would be unable to retain a significant part of its business activities, and other extraordinary corporate actions such as liquidations, dissolutions and (if ordered by a court) arrangements, are required to be approved by “special resolution” of the shareholders.
A “special resolution” is a resolution passed by not less than two-thirds of the votes cast by the shareholders who voted in respect of the resolution or signed by all shareholders entitled to vote on the resolution. In specified cases, a special resolution to approve the extraordinary corporate action is also required to be approved by the holders of a class or series of shares, including in certain cases a class or series of shares not otherwise carrying voting rights.
Dissenter’s Rights of Appraisal
Under the DGCL, a stockholder of a Delaware corporation generally has the right to dissent from a merger or consolidation in which the Delaware corporation is participating, subject to specified procedural requirements, including that such dissenting stockholder does not vote in favor of the merger or consolidation. However, the DGCL does not confer appraisal rights, in certain circumstances, including if the dissenting stockholder owns shares traded on a national securities exchange and will receive publicly traded shares in the merger or consolidation. Under the DGCL, a stockholder asserting appraisal rights does not receive any payment for his or her shares until the court determines the fair value or the parties otherwise agree to a value. The costs of the proceeding may be determined by the court and assessed against the parties as the court deems equitable under the circumstances.
Under the MCA, each of the following matters listed will entitle shareholders to exercise rights of dissent and to be paid the fair value of their shares: (i) any amalgamation with another corporation (other than with certain affiliated corporations), (ii) an amendment to the corporation’s articles to add, change or remove any provisions restricting or constraining the issue or transfer of that class of shares, (iii) an amendment to the corporation’s articles to add, change or remove any restriction upon the business or businesses that the corporation may carry on, (iv) a continuance under the laws of another jurisdiction, (v) a sale, lease or exchange of all or substantially all the property of the corporation other than in the ordinary course of business, (vi) an amendment to the corporation’s articles to convert the corporation from a corporation with share capital into a corporation without share capital (or vice versa), (vii) where a court order permits a shareholder to dissent in connection with an application to the court for an order approving an arrangement, (viii) certain amendments to the articles of a corporation which require a separate class or series vote by a holder of shares of any class or series.
However, a shareholder is not entitled to dissent if an amendment to the articles is effected by a court order approving a reorganization or by a court order made in connection with an action for an oppression remedy, unless otherwise authorized by the court. The MCA provides these dissent rights for both listed and unlisted shares.
Under the MCA, a shareholder may, in addition to exercising dissent rights, seek an oppression remedy for any act or omission of a corporation which is oppressive or unfairly prejudicial to or that unfairly disregards a shareholder’s interests.
Oppression Remedy
The MCA provides an oppression remedy that enables a court to make any order, whether interim or final, to rectify matters that are oppressive or unfairly prejudicial to, or that unfairly disregards the interests of, any security holder, creditor, director or officer of the corporation if an application is made to a court by a “complainant”. An “complainant” with respect to a corporation means any of the following: (i) a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates; (ii) a present or former officer or director of the corporation or any of its affiliates; (iii) the director appointed pursuant to the MCA; and (iv) any other person who in the discretion of the court has the interest to make the application.
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The oppression remedy provides the court with very broad and flexible powers to intervene in corporate affairs to protect shareholders and other complainants by making any interim or final order that it thinks fit including, without limiting the foregoing, (i) an order restraining the conduct complained of, (ii) an order appointing a receiver or receiver-manager, (iii) an order to regulate the corporation’s affairs by amending the articles or by-laws or creating or amending a unanimous shareholders agreement, (iv) an order directing an issue or exchange of securities, (v) an order appointing directors in place of or in addition to all or any of the directors then in office, (vi) an order directing a corporation, subject to certain restrictions, or any other person, to purchase securities of a security holder, (vii) an order directing the corporation, subject to certain restrictions, or any other person, to pay to a security holder any part of the moneys paid by him or her for securities, (viii) an order varying or setting aside a transaction or contract to which a corporation is a party and compensating the corporation or any other party to the transaction or contract, (ix) an order requiring the corporation, within a time specified by the court, to produce to the court or an interested person financial statements, (x) an order compensating an aggrieved person, or (xi) an order liquidating and dissolving the corporation. While conduct that is in breach of fiduciary duties of directors or that is contrary to the legal right of a complainant will normally trigger the court’s jurisdiction under the oppression remedy, the exercise of that jurisdiction does not depend on a finding of a breach of those legal and equitable rights. Furthermore, the court may order a corporation to pay the interim costs, including legal fees and disbursements, of an applicant seeking an oppression remedy, but the applicant may be held accountable for interim costs on final disposition of the complaint...The DGCL does not provide for a similar remedy.
Shareholder Derivative Actions
Under Delaware law, stockholders may bring derivative actions on behalf of, and for the benefit of, the corporation. The plaintiff in a derivative action on behalf of the corporation either must be or have been a stockholder of the corporation at the time of the transaction or must be a stockholder who became a stockholder by operation of law in the transaction regarding which the stockholder complains.
Under the MCA, a complainant may apply to a court for leave to bring an action in the name of, and on behalf of, the corporation or its subsidiary, or to intervene in an existing action to which the corporation or its subsidiary is a party, for the purpose of prosecuting, defending or discontinuing an action on behalf of the corporation or on behalf of its subsidiary. Under the MCA, no action may be brought and no intervention in an action may be made unless a court is satisfied that: (i) the complainant has given the required notice to the directors of the corporation or of the subsidiary, as applicable, of the shareholder’s intention to apply to the court if the directors do not bring, diligently prosecute or defend or discontinue the action; (ii) the complainant is acting in good faith; (iii) it appears to be in the best interests of the corporation or its subsidiary that the action be brought, prosecuted, defended or discontinued.
Under the MCA, the court in a derivative action may make any order it thinks fit including, without limiting the generality of the foregoing, (i) an order authorizing the complainant or any other person to control the conduct of the action, (ii) an order giving directions for the conduct of the action, (iii) an order directing that any amount adjudged payable by a defendant in the action shall be paid, in whole or in part, directly to former and present security holders of the corporation or its subsidiary instead of to the corporation or its subsidiary, and (iv) an order requiring the corporation or its subsidiary to pay reasonable legal fees incurred by the complainant in connection with the action.
Anti-Takeover and Ownership Provisions
Unless an issuer opts out of the provisions of Section 203 of the DGCL, Section 203 generally prohibits a public Delaware corporation from engaging in a “business combination” with a holder of 15% or more of the corporation’s voting stock (as defined in Section 203), referred to as an interested stockholder, for a period of three years after the date of the transaction in which the interested stockholder became an interested stockholder, except as otherwise provided in Section 203. For these purposes, the term “business combination” includes mergers, assets sales and other similar transactions with an interested stockholder.
Rules and policies of certain Canadian securities regulatory authorities, including the Manitoba Securities Commission, such as Multilateral Instrument 61-101—Protection of Minority Security Holders in Special Transactions, or Multilateral Instrument 61-101, contain requirements in connection with, among other things, ‘related party transactions” and “business combinations”, including, among other things, any transaction by which an issuer directly or indirectly engages in the following with a related party: acquires, sells, leases or transfers an asset, acquires the related party, acquires or issues treasury securities, amends the terms of a security if the security is owned by the related party or assumes or becomes subject to a liability or takes certain other actions with respect to debt.
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Under Multilateral Instrument 61-101, the term “related party” includes directors, senior officers and holders of more than 10% of the voting rights attached to all outstanding voting securities of the issuer or holders of a sufficient number of any securities of the issuer to materially affect control of the issuer.
Multilateral Instrument 61-101 requires, subject to certain exceptions, the preparation of a formal valuation relating to certain aspects of the transaction and more detailed disclosure in the proxy material sent to security holders in connection with related party transaction including related to the valuation. Multilateral Instrument 61-101 also required, subject to certain exceptions, that an issuer not engage in a related party transaction unless the shareholders of the issuer, other than the related parties, approve the transaction by a simple majority of the votes cast.
Multilateral Instrument 62-104 provides that a take-over bid is triggered when a person makes “an offer to acquire voting securities or equity securities of a class made to one or more persons … where the securities subject to the offer to acquire, together with the offeror’s securities, constitute in the aggregate 20% or more of the outstanding securities of that class of securities at the date of the offer to acquire...” When a take-over bid is triggered, an offeror must comply with certain requirements. These include, among other things, making the offer of identical consideration to all holders of the class of security that is the subject of the bid; making a public announcement of the bid in a newspaper; and sending out a bid circular to security holders which explains the terms and conditions of the bid. Directors of an issuer whose securities are the subject of a take-over bid are required to evaluate the proposed bid and circulate a directors’ circular indicating whether they recommend to accept or reject the bid or are not making a recommendation regarding the bid. Strict timelines must be adhered to.
Multilateral Instrument 62-104 further requires that whenever a person acquires beneficial ownership of, or control or direction over, voting or equity securities of any class of a reporting issuer or securities convertible into voting or equity securities of any class of a reporting issuer that, together with the person’s securities of that class, would constitute 10% or more of the outstanding securities of that class, the person must file a press release announcing that fact and file an “early warning report” with applicable Canadian securities regulators. An additional news release and report must be filed at each instance the person acquires an additional 2% or more of the outstanding securities or securities convertible into 2% or more of the outstanding securities.
An “issuer bid” is defined in Multilateral Instrument 62-104 to be “an offer to acquire or redeem securities of an issuer made by the issuer to one or more persons.” Similar requirements to a takeover bid exist for issuer bids. Multilateral Instrument 62-104 also contains a number of exemptions to the take-over bid and issuer bid requirements
Other Important Provisions in our Articles of Incorporation and Bylaws
The following is a summary of certain important provisions of our articles of incorporation, as amended, and our bylaws, as amended. Please note that this is only a summary, is not intended to be exhaustive and is qualified in its entirety by reference to our articles of incorporation and bylaws. For further information, please refer to the full version of our articles of incorporation and bylaws, copies of which are filed as exhibits to the registration statement of which this prospectus forms a part.
Objects and Purposes of the Company
Our articles of incorporation do not contain and are not required to contain a description of our objects and purposes. There is no restriction contained in our articles of incorporation on the business that we may carry on.
Directors
Interested Transactions
The MCA states that a director must disclose to us, in accordance with the provisions of the MCA, the nature and extent of an interest that the director has in a material contract or material transaction, whether made or proposed, with us, if the director is a party to the contract or transaction, is a director or an officer or an individual acting in a similar capacity of a party to the contract or transaction, or has a material interest in a party to the contract or transaction.
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A director who holds an interest in respect of any material contract or transaction into which we have entered or propose to enter is not entitled to vote on any directors’ resolution to approve that contract or transaction, unless the contract or transaction:
| ● | relates primarily to the director’s remuneration as a director, officer, employee or agent of us or an affiliate; |
| ● | is for indemnity or insurance otherwise permitted under the MCA; or |
| ● | is with an affiliate. |
Remuneration of Directors
The MCA provides that the remuneration of our directors, if any, may be determined by our directors subject to our articles of incorporation and bylaws. That remuneration may be in addition to any salary or other remuneration paid to any of our employees who are also directors.
Age Limit Requirement
Neither our articles of incorporation nor the MCA impose any mandatory age-related retirement or non-retirement requirement for our directors.
Share Ownership
Neither our articles of incorporation nor the MCA provide that a director is required to hold any of our shares as a qualification for holding his or her office. Our board of directors has discretion to prescribe minimum share ownership requirements for directors.
Quorum
Under our bylaws, the quorum for the transaction of business at a meeting of our board of directors is a majority of the number of directors or the minimum number of directors required by our articles of incorporation or by a resolution of the shareholders.
Borrowing Powers
Pursuant to our bylaw relating to the borrowing powers of our directors, our board of directors may: (i) borrow money upon our credit in such amounts and on such terms as may be deemed expedient by obtaining loans or advances or by way of overdraft or otherwise; (ii) issue debentures or other securities; (iii) sell, pledge or hypothecate debentures or other securities in such amounts as may be deemed expedient; (iv) mortgage, hypothecate, give as security or as guaranty, any or all real property, whether movable or immovable, as well as other rights and undertakings, present or future, of our company, to secure any debenture or other assets, present or future, of our company or for the repayment of all or any money borrowed or to be borrowed or other obligations or liabilities, present or future, of our company.
Action Necessary to Change the Rights of Holders of Our Shares
Our shareholders can authorize the amendment of our articles of incorporation to create or vary the special rights or restrictions attached to any of our shares by passing a special resolution. However, a right or special right attached to any class or series of shares may not be prejudiced or interfered with unless the shareholders holding shares of that class or series to which the right or special right is attached consent by a separate special resolution. A special resolution means a resolution passed by: (1) a majority of not less than two-thirds of the votes cast by the applicable class or series of shareholders who vote in person or by proxy at a meeting or (2) a resolution consented to in writing by all of the shareholders entitled to vote.
Shareholder Meetings
We must hold an annual general meeting of our shareholders at least once every year at a time and place determined by our board of directors, provided that the meeting must not be held later than 15 months after the preceding annual general meeting but no later than six months after the end of our preceding financial year. A meeting of our shareholders may be held anywhere in Canada, as provided in our bylaws or, at a place outside Canada if the place is specified in our articles or all the shareholders entitled to vote at the meeting agree that the meeting is to be held at that place.
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Our directors may, at any time, call a special meeting of our shareholders. Shareholders holding not less than 5% of our issued voting shares may also cause our directors to call a shareholders’ meeting.
A notice to convene a meeting, specifying the date, time and location of the meeting, and, where a meeting is to consider special business, the general nature of the special business, must be sent to shareholders, to each director and the auditor not less than 21 days prior to the meeting, although, as a result of applicable securities laws, the time for notice is effectively longer. Under the MCA, shareholders entitled to notice of a meeting may waive or reduce the period of notice for that meeting, provided applicable securities laws requirements are met. The accidental omission to send notice of any meeting of shareholders to, or the non-receipt of any notice by, any person entitled to notice does not invalidate any proceedings at that meeting.
A quorum for meetings under our bylaws, as amended in connection with this offering will be two persons present and holding, or represented by proxy, 25% of the issued shares entitled to be voted at the meeting. If a quorum is not present at the opening of the meeting, the shareholders may adjourn the meeting to a fixed time and place but may not transact any further business.
Holders of our outstanding common shares are entitled to attend meetings of our shareholders. Except as otherwise provided with respect to any particular series of preferred shares, and except as otherwise required by law, the holders of our preferred shares are not entitled as a class to receive notice of, or to attend or vote at any meetings of our shareholders. Our directors, our secretary (if any), our auditor and any other persons invited by our chairman or directors or with the consent of those at the meeting are entitled to attend at any meeting of our shareholders but will not be counted in the quorum or be entitled to vote at the meeting unless he or she is a shareholder or proxyholder entitled to vote at the meeting.
Director Nominations
Pursuant to our bylaw relating to the advance notice of nominations of directors, shareholders seeking to nominate candidates for election as directors other than pursuant to a proposal or requisition of shareholders made in accordance with the provisions of the MCA, must provide timely written notice to our corporate secretary. To be timely, a shareholder’s notice must be received (i) in the case of an annual meeting of shareholders, not less than 30 days prior to the date of the annual meeting of shareholders; provided, however, that in the event that the annual meeting of shareholders is to be held on a date that is less than 50 days after the date on which the first public announcement of the date of the annual meeting was made, notice by the shareholder must be received not later than the close of business on the 10th day following the date of such public announcement; and (ii) in the case of a special meeting (which is not also an annual meeting) of shareholders called for any purpose which includes the election of directors to the board of directors, not later than the close of business on the 15th day following the day on which the first public announcement of the date of the special meeting was made. This bylaw also prescribes the proper written form for a shareholder’s notice.
Impediments to Change of Control
Our articles of incorporation do not contain any change of control limitations with respect to a merger, acquisition or corporate restructuring that involves us.
Compulsory Acquisition
The MCA provides that if, within 120 days after the date of a take-over bid made to shareholders of a corporation, the bid is accepted by the holders of not less than 90% of the shares (other than the shares held by the offeror or an affiliate of the offeror) of any class of shares to which the bid relates, the offeror is entitled to acquire (on the same terms on which the offeror acquired shares under the take-over bid) the shares held by those holders of shares of that class who did not accept the take-over bid. If a shareholder who did not accept the take-over bid (a dissenting offeree) does not receive an offeror’s notice, with respect to a compulsory acquisition (as described in the preceding sentence), that shareholder may require the offeror to acquire those shares on the same terms under which the offeror acquired (or will acquire) the shares owned by the shareholders who accepted the take-over bid.
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Ownership and Exchange Controls
Competition Act
Limitations on the ability to acquire and hold our common shares may be imposed by the Competition Act (Canada). This legislation establishes a pre-merger notification regime for certain types of merger transactions that exceed certain statutory shareholding and financial thresholds. Transactions that are subject to notification cannot be closed until the required materials are filed and the applicable statutory waiting period has expired or been waived by the Commissioner of Competition, or the Commissioner. Further, the Competition Act (Canada) permits the Commissioner to review any acquisition of control over or of a significant interest in us, whether or not it is subject to mandatory notification. This legislation grants the Commissioner jurisdiction, for up to one year, to challenge this type of acquisition before the Canadian Competition Tribunal if it would, or would be likely to, substantially prevent or lessen competition in any market in Canada.
Investment Canada Act
The Investment Canada Act requires notification and, in certain cases, advance review and approval by the Government of Canada of an investment to establish a new Canadian business by a non-Canadian or of the acquisition by a non-Canadian of “control” of a “Canadian business”, all as defined in the Investment Canada Act. Generally, the threshold for advance review and approval will be higher in monetary terms for a member of the World Trade Organization. The Investment Canada Act generally prohibits the implementation of such a reviewable transaction unless, after review, the relevant minister is satisfied that the investment is likely to be of net benefit to Canada.
The Investment Canada Act contains various rules to determine if there has been an acquisition of control. For example, for purposes of determining whether an investor has acquired control of a corporation by acquiring shares, the following general rules apply, subject to certain exceptions. The acquisition of a majority of the voting shares of a corporation is deemed to be acquisition of control of that corporation. The acquisition of less than a majority but one-third or more of the voting shares of a corporation is presumed to be an acquisition of control of that corporation unless it can be established that, on the acquisition, the corporation is not controlled in fact by the acquiror through the ownership of voting shares. The acquisition of less than one-third of the voting shares of a corporation is deemed not to be acquisition of control of that corporation.
In addition, under the Investment Canada Act, national security review on a discretionary basis may also be undertaken by the federal government in respect of a much broader range of investments by a non-Canadian to “acquire, in whole or in part, or to establish an entity carrying on all or any part of its operations in Canada, with the relevant test being whether such an investment by a non-Canadian could be “injurious to national security.” The Minister of Industry has broad discretion to determine whether an investor is a non-Canadian and therefore may be subject to national security review. Review on national security grounds is at the discretion of the federal government and may occur on a pre- or post-closing basis.
See “Material United States and Canadian Income Tax Considerations—U.S. Federal Income Taxation Considerations” for additional information regarding the material U.S. federal income tax consequences relating to the ownership and disposition of our common shares by U.S. Holders (as defined thereto).
Any of these provisions may discourage a potential acquirer from proposing or completing a transaction that may have otherwise presented a premium to our shareholders. We cannot predict whether investors will find our company and our common shares less attractive because we are governed by foreign laws.
Listing
In connection with this offering, we have filed an application to list our common shares under the symbol “LITM” on the Nasdaq Capital Market.
Transfer Agent and Registrar
Upon the closing of this offering, the transfer agent and registrar for our common shares in the United States will be Vstock Transfer, LLC. The address for VStock Transfer, LLC is 18 Lafayette Place, Woodmere, New York, 11598, and the telephone number is 212 828-8436.
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SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has not been a public market for shares of our common shares. Future sales of substantial amounts of common shares, including shares issued upon the conversion of convertible notes, the exercise of outstanding options and warrants, in the public market after this offering, or the possibility of these sales occurring, could cause the prevailing market price for our common shares to fall or impair our ability to raise equity capital in the future.
Immediately following the closing of this offering, we will have 15,867,319 common shares issued and outstanding, assuming an initial public offering price of US$7.00 per share (which is the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus). In the event the underwriters exercise the over-allotment option in full, we will have 16,295,890 common shares issued and outstanding, assuming an initial public offering price of US$7.00 per share (which is the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus). The common shares sold in this offering will be freely tradable without restriction or further registration or qualification under the Securities Act.
Previously issued common shares that were not offered and sold in this offering, as well as shares issuable upon the exercise of warrants and subject to employee stock options, are or will be upon issuance, “restricted securities,” as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if such public resale is registered under the Securities Act or if the resale qualifies for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which are summarized below.
Rule 144
In general, a person who has beneficially owned restricted common shares for at least twelve months, or at least six months in the event we have been a reporting company under the Exchange Act for at least ninety (90) days before the sale, would be entitled to sell such securities, provided that such person is not deemed to be an affiliate of ours at the time of sale or to have been an affiliate of ours at any time during the ninety (90) days preceding the sale. A person who is an affiliate of ours at such time would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of shares that does not exceed the greater of the following:
| ● | 1% of the number of common shares then outstanding; or |
| ● | 1% of the average weekly trading volume of our common shares during the four calendar weeks preceding the filing by such person of a notice on Form 144 with respect to the sale; |
provided that, in each case, we are subject to the periodic reporting requirements of the Exchange Act for at least 90 days before the sale. Rule 144 trades must also comply with the manner of sale, notice and other provisions of Rule 144, to the extent applicable.
Rule 701
In general, Rule 701 allows a shareholder who purchased shares pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of ours during the immediately preceding 90 days to sell those shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. All holders of Rule 701 shares, however, are required to wait until ninety (90) days after the date of this prospectus before selling shares pursuant to Rule 701.
Lock-Up Agreements
We, all of our directors and officers and all of our shareholders have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any of our common shares or securities convertible into or exercisable or exchangeable for our common shares for a period of (i) 180 days after the closing of this offering in the case of our company, (ii) 12 months after the date of this prospectus in the case of our directors and officers, and (iii) 180 days after the date of this prospectus in the case of our shareholders. See “Underwriting—Lock-Up Agreements.”
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MATERIAL UNITED STATES AND CANADIAN INCOME TAX CONSIDERATIONS
Canadian Income Tax Considerations
The following summary describes, as of the date hereof, the material Canadian federal income tax considerations generally applicable to a purchaser who acquires, as a beneficial owner, common shares pursuant to this prospectus and who, at all relevant times, for the purposes of the application of the Income Tax Act (Canada) and the Income Tax Regulations (which we collectively refer to as the Canadian Tax Act), (i) is not, and is not deemed to be, resident in Canada for purposes of the Canadian Tax Act and any applicable income tax treaty or convention; (ii) deals at arm’s length with us; (iii) is not affiliated with us; (iv) does not use or hold, and is not deemed to use or hold, common shares in a business or part of a business carried on in Canada; (v) has not entered into, with respect to the common shares, a “derivative forward agreement”, as that term is defined in the Canadian Tax Act and (vi) holds the common shares as capital property (which we refer to as a Non-Canadian Holder). This summary does not apply to a Non-Canadian Holder that is an insurer carrying on an insurance business in Canada and elsewhere or an “authorized foreign bank”, as that term is defined in the Canadian Tax Act. Such Non-Canadian Holders should consult their tax advisors for advice having regards to their particular circumstances.
This summary is based on the current provisions of the Canadian Tax Act, and an understanding of the current administrative policies of the Canada Revenue Agency published in writing prior to the date hereof. It takes into account all specific proposals to amend the Canadian Tax Act and the Canada-United States Tax Convention (1980), as amended, or the Canada-U.S. Tax Treaty, publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (which we refer to as the Proposed Amendments) and assumes that all Proposed Amendments will be enacted in the form proposed. However, no assurances can be given that the Proposed Amendments will be enacted as proposed, or at all. This summary does not otherwise take into account or anticipate any changes in law or administrative policy or assessing practice whether by legislative, regulatory, administrative or judicial action nor does it take into account tax legislation or considerations of any province, territory or foreign jurisdiction, which may differ from those discussed herein.
This summary is of a general nature only and is not, and is not intended to be, legal or tax advice to any particular shareholder, and no representations with respect to the income tax consequences to any particular shareholder are made. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, you should consult your own tax advisor with respect to your particular circumstances.
Generally, for purposes of the Canadian Tax Act, all amounts relating to the acquisition, holding or disposition of the common shares must be converted into Canadian dollars based on the exchange rates as determined in accordance with the Canadian Tax Act. The amount of any dividends, capital gains or capital losses realized by a Non-Canadian Holder may be affected by fluctuations in the Canadian exchange rate.
Dividends
Dividends paid or credited on the common shares or deemed to be paid or credited on the common shares to a Non-Canadian Holder will be subject to Canadian withholding tax at the rate of 25%, subject to any reduction in the rate of withholding to which the Non-Canadian Holder is entitled under any applicable income tax treaty or convention between Canada and the country in which the Non-Canadian Holder is resident. For example, under the Canada-U.S. Tax Treaty, where dividends on the common shares are considered to be paid to or derived by a Non-Canadian Holder that is a beneficial owner of the dividends and is a U.S. resident for the purposes of, and is entitled to benefits of, the Canada-U.S. Tax Treaty, the applicable rate of Canadian withholding tax is generally reduced to 15% (or 5% in the case of a U.S. Holder that is a corporation beneficially owning at least 10% of all of the issued voting shares). We will be required to withhold the applicable withholding tax from any dividend and remit it to the Canadian government for the Non-Canadian Holder’s account. Non-Canadian Holders are urged to consult their own tax advisors to determine their entitlement to relief under an applicable income tax treaty.
Dispositions
A Non-Canadian Holder will not be subject to tax under the Canadian Tax Act on any capital gain realized on a disposition or deemed disposition of a common share, nor will capital losses arising therefrom be recognized under the Canadian Tax Act, unless (i) the common shares are “taxable Canadian property” to the Non-Canadian Holder for purposes of the Canadian Tax Act at the time of disposition; and (ii) the Non-Canadian Holder is not entitled to relief under an applicable income tax treaty or convention between Canada and the country in which the Non-Canadian Holder is resident.
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Generally, the common shares will not constitute “taxable Canadian property” to a Non-Canadian Holder at a particular time provided that the common shares are listed at that time on a “designated stock exchange” (as defined in the Canadian Tax Act), which includes Nasdaq unless at any particular time during the 60-month period that ends at that time:
| ● | at least 25% of the issued shares of any class or series of our capital stock was owned by or belonged to any combination of (a) the Non-Canadian Holder, (b) persons with whom the Non-Canadian Holder does not deal at arm’s length, and (c) partnerships in which the Non-Canadian Holder or a person described in (b) holds a membership interest directly or indirectly through one or more partnerships, and |
| ● | more than 50% of the fair market value of the common shares was derived, directly or indirectly, from one or any combination of : (i) real or immoveable property situated in Canada, (ii) “Canadian resource properties” (as that term is defined in the Canadian Tax Act), (iii) “timber resource properties” (as that term is defined in the Canadian Tax Act) and (iv) options in respect of, or interests in, or for civil law rights in, property in any of the foregoing whether or not the property exists. |
Notwithstanding the foregoing, in certain circumstances, common shares could be deemed to be “taxable Canadian property.”
A Non-Canadian Holder’s capital gain (or capital loss) of a disposition or deemed disposition of common shares that constitute or are deemed to constitute taxable Canadian property (and are not “treaty-protected property” as defined in the Canadian Tax Act) generally will be computed and taxed as though the Canadian Holder were a Resident Holder. Such Non-Canadian Holder may be required to report the disposition or deemed disposition of common shares by filing a tax return in accordance with the Canadian Tax Act. Non-Canadian Holders whose common shares may be taxable Canadian property should consult their own tax advisors regarding the tax and compliance considerations that may be relevant to them.
U.S. Federal Income Taxation Considerations
The following discussion describes the material U.S. federal income tax consequences relating to the ownership and disposition of common shares by U.S. Holders (as defined below). This discussion applies to U.S. Holders that purchase our common shares pursuant to this prospectus and hold such common shares as capital assets. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion does not address all of the U.S. federal income tax consequences that may be relevant to specific U.S. Holders in light of their particular circumstances or to U.S. Holders subject to special treatment under U.S. federal income tax law (such as certain financial institutions, insurance companies, currency or securities dealers and traders in securities or other persons that generally mark their securities to market for U.S. federal income tax purposes, tax-exempt entities, retirement plans, regulated investment companies, real estate investment trusts, certain former citizens or residents of the United States, persons who hold our common shares as part of a “straddle”, “hedge”, “conversion transaction”, “synthetic security” or integrated investment, persons that have a “functional currency” other than the U.S. dollar, persons that own directly, indirectly or through attribution 10% or more of the voting power of our shares, corporations that accumulate earnings to avoid U.S. federal income tax, persons subject to special tax accounting rules under Section 451(b) of the Code, partnerships and other pass-through entities, and investors in such pass-through entities. This discussion does not address any U.S. state or local or non-U.S. tax consequences or any U.S. federal estate, gift or alternative minimum tax consequences.
As used in this discussion, the term “U.S. Holder” means a beneficial owner of our common shares that is, for U.S. federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source or (iv) a trust (x) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of its substantial decisions or (y) that has elected under applicable U.S. Treasury regulations to be treated as a domestic trust for U.S. federal income tax purposes.
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If an entity treated as a partnership for U.S. federal income tax purposes holds our common shares, the U.S. federal income tax consequences relating to an investment in our common shares will depend in part upon the status and activities of such entity and the particular partner. Any such entity should consult its own tax advisor regarding the U.S. federal income tax consequences applicable to it and its partners of the purchase, ownership and disposition of our common shares. Persons considering an investment in our common shares should consult their own tax advisors as to the particular tax consequences applicable to them relating to the purchase, ownership and disposition of our common shares, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.
Passive Foreign Investment Company Consequences
In general, a corporation organized outside the United States will be treated as a passive foreign investment company, or PFIC, for any taxable year in which either (1) at least 75% of its gross income is “passive income” or (2) on average at least 50% of its assets, determined on a quarterly basis, are assets that produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, dividends, interest, royalties, rents, and gains from the sale or exchange of property that gives rise to passive income. Assets that produce or are held for the production of passive income generally include cash, even if held as working capital or raised in a public offering, marketable securities, and other assets that may produce passive income. Generally, in determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.
Although we do not believe that we were a PFIC for the year ending June 30, 2021, our determination is based on an interpretation of complex provisions of the law, which are not addressed in a significant number of administrative pronouncements or rulings by the Internal Revenue Service, or IRS. Accordingly, there can be no assurance that our conclusions regarding our status as a PFIC for the 2021 taxable year will not be challenged by the IRS and, if challenged, upheld in appropriate proceedings. In addition, because PFIC status is determined on an annual basis and generally cannot be determined until the end of the taxable year, there can be no assurance that we will not be a PFIC for the current taxable year. Because we may continue to hold a substantial amount of cash and cash equivalents, and because the calculation of the value of our assets may be based in part on the value of our common shares, which may fluctuate considerably, we may be a PFIC in future taxable years. Even if we determine that we are not a PFIC for a taxable year, there can be no assurance that the IRS will agree with our conclusion and that the IRS would not successfully challenge our position. Our status as a PFIC is a fact-intensive determination made on an annual basis.
If we are a PFIC in any taxable year during which a U.S. Holder owns our common shares, the U.S. Holder could be liable for additional taxes and interest charges under the “PFIC excess distribution regime” upon (1) a distribution paid during a taxable year that is greater than 125% of the average annual distributions paid in the three preceding taxable years, or, if shorter, the U.S. Holder’s holding period for our common shares, and (2) any gain recognized on a sale, exchange or other disposition, including a pledge, of our common shares, whether or not we continue to be a PFIC. Under the PFIC excess distribution regime, the tax on such distribution or gain would be determined by allocating the distribution or gain ratably over the U.S. Holder’s holding period for our common shares. The amount allocated to the current taxable year (i.e., the year in which the distribution occurs or the gain is recognized) and any year prior to the first taxable year in which we are a PFIC will be taxed as ordinary income earned in the current taxable year. The amount allocated to other taxable years will be taxed at the highest marginal rates in effect for individuals or corporations, as applicable, to ordinary income for each such taxable year, and an interest charge, generally applicable to underpayments of tax, will be added to the tax.
If we are a PFIC for any year during which a U.S. Holder holds our common shares, we must generally continue to be treated as a PFIC by that holder for all succeeding years during which the U.S. Holder holds our common shares, unless we cease to meet the requirements for PFIC status and the U.S. Holder makes a “deemed sale” election with respect to our common shares. If the election is made, the U.S. Holder will be deemed to sell our common shares it holds at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain recognized from such deemed sale would be taxed under the PFIC excess distribution regime. After the deemed sale election, the U.S. Holder’s common shares would not be treated as shares of a PFIC unless we subsequently become a PFIC.
If we are a PFIC for any taxable year during which a U.S. Holder holds our common shares and one of our non-U.S. corporate subsidiaries is also a PFIC (i.e., a lower-tier PFIC), such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC and would be taxed under the PFIC excess distribution regime on distributions by the lower-tier PFIC and on gain from the disposition of shares of the lower-tier PFIC even though such U.S. Holder would not receive the proceeds of those distributions or dispositions. Each U.S. Holder is advised to consult its tax advisors regarding the application of the PFIC rules to our non-U.S. subsidiaries.
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If we are a PFIC, a U.S. Holder will not be subject to tax under the PFIC excess distribution regime on distributions or gain recognized on our common shares if such U.S. Holder makes a valid “mark-to-market” election for our common shares. A mark-to-market election is available to a U.S. Holder only for “marketable stock”.
Our common shares will be marketable stock so long as they remain listed on Nasdaq and are regularly traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. If a mark-to-market election is in effect, a U.S. Holder generally would take into account, as ordinary income each year, the excess of the fair market value of our common shares held at the end of such taxable year over the adjusted tax basis of such common shares. The U.S. Holder would also take into account, as an ordinary loss each year, the excess of the adjusted tax basis of such our common shares over their fair market value at the end of the taxable year, but only to the extent of the excess of amounts previously included in income over ordinary losses deducted as a result of the mark-to-market election. The U.S. Holder’s tax basis in our common shares would be adjusted to reflect any income or loss recognized as a result of the mark-to-market election. Any gain from a sale, exchange or other disposition of our common shares in any taxable year in which we are a PFIC would be treated as ordinary income and any loss from such sale, exchange or other disposition would be treated first as ordinary loss (to the extent of any net mark-to-market gains previously included in income) and thereafter as capital loss.
A mark-to-market election will not apply to our common shares for any taxable year during which we are not a PFIC, but will remain in effect with respect to any subsequent taxable year in which we become a PFIC. Such election will not apply to any non-U.S. subsidiaries that we may organize or acquire in the future. Accordingly, a U.S. Holder may continue to be subject to tax under the PFIC excess distribution regime with respect to any lower-tier PFICs that we may organize or acquire in the future notwithstanding the U.S. Holder’s mark-to-market election for our common shares.
The tax consequences that would apply if we are a PFIC would also be different from those described above if a U.S. Holder were able to make a valid qualified electing fund, or QEF, election. At this time, we do not expect to provide U.S. Holders with the information necessary for a U.S. Holder to make a QEF election. Consequently, prospective investors should assume that a QEF election will not be available.
Each U.S. person that is an investor of a PFIC is generally required to file an annual information return on IRS Form 8621 containing such information as the U.S. Treasury Department may require. The failure to file IRS Form 8621 could result in the imposition of penalties and the extension of the statute of limitations with respect to U.S. federal income tax.
The U.S. federal income tax rules relating to PFICs are very complex. Prospective U.S. investors are strongly urged to consult their own tax advisors with respect to the impact of PFIC status on the purchase, ownership and disposition of our common shares, the consequences to them of an investment in a PFIC, any elections available with respect to our common shares and the IRS information reporting obligations with respect to the purchase, ownership and disposition of the common shares of a PFIC.
Distributions
Subject to the discussion above under “—Passive Foreign Investment Company Consequences”, a U.S. Holder that receives a distribution with respect to our common shares generally will be required to include the gross amount of such distribution in gross income as a dividend when actually or constructively received to the extent of the U.S. Holder’s pro rata share of our current and/or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent a distribution received by a U.S. Holder is not a dividend because it exceeds the U.S. Holder’s pro rata share of our current and accumulated earnings and profits, it will be treated first as a tax-free return of capital and reduce (but not below zero) the adjusted tax basis of the U.S. Holder’s common shares. To the extent the distribution exceeds the adjusted tax basis of the U.S. Holder’s common shares, the remainder will be taxed as capital gain. Because we may not account for our earnings and profits in accordance with U.S. federal income tax principles, U.S. Holders should expect all distributions to be reported to them as dividends. Distributions on our common shares that are treated as dividends generally will constitute income from sources outside the United States for foreign tax credit purposes and generally will constitute passive category income. Such dividends will not be eligible for the “dividends received” deduction generally allowed to corporate shareholders with respect to dividends received from U.S. corporations.
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A U.S. Holder receiving a distribution from which the 25% Canadian withholding tax (as described above in “Canadian Income Tax Considerations – Dividends”) has been deducted may be entitled to a foreign tax credit in determining the U.S. Holder’s federal income tax liability for the year in which the distribution is received. The availability of a full or partial foreign tax credit in respect of such Canadian withholding tax is determined under rules of considerable complexity, and the foreign tax credit may not be available in all cases. Prospective U.S. investors are strongly urged to consult their own tax advisors with respect to the availability of the foreign tax credit with respect to distributions received from which Canadian tax has been withheld at source.
Dividends paid by a “qualified foreign corporation” are eligible for taxation for certain non-corporate U.S. Holders at a reduced capital gains rate rather than the marginal tax rates generally applicable to ordinary income provided that certain requirements are met. However, if we are a PFIC for the taxable year in which the dividend is paid or the preceding taxable year (see discussion above under “—Passive Foreign Investment Company Consequences”), we will not be treated as a qualified foreign corporation, and therefore the reduced capital gains tax rate described above will not apply. Each U.S. Holder is advised to consult its tax advisors regarding the availability of the reduced tax rate on dividends with regard to its particular circumstances.
A non-United States corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information provision, or (b) with respect to any dividend it pays on our common shares that are readily tradable on an established securities market in the United States. We believe that we qualify as a resident of Canada for purposes of, and are eligible for the benefits of, the U.S.-Canada Treaty, although there can be no assurance in this regard. Further, the IRS has determined that the U.S.-Canada Treaty is satisfactory for purposes of the qualified dividend rules and that it includes an exchange of information provision. Therefore, subject to the discussion above under “—Passive Foreign Investment Company Consequences”, if the U.S.-Canada Treaty is applicable, such dividends will generally be “qualified dividend income” in the hands of individual U.S. Holders, provided that certain conditions are met, including holding period and the absence of certain risk reduction transactions.
Sale, Exchange or Other Disposition of our Common Shares
Subject to the discussion above under “—Passive Foreign Investment Company Consequences”, a U.S. Holder generally will recognize capital gain or loss for U.S. federal income tax purposes upon the sale, exchange or other disposition of our common shares in an amount equal to the difference, if any, between the amount realized (i.e., the amount of cash plus the fair market value of any property received) on the sale, exchange or other disposition and such U.S. Holder’s adjusted tax basis in our common shares. Such capital gain or loss generally will be long-term capital gain taxable at a reduced rate for noncorporate U.S. Holders or long-term capital loss if, on the date of sale, exchange or other disposition, our common shares were held by the U.S. Holder for more than one year. Any capital gain of a non-corporate U.S. Holder that is not long-term capital gain is taxed at ordinary income rates. The deductibility of capital losses is subject to limitations. Any gain or loss recognized from the sale or other disposition of our common shares will generally be gain or loss from sources within the United States for U.S. foreign tax credit purposes.
Medicare Tax
Certain U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally are subject to a 3.8% tax on all or a portion of their net investment income, which may include their gross dividend income and net gains from the disposition of our common shares. If you are a United States person that is an individual, estate or trust, you are encouraged to consult your tax advisors regarding the applicability of this Medicare tax to your income and gains in respect of your investment in our common shares.
Information Reporting
U.S. Holders may be required to file certain U.S. information reporting returns with the IRS with respect to an investment in our common shares, including, among others, IRS Form 8938 (Statement of Specified Foreign Financial Assets). As described above under “Passive Foreign Investment Company Consequences”, each U.S. Holder who is a shareholder of a PFIC must file an annual report containing certain information. U.S. Holders paying more than US$100,000 for our common shares may be required to file IRS Form 926 (Return by a U.S. Transferor of Property to a Foreign Corporation) reporting this payment. Substantial penalties may be imposed upon a U.S. Holder that fails to comply with the required information reporting.
U.S. Holders should consult their own tax advisors regarding the information reporting rules.
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN COMMON SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.
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ENFORCEABILITY OF CIVIL LIABILITIES
We were incorporated under the laws of the Province of Manitoba, Canada. All of our directors and officers, as well as the certain experts named in the “Experts” section of this prospectus, reside outside of the United States. Service of process upon such persons may be difficult or impossible to effect within the United States. Furthermore, because a substantial portion of our assets, and substantially all the assets of our directors and officers and the Canadian experts named herein, are located outside of the United States, any judgment obtained in the United States, including a judgment based upon the civil liability provisions of United States federal securities laws, against us or any of such persons may not be collectible within the United States. In addition, it may be difficult for an investor, or any other person or entity, to assert United States securities laws claims in original actions instituted in Canada. The Supreme Court of Canada has repeatedly affirmed that the requirements to enforce a foreign judgment are as follows:
| ● | the judgment of the foreign court must be final and conclusive; |
| ● | the court granting the foreign judgment must have had jurisdiction over the parties and the cause of action; |
| ● | the action to enforce a foreign judgment must have been commenced within applicable limitation periods; |
| ● | the judgment is not contrary to the law, public policy, security or sovereignty of Canada and its enforcement is not incompatible with Canadian concepts of justice or contrary to the laws governing enforcement of judgments; and |
| ● | the judgment was not obtained by fraud and does not conflict with any other valid judgment in the same matter between the same parties; |
Foreign judgments enforced by Canadian courts generally will be payable in Canadian dollars. A Canadian court hearing an action to recover an amount in a non-Canadian currency will render judgment for the equivalent amount in Canadian currency.
Our agent for service of process in the United States is Cogency Global Inc., located at 122 East 42th Street, 18th Floor, New York, N.Y. 10168.
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ThinkEquity LLC is the representative for the several underwriters of this offering, or the representative. We have entered into an underwriting agreement dated , 2021, with the underwriters named below. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has agreed, severally and not jointly, to purchase, at the public offering price less the underwriting discounts set forth on the cover page of this prospectus, the number of common shares at the initial public offering price, less the underwriting discounts and commissions, as set forth on the cover page of this prospectus, the number of shares listed next to its name in the following table:
| Underwriter | Number of Shares | |||
| ThinkEquity LLC | ||||
| Total | ||||
The underwriters are committed to purchase all common shares offered by us other than those covered by the over-allotment option described below, if any are purchased. The obligations of the underwriters may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, the underwriting agreement provides that the obligations of the underwriters to pay for and accept delivery of the common shares offered by us in this prospectus are subject to various representations and warranties and other customary conditions specified in the underwriting agreement, such as receipt by the representative of officers’ certificates and legal opinions.
We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect thereof.
The underwriters are offering the common shares subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by its counsel and other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
We have granted the underwriters an over-allotment option. This option, which is exercisable for up to 45 days after the date of this prospectus, permits the underwriters to purchase up to an aggregate of 428,571 additional common shares (equal to 15% of the common shares sold in this offering) at the public offering price per share, less underwriting discounts and commissions, solely to cover over-allotments, if any. If the underwriters exercise this option in whole or in part, then the underwriters will be committed, subject to the conditions described in the underwriting agreement, to purchase the additional common shares in proportion to their respective commitments set forth in the prior table.
Discounts, Commissions and Reimbursement
The representative has advised us that the underwriters propose to offer the shares to the public at the initial public offering price per share set forth on the cover page of this prospectus. The underwriters may offer shares to securities dealers at that price less a concession of not more than $ per share of which up to $ per share may be reallowed to other dealers. After the initial offering to the public, the public offering price and other selling terms may be changed by the representative.
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The following table summarizes the underwriting discounts and commissions, non-accountable underwriters’ expense allowance and proceeds, before expenses, to us assuming both no exercise and full exercise by the underwriters of their over-allotment option:
| Total | ||||||||||||
| Per Share | Offering without Over-Allotment Option | Offering with Over-Allotment Option | ||||||||||
| Public offering price | US$ | US$ | US$ | |||||||||
| Underwriting discounts and commissions (7.5%) | ||||||||||||
| Non-accountable expense allowance (1%) | ||||||||||||
| Proceeds, before expenses, to us | US$ | US$ | US$ | |||||||||
We have agreed to reimburse the representative for its out-of-pocket accountable expenses relating to this offering up to $50,000. We have agreed to pay an expense deposit of $50,000 to the representative of the underwriters upon execution of an engagement letter relating to this offering (the “Advance”), which will be applied against the actual out-of-pocket accountable expenses that will be incurred by the underwriters in connection with this offering, and will be reimbursed to us to the extent not incurred, of which $50,000 has been paid as of the date hereof.
We estimate that the total expenses of this offering payable by us, not including underwriting discounts, commissions and expenses, will be approximately $189,960.
Representative’s Warrants
Upon the closing of this offering, we have agreed to issue to the representative warrants to purchase a number of common shares equal in the aggregate to 5% of the total shares sold in this public offering (the “Representative’s Warrants”). The Representative’s Warrants will be exercisable at a per share exercise price equal to 125% of the public offering price per share sold in this offering. The Representative’s Warrants are exercisable at any time and from time to time, in whole or in part, during the four-and-½-year period commencing six months after the effective date of the registration statement related to this offering. The Representative’s Warrants also provide for one demand registration right of the shares underlying the Representative’s Warrants, and unlimited “piggyback” registration rights with respect to the registration of the shares of common stock underlying the Representative’s Warrants and customary antidilution provisions. The demand registration right provided will not be greater than five years from the effective date of the registration statement related to this offering in compliance with FINRA Rule 5110(g)(8)(C). The piggyback registration right provided will not be greater than seven years from the effective date of the registration statement related to this offering in compliance with FINRA Rule 5110(g)(8)(D).
The Representative’s Warrants and the shares of common stock underlying the Representative’s Warrants have been deemed compensation by the Financial Industry Regulatory Authority, or FINRA, and are therefore subject to a 180-day lock-up pursuant to Rule 5110(e)(1) of FINRA. The representative, or permitted assignees under such rule, may not sell, transfer, assign, pledge, or hypothecate the Representative’s Warrants or the securities underlying the Representative’s Warrants, nor will the representative engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the Representative’s Warrants or the underlying shares for a period of 180 days from the effective date of the registration statement. Additionally, the Representative’s Warrants may not be sold transferred, assigned, pledged or hypothecated for a 180-day period following the effective date of the registration statement except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners. The Representative’s Warrants will provide for adjustment in the number and price of the Representative’s Warrants and the shares of common stock underlying such Representative’s Warrants in the event of recapitalization, merger, stock split or other structural transaction, or a future financing undertaken by us.
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Right of First Refusal
Until twelve (12) months from the closing of this offering, the representative shall have an irrevocable right of first refusal to act as sole investment banker, sole book-runner, sole financial advisor, sole underwriter and/or sole placement agent, at the representative’s sole discretion, for each and every future public and private equity offerings for our company, or any successor to or any subsidiary of our company, including all equity linked financings, on terms customary to the representative. The representative shall have the sole right to determine whether or not any other broker-dealer shall have the right to participate in any such offering and the economic terms of any such participation. The representative will not have more than one opportunity to waive or terminate the right of first refusal in consideration of any such transaction.
Discretionary Accounts
The underwriters do not intend to confirm sales of the securities offered hereby to any accounts over which they have discretionary authority.
Lock-Up Agreements
We agreed that for a period of 180 days after the closing of this offering we will not, without the prior written consent of the representative and subject to certain exceptions, directly or indirectly:
| ● | offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any common shares or any securities convertible into or exercisable or exchangeable for common shares; |
| ● | file or caused to be filed any registration statement with SEC relating to the offering of any common shares or any securities convertible into or exercisable or exchangeable for common shares; |
| ● | complete any offering of our debt securities, other than entering into a line of credit with a traditional bank; or |
| ● | enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of our common shares, whether any such transaction is to be settled by delivery of common shares or such other securities, in cash or otherwise. |
In addition, each of our directors, officers and shareholders, including our majority shareholder, Nova Minerals, have agreed that for a period of (i) 12 months after the date of this prospectus in the case of our directors and officers and (ii) 180 days after the date of this prospectus in the case of our shareholders, without the prior written consent of the representative and subject to certain exceptions, they will not directly or indirectly:
| ● | offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of, directly or indirectly, any of our common shares or any securities convertible into or exercisable or exchangeable for common shares; |
| ● | enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of our common shares or any securities convertible into or exercisable or exchangeable for common shares, whether any such transaction is to be settled by delivery of common shares or such other securities, in cash or otherwise; |
| ● | make any demand for or exercise any right with respect to the registration of any common shares or any securities convertible into or exercisable or exchangeable for common shares; or |
| ● | publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement relating to any common shares or any securities convertible into or exercisable or exchangeable for common shares. |
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Electronic Offer, Sale and Distribution of Securities
A prospectus in electronic format may be made available on the websites maintained by the underwriters or selling group members. The underwriters may agree to allocate a number of securities to selling group members for sale to its online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on these websites is not part of, nor incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us, and should not be relied upon by investors.
Stabilization
In connection with this offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate-covering transactions, penalty bids and purchases to cover positions created by short sales.
Stabilizing transactions permit bids to purchase shares so long as the stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventing or retarding a decline in the market price of the shares while this offering is in progress.
Over-allotment transactions involve sales by the underwriters of common shares in excess of the number of common shares the underwriters are obligated to purchase. This creates a syndicate short position which may be either a covered short position or a naked short position. In a covered short position, the number of common shares over-allotted by the underwriters are not greater than the number of common shares that they may purchase in the over-allotment option. In a naked short position, the number of common shares involved is greater than the number of common shares in the over-allotment option. The underwriters may close out any short position by exercising their over-allotment option and/or purchasing common shares in the open market.
Syndicate covering transactions involve purchases of common shares in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of common shares to close out the short position, the underwriters will consider, among other things, the price of common shares available for purchase in the open market as compared with the price at which it may purchase common shares through exercise of the over-allotment option. If the underwriters sell more common shares than could be covered by exercise of the over-allotment option and, therefore, have a naked short position, the position can be closed out only by buying common shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the common shares in the open market that could adversely affect investors who purchase in this offering.
Penalty bids permit an underwriter to reclaim a selling concession from a syndicate member when the common shares originally sold by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common shares or preventing or retarding a decline in the market price of our common shares. As a result, the price of our common shares in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our common shares. These transactions may be effected in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.
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Passive Market Making
In connection with this offering, underwriters and selling group members may engage in passive market making transactions in our common shares on Nasdaq in accordance with Rule 103 of Regulation M under the Exchange Act, during a period before the commencement of offers or sales of the securities and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, then that bid must then be lowered when specified purchase limits are exceeded.
Other Relationships
The underwriters and their affiliates may in the future provide various investment banking, commercial banking and other financial services for us and our affiliates for which they may in the future receive customary fees.
Offer Restrictions Outside The United States
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to this offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Australia
This prospectus is not a disclosure document under Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian Securities and Investments Commission and does not purport to include the information required of a disclosure document under Chapter 6D of the Australian Corporations Act. Accordingly, (i) the offer of the securities under this prospectus is only made to persons to whom it is lawful to offer the securities without disclosure under Chapter 6D of the Australian Corporations Act under one or more exemptions set out in section 708 of the Australian Corporations Act, (ii) this prospectus is made available in Australia only to those persons as set forth in clause (i) above, and (iii) the offeree must be sent a notice stating in substance that by accepting this offer, the offeree represents that the offeree is such a person as set forth in clause (i) above, and, unless permitted under the Australian Corporations Act, agrees not to sell or offer for sale within Australia any of the securities sold to the offeree within 12 months after its transfer to the offeree under this prospectus.
China
The information in this document does not constitute a public offer of the securities, whether by way of sale or subscription, in the People’s Republic of China (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan). The securities may not be offered or sold directly or indirectly in the PRC to legal or natural persons other than directly to “qualified domestic institutional investors.”
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European Economic Area — Belgium, Germany, Luxembourg and Netherlands
The information in this document has been prepared on the basis that no offers of securities will be in member states (“Member State”) of the European Economic Area (the “EEA”)other than:
| ● | to legal entities that are qualified investors as defined in the Prospectus Regulation; |
| ● | to fewer than 150 natural or legal persons (other than qualified investors within the meaning of the Prospectus Regulation) subject to obtaining the prior consent of our company or any underwriter for any such offer; or |
| ● | in any other circumstances falling within Article 1(4) of the Prospectus Regulation, provided that no such offer of securities shall result in a requirement for the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive. |
This prospectus has been prepared on the basis that any offer of common shares in any Member State of the EEA will be made pursuant to an exemption under the Prospectus Regulation from the requirement to publish a prospectus for offers of shares. Accordingly any person making or intending to make an offer in that Member State of shares of our common stock which are the subject of the offering contemplated in this prospectus supplement may only do so in circumstances in which no obligation arises for the Company or any of the Representatives to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation, in each case, in relation to such offer. Neither the Company nor the Representatives have authorized, nor do they authorize, the making of any offer of shares of our common stock in circumstances in which an obligation arises for the Company or the Representatives to publish a prospectus for such offer.
For the purposes of this provision, the expression an “offer of shares of our common stock to the public” in relation to any common shares in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the common shares to be offered so as to enable an investor to decide to purchase or subscribe the common shares, as the same may be varied in that Member State by any measure implementing the Prospectus Regulation in that Member State, the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
The above selling restriction is in addition to any other selling restrictions set out below.
Notice to Prospective Investors in the United Kingdom
In relation to the United Kingdom, no offer of common shares which are the subject of the offering has been, or will be made to the public in the United Kingdom, other than:
| (a) | to any legal entity which is a qualified investor as defined in Article 2 of the UK Prospectus Regulation (as defined below); |
| (b) | to fewer than 150 natural or legal persons (other than qualified investors as defined in Article 2 of the UK Prospectus Regulation) in the United Kingdom subject to obtaining the prior consent of Representatives for any such offer; or |
| (c) | in any other circumstances falling within section 86 of the FSMA, |
provided that no such offer of common shares shall require us or any underwriter to publish a prospectus pursuant to section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the UK Prospectus Regulation.
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In the United Kingdom, this prospectus is not a prospectus for the purposes of the UK Prospectus Regulation (as defined below). This prospectus has been prepared on the basis that any offer of shares of common stock in the United Kingdom will be made pursuant to an exemption under the UK Prospectus Regulation from the requirement to publish a prospectus for offers of shares of common stock. Accordingly any person making or intending to make an offer in the United Kingdom of shares of common stock which are the subject of the offering contemplated in this prospectus supplement may only do so in circumstances in which no obligation arises for the us or any of the underwriters to publish a prospectus pursuant to Article 3 of the UK Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the UK Prospectus Regulation, in each case, in relation to such offer. Neither us nor the underwriters have authorized, nor do they authorize, the making of any offer of shares of common stock in circumstances in which an obligation arises for us or the underwriters to publish or supplement a prospectus for such offer.
For the purposes of this provision, the expression an “offer of shares of our common stock to the public” in relation to any shares of our common stock in the United Kingdom means the communication in any form and by any means of sufficient information on the terms of the offer and the common shares to be offered so as to enable an investor to decide to purchase or subscribe the common shares, as the same may be varied in United Kingdom by any measure implementing the UK Prospectus Regulation, the expression “UK Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.
The communication of prospectus and any other document or materials relating to the issue of the common shares offered hereby is not being made, and such documents and/or materials have not been approved, by an authorized person for the purposes of section 21 of the United Kingdom’s Financial Services and Markets Act 2000, as amended (the “FSMA”). Accordingly, such documents and/or materials are not being distributed to, and must not be passed on to, the general public in the United Kingdom. The communication of such documents and/or materials as a financial promotion is only being made to those persons in the United Kingdom (i) who have professional experience in matters relating to investments falling within Article 19 (5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”) and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). This document must not be acted on or relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any investment or investment activity to which this document relates is only available to, and will be engaged in with, relevant persons.
Any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) in connection with the issue or sale of the shares of common stock may only be communicated or caused to be communicated in circumstances in which Section 21(1) of the FSMA does not apply to us.
All applicable provisions of the FSMA must be complied with in respect to anything done by any person in relation to the shares of common stock in, from or otherwise involving the United Kingdom.
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France
This document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code monétaire et financier) and Articles 211-1 et seq. of the General Regulation of the French Autorité des marchés financiers, or AMF. The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France.
This document and any other offering material relating to the securities have not been, and will not be, submitted to the AMF for approval in France and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in France.
Such offers, sales and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-1 to D.411-3, D. 744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation and/or (ii) a restricted number of non-qualified investors (cercle restreint d’investisseurs) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-4, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation.
Pursuant to Article 211-3 of the General Regulation of the AMF, investors in France are informed that the securities cannot be distributed (directly or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Monetary and Financial Code.
Ireland
The information in this document does not constitute a prospectus under any Irish laws or regulations and this document has not been filed with or approved by any Irish regulatory authority as the information has not been prepared in the context of a public offering of securities in Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005, or the Prospectus Regulations. The securities have not been offered or sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of a public offering, except to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations and (ii) fewer than 100 natural or legal persons who are not qualified investors.
Israel
The securities offered by this prospectus have not been approved or disapproved by the Israeli Securities Authority, or the ISA, nor have such securities been registered for sale in Israel. The shares may not be offered or sold, directly or indirectly, to the public in Israel, absent the publication of a prospectus. The ISA has not issued permits, approvals or licenses in connection with this offering or publishing the prospectus; nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the securities being offered. Any resale in Israel, directly or indirectly, to the public of the securities offered by this prospectus is subject to restrictions on transferability and must be effected only in compliance with the Israeli securities laws and regulations.
Italy
The offering of the securities in the Republic of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione Nazionale per le Società e la Borsa), or CONSOB, pursuant to the Italian securities legislation and, accordingly, no offering material relating to the securities may be distributed in Italy and such securities may not be offered or sold in Italy, other than:
| ● | to Italian qualified investors, or Qualified Investors, as defined in Article 100 of Decree no.58 by reference to Article 34-ter of CONSOB Regulation no. 11971 of 14 May 1999, or Regulation no. 1197l, as amended; and |
| ● | in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971 as amended. |
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Any offer, sale or delivery of the securities or distribution of any offer document relating to the securities in Italy (excluding placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:
| ● | made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended), Decree No.58, CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable laws; and |
| ● | in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws. |
Any subsequent distribution of the securities in Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and the Regulation No. 11971 as amended, unless an exception from those rules applies. Failure to comply with such rules may result in the sale of such securities being declared null and void and in the liability of the entity transferring the securities for any damages suffered by the investors.
Japan
The securities have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended, or the FIEL, pursuant to an exemption from the registration requirements applicable to a private placement of securities to Qualified Institutional Investors (as defined in and in accordance with Article2, paragraph 3 of the FIEL and the regulations promulgated thereunder). Accordingly, the securities may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan other than Qualified Institutional Investors. Any Qualified Institutional Investor who acquires securities may not resell them to any person in Japan that is not a Qualified Institutional Investor, and acquisition by any such person of securities is conditional upon the execution of an agreement to that effect.
Portugal
This document is not being distributed in the context of a public offer of financial securities (oferta pública de valores mobiliários) in Portugal, within the meaning of Article 109 of the Portuguese Securities Code (Código dos Valores Mobiliários). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal. This document and any other offering material relating to the securities have not been, and will not be, submitted to the Portuguese Securities Market Commission (Comissăo do Mercado de Valores Mobiliários) for approval in Portugal and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances that are deemed not to qualify as a public offer under the Portuguese Securities Code. Such offers, sales and distributions of securities in Portugal are limited to persons who are “qualified investors” (as defined in the Portuguese Securities Code). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.
Sweden
This document has not been, and will not be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this document may not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances that are deemed not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella instrument). Any offering of securities in Sweden is limited to persons who are “qualified investors” (as defined in the Financial Instruments Trading Act). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.
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Switzerland
The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering material relating to the securities may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering material relating to the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority.
This document is personal to the recipient only and not for general circulation in Switzerland.
United Arab Emirates
Neither this document nor the securities have been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates, nor have we received authorization or licensing from the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates to market or sell the securities within the United Arab Emirates. This document does not constitute and may not be used for the purpose of an offer or invitation. No services relating to the securities, including the receipt of applications and/or the allotment or redemption of such shares, may be rendered within the United Arab Emirates by us.
No offer or invitation to subscribe for securities is valid or permitted in the Dubai International Financial Centre.
Canada
The securities may be sold in Canada only to purchasers, purchasing, or deemed to be purchasing, as principal, that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario). Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable Canadian securities laws. Canadian purchasers should refer to any applicable provisions of the securities legislation of their province or territory for particulars of these rights or consult with a legal advisor.
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EXPENSES RELATED TO THIS OFFERING
Set forth below is an itemization of our total expenses, excluding underwriting discounts and commissions, which are expected to be incurred in connection with the offer and sale of the common shares by us. With the exception of the SEC registration fee, the FINRA filing fee and the Nasdaq listing fee, all amounts are estimates.
| Amount | ||||
| SEC registration fee | US$ | 2,509.30 | ||
| FINRA filing fee | 3,950.00 | |||
| Nasdaq listing fee | 75,000.00 | |||
| Accounting fees and expenses | 8,500.00 | |||
| Legal fees and expenses | 75,000.00 | |||
| Transfer agent fees and expenses | 10,000.00 | |||
| Printing fees and expenses | 10,000.00 | |||
| Miscellaneous | 5,000.70 | |||
| TOTAL | US$ | 189,960.00 | ||
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Certain legal matters as to the United States federal and New York law in connection with this offering will be passed upon for us by Bevilacqua PLLC. Certain legal matters as to the United States federal and New York law in connection with this offering will be passed upon for the underwriters by Loeb & Loeb LLP. The validity of the common shares offered in this offering and certain other legal matters as to Canada law will be passed upon for us by Thompson Dorfman Sweatman LLP. Bevilacqua PLLC may rely upon Thompson Dorfman Sweatman LLP with respect to matters governed by Canadian law.
Our consolidated financial statements as of June 30, 2020 and 2021 and for the years then ended included in this prospectus have been audited by DeVisser Gray LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such financial statements are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The offices of DeVisser Gray LLP are located at 401-905 West Pender Street, Vancouver, BC V6C 1L6.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form F-1, including relevant exhibits and schedules, under the Securities Act with respect to the common shares to be sold in this offering. This prospectus, which constitutes a part of the registration statement, does not contain all of the information contained in the registration statement. You should read the registration statement on Form F-1 and its exhibits and schedules for further information with respect to us and the common shares.
Immediately upon completion of this offering, we will become subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly, we will be required to file reports, including annual reports on Form 20-F, and other information with the SEC. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov. Additionally, we will make these filings available, free of charge, on our website at https://snowlakeresources.com as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC. The information on our website, other than these filings, is not, and should not be, considered part of this prospectus and is not incorporated by reference into this document.
As a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing the furnishing and content of proxy statements to shareholders, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
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F-1
Consolidated Financial Statements
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Snow Lake Resources Ltd.,
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Snow Lake Resources Ltd. (“the Company”), which comprise the consolidated statements of financial position as at June 30, 2021 and 2020 and the consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information (collectively referred to as the “financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 2021 and 2020 and its financial performance and its cash flows for the years then ended, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Going Concern
Without modifying our opinion, we draw attention to Note 1 in the consolidated financial statements which indicates that there are material uncertainties that cast significant doubt about the going concern assumption. The Company has no current source of revenue, has incurred losses from inception and is dependent upon its ability to secure new sources of financing. These conditions, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty that casts significant doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free of material misstatement, whether due to fraud or error. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, Canada
October 15, 2021
We have served as the Company’s auditor since 2019.
F-3
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian Dollars)
| Years ended June 30, | Note | 2021 | 2020 | |||||||
| $ | $ | |||||||||
| Assets | ||||||||||
| Current | ||||||||||
| Cash | 318,844 | 143,089 | ||||||||
| Prepaids and deposits | 67,973 | 794 | ||||||||
| Sales tax receivable | 10,644 | 10,597 | ||||||||
| 397,461 | 154,480 | |||||||||
| Non-current | ||||||||||
| Exploration and evaluation assets | 4 | 5,730,224 | 5,396,879 | |||||||
| Total assets | 6,127,685 | 5,551,359 | ||||||||
| Liabilities | ||||||||||
| Current | ||||||||||
| Accounts payable | 262,125 | 125,786 | ||||||||
| Due to related parties | 7 | 279,642 | 217,948 | |||||||
| Convertible debentures | 5 | 423,139 | - | |||||||
| Derivative liability - convertible debentures conversion feature | 5 | 409,913 | - | |||||||
| 1,374,819 | 343,734 | |||||||||
| Shareholders’ Equity | ||||||||||
| Share capital | 6 | 5,750,252 | 5,745,369 | |||||||
| Reserves | 6 | 1,274,138 | 1,181,344 | |||||||
| Deficit | (2,271,524 | ) | (1,719,088 | ) | ||||||
| Total shareholders’ equity | 4,752,866 | 5,207,625 | ||||||||
| Total liabilities and shareholders’ equity | 6,127,685 | 5,551,359 | ||||||||
| Nature of operations and going concern (Note 1) | ||||||||||
| Commitments and contingencies (Note 12) | ||||||||||
| Subsequent event (Note 14) | ||||||||||
Approved on behalf of the Board of Directors on October 15, 2021:
| “Louie Simens” | “Nachum Labkowski” | |
| Louie Simens, Director | Nachum Labkowski, Director |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Expressed in Canadian Dollars)
| Years ended June 30, | Note | 2021 | 2020 | |||||||
| $ | $ | |||||||||
| Expenses | ||||||||||
| Bank fees and interest | 2,084 | 2,669 | ||||||||
| Consulting fees | 34,399 | 43,255 | ||||||||
| Director and officer consulting fees | 200,858 | 118,700 | ||||||||
| General and administrative | 8,254 | 20,626 | ||||||||
| Interest expense and accretion | 5 | 140,264 | - | |||||||
| Amortization of transaction costs | 5 | 13,284 | - | |||||||
| Professional fees | 174,211 | 57,272 | ||||||||
| Transfer agent and regulatory fees | 22,244 | 3,885 | ||||||||
| Travel expenses | - | 957 | ||||||||
| (595,598 | ) | (247,364 | ) | |||||||
| Other income (loss) | ||||||||||
| Foreign currency loss | (254 | ) | (6,001 | ) | ||||||
| Recovery of accounts payable | 10,740 | - | ||||||||
| Gain on change in fair value of derivative liability | 5 | 32,676 | - | |||||||
| Recovery of flow through share liability | 6(f) | - | 71,249 | |||||||
| Loss and comprehensive loss for the year | (552,436 | ) | (182,116 | ) | ||||||
| Weighted average number of shares outstanding | ||||||||||
| Basic and diluted | 13,008,669 | 13,007,995 | ||||||||
| Loss per share | ||||||||||
| Basic and diluted | ||||||||||
| $ | (0.04 | ) | $ | (0.01 | ) | |||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in Canadian Dollars, except number of shares)
| Share Capital | Reserves | Total | ||||||||||||||||||||||||||||
| Common | Issued | Stock | Total | Accumulated | shareholders’ | |||||||||||||||||||||||||
| Note | shares * | capital | Warrant | options | Reserves | losses | equity | |||||||||||||||||||||||
| # | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Balance at June 30, 2019 | 13,007,956 | 5,745,215 | 26,480 | 1,154,905 | 1,181,385 | (1,536,972 | ) | 5,389,628 | ||||||||||||||||||||||
| Loss for the period | - | - | - | - | - | (182,116 | ) | (182,116 | ) | |||||||||||||||||||||
| Warrants exercised | 6(d) | $ | 50 | 154 | (41 | ) | - | (41 | ) | 113 | ||||||||||||||||||||
| Balance at June 30, 2020 | 13,008,006 | 5,745,369 | 26,439 | 1,154,905 | 1,181,344 | (1,719,088 | ) | 5,207,625 | ||||||||||||||||||||||
| Warrants exercised | 2,170 | 4,883 | - | - | - | - | 4,883 | |||||||||||||||||||||||
| Convertible debenture warrants | - | - | 90,769 | - | 90,769 | - | 90,769 | |||||||||||||||||||||||
| Convertible debenture finder’s warrants | - | - | 2,025 | 2,025 | 2,025 | |||||||||||||||||||||||||
| Loss for the period | - | - | - | - | (552,436 | ) | (552,436 | ) | ||||||||||||||||||||||
| Balance at June 30, 2021 | 13,010,176 | 5,750,252 | 119,233 | 1,154,905 | 1,274,138 | (2,271,524 | ) | 4,752,866 | ||||||||||||||||||||||
| * | The Company’s completed a 5:1 share consolidation on October 7, 2021. Shares, warrants and options presented in the consolidated financial statements are presented on a post-consolidation basis. |
The accompanying notes are an integral part of these consolidated financial statements.
F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in Canadian Dollars)
| Years ended June 30, | 2021 | 2020 | ||||||
| $ | $ | |||||||
| Cash flows used in operating activities | ||||||||
| Loss for the year | (552,436 | ) | (182,116 | ) | ||||
| Adjustments for items not involving cash: | ||||||||
| Write-off of exploration and evaluation assets | - | - | ||||||
| Recovery of accounts payable | (10,740 | ) | - | |||||
| Interest expense and accretion | 140,264 | - | ||||||
| Amortization of transaction costs | 13,284 | - | ||||||
| Gain on change of fair value of derivative liability | (32,676 | ) | - | |||||
| Recovery of flow through share liability | - | (71,249 | ) | |||||
| Foreign exchange | - | 2,675 | ||||||
| Net changes in non-cash working capital: | ||||||||
| Prepaids and deposits | (67,179 | ) | 17,357 | |||||
| Sales tax receivable | (47 | ) | 16,034 | |||||
| Accounts payable | 84,360 | (52,992 | ) | |||||
| Due to related party | 61,694 | 12,310 | ||||||
| (363,476 | ) | (257,981 | ) | |||||
| Cash flows used in investing activities | ||||||||
| Payments for exploration and evaluation assets | (270,652 | ) | (196,928 | ) | ||||
| (270,652 | ) | (196,928 | ) | |||||
| Cash flows provided by (used in) financing activities | ||||||||
| Loan from Nova Minerals Limited | - | (1,114 | ) | |||||
| Proceeds from the exercise of warrants | 4,883 | 113 | ||||||
| Proceeds from issuance of convertible debentures | 805,000 | - | ||||||
| 809,883 | (1,001 | ) | ||||||
| Net increase (decrease) in cash | 175,755 | (455,910 | ) | |||||
| Cash, beginning of the year | 143,089 | 598,999 | ||||||
| Cash, end of the year | 318,844 | 143,089 | ||||||
Supplemental disclosure with respect to cash flows (Note 8)
The accompanying notes are an integral part of these consolidated financial statements.
F-7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 1 – NATURE OF OPERATIONS AND GOING CONCERN
Snow Lake Resources Ltd. (“Snow Lake” or the “Company”) was incorporated under the Canada Business Corporations Act on May 25, 2018. The corporate and principal place of business is 242 Hargrave St. #1700, Winnipeg, Manitoba, R3C 0V1 Canada. The Company is a Canadian natural resource exploration company engaged in the exploration and development of mineral resources through the subsidiaries:
| i. | Snow Lake Exploration Ltd. (“SLE”) |
| ii. | Snow Lake (Crowduck) Ltd. (“SLC”) |
| iii. | Thompson Bros Lithium Pty Ltd. (formerly Manitoba Minerals Pty Ltd.) (“Thompson Bros”) |
In this report, Snow Lake and the subsidiaries it controlled are referred to as “the Group”.
On March 7, 2019, Snow Lake and Nova Minerals Ltd. (“Nova”), a related party, entered into a share sale agreement (the “Agreement”), whereby Snow Lake acquired all 100,000,000 of the issued and outstanding shares of Thompson Bros Lithium Pty Ltd (“Thompson Bros”), formerly Manitoba Minerals Pty Ltd (“Manitoba Minerals”)., a wholly owned subsidiary of Nova as part of a group restructuring.
On February 9, 2021, Thompson Bros was dissolved.
For the year ended June 30, 2021, the Company had not yet placed any of its mineral properties into production, the Company incurred a net loss of $552,436 (June 30, 2020 - $182,116). As of June 30, 2021, the Company had a deficit (accumulated losses) of $2,271,524 (June 30, 2020 - $1,719,088) and current liabilities in excess of current assets of $977,358 (June 30, 2020 – current liabilities in excess of current assets of $189,254). There is no certainty that additional financing at terms that are acceptable to the Company will be available, and an inability to obtain financing would have a direct impact on the Company’s ability to continue as a going concern.
These conditions indicate a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern.
These financial statements do not reflect the adjustments to the carrying values and classifications of assets and liabilities that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.
NOTE 2 – BASIS OF PRESENTATION
| (a) | Statement of compliance |
These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), effective for the financial year ended June 30, 2021. IFRS include International Accounting Standards (“IAS”) and interpretations issued by the IFRS Interpretations Committee (“IFRIC”).
These financial statements were approved and authorized for issuance by the Board of Directors of the Company on October 15, 2021.
| (b) | Basis of measurement |
These financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities which are measured at fair value, or amortized cost, as applicable. The presentation currency is the Canadian dollar; therefore, all amounts are presented in Canadian dollars unless otherwise noted.
F-8
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 2 – BASIS OF PRESENTATION (continued)
| (c) | Significant accounting judgements and key sources of estimate uncertainty |
The preparation of the financial statements in conformity with IFRS requires management to select accounting policies and make estimates and judgments that may have a significant impact on the financial statements. Estimates are continuously evaluated and are based on management’s experience and expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes may differ from these estimates.
Significant judgments exercised in applying accounting policies, apart from those involving estimates, that have the most significant effect on the amounts recognized in the financial statements are as follows:
| i. | Going concern |
The financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The assessment of the Company’s ability to source future operations and continue as a going concern involves judgment. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. If the going concern assumption were not appropriate for the financial statements, then adjustments to the carrying value of assets and liabilities, the reported expenses and the statement of financial position would be necessary (Note 1).
| ii. | Functional currency |
The functional currency for the Company is the currency of the primary economic environment in which the entity operates. The Company has determined that the functional currency is the Canadian dollar. Determination of functional currency may involve certain judgments to determine the primary economic environment and the Company reconsiders the functional currency of its entities if there is a change in events and conditions that determined the primary economic environment.
During the year, the Company assessed Thompson Bros operating environment and concluded its functional currency should be the Canadian dollar. The main factor for change was the tendency of the entity to incur exploration expenditures in the Canadian dollar rather than the Australian dollar. The Company identified March 7, 2019, to be the date of transition.
| iii. | Economic recoverability of future economic benefits of exploration and evaluation assets |
Management has determined that exploration and evaluation assets and related costs incurred, which have been recognized on the statements of financial position, are economically recoverable. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefit including geological data, scoping studies, accessible facilities, and existing and future permits.
Key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are:
| i. | Provisions |
Provisions recognized in the financial statements involve judgments on the occurrence of future events, which could result in a material outlay for the Company. In determining whether an outlay will be material, the Company considers the expected future cash flows based on facts, historical experience and probabilities associated with such future events. Uncertainties exist with respect to estimates made by management and as a result, the actual expenditure may differ from amounts currently reported.
F-9
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 2 – BASIS OF PRESENTATION (continued)
| ii. | Convertible debt |
The Company presents convertible debt separately in its debt and equity components on the consolidated statement of financial position. The fair value of a compound instrument at issuance is assigned to its respective debt and equity components. If the debt is convertible into equity on a fixed-for-fixed basis, the fair value of the debt component is established first with the equity component being determined by the residual amount. If the debt is convertible on a variable basis based on changes in variables affecting calculation of the conversion price, the conversion feature is first valued at fair value, with the residual amount being allocated to the loan liability and, where applicable, to warrants issued to debenture holders, which are recorded to reserves.
| iii. | Income taxes |
The provision for income taxes and composition of income tax assets and liabilities requires management’s judgment. The application of income tax legislation also requires judgment in order to interpret legislation and apply those findings to the Company’s transactions.
| iv. | Equity-settled share-based payments |
Share-based payments are measured at fair value. Options and finder’s warrants are measured using the Black-Scholes option pricing model based on estimated fair values of all share-based awards at the date of grant and are expensed to earnings or loss from operations over each award’s vesting period. The Black-Scholes option pricing model utilizes subjective assumptions such as expected price volatility and expected life of the option. Changes in these input assumptions can significantly affect the fair value estimate.
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
| (a) | Foreign currency translation |
The financial statements of the Company are prepared in its functional currency, determined on the basis of the primary economic environment in which the entity operates. Given that operations are in Canada, the presentation and functional currency of the Company is the Canadian dollar.
Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing at the transaction dates. At each reporting date, monetary items denominated in foreign currencies are translated into the entity’s functional currency at the then prevailing rates and non-monetary items measured at historical cost are translated into the entity’s functional currency at rates in effect at the date the transaction took place.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are included in the statements of loss and comprehensive loss for the period in which they arise.
| (b) | Current and non-current classification |
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
F-10
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (continued)
A liability is classified as current when: it is either expected to be settled in the consolidated entity’s normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
| (c) | Cash |
Cash consist of cash on hand, and deposits held with banks.
| (d) | Exploration and evaluation assets |
Title to exploration and evaluation assets including mineral properties 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 historical characteristic of many properties. The Company has investigated title to all its mineral properties and, to the best of its knowledge title to all its properties are in good standing.
The Company accounts for exploration and evaluation assets in accordance with IFRS 6 – Exploration for and evaluation of mineral properties (“IFRS 6”). Once the legal right to explore a property has been acquired, costs directly related to exploration and evaluation are recognized and capitalized, in addition to the acquisition costs. These expenditures include but are not limited to acquiring licenses, researching and analyzing existing exploration data, conducting geological studies, exploration drilling and sampling and payments made to contractors and consultants in connection with the exploration and evaluation of the property. Costs not directly attributable to exploration and evaluation activities, including general administrative overhead costs, are expensed in the year in which they occur.
Acquisition costs incurred in obtaining legal right to explore a mineral property are deferred until the legal right is granted and thereon reclassified to mineral properties. Transaction costs incurred in acquiring an asset are deferred until the transaction is completed and then included in the purchase price of the asset acquired.
When a project is deemed to no longer have commercially viable prospects to the Company, exploration and evaluation expenditures in respect of that project are deemed to be impaired. As a result, those exploration and evaluation expenditure costs, in excess of the estimated recoverable amount, are written off to the statement of loss and comprehensive loss.
The Company assesses exploration and evaluation assets for impairment when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use.
Once the technical feasibility and commercial viability of extracting the mineral resource has been determined, the property is considered a mine under development. Exploration and evaluation assets are also tested for impairment before the assets are transferred to development properties.
As the Company currently has no operational income, any incidental revenues earned in connection with exploration activities are applied as a reduction to capitalized exploration costs.
| (e) | Provisions |
Provisions are recorded when a present legal or constructive obligation exists as a result of past events where it is probable that an outflow of resources embodying economic benefit will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.
F-11
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (continued)
| (f) | Impairment of assets |
At each reporting date, the Company reviews the carrying amounts of its assets to determine whether there are any indicators of impairment. If any such indicator exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any.
Where the asset does not generate cash inflows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit (“CGU”) to which the asset belongs. Any intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired. An asset’s recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value, using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or CGU is estimated to be less than it carrying amount, the carrying amount is reduced to the recoverable amount and an impairment loss is recognized immediately in the statement of loss and comprehensive loss. Where an impairment subsequently reverses, the carrying amount is increased to the revised estimate of recoverable amount but only to the extent that this does not exceed the carrying value that would have been determined if no impairment had previously been recognized. A reversal of impairment is recognized in the statement of loss and comprehensive loss.
| (g) | Impairment of non-financial assets |
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.
| (h) | Trade and other payables |
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their short-term nature, they are measured at amortised cost and are not discounted. The amounts are unsecured.
| (i) | Convertible debt |
If convertible debt can be converted to equity at a fixed conversion rate at the option of the holder, the liability component of convertible debentures is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The conversion component is initially valued at fair value based on generally accepted valuation techniques, with the residual value of the convertible debt allocated to loan liability and warrant components. Subsequent to initial recognition, the liability component of a convertible debenture is measured at amortized cost using the effective interest method and accreted to face value over the term of the convertible debenture.
If convertible debt is convertible to equity at a variable conversion rate, where the quantity of shares or units into which the debt is convertible varies based on changes in variables affecting calculation of the conversion price, the value of the conversion component is first calculated and classified as a derivative liability, with the residual value allocated to the loan liability component, which is recognized as a liability and, where applicable, to warrants issued to debenture holders, which are recognized in reserves. Subsequent to initial recognition, the liability component of a convertible debenture is measured at
amortized cost using the effective interest method and accreted to face value over the terms of the convertible debenture. The conversion component of the convertible debentures is remeasured to fair value at the end of each reporting period using the Black Scholes valuation model, with gains or losses on remeasurement recognized in income and loss.
F-12
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (continued)
Any difference between the proceeds (net of transaction costs) and the redemption value is recognized as an adjustment to accretion expense over the period of the borrowings using the effective interest method.
Convertible debt is classified as current liability unless the Company has an unconditional right to defer settlement of the liability, or a portion of the liability, for at least 12 months after the reporting date.
| (j) | Share capital |
Common shares are classified as share capital. Costs directly attributable to the issue of common shares are recognized as a deduction from share capital, net of any tax effects.
| (k) | Warrants |
Share purchase warrants are classified as a component of equity. Share purchase warrants issued along with shares in an equity unit financing are measured using the residual approach, whereby the fair value of the warrant is determined after deducting the fair value of the shares from the unit price less applicable financing costs. Share purchase warrants issued for broker/financing compensation, are recognized at the fair value using the Black-Scholes option pricing model at the date of issue. Share purchase warrants are initially recorded as a part of warrant reserves in equity at the recognized fair value. Upon exercise of the share purchase warrants the previously recognized fair value of the warrants exercised is reallocated to share capital from warrant reserves. The proceeds generated from the payment of the exercise price are also allocated to share capital.
| (l) | Flow-through shares |
Proceeds received from the issuance of flow-through shares are restricted to be used only for Canadian resource property exploration expenditures within a two-year period. The portion of the proceeds received but not yet expended at the end of the year is disclosed separately.
The issuance of flow-through common shares results in the tax deductibility of the qualifying resource expenditures funded from the proceeds of the sales of such common shares being transferred to the purchasers of the shares. On the issuance of such shares, the Company bifurcates the flow-through shares into a flow-through share premium, equal to the estimated fair value of the premium that investors pay for the flow-through tax feature, which is recognized as a liability, and equity values of share capital and/or warrants. As the related exploration expenditures are incurred, the Company derecognizes the premium liability and recognizes the related recovery.
| (m) | Income taxes |
Income tax reported in the statement of loss and comprehensive loss for the period presented comprises current and deferred income tax. Income tax is recognized in the statement of loss and comprehensive loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.
Current income tax for each taxable entity in the Company is based on the local taxable income at the local statutory tax rate enacted or substantively enacted at the reporting date, and includes any adjustments to tax payable or recoverable with regards to previous periods.
Deferred income tax is determined using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred income tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using the expected future tax rates enacted or substantively enacted at the reporting date.
F-13
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (continued)
A deferred income tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred income tax assets and liabilities are offset only when there is a legally enforceable right to set off current tax assets against current tax liabilities, when they relate to income taxes levied by the same taxation authority and the Company intends to settle its tax assets and liabilities on a net basis.
| (n) | Financial instruments |
The following are the Company’s accounting policies under IFRS 9:
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless, an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, it’s carrying value is written off.
Impairment of financial assets
The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the consolidated entity’s assessment at the end of each reporting period as to whether the financial instrument’s credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset’s lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.
Financial assets at amortized cost
Financial assets at amortized cost are initially recognized at fair value and subsequently carried at amortized cost less any impairment. They are classified as current assets or non-current assets based on their maturity date. Gains and losses on derecognition of financial assets classified amortized cost are recognized in profit or loss.
Financial liabilities
Where the fair value option is taken for financial liabilities, the part of a fair value change relating to the Company’s own credit risk is recorded in other comprehensive income rather than in profit or loss, unless this creates an accounting mismatch. Financial liabilities are recognized initially at fair value, net of transaction costs incurred, and are subsequently measured at amortized cost. Any difference between the amounts originally received, net of transaction costs, and the redemption value is recognized in profit and loss over the period to maturity using the effective interest method.
F-14
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (continued)
| (o) | Loss per share |
Basic loss per share is calculated by dividing the net loss available to common shareholders by the weighted average number of shares outstanding during the reporting period. The diluted loss per share is calculated by dividing the net loss available to common shareholders by the weighted average number of shares outstanding on a diluted basis. The weighted average number of shares outstanding on a diluted basis takes into account the additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options were exercised and that the proceeds from such exercises were used to acquire common stock at the average market price during the reporting period.
| (p) | Comprehensive loss |
Other comprehensive loss is the change in net assets arising from transactions and other events and circumstances from non-owner sources. Comprehensive loss comprises net loss and other comprehensive loss. Foreign currency translation differences arising on translation of foreign subsidiaries in functional currencies other than the reporting currency would also be included in other comprehensive loss.
| (q) | Changes in accounting policies |
Leases
In January 2016, the IASB published a new accounting standard, IFRS 16 - Leases (“IFRS 16”) which supersedes IAS 17 - Leases. IFRS 16 specifies how to recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, unless the lease term is 12 months or less or the underlying asset has a low value.
The Company adopted IFRS 16 effective July 1, 2019. As the Company does not have any material lease agreements, the adoption of this standard did not materially impact the financial statements.
| (r) | Accounting standards issued but not yet effective |
There are no accounting standards issued but not yet effective that are expected to have a material impact on the financial statements.
NOTE 4 – EXPLORATION AND EVALUATION ASSETS
Changes in the Company’s exploration and evaluation assets during the years ended June 30, 2021 and 2020 are reconciled as follows:
| Years ended June 30, | 2021 | 2020 | ||||||
| Balance beginning of the year | $ | 5,396,879 | $ | 5,174,451 | ||||
| Exploration and evaluation expenditures | 333,345 | 222,428 | ||||||
| Balance end of the year | $ | 5,730,224 | $ | 5,396,879 | ||||
F-15
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 5 – CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITY
In February 2021, the Company issued convertible debt (the “Debentures”) for a total of $865,263 (the “Subscribed Amount”). The Debentures were sold at a discount of approximately 5% for proceeds of $805,000, net of a $15,000 cash commission.
Under the terms of the Agreement, the Subscribed Amount plus interest accrued, at a rate which should be the higher of (i) 12% per annum or (ii) Wall Street Prime Rate (currently approximately 3.3%) + 7%, is convertible, at the option of the Debenture holder, into common shares of the Company at a price that is the lesser of (i) $1.25 per share or (ii) a 20% discount to the price of a Liquidity Transaction (defined below). The conversion feature expires (the “Expiry Date”) on the earlier of twenty-four months from execution, or the closing of a registered public offering (the “Liquidity Transaction”).
In the event of a default, interest accrues at the lesser of (i) 24% per annum or (ii) the maximum legally authorized rate. The Company has the right to repay the note prior to maturity at 110% of the then outstanding principal and interest. The Company must provide 30 days’ notice and the Lender shall have the right to convert prior to the 30-day notice expiration.
The remaining undiscounted principal balance outstanding of the Debentures as at June 30, 2021 was $865,263.
The Company determined the fair value of the conversion feature component upon initial recognition was $442,589. The residual $362,411 value of the $805,000 net proceeds received was allocated on a pro-rata basis between the debt component ($271,642) and the warrants component ($90,769) based on their relative fair values. The debt component was discounted at a rate of 20% and 346,104 subscriber warrants were valued using the Black Scholes valuation model, using the following assumptions: expected life: 2.5 years; volatility: 70%; dividend yield: nil; risk-free rate: 0.18% - 0.22%, market price: $1.50; and exercise price of $1.50. The Company recognized $101,565 of accretion expense relating to accreting the debt component of the Debentures up to their principal value and $38,699 of cash interest payable.
The Company incurred $24,507 in transaction costs pursuant to issuing the Debentures, including paying a $15,000 cash commission, issuing 15,000 finder’s warrants exercisable at $1.50 for the earlier of (i) 60 months from the grant date or (ii) 24 months from the Company completing a listing on a Canadian stock exchange and $27 in bank charges. These costs, along with the $45,263 discount, are being amortized over the term of the Debentures. During the year ended June 30, 2021, the Company amortized $13,284 of transaction costs and discount in the statement of loss and comprehensive loss, including $2,025 recorded to the warrants reserve for the value of the finder’s warrants allocated to the warrants component. The 15,000 finder’s warrants were valued using the Black Scholes valuation model, using the following assumption: expected life: 2.5 years; volatility: 70%; dividend yield: nil; risk-free rate: 0.18% - 0.22%, market price: $1.50; and exercise price of $1.50.
F-16
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 5 – CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITY (continued)
The following schedule describes the break-down of the components of the debenture and allocations to each of its components:
| Derivative | ||||||||||||||||
| liability- convertible | Warrants value | Interest | ||||||||||||||
| Convertible | debentures conversion | recorded to warrants | expense and | |||||||||||||
| debentures | feature | reserve | accretion | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Balance - June 30, 2019 and 2020 | - | - | - | - | ||||||||||||
| Principal value of convertible debentures | 865,263 | - | - | - | ||||||||||||
| Discount on proceeds received | (45,263 | ) | - | - | - | |||||||||||
| Cash commission | (15,000 | ) | - | - | - | |||||||||||
| Allocation to conversion feature | (442,589 | ) | 442,589 | - | - | |||||||||||
| Allocation to warrants | (90,769 | ) | - | 90,769 | - | |||||||||||
| Value at initial recognition | 271,642 | 442,589 | 90,769 | - | ||||||||||||
| Accretion expense | 101,565 | - | - | 101,565 | ||||||||||||
| Interest expense | 38,699 | - | - | 38,699 | ||||||||||||
| Amortization of transaction costs | 11,233 | - | 2,025 | - | ||||||||||||
| Gain on change in fair value of conversion feature derivative liability | - | (32,676 | ) | - | - | |||||||||||
| Balance - June 30, 2021 | 423,139 | 409,913 | 92,794 | 140,264 | ||||||||||||
NOTE 6 – SHARE CAPITAL AND RESERVES
| (a) | Authorized |
Unlimited number of voting common shares without par value.
Unlimited preferred shares.
| (b) | Issued Share Capital |
During the years ended June 30, 2021 and June 30, 2020, the Company had the following movements in common shares:
| Issue | Issued | |||||||||||
| Shares | price | capital | ||||||||||
| # | $ | $ | ||||||||||
| Balance – June 30, 2019 | 13,007,956 | 5,745,215 | ||||||||||
| Warrants exercised | 50 | 3.08 | 154 | |||||||||
| Balance - June 30, 2020 | 13,008,006 | 5,745,369 | ||||||||||
| Warrants exercised | 2,170 | 2.25 | 4,883 | |||||||||
| Balance – June 30, 2021 | 13,010,176 | 5,750,252 | ||||||||||
| (c) | Common Share Transaction Details |
The Company had the following common share transactions during the years ended June 30, 2021 and 2020:
| ● | On February 11, 2020, the Company issued 250 common shares pursuant to the exercise of warrants for proceeds of $154. Upon exercise of these warrants, $41 was reclassified from reserves to share capital. |
F-17
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 6 – SHARE CAPITAL AND RESERVES (continued)
| ● | During March 2021, the Company issued 2,170 common shares pursuant to the exercise of warrants for proceeds of $4,883. |
| (d) | Warrants |
The following table summarizes common share purchase warrants issued and outstanding as at June 30, 2021:
| Balance | Balance | |||||||||||||||||||||||
| Exercise | June 30, | June 30, | ||||||||||||||||||||||
| Grant Date | Price | 2020 | Granted | Exercised | Exercised | 2021 | ||||||||||||||||||
| November 29, 2018 (1) | $ | 1.50 | 400,000 | - | - | - | 400,000 | |||||||||||||||||
| December 3, 2018 (2) | $ | 1.25 | 32,000 | - | - | - | 32,000 | |||||||||||||||||
| December 31, 2018 (3) | $ | 2.25 | 71,427 | - | - | - | 71,427 | |||||||||||||||||
| March 18, 2019 (4) | $ | 2.25 | 32,502 | - | (2,170 | ) | (30,332 | ) | - | |||||||||||||||
| February 8, 2021 (4) | $ | 1.50 | 198,734 | - | - | 198,734 | ||||||||||||||||||
| February 8, 2021 (5) | $ | 1.50 | 15,000 | - | - | 15,000 | ||||||||||||||||||
| February 22, 2021 (4) | $ | 1.50 | 147,364 | - | - | 147,364 | ||||||||||||||||||
| Total | 535,929 | 361,098 | (2,170 | ) | (30,332 | ) | 864,525 | |||||||||||||||||
| (1) | The expiry date of the warrants is variable based on the occurrence of the Company going public and listing on a Canadian stock exchange. Accordingly, the expiry date of the warrants is the earlier of: |
| ● | 60 months from the grant date; or |
| ● | 24 months from the Company completing a listing on a Canadian stock exchange. |
| (2) | The expiry date of these broker warrants is variable based on the occurrence of the Company going public and listing on a Canadian stock exchange. Accordingly, the expiry date of the warrants is the earlier of: |
| ● | 60 months from the grant date; or |
| ● | 24 months from the Company completing a listing on a Canadian stock exchange. |
| (3) | The expiry date of these warrants was March 15, 2021. |
| (4) | The expiry date of these warrants is variable based on the occurrence of the Company going public and listing on a Canadian stock exchange. Accordingly, the expiry date of the warrants is the earlier of: |
| ● | 60 months from the grant date; or |
| ● | 24 months from the date the Company achieves a public offering of the common shares and such common shares are freely tradable. |
| (5) | The expiry date of these broker warrants is variable based on the occurrence of the Company going public and listing on a Canadian stock exchange. Accordingly, the expiry date of the warrants is the earlier of: |
| ● | 60 months from the grant date; or |
| ● | 24 months from the date the Company achieves a public offering of the common shares and such common shares are freely tradable. |
As part of the convertible debentures issued in February 2021, the Company issued 346,104 warrants to subscribers of the debentures. Debenture holders were eligible to receive such number of common shares purchase warrants equal to half of the number of common shares issuable upon conversion of the debenture at the initial conversion price ($1.25). Each warrant is exercisable into one common share at an exercise price of $1.50 per warrant until the earlier of (i) 60 months from the grant date or (ii) 24 months from the Company completing a listing on a Canadian stock exchange. These warrants were valued at $90,769, recorded to the warrants reserve after allocating, on a pro-rata basis, the $362,411 residual value of the Debentures between the debt and warrants components after the initial allocation of $442,589 of the $805,000 net proceeds received to the conversion feature.
F-18
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 6 – SHARE CAPITAL AND RESERVES (continued)
The Debenture warrants were valued using the Black Scholes valuation model, using the following assumptions: expected life: 2.5 years; volatility: 70%; dividend yield: nil; risk-free rate: 0.18% - 0.22%, market price: $1.50; and exercise price of $1.50. The Company recognized $101,565 of accretion expense relating to accreting the debt component of the Debentures up to their principal value and $38,699 of cash interest payable. $2,025 of Debenture transaction costs was recorded to the warrants reserve in amortizing the value of transaction costs allocated to the warrants component of the Debentures.
15,000 Debenture finder’s warrants exercisable on the same terms as the Debenture warrants were valued at $9,480 using the Black Scholes valuation model, using the following assumptions: expected life: 2.5 years; volatility: 70%; dividend yield: nil; risk-free rate: 0.18% , market price: $1.50; and exercise price of $1.50. The value of these warrants allocated to loan liability transaction costs is being amortized in the statement of loss and comprehensive loss in accreting up the carrying value of the Debenture loan liability to its principal balance and the value allocated to Debenture warrants transaction costs is being amortized to the warrants reserve over the term of the Debentures.
On March 15, 2021, 30,332 warrants exercisable at $2.25 expired unexercised. The estimated fair value of these warrants when granted was $Nil.
In March 2021, 2,170 warrants exercisable at $2.25 were exercised for net proceeds of $4,883. The estimated fair value of these warrants when granted was $Nil.
| (e) | Stock Options |
The following table summarizes the stock options issued and outstanding as at June 30, 2021 and 2020:
| Weighted | ||||||||
| Number of | average | |||||||
| stock | exercise | |||||||
| options | price | |||||||
| # | $ | |||||||
| Balance at June 30, 2019 (1) | 1,040,000 | 2.50 | ||||||
| Option cancelled | (220,000 | ) | 2.50 | |||||
| Balance at June 30, 2020 (1) | 820,000 | 0.50 | ||||||
| Options cancelled (2) | (160,000 | ) | 2.50 | |||||
| Options reinstated (2) | 160,000 | 2.50 | ||||||
| Balance at June 30, 2021 (1) | 820,000 | 2.50 | ||||||
| (1) | The options vested on issuance and have an expiry date of May 24, 2023. |
| (2) | 160,000 options were cancelled and reinstated as a result of the resignation and reincorporation of a director. |
As at June 30, 2021, the weighted average remaining contractual life of the stock options is 1.90 years (June 30, 2020 - 2.90 years).
F-19
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 6 – SHARE CAPITAL AND RESERVES (continued)
| (f) | Flow-Through Shares |
Flow-through share arrangements involve resource expenditure deductions for income tax purposes which are renounced to purchasers of common shares in accordance with income tax legislation. Each flow-through share entitles the holder to a 100% tax deduction in respect of qualifying Canadian Exploration Expenses (“CEE”) as defined.
The value of the flow-through share liability was determined using the residual value method, after determining the fair value of the common shares and common shares purchase warrants attached to the Flow-Through Share Unit Financing. The Flow-Through Share Unit Financing premium established the flow-through share liability value at $71,249 as at June 30, 2019.
During the year ended June 30, 2020, the Company satisfied all of its flow-through obligations and recognized a recovery on the statement of loss and comprehensive loss for the full amount of the flow-through share liability.
NOTE 7 – RELATED PARTY TRANSACTIONS
| (a) | Related Party Transactions |
The Company incurred charges to directors and officers, or to companies associated with these individuals, which are included in the following categories, during the year ended June 30, 2021 and 2020:
| Years ended June 30, | 2021 | 2020 | ||||||
| Directors & officers consulting fees | $ | 200,858 | $ | 100,500 | ||||
| Exploration and evaluation expenditures | 48,000 | 57,243 | ||||||
| $ | 248,858 | $ | 157,743 | |||||
Management consulting fees are paid to companies controlled by the Chief Executive Officer (“CEO”), the President, the Chief Financial Officer (“CFO”) and the Chief Operating Officer (“COO”).
| (b) | Related Party Balances |
All related party balances payable, for services and business expense reimbursements rendered as at June 30, 2021 and 2020, are non-interest bearing and payable on demand, and are comprised of the following:
| Balance at June 30, | 2021 | 2020 | ||||||
| Payable to Nova Minerals | $ | 236,402 | $ | 205,648 | ||||
| Payable to officers & directors | 43,240 | 12,300 | ||||||
| $ | 279,642 | $ | 217,948 | |||||
NOTE 8 – SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
Significant non-cash transactions for the years ended June 30, 2021 and June 30, 2020 were as follows:
June
30, | June
30, | |||||||
| $ | $ | |||||||
| Exploration and evaluation assets in accounts payable | 117,015 | 54,322 | ||||||
| 117,015 | 54,322 | |||||||
F-20
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 9 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
| (a) | Classification and measurement changes |
As at June 30, 2021, the Company’s financial instruments consist of cash, accounts payable, convertible debentures, amounts due to related parties and derivative liability. Cash, accounts payable and due to related party are designated as at amortized cost, while convertible debentures are initially measured at fair value, then amortized using the effective interest rate method and the derivative liability relating to the conversion feature of the convertible debentures is measured at fair value through profit and loss.
| (b) | Fair Value of Financial Instruments |
IFRS requires disclosures about the inputs to fair value measurements for financial assets and liabilities recorded at fair value, including their classification within a hierarchy that prioritizes the inputs to fair value measurement.
The three levels of hierarchy are:
Level 1 – Quoted prices in active markets for identical assets or liabilities;
Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 – Inputs for the asset or liability that are not based on observable market data.
As at June 30, 2021, the Company believes that the carrying values of cash, accounts payable, convertible debentures, derivative liability – convertible debentures conversion feature and due to related parties approximate their fair values because of their nature and relatively short maturity dates or durations.
| (c) | Financial Instruments Risk |
The Company’s financial instruments are exposed in varying degrees to a variety of financial risks. The Board approves and monitors the risk management processes:
| (i) | Credit risk: |
Credit risk exposure primarily arises with respect to the Company’s cash and receivables. The risk exposure is limited because the Company places its instruments in banks of high credit worthiness within Canada and continuously monitors the collection of other receivables.
| (ii) | Liquidity risk: |
Liquidity risk is the risk that the Company cannot meet its financial obligations as they become due. The Company’s approach to managing liquidity is to ensure as far as possible that it will have sufficient liquidity to settle obligations and liabilities when they become due. As at June 30, 2021, the Company had cash of $318,844 (June 30, 2020 - $143,089) and a working capital deficiency of $977,358 (June 30, 2020 – $189,254) with total liabilities of $1,374,819 (June 30, 2020 - $343,734).
| (iii) | Market risk: |
| a. | Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. A change of 100 basis points in the interest rates would not be material to the financial statements. |
| b. | Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of the changes in the foreign exchange rates. Assuming all other variables constant, an increase or a decrease of 10% of the Australian dollar against the Canadian dollar, the net loss of the Company and the equity for the year ended June 30, 2021 would have varied by a negligible amount. |
| c. | The Company had no hedging agreements in place with respect to foreign exchange rates. |
F-21
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 10 – CAPITAL MANAGEMENT
The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a going concern such that it can provide returns for shareholders and benefits for other stakeholders. The management of the capital structure is based on the funds available to the Company in order to support the acquisition, exploration and development of mineral properties and to maintain the Company in good standing with the various regulatory authorities. In order to maintain or adjust its capital structure, the Company may issue new shares, sell assets to settle liabilities, issue debt instruments or return capital to its shareholders. The Company monitors its capital structure and makes adjustments in light of changes in economic conditions and the risk characteristics of the underlying assets.
NOTE 11 – SEGMENT INFORMATION
The Company has determined that it has one reportable operating segment, being the acquisition, exploration, and devaluation of mineral properties located in Canada. At June 30, 2021, all of the Company’s operating and capital assets are located in Canada.
NOTE 12 – COMMITMENTS AND CONTINGENCIES
| a. | The Company only undiscounted liabilities are accounts payable and accrued liabilities and amounts due to related parties, which are due within one year and as at June 30, 2021 totaled $541,767 (June 30, 2020 – $125,786). |
| b. | On December 2, 2020, the Company entered into a consulting agreement with its CEO, cancellable on three-months’ notice. As part of his remuneration package, the Company’s CEO is entitled to the following compensation: |
| ● | US$15,000 signing fee; |
| ● | US$10,000 retainer per month; and |
| ● | 240,000 Restricted Shares Units, to be awarded upon the achievement of the following targets: |
| o | 50,000 Restricted Share Units (“performance Shares”) to be awarded on completion of a preliminary economic assessment of Thompson Brothers Lithium property; |
| o | 70,000 Restricted Share Units to be awarded upon increasing the Thompson Brothers Lithium resource to above 12Mt lithium at or above 1% Li20 and at or above a cutoff grade of 0.4% Li20; |
| o | 120,000 Restricted Share Units to be awarded upon successful IPO. |
F-22
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars)
NOTE 13 – INCOME TAXES
Income tax expense differs from the amount that would result by applying the combined Canadian federal and provincial income tax rates to net income before income taxes. The statutory rate was 27% (2020 – 27%) for the years ended June 30, 2021 and 2020.
| June 30, | June 30, | |||||||
| 2021 | 2020 | |||||||
| $ | $ | |||||||
| Loss before income taxes | 552,436 | 182,116 | ||||||
| Combined federal and provincial statutory income tax rates | 27 | % | 27 | % | ||||
| Income tax recovery at statutory rates | 149,158 | 49,171 | ||||||
| Non-deductible differences | (7,310 | ) | 18,711 | |||||
| Change in unrecognized deductible temporary differences | (141,848 | ) | (67,882 | ) | ||||
| Total income tax recovery | - | - | ||||||
Unrecognized deductible temporary differences
The income tax benefit of the following deductible temporary differences has not been recorded in these financial statements because of the uncertainly of their recovery:
| June 30, | June 30, | |||||||
| 2021 | 2020 | |||||||
| $ | $ | |||||||
| Non-capital losses carried forward | 300,805 | 169,751 | ||||||
| Exploration and evaluation assets | (109,447 | ) | (60,266 | ) | ||||
| Other items | 15,278 | 5,409 | ||||||
| 206,636 | 114,894 | |||||||
Non-capital losses carried forward
The Company has non-capital tax losses available to reduce taxes in future years of approximately $1,114,000 (2020 – $629,000). These losses have expiry dates between 2038 and 2041.
Tax attributes are subject to review, and potential adjustment, by tax authorities.
NOTE 14 – SUBSEQUENT EVENT
On October 7, 2021, the Company completed a consolidation of its share capital on the basis of one new common share for every five pre-consolidation common shares.
F-23
2,857,143 Common Shares
Snow Lake Resources Ltd.
PRELIMINARY PROSPECTUS
ThinkEquity
, 2021
Through and including , 2021 (the 25th day after the date of this offering), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
| Item 6. | Indemnification of Directors and Officers. |
Under the MCA, we may indemnify our current or former directors or officers or another individual who acts or acted at our request as a director or officer, or an individual acting in a similar capacity, of another entity which the Company is or was a shareholder or creditor of, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of his or her association with us or another entity. The MCA also provides that we may also advance moneys to a director, officer or other individual for costs, charges and expenses reasonably incurred in connection with such a proceeding; provided that such individual shall repay the moneys if the individual does not fulfill the conditions described below.
However, indemnification is prohibited under the MCA unless the individual:
| ● | acted honestly and in good faith with a view to our best interests, or the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at our request; and |
| ● | in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the individual had reasonable grounds for believing that his or her conduct was lawful. |
Our bylaws require us to indemnify each of our current or former directors or officers and each individual who acts or acted at our request as a director or officer of another entity which the Company is or was a shareholder or creditor of, as well as their respective heirs and successors, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him or her in respect of any civil, criminal or administrative action or proceeding to which he or she is made a party by reason of being or having been a director or officer, except as may be prohibited by the MCA.
Under the form of indemnification agreement filed as an exhibit to this registration statement, we will agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director or executive officer.
The form of underwriting agreement filed as an exhibit to this registration statement will also provide for indemnification of us and our officers and directors.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Item 7. Recent Sales of Unregistered Securities.
In the past three years, we have issued and sold the securities described below without registering the securities under the Securities Act.
Upon our incorporation, we issued 20 (post-consolidation) common shares to our parent company, Nova, for a total purchase price of C$1.00 (approximately US$0.73).
On November 29, 2018, we closed a private placement financing, pursuant to which we issued 800,000 (post-consolidation) units at a price of C$1.25 (approximately US$1.01) per unit for aggregate gross proceeds of C$1,000,000 (approximately US$734,538). Each unit is comprised of one common share and a warrant for the purchase of one-half of one (1/2) common share at an exercise price of C$1.50 (approximately US$1.21) per whole common share. The warrants may be exercised at any time until the earlier of (i) five years after the date of issuance or (ii) two years from the completion of a liquidity transaction, which is defined as a business combination with a public company pursuant to a reverse take-over, merger, amalgamation, arrangement, take-over bid, insider bid, reorganization, joint venture, sale or exchange of assets or similar transaction, or an initial public offering. We also issued warrants for the purchase of 32,000 (post-consolidation) common shares to the broker. This warrant has an exercise price of C$1.25 (approximately US$1.01) and may also be exercised at any time until the earlier of (i) five years after the date of issuance or (ii) two years from the completion of a liquidity transaction.
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On December 31, 2018, we closed a private placement financing, pursuant to which we issued 142,856 (post-consolidation and subject to fractional shares rounding) units at a price of C$1.75 (approximately US$1.41) per unit for aggregate gross proceeds of C$250,000 (approximately US$201,548). Each unit is comprised of one common share and a warrant for the purchase of one-half of one (1/2) common share at an exercise price of C$2.25 (approximately US$1.81) per whole common share. The warrants may be exercised at any time until the earlier of (i) five years after the date of issuance or (ii) two years from the completion of a liquidity transaction (as defined above). If, following the closing of this offering, the closing price of our common shares is equal to or greater than C$0.75 for any 20 consecutive trading days, we may, upon providing written notice to the holders of these warrants, accelerate the expiry date of the warrants to the date that is 30 days following the date of such written notice.
On March 15, 2019, we closed a private placement financing, pursuant to which we issued 65,100 (post-consolidation and subject to rounding of fractional shares) units at a price of C$1.75 (approximately US$1.41) per unit for aggregate gross proceeds of C$113,938 (approximately US$91,856). Each unit is comprised of one common share and a warrant for the purchase of one-half of one (1/2) common share at an exercise price of C$2.25 (approximately US$1.81) per whole share. These warrants may be exercised at any time until March 15, 2021.
On March 28, 2019, we issued one common share to Nova Minerals in relation to the intercompany loan re-assignment described under “Related Party Transactions” above.
On April 12, 2019, we issued 2,100,000 (post-consolidation) common shares to Progressive Planet and 300,000 (post-consolidation) common shares to Strider Resources in connection with our acquisition of the TBL property. See “Corporate History and Structure” for more information regarding this transaction.
On May 25, 2019, we issued to certain of our officers and directors options to acquire 1,040,000 (post-consolidation) of our common shares. Some of those options have since been terminated; options to purchase 820,000 (post-consolidation) of our common shares remain outstanding. Each option provides the option holder the right to purchase one of our common shares until May 24, 2023, as an exercise price of C$2.50 per share.
On February 11, 2020, we issued 50 (post-consolidation) common shares on the exercise of a warrant for proceeds of C$113 (approximately US$91).
On January 1, 2021, Philip Gross became our Chief Executive Officer. Under our consulting agreement with Mr. Gross, we agreed to issue to him up to 240,000 (post-consolidation) of our restricted ordinary shares under the following conditions: (i) 50,000 (post-consolidation) restricted share units are to be awarded to Mr. Gross on completion of a preliminary economic assessment of the TBL property, (ii) 70,000 (post-consolidation) restricted share units to be awarded upon increasing the TBL property lithium resource to above 12Mt lithium at or above 1% Li20 and at or above a cut-off grade of 0.4% Li20. And (iii) 120,000 (post-consolidation) restricted share units to be awarded upon the completion of our initial public offering.
On February 8, 2021, we conducted an initial closing of a private placement offering of our unsecured convertible debentures in which we sold C$470,000 (approximately $378,910) in principal amount of the convertible debentures. On February 22, 2021, we conducted a second and final closing of this offering in which we sold C$350,000 (approximately $282,167) in principal amount of the convertible debentures. The convertible debentures, which were issued with an original issue discount of 5%, bear interest on the unpaid principal amount at a rate equal to the greater of 12% per annum, and (ii) the WSJ prime rate plus 7%, calculated and added to the principal amount annually, payable in cash in arrears on the maturity date. The convertible debenture matures on the earlier of (i) December 23, 2022, (ii) the date that we complete a public offering, and (iii) such earlier date as the principal amount of the debentures may become due, subject to and in accordance with the terms, conditions and provisions of the debentures, subject to extension upon mutual agreement of the parties. The convertible debentures entitle the purchasers to receive warrants to purchase a number of our common shares equal to 50% of the number of our common shares issuable upon conversion of the convertible debentures. Each warrant will entitle the holder to purchase our common shares at an exercise price of C$1.50 (approximately $1.21) per share and will expire on the earlier of five years from the date of Issuance and two years after the closing of this Offering. Pursuant to the terms and conditions of section 6(h) of the debenture subscription agreement, the debenture holder has the registration rights that would require us to include the debentures, common shares, and warrants (i) not previously sold or transferred by the debenture holder; or (ii) not otherwise able to be freely sold by the debenture holder in this offering. Pursuant to section 15 of the debenture, the debenture holder also has participation rights to subscribe for and purchase the securities offered in this offering, at the initial public offering price, up to an amount of the Common Shares equal to the debenture holder’s principal amount. We received written waivers dated October 26, 2021 from all of the debenture holders under which the debenture holders agreed to waive notice rights, registration rights and participation rights under the subscription agreements for debentures and unsecured convertible debentures dated December 2020 and February 2021, respectively. In addition, we expect to receive the written election of each of the debenture holders to convert such debenture into our common shares at a price that is the lesser of (i) C$1.25 (approximately US$1.01) per share or (ii) a 20% discount to the price at which we sell securities in this offering upon the closing of this offering.
Between March 10, 2021 and March 15, 2021, we issued 2,170 (post-consolidation) of our common shares upon the exercise of outstanding warrants for proceeds to us of C$4,882 (approximately US$3,936).
No underwriters were involved in these issuances. We believe that each of the above issuances was exempt from registration under the Securities Act in reliance on Regulation S under the Securities Act or pursuant to Section 4(2) of the Securities Act regarding transactions not involving a public offering.
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Item 8. Exhibits and Financial Statement Schedules.
(a) Exhibits
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| † | Filed herewith. |
(b) Financial Statement Schedules
Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or the notes thereto.
Item 9. Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
| (1) | For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
| (2) | For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Winnipeg, Manitoba, Canada on the 27th day of October of 2021.
| SNOW LAKE RESOURCES LTD. | ||
| By: | /s/ Philip Gross | |
| Name: | Philip Gross | |
| Title: | Chief Executive Officer | |
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature |
Title |
Date | ||
/s/ Philip Gross |
Chief Executive Officer and Director (Principal Executive Officer) | October 27, 2021 | ||
| Philip Gross | ||||
/s/ Philip Gross* |
Chief Financial Officer (Principal Financial and Accounting Officer) | October 27, 2021 | ||
| Mario Miranda | ||||
/s/ Philip Gross* |
Chairman of the Board | October 27, 2021 | ||
| Louie Simens | ||||
/s/ Philip Gross* |
Director and VP of Resource Development |
October 27, 2021 | ||
| Dale Schultz | ||||
/s/ Philip Gross* |
Independent Director | October 27, 2021 | ||
| Nachum Labkowski | ||||
/s/ Philip Gross* |
Independent Director | October 27, 2021 | ||
| Hadassah Slater | ||||
/s/ Philip Gross* |
Independent Director | October 27, 2021 | ||
| Allan David Engel |
| * | Attorney-in-fact |
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SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
Pursuant to the Securities Act of 1933, the undersigned, the duly authorized representative in the United States of Snow Lake Resources Ltd. has signed this registration statement or amendment thereto in New York on October 27, 2021.
| Authorized U.S. Representative | ||
| By: | /s/ Colleen A. De Vries | |
| Name: | Ms. Colleen A. De Vries | |
| Title: | Senior Vice President on behalf of Cogency Global Inc. | |
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Exhibit 5.1
October 26, 2021
Snow Lake Resources Ltd.
1700 – 242 Hargrave Street
Winnipeg, MB R3C 0V1
Re: Snow Lake Resources Ltd.
Dear Sirs/Mesdames:
We have acted as Canadian counsel to Snow Lake Resources Ltd., a Manitoba corporation (the “Corporation”), in connection with the Corporation’s filing of a Registration Statement on Form F-1 (File No. 333-254755) (the “Registration Statement”) filed by the Corporation under the Securities Act of 1933 of the United States (the “Act”) with the Securities and Exchange Commission ( the “SEC”) relating to the initial public offering (the “Offering”) by the Corporation of up to 3,538,461 common shares at a price per share of no less than $6.50 USD, without par value, of the Corporation (including the up to 461,538 common shares that the underwriters have the option to purchase to cover any over-allotments) (such common shares referred to as the “Common Shares” and the Common Shares being issued pursuant to the Offering specifically, the “Offering Shares”) pursuant to an underwriting agreement to be entered into on or prior to the closing date of the Offering (the “Underwriting Agreement”) between the Corporation and ThinkEquity, LLC, as representative, and the other several underwriters to be named therein.
Documents Reviewed
For the purposes of this opinion, we have examined and relied on, but have not participated in the preparation of, among other things, the following:
| (a) | A certificate of an officer of the Corporation dated October 26, 2021, attaching the constating documents and by-laws of the Corporation (the “Officer’s Certificate”); |
| (b) | a certificate of status dated October 26, 2021 issued by the Manitoba Companies Office (the “Certificate of Status”); and |
| (c) | resolutions of the directors of the Corporation relating to the Offering and the transactions contemplated thereby, including resolutions of the directors approving, among other things, the Offering. |
As to certain matters of fact, we have relied on the Officer’s Certificate, a copy of which has been provided to you with this opinion.
In preparation for the delivery of this opinion, we have examined the above-mentioned documents and we have examined all such other documents and made such other investigations as we consider relevant and necessary in order to give this opinion. In particular, we have not reviewed, and express no opinion on, any document that is referred to or incorporated by reference into the documents reviewed by us. As to various questions of fact material to this opinion which we have not independently established, we have examined and relied upon, without independent verification, certificates of public officials and officers of the Corporation including, without limitation, the Officer’s Certificate.
For purposes of the opinion set forth below, we have assumed:
| (a) | the legal capacity of all individuals; |
| (b) | the genuineness of all signatures on, and the authenticity and completeness of all documents submitted to us as originals and the conformity to authentic or original documents of all documents submitted to us as certified, conformed, telecopied, photostatic, electronically transmitted copies (including commercial reproductions); |
| (c) | the identity and capacity of any person acting or purporting to act as a corporate or public official; |
| (d) | the accuracy and completeness of all information provided to us by public officials or offices of public record; |
| (e) | the accuracy and completeness of all representations and statements of fact contained in all documents, instruments and certificates (including the Officer’s Certificate); |
| (f) | the accuracy and completeness of the minute books and all other corporate records of the Corporation reviewed by us; |
| (g) | the facts stated in the Certificate of Status continue to be true as of the date hereof; |
| (h) | the Offering Shares will be offered, issued and sold in compliance with applicable United States federal and state securities laws, and in the manner stated in the Registration Statement; and |
| (i) | that the facts stated in the Certificate of Status and the Officer’s Certificate shall continue to be true and correct as at the date of completion of the Offering. |
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We have not undertaken any independent investigation to verify the accuracy of any of the foregoing assumptions.
When our opinion refers to Offering Shares or Common Shares to be issued having been issued as being “fully paid and non- assessable”, such opinion indicates that the holder of such Common Shares cannot be required to contribute any further amounts to the Corporation by virtue of his, her or its status as holder of such Common Shares, either in order to complete payment for the Common Shares, to satisfy claims of creditors or otherwise. No opinion is expressed as to the adequacy of any consideration received for such Common Shares.
We are qualified to practise law only in the Province of Manitoba. Our opinion below is limited to the existing laws of the Province of Manitoba and the federal laws of Canada applicable therein as of the date of this opinion and should not be relied upon, nor are they given, in respect of the laws of any other jurisdiction. In particular, we express no opinion as to United States federal or state securities laws or any other laws, rule or regulation, federal or state, applicable to the Corporation. We disclaim any obligation or duty to update this opinion to reflect any changes in such laws or other circumstances after the date hereof.
In rendering our opinion in paragraph 1 below as to the valid existence of the Corporation, we have relied solely on the Certificate of Status, a copy of which has been delivered to you.
Based and relying upon and subject to the foregoing and the qualifications expressed below, we are of the opinion that:
| 1. | The Corporation is a corporation registered under The Corporations Act (Manitoba) and is still in existence. |
| 2. | The Offering Shares have been duly authorized by all necessary corporate action on the part of the Corporation and, upon payment and delivery in accordance with the Underwriting Agreement, will be validly issued, fully paid and non-assessable. |
We hereby consent to the reference to our firm’s name under the caption “Legal Matters” in the prospectus included in the Registration Statement and the filing of this opinion with the SEC as an exhibit to the Registration Statement. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the SEC promulgated thereunder.
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This opinion letter is furnished to you at your request in accordance with the requirements of Item 8(5.1) of Form F-1 in connection with the filing of the Registration Statement, and is not to be used, circulated, quoted or otherwise relied upon for any other purpose. No opinion is expressed as to the contents of the Registration Statement, other than the opinions expressly set forth herein relating to the Offering Shares. This opinion is expressed as of the date hereof unless otherwise expressly stated, and we disclaim any undertaking to advise you of any subsequent changes in the facts stated or assumed herein or of any subsequent changes in applicable laws.
| Yours truly, | |
| /s/ THOMPSON DORFMAN SWEATMAN LLP |
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Exhibit 10.15
INDEPENDENT DIRECTOR AGREEMENT
INDEPENDENT DIRECTOR AGREEMENT, dated effective October __, 2021 (this “Agreement”), by and between Snow Lake Resources Ltd., a company incorporated in the Province of Manitoba, Canada (the “Company”), and [ ] (the “Director”).
RECITALS
A. The Company has proposed to raise additional capital through an initial public offering (“IPO”) of the Company’s common shares and, in connection with the IPO, the Company proposes to file with the United States Securities and Exchange Commission a registration statement on Form F-1 (the “Form F-1 Registration Statement”) relating to the registration of the IPO shares under Section 5 of the Securities Act of 1933, as amended; and
B. The Company and its shareholders have elected the Director to serve on the Company’s board of directors (the “Board”) and the Director has accepted such appointment to serve on the Board; and
C. The Director may be appointed as a member of one or more committees of the Board; and
D. The Director may also be appointed to serve as Chairperson of one or more committees of the Board.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and the Director’s services to the Company as a member of the Board, as a member of such Committees of the Board to which he may be appointed from time to time and as Chairperson of one or more committees to which he may be appointed in such capacity from time to time, and intending to be legally bound hereby, the Company and the Director hereby agree as follows:
1. Appointment; Duties.
(a) Appointment. The Director has been elected to serve as a member of the Board effective as of [ ].
(b) General Duties. The Company requires that the Director be available to perform the duties of an independent director customarily related to this function and as may be required by the Company’s constituent instruments, including its Articles of Incorporation, as amended from time to time (“Articles”) and its corporate governance and board committee charters, each as amended or modified from time to time, and by applicable law, including The Corporations Act (Manitoba). The Director agrees to devote as much time as is necessary to perform completely the duties as a Director of the Company, including duties as a member of one or more committees of the Board, to which the Director may hereafter be appointed. The Director will perform such duties described herein in accordance with the general fiduciary duty of directors and as required pursuant to applicable law, including The Corporations Act (Manitoba).
(c) Conflicts of Interest. In the event that the Director has a direct or indirect financial or personal interest in a contract or transaction to which the Company is a party, or the Director is contemplating entering into a transaction that involves use of corporate assets or competition against the Company, the Director shall promptly disclose such potential conflict to the Board and proceed as directed by the Board, and as required pursuant to applicable law, including The Corporations Act (Manitoba).
(d) Corporate Opportunities. Whenever the Director becomes aware of a business opportunity, related to the Company’s business, which one could reasonably expect the Director to make available to the Company, the Director shall promptly disclose such opportunity to the applicable Board committee and proceed as directed by such committee or the Board, as applicable, and as required pursuant to applicable law, including The Corporations Act (Manitoba).
2. Term. The term of this Agreement shall commence as of the date first above written (the “Effective Date”), which shall be the date of the Director’s appointment to the board of directors of the Company, and shall continue until the Director’s removal or resignation.
3. Compensation.
(a) Cash Compensation. Following the commencement of the term of this Agreement, for all services to be rendered by the Director in any capacity hereunder, the Company agrees to compensate the Director a fee of Twenty Four Thousand Dollars ($24,000.00) per year in cash (the “Annual Fee”), which Annual Fee shall be paid to the Director in monthly equal installments of Two Thousand Dollars ($2,000.00), at the discretion of the Board, no later than the fifth business day of each applicable payment period commencing in the first month following the Effective Date. The Director shall be responsible for his or her own individual income tax payment on the Annual Fee in jurisdictions where the Director resides.
(b) Equity Compensation. Upon execution of this agreement, the Director shall be entitled to receive certain stock options to purchase the Company’s common shares in such amounts as determine by the Board and its compensation committee from time to time, and pursuant to the terms of the Company’s stock option plan, as may be amended or replaced from time to time.
In the event that the Director serves less than a full year on the Board, the Company shall only be obligated to pay the pro rata portion of such Annual Fee to the Director for his or her services performed during such year.
4. Independence. The Director acknowledges that his or her appointment hereunder is contingent upon the Board’s determination that he or she is “independent” with respect to the Company, in accordance with the listing requirements of the Nasdaq Stock Market, and that he or she shall resign as a Director upon written notice from the nomination and governance committee of the Company that he or she ceases to qualify as an independent director pursuant to the listing requirements of the Nasdaq Stock Market.
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5. Expenses. The Company shall reimburse the Director for pre-approved reasonable business related expenses incurred in good faith in connection with the performance of the Director’s duties for the Company. Such reimbursement shall be made by the Company upon submission by the Director of a signed statement itemizing the expenses incurred, which shall be accompanied by sufficient documentation to support the expenditures.
6. Other Agreements.
(a) Confidential Information and Insider Trading. The Company and the Director each acknowledge that, in order for the intentions and purposes of this Agreement to be accomplished, the Director shall necessarily be obtaining access to certain confidential information concerning the Company and its affairs, including, but not limited to, business methods, information systems, financial data and strategic plans which are unique assets of the Company (as further defined below, the “Confidential Information”) and that the communication of such Confidential Information to third parties could irreparably injure the Company and its business. Accordingly, the Director agrees that, during his or her association with the Company and thereafter, he or she will treat and safeguard as confidential and secret all Confidential Information received by him at any time and that, without the prior written consent of the Company, he will not disclose or reveal any of the Confidential Information to any third party whatsoever or use the same in any manner except in connection with the business of the Company and in any event in no way harmful to or competitive with the Company or its business. For purposes of this Agreement, “Confidential Information” includes any information not generally known to the public or recognized as confidential according to standard industry practice, any trade secrets, know-how, development, manufacturing, marketing and distribution plans and information, inventions, formulas, methods or processes, whether or not patented or patentable, pricing policies and records of the Company (and such other information normally understood to be confidential or otherwise designated as such in writing by the Company), all of which the Director expressly acknowledges and agrees shall be confidential and proprietary information belonging to the Company. Upon termination of his or her association with the Company, the Director shall return to the Company all documents and papers relating to the Company, including any Confidential Information, together with any copies thereof, or certify that he or she has destroyed all such documents and papers. Furthermore, the Director recognizes that the Company has received and in the future will receive confidential or proprietary information from third parties subject to a duty on the Company’s part to maintain the confidentiality of such information and, in some cases, to use it only for certain limited purposes. The Director agrees that the Director owes the Company and such third parties, both during the term of the Director’s association with the Company and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to, except as is consistent with the Company’s agreement with the third party, disclose it to any person or entity or use it for the benefit of anyone other than the Company or such third party, unless expressly authorized to act otherwise by an officer of the Company. In addition, the Director acknowledges and agrees that the Director may have access to “material non-public information” for purposes of the federal securities laws (“Insider Information”) and that the Director will abide by all securities laws relating to the handling of and acting upon such Insider Information.
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(b) Disparaging Statements. At all times during and after the period in which the Director is a member of the Board and at all times thereafter, the Director shall not either verbally, in writing, electronically or otherwise: (i) make any derogatory or disparaging statements about the Company, any of its affiliates, any of their respective officers, directors, shareholders, employees and agents, or any of the Company’s current or past customers or employees, or (ii) make any public statement or perform or do any other act prejudicial or injurious to the reputation or goodwill of the Company or any of its affiliates or otherwise interfere with the business of the Company or any of its affiliates; provided, however, that nothing in this paragraph shall preclude the Director from complying with all obligations imposed by law or legal compulsion, and provided, further, however, that nothing in this paragraph shall be deemed applicable to any testimony given by the Director in any legal or administrative proceedings.
(c) Enforcement. The Director acknowledges and agrees that the covenants contained herein are reasonable, that valid consideration has been and will be received and that the agreements set forth herein are the result of arms-length negotiations between the parties hereto. The Director recognizes that the provisions of this Section 6 are vitally important to the continuing welfare of the Company and its affiliates and that any violation of this Section 6 could result in irreparable harm to the Company and its affiliates for which money damages would constitute a totally inadequate remedy. Accordingly, in the event of any such violation by the Director, the Company and its affiliates, in addition to any other remedies they may have, shall have the right to institute and maintain a proceeding to compel specific performance thereof or to obtain an injunction or other equitable relief restraining any action by the Director in violation of this Section 6 without posting any bond therefore or demonstrating actual damages, and the Director will not claim as a defense thereto that the Company has an adequate remedy at law or require the posting of a bond. If any of the restrictions or activities contained in this Section 6 shall for any reason be held by a court of competent jurisdiction to be excessively broad as to duration, geographical scope, activity or subject, such restrictions shall be construed so as thereafter to be limited or reduced to be enforceable to the extent compatible with the applicable law; it being understood that by the execution of this Agreement the parties hereto regard such restrictions as reasonable and compatible with their respective rights. The Director acknowledges that injunctive relief may be granted immediately upon the commencement of any such action without notice to the Director and in addition Company may recover monetary damages.
(d) Separate Agreement. The parties hereto further agree that the provisions of Section 6 are separate from and independent of the remainder of this Agreement and that Section 6 is specifically enforceable by the Company notwithstanding any claim made by the Director against the Company. The terms of this Section 6 shall survive termination of this Agreement.
7. Market Stand-Off Agreement. In the event of a public or private offering of the Company’s securities and upon request of the Company, the underwriters or placement agents placing the offering of the Company’s securities, the Director agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company Director may own, other than those included in the registration, without the prior written consent of the Company or such underwriters, as the case may be, for such period of time from the effective date of such registration as may be requested by the Company or such placement agent or underwriter.
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8. Termination. Subject to applicable law, including The Corporations Act (Manitoba), with or without cause, the Company and the Director may each terminate this Agreement at any time upon ten (10) days written notice, and the Company shall be obligated to pay to the Director the compensation and expenses due up to the date of the termination. Nothing contained herein or omitted herefrom shall prevent the shareholder(s) of the Company from removing the Director with immediate effect at any time for any reason, nor shall it cause the removal of the Director as a director of the Company except in accordance with and pursuant to applicable law, including The Corporations Act (Manitoba).
9. Indemnification. The Company shall indemnify, defend and hold harmless the Director, to the full extent allowed by the laws of the Province of Manitoba and the laws of Canada, and as provided by, or granted pursuant to, the Articles of the Company, agreement (including, without limitation, the Indemnification Agreement executed herewith), vote of shareholders or disinterested directors or otherwise, both as to action in the Director’s official capacity and as to action in another capacity while holding such office. The Company and the Director are executing an indemnification agreement in the form attached hereto as Exhibit A.
10. Effect Of Waiver. The waiver by either party of the breach of any provision of this Agreement shall not operate as or be construed as a waiver of any subsequent breach thereof.
11. Notice. Any and all notices referred to herein shall be sufficient if furnished in writing at the addresses specified on the signature page hereto or, if to the Company, to the Company’s address as specified in filings made by the Company with the U.S. Securities and Exchange Commission.
12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of Manitoba and the laws of Canada applicable therein and the parties hereby attorn to the jurisdiction of the courts of the Province of Manitoba.
13. Assignment. The rights and benefits of the Company under this Agreement shall be transferable, and all the covenants and agreements hereunder shall inure to the benefit of, and be enforceable by or against, its successors and assigns. The duties and obligations of the Director under this Agreement are personal and therefore the Director may not assign any right or duty under this Agreement without the prior written consent of the Company.
14. Miscellaneous. If any provision of this Agreement shall be declared invalid or illegal, for any reason whatsoever, then, notwithstanding such invalidity or illegality, the remaining terms and provisions of the this Agreement shall remain in full force and effect in the same manner as if the invalid or illegal provision had not been contained herein. The article headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same instrument. Except as provided elsewhere herein, this Agreement sets forth the entire agreement of the parties with respect to its subject matter and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party to this Agreement with respect to such subject matter.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Independent Director Agreement to be duly executed and signed as of the day and year first above written.
SNOW LAKE RESOURCES LTD.
|
DIRECTOR
| |||
| By: | By: | |||
| Name: | Philip Gross | Name: | ||
| Title: | Chief Executive Officer | |||
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EXHIBIT A
Indemnity Agreement
(See Attached)
Exhibit 10.18
SUBSCRIPTION AGREEMENT FOR DEBENTURE UNITS
SNOW LAKE RESOURCES LTD.
|
HAVE YOU COMPLETED THIS SUBSCRIPTION AGREEMENT PROPERLY?
The following items in this Subscription Agreement must be completed. (Please initial each applicable box.)
| ||
| All Subscribers | ||
| Complete all Subscriber information in the boxes on page 2. | ||
| Subscribers resident in the United States | ||
| Schedule A and Appendix 1 and 2 thereto, indicating which category (if any) is applicable. | ||
| Subscribers resident in Canada purchasing under the “accredited investor” exemption | ||
| Schedule C, indicating which category (if any) is applicable. If you are purchasing as an individual relying on category (j), (j.1), (k) or (l) of the Accredited Investor Certificate, please also complete Form 45-106F9 – Form for Individual Accredited Investors attached as Schedule D hereto. | ||
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Subscribers that are resident outside the United States and Canada | ||
| Please complete Schedule E. | ||
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A completed and executed copy of this Subscription Agreement, including all applicable schedules, must be delivered to:
Garfinkle Biderman LLP 1 Adelaide St E, Suite 801 Toronto, ON M5C 1J4 Attention: Shimmy Posen Fax No: 416-869-0547 E-mail: sposen@garfinkle.com
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METHOD OF PAYMENT
Provide payment of the purchase price in Canadian dollars by delivering a certified cheque, money order or bank draft made payable to “Garfinkle Biderman LLP, in trust” or by wire to Garfinkle Biderman LLP in accordance with the wire instructions attached hereto as Schedule “G”
SNOW LAKE RESOURCES LTD.
SUBSCRIPTION AGREEMENT
| TO: |
SNOW LAKE RESOURCES LTD. (the “Corporation”) |
The undersigned (the “Subscriber”) hereby irrevocably subscribes for and agrees to purchase from the Corporation an unsecured convertible debenture of the Corporation (the “Debenture”) having an aggregate principal amount set forth below (such principal amount being reduced by an original issuance discount equal to 5%) and the corresponding number of Warrants (as defined herein) as calculated and set forth below, for the purchase price set forth below, upon and subject to the terms and conditions set forth in the attached “Terms and Conditions of Subscription for Debenture and Warrants” (the “Terms and Conditions”, and together with this page and the attached schedules, the “Subscription Agreement”).
| Purchase Price: $ | Account Registration Information: Same as Subscriber Information ☐ or | |
| (the “Subscription Amount”) (Principal Amount less the | ||
| original issuance discount of 5%) | (Name) | |
| Aggregate Principal Amount: $ | (Account Reference, if applicable) | |
|
Subscriber Information: |
(Address, including Postal Code) (Telephone Number) | |
| (Name of Subscriber) | Additional Subscriber Information: | |
| Account Reference (if applicable): | 1. Number and kind of securities of the Issuer held, directly or indirectly, if any: | |
|
By: |
||
| Authorized Signature | 2. State whether Subscriber is an Insider of the Issuer: | |
| Yes ☐ No ☐ | ||
| (Official Capacity or Title – if the Subscriber is not an individual) | ||
| (Name of individual whose signature appears above if different than the name of the Subscriber printed above.) | Name of Principal | |
| (Subscriber’s Address, including Municipality and Province) | Principal's Address | |
| City/Town Province Postal Code | ||
| (Telephone Number) (Email Address) | Principal's Telephone Number -OR- E-mail Address | |
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ACCEPTANCE: The Corporation hereby accepts the subscription as set forth above on the terms and conditions contained in this Subscription this day of December, 2020.
| SNOW LAKE RESOURCES LTD. | ||
| Per: | ||
| Authorized Signatory | ||
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TERMS AND CONDITIONS OF SUBSCRIPTION FOR DEBENTURE AND WARRANTS
| 1. | Subscription for Debentures and Warrants. The Subscriber hereby confirms its subscription for and offer to purchase the Debenture and Warrants, on and subject to the terms and conditions set out in this Subscription Agreement, for the Subscription Amount, which is payable as described in Sections 4 and 5 hereto (the offer, issue and sale of the Debenture and Warrants, the “Offering”). The Debenture subscribed for hereunder forms part of a larger sale of an aggregate of up to $600,000 of Debentures. |
The Debenture will entitle the holders thereof to receive such number of common share purchase warrants (each, a “Warrant”) equal to half of the number of Common Shares issuable upon conversion of the Debenture at the initial Conversion Price (as defined below). Each Warrant is exercisable into one Common Share (a “Warrant Share”) at an exercise price of $0.30 per Warrant Share (the “Warrant Exercise Price”) for a period of two years from the date the Corporation achieves a Public Offering of the Common Shares and such Common Shares are freely tradable, subject to adjustment as set forth in the terms of the Warrants.
The description of the Debenture and the Warrants in this Subscription Agreement is a summary only and is subject to the detailed provisions of the certificates representing the Debenture and the Warrants.
| 2. | Definitions. In this Subscription Agreement, unless the context otherwise requires: |
| (a) | “Accredited Investor Certificate” means the Accredited Investor Certificate in the form attached hereto as Schedule A and B; |
| (b) | “affiliate” has the meaning ascribed to such term in the Business Corporations Act (Ontario), as in effect on the date of this Subscription Agreement. |
| (c) | “Asset Sale” means the sale of any assets of the Corporation outside of the ordinary course of busines. |
| (d) | “Business Day” means any day other than a Saturday, Sunday or any other day on which principal chartered banks located in the City of Toronto are not open for business; |
| (e) | “Conversion Price” means, subject to adjustment as provided in the Debenture, the lesser of (i) $0.25 per Common Share, and (ii) a 20% discount to the issue price of any Common Shares issuable upon the sale or conversion of Offered Securities issued in a Qualified Financing; |
| (f) | “Closing” means the completion of the issue and sale by the Corporation and the purchase by the Subscribers of the Debentures and Warrants pursuant to the subscription agreements, in the form of this Subscription Agreement, completed by Subscribers; |
| (g) | “Closing Date” has the meaning ascribed thereto in Section 7; |
| (h) | “Closing Time” means 1:00 p.m. (Toronto time) on the Closing Date or such other time as the Corporation may determine; |
| (i) | “Common Shares” means fully-paid and non-assessable common shares in the capital of the Corporation as constituted on the date hereof, and after the date hereof any other shares, other securities, money or property which the Subscriber is entitled to receive in respect or substitution thereof upon conversion of the Debenture; |
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| (j) | “Designated Provinces” means each of the provinces of Canada; |
| (k) | “Disclosed Principal” mean a principal for whom the Subscriber is purchasing as disclosed on the face page of this Subscription Agreement; |
| (l) | “distribution” and “insider” have the respective meanings ascribed to them in the Securities Act (Ontario); |
| (m) | “material” means material in relation to the Corporation and its subsidiaries, considered on a consolidated basis; |
| (n) | “Maturity Date” means the earlier of (i) December 23, 2022, (ii) the date the Corporation completes a Public Offering, and (iii) such earlier date as the principal amount hereof may become due, subject to and in accordance with the terms, conditions and provisions of the Debenture, subject to extension upon mutual agreement of the parties; |
| (o) | “NI 45-106” means National Instrument 45-106 - Prospectus Exemptions; |
| (p) | “Offered Securities” any equity or voting securities, or securities convertible into or exchangeable for equity or voting securities, of the Corporation; |
| (q) | “person” includes an individual, a corporation, a partnership, trust, fund and an association, syndicate, organization or other organized group of persons, whether incorporated or not and an individual or other person in that person's capacity as a trustee, executor, administrator or personal or other legal representative; |
| (r) | “Public Offering” means a Qualified Financing that either (i) effects a listing of Common Shares on a Securities Exchange or (ii) takes place after shares have been listed on a Securities Exchange; |
| (s) | “Qualified Financing” means the sale by the Corporation of any Offered Securities, or the raising of any funds by way of equity sale, debt sale, or otherwise following the date of the Debenture; |
| (t) | “Securities Commissions” means, collectively, the applicable securities commission or other securities regulatory authority in each of the Designated Provinces or the United States; |
| (u) | “Securities Exchange” shall have the meaning ascribed to such term in Section 8.2(m) of the Debenture; |
| (v) | “Securities Laws” means, collectively, the applicable securities laws of the relevant jurisdictions, the regulations, rules, rulings and orders made thereunder, the applicable policy statements issued by the securities regulators thereunder, the securities legislation and policies of each other relevant jurisdiction and the rules of the relevant stock exchange, in each case in effect from time to time; |
| (w) | “Subscriber” means a subscriber for Debentures and Warrants and “Subscribers” means all subscribers for the Debentures and Warrants including the Subscriber; |
| (x) | “Subscription Amount” means the aggregate subscription amount for Debentures and Warrants as more particularly set forth on the face page hereof, subscribed for and paid for pursuant to this Subscription Agreement; |
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| (y) | “Term Sheet” means the term sheet attached hereto as Schedule F; |
| (z) | “United States” or “U.S.” means the United States of America, its territories and possessions, and any state of the United States and the District of Columbia; |
| (aa) | “U.S. Person” shall have the meaning ascribed to such term in Rule 902(k) of Regulation S under the U.S. Securities Act; and |
| (bb) | “U.S. Securities Act” means the United States Securities Act of 1933, as amended. |
| 3. | Description of Offering. |
| (a) | The Debenture is an unsecured convertible debenture and shall evidence indebtedness of the Corporation to the holder thereof in the principal amount stated on the Debenture certificate and such principal amount shall be equal to the “Principal Amount” stated on the face page hereof (the “Principal Amount”). |
| (b) | Interest shall accrue on the Principal Amount at a rate of the greater of 12% (subject to Section 4.2 of the Debenture) per annum, and (ii) the WSJ prime rate + 7%, in Canadian dollars (“Interest”), with interest to be paid upon the Maturity Date. Upon an Event of Default (as such term is defined in the Debenture), Interest shall increase to the lesser of (i) 24% per annum, and (ii) the maximum legal rate, from the date of the Event of Default (as defined in the Debenture) until the date such Event of Default is cured. |
| (c) | The Debenture shall be convertible into Common Shares, in whole or in part, at the option of the Debenture holder, at the Conversion Price. |
| (d) | The Corporation may, at its option, subject to providing not less than 30 days prior written notice to the Debenture holder, prepay the entire principal amount of the Debenture and the accrued Interest at 110% of the current principal amount of the Debenture and the accrued Interest. |
| (e) | The description of the Debenture in this Subscription Agreement is a summary only and is subject to the detailed provisions of the certificates representing the Debenture pursuant to which such Debenture is to be issued. |
| 4. | Delivery and Payment. The Subscriber agrees that the following shall be delivered to Garfinkle Biderman LLP at 1 Adelaide St E, Suite 801 Toronto, ON M5C 1J4 Attention: Shimmy Posen Fax No: 416-869-0547 E-mail: sposen@garfinkle.com, not later than 4:00 p.m. (Toronto Time) on the day that is not less than one business day prior to the Closing Date or such other date or place as the Corporation may advise: |
| (a) | a completed and duly signed copy of this Subscription Agreement; |
| (b) | If you are a resident of the United States, a duly completed Schedule “A” – the United States Accredited Investor Representation Letter, including Appendix “1” and, if applicable, Appendix “2”, to the Schedule “A” – the Form of U.S. Accredited Investor Status Certificate; |
| (c) | If you are a resident of Canada, a duly completed form regarding the particulars of the Subscriber attached hereto as Schedule C; |
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| (d) | If you are a resident of Canada, are subscribing as an “accredited investor” and are an individual, you must complete and sign Schedule D “Form 45-106F9 – Risk Acknowledgement Form”; |
| (e) | If you are a not a resident of Canada or the United States, you must complete and sign Schedule E; |
| (f) | any other documents required by applicable Securities Laws which the Corporation may request; and |
| (g) | the aggregate Subscription Amount payable by the Subscriber for the Subscriber’s Debenture and Warrants subscribed for under this Subscription Agreement, in Canadian dollars, paid by delivering a certified cheque or bank draft drawn on a Canadian chartered bank, made payable to “Garfinkle Biderman LLP, in trust” or by wire to Garfinkle Biderman LLP in accordance with the wire instructions attached hereto as Schedule “G”. |
The Subscriber acknowledges and agrees that such documents, when executed and delivered by the Subscriber, will form part of and will be incorporated into this Subscription Agreement with the same effect as if each constituted a representation and warranty or covenant of the Subscriber hereunder in favour of the Corporation. The Subscriber consents to the filing of such documents as may be required to be filed with any securities regulatory authority in connection with the transactions contemplated hereby.
| 5. | Closing. The transactions contemplated hereby will be completed at the Closing at the offices of Garfinkle Biderman LLP, Dynamic Funds Tower, 1 Adelaide Street East, Suite 801, Toronto, Ontario, M5C 2V9 at the Closing Time. |
If, at the Closing Time, the terms and conditions contained in this Subscription Agreement have been complied with to the satisfaction of the Corporation, or waived by the Corporation, the Corporation, upon receipt of all completed and executed Subscription Agreements in respect of the Offering and the aggregate subscription proceeds in respect of the Offering, will deliver or cause to be delivered to the Subscriber certificates evidencing ownership of the Debenture and Warrants so purchased, and such other documentation and securities as may be required pursuant to this Subscription Agreement.
If, prior to the Closing Time, the terms and conditions contained in this Subscription Agreement (other than delivery by the Corporation to the Subscriber of the Debenture and Warrants), have not been complied with to the satisfaction of the Corporation, or waived by it, the Corporation and the Subscriber will have no further obligations under this Subscription Agreement.
| 6. | Representations, Warranties and Covenants of the Corporation. The Corporation represents and warrants to, and covenants with the Subscriber that, except as set out expressly in any specific subsection below, as of the date of this Subscription Agreement; |
| (a) | the Corporation is a valid and subsisting corporation duly organized and in good standing under the laws of the Province of Manitoba; |
| (b) | the Corporation has full power and authority to enter into and perform this Subscription Agreement and to do all other acts which are necessary to consummate the transactions contemplated in the Subscription Agreement; |
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| (c) | no order ceasing or suspending trading in the securities of the Corporation nor prohibiting sale of such securities has been issued to the Corporation or its directors, officers or promoters and, to the knowledge of the Corporation, no investigations or proceedings for such purposes are pending or threatened; |
| (d) | the Corporation has complied and will fully comply with the requirements of applicable securities and corporate legislation in respect of the Offering; |
| (e) | the issuance and sale of the Debenture and Warrants does not and will not conflict with and does not and will not result in a breach of any of the terms, conditions, or provisions of the constating documents of the Corporation or any agreement or instrument to which the Corporation is a party or by which its assets are affected; |
| (f) | this Subscription Agreement has been or will be at the Closing, duly authorized by all necessary corporate action on the part of the Corporation, and constitutes a valid obligation of the Corporation legally binding upon it and enforceable against the Corporation in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the enforcement of creditors' rights generally and as limited by laws relating to the availability of equitable remedies; |
| (g) | the Warrant Shares, upon payment in full therefor, will, at the time of issue, be duly allotted, validly issued, fully paid and non-assessable and will be free of all liens, charges and encumbrances; and |
| (h) | The Corporation covenants and agrees that if, at any time prior to the Maturity Date, the Corporation proposes to file a registration statement with respect to any class of equity or equity-related securities (other than in connection with an offering to the Corporation’s employees (e.g., Form S-8), or in connection with an acquisition, merger or similar transaction (e.g., Form S-4), under the U.S. Securities Act in a primary registration on behalf of the Corporation and/or in a secondary registration on behalf of holders of such securities, and the registration form to be used may be used for the resale of the Common Shares, the Corporation will include such Debentures, Common Shares, and Warrants (i) not previously sold or transferred by the Subscriber (i.e., held by the original Subscriber); or (ii) not otherwise able to be freely sold by the Subscriber pursuant to the requirements of Rule 144 of the U.S. Securities Act (such remaining Common Shares, the “Registrable Securities”), in such registration statement or give prompt written notice to the Subscriber of its intention to file a registration statement and will offer to include in such registration statement, such number of Registrable Securities with respect to which the Subscriber has received written requests for inclusion therein within twenty (20) days after the giving of notice by Corporation (the “Piggyback Registration Rights”). The Subscriber acknowledges and understands that the Corporation may file a primary or secondary registration on behalf of certain investors that have provided or will provide financing or other resources to the Corporation, that the inclusion of the Registrable Securities in such registration is subject to the prior approval of such investors, and that such investors may not approve the inclusion of the Registrable Securities, in which case, the Piggyback Registration Rights provided in this paragraph will continue pursuant to the terms of this paragraph for any subsequent primary or secondary registration. The Subscriber also agrees that the Corporation may be limited in its ability to register all of the Registrable Securities on a single registration statement pursuant to Rule 415 of the U.S. Securities Act and consents and agrees to the Corporation registering less than all of the Registrable Securities in the event the Corporation is precluded from registering all of the Registrable Securities pursuant to Rule 415 (or any other rule or regulation promulgated by the Securities and Exchange Commission). Notwithstanding the requirements of this Section (j), the Piggyback Registration Rights shall not apply to offerings by the Corporation on Form S-3 (or pursuant to prospectus supplements filed to Form S-3’s), unless the Corporation files a resale registration on Form S-3. |
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| 7. | Conditions and Closing. The Closing shall occur on or before December 31, 2020, or on such other date as may be determined by the Corporation (the “Closing Date”). |
The Closing (including the closing of this Subscription) is conditional upon and subject to:
| (a) | payment by the Subscriber (in form acceptable to the Corporation) of the Subscription Amount in immediately available funds; |
| (b) | the Subscriber having properly completed, signed and delivered to the Corporation this Subscription Agreement, including any applicable Schedules, and all other documentation contemplated by this Subscription Agreement; |
| (c) | the Corporation accepting the Subscriber's subscription, in whole or in part; |
| (d) | the Corporation having obtained all necessary approvals and consents; and |
| (e) | the issue and sale of the Debenture and Warrants being exempt from the requirement to file a prospectus and the requirement to deliver an offering memorandum under applicable securities legislation relating to the sale of the Debenture and the Warrants, or the Corporation having received such orders, consents or approvals as may be required to permit such sale without the requirement to file a prospectus or deliver an offering memorandum. |
The Subscriber acknowledges and agrees that as the sale of the Subscriber's Debenture and Warrants will not be qualified by a prospectus, such sale is subject to the condition that the Subscriber (or, if applicable, any others for whom the Subscriber is contracting hereunder) sign and return to the Corporation all relevant documentation required by applicable Securities Laws.
| 8. | Acceptance or Rejection. The Corporation will have the right to accept or reject this subscription at any time at or prior to the Closing Time. The Subscriber acknowledges and agrees that the acceptance of this subscription will be conditional upon the sale of the Debenture and Warrants to the Subscriber and the Common Shares underlying such Debenture and Warrants, being exempt from any prospectus requirements of all applicable Securities Laws. The Corporation will be deemed to have accepted this subscription upon the Corporation's execution of the acceptance form at the beginning of this Subscription Agreement and the delivery at the Closing of the certificate or evidence of electronic delivery representing the Subscriber's Debenture and Warrants in accordance with the provisions hereof. |
| 9. | Subscriber's Representations, Warranties & Acknowledgments. The Subscriber (on its own behalf and, if applicable, on behalf of each person on whose behalf the Subscriber is contracting) represents, warrants, covenants and acknowledges to the Corporation (and acknowledges that the Corporation and its counsel are relying thereon), both at the date hereof and at the Closing Time: |
| (a) | The Subscriber (including, if applicable, each Disclosed Principal) was offered the Debenture and Warrants in, and is resident, or if not an individual has its head office in, the jurisdiction set out on the face page of this Subscription Agreement, and intends the applicable Securities Laws of that jurisdiction to govern the offer, sale and issuance of the Debenture and the Warrants to the Subscriber. Such address was not created and is not used solely for the purpose of acquiring the Debenture and the Warrants and the Subscriber was solicited to purchase in such jurisdiction. The Subscriber and any beneficial purchaser for whom it is acting was not created or used solely to purchase or hold the Debenture and the Warrants in reliance upon an exemption from the prospectus requirements as set out in NI 45-106. |
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| (b) | If the Subscriber (including, if applicable, each Disclosed Principal) is resident in or otherwise subject to the laws of any province of Canada, the Subscriber has properly completed, executed and delivered to the Corporation this Subscription Agreement and Schedule “A” – the United States Accredited Investor Representation Letter, including Appendix “1” to Schedule “A” – the Form of U.S. Accredited Investment Status Certificate, as applicable and the representations, warranties, covenants, and information contained herein and therein are true and correct as of the date hereof and will be true and correct as of the Closing. |
| (c) | The Subscriber (including, if applicable, each Disclosed Principal) will not offer, sell or otherwise dispose of the Debenture, the Warrants or the underlying Common Shares in the United States or to a U.S. Person unless such offer, sale or disposition is made in accordance with an exemption from the registration requirements under the U.S. Securities Act and the Securities Laws of all applicable states of the United States or the U.S. Securities and Exchange Commission has declared effective a registration statement in respect of such securities. |
| (d) | The execution and delivery of this Subscription Agreement, the performance and compliance with the terms hereof, the subscription for the Debenture and the Warrants and the completion of the transactions described herein by the Subscriber will not result in any material breach of, or be in conflict with, or constitute a material default under, or create a state of facts that, after notice or lapse of time, or both, would constitute a material default under any term or provision of the constating documents, by-laws or resolutions of the Subscriber (if applicable), the Securities Laws or any other laws applicable to the Subscriber, any agreement to which the Subscriber is a party, or any judgment, decree, order, statute, rule or regulation applicable to the Subscriber. |
| (e) | If the Subscriber (including, if applicable, each Disclosed Principal) is resident in or otherwise subject to the laws of any province of Canada and is purchasing the Debenture and the Warrants as an “accredited investor” (as defined in NI 45-106 and section 73.3 of the Securities Act (Ontario)), it has duly completed, executed and delivered to the Corporation a copy of the Accredited Investor Certificate in the form included in Schedule C, and if the if the Subscriber is an individual and is relying on category (j), (j.1), (k) or (l) of the Accredited Investor Certificate, the Subscriber has delivered with this Subscription Agreement a duly completed and executed copy of each of Form 45-106F9 – Risk Acknowledgement Form for Individual Accredited Investors attached as Schedule D hereto, and the information contained therein is true and correct as of the date hereof and as of the Closing Date.. |
| (f) | The Subscriber is subscribing for the Debenture and the Warrants as principal for its own account and not for the benefit of any other person (within the meaning of applicable Securities Laws) or it is subscribing as agent for a Disclosed Principal, as disclosed on the face page of this Subscription Agreement, and acknowledges that the Corporation may be required by law to collect, use and disclose the personal information of the Subscriber (including, if applicable, any Disclosed Principal) and consents (including, if applicable, on behalf of any Disclosed Principal) to such collection, use and disclosure to certain regulatory authorities (including stock exchanges). |
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| (g) | In the case of a subscription for the Debenture and the Warrants by the Subscriber acting as trustee or agent for a fully managed account or as agent for a Disclosed Principal, the Subscriber is duly authorized to execute and deliver this Subscription Agreement and all other necessary documentation in connection with such subscription on behalf of the fully managed account or Disclosed Principal, as applicable, and this Subscription Agreement has been duly authorized, executed and delivered by or on behalf of and constitutes a legal, valid and binding agreement of, the fully managed account or Disclosed Principal, as applicable. |
| (h) | In the case of a subscription for the Debenture and the Warrants by the Subscriber acting as principal, this Subscription Agreement has been duly authorized, executed and delivered by, and constitutes a legal, valid and binding agreement of, the Subscriber. This Subscription Agreement is enforceable in accordance with its terms against the Subscriber. |
| (i) | If the Subscriber is: |
| (i) | a corporation, the Subscriber is duly incorporated and is validly subsisting under the laws of its jurisdiction of incorporation and has all requisite legal and corporate power and authority to execute and deliver this Subscription Agreement, to subscribe for the Debenture and the Warrants as contemplated herein and to carry out and perform its obligations under the terms of this Subscription Agreement; |
| (ii) | a partnership, syndicate or other form of unincorporated organization, the Subscriber has the necessary legal capacity and authority to execute and deliver this Subscription Agreement and to observe and perform its covenants and obligations hereunder and has obtained all necessary approvals in respect thereof; or |
| (iii) | an individual, the Subscriber is of the full age of majority in the jurisdiction in which the Subscription agreement is executed and is legally competent to execute this Subscription Agreement and to observe and perform his or her covenants and obligations hereunder. |
| (j) | There is no person acting or purporting to act in connection with the Offering who is entitled to any brokerage or finder's fee. If any person establishes a claim that any fee or other compensation is payable in connection with this subscription for the Debenture and the Warrants, the Subscriber covenants to indemnify and hold harmless the Corporation with respect thereto and with respect to all costs reasonably incurred in the defence thereof. |
| (k) | If required by applicable Securities Laws or the Corporation, the Subscriber will execute, deliver and file, or assist the Corporation in filing, such reports, undertakings and other documents with respect to the issue and/or sale of the Debenture and the Warrants as may be required by any Securities Commission, stock exchange or other regulatory authority. |
| (l) | The Subscriber (including, if applicable, each Disclosed Principal) has been advised to consult its own legal advisors with respect to trading in the Debenture, the Warrants and the underlying Common Shares, and with respect to the resale restrictions imposed by the Securities Laws of the jurisdiction in which the Subscriber resides and other applicable Securities Laws, and acknowledges that no representation has been made respecting the applicable hold periods imposed by the Securities Laws or other resale restrictions applicable to such securities which restrict the ability of the Subscriber (or others for whom it is contracting hereunder) to resell such securities, that the Subscriber (including, if applicable, each Disclosed Principal) is solely responsible to find out what these restrictions are and the Subscriber is solely responsible (and the Corporation is not in any way responsible) for compliance with applicable resale restrictions and the Subscriber is aware that it (and, if applicable, each Disclosed Principal) may not be able to resell such Debenture, Warrants or underlying Common Shares except in accordance with limited exemptions under the Securities Laws and other applicable laws. The Subscriber also acknowledges the legend restriction notation applicable to the resale of the Debenture, the Warrants and the underlying Common Shares as set out below. |
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| (m) | The Subscriber (including, if applicable, each Disclosed Principal) has not received or been provided with a prospectus, registration statement or offering memorandum, within the meaning of the Securities Laws, or any sales or advertising literature in connection with the Offering or any document purporting to describe the business and affairs of the Corporation which has been prepared for review by prospective purchasers to assist in making an investment decision in respect of the Debenture and the Warrants, and the Subscriber's decision to subscribe for the Debenture and the Warrants was not based upon, and the Subscriber has not relied upon, any verbal or written representations as to facts made by or on behalf of the Corporation. The Subscriber's decision to subscribe for the Debenture and the Warrants was based solely upon this Subscription Agreement, including the Term Sheet, and information about the Corporation which is publicly available. |
| (n) | Except for its knowledge regarding its subscription for the Debenture and Warrants hereunder, the Subscriber has no knowledge of a “material fact” or a “material change” (as those terms are defined in the Securities Act (Ontario) and which generally means a fact or change which would reasonably be expected to have a significant effect on the market price of the Common Shares) in the affairs of the Corporation that has not been generally disclosed. |
| (o) | No person has made any written or oral representations: |
| (i) | that any person will resell or repurchase the Debenture, the Warrants or the underlying Common Shares, |
| (ii) | that any person will refund the Subscription Amount; or |
| (iii) | as to the future price or value of the Debenture, the Warrants or the underlying Common Shares. |
| (p) | The subscription for the Debenture and the Warrants has not been made through or as a result of, and the distribution of the Debentures and the Warrants is not being accompanied by any general solicitation or advertisement, including without limitation in printed public media, radio, television or telecommunications, including electronic display, or as part of a general solicitation. |
| (q) | There are risks associated with the purchase of and investment in the Debenture and the Warrants and the Subscriber has such knowledge and experience that it is capable of evaluating the merits and risks of an investment in the Debenture and the Warrants and fully understands the restrictions on resale of the Debenture, the Warrants and the underlying Common Shares and is capable of bearing the economic risk of the investment. |
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| (r) | The funds representing the Subscription Amount that will be advanced by the Subscriber to the Corporation hereunder will not represent proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (the “PCMLTFA”) and the Subscriber acknowledges that the Corporation or its advisors may in the future be required by law to disclose the Subscriber's name and other information relating to this Subscription Agreement and the Subscriber's subscription hereunder, on a confidential basis, pursuant to the PCMLTFA. To the best of the Subscriber’s knowledge (a) none of the Subscription Amount to be provided by the Subscriber (i) has been or will be derived from or related to any activity that is deemed criminal under the laws of Canada, the United States, or any other jurisdiction, or (ii) is being tendered on behalf of a person or entity who has not been identified to the Subscriber, and (b) the Subscriber shall promptly notify the Corporation if the Subscriber discovers that any of such representations ceases to be true, and to provide the Corporation with appropriate information in connection therewith. None of the funds the Subscriber is using to purchase the Debenture and Warrants are, to the knowledge of the Subscriber, proceeds obtained or derived, directly or indirectly, as a result of illegal activities. |
| (s) | The Subscriber has not received from the Corporation any financial assistance of any kind, directly or indirectly, in connection with its purchase of the Debenture and Warrants hereunder. |
| 10. | Acknowledgements and Covenants of the Subscriber. The Subscriber, on its own behalf and, if applicable on behalf of others for whom it is acting hereunder, hereby acknowledges, covenants and agrees as follows: |
| (a) | It has received and reviewed a copy of the Term Sheet setting out the principal terms of the Offering. |
| (b) | The Subscriber acknowledges that the Debenture, the Warrants and the underlying Common Shares have not been, and will not be, registered under the U.S. Securities Act and may not be offered or sold in the United States or to a U.S. Person unless the Debenture, the Warrants and the underlying Common Shares are registered under the U.S. Securities Act and all applicable state Securities Laws or an exemption from such registration requirements is available, and further agrees that hedging transactions involving such Common Shares may not be conducted unless in compliance with the U.S. Securities Act. |
| (c) | The Debenture, the Warrants and the underlying Common Shares shall be subject to statutory resale restrictions under the Securities Laws of the jurisdiction in which the Subscriber resides and under other applicable Securities Laws, and the Subscriber covenants that it will not resell the Debenture, the Warrants or the underlying Common Shares except in compliance with such laws and the Subscriber acknowledges that it is solely responsible for such compliance. |
| (d) | The ability to transfer the Debenture, the Warrants and the underlying Common Shares is limited by, among other things, applicable Securities Laws and the Corporation shall refuse, and shall instruct its transfer agent to refuse to register any transfer that does not comply with the Securities Laws. It is the responsibility of the Subscriber to find out what the transfer restrictions are and to comply with them before selling their securities. |
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| (e) | None of the Corporation or any of its officers, directors, employees, shareholders, representatives, affiliates, related entities and associates, or any persons acting on its or their behalf, will in any circumstances be liable to the Subscriber under, arising out of, or in any way connected with this Subscription Agreement for any indirect or consequential loss or damage whether arising in contract or tort. |
| (f) | The Debenture and the Warrants and the underlying Common Shares shall have attached to them, as of the Closing Date, the legends substantially in the following form and with the necessary information inserted: |
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) DECEMBER 31, 2020, AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR U.S. STATE SECURITIES LAWS. THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO SNOW LAKE RESOURCES LTD. (THE “CORPORATION”), (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS, (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES ACT PROVIDED BY (I) RULE 144 THEREUNDER IF AVAILABLE OR (II) RULE 144A THEREUNDER, IF AVAILABLE, AND IN EACH CASE IN ACCORDANCE WITH APPLICABLE U.S. STATE SECURITIES LAWS, (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT, PROVIDED THAT, IN THE CASE OF TRANSFERS PURSUANT TO (C)(I) OR (D) ABOVE, THE HOLDER HAS, PRIOR TO SUCH TRANSFER, FURNISHED TO THE CORPORATION AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE CORPORATION. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”
| (g) | The Subscriber, and each Disclosed Principal, if applicable, shall execute, deliver, file and otherwise assist the Corporation with filing all documentation required by the applicable Securities Laws to permit the subscription for the Debenture and Warrants and the issuance of the Debenture and the Warrants. |
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| (h) | The Corporation is relying on an exemption from the requirement to provide the Subscriber with a prospectus under applicable Securities Laws and, as a consequence of acquiring the Debenture and the Warrants pursuant to such exemption: |
| (i) | certain protections, rights and remedies provided by applicable Securities Laws, including statutory rights of rescission and certain statutory remedies against an issuer, underwriters, auditors, directors and officers that are available to investors who acquire securities offered by a prospectus, will not be available to the Subscriber, |
| (ii) | the common law may not provide investors with an adequate remedy in the event that they suffer investment losses in connection with securities acquired in a private placement, |
| (iii) | the Subscriber may not receive information that would otherwise be required to be given under applicable Securities Laws, and |
| (iv) | the Corporation is relieved from certain obligations that would otherwise apply under applicable Securities Laws. |
| (i) | The Subscriber is responsible for obtaining such legal and tax advice as it considers appropriate in connection with the execution, delivery and performance of this Subscription Agreement and the transactions contemplated under this Subscription Agreement, and the Subscriber is not relying on the Corporation or its affiliates or counsel, in this regard. |
| (j) | There is no government guarantee or insurance covering the Debenture and the Warrants. |
| (k) | There are risks associated with the purchase of the Debenture and the Warrants and the Subscriber may lose his, her or its entire investment. |
| (l) | The Subscriber authorizes the indirect collection of Personal Information by the securities regulatory authority or regulator (each as defined in National Instrument 14-101 Definitions) and confirms that the Subscriber has been notified by the Issuer: |
| (i) | that the Issuer will be delivering Personal Information to the securities regulatory authority or regulator; |
| (ii) | that the Personal Information is being collected indirectly by the securities regulatory authority or regulator under the authority granted to it in Applicable Securities Laws; |
| (iii) | that such Personal Information is being collected for the purpose of the administration and enforcement of Applicable Securities Laws; and |
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| (iv) | that the title, business address and business telephone number of the public official who can answer questions about the securities regulatory authority’s or regulator’s indirect collection of the Personal Information is as follows: |
| (A) | British Columbia Securities Commission, P.O. Box 10142, Pacific Centre, 701 West Georgia Street, Vancouver, British Columbia V7Y 1L2, Inquiries: (604) 899-6854, Toll free in Canada: 1-800-373-6393, Facsimile: (604) 899-6581, Email: inquiries@bcsc.bc.ca; |
| (B) | Alberta Securities Commission, Suite 600, 250 – 5th Street, SW Calgary, Alberta T2P 0R4, Telephone: (403) 297-6454, Toll free in Canada: 1-877-355-0585, Facsimile: (403) 297-2082; |
| (C) | Financial and Consumer Affairs Authority of Saskatchewan, Suite 601 - 1919 Saskatchewan Drive, Regina, Saskatchewan S4P 4H2, Telephone: (306) 787-5879, Facsimile: (306) 787-5899; |
| (D) | The Manitoba Securities Commission, 500 – 400 St. Mary Avenue, Winnipeg, Manitoba R3C 4K5, Telephone: (204) 945-2548, Toll free in Manitoba 1-800-655-5244, Facsimile: (204) 945-0330; |
| (E) | Ontario Securities Commission, 20 Queen Street West, 22nd Floor Toronto, Ontario M5H 3S8, Telephone: (416) 593-8314, Toll free in Canada: 1-877-785-1555, Facsimile: (416) 593-8122, Email: exemptmarketfilings@osc.gov.on.ca, Public official contact regarding indirect collection of information: Inquiries Officer; |
| (F) | Autorité des marchés financiers, 800, Square Victoria, 22e étage, C.P. 246, Tour de la Bourse, Montréal, Québec H4Z 1G3, Telephone: (514) 395-0337 or 1-877-525-0337, Facsimile: (514) 873-6155 (For filing purposes only), Facsimile: (514) 864-6381 (For privacy requests only), Email: financementdessocietes@lautorite.qc.ca (For corporate finance issuers); fonds_dinvestissement@lautorite.qc.ca (For investment fund issuers); |
| (G) | Financial and Consumer Services Commission (New Brunswick), 85 Charlotte Street, Suite 300 Saint John, New Brunswick E2L 2J2, Telephone: (506) 658-3060, Toll free in Canada: 1-866-933-2222, Facsimile: (506) 658-3059, Email: info@fcnb.ca; |
| (H) | Nova Scotia Securities Commission, Suite 400, 5251 Duke Street, Duke Tower, P.O. Box 458 Halifax, Nova Scotia B3J 2P8, Telephone: (902) 424-7768, Facsimile: (902) 424-4625; |
| (I) | Prince Edward Island Securities Office, 95 Rochford Street, 4th Floor Shaw Building, P.O. Box 2000 Charlottetown, Prince Edward Island C1A 7N8, Telephone: (902) 368-4569, Facsimile: (902) 368-5283; and |
| (J) | Government of Newfoundland and Labrador, Financial Services Regulation Division, P.O. Box 8700, Confederation Building 2nd Floor, West Block, Prince Philip Drive, St. John’s, Newfoundland and Labrador A1B 4J6, Attention: Director of Securities, Telephone: (709) 729-4189, Facsimile: (709) 729-6187. |
| (m) | For the purposes of this section the term Personal Information means any personal information as that term is defined under applicable privacy legislation, including, without limitation, the Personal Information Protection and Electronic Documents Act (Canada) and any other applicable similar, replacement or supplemental provincial or federal legislation or laws in effect from time to time and without limiting the foregoing, but for greater clarity in this subscription agreement, means information about an identifiable individual, including but not limited to any information about the Subscriber and, if applicable, any Disclosed Principal, and includes information provided by the Subscriber in this subscription agreement. |
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| (n) | The Subscriber is not a “control person” of the Corporation, as that term is defined in the Securities Act (Manitoba), will not become a “control person” of the Corporation by purchasing the Debenture and the number of Warrants subscribed for under this Subscription Agreement, and does not intend to act jointly or in concert with any other person to form a control group in respect of the Corporation. The Subscriber has not and will not enter into any voting trust or similar agreement that has the effect of directing the manner in which the votes attached to the securities purchased pursuant to this Subscription Agreement may be voted following the Closing Date. |
| (o) | The Subscriber will not resell the Debenture, the Warrants or the underlying Common Shares (if applicable) except in accordance with the provisions of applicable Securities Laws and stock exchange rules, if applicable, in the future. |
| (p) | The Subscriber acknowledges that the Corporation may complete additional financings in the future in order to develop the proposed business of the Corporation and to fund its ongoing development; that there is no assurance that such financings will be available and, if available, on reasonable terms; any such future financings may have a dilutive effect on current securityholders, including the Subscriber; that if such future financings are not available, the Corporation may be unable to fund its ongoing development and the lack of capital resources may result in the failure of its business venture. |
| (q) | The Subscriber acknowledges and agrees that, other than as set forth in the Term Sheet, all costs incurred by the Subscriber (including any fees and disbursements of any special counsel retained by the Subscriber) relating to the sale of the Debenture and Warrants to the Subscriber shall be borne by the Subscriber. |
| (r) | The Subscriber acknowledges that all warranties, conditions, representations or stipulations, whether express or implied and whether arising hereunder or under a prior agreement or statement or by statute or at common law, are expressly those of the Corporation. The Subscriber acknowledges that no information or representation concerning the Corporation has been provided to the Subscriber by the Corporation other than those contained in this Subscription Agreement, and that the Subscriber is relying entirely upon this Subscription Agreement for any representations or warranties in relation to the Corporation. |
| 11. | Reliance on Representations, Warranties, Covenants and Acknowledgements. The Subscriber acknowledges and agrees that the representations, warranties, covenants and acknowledgements made by the Subscriber in this Subscription Agreement are made with the intention that they may be relied upon by the Corporation and its counsel in determining the Subscriber's eligibility (and, if applicable, the eligibility of others for whom the Subscriber is contracting hereunder) to purchase the Debenture and the Warrants under Securities Laws. The Subscriber undertakes to immediately notify the Corporation of any change in any statement or other information relating to the Subscriber set forth in this Subscription Agreement that takes place prior to the Closing time. The Subscriber further agrees that by accepting the Debenture and the Warrants, the Subscriber shall be representing and warranting that such representations, warranties, acknowledgements and covenants are true as at the Closing Time with the same force and effect as if they had been made by the Subscriber at the Closing Time. |
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| 12. | Survival of Representations, Warranties and Covenants of the Subscriber. The representations, warranties and covenants of the Subscriber contained in this Subscription Agreement and any certificate or document delivered pursuant to or in connection with this Subscription Agreement shall survive the Closing and, notwithstanding such Closing or any investigation made by or on behalf of the Corporation with respect thereto, and notwithstanding any subsequent disposition by the Subscriber of the Debenture, the Warrants or the underlying Common Shares, and shall continue in full force and effect for the benefit of the Corporation for a period of two years following the Closing Date. |
| 13. | General Authorization to Correct Minor Errors. The Subscriber hereby authorizes the Corporation and its counsel to correct any minor errors in, or complete any minor information missing from any part of the Subscription Agreement and any other acknowledgements, provisions, forms, certificates or documents executed by the Subscriber and delivered to the Corporation in connection with the Offering. |
| 14. | No Regulatory Endorsement. The Subscriber is aware that no stock exchange or governmental agency, authority, regulatory body, Securities Commission or other entity has made any finding or determination as to the merit of investment in, nor has any such stock exchange or governmental agency, authority, regulatory body, Securities Commission, or other entity made any recommendation or endorsement with respect to the Debenture or Warrants. |
| 15. | Legal and Tax Advice. The Subscriber acknowledges and agrees that it is solely responsible for obtaining such legal advice and tax advice as it considers appropriate in connection with the execution, delivery and performance by it of this Subscription Agreement and the completion of the transactions contemplated hereby. |
| 16. | No Revocation. The Subscriber, on its own behalf and, if applicable, on the behalf of others for whom it is contracting hereunder, agrees that this offer is made for valuable consideration and may not be withdrawn, cancelled, terminated or revoked by the Subscriber on its own behalf and, if applicable, on behalf of others for whom it is contracting hereunder, without the consent of the Corporation. |
| 17. | Indemnity. The Subscriber agrees to indemnify and hold harmless the Corporation and its directors, officers, employees, agents, advisers and shareholders from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, law suit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Subscriber contained herein or in any document furnished by the Subscriber to the Corporation in connection herewith being untrue in any material respect or any breach or failure by the Subscriber to comply with any covenant or agreement made by the Subscriber herein or in any document furnished by the Subscriber to the Corporation in connection herewith. The Subscriber represents and warrants that it has the authority to provide the consents and acknowledgements set out in this paragraph on behalf of all beneficial purchasers. |
| 18. | Assignment. The terms and provisions of this Subscription Agreement shall be binding upon and enure to the benefit of the Subscriber, the Corporation and their respective successors and assigns; provided that, except for the assignment by a Subscriber who is acting as nominee or agent to the beneficial owner and as otherwise herein provided, this Subscription Agreement shall not be assignable by any party without the prior written consent of the other parties. |
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| 19. | Governing Law. This Subscription Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. The Subscriber on its own behalf and, if applicable, on behalf of others for whom it is contracting hereunder, hereby irrevocably attorns to the jurisdiction of the courts of the Province of Ontario with respect to any matters arising out of this Subscription Agreement. |
| 20. | Facsimile Subscriptions and Counterparts. The Corporation shall be entitled to rely on electronic delivery or delivery by facsimile machine of an executed copy of this Subscription Agreement, including the completed schedules hereto, and acceptance by the Corporation of such electronic or facsimile copy shall be legally effective to create a valid and binding agreement between the Subscriber and the Corporation in accordance with the terms hereof. This Subscription Agreement may be executed in any number of counterparts, each of which when delivered, either in original, electronic or facsimile form, shall be deemed to be an original and all of which together shall constitute one and the same document. If less than a complete copy of this Subscription Agreement is delivered to the Corporation, the Corporation and its advisors are entitled to assume that the Subscriber accepts and agrees to all the terms and conditions of the pages not delivered, unaltered. |
| 21. | Entire Agreement and Modification. This Subscription Agreement (including the schedules hereto) contains the entire agreement of the parties hereto relating to the subject matter hereof and there are no representations, covenants or other agreements relating to the subject matter hereof except as stated or referred to herein. Subject to the terms hereof, neither this Subscription Agreement nor any provision hereof shall be modified, changed, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought. |
| 22. | Headings. The division of this Subscription Agreement into Articles, Sections, Schedules and other subdivisions and the inclusion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Subscription Agreement. The headings in this Subscription Agreement are not intended to be full or precise descriptions of the text to which they refer. Unless something in the subject matter or context is inconsistent therewith, references herein to an Article, Section, Subsection, paragraph, clause or Schedule are to the applicable article, section, subsection, paragraph, clause or schedule of this Subscription Agreement. |
| 23. | Time of Essence. Time is of the essence of this Subscription Agreement. |
| 24. | Effective Date. This Subscription Agreement is intended to and shall take effect on the Closing Date, notwithstanding its actual date of execution or delivery by any of the parties. |
| 25. | Currency. Except if specifically stated otherwise, all dollar amounts herein are in Canadian dollars. |
| 26. | Gender and Number. Words importing the singular number only shall include the plural and vice versa, and words importing the masculine gender shall include the feminine gender and vice versa. |
| 27. | Severability. If any one or more of the provisions contained in this Subscription Agreement should be invalid, illegal or unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such provision or provisions shall not in any way be affected or impaired thereby in any other jurisdiction and the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless in either case as a result of such determination this Subscription Agreement would fail of its essential purpose. |
| 28. | Language. The parties hereto acknowledge and confirm that they have requested that this Subscription Agreement as well as all notices and other documents contemplated hereby be drawn up in the English language |
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SCHEDULE “A”
United States Accredited
Investor Representation Letter
This United States Accredited Investor Representation Letter is being delivered in connection with the execution and delivery of the Subscription Agreement of the undersigned purchaser (the “Purchaser”) in connection with the issuance of a debenture (the “Debenture”) and warrants ("Warrants") of Snow Lake Resources Ltd. (the “Corporation”). Capitalized terms used herein and not defined herein will have the meanings ascribed thereto in the Subscription Agreement. The Purchaser represents, warrants and covenants (which representations, warranties and covenants will survive the Closing Date) on its own behalf and, if applicable, on behalf of any beneficial purchaser for whom the Purchaser is contracting hereunder to the Corporation and acknowledges that the Corporation and its respective counsel are relying thereon that:
| (a) | The Purchaser understands and acknowledges that the Debenture and Warrants have not been and will not be registered under the U.S. Securities Act or the securities laws of any state of the United States, and that the offer and sale of the Debenture and Warrants to it are being made in reliance upon the exemption from registration provided by Regulation D under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) and similar exemptions under applicable state securities laws. |
| (a) | The Purchaser is an “accredited investor” as defined in Rule 501(a) of Regulation D under the U.S. Securities Act (a “U.S. Accredited Investor”) and has executed and delivered to the Corporation Appendix “1” and, if applicable, Appendix “2”, to this Schedule “A” and is acquiring the Debenture and Warrants for its own account and not on behalf of any other person or for the account of a U.S. Accredited Investor with respect to which it exercises sole investment discretion and, in either case, not with a view to any resale, distribution or other disposition of the Debenture and Warrants in violation of United States federal or state securities laws. |
| (b) | The Purchaser acknowledges that it has not purchased the Debenture and Warrantsas a result of any “directed selling efforts” (as defined in Regulation S under the U.S. Securities Act (“Regulation S”) or any “general solicitation” or “general advertising” (as those terms are used in Regulation D under the U.S. Securities Act), including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or on the Internet, or broadcast over radio or television, or the internet, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising. |
| (c) | The Purchaser understands and acknowledges that the Debenture and Warrants will be “restricted securities” within the meaning of Rule 144(a)(3) under the U.S. Securities Act, and agrees that if it decides to offer, sell, pledge or otherwise transfer any of the Debenture and Warants, it will not offer, sell, pledge or otherwise transfer any of such securities, directly or indirectly, unless the transfer is: |
| (i) | to the Corporation, or a subsidiary thereof (though the Corporation or its subsidiaries are under no obligation to purchase any such Debenture and Warrants); |
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| (ii) | made outside the United States in accordance with Rule 904 of Regulation S and in compliance with applicable local laws and regulations; |
| (iii) | made in compliance with the exemption from registration under the U.S. Securities Act provided by Rule 144 under the U.S. Securities Act, if available or Rule 144A under the U.S. Securities Act, if available; |
| (iv) | in another transaction that does not require registration under the U.S. Securities Act, and the holder of the Debenture and Warrants has furnished to the Corporation an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Corporation to such effect; or |
| (v) | pursuant to an effective registration statement under the U.S. Securities Act, and in each case in compliance with any applicable state securities laws in the United States; |
| (d) | Upon the original issuance of the Debenture and Warrants and until such time as is no longer required under applicable requirements of the U.S. Securities Act or applicable state securities laws, all certificates representing the Debenture and Warrants sold in the United States to Accredited Investors, and all certificates issued in exchange therefor or in substitution thereof, shall bear a legend substantially in the following form: |
“THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE ON CONVERSION HEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR U.S. STATE SECURITIES LAWS. THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO SNOW LAKE RESOURCES LTD. (THE “CORPORATION”), (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS, (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES ACT PROVIDED BY (I) RULE 144 THEREUNDER IF AVAILABLE OR (II) RULE 144A THEREUNDER, IF AVAILABLE, AND IN EACH CASE IN ACCORDANCE WITH APPLICABLE U.S. STATE SECURITIES LAWS, (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT, PROVIDED THAT, IN THE CASE OF TRANSFERS PURSUANT TO (C)(I) OR (D) ABOVE, THE HOLDER HAS, PRIOR TO SUCH TRANSFER, FURNISHED TO THE CORPORATION AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE CORPORATION. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”
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provided, that if, the Debenture are being sold in compliance with the requirements of Rule 904 of Regulation S and in compliance with applicable local laws and regulations, the above legend may be removed by providing a declaration to the Corporation and to the transfer agent for the Corporation, in the form attached as Schedule “B” to this Subscription Agreement (or as the Corporation may prescribe from time to time); provided further, if any of the Debenture are being sold pursuant to Rule 144 under the U.S. Securities Act, if available, the legend may be removed by delivering to the Corporation and the transfer agent for the Corporation an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Corporation, to the effect that the legend is no longer required under applicable requirements of the U.S. Securities Act. Notwithstanding the foregoing, the transfer agent for the Corporation may impose additional requirements for the removal of legends from securities sold in compliance with Rule 904 of Regulation S in the future;
| (e) | Warrants may not be exercised in the United States or by or on behalf of a U.S. Person unless registered under the U.S. Securities Act and any applicable state securities laws unless an exemption from such registration requirements is available and upon the original issuance of the Warrants, and until such time as it is no longer required under applicable requirements of the U.S. Securities Act or applicable state securities laws, all certificates representing the Warrants and all certificates issued in exchange therefor or in substitution thereof, shall bear the following legend: |
"THIS WARRANT AND THE SECURITIES DELIVERABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF A "U.S. PERSON" OR A PERSON IN THE UNITED STATES UNLESS THE WARRANT AND THE UNDERLYING SECURITIES HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT."
| (f) | The Purchaser consents to the Corporation making a notation on its records or giving instructions to any transfer agent of the Debenture and Warrants in order to implement the restrictions on transfer set forth and described herein; |
| (g) | If required by applicable securities legislation, regulatory policy or order or by any securities commission, stock exchange or other regulatory authority, the Purchaser will execute, deliver, file and otherwise assist the Corporation in filing reports, questionnaires, undertakings and other documents with respect to the ownership of the Debenture and Warrants; |
| (h) | The Purchaser acknowledges that neither the Corporation nor any person representing the Corporation has made any representation to it with respect to the Corporation or the offering or sale of the Debenture and Warrants, other than the information contained or incorporated by reference in this Subscription Agreement, which has been delivered to it and upon which it is relying in making its investment decision with respect to the Debenture and Warrants; |
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| (i) | The Purchaser understands that the Corporation is not obligated to file and has no present intention of filing with the U.S. Securities and Exchange Commission or with any state securities administrator any registration statement in respect of resales of the Debenture or Warrants in the United States, and acknowledges that there are substantial restrictions on the transferability of the Debenture and Warrants and underlying shares and that it may not be possible for the Purchaser to readily liquidate his, her or its investment in the case of an emergency at any time; |
| (j) | The Purchaser understands and agrees that the financial statements of the Corporation have been prepared in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board, and are subject to Canadian auditing and auditor independence standards, which differ in some respects from United States generally accepted accounting principles, and United States auditing and auditor independence standards, respectively, and thus may not be comparable to financial statements of United States companies; |
| (k) | The Purchaser understands and agrees that there may be material tax consequences to it of an acquisition, holding, exercise or disposition of the Debenture and/or Warrants. The Corporation gives no opinion and makes no representation with respect to the tax consequences to the Purchaser under United States, state, local or foreign tax law of its acquisition, holding, exercise or disposition of the Debenture or Warrants, and the Purchaser acknowledges that it is solely responsible for determining the tax consequences to it with respect to its investment, including whether the Corporation will at any given time be deemed a “passive foreign investment company” within the meaning of Section 1297 of the United States Internal Revenue Code of 1986, as amended; |
| (l) | The Purchaser is aware that its ability to enforce civil liabilities under the United States federal securities laws may be affected adversely by, among other things: (i) the fact that the Corporation is organized under the laws of Ontario, Canada; (ii) some or all of the directors and officers may be residents of countries other than the United States; and (iii) all or a substantial portion of the assets of the Corporation and such persons may be located outside the United States; |
| (m) | The office or other address of the Purchaser at which the Purchaser received and accepted the offer to purchase the Debenture and Warrants is the address listed as the “Purchaser’s Residential Address” on the face page of the Subscription Agreement; |
| (n) | That the funds representing the Subscription Price which will be advanced by the Purchaser to the Corporation, hereunder will not represent proceeds of crime for the purposes of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the “PATRIOT Act”) and the Purchaser acknowledges that the Corporation may in the future be required by law to disclose the Purchaser’s name and other information relating to the subscription agreement and the Purchaser’s subscription hereunder, on a confidential basis, pursuant to the PATRIOT Act. No portion of the Aggregate Subscription Price to be provided by the Purchaser (i) has been or will be derived from or related to any activity that is deemed criminal under the laws of the United States, or any other jurisdiction, or (ii) is being tendered on behalf of a person or entity who has not been identified to or by the Purchaser, and it shall promptly notify the Corporation if the Purchaser discovers that any of such representations ceases to be true and provide the Corporation with appropriate information in connection therewith; and |
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| (o) | The provisions of this United States Accredited Investor Representation Letter will be true and correct both as of the date of execution of this Subscription Agreement and as of the Closing Date. |
The Purchaser undertakes to notify the Corporation immediately of any change in any representation, warranty or other information relating to the Purchaser or, if applicable, the beneficial purchaser set forth herein, which takes place prior to the Closing Date.
DATED at __________________________ this ___ day of _______________, 2020.
| Name of Entity | |
| Type of Entity | |
| Signature of Person Signing | |
| Print or Type Name and Title of Person Signing |
24
APPENDIX 1 TO SCHEDULE “A”
FORM OF U.S. ACCREDITED INVESTOR CERTIFICATE
In connection with the purchase of the Debenture and Warrants of Snow Lake Resources Ltd. (the "Corporation") by the undersigned, as an integral part of the accompanying Subscription Agreement, the undersigned hereby represents and warrants to the Corporation that the undersigned, and each beneficial purchaser, if any, on whose behalf the undersigned is subscribing for the Debenture and Warrants, satisfies one or more of the following accredited investor categories, within the meaning of Rule 501(a) of Regulation D under the U.S. Securities Act (please write “PUR” for the undersigned Purchaser, and “BP” for each beneficial purchaser, if any, on each line that applies):
| Category 1. | A bank, as defined in Section 3(a)(2) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the United States Securities Exchange Act of 1934, as amended; an insurance company as defined in Section 2(a)(13) of the U.S. Securities Act; an investment company registered under the United States Investment Company Act of 1940, as amended; a business development company as defined in Section 2(a)(48) of the United States Investment Company Act of 1940, as amended; a small business investment company licensed by the U.S. Small Business Administration under Section 301 (c) or (d) of the United States Small Business Investment Act of 1958, as amended; a plan established and maintained by a state, its political subdivisions or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, with total assets in excess of US$5,000,000; or an employee benefit plan within the meaning of the United States Employee Retirement Income Security Act of 1974, as amended, in which the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or an employee benefit plan with total assets in excess of US$5,000,000 or, if a self-directed plan, with investment decisions made solely by persons who are “accredited investors” (as such term is defined in Rule 501(a) of Regulation D under the U.S. Securities Act); or | |
| Category 2 | A private business development company as defined in Section 202(a)(22) of the United States Investment Advisers Act of 1940, as amended; or | |
| Category 3. | An organization described in Section 501(c)(3) of the United States Internal Revenue Code of 1986, as amended, a corporation, a Massachusetts or similar business trust, a limited liability company or a partnership, not formed for the specific purpose of acquiring the Debenture and Warrants offered, with total assets in excess of US$5,000,000; or |
| Category 4. | A director or executive officer of the Corporation; or |
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| Category 5. | A natural person with individual “net worth”, or joint “net worth” with his or her spouse, at the time of purchase in excess of US$1,000,000;
Note: For purposes of calculating “net worth” under this paragraph:
(i) The person’s primary residence shall not be included as an asset;
(ii) Indebtedness that is secured by the person's primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of the sale of the Debenture and Warrants exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and (iii) Indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the primary residence at the time of the sale of the Debenture and Warrants shall be included as a liability; or | |
| Category 6. | A natural person who had an individual income in excess of US$200,000 in each of the last two years or joint income with his or her spouse in excess of US$300,000 in each of those years, and who reasonably expects to reach the same income level in the current year; or | |
| Category 7. | A trust, with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the Debenture and Warrants, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the U.S. Securities Act. | |
| Category 8. | An entity in which all of the equity owners are Accredited Investors. |
The Purchaser acknowledges that if it is an individual U.S. Accredited Investor that is relying on the net worth or income eligibility qualifications set forth in Category 5 or Category 6 above, such Purchaser shall also complete and deliver to the Corporation a U.S. Individual Accredited Investor Questionnaire in the form attached as Appendix 2 to this Schedule “A”.
Terms used herein but not otherwise defined have the meaning ascribed hereto in the accompanying Subscription Agreement.
| Dated: | Signed: | |||
|
Print the Name of Purchaser | ||||
|
Print Name and Title of Authorized Signing Officer | ||||
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APPENDIX 2 TO SCHEDULE “A”
U.S. INDIVIDUAL ACCREDITED INVESTOR QUESTIONNAIRE
I understand that in order to be accepted as an “accredited investor”, I must satisfy certain of the following standards. The undersigned hereby represents and warrants to Snow Lake Resources Ltd. (the “Corporation”) as follows:
GENERAL INFORMATION REQUIRED OF EACH PROSPECTIVE INVESTOR:
1. General Information
| Name(s): | _______________________ | _______________________ |
| Principal Residence: | _______________________ | _______________________ |
| _______________________ | _______________________ | |
| _______________________ | _______________________ | |
| Business Hours Telephone: | _______________________ | _______________________ |
| Home Telephone: | _______________________ | _______________________ |
| Email: | _______________________ | _______________________ |
2. Financial Status. Please answer the following questions concerning your financial status by marking
the appropriate box and filling in the blanks.
2.1 Does your individual or joint (together with your spouse) net worth exceed US$1,000,000? For the purpose of calculating your individual or joint (together with your spouse) net worth, (i) your primary residence shall not be included as an asset, (ii) indebtedness that is secured by your primary residence, up to the estimated fair market value of the primary residence as of the date hereof, shall not be included as a liability (except that if the amount of such indebtedness outstanding as of the date hereof exceeds the amount outstanding 60 days before the date hereof, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability) and (iii) indebtedness that is secured by your primary residence in excess of the estimated fair market value of your primary residence as of the date hereof shall be included as a liability:
| ☐ Yes | ☐ No |
2.1.1 If you answered “No” to Question 2.1, please indicate the actual amount of individual or joint (together with your spouse) net worth (calculated in accordance with the instructions provided in Question 2.1 above).
US$ ______________
2.2 Please indicate, for each of the two most recent years, what your individual income (or joint income together with your spouse) was, and for the current year what your individual income (or joint income together with your spouse) is expected to be.
| 2017 | Individual | Joint | |||
| 2018 | Individual | Joint | |||
| 2020 | Individual | Joint |
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3. Financial Background. Please respond to the following questions, supplying as much detail as possible in order to make your answers complete.
3.1 Indicate by check mark which of the following categories best describes the extent of your prior experience in the areas of investment listed below:
| No Experience | Some Experience | Substantial Experience |
| ☐ | ☐ |
☐ Marketable Securities |
| ☐ | ☐ | ☐ Securities for which no public market exists |
3.2 For those investments for which you indicated “Substantial Experience” or “Some Experience” in question 3.1 above, please answer the following additional question:
How often do you make your own investment decisions with respect to such investments?
3.3 Do you have adequate means of providing for your current needs and personal contingencies and have no need for liquidity in such investments?
| ☐ Yes | ☐ No |
4. Prior Purchases of Securities. Have you made prior purchases of securities sold in reliance on the private offering exemption from registration under the U.S. Securities Act:
| ☐ Yes | ☐ No |
I hereby represent and warrant that:
(a) I, individually or together with my spouse, have a net worth (i.e., a total assets in excess of total liabilities, as calculated in accordance with the instructions provided in Question 2.1 above) of at least US$1,000,000; or
(b) I, individually (without my spouse), have had an income of not less than US$200,000 (or, jointly with my spouse, US$300,000) during each of the last two years, and reasonably expect that I will have an income of at least US$200,000 (or US$300,000, together with my spouse) during the present year.
The foregoing representations and warranties and all other information which I have provided to the Corporation concerning myself and my financial condition are true and accurate as of the date hereof. If in any respect, such representations, warranties, or information shall not be true and accurate, I will give written notice of such fact to the Corporation specifying which representations, warranties or information are not true and accurate, and the reasons therefor.
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I understand that the information contained herein is being furnished by me in order for the Corporation to determine my suitability as an “accredited investor”, may be accepted by the Corporation in light of the requirements of Regulation D under the U.S. Securities Act and that the Corporation will rely on the information contained herein for purposes of such determination.
IN WITNESS WHEREOF, the undersigned has executed this U.S. Individual Accredited Investor Questionnaire as of the day of _______________________, 2020.
| Print or Type Name |
| X | |
| Signature |
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SCHEDULE “B”`
FORM OF DECLARATION FOR REMOVAL OF U.S. LEGEND
TO: Snow Lake Resources Ltd. (and any transfer agent for Snow Lake Resources Ltd.)
The undersigned (a) acknowledges that the sale of _____________________ Debenture or ___________ Warrants of Snow Lake Resources Ltd. (the "Issuer") to which this declaration relates, represented by certificate number , is being made in reliance on Rule 904 of Regulation S under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), and (b) certifies that (1) it is not an "affiliate" (as defined in Rule 405 under the U.S. Securities Act) of the Issuer, (2) the offer of such securities was not made to a person in the United States, and either (A) at the time the buy order was originated, the buyer was outside the United States, or the seller and any person acting on its behalf reasonably believe that the buyer was outside the United States, or (B) the transaction was executed on or through the facilities of the Canadian Securities Exchange (or another designated offshore securities market) and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States, (3) neither the seller nor any affiliate of the seller nor any person acting on any of their behalf has engaged or will engage in any "directed selling efforts" in the United States in connection with the offer and sale of such securities, (4) the sale is bona fide and not for the purpose of "washing off" the resale restrictions imposed because the securities are "restricted securities" (as such term is defined in Rule 144(a)(3) under the U.S. Securities Act), (5) the seller does not intend to replace the securities sold in reliance on Rule 904 of Regulation S under the U.S. Securities Act with fungible unrestricted securities, and (6) the contemplated sale is not a transaction, or part of a series of transactions which, although in technical compliance with Regulation S under the U.S. Securities Act, is part of a plan or scheme to evade the registration provisions of the U.S. Securities Act. Terms used herein have the meanings given to them by Regulation S under the U.S. Securities Act.
Dated:
| By:_______________________________________ | |
| Signature | |
| Print name of Signatory | |
| (if different from Purchaser) | |
| Title |
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SCHEDULE “C”
INVESTOR QUESTIONNAIRE
(RESIDENTS OF CANADA AND OFFSHORE)
| TO: | Snow Lake Resources Ltd. (the “Corporation”) |
| RE: | Purchase of Debentures and Warrants of the Corporation |
Capitalized terms used in this Investor Questionnaire and not specifically defined have the meaning ascribed to them in the Subscription Agreement among the Subscriber and the Corporation to which this Schedule C is attached.
In connection with the purchase by the Subscriber (being the undersigned, or if the undersigned is purchasing the Debentures and Warrants as agent on behalf of a disclosed beneficial Subscriber, such beneficial Subscriber, shall be referred herein as the “Subscriber”) of the Debentures and Warrants, the Subscriber hereby represents, warrants and certifies to the Corporation that the Subscriber:
| (i) | is purchasing the Debentures and Warrants as principal (or deemed principal under the terms of National Instrument 45-106 - Prospectus Exemptions adopted by the Canadian Securities Administrators (“NI 45-106”)); |
| (ii) | (A) is resident in or is subject to the laws of one of a province of Canada, please indicate _______________________________ (INSERT NAME OF PROVINCE OF RESIDENCE): |
or
| (B) ☐ is resident in a country other than Canada or the United States; and |
| (iii) | has not been provided with any offering memorandum in connection with the purchase of the Debentures and Warrants. |
PLEASE COMPLETE THE APPROPRIATE EXEMPTION SECTION ON THE FOLLOWING PAGES:
| I. | ACCREDITED INVESTORS who are INDIVIDUALS – staring on page 31. |
| II. | ACCREDITED INVESTORS who are NOT INDIVIDUALS – starting on page 34. |
* * *
[The rest of this page is intentionally left blank.]
31
The Subscriber undertakes to immediately notify the Corporation of any change in any statement or other information relating to the Subscriber set forth in the Subscription Agreement or in this Questionnaire which takes place prior to the Closing.
By completing this certificate, the Subscriber authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable legislation.
DATED as of _______ day of __________________, 2020.
| Print Name of Subscriber (or person signing as agent) | ||
| By: | ||
| Signature | ||
| Title | ||
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I. ACCREDITED INVESTORS who are INDIVIDUALS
In connection with the purchase of the Debentures and Warrants of the Corporation, the Subscriber hereby represents, warrants, covenants and certifies that the Subscriber:
| 1. | has read and fully understands the meaning and the terms and conditions of the category for the initialed criterion of an accredited investor as set out below and confirms that it has reviewed and understands the “Guidance On Accredited Investor Exemptions for Individuals”, and in particular, if the Subscriber is an “accredited investor” by virtue of satisfying paragraph (j), (j.1), (k) or (l) below, it has reviewed and understands the definitions of “financial assets” and “related liabilities”, as applicable, and the other cautionary statements contained in such paragraphs; and |
| 2. | meets one or more of the following criteria: |
YOU MUST COMPLETE FORM 45-106F9, attached as SCHEDULE D
Accredited Investor – (as defined in National Instrument 45-106, and in Ontario, as defined in Section 73.3 of the Securities Act (Ontario) as supplemented by the definition in National Instrument 45-106) includes:
| PLEASE INITIAL APPROPRIATE CATEGORY: | ||
| _______ | (d) a person registered under the securities legislation of a province or territory of Canada as an adviser or dealer, and in Ontario except as otherwise prescribed by applicable regulations, | |
| _______ | (e) an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (d), | |
| _______ | (e.1) an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador), | |
Name of person with whom Subscriber is or was registered: ______________________________
Jurisdiction(s) registered: _________________ Categories of registration:___________________
| ||
| _______ | (j) an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds $1,000,000. | |
| _______ | (j.1) an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5,000,000. | |
| _______ | (k) an individual whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300 000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year. | |
| _______ | (l) an individual who, either alone or with a spouse, has net assets of at least $5,000,000. | |
Guidance On Accredited Investor Exemptions for Individuals
An individual accredited investor is an individual:
| (a) | who, either alone or with a spouse, beneficially owns financial assets (please see the guidance below regarding what financial assets are) having an aggregate realizable value that. before taxes but net of any related liabilities (please see the guidance below regarding what related liabilities are), exceeds $1,000,000; |
33
| (b) | whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year; | |
| (c) | who, either alone or with a spouse, has net assets (please see the guidance below regarding calculating net assets) of at least $5,000,000; and | |
| (d) | who beneficially owns financial assets (please see the guidance below regarding what financial assets are) having an aggregate realizable value that, before taxes but net of any related liabilities (please see the guidance below regarding what related liabilities are), exceeds $5,000,000. |
The monetary thresholds above are intended to create bright-line standards. Subscribers who do not satisfy these monetary thresholds do not qualify as accredited investors.
Spouses
Sections (a), (b) and (c) above are designed to treat spouses as a single investing unit, so that either spouse qualifies as an accredited investor if the combined financial assets of both spouses exceed $1,000,000, the combined net income of both spouses exceeds $300,000, or the combined net assets of both spouses exceed $5,000,000. Section (d) above does not treat spouses as a single investing unit.
If the combined net income of both spouses does not exceed $300,000, but the net income of one of the spouses exceeds $200,000, only the spouse whose net income exceeds $200,000 qualifies as an accredited investor.
Financial Assets and Related Liabilities
For the purposes of Sections (a) and (d) above, “financial assets” means: (1) cash, (2) securities, or (3) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation. These financial assets are generally liquid or relatively easy to liquidate. The value of a subscriber's personal residence is not included in a calculation of financial assets.
The calculation of financial assets must exclude “related liabilities”, meaning: (1) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or (2) liabilities that are secured by financial assets.
As a general matter, it should not be difficult to determine whether financial assets are beneficially owned by an individual, an individual's spouse, or both, in any particular instance. However, in the case where financial assets are held in a trust or in another type of investment vehicle for the benefit of an individual, there may be questions as to whether the individual beneficially owns the financial assets. The following factors are indicative of beneficial ownership of financial assets:
| ● | physical or constructive possession of evidence of ownership of the financial asset; |
| ● | entitlement to receipt of any income generated by the financial asset; |
| ● | risk of loss of the value of the financial asset; and |
| ● | the ability to dispose of the financial asset or otherwise deal with it as the individual sees fit. |
For example, securities held in a self-directed RRSP for the sole benefit of an individual are beneficially owned by that individual.
In general, financial assets in a spousal RRSP can be included for the purposes of the $1,000,000 financial asset test in Section (a) above because Section (a) takes into account financial assets owned beneficially by a spouse. However, financial assets in a spousal RRSP cannot be included for purposes of the $5,000,000 financial asset test in Section (d) above.
Financial assets held in a group RRSP under which the individual does not have the ability to acquire the financial assets and deal with them directly do not meet the beneficial ownership requirements in either Sections (a) or (d) above.
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II. ACCREDITED INVESTORS who are NOT INDIVIDUALS
In connection with the purchase of the Debentures and Warrants of the Corporation, the Subscriber hereby represents, warrants, covenants and certifies that the Subscriber meets one or more of the following criteria:
Accredited Investor – (as defined in National Instrument 45-106, and in Ontario, as defined in Section 73.3 of the Securities Act (Ontario) as supplemented by the definition in National Instrument 45-106) includes:
PLEASE INITIAL APPROPRIATE CATEGORY:
| |
| _______ | (a) except in Ontario, a Canadian financial institution, or a Schedule III bank, |
| _______ | (a.1) in Ontario, a financial institution described in paragraph 1, 2 or 3 of subsection 73.1 (1) of the Securities Act (Ontario), |
| _______ | (b) except in Ontario, the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada), |
| _______ | (b.1) in Ontario, the Business Development Bank of Canada, |
| _______ | (c) except in Ontario, a subsidiary of any person referred to in paragraphs (a) or (b), if the person owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary, |
| _______ | (c.1) in Ontario, a subsidiary of any person or company referred to in clause (a.1) or (b.1), if the person or company owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary, |
| _______ | (d) except in Ontario, a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer, |
| _______ | (d.1) in Ontario, a person or company registered under the securities legislation of a province or territory of Canada as an adviser or dealer, except as otherwise prescribed by the regulations, |
| Jurisdiction(s) registered: ________________ Categories of registration:__________________ | |
| _______ | (f) except in Ontario, the Government of Canada or a jurisdiction of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada, |
| _______ | (f.1) in Ontario, the Government of Canada, the government of a province or territory of Canada, or any Crown corporation, agency or wholly owned entity of the Government of Canada or of the government of a province or territory of Canada, |
| _______ | (g) a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l'île de Montréal or an intermunicipal management board in Québec, |
| _______ | (h) any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government, |
| _______ | (i) except in Ontario, a pension fund that is regulated by the Office of the Superintendent of Financial Institutions (Canada), a pension commission or similar regulatory authority of a jurisdiction of Canada, |
| _______ | (i.1) in Ontario, a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada) or a pension commission or similar regulatory authority of a province or territory of Canada, |
| Jurisdiction(s) registered: _________________ Registration number(s):____________________ |
35
| _______ | (m) a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements, |
| Type of entity: ________________ Jurisdiction and date of formation: _____________________ | |
| _______ |
(n) an investment fund that distributes or has distributed its securities only to:
(i) a person that is or was an accredited investor at the time of the distribution,
(ii) a person that acquires or acquired securities in the circumstances referred to in sections 2.10 [Minimum amount investment], or 2.19 [Additional investment in investment funds], or
(iii) a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 [Investment fund reinvestment],
|
| _______ | (o) an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt, |
| _______ | (p) a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be, |
| Jurisdiction(s) registered: __________________ Registration number(s):____________________ | |
| _______ | (q) a person acting on behalf of a fully managed account managed by that person, if that person is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction, |
|
Jurisdiction(s) registered or authorized: _____________________________________
Categories of registration: _________________________________________________
| |
| _______ | (r) a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded, |
|
Registration number(s) assigned to subscriber: _____________________________________
Name of eligibility advisor or registered advisor: ___________________________________
Jurisdiction(s) registered: _________________ Categories of registration:___________________ |
| _______ | (s) an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (d) paragraph (i) [and in Ontario, paragraphs (a.1) to (d.1) or paragraph (i.1)] in form and function, |
| Jurisdiction organized: _____________________ Type of entity: _________________________ | |
| _______ | (t) a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors [If this is your applicable category, each owner of interest must individually complete and submit to the Company its own copy of this Certificate of Accredited Investor], |
|
Name(s) of owners of interest: ______________________________________________
Type of entity (if applicable): _______________________________________________
Categories of accredited investor: ___________________________________________ |
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| _______ | (u) an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser, |
|
Name of advisor: _______________________ Jurisdiction(s) registered: ____________________
Categories of registration:_________________ Basis of exemption: _________________________
| |
| _______ | (v) a person that is recognized or designated by the securities regulatory authority or, except in Ontario and Québec, the regulator as an accredited investor, |
| _______ | (v.1) in Ontario, a person or company that is recognized or designated by the Commission as an accredited investor, |
| Jurisdiction(s) recognized or designated: ___________________________________________ | |
| _______ | (w) a trust established by an accredited investor for the benefit of the accredited investor's family members of which a majority of the trustees are accredited investors and all of the beneficiaries are the accredited investor's spouse, a former spouse of the accredited investor or a parent, grandparent, brother, sister, child or grandchild of that accredited investor, of that accredited investor's spouse or of that accredited investor's former spouse. |
|
Name(s) of settlor: _____________________________________________________________
Name(s) of trustees: ____________________________________________________________
Categories of accredited investor: ________________________________________________
Categories of beneficiaries: _____________________________________________________ |
Guidance On Accredited Investor Exemptions for Corporations, Trusts and Other Entities
Accredited investors that are corporations, trusts or other entities include:
| (a) | a corporation, trust or other entity, other than an investment fund, that has net assets (please see the guidance below regarding calculating net assets) of at least $5,000,000 as shown on its most recently prepared financial statements in accordance with applicable generally accepted accounting principles and that has not been created or used solely to purchase or hold securities as an accredited investor; | |
| (b) | a corporation, trust or other entity in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors; and | |
| (c) | a trust established by an accredited investor for the benefit of the accredited investor's family members of which a majority of the trustees are accredited investors and all of the beneficiaries are the accredited investor's spouse, a former spouse of the accredited investor or a parent, grandparent, brother, sister, child or grandchild of that accredited investor, of that accredited investor's spouse or of that accredited investor's former spouse. |
37
General Guidance on Terms Used in this Questionnaire
For the purposes of the Investor Questionnaire:
| (a) | an issuer is “affiliated” with another issuer if |
| (i) | one of them is the subsidiary of the other, or |
| (ii) | each of them is controlled by the same person; |
| (b) | “control person” means |
| (i) | a person who holds a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer, or |
| (ii) | each person in a combination of persons, acting in concert by virtue of an agreement, arrangement, commitment or understanding, which holds in total a sufficient number of the voting rights attached to all outstanding voting securities of an issuer to affect materially the control of the issuer, |
and, if a person or combination of persons holds more than 20% of the voting rights attached to all outstanding voting securities of an issuer, the person or combination of persons is deemed, in the absence of evidence to the contrary, to hold a sufficient number of the voting rights to affect materially the control of the issuer;
| (c) | “director” means |
| (i) | a member of the board of directors of a company or an individual who performs similar functions for a company, and |
| (ii) | with respect to a person that is not a company, an individual who performs functions similar to those of a director of a company; |
| (d) | “eligibility adviser” means |
| (i) | a person that is registered as an investment dealer and authorized to give advice with respect to the type of security being distributed; and |
| (ii) | in Saskatchewan or Manitoba, also means a lawyer who is a practicing member in good standing with a law society of a jurisdiction of Canada or a public accountant who is a member in good standing of an institute or association of chartered accountants, certified general accountants or certified management accountants in a jurisdiction of Canada provided that the lawyer or public accountant must not: |
| (A) | have a professional, business or personal relationship with the issuer, or any of its directors, executive officers, founders or control persons, and |
| (B) | have acted for or been retained personally or otherwise as an employee, executive officer, director, associate or partner of a person that has acted for or been retained by the issuer or any of its directors, executive officers, founders or control persons within the previous 12 months; |
| (e) | “executive officer” means, for an issuer, an individual who is |
| (i) | a chair, vice-chair or president, |
| (ii) | a vice-president in charge of a principal business unit, division or function including sales, finance or production, or |
| (iii) | performing a policy-making function in respect of the issuer; |
| (f) | “financial assets” means |
| (i) | cash, |
| (ii) | securities, or |
| (iii) | a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation; |
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| (g) | “foreign jurisdiction” means a country other than Canada or a political subdivision of a country other than Canada; |
| (h) | “founder” means, in respect of an issuer, a person who, |
| (i) | acting alone, in conjunction, or in concert with one or more persons, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of the issuer, and |
| (ii) | at the time of the distribution or trade is actively involved in the business of the issuer; |
| (i) | “fully managed account” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client's express consent to a transaction; |
| (j) | “individual” means a natural person, but does not include |
| (i) | a partnership, unincorporated association, unincorporated syndicate, unincorporated organization or trust, or |
| (ii) | a natural person in the person's capacity as a trustee, executor, administrator or personal or other legal representative; |
| (k) | “investment fund” means a mutual fund or a non-redeemable investment fund, and, for great certainty in British Columbia, includes an employee venture capital corporation and a venture capital corporation as such terms are defined in National Instrument 81-106 Investment Fund Continuous Disclosure; |
| (l) | “jurisdiction” or “jurisdiction of Canada” means a province or territory of Canada except when used in the term foreign jurisdiction; |
| (m) | “non-redeemable investment fund” means an issuer: |
| (i) | whose primary purpose is to invest money provided by its securityholders; |
| (ii) | that does not invest |
| (A) | for the purpose of exercising or seeking to exercise control of an issuer, other than an issuer that is a mutual fund or a non-redeemable investment fund, or |
| (B) | for the purpose of being actively involved in the management of any issuer in which it invests, other than an issuer that is a mutual fund or a non-redeemable investment fund, and |
| (iii) | that is not a mutual fund; |
| (n) | “person” includes |
| (i) | an individual; |
| (ii) | a corporation; |
| (iii) | a partnership, trust, fund and an association, syndicate, organization or other organized group of persons, whether incorporated or not; and |
| (iv) | an individual or other person in that person's capacity as a trustee, executor, administrator or personal or other legal representative; |
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| (o) | “related liabilities” means |
| (i) | liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or |
| (ii) | liabilities that are secured by financial assets; and |
| (p) | “spouse” means, an individual who, |
| (i) | is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual, |
| (ii) | is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or |
| (iii) | in Alberta, is an individual referred to in paragraph (i) or (ii), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta). |
Net Assets
“Net assets” means all of the subscriber's total assets minus all of the subscriber's total liabilities. The minimum net asset threshold of $5,000,000 specified in Section (a) above must be shown on the entity's most recently prepared financial statements. The financial statements must be prepared in accordance with applicable generally accepted accounting principles.
The above representations and warranties will be true and correct both as of the execution of this certificate and as of the closing time of the purchase and sale of the Securities and acknowledges that they will survive the completion of the issue of the Securities.
The Subscriber acknowledges that the foregoing representations and warranties are made by the undersigned with the intent that they be relied upon in determining the suitability of the Subscriber as a Subscriber of the Securities and that this certificate is incorporated into and forms part of the Agreement and the undersigned undertakes to immediately notify the Corporation of any change in any statement or other information relating to the Subscriber set forth herein which takes place prior to the closing time of the purchase and sale of the Securities.
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SCHEDULE D
Form 45-106F9
Risk Acknowledgement Form of Individual Accredited Investors
|
WARNING! This investment is risky. Don't invest unless you can afford to lose all the money you pay for this investment. | |
| SECTION 1 TO BE COMPLETED BY THE ISSUER OR SELLING SECURITY HOLDER | |
| 1. About your investment | |
| Type of securities: Debentures of the Issuer and Warrants | Issuer: Snow Lake Resources Ltd. (the “Issuer”) |
| Purchased from: The Issuer. | |
| SECTIONS 2 TO 4 TO BE COMPLETED BY THE PURCHASER | |
| 2. Risk acknowledgement | ||
| This investment is risky. Initial that you understand that: | Your initials | |
| Risk of loss – You could lose your entire investment of $__________. [Instruction: Insert the total dollar amount of the investment.] | ||
| Liquidity risk – You may not be able to sell your investment quickly – or at all. | ||
| Lack of information – You may receive little or no information about your investment. | ||
| Lack of advice – You will not receive advice from the salesperson about whether this investment is suitable for you unless the salesperson is registered. The salesperson is the person who meets with, or provides information to, you about making this investment. To check whether the salesperson is registered, go to www.aretheyregistered.ca. | ||
| 3. Accredited investor status | ||
| You must meet at least one of the following criteria to be able to make this investment. Initial the statement that applies to you. (You may initial more than one statement.) The person identified in section 6 is responsible for ensuring that you meet the definition of accredited investor. That person, or the salesperson identified in section 5, can help you if you have questions about whether you meet these criteria. | Your initials | |
| ● | Your net income before taxes was more than $200,000 in each of the 2 most recent calendar years, and you expect it to be more than $200,000 in the current calendar year. (You can find your net income before taxes on your personal income tax return.) | |
| ● | Your net income before taxes combined with your spouse's was more than $300,000 in each of the 2 most recent calendar years, and you expect your combined net income before taxes to be more than $300,000 in the current calendar year. | |
| ● | Either alone or with your spouse, you own more than $1 million in cash and securities, after subtracting any debt related to the cash and securities. | |
| ● | Either alone or with your spouse, you have net assets worth more than $5 million. (Your net assets are your total assets (including real estate) minus your total debt.) | |
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| 4. Your name and signature | |
| By signing this form, you confirm that you have read this form and you understand the risks of making this investment as identified in this form. | |
| First and last name (please print): | |
| Signature: | Date: |
| SECTION 5 TO BE COMPLETED BY THE SALESPERSON | |
| 5. Salesperson information | |
| [Instruction: The salesperson is the person who meets with, or provides information to, the purchaser with respect to making this investment. That could include a representative of the issuer or selling security holder, a registrant or a person who is exempt from the registration requirement.] | |
| First and last name of salesperson (please print): | |
| Telephone: | Email: |
| Name of firm (if registered): | |
| SECTION 6 TO BE COMPLETED BY THE ISSUER OR SELLING SECURITY HOLDER | |
| 6. For more information about this investment | |
| For investment in a non-investment fund | |
|
Snow Lake Resources Ltd. 242 Hargrave St #1700, Winnipeg, MB R3C 0V1 Canada Winnipeg, Manitoba R3B 3L3 Attention: Derek Knight, Vice President Corporate Development Email: derek@snowlakeresources.com | |
| For more information about prospectus exemptions, contact your local securities regulator. You can find contact information at www.securities-administrators.ca. | |
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SCHEDULE “E”
INTERNATIONAL INVESTOR CERTIFICATE
FOR SUBSCRIBERS RESIDENT OUTSIDE OF CANADA AND THE UNITED STATES
| TO: | Snow Lake Resources Ltd. (the “Company”) |
The undersigned (the “Subscriber”) represents covenants and certifies to the Company that:
| i. | the Subscriber (and if the Subscriber is acting as agent for a disclosed principal, such disclosed principal) is not resident in Canada or the United States or subject to applicable securities laws of Canada or the United States; |
| ii. | the issuance of the securities in the capital of the Corporation under this agreement (the “Securities”) by the Corporation to the Subscriber (or its disclosed principal, if any) may be effected by the Corporation without the necessity of the filing of any document with or obtaining any approval from or effecting any registration with any governmental entity or similar regulatory authority having jurisdiction over the Subscriber (or its disclosed principal, if any); |
| iii. | the Subscriber is knowledgeable of, or has been independently advised as to, the applicable securities laws of the jurisdiction which would apply to this subscription, if there are any; |
| iv. | the issuance of the Securities to the Subscriber (and if the Subscriber is acting as agent for a disclosed principal, such disclosed principal) complies with the requirements of all applicable laws in the jurisdiction of its residence; |
| v. | the applicable securities laws do not require the Corporation to register the Securities, file a prospectus or similar document, or make any filings or disclosures or seek any approvals of any kind whatsoever from any regulatory authority of any kind whatsoever in the international jurisdiction; |
| vi. | the purchase of the Securities by the Subscriber, and (if applicable) each disclosed beneficial subscriber, does not require the Corporation to become subject to regulation in the Subscriber’s or disclosed beneficial subscriber's jurisdiction, nor does it require the Corporation to attorn to the jurisdiction of any governmental authority or regulator in such jurisdiction or require any translation of documents by the Corporation; |
| vii. | the Subscriber will not sell, transfer or dispose of the Securities except in accordance with all applicable laws, including applicable securities laws of Canada and the United States, and the Subscriber acknowledges that the Corporation shall have no obligation to register any such purported sale, transfer or disposition which violates applicable Canadian or United States securities laws; and |
| viii. | the Subscriber will provide such evidence of compliance with all such matters as the Corporation or its counsel may request. |
The Subscriber acknowledges that the Corporation is relying on this certificate to determine the Subscriber’s suitability as a purchaser of securities of the Corporation. The Subscriber agrees that the representations, covenants and certifications contained to this certificate shall survive any issuance of Securities and warrants of the Corporation to the Subscriber.
The statements made in this Form are true and accurate as of the date hereof.
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Dated and certified (if applicable), acknowledged and agreed, at _______________________ on____________________________
| (Name of Purchaser - please print) | |
| (Authorized Signature) | |
| (Official Capacity - please print) | |
| (Please print name of individual whose signature appears above) |
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SCHEDULE F
TERM SHEET
(See attached)
45
SCHEDULE G
WIRE INSTRUCTIONS
(See attached)
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Exhibit 10.19
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [INSERT CLOSING DATE], AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE ON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR UNDER THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE ISSUER OF SUCH SECURITIES AND ITS SUCCESSORS (THE “CORPORATION”) THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION; (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH LOCAL LAWS AND REGULATIONS; (C) IN ACCORDANCE WITH THE EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS; OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND, IN THE CASE OF PARAGRAPH (C) OR (D), THE SELLER HAS PRIOR TO SUCH TRANSFER FURNISHED TO THE CORPORATION AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION TO SUCH EFFECT. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE GOOD DELIVERY IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.
SNOW LAKE RESOURCES LTD.
UNSECURED CONVERTIBLE DEBENTURE
PRINCIPAL AMOUNT: $[●] PURCHASE PRICE: $[●] |
Date: February [●], 2021 |
| 1. | Promise to Pay FOR VALUE RECEIVED, the undersigned, Snow Lake Resources Ltd. (the “Corporation”) promises to pay to or to the order of [●] (the “Debentureholder”), or such other place and/or person as the Debentureholder may direct by notice in writing to the Corporation. the principal amount of $[●] (the “Principal Amount”) in lawful money of Canada (such Principal Amount having a purchase price of $[●] after being reduced by an original issuance discount equal to 5% and $15,000 for the Debentureholder’s legal and closing costs) together with interest and all other Obligations (as hereafter defined), subject to the terms and conditions contained herein. |
| 2. | Definitions and Interpretation |
| 2.1 | As used herein, the following terms shall have the following respective meanings, unless the context otherwise requires: |
“Affiliate” has the meaning ascribed to such term in the Business Corporations Act (Ontario), as in effect on the date of this Debenture.
“Asset Sale” means the sale of any assets of the Corporation outside of the ordinary course of business.
“Business Day” means any day except Saturday, Sunday or any statutory holiday in the City of Toronto, Ontario, Canada.
“Common Share Reorganization” shall have the meaning ascribed to such term in Section 7.
“Common Shares” means fully-paid and non-assessable common shares in the capital of the Corporation as constituted on the date hereof, and after the date hereof any other shares, other securities, money or property which the Debentureholder is entitled to receive in respect or substitution thereof upon conversion of this Debenture pursuant to Section 6.
“Conversion Date” means the date on which the Debenture is received by the Corporation for conversion in accordance with the terms and conditions in Section 6.
“Conversion Notice” shall have the meaning ascribed to such term in Section 6.2.
“Conversion Price” means, subject to adjustment as provided in Section 7, the lesser of (i) $0.25 per Common Share, and (ii) a 20% discount to the issue price of any Common Shares issuable upon the sale or conversion of Offered Securities issued in a Qualified Financing.
“Corporation” means Snow Lake Resources Ltd., a corporation incorporated under the laws of the Province of Manitoba and includes any successor to or of the Corporation which shall have complied with the provisions of Section 14.
“Credit Documents” means, collectively, the Debentures and all certificates, notices, agreements and other documents delivered to the Debentureholder, or entered into by the Debentureholder pursuant to or in connection with the Debentures;
“CSE” means the Canadian Securities Exchange.
“Current Market Price” shall have the meaning ascribed to the term in Section 7.1(d).
“Debenture” means this unsecured convertible debenture as it may be amended, supplemented or restated from time to time and “Debentures” means the aggregate of up to $[●] in principal amount of Debentures (inclusive of an original discount equal to 5%, and for greater certainty, including this Debenture) issued pursuant to the Offering.
“Debentureholder” shall have the meaning ascribed to such term in the introductory paragraph hereto.
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“Dividends Paid in the Ordinary Course” means cash dividends declared payable on the Common Shares in any fiscal year of the Corporation to the extent that such cash dividends do not exceed, in the aggregate, an amount greater than:
| (a) | fifty (50%) percent of the retained earnings of the Corporation as at the end of its immediately preceding fiscal year; and |
| (b) | one hundred (100%) percent of the aggregate consolidated net income of the Corporation, determined before computation of extraordinary items, for its immediately preceding fiscal year; |
“Event of Default” shall have the meaning ascribed to such term in Section 8.2.
“Exchangeable Securities” shall have the meaning ascribed to such term in Section 7.
“Exercise Date” shall have the meaning ascribed to such term in Section 6.2.
“Expiration Time” means 5:00 pm (Toronto time) on the Maturity Date.
“Indebtedness” means, at any time and from time to time, all of the Principal Amount, any accrued interest and any other amount owing pursuant to this Debenture, including any penalties, in each case which has not been paid to the Debentureholder by the Corporation.
“Interest Rate” shall have the meaning ascribed to such term in Section 4.1.
“Maturity Date” means the earlier of (i) December 23, 2022, (ii) the date the Corporation completes a Public Offering, and (iii) or such earlier date as the principal amount hereof may become due, subject to and in accordance with the terms, conditions and provisions hereof, subject to extension upon mutual agreement of the parties.
“Material Adverse Change” means a material adverse effect on (i) the ability of the Corporation to pay its obligations hereunder as and when due; (ii) the business, operation, prospects, assets or condition, financial or otherwise, of the Corporation or any Subsidiary; or (iii) the ability of the Corporation or any Subsidiary to perform any other material obligations to the Debentureholder under this Debenture or any other present or future agreements in respect of the property and assets of the Corporation.
“Obligations” means all Indebtedness, liability and other obligations of the Corporation hereunder or under the Subscription Agreement and any other agreement between the Corporation and the Debentureholder.
“Offered Securities” any equity or voting securities, or securities convertible into or exchangeable for equity or voting securities, of the Corporation;
“Offering” means the private placement offering of $630,000 in aggregate principal amount of Debentures by the Corporation pursuant subscription agreements entered into between the Corporation and the Debentureholder;
“Other Agreements” has the meaning ascribed thereto in Section 8.2(l).
“Participation Right” has the meaning ascribed thereto in Section 15.
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“Person” includes an individual, a trust, a partnership, a body corporate or politic, a syndicate, a joint venture, a company, an association and any other form of incorporated or unincorporated organization or entity.
“Principal Amount” has the meaning ascribed thereto in Section 1.
“Public Offering” means a Qualified Financing that either (i) effects a listing of Common Shares on a Securities Exchange or (ii) takes place after shares have been listed on a Securities Exchange
“Qualified Financing” means the sale by the Corporation of any Offered Securities, or the raise of any funds by way of equity sale, debt sale, or otherwise following the date of this Debenture.
“Rights Offering” shall have the meaning ascribed to such term in Section 7.
“Rights Period” shall have the meaning ascribed to such term in Section 7.
“Securities Exchange” shall have the meaning ascribed to such term in Section 8.2(m).
“Securities Laws” means, collectively, the applicable securities laws of the relevant jurisdictions, the regulations, rules, rulings and orders made thereunder, the applicable policy statements issued by the securities regulators thereunder, the securities legislation and policies of each other relevant jurisdiction and the rules of the relevant stock exchange, in each case in effect from time to time.
“Share Certificates” shall have the meaning ascribed to such term in Section 6.3.
“Special Distribution” shall have the meaning ascribed to such term in Section 7.
“Subscription Agreement” means a Subscription Agreement of even date between the Corporation and the Debentureholder providing for the issuance of the Debenture, as such agreement may be amended, supplemented or restated from time to time.
“Subsidiary” has the meaning ascribed to such term in the Business Corporations Act (Ontario), as in effect on the date of this Debenture.
“Warrants” means the Common Share purchase warrants issued by the Corporation to the Debentureholder on or about the date hereof.
| 2.2 | Interpretation |
Words importing the singular only shall include the plural and vice versa, words importing the masculine gender shall include the feminine gender and words importing persons shall include firms and corporations and vice versa.
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| 2.3 | Headings |
The division of this Debenture into Articles and Sections and the use of headings are for convenience of reference only and shall not affect the construction or interpretation of this Debenture.
| 2.4 | Time of Essence |
Time is of the essence of this Debenture.
| 2.5 | Currency |
Unless otherwise specified, all dollar amounts in this Debenture, including the symbol “$”, refer to Canadian currency.
| 2.6 | Business Day |
If the date upon which any amount is payable by the Corporation, or upon which any other action is required to be taken by the Corporation hereunder, is not a Business Day, then such amount shall be payable or such other action shall be taken on or by the next succeeding Business Day.
| 3. | Payment |
| (a) | Unless the Indebtedness is redeemed or converted in accordance with this Debenture, the Corporation shall pay to the Debentureholder the Indebtedness on the Maturity Date. |
| (b) | Upon the Principal Amount and interest (including interest on amounts in default, if any) on this Debenture and all other money payable hereunder having been paid or satisfied, the Debentureholder shall, at the request of the Corporation, release and discharge this Debenture. Upon such request, the Debentureholder shall execute and deliver such instruments as it shall be advised by the Corporation’s counsel are requisite to release the Corporation from its covenants herein contained. |
| 4. | Interest |
| 4.1 | The Principal Amount from time to time outstanding shall bear interest at a rate of the greater of 12% (subject to Section 4.2) per annum, and (ii) the WSJ prime rate + 7% (the “Interest Rate”), calculated and added to the Principal Amount annually, payable in cash in arrears on the Maturity Date (the “Interest Payment Date”). |
| 4.2 | Upon an Event of Default, the Interest Rate shall increase to the lesser of (i) 24% per annum, and (ii) the maximum legal rate, from the date of the Event of Default until the date such Event of Default is cured. |
| 4.3 | Notwithstanding the foregoing provisions of this Section 4, the Corporation shall in no event be obliged to make any payments of interest or other amounts payable to the Debentureholder hereunder in excess of an amount or rate which would be prohibited by law or would result in the receipt by the Debentureholder of interest at a criminal rate (as such terms are construed under the Criminal Code (Canada). |
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| 5. | Redemption by the Corporation |
| 5.1 | Subject to Section 6, the Corporation may, at its option, subject to providing not less than 30 days prior written notice to the Debentureholder, prepay the entire amount of the Indebtedness at 110% of the current amount of the Indebtedness (“Redemption”). |
| 6. | Conversion by the Debentureholder |
| 6.1 | Subject to the provisions of this Debenture, including Section 8.3 and any regulatory approval, the Debentureholder shall have the right, at the option of the Debentureholder during the period beginning on the date of this Debenture, to the close of business on the Business Day before the Maturity Date, and the Business Day preceding the date fixed for Redemption (the “Conversion Date”), to elect to convert a part or all of the Indebtedness then outstanding into Common Shares at the Conversion Price, subject to adjustment in certain events as described in Section 7. |
| 6.2 | Fractional Common Shares will not be issued on any conversion and in lieu thereof the Corporation will round up to the next full Common Share if the fraction is 0.5 or greater, and will round down and issue no additional Common Share if the fraction is below 0.5. If the Debentureholder desires to convert the Indebtedness it shall send to the Corporation prior to the date on which the Indebtedness is to be converted into Common Shares (the “Exercise Date”) a notice, in the form of Schedule “A” (the “Conversion Notice”), of the conversion specifying the Exercise Date and the number of Common Shares to be issued upon conversion. On the Exercise Date, the Debentureholder shall be entered in the books of the Corporation as the holder of the number of Common Shares resulting from the conversion and shall be treated for all purposes (including the right to receive dividends) as the holder of record of such Common Shares which shall be deemed outstanding as fully paid and non-assessable. The Corporation must maintain, free from preemptive rights, sufficient authorized but unissued Common Shares so that the Conversion Notice may be fully exercised without additional authorization of Common Shares after giving effect to all other options, warrants, convertible securities and other rights of third parties to purchase shares of Common Shares. |
| 6.3 | If the Debentureholder sends a Conversion Notice, the Debentureholder must thereafter surrender this Debenture to the Corporation in exchange for Common Share certificates (the “Share Certificates”) of the Corporation in the name of Debentureholder evidencing the ownership of that number of Common Shares specified in the Conversion Notice. As soon as practicable after the surrender of this Debenture by the Debentureholder to the Corporation (but in no event prior to the Exercise Date), the Corporation shall deliver or arrange for the delivery of the Share Certificates to the Debentureholder. In the event of the conversion of this Debenture in part, the Corporation shall, without charge, forthwith execute and deliver to the Debentureholder a new debenture in a principal amount equal to the unconverted part of this Debenture so surrendered in the same form as this Debenture, except as to Principal Amount. |
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| 6.4 | If the Debentureholder fails to surrender this Debenture within five (5) days from the Exercise Date, the Share Certificates will be set aside in trust for the Debentureholder and such setting aside shall for all purposes be deemed to satisfy the Corporation’s obligations to the Debentureholder pursuant to this Section 6 and the Debentureholder shall have no right, except upon surrender of this Debenture to the Corporation, to receive the Share Certificates. |
| 6.5 | If the Corporation fails to deliver the Share Certificates to the Debentureholder within three (3) Business Days from the Exercise Date, the Corporation shall pay to the Debentureholder, in cash, an amount equal to 2% of the amount of Indebtedness being converted pursuant to the Conversion Notice for the applicable Exercise Date, which amount shall accrue daily until the Share Certificates have been delivered to the Debentureholder. |
| 7. | Adjustment of Conversion Price |
| 7.1 | The Conversion Price in effect at any date shall be subject to adjustment from time to time as follows: |
| (a) | If and whenever at any time after the date hereof and prior to the Expiration Time the Corporation shall: |
| (i) | issue Common Shares or securities exchangeable for or convertible into Common Shares to all or substantially all of the Corporation’s shareholders as a stock dividend or make a distribution on its outstanding Common Shares (other than as Dividends Paid in the Ordinary Course); |
| (ii) | subdivide, redivide or change its outstanding Common Shares into a greater number of shares; or |
| (iii) | consolidate, reduce or combine its outstanding Common Shares into a smaller number of shares; |
(each of the events enumerated in the clauses (i), (ii) and (iii), above, being hereinafter referred to as a “Common Share Reorganization”), the Conversion Price shall be adjusted effective immediately after the record date or effective date, as the case may be, which is used to determine the holders of outstanding Common Shares for the happening of a Common Share Reorganization, by multiplying the Conversion Price in effect immediately prior to such record date or effective date by a fraction, the numerator of which shall be the number of Common Shares outstanding on such record date or effective date, as the case may be, before giving effect to such Common Shares Reorganization, and the denominator of which shall be the number of Common Shares outstanding as of the effective date or record date, as the case may be, after giving effect to such Common Share Reorganization (including, in the case where securities exchangeable for or convertible into Common Shares are distributed, the number of Common Shares that would have been outstanding had such securities been fully exchanged or exercised for or converted into Common Shares on such record date or effective date, as the case may be).
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| (b) | If and whenever at any time after the date hereof and prior to the Expiration Time, the Corporation shall fix a record date for the issuance of rights, options or warrants to all or substantially all of the holders of the outstanding Common Shares with respect to the payment of dividends or the return of capital, including the Common Shares pursuant to which such shareholders are entitled, directly or indirectly, during a period expiring not less than 21 days and not more than 90 days after such record date (the “Rights Period”), to subscribe for or purchase Common Shares at a price per share to the holder of less than 95% of the Current Market Price on such record date or to subscribe for or purchase securities (in this paragraph (b) referred to as “Exchangeable Securities”) exchangeable or exercisable for or convertible into Common Shares at an effective subscription price per Common Shares (giving effect to the terms of such subscription or purchase and of such exchange or conversion privilege) of less than 95% of the Current Market Price on such record date (any of such events being hereinafter called a “Rights Offering”), then the Conversion Price shall be adjusted effective immediately after the end of the Rights Period to a price determined by multiplying the Conversion Price in effect immediately prior to the end of the Rights Period by a fraction: |
| (i) | the numerator of which shall be the aggregate of: |
| (A) | the number of Common Shares outstanding as of the record date for the Rights Offering, and |
| (B) | a number determined by dividing: (I) either (1) the product of the number of Common Shares issued or subscribed for during the Rights Period and the price per share at which such Common Shares are acquired; or, as the case may be, (2) the product of the exchange, exercise or conversion price of the Exchangeable Securities and the maximum number of Common Shares for or into which such Exchangeable Securities distributed under the Rights Offering may be exchanged, exercised or converted; by (II) the Current Market Price as of the record date for the Rights Offering; and |
| (ii) | the denominator of which shall be the number of Common Shares outstanding immediately after the end of the Rights Period (after giving effect to the Rights Offering, including the number of Common Shares actually issued or subscribed for during the Rights Period upon exercise of the rights, warrants or options distributed under the Rights Offering and the number of Common Shares that would have been issued had all Exchangeable Securities been exchanged or exercised for or converted into Common Shares). |
For the purposes of any computation made in accordance with this subsection 7.1(b), Common Shares owned legally or beneficially by the Corporation or a subsidiary or any other Affiliate of the Corporation shall be disregarded. To the extent that any adjustment in the Conversion Price occurs pursuant to this subsection 7.1(b) as a result of the fixing by the Corporation of a record date for the issue or distribution of rights, options or warrants referred to in this subsection 7.1(b), the Conversion Price shall be readjusted immediately after the expiry of any relevant exchange, conversion or exercise right to the Conversion Price which would then be in effect based upon the number of Common Shares actually issued and remaining issuable after such expiry and shall be further readjusted in such manner upon the expiry of any further such right.
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| (c) | If and whenever at any time after the date hereof and prior to the Expiration Time the Corporation shall fix a record date for the issue or the distribution to all or substantially all of the holders of one or more classes of outstanding Common Shares of: (i) shares of any class other than Common Shares; (ii) rights, options or warrants to acquire Common Shares or securities exchangeable for or convertible into Common Shares (excluding those referred to in Section 7.1(b)); (iii) evidences of the Corporation’s indebtedness; or (iv) any property or other assets (including cash), and if such issuance or distribution does not constitute Dividends Paid in the Ordinary Course, a Common Share Reorganization or a Rights Offering (any of such non-excluded events being herein called a “Special Distribution”), the Conversion Price shall, subject to the prior written approval of any stock exchange or over-the-counter market on which the Common Shares are then listed or quoted for trading, if required, be adjusted effective immediately after such record date to a price determined by multiplying the Conversion Price in effect on such record date by a fraction: |
| (i) | the numerator of which shall be: |
| (A) | the product obtained when the number of Common Shares outstanding on such record date is multiplied by the Current Market Price on such record date; less |
| (B) | the excess, if any, of (1) the fair market value, as determined by action by the directors of the Corporation (whose determination shall be conclusive), which action shall be subject to the prior written approval of any stock exchange or over-the-counter market on which the Common Shares are then listed or quoted for trading, if required, to the holders of the Common Shares of the shares, rights, options, warrants, evidences of indebtedness or property or other assets issued or distributed in the Special Distribution, over (2) the fair market value of any consideration received therefore by the Corporation from the holders of the Common Shares, as determined by action by the directors of the Corporation (whose determination shall be conclusive); and |
| (ii) | the denominator of which shall be the product obtained when the number of Common Shares outstanding on such record date is multiplied by the Current Market Price on such record date. |
To the extent that such distribution is not so made, the Conversion Price shall be readjusted to the Conversion Price which would then be in effect if such record date had not been fixed or to the Conversion Price which would then be in effect based upon such shares or rights, options or warrants or evidences of indebtedness or assets actually distributed.
For the purposes of any computation made in accordance with this subsection 7.1(c), Common Shares owned legally or beneficially by the Corporation or a subsidiary or any other Affiliate of the Corporation shall be disregarded.
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| (d) | For the purpose of any computation under this Debenture, the “Current Market Price” in respect of a Common Share at any date means the volume weighted average price per share for the 10 consecutive trading days ending not more than three Business Days before such date when the securities are listed on the facilities of the TSX Venture Exchange, or if the Common Shares are not then listed on the TSX Venture Exchange, on such other stock exchange on which the Common Shares trade as may be selected by the directors of the Corporation for such purpose; the volume weighted average price shall be determined by dividing the aggregate of the sale prices of all such shares sold on such exchange, during such 10 consecutive trading days by the total number of such shares so sold; or if: |
| (i) | the Common Shares are not listed upon a nationally-recognized stock exchange; or |
| (ii) | within such 10 consecutive trading days there have not been at least five days in which at least 100 Common Shares have traded, |
the Current Market Price in respect of a Common Share shall be determined by the directors of the Corporation acting reasonably and in good faith;
| (e) | In any case in which Section 7 shall require that an adjustment become effective immediately after a record date or agreement date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing or transferring to the Debentureholder who converts on a Conversion Date after such record date or agreement date and before the occurrence of such event the additional Common Shares issuable upon such conversion by reason of the adjustment of the Conversion Price required by such event before giving effect to such adjustment provided, however, that the Corporation shall deliver to the Debentureholder an appropriate instrument evidencing the Debentureholder’s right to receive such additional Common Shares upon the occurrence of the event requiring such adjustment and the right to receive any distributions made on such additional Common Shares declared in favour of holders of record of such Common Shares on and after the Conversion Date or such later date as such Debentureholder would, but for the provisions of this Section 7.1(e), have become the holder of record of such additional Common Shares. |
| (f) | In case the Corporation after the date hereof shall take any action affecting its Common Shares, other than any action described in Section 7, which in the opinion of the directors of the Corporation, acting reasonably, would materially affect the conversion rights of the Debentureholder, the Conversion Price shall be adjusted in such manner, at such time and by such action by the directors, as they may determine, acting reasonably, to be equitable to the Debentureholder and the Corporation in the circumstances, but subject in all cases to any necessary regulatory approval. The failure to take any such action by the directors so as to provide for an adjustment on or prior to the effective date or record date of any action by the Corporation affecting its Common Shares shall be conclusive evidence that the directors of the Corporation has determined that it is equitable to make no adjustment in the circumstances. |
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| (g) | In the event of any dispute arising with respect to the adjustments provided in Section 7, such question shall be conclusively determined by a firm of chartered accountants appointed by the Corporation (who may be auditors of the Corporation) and acceptable to the Debentureholder, acting reasonably, and such accountants shall have access to all necessary records of the Corporation and such determination shall be binding upon the Corporation and the Debentureholder. |
| (h) | If any Common Shares to be issued upon the conversion of this Debenture hereunder require any filing with, or registration with or approval of any governmental authority or compliance with any other requirement under any law before such shares may be validly issued upon such conversion or traded by the person to whom they are issued pursuant to such conversion, the Corporation will take all action as may be necessary to secure such filing, registration, approval or compliance, as the case may be. The Debentureholder acknowledges that the Common Shares may be subject to restrictions on resale and may bear a legend with respect to such restrictions. |
| (i) | Notwithstanding the foregoing, nothing in Section 7 shall in any manner compromise or derogate from any rights the Debentureholder may have to approve any transaction contemplated by Section 7, whether in its capacity as a shareholder (if applicable), as a Debentureholder or otherwise. |
| (j) | The adjustments to the Conversion Price and number of Common Shares or other securities or property of the Corporation provided for herein are cumulative and such adjustments shall be made successively whenever any of the relevant events referred to herein shall occur. For purposes of the adjustments set forth above, the following provisions shall apply: |
| (i) | if the Corporation shall set a record date to determine holders of outstanding Common Shares entitled to receive any dividend or distribution or any subscription or purchase rights and shall, thereafter and before the distribution to such shareholders of any such dividend, distribution or subscription or purchase rights, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then no adjustment in the Conversion Price shall be required solely by reason of the setting of such record date; |
| (ii) | in the absence of a resolution of the directors fixing a record date for a Common Share Reorganization, Rights Offering or Special Distribution, the Corporation shall be deemed to have fixed as the record date therefor the date on which the Common Share Reorganization, Rights Offering or Special Distribution is effected; |
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| (iii) | as a condition precedent to the taking of any action which would require any adjustment the Conversion Price or securities to be received, the Corporation shall take any corporate action which may, in the opinion of counsel, be necessary in order that the Corporation have unissued and reserved in its authorized capital and may validly and legally issue as fully paid and non-assessable all shares or other securities that the Debentureholder is entitled to receive on the total exercise thereof in accordance with the provisions thereof; and |
| (iv) | notwithstanding any other provision of this Section, no adjustment shall be made which would result in any increase in the Conversion Price (except upon a consolidation, reduction or combination of outstanding Common Shares). |
| (k) | No adjustment in the Conversion Price shall be made in respect of any event described in Sections 7.1(a), 7.1(b) or 7.1(c), other than the events referred to in clauses 7.1(a)(ii) and 7.1(a)(iii) of Section 7.1(a), if the Debentureholder is, without converting this Debenture, entitled to participate in such event on the same terms mutatis mutandis as if the Debentureholder had received Common Shares as a result of having converted this Debenture prior to or on the effective date or record date of such event; provided that such participation shall be subject to receipt of all necessary regulatory approvals. |
| (l) | In determining at any time and from time to time the number of Common Shares outstanding at any particular time for purposes of this Section 7, there shall be excluded any Common Shares (and Common Shares which would be outstanding upon conversion of convertible securities) held by or for the account of the Corporation. |
| (m) | If in the opinion of the directors of the Corporation the provisions of Section 7 are not strictly applicable, or if strictly applicable would not fairly protect the rights of the Debentureholder in accordance with the intent and purposes hereof, the directors of the Corporation shall make any adjustment in such provisions as the directors of the Corporation deems appropriate, acting reasonably, for the benefit of the Debentureholder. |
| 7.2 | Reclassifications, Reorganizations, etc. In case of any amalgamation of the Corporation with, or merger of the Corporation into, any other corporation with the result that the Corporation ceases to exist in its present capacity, or in case of any sale, transfer or other disposition of all or substantially all of the assets of the Corporation, the successor corporation or holder of the corporation’s assets as the case may be shall, and the Corporation shall cause such successor corporation or holder of the corporation’s assets to, give notice in the manner specified in Section 21 to the Debentureholder. Such notice shall confirm that the Debentureholder shall have the right to convert the Debenture into the kind and amount of shares and other securities and property receivable upon such amalgamation, merger or sale by a holder of the number of Common Shares into which such Debenture might have been converted immediately prior to such event. Such notice shall confirm adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section. The above provisions of this Section 7.2 shall similarly apply to successive amalgamations, mergers, sales, transfers or other dispositions. |
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| 7.3 | Certificates as to Adjustment The Corporation shall from time to time forthwith after the occurrence of any event which requires adjustment or readjustment as provided in Section 7, deliver to the Debentureholder, an officer’s certificate specifying the nature of the event requiring the adjustment or readjustment and the amount of the adjustment or readjustment necessitated thereby and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. |
| 7.4 | Notice of Special Matters The Corporation covenants that so long as this Debenture remains outstanding, it will give notice to the Debentureholder at the address provided for in Section 21, of its intention to fix a record date or agreement date for any event which may give rise to an adjustment in the Conversion Price and, in each case, such notice shall specify the particulars of such event and the record date, the agreement date and the effective date for such event, provided that the Corporation shall only be required to specify in such notice such particulars of such event as shall have been fixed and determined on the date on which such notice is given. Such notice shall be given not less than 7 days in each case prior to such applicable record date. The Corporation shall not during the period of such notice close the transfer books for Common Shares so as to prevent the conversion of this Debenture or fix a record date for voting so as to prevent the Common Shares resulting from a conversion of this Debenture from being voted. Nothing in this Section 7.4 shall in any manner derogate from or compromise the Debentureholder’s rights to receive notice pursuant to any applicable laws. |
| 8. | Covenants and Events of Default and Representations |
| 8.1 | Covenants The Corporation covenants and agrees, on its own behalf and on behalf of each Subsidiary (where applicable) with the Debentureholder that, so long as this Debenture is outstanding and in force and except as otherwise permitted by the prior written consent of the Debentureholder: |
| (a) | To Pay Principal and Interest: The Corporation will duly and punctually pay or cause to be paid to the Debentureholder the principal of, premium (if any) and interest accrued on the Debentures of which it is the holder on the dates, at the places and in the manner mentioned herein and in the Debentures. |
| (b) | Notice of Event of Default: The Corporation shall forthwith notify the Debentureholder of the occurrence of any Event of Default or any event of which it is aware which with notice or lapse of time or both would constitute an Event of Default together with full details and any action proposed to be taken. |
| (c) | Preservation of Existence, etc: Subject to the express provisions hereof, the Corporation will carry on and conduct its activities, and cause its Subsidiaries to carry on and conduct their businesses, in a business-like manner and in accordance with good business practices; and, subject to the express provisions hereof, it will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and rights. |
| (d) | Keeping of Books: The Corporation will keep or cause to be kept proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Corporation and each Subsidiary in accordance with generally accepted accounting principles. |
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| (e) | Withholding Matters: All payments made by or on behalf of the Corporation under or with respect to the Debentures (including, without limitation, any penalties, interest and other liabilities related thereto) will be made free and clear of and without withholding, or deduction for, or on account of, any present or future tax, duty, levy, impost, assessment or other governmental charge (including, without limitation, penalties, interest and other liabilities related hereto) imposed or levied by or on behalf of the Government of Canada or the United States or elsewhere, or of any province or territory thereof or by any authority or agency therein or thereof having power to tax (“Withholding Taxes”), unless the Corporation is required by law or the interpretation or administration thereof, to withhold or deduct any amounts for, or on account of Withholding Taxes. If the Corporation is so required to withhold or deduct any amount for, or on account of, Withholding Taxes from any payment made under or with respect to the Debentures, the Corporation shall deduct and withhold such Withholding Taxes from any payment to be made or with respect to the Debentures and, provided that the Corporation forthwith remits such amount to the relevant governmental authority or agency, the amount of any such deduction or withholding will be considered an amount paid in satisfaction of the Corporation’s obligations under the Debentures. There is no obligation on the Corporation to gross-up or pay additional amounts to a holder of Debentures in respect of such deductions or withholdings. For greater certainty, if any amount is required to be deducted or withheld in respect of Withholding Taxes upon a conversion of a Debenture, the Corporation shall be entitled to liquidate such number of Common Shares (or other securities) issuable as a result of such conversion as shall be necessary in order to satisfy such requirement. The Corporation shall provide the Debentureholder with copies of receipts or other communications relating to the remittance of such withheld amount or the filing of any forms received from such government authority or agency promptly after receipt thereof. |
| (f) | No Material Change of Business: The Corporation will notify the Debentureholder in the event of any Material Adverse Change. The Corporation will notify the Debentureholder in the event it receives notice of any regulatory, governmental or criminal citation, notice of violation, investigation or proceeding that may have a material impact on the Corporation’s license, business activities or operations. The Corporation will notify the Debentureholder in the event it receives notice of any non-compliance citations or notices of violations, of which the Corporation is aware, that may have a material impact on the investee’s, supplier’s or customers’ license, business activities or operations. |
| (g) | Ranking and Additional Debt: The Debenture shall rank senior to all existing debt of the Corporation. Except for debt incurred in the ordinary course of business, the Corporation will not incur any additional debt nor issue any debt securities, except that the Corporation shall be permitted to issue debt securities provided that such debt securities rank subordinate to the Debenture. |
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| (h) | Restrictions on Operations: Without the consent of a majority of the Debentureholders, the Corporation will not (i) sell, divest or change the structure of any material assets of the Corporation, (ii) enter into any variable rate transactions, or (iii) accept merchant cash advances or similar financing instruments. |
| 8.2 | Events of Default Unless waived in writing by the Debentureholder, any one or more of the following events shall constitute an Event of Default hereunder: |
| (a) | failure for 10 days to pay interest on the Debentures when due; |
| (b) | failure to pay principal or premium (whether by way of payment of cash or delivery of Common Shares), if any, when due on the Debentures whether at maturity, upon redemption, by declaration or otherwise; |
| (c) | default in the delivery, when due, of any Common Shares or other consideration, payable on conversion with respect to the Debentures, which default continues for 3 days; |
| (d) | default in the observance or performance of any covenant or condition of the Debenture by the Corporation and the failure to cure (or obtain a waiver for) such default for a period of 10 days; |
| (e) | if a decree or order of a Court having jurisdiction is entered adjudging the Corporation a bankrupt or insolvent under the Bankruptcy and Insolvency Act (Canada) or any other bankruptcy, insolvency or analogous laws, or issuing sequestration or process of execution against, or against any substantial part of, the property of the Corporation, or appointing a receiver of, or of any substantial part of, the property of the Corporation or ordering the winding-up or liquidation of its affairs, and any such decree or order continues unstayed and in effect for a period of 60 days; |
| (f) | if the Corporation institutes proceedings to be adjudicated a bankrupt or insolvent, or consents to the institution of bankruptcy or insolvency proceedings against it under the Bankruptcy and Insolvency Act (Canada) or any other bankruptcy, insolvency or analogous laws, or consents to the filing of any such petition or to the appointment of a receiver of, or of any substantial part of, the property of the Corporation, or any Subsidiary or makes a general assignment for the benefit of creditors, or admits in writing its inability to pay its debts generally as they become due; |
| (g) | if, after the date of this Debenture, the Corporation fails to provide the Debentureholder with a Participation Right (as defined herein); |
| (h) | if, after the date of this Debenture, any proceedings with respect to the Corporation are taken with respect to a compromise or arrangement, with respect to creditors of the Corporation generally, under the applicable legislation of any jurisdiction; |
| (i) | the Corporation restates any financial statements for any date or period from two years prior to the date of this Debenture and until this Debenture is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Debentureholder with respect to this Debenture. |
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| (j) | any court of competent jurisdiction issues an order declaring this Debenture, any of the other related documents or any provision hereunder or thereunder to be illegal, as long as such declaration was not the result of an act of negligence by the Debentureholder, exclusive of the execution of the Debenture and related documents or the transactions and acts contemplated herein. |
| (k) | any cessation of operations by the Corporation or the Corporation admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Corporation’s ability to continue as a “going concern” shall not be an admission that the Corporation cannot pay its debts as they become due. |
| (l) | notwithstanding anything to the contrary contained in this Debenture or the other related or companion documents, a breach or default by the Corporation of any covenant or other term or condition contained in any of the other financial instrument, including but not limited to all promissory notes, currently issued, or hereafter issued, by the Corporation, to the Debentureholder or any other third party (the “Other Agreements”), after the passage of all applicable notice and cure or grace periods, that results in a Material Adverse Change shall, at the option of the Debentureholder, be considered a default under this Debenture, in which event the Debentureholder shall be entitled to apply all rights and remedies of the Debentureholder under the terms of this Debenture by reason of a default under said Other Agreement or hereunder. |
| (m) | if at any time on or after the date on which the Common Shares are listed or quoted on the Toronto Stock Exchange, TSX Venture Exchange, CSE, OTC Pink or an equivalent U.S. replacement exchange, the Nasdaq Global Market, the Nasdaq Capital Market, the New York Stock Exchange, the NYSE MKT, or any other recognized securities exchange (a “Securities Exchange”): |
| (1) | the Corporation shall fail to maintain the listing or quotation of the Common Shares, or if its shares have been suspended from trading on a Securities Exchange; |
| (2) | the Corporation shall fail to comply with the annual and periodic reporting requirements of the Securities Exchange upon which the Common Shares are listed or quoted; |
| (3) | the Corporation shall fail to comply with the disclosure laws for publicly traded companies in its relevant jurisdiction; |
| (4) | once the Common Shares have been accepted by the DTC, the DTC places a “chill” (i.e. a restriction placed by DTC on one or more of DTC’s services, such as limiting a DTC participant’s ability to make a deposit or withdrawal of the security at DTC) on any of the Corporation’s securities; |
| (5) | once the Common have been made eligible for trading through the DTC’s Fast Automated Securities Transfer or Deposit/Withdrawal at Custodian programs, the Corporation loses such eligibility; |
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| (6) | the Corporation shall lose the “bid” price for its Common Shares ($0.0001 on the “Ask” with zero market makers on the “Bid” per Level 2) and/or a market (including the OTC Pink, OTCQB or any other Securities Exchange); |
| (7) | any attempt by the Corporation or its officers, directors, and/or Affiliates to transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Corporation or its officers, directors, and/or Affiliates of, material non-public information concerning the Corporation, to the Debentureholder or its successors and assigns, which is not immediately cured by Corporation’s filing of a Form 8-K pursuant to Regulation FD (or the equivalent in a relevant jurisdiction) on that same date. |
| 8.3 | Acceleration Upon the occurrence of any one or more of the Events of Default, the Indebtedness outstanding at that time shall be accelerated, and shall become immediately due and payable at the option of the Debentureholder. Alternatively, upon the occurrence of any one or more of the Events of Default, the Debentureholder may, by giving written notice thereof to the Corporation, elect to convert, in whole or in part, the Indebtedness then outstanding in accordance with the terms hereof. |
| 8.4 | Remedies Cumulative The rights and remedies of the Debentureholder hereunder are cumulative and in addition to and not in substitution for any rights or remedies provided by law. |
| 8.5 | Non-Merger The taking of a judgment or judgments or any other action or dealing whatsoever by the Debentureholder in respect of any security given by the Corporation (if any) to the Debentureholder shall not operate as a merger of any indebtedness or liability of the Corporation to the Debentureholder or in any way suspend payment or affect or prejudice the rights, remedies and powers, legal or equitable, which the Debentureholder may have in connection with such liabilities and the surrender, cancellation or any other dealings with any security for such liabilities shall not release or affect the liability of the Corporation hereunder or any security held by the Debentureholder. All Obligations shall survive the Maturity Date until all Obligations of the Corporation hereunder have been satisfied and discharged in accordance with this Debenture. |
| 8.6 | Security Upon the occurrence of any one or more of the Events of Default, the Corporation must enter into a security agreement with the Debentureholder, in a form acceptable to the Debentureholder, acting reasonably, and permit the Debentureholder to secure any outstanding Indebtedness with a registration under the Personal Property Security Act (Manitoba) against the Corporation. |
| 9. | Person Entitled to Payment |
The Debentureholder shall be entitled to payment of all amounts due hereunder free from all equities or rights of set-off or counterclaim between the Corporation and the original or any intermediate Debentureholder hereof and all persons may act accordingly and a transferee of this Debenture shall become the Debentureholder of this Debenture free from all equities or rights of set-off or counterclaim between the Corporation and the transferor or any previous Debentureholder hereof, save in respect of equities of which the Corporation is required to take notice by statute or by order of a court of competent jurisdiction.
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| 10. | Supplement to Debenture |
| 10.1 | From time to time the Corporation, either at its own discretion or when so directed by the Debentureholder, shall execute, acknowledge and deliver by its proper officers, deeds or instruments supplemental hereto, which thereafter shall form part hereof, for any one or more of the following purposes: |
| (a) | making such provisions not inconsistent with this Debenture as may be necessary or desirable with respect to matters or questions arising hereunder, including the making of any modifications in the form of the Debenture which do not affect the substance thereof and which provisions and modifications will not, in the opinion of the Debentureholder’s solicitor, be prejudicial to the interests of the Debentureholder; |
| (b) | evidencing the succession or the successive successions of other corporations to the Corporation and the covenants of and obligations assumed by any such successor in accordance with the provisions of this Debenture; and |
| (c) | for any other purpose not inconsistent with the terms of this Debenture. |
| 10.2 | The Corporation may correct any typographical or other manifest errors in this Debenture, provided that in the opinion of the Debentureholder’s solicitor such corrections will not prejudice the rights of the Debentureholder hereunder and may execute all such documents as may be necessary to correct such errors. |
| 11. | Mutilation, Loss, Theft or Destruction |
In case this Debenture shall become mutilated or be lost, stolen or destroyed, the Corporation shall execute and deliver a new Debenture having the same date of issue upon surrender and cancellation of the mutilated Debenture, or in case this Debenture is lost, stolen or destroyed, in lieu of and in substitution for the same. In case of loss, theft or destruction the person applying for a substituted Debenture shall furnish to the Corporation such evidence of such loss, theft or destruction as shall be satisfactory to the Corporation, shall furnish an indemnity satisfactory to the Corporation (but in any event in an amount not exceeding the principal amount outstanding) and shall pay all reasonable expenses incidental to the issuance of any substituted Debenture.
| 12. | Debentureholder Not a Shareholder |
This Debenture shall, in itself, not confer or be construed as conferring upon the Debentureholder any right or interest whatsoever as a shareholder of the Corporation, including, but not limited to, the right to vote at, to receive notice of, or to attend meetings of shareholders or any other proceedings of the Corporation, or the right to receive dividends and other distributions.
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| 13. | Transfer of Debentures |
| 13.1 | The Corporation shall maintain a register on which are recorded the names and addresses of each holder hereof. Subject to compliance with the terms of this Debenture and with applicable laws and regulations, a transfer shall be recorded by the Corporation in the register of holders hereof maintained by the Corporation, upon surrender of this Debenture with the Transfer Form in the form attached hereto as Schedule “B” duly completed by the Debentureholder or by its duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment or other authority to transfer on behalf of the Debentureholder. Upon each transfer the Corporation shall cancel this Debenture and execute and deliver such replacement debenture as is required, in the form hereof. |
| 13.2 | Restrictions on Transfers: The Corporation shall not register any transfers of the Debenture or issue or transfer any Common Shares issuable on conversion of the Debenture: |
| (a) | to a United States person, any person in the United States or any person for the account or benefit of a United States person or a person in the United States except pursuant to Rule 144 under the United States Securities Act of 1993, as amended (the “U.S. Securities Act”), if available; |
| (b) | in connection with any transfers or conversions which are otherwise not in compliance with (i) the U.S. Securities Act and the regulations thereunder if applicable, (ii) the Securities Act (Ontario) and the rules and regulations thereunder, (iii) applicable securities laws and regulations of other relevant jurisdictions, or (iv) the policies of the TSX Venture Exchange or such other Securities Exchange on which the Corporation’s securities may then be traded; and |
| (c) | prior to the expiry of the applicable hold period, unless the Corporation and its legal counsel are satisfied, acting reasonably, that it is permitted under applicable Securities Laws and under the policies of the TSX Venture Exchange or such other Securities Exchange on which the Corporation’s securities may then be traded. |
Notwithstanding anything to the contrary contained herein but subject to the terms of this Section 13, no assignment or transfer of any right or interest in this Debenture shall be permitted except in compliance with applicable Securities Laws and the transferee, assignee or Debentureholder as the case may be, furnishes to the Corporation such evidence as the Corporation may reasonably require in order to satisfy itself with respect to the foregoing. No prior written consent of the Corporation is required to permit the assignment or transfer of any right or interest in this Debenture by a Debentureholder to any Affiliate of the Debentureholder or to any investment fund managed by the Debentureholder’s manager or its Affiliate provided the other conditions to such assignment or transfer as provided in this Section 13 are satisfied. Any purported assignment or transfer of any right or interest in this Debenture by a Debentureholder that is not in compliance with this Section 13 shall be null and void.
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The appropriate legends, as follows, will be placed on the certificates representing the Common Shares issued on conversion of the Debenture denoting the restrictions on transfer imposed by applicable Securities Laws and the policies of the TSX Venture Exchange or such other Securities Exchange on which the Corporation’s securities may then be traded, including but not limited to the following legends:
“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) FEBRUARY 8, 2021 AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY. ”
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR U.S. STATE SECURITIES LAWS. THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO SNOW LAKE RESOURCES LTD. (THE “CORPORATION”), (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS, (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES ACT PROVIDED BY (I) RULE 144 THEREUNDER IF AVAILABLE OR (II) RULE 144A THEREUNDER, IF AVAILABLE, AND IN EACH CASE IN ACCORDANCE WITH APPLICABLE U.S. STATE SECURITIES LAWS, (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT, PROVIDED THAT, IN THE CASE OF TRANSFERS PURSUANT TO (C)(I) OR (D) ABOVE, THE HOLDER HAS, PRIOR TO SUCH TRANSFER, FURNISHED TO THE CORPORATION AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE CORPORATION. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”
| 14. | Certain Requirements re: Successor Corporations |
The Corporation shall not, directly or indirectly, sell, lease, transfer or otherwise dispose of all or substantially all of its property and assets as an entirety to any other entity, and shall not consolidate, amalgamate, reorganize or merge with or into any other corporation (any such other entity or corporation being herein referred to as a “successor corporation”) unless:
| (a) | the Corporation has received express written consent for such transaction from the Debentureholder; |
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| (b) | the successor corporation shall execute, prior to or contemporaneously with the consummation of any such transaction, such instruments as are reasonably necessary to evidence the assumption by the successor corporation of the due and punctual payment of the outstanding amount of this Debenture or the reservation and allotment for issuance of a sufficient number of shares to satisfy the conversion privilege and interest payment obligations hereunder and to observe and perform all the covenants and obligations of the Corporation under this Debenture and the Subscription Agreement; |
| (c) | such transaction shall be upon such terms as to preserve and not to impair any of the rights or powers of the Debentureholder hereunder, under the Subscription Agreement or any security pertaining hereto or thereto; and |
| (d) | immediately after giving effect to such transaction, no condition or event shall exist which constitutes an Event of Default, or may constitute an Event of Default after notice or lapse of time or both. |
| 15. | Participation Rights |
| 15.1 | The Corporation agrees that, for eighteen (18) months from the date of this Debenture, the Debentureholder (directly or through an Affiliate) shall have the right (the “Participation Right”), to subscribe for and to be issued as part of a Sale (as defined herein) at the subscription price per Offered Security pursuant to the Sale and otherwise on substantially the terms and conditions of the Sale, up to an amount of the Offered Securities equal to the Principal Amount (provided that, if the Debentureholder is prohibited by Securities Laws or other applicable law from participating on substantially the terms and conditions of the Sale, the Corporation shall use commercially reasonable efforts to enable the Debentureholder to participate on terms and conditions that are as substantially similar as circumstances permit). |
| 15.2 | While the Debenture or any Indebtedness due thereunder remain outstanding and unpaid, if the Corporation proposes to issue (the “Issuance”) any Offered Securities for cash consideration pursuant to a public offering or a private placement (a “Sale”) at any time after the date hereof, the Corporation will, as soon as possible after the public announcement of the Issuance, but in any event not later than three (3) Business Days following such public announcement, and at least five (5) Business Days prior to the expected completion date of the Issuance, give written notice of the Issuance (the “Offering Notice”) to the Debentureholder including, to the extent known by the Corporation, full particulars of the Sale, including the number of Offered Securities, the rights, privileges, restrictions, terms and conditions of the Offered Securities, the price per Offered Security to be issued under the Sale, the expected use of proceeds of the Sale and the expected closing date of the Sale . |
| 15.3 | If the Debentureholder wishes to exercise the Participation Right, the Debentureholder shall give written notice to the Corporation (the “Exercise Notice”) of its intention to exercise such right and of the number of Offered Securities the Debentureholder wishes to purchase, and shall subscribe to the Sale within seven (7) Business Days after the date of receipt of an Offering Notice, or in the case of a public offering that is a “bought deal”, within two (2) Business Days of receipt of an Offering Notice (the “Notice Period”), failing which the Debentureholder will not be entitled to exercise the Participation Right in respect of such Sale or Issuance. |
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| 15.4 | If the Corporation receives an Exercise Notice from the Debentureholder within the Notice Period, then the Corporation shall: |
(i) subject to the receipt and continued effectiveness of all required approvals (including any applicable approval(s) of a securities exchange and any required approvals under Securities Laws and any required shareholder approval), which approvals the Corporation shall use all commercially reasonable efforts to promptly obtain (including by applying for any necessary price protection confirmations, seeking shareholder approval (if required) in the manner described below, and using its commercially reasonable efforts to cause management and each member of the Board to vote their Common Shares and any shares of the Corporation entitled to vote in the matter and all votes received by proxy in favour of the issuance of the Offered Securities to the Debentureholder); and
(ii) subject to the issuance to the Debentureholder or its Affiliate of Common Shares or other Offered Securities being exempt from prospectus and registration requirements under Securities Laws and subject to the completion of the relevant Offering, issue to the Debentureholder or its Affiliate, against payment of the subscription price payable in respect thereof, that number of Common Shares or other Offered Securities, as applicable, set forth in the Exercise Notice.
The parties agree that the issuance of any Common Shares or other Offered Securities to the Debentureholder pursuant to this Section shall occur concurrently with the completion of the relevant Sale. If the Corporation is required to seek shareholder approval for the issuance of the Offered Securities to the Debentureholder or its Affiliate, then the Corporation shall call and hold a meeting of its shareholders to consider the issuance of the Offered Securities to the Debentureholder or its Affiliate as soon as reasonably practicable, and in any event such meeting shall be held within seventy-five (75) days after the date that the Corporation is advised that it will require shareholder approval, and shall recommend approval of the issuance of the Offered Securities and shall solicit proxies in support thereof.
| 16. | Adjustment for More Favourable Terms Contained in Future Financings |
| (n) | If, after the date of this Debenture, the Corporation or any of its Subsidiaries issues a convertible security or equity-linked security (whether such debt begins with a convertible feature or such feature is added at a later date) with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Debentureholder in this Debenture, including the issuance of warrants or extent of warrant coverage even if merely based on a reduction of the conversion price or original issuance discount, or more favorable terms than the Warrants, then the Company shall notify the Debentureholder of such additional or more favorable term and such term, at the Debentureholder’s option, shall become a part of this Debenture and its supporting documentation (types of terms contained in the other security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, conversion look back periods, interest rates, original issue discount percentages and warrant coverage). |
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| 17. | Asset Sale or Financing |
If, after the date of this Debenture, the Corporation completes an Asset Sale or a Qualified Financing, the Corporation must use the gross proceeds of the Asset Sale or Qualified Financing, as applicable, to prepay the Indebtedness.
| 18. | Vesting of Powers in Successors |
Whenever the conditions of Section 14 have been fully observed and performed, the successor corporation shall possess and from time to time may exercise each and every right and power of the Corporation under this Debenture in the name of the Corporation or otherwise and any act or proceeding by any provision of this Debenture required to be done or performed by the Corporation or its officers may be done and performed with like force and effect by the successor corporation or its officers.
| 19. | Waiver |
No waiver on the part of the Debentureholder in exercising any right or privilege hereunder and no waiver as to any Event of Default hereunder shall operate as a waiver thereof unless made in writing and signed by the Debentureholder. No written waiver shall preclude the further or other exercise by the Debentureholder of any right, power or privilege hereunder, or extend to or apply to any further Event of Default.
| 20. | Further Assurances |
The Corporation shall from time to time forthwith on the Debentureholder’s request do, make and execute all such further assignments, documents, acts, matters and things as may be required by the Debentureholder with respect to give effect to the matters contemplated in the Credit Documents or any part thereof, including all matters contemplated in this Debenture.
| 21. | Notices |
Any notice or communication to be given hereunder may be effectively given by delivering the same at the addresses hereinafter set forth or by sending the same by email or prepaid registered mail to the parties at such addresses. Any notice so mailed shall be deemed to have been received on the fifth Business Day next following the mailing thereof provided the postal service is in operation during such time. Any email notice shall be deemed to have been received on the Business Day next following the date of transmission. The mailing and email addresses of the parties for the purposes hereof shall respectively be:
if to the Debentureholder: To the address set out on the first page of this Debenture, with a copy to:
Garfinkle Biderman LLP
1 Adelaide Street East, Suite 801
Toronto, Ontario M5C 1J4
Attention: Shimmy Posen
Email: sposen@garfinkle.com
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if to the Corporation: Snow Lake Resources Ltd.
201 Portage Avenue, Suite 2200
Winnipeg, Manitoba R3B 3L3
Attention: [●]
Email: [●]
Either party may from time to time notify the other party hereto, in accordance with the provisions hereof, of any change of address which thereafter, until changed by like notice, shall be the address of such party for all purposes of this Agreement.
| 22. | Successors and Assigns |
This Debenture shall be binding upon and shall enure to the benefit of the Corporation and the Debentureholder and their respective successors and assigns, provided that neither party shall assign any of its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld.
| 23. | Governing Law and Submission to Jurisdiction |
This Debenture and all other documents delivered to the Debentureholder hereunder shall be construed and interpreted in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. Each of the Corporation and the Debentureholder hereby agrees that any legal suit, action or proceeding arising out of or relating to this Debenture and all such other documents may be instituted in the courts of the Province of Ontario only and the parties accept and irrevocably submit to the jurisdiction of the said courts, and acknowledge their competence and agree to be bound by any judgment thereof.
| 24. | No Broker-Dealer Acknowledgement |
Absent a final adjudication from a court of competent jurisdiction stating otherwise, so long as any obligation of Corporation under this Debenture or the other related documents is outstanding, the Corporation shall not state, claim, allege, or in any way assert to any person, institution, or entity, that Debentureholder is currently, or ever has been, a broker-dealer under the Securities Exchange Act of 1934.
| 25. | Opportunity to Consult with Counsel. |
The Corporation represents and acknowledges that it has been provided with the opportunity to discuss and review the terms of this Debenture and the other related documents with its counsel before signing it and that it is freely and voluntarily signing such documents in exchange for the benefits provided herein. In light of this, the Corporation will not contest the validity of such documents and the transactions contemplated therein. The Corporation further represents and acknowledges that it has been provided a reasonable period of time within which to review the terms of such documents.
[remainder of page intentionally left blank]
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DATED as of the ____ day of November, 2020.
| SNOW LAKE RESOURCES LTD. | ||
| Per: | ||
| [●] | ||
Signature Page Debenture
SCHEDULE “A”
CONVERSION NOTICE
TO: SNOW LAKE RESOURCES LTD.
Reference is made to the Unsecured Convertible Debenture of Snow Lake Resources Ltd. dated November [●], 2020. Any term not otherwise defined in this Notice shall have the meaning ascribed to it in the Debenture.
The undersigned Debentureholder of the Debenture hereby gives notice that it elects to convert certain Indebtedness for the undernoted number of Common Shares in accordance with the terms of the Debenture and as follows.
| Amount of Indebtedness Being Converted: | $_____________________ |
| Common Shares to be Issued: | ______________________ |
| Effective Date: | ______________________ |
The undersigned hereby directs that the shares are to be issued and delivered as follows:
| Registration Instructions: | Delivery Instructions: | |
Any unpaid interest shall be paid by cash.
By checking the applicable box below, the undersigned represents, warrants and certifies as follows (only one of the following must be checked):
| A. ☐ | at the time of execution of this Conversion Notice, it (and any person named hereunder to which common shares are to be issued) (i) is not a U.S. person or a person within the United States and is not converting the Debentures on behalf of a U.S. person or a person within the United States; and (ii) did not execute or deliver this Conversion Notice in the United States; |
| (For purposes hereof, “United States” and “U.S. person” shall have the meanings given to such terms in Regulation S under the United States Securities Act of 1933 (the “U.S. Securities Act”)); |
or
| B. ☐ | it is furnishing herewith a written opinion of counsel of recognized standing or other evidence (which must be satisfactory to the Company) to the effect that the common shares issuable upon conversion of the Debentures have been registered under the United States Securities Act of 1933, as amended, and applicable state securities laws or are exempt from registration requirements thereunder. |
Note: The undersigned understands that unless Box A above is checked, the certificate representing the common shares will bear a legend restricting transfer without registration under the U.S. Securities Act and applicable state securities laws unless an exemption from registration is available.
Note: Certificates representing common shares will not be registered or delivered to an address in the United States unless Box B above is checked. If Box B is checked, any opinion or other evidence tendered must be in form and substance reasonably satisfactory to the Corporation. Holders planning to deliver an opinion of counsel or other evidence in connection with the conversion of Debentures should contact the Corporation in advance to determine whether any opinions or other evidence to be tendered will be acceptable to the Corporation.
Dated this ______day ______________, 20______.
| [DEBENTUREHOLDER] | ||
| Per: | ||
| Name: | ||
| Title: | ||
| (authorized signing officer) | ||
Instructions for Conversion
This conversion notice is to be signed by the Debentureholder.
The Debenture must be surrendered at the office of the Corporation, located at 201 Portage Avenue, Suite 2200, Winnipeg, Manitoba R3B 3L3
Fractional Common Shares will not be issued on any conversion and in lieu thereof the Corporation will round up to the next full Common Share if the fraction is 0.5 or greater, and will round down and issue no additional Common Share if the fraction is below 0.5.
Upon surrender of the Debenture, the Corporation will issue to the Debentureholder the number of shares converted and shall deliver a certificate(s) or other evidence of such shares. The Corporation shall also deliver a new debenture in the event of a partial conversion.
If Common Shares are to be issued in the name of a person other than the Debentureholder, all requisite transfer taxes must be tendered by the Debentureholder.
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SCHEDULE “B”
TRANSFER FORM
| TO: | SNOW LAKE RESOURCES LTD. |
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:
| Name |
| Address |
| Social Insurance Number, Social Security Number, or Tax Identification Number |
$_________________________ of the principal amount of Debenture registered in the name of the undersigned represented by the within certificate (which amount must be $1,000 or an integral multiple thereof) and do hereby irrevocably constitute and appoint the Corporate Secretary of the Corporation attorney to transfer the said Debenture on the books of the Corporation with full power of substitution in the premises.
DATED this _______ day of ___________.
| Signature of Debentureholder | |
| Name of Debentureholder (Please Print) | |
| Authorized Signature Name and Title |
TRANSFEREE ACKNOWLEDGMENT
In connection with this transfer (check one):
¨ The undersigned transferee hereby certifies that (i) it was not offered the Debentures while in the United States and did not execute this certificate while within the United States; (ii) it is not acquiring any of the Debenturess represented by this Debenture Certificate by or on behalf of any person within the United States; and (iii) it has in all other respects complied with the terms of Regulation S of United States Securities Act of 1933, as amended (the “1933 Act”), or any successor rule or regulation of the United States Securities and Exchange Commission as presently in effect.
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¨ The undersigned transferee is delivering a written opinion of U.S. Counsel acceptable to the Company to the effect that this transfer of Debentures has been registered under the 1933 Act or is exempt from registration thereunder.
| (Signature of Transferee) | ||
| Date | Name of Transferee (please print) |
The Debenturess and the common shares issuable upon conversion of the Debentures shall only be transferable in accordance with applicable laws. The Debentures may only be exercised in the manner required by the certificate representing the Debentures and the Conversion Notice attached thereto. Any common shares acquired pursuant to the Debentures shall be subject to applicable hold periods and any certificate representing such common shares will bear restrictive legends.
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Exhibit 10.20
Snow Lake Resources Ltd.
AMENDED AND RESTATED STOCK OPTION PLAN
Dated as of October 26, 2021
| 1.1 | Defined Terms |
For the purposes of this Plan, the following terms shall have the following meanings:
| (a) | “Act” means The Securities Act (Manitoba), as amended from time to time; |
| (b) | “Affiliate” has the meaning ascribed to affiliated companies by the Act; |
| (c) | “Associate” has the meaning ascribed thereto by the Act; |
| (d) | “Board” means the board of directors of the Corporation or, as applicable, a committee consisting of not less than three Directors of the Corporation duly appointed to administer this Plan; |
| (e) | “Common Shares” means the common shares of the Corporation; |
| (f) | “Company” unless specifically indicated otherwise, means a corporation, incorporated association or organization, body corporate, partnership, trust, association or other entity other than an individual; |
| (g) | “Consultant” means, in relation to a Corporation, an individual (other than an Employee or a Director of the Corporation) or Company that: |
| (i) | is engaged to provide on an ongoing bona fide basis, consulting, technical, management or other services to the Corporation or to an Affiliate of the Corporation, other than services provided in relation to a distribution; |
| (ii) | provides the services under a written contract between the Corporation or the Affiliate and the individual or the Company, as the case may be; |
| (iii) | in the reasonable opinion of the Corporation, spends or will spend a significant amount of time and attention on the affairs and business of the Corporation or an Affiliate of the Corporation; and |
| (iv) | has a relationship with the Corporation or an Affiliate of the Corporation that enables the individual to be knowledgeable about the business and affairs of the Corporation, and includes a Company of which a Consultant is an employee or shareholder and a partnership of which a Consultant is an employee or partner; |
| (h) | “Corporation” means Snow Lake Resources Ltd., a company incorporated under the laws of Manitoba, and its successor entities; |
| (i) | “Director” means a director of the Corporation or of an Affiliate; |
| (j) | “Disinterested Shareholder Approval” means an ordinary resolution approved by a majority of the votes cast by members of the Corporation at a shareholders’ meeting, excluding votes attaching to Common Shares beneficially owned by Insiders to whom Options may be granted and Associates of those persons including, on a resolution that requires disinterested approval, votes cast by any holders of non-voting and subordinate voting shares of the Corporation who shall be given full voting rights on such a resolution; |
| (k) | “Eligible Person” means a Director, Officer, Employee or Consultant, and includes an issuer all the voting securities of which are owned by Eligible Persons; |
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| (l) | “Employee” means an individual who: |
| (i) | is considered an employee of the Corporation or its subsidiary under the Income Tax Act (Canada) (and for whom income tax, employment insurance and Canada Pension Plan deductions must be made at source); |
| (ii) | works full-time for the Corporation or its subsidiary providing services normally provided by an employee and who is subject to the same control and direction by the Corporation over the details and methods of work as an employee of the Corporation, but for whom income tax deductions are not made at source; or |
| (iii) | works for the Corporation or its subsidiary on a continuing and regular basis for a minimum amount of time per week providing services normally provided by an employee and who is subject to the same control and direction by the Corporation over the details and methods of work as an employee of the Corporation, but for whom income tax deductions are not made at source; |
| (m) | “Exchange” means the stock exchange or over the counter market on which the Common Shares are listed; |
| (n) | “Exchange Act” means the United States Securities Exchange Acti of 1934, as amended from time to time; |
| (o) | “Expiry Date” means the last day of the term for an Option, as set by the Board at the time of grant in accordance with Section 5.2 herein and, if applicable, as amended from time to time; |
| (p) | “Insider” means, in respect of the Corporation: (a) a Director or senior officer of the Corporation, (b) a Director or senior officer of a Company that is an Insider or subsidiary of the Corporation; (c) a Person that beneficially owns or controls, directly or indirectly, Common Shares carrying more than 10% of the voting rights attached to all outstanding Common Shares of the Corporation, or (d) the Corporation itself, if it holds any of its own securities; |
| (q) | “Investor Relations Activities” means any activities, by or on behalf of the Corporation or shareholder of the Corporation, that promote or reasonably could be expected to promote the purchase or sale of securities of the Corporation, but does not include: |
| (i) | the dissemination of information provided, or records prepared, in the ordinary course of the business of the Corporation: |
| (A) | to promote the sale of products or services of the Corporation; or |
| (B) | to raise public awareness of the Corporation, that cannot reasonably be considered to promote the purchase or sale of securities of the Corporation; |
| (ii) | activities or communications necessary to comply with the requirements of: |
| (A) | applicable securities laws; |
| (B) | Exchange requirements or the by-laws, rules or other regulatory instruments of any other self-regulatory body or exchange having jurisdiction over the Corporation; |
| (iii) | communications by a publisher of, or writer for, a newspaper, magazine or business or financial publication, that is of general and regular paid circulation, distributed only to subscribers to it for value or to purchasers of it, if: |
| (A) | the communication is only through the newspaper, magazine or publication; and |
| (B) | the publisher or writer receives no commission or other consideration other than for acting in th-e4ca-pacity of publisher or writer; or |
| (iv) | activities or communications that may be otherwise specified by the Exchange; |
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| (r) | “Management Company Employee” means an individual who is employed by a person providing management services to the Corporation or an Affiliate which are required for the ongoing successful operation of the business enterprise of the Corporation or the Affiliate, but excluding a person providing Investor Relations Activities; |
| (s) | “Officer” means an officer of the Corporation or of an Affiliate, and includes a Management Company Employee; |
| (t) | “Option” means an option to purchase Common Shares pursuant to this Plan; |
| (u) | “Option Agreement” means an agreement, in the form attached hereto as Schedule “A”, whereby the Corporation grants to an Eligible Persons an Option; |
| (v) | “Other Share Compensation Arrangement” means, other than this Plan and any Options, any stock option plan, stock options, employee stock purchase plan or other compensation or incentive mechanism involving the issuance or potential issuance of Common Shares, including but not limited to a purchase of Common Shares from a treasury which is financially assisted by the Corporation by way of loan, guarantee or otherwise; |
| (w) | “Participant” means an Eligible Person who has been granted an Option; and |
| (x) | “Plan” means this Stock Option Plan. |
| 1.2 | Interpretation References to the outstanding Common Shares at any point in time shall be computed on a non- diluted basis. |
ARTICLE 2
ESTABLISHMENT OF PLAN
| 2.1 | Purpose |
The purpose of this Plan is to advance the interests of the Corporation, through the grant of Options, by:
| (a) | providing an incentive mechanism to foster the interest of Eligible Persons in the success of the Corporation and its Affiliates; |
| (b) | encouraging Eligible Persons to remain with the Corporation or its Affiliates; and |
| (c) | attracting new Directors, Officers, Employees and Consultants. |
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| 2.2 | Shares Reserved |
| (a) | The aggregate number of Common Shares that may be reserved for issuance pursuant to Options shall not exceed 2,406,732 Common Shares. For greater certainty, if an Option is surrendered, terminated or expires without being exercised, the Common Shares reserved for issuance pursuant to such Option shall be available for new Options granted under this Plan. |
| (b) | If there is a change in the outstanding Common Shares by reason of any share consolidation or split, reclassification or other capital reorganization, or a stock dividend, arrangement, amalgamation, merger or combination, or any other change to, event affecting, exchange of or corporate change or transaction affecting the Common Shares, the Board shall make, as it shall deem advisable and subject to the requisite approval of the relevant regulatory authorities, appropriate substitution and/or adjustment in: |
| (i) | the number and kind of shares or other securities or property reserved or to be allotted for issuance pursuant to this Plan; |
| (ii) | the number and kind of shares or other securities or property reserved or to be allotted for issuance pursuant to any outstanding unexercised Options, and in the exercise price for such shares or other securities or property; and |
| (iii) | the vesting of any Options (subject to the approval of the Exchange if such vesting is mandatory under the policies of the Exchange), including the accelerated vesting thereof on conditions the Board deems advisable, and if the Corporation undertakes an arrangement or is amalgamated, merged or combined with another corporation, the Board shall make such provision for the protection of the rights of Participants as it shall deem advisable. |
| (c) | No fractional Common Shares shall be reserved for issuance under this Plan and the Board may determine the manner in which an Option, insofar as it relates to the acquisition of a fractional Common Share, shall be treated. |
| (d) | The Corporation shall, at all times while this Plan is in effect, reserve and keep available such number of Common Shares as will be sufficient to satisfy the requirements of this Plan. |
| 2.3 | Non-Exclusivity |
Nothing contained herein shall prevent the Board from adopting such other incentive or compensation arrangements as it shall deem advisable.
| 2.4 | Effective Date |
This Plan shall be subject to the approval of any regulatory authority whose approval is required, if any. Any Options granted under this Plan prior to such approvals being given, if required, shall be conditional upon such approvals being given, and no such Options may be exercised unless and until such approvals are given. If no such approvals are required then this Plan is effective on the date it is approved by the Board.
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ARTICLE 3
ADMINISTRATION OF PLAN
| 3.1 | Administration |
| (a) | This Plan shall be administered by the Board. Subject to the provisions of this Plan, the Board shall have the authority: |
| (i) | to determine the Eligible Persons to whom Options are granted, to grant such Options, and to determine any terms and conditions, limitations and restrictions in respect of any particular Option grant, including but not limited to the nature and duration of the restrictions, if any, to be imposed upon the acquisition, sale or other disposition of Common Shares acquired upon exercise of the Option, and the nature of the events and the duration of the period, if any, in which any Participant’s rights in respect of an Option or Common Shares acquired upon exercise of an Option may be forfeited; |
| (ii) | to interpret the terms of this Plan, to make all such determinations and take all such other actions in connection with the implementation, operation and administration of this Plan, and to adopt, amend and rescind such administrative guidelines and other rules and regulations relating to this Plan, as it shall from time to time deem advisable, including without limitation for the purpose of ensuring compliance with Section 3.3 hereof. |
| (b) | The Board’s interpretations, determinations, guidelines, rules and regulations shall be conclusive and binding upon the Corporation, Eligible Persons, Participants and all other persons. |
| 3.2 | Amendment, Suspension and Termination |
The Board may amend, subject to the approval of any regulatory authority whose approval is required, suspend or terminate this Plan or any portion thereof. No such amendment, suspension or termination shall alter or impair any outstanding unexercised Options or any rights without the consent of such Participant. If this Plan is suspended or terminated, the provisions of this Plan and any administrative guidelines, rules and regulations relating to this Plan shall continue in effect for the duration of such time as any Option remains outstanding.
| 3.3 | Compliance with Legislation |
| (a) | This Plan, the grant and exercise of Options hereunder and the Corporation’s obligation to sell, issue and deliver any Common Shares upon exercise of Options shall be subject to all applicable federal, provincial and foreign laws, policies, rules and regulations, including any applicable Canadian provincial securities laws and United States state securities laws, in addition to the policies, rules and regulations of any Exchange or other markets on which the Common Shares are listed or quoted for trading and to such approvals by any governmental or regulatory agency as may, in the opinion of counsel to the Corporation, be required. The Corporation shall not be obligated by the existence of this Plan or any provision of this Plan or the grant or exercise of Options hereunder to sell, issue or deliver Common Shares upon exercise of Options in violation of such laws, policies, rules and regulations or any condition or requirement of such approvals. |
| (b) | No Option shall be granted and no Common Shares shall be sold, issued or delivered hereunder where such grant, sale, issue or delivery would require any new registration or other qualification of this Plan or of the Common Shares under the securities laws of any foreign jurisdiction, and any purported grant of any Option or any sale, issue and delivery of Common Shares hereunder in violation of this provision shall be void. In addition, the Corporation shall have no obligation to sell, issue or deliver any Common Shares hereunder unless such Common Shares shall have been duly listed, upon official notice of issuance, with all stock exchanges on which the Common Shares are listed for trading. |
| (c) | Common Shares sold, issued and delivered to Participants pursuant to the exercise of Options shall be subject to restrictions on resale and transfer under applicable securities laws and the requirements of any stock exchanges or other markets on which the Common Shares are listed or quoted for trading, and any certificates representing such Common Shares shall bear, as required, a restrictive legend in respect thereof. |
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ARTICLE 4
OPTION GRANTS
| 4.1 | Eligibility and Multiple Grants |
Options shall only be granted to Eligible Persons. An Eligible Person may receive Options on more than one occasion and may receive separate Options, with differing terms, on any one or more occasions.
| 4.2 | Option Agreement |
Every Option shall be evidenced by an Option Agreement executed by the Corporation and the Participant, which shall, if the Participant is an Employee, Consultant or Management Company Employee, contain a representation and warranty by the Corporation and such Participant that such Participant is a bona fide Employee, Consultant or Management Company Employee, as the case may be, of the Corporation or an Affiliate. In the event of any discrepancy between this Plan and an Option Agreement, the provisions of this Plan shall govern.
| 4.3 | Compliance with securities laws. |
Common Shares shall not be issued with respect to an Option unless the exercise of such Option and the issuance and delivery of such Common Shares shall comply with all relevant provisions of law, including, without limitation, any applicable Canadian provincial and/or United States’ state securities laws, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations thereunder and the requirements of any Exchange upon which such Common Shares may then be listed or quoted, and such issuance shall be further subject to the approval of counsel for the Corporation with respect to such compliance, including the availability of an exemption from registration for the issuance and sale of such Common Shares. The inability of the Corporation to obtain from any regulatory body in Canada or the United States, or otherwise, the authority deemed by the Corporation to be necessary for the lawful issuance and sale of any Common Shares hereunder, or the unavailability of an exemption from registration for the issuance and sale of any Common Shares hereunder, shall relieve the Corporation of any liability respect to the non-issuance or sale of such Common Shares other than with respect to a refund of any Option Price paid.
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ARTICLE 5
OPTION TERMS
| 5.1 | Exercise Price |
| (a) | The Corporation must not grant Options with an exercise price lower than the greater of the closing market prices of the underlying securities on: (a) the trading day prior to the date of grant of the Options; and (b) the date of grant of the Options. |
| (b) | If an Option is granted by the Corporation after its initial listing or after it has been recalled for trading following a suspension or halt, the Corporation must wait until a satisfactory market has been established before setting the exercise price for and granting the Option, being at least ten trading days since the date of listing or the day on which trading in the Company’s securities resumes, as the case may be. |
| (c) | If Options are granted within ninety days of a distribution by the Corporation by prospectus or similar offering document, then the exercise price per Common Share for such Option shall not be less than the greater of the minimum exercise price calculated pursuant to subsection (a) herein and the price per Common Share paid by the public investors for Common Shares acquired pursuant to such distribution. Such ninety day period shall begin: |
| (i) | on the date the final receipt is issued for the final prospectus or similar offering document in respect of such distribution; |
| (ii) | in the case of an initial public offering, on the date of listing; and |
| (iii) | in the case of a prospectus or similar offering document that qualifies special warrants, on the closing date of the private placement in respect of such special warrants. |
| 5.2 | Expiry Date |
| (a) | Every Option shall have a term not exceeding, and shall therefore expire no later than, 5 years after the date of grant, subject to extension where the Expiry Date falls within a blackout period as detailed in Section 5.2(b) below. |
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| (b) | The Expiry Date of an Option shall automatically extend if such Expiry Date falls within a period (a “blackout period”) during which the Corporation prohibits Optionees from exercising their Options to the extent that: |
| (i) | the blackout period is formally imposed by the Corporation pursuant to its internal trading policies as a result of the bona fide existence of undisclosed Material Information. For greater certainty, in the absence of the Corporation formally imposing a blackout period, the Expiry Date of any Options will not be automatically extended in any circumstances; |
| (ii) | the blackout period must expire upon the general disclosure of the undisclosed Material Information. The Expiry Date of the affected Options can be extended to no later than ten business days after the expiry of the blackout period; and |
| (iii) | the automatic extension of an Optionee’s Options will not be permitted where the Optionee or the Corporation is subject to a cease trade order (or similar order under securities laws) in respect of the Corporation’s securities. |
| 5.3 | Vesting |
| (a) | Subject to subsection (b) below and otherwise in compliance with the policies of the Exchange, the Board shall determine the manner in which an Option shall vest and become exercisable. |
| (b) | Options granted to Eligible Persons performing Investor Relations Activities shall vest over a minimum of 12 months with no more than 1/4 of such Options vesting in any three month period. |
| 5.4 | Non-Assignability |
Options may not be assigned or transferred.
| 5.5 | Ceasing to be Eligible Person |
| (a) | If a Participant who is an Officer, Employee or Consultant is terminated for cause, each Option held by such Participant shall terminate and shall therefore cease to be exercisable upon such termination for cause. |
| (b) | If a Participant dies prior to otherwise ceasing to be an Eligible Person, each Option held by such Participant shall terminate and shall therefore cease to be exercisable no later than the earlier of the Expiry Date and the date which is six months after the date of the Participant’s death, always provided that the Board may, in its discretion, extend the date of such termination and the resulting period in which such Option remains exercisable to a date not exceeding the earlier of the Expiry Date and the date which is twelve months after the date of the Participant’s death. |
| (c) | If a Participant ceases to be an Eligible Person other than in the circumstances set out in subsection (a) or (b) herein, each Option held by such Participant shall terminate and shall therefore cease to be exercisable no later than the earlier of the Expiry Date and the date which is 30 days after such event, always provided that the Board may, in its discretion, extend the date of such termination and the resulting period in which such Option remains exercisable to a date not exceeding the earlier of the Expiry Date and the date which is twelve months after such event, and further provided that the Board may, in its discretion, on a case-by-case basis and only with the approval of the Exchange, further extend the date of such termination and the resulting period in which such Option remains exercisable to a date exceeding the date which is after twelve months of such event. |
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| (d) | For greater certainty, if a Participant dies, each Option held by such Participant shall be exercisable by the legal representative of such Participant until such Option terminates and therefore ceases to be exercisable pursuant to the terms of Section 5.5(b) herein. |
| (e) | If any portion of an Option is not vested at the time a Participant ceases, for any reason whatsoever, to be an Eligible Person, such unvested portion of the Option may not be thereafter exercised by the Participant or its legal representative, as the case may be, always provided that the Board may, in its discretion further and subject to the approval of the Exchange where the vesting of the said Participant’s options was a requirement of the Exchange’s policies, thereafter permit the Participant or its legal representative, as the case may be, to exercise all or any part of such unvested portion of the Option that would have vested prior to the time such Option otherwise terminates and therefore ceases to be exercisable pursuant to the terms of this Section. For greater certainty, and without limitation, this provision will apply regardless of whether the Participant ceased to be an Eligible Person voluntarily or involuntarily, was dismissed with or without cause, and regardless of whether the Participant received compensation in respect of dismissal or was entitled to a notice of termination for a period which would otherwise have permitted a greater portion of an Option to vest. |
ARTICLE 6
EXERCISE PROCEDURE
| 6.1 | Exercise Procedure |
An Option may be exercised from time to time, and shall be deemed to be validly exercised by the Participant only upon the Participant’s delivery to the Corporation at its registered office of the following:
| (a) | a written notice of exercise, in the form hereto attached as Schedule “B”, addressed to the Corporate Secretary of the Corporation, specifying the number of Common Shares with respect to which the Option is being exercised; |
| (b) | the originally signed Option Agreement with respect to the Option being exercised; |
| (c) | a certified cheque or bank draft made payable to the Corporation for the aggregate exercise price for the number of Common Shares with respect to which the Option is being exercised; |
| (d) | documents containing such representations, warranties, agreements and undertakings, including as to the Participant’s future dealings in such Common Shares, as counsel to the Corporation reasonably determines to be necessary or advisable in order to comply with or safeguard against the violation of the laws of any jurisdiction; and |
| (e) | if the Participant is performing Investor Relations Activities for the Corporation, the Optionee must either: (i) deposit the Common Shares on exercise of an Option to a designated brokerage account as directed by the Board through which the Optionee conducts all trades in the Common Shares of the Corporation; or (ii) file insider trading reports with the Board when each trade is made with Common Shares in respect of exercised Options, and on the business day following, the Participant shall be deemed to be a holder of record of the Common Shares with respect to which the Option is being exercised, and thereafter the Corporation shall, within a reasonable amount of time, cause certificates for such Common Shares to be issued and delivered to the Participant. |
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ARTICLE 7
AMENDMENT OF OPTIONS
| 7.1 | Consent to Amend |
The Board may amend any Option with the consent of the affected Participant and the Exchange, including any shareholder approval required by the Exchange. For greater certainty, if required by the Exchange, Disinterested Shareholder Approval shall be required for any reduction in the exercise price of an Option if the Participant is an Insider at the time of the proposed amendment.
| 7.2 | Amendment Subject to Approval |
If the amendment of an Option requires regulatory or shareholder approval, such amendment may be made prior to such approvals being given, but no such amended Options may be exercised unless and until such approvals are given.
ARTICLE 8
MISCELLANEOUS
| 8.1 | No Rights as Shareholder |
Nothing in this Plan or any Option shall confer upon a Participant any rights as a shareholder of the Corporation with respect to any of the Common Shares underlying an Option unless and until such Participant shall have become the holder of such Common Shares upon exercise of such Option in accordance with the terms of the Plan.
| 8.2 | No Right to Employment |
Nothing in this Plan or any Option shall confer upon a Participant any right to continue in the employ of the Corporation or any Affiliate or affect in any way the right of the Corporation or any Affiliate to terminate the Participant’s employment, with or without cause, at any time; nor shall anything in the Plan or any Option be deemed or construed to constitute an agreement, or an expression of intent, on the part of the Corporation or any Affiliate to extend the employment of any Participant beyond the time which the Participant would normally be retired pursuant to the provisions of any present or future retirement plan of the Corporation or any Affiliate, or beyond the time at which he would otherwise be retired pursuant to the provisions of any contract of employment with the Corporation or any Affiliate.
| 8.3 | Governing Law |
This Plan, all Option Agreements, the grant and exercise of Options hereunder, and the sale, issuance and delivery of Common Shares hereunder upon exercise of Options shall be, as applicable, governed by and construed in accordance with the laws of the Province of Manitoba and the federal laws of Canada applicable therein. The Courts of the Province of Manitoba shall have the exclusive jurisdiction to hear and decide any disputes or other matters arising herefrom.
| 8.4 | Approval |
Approved by the Board of the Corporation on October _26th_, 2021.
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Exhibit 10.21
SCHEDULE “A”
FORM OF STOCK OPTION PLAN OPTION AGREEMENT
This Option Agreement is entered into between Snow Lake Resources Ltd. (the “Corporation”) and the Optionee named below pursuant to the 2021 Amended and Restated Stock Option Plan (the “Plan”), a copy of which is attached hereto, and confirms that:
| 1. | (the “Grant Date”); |
| 2. | (the “Optionee”); |
| 3. | was granted the option (the “Option”) to purchase common shares (the “Common Shares”) of the Corporation; |
| 4. | for the price (the “Option Price”) of $ per Common Share; |
| 5. | which shall be exercisable (“Vested”) in whole or in part in the following amounts on or after the following dates: |
| (a) | % on the Grant Date; and |
| (b) | % every months thereafter; |
| 6. | terminating on (the “Expiry Date”), |
all on the terms and subject to the conditions set out in the Plan. For greater certainty, once Common Shares have become Vested, the shares continue to be exercisable until the termination or cancellation thereof as provided in this Option Agreement and the Plan.
The undersigned Optionee represents and warrants that he/she is engaged to provide on, an ongoing bona fide basis, consulting, technical, management or other services to the Corporation or to an Affiliate of the Corporation.
By signing this Option Agreement, the Optionee acknowledges that the Optionee has read and understandings the Plan and agrees to the terms and conditions of the Plan and this Option Agreement.
[REMAINDER INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF the parties hereto have executed this Option Agreement as of the day of, 20.
| SNOW LAKE RESOURCES LTD. | |||
| Per: | |||
| Name: | |||
| Title: | |||
| SIGNED, SEALED, AND DELIVERED | ) | OPTIONEE |
| in the presence of | ) | |
| ) | ||
| ) | ||
| ) | ||
| ) | ||
| Witness | ) | Name: |
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITOR
We consent to the use in the prospectus constituting a part of this Registration Statement on Form F-1, as it may be amended, of our Independent Auditor’s Report dated October 15, 2021 relating to the audited financial statements of Snow Lake Resources Ltd. for the year ended June 30, 2021 and 2020. We also consent to the reference to us under the caption “Experts” in the Prospectus.
October 27, 2021
“De Visser Gray LLP”
CHARTERED PROFESSIONAL ACCOUNTANTS