Frontier Nuclear & Minerals Inc 6-K, filed Mar 31, 2022
Frontier Nuclear & Minerals Inc. (FNUC)
About this 6-K
Frontier Nuclear & Minerals Inc filed this 6-K on March 31, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of, March 2022
Commission File Number
(Translation of registrant’s name into English)
242 Hargrave Street, #1700
Winnipeg, Manitoba R3C 0V1 Canada
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
EXPLANATORY NOTE
Snow Lake Resources Ltd. (the “Company”) is furnishing this Form 6-K to provide the unaudited consolidated financial statements for the six months ended December 31, 2021 and 2020 and incorporate such financial statements into the Company’s registration statements referenced below.
This Form 6-K is hereby incorporated by reference into the registration statements of the Company on Form S-8 (Registration Numbers 333-261358) to the extent not superseded by documents or reports subsequently filed or furnished by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
FORWARD-LOOKING INFORMATION
This Report on Form 6-K contains forward-looking statements and information relating to us that are based on the current beliefs, expectations, assumptions, estimates and projections of our management regarding our company and industry. When used in this report, the words “may”, “will”, “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. These statements reflect management’s current view of us concerning future events and are subject to certain risks, uncertainties and assumptions, including among many others: 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; volatility in lithium prices and lithium demand may make it commercially unfeasible for us to develop our Thompson Bros Lithium Project; and other risks and uncertainties which are generally set forth under the heading, “Risk Factors” and elsewhere in our SEC filings. Should any of these risks or uncertainties materialize, or should the underlying assumptions about our business and the commercial markets in which we operate prove incorrect, actual results may vary materially from those described as anticipated, estimated or expected in the SEC filings.
All forward-looking statements included herein attributable to us or other parties or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, we undertake no obligations to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: March 31, 2022 | SNOW LAKE RESOURCES LTD. | |
| By: | /s/ Philip Gross | |
| Philip Gross | ||
| Chief Executive Officer and Director | ||
2
EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 | Unaudited Interim Consolidated Financial Statements as of December 31, 2021 and for the six months ended December 31, 2021 and 2020 | |
| 99.2 | Operating and Financial Review and Prospects in Connection with the Interim Consolidated Financial Statements for the six months ended December 31, 2021 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
3
Exhibit 99.1
Snow Lake Resources Ltd.
Condensed Consolidated Interim Financial Statements
For the Three and Six months Ended December 31, 2021 and 2020
(Expressed in Canadian Dollars)
(UNAUDITED)
SNOW LAKE RESOURCES LTD.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF
FINANCIAL POSITION
(Expressed in Canadian Dollars)
| December 31, | June 30, | |||||||||||
| Note | 2021 | 2021 | ||||||||||
| $ | $ | |||||||||||
| Assets | ||||||||||||
| Current | ||||||||||||
| Cash | ||||||||||||
| Prepaids and deposits | 5 | |||||||||||
| Sales tax receivable | ||||||||||||
| Non-current | ||||||||||||
| Exploration and evaluation assets | 6 | |||||||||||
| Total assets | ||||||||||||
| Liabilities | ||||||||||||
| Current | ||||||||||||
| Accounts payable | ||||||||||||
| Loan payable | 7 | |||||||||||
| Due to related party | 11 | |||||||||||
| Convertible debentures | 8(a) | |||||||||||
| Derivative liability | 8(d) | |||||||||||
| Shareholders’ Equity | ||||||||||||
| Share capital | 9 | |||||||||||
| Reserves | 9 | |||||||||||
| Deficit | ( | ) | ( | ) | ||||||||
| Total shareholders’ equity | ||||||||||||
| Total liabilities and shareholders’ equity | ||||||||||||
Nature of operations (Note 1)
Commitments and contingencies (Note 14)
Subsequent event (Note 15)
Approved on behalf of the Board of Directors on March 31, 2022:
| “Louie Simens” | “Nachum Labkowski” | |
| Louie Simens, Director | Nachum Labkowski, Director |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
2
SNOW LAKE RESOURCES LTD.
UNAUDITED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Expressed
in Canadian Dollars)
| Three months | Six months | |||||||||||||||||||
| Periods ended December 31, | Note | 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||
| Expenses | ||||||||||||||||||||
| Bank fees and interest | ||||||||||||||||||||
| Consulting fees | ||||||||||||||||||||
| Director and officer consulting fees | ||||||||||||||||||||
| General and administrative | ||||||||||||||||||||
| Interest expense and accretion on convertible debenture | 8(a) | |||||||||||||||||||
| Other interest and charges | 7 & 11 | |||||||||||||||||||
| Insurance | ||||||||||||||||||||
| Amortization of transaction cost | 8(a) | - | ||||||||||||||||||
| Professional fees | ||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||
| Transfer agent and regulatory fees | ||||||||||||||||||||
| Travel expenses | ||||||||||||||||||||
| ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
| Other income (loss) | ||||||||||||||||||||
| Foreign currency | ||||||||||||||||||||
| Government grants | 10 | |||||||||||||||||||
| Gain on change in fair value of derivative liability | 8(d) | |||||||||||||||||||
| Loss and comprehensive loss for the period | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Weighted average number of shares outstanding | ||||||||||||||||||||
| Basic and diluted | ||||||||||||||||||||
| Loss per share | ||||||||||||||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
3
SNOW LAKE RESOURCES LTD.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in Canadian Dollars, except number of shares)
| Share Capital | Reserves | |||||||||||||||||||||||||||||||
| Note | Common shares * | Issued capital | Warrant | Stock options | Total Reserves | Accumulated losses | Total shareholders’ equity | |||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Balance at June 30, 2020 | ( | ) | ||||||||||||||||||||||||||||||
| Loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at December 31, 2021 | ( | ) | ||||||||||||||||||||||||||||||
| Warrants exercised | ||||||||||||||||||||||||||||||||
| Convertible debenture warrants | - | |||||||||||||||||||||||||||||||
| Convertible debenture finder’s warrants | - | |||||||||||||||||||||||||||||||
| Loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at June 30, 2021 | ( | ) | ||||||||||||||||||||||||||||||
| Issued on IPO | ||||||||||||||||||||||||||||||||
| Share issue cost | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Convertible debenture finder’s warrants | - | |||||||||||||||||||||||||||||||
| Warrants exercised | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Shares issued on convertion of convertible debt | ||||||||||||||||||||||||||||||||
| Shared-based payments | - | |||||||||||||||||||||||||||||||
| Loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at December 31, 2021 | ( | ) | ||||||||||||||||||||||||||||||
| * | The Company’s completed a 5:1 share consolidation on October 7, 2021. Shares, warrants, and options in the consolidated financial statements are presented on a post-consolidation basis. |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
4
SNOW LAKE RESOURCES LTD.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in Canadian
Dollars)
| Six months ended December 31, | 2021 | 2020 | ||||||
| $ | $ | |||||||
| Cash flows used in operating activities | ||||||||
| Loss for the period | ( | ) | ( | ) | ||||
| Adjustments for items not involving cash: | ||||||||
| Recovery of flow through share liability | ||||||||
| Interest expense and accretion | ||||||||
| Amortization of transaction cost | ||||||||
| Share-based payments | ||||||||
| Gain on change in fair value of derivative liability | ( | ) | ||||||
| Net changes in non-cash working capital: | ||||||||
| Prepaids and deposits | ( | ) | ||||||
| Sales tax receivable | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Due to related party | ( | ) | ||||||
| ( | ) | ( | ) | |||||
| Cash flows used in investing activities | ||||||||
| Payments for exploration and evaluation assets | ( | ) | ( | ) | ||||
| ( | ) | ( | ) | |||||
| Cash flows provided by (used in) financing activities | ||||||||
| Loan from Nova Minerals Limited | ||||||||
| Proceeds from the exercise of warrants | ||||||||
| Issue of loan payable | ||||||||
| Proceeds from private placement | ||||||||
| Transaction costs related to issuance of shares or options | ( | ) | ||||||
| Net increase in cash | ( | ) | ||||||
| Cash, beginning of the period | ||||||||
| Cash, end of the period | ||||||||
| Supplemental disclosure with respect to cash flows (Note 12) | ||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
5
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended December 31, 2021, and 2020
(Expressed in Canadian Dollars)
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS
Snow Lake Resources Ltd., d/b/a Snow Lake Lithium Ltd. (Nasdaq: LITM) (“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”) (Now dissolved) |
In this report, Snow Lake and the subsidiaries it controls 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
On February 9, 2021, Thompson Bros was dissolved.
On November 22, 2021, the Company initiated trading under NASDAQ Composite under the symbol “LITM”
On November 23, 2021, the Company closed its initial
public offering (“IPO”) issuing
These unaudited condensed consolidated interim financial statements were approved by the Board of Directors for issue on March 31, 2022.
NOTE 2 – BASIS OF PRESENTATION
(a) Accounting Policies
The principal accounting policies applied in the preparation of these condensed consolidated interim financial statements are set out below. These policies have been consistently applied in the periods presented, unless otherwise stated. These unaudited condensed consolidated interim financial statements are expressed in Canadian dollars, which is the Company’s presentation and functional currency.
(b) Statement of compliance
The Company applies International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretation issued by the International Financial Reporting Interpretations Committee (“IFRIC”). These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements required by IFRS as issued by IASB and interpretations issued by IFRIC.
The policies applied in these unaudited condensed consolidated interim financial statements are based on IFRSs issued and outstanding as of March 31, 2022, the date the Board of Directors approved the statements. The same accounting policies and methods of computation are followed in these unaudited condensed consolidated interim financial statements as compared with the most recent annual consolidated financial statements as at and for the year ended June 30, 2021. Any subsequent changes to IFRS that are given effect in the Company’s annual consolidated financial statements for the year ending June 30, 2022, could result in restatement of these unaudited condensed consolidated interim financial statements.
6
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended December 31, 2021, and 2020
(Expressed in Canadian Dollars)
(Unaudited)
NOTE 3 – 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 adjusts in light of changes in economic conditions and the risk characteristics of the underlying assets.
NOTE 4 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(a) Classification and measurement changes
As of December 31, 2021, the Company’s financial instruments consist of cash, accounts payable, loan payable, amounts due to related parties and derivative liability. Cash, accounts payable and due to related party are designated as at amortized cost, 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 of December 31, 2021, the Company believes that the carrying values of cash, accounts payable, loan 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 of December 31, 2021,
the Company had cash of $
7
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended December 31, 2021, and 2020
(Expressed in Canadian Dollars)
(Unaudited)
(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. |
| ● | 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 period ended December 2021 would have varied by approximately $17,000. |
| ● | Assuming all other variables constant, an increase or a decrease of 10% of the United States dollar against the Canadian dollar, the net loss / gain of the Company and the equity for the period ended December 2021 would have varied approximately $3,078,000. |
| c. | The Company had no hedging agreements in place with respect to foreign exchange rates. |
NOTE 5 – PREPAIDS AND DEPOSITS
Included under prepaid expenses are approximately $
NOTE 6 – EXPLORATION AND EVALUATION ASSETS
Changes in the Company’s exploration and evaluation assets between the year ended June 30, 2021, and the six months ended
December 31, 2021 are reconciled as follows:
| As of | December 31, 2021 | June 30, 2021 | ||||||
| Balance beginning of the period | $ | $ | ||||||
| Exploration and evaluation expenditures | ||||||||
| Balance end of the period | $ | $ | ||||||
NOTE 7 – LOAN PAYABLE
On November 29, 2021, the Company entered into
a loan agreement for US$
NOTE 8 – CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITY
(a) Convertible debentures:
In February 2021, the Company issued convertible debt (the “Debentures”)
for a total of $
The Debentures were sold at a discount of approximately
Under the terms of the Agreement, the
Subscribed Amount plus interest accrued, at a rate which should be the higher of
8
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended December 31, 2021, and 2020
(Expressed in Canadian Dollars)
(Unaudited)
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 of June 30, 2021, was $
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.
During November 2021 all debt holders exercised their conversion rights
at a price of $
9
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended December 31, 2021, and 2020
(Expressed in Canadian Dollars)
(Unaudited)
The following schedule describes the break-down of the components of the debenture and allocations to each of its components:
| Convertible debenture | Derivative liability - convertible debenture conversion feature | Warrants value recorded to warrants reserve | Interest expenses and accretion | |||||||||||||
| Balance June 30, 2020 | $ | $ | $ | $ | ||||||||||||
| Principal value of convertible debenture | ||||||||||||||||
| Discount on proceeds received | ( | ) | ||||||||||||||
| Cash commission | ( | ) | ||||||||||||||
| Allocation to conversion feature | ( | ) | ||||||||||||||
| Allocation to warrants | ( | ) | ||||||||||||||
| Value at initial recognition | ||||||||||||||||
| Accretion expense | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Amortization of transaction cost | ||||||||||||||||
| Gain on change in fair value of conversion feature derivative liability | ( | ) | ||||||||||||||
| Balance June 30, 2021 | ||||||||||||||||
| Accretion expense | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Amortization of transaction cost | ||||||||||||||||
| Gain on change in fair value of conversion feature derivative liability | ( | ) | ||||||||||||||
| Warrants exercised | ( | ) | ||||||||||||||
| Conversion of convertible debenture | ( | ) | ( | ) | ||||||||||||
| Balance December 31, 2021 | $ | $ | $ | $ | ||||||||||||
(b) Compensation warrants:
As part of the initial IPO that the Company closed
on November 23, 2021,
The Company measures at each reporting period the fair value of its warrants denominated in a currency other that the Company’s functional currency which is the Canadian dollar. All the warrants issued under the IPO were denominated in United States dollars.
All derivatives have been classified as fair value through profit and loss, are included on the balance sheet within other assets, warrants or other liabilities. Gains and losses on re-measurement to fair value of warrants are included in “other gains and losses (net)”.
The fair value of all warrants is determined at each reporting period and at the time they are exercised. The difference between the carrying value and re-measured value is charged to income.
The warrants were valued using the Black Scholes valuation model, assuming a dividend yield as well as the risk-free rate, market price; and exercise price described in the table below:
10
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended December 31, 2021, and 2020
(Expressed in Canadian Dollars)
(Unaudited)
| Canadian dollars | ||||||||||||||||||||||||||||||||||||
| Valuation date | Number of warrants | Market price of unit USD | Volatility | Risk-free interest rate | Expected life (yrs.) | Foreign exchange rate | Exercise price | Fair value of a unit | Fair value | |||||||||||||||||||||||||||
| November 23, 2021 | $ | % | % | $ | $ | $ | ||||||||||||||||||||||||||||||
| December 31, 2021 | $ | % | % | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Revaluation | $ | ( | ) | |||||||||||||||||||||||||||||||||
c) Gain on change in fair value of derivative liabilities:
The following schedule summarizes the gain (loss) on derivative liabilities for the three and six months ended December 31, 2021:
| Periods ended December 31, 2021 | Three months | Six months | ||||||
| Gain on change in fair value of conversion feature derivative liability | $ | $ | ||||||
| Gain in reevaluation of derivative warrants | ||||||||
| $ | $ | |||||||
NOTE 9 – SHARE CAPITAL AND RESERVES
(a) Authorized
Unlimited number of voting common shares without par value.
Unlimited preferred shares.
(b) Issued Share Capital
The following schedule describes the Company’s capital transactions since June 30, 2020:
| Shares | Issued capital | |||||||
| # | $ | |||||||
| Balance - June 30, 2020 | ||||||||
| Warrants exercised | ||||||||
| Balance – June 30, 2021 | ||||||||
| Shares issued on initial public offering | ||||||||
| Conversion of convertible debt | ||||||||
| Warrants exercised | ||||||||
| Share issue costs | ( | ) | ||||||
| Fair value of warrants exercised | ||||||||
| Balance December 31, 2021 | ||||||||
11
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended December 31, 2021, and 2020
(Expressed in Canadian Dollars)
(Unaudited)
(c) Common Share Transaction Details
The Company had the following common share transactions during the year ended June 30, 2021, and the six months ended December 31, 2021:
| ● | During March 2021, the Company issued |
| ● | On November 23, 2021, the Company closed its IPO issuing |
| ● | On November 23, 2021, the Company issued |
| ● | During December 2021, the company issued |
| ● | On November 30, 2021, the company issued |
| ● | On December 16, 2021, the company issued |
(d) Warrants
The following tables summarizes common share purchase warrants transactions and outstanding as of December 31, 2021:
| Grant Date | Exercise price | Balance 30-Jun-20 | Issued | Exercised | Balance 31-Dec-21 | Expiry Dates | ||||||||||||||||
| November 29, 2018 | $ | ( | ) | |||||||||||||||||||
| December 3, 2018 | $ | |||||||||||||||||||||
| December 3, 2018 | $ | |||||||||||||||||||||
| December 31, 2018 | $ | |||||||||||||||||||||
| February 8, 2021 | $ | ( | ) | |||||||||||||||||||
| February 8, 2021 | $ | ( | ) | |||||||||||||||||||
| February 22, 2021 | $ | |||||||||||||||||||||
| November 23, 2021 | US 9.375 | |||||||||||||||||||||
| Total | ( | ) | ||||||||||||||||||||
As part of the convertible debentures issued in
February 2021, the Company issued
12
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended December 31, 2021, and 2020
(Expressed in Canadian Dollars)
(Unaudited)
The Debenture warrants were valued using the Black
Scholes valuation model, using the following assumptions: expected life:
As part of the IPO that the Company closed on
November 23, 2021, the Company issued
(e) Stock Options
The following table summarizes the stock options issued and outstanding as of June 30, 2021 and December 31, 2021:
| Number of stock options | Weighted average exercise price | |||||||
| # | $ | |||||||
| Balance at June 30, 2019 (1) | $ | |||||||
| Option cancelled | ( | ) | ||||||
| Balance June 30, 2020 | ||||||||
| Options cancelled | ( | ) | ||||||
| Options reinstated (2) | ||||||||
| Balance at June 30, 2021 | ||||||||
| Options granted (3) | ||||||||
| Balance at December 31, 2021 | ||||||||
| (1) | |
| (2) | |
| (3) |
On November 18, 2021,
As of December 31, 2021, the weighted average
remaining contractual life of the stock options is
NOTE 10 – GOVERNMENT GRANTS
On December 14, 2021, the Company received a grant
for $
13
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended December 31, 2021, and 2020
(Expressed in Canadian Dollars)
(Unaudited)
NOTE 11 – RELATED PARTY TRANSACTIONS
(a) Related Party Transactions
During the three and six months ended December 31, 2021 and 2020, the Company made payments to directors and officers, or to companies associated with these individuals, which are classified under the following categories:
| Consulting fees paid to officers & directors: | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| Periods ended December 31, | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Directors & officers consulting fees | $ | $ | $ | $ | ||||||||||||
| Exploration and evaluation expenditures | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Management consulting fees are paid to companies controlled by the Chief Executive Officer (“CEO”), the Chief Financial Officer (“CFO”) and the Chief Operating Officer (“COO”).
Included under Other Interest and Charges there are $
(b) Related Party Balances
All related party balances payable, for services and business expense reimbursements rendered as of December 31, 2021 and
June 30, 2021, are non-interest bearing and payable on demand, and are comprised of the following:
| December 30, | June 30, | |||||
| 2021 | 2021 | |||||
| Payable to Nova Minerals | $ | $ | ||||
| Payable to officers & directors | ||||||
| $ | $ |
NOTE 12 – SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
Significant non-cash transactions for the six months ended December 31, 2021 and the year ended June 30, 2021 were as follows:
| December 31, 2021 | June 30, 2021 | |||||||
| Exploration and evaluation assets in accounts payable | $ | $ | ||||||
NOTE 13 – SEGMENT INFORMATION
The Company has determined that it has one reportable operating segment, being the acquisition, exploration, and valuation of mineral properties located in Canada. At December 31, 2021, all of the Company’s operating and capital assets are located in Canada.
14
SNOW LAKE RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended December 31, 2021, and 2020
(Expressed in Canadian Dollars)
(Unaudited)
NOTE 14 – COMMITMENTS AND CONTINGENCIES
| a) | The Company’s only undiscounted liabilities are accounts payable and accrued liabilities and amounts due to related parties, which are due within one year. |
| b) |
NOTE 15 – SUBSEQUENT EVENT
In January 2022, as part of the CEO’s compensation package, the company issued the following RSU to its CEO:
| ● |
| ● |
| ● |
15
Exhibit 99.2
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
IN CONNECTION WITH THE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS FOR THE
SIX MONTHS ENDED DECEMBER 31, 2021
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 Report on Form 6-K. 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 identified elsewhere in this report on Form 6-K, and those listed in the “Risk Factors” section in our SEC filings.
The unaudited condensed consolidated financial statements for the periods ended December 31, 2021 and December 31, 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.
The Operating and Financial Review and Prospects of the Company for the six months period ended December 31, 2021, and its financial position as of the same date, should be read in conjunction with the Company’s unaudited condensed consolidated financial statements as at December 31, 2021, including the notes thereto. The comparative reporting period is the six-month period ended December 31, 2020.
All figures are in Canadian dollars, unless otherwise noted.
Cautionary Note Regarding Forward-looking Information and Statements:
This Operating and Financial Review and Prospects 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 under “Risk Factors” section in our SEC filings. 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 our SEC filings. 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.
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.
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 report, 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.
2
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 our exploration activities has been delayed until recently.
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.
3
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 Report, 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
In November 2021, we closed an Initial Public Offering (“IPO”) where the Company issued 3,680,000 shares at US$7.50 per shares for gross proceeds of C$35.0 million. The Company now qualifies 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 the above mentioned IPO; (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
For the six months ended December 31, 2021, the Company had not yet placed any of its mineral properties into production, the Company incurred a net loss of 2,412,658 (December 31, 2020 - $103,759). As of December 31, 2021, the Company had a deficit (accumulated losses) of $4,684,182 (June 30, 2021 - $2,271,524) and current assets in excess of current liabilities of $30,036,366, compared to an excess of current liabilities of $977,358 for the year ended June 30, 2021. 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.
4
The following schedule sets forth key components of our results of operations during the six-month periods ended Dec 31, 2021, and Dec 31, 2020.
| Six months ended December 31, | 2021 | 2020 | Change | |||||||||
| $ | $ | |||||||||||
| Expenses | ||||||||||||
| Bank fees and interest | 4,077 | 557 | 3,520 | |||||||||
| Consulting fees | 82,771 | 24,650 | 58,121 | |||||||||
| Director and officer consulting fees | 238,102 | 71,093 | 167,009 | |||||||||
| General and administrative | 32,118 | 6,593 | 25,525 | |||||||||
| Interest expense and accretion of convertible debt | 155,092 | - | 155,092 | |||||||||
| Insurances | 98,299 | - | 98,299 | |||||||||
| Amortization of transaction cost | 50,617 | - | 50,617 | |||||||||
| Professional fees | 393,811 | 5,897 | 387,914 | |||||||||
| Share-based compensation | 1,713,160 | - | 1,713,160 | |||||||||
| Transfer agent and regulatory fees | 139,491 | - | 139,491 | |||||||||
| Travel expenses | 18,281 | - | 18,281 | |||||||||
| (2,925,819 | ) | (108,790 | ) | (2,817,029 | ) | |||||||
| Other loss (income) | ||||||||||||
| Foreign currency | 18,200 | 5,031 | 13,169 | |||||||||
| Government grants | 30,732 | - | 30,995 | |||||||||
| Gain on change in fair value of derivative liability | 463,968 | - | 463,968 | |||||||||
| Loss and comprehensive loss for the period | (2,412,658 | ) | (103,759 | ) | (2,308,899 | ) | ||||||
| Weighted average number of shares outstanding | ||||||||||||
| Basic and diluted | 13,943,551 | 13,008,014 | 935,536 | |||||||||
| Loss per share | ||||||||||||
| Basic and diluted | $ | (0.17 | ) | $ | (0.01 | ) | $ | (0.17 | ) | |||
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 increased during the six months period ended December 31, 2021, when compared to the six months ended December 31, 2020, mainly as a result of the initiation of environmental assessment activities as well as cost associated with our IPO. This account is mainly composed of sustainability and Environmental, Social, and Governance (ESG) services, where approximately $38,000 were spent during the six months ended December 31, 2021, and approximately $46,000 in accounting services related to the filing of the F1 related to the Company’s IPO.
Director and officer consulting fees: Directors and officers fees increased by $167,009 (USD$66,235) resulting from an increase in compensation to senior executives.
General and administrative: The increase in general and administrative fees by $ 25,525 is mainly related to investor relations website setup and monthly maintenance for the same.
Interest expenses and accretion on convertible debt. 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.
The company incurred approximately $35,000 in interest on these debentures during the six months ended December 31, 2021. In addition, we incurred approximately $92,000 in accreted expenses related to the convertible debenture.
Insurances. The increase in insurance expenses relates to new director and officers’ liability insurance contracted during the year.
5
Amortization of transaction cost. As part of the convertible debenture issued during February 2021, we accreted approximately $51,000 of charges related to this debt financing.
Professional fees. Professional fees include the fees that we pay to professional advisors, such as our legal counsel. Our professional fees increased by $ 387,914, resulting from an increase in legal fees related to Nasdaq application and other services associated with the listing of the Company.
Share based payments. On November 18, 2021, the Company granted an aggregate of 1,269,386 incentive stock options to officers, directors, and consultants of the Company. The fair value of each option was estimated on the date of the grant using the Black-Scholes option pricing model, with the following assumptions: share price of US$7.5, expected dividend yield of 0%, expected volatility of 70%; risk-free interest rate of 1.47%; and an expected average life of 5 years. The fair value of all these options was estimated at $6,989,950 on granting. As the options vest over a period of a year at a rate of 25% per quarter, the Company has recognized the proportionate vested portion into income.
Transfer agent and regulatory fees. Transfer agent and regulatory fees increased by $139,491 resulting from an increase in transfer agent fees and initial listing fees in Nasdaq, services that we did not have during the comparative period.
Loss and comprehensive loss. As a result of the cumulative effect of the factors described above, we had a loss and comprehensive loss of $2,412,658 for the period ended December 31, 2021, as compared to $103,759 for the period ended December 31, 2020, an increase of $2,308,899.
Other items:
Foreign currency (loss) gain. For the period ended December 31, 2021, we incurred a foreign currency translation loss of $18,198, as compared to a foreign currency translation loss of $5,031 for the comparative period.
Gain on change in fair value of derivative liabilities. As the convertible debentures issued on February 2021, are considered a derivative liability due to its denomination in foreign currency, the Company is require to remeasure its value at each reporting period. The Company reported a gain in the change in the fair value of this derivative of $463,968.
Liquidity and Capital Resources
As of December 31, 2021, we had not yet placed any of our mineral properties into production and we had cash in the amount of $30,779,336 (June 30, 2021 - $318,844), a deficit (accumulated losses) of $4,684,182 (June 30, 2021 - $2,271,524) and a working capital of $30,036,366 (June 30, 2021 – deficiency of $977,358). 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.
During the six months ended December 31, 2021, the Company generated $32,174,831, net of issuing costs, by issuing 4,590,899 common shares, with an average gross proceeds per share of $7.86. The breakdown is composed by the issuance of 3,680,000 shares issued on our IPO, 751,163 shares issued on conversion of convertible debt and 159,736 shares related to the conversion of warrants.
6
Outlook
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 and additional outside targets as identified through prospecting and our ongoing geophysics drone survey
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. The Company also plans 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.
We will be conducting a winter ice road drilling program that will include three drills on the property and it is our intention to continue with at least two drills into the spring/summer season using helicopter support.
We have initiated the environmental base line studies with SLR who will be conducting the comprehensive process that is required ultimately for achieving permitting on the project.
We have initiated the metallurgy studies with SGS Lakefield in Ontario.
We are conducting an ongoing geophysical drone survey to identify additional anomalies across the property. We have to date only prospected circa 1% of the entire footprint.
We are working closely with federal, provincial and municipal authorities to progress the various stages of the projects through the system.
We significantly increased the landholding by over 100%.
7
Summary of Cash Flow
Comparison for the periods ended December 31, 2021 and December 30, 2020
The following table provides detailed information about our net cash flow for all financial statement periods presented in this Report.
| Six months ended December 31, | 2021 | 2020 | ||||||
| $ | $ | |||||||
| Cash flows used in operating activities | ||||||||
| Loss for the period | (2,412,658 | ) | (103,759 | ) | ||||
| Adjustments for items not involving cash: | ||||||||
| Recovery of flow through share liability | - | - | ||||||
| Interest expense and accretion | 126,884 | - | ||||||
| Amortization of transaction cost | 50,618 | - | ||||||
| Share-based payments | 1,713,160 | - | ||||||
| Gain on change in fair value of derivative liability | (463,968 | ) | - | |||||
| Net changes in non-cash working capital: | ||||||||
| Prepaids and deposits | (1,185,783 | ) | - | |||||
| Sales tax receivable | (42,512 | ) | 104 | |||||
| Accounts payable | 13,750 | (34,103 | ) | |||||
| Due to related party | (30,072 | ) | 61,227 | |||||
| (2,230,581 | ) | (76,531 | ) | |||||
| Cash flows used in investing activities | ||||||||
| Payments for exploration and evaluation assets | (324,142 | ) | (46,965 | ) | ||||
| (324,142 | ) | (46,965 | ) | |||||
| Cash flows provided by (used in) financing activities | ||||||||
| Loan from Nova Minerals Limited | - | 32,700 | ||||||
| Proceeds from the exercise of warrants | 239,720 | - | ||||||
| Issue of loan payable | 782,423 | - | ||||||
| Proceeds from private placement | 34,988,520 | - | ||||||
| Transaction costs related to issuance of shares or options | (2,995,448 | ) | - | |||||
| 33,015,215 | 32,700 | |||||||
| Net increase (decrease) in cash | 30,460,492 | (90,796 | ) | |||||
| Cash, beginning of the period | 318,844 | 143,089 | ||||||
| Cash, end of the period | 30,779,336 | 52,293 | ||||||
Our net cash used in operating activities was $2,230,581 for the period ended December 31, 2021, as compared $76,531 for the period ended December 31, 2020.
Non-cash items affecting (reducing) the loss for the period includes share-based payments for $1,713,160 a gain in the change in fair value of derivative liabilities of $463,968 and the change in non-cash working capital items for $1,244,617.
Our net cash used in investing activities was $324,142 for the period ended December 31, 2021, as compared to $46,965 for the period ended December 31, 2021. Our net cash used in investing activities for the six months ended December 31, 2021 as well as for year ended June 30, 2021 consisted entirely of payments for the exploration and evaluation of assets.
Our net cash provided by financing activities was $33,015,215 for the period ended December 31, 2021, as compared to $32,700 for the period ended December 31, 2020.
The Company raised $34,988,520 (before issue cost) in its IPO, $854,656 through the conversion of convertible debt, were during November 2021 all debtholders exercised their conversion rights at a price of $1.25 per common share. Also $239,720 where raised through the exercise of warrants. Total share issue cost incurred for the period was $3,932,926.
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.
8
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.
The Company carries the majority of its funds in U.S dollars. A 10.0% appreciation of the U.S. dollar against the Canadian dollar, from the exchange rate of C$1.2890 per US$1.00 as of December 31, 2021 to a rate of C$1.4179 per US$1.00, will result in an increase of approximately C$3,077,934 in our cash equivalent position. 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$1.2890 per US$1.00 as of June 30, 2021 to a rate of C$1.1718 for $1.00, will result in a decrease of C$2,798,121 in our cash equivalent position.
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.
Critical Accounting Policies
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.
Please see Note 2 of our condensed consolidated interim financial statements as of December 31, 2021, for a summary of significant accounting policies.
9