37 CAPITAL INC 20-F for FY2023
37 CAPITAL INC (HHHEF)
About this 20-F
37 CAPITAL INC filed this 20-F on May 14, 2024, covering the fiscal year ended December 31, 2023 (FY2023).
Headline figures
Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- 48.82K CAD
- compared with a net loss of 125.04K CAD a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the fiscal year ended
For the transition period from ___ to ___
OR
Date of event requiring this shell company report: _______
Commission
file number
(Exact name of Registrant as specified in its charter)
(Jurisdiction of Incorporation or organization)
(Address of principal executive offices)
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
| Common Stock, Fully Paid and Non-Assessable Common Shares Without Par Value | ||
| (Title of Class) |
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
| (Title of Class) |
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: common shares as of December 31, 2023. No preferred shares issued and outstanding.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes
☐
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Emerging
growth company |
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| U.S. GAAP ☐ | Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
| Item 17 ☐ | Item 18 ☐ |
If this is an Annual Report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (s 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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37 CAPITAL INC.
FORM 20-F ANNUAL REPORT 2022
TABLE OF CONTENTS
| ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | 3 |
| ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE | 3 |
| ITEM 3. KEY INFORMATION | 4 |
| ITEM 4. INFORMATION ON THE COMPANY | 6 |
| ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS | 11 |
| ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES | 17 |
| ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS | 20 |
| ITEM 8. FINANCIAL INFORMATION | 24 |
| ITEM 9. THE OFFER & LISTING | 25 |
| ITEM 10. ADDITIONAL INFORMATION | 28 |
| ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 36 |
| ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | 37 |
| ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | 37 |
| ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 37 |
| ITEM 15. CONTROLS AND PROCEDURES | 38 |
| ITEM 16. AUDIT COMMITTEE, CODE OF ETHICS, ACCOUNTANT FEES. | 38 |
| ITEM 17. FINANCIAL STATEMENTS | 39 |
| ITEM 18. FINANCIAL STATEMENTS | 39 |
| ITEM 19. LIST OF EXHIBITS | 40 |
| SIGNATURE PAGE | 78 |
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ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
| Name of Directors and/or Officers of the Issuer | Position Held as at the date of this Annual Report |
| Jacob H. Kalpakian, Vancouver, British Columbia, Canada | President, CEO and Director |
| Neil Spellman*, Carlsbad, CA, USA | CFO & Director |
| Bedo H. Kalpakian*1, Delta, British Columbia, Canada | Director |
| Gregory T. McFarlane*, Washington, Utah, USA | Director |
| Maria P. Arenas, Surrey, British Columbia, Canada | Corporate Secretary |
*Members of the Audit Committee
1Bedo Kalpakian was appointed to the Board of Directors on May 25, 2021
Fred Tejada stepped down from the Board of Directors on May 1, 2021.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
Item 3.A. Selected Financial Data
The selected financial data in Table I has been derived from the audited financial statements of 37 Capital Inc. (hereinafter referred to as the “Company” or the “Registrant” or “37 Capital”). The financial data under 2023, 2022, 2021, 2020 and 2019 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The information should be read in conjunction with the Registrant's financial statements and notes thereto included in Item 17 of this Annual Report.
All financial figures presented herein and throughout this Annual Report are expressed in Canadian dollars (Cdn$) unless otherwise specified. All common shares and per share amounts included in this Annual Report on Form 20-F (2023) have been restated to give retroactive effect to the 5:1 share consolidation, which took effect on June 20, 2021 as further described in Results of Operations in Item 4.(a) of this document.
TABLE I
The financial data under the tables 2023, 2022, 2021, 2020 and 2019 have been prepared in accordance with IFRS.
| Year Ended December 31, 2023 | Year Ended December 31, 2022 | Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2019 | ||||||||||||||||
| Operating Revenue | $ | 0 | 0 | 0 | 0 | 0 | ||||||||||||||
| Interest Income | $ | 0 | 0 | 0 | 0 | 0 | ||||||||||||||
| Comprehensive loss | $ | (48,820 | ) | (125,036 | ) | (1,044,863 | ) | (133,379 | ) | (147,137 | ) | |||||||||
| Basic and diluted loss per common share before other items | $ | (0.00 | ) | (0.03 | ) | (0.24 | ) | (0.09 | ) | (0.10 | ) | |||||||||
| Total Assets | $ | 121,374 | 55,683 | 2,113 | 40,573 | 33,180 | ||||||||||||||
| Capital Stock | $ | 27,736,269 | 27,536,269 | 27,511,269 | 25,864,950 | 25,857,450 | ||||||||||||||
| Number of common shares at year-end | 13,745,947 | 5,745,947 | 4,495,947 | 1,458,542 | 1, 438,542 | |||||||||||||||
| Long-term obligations | $ | 0 | 0 | 0 | 0 | 0 | ||||||||||||||
| Cash dividends | $ | 0 | 0 | 0 | 0 | 0 | ||||||||||||||
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Bank of Canada Exchange Rates
| Monthly High ($)(1) | Monthly Low ($)(1) | |||||||
| July 2023 | 0.7617 | 0.7492 | ||||||
| August 2023 | 0.7524 | 0.7350 | ||||||
| September 2023 | 0.7450 | 0.7313 | ||||||
| October 2023 | 0.7358 | 0.7209 | ||||||
| November 2023 | 0.7363 | 0.7207 | ||||||
| December 2023 | 0.7573 | 0.7353 | ||||||
(1) The high and low exchange rates have been calculated using the rates of the Bank of Canada.
| For Year Ended December 31, 2023 | For Year Ended December 31, 2022 | For Year Ended December 31, 2021 | For Year Ended December 31, 2020 | For Year Ended December 31, 2019 | |||||||||||||||||
| Average rate ($)(2) | 0.7446 | 0.7692 | 0.7980 | 0.7461 | 0.7560 | ||||||||||||||||
| High ($)(3) | 0.7573 | 0.8031 | 0.8306 | 0.7863 | 0.7699 | ||||||||||||||||
| Low ($)(3) | 0.7353 | 0.7217 | 0.7727 | 0.6898 | 0.7393 | ||||||||||||||||
(2)The average exchange rate for the period has been calculated using the yearly rate of the Bank of Canada.
(3)The high and low exchange rates in each period were determined from the yearly rate of the Bank of Canada.
All of the amounts in the Exchange rates tables above are stated in U.S. currency. Accordingly, at the closing on December 31, 2023, the US $1.00 was equal to Cdn $1.3243.
Item 3.D. Risk Factors
The Company and the Securities of the Company, should be considered a highly speculative investment. The following risk factors should be given special consideration when evaluating an investment in any of the Company's Securities:
1). RISKS RELATED TO THE COMPANY’S BUSINESS
- Regulations: Mineral exploration programs are subject to extensive federal, provincial and local laws and regulations governing such exploration, development and operation of mining activities as well as the protection of the environment, including laws and regulations relating to obtaining permits to mine, protection of air and water quality, hazardous waste management, mine reclamation and the protection of endangered or threatened species.
- Exploration and Development: The resource properties in which the Company has an interest are in the exploration stages only and do not have a known body of commercial ore. Exploration and development of natural resource properties involve a high degree of risk and few properties which are explored are ultimately developed into producing properties. Substantial expenditures are required to establish reserves through drilling, to develop processes to extract the resources and, in the case of new properties, to develop the extraction and processing facilities and infrastructure at any site chosen for extraction. Although substantial benefits may be derived from the discovery of a major deposit, no assurance can be given that resources will be discovered in sufficient quantities or grades to justify commercial operations or that the funds required for development can be obtained on a timely basis.
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- Operating Hazards and Risks: Exploration for natural resources involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome.
- Fluctuating Metal Prices: The prices of those commodities have fluctuated widely, particularly in recent years, and are affected by numerous factors beyond the Company's control including international, economic and political trends, expectations of inflation or deflation, currency exchange rate fluctuations, interest rates fluctuations, global or regional consumptive patterns, speculative activities and increased production due to new extraction developments and improved extraction and production methods. The effect of these factors on the prices of metals determines the economic viability of exploration projects, which cannot be accurately predicted.
- Environmental Factors: Should the Company decide to conduct any mineral exploration work then all phases of the Company's mineral exploration work shall be subject to environmental regulations. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees.
- Competition: The resource industry is intensely competitive in all of its respective phases, and the Company competes with many companies possessing much greater financial resources and technical facilities than the Company. As such, competition is adversely affecting the Company's ability to acquire suitable mineral exploration properties at reasonable prices.
- Management: The Company is dependent on a relatively small number of key employees, the loss of any of whom could have an adverse effect on the Company.
- Dilution: There are a number of outstanding securities and agreements pursuant to which common shares of the Company may be issued in the future. This will result in further dilution to the Company's shareholders.
- Revenues and Dividends: The Company does not anticipate to generate any revenue in the future and has not recognized any revenue in fiscal 2019, 2020, 2021, 2022 and 2023. In the event that the Company generates any revenues in the future, then the Company intends to retain its earnings in order to finance growth. Furthermore, apart from the Arrangement Agreement, the Company has not paid any dividends in the past and does not expect to pay any dividends in the future.
- Requirement of New Capital: As a company without any revenues, the Company typically needs more capital than it has available to it or can expect to generate through the sale of its assets. In the past, the Company has had to raise, by way of debt and equity financings, considerable funds to meet its capital needs. There is no assurance that the Company will be able to continue to raise funds needed for its business. Failure to raise the necessary funds in a timely fashion will limit the Company's growth or may jeopardize the Company’s ability to continue as a going concern. The Company has outstanding debts, has working capital deficiency, has no revenues, has incurred operating losses, and has no assurances that sufficient funding will be available to the Company to continue its operations for an extended period of time.
- U.S. Federal Income Tax Considerations: The Company is classified as a Passive Foreign Investment Company ("PFIC") for U.S. Federal Income Tax purposes. Classification as a PFIC will create U.S. Tax consequences to a U.S. shareholder of the Company that are unique to the PFIC provisions and that are not encountered in other investments. Prospective investors are advised to consult their own tax advisors with respect to the tax consequences of an investment in the common shares of the Company.
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- Penny Stock: The Company's securities are deemed to be Penny Stocks and are therefore subject to Penny Stock rules as defined in Rule 3a(51)(1) of the 1934 Exchange Act. The Penny Stock disclosure requirements may have the effect of reducing the level of trading activity of the Company's securities in the secondary market. Penny Stocks are low-priced shares of small companies not traded on a U.S. national exchange or quoted on Nasdaq. The Company's securities were quoted for trading on the OTCQB tier of the OTC Markets Group (“OTCQB”) until June 1, 2020. Presently, the Company’s securities are quoted on the PINK Sheets on the OTC market. Penny Stocks, such as the Company's securities, can be very risky. Prices of Penny Stocks are often not available. Investors in Penny Stocks are often unable to sell stock back to the dealer that sold them the stock. Investors may lose all their investment in Penny Stocks. There is no guaranteed rate of return on Penny Stocks. Before an investor purchases any Penny Stock, U.S. Federal law requires a salesperson to tell the investor the "offer" and the "bid" on the Penny Stock, and the "compensation" the salesperson and the firm receive for the trade. The firm also must mail a confirmation of these prices to the investor after the trade. The Investor's Broker-dealer is required to obtain the investor's signature to show that the investor has received the statement titled "Important Information on Penny Stocks" before the investor first trades in a Penny Stock. This Statement is required by the U.S. Securities and Exchange Commission ("SEC") and contains important information on Penny Stocks. Furthermore, under penalty of Federal Law the Investor's brokerage firm must tell the investor at two different times - before the investor agrees to buy or sell a Penny Stock, and after the trade, by written confirmation the following: 1) the bid and offer price quotes for the Penny Stock, and the number of shares to which the quoted prices apply, 2) the brokerage firm's compensation for the trade, 3) the compensation received by the brokerage firm's salesperson for the trade. In addition, to these items listed above the investor's brokerage firm must send the investor monthly account statements and a written statement of the investor's financial situation and investment goals as required by the Securities Enforcement and Penny Stock Reform Act of 1990.
- Disruption in Trading: Trading in the common shares of the Company may be halted or suspended or may be subject to cease trade order at any time for certain reasons, including, but not limited to, the failure by the Company to submit documents to the Regulatory Authorities within the required time periods.
- Market Price Volatility: The market price of the Company’s common shares has experienced considerable volatility and may continue to fluctuate in the future. Furthermore, there is a limited trading market for the Company’s common shares and as such, the ability of investors to sell their shares cannot be assured.
- Tax Considerations – Persons considering the purchase of the Company’s common shares should consult their tax advisors with regard to the application of Canadian, U.S. and other tax laws to their particular situation.
- Investment in Mexican Gaming Company: The Company has determined that it will not recover its investment in the Mexican gaming company, as a result the Company has written-off its investment in the Mexican gaming company.
- The Company’s investment in its mineral exploration property: Changing conditions in the financial markets, and Canadian Income Tax legislation may have a direct adverse impact on the Company’s ability to raise funds for its Extra High mineral exploration property. A drop in the availability of equity financings will likely impede spending on mineral properties. As a result of all these significant risks, it is quite possible that the Company shall lose its investment in the Company’s Extra High mineral exploration property.
ITEM 4. INFORMATION ON THE COMPANY
Item 4.A. History and Development of the Company
The Company was incorporated by memorandum under the Company Act of the Province of British Columbia, Canada on August 24, 1984 (Exhibit 3.1 – Incorporated by reference) and was registered extra-provincially in the Province of Ontario, Canada on October 19, 1984. On May 31, 1988, the Company adopted the French form of its name to "Ressources Armeno Inc.". On May 25, 1992, the name of the Company was changed to “Ag Armeno Mines and Minerals Inc”. in the English form, and "Les Mines et Mineraux Ag Armeno Inc." in the French form. On April 25, 2000, the name of the Company was changed from “Ag Armeno Mines and Minerals Inc”. in the English form, and "Les Mines et Mineraux Ag Armeno Inc.", in the French form, to “Golden Nugget Exploration Inc”. On May 2, 2002, the name of the Company was changed from “Golden Nugget Exploration Inc.” to “Lucky 1 Enterprises Inc.” On January 17, 2005, the name of the Company was changed to “Bronx Ventures Inc”. and the Company adopted new Articles (Exhibit 3.2 - Incorporated by reference). On March 19, 2007, the Company changed its name to “Zab Resources Inc”. On April 16, 2009, the Company changed its name to “Kokomo Enterprises Inc”. On August 31, 2012, the Company changed its name to “High 5 Ventures Inc.” (Exhibit 3.5 – Incorporated by reference). On July 7, 2014, the Company changed its name to 37 Capital Inc. (see Exhibit 3.6 – Incorporated by reference).
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On April 4, 1985, the Company's common shares were listed and posted for trading on the Vancouver Stock Exchange, on the Montreal Exchange on January 15, 1988 and, on the Nasdaq SmallCap Market on May 11, 1988. On July 12, 1991, the Company voluntarily de-listed its common shares from the Montreal Exchange, and, on October 3, 1994, the Company's shares were delisted from the Nasdaq SmallCap Market. Effective October 4, 1994, the Company's shares have been listed for trading on the OTC Bulletin Board and were listed for trading on the OTCQB tier of the OTC Markets Group Inc. (“OTCQB) until June 1, 2020. Presently, the Company’s shares are listed for trading on the PINK Sheets on the OTC Markets. Effective November 29, 1999 the Vancouver Stock Exchange became known as the Canadian Venture Exchange (hereinafter referred to as the “CDNX”) as a result of the merger between the Vancouver Stock Exchange and the Alberta Stock Exchange. On July 5, 2001, the Company made a formal application to the CDNX requesting the voluntary delisting of the Company’s common shares from trading on the CDNX, as a result of which, the common shares of the Company were delisted from trading on the CDNX effective at the close of trading on July 31, 2001.
On July 30, 1986, the Company's share capital split on the basis of one-old-for-two-new common shares. On May 25, 1992, the Company's share capital was consolidated on the basis of ten-old-for-one-new common share. On April 25, 2000, the Company’s share capital was consolidated on the basis of fifteen-old-for-one-new common share. On May 2, 2002, the Company’s share capital was consolidated on the basis of five-old-for-one-new common share and its authorized share capital was subsequently increased to 200,000,000 common shares without par value. On January 17, 2005, the Company’s share capital was consolidated on the basis of thirty-five-old-for-one-new common share and its authorized share capital was increased to an unlimited number of common and preferred shares without par value. On March 19, 2007, the Company subdivided its capital stock on a 1 (old) share for 50 (new) shares basis. As a result, the shares of Bronx Ventures Inc. were de-listed from trading and the shares of Zab Resources Inc. (“Zab”) commenced trading on March 22, 2007 on the OTC Bulletin Board in the USA under the symbol “ZABRF”.
As of November 28, 2007, the common shares of the Company have been listed for trading on the Canadian Securities Exchange (“CSE”) (formerly known as the Canadian National Stock Exchange (CNSX)) under the trading symbol “ZABK”. On October 17, 2008, the Company’s trading symbol on the CSE was changed to “ZAB” pursuant to the CSE adopting a three character symbol format.
On April 16, 2009, the Company’s share capital was consolidated on the basis of 25 (old) shares for 1 (new) share and the Company changed its name to Kokomo Enterprises Inc. (“Kokomo”). As a result, the shares of Zab were de-listed from trading and the shares of Kokomo commenced trading in Canada on the CSE under the symbol “KKO”, and in the U.S.A. the shares of Kokomo commenced trading on the OTC Bulletin Board under the symbol “KKOEF”.
On August 31, 2012, the Company’s share capital was consolidated on the basis of 15 (old) common shares for 1 (new) common share and the Company changed its name to High 5 Ventures Inc. (“High 5”). As a result, the shares of Kokomo were de-listed from trading and the shares of High 5 commenced trading in Canada on the CSE under the symbol “HHH”, and in the U.S.A. the shares of High 5 traded on the OTCQB under the symbol “HHHEF”. The Cusip number of the Company’s common shares is 42966V105.
On April 8, 2013, the Company entered into a purchase and sale agreement with a Mexican gaming company, whereby the Company agreed to purchase a royalty revenue stream of an amount the greater of 10% of the net profits or 5% of the gross revenues of the Mexican land-based casino for a purchase price of $800,000. As of December 31, 2013, the Company invested $800,000 and advanced $49,200 for working capital purposes. The Mexican gaming company repaid the $49,200 advanced and the Company recognized $4,157 in royalty revenue during the year ended December 31, 2014. As at December 31, 2014, the Company assessed the fair value of the investment and recorded impairment of $799,999 on the investment due to nominal royalty payments received. On December 31, 2021, the Company received confirmation that the purchase and sale agreement with the Mexican gaming company has been terminated and is of no further effect. Accordingly, the Company recorded an impairment loss of $1 as at December 31, 2021.
On July 7, 2014, the Company’s share capital was consolidated on the basis of 6 (old) common shares for 1 (new) common share and the Company changed its name to 37 Capital Inc. (“37 Capital”). As a result, the shares of High 5 were de-listed from trading and the shares of 37 Capital commenced trading in Canada on the CSE under the symbol “JJJ”, and in the U.S.A. the shares of 37 Capital started trading on the OTCQB under the symbol “HHHEF”. The Cusip number of the Company’s common shares was 88429G102.
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On June 21, 2019 the CSE deemed that the Company is inactive pursuant to the policies of the CSE, as a result the CSE changed the Company’s trading symbol to “JJJ.X”. The Company's common shares traded on the OTCQB tier of the OTC markets under the trading symbol “HHHEF” until June 1, 2020. Presently, the Company’s common shares are listed for trading on the PINK Sheets on the OTC market under the same trading symbol “HHHEF”.
On June 15, 2021, the Company’s share capital was consolidated on the basis of 5 (old) common shares for 1 (new) common share. As a result of the consolidation, the shares of the Company commenced trading on a consolidated basis in Canada on the CSE under the symbol “JJJ.X”, and in the U.S.A. the shares of 37 Capital are listed for trading on the PINK Sheets on the OTC market under the trading symbol “HHHEF. The Cusip number of the Company’s common shares is 88429G201.
Subsequently on February 5, 2024, the CSE has deemed the Company to meet its minimum listing requirements and, as a result, the Company is now trading under the symbol “JJJ”.
Since its incorporation, the Company has been engaged primarily in the identification, acquisition, exploration and, if warranted, the development of natural resource properties and, for a brief period of time from 1991 to 1994, the Company, through its formerly owned Ecuadorean subsidiary, Armenonic del Ecuador S.A. (“Armenonic”) operated the San Bartolome lead/zinc/silver mine in Ecuador.
37 Capital is a junior mineral exploration company. The Company has a 100% undivided interest in the Extra High Claims located in the Province of British Columbia, and the Company has a one-half percent (1/2%) gross receipts royalty interest in certain lithium mineral exploration properties located in the Province of Ontario. Furthermore, the Company had entered into a Property Option Agreement and an Amendment Agreement to the Property Option Agreement in respect to the Acacia Property in British Columbia, Canada whereby the Company had the right and option to acquire a 60% interest in the subject property on certain terms and conditions (see Item 4.D II). The Property Option Agreement and the Amendment Agreement to the Property Option Agreement in respect to the Acacia Property were mutually terminated as of November 1, 2021. The principal business of 37 Capital is in mineral exploration. The Compan’'s ability to pursue its stated primary business and to meet its obligations as they come due is dependent upon the ability of management to obtain the necessary financings either through private placements or by means of public offerings of the Compan’'s securities or through the exercise of incentive stock options or warrants or through debt financings or through the sale of its assets or through the issusance of the Company’s securities.
Arrangement Agreement
On February 26, 2015, the Company incorporated then two wholly-owned subsidiaries, 27 Red Capital Inc. (“27 Red”) and 4 Touchdowns Capital Inc. (“4 Touchdowns”). On April 30, 2015, the Company entered into an arrangement agreement (the “Arrangement Agreement”) (see Exhibit 12 – Incorporated by reference) with 27 Red (“Spinco1”) and 4 Touchdowns (“Spinco2”). The Company completed the Plan of Arrangement with 27 Red (Spinco 1) and 4 Touchdowns (Spinco 2) on February 12, 2016 (the “Effective Date”). Shareholders of record on the Effective Date received one new common share, one Class 1 Reorganization Share and one Class 2 Reorganization Share of the Company. As a result of the completion of the Arrangement on February 12, 2016, 27 Red and 4 Touchdowns are independent entities and are no longer subsidiaries of the Company.
A copy of the Arrangement Agreement is available on www.sedarplus.ca.
Company Information
On August 23, 2016, Mr. Neil Spellman of Carlsbad, California, joined the Board of Directors of the Company. Mr. Spellman was appointed as the CFO of the Company effective as of April 1, 2017.
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Effective as of August 1, 2021, the Company’s office is located at Suite 575, 510 Burrard Street, Vancouver, British Columbia, Canada, V6C 3A8. The telephone number is (604) 681-0204 (ext. 6105) and the telefax number is (604) 681-9428. The contact person is Jake H. Kalpakian.
The Company’s registered and records office is located at Suite 3200-650 West Georgia Street, Vancouver BC V6B 4P7. The telefax number is (604) 669-9385.
The Registrar and Transfer Agent of the Company is Computershare Investor Services Inc., at 510 Burrard Street, Vancouver, BC, Canada V6C 3B9. The telefax number is (604) 661-9407.
As of March 28, 2017, the Company’s auditors are Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants, at 1500-1140 W. Pender Street, Vancouver, BC V6E 4G1 (the “Auditors”). The telefax number is (604) 689-2778.
Item 4.B. Business Overview
Summary
37 Capital is a junior mineral exploration company. The Company has a 100% undivided interest in the Extra High Claims located in the Province of British Columbia, and the Company is entitled to receive a one-half percent (1/2%) gross receipts royalty interest after six months from the date of commencement of commercial production from certain lithium mineral properties located in the Province of Ontario. Furthermore, the Company had entered into a Property Option Agreement and an Amendment Agreement to the Property Option Agreement in respect to the Acacia Property in British Columbia, Canada whereby the Company had the right and option to acquire a 60% interest in the subject property on certain terms and conditions (see Item 4.D II). By mutual consent, the Property Option Agreement and the Amendment Agreement to the Property Option Agreement were terminated effective November 1, 2021. The principal business of 37 Capital is in mineral exploration. However, the Company had a minority investment in a non-mining related project located in Mexico. The Company has determined that it will not recover its investment in the non-mining related project located in Mexico, and has written-off its investment.
37 Capital is a reporting issuer in the Provinces of British Columbia, Alberta, Quebec and Ontario and files all public documents on www.sedarplus.ca. The Company is a foreign private issuer in the United States of America and in this respect files, on EDGAR, its Annual Report on Form 20-F and other reports on Form 6K at the following link:
http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000825171&owner=exclude&count=40 will give you direct access to the Company’s filings.
Presently, 37 Capital is seeking opportunities of merit to get involved with. It should be noted that there are no assurances whatsoever that 37 Capital shall be successful in its attempts of seeking opportunities of merit.
Item 4. C. Organizational Structure
Arrangement Agreement
On February 26, 2015, the Company incorporated then two wholly-owned subsidiaries, 27 Red Capital Inc. (“27 Red”) and 4 Touchdowns Capital Inc. (“4 Touchdowns”). On April 30, 2015, the Company entered into an arrangement agreement (the “Arrangement Agreement”) (see Exhibit 12 – Incorporated by reference) with 27 Red (“Spinco1”) and 4 Touchdowns (“Spinco2”). The Company completed the Plan of Arrangement with 27 Red (Spinco 1) and 4 Touchdowns (Spinco 2) on February 12, 2016 (the “Effective Date”). Shareholders of record on the Effective Date received one new common share, one Class 1 Reorganization Share and one Class 2 Reorganization Share of the Company. As a result of the completion of the Arrangement on February 12, 2016, 27 Red and 4 Touchdowns are independent entities and are no longer subsidiaries of the Company.
A copy of the Arrangement Agreement is available on www.sedarplus.ca.
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Item 4.D. Property, Plants and Equipment
I. Extra High Claims, Kamloops Mining Division, British Columbia, Canada
Previously the Company held a 33% interest in the Extra High Claims, located in the Kamloops Mining Division of the Province of British Columbia (“Extra High Property”) (see Exhibits 10.5.1; 10.5.2; 10.11.2; 10.11.3; 10.11.4 – Incorporated by references).
On October 31, 2019, as amended on November 4, 2019, the Company entered into an agreement with Colt Resources Inc. (“Colt Resources”) to purchase the remaining 67% right, interest and title in and to the Extra High Property.
During the year ended December 31, 2021, the Company recorded an impairment loss of $25,001 relating to the Extra High Property.
Pursuant to the Company’s offer letter to Colt Resources dated July 6, 2022 which was accepted by Colt Resources, the Company has made a cash payment of $15,000 and, has issued 50,000 common shares in the capital of the Company to Colt Resources as consideration for the full and final settlement of all matters between the Company and Colt Resources in respect to the Extra High Property. The 50,000 common shares in the capital of the Company were subject to a hold period from trading which expired on December 10, 2022.
During 2023 the Company hired the services of Discovery Consultants of Vernon, British Columbia (“Discovery “) to plan, conduct, and complete the Company’s exploration work program on the Extra High Property (the “Company’s 2023 Exploration Work Program”). The Company’s 2023 Exploration Work Program consisted of 2 Phases. The Company incurred $20,000 of exploration related expenditures for Phase 1, and the Company incurred $24,991 of exploration related expenditures for Phase 2, for a total amount of $44,991. The mineral claims covering the Extra High Property are valid until December 28, 2028.
As at December 31, 2023, the Company owns a 100% undivided right, interest and title in and to the Extra High Property.
The Extra High Property is subject to a 1.5% Net Smelter Returns Royalty (“NSR”) payable to a third party, 50% of which, or 0.75%, can be purchased by the Company at any time by paying $500,000.
As of the date of this Annual Report, the Company holds a 100% undivided interest in the Extra High Claims.
The Extra High Claims are located on Samatosum Mountain, immediately south of the formerly producing Samatosum Mine, 60 km northeast of Kamloops, British Columbia.
Legal Description
The Extra High Mineral Claims tenures are as follows:
| TENURE NUMBER | NAME OF CLAIM | Property Size (in hectares) | CONVERSION DATE OR DATE STAKED | BC MAP # | EXPIRY DATE | |||||||||||||
| 509949 | Extra High | 60.829 | 2005/MAR/31 | 082M | 2028/DEC/28 | |||||||||||||
| 509961 | Extra High | 121.664 | 2005/MAR/31 | 082M | 2028/DEC/28 | |||||||||||||
| 509969 | Extra High | 344.834 | 2005/MAR/31 | 082M | 2028/DEC/28 | |||||||||||||
| 510214 | Extra High | 40.557 | 2005/APR/05 | 082M | 2028/DEC/28 | |||||||||||||
| 510215 | Extra High | 81.124 | 2005/APR/05 | 082M | 2028/DEC/28 | |||||||||||||
| Total: | 650 | |||||||||||||||||
| 10 |
II. Acacia Property, Adams Plateau, British Columbia
On September 30, 2019, the Company entered into a property option agreement (the “Option Agreement”) with Eagle Plains Resources ltd. (“Eagle Plains”) to acquire a 60% interest in the Acacia Property (“Acacia Property”) in Adams Plateau Area of the Province of British Columbia.
On October 15, 2020, the Company entered into an amendment agreement to the Option Agreement with Eagle Plains as the Company was not able to incur the required amount of $100,000 in property related expenditure during the 1st Anniversary.
During November 2021, by mutual consent, the Company and Eagle Plains terminated the Option Agreement dated September 30, 2019 and the Amendment Agreement to the Option Agreement dated October 15, 2020. Accordingly, the Company recorded an impairment loss of $15,000 during the year ended December 31, 2021.
III. Ontario, Canada Lithium Properties (Mineral Leases)
These Mineral Leases were previously written off at the end of fiscal 2000. During the year ended December 31, 2008, the Company sold all of its Mineral Leases for gross proceeds of $54,500. However, in the event that at a future date the Mineral Leases are placed into commercial production, then the Company is entitled to receive a 0.50% gross receipts royalty after six months from the date of commencement of commercial production.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Item. 5.A. Results of Operations
The following table contains selected annual information for the three years ended December 31, 2023, 2022 and 2021 which are in accordance with IFRS:
Year Ended December 31, 2023 | Year Ended December 31, 2022 | Year Ended December 31, 2021 | ||||||||||
| Revenue | $ | 0 | $ | 0 | 0 | |||||||
| Interest income | 0 | 0 | 0 | |||||||||
| Expenses | 48,820 | 125,036 | 1,044,863 | |||||||||
| Basic and diluted loss per common share before other items | (0.03 | ) | (0.24 | ) | ||||||||
| Comprehensive loss | (48,820 | ) | (125,036 | ) | (1,044,863 | ) | ||||||
| Total assets | 121,374 | 55,683 | 2,113 | |||||||||
| Long-term financial obligations | 0 | 0 | 0 | |||||||||
| Cash dividends | 0 | 0 | 0 | |||||||||
All financial figures presented herein are expressed in Canadian Dollars (CDN$) unless otherwise specified.
In Canada, the common shares of the Company trade on the Canadian Securities Exchange (CSE) under the symbol “JJJ”, and in the USA, the Company's common shares traded on the OTCQB tier of the OTC markets under the trading symbol “HHHEF” until June 1, 2020. Presently, the Company’s common shares are listed for trading in the USA on the PINK Sheets on the OTC market. The Cusip number of the Company’s common shares is 88429G201. The Company’s office is located at Suite 575 – 510 Burrard Street, Vancouver, British Columbia, Canada, V6C 3A8 and its registered office is located at Suite 3200-650 West Georgia Street, Vancouver BC V6B 4P7. The Company’s registrar and transfer agent is Computershare Investor Services Inc. located at 510 Burrard Street, Vancouver, British Columbia, Canada, V6C 3B9.
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For the year ended December 31, 2023:
| • | The Company’s operating expenses were $48,820 as compared to $125,036 for the corresponding period in 2022 and as compared to $1,044,863 for the corresponding period in 2021. |
| • | The Company recorded a comprehensive loss of $48,820 as compared to a comprehensive loss of $125,036 for the corresponding period in 2022 and as compared to a comprehensive loss of $1,044,863 for the corresponding period in 2021. |
| • | The Company’s basic and diluted loss per common share was $0.00 as compared to a basic and diluted loss per common share of $0.03 and as compared to a basic and diluted loss of $0.24 during the corresponding period in 2021. |
| • | The Company’s total assets were $121,374 as compared to $55,683 during the corresponding period in 2022 and as compared to $2,113 during the corresponding period in 2021. |
| • | The Company’s total liabilities were $741,436 as compared to $826,925 during the corresponding period in 2022 and as compared to $697,319 during the corresponding period in 2021. |
| • | The Company had a working capital deficiency of $719,054 as compared to a working capital deficiency of $825,243 during the corresponding period of 2022 and as compared to a working capital deficiency of $695,206 during the corresponding period of 2021. |
On April 1, 2017, Mr. Bedo H. Kalpakian stepped down as the Company’s President, CEO & CFO. In replacement to Mr. Bedo H. Kalpakian, effective as of April 1, 2017 Mr. Jacob H. Kalpakian became the President & CEO of the Company, and Mr. Neil Spellman became the CFO of the Company.
The Company’s Board of Directors decided to change the Company’s auditors. Effective as of March 28, 2017, the Company’s Auditors are Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants, 1500-1140 W. Pender St., Vancouver, BC V6E 4G1. The telefax number is (604) 689-2778.
Pursuant to debt settlement agreements dated December 11, 2020 totaling the sum of $739,351.50 between the Company and certain creditors, including Jackpot Digital Inc. (“Jackpot’) and the Company’s President and CEO, on January 25, 2021 the Company issued a total of 2,957,406 common shares of the Company at a deemed price of $0.25 per common share (the “Debt Settlement Shares of the Company”), of which Jackpot acquired 597,380 Debt Settlement Shares of the Company and the Company’s President and CEO acquired 615,395 Debt Settlement Shares of the Company. As of the date of this Annual Report, Jackpot owns 607,377 common shares of the Company representing approximately 4.42% of the issued and outstanding common shares of the Company.
Effective as of May 1, 2021, Fred A.C. Tejada resigned from the Board of Directors of the Company, and effective as of May 25, 2021, Bedo H. Kalpakian was appointed as a director of the Company.
At the Company’s Annual General Meeting, which was held on December 3, 2021, the Company’s shareholders passed all the resolutions presented including the re-election of Jake H. Kalpakian, Gregory T. McFarlane, Neil Spellman and Bedo H. Kalpakian as Directors of the Company; re-appointed the Company’s Auditor, Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants for the ensuing year and authorized the Directors to fix the remuneration to be paid to the Auditor; and re-approved the Company’s Stock Option Plan.
At the Company’s Annual General Meeting, which was held on November 14, 2022, the Company’s shareholders passed all the resolutions presented including the re-election of Jake H. Kalpakian, Gregory T. McFarlane, Neil Spellman and Bedo H. Kalpakian as Directors of the Company; re-appointed the Company’s Auditor, Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants for the ensuing year and authorized the Directors to fix the remuneration to be paid to the Auditor; and re-approved the Company’s Stock Option Plan.
At the Company’s Annual General Meeting, which was held on December 12, 2023 (see Exhibit 13.7* - Attached), the Company’s shareholders passed all the resolutions presented including the re-election of Jake H. Kalpakian, Gregory T. McFarlane, Neil Spellman and Bedo H. Kalpakian as Directors of the Company; re-appointed the Company’s Auditor, Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants for the ensuing year and authorized the Directors to fix the remuneration to be paid to the Auditor; and re-approved the Company’s Stock Option Plan.
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During December 2019, the Company had intended to issue up to 800,000 flow-through units of the Company at a price of $0.25 per unit for gross proceeds to the Company of $200,000 in order to use the proceeds of this financing towards mineral exploration work expenditures located in the Province of British Columbia. However, due to the Covid-19 pandemic the Company was only able to raise the amount of $20,000 which the Company intended to incur towards mineral exploration work expenditures during the Company’s 2021 fiscal year. As such, the Company issued 80,000 flow-through units. Each flow-through unit consisted of one flow-through common share of the Company and one non-flow-through share purchase warrant to acquire one non-flow-through common share of the Company at a price of $0.50 for a period of two years. All securities issued in connection with this financing were subject to a hold period which expired on May 16, 2021. As the Company was not able to utilize the $20,000 towards mineral exploration expenditures, during the year-ended December 31, 2022, the Company made a formal application to Canada Revenue Agency (the “CRA”) and cancelled the Company’s flow-through share application which was submitted to the CRA during the year ended December 31, 2020 (see Exhibit 10.21* - Attached). Subsequent to the year-ended December 31, 2022, the non-flow share purchase warrants expired unexercised.
The Company is presently not a party to any legal proceedings whatsoever.
Summary of Quarterly Results
| For the Quarterly Periods ended: | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||||
| Total Revenues | 0 | 0 | 0 | 0 | ||||||||||||
| Net income/(loss) and Comprehensive income/(loss) | (35,061 | ) | (21,948 | ) | 27,072 | (18,883 | ) | |||||||||
| Income/(loss) per share | (0.00 | ) | (0.00 | ) | 0.00 | (0.00 | ) | |||||||||
| For the Quarterly Periods ended: | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||
| Total Revenues | 0 | 0 | 0 | 0 | ||||||||||||
| Net loss and comprehensive loss | (57,456 | ) | (20,694 | ) | (24,768 | ) | (22,118 | ) | ||||||||
| Loss per share | (0.01 | ) | (0.00 | ) | (0.01 | ) | (0.01 | ) | ||||||||
The Company’s business is not of a seasonal nature.
Item 5.B. Liquidity and Capital Resources
Liquidity and Capital Resources
The Company has incurred significant operating losses over the past three fiscal years, has limited resources, and no sources of operating cash flow.
During 2024, the Company shall require at least $400,000 so as to conduct its operations uninterruptedly. In order to meet this requirement, the Company intends to seek equity and/or debt financings through private placements and/or public offerings and/or loans. In the past, the Company has been successful in securing equity and debt financings in order to conduct its operations uninterruptedly. While the Company does not give any assurances whatsoever that in the future it will continue being successful in securing equity and/or debt financings in order to conduct its operations uninterruptedly, it is the Company’s intention to pursue these methods for future funding of the Company.
| 13 |
As at December 31, 2023:
| • | the Company’s total assets were $121,374 as compared to $55,683 for the year ended December 31, 2022 and as compared to $2,113 for the year ended December 31, 2021. |
| • | the Company’s total liabilities were $741,436 as compared to $826,925 for the year ended December 31, 2022 and as compared to $697,319 for the year ended December 31, 2021. |
| • | the Company had $18,304 in cash as compared to $122 in cash for the year ended December 31, 2022 and as compared to $1,611 in cash for the year ended December 31, 2021. |
| • | the Company had GST receivable in the amount of $4,078 as compared to $1,560 for the year ended December 31, 2023 and as compared to $502 for the year ended December 31, 2021. |
Shares for Debt Financing
Pursuant to debt settlement agreements dated December 11, 2020 totaling the amount of $739,351.50 between the Company and certain creditors, on January 25, 2021, the Company issued 2,957,406 common shares of the Company (the “Debt Settlement Shares of the Company”) at a price of $0.25 per common share in settlement of debts totaling the amount of $739,351.50 to certain creditors, including to a related party and a director and officer of the Company. The Debt Settlement Shares of the Company were subject to a hold period which expired on May 26, 2021. The fair value of the 2,957,406 common shares was $1,626,573. As a result, the Company recorded a loss on debt settlement of $887,222.
Private Placement Financings
During the year ended December 31, 2023, the following transactions have occurred:
| • | On July 24, 2023, the Company closed a non-brokered private placement financing which was announced on June 5, 2023 for gross proceeds of $50,000 through the issuance of 2,000,000 flow-through units of the Company at $0.025 per unit. Each unit consists of one flow-through common share in the capital of the Company and non-flow-through share purchase warrant to purchase an additional common share in the capital of the Company at the price of $0.05 per common share for a period of 5 years. All securities issued in connection with this financing include a hold period in accordance with applicable securities laws. Based on the residual method the warrants were valued at $nil. The units were issued below the then market price of the Company shares, therefore a flow-through premium was recorded. |
| • | On May 15, 2023, the Company closed the non-brokered private placement financing which was announced in December 2022 for gross proceeds of $150,000 through the issuance of 6,000,000 units of the Company at $0.025 per unit. Each unit consists of one common share in the capital of the Company and one share purchase warrant to purchase an additional common share in the capital of the Company at the price of $0.05 per common share for a period of 5 years. All securities issued in connection with this financing included a hold period in accordance with applicable securities laws. Based on the residual value the warrants were valued at $nil. |
During the year ended December 31, 2022, the following share transactions occurred:
i) During August and October 2022, the Company issued in aggregate 1,200,000 non flow-through units of the Company. Each non flow-through unit consists of one common share and one share purchase warrant to acquire one common share of the Company at a price of $0.05 for a period of five years. All securities issued in connection with this financing were subject to four-months and one day hold period.
ii) On January 15, 2021, the Company issued 80,000 flow-through units of the Company. Each flow-through unit consists of one flow-through common share of the Company and one non-flow-through share purchase warrant to acquire one non-flow-through common share of the Company at a price of $0.50 for a period of two years. All securities issued in connection with this financing were subject to a hold period which expired on May 16, 2021.
| 14 |
Loan Payable
The Company had borrowed the sum of $103,924 from a party to pay certain amounts that were owed by the Company to some of its creditors. The borrowed amount of $103,924 was non-interest bearing, unsecured and was payable on demand. Pursuant to a debt settlement agreement dated December 11, 2020 with the Company and the party, on January 25, 2021 the Company issued a total of 415,697 common shares of the Company with a fair value of $0.55 per shares in full settlement of the debt (the “Debt Settlement Shares of the Company”). The Company recognized a loss of $124,709 during the year ended December 31, 2021. The Debt Settlement Shares of the Company were subject to a hold period which expired on May 26, 2021.
During May 2021, an arm’s length party has lent the Issuer the amount of $50,000. As of December 31, 2023, the loan is outstanding and has accrued interest in the amount of $12,973.
Convertible Debentures Financing 2015
On January 6, 2015, the Company closed a convertible debenture financing with two directors of the Company for the amount of $250,000. The convertible debentures matured on January 6, 2016, and bear interest at the rate of 12% per annum payable on a quarterly basis. The convertible debentures are convertible into common shares of the Company at a conversion price of $1.50 per share. The liability component of the convertible debentures was recognized initially at the fair value of a similar liability with no equity conversion option, which was calculated based on the application of a market interest rate of 25%. On the initial recognition of the convertible debentures, the amount of $222,006 was recorded under convertible debentures and the amount of $27,994 has been recorded under the equity portion of convertible debenture reserve.
On October 29, 2021, the Company entered into an Addendum to the convertible debentures whereby the maturity date of the principal amount totaling $250,000 of the convertible debentures together with the accrued interest has been extended indefinitely, until mutual consent of the Company and Lender has been reached.
As at December 31, 2023, the Company recorded interest expense of $30,000 (December 31, 2022 - $30,000). As of December 31, 2023, $250,000 of the convertible debentures are outstanding plus the accrued interest of $269,589 (December 31, 2022 - $239,589).
Convertible Debentures Financing 2013
Pursuant to debt settlement agreements dated December 11, 2020 in respect to the convertible debentures 2013, on January 25, 2021 the Company issued an aggregate of 833,409 common shares of the Company with a fair value of $0.55 per share in settlement of the outstanding convertible debentures 2013 totaling $100,000 plus accrued interest. The Company recognized a loss of $250,023 during the year ended December 31, 2021.
Warrants
As at December 31, 2023, a total of 9,200,000 warrants exercisable at the price of $0.05 per warrant share were outstanding. As of the date of this MD&A, there are 9,200,000 share purchase warrants outstanding.
While there are no assurances whatsoever that any warrants may be exercised, however if any warrants are exercised in the future, then any funds received by the Company from the exercising of warrants shall be used for general working capital purposes.
Stock Options
As at December 31,2023, there were no outstanding stock options (December 31, 2022 – Nil).
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Item 5.C. Research and development, patents and licences
The Company does not have a research and development department nor does it have any patents or licenses.
Item 5.D. Trend Information
During the last several years commodity prices have fluctuated significantly, and should this trend continue or should commodity prices remain at current levels, then companies such as 37 Capital will have difficulty in raising funds and/or acquiring mineral properties of merit at reasonable prices.
Item 5.E. Off balance sheets arrangements.
The Company has no off balance sheets arrangements and the Company’s financial information including its balance sheets and statements of comprehensive loss have been fairly represented in accordance with IFRS.
Item 5.F. Tabular disclosure of contractual obligations
The Company has two convertible debentures totalling $250,000 plus accrued interest, which have been extended indefinitely (see Exhibit 10.15. 1 - Incorporated by reference). The Company has no Capital Lease Obligations or Purchase Lease Obligations reflected on the Company’s Balance Sheets, however the Company has Obligations pursuant to the 2015 Convertible Debentures Financing (see Exhibit 10.15 – Incorporated by reference). During the year ended December 31, 2021, the Company entered into Debt Settlements Agreements to settle certain outstanding debts and loans (see Exhibit 10.20 – Incorporated by reference).
Furthermore, pursuant to the Property Purchase Agreement with Colt, the Company was obligated to pay $75,000 to Colt within eighteen months from the closing date of the Property Option Agreement (see Exhibit 10.11.5 – Incorporated by reference). Pursuant to the Company’s offer letter to Colt dated July 6, 2022 which was accepted by Colt (see Exhibit 10.11.6* - Attached), the Company has made a cash payment of $15,000 and, has issued 50,000 common shares in the capital of the Company to Colt as consideration for the full and final settlement of all matters between the Company and Colt in respect to the Extra High Property located in the Province of British Columbia. The 50,000 common shares in the capital of the Company were subject to a hold period from trading which expired on December 10, 2022.
In respect to information covered by Items 5.E. and 5.F., all financial information and statements have been fairly represented in accordance with IFRS.
Item 5.G. Safe Harbour
Special Note regarding Forward-Looking Statements
We make certain forward looking-statements in this Form 20-F within the meaning of Section 27A of the Securities Act 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, relating to our financial condition, profitability, liquidity, resources, business outlook, proposed acquisitions, market forces, corporate strategies, contractual commitments, capital requirements and other matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbour for forward-looking statements. To comply with the terms of the safe harbour, we note that a variety of factors could cause our actual results and experience to differ substantially from the anticipated results or other expectations expressed in our forward-looking statements. When words and expressions such as: “believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “possible,” “seeks,” “may,” “could,” “should,” “might,” “likely,” “enable” or similar words or expressions are used in this Form 20-F, as well as statements containing phrases such as “in our view,” “there can be no assurances,” “although no assurances can be given,” or “there is no way to anticipate with certainty,” forward-looking statements are being made. These forward-looking statements speak as of the date of this Form 20-F.
| 16 |
The forward-looking statements are not guarantees of future performance and involve risk and uncertainties. These risks and uncertainties may affect the operation, performance, development and results of our business and could cause future outcomes to differ materially from those set forth in our forward-looking statements. These statements are based on our current beliefs as to the outcome projected or implied in the forward-looking statements. Furthermore, some forward-looking statements are based upon assumptions of future events which may not prove to be accurate. The forward-looking statements involve risks and uncertainties including, but not limited to, the risks and uncertainties referred to in “Item 3.D. RISK FACTORS,” and elsewhere within the document and in other of our filings with the Securities and Exchange Commission.
New risk factors emerge from time to time and it is not possible for us to predict all such risk factors which can cause actual results to differ significantly from those forecast in any forward-looking statements. Given these risks and uncertainties, investors should not overly rely or attach undue weight to forward-looking statements as an indication of our actual future results.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
As of December 31, 2023, the name, municipality of residence and the principal occupation of the directors and officers of the Company are the following:
| Name and municipality of residence | Position with the Registrant | Date of Birth | Principal occupation | Term of Office with the Registrant |
Jacob H. Kalpakian(1) Vancouver, B.C. Canada |
President, CEO and Director | October 18, 1968 |
President & CEO |
April 2017 to Present |
| Vice President of Registrant | 1991 to April 2017 | |||
| President of Jackpot Digital Inc. (“Jackpot”) | 1991 to Present | |||
| CEO of Jackpot | 2004 to Present | |||
| President of Yo Eleven Gaming Inc. | June 2021 to Present | |||
Neil Spellman*(2) Carlsbad, CA, USA |
CFO & Director |
January 24, 1953 |
Director of the Registrant CFO of the Registrant |
Aug 2016 to Present
|
| Director of Jackpot | April 2017 to Present | |||
| Senior Vice President of DB Financial | 2002 to July 2020 | |||
| CFO of Yo Eleven Gaming Inc. | June 2021 to Present | |||
Gregory T. McFarlane* Washington, Utah, USA |
Director | November 13, 1968 | Director of the Registrant Director of Jackpot |
1992 to Present |
| Principal of McFarlane Media, LLC (2005) | 2005 to Present | |||
| Director of Yo Eleven Gaming Inc. | June 2021 to Present | |||
Bedo H. Kalpakian* (2) Delta, B.C. Canada |
Director | May 14, 1946 | Director of the Registrant |
2021 to Present 1984 to 2017 |
Maria P. Arenas Surrey, B.C. Canada |
Corporate Secretary | September 29, 1969 | Corporate Secretary of the Registrant |
2008 to Present |
| Corporate Secretary of Jackpot | 2008 to Present | |||
| Corporate Secretary of Yo Eleven Gaming Inc. | June 2021 to Present |
*Members of the Company’s audit committee.
(1) Upon Bedo H. Kalpakian stepping down as President & CEO, as of April 1, 2017, Mr. Jacob H. Kalpakian was appointed as President & CEO.
(2) Upon Bedo H. Kalpakian stepping down as CFO, as of April 1, 2017, Mr. Neil Spellman has been appointed as CFO. As of May 25, 2021, Bedo H. Kalpakian was appointed to the Board of Directors.
All directors serve for a term of one year until the next annual general meeting or until the date of their resignation, whichever occurs first.
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.
Item 6.B. Compensation
On August 1, 2016, the Management Services Agreement with Kalpakian Bros. of B.C. Ltd. (“Kalpakian Bros.”) was terminated by mutual consent (see Exhibits 10.4, 10.4.1, 10.4.2, 10.4.3, 10.4.4, 10.4.5, 10.4.5.6 - Incorporated by reference). The principal of Kalpakian Bros. is Jacob H. Kalpakian, the President, CEO and director of the Company. Bedo H. Kalpakian, former President, CEO, CFO and director of the Company was a principal of Kalpakian Bros. until December 31, 2019.
Pursuant to indemnity agreements dated April 1, 1993, January 7, 2008, August 2 2016, and May 25, 2021 between the Company and each of Bedo H. Kalpakian, Jacob H. Kalpakian, Gregory T. McFarlane, Maria P. Arenas, and Neil Spellman (collectively “the directors and officers”), the Company agreed to indemnify and save the directors and officers, their heirs and personal representatives harmless from and against all costs, charges and expenses arising out of their association with the Registrant. These costs, charges and expenses include any amounts paid to settle an action or to satisfy a judgement brought or found against the directors and/or officers and any amounts paid to settle an administrative action or proceeding provided that the indemnified party has acted in good faith and in the best interests of the Company. The Company Act requires a Court Order to be obtained prior to the Company making payment under the indemnity agreements. To date, the Company has not made any payments under the indemnity agreements.
During 2023, 2022 and 2021, there were no stock options granted to Directors, Officers and Employees.
The Company has no long-term incentive plans in place and, has not granted any stock appreciation rights.
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Item 6.C. Board Practices
6.C.1. Directors’ Terms of service.
All directors are elected annually by the Company’s shareholders to serve for a term of one year until the next annual general meeting of the shareholders. All directors may be annually re-elected by the Company’s shareholders at the annual general meeting of the shareholders for additional one year terms. Jacob H. Kalpakian has served as a director since 1991; Gregory T. McFarlane has served as a director since 1992; Neil Spellman has served as a director since August 2016 and Bedo H. Kalpakian served as director from 1984 until 2017 and again since May 25, 2021.
6.C.2. Details of Directors’ Service Contracts.
On August 1, 2016, the Management Services Agreement with Kalpakian Bros. of B.C. Ltd. (“Kalpakian Bros.”) was terminated by mutual consent (Exhibits 10.4, 10.4.1, 10.4.2, 10.4.3, 10.4.4, 10.4.5, 10.4.5.6 - Incorporated by reference). The principal of Kalpakian Bros. is Jacob H. Kalpakian, the President, CEO and director of the Company. Bedo H. Kalpakian, former President, CEO, CFO and director of the Company was a principal of Kalpakian Bros. until December 31, 2019.
6.C.3. Details relating to the Company’s audit committee and remuneration committee.
All directors are elected annually by the Company’s shareholders to act as directors of the Company for a term of one year. The Company’s audit committee is appointed on an annual basis by the Company’s directors. Presently, the Company’s audit committee consists of the following directors; Neil Spellman, Gregory T. McFarlane and Bedo H. Kalpakian. The majority of the members of the audit committee must be made up of directors who are not officers of the Company. The audit committee is also responsible to monitor compliance of the Company’s Code of Ethics (see Exhibit 14.1 – Incorporated by reference).
Pursuant to Canadian National Policy (52-110) with respect to Audit Committee Disclosure, the charter of the Company’s Audit Committee and other information required to be disclosed have been disclosed in the Company’s Annual Information Circular with respect to the Company’s Annual General Shareholder’s meeting which was held on December 12, 2023. The Company’s 2023 Annual Information Circular (see Exhibit 13.7* - Attached) includes the Company’s Audit Committee Disclosure under Form 52-110F2.
The Company does not have a remuneration committee or an executive committee largely due to its size.
Item 6.D. Employees
The Company’s employees are not represented by a union or other collective bargaining organization and the Company has not experienced any work stoppage by its employees. The Company believes that its employee relations are good.
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Item 6.E. Share Ownership
The number of common shares beneficially owned (directly and indirectly) by officers and directors of the Company as of December 31, 2023 are as follows:
| Name of Director/Officer and Municipality | Number of Issued Shares | Percentage of the total Issued Share Capital* | ||||||
| Jacob H. Kalpakian Vancouver, BC, Canada | 5,403,039 | (1) | 39.31 | % | ||||
| Gregory T. McFarlane, Washington, UT, USA | 25 | 0.00 | % | |||||
| Bedo Kalpakian, Delta, BC, Canada | 140,786 | 1.02 | % | |||||
| Neil Spellman Carlsbad, CA, USA | 0 | 0.00 | % | |||||
| Maria P. Arenas Surrey, BC, Canada | 114 | 0.00 | % | |||||
Notes: *Based on 13,745,947 issued and outstanding common shares as of December 31, 2023.
(1) Of these common shares, 126,264 are held by 30 Rock Management Inc., 2,217,656 are held by Kalpakian Bros.and 302,831 are held by a family member.
(2) Kalpakian Bros. and 30 Rock Management Inc. are private companies controlled by Jacob H. Kalpakian.
The number of common shares beneficially owned (directly and indirectly) by officers and directors of the Company as of December 31, 2022 are as follows:
| Name of Director/Officer and Municipality | Number of Issued Shares | Percentage of the total Issued Share Capital* | ||||||
| Jacob H. Kalpakian Vancouver, BC, Canada | 1,802,039 | (1) | 31.36 | % | ||||
| Gregory T. McFarlane, Washington, UT, USA | 25 | 0.00 | % | |||||
| Bedo Kalpakian, Delta, BC, Canada | 140,786 | 2.45 | % | |||||
| Neil Spellman Carlsbad, CA, USA | 0 | 0.00 | % | |||||
| Maria P. Arenas Surrey, BC, Canada | 114 | 0.002 | % | |||||
Notes: *Based on 5,745,947 issued and outstanding common shares as of December 31, 2022.
(1) Of these common shares, 126,264 are held by 30 Rock Management Inc., 1,416,656 are held by Kalpakian Bros.and 2,831 are held by a family member.
(2) Kalpakian Bros. and 30 Rock Management Inc. are private companies controlled by Jacob H. Kalpakian.
The number of common shares beneficially owned (directly and indirectly) by officers and directors of the Company as of December 31, 2021 were as follows:
| Name of Director/Officer and Municipality | Number of Issued Shares | Percentage of the total Issued Share Capital* | ||||||
| Jacob H. Kalpakian Vancouver, BC, Canada | 439,039 | (1) | 9.77 | % | ||||
| Gregory T. McFarlane, Washington, UT, USA | 25 | 0.00 | % | |||||
| Bedo Kalpakian, Delta, BC, Canada | 140,786 | 3.13 | % | |||||
| Neil Spellman Carlsbad, CA, USA | 0 | 0.00 | % | |||||
| Maria P. Arenas Surrey, BC, Canada | 114 | 0.002 | % | |||||
Notes: *Based on 4,495,947 issued and outstanding common shares as of December 31, 2021.
(1) Of these common shares, 126,264 were held by 30 Rock Management Inc., 303,656 were held by Kalpakian Bros.and 2,831 were held by a family member.
(2) Kalpakian Bros. and 30 Rock Management Inc. are private companies controlled by Jacob H. Kalpakian.
Item 6.E.2. Stock Options for Employees
From time to time the Company grants Incentive Stock Options to its directors, officers, employees and consultants. The incentive stock options entitle the holders to acquire common shares of the Company from treasury. The incentive stock options are a means of rewarding future services provided to the Company and are not intended as a substitute for salaries or wages, or as a means of compensation for past services rendered.
At the Company’s Annual General Meeting of shareholders held on April 30, 2004, the shareholders of the Company approved the Company’s 2004 Stock Option Plan (Exhibit 10.7 – Incorporated by reference). Shareholders of the Company adopted and approved the 2015 Stock Option Plan at the Company’s Annual and Special General Meeting of Shareholders which took place on June 4, 2015 (see Exhibit 12 – Incorporated by reference) and was re-approved by the Shareholders of the Company at the Annual General Meeting of Shareholders which took place on Wednesday, November 18, 2019 see Exhibit 13.3 – Incorporated by reference), at the Annual General Meeting of Shareholders which took place on Friday, November 20, 2020 (see Exhibit 13.4 - Incorporated by reference), at the Annual General Meeting of Shareholders which took place on Friday, December 3, 2021 (see Exhibit 13.5 – Incorporated by reference), at the Annual General Meeting of Shareholders which took place on Monday, November 14, 2022 (see Exhibit 13.6 – Incorporated by reference) and at the last Annual General Meeting of Shareholders which took place on Tuesday, December 12, 2023 (see Exhibit 13.7* - Attached).
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The Company’s 2015 Stock Option Plan reserves for granting to directors, officers, employees and consultants up to 20% of the issued and outstanding common shares of the Company calculated from time to time on a rolling basis. The terms of the options are determined at the date of grant.
During 2023, 2022 and 2021 there were no stock options granted to Directors, Officers, Employees and Consultants.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7.A.1. The Company is a publicly-owned corporation, the common shares of which are owned by Canadian residents, U.S. residents, and residents of other countries. The Company is not directly or indirectly controlled by any foreign government. However, Jackpot owned 48.64% of the Company’s issued and outstanding common shares as at December 31, 2018. During the twelve months ended December 31, 2019, Jackpot sold a total of 680,000 of the Company’s common shares. As at December 31, 2019 and 2020, Jackpot owned 9,997 common shares of the Company. In addition, Jackpot owned 689,997 share purchase warrants of the Company exercisable at $0.60 per share which expired unexercised on November 2, 2022. Subsequent to the year-ended December 31, 2020, Jackpot acquired 597,380 (post-consolidated) additional shares pursuant to a debt settlement agreement (see Exhibit 10.20 - Incorporated by reference).
As of the date of this Annual Report, Jackpot owns 607,377 common shares of the Company representing 4.42% of the issued and outstanding common shares of the Company. The Debt Settlement Shares of the Company were subject to a hold period which expired on May 26, 2021.
As at December 31, 2023, the following persons or corporations beneficially own, directly or indirectly, or exercise control over shares carrying more than 5% of the issued and outstanding shares of the Company:
| Name of Shareholder and Municipality | Number of Issued Capital | Percentage of the Total Issued Share Capital* | ||||||
| Bedo
H. Kalpakian, Delta, BC and Jacob H. Kalpakian Vancouver, BC | 5,543,825 | (1) | 40.33 | % | ||||
| Roberto Fia, Toronto, ON | 4,040,000 | 29.39 | % | |||||
(1) Of these shares, 140,786 common shares are held by Bedo H. Kalpakian directly, 2,756,288 common shares are held by Jacob H. Kalpakian directly, 2,343,920 common shares are held by private companies which are controlled by Jacob H. Kalpakian, and 302,831 common shares are held by a family member of Jacob H. Kalpakian.
* Based on 13,745,947 issued and outstanding common shares as of December 31, 2023.
As at December 31, 2022, the following persons or corporations beneficially own, directly or indirectly, or exercise control over shares carrying more than 5% of the issued and outstanding shares of the Company:
| Name of Shareholder and Municipality | Number of Issued Capital | Percentage of the Total Issued Share Capital* | ||||||
| Bedo
H. Kalpakian, Delta, BC and Jacob H. Kalpakian Vancouver, BC | 1,942,825 | (1) | 33.81 | % | ||||
Jackpot Digital Inc., Vancouver, BC 607,377 10.5%
(1) Of these shares, 140,786 common shares are held by Bedo H. Kalpakian directly, 256,288 common shares are held by Jacob H. Kalpakian directly, 1,542,920 common shares are held by private companies which are controlled by Jacob H. Kalpakian, and 2,831 common shares are held by a family member of Jacob H. Kalpakian.
* Based on 5,745,947 issued and outstanding common shares as of December 31, 2022.
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As at December 31, 2021, the following persons or corporations beneficially own, directly or indirectly, or exercise control over shares carrying more than 5% of the issued and outstanding shares of the Company:
| Name of Shareholder and Municipality | Number of Issued Capital | Percentage of the Total Issued Share Capital* | ||||||
| Bedo H. Kalpakian, Delta, BC and Jacob H. Kalpakian Vancouver, BC and Isabel Kalpakian Vancouver, BC | 1,317,249 | (1) | 29.30 | % | ||||
Jackpot Digital Inc., Vancouver, BC 607,377 13.51%
(1) Of these shares, 140,786 common shares are held by Bedo H. Kalpakian directly, 6,288 common shares are held by Jacob H. Kalpakian directly, 737,424 common shares are held by Isabel Kalpakian, 429,920 common shares are held by private companies which are controlled by Jacob H. Kalpakian, and 2,831 common shares are held by a family member of Jacob H. Kalpakian.
* Based on 4,495,947 issued and outstanding common shares as of December 31, 2021.
7.A.1.(c) All shareholders of the Company have equal voting rights. Holders of common shares of the Company are entitled to one vote per share at all meetings of shareholders, to receive dividends as and when declared by the Directors, and to receive a pro-rata share of the assets of the Company available for distribution to common shareholders in the event of the liquidation, dissolution or winding up of the Company. There are no pre-emptive, conversion or surrender rights attached to the common shares of the Company.
7.A.2. As of December 31, 2023, the Company had 13,745,947 issued and outstanding common shares. The number of outstanding common shares of the Company held in the United States and the number of registered holders thereof were 919 outstanding common shares and 2 registered shareholders (which include depository trusts which hold shares on behalf of non-registered shareholders).
7.A.3. To the best of the Company’s knowledge the Company is not controlled directly or indirectly by any foreign government or by any natural or legal person severally or jointly other than as disclosed in 7.A.1. in this Annual Report.
7.A.4. To the best of the Company’s knowledge, there are no known arrangements which may at a subsequent date result in a change of control of the Company.
Item 7.B. Related Party Transactions
The Company shares office space and certain employees with Jackpot, a company related by certain common key management personnel.
The Company has an office lease agreement with Jackpot. Under the agreement, the Company is entitled to have office space from Jackpot at a monthly rate of $1,000 plus applicable taxes. Furthermore, Jackpot or the Company may terminate this agreement by giving each other a three months’ notice in writing.
Effective as of May 1, 2018, the Company entered into an agreement for office support services with Jackpot for a term of one year. On May 1, 2019 the agreement was extended for a period of one year and has subsequently been extended up to September 30, 2024. Under the agreement, the Company is entitled to receive office support services from Jackpot at a monthly rate of $1,000 plus applicable taxes. Either Jackpot or the Company may terminate this agreement by giving each other a three months’ notice in writing.
During the year ended December 31, 2023 the Company settled accounts payable and recognized a gain of $53,371 (December 31, 2022 and 2021 - $nil).
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The amounts due to related parties are unsecured, payable on demand which consist of the following:
| December 31, 2023 | December 31, 2022 | |||||||
| Advances from directors (interest at prime plus 1%) | $ | — | $ | 40,372 | ||||
| Entities controlled by directors (non-interest-bearing) | 82,328 | 62,828 | ||||||
| 82,328 | $ | 103,200 | ||||||
The convertible debentures and accrued interest of $519,589 (December 31, 2022 - $489,589) is owed to the Chief Executive Officer, and to a director of the Company.
During the years ended December 31, the following amounts were charged by related parties.
| 2023 | 2022 | 2021 | ||||||||||
| Interest charged on amounts due to related parties | $ | 1,100 | $ | 1,158 | $ | 275 | ||||||
| Interest on convertible debentures | 30,000 | 30,000 | 30,000 | |||||||||
| Rent charged by entities with common directors | 12,000 | 12,000 | 12,000 | |||||||||
| Office
expenses charged by, and other expenses paid on behalf of the Company by a company with common directors | 15,081 | 19,272 | 13,901 | |||||||||
| $ | 58,181 | $ | 62,430 | $ | 56,176 | |||||||
The Company, together with Jackpot a related company with certain common directors, have entered into an office lease agreement, and an office support services agreement.
On January 6, 2015, the Company closed a convertible debenture financing with two directors of the Company for the amount of $250,000. The convertible debentures matured on January 6, 2016, and bear interest at the rate of 12% per annum payable on a quarterly basis. The convertible debentures are convertible into common shares of the Company at a conversion price of $1.50 per share. The liability component of the convertible debentures was recognized initially at the fair value of a similar liability with no equity conversion option, which was calculated based on the application of a market interest rate of 25%. On the initial recognition of the convertible debentures, the amount of $222,006 was recorded under convertible debentures and the amount of $27,994 has been recorded under the equity portion of convertible debenture reserve.
On October 29, 2021 the Company entered into an Addendum (see Exhibit 10.15.1 – Incorporated by reference) to the convertible debentures whereby the maturity date of the principal amount totaling $250,000 of the convertible debentures together with the accrued interest has been extended indefinitely, until mutual consent of the Company and Lender has been reached.
At December 31, 2023, the Company recorded interest expense of $30,000 (2022 - $30,000). As of December 31, 2023, $250,000 of the convertible debentures are outstanding plus the accrued interest of $269,589 (2022 - $239,589).
Pursuant to debt settlement agreements dated December 11, 2020 totaling the sum of $739,351.50 between the Company and certain creditors, including Jackpot Digital Inc. (“Jackpot’) and the Company’s President and CEO, on January 25, 2021 the Company issued a total of 2,957,406 common shares of the Company at a deemed price of $0.25 per common share (the “Debt Settlement Shares of the Company”), of which Jackpot acquired 597,380 Debt Settlement Shares of the Company and the Company’s President and CEO acquired 615,395 Debt Settlement Shares of the Company. As of the date of this Annual Report, Jackpot owns 607,377 common shares of the Company representing approximately 4.42% of the issued and outstanding common shares of the Company. The Debt Settlement Shares of the Company were subject to a hold period which expired on May 26, 2021.
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Jackpot is related to the Company by virtue of the fact that Jackpot’s CEO and President, namely Jacob H. Kalpakian, is the President & CEO of the Company. Furthermore, Gregory T. McFarlane and Neil Spellman are directors of both the Company and Jackpot.
Previously, the Company hired the services of J.W. Murton & Associates to provide geological services. J.W. Murton & Associates is a private company owned by J.W. Murton, a former director of the Company.
Colt was previously related to the Company by virtue of the fact that Bedo H. Kalpakian was the President and CEO of Colt and was the former President, CEO and CFO of the Company, and Jacob H. Kalpakian was the Vice President and Director of Colt and is the President, CEO and Director of the Company. Furthermore, J. Wayne Murton was a former Director of the Company and was a director of Colt.
The Company is or was related to the following companies by common management and/or directors and/or officers:
| - | Jackpot Digital Inc. (“Jackpot”), a public company listed on the TSX Venture Exchange, also quoted in the U.S.A. on the OTCQB of the OTC Markets Group and on the Frankfurt Stock Exchange. Jacob H. Kalpakian is an officer, director and shareholders of Jackpot and Gregory T. McFarlane and Neil Spellman are directors of Jackpot. Bedo H. Kalpakian was a director and officer of the Company and was an officer and director of Jackpot. As of May 25, 2021, Bedo Kalpakian was appointed to the Board of Directors of the Company. |
| - | Kalpakian Bros. of B.C. Ltd., a private company incorporated under the laws of the Province of British Columbia, the principal shareholder is Jacob H. Kalpakian, director of the Company; - Yo Eleven Gaming Inc. (“Yo Eleven”), a reporting issuer incorporated under the laws of the Province of British Columbia. Jacob Kalpakian, Neil Spellman and Greg McFarlane are directors of Yo Eleven and Maria Arenas is the Corporate Secretary of Yo Eleven; |
| - | BHK Management Inc., was a private company incorporated under the laws of the Province of British Columbia, the principal shareholder of which was Bedo H. Kalpakian, who is currently a director of the Company; |
| - | 30 Rock Management Inc., a private company incorporated under the laws of the Province of British Columbia, the principal shareholder of which is Jacob H. Kalpakian, a director of the Company; |
| - | Colt Resources Inc. (“Colt”), is a public company. Colt was formerly related to the Company by certain directors and officers as more particularly described in this Annual Report; |
| - | J.W. Murton & Associates, a private company incorporated under the laws of the Province of British Columbia, the principal shareholder of which is J. Wayne Murton, a former director of the Company; |
| - | Green Arrow Resources Inc. (“Green Arrow”) is a public company listed on the TSX Venture Exchange. Jacob H. Kalpakian was a former President and director of Green Arrow from April 2012 until November 2017. Neil Spellman and Bedo Kalpakian were also former directors of Green Arrow until March 14, 2017 and November 30, 2017, respectively. |
| - | 27 Red Capital Inc., a reporting issuer incorporated under the laws of the Province of British Columbia. Jacob Kalpakian was a former officer and director. Bedo H. Kalpakian and Neil Spellman were former directors of 27 Red Capital Inc. |
| - | 4 Touchdowns Capital Inc., a reporting issuer incorporated under the laws of the Province of British Columbia. Jacob Kalpakian was a former officer and director. Bedo H. Kalpakian and Neil Spellman were former directors of 4 Touchdowns Capital Inc. |
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Item 7.C. Interests of Experts and Counsel
Not Applicable.
ITEM 8. FINANCIAL INFORMATION
Item 8.A. Financial Statements and Other Information
The Company’s Audited Financial Statements together with the Management’s Discussion & Analysis for the year ended December 31, 2023, are included in Item 17 of this Annual Report.
Item 8.A.7. Legal Proceedings
On January 17, 2017 a Notice of Civil Claim was filed in the Supreme Court of British Columbia by 310047 B.C. Ltd. against the Company for the sum of $53,024.40 being monies due by the Company to 310047 B.C. Ltd. pursuant to an assignment by the Company’s solicitor Clark Wilson LLP.
On February 21, 2017 an Assignment of Debt Agreement was entered into between Clark Wilson LLP, and 310047 B.C. Ltd., and Jamco Capital Inc. (formerly Kape Holdings Inc.) (“Jamco”) whereby the outstanding debt in the amount of $53,024.40 was assigned to Jamco. The Company had acknowledged this assignment to Jamco and agreed to adjust the Company’s financial accounts and records to reflect this assignment. Jamco is an arm’s length party to the Company. As a result of this Assignment of Debt Agreement, a Notice of Discontinuance was filed in the Supreme Court of British Columbia on March 21, 2017 by 310047 B.C. Ltd. and Clark Wilson LLP whereby the Civil Claim that was filed by 310047 B.C. Ltd. against the Company was discontinued. On January 25, 2021, the Company issued 212,098 common shares to Jamco in settlement of the $53,023.40 pursuant to a debt settlement agreement (see Exhibit 10.20 - Incorporated by reference).
The Company’s corporate legal counsel is Harper Grey LLP, (Attention: Michael Kennedy), Suite 3200-650 West Georgia Street, Vancouver BC V6B 4P7. The telefax number is (604) 669-9385.
Item 8.A.8. Dividends
The Company entered into an Arrangement Agreement. For further particulars, please see Item 4. C. Organizational Structure.
Item 8. B. Significant Changes
As a result of the completion of the Arrangement, 27 Red and 4 Touchdowns are independent entities and are no longer subsidiaries of the Company.
During 2018, Jackpot owned 689,997 common shares of the Company which represented 48.64% of the Company’s then issued and outstanding common shares as at December 31, 2018. As such, Jackpot had direct control of the Company. During the year ended December 31, 2019, Jackpot sold 680,000 common shares of the Company. As at December 31, 2020, Jackpot owned 49,985 common shares in the capital of the Company representing approximately 0.69% of the then Company’s issued and outstanding common shares. In addition, Jackpot owned 689,997 share purchase warrants of the Company exercisable at $0.60 per share which expired unexercised on November 2, 2022. On January 25, 2021, Jackpot acquired additional 597,380 common shares pursuant to a debt settlement agreement (see Exhibit 10.20 - Incorporated by reference). As of the date of this Report, Jackpot owns 607,377 common shares of the Company representing approximately 4.42% of the issued and outstanding common shares of the Company.
| 24 |
ITEM 9. THE OFFER & LISTING
Item 9.A. (4) Listing Details
On April 4, 1985, the Company’s common shares were listed and posted for trading on the Vancouver Stock Exchange, on the Montreal Exchange on January 15, 1988 and, on the Nasdaq SmallCap Market on May 11, 1988. On July 12, 1991, the Company voluntarily de-listed its common shares from the Montreal Exchange, and, on October 3, 1994, the Company’s shares were delisted from the Nasdaq SmallCap Market. Effective October 4, 1994, the Company’s shares have been listed for trading on the OTC Bulletin Board, and were listed on the OTCQB tier of the OTC Markets Group (“OTCQB”) until June 1, 2020. Presently, the Company’s common shares are listed for trading on the PINK Sheets on the OTC market. Effective on November 29, 1999 the Vancouver Stock Exchange became known as the CDNX as a result of the merger between the Vancouver Stock Exchange and the Alberta Stock Exchange. On July 5, 2001, the Company made a formal application to the CDNX requesting the voluntary delisting of the Company’s common shares from trading on the CDNX, as a result of which, the common shares of the Company were de-listed from trading on the CDNX effective at the close of trading on July 31, 2001. The trading symbol of the Company’s common shares when they were listed on the CDNX was “GGG”.
On July 30, 1986, the Company’s share capital split on the basis of one-old-for-two-new common shares. On May 25, 1992, the Company’s share capital was consolidated on the basis of ten-old-for-one-new common share. On April 25, 2000, the Company’s share capital was consolidated on the basis of fifteen-old-for-one-new common share. On May 2, 2002, the Company’s name was changed to Lucky 1 Enterprises Inc. and its share capital was consolidated on the basis of five-old-for-one-new common share and its authorized share capital was subsequently increased to 200,000,000 common shares without par value. On January 17, 2005, the Company’s name was changed to Bronx Ventures Inc. and its share capital was consolidated on the basis of thirty-five-old-for-one-new-common share, and its authorized share capital was subsequently increased to an unlimited number of common and preferred shares without par value. Effective at the opening of business on January 24, 2005, the common shares of Lucky 1 Enterprises Inc. were de-listed, and the common shares of Bronx Ventures Inc. commenced trading on the OTC Bulletin Board and were listed on the OTC Bulletin Board in the U.S.A. under the trading symbol “BRXVF”. On March 19, 2007, the Company changed its name to Zab Resources Inc. and subdivided its stock on a one (1) old for 50 (new) shares basis. As a result, the shares of Bronx Ventures Inc. were de-listed from trading and the shares of Zab Resources Inc. commenced trading on the OTC Bulletin Board and were listed on the OTC Bulletin Board in the USA under the symbol “ZABRF” on March 22, 2007.
Effective November 28, 2007, the common shares of the Company have been listed for trading on the Canadian Securities Exchange (“CSE”) (formerly Canadian National Stock Exchange) under the trading symbol “ZABK”. On October 17, 2008, the Company’s CSE symbol was changed to “ZAB” pursuant to the CSE adopting a three character symbol format.
On April 16, 2009, the Company changed its name from Zab Resources Inc. (“Zab”) to Kokomo Enterprises Inc. (“Kokomo”) and the Company’s share capital was consolidated on the basis of 25 (old) shares of Zab for 1 (new) share of Kokomo. As a result, the shares of Zab were de-listed from trading and the shares of Kokomo commenced trading in Canada on the CSE under the symbol “KKO”, and in the U.S.A. the shares of Kokomo commenced trading on the OTCQB under the symbol “KKOEF”. The Cusip number of the Company’s common shares was 500323100.
On August 31, 2012, the Company changed its name from Kokomo Enterprises Inc. (“Kokomo”) to High 5 Ventures Inc. (“High 5”) and the Company’s share capital was consolidated on the basis of 15 (old) shares of Kokomo for 1 (new) share of High 5. As a result, the shares of Kokomo were de-listed from trading and the shares of High 5 commenced trading in Canada on the CSE under the symbol “HHH” and in the USA, the shares of High 5 commenced trading on the OTCQB under the symbol “HHHEF”. The Cusip number of the Company’s common shares was 42966V105.
On July 7, 2014, the Company’s share capital was consolidated on the basis of 6 (old) common shares for 1 (new) common share and the Company changed its name to 37 Capital Inc. (“37 Capital”). As a result, the shares of High 5 were de-listed from trading and the shares of 37 Capital commenced trading in Canada on the CSE under the symbol “JJJ”, and in the U.S.A. the trading symbol of the Company’s shares remained unchanged on the OTCQB under the trading symbol “HHHEF”. The Cusip number of the Company’s common shares was 88429G102.
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On June 21, 2019 the CSE deemed that the Company is inactive pursuant to the policies of the CSE, as a result the CSE changed the Company’s trading symbol to “JJJ.X”. The Company's common shares traded on the OTCQB tier of the OTC markets under the trading symbol “HHHEF” until June 1, 2020. Presently, the Company’s common shares are listed for trading on the PINK Sheets on the OTC market under the trading symbol “HHHEF”.
Effective June 15, 2021, the Company consolidated its capital stock on the basis of 5 pre-consolidation common shares to 1 post-consolidation common share. The Cusip number of the Company’s common shares is 88429G201. All the figures as to the number of common shares, stock options, warrants, prices of issued shares, exercise prices of stock options and warrants, as well as loss per share, in this Report are post-consolidation amounts and the prior year comparatives have been retroactively restated to present the post-consolidation amounts.
The following tables set forth the market price range and trading volumes of the common shares of the Company on the OTC Pink Sheets and on the CSE for the periods indicated.
OTC Pink Sheets – OTC Markets Group
Trading Range
| Five Most Recent Financial Years | U.S.$ High | U.S.$ Low | Volume | |||||||||
| 2019 | 0.76 | 0.25 | 2,184 | |||||||||
| 2020 | 0.2805 | 0.1205 | 1,605 | |||||||||
| 2021 | 0.8415 | 0.03 | 43,621 | |||||||||
| 2022 | 0.132 | 0.089 | 5,321 | |||||||||
| 2023 | N/A | N/A | N/A | |||||||||
| Two Most Recent Financial Years | ||||||||||||
| Year 2022 | ||||||||||||
| Jan 1 – Mar 31 | 0.132 | 0.089 | 5,321 | |||||||||
| Apr 1 – Jun 30 | N/A | N/A | 0 | |||||||||
| Jul 1 – Sept 30 | N/A | N/A | 0 | |||||||||
| Oct 1 – Dec 31 | N/A | N/A | 0 | |||||||||
| Year 2023 | ||||||||||||
| Jan 1 – Mar 31 | N/A | N/A | 0 | |||||||||
| Apr 1 – Jun 30 | N/A | N/A | 0 | |||||||||
| Jul 1 – Sept 30 | N/A | N/A | 0 | |||||||||
| Oct 1 – Dec 31 | N/A | N/A | 0 | |||||||||
CSE
Canadian Stock Exchange
Trading Range
| Cdn $ High | Cdn $ Low | Volume | ||||||||||
| Five Most Recent Financial Years | ||||||||||||
| 2019 | 1.45 | 0.05 | 892,666 | |||||||||
| 2020 | 0.30 | 0.05 | 286,344 | |||||||||
| 2021 | 1.15 | 0.25 | 1,306,227 | |||||||||
| 2022 | 0.17 | 0.015 | 556,306 | |||||||||
| 2023 | 0.075 | 0.025 | 235,555 | |||||||||
| Two Most Recent Financial Years | ||||||||||||
| Year 2022 | ||||||||||||
| Jan 1 – Mar 31 | 0.17 | 0.12 | 69,450 | |||||||||
| Apr 1 – Jun 30 | 0.095 | 0.05 | 130,799 | |||||||||
| Jul 1 – Sep 30 | 0.04 | 0.02 | 27,931 | |||||||||
| Oct 1 – Dec 31 | 0.04 | 0.015 | 328,126 | |||||||||
| Year 2023 | ||||||||||||
| Jan 1 – Mar 31 | 0.05 | 0.05 | 1,360 | |||||||||
| Apr 1 – Jun 30 | 0.05 | 0.025 | 7,004 | |||||||||
| Jul 1 – Sep 30 | 0.06 | 0.06 | 2,500 | |||||||||
| Oct 1 – Dec 31 | 0.075 | 0.06 | 224,691 | |||||||||
| 26 |
Item 9.C. Markets
On April 4, 1985, the Company’s common shares were listed and posted for trading on the Vancouver Stock Exchange, on the Montreal Exchange on January 15, 1988 and, on the Nasdaq SmallCap Market on May 11, 1988. On July 12, 1991, the Company voluntarily de-listed its common shares from the Montreal Exchange, and, on October 3, 1994, the Company’s shares were de-listed from the Nasdaq SmallCap Market. On October 4, 1994, the Company’s shares were listed for trading on the OTC Bulletin Board. On November 29, 1999 the Vancouver Stock Exchange became known as the CDNX as a result of the merger between the Vancouver Stock Exchange and the Alberta Stock Exchange. On July 5, 2001, the Company made a formal application to the CDNX requesting the voluntary delisting of the Company’s common shares from trading on the CDNX, as a result of which, the common shares of the Company were de-listed from trading on the CDNX effective at the close of trading on July 31, 2001.
On November 28, 2007, the common shares of the Company were listed for trading on the Canadian Stock Exchange (“CSE”) (formerly Canadian National Stock Exchange) under the trading symbol “ZABK”. On October 17, 2008, the Company’s CSE symbol was changed to “ZAB” pursuant to the CSE adopting a three-character symbol format.
On April 16, 2009, the Company changed its name from Zab Resources Inc. (“Zab”) to Kokomo Enterprises Inc. (“Kokomo”), and the Company consolidated its capital stock on the basis of 25 (old) shares of Zab for 1 (new) share of Kokomo. As a result, the shares of Zab were de-listed from trading and the shares of Kokomo commenced trading in Canada on the CSE under the symbol “KKO”, and in the U.S.A. the shares of Kokomo commenced trading on the OTCQB under the symbol “KKOEF”. The Cusip number of the Company’s common shares was 500323100.
On August 31, 2012, the Company changed its name from Kokomo Enterprises Inc. (“Kokomo”) to High 5 Ventures Inc. (“High 5”) and the Company’s share capital was consolidated on the basis of 15 (old) shares of Kokomo for 1 (new) share of High 5. As a result, the shares of Kokomo were de-listed from trading and the shares of High 5 commenced trading in Canada on the CSE under the symbol “HHH” and in the USA, the shares of High 5 commenced trading on the OTCQB under the symbol “HHHEF”. The Cusip number of the Company’s common shares was 42966V105.
On July 7, 2014, the Company changed its name from High 5 Ventures Inc. (“High 5”) to 37 Capital Inc. (“37 Capital”) and consolidated its share capital on the basis of one new 37 Capital common share for every six old High 5 common shares (1:6). As a result, the Company’s trading symbol on the CSE is “JJJ” and in the USA, the trading symbol of the Company’s shares remains unchanged on the OTCQB and trade under the symbol “HHHEF”. The Cusip number of the Company’s common shares was 88429G102.
On June 21, 2019 the CSE deemed the Company inactive pursuant to the policies of the CSE, as a result the CSE changed the Company’s trading symbol to “JJJ.X”. Effective February 5, 2024, the Company has satisfied the continuous listing requirements of the CSE and is an active issuer trading under the trading symbol “JJJ”. The Company's common shares traded on the OTCQB tier of the OTC markets under the trading symbol “HHHEF” until June 1, 2020.
Effective June 15, 2021, the Company consolidated its capital stock on the basis of 5 pre-consolidation common shares to 1 post-consolidation common share. The Cusip number of the Company’s common shares is 88429G201. Presently, the Company’s common shares are listed for trading on the CSE under the trading symbol to “JJJ”, and on the the PINK Sheets on the OTC market under the trading symbol “HHHEF”.
On February 5, 2024, the CSE has deemed the Company to meet its minimum listing requirements and, as a result, the Company is now trading under the symbol “JJJ”.
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ITEM 10. ADDITIONAL INFORMATION
Item 10. A. Share Capital
Effective June 15, 2021, the Company consolidated its capital stock on the basis of 5 pre-consolidation common shares to 1 post-consolidation common share.
On July 7, 2014, the Company’s name was changed to 37 Capital Inc. (“37 Capital”), its share capital was consolidated on the basis of 6 (old) shares of High 5 for 1 (new) share of 37 Capital.
At the Company’s 2005 Special General Meeting held on January 10, 2005, the shareholders approved the deletion of the Pre-Existing Company Provisions in the notice of Articles of the Company and approved the alteration of the Company’s Notice of Articles. The shareholders approved the increase of the Company’s authorized capital to an unlimited number of Common and Preferred Shares, both without par value, approved the adoption of new articles in substitution for the old articles of the Company (Exhibit 3.2 – Incorporated by reference).
The authorized share capital of the Company consists of an unlimited number of common and preferred shares without par value of which 13,745,947 common shares are issued and outstanding as of December 31, 2023. No preferred shares have been issued.
Holders of common shares of the Company are entitled to one vote per share at all meetings of shareholders of the Company, to receive dividends as and when declared by the Directors, and to receive a pro-rata share of the assets of the Company available for distribution to common shareholders in the event of the liquidation, dissolution or winding up of the Company. There are no pre-emptive, conversion or surrender rights attached to the common shares of the Company.
All shares have been issued pursuant to resolutions of the Board of Directors of the Company.
| Outstanding Share Data | No. of Common Shares | No. of Preferred Shares | Exercise Price per Share | Expiry Date |
Issued and Outstanding as at April 29, 2024 |
13,745,947 | Nil | N/A | N/A |
Warrants |
250,000 750,000 200,000 6,000,000 2,000,000 9,200,000 |
Nil | $0.05 $0.05 $0.05 $0.05 $0.05 |
August 31, 2027 October 7, 2027 October 31, 2027 May 15, 2028 July 24, 2028 |
Stock Options |
1,750,000 |
Nil |
$0.10 |
January 29, 2027 |
Fully Diluted as at April 29, 2024 |
24,695,947 |
Nil |
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Item 10.A.4. Warrants
All warrants have been issued pursuant to resolutions of the Board of Directors of the Company.
The following summarizes the warrants that have been granted, exercised, cancelled or expired during the years ended December 31,2023, 2022 and 2021:
Warrants activity for the years ended December 31, 2023, 2022 and 2021 are as follows:
| Number of Warrants | Weighted Average Exercise Price | ||||||||
| Balance, December 31, 2021 | 944,997 | $ | 0.59 | ||||||
| Issued | 1,200,000 | $ | 0.05 | ||||||
| Expired | (864,997 | ) | $ | 0.12 | |||||
| Balance, December 31, 2022 | 1,280,000 | $ | 0.08 | ||||||
| Expired | (80,000 | ) | $ | 0.5 | |||||
| Issued | 8,000,000 | $ | 0.05 | ||||||
| Balance, December 31, 2023 | 9,200,000 | $ | 0.05 | ||||||
As of December 31, 2023, the following warrants were outstanding:
| Expiry Date | Exercise Price | Number of Warrants Outstanding | ||||||
| August 31, 2027 | $ | 0.05 | 250,000 | |||||
| October 7, 2027 | $ | 0.05 | 750,000 | |||||
| October 31, 2027 | $ | 0.05 | 200,000 | |||||
| May 15, 2028 | $ | 0.05 | 6,000,000 | |||||
| July 24, 2028 | $ | 0.05 | 2,000,000 | |||||
| 9,200,000 | ||||||||
The weighted average remaining contractual life for warrants outstanding at December 31, 2023 is 4.34 years (2022 – 4.46 years).
Item 10.A.5. Stock Options
From time to time, the Company grants stock options to its directors, employees and consultants on terms and conditions acceptable to the Regulatory Authorities. The stock options entitle the holders to acquire common shares of the Company from treasury (see Exhibit 13.3 – Incorporated by reference).
The 2015 Stock Option Plan was re-approved by the Shareholders at the Company’s Annual General Meeting held on November 14, 2022. The Company’s 2015 Stock Option Plan provides that the Board of Directors of the Company may grant to directors, officers, employees and consultants of the Company options to acquire up to 20% of the issued and outstanding common shares of the Company calculated from time to time on a rolling basis. The terms of the options are determined at the date of grant (see Exhibit 13.6 – Incorporated by reference).
As of December 31, 2023, there were no stock options outstanding (December 31, 2022: Nil) (December 31, 2021: Nil).
Item 10. A.6. History of Share Capital
There are no special voting rights attached to any of the Company’s issued and outstanding shares. All shares which were issued from the Company’s Treasury were issued for cash or in the case of Finder’s Fees for services rendered or shares for debt in the case of outstanding debts.
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CAPITAL STOCK
Authorized: Unlimited number of Common and Preferred shares without par value. No preferred shares have been issued.
Reserves
| Reserves | ||||||||||||||||||||||||
| Common Shares | Amount | Equity Portion of Convertible Debentures Reserve | Warrants | Deficit | Total Stockholders' Equity (Deficiency) | |||||||||||||||||||
| Balance, December 31, 2020 | 1,458,542 | $ | 25,864,950 | $ | 33,706 | $ | — | $ | (27,195,318 | ) | $ | (1,296,662 | ) | |||||||||||
| Net loss for the year | — | — | — | — | (1,044,863 | ) | (1,044,863 | ) | ||||||||||||||||
| Private
placement, net of issuance of costs | 80,000 | 20,000 | — | — | — | 20,000 | ||||||||||||||||||
| Shares issued for debt, net of issuance of costs | 2,957,406 | 1,626,319 | — | — | — | 1,626,319 | ||||||||||||||||||
| Fractional share adjustment | (1 | ) | — | — | — | — | — | |||||||||||||||||
| Balance, December 31, 2021 | 4,495,947 | 27,511,269 | 33,706 | — | (28,240,181 | ) | (695,206 | ) | ||||||||||||||||
| Net loss for the year | — | — | — | — | (125,036 | ) | (125,036 | ) | ||||||||||||||||
| Shares issued for mineral property interest | 50,000 | 1,000 | — | — | 1,000 | |||||||||||||||||||
| Private
placement, net of issuance of costs | 1,200,000 | 24,000 | — | 24,000 | — | 48,000 | ||||||||||||||||||
| Balance, December 31, 2022 | 5,745,947 | 27,536,269 | 33,706 | 24,000 | (28,365,217 | ) | $ | (771,242 | ) | |||||||||||||||
| Net loss for the year | — | — | — | — | (48,820 | ) | (48,820 | ) | ||||||||||||||||
| Private placement, net of issuance of costs | 8,000,000 | 200,000 | — | — | — | 200,000 | ||||||||||||||||||
| Balance, December 31, 2023 | 13,745,947 | $ | 27,736,269 | $ | 33,706 | $ | 24,000 | $ | (28,414,037 | ) | $ | (620,062 | ) | |||||||||||
Item 10.B. Articles of Association
The Company’s shareholders considered and approved a special resolution to adopt new Articles for the Company at the Company’s Special Meeting which was held on January 10, 2005, (Exhibit 3.2 – Incorporated by reference). On September 18, 2014, the Company’s shareholders considered and approved a resolution to adopt an Amendment to the Articles for the implementation of the Advance Notice Provisions (see Exhibit 3 – Incorporated by reference).
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Item 10. C. Material Contracts
Previously the Company entered into an Option Agreement, as amended , with Colt on the Extta High Claims, (see Exhibits 10.5; 10.11; 10.5.1; 10.5.2; 10.11.2; 10.11.3; 10.11.5)
Pursuant to the Company’s offer letter to Colt dated July 6, 2022 which was accepted by Colt (see Exhibit 10.11.6* - Attached), the Company has made a cash payment of $15,000 and, has issued 50,000 common shares in the capital of the Company to Colt as consideration for the full and final settlement of all matters between the Company and Colt in respect to the Extra High Property located in the Province of British Columbia. The 50,000 common shares in the capital of the Company were subject to a hold period from trading which expired on December 10, 2022.
During the year ended December 31, 2008, the Company sold all of its Ontario Lithium Properties to an arm’s length party for gross proceeds of $54,500 consisting of $50,000 cash payment and marketable securities of $4,500 valued at the quoted market price at receipt (see Exhibit 10.12 – Incorporated by reference). Furthermore, the arm’s length party is obligated to pay to the Company one-half percent (1/2%) gross receipts royalty after six months from the date of commencement of commercial production from the Ontario Lithium Properties. These properties were previously written-off at the end of fiscal year 2000.
On September 30, 2019, the Company entered into and executed a Property Option Agreement with Eagle Plains Resources Inc. of Cranbrook, BC (“Eagle Plains”) in respect to the Acacia Property whereby the Company had the right and option to acquire a 60% interest in the Acacia Property by issuing to Eagle Plains in stages a total of 60,000 common shares in the capital of the Company and by incurring a total amount of $2,500,000 in property related expenditures over a period of five years (see Exhibit 10.19 – Incorporated by reference).
On October 15, 2020, the Company entered into an Amendment Agreement to the Acacia Property Option Agreement with Eagle Plains Resources Inc. (“Eagle Plains”) whereby the Company a) was required to issue to Eagle Plains 10,000 common shares (issued) in lieu of not having incurred the required $100,000 in property related expenditures during the 1st Anniversary of the Acacia Property Option Agreement, b) was required to issue to Eagle Plains an additional 10,000 common shares in order to continue with the 2nd Period of the Acacia Property Option Agreement and c) made a firm commitment to incur a total amount of $200,000 in property related expenditures during the 2nd Period of the Acacia Property Option Agreement. Consequently, on October 16, 2020, the Company issued 20,000 common shares in the capital of the Company to Eagle Plains at the deemed price of $0.375 per share which were subject to a hold period which expired on February 17, 2021. The Company did not incur the required property related expenditures. During November 2021, by mutual consent, the Company and Eagle Plains terminated the Option Agreement dated September 30, 2019 and the Amendment Agreement to the Option Agreement dated October 15, 2020. Accordingly, the Company recorded an impairment loss of $15,000.
On August 1, 2016, the Management Services Agreement with Kalpakian Bros. of B.C. Ltd. (“Kalpakian Bros.”) was terminated by mutual consent (Exhibits 10.4, 10.4.1, 10.4.2, 10.4.3, 10.4.4, 10.4.5, 10.4.5.6 - Incorporated by reference). The principal of Kalpakian Bros. is Jacob H. Kalpakian, the President, CEO and director of the Company. Bedo H. Kalpakian, former President, CEO, CFO and director of the Company was a principal of Kalpakian Bros. until December 31, 2019.
The Company has entered into debt settlement agreements with Jackpot, and with Kalpakian Bros., companies related to 37 Capital by certain common directors (see Exhibit 10.18 - Incorporated by reference). The Company issued 849,997 units of the Company to Jackpot at the price of $0.45 per unit in settlement of the Company’s outstanding debt to Jackpot for the total amount of $382,498.65 for shared office rent, office support services and miscellaneous office expenses provided by Jackpot to the Company from August 1, 2014 up to September 30, 2017. In respect to the Company’s outstanding debt to Kalpakian Bros. for the total amount of $15,750, the Company issued 35,000 units of the Company at the price of $0.45 per unit in settlement of the Company’s outstanding debt owed to Kalpakian Bros. for unpaid management fees from May 1, 2016 up to July 30, 2016. Each unit consisted of one common share and one share purchase warrant. Each warrant was exercisable at the price of $0.60 per share until November 2, 2022. The securities issued were subject to a hold period in accordance with applicable securities laws. During September 2018, Jackpot sold 160,000 units of 37 Capital to an arm’s length party, and during the year ended December 31, 2019, Jackpot sold 680,000 common shares of the Company. In addition, Jackpot owned 689,997 share purchase warrants of the Company exercisable at $0.60 which expired unexercised on November 2, 2022.
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On December 11, 2020, the Company entered into debt settlement agreements with certain creditors (the “Company’s Creditors”) whereby the Company’s Creditors agreed to accept common shares in the capital of the Company as full and final settlement of amounts owing to the Company’s Creditors. Pursuant to the debt settlement agreements, on January 25, 2021, the Company issued 2,957,406 common shares of the Company (the “Debt Settlement”) with a fair value of $0.55 per common share to certain creditors, including to a related party and a director and officer of the Company (the “Creditors”) (see Exhibit 10.20 – Incorported by reference), of which Jackpot acquired 597,380 Debt Settlement Shares of the Company and the Company’s President and CEO acquired 615,395 Debt Settlement Shares of the Company. As of the date of this Annual Report, Jackpot owns 607,377 common shares of the Company representing approximately 10.5% of the issued and outstanding common shares of the Company. The Debt Settlement Shares of the Company were subject to a hold period which expired on May 26, 2021.
On June 6, 2023 and September 29, 2023, the Company entered into a Geological and Exploration Consulting Contracts (the “Agreements”) (with Discovery Consultants, to provide geological and exploration related services in respect to the Company’s Extra High property in British Columba (see Exhibits 21 & 21.2* - Attached).
Item 10. D. Exchange Controls
| (a) | No governmental laws, decrees or regulations in the Province of British Columbia, Canada, restrict export or import of capital, including, but not limited to, foreign exchange controls, or affect the remittance of dividends, interest or other payments to non-resident holders of the Registrant’s securities. |
| (b) | There are no limitations on the right of non-resident or foreign owners to hold or vote such securities imposed by foreign law or by the charter or other constituent document of the Registrant. |
Item 10.E. Taxation
General
The following comments summarize the material Canadian and U.S. Federal Income Tax consequences for a shareholder of the Registrant who is a non-resident of Canada and who is a resident of the United States subject to taxation under the laws of the United States.
The following is based upon the current provisions of the Income Tax Act (Canada) (the “Tax Act”) and regulations thereunder, the U.S. Internal Revenue Code of 1986 (the “Code”) and regulations thereunder, the Canada-United States Income Tax Convention, 1980 (the “Convention”), the current administrative policies and practices published by Canada Revenue Agency or by the U.S. Internal Revenue Service and all specific proposals to amend the Tax Act and regulations thereunder that have been publicly announced by the Minister of Finance (Canada) prior to the date hereof, and judicial decisions, all of which are subject to change. The following does not take into account the tax laws of the various provinces or territories of Canada or the tax laws of the various state and local jurisdictions of the United States or foreign jurisdictions.
The following is intended to be a general description of the Canadian and U.S. Federal income tax considerations material to a purchase of the common shares and is not intended to be, nor should it be construed to be, legal or tax advice to any prospective holders. The following does not address consequences peculiar to any holder subject to special provision of Canadian or U.S. income tax law. Therefore, prospective holders are urged to consult their own tax advisors with respect to the tax consequences of an investment in the common shares of 37 Capital Inc.
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CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
Dividends on Common Stock
Under the Tax Act, a non-resident of Canada is subject to withholding tax at the rate of 25% on dividends from a corporation resident in Canada. The Convention reduces this rate to 15% for a shareholder resident in the United States. Withholding tax is further reduced to 5% if the United States resident shareholder is a corporation that beneficially owns at least 10% of the voting stock of the corporation paying the dividend.
Exemptions from Withholding Tax
The Convention provides exemption from Canadian income tax on dividends paid to religious, scientific, literary, educational or charitable organizations or to an organization constituted and operated exclusively to administer or provide benefits under one or more pension, retirement or employee benefit funds or plans. To qualify for exemption such organizations must be resident in the United States and be exempt from income tax under the laws of the United States.
Dispositions of Common Stock
The following comments apply only to a shareholder whose Common stock constitutes capital property to him/her for purposes of the Income Tax Act.
Common stock will generally constitute capital property unless the holder is a trader or dealer in securities or is engaged in a venture in the nature of trade in respect of Common Stock.
Common stock of a resident public corporation will constitute taxable Canadian property of a shareholder at a particular time if at any time in the preceding five (5) years, 25% or more of the issued shares of any class of the capital stock of the Registrant belonged to the non-resident shareholder, persons with whom the non-resident did not deal at arm’s length, or to the non-resident shareholder and persons with whom the non-resident shareholder did not deal at arm’s length.
Under the Tax Act, a non-resident of Canada is subject to Canadian tax on taxable capital gains from dispositions of taxable Canadian property and may deduct allowable capital losses from dispositions of taxable Canadian property. If the shares are considered taxable Canadian property, the vendor may be required to withhold tax pursuant to section 116 of the Tax Act.
Upon disposal of capital property the amount, if any, by which a taxpayer’s proceeds of disposition exceed or are exceeded by the adjusted cost base of the capital property (including expenses of disposition) represent the capital gain (or loss) on disposition of the capital property. One half of the gain (the “taxable capital gain”) is brought into income and taxed at normal rates. One half of the loss (the “allowable capital loss”) can be deducted from taxable capital gains realized in the same year. Pursuant to the Federal Budget which was announced on February 28, 2000, the taxable capital gain and allowable capital loss inclusion rate was reduced from three-fourths to two-thirds for dispositions after February 27, 2000. On October 18, 2000, the Federal Budget further reduced the inclusion rate from two-thirds to one-half for dispositions after October 17, 2000. For dispositions of taxable Canadian property any excess of allowable capital losses over taxable capital gains becomes a “net capital loss” which can be carried to other years to reduce taxable capital gains from the disposition of such property.
The Convention gives protection to United States residents from Canadian tax on certain gains derived from the alienation of property. There is no protection for a gain on a disposition of shares the value of which is derived principally from real property in Canada. Protection under the Convention will be available as long as the Registrant remains a Canadian public corporation or its shares continue to be listed on a prescribed stock exchange.
Canada Revenue Agency has indicated that it considers the protection of the Convention with respect to capital gains extend to a “deemed disposition” under the Tax Act, including the “deemed disposition” arising upon the death of a taxpayer.
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U.S. FEDERAL INCOME TAX CONSIDERATIONS
37 CAPITAL INC. (“37 Capital”) is classified as a Passive Foreign Investment company (“PFIC”) for U.S. federal income tax purposes since the following conditions have applied for at least one taxable year since 1986:
1) 75% or more of its gross income has been passive;
2) The average percentage of its assets producing passive income is at least 50%.
The following is intended to be a general description of the U.S. Federal income tax considerations material to a purchase of the common shares and is not intended to be, nor should it be construed to be, legal or tax advice to any prospective holders. Prospective holders are urged to consult their own tax advisors with respect to the tax consequences of an investment in the common shares of 37 Capital.
Since 37 Capital has satisfied the PFIC criteria for at least one taxable year since 1986, while a shareholder holds shares in 37 Capital, it remains a PFIC as to that shareholder even if it no longer meets the income or asset test. Classification as a PFIC will create U.S. tax consequences to a U.S. Shareholder that are unique to the PFIC provisions and that are not encountered in other investments.
Generally, a U.S. shareholder will realize ordinary income on the receipt of cash dividends or property distributions from an investment in the shares of a foreign corporation to the extent such dividends are paid out of the foreign company’s current accumulated earnings and profits. To the extent of any withholding taxes, both individual and corporate investors must include such taxes in income and, in turn, claim a foreign tax credit. Certain corporate investors are also entitled to gross up the underlying foreign corporate income taxes and claim a foreign tax credit.
Thus, under the general rule, no U.S. federal income tax consequences occur until an actual dividend is paid. Although this general rule can apply in a PFIC investment, there are significant deviations from this general rule and many elections available to a U.S. shareholder that can alter the U.S. federal income tax consequences. Such consequences will be unique to each U.S. shareholder.
In the absence of any PFIC elections, a U.S. shareholder of a PFIC, will be taxed under the excess distribution method. Under this method, where a current year dividend exceeds 125% of the average of dividends during the preceding three taxable years, the excess must be allocated rateably to each day in the taxpayer’s holding period.
The amount of the excess allocated to the current year and to years when the corporation was not a PFIC is included in the shareholder’s gross income for the year of the distribution. The remainder of the excess is not included in gross income, but the U.S. shareholder must pay a deferred tax amount by allocating the remaining excess to all PFIC years, re-computing the tax for each PFIC year and computing and paying the resultant interest on the recomputed tax for each PFIC year. As indicated above, foreign tax credit relief is available for withholding taxes for both individual and corporate investors. Relief for underlying corporate tax is only available for certain corporate investors.
Under the excess distribution method, gain on the disposition of PFIC shares results in the same allocation process; gross income inclusion; tax re-computation; and interest charges as an excess distribution.
In lieu of the excess distribution method, a U.S. shareholder may elect to treat a PFIC as a Qualified Electing Fund (“QEF”) and be taxed under the QEF method. If that election is made, the U.S. shareholder will be taxed currently on its pro-rata share of the earnings of the QEF. The current income inclusion eliminates the interest charge under the excess distribution method. Thus, unlike the excess distribution method that requires the receipt of cash from an actual dividend or sale, the QEF method invokes taxation without the receipt of cash.
Shareholders, who make a QEF election may, or may not, remain subject to tax under the excess distribution method. If the U.S. shareholder makes the QEF election for the foreign corporation’s first tax year as a PFIC that is included in the shareholder’s holding period, the excess distribution will not apply to the shareholder. Thus, this type of shareholder will include its pro-rata share of PFIC earnings as a dividend, claim the appropriate foreign tax credit, and not face any interest charge.
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If the shareholder makes the QEF election at a later time, in the absence of any other PFIC election, current taxation under the QEF method will apply prospectively. However, the excess distribution method continues to apply prior to the effective date of the QEF election.
If the shareholder makes the QEF election at a later time, the shareholder has an additional option to make a purging election. If a purging election is made, the PFIC stock would be treated as if it were sold and the gain treated as an excess distribution requiring: a gross income inclusion; allocation to PFIC years in the shareholder’s holding period, a tax re-computation for PFIC years in the shareholder’s holding period; and an interest charge payment. As a result of the purging election, thereafter the excess distribution method would not apply to that shareholder.
Under the QEF method, the U.S. shareholder has another option. In lieu of paying the tax on its pro-rata share of PFIC earnings, the U.S. shareholder in a QEF on the last day of the QEF’s tax year may elect to extend the time for payment of any of its undistributed PFIC earnings tax liability for the tax year. If the election is made, the election is treated as an extension of time to pay tax and, thus, the U.S. shareholder is liable for interest.
In lieu of any of the above-described methods, since 37 Capital is regularly traded on a national securities exchange, U.S. shareholders may wish to make an election to mark to market.
A U.S. shareholder of a PFIC may make a mark to market election for marketable PFIC stock. If the election is made, the shareholder includes in income each year an amount equal to the excess, if any, of the fair market value of the PFIC stock as of the close of the tax year over the shareholder’s adjusted basis in the stock. Decreases in market value are allowed as deductions, within certain prescribed limits.
Generally, under the mark to market election, the general PFIC rules under the excess distribution method and QEF method do not apply. However, if the mark to market election is made after a U.S. shareholder has maintained its investment, there are provisions that ensure that the interest charge on amounts attributable to periods before the election is not avoided.
PERSONS CONSIDERING THE PURCHASE OF THE COMPANY’S COMMON SHARES SHOULD CONSULT THEIR TAX ADVISORS WITH REGARD TO THE APPLICATION OF CANADIAN, U.S. AND OTHER TAX LAWS TO THEIR PARTICULAR SITUATION.
Item 10. F. Dividends and Paying Agents.
The Company’s registrar and transfer agent is Computershare Investor Services Inc. located at 510 Burrard Street, Vancouver, British Columbia, Canada, V6C 3B9. The telefax number is (604) 661-9407.
Item 10. G. Statement by Experts
Not Applicable.
Item 10. H. Documents on Display.
We have filed this 2023 Annual Report on Form 20-F with the Securities and Exchange Commission under the Securities Exchange Act of 1934. Statements made in this Annual Report as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to this Annual Report, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference.
We are subject to the informational requirements of the Securities Exchange Act and file reports and other information with the Securities and Exchange Commission. Reports and other information which we file with the Securities and Exchange Commission, including this Annual Report on Form 20-F, may be inspected at the public reference facilities of the Securities and Exchange Commission at: 450 Fifth Street N.W., Room 1024, Washington, D.C. 20549. Additionally, copies of this material may also be obtained from the Securities and Exchange Commission’s Investor Site at http://www.sec.gov . The Commission’s telephone number is 1-800-SEC-0330.
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Item 10. I Subsidiary Information
On February 26, 2015, the Company incorporated two wholly-owned subsidiaries, 27 Red Capital Inc. (“27 Red”) and 4 Touchdowns Capital Inc. (“4 Touchdowns”).
On April 30, 2015, the Company entered into an arrangement agreement (the “Arrangement Agreement”) (see Exhibit 12 – Incorporated by reference) with 27 Red (“Spinco1”) and 4 Touchdowns (“Spinco2”).
At the Company’s annual and special meeting which was held on June 4, 2015 (see Exhibit 12 - Incorporated by reference), the Company’s shareholders passed all the resolutions presented including the re-election of the board of directors, re-appointment of the Company’s auditor, approval of the Company’s stock option plan, and the proposed Plan of Arrangement with 27 Red and 4 Touchdowns.
In respect to the Plan of Arrangement, the Company applied for an Interim Order which was granted on May 6, 2015 by the Supreme Court of British Columbia, and on June 12, 2015 the Company received the final court approval for the Plan of Arrangement (see Exhibit 12 - Incorporated by reference),.
A copy of the Arrangement Agreement is available on www.sedarplus.ca.
As a result of the completion of the Arrangement, 27 Red and 4 Touchdowns are independent entities and are no longer subsidiaries of the Company.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(a) Risk management overview
The Company's activities expose it to a variety of financial risks including credit risk, liquidity risk and market risk. This note presents information about the Company's exposure to each of the above risks, the Company's objectives, policies and processes for measuring and managing risk, and the Company's management of capital. The Company employs risk management strategies and policies to ensure that any exposure to risk is in compliance with the Company's business objectives and risk tolerance levels. While the Board of Directors has the overall responsibility for the Company's risk management framework, the Company's management has the responsibility to administer and monitor these risks.
(b) Fair value of financial instruments
The fair values of cash, accounts payable and accrued liabilities, due to related parties, refundable subscription, loan payable and convertible debentures approximate their carrying values due to the short-term maturity of these instruments.
IFRS establishes a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
Level 1 – quoted prices (unadjusted) 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 (unobservable inputs).
| 36 |
(c) Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The financial instruments that potentially subject the Company to a significant concentration of credit risk consist of cash. The Company mitigates its exposure to credit loss associated with cash by placing its cash with a major financial institution.
(d) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they are due. The Company's approach to managing liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due.
At December 31, 2023, the Company had cash of $18,304 (December 31, 2022 - $122) available to apply against short-term business requirements and current liabilities of $741,436 (December 31, 2022 - $826,925). All of the current liabilities are due within 90 days. Amounts due to related parties are due on demand. As of December 31, 2023, two convertible debentures together with the accrued interest for a total amount of $519,589 are outstanding, and the loan payable in the amount of $50,000 plus accrued interest in the amount of $12,973 are due. Liquidity risk is assessed as high.
(e) Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company's net earnings or the value of financial instruments. As at December 31, 2023, the Company is not exposed to significant interest rate risk, currency risk or other price risk on its financial assets and liabilities due to the short-term maturity of its financial liabilities and the fixed interest rate on the outstanding convertible debentures.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
As at the date of this Annual Report, the Company has two Convertible Debentures totalling the principal amount of $250,000 plus accrued interest outstanding (see Exhibits 10.15 & 10.15.1 – Incorporated by reference).
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Except for outstanding loans, accounts payable, accrued liabilities and two convertible debentures totalling the principal amount of $250,000 plus accrued interest, the Company is not in default in the payment of principal, interest, sinking fund instalment or any other default with respect to any other indebtedness of the Company.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
There have been no changes in the constituent instruments defining the rights of holders of common stock and no issuance of any other securities that has modified the rights of holders of common stock.
Use of Proceeds from Offering
Not Applicable.
| 37 |
ITEM 15. CONTROLS AND PROCEDURES
| a) | EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures [(as defined in Rules 13a-15(d) and 15d -15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)] as of the end of the period covered by this Annual Report on Form 20-F. Based on such evaluation, they have concluded that as of such date, our disclosure controls and procedures are effective and designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms. |
| b) | MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING. Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and Rule 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of our financial statements for external purposes in accordance with generally accepted accounting principles. Our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of this assessment, it was found that the internal controls cannot be relied upon due to lack of segregation of duties. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. |
This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the SEC that permit the Company to provide only management’s report in this Annual Report.
| c) | CHANGES IN INTERNAL CONTROLS. There were no changes in our internal controls or in other factors that could affect these controls subsequent to the date of evaluation by our Chief Executive Officer and Chief Financial Officer. |
[Exhibit 31.1* – Attached herewith]
ITEM 16. AUDIT COMMITTEE, CODE OF ETHICS, ACCOUNTANT FEES.
16.A. Audit Committee Financial Expert
The financial experience of Neil Spellman (Chairman of the Audit Committee), including his experience as a member of the audit committee of another public company determines that he is an audit committee financial expert within the meaning of the U.S. Sarbanes-Oxley Act of 2002. (See Item 6.C.3. in this Annual Report for further details on the Audit Committee.)
16.B. Code of Ethics
On May 31, 2004, the Company’s Board of Directors adopted a Code of Ethics (the “Code”) for the Company’s Chief Executive Officer and Chief Financial Officer and its principal accounting officer or controller, or persons performing similar function (the “Senior Financial Officers”) to deter wrongdoing and promote honest and ethical conduct in the practice of financial management, full, fair, accurate, timely and understandable disclosure; and compliance with all applicable laws and regulations. These Senior Financial Officers are expected to abide by this Code as well as by all of the Company’s other applicable business policies, standards and guidelines. (Exhibit 14.1 –Incorporated by reference).
| 38 |
The Code of Ethics can be accessed electronically at http://www.37capitalinc.com.
Item 16.C. Auditor’s Fees & Services
| (a) | Audit Fees: The aggregate fees billed for each of the last three fiscal years by the Company’s Auditors were (2023: $21,000) (2022: $21,000) and (2021: $17,000) |
| (b) | Audit Related Fees were (2023: $Nil) (2022: $Nil) and (2021: $Nil) |
| (c) | Tax Fees: Tax fees were (2023: $1,700) (2022: $1,700) and (2021:$1,050) |
| (d) | All other Fees were (2023: $Nil) (2022: $Nil) and (2021: $Nil). |
Further details with respect to the Audit Committee’s Charter is included in the Company’s Management Information Circulars dated October 20, 2021, October 7, 2022 and November 6, 2023 (see Exhibits 13.5 and 13.6 – Incorporated by reference) and Exhibit 13.7*– Attached).
The Audit Committee’s pre-approval policies and procedures: The Audit Committee has adopted procedures to pre-approve audit services and all non-audit related services to be rendered by the Company’s external auditors. The Chairman of the Audit Committee has been delegated authority to pre-approve audit services up to a maximum cost of $30,000 and individual assignments up to a maximum cost of $5,000. All other assignments must be pre-approved by the Audit Committee. All amounts which exceed the authorized amounts require further approval from the Audit Committee.
ITEM 17. FINANCIAL STATEMENTS
The Company’s Audited Financial Statements for the year ended December 31, 2023 and 2022, together with the report of the auditors, Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants, are filed as part of this Annual Report. The Company’s financial statements are stated in Canadian dollars (Cdn $).
| A) Index to Financial Statements | Page |
| i) Financial Statements | 45 |
| Report of Independent Registered Public Accounting Firm to the Shareholders | 46-47 |
| Balance Sheets as at December 31, 2023 and 2022 | 48 |
| Statements of Comprehensive Loss for the years ended December 31, 2023, 2022 and 2021 | 49 |
| Statements of Changes in Stockholders’ Deficiency for the years ended December 31, 2023, 2022 and 2021 | 50 |
| Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 | 51 |
| Notes to the Financial Statements | 52-67 |
| ii) Management’s Discussion & Analysis for the year ended December 31, 2023 |
ITEM 18. FINANCIAL STATEMENTS
The Company's financial statements which are required to be filed hereunder are listed in Item 17 and are specifically incorporated herein by this reference. The Company's financial statements are stated in Canadian dollars (Cdn $) and are prepared in accordance with the International Financial Reporting Standards as issued by the International Accounting Standards Board.
| 39 |
ITEM 19. LIST OF EXHIBITS
| 40 |
37 CAPITAL INC.
Audited Financial Statements
December 31, 2023 and 2022
(Expressed in Canadian Dollars)
| Report of Independent Registered Public Accounting Firm | F-2 |
| Financial Statements | |
| Balance Sheets | F-3 |
| Statements of Comprehensive Loss | F-4 |
| Statements of Changes in Stockholders’ Deficiency | F-5 |
| Statements of Cash Flows | F-6 |
| Notes to Financial Statements | F-7 - F-23 |
| F-1 |
Report of Independent Registered Public Accounting Firm
To the stockholders and the board of directors of 37 Capital Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of 37 Capital Inc. (the "Company") as of December 31, 2023 and 2022, the related statements of comprehensive loss, changes in stockholders’ deficiency, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and its financial performance and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has an accumulated deficit and has a working capital deficiency. The Company has limited resources and no sources of cash from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's 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 the 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 about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB. 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 in accordance with the standards of the PCAOB.
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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
| CRITICAL AUDIT MATTER | HOW THE MATTER WAS ADDRESSED IN THE AUDIT |
Assessment of Mineral property interests for potential impairment indicators As described in Notes 4 and 5 to the financial statements, management reviews and evaluates the net carrying value of mineral property interests for impairment upon the occurrence of events or changes in circumstances that indicate that the related carrying amounts may not be recoverable. If deemed necessary based on this review and evaluation, management performs a test for impairment. In its review and evaluation, management determined that there were no indicators that the carrying amount of mineral property interests, which has a carrying value of $98,992 as of December 31, 2023, may not be recoverable. We identified the assessment of unproved mineral properties for potential impairment indicators as a critical audit matter due to the materiality of the balance, the high degree of auditor judgment and an increased level of effort when performing audit procedures to evaluate the reasonableness of management’s assumptions in determining whether indicators of impairment are present. |
The primary procedures we performed to address this critical audit matter included: • Evaluation of the Company’s identification of significant events or changes in circumstances that have occurred indicating the underlying mineral property interests may not be recoverable by performing an independent assessment. • Discussion with management of future business plans for the mineral property interests. • Ensuring key assumptions were consistent with evidence obtained in other areas of the audit. |
/s/ DMCL LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
PCAOB
#
We have served as the Company’s auditor since 2016
April 29, 2024
| F-2 |
37 CAPITAL INC.
Balance Sheets December 31,
(Expressed in Canadian Dollars)
| As at | 2023 | 2022 | ||||||
| Assets | ||||||||
| Current | ||||||||
| Cash | $ | $ | ||||||
| GST receivable | ||||||||
| 22,382 | 1,682 | |||||||
| Mineral Property Interests (note 5) | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficiency | ||||||||
| Current | ||||||||
| Accounts payable and accrued liabilities (notes 6 and 13) | $ | $ | ||||||
| Due to related parties (note 7) | ||||||||
| Loan payable (note 8) | ||||||||
| Convertible debentures (note 9) | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Deficiency | ||||||||
| Capital stock (note 10) | ||||||||
| Equity portion of convertible debentures (note 9) | ||||||||
| Reserves | ||||||||
| Deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficiency | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficiency | $ | $ | ||||||
On behalf of the Board:
”Jake H. Kalpakian” (signed)
Jake H. Kalpakian, Director
“Gregory T. McFarlane” (signed)
Gregory T. McFarlane, Director
The accompanying notes form an integral part of these financial statements.
| F-3 |
37 CAPITAL INC.
Statements of Comprehensive Loss
Years Ended December 31,
(Expressed in Canadian Dollars)
| 2023 | 2022 | 2021 | ||||||||||
| Expenses | ||||||||||||
| Finance and interest (notes 7, 8 and 9) | $ | $ | $ | |||||||||
| Foreign exchange loss | ||||||||||||
| Legal, accounting and audit | ||||||||||||
| Office, rent and miscellaneous (note 7) | ||||||||||||
| Regulatory and transfer fees | ||||||||||||
| Travel, meals and entertainment | ||||||||||||
| Loss (gain) on debt settlement (note 6 and 10) | ( | ) | ||||||||||
| Impairment loss (notes 5) | ||||||||||||
| Shareholder communications | ||||||||||||
| 48,820 | 125,036 | 1,044,863 | ||||||||||
| Net and Comprehensive Loss for the Year | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Basic and Diluted Loss per Common Share | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Weighted
Average Number of Common Shares Outstanding - Basic and Diluted | ||||||||||||
The accompanying notes form an integral part of these financial statements.
| F-4 |
37 CAPITAL INC.
Statements of Changes in Stockholders’ Deficiency
(Expressed in Canadian Dollars)
| Reserves | ||||||||||||||||||||||||
| Common Shares | Amount | Equity
Portion of Convertible Debentures Reserve | Warrants | Deficit | Total
Stockholders' Equity (Deficiency) | |||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Net loss for the year | — | ( | ) | ( | ) | |||||||||||||||||||
| Private placement, net of issuance of costs | ||||||||||||||||||||||||
| Shares issued for debt, net of issuance of costs | ||||||||||||||||||||||||
| Fractional share adjustment | ( | ) | ||||||||||||||||||||||
| Balance, December 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss for the year | — | ( | ) | ( | ) | |||||||||||||||||||
| Shares issued for mineral property interest | ||||||||||||||||||||||||
| Private placement, net of issuance of costs | ||||||||||||||||||||||||
| Balance, December 31, 2022 | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net loss for the year | — | ( | ) | ( | ) | |||||||||||||||||||
| Private placement, net of issuance of costs | ||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
The accompanying notes form an integral part of these financial statements.
| F-5 |
37 CAPITAL INC.
Statements of Cash Flows
Years Ended December 31,
(Expressed in Canadian Dollars)
| 2023 | 2022 | 2021 | ||||||||||
| Operating Activities | ||||||||||||
| Net loss for the year | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Items not involving cash: | ||||||||||||
| Interest expense on loan and convertible debentures | ||||||||||||
| Impairment loss of investment | ||||||||||||
| Impairment loss of mineral property (note 5) | ||||||||||||
| Loss/(Gain) on debt settlement | ( | ) | ||||||||||
| ( | ) | ( | ) | ( | ) | |||||||
| Changes in non-cash working capital (note 11) | ( | ) | ||||||||||
| Cash used in operating activities | ( | ) | ( | ) | ( | ) | ||||||
| Investing Activities | ||||||||||||
| Purchase of mineral property interest | ( | ) | ( | ) | ||||||||
| Cash used in investing activities | ( | ) | ( | ) | ||||||||
| Financing Activities | ||||||||||||
| Private placement, net of share issue costs | ||||||||||||
| Share issue cost | ( | ) | ||||||||||
| Proceeds from loan payable | ||||||||||||
| Proceed from related party loan | ||||||||||||
| Repayment of loan from related party | ( | ) | ( | ) | ( | ) | ||||||
| Cash provided by financing activities | ||||||||||||
| Net increase (decrease) in cash | ( | ) | ||||||||||
| Cash, beginning | ||||||||||||
| Cash, ending | $ | $ | $ | |||||||||
The accompanying notes form an integral part of these financial statements.
| F-6 |
37 CAPITAL INC.
Notes to Financial Statements
Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
1. NATURE OF BUSINESS
37
Capital Inc. (“37 Capital” or the “Company”) was incorporated on
The common shares of the Company trade on the Canadian Securities Exchange (the “Exchange”) under the symbol “JJJ”, and trade on the OTC Pink tier of the OTC markets in the United States of America under the symbol “HHHEF”. The Company’s office is located at 575 – 510 Burrard Street, Vancouver, British Columbia, Canada, V6C 3A8, and its registered office is located at 3200 - 650 West Georgia Street, Vancouver BC V6B 4P7.
2. GOING CONCERN
These financial statements have been prepared on the basis of accounting principles applicable to a "going concern", which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations.
Several
adverse conditions cast substantial doubt on the validity of this assumption. The Company has incurred significant losses over the past
three fiscal years. As of December 31, 2023, the Company has an accumulated deficit of $
The application of the going concern concept is dependent upon the Company’s ability to raise sufficient funding to pay creditors and to satisfy its liabilities as they become due. Management is actively engaged in the review and due diligence on opportunities of merit and is seeking to raise the necessary capital to meet its funding requirements. There can be no assurance whatsoever that management’s plan will be successful.
If the going concern assumption were not appropriate for these financial statements then adjustments may be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used. Such adjustments could be material.
| F-7 |
37 CAPITAL INC.
Notes to Financial Statements
Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
3. BASIS OF PRESENTATION
(a) Statement of compliance
These financial statements are prepared in accordance with the International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretation Committee (“IFRIC”).
(b) Basis of presentation
These financial statements have been prepared on a historical cost basis, except for certain financial instruments which are measured at fair value.
In addition, these financial statements have been prepared on the accrual basis, except for cash flow information. These financial statements are presented in Canadian dollars, which is the Company’s functional currency.
(c) Approval of the financial statements
These financial statements were approved and authorized for issue by the Board of Directors on April 29, 2024.
(d) Use of estimates and judgments
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and judgments 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. Accounting estimates will, by definition, seldom equal the actual results. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
The key area of judgment applied in the preparation of the financial statements that could result in a material adjustment to the carrying amounts of assets and liabilities is as follows:
| • | assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that give rise to significant uncertainty; |
| • | the classification/allocation of expenses as exploration and evaluation expenditures or operating expenses; and |
| • | the determination whether there have been any events or changes in circumstances that indicate the impairment of its exploration and evaluations assets. |
| F-8 |
37 CAPITAL INC.
Notes Financial Statements
Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
3. BASIS OF PRESENTATION (Continued)
The key estimates applied in the preparation of the financial statements that could result in a material adjustment to the carrying amounts of assets and liabilities are as follows:
| • | The recoverability of the carrying value of exploration and evaluation assets; |
| • | The provision for income taxes and recognition of deferred income tax assets and liabilities; and |
| • | The inputs in determining the liability and equity components of the convertible debentures. |
4. MATERIAL ACCOUNTING POLICY INFORMATION
Effective January 1, 2023, the Company adopted Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2), which require entities to disclose material accounting policies instead of significant accounting policies. The amendments also provide guidance on the application of materiality to disclosure of accounting policies that provide useful, entity-specific accounting policy information that users need to understand other information in the financial statements. While the amendments did not result in any changes to the Company’s accounting policies themselves, they impacted the accounting policy information disclosed in the Company’s financial statements.
The material accounting policies of the Company include the following:
(a) Financial instruments
(i) Recognition and classification
The Company classifies its financial instruments in the following categories:
| • | At fair value through profit and loss (“FVTPL”): cash |
| • | Amortized cost: accounts payable and accrued liabilities, due to related parties, loan payable and convertible debentures |
The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL.
(ii) Measurement
Financial assets and liabilities at amortized cost
Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.
Financial assets and liabilities at FVTPL
Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the statements of comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the statements of comprehensive loss in the period in which they arise.
| F-9 |
37 CAPITAL INC.
Notes to Financial Statements
For Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(iii) Impairment of financial assets at amortized cost
The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit.
(iv) Derecognition
Financial assets
The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity.
Financial liabilities
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when the terms of the liability are modified such that the terms and / or cash flows of the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.
Gains and losses on derecognition are generally recognized in profit or loss.
(b) Mineral property interests
Costs directly related to the acquisition, exploration and evaluation of resource properties are capitalized once the legal rights to explore the resource properties are acquired.
The mineral property interests are tested for impairment if facts or circumstances indicate that impairment exists:
| • | the period for which the Company has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed |
| • | substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned |
| • | exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area; and |
| • | sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale. |
| F-10 |
37 CAPITAL INC.
Notes to Financial Statements
For Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
If it is determined that capitalized acquisition, exploration and evaluation costs are not recoverable, or the property is abandoned or management has determined there is an impairment in value, the property is written down to its recoverable amount. From time to time, the Company acquires or disposes properties pursuant to the terms of option agreements. Options are exercisable entirely at the discretion of the optionee, and accordingly, are recorded as mineral property costs or recoveries when the payments are made or received. After costs are recovered, the balance of the payments received is recorded as a gain on option or disposition of mineral property interest.
Once the technical feasibility and commercial viability of the extraction of mineral resources are demonstrable, mineral property interests attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets within property and equipment.
To date, the Company’s mineral property interest has not demonstrated technical feasibility and commercial viability. The recoverability of the carrying amount of any mineral property interests is dependent on successful development and commercial exploitation or, alternatively, sale of the respective areas of interest.
(c) Impairment
At the end of each reporting period, the Company’s assets are reviewed to determine whether there is any indication that those assets may be impaired. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment. The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. 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. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
(d) Decommissioning liabilities
An obligation to incur decommissioning and site rehabilitation costs occurs when environmental disturbance is caused by exploration, evaluation, development or ongoing production.
Decommissioning and site rehabilitation costs arising from the installation of plant and other site preparation work, discounted to their net present value, are provided when the obligation to incur such costs arises and are capitalized into the cost of the related asset. These costs are charged against operations through depreciation of the asset and unwinding of the discount on the provision.
| F-11 |
37 CAPITAL INC.
Notes to Financial Statements
For Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation is included in operating costs while the unwinding of the discount is included as a financing cost. Changes in the measurement of a liability relating to the decommissioning or site rehabilitation of plant and other site preparation work are added to, or deducted from, the cost of the related asset. The costs for the restoration of site damage, which arises during production, are provided at their net present values and charged against operations as extraction progresses.
Changes in the measurement of a liability, which arise during production, are charged against operating profit. The discount rate used to measure the net present value of the obligations is the pre-tax rate that reflects the current market assessment of the time value of money and the risks specific to the obligation. To date the Company does not have any decommissioning liabilities.
(e) Income taxes
Income tax expense consisting of current and deferred tax expense is recognized to profit or loss. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period-end, adjusted for amendments to tax payable with regard to previous years.
Deferred tax assets and liabilities and the related deferred income tax expense or recovery are recognized for deferred tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment occurs.
A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
The Company grants stock options to directors, officers, employees and consultants of the Company. The fair value of share-based payments to employees is measured at grant date, using the Black-Scholes Option Pricing Model, and is recognized over the vesting period using the graded method. Fair value of share-based payments for non-employees is recognized and measured at the date the goods or services are received based on the fair value of the goods or services received. If it is determined that the fair value of goods and services received cannot be reliably measured, the share-based payment is measured at the fair value of the equity instruments issued using the Black-Scholes Option Pricing Model.
| F-12 |
37 CAPITAL INC.
Notes to Financial Statements
For Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
For both employees and non-employees, the fair value of share-based payments is recognized as either an expense or as mineral property interests with a corresponding increase in option reserves. The amount to be recognized as expense is adjusted to reflect the number of share options expected to vest. Consideration received on the exercise of stock options is recorded in capital stock and the related share-based payment is transferred from the stock option reserve to capital stock. For unexercised options that expire, the recorded value is transferred to deficit.
(g) Convertible debentures
The liability component of convertible debentures is recognized initially at the fair value of a similar liability that does not have a conversion option. The equity component is recognized initially, as the difference between the fair value of the convertible debenture as a whole and the fair value of the liability component. Transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of the convertible debenture is measured at amortized cost using the effective interest method. The equity component is not re-measured subsequent to initial recognition.
Loss per share is calculated by dividing net loss attributable to common shares of the Company by the weighted average number of common shares outstanding during the year. The Company uses the treasury stock method for calculating diluted loss per share. Under this method, the dilutive effect on earnings per share is calculated on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds of such exercise would be used to purchase common shares at the average market price during the period. However, the calculation of diluted loss per share excludes the effects of various conversions and exercise of options and warrants that would be anti-dilutive.
(i) Capital stock
Proceeds from the exercise of stock options and warrants are recorded as capital stock. The proceeds from the issuance of units of the Company are allocated between common shares and warrants based on the residual value method. Under this method, the proceeds are allocated first to capital stock based on the fair value of the common shares at the time the units are issued and any residual value is allocated to the warrants. When the warrants are exercised, the related value is transferred from the warrant reserve to capital stock. For unexercised warrants that expire, the recorded value is transferred from the warrant reserves to deficit.
On the issuance of flow-through shares, any premium received in excess of the market price of the Company’s common shares is initially recorded as a liability (“flow-through tax liability”). Provided that the Company has renounced the related expenditures, or that there is a reasonable expectation that it will do so, the flow-through tax liability is reduced on a pro-rata basis as the expenditures are incurred. If such expenditures are capitalized, a deferred tax liability is recognized. To the extent that the Company has suitable unrecognized deductible temporary differences, an offsetting recovery of deferred income taxes would be recorded.
(j) Foreign currency translation
Amounts recorded in foreign currency are translated into Canadian dollars as follows:
| (i) | Monetary assets and liabilities, at the rate of exchange in effect as at the balance sheet date; |
| (ii) | Non-monetary assets and liabilities, at the exchange rates prevailing at the time of the acquisition of the assets or assumption of the liabilities; and |
| (iii) | Revenues and expenses (excluding amortization, which is translated at the same rate as the related asset), at the rate of exchange on the transaction date. |
| F-13 |
37 CAPITAL INC.
Notes to Financial Statements
For Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
4. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Exchange differences are recognized in profit or loss in the period which they arise.
(k) Accounting standards issued but not yet effective
At the date of the approval of the financial statements, a number of standards and interpretations were issued but not effective. The Company considers that these new standards and interpretations are either not applicable or are not expected to have a significant impact on the Company’s financial statements.
5. MINERAL PROPERTY INTERESTS
| Schedule of mineral property interests | ||||
Extra High Property |
||||
| Balance, December 31, 2020 | $ | |||
| Acquisition costs | ( | ) | ||
| Balance, December 31, 2021 | $ | |||
| Acquisition costs | ||||
| Balance, December 31, 2022 | $ | |||
Acacia Property
On
September 30, 2019, the Company entered into a property option agreement (the “Option Agreement”) with Eagle Plains Resources
ltd. (“Eagle Plains”) to acquire a
| F-14 |
37 CAPITAL INC.
Notes to Financial Statements
For Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
5. MINERAL PROPERTY INTERESTS (Continued)
On
October 15, 2020, the Company entered into an amendment agreement to the Option Agreement with Eagle Plains as the Company was not able
to incur the required amount of $
During
November 2021, by mutual consent, the Company and Eagle Plains terminated the Option Agreement dated September 30, 2019 and the Amendment
Agreement to the Option Agreement dated October 15, 2020. Accordingly, the Company recorded an impairment loss of $
Extra High Property
Previously
the Company held a
On
October 31, 2019, as amended on November 4, 2019, the Company entered into an agreement with Colt Resources Inc. (“Colt Resources”)
to purchase the remaining
During
the year ended December 31, 2021, the Company recorded an impairment loss of $
Pursuant
to the Company’s offer letter to Colt Resources dated July 6, 2022, the Company has made a cash payment of $
During
the year ended December 31, 2022, the Company incurred $
During
2023 the Company hired the services of Discovery Consultants of Vernon, British Columbia (“Discovery “) to plan, conduct,
and complete the Company’s exploration work program on the Extra High Property (the “Company’s 2023 Exploration Work
Program”). The Company’s 2023 Exploration Work Program consisted of 2 Phases. The Company incurred $20,000 of exploration
related expenditures for Phase 1, and the Company incurred $24,991 of exploration related expenditures for Phase 2, for a total amount
of $
As at December 31, 2023, the Company owns a 100% undivided right, interest and title in and to the Extra High Property.
The
Extra High Property is subject to a 1.5% Net Smelter Royalty (“NSR”) payable to a third party, 50% of which, or 0.75%, can
be purchased by the Company at any time by paying $
| F-15 |
37 CAPITAL INC.
Notes to Financial Statements
For Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
| Schedule of accounts payable and accrued liabilities | ||||||||
| December 31, 2023 | December 31, 2022 | |||||||
| Trade payables | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
During
the year ended December 31, 2023 the Company settled accounts payable and recorded a gain of $
7. RELATED PARTY TRANSACTIONS
The amounts due to related parties are unsecured, payable on demand which consist of the following:
| Amounts due to related parties | ||||||||
| December 31, 2023 | December 31, 2022 | |||||||
| Advances from directors (interest at prime plus 1%) | $ | $ | ||||||
| Entities controlled by directors (non-interest-bearing) | ||||||||
| Due to related parties | $ | $ | ||||||
The convertible
debentures and accrued interest of $
During the years ended December 31, the following amounts were charged by related parties.
| Amounts charged by related parties | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Interest charged on amounts due to related parties | $ | $ | $ | |||||||||
| Interest on convertible debentures | ||||||||||||
| Rent charged by entities with common directors (note 13) | ||||||||||||
| Office expenses charged by, and other expenses paid on behalf of the Company by a company with common directors (note 13) | ||||||||||||
| Total expenses | $ | $ | $ | |||||||||
The Company, together with Jackpot Digital Inc. (“Jackpot”), a related company with certain common directors, have entered into an office lease agreement, and an office support services agreement (Note 13).
| F-16 |
37 CAPITAL INC.
Notes to Financial Statements
For Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
8. LOAN PAYABLE
During
the year ended December 31, 2016, the Company entered into an agreement with a party whereby the party paid certain debts owed by the
Company. The loan was non-interest bearing, unsecured and due on demand. On January 25, 2021, the principal amount of $
During
May 2021, a party lent the Company $
9. CONVERTIBLE DEBENTURES FINANCING
Convertible Debentures Financing 2015
On
January 6, 2015, the Company closed a convertible debenture financing with two directors of the Company for the amount of $
On
October 29, 2021 the Company entered into an Addendum to the convertible debentures whereby the maturity date of the principal amount
totaling $
At
December 31, 2023, the Company recorded interest expense of $
Convertible Debentures Financing 2013
Pursuant
to debt settlement agreements dated December 11, 2020 in respect to the convertible debentures 2013, on January 25, 2021 the Company
issued an aggregate of
| F-17 |
37 CAPITAL INC.
Notes to Financial Statements
For Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
9. CONVERTIBLE DEBENTURES FINANCING (Continued)
The following table reconciles the fair value of the debentures to the carrying amount.
| Reconciles of fair value of debentures to carrying amount | ||||||||||||
| Liability Component | Equity Component | Total | ||||||||||
| Balance, December 31, 2021 | $ | $ | $ | |||||||||
| Interest accrued | ||||||||||||
| Balance, December 31, 2022 | ||||||||||||
| Interest accrued | ||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | |||||||||
10. CAPITAL STOCK
(a) Authorized
Unlimited number of common and preferred shares without par value.
As of December 31, 2023, there are no preferred shares issued.
(b) Issued
As of December 31, 2023, there are 5,745,947 common shares issued and outstanding.
On
July 24, 2023, the Company closed a non-brokered private placement financing, for gross proceeds of $
On
May 15, 2023, the Company closed a non-brokered private placement financing for gross proceeds of $
On
October 7, 2022 and October 31, 2022, the Company closed the second, third and final tranches of the non-brokered private placement financing
which was announced on August 8, 2022 for gross proceeds of $
On
August 31, 2022 the Company closed the first tranche of the non-brokered private placement financing which was announced on August 8,
2022 for gross proceeds of $
| F-18 |
37 CAPITAL INC.
Notes to Financial Statements
For Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
10. CAPITAL STOCK (Continued)
(b) Issued (Continued)
On
January 15, 2021, the Company issued
On
January 25, 2021, the Company issued
(c) Warrants
Warrants activity is as follows:
| Warrants activity | |||||||||
| Number of Warrants | Weighted Average Exercise Price | ||||||||
| Balance, December 31, 2021 | $ | ||||||||
| Issued | $ | ||||||||
| Expired | $ | ||||||||
| Balance, December 31, 2022 | $ | ||||||||
| Expired | ( | ) | $ | ||||||
| Issued | $ | ||||||||
| Balance, December 31, 2023 | $ | ||||||||
As of December 31, 2022, the following warrants were outstanding:
| Warrants outstanding | ||||||||
| Expiry Date | Exercise Price | Number of Warrants Outstanding | ||||||
| August 31, 2027 | $ | |||||||
| October 7, 2027 | $ | |||||||
| October 31, 2027 | $ | |||||||
| May 15, 2028 | $ | |||||||
| July 24, 2028 | $ | |||||||
The weighted
average remaining contractual life for warrants outstanding at December 31, 2023 is
| F-19 |
37 CAPITAL INC.
Notes to Financial Statements
For Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
11. CAPITAL STOCK (Continued)
(d) Stock options
The Company’s 2015 Stock Option Plan provides that the Board of Directors of the Company may grant to directors, officers, employees and consultants of the Company options to acquire up to 20% of the issued and outstanding common shares of the Company calculated from time to time on a rolling basis. The terms of the options are determined at the date of grant.
As of December 31, 2023, there were no stock options outstanding (2022 – Nil).
11. CHANGES IN NON-CASH WORKING CAPITAL
| Schedule Of Changes in noncash working capital | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| GST receivable | $ | ( | ) | $ | ( | ) | $ | |||||
| Accounts payable and accrued liabilities | ( | ) | ||||||||||
| Due to related parties | ||||||||||||
| Changes in non-cash working capital | $ | ( | ) | $ | $ | |||||||
| Supplemental information | ||||||||||||
| Non-cash items | ||||||||||||
| Interest expense included in convertible debt | $ | $ | $ | |||||||||
| Interest expense included in due to related parties | $ | $ | $ | |||||||||
| Shares issued for mineral property interests | $ | $ | $ | |||||||||
| Shares issued for debt | $ | $ | $ | |||||||||
12. INCOME TAXES
Income
tax expense differs from the amount that would be computed by applying the Canadian statutory income tax rate of
| Schedule of income tax expenses | ||||||||||||
| For the years ended December 31, | 2023 | 2022 | 2021 | |||||||||
| Loss before income taxes | $ | $ | $ | |||||||||
| Statutory income tax rate | % | % | % | |||||||||
| Expected income tax benefit | ( | ) | ( | ) | ( | ) | ||||||
| Items not deductible for income tax purposes | ||||||||||||
| Tax effect of flow-through shares | ||||||||||||
| Underprovided in prior years | ( | ) | ( | ) | ( | ) | ||||||
| Unrecognized benefit of deferred tax assets | ||||||||||||
| Income tax expense | $ | $ | $ | |||||||||
| F-20 |
37 CAPITAL INC.
Notes to Financial Statements
For Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
12. INCOME TAXES (Continued)
The Company recognizes tax benefits on losses or other deductible amounts where it is probable the Company will generate sufficient taxable income to utilize deferred tax assets. The Company’s unrecognized deductible temporary differences and unused tax losses for which no deferred tax asset is recognized consist of the following amounts:
| Schedule of unrecognized deductible temporary differences and unused tax losses | ||||||||
| For the years ended December 31, | 2023 | 2022 | ||||||
| Excess of unused exploration expenditures over carrying value of mineral property interests | $ | $ | ||||||
| Excess of undepreciated capital cost over carrying value of fixed assets | ||||||||
| Non-refundable mining investment tax credits | ||||||||
| Non-capital losses carried forward | ||||||||
| Capital losses carried forward | ||||||||
| Unrecognized deductible temporary differences | $ | $ | ||||||
At December
31, 2023, the Company has non-capital losses of $
The Company
has available approximate net capital losses of $
13. COMMITMENTS
| a) | The
Company has an office lease agreement with Jackpot. Under the agreement, the Company is entitled
to have office space from Jackpot at a monthly rate of $ |
| b) | The Company has an office support services agreement with Jackpot which has been extended until September 30, 2024. Under the agreement, the Company is entitled to receive office support services from Jackpot at a monthly rate of $1,000 plus applicable taxes. Either Jackpot or the Company may terminate this agreement by giving each other a three-month’ notice in writing. |
| c) | In
relation to the flow-through private placement completed during January 2021, the Company
was committed to incur and renounce $ |
| d) | In
relation to the flow-through private placement completed during July 2023, the Company is
committed to incur and renounce $ |
| F-21 |
37 CAPITAL INC.
Notes to Financial Statements
For Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
14. CAPITAL MANAGEMENT
The Company considers its capital to be comprised of stockholders’ deficiency and convertible debenture.
The Company’s objective when managing capital is to maintain adequate levels of funding to support the acquisition, exploration and, if warranted, the development of mineral properties, to invest in non-mining related projects and to maintain the necessary corporate and administrative functions to facilitate these activities. This is done primarily through equity and debt financing. Future financings are dependent on market conditions and there can be no assurance that the Company will be able to raise funds in the future. There were no changes to the Company’s approach to capital management during the year ended December 31, 2023. The Company is not subject to externally imposed capital requirements.
15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(a) Risk management overview
The Company's activities expose it to a variety of financial risks including credit risk, liquidity risk and market risk. This note presents information about the Company's exposure to each of the above risks, the Company's objectives, policies and processes for measuring and managing risk, and the Company's management of capital. The Company employs risk management strategies and policies to ensure that any exposure to risk is in compliance with the Company's business objectives and risk tolerance levels. While the Board of Directors has the overall responsibility for the Company's risk management framework, the Company's management has the responsibility to administer and monitor these risks.
(b) Fair value of financial instruments
The fair values of cash, accounts payable and accrued liabilities, due to related parties, loan payable and convertible debentures approximate their carrying values due to the short-term maturity of these instruments.
IFRS establishes a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
Level 1 – quoted prices (unadjusted) 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 (unobservable inputs).
(c) Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The financial instruments that potentially subject the Company to a significant concentration of credit risk consist of cash. The Company mitigates its exposure to credit loss associated with cash by placing its cash with a major financial institution.
| F-22 |
37 CAPITAL INC.
Notes to Financial Statements
For Years Ended December 31, 2023 and 2022
(Expressed in Canadian Dollars)
15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)
(d) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they are due. The Company's approach to managing liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due.
At
December 31, 2023, the Company had cash of $
(e) Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company's net earnings or the value of financial instruments. As at December 31, 2023, the Company is not exposed to significant interest rate risk, currency risk or other price risk on its financial assets and liabilities due to the short-term maturity of its financial liabilities and the fixed interest rate on the outstanding convertible debentures.
16. SUBSEQUENT EVENTS
Subsequent to December 31, 2023:
a) the Company granted a total of incentive stock options to directors, officers and consultants exercisable at the price of $per share for a period of three years.
b)
the Company announced a private placement and intends to raise gross proceeds of up to $by issuing up to 300,000 units of the Company,
at the price of $0.10 per unit. Each unit will consist of one (1) common share of the Company and one (1) share purchase warrant to purchase
an additional common share of the Company, at the price of $0.15 per common share, for a period of three (3) years from the closing date.
To date, the Company has received $
| F-23 |
Form 51-102F1
37 CAPITAL INC.
Management’s Discussion & Analysis
Audited Financial Statements for the
Year ended December 31, 2023
The following discussion and analysis of the financial condition and financial position and results of operations of 37 Capital Inc. (the “Company” or “37 Capital”) should be read in conjunction with the annual audited financial statements for the years ended December 31, 2023 and 2022 and the notes thereto.
The financial statements, including comparatives, have been prepared using accounting policies in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The Company’s financial statements are expressed in Canadian (CDN) Dollars which is the Company’s functional currency. All amounts in this MD&A are in CDN dollars unless otherwise stated.
The following information is prepared as at April 29, 2024.
Forward-Looking Statements
Certain statements contained herein are “forward-looking” and are based on the opinions and estimates of management, or on opinions and estimates provided to and accepted by management. Forward-looking statements may include, among others, statements regarding future plans, costs, projections, objectives, economic performance, or the assumptions underlying any of the foregoing. In this MD&A, words such as “may”, “would”, “could”, “will”, “likely”, “seek”, “project”, “predict”, “potential”, “should”, “might”, “hopeful”, “objective”, “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “optimistic” and similar words are used to identify forward-looking statements. Forward-looking statements are subject to a variety of significant risks and uncertainties and other factors that could cause actual events or results to differ materially from those expressed or implied. Although management believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, projections and estimations, there can be no assurance that these assumptions, projections or estimations are accurate. Readers, shareholders and investors are therefore cautioned not to place reliance on any forward-looking statements in this MD&A as the plans, assumptions, intentions, estimations, projections, expectations or factors upon which they are based might vary or might not occur. The forward-looking statements contained in this MD&A are made as of the date of this MD&A, and are subject to change after such date. The Company undertakes no obligation to update or revise any forward-looking statements, except in accordance with applicable securities laws.
Description of Business
The Company is a junior mineral exploration company.
The Company was incorporated on August 24, 1984 in British Columbia, Canada. The principal business of the Company is the acquisition, exploration and, if warranted, the development of natural resource prospects.
| 64 |
37 Capital is a reporting issuer in the Provinces of British Columbia, Alberta, Quebec and Ontario and files all public documents on www.Sedar.com. The Company is a foreign private issuer in the United States of America and in this respect files, on EDGAR, its Annual Report on Form 20-F and other reports on Form 6K. The following link, http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=825171 will give you direct access to the Company’s filings with the United States Securities and Exchange Commission (“U.S. SEC”).
Effective June 15, 2021, the Company consolidated its capital stock on the basis of 5 pre-consolidation common shares to 1 post-consolidation common share. The CUSIP number of the Company’s common shares is 88429G201. All the figures as to the number of common shares, stock options, warrants, prices of issued shares, exercise prices of stock options and warrants, as well as loss per share, in the Company’s condensed interim unaudited financial statements and in this Management Discussion and Analysis are post-consolidation amounts and the prior year comparatives have been retroactively restated to present the post-consolidation amounts.
In Canada, the common shares of the Company trade on the Canadian Securities Exchange (CSE) under the symbol “JJJ”, and in the USA, the Company's common shares trade on the OTC Pink tier of the OTC markets under the trading symbol “HHHEF”. The Company’s office is located at Suite 575, 510 Burrard Street, Vancouver, British Columbia V6C 3A8, Canada, and its registered and records office is located at Suite 3200 - 650 West Georgia Street, Vancouver, British Columbia V6B 4P7. The Company’s registrar and transfer agent is Computershare Investor Services Inc., at 510 Burrard Street, Vancouver, British Columbia, V6C 3B9. The Company’s auditors are Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants, at 1500-1140 West Pender Street, Vancouver, British Columbia V6E 4G1. The facsimile number is (604) 689-2778.
Effective February 5, 2024, the CSE has deemed the Company to meet its minimum listing requirements and, as a result, the Company is now trading under the symbol “JJJ”.
Selected Annual Information
Selected annual information from the financial statements (audited) for the three years ended December 31, 2023, 2022 and 2021 is shown in the following table:
| Year Ended December 31, 2023 | Year Ended December 31, 2022 | Year Ended December 31, 2021 | ||||||||||
| Revenue | 0 | 0 | 0 | |||||||||
| Interest income | 0 | 0 | 0 | |||||||||
| Expenses | 48,820 | 125,036 | 1,044,863 | |||||||||
| Basic
and diluted loss per common share before other items | (0.00 | ) | (0.03 | ) | (0.24 | ) | ||||||
| Comprehensive loss | (48,820 | ) | (125,036 | ) | (1,044,863 | ) | ||||||
| Total assets | 121,374 | 55,683 | 2,113 | |||||||||
| Long-term financial obligations | 0 | 0 | 0 | |||||||||
| Cash dividends | 0 | 0 | 0 | |||||||||
| 65 |
Results of Operations
For the year ended December 31, 2023:
| • | The Company’s operating expenses were $48,820 as compared to $125,036 for the corresponding period in 2022 and as compared to $1,044,863 for the corresponding period in 2021. |
| • | The Company recorded a comprehensive loss of $48,820 as compared to a comprehensive loss of $125,036 for the corresponding period in 2022 and as compared to a comprehensive loss of $1,044,863 for the corresponding period in 2021. |
| • | The Company’s basic and diluted loss per common share was $0.00 as compared to a basic and diluted loss per common share of $0.03 and as compared to a basic and diluted loss of $0.24 during the corresponding period in 2021. |
| • | The Company’s total assets were $121,374 as compared to $55,683 during the corresponding period in 2022 and as compared to $2,113 during the corresponding period in 2021. |
| • | The Company’s total liabilities were $741,436 as compared to $826,925 during the corresponding period in 2022 and as compared to $697,319 during the corresponding period in 2021. |
| • | The Company had a working capital deficiency of $719,054 as compared to a working capital deficiency of $825,243 during the corresponding period of 2022 and as compared to a working capital deficiency of $695,206 during the corresponding period of 2021. |
The Company is presently not a party to any legal proceedings whatsoever.
Pursuant to debt settlement agreements dated December 11, 2020 totaling the sum of $739,351.50 between the Company and certain creditors, including Jackpot Digital Inc. (“Jackpot’) and the Company’s President and CEO, on January 25, 2021 the Company issued a total of 2,957,406 common shares of the Company at a deemed price of $0.25 per common share (the “Debt Settlement Shares of the Company”), of which Jackpot acquired 597,380 Debt Settlement Shares of the Company and the Company’s President and CEO acquired 615,395 Debt Settlement Shares of the Company. As of the date of this MD&A, Jackpot owns 607,377 common shares of the Company representing 4.42% of the issued and outstanding common shares of the Company. The Debt Settlement Shares of the Company were subject to a hold period which expired on May 26, 2021.
Effective as of May 1, 2021, Fred A.C. Tejada resigned from the Board of Directors of the Company, and effective as of May 25, 2021, Bedo H. Kalpakian was appointed as a director of the Company.
At the Company’s Annual General Meeting, which was held on December 12, 2023, the Company’s shareholders passed all the resolutions presented including the re-election of Jake H. Kalpakian, Gregory T. McFarlane, Neil Spellman and Bedo H. Kalpakian as Directors of the Company; re-appointed the Company’s Auditor, Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants for the ensuing year and authorized the Directors to fix the remuneration to be paid to the Auditor; and re-approved the Company’s Stock Option Plan.
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During 2019 the Company had intended to issue up to 800,000 flow-through units of the Company at a price of $0.25 per unit for gross proceeds to the Company of $200,000 in order to use the proceeds of this financing towards mineral exploration work expenditures located in the Province of British Columbia. However, due to the Covid-19 pandemic the Company was able to raise only the amount of $20,000 for which the Company has issued 80,000 flow-through units of the Company. Each flow-through unit consisted of one flow-through common share of the Company and one non-flow-through share purchase warrant to acquire one non-flow-through common share of the Company at a price of $0.50 for a period of two years. All securities issued in connection with this financing were subject to a hold period which expired on May 16, 2021. During the year-ended December 31, 2022, the Company made a formal application to Canada Revenue Agency and cancelled the Company’s flow-through share application which was submitted during the year ended December 31, 2020. On January 15, 2023, the non-flow through share purchase warrants expired unexercised.
In relation to the flow-through share private placement completed during January 2021, the Company was committed to incur and renounce $20,000 in Canadian exploration expenditures by December 31, 2022. The Company was unable to incur the $20,000. The Company has agreed to indemnify the flow-through shareholder for certain costs incurred by the shareholder as a result of the Company not meeting its obligation to spend the flow-through share proceeds on qualifying Canadian exploration expenditures in compliance with the applicable tax rules and pursuant to the share subscription agreement. As at December 31, 2023 and 2022, the Company has included a provision for indemnification of the flow through shareholder for an amount of $10,000 in accounts payable.
On August 8, 2022, the Company announced that it intended to offer a non-brokered private placement financing whereby the Company may raise gross proceeds of up to $400,000 by issuing up to 10,000,000 units of the securities of the Company at the price of $0.04 per unit. During August and October 2022, the Company closed the private placement financing in three tranches by the issuance in aggregate of 1,200,000 non-flow through units of the Company at $0.04 per unit for total gross proceeds of $48,000. Each Unit consists of one common share in the capital of the Company and one share purchase warrant to purchase an additional common share in the capital of the Company at the price of $0.05 per common share for a period of five years. All securities that have been issued were subject to a four-month and one day hold period.
On May 15, 2023, the Company closed the non-brokered private placement financing which was announced in December 2022 for gross proceeds of $150,000 through the issuance of 6,000,000 units of the Company at $0.025 per unit. Each unit consists of one common share in the capital of the Company and one share purchase warrant to purchase an additional common share in the capital of the Company at the price of $0.05 per common share for a period of 5 years. All securities issued in connection with this financing include a hold period in accordance with applicable securities laws.
On June 1 & 5, 2023, the Company announced a non-brokered private placement of up to $100,000 through the issuance of up to 4,000,000 units of the Company at the price of $0.025 per unit whereby each unit would have consisted of one common share and one share purchase warrant to purchase an additional common share in the capital of the Company at the price of $0.05 per share for a period of five years from closing. The proposed private placement did not close.
On June 5, 2023, the Company announced a non-brokered private placement offering to raise funds for gross proceeds of up to $100,000 by the issuance of up to 4,000,000 flow-through units of the Company at the price of $0.025 per unit. On July 24, 2023, the Company closed the flow-through share offering through the issuance of 2,000,000 flow-through units of the Company at $0.025 per unit for gross proceeds of $50,000. Each flow-through unit consists of one flow-through common share of the Company and one non-flow-through share purchase warrant to acquire one non-flow-through common share of the Company at a price of $0.05 for a period of five years. The funds raised from this financing were utilized towards exploration work expenditures on the Company’s mineral property located in the Province of British Columbia. In the event that the Company’s shares trade on the CSE at $0.20 per share or above for a period of 10 consecutive trading days, a forced exercise provision will come into effect for the warrants issued in connection with this financing. All securities issued in connection with this financing include a hold period in accordance with applicable securities laws. In relation to the flow-through private placement, the Company is committed to incur and renounce $50,000 in Canadian exploration expenditures by December 31, 2024. As at December 31, 2023, the Company had incurred $44,991 and had renounced the $50,000 with the remaining $5,009 being spent subsequent to December 31, 2023.
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Mineral Properties
1. Extra High Claims
Previously the Company held a 33% interest in the Extra High Claims which are located in the Kamloops Mining Division of the Province of British Columbia (“Extra High Property”).
On October 31, 2019, as amended on November 4, 2019, the Company entered into an agreement with Colt Resources Inc. (“Colt Resources”) to purchase the remaining 67% right, interest and title in and to the Extra High Property.
During the year ended December 31, 2021, the Company recorded an impairment loss of $25,001 relating to the Extra High Property.
Pursuant to the Company’s offer letter to Colt Resources dated July 6, 2022 which was accepted by Colt Resources, the Company has made a cash payment of $15,000 and, has issued 50,000 common shares in the capital of the Company to Colt Resources as consideration for the full and final settlement of all matters between the Company and Colt Resources in respect to the Extra High Property. The 50,000 common shares in the capital of the Company were subject to a hold period from trading which expired on December 10, 2022.
During 2023 the Company hired the services of Discovery Consultants of Vernon, British Columbia (“Discovery “) to plan, conduct, and complete the Company’s exploration work program on the Extra High Property (the “Company’s 2023 Exploration Work Program”). The Company’s 2023 Exploration Work Program consisted of 2 Phases. The Company incurred $20,000 of exploration related expenditures for Phase 1, and the Company incurred $24,991 of exploration related expenditures for Phase 2, for a total amount of $44,991. The mineral claims covering the Extra High Property are valid until December 28, 2028.
As at December 31, 2023, the Company owns a 100% undivided right, interest and title in and to the Extra High Property.
The Extra High Property is subject to a 1.5% Net Smelter Returns Royalty (“NSR”) payable to a third party, 50% of which, or 0.75%, can be purchased by the Company at any time by paying $500,000.
2. Ontario Mineral Leases (Lithium)
During the year ended December 31, 2008, the Company sold all of its Ontario Mineral Leases (Lithium). In the event that at a future date the Ontario Mineral Leases (Lithium) are placed into commercial production, then the Company is entitled to receive a 0.5% gross receipts royalty after six months from the date of commencement of commercial production from the Ontario Mineral Leases (Lithium).
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3. Acacia Property
On September 30, 2019, the Company entered into a property option agreement (the “Option Agreement”) with Eagle Plains Resources ltd. (“Eagle Plains”) to acquire a 60% interest in the Acacia Property (“Acacia Property”) in Adams Plateau Area of the Province of British Columbia. The following was required to exercise the option:
| • | Issuance of 20,000 common shares (issued) to Eagle Plains upon receipt of the current Acacia Property NI 43-101 Technical Report; |
| • | Incur a total of $100,000 in property related expenditures on or before the first anniversary of the Option Agreement; |
| • | Issuance of 10,000 common shares to Eagle Plains and incur a total of $100,000 in property related expenditures on or before the second anniversary of the Option Agreement; |
| • | Issuance of 10,000 common shares to Eagle Plains and incur a total of $300,000 in property related expenditures on or before the third anniversary of the Option Agreement; |
| • | Issuance of 10,000 common shares to Eagle Plains and incur a total of $750,000 in property related expenditures on or before the fourth anniversary of the Option Agreement; and |
| • | Issuance of 10,000 common shares to Eagle Plains and incur a total of $1,250,000 in property related expenditures on or before the fifth anniversary of the Option Agreement. |
Within a period of 30 days after each annual anniversary of the Option Agreement, the Company was required to decide whether or not it wishes to continue with the Option Agreement.
On October 15, 2020, the Company entered into an amendment agreement to the Option Agreement with Eagle Plains as the Company was not able to incur the required amount of $100,000 in property related expenditure during the 1st Anniversary. The following are the amendments which were required to exercise the option:
| • | Issuance of 20,000 common shares (issued) to Eagle Plans. |
| • | Commitment to incur $200,000 in property-related expenditures during the 2nd period of the agreement. |
During November 2021, by mutual consent, the Company and Eagle Plains terminated the Option Agreement dated September 30, 2019 and the Amendment Agreement to the Option Agreement dated October 15, 2020. Accordingly, the Company recorded an impairment loss of $15,000 at year-end December 31, 2021.
Fourth Quarter (December 31, 2023)
During the three months [fourth quarter] period ended December 31, 2023:
| • | The Company had a comprehensive loss of $35,061 as compared to comprehensive loss of $57,456 or $0.01 per share during the same three-month period (fourth period) ended December 31, 2022 and as compared to a comprehensive loss of $969,942 or $0.22 per share during the same three-month period (fourth period) ended December 31, 2021. |
| • | The Company’s Operating costs were $35,061 as compared to $57,456 for the same period in 2022 and as compared to $969,942 for the same period in 2021. |
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Summary of Quarterly Results
| For the Quarterly Periods ended: | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||||
| Total Revenues | 0 | 0 | 0 | 0 | ||||||||||||
| Net income/(loss) and Comprehensive income/(loss) | (35,061 | ) | (21,948 | ) | 27,072 | (18,883 | ) | |||||||||
| Income/(loss) per share | (0.00 | ) | (0.00 | ) | 0.00 | (0.00 | ) | |||||||||
| For
the Quarterly Periods ended: | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||
| Total Revenues | 0 | 0 | 0 | 0 | ||||||||||||
| Net
loss and comprehensive loss | (57,456 | ) | (20,694 | ) | (24,768 | ) | (22,118 | ) | ||||||||
| Loss per share | (0.01 | ) | (0.00 | ) | (0.01 | ) | (0.01 | ) | ||||||||
The Company’s business is not of a seasonal nature.
Risks related to our Business
The Company, and the securities of the Company, should be considered a highly speculative investment. The following risk factors should be given special consideration when evaluating an investment in any of the Company's securities:
| • | The Company does not anticipate to generate any revenue in the foreseeable future. In the event that the Company generates any revenues in the future, then the Company intends to retain its earnings in order to finance growth. |
| • | There are a number of outstanding securities and agreements pursuant to which common shares of the Company may be issued in the future. This will result in further dilution to the Company's shareholders. |
| • | Governmental regulations, including those regulations governing the protection of the environment, taxes, labour standards, occupational health, waste disposal, mine safety and other matters, could have an adverse impact on the Company. |
| • | Trading in the common shares of the Company may be halted or suspended or may be subject to cease trade orders at any time and for any reason, including, but not limited to, the failure by the Company to submit documents to the Regulatory Authorities within the required time periods. |
| • | The exploration of mineral properties involves significant risks which even experience, knowledge and careful evaluation may not be able to avoid. The prices of metals have fluctuated widely, particularly in recent years as it is affected by numerous factors which are beyond the Company’s control including international, economic and political trends, expectations of inflation or deflation, currency exchange fluctuations, interest rate fluctuations, global or regional consumptive patterns, speculative activities and increased production due to new extraction methods. The effect of these factors on the price of metals, and therefore the economic viability of the Company’s interest in its mineral exploration property cannot be accurately predicted. Furthermore, changing conditions in the financial markets, and Canadian Income Tax legislation may have a direct adverse impact on the Company’s ability to raise funds for its interest in the Extra High mineral exploration property. A drop in the availability of equity financings will likely impede spending on mineral properties which can affect the Company. |
| • | The Company has outstanding debts, has working capital deficiency, has no revenues, has incurred operating losses, and has no assurances whatsoever that sufficient funding can be available for the Company to continue its operations uninterruptedly. |
| • | The market price of the Company’s common shares has experienced considerable volatility and may continue to fluctuate in the future. Furthermore, there is a limited trading market for the Company’s common shares and as such, the ability of investors to sell their shares cannot be assured. |
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Liquidity and Capital Resources
The Company has incurred operating losses over the past three fiscal years, has limited resources, and does not have any source of operating cash flow.
During 2024, the Company shall require at least $400,000 to conduct its operations uninterruptedly. In order to meet this requirement, the Company intends to seek equity and/or debt financings through private placements and/or public offerings and/or loans. In the past, the Company has been successful in securing equity and debt financings in order to conduct its operations uninterruptedly. While the Company does not give any assurances whatsoever that in the future it will continue being successful in securing equity and/or debt financings in order to conduct its operations uninterruptedly, it is the Company’s intention to pursue these methods for future funding of the Company.
As at December 31, 2023:
| • | the Company’s total assets were $121,374 as compared to $55,683 for the year ended December 31, 2022 and as compared to $2,113 for the year ended December 31, 2021. |
| • | the Company’s total liabilities were $741,436 as compared to $826,925 for the year ended December 31, 2022 and as compared to $697,319 for the year ended December 31, 2021. |
| • | the Company had $18,304 in cash as compared to $122 in cash for the year ended December 31, 2022 and as compared to $1,611 in cash for the year ended December 31, 2021. |
| • | the Company had GST receivable in the amount of $4,078 as compared to $1,560 for the year ended December 31, 2023 and as compared to $502 for the year ended December 31, 2021. |
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Shares for Debt Financing
Pursuant to debt settlement agreements dated December 11, 2020 totaling the amount of $739,351.50 between the Company and certain creditors, on January 25, 2021, the Company issued 2,957,406 common shares of the Company (the “Debt Settlement Shares of the Company”) at a price of $0.25 per common share in settlement of debts totaling the amount of $739,351.50 to certain creditors, including to a related party and a director and officer of the Company. The Debt Settlement Shares of the Company were subject to a hold period which expired on May 26, 2021. The fair value of the 2,957,406 common shares was $1,626,573. As a result, the Company recorded a loss on debt settlement of $887,222.
Private Placement Financings
During the year ended December 31, 2023 and up to the date of the MD&A, the following transactions have occurred:
| i) | On July 24, 2023, the Company closed a non-brokered private placement financing which was announced on June 5, 2023 for gross proceeds of $50,000 through the issuance of 2,000,000 flow-through units of the Company at $0.025 per unit. Each unit consists of one flow-through common share in the capital of the Company and non-flow-through share purchase warrant to purchase an additional common share in the capital of the Company at the price of $0.05 per common share for a period of 5 years. All securities issued in connection with this financing include a hold period in accordance with applicable securities laws. Based on the residual method the warrants were valued at $nil. The units were issued below the then market price of the Company shares, therefore a flow-through premium was recorded. |
| ii) | On May 15, 2023, the Company closed the non-brokered private placement financing which was announced in December 2022 for gross proceeds of $150,000 through the issuance of 6,000,000 units of the Company at $0.025 per unit. Each unit consists of one common share in the capital of the Company and one share purchase warrant to purchase an additional common share in the capital of the Company at the price of $0.05 per common share for a period of 5 years. All securities issued in connection with this financing included a hold period in accordance with applicable securities laws. Based on the residual value the warrants were valued at $nil. |
During the year ended December 31, 2022, the following share transactions occurred:
| i) | During August and October 2022, the Company issued in aggregate 1,200,000 non flow-through units of the Company. Each non flow-through unit consists of one common share and one share purchase warrant to acquire one common share of the Company at a price of $0.05 for a period of five years. All securities issued in connection with this financing were subject to four-months and one day hold period. |
| ii) | On January 15, 2021, the Company issued 80,000 flow-through units of the Company. Each flow-through unit consists of one flow-through common share of the Company and one non-flow-through share purchase warrant to acquire one non-flow-through common share of the Company at a price of $0.50 for a period of two years. All securities issued in connection with this financing were subject to a hold period which expired on May 16, 2021. |
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Loan Payable
The Company had borrowed the sum of $103,924 from a party to pay certain amounts that were owed by the Company to some of its creditors. The borrowed amount of $103,924 was non-interest bearing, unsecured and was payable on demand. Pursuant to a debt settlement agreement dated December 11, 2020 with the Company and the party, on January 25, 2021 the Company issued a total of 415,697 common shares of the Company with a fair value of $0.55 per shares in full settlement of the debt (the “Debt Settlement Shares of the Company”). The Company recognized a loss of $124,709 during the year ended December 31, 2021. The Debt Settlement Shares of the Company were subject to a hold period which expired on May 26, 2021.
During May 2021, an arm’s length party has lent the Issuer the amount of $50,000. As of December 31, 2023, the loan is outstanding and has accrued interest in the amount of $12,973.
Convertible Debentures Financing 2015
On January 6, 2015, the Company closed a convertible debenture financing with two directors of the Company for the amount of $250,000. The convertible debentures matured on January 6, 2016, and bear interest at the rate of 12% per annum payable on a quarterly basis. The convertible debentures are convertible into common shares of the Company at a conversion price of $1.50 per share. The liability component of the convertible debentures was recognized initially at the fair value of a similar liability with no equity conversion option, which was calculated based on the application of a market interest rate of 25%. On the initial recognition of the convertible debentures, the amount of $222,006 was recorded under convertible debentures and the amount of $27,994 has been recorded under the equity portion of convertible debenture reserve.
On October 29, 2021, the Company entered into an Addendum to the convertible debentures whereby the maturity date of the principal amount totaling $250,000 of the convertible debentures together with the accrued interest has been extended indefinitely, until mutual consent of the Company and Lender has been reached.
As at December 31, 2023, the Company recorded interest expense of $30,000 (December 31, 2022 - $30,000). As of December 31, 2023, $250,000 of the convertible debentures are outstanding plus the accrued interest of $269,589 (December 31, 2022 - $239,589).
Convertible Debentures Financing 2013
Pursuant to debt settlement agreements dated December 11, 2020 in respect to the convertible debentures 2013, on January 25, 2021 the Company issued an aggregate of 833,409 common shares of the Company with a fair value of $0.55 per share in settlement of the outstanding convertible debentures 2013 totaling $100,000 plus accrued interest. The Company recognized a loss of $250,023 during the year ended December 31, 2021.
Warrants
As at December 31, 2023, a total of 9,200,000 warrants exercisable at the price of $0.05 per warrant share were outstanding. As of the date of this MD&A, there are 9,200,000 share purchase warrants outstanding.
While there are no assurances whatsoever that any warrants may be exercised, however if any warrants are exercised in the future, then any funds received by the Company from the exercising of warrants shall be used for general working capital purposes.
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Stock Options
As at December 31, 2023, there were no outstanding stock options (December 31, 2022 – Nil). Subsequent to the year ended December 31, 2023, the Company granted a total of 1,750,000 incentive stock options to directors, officers and consultants exercisable at the price of $0.10 per share for a period of three years.
Material Accounting Policy Information
The Annual Audited Financial Statements for the year ended December 31, 2023 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretation Committee (“IFRIC”).
The Material Accounting Policies are detailed in Note 4 of the Company’s Annual Audited Financial Statements for the year ended December 31, 2023.
Effective January 1, 2019, the Company adopted IFRS 16 which supersedes IAS 17 Leases (“IAS 17”). The Company has applied the new standard using the modified retrospective approach with no restatement of comparative periods. There were no adjustments to retained earnings as a result of adoption. The Company has elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Company relied on its previous assessment made under IAS 17 and IFRIC 4 Determining whether an arrangement contains a lease. The definition of a lease under IFRS 16 was applied only to contracts entered into or modified on or after January 1, 2019.
On transition to IFRS 16, the Company did not recognize any lease assets or liabilities as its operating leases had a remaining term of less than 12 months from the date of initial application.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Trends
During the last several years commodity prices have fluctuated significantly, and should this trend continue or should commodity prices remain at current levels, then companies such as 37 Capital will have difficulty in raising funds and/or acquiring mineral properties of merit at reasonable prices.
Related Party Transactions
The Company shares office space and certain employees with Jackpot, a company related by certain common key management personnel.
The Company has an office lease agreement with Jackpot. Under the agreement, the Company is entitled to have office space from Jackpot at a monthly rate of $1,000 plus applicable taxes. Furthermore, Jackpot or the Company may terminate this agreement by giving each other a three months’ notice in writing.
The Company has an office support services agreement with Jackpot which has been extended until September 30, 2024. Under the agreement, the Company is entitled to receive office support services from Jackpot at a monthly rate of $1,000 plus applicable taxes. Either Jackpot or the Company may terminate this agreement by giving each other a three months’ notice in writing.
Jackpot is related to the Company by virtue of the fact that Jackpot has certain directors and officers who are also directors and officers of the Company.
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The amounts due to related parties are unsecured, payable on demand which consist of the following:
| December 31, 2023 | December 31, 2022 | |||||||
| Advances from directors (interest at prime plus 1%) | $ | — | $ | 40,372 | ||||
| Entities controlled by directors (non-interest-bearing) | 82,328 | 62,828 | ||||||
| $ | 82,328 | $ | 103,200 | |||||
During the years ended December 31, the following amounts were charged by related parties.
| 2023 | 2022 | 2021 | ||||||||||
| Interest charged on amounts due to related parties | $ | 1,100 | $ | 1,158 | $ | 275 | ||||||
| Interest on convertible debentures | 30,000 | 30,000 | 30,000 | |||||||||
| Rent charged by entities with common directors | 12,000 | 12,000 | 12,000 | |||||||||
| Office expenses charged by, and other expenses paid on behalf of the Company by a company with common directors | 15,081 | 19,272 | 13,901 | |||||||||
| $ | 58,181 | $ | 62,430 | $ | 56,176 | |||||||
On January 6, 2015, the Company closed convertible debentures financing with two directors of the Company for the Principal amount of $250,000. The convertible debentures have a maturity date of twelve months from the date of closing, and bear interest at the rate of 12% per annum payable on a quarterly basis. The Principal amount of $250,000 together with the accrued interest of the convertible debentures became due and payable on January 6, 2016 (the “Due Date”). However, on the Due Date the Company was unable to repay the Principal amount and the accrued interest to the two directors. On October 29, 2021 the Company entered into an Addendum to the Convertible Debentures whereby the maturity date of the principal amount of $250,000 of the convertible debentures together with the accrued interest has been extended indefinitely, until mutual consent of the Company and Lender has been reached.
The convertible debentures and accrued interest of $519,589 (December 31, 2022 - $489,589) is owed to the Chief Executive Officer, and to a director of the Company.
As of the date of this MD&A, Jackpot owns 607,377 common shares of the Company representing 4.42% of the Company’s issued and outstanding common shares.
Insider Participation
In connection with the non-brokered private placement which was announced on June 5, 2023, two Insiders of the Company acquired 2,000,000 flow-through units at $0.025 per unit in the capital of 37 Capital. For further particulars please see Private Placement Financings on page 9 of this MD&A.
In connection with the non-brokered private placement which was announced on December 16, 2022, an Insider of the Company, a family member and his private company, acquired in aggregate 2,600,000 units at $0.025 per unit in the capital of 37 Capital. For further particulars please see Private Placement Financings on page 9 of this MD&A.
In connection with the non-brokered private placement which was announced on August 8, 2022, an Insider of the Company and his private company, acquired in aggregate 1,200,000 units at $0.04 per unit in the capital of 37 Capital. For further particulars please see Private Placement Financings on page 9 of this MD&A.
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FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(a) Risk management overview
The Company's activities expose it to a variety of financial risks including credit risk, liquidity risk and market risk. This note presents information about the Company's exposure to each of the above risks, the Company's objectives, policies and processes for measuring and managing risk, and the Company's management of capital. The Company employs risk management strategies and policies to ensure that any exposure to risk is in compliance with the Company's business objectives and risk tolerance levels. While the Board of Directors has the overall responsibility for the Company's risk management framework, the Company's management has the responsibility to administer and monitor these risks.
(b) Fair value of financial instruments
The fair values of cash, accounts payable and accrued liabilities, due to related parties, refundable subscription, loan payable and convertible debentures approximate their carrying values due to the short-term maturity of these instruments.
IFRS establishes a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
Level 1 – quoted prices (unadjusted) 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 (unobservable inputs).
(c) Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The financial instruments that potentially subject the Company to a significant concentration of credit risk consist of cash. The Company mitigates its exposure to credit loss associated with cash by placing its cash with a major financial institution.
(d) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they are due. The Company's approach to managing liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due.
At December 31, 2023, the Company had cash of $18,304 (December 31, 2022 - $122) available to apply against short-term business requirements and current liabilities of $741,436 (December 31, 2022 - $826,925). All of the current liabilities are due within 90 days. Amounts due to related parties are due on demand. As of December 31, 2023, two convertible debentures together with the accrued interest for a total amount of $519,589 are outstanding, and the loan payable in the amount of $50,000 plus accrued interest in the amount of $12,973 are due. Liquidity risk is assessed as high.
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(e) Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company's net earnings or the value of financial instruments. As at December 31, 2023, the Company is not exposed to significant interest rate risk, currency risk or other price risk on its financial assets and liabilities due to the short-term maturity of its financial liabilities and the fixed interest rate on the outstanding convertible debentures.
Analysis of expenses
For a breakdown of general and administrative expenditures, please refer to the Statements of Comprehensive Loss in the Company’s Annual Audited Financial Statements for the years ended December 31, 2023 and 2022.
Capital Stock
Authorized share capital: Unlimited number of common shares without nominal or par value
Unlimited number of preferred shares without nominal or par value
| Outstanding Share Data | No. of Common Shares | No. of Preferred Shares | Exercise Price per Share | Expiry Date | ||||||||||
| Issued
and Outstanding as at April 29, 2024 | 13,745,947 | Nil | N/A | N/A | ||||||||||
| Warrants | 250,000 750,000 200,000 6,000,000 2,000,000 9,200,000 | Nil | $0.05 $0.05 $0.05 $0.05 $0.05 | August
31, 2027 October 7, 2027 October 31, 2027 May 15, 2028 July 24, 2028 | ||||||||||
| Stock Options | 1,750,000 | Nil | $ | 0.10 | January 29, 2027 | |||||||||
| Fully
Diluted as at April 29, 2024 | 24,695,947 | Nil | ||||||||||||
Director Approval
The contents of this MD&A and the sending thereof to the Shareholders of the Company have been approved by the Company’s Board of Directors.
Outlook
Management’s efforts are directed towards pursuing opportunities of merit for the Company, and Management is hopeful that, in due course, the Company shall be able to acquire an opportunity of merit. However, there are no assurances whatsoever that Management’s efforts shall succeed.
| 77 |
SIGNATURE PAGE
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 20-F (2022) and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
37 CAPITAL INC.
“Jacob H. Kalpakian”
Jacob H. Kalpakian
President & Chief Executive Officer
Dated this 13th day of May, 2024.
| 78 |
Exhibit 10.21
December 21, 2022
By facsimile (902) 432-6148
Canada Revenue Agency
Business Returns Division
Prince Edward Island Tax Centre
275 Pope Rd
Summerside, PE C1N 5Z7
Dear Sir/Madam:
Re: 37 Capital Inc. (the “Company”).
Flow-Through Share (FTS) Identification Number: 20-48528-4
Corporation Account Number: 10026 4068 RC0001
The Company would like to cancel the above-noted flow through share (FTS) offering. The Company will be issuing an amended T101 to the subscriber.
Should you have any questions, please contact the undersigned at (604) 681-0204 ext. 6105 or by email at info@37capitalinc.com.
Thanking you,
Yours sincerely,
37 Capital Inc.
“Jake H. Kalpakian”
Jake H. Kalpakian
President
Exhibit 10.11.6
July 6, 2022
By email: paul@worldlink-group.com
joetai@chineseworldnet.com
john.gravelle@rogers.com
COLT RESOURCES INC.
Suite 2209, 1111 Alberni Street
Vancouver, BC V6E 4V2
Attention: Mssrs. Paul Yeou , Joe Tai and John Gravelle, Directors of Colt Resources Inc.
Dear Sirs:
Re: Property Purchase Agreement dated October 31, 2019 as amended by an Addendum to the Property
Purchase Agreement dated November 4, 2019 (collectively referred to as the “Agreement”).
Further to the letter of 37 Capital Inc. (hereinafter referred to as “37 Capital”) addressed to Colt Resources Inc. (hereinafter referred to as “Colt”) dated June 30, 2022 in respect to the Agreement and our subsequent communications, it is 37 Capital’s understanding that Colt shall accept and shall agree to the removal from the Agreement and cancellation of:-
| • | Article 2.1 (b) $75,000 (Seventy-Five Thousand Dollars) after 18 (Eighteen) months from the Closing; |
| • | Article 2.1 (c) 0.5% (Half of one percent) NSR (Net Smelter Returns) Royalty which shall be payable 60 business days after the commencement of commercial production from the Extra High Property (hereinafter referred to as “Colt’s NSR Royalty”). 37 Capital may, at its sole discretion, purchase Colt’s NSR Royalty at any time by making a payment of $500,000 (Five Hundred Thousand Dollars) to Colt; and |
| • | All related Articles to 2.1(b) and (c) covered by the Agreement. |
For a consideration of:
| 1) | a cash payment of Cdn $15,000 (Fifteen thousand Canadian dollars) by 37 Capital to Colt; and |
| 2) | the issuance to Colt of 50,000 (Fifty thousand) common shares of 37 Capital as fully paid which will be subject to the approval of the Canadian Securities Exchange (the “CSE”), and which will have a hold period from trading of four months and one day. |
For greater certainty, once 37 Capital has made the cash payment of $15,000 (Fifteen thousand Canadian dollars) to Colt and has issued to Colt the 50,000 (Fifty thousand) 37 Capital common shares, Colt will have no interest, right, and title in and to the Extra High Property.
Should the above mentioned be acceptable to Colt, and to all of its Directors, then please indicate so by signing at the bottom of this letter.
Yours sincerely,
37 CAPITAL INC.
“Jake H. Kalpakian”
Jake H. Kalpakian
President & CEO
Accepted and agreed to the above this _7th__ day of July, 2022 by :
“Paul Yeou”
Paul Yeou, Director
Authorized Signatory of Colt Resources Inc.
Accepted and agreed to the above this 29th day of July, 2022 by
“Joe Tai”
Joe Tai, Director
Authorized Signatory of Colt Resources Inc.
Accepted and agreed to the above this ___ day of July, 2022 by
“John Gravelle”
John Gravelle, Director
Authorized Signatory of Colt Resources Inc.
Exhibit 11.1
Explanation of how earnings/loss per (weighted average) share is calculated
Earnings and Loss per share are calculated by dividing the net loss or profit by the total weighted average number of common shares outstanding. The weighted average number of common shares outstanding is obtained as follows:
Whenever the Company issues shares from its treasury during a specific reporting period, the number of common shares issued is pro-rated over the remaining months of the year, and such number is added to the December 31st closing balance of the previous year.
37 CAPITAL INC.
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Annual General Meeting (the "Meeting") of the Shareholders of 37 CAPITAL INC. (hereinafter called the "Company") will be held on Tuesday, December 12, 2023, at Suite 575, 510 Burrard Street, Vancouver, British Columbia at the hour of 11:00 a.m. (Vancouver time) for the following purposes:
| 1. | To receive and consider the audited financial statements of the Company for the fiscal year ended December 31, 2022 and the Auditor's Report thereon; |
| 2. | To fix the number of Directors for the ensuing year at four (4); |
| 3. | To elect four (4) Directors for the ensuing year; |
| 4. | To re-appoint Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants, as the Company’s Auditor for the ensuing year and to authorize the Directors to fix the remuneration to be paid to the Auditor; |
| 5. | To re-approve the Company's Stock Option Plan; and |
| 6. | To transact such other business as may properly come before the Meeting. |
Accompanying this Notice is an Information Circular and Proxy with notes to Proxy.
Shareholders unable to attend the Meeting in person should read the notes accompanying the enclosed Proxy and complete and return the Proxy to the Company's Registrar and Transfer Agent within the time and to the location set out in the said notes to the Proxy.
The enclosed Proxy is solicited by Management and you may amend it, if you so desire, by striking out the names listed therein and inserting in the space provided the name of the person you wish to represent you at the Meeting.
In light of ongoing concerns related to COVID-19, and in order to mitigate potential risks to the health and safety of the Shareholders, employees, communities and other stakeholders, Meeting participants are encouraged not to attend in person. Rather, participants are encouraged to vote on the matters before the Meeting by proxy and to join the Meeting by teleconference. Those who attend the Meeting by teleconference are requested to read the notes to the enclosed form of proxy and then to, complete, sign and mail the enclosed form of proxy in accordance with the instructions set out therein and in the Information Circular accompanying this notice of Meeting.
To access the Meeting by teleconference, dial +1-778-654-8779 (Canada and USA) and when prompted, enter ID# 170-421-056.
DATED at Vancouver, British Columbia, this 6th day of November, 2023.
BY ORDER OF THE BOARD,
“Jake H. Kalpakian”
Jake
H. Kalpakian
President, CEO & Director
| 1 |
37
CAPITAL INC.
Suite 575, 510 Burrard Street
Vancouver, BC V6C 3P1
Telephone: (604) 681-0204
INFORMATION
CIRCULAR
(Containing Information as at November 6, 2023, unless otherwise stated)
SOLICITATION OF PROXIES
This Information Circular is furnished in connection with the solicitation of proxies by the Management of 37 Capital Inc. (the “Company”), for use at the Annual General Meeting (the “Meeting”) of the Shareholders of the Company, to be held on Tuesday, the 12th day of December, 2023, at the time and place and for the purposes set forth in the accompanying Notice of Meeting and at any adjournment thereof. The solicitation will be primarily by mail, however, proxies may be solicited personally or by telephone by the regular officers and employees of the Company. The cost of solicitation will be borne by the Company.
CAUTION CONCERNING COVID-19 PANDEMIC
In light of ongoing concerns related to COVID-19, and in order to mitigate potential risks to the health and safety of the Shareholders, employees, communities and other stakeholders, Meeting participants are encouraged not to attend in person. Rather, participants are encouraged to vote on the matters before the Meeting by proxy and to join the Meeting by teleconference. Those who attend the Meeting by teleconference are requested to read the notes to the enclosed form of proxy and then to, complete, sign and mail the enclosed form of proxy in accordance with the instructions set out therein and in the Information Circular accompanying this notice of Meeting.
To access the Meeting by teleconference, dial +1-778-654-8779 (Canada and USA) and enter the following ID# 170-421-056.
APPOINTMENT AND REVOCATION OF PROXIES
The persons named in the accompanying form of Proxy are Directors and/or officers of the Company. A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A SHAREHOLDER) TO ATTEND AND ACT FOR HIM OR HER ON HIS OR HER BEHALF AT THE MEETING OTHER THAN THE PERSONS NAMED IN THE ENCLOSED INSTRUMENT OF PROXY. TO EXERCISE THIS RIGHT, A SHAREHOLDER SHALL STRIKE OUT THE NAMES OF THE PERSONS NAMED IN THE INSTRUMENT OF PROXY AND INSERT THE NAME OF HIS/HER NOMINEE IN THE BLANK SPACE PROVIDED, OR COMPLETE ANOTHER INSTRUMENT OF PROXY. A PROXY WILL NOT BE VALID UNLESS IT IS DEPOSITED WITH THE COMPANY’S REGISTRAR AND TRANSFER AGENT, COMPUTERSHARE TRUST COMPANY OF CANADA, AT 100 UNIVERSITY AVENUE, 9TH FLOOR, TORONTO, ONTARIO, M5J 2Y1, NOT LESS THAN 48 HOURS (EXCLUDING SATURDAYS, SUNDAYS AND HOLIDAYS) BEFORE THE TIME OF THE MEETING OR ANY ADJOURNMENT THEREOF.
The Instrument of Proxy must be signed by the Shareholder or by his attorney in writing, or, if the Shareholder is a corporation, it must either be under its common seal or signed by a duly authorized officer.
A Shareholder who has given a proxy may revoke it at any time before it is exercised. In addition to revocation in any other manner permitted by law, a proxy may be revoked by instrument in writing executed by the Shareholder or by his attorney authorized in writing, or, if the Shareholder is a corporation, it must either be under its common seal, or signed by a duly authorized officer and deposited at the Company’s Registrar and Transfer Agent, Computershare Trust Company of Canada, 100 University Avenue, 9th Floor, Toronto, Ontario, M5J 2Y1, at any time up to and including the last business day preceding the day of the Meeting, or any adjournment of it, at which the proxy is to be used, or to the Chairperson of the Meeting on the day of the Meeting or any adjournment of it. A revocation of a proxy does not affect any matter on which a vote has been taken prior to the revocation.
VOTING OF SHARES AND EXERCISE OF DISCRETION OF PROXIES
On any poll, the persons named in the enclosed Instrument of Proxy will vote the shares in respect of which they are appointed. Where directions are given by the Shareholder in respect of voting for or against any resolution, the proxy holder will do so in accordance with such direction.
IN THE ABSENCE OF ANY INSTRUCTION IN THE PROXY, IT IS INTENDED THAT SUCH SHARES WILL BE VOTED IN FAVOUR OF THE MOTIONS PROPOSED TO BE MADE AT THE MEETING AS STATED UNDER THE HEADINGS IN THIS INFORMATION CIRCULAR. The Instrument of Proxy enclosed, when properly signed, confers discretionary authority with respect to amendments or variations to the matters which may properly be brought before the Meeting. At the time of printing this Information Circular, the Management of the Company is not aware that any such amendments, variations or other matters are to be presented for action at the Meeting. However, if any other matters which are not now known to the Management should properly come before the Meeting, the Proxies hereby solicited will be exercised on such matters in accordance with the best judgment of the nominee.
In order to approve a motion proposed at the Meeting, a majority of greater than 50% of the votes cast will be required (an “Ordinary Resolution”) unless the motion requires a Special Resolution, in which case a majority of not less than two-thirds of the votes cast will be required. In the event a motion proposed at the Meeting requires disinterested Shareholder approval, common shares (“Common Shares”) held by Shareholders of the Company who have an interest in the motion and their “associates”, as such term is defined under applicable securities laws, will be excluded from the count of votes cast on such motion.
ADVICE TO BENEFICIAL SHAREHOLDERS
The information set forth in this section is of significant importance to many Shareholders as a substantial number of Shareholders do not hold their shares in their own name. Shareholders who do not hold their shares in their own name (referred to as “Beneficial Shareholders”) should note that only proxies deposited by Shareholders whose names appear on the records of the Company as the registered holders of shares can be recognized and acted upon at the Meeting.
If Common Shares are listed in an account statement provided to a Shareholder by a broker, then, in almost all cases, those Common Shares will not be registered in the Shareholder’s name on the records of the Company. Such shares will more likely be registered under the name of the Shareholder’s broker or an agent of that broker. In Canada, the vast majority of such Common Shares are registered under the name CDS & Co., the registration name for The Canadian Depositary for Securities, which acts as nominee for many Canadian brokerage firms. The Common Shares held by brokers or their agents or nominees can only be voted for or against resolutions upon the instructions of the Beneficial Shareholder. Without specific instructions, a broker and its agents or nominees are prohibited from voting shares for the broker’s clients. Beneficial Shareholders should carefully ensure that instructions respecting the voting of their Common Shares are communicated to the appropriate person.
Applicable regulatory rules require intermediaries/brokers to seek voting instructions from Beneficial Shareholders in advance of shareholders’ meetings. Every intermediary/broker has its own mailing procedures and provides its own return instructions to clients, which should be carefully followed by Beneficial Shareholders in order to ensure that their shares are voted at the Meeting. The purpose of the form of proxy or voting instruction form provided to a Beneficial Shareholder by its broker, agent or nominee is limited to instructing the registered holder of the shares on how to vote such shares on behalf of the Beneficial Shareholder.
The majority of brokers now delegate responsibility for obtaining instructions from clients to Broadridge Investor Communications (“Broadridge”). Broadridge typically supplies a voting instruction form, mails those forms to Beneficial Shareholders and asks those Beneficial Shareholders to return the forms to Broadridge or follow specific telephone or other voting procedures. Broadridge then tabulates the results of all instructions received by it and provides appropriate instructions respecting the voting of the shares to be represented at the Meeting. A Beneficial Shareholder receiving a voting instruction form from Broadridge cannot use that form to vote Common Shares directly at the Meeting. Instead, the voting instruction form must be returned to Broadridge or the alternate voting procedures must be completed well in advance of the Meeting in order to ensure such Common Shares are voted.
Although Beneficial Shareholders may not be recognized directly at the Meeting for the purpose of voting Common Shares registered in the name of their broker, agent or nominee, a Beneficial Shareholder may attend the Meeting as a proxyholder for a Shareholder and vote shares in that capacity. Beneficial Shareholders who wish to attend the Meeting and indirectly vote their shares as proxyholder for the registered Shareholder should contact their broker, agent or nominee well in advance of the Meeting to determine the steps necessary to permit them to indirectly vote their shares as a proxyholder.
This Information Circular and accompanying form of proxy are being sent to both registered and non-registered owners of the shares of the Company. If you are a non-registered owner and the Company has sent these materials directly to you, your name and address and information about your holdings of securities have been obtained in accordance with applicable securities regulatory requirements from the intermediary holding on your behalf. In this event, by choosing to send this Information Circular to you directly, the Company (and not the intermediary holding on your behalf) has assumed responsibility for (i) delivering this Information Circular to you; and (ii) executing your proper voting instructions. Please return your voting instructions as specified in the request for voting instructions.
The Company will not pay for an intermediary to deliver proxy related materials and voting instruction forms to objecting beneficial owners (called OBOs for Objecting Beneficial Owners). OBOs have objected to their intermediary disclosing ownership information about themselves to the Company. Accordingly, OBOs will not receive the materials unless their intermediary assumes the costs of delivery.
The Company is not relying on the “notice-and-access” delivery procedures outlined in National Instrument 54-101 to distribute copies of the proxy related materials in connection with the Meeting.
All references to Shareholders in this Information Circular and the accompanying form of proxy are to registered Shareholders unless specifically stated otherwise.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
The Company’s authorized capital consists of an unlimited number of Common Shares without par value and an unlimited number of preferred shares (“Preferred Shares”) without par value. As at November 6, 2023 (the “Record Date”), the Company has 13,745,947 Common Shares issued and outstanding, each share carrying the right to one vote. There are no Preferred Shares outstanding.
Any Shareholder of record at the close of business on the Record Date who either personally attends the Meeting or who has completed and delivered a Proxy in the manner and subject to the provisions described above, shall be entitled to vote or to have such Shareholder’s shares voted at the Meeting.
To the best of the knowledge of the Directors and senior officers of the Company, the only persons who beneficially own, or control or direct, directly or indirectly, more than 10% of the issued and outstanding Common Shares of the Company, are as follows:
| Name | Number of Voting Securities | Percentage | ||||||
Jake
H. Kalpakian, Delta, BC | 5,543,825 | (1) | 40.3 | % | ||||
| Roberto
Fia, Toronto, ON | 4,040,000 | 29.4 | % | |||||
| (1) | Of these shares, 140,786 Common Shares are held by Bedo H. Kalpakian directly, 2,756,288 Common Shares are held by Jake H. Kalpakian directly, 2,343,920 Common Shares are held by private companies which are controlled by and in which Jake H. Kalpakian is the principal shareholder and 2,831 Common Shares are held by a family member of Jake H. Kalpakian. |
EXECUTIVE COMPENSATION
In accordance with the provisions of applicable securities legislation, the Company had two “Named Executive Officers” during the financial year ended December 31, 2022, namely Mr. Jake H. Kalpakian, President and CEO and Mr. Neil Spellman, CFO.
Definitions:
For the purpose of this Information Circular:
“CEO” means an individual who acted as chief executive officer of the company, or acted in a similar capacity, for any part of the most recently completed financial year;
“CFO” means an individual who acted as chief financial officer of the company, or acted in a similar capacity, for any part of the most recently completed financial year;
“closing market price” means the price at which the company’s security was last sold, on the applicable date,
| (a) | in the security’s principal marketplace in Canada, or |
| (b) | if the security is not listed or quoted on a marketplace in Canada, in the security’s principal marketplace; |
“company” includes other types of business organizations such as partnerships, trusts and other unincorporated business entities;
“equity incentive plan” means an incentive plan, or portion of an incentive plan, under which awards are granted and that falls within the scope of IFRS2 Share-Based Payment;
“external management company” includes a subsidiary, affiliate or associate of the external management company;
“grant date” means a date determined for financial statement reporting purposes under IFRS2 Share-Based Payment;
“incentive plan” means any plan providing compensation that depends on achieving certain performance goals or similar conditions within a specified period;
“incentive plan award means compensation awarded, earned, paid, or payable under an incentive plan;
“NEO” or “Named Executive Officer” means each of the following individuals:
| (a) | a CEO; |
| (b) | a CFO; |
| (c) | each of the three most highly compensated executive officers, or the three most highly compensated individuals acting in a similar capacity, other than the CEO and CFO, at the end of the most recently completed financial year whose total compensation was, individually, more than $150,000, as determined in accordance with subsection 1.3(6) of National Instrument 51-102, for that financial year; and |
| (d) | each individual who would be an NEO under paragraph (c) but for the fact that the individual was neither an executive officer of the company, nor acting in a similar capacity, at the end of that financial year; |
“NI 52-107” means National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency;
“non-equity incentive plan” means an incentive plan or portion of an incentive plan that is not an equity incentive plan;
“option-based award” means an award under an equity incentive plan of options, including, for greater certainty, share options, share appreciation rights, and similar instruments that have option-like features;
“plan” includes any plan, contract, authorization, or arrangement, whether or not set out in any formal document, where cash, securities, similar instruments or any other property may be received, whether for one or more persons;
“replacement grant” means an option that a reasonable person would consider to be granted in relation to a prior or potential cancellation of an option;
“repricing” means, in relation to an option, adjusting or amending the exercise or base price of the option, but excludes any adjustment or amendment that equally affects all holders of the class of securities underlying the option and occurs through the operation of a formula or mechanism in, or applicable to, the option;
“share-based award” means an award under an equity incentive plan of equity-based instruments that do not have option-like features, including, for greater certainty, Common Shares, restricted shares, restricted share units, deferred share units, phantom shares, phantom share units, common share equivalent units, and stock.
compensation discussion and analysis
The Company’s executive officers do not currently receive any compensation but may, in the future, receive a base salary in recognition for discharging job responsibilities and that reflects the officer’s performance over time, as well as that individual’s particular experience and qualifications. If paid in the future, an officer’s base salary will be reviewed by the Board of Directors on an annual basis and may be adjusted to take into account performance contributions for the year and to reflect sustained performance contributions over a number of years. Officers are also eligible to receive discretionary bonuses as determined by the Board of Directors based on each officer’s responsibilities, his achievement of corporate objectives and the Company’s financial performance.
In addition, officers are eligible under the Company’s Stock Option Plan (the "Stock Option Plan") to receive grants of stock options. The Stock Option Plan is an important part of the Company’s long-term incentive strategy for its officers, permitting them to participate in any appreciation of the market value of the Common Shares over a stated period of time. The Stock Option Plan is intended to reinforce commitment to long-term growth in profitability and shareholder value. The size of stock option grants to officers is dependent on each officer's level of responsibility, authority and importance to the Company and the degree to which such officer's long-term contribution to the Company will be key to its long-term success.
In setting compensation and bonus levels, the Board has not yet established any formal objectives or criteria as the Company’s current stage of development and financial resources requires flexibility in determining remuneration for its NEO’s. The Board will, as circumstances require, review and consider the general risks associated with the Company's compensation policies and strategies in terms of compensation paid or proposed to be paid to its NEO’s.
The Board of Directors has not conducted a formal evaluation of the implications of the risks associated with the Company’s compensation policies. Risk management is a consideration of the Board of Directors when implementing its compensation policies and the Board of Directors do not believe that the Company’s compensation policies result in unnecessary or inappropriate risk taking including risks that are likely to have a material adverse effect on the Company.
Use of Financial Instruments
The Company does not have a policy that would prohibit a Named Executive Officer or Director from purchasing financial instruments, including prepaid variable forward contracts, equity swaps, collars or units of exchange funds, that are designed to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by the Named Executive Officer or Director. However, management is not aware of any Named Executive or Director purchasing such an instrument.
The following table sets out certain information respecting the compensation paid to Named Executive Officers of the Company for the financial years ended December 31, 2022 and 2021.
Summary Compensation Table
| Name and position | Financial Year | Salary, consulting fee, retainer or commission ($) | Bonus ($) | Committee
or meeting fees ($) | Value of perquisites ($) | Value of all other compensation ($) | Total compensation ($) | |||||||||||||||
| Jake
Kalpakian President, CEO and Director | 2022 | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
| 2021 | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||
| Neil
Spellman CFO and Director | 2022 | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
| 2021 | N/A | N/A | N/A | N/A | N/A | N/A |
option based awards
Common Share Purchase Plan
The Company has in effect the Stock Option Plan in order to provide effective incentives to Directors, officers, senior management personnel, employees and consultants of the Company and to enable the Company to attract and retain experienced and qualified individuals in those positions by permitting such individuals to directly participate in an increase in per share value created for the Company’s Shareholders. The Company has no equity compensation plans other than the Stock Option Plan. The Stock Option Plan is an important part of the Company’s long-term incentive strategy for its executive officers, permitting them to participate in any appreciation of the market value of the Common Shares over a stated period of time. The Stock Option Plan is intended to reinforce commitment to long-term growth in profitability and shareholder value. The size of stock option grants to officers is dependent on each officer's level of responsibility, authority and importance to the Company and the degree to which such executive officer’s long term contribution to the Company will be key to its long-term success. Previous grants of stock options are taken into account when considering new grants.
Outstanding Share-Based Awards and Option-Based Awards
There were no outstanding share-based or option-based awards held by the NEO’s as at December 31, 2022.
Incentive Plan Awards – Value Vested Or Earned During The Year
For NEO’s, no option based awards or share based awards were vested or earned during the year ended December 31, 2022.
Pension Plan Benefits
No pension, retirement or deferred compensation plans, including defined contribution plans, have been instituted by the Company and none are proposed at this time.
Termination and Change of Control Benefits
There are no contracts, agreements, plans or arrangements that provide for payments to NEO’s at, following or in connection with any termination (whether voluntary, involuntary or constructive), resignation, retirement, a change of control of the Company or a change in a NEO’s responsibilities.
DIRECTOR COMPENSATION
There was no compensation paid to Directors who were not NEO’s for the financial year ended December 31, 2022.
The Company has no standard arrangement pursuant to which Directors who were not NEO’s are compensated by the Company for their services in the capacity as Directors except for the granting from time to time of incentive stock options. See “Option Based Awards – Common Share Purchase Plan”.
During the Company's most recently completed fiscal year, there were no stock options granted by the Company to Directors who were not NEO’s.
Outstanding Share Based & Option Based Awards
There were no outstanding share-based or option-based awards held by Directors of the Company who were not NEO’s as at December 31, 2022.
Incentive Plan Awards – Value Vested or Earned During the Year
There were no option-based awards or share based awards vested or earned during the year ended December 31, 2022 by the Directors who were not NEO's.
Securities Authorized for Issuance under Equity Compensation
The following table sets forth information with respect to all compensation plans under which equity securities are authorized for issuance as of December 31, 2022:
Equity Compensation Plan Information
| Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||
| Plan Category | (a) | (b) | (c) | |||||
| Equity compensation plans approved by securityholders (1) | NIL | N/A | 1,149,189 | |||||
| Equity compensation plans not approved by securityholders | N/A | N/A | N/A | |||||
| TOTAL | NIL | N/A | 1,149,189 | |||||
| (1) | Represents 20% “rolling” stock option plan (the “Stock Option Plan”). The number of Common Shares remaining available for issuance under the Stock Option Plan as at December 31, 2022 is based on the difference between the number of total number of Common Shares issuable under the Stock Option Plan as at December 31, 2022, being 1,149,189 shares (20% of 5,745,947 then-outstanding shares), less shares reserved for issuance under outstanding options as at December 31, 2022 (NIL). |
For further information on the Company's equity compensation plan, refer to the heading "Particulars of Other Matters To Be Acted” Upon" – "Re-approval of the Stock Option Plan."
INDEBTEDNESS OF DIRECTORS AND Executive OFFICERS
Other than “routine indebtedness” as defined in applicable securities legislation, since the beginning of the last fiscal year of the Company, none of the executive officers or Directors of the Company or any proposed nominee for election as a Director of the Company or any of their respective associates is or has been indebted to the Company or has been indebted to any other entity where that indebtedness was the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by the Company.
Interest Of Certain Persons In Matters To Be Acted Upon
Except as otherwise disclosed herein, none of:
| (e) | the Directors or executive officers of the Company at any time since the beginning of the last financial year of the Company; |
| (f) | the proposed nominees for election as a Director of the Company; or |
| (g) | any associate or affiliate of the foregoing persons, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matters to be acted upon at the Meeting exclusive of the election of Directors or the appointment of auditors. |
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
For purposes of the following discusion, "Informed Person" means (a) a Director or executive officer of the Company; (b) a Director or executive officer of a person or company that is itself an Informed Person or a subsidiary of the Company; (c) any person or company who beneficially owns, or controls or directs, directly or indirectly, voting securities of the Company or a combination of both carrying more than 10 percent of the voting rights attached to all outstanding voting securities of the Company, other than the voting securities held by the person or company as underwriter in the course of a distribution; and (d) the Company itself if it has purchased, redeemed or otherwise acquired any of its securities, for so long as it holds any of its securities.
Except as disclosed below, elsewhere herein or in the Notes to the Company's financial statements for the financial year ended December 31, 2022, none of:
| (h) | the Informed Persons of the Company; |
| (i) | the proposed nominees for election as a Director of the Company; or |
| (j) | any associate or affiliate of the foregoing persons, has any material interest, direct or indirect, in any transaction since the commencement of the last financial year of the Company or in a proposed transaction which has materially affected or would materially affect the Company or any subsidiary of the Company. |
FIXING THE NUMBER OF DIRECTOrS AND ELECTION OF DIRECTORS
The persons named in the enclosed Instrument of Proxy intend to vote in favour of fixing the number of Directors at four (4). Although Management is nominating four (4) individuals to stand for election, the names of further nominees for Directors may come from the floor at the Meeting.
Each Director of the Company is elected annually and holds office until the next Annual General Meeting of Shareholders or until his successor is duly elected, if his office is earlier vacated, in accordance with the Articles of the Company.
In the absence of instructions to the contrary, the Common Shares represented by Proxy will be voted for the nominees herein listed. Management does not contemplate that any of the nominees will be unable to serve as a Director.
INFORMATION CONCERNING NOMINEES SUBMITTED BY MANAGEMENT
The following table sets out the names of the persons proposed to be nominated by Management for election as a Director, the province or state and country in which he is ordinarily resident, the positions and offices which each presently holds with the Company, the period of time for which he has been a Director of the Company, the respective principal occupations or employment during the past five years if such nominee is not presently an elected Director and the number of Common Shares of the Company which each beneficially owns, or controls or directs, directly or indirectly, as of the date of this Information Circular. The four nominees are all currently Directors of the Company.
The nominees for the office of Director and information concerning them as furnished by the individual nominees are as follows:
| Name, Province or State and Country of Ordinary Residence and Positions Held with the Company(1) | Principal Occupation (2) | Dates Served as a Director | No. of Shares Beneficially Owned, Directly or Indirectly(3) | |||||
| Jake
H. Kalpakian President, CEO and Director BC, Canada | President & CEO of the Company; President and | January 2, 1991 to present | 2,756,288 (direct) | |||||
| CEO of Jackpot Digital Inc. from 1991 to present | 2,646,751 (indirect)(4) | |||||||
| Neil
Spellman CFO and Director California, USA | CFO
of Jackpot Digital Inc. since July 2019 Sr. Vice-President of DB Financial Management, Inc. from February 2001 until July 2020 | August 23, 2016 to present | 0 | |||||
| Bedo
H. Kalpakian Director BC, Canada | Director
of the Company President, CEO and CFO of the Company Chairman, CFO and Director of Jackpot Digital Inc. | May
25, 2021 to present August 1984 to April 2017 September 9, 1987 to December 2019 | 140,786 (direct) | |||||
| Gregory
Todd McFarlane Director Utah, USA | Freelance Advertising Copywriter | October 1, 1992 to present | 25 (direct) | |||||
| (1) | For the purposes of disclosing positions held in the Company, "Company" shall include the Company and a parent or subsidiary thereof. |
| (2) | Unless otherwise stated above, all nominees have held the principal occupation or employment indicated for the past five years. |
| (3) | Common Shares beneficially owned, or controlled or directed, directly or indirectly, by Directors is based on information furnished to the Company by the nominees. |
| (4) | 2,217,656 Common Shares are held by Kalpakian Bros. of B.C. Ltd (private company controlled by Jake H. Kalpakian), and 126,264 Common Shares are held by 30 Rock Management Inc. (private company controlled by Jake H. Kalpakian). In addition, Mr. Jake Kalpakian’s indirect holdings include 302,831 Common Shares held by a family member. |
The Company does not currently have an Executive Committee of its Board of Directors. The current members of the audit committee are Neil Spellman, Gregory McFarlane and Bedo Kalpakian.
CEASE TRADE ORDERS, CORPORATE AND PERSONAL BANKRUPTCIES, PENALTIES AND SANCTIONS
No proposed Director (including any personal holding company of a proposed Director):
| (1) | is, as at the date of the Information Circular, or has been, within 10 years before the date of this Information Circular, a director, chief executive officer or chief financial officer of any company (including the Company) that: |
(a) was the subject of a cease trade order (including a management cease trade order which applies to directors or executive officers), an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation that was in effect for a period of more than 30 consecutive days (collectively an “order”), that was issued while such person was acting in the capacity as director, chief executive officer or chief financial officer;
(b) was subject to an order that was issued after such person ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as a director, chief executive officer or chief financial officer;
| (2) | is, as at the date of this Information Circular, or has been within 10 years before the date of the Information Circular, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; |
| (3) | has, within the 10 years before the date of this Information Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed Director; or |
| (4) | has been subject to: |
(a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority since December 31, 2000 or before December 31, 2000 the disclosure of which would likely be important to a reasonable security holder in deciding whether to vote for a proposed Director; or
(b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a proposed Director.
No proposed Director is to be elected under any arrangement or understanding between the proposed Director and any other person or company, except the Directors and executive officers of the Company acting solely in such capacity.
audit committee disclosure
The Audit Committee Charter and the disclosure required by National Instrument 52-110 are attached hereto as Schedule “A”. The Audit Committee monitors the integrity of internal controls and monitors the business conduct of the Company. The committee reviews matters on a quarterly basis, relating to the financial position of the Company in order to provide reasonable assurances that the Company is in compliance with applicable laws and regulations
APPOINTMENT AND REMUNERATION OF AUDITORS
Management recommends the re-appointment of Dale Matheson Carr-Hilton Labonte LLP (“DMCL”), Chartered Professional Accountants, of Suite 1500 - 1140 West Pender Street, Vancouver, British Columbia, V6E 4G1, as the Auditor of the Company to hold office until the next Annual General Meeting of the Shareholders at remuneration to be fixed by the Board of Directors, and the persons named in the enclosed Proxy intend to vote in favour of such re-appointment. DMCL were initially appointed as auditor of the Company on March 28, 2017.
Corporate governance
The information required to be disclosed by National Instrument 58-101 Disclosure of Corporate Governance Practices is attached to this Information Circular as Schedule “B”.
PARTICULARS OF OTHER MATTERS TO BE ACTED UPON
Re-approval of the Stock Option Plan
At last year's annual general meeting held on November 14, 2022, the Company proposed and the Shareholders reapproved the Company's 20% “rolling” stock option plan (the "Stock Option Plan"). Shareholders are being asked to re-approve the Company’s Stock Option Plan at this year's Annual General Meeting.
1. Number of Common Shares Reserved for Issuance under the Plan
Under the Plan, that number of Common Shares as is equal to 20% of the Company's issued and outstanding Common Shares from time to time may be reserved for the granting of stock options.
2. Purposes of the Plan and Eligibility
The purpose of the Plan is to advance the interests of the Company by providing eligible persons with additional incentive; encouraging stock ownership of eligible persons; increasing the proprietary interest of eligible persons in the success of the Company; encouraging eligible persons to remain with the Company or its subsidiaries; and attracting new employees, Directors and officers.
Directors, senior officers, consultants, employees, and management company employees of the Company and its subsidiaries are eligible to participate in the Plan.
While the Board, or any Committee to which administration of the Plan may be delegated, may, at its discretion, decide which terms to include in any option agreement on a case-by-case basis and there is no obligation on the Board or such Committee, if any, to use an identical form of option agreement or stipulate identical terms for each category of optionee or otherwise, the Board imposes certain restrictions as set out below.
The aggregate number of Common Shares that may be reserved for issuance pursuant to an option or options granted to any one individual in any 12-month period shall not exceed 5% and in the case of insiders, 10%, of the issued and outstanding Common Shares, calculated at the date any such option is granted. The maximum number of Common Shares which may be issued to insiders under the Plan or any other share compensation arrangement within any 12-month period shall be 10% of the Common Shares issued and outstanding at the time of issuance.
3. Vesting Requirements
For any option granted under the Plan, the Board of Directors may, at its sole discretion, determine whether such option shall vest immediately or be subject to such vesting schedule as the Board may deem appropriate in the circumstances.
Notwithstanding the above, in the event of a take-over bid, as defined in applicable securities legislation (but excluding an exempt take-over bid pursuant to applicable securities legislation) is made by any offeror to acquire outstanding voting or equity securities of the Company, the Board of Directors shall have the power and authority to pass a resolution deeming options that have not vested at the time to have vested, so as to enable optionees to exercise their respective options to the fullest extent possible and to tender all shares thereunder to such take-over bid.
4. Termination or Expiry of Options
The Plan stipulates that options may be granted under the Plan with a maximum term of five years.
Except as otherwise determined by the Board options granted under the Plan must expire 90 days after an optionee ceases to be a Director, senior officer, consultant, employee or management company employee. Termination for cause shall result in expiry of the affected option effective immediately upon such termination.
In the event of an optionee's death, the deceased's option may be exercised by his or her heirs or administrators within one year after the date of death (to the extent that the optionee was entitled to exercise such option as of the date of death).
5. Other Material Terms
The exercise price for any option shall be fixed by the Board. The Plan stipulates that the minimum exercise price may be at a discount of 25% to the closing market price of the Company’s Common Shares on the day preceding the grant of the option but not less than $0.05 per share.
All options granted and any Common Shares issuable upon exercise thereof shall be subject to any resale restrictions under applicable securities laws.
All options are non-assignable and non-transferable (subject to the options being exercisable by the optionee's heirs or administrators in the event of the optionee's death).
The Board of Directors may at any time, and from time to time, amend the Plan. However, no amendment shall be effective unless approved by the Shareholders of the Company to the extent shareholder approval is necessary for the Plan to satisfy any stock exchange or quotation system listing requirements. The Board shall not make any changes to any existing option agreements that are adverse to the optionee unless such optionee first consents in writing to any such changes.
If any change is made in the Common Shares subject to the Plan, or subject to any option (through merger, consolidation, reorganization, recapitalization, stock dividend, dividend property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the type(s) and maximum number of securities subject to the Plan and the maximum number of securities subject to award to any person, and the outstanding options will be appropriately adjusted in the type(s) and number of securities and price per share of shares subject to such outstanding options.
The Board of Directors unanimously recommends that Shareholders ratify, confirm and approve the re-approval of the Stock Option Plan by voting in favour of the above resolution. It is the intention of the persons named in the enclosed Proxy, in the absence of instructions to the contrary, to vote the Proxy in favour of the resolution approving the re-approval of the Stock Option Plan.
Other Matters
As of the date of this Information Circular, management knows of no other matters to be acted upon at this Annual General Meeting. However, should any other matters properly come before the Meeting, the shares represented by the proxy solicited hereby will be voted on such matters in accordance with the best judgment of the persons voting the shares represented by the proxy.
additional information
Additional information relating to the Company is available on SEDAR at www.sedar.com. Copies of the Company’s Financial Statements and Management Discussion and Analysis may be obtained without charge upon request from the Company, at Suite 575, 510 Burrard Street, Vancouver, BC V6C 3A8, phone (604) 681-0204 and such documents will be sent by mail or electronically by email as may be specified at the time of the request.
director approval
The contents of this Information Circular and the sending thereof to the Shareholders of the Company have been approved by the Board of Directors.
DATED
at Vancouver, British Columbia, this 6th day of November, 2023.
"Jake
H. Kalpakian"
JAKE H. Kalpakian
President, Chief Executive Officer and Director
| 2 |
37 CAPITAL INC.
(the
"Company")
SCHEDULE "A"
FORM 52-110F2
AUDIT COMMITTEE DISCLOSURE
ITEM 1: THE AUDIT COMMITTEE’S CHARTER
Purpose
The overall purpose of the Audit Committee (the "Committee") of 37 Capital Inc. (the "Company") is to ensure that the Company's management has designed and implemented an effective system of internal financial controls, to review and report on the integrity of the financial statements and related financial disclosure of the Company, and to review the Company's compliance with regulatory and statutory requirements as they relate to financial statements, taxation matters and disclosure of financial information. It is the intention of the Board that through the involvement of the Committee, the external audit will be conducted independently of the Company’s Management to ensure that the independent auditors serve the interests of Shareholders rather than the interests of Management of the Company. The Committee will act as a liaison to provide better communication between the Board and the external auditors. The Committee will monitor the independence and performance of the Company's independent auditors.
Composition, Procedures and Organization
| (1) | The Committee shall consist of at least three members of the Board of Directors (the "Board"). |
| (2) | At least two (2) members of the Committee shall be independent and the Committee shall endeavour to appoint a majority of independent directors to the Committee, who in the opinion of the Board, would be free from a relationship which would interfere with the exercise of the Committee members’ independent judgment. At least one (1) member of the Committee shall have accounting or related financial management expertise. All members of the Committee that are not financially literate will work towards becoming financially literate to obtain a working familiarity with basic finance and accounting practices applicable to the Company. For the purposes of this Charter, an individual is financially literate if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company's financial statements. |
| (3) | The Board, at its organizational meeting held in conjunction with each annual general meeting of the shareholders, shall appoint the members of the Committee for the ensuing year. The Board may at any time remove or replace any member of the Committee and may fill any vacancy in the Committee. |
| (4) | Unless the Board shall have appointed a chair of the Committee, the members of the Committee shall elect a chair and a secretary from among their number. |
| (5) | The quorum for meetings shall be a majority of the members of the Committee, present in person or by telephone or other telecommunication device that permits all persons participating in the meeting to speak and to hear each other. |
| (6) | The Committee shall have access to such officers and employees of the Company and to the Company’s external auditors, and to such information respecting the Company, as it considers to be necessary or advisable in order to perform its duties and responsibilities. |
| (7) | Meetings of the Committee shall be conducted as follows: |
(a) the Committee shall meet at least four times annually at such times and at such locations as may be requested by the chair of the Committee. The external auditors or any member of the Committee may request a meeting of the Committee;
(b) the external auditors shall receive notice of and have the right to attend all meetings of the Committee; and
(c) management representatives may be invited to attend all meetings except private sessions with the external auditors.
| (5) | The internal auditors and the external auditors shall have a direct line of communication to the Committee through its chair and may bypass management if deemed necessary. The Committee, through its chair, may contact directly any employee in the Company as it deems necessary, and any employee may bring before the Committee any matter involving questionable, illegal or improper financial practices or transactions. |
Roles And Responsibilities
| (9) | The overall duties and responsibilities of the Committee shall be as follows: |
(a) to assist the Board in the discharge of its responsibilities relating to the Company’s accounting principles, reporting practices and internal controls and its approval of the Company’s annual and quarterly financial statements and related financial disclosure;
(b) to establish and maintain a direct line of communication with the Company’s internal and external auditors and assess their performance;
(c) to ensure that the management of the Company has designed, implemented and is maintaining an effective system of internal financial controls; and
(d) to report regularly to the Board on the fulfilment of its duties and responsibilities.
| (10) | The duties and responsibilities of the Committee as they relate to the external auditors shall be as follows: |
(a) to recommend to the Board a firm of external auditors to be engaged by the Company, and to verify the independence of such external auditors;
(b) to review and approve the fee, scope and timing of the audit and other related services rendered by the external auditors;
(c) review the audit plan of the external auditors prior to the commencement of the audit;
(d) to review with the external auditors, upon completion of their audit:
A. contents of their report;
B. scope and quality of the audit work performed;
C. adequacy of the Company’s financial and auditing personnel;
D. co-operation received from the Company’s personnel during the audit;
E. internal resources used;
F. significant transactions outside of the normal business of the Company;
G. significant proposed adjustments and recommendations for improving internal accounting controls, accounting principles or management systems; and
H. the non-audit services provided by the external auditors;
(e) to discuss with the external auditors the quality and not just the acceptability of the Company’s accounting principles; and
(f) to implement structures and procedures to ensure that the Committee meets the external auditors on a regular basis in the absence of management.
| (11) | The duties and responsibilities of the Committee as they relate to the internal control procedures of the Company are to: |
(a) review the appropriateness and effectiveness of the Company’s policies and business practices which impact on the financial integrity of the Company, including those relating to internal auditing, insurance, accounting, information services and systems and financial controls, management reporting and risk management;
(b) review compliance under the Company’s business conduct and ethics policies and to periodically review these policies and recommend to the Board changes which the Committee may deem appropriate;
(c) review any unresolved issues between management and the external auditors that could affect the financial reporting or internal controls of the Company; and
(d) periodically review the Company’s financial and auditing procedures and the extent to which recommendations made by the internal audit staff or by the external auditors have been implemented.
| (12) | The Committee is also charged with the responsibility to: |
(a) review the Company’s quarterly statements of earnings, including the impact of unusual items and changes in accounting principles and estimates and report to the Board with respect thereto;
(b) review and approve the financial sections of:
A. the annual report to Shareholders;
B. the annual information form, if required;
C. annual and interim MD&A;
D. prospectuses;
E. news releases discussing financial results of the Company; and
F. other public reports of a financial nature requiring approval by the Board, and report to the Board with respect thereto;
(c) review regulatory filings and decisions as they relate to the Company’s financial statements;
(d) review the appropriateness of the policies and procedures used in the preparation of the Company’s financial statements and other required disclosure documents, and consider recommendations for any material change to such policies;
(e) review and report on the integrity of the Company’s financial statements;
(f) review the minutes of any audit committee meeting of subsidiary companies;
(g) review with management, the external auditors and, if necessary, with legal counsel, any litigation, claim or other contingency, including tax assessments that could have a material effect upon the financial position or operating results of the Company and the manner in which such matters have been disclosed in the financial statements;
(h) review the Company’s compliance with regulatory and statutory requirements as they relate to financial statements, tax matters and disclosure of financial information; and
(i) develop a calendar of activities to be undertaken by the Committee for each ensuing year and to submit the calendar in the appropriate format to the Board of Directors following each annual general meeting of shareholders.
| (13) | The Committee shall have the authority: |
(a) to engage independent counsel and other advisors as it determines necessary to carry out its duties,
(b) to set and pay the compensation for any advisors employed by the Committee; and
(c) to communicate directly with the internal and external auditors.
ITEM 2: COMPOSITION OF THE AUDIT COMMITTEE
The members of the Committee are Bedo Kalpakian, Neil Spellman and Gregory McFarlane. All of the members are financially literate. Bedo Kalpakian and Gregory Todd McFarlane are considered to be independent. Neil Spellman is the Chief Financial Officer of the Company and is therefore not independent. "Independent" and "financially literate" have the meaning used in Multilateral Instrument 52-110 (the "Instrument") of the Canadian Securities Administrators.
ITEM 3: RELEVANT EDUCATION AND EXPERIENCE
The Instrument provides that an individual is "financially literate" if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements.
All of the members of the Company's audit committee are financially literate as that term is defined in the Instrument.
The Chairman of the Audit Committee, Neil Spellman sits on the audit committee of another public issuer. In addition, Neil Spellman sits on the audit committee of another private issuer. All members have an understanding of the accounting principles used by the Company to prepare its financial statements and have an understanding of its internal controls and procedures for financial reporting.
ITEM 4: AUDIT COMMITTEE OVERSIGHT
At no time since the commencement of the Company’s most recently completed financial year was a recommendation of the Committee to nominate or compensate an external auditor (currently, Dale Matheson Carr-Hilton Labonte LLP, not adopted by the Board.
ITEM 5: RELIANCE ON CERTAIN EXEMPTIONS
Since the effective date of MI 52-110, the Company has not relied on the exemptions contained in sections 2.4 or 8 of MI 52-110. Section 2.4 provides an exemption from the requirement that the audit committee must pre-approve all non-audit services to be provided by the auditor, where the total amount of fees related to the non-audit services are not expected to exceed 5% of the total fees payable to the auditor in the fiscal year in which the non-audit services were provided. Section 8 permits a company to apply to a securities regulatory authority for an exemption from the requirements of MI 52-110, in whole or in part.
ITEM 6: PRE-APPROVAL POLICIES AND PROCEDURES
Formal policies and procedures for the engagement of non-audit services have yet to be formulated and adopted. Subject to the requirements of the Instrument, the engagement of non-audit services is considered by the Company's Board of Directors, and where applicable by the Audit Committee, on a case- by-case basis.
ITEM 7: EXTERNAL AUDITOR SERVICE FEES (BY CATEGORY)
The aggregate fees charged to the Company by the external auditor in each of the last two fiscal years are as follows:
| FYE 2021 | FYE 2022 | |||||||
| Audit fees for the year ended | $ | 17,000 | $ | 21,000 | ||||
| Audit related fees | $nil | $nil | ||||||
| Tax fees | $ | 860 | (1) | $ | 1,063 | (1) | ||
| All other fees (non-tax) | $ | 207 | (2) | $ | 256 | (2) | ||
| Total Fees: | $ | 18,067 | $ | 22,700 | ||||
(1) These fees are for the preparation and filing of the Company’s tax return.
(2) These fees are charged by the Canadian Public Accountability Board (CPAB).
ITEM 8: EXEMPTION
In respect of the most recently completed financial year, the Company is relying on the exemption set out in section 6.1 of the Instrument with respect to compliance with the requirements of Part 3 (Composition of the Audit Committee) and Part 5 (Reporting Obligations) of the Instrument.
| 3 |
37 CAPITAL INC.
(the
"Company")
SCHEDULE
"B"
CORPORATE GOVERNANCE
Pursuant to National Instrument 58-101 Disclosure of Corporate Governance Practices the Company is required to and hereby discloses its corporate governance practices as follows.
ITEM 1. BOARD OF DIRECTORS
The Board of Directors of the Company facilitates its exercise of independent supervision over the Company’s management through frequent meetings of the Board.
Mr. Jake H. Kalpakian is the President, CEO and a Director of the Company and is therefore not independent.
Mr. Neil Spellman is the CFO & a Director of the Company and is therefore not independent.
Mr. Gregory T. McFarlane, a Director of the Company, is "independent" in that he has no direct or indirect material relationship with the Company.
Mr. Bedo H. Kalpakian, a Director of the Company, is "independent" in that he has no direct or indirect material relationship with the Company.
ITEM 2. DIRECTORSHIPS
The Directors of the Company are currently directors of the following other reporting issuers:
| Name of Director | Name of Reporting Issuer | Term | ||
| Jake H. Kalpakian | Jackpot Digital Inc. (TSX.V) | January 1991 to present | ||
| Yo Eleven Gaming Inc. (not publicly traded) | June 2021 to present | |||
| Gregory Todd MacFarlane | Jackpot Digital Inc. (TSX.V) | October 1992 to present | ||
| Yo Eleven Gaming Inc. (not publicly traded) | June 2021 to present | |||
| Neil Spellman | Jackpot Digital Inc. (TSX.V) | July 2021 to present | ||
| Yo Eleven Gaming Inc. (not publicly traded) | June 2021 to present | |||
| Bedo H. Kalpakian | N/A | N/A |
ITEM 3. ORIENTATION AND CONTINUING EDUCATION
The Board of Directors of the Company brief all new Directors with the policies of the Board of Directors, and other relevant corporate and business information.
ITEM 4. ETHICAL BUSINESS CONDUCT
The Board has found that the fiduciary duties placed on individual Directors by the Company’s governing corporate legislation and the common law and the restrictions placed by applicable corporate legislation on an individual Director’s participation in decisions of the Board in which the Director has an interest have been sufficient to ensure that the Board operates independently of management and in the best interests of the Company.
Under the corporate legislation, a director is required to act honestly and in good faith with a view to the best interests of the Company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, and disclose to the board the nature and extent of any interest of the director in any material contract or material transaction, whether made or proposed, if the director is a party to the contract or transaction, is a director or 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. The director must then abstain from voting on the contract or transaction unless the contract or transaction (i) relates primarily to their remuneration as a director, officer, employee or agent of the Company or an affiliate of the Company, (ii) is for indemnity or insurance for the benefit of the director in connection with the Company, or (iii) is with an affiliate of the Company. If the director abstains from voting after disclosure of their interest, the directors approve the contract or transaction and the contract or transaction was reasonable and fair to the Company at the time it was entered into, the contract or transaction is not invalid and the director is not accountable to the Company for any profit realized from the contract or transaction. Otherwise, the director must have acted honestly and in good faith, the contract or transaction must have been reasonable and fair to the Company and the contract or transaction be approved by the shareholders by a special resolution after receiving full disclosure of its terms in order for the director to avoid such liability or the contract or transaction being invalid.
ITEM 5. NOMINATION OF DIRECTORS
The Board of Directors is responsible for identifying individuals qualified to become new Board members and recommending to the Board new Director nominees for the next annual meeting of the shareholders.
New nominees must have a track record in general business management, special expertise in an area of strategic interest to the Company, the ability to devote the time required, shown support for the Company’s mission and strategic objectives, and a willingness to serve.
ITEM 6. COMPENSATION
The Board of Directors conducts reviews with regard to Directors’ compensation once a year. To make its recommendation on Directors' compensation, the Board of Directors takes into account the types of compensation and the amounts paid to Directors of comparable publicly traded Canadian companies.
ITEM 7. OTHER BOARD COMMITTEES
The Board of Directors has no other committees other than the Audit Committee.
ITEM 8. ASSESSMENTS
The Board of Directors monitors the adequacy of information given to Directors, communication between the board and management and the strategic direction and processes of the Board and the Audit Committee.
| 4 |
GEOLOGICAL AND EXPLORATION CONSULTING CONTRACT
THIS AGREEMENT is made as of the 6th day of June, 2023
BETWEEN:
37 Capital Inc
(the "Company")
Mailing Address: 303-570 Granville Street
Vancouver, BC V6C 3Pl
AND:
Discovery Consultants (the "Consultant")
Mailing Address: P.O. Box 933
Vernon, BC VlT 6M8
Courier Address: Unit 10-100 Kalamalka Lake Road Vernon, BC
V1T7M9
A. The Consultant represents that it has in its employ a qualified geologist(s) (the "Geologists") and other personnel who have experience and expertise in exploration for mineral deposits, specifically relating to completing one year of assessment work on the Company's Extra High property in British Columbia.
B. The Company wishes to obtain consulting advice with respect to geological and other exploration matters pe1taining to an exploration program of geological mapping, geochemical surveying, geophysical surveying, prospecting, surveying, trenching, data compilation and interpretation, and reporting on the Company's prope1ty and wishes to retain the service of the Consultants for those purposes; and
C. The_Consultants wishes to provide the services of the Geologist and other personnel to he Company for the purpose of completing and filing one year of assessment work on the Company's Extra High Property in British Columbia.
NOW THEREFORE the parties AGREE as follow:
1.0 SERVICES
The Consultant agrees, in consideration of the fees payable to the Consultant as itemized in Schedule "A", to provide the Company with the services of the Geologist and other personnel, and to provide services including the rental of equipment, with respect to geological, geochemical and geophysical matters (the "Services") in connection with the proposed exploration program of the Company on its property.
2.0 TERM
The term of this Agreement will be the period that begins on June 6, 2023, and ends on October 1, 2023. Sufficient assessment work (to hold titles to at least June 30, 2024) will be filed with MTO before June 30, 2023. The Company can make William Gilmour (FMC 109663) an agent for the Company on the matter of filing assessment work.
3.0 EXPENSES
3.1 The Company will, with respect to Services requested, reimburse the Consultant for all reasonable travelling and out-of-pocket expenses incurred by the Geologist and other personnel employed by the Consultant while engaged in the performance of the Services, and such expenses shall not exceed the total sum of $20,000.
4.0 INVOICES
4.1 The Consultant will submit to the Company from time-to-time invoices for out-of-pocket expenses, for equipment rentals, and for fees in consideration of time spent by the Geologist and other personnel in providing Services requested by the Company, and such invoices shall not exceed the total sum of $20,000.
4.2 The Company will pay the Consultant in full within 20 days after the date of each invoice.
5.0 ADVANCE
On acceptance of this Agreement, the Company will advance to the Consultant $5,000 as an advance against fees and expenses to be accounted for iq the final invoice for the project.
6.0 WORK STANDARD
The Consultant will provide the Services in a good and workmanlike fashion, diligently, in good faith and without waste, inte1rnption or delay except for causes beyond the reasonable control of the Consultant.
7.0 RELATIONSHIP
With respect to all claims or damages on account of loss or damage to property, or injury to, or death of, any person or persons arising from or out of the provision of Services by the Consultant w1der this Agreement, the Consultant will be deemed to be an independent contractor and neither the Geologist nor any other employee of the Consultant will be deemed to be a representative, agent, or employee of the Company and, with respect to any claim, damage, loss, injury or death, the Consultant will indemnify and save the Company harmless from and against any and all liability for such loss, damage, injuiy or death, including all expenses, costs, and legal fees incurred in connection therewith.
8.0 COMPLIANCE WITH LAWS
The Consultant will comply with all applicable federal and provincial statutes and regulations and the lawful requirements and directions of any government authority having jurisdiction with respect to the Services it provides, including the obtaining of all necessa1y permits and licences and will indemnify the Company against all claims, loss, damages and expenses incurred by the Consultant's failure to make necessary returns or payment or by any violation of any statute or regulation.
9.0 INSURANCE
Without in any way limiting the liability of the Consultant under this Agreement, including the Consultant's indemnity to the Company as set out in Section 7.0, it will be the sole responsibility of the Consultant to maintain and keep in force and effect during the term of this Agreement the followjng insurance coverage:
9.1 Comprehensive general liability insurance against claims which may. arise from the Consultant's Services or operations under this Agreement including claims arising out of personal injury, bodily injury and death and damage to or destruction of property of others, including loss of use thereof, with the coverage to apply to the Company and the Consultant and each of them with a combined single limit of not less than $5,000,000 for any one accident or occurrence or series of accidents or occurrences arising out of any one event;
9.2 Worker's compensation or like coverage as required by applicable law or other authorized governmental authority covering all persons employed by the Consultant or sub-contractors on work to be performed under this Agreement.
9.3 Automobile bodily injury and property damage liability insurance covering automobile owned or leased by the Consultant, its contractors, agents or employees in connection with the work under this Agreement, with the limits of insurance to be not less than $1,000,000 inclusive for any one occurrence; and
9.4 Fire fighting insurance for the cost of controlling or extinguishing forest fires, with $1,000,000 coverage.
10.0 CONFIDENTIALITY
JO.I Each patty acknowledges that, during the te1m of this Agreement, it may be required from time to time to disclose to the other party certain materials, information and data relating to that patty's business ("Confidential Information"), and that the other patty's Confidential Information, other than what is publicly known, is confidential and proprietary information and constitutes trade secrets.
10.2 Each party will exercise the same degree of care of the other party's Confidential Information that it does with its own Confidential Information and will restrict confine knowledge of the other's Confidential Information to those of its employees, officers and directors who require that knowledge for use in the ordinary course and scope of their employment for the purpose of this Agreement.
10.3 Neither party will, during the term of this Agreement or thereafter, use, disclose, divulge or make available the other's Confidential Information to any third party either directly or indirectly in any manner whatsoever without the written consent of the other party.
11.0 EXCLUSIVITY
The Consultant will not, during the term of this Agreement, provide similar consulting services or advice to third parties relating to or in connection with the Company's property without the written consent of the Company.
12.0 TERMINATION
Notwithstanding Section 2.0, the Company will have the right at any time to terminate this Agreement on not less than 5 days' written notice to the Consultant. However, any fees, expenses or other charges incurred by or occuring from work performed by the Consultant for the Company up to the date of termination will remain due and payable on receipt of the Consultant's final invoice.
13.0 ARBITRATION
In case of a dispute or difference arising under this Agreement, which is not settled within a reasonable time and not exceeding 3 months, the parties will refer the dispute or difference to arbitration under the Commercial Arbitration Act (British Columbia).
14.0 ASSIGNMENT
The Consultant may not assign, pledge, mmtgage or otherwise encumber any of its rights under this Agreement without the written consent of the Company.
15.0 NOTICE
15.1 All payments and communications, which may be or are required to be given by either party to the other will (in the absence of any specific provision to the contrary) be in writing and delivered or sent by registered mail or courier to the parties at their following respective addresses:
a) to the Company:
303-570 Granville Street Vancouv.er, BC
V6C 3Pl
Phone: 604 681-0204
Attention: Bedo Kalpakian
Email: bedo@jackpotdigital.com
b) to the Consultant:
P.O. Box 933
Vernon. BC V1T6M8
Phone: 250 542-8960
Attention: Bill Gilmour, PGeo
Email: info@discoveryconsultants.com
15.2 Either party may from time to time change its address by notice to the other in accordance with Section 15.1.
16.0 GOVERNING LAWS
16.1 This Agreement and the rights and obligations and relations of the parties will be governed by and construed in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein (but without giving effect to any conflict of laws rules).
16.2 The courts of British Columbia will have jurisdiction to entertain any action or other legal proceedings based on any provisions of this Agreement, and each party attorney's to the jurisdiction of such courts.
17.0 TIME
Time will be of the essence of this Agreement and of every part of it and no extension or variation of this Agreement will operate as a waiver of this provision.
18.0 INUREMENT
This Agreement will ensure to the benefit of and be binding on the parties and their respective heirs, executors, administrators, successors and assigns.
IN WITNESS WHEREOF the parties have executed this Agreement on and as of the day first above written.
37 CAPITAL INC.
per: “signed”
Authorized Signatory
DISCOVERY CONSULTANTS
per: “signed”
Authorized Signatory
| 1 |
SCHEDULE A
For the agreement between 37 Capital Inc and
Discovery Consultants, of Vernon, British Columbia, dated as of June 6, 2023.
RATE SCHEDULE
| Senior Geologists | $800/dav or $110/hr |
| Intermediate geologists | $750/dav or $80/hr |
| Senior Technicians | $650/ dav |
| Field Technicians | $300 - 600/ dav |
| In-house Staff | $45 - 60 oer hour |
| Vehicle Usage | $50/dav off-road |
| $0.6l/km olus fuel | |
| Colour Mao olotting (volume discounts aoolv >150 Jin. ft/mo) | $4.00/lin. ft |
| Management fee on direct expense items | @15% ofcost |
Discovery will supply at its own cost for each Discovery geologist or technologist: current computer and software, digital camera, current hand held GPS, personal logging equipment + selected equipment as requested and agreed to by both Parties: in other words all necessary tools and equipment required to deliver the Services under this Agreement.
| 2 |
GEOLOGICAL AND EXPLORATION CONSULTING CONTRACT
THIS AGREEMENT is made as of the 29th day of September, 2023 BETWEEN:
37 Capital Inc
(the "Company")
Mailing Address: Suite 575,510 Burrard Street
Vancouver, BC V6C 3A8
AND:
Discovery Consultants (the "Consultant")
Mailing Address: P.O. Box 933
Vemon,BC V1T6M8
Courier Address: Unit 10 - 100 Kalamalka Lake Road Vemon,BC
VIT 9Gl
WHEREAS:
A. The Consultant represents that it has in its employ a qualified geologist(s) (the "Geologists") and other personnel who have experience and expertise in exploration for mineral deposits, specifically relating to completing assessment work on the Company's Extra High property in British Columbia.
B. The Company wishes to obtain consulting advice with respect to geological and other exploration matters pertaining to an exploration program of geological mapping, geochemical surveying, geophysical surveying, prospecting, surveying, trenching, data compilation and interpretation; and reporting on the Company's property and wishes to retain the service of the Consultants for those purposes; and·
C. The Consultants wishes to provide the services of the Geologist and other personnel to the Company for the purpose of completing and filing assessment work on the Company's_ Extra igh •Property in British Columbia.
NOW THEREFORE the parties AGREE as follow:
1.0 SERVICES
The Consultant agrees, in consideration of the fees payable to the Consultant as itemized in Schedule "A", to provide the Company with the services of the Geologist and other personnel, and to provide services
including the rental of equipment, with respect to geological, geochemical and geophysical matters (the "Services") in connection with the proposed exploration program of the Company on its property.
2.0 TERM
The term of this Agreement will be the period that begins on September 29, 2023, and ends on Februaiy 28, 2024. The Company can make William Gilmour (FMC 109663) an agent for the Company on the matter of filing assessment work.
3.0 EXPENSES
3.1 The Company will, with respect to Services requested, reimburse the Consultant for all reasonable travelling and out-of-pocket expenses incurred by the Geologist and other personnel employed by the Consultant while engaged in the pe1formance of the Services, and such expenses shall not exceed the total sum of $25,000.
4.0 INVOICES
4.1 The Consultant will submit to the Company from time-to-time invoices for out-of-pocket expenses, for equipment rentals, and for fees in consideration of time spent by the Geologist and other personnel in providing Services requested by the Company, and such invoices shall not exceed the total sum of $25,000.
4.2 The Company will pay the Consultant in full within 20 days after the date of each invoice.
5.0 WORK STANDARD
The Consultant will provide the Services in a good and workmanlike fashion, diligently, in good faith and without waste, interruption or delay except for causes beyond the reasonable control of the Consultant.
6.0 RELATIONSHIP
With respect to all claims or damages on account of loss or damage to property, or injury to, or death of, any person or persons arising from or out of the provision of Services by the Consultant under this Agreement, the Consultant will be deemed to be an independent contractor and neither the Geologist nor any other employee of the Consultant will be deemed to be a representative, agent, or employee of the Company and, with respect to any claim, damage, loss, injury or death, the Consultant will indemnify and save the Company harmless from and against any and all liability for such loss, damage, injury or death, including all expenses, costs, and legal fees incurred in connection therewith.
7.0 COMPLIANCE WITH LAWS
The Consultant will comply with all applicable federal and provincial statutes and regulations and the lawful requirements and directions of any government authority having jurisdiction with respect to the Services it provides, including the obtaining of all necessary permits and licences and will indemnify the Company against all claims, loss, damages and expenses incurred by the Consultant's failure to make necessary returns or payment or by any violation of any statute or regulation.
8.0 INSURANCE
Without in any way limiting the liability of the Consultant under this Agreement, including the Consultant's indemnity to the Company as set out in Section 6.0, it will be the sole responsibility of the Consultant to maintain and keep in force and effect during the term of this Agreement the following insurance coverage:
8.1 Comprehensive general liability insurance against claims which may arise from the Consultant's Services or operations under this Agreement including claims arising out of personal injury, bodily injury and death and damage to or destruction of property of others, including loss of use thereof, with the coverage to apply to the Company and the Consultant and each of them with a combined single limit of not less than $5,000,000 for any one accident or occurrence or series of accidents or occurrences arising out of any one event;
8.2 Worker's compensation or. like coverage as required by applicable law or other authorized governmental authority covering all persons employed by the Consultant or sub-contractors on work to be performed under this Agreement.
8.3 Automobile bodily injury and property damage liability insurance covering automobile owned or leased by the Consultant, its contractors, agents or employees in connection with the work under this Agreement, with the limits of insurance to be not less than $1,000,000 inclusive for any one occurrence; and
8.4 Fire fighting insurance for the cost of controlling or extinguishing forest fires, with $ 1,000,000 coverage.
9.0 CONFIDENTIALITY
9.1 Each party acknowledges that, during the term of this Agreement, it may be required from time to time to disclose to the other party certain materials, inf01mation and data relating to that party's business ("Confidential Information"), and that the other party's Confidential Information, other than what is publicly known, is confidential and proprietary information and constitutes trade secrets.
9.2 Each party will exercise the same degree of care of the other party's Confidential Information that it does with its own Confidential Information and will restrict confine knowledge of the other's Confidential Info1mation to those of its employees, officers and directors who require that knowledge for use in the ordinary course and scope of their employment for the purpose of this Agreement.
9.3 Neither party will, during the term of this Agreement or thereafter, use, disclose, divulge or make available the other's Confidential Information to any third party either directly or indirectly in any manner whatsoever without the written consent of the other party.
10.0 EXCLUSIVITY
The Consultant will not, during the term of this Agreement, provide similar consulting services or advice to third parties relating to or in connection with the Company's prope11y without the written consent of the Company.
11.0 TERMINATION
Notwithstanding Section 2.0, the Company will have the right at any time to terminate this Agreement on not less than 5 days' written notice to the Consultant. However, any fees, expenses or other charges incurred by or accruing from work performed by the Consultant for the Company up to the date of termination will remain due and payable on receipt of the Consultant's final invoice.
12.0 ARBITRATION
In case of a dispute or difference arising under this Agreement, which is not settled within a reasonable time and not exceeding 3 months, the parties will refer the dispute or difference to arbitration under the Commercial Arbitration Act (British Columbia).
13.0 ASSIGNMENT
The Consultant may not assign, pledge, mortgage or otherwise encumber any of its rights under this Agreement without the written consent of the Company.
14.0 NOTICE
14.1 All payments and communications, which may be or are required to be given by either party to the other will (in the absence of any specific provision to the contrary) be in writing and delivered or sent by registered mail or courier to the parties at their following respective addresses:
a) to the Company:
Suite 575,510 Bmrnrd Street Vancouver, BC
V6C 3A8
Phone: 604 681-0204
Attention: Bedo Kalpakian
Email: bedo@jackpotdigital.com
b) to the Consultant:
P.O. Box 933
Vernon. BC VlT 6M8
Phone: 250 542-8960
Attention: Bill Gilmour, PGeo
Email: info@discoveryconsultants.com
14.2 Either party may from time to time change its address by notice to the other in accordance with Section 14.1.
15.0 GOVERNING LAWS
15.1 This Agreement and the rights and obligations and relations of the parties will be governed by and construed in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein (but without giving effect to any conflict of laws rules).
15.2 The courts of British Columbia will have jurisdiction to entertain any action or other legal proceedings based on any provisions of this Agreement, and each party attorns to the jurisdiction of such courts.
16.0 TIME
Time will be of the essence of this Agreement and of every pa1t of it and no extension or variation of this Agreement will operate as a waiver of this provision.
17.0 INUREMENT
This Agreement will ensure to the benefit of and be binding on the parties and their respective heirs, executors, administrators, successors and assigns.
IN WITNESS WHEREOF the parties have executed this Agreement on and as of the day first above written.
37 CAPITAL INC.
per: “signed”
Authorized signatory
DISCOVERY CONSULTANTS
per.: “signed”
Authorized Signatory
| 1 |
SCHEDULE A
For the agreement between 37 Capital Inc and
Discovery Consultants, of Vernon, British Columbia, dated as of September 29, 2023.
RATE SCHEDULE
| Senior Geologists | $800/day or $110/hr |
| Intermediate geologists | $750/day or $80/hr |
| Senior Technicians | $650/ day |
| Field Technicians | $ 300 - 600/ day |
| In-house Staff | $ 45 - 60 per hour |
| Vehicle Usage | $50/day off-road |
| $0.61/km plus fuel | |
| Colour Map plotting (volume discounts apply>150 lin. ft/mo) | $4.00/lin. ft |
| Management fee on direct expense items | @15% of cost |
Discovery will supply at its own cost for each Discovery geologist or technologist: current computer and software, digital camera, current hand held GPS, personal logging equipment + selected equipment as requested and agreed to by both Paiiies: in other words all necessary tools and equipment required to deliver the Services under this Agreement.
| 2 |
Exhibit 31.1
CERTIFICATION PURSUANT TO
Rule 13a-14(b) and Section 1350 of Chapter 63
of Title18 of the United States Code (18 U.S.C. 1350).
I, Jacob H. Kalpakian, certify that:
1. I have reviewed this Annual Report on Form 20-F (2023) of 37 Capital Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide a reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the Annual Report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
Date: May 13, 2024
“Jacob H. Kalpakian”
Jacob H. Kalpakian,
Chief Executive Officer
Exhibit 31.2
CERTIFICATION PURSUANT TO
Rule 13a-14(b) and Section 1350 of Chapter 63
of Title18 of the United States Code (18 U.S.C. 1350).
I, Neil Spellman, certify that:
1. I have reviewed this Annual Report on Form 20-F (2023) of 37 Capital Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide a reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the Annual Report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
Date: May 13, 2024.
“Neil Spellman”
Neil Spellman
Chief Financial Officer
Exhibit 32.1
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of 37 Capital Inc., (the "Company") on Form 20-F for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jacob H. Kalpakian, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Signed this 13th day of May, 2024.
37 Capital Inc.
“Jacob H. Kalpakian”
Jacob H. Kalpakian,
President & Chief Executive Officer
Exhibit 99.1*
37 CAPITAL INC.
MARKETABLE SECURITIES – OTHER INVESTMENTS
Schedule I
December 31, 2023
| Name of Issuer and Title of Issuer | Number of Shares/Principal Amount of Bonds | Costs | Market Value | Amount at Which The Portfolio is Carried in the Books | ||||||||
Nil |
Nil |
Nil |
Nil |
Nil |
Exhibit 99.2*
37 CAPITAL INC.
AMOUNTS RECEIVABLE/(PAYABLE) FROM RELATED PARTIES AND UNDERWRITERS
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
Schedule II
| Name of Debtor | Balance Beginning of Period | Additions | (Collected)/ Paid | Amount Written off | Balance End of Period Receivable (Payable) | |||||||||||||||||||
| 2023 | ||||||||||||||||||||||||
| Jackpot Digital Inc. | $ | (62,828 | ) | (28,288 | ) | 8,788 | 0 | (82,328 | ) | |||||||||||||||
| Jacob H. Kalpakia | (14,110 | ) | (386 | ) | (14,96 | ) | 0 | 0 | ||||||||||||||||
| 2022 | ||||||||||||||||||||||||
| Jackpot Digital Inc. | $ | (33,401 | ) | (29,427 | ) | 0 | 0 | (62,828 | ) | |||||||||||||||
| Jacob H. Kalpakian | (0 | ) | (38,828 | ) | 24,718 | 0 | (14,110 | ) | ||||||||||||||||
| 2021 | ||||||||||||||||||||||||
| Jackpot Digital Inc. | $ | (155,644 | ) | (27,101 | ) | 149,344 | 0 | (33,401 | ) | |||||||||||||||
| Jacob H. Kalpakian | (153,290 | ) | (44,515 | ) | 197,805 | 0 | 0 | |||||||||||||||||
Exhibit 99.3*
37 CAPITAL INC.
PROPERTY, PLANT AND EQUIPMENT AND
ACCUMULATED AMORTIZATION (DEPRECIATION AND DEPLETION) THEREOF
Schedules III and IV
| Balance Beginning of Period | Additions | Disposals and Retirements | Other Charges | Balance, End of Period | ||||||||||||||||
| 2023 | ||||||||||||||||||||
| Property, plant & equipment | ||||||||||||||||||||
| Machinery & equipment | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
| Accumulated amortization | ||||||||||||||||||||
| Machinery and equipment | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
| 2022 | ||||||||||||||||||||
| Property, plant & equipment | ||||||||||||||||||||
| Machinery & equipment | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
| Accumulated amortization | ||||||||||||||||||||
| Machinery and equipment | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
| 2021 | ||||||||||||||||||||
| Property, plant & equipment | ||||||||||||||||||||
| Machinery & equipment | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
| Accumulated amortization | ||||||||||||||||||||
| Machinery and equipment | 0 | 0 | 0 | 0 | 0 | |||||||||||||||