Ivanhoe Electric Inc 10-Q for FY2024 Q2
Ivanhoe Electric Inc. (IE)
10-Q
2024-08-07
For: 2024-06-30
View Original
Added on
April 04, 2026
About this 10-Q
Ivanhoe Electric Inc filed this 10-Q on August 7, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $538K
- down 59.1% from $1.31M a year earlier
- Net loss
- $51.52M
- compared with a net loss of $44.85M a year earlier
- Diluted EPS
- $0.39
- down 4.9% from $0.41 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2024
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File Number: 001-41436
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (Address of principal executive offices) | (Zip Code) | ||||
Registrant’s telephone number, including area code: (480 ) 656-5821
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| x | Accelerated filer | o | |||||||||
| Non-accelerated filer | o | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of August 7, 2024, the registrant had 120,397,648 shares of common stock, $0.0001 par value per share, outstanding.
Table of Contents
IVANHOE ELECTRIC INC. Form 10-Q
For the Quarter Ended June 30, 2024
| Page | ||||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||||
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
IVANHOE ELECTRIC INC.
Condensed Interim Consolidated Balance Sheets (Unaudited)
(Expressed in thousands of U.S. dollars)
| June 30, 2024 | December 31, 2023 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable | |||||||||||
| Inventory | |||||||||||
| Prepaid expenses and deposits | |||||||||||
| Non-current assets: | |||||||||||
| Investments subject to significant influence | |||||||||||
| Other investments | |||||||||||
| Exploration mineral interests | |||||||||||
| Property, plant and equipment | |||||||||||
| Other non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued liabilities | $ | $ | |||||||||
| Note payable, current | |||||||||||
| Due to related party | |||||||||||
| Lease liabilities, current | |||||||||||
| Contract liability | |||||||||||
| Non-current liabilities: | |||||||||||
| Note payable | |||||||||||
| Convertible debt | |||||||||||
| Deferred income taxes | |||||||||||
| Lease liabilities, net of current portion | |||||||||||
| Other non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 15) | |||||||||||
| Equity: | |||||||||||
Common stock, par value $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive income | ( | ( | |||||||||
| Equity attributable to common stockholders | |||||||||||
| Non-controlling interests | |||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
3
IVANHOE ELECTRIC INC.
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Unaudited)
(Expressed in thousands of U.S. dollars, except for share and per share amounts)
| Three Months Ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of sales | ( | ( | ( | ( | |||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Exploration expenses | |||||||||||||||||||||||
| General and administrative expenses | |||||||||||||||||||||||
| Research and development expenses | |||||||||||||||||||||||
| Selling and marketing expenses | |||||||||||||||||||||||
| Loss from operations | |||||||||||||||||||||||
| Other expenses (income): | |||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
| Foreign exchange loss (gain) | ( | ( | |||||||||||||||||||||
| Loss (gain) on revaluation of investments | ( | ( | |||||||||||||||||||||
| Share of loss of equity method investees | |||||||||||||||||||||||
| Other expense (income), net | ( | ( | |||||||||||||||||||||
| Loss before income taxes | |||||||||||||||||||||||
| Income tax recovery | ( | ( | ( | ||||||||||||||||||||
| Net loss | |||||||||||||||||||||||
| Less loss attributable to non-controlling interests | ( | ( | ( | ( | |||||||||||||||||||
| Net loss attributable to common stockholders or parent | |||||||||||||||||||||||
| Net loss | |||||||||||||||||||||||
| Other comprehensive loss , net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustments | |||||||||||||||||||||||
| Other comprehensive loss | |||||||||||||||||||||||
| Comprehensive loss | $ | $ | $ | $ | |||||||||||||||||||
| Comprehensive loss attributable to: | |||||||||||||||||||||||
| Common stockholders or parent | |||||||||||||||||||||||
| Non-controlling interests | $ | $ | |||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Net loss per share attributable to common stockholders | |||||||||||||||||||||||
| Basic and diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average common shares outstanding | |||||||||||||||||||||||
| Basic and diluted | |||||||||||||||||||||||
4
IVANHOE ELECTRIC INC.
Condensed Interim Consolidated Statements of Changes in Equity (Unaudited)
(Expressed in thousands of U.S. dollars, except share amounts)
| Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive loss | Non-controlling interest | Total | |||||||||||||||||||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||||||||||||||||||||
| Three months ended June 30, 2024 | Shares | Amount | |||||||||||||||||||||||||||||||||||||||
| Balance at April 1, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Non-controlling interests investment in subsidiary | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other changes in non-controlling interests | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Six months ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Issuance of common stock; Kaizen arrangement | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock; earn-in payment | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Settlement of restricted share units | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Settlement of deferred share units | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Non-controlling interests investment in subsidiary | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other changes in non-controlling interests | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
IVANHOE ELECTRIC INC.
Condensed Interim Consolidated Statements of Changes in Equity (Unaudited)
(Expressed in thousands of U.S. dollars, except share amounts)
| Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive loss | Non-controlling interest | Total | |||||||||||||||||||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||||||||||||||||||||
| Three months ended June 30, 2023 | Shares | Amount | |||||||||||||||||||||||||||||||||||||||
| Balance at April 1, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Settlement of deferred share units | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Non-controlling interests investment in subsidiary | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other changes in non-controlling interests | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Six months ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Issuance of common stock; earn-in payment | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Settlement of deferred share units | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Non-controlling interests investment in subsidiary | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other changes in non-controlling interests | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
5
IVANHOE ELECTRIC INC.
Condensed Interim Consolidated Statements of Cash Flows (Unaudited)
(Expressed in thousands of U.S. dollars)
Six months ended June 30, 2024 and 2023
| 2024 | 2023 | ||||||||||
| Operating activities | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to cash provided by used in operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Stock-based compensation | |||||||||||
| Non-cash exploration expense | |||||||||||
| Non-cash research and development expense | |||||||||||
| Unrealized foreign exchange loss (gain) | ( | ||||||||||
| Interest expense | |||||||||||
| Income taxes | ( | ||||||||||
| Loss (gain) on revaluation of investments | ( | ||||||||||
| Share of loss of equity method investees | |||||||||||
| Other | ( | ||||||||||
| Changes in other operating assets and liabilities: | |||||||||||
| Trade accounts receivable | ( | ||||||||||
| Inventory | ( | ||||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Accounts payable and accrued liabilities | |||||||||||
| Other operating assets and liabilities | ( | ( | |||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Investing activities | |||||||||||
| Purchase of mineral interests | ( | ( | |||||||||
| Purchase of property, plant and equipment and intangible assets | ( | ( | |||||||||
| Purchase of investments subject to significant influence | ( | ( | |||||||||
| Cash acquired on acquisition of subsidiary | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Financing activities | |||||||||||
| Non-controlling interests investment in subsidiary | |||||||||||
| Proceeds from exercise of stock options | |||||||||||
| Net cash provided by financing activities | |||||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Decrease in cash and cash equivalents | ( | ( | |||||||||
| Cash and cash equivalents, beginning of the year | |||||||||||
| Cash and cash equivalents, end of the period | $ | $ | |||||||||
| Supplemental cash flow information | |||||||||||
| Cash paid for income taxes | $ | $ | |||||||||
| Supplemental disclosure of non-cash investing and financing activities | |||||||||||
| Note payable issued as consideration for land purchase | $ | $ | |||||||||
| Issuance of common stock; Kaizen arrangement | |||||||||||
| Issuance of common stock; earn-in payment | |||||||||||
| Non-controlling interests investment in subsidiary | |||||||||||
| Settlement of loan upon issuance of shares of subsidiary | ( | ||||||||||
| Settlement of related party loan | $ | ( | $ | ||||||||
6
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
1. Background and basis of preparation:
Ivanhoe Electric Inc. (“Ivanhoe Electric” or “the Company”) is a United States domiciled company that combines advanced mineral exploration technologies with electric metals exploration projects predominantly located in the United States. The Company’s mineral exploration efforts focus on copper as well as other metals including nickel, vanadium, cobalt, platinum group elements, gold and silver. The Company’s portfolio of electric metals exploration projects include the Santa Cruz Project in Arizona and the Tintic Project in Utah, as well as other exploration projects in the United States.
In addition to mineral projects in the United States, the Company also holds direct and indirect ownership interests, and in some cases controlling financial interests, in other non-U.S. mineral projects, and in proprietary mineral exploration and minerals-based technologies.
The Company holds a 50 % interest in a joint venture with Saudi Arabian Mining Company Ma’aden (“Ma’aden”) to explore prospective land in Saudi Arabia.
The Company conducts the following business activities through certain subsidiaries:
•VRB Energy Inc. (“VRB”), develops, manufactures and installs vanadium flow batteries for grid-scale energy storage. Ivanhoe Electric had an ownership interest in VRB of 90.0 % as at June 30, 2024 (December 31, 2023 — 90.0 %).
•Computational Geosciences Inc. (“CGI”), provides data analytics, geophysical modeling, software licensing and artificial intelligence services for the mineral, oil & gas and water exploration industries. Ivanhoe Electric had an ownership interest in CGI of 94.3 % as at June 30, 2024 (December 31, 2023 — 94.3 %).
•Cordoba Minerals Corp. (“Cordoba”) holds the San Matias copper-gold-silver project in northern Colombia. Ivanhoe Electric had an ownership interest in Cordoba of 62.8 % as at June 30, 2024 (December 31, 2023 — 62.8 %).
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required by generally accepted accounting principles in the United States. Therefore, this information should be read in conjunction with the Company's consolidated financial statements and notes contained on its Form 10-K for the year ended December 31, 2023. The information furnished herein reflects all normal recurring entries, that are in the opinion of management, necessary for a fair statement of the results for the interim periods reported. Operating results for the six months ended June 30, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.
The condensed interim consolidated financial statements have been prepared on a going concern basis, which presumes the realization of assets and satisfaction of liabilities in the normal course of business.
References to “$” refer to United States dollars and “Cdn$” to Canadian dollars.
2. Significant accounting policies:
The Company discloses in its consolidated financial statements for the year ended December 31, 2023, those accounting policies that it considers significant in determining its results of operations and financial position. There have been no material changes to, or in the application of, the accounting policies previously identified and described in the Company’s consolidated financial statements for the year ended December 31, 2023.
Recent accounting pronouncements not yet adopted:
In August 2023, the FASB issued ASU 2023-05 Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. The update was issued to address the accounting for contributions made to a joint venture, upon formation, in a joint venture’s separate financial statements. Upon formation, a joint venture will recognize and initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). This update is effective prospectively for all joint venture formations with a formation date on or after January 1, 2025.
7
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The update was issued to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The Company is required to adopt ASU 2023-07 on January 1, 2025 and is currently evaluating the expected impact on the consolidated financial statements.
3. Use of estimates:
The preparation of consolidated financial statements requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, the related disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results may differ from these estimates.
The significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended December 31, 2023.
4. Cash and cash equivalents:
Of the total cash and cash equivalents at June 30, 2024 and December 31, 2023, $20.8 million and $15.0 million, respectively, was not available for the general corporate purposes of the Company as it was held by non-wholly-owned subsidiaries.
5. Investments subject to significant influence:
The Company’s principal investment subject to significant influence is its investment in Ma'aden Ivanhoe Electric Exploration and Development Limited Company ("Ma'aden Joint Venture"). Others include its investments in Sama Resources Inc. (“Sama”) and Go2Lithium Inc. ("Go2Lithium").
| Equity Method | Carried at fair value | ||||||||||||||||||||||||||||||||||
| Ma'aden Joint Venture | SNC (Note a) | Go2Lithium | Other | Sama | Total | ||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Change in fair value | — | — | — | — | |||||||||||||||||||||||||||||||
| Investment | — | — | — | ||||||||||||||||||||||||||||||||
| Share of loss | ( | ( | ( | ( | — | ( | |||||||||||||||||||||||||||||
| Acquisition | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||
| Foreign currency translation | — | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(a) Acquisition of Sama Nickel Corporation:
On March 11, 2024, the Company completed its earn-in and acquired an additional 30 % in Sama Nickel Corporation ("SNC") bringing its total ownership interest in SNC to 60 % . SNC owns the Samapleu-Grata Nickel-Copper Project ("Samapleu Project") in the Ivory Coast. The Company determined that it acquired control of SNC and commenced consolidating the results of SNC from March 11, 2024 under the voting interest entity model. The acquisition was accounted for as an asset acquisition as SNC did not meet the definition of a business. The cost of the acquisition has been allocated to the assets and liabilities of SNC, including its exploration property in the Ivory Coast.
8
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
6. Exploration properties:
| Santa Cruz | Tintic | San Matias | Other | Total | |||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Acquisition costs | |||||||||||||||||||||||||||||
| Foreign currency translation | |||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
7. Note payable:
| Note payable | |||||
| Balance at December 31, 2023 | $ | ||||
| Interest expense | |||||
| Balance at June 30, 2024 | $ | ||||
| Current portion | |||||
| Non-current portion | |||||
| Balance at June 30, 2024 | $ | ||||
In May 2023, the Company issued a secured promissory note in the amount of $82.6 million as part of a land acquisition at its Santa Cruz project. The promissory note includes an annual interest rate of plus 1 % and is to be paid in installments, as follows:
•$34.3 million, plus accrued interest, paid in November 2023;
•four equal principal payments of $12.1 million on the first, second, third and fourth anniversaries of the November 2023 payment, plus applicable accrued interest.
8. Convertible debt:
| VRB Convertible Bond | |||||||||||||||||
| Balance at December 31, 2023 | $ | ||||||||||||||||
| Interest expense | |||||||||||||||||
| Balance at June 30, 2024 | $ | ||||||||||||||||
On July 8, 2021, VRB issued a convertible bond for gross proceeds of $24.0 million. The bond has a five-year term and interest accrues at a rate of 8 % per annum.
Prior to the maturity date, the convertible bond is automatically converted into equity of VRB upon an equity financing or sale event, at a price per share equal to the lower of:
•the transaction price of the equity financing or sale event; and
•the valuation cap price of $158.0 million divided by the total shares outstanding at the time of the event.
If no equity financing or sale event occurs, VRB must repay the outstanding principal and interest on maturity.
The Company has accounted for the convertible bond, including its embedded features, as a debt instrument accounted at amortized cost, as it was determined the embedded features are not required to be bifurcated.
9
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
9. Equity:
(a) Common stock transactions:
On February 6, 2024, Ivanhoe Electric acquired all of the issued and outstanding common shares of Kaizen Discovery Inc. (“Kaizen”) not already beneficially owned by Ivanhoe Electric pursuant to a plan of arrangement under the Business Corporations Act (British Columbia) (the “Arrangement”).
Immediately prior to the closing of the Arrangement, Ivanhoe Electric beneficially owned 82.5 % of the issued and outstanding common shares of Kaizen on a non-diluted basis. Following the closing of the Arrangement, Ivanhoe Electric beneficially owns 100 % of the issued and outstanding common shares of Kaizen on a fully diluted basis.
Ivanhoe Electric acquired the common shares in consideration for the issuance of one share of common stock of Ivanhoe Electric for every 127 Common Shares issued and outstanding immediately prior to the closing of the Arrangement. A total of 116,413 shares of Ivanhoe Electric were issued.
(b) Stock-based compensation:
Stock-based payment compensation was allocated to operations as follows:
| Three Months Ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| General and administrative expenses | $ | $ | $ | $ | |||||||||||||||||||
| Exploration expenses | |||||||||||||||||||||||
| Research and development expenses | |||||||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
(i) Stock options:
During the six months ended June 30, 2024 Company granted stock options to certain directors, officers and employees of the Company. The options have a seven-year term and comprise three equal tranches vesting in one-third annual increments beginning one year from the grant date.
Information related to stock options granted during the six months ended June 30, 2024 is presented below.
| Grant date: | |||||||||||
| March 11, 2024 | April 8, 2024 | ||||||||||
| Exercise price | $ | $ | |||||||||
| Number of options granted | |||||||||||
| Weighted average assumptions used to value stock option awards: | |||||||||||
| Expected volatility | % | % | |||||||||
| Expected life of options (in years) | |||||||||||
| Expected dividend rate | % | % | |||||||||
| Risk-free interest rate | % | % | |||||||||
| Weighted average grant-date fair value (per option) | $ | $ | |||||||||
10
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
10. Revenue:
The Company recognized revenue from the following sources:
| Three Months Ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
| Revenue type | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Software licensing | $ | $ | $ | $ | ||||||||||||||||||||||
| Data processing services | ||||||||||||||||||||||||||
| Renewable energy storage systems (Note a) | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
(a)At June 30, 2024, the Company had a contract liability of $2.7 million (December 31, 2023 — $2.4 million) relating to the sale of renewable energy storage systems.
11. Exploration expense:
| Three Months Ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
| Project | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Santa Cruz, USA | $ | $ | $ | $ | ||||||||||||||||||||||
| Tintic, USA | ||||||||||||||||||||||||||
| San Matias, Colombia (Cordoba) | ||||||||||||||||||||||||||
| Hog Heaven, USA | ||||||||||||||||||||||||||
| Unity, USA | ||||||||||||||||||||||||||
| Samapleu Project, Ivory Coast (Note 5(a)) | ||||||||||||||||||||||||||
| Carolina, USA | ||||||||||||||||||||||||||
| Bitter Creek, USA | ||||||||||||||||||||||||||
| White Hill, USA | ||||||||||||||||||||||||||
| Lincoln, USA | ||||||||||||||||||||||||||
| Generative exploration and other | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
12. Related party transactions:
Related parties include entities with common direct or indirect shareholders and/or directors. Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.
11
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
The following table summarizes transactions between the Company and significant related parties.
| Balance outstanding as at | Transactions for the three months ended June 30, | Transactions for the six months ended June 30, | |||||||||||||||||||||||||||||||||
| June 30, 2024 | December 31, 2023 | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||
| Total expenses and accounts payable | |||||||||||||||||||||||||||||||||||
| Global Mining (Note a) | |||||||||||||||||||||||||||||||||||
| Ivanhoe Capital Aviation (Note b) | |||||||||||||||||||||||||||||||||||
| I-Pulse (Note c) | |||||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| Revenue and accounts receivable | |||||||||||||||||||||||||||||||||||
| Ma'aden Joint Venture (Note d) | |||||||||||||||||||||||||||||||||||
| Advances | |||||||||||||||||||||||||||||||||||
| Global Mining (Note a) | — | — | — | — | |||||||||||||||||||||||||||||||
| Ma'aden Joint Venture (Note d) | — | — | — | — | |||||||||||||||||||||||||||||||
| Deposit | |||||||||||||||||||||||||||||||||||
| I-Pulse (Note c) | — | — | — | — | |||||||||||||||||||||||||||||||
| Loan | |||||||||||||||||||||||||||||||||||
| JCHX Mining Management Co., Ltd (Note e) | — | — | — | — | |||||||||||||||||||||||||||||||
| Transactions for the three months ended June 30, | Transactions for the six months ended June 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Expense classification | |||||||||||||||||||||||||||||||||||
| Exploration expenses | |||||||||||||||||||||||||||||||||||
| General and administrative expenses | |||||||||||||||||||||||||||||||||||
| Research and development expenses | |||||||||||||||||||||||||||||||||||
(a)Global Mining Management Corp. (“Global Mining”) is a private company based in Vancouver, Canada, that provides administration, accounting, and other office services to the Company on a cost-recovery basis. The Company held 6.7 % of Global Mining’s outstanding common stock at June 30, 2024 (December 31, 2023 — 7.1 %). The advance provided to Global Mining is included in other non-current assets.
(b)Ivanhoe Capital Aviation (“ICA”) is an entity beneficially owned by the Company’s Executive Chairman. ICA provides use of its aircraft to the Company.
(c)I-Pulse is a shareholder of the Company. On October 24, 2022, the Company entered into an agreement with I-Pulse, to purchase six Typhoon™ transmitters to be delivered in stages over approximately three years . The total purchase price for the six Typhoon™ transmitters is $12.4 million, which includes research and development costs of $2.8 million. The agreement also includes maintenance costs of $1.7 million. The Company is recognizing the research and development costs and annual maintenance costs on a straight line basis in the consolidated statement of loss over the applicable term. In October 2022, the Company made deposit payments totaling $7.1 million, representing 50 % of each component of the agreement and recorded in other non-current assets. The remaining payments will be made as each Typhoon™ transmitter system is
12
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
delivered. In December 2023, the Company received the first Typhoon™ transmitter that was deliverable under the agreement.
(d)The Company's majority owned subsidiary, CGI, provides geophysical data processing services to the Ma'aden joint venture and recognized revenue totaling $0.7 million.
At June 30, 2024 the Company has $0.9 million in accounts receivable owed by the Ma'aden joint venture for costs that the Company incurred on behalf of the Ma’aden Joint Venture related to exploration work in Saudi Arabia.
(e)JCHX Mining Management Co., Ltd (“JCHX") held 19.8 % of Cordoba’s issued and outstanding common stock as at June 30, 2024 (December 31, 2023 - 19.8 %).
In November 2023, $4.0 million was advanced to Cordoba by JCHX. In January 2024, Cordoba announced receipt of the second installment of $40.0 million relating to the strategic arrangement entered into with JCHX in May 2023. The $4.0 million loan was settled in full by applying it towards the second installment received as a payment in kind.
13. Fair value measurement:
The following table provides the valuation hierarchy classification of assets and liabilities that are recorded at fair value and measured on a recurring basis in the combined balance sheets:
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||||||||
| Investments subject to significant influence | |||||||||||||||||||||||||||||||||||
| Other investments | |||||||||||||||||||||||||||||||||||
| Total financial assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||||||||
| Total financial liabilities | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
There were no movements in level three instruments for the three months ended June 30, 2024.
14. Segment reporting:
The Company’s President & Chief Executive Officer is the Chief Operating Decision Maker (“CODM”) of the Company. The CODM evaluates how the Company allocates resources, assesses performance and makes strategic and operational decisions. Based upon such evaluation, the Company has determined that it has three reportable segments. The Company’s reportable segments are critical metals, data processing and energy storage.
Critical metals is focused on mineral project exploration and development with a focus on identifying and developing mineral projects, and ultimately mines, associated with the metals necessary for electrification.
The data processing segment provides data analytics, geophysical modeling and artificial intelligence services for the mineral, oil & gas and water exploration industries.
The energy storage segment develops, manufactures and installs vanadium flow batteries for grid-scale energy storage.
13
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
Segment information for the periods presented is as follows:
| Three Months Ended June 30, 2024 | Six months ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Critical Metals | Data Processing | Energy Storage | Total | Critical Metals | Data Processing | Energy Storage | Total | ||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Intersegment revenues | |||||||||||||||||||||||||||||||||||||||||||||||
| Loss (income) from operations | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Segment assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2023 | Six months ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Critical Metals | Data Processing | Energy Storage | Total | Critical Metals | Data Processing | Energy Storage | Total | ||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Intersegment revenues | |||||||||||||||||||||||||||||||||||||||||||||||
| Loss (income) from operations | |||||||||||||||||||||||||||||||||||||||||||||||
| Segment assets | |||||||||||||||||||||||||||||||||||||||||||||||
15. Commitments and contingencies:
The Company has entered into a contractual arrangement to purchase six Typhoon™ transmitters from I-Pulse (Note 12).
In the ordinary course of business, the Company may be involved in various legal proceedings and subject to claims that arise. Although the results of litigation and claims are inherently unpredictable and uncertain, the Company is not currently a party to any legal proceedings the outcome of which, if determined adversely to it, are believed to, either individually or taken together, have a material adverse effect on the Company’s business, financial condition or results of operations.
14
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with the condensed interim consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q (this “Quarterly Report”) and with our audited consolidated financial statements and the related notes for the fiscal year ended December 31, 2023 included in Part II of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2024 (the “2023 Form 10-K”).
Special Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), that involve risks and uncertainties, including statements based on our current expectations, assumptions, estimates and projections about future events, our business, our financial condition, results of operations and prospects, our industry and the regulatory environment in which we operate. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Those statements include, but are not limited to, statements with respect to: estimated calculations of mineral reserves and resources at our properties including changes in those estimated calculations, anticipated results and timing of exploration activities, timing of studies for advancing or developing our properties, plans and objectives, industry trends, our requirements for additional capital, treatment under applicable government regimes for permitting or attaining approvals, government regulation, environmental risks, title disputes or claims, synergies of potential future acquisitions, the projected, forecast or anticipated economic parameters of our mineral projects (including capital cost, operating cost, net present value, internal rate of return and other parameters), and our anticipated uses of the net proceeds from our initial public offering or other offerings of our securities. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “could,” “should,” “would,” “achieve,” “budget,” “scheduled,” “forecasts,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our industry. All forward-looking statements speak only as of the date on which they are made. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions concerning future events that are difficult to predict. Therefore, actual future events or results may differ materially from these statements. We believe that the factors that could cause our actual results to differ materially from those expressed or implied by forward-looking statements include the following: our mineral projects are all at the exploration stage and are subject to the significant risks and uncertainties associated with mineral exploration; the initial assessment for our Santa Cruz Project is only an early stage study of its potential economic viability and future studies and actual economic outcomes may vary greatly from those set forth in the initial assessment; we have no mineral reserves, other than at the San Matias project; we have a limited operating history on which to base an evaluation of our business and prospects; we depend on our material projects for our future operations; our mineral resource and reserve calculations and economic projections relating to our properties are only estimates; actual capital costs, operating costs, production and economic returns at any future mine may differ significantly from those we have anticipated or projected; the title to some of the mineral properties may be uncertain or defective; our business is subject to changes in the prices of copper, gold, silver, nickel, cobalt, vanadium and platinum group metals; we have claims and legal proceedings against one of our subsidiaries; our business is subject to significant risk and hazards associated with future mining operations; we may fail to identify attractive acquisition candidates or joint ventures with strategic partners or be unable to successfully integrate acquired mineral properties; we may fail to successfully manage joint ventures and are reliant on our joint venture partners to comply with their obligations; our business is extensively regulated by the United States and foreign governments as well as local governments; the requirements that we obtain, maintain and renew environmental, construction and mining permits are often a costly and time-consuming process; our non-U.S. operations are subject to additional political, economic and other uncertainties not generally associated with domestic operations; and our activities may be hindered, delayed or have to cease as a result of climate change effects, including increased and excessive heating and the potential for forest fires at many of our properties.
You should carefully consider these risks, as well as the additional risks described in other documents we file with the SEC. We also operate in a very competitive and rapidly changing industry. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.
15
These factors should not be construed as exhaustive and should be read in conjunction with the risks described under the heading “Risk Factors” in our 2023 Form 10-K. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under “Risk Factors” in the 2023 Form 10-K. These risks and uncertainties, as well as other risks of which we are not aware or which we currently do not believe to be material, may cause our actual future results to be materially different than those expressed in our forward-looking statements. We caution you not to place undue reliance on these forward-looking statements. We do not undertake any obligation to make any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by law.
Business Overview
We are a United States domiciled company that combines advanced mineral exploration technologies with electric metals exploration projects predominantly located in the United States. We use our powerful Typhoon™ geophysical surveying system, together with advanced data analytics provided by our 94.3% owned subsidiary, Computational Geosciences Inc. (“CGI”), to accelerate and de-risk the mineral exploration process as we seek to discover new deposits of critical metals that may otherwise be undetectable by traditional exploration technologies. We believe the United States is significantly underexplored and has the potential to yield major new discoveries of critical metals. Our mineral exploration efforts focus on copper as well as other metals including nickel, vanadium, cobalt, platinum group elements, gold and silver. Through the advancement of our portfolio of electric metals exploration projects, headlined by the Santa Cruz Project in Arizona and the Tintic Project in Utah, as well as other exploration projects in the United States, we intend to support the United States' supply chain independence by finding and delivering critical metals necessary for the electrification of the economy. We also operate a 50/50 joint venture with Saudi Arabian Mining Company Ma’aden ("Ma'aden") to explore for minerals on ~48,500 km2 of underexplored Arabian Shield in Saudi Arabia.
Finally, in addition to our mineral projects, we also own a 90.0% controlling interest in VRB Energy Inc. ("VRB") which is primarily engaged in the design, manufacture, installation, and operation of vanadium redox flow energy storage systems.
At our Santa Cruz Project in Arizona, we are evaluating the potential for a high-grade modern underground copper mining operation. In September 2023, we completed the Initial Assessment & Technical Report Summary for the Santa Cruz Project (the "IA"), which outlines a potential 5.9 million tonnes per year underground mining operation, supported by 105.2 million tonnes of modeled mill feed with an average grade of 1.58% copper from the Santa Cruz and East Ridge Deposits, resulting in an estimated 20-year mine life. We are advancing further studies for an underground copper mining operation with a focus on minimizing the surface footprint of the mine while at the same time incorporating leading technologies to improve efficiencies and costs. We are designing a technologically advanced mine that we expect to result in low carbon dioxide emissions per pound of copper produced and be a leading example of responsibly produced domestic copper. Key considerations that will influence our decision making include, but are not limited to, using clean and renewable energy in our future mining operations, optimizing and minimizing our water utilization, minimizing our environmental footprint, ensuring workforce diversity and hiring from local communities, health, safety and environmental performance, support of local cultural heritage and biodiversity protection.
On May 7, 2024, we entered into an Exploration Alliance Agreement with BHP Mineral Resources Inc. (“BHP”), which sets out the framework for BHP and the Company to explore mutually agreed “Areas of Interest” in the United States to identify copper and other critical metal exploration opportunities within those Areas of Interest that may become 50/50 owned joint ventures following a discovery. The Agreement is for a term of three years, which may be extended upon mutual agreement. BHP will provide the initial funding of $15 million and thereafter the Company and BHP would provide funding on a 50/50 basis. The Company will provide access to one Typhoon™ system for use pursuant to the Exploration Alliance Agreement.
References to our mineral projects refers to our interests in such projects which may be a direct ownership interest in mineral titles (including through subsidiary entities), a right to acquire mineral titles through an earn-in or option agreement, or, in the case of our investments in publicly listed companies in Canada, through our ownership of the equity of those companies that have an interest in such mineral projects.
Our shares of common stock are listed on the NYSE American and the TSX under the ticker symbol “IE”.
Segments
We account for our business in three business segments – (i) critical metals, (ii) data processing and software licensing services and (iii) energy storage systems.
16
Significant Components of Results of Operations
Revenue, Cost of Sales and Gross Profit
We have not generated any revenue from our mining projects because they are in the exploration stage. We do not expect to generate any revenue from our mining projects for the foreseeable future.
We generate revenue from our technology businesses CGI and VRB, which are included in the data processing and energy storage systems business segments, respectively.
CGI generates revenue from the sale of data processing services to the mining and oil and gas industries. In prior years, CGI has also generated revenue from software licensing.
VRB generates revenue from developing, manufacturing and selling vanadium redox flow energy storage systems.
Exploration Expenses
Exploration expenses include topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and activities in relation to identifying a mineral resource and then evaluating the technical feasibility and commercial viability of extracting the mineral resource, as well as value-added taxes in relation to these direct exploration and evaluation costs incurred in foreign jurisdictions where recoverability of those taxes is uncertain. Exploration expenses also include salaries, benefits and non-cash stock-based compensation expenses of the employees performing these activities.
Exploration expenses also include payments under earn-in and option agreements where the option right is with respect to ownership interests in legal entities owning the underlying mineral project in the exploration project phase. Through our earn-in and option agreements, we have the right (and in some cases, the obligation) to fund and conduct exploration on the underlying mineral project prior to determining whether to acquire a minority or majority ownership interest through further funding the costs of such exploration and, in some cases, through direct payments to the owners of the project. In the event we cease making expenditures on an exploration mineral project or fail to incur the agreed level of exploration expenditures, we will not obtain an ownership right beyond any which may have been acquired as of the date of termination.
Included in exploration expenses are exploration costs that we incur in relation to generating new projects. These activities may or may not proceed to earn-in agreements depending on our evaluation. These are categorized as “Project generation and other”.
General and Administrative Expenses
Our general and administrative expenses consist of salaries and benefits, stock-based compensation, professional and consultant fees, insurance and other general administration costs.
Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023
For the three months ended June 30, 2024 we recorded a net loss attributable to common stockholders of $46.8 million ($0.39 per share), compared to $38.3 million ($0.41 per share) for the three months ended June 30, 2023, which was an increase of $8.5 million. Significant contributors to this increase for the three months ended June 30, 2024 included an increase of $4.7 million in exploration expenditures, an increase of $0.8 million in the share of loss of equity method investees and a decrease of $0.8 million in revenue, partially offset by a decrease of $2.0 million in general and administrative expenses compared to the three months ended June 30, 2023.
Exploration expenses were $37.3 million for the three months ended June 30, 2024, an increase of $4.7 million from $32.6 million for the three months ended June 30, 2023. Exploration expenses consisted of the following:
17
| Three months ended June 30, | ||||||||||||||
| (In thousands) | 2024 | 2023 | ||||||||||||
| Exploration Expenses: | ||||||||||||||
| Santa Cruz, USA | $ | 20,478 | $ | 15,043 | ||||||||||
| Tintic, USA | 3,681 | 1,954 | ||||||||||||
| San Matias, Colombia (Cordoba) | 3,236 | 10,109 | ||||||||||||
| Hog Heaven, USA | 2,530 | 416 | ||||||||||||
| Unity, USA | 1,552 | — | ||||||||||||
| Samapleu Project, Ivory Coast | 1,414 | — | ||||||||||||
| Carolina, USA | 300 | 790 | ||||||||||||
| Bitter Creek, USA | 528 | 15 | ||||||||||||
| White Hill, USA | 94 | 259 | ||||||||||||
| Lincoln, USA | 8 | 182 | ||||||||||||
| Generative exploration and other | 3,433 | 3,783 | ||||||||||||
| Total | $ | 37,254 | $ | 32,551 | ||||||||||
During the three months ended June 30, 2024, exploration expenditures largely focused on activities at:
•the Santa Cruz Project where $20.5 million of exploration expenditure was incurred in the three months ended June 30, 2024 compared to $15.0 million incurred in the three months ended June 30, 2023. Activities during the three months ended June 30, 2024 at Santa Cruz were focused on a program of infill resource drilling, geotechnical, hydrological, and metallurgical drilling/laboratory testing along with advancing permitting and technical studies required to support a prefeasibility study;
•the Tintic Project where $3.7 million of exploration expenditure was incurred in the three months ended June 30, 2024 compared to $2.0 million incurred in the three months ended June 30, 2023. Activities during the three months ended June 30, 2024 were focused on diamond drilling in the Mammoth area;
•the San Matias Project where $3.2 million of exploration expenditure was incurred by Cordoba Minerals for the three months ended June 30, 2024 focused on preparations for detailed engineering design of the Alacran mine; and
•the Hog Heaven Project where $2.5 million of exploration expenditure was incurred in the three months ended June 30, 2024 compared to $0.4 million incurred in the three months ended June 30, 2023. Activities during the three months ended June 30, 2024 were focused on diamond drilling in the west Flathead and Battle Butte areas.
General and administrative expenses were $10.7 million for the three months ended June 30, 2024, a decrease of $2.0 million from $12.7 million for the three months ended June 30, 2023. The decrease was largely a result of a $1.8 million decrease in non-cash stock-based compensation expense from $4.8 million for the three months ended June 30, 2023 to $3.0 million for the three months ended June 30, 2024.
Share of loss of equity method investees was $1.5 million for the three months ended June 30, 2024, an increase of $0.8 million from $0.6 million for the three months ended June 30, 2023. The increase in loss was largely due to our $1.1 million share of the loss from the Ma'aden joint venture three months ended June 30, 2024. The Ma'aden joint venture was formed in July 2023.
Revenue for the three months ended June 30, 2024 was $0.5 million a decrease of $0.8 million from $1.3 million for three months ended June 30, 2023. The sources of revenue for the periods changed significantly. CGI’s software licensing and data processing services to the mining and oil and gas industries represented 100.0% of our revenue for the three months ended June 30, 2024 and 3.2% of our revenue for three months ended June 30, 2023 ($0.0 million). VRB generated no revenue during the three months ended June 30, 2024 and represented 96.8% three months ended June 30, 2023 ($1.3 million).
Due to the nature of VRB's contracts, revenue is typically recognized when an energy storage system is installed and commissioned. VRB did not complete any installations and commissionings during three months ended June 30, 2024 and therefore recorded no revenue during this period. During the three months ended June 30, 2023, the majority of our
18
revenue came from VRB as it delivered, installed and commissioned a 1MW/2MWh energy storage system to a customer in China, which resulted in $1.3 million of revenue being recognized.
| Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Percentage Change | |||||||||||||||
| (In thousands) | |||||||||||||||||
| CGI: Software licensing and data processing services: | |||||||||||||||||
| Revenue | $ | 538 | $ | 42 | 1177 | % | |||||||||||
| Cost of sales | (192) | (21) | 811 | % | |||||||||||||
| Gross profit | 346 | 21 | 1543 | % | |||||||||||||
| VRB: Energy storage systems: | |||||||||||||||||
| Revenue | $ | — | $ | 1,272 | (100) | % | |||||||||||
| Cost of sales | — | (1,235) | (100) | % | |||||||||||||
| Gross profit | — | 37 | (100) | % | |||||||||||||
| Total | |||||||||||||||||
| Revenue | $ | 538 | $ | 1,314 | (59) | % | |||||||||||
| Cost of sales | (192) | (1,256) | (85) | % | |||||||||||||
| Gross profit | 346 | 58 | 496 | % | |||||||||||||
CGI’s revenue for the three months ended June 30, 2024 was $0.5 million, an increase of $0.5 million from $0.0 million for the three months ended June 30, 2023. The increase in CGI’s revenue was a result of more data processing services being contracted for by customers than the prior period in 2023.
CGI’s gross profit for the three months ended June 30, 2024 was $0.3 million, an increase of $0.3 million from $0.0 million for the three months ended June 30, 2023. The increase in CGI's gross profit was consistent with the increase in revenue.
Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023
For the six months ended June 30, 2024 we recorded a net loss attributable to common stockholders of $102.3 million ($0.85 per share), compared to $74.3 million ($0.80 per share) for the six months ended June 30, 2023, which was an increase of $28.0 million. Significant contributors to this increase for the six months ended June 30, 2024 included an increase of $21.8 million in exploration expenditures and an increase of $3.2 million in the share of loss of equity method compared to the six months ended June 30, 2023.
Exploration expenses were $80.9 million for the six months ended June 30, 2024, an increase of $21.8 million from $59.1 million for the six months ended June 30, 2023. Exploration expenses consisted of the following:
| Six months ended June 30, | ||||||||||||||
| (In thousands) | 2024 | 2023 | ||||||||||||
| Exploration Expenses: | ||||||||||||||
| Santa Cruz, USA | $ | 48,315 | $ | 29,725 | ||||||||||
| Tintic, USA | 7,201 | 3,075 | ||||||||||||
| San Matias, Colombia (Cordoba) | 6,754 | 14,767 | ||||||||||||
| Hog Heaven, USA | 5,837 | 1,054 | ||||||||||||
| Unity, USA | 1,650 | 21 | ||||||||||||
| Samapleu Project, Ivory Coast | 1,414 | — | ||||||||||||
| Carolina, USA | 1,195 | 1,028 | ||||||||||||
| Bitter Creek, USA | 1,186 | 42 | ||||||||||||
| White Hill, USA | 331 | 750 | ||||||||||||
| Lincoln, USA | 138 | 477 | ||||||||||||
| Generative exploration and other | 6,876 | 8,171 | ||||||||||||
| Total | $ | 80,897 | $ | 59,110 | ||||||||||
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During the six months ended June 30, 2024, exploration expenditures largely focused on activities at:
•the Santa Cruz Project where $48.3 million of exploration expenditure was incurred in the six months ended June 30, 2024 compared to $29.7 million incurred in the six months ended June 30, 2023. Activities during the six months ended June 30, 2024 at Santa Cruz were focused on a program of infill resource drilling, geotechnical, hydrological, and metallurgical drilling/laboratory testing along with advancing permitting and technical studies required to support a prefeasibility study;
•the Tintic Project where $7.2 million of exploration expenditure was incurred in the six months ended June 30, 2024 compared to $3.1 million incurred in the six months ended June 30, 2023. Activities during the six months ended June 30, 2024 were focused on diamond drilling in the Mammoth area;
•the San Matias Project where $6.8 million of exploration expenditure was incurred by Cordoba Minerals for the six months ended June 30, 2024 compared to $14.8 million incurred in the six months ended June 30, 2023. Activities during the six months ended June 30, 2024 were focused on preparations for detailed engineering design of the Alacran mine; and
•the Hog Heaven Project where $5.8 million of exploration expenditure was incurred in the six months ended June 30, 2024 compared to $1.1 million incurred in the six months ended June 30, 2023. Activities during the six months ended June 30, 2024 were focused on diamond drilling in the Flathead Mine, West Flathead and Battle Butte areas.
General and administrative expenses were $23.3 million for the six months ended June 30, 2024, which was consistent with the $23.3 million incurred for the six months ended June 30, 2023.
Share of loss of equity method investees was $4.5 million for the six months ended June 30, 2024, an increase of $3.2 million from $1.2 million for the six months ended June 30, 2023. The increase in loss was due to our $3.2 million share of the loss from the Ma'aden joint venture six months ended June 30, 2024. The Ma'aden joint venture was formed in July 2023.
Revenue for the six months ended June 30, 2024 was $1.1 million a decrease of $0.8 million from $2.0 million for six months ended June 30, 2023. The sources of revenue for the periods changed significantly. CGI’s software licensing and data processing services to the mining and oil and gas industries represented 100.0% of our revenue for the six months ended June 30, 2024 ($0.9 million) and 36.2% for the six months ended June 30, 2023 ($0.7 million). VRB generated no revenue during the six months ended June 30, 2024 and 63.8% of the revenue for the six months ended June 30, 2023 ($1.3 million.
Due to the nature of VRB's contracts, revenue is typically recognized when an energy storage system is installed and commissioned. VRB did not complete any installations and commissionings during six months ended June 30, 2024 and therefore recorded no revenue during this period. During the six months ended June 30, 2023, $1.3 million of our revenue came from VRB as it delivered, installed and commissioned a 1MW/2MWh energy storage system to a customer in China.
| Six months ended June 30, 2024 | Six months ended June 30, 2023 | Percentage Change | |||||||||||||||
| (In thousands) | |||||||||||||||||
| CGI: Software licensing and data processing services: | |||||||||||||||||
| Revenue | $ | 898 | $ | 721 | 25 | % | |||||||||||
| Cost of sales | (292) | (205) | 43 | % | |||||||||||||
| Gross profit | 606 | 516 | 17 | % | |||||||||||||
| VRB: Energy storage systems: | |||||||||||||||||
| Revenue | $ | — | $ | 1,272 | (100) | % | |||||||||||
| Cost of sales | — | (1,235) | (100) | % | |||||||||||||
| Gross profit | — | 37 | (100) | % | |||||||||||||
| Total | |||||||||||||||||
| Revenue | $ | 898 | $ | 1,993 | (55) | % | |||||||||||
| Cost of sales | (292) | (1,440) | (80) | % | |||||||||||||
| Gross profit | 606 | 553 | 9 | % | |||||||||||||
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CGI’s revenue for the six months ended June 30, 2024 was $0.9 million, an increase of $0.2 million from $0.7 million for the six months ended June 30, 2023. The increase in CGI’s revenue was a result of more data processing services being contracted for by customers than the prior period in 2023. CGI’s gross profit for the six months ended June 30, 2024 was $0.6 million, an increase of $0.1 million from $0.5 million for the six months ended June 30, 2023. The increase in CGI's gross profit was consistent with the increase in revenue.
Stock-Based Compensation
During the six months ended June 30, 2024, we granted the following stock options to certain directors, officers and employees of the Company:
•1.8 million stock options issued on March 11, 2024 at an exercise price of $13.50. The fair value of the option grant was determined using the Black-Scholes option-pricing model as $3.46 per share; and
•0.4 million stock options issued on April 8, 2024 at an exercise price of $13.50. The fair value of the option grant was determined using the Black-Scholes option-pricing model as $4.72 per share.
Liquidity, Capital Resources and Capital Requirements
Cash Resources
We have recurring net losses and negative operating cash flows and we expect that we will continue to operate at a loss for the foreseeable future.
We generate revenue from our technology businesses. We have not generated any revenue from our mining projects and do not expect to generate any revenue from our mining projects for the foreseeable future.
We have funded our operations primarily through the sale of our equity and convertible securities.
At June 30, 2024 and December 31, 2023, we had cash and cash equivalents of $133.8 million and $205.0 million, respectively, and a working capital of $106.8 million and $176.8 million, respectively. Of the total cash and cash equivalents at June 30, 2024 and December 31, 2023, $20.8 million and $15.0 million, respectively, was not available for the general corporate purposes of the Company as these amounts were held by non-wholly-owned subsidiaries.
As at August 7, 2024, we believe that we will have sufficient cash resources to carry out our business plans for at least the next 12 months, after which we expect to need additional financing to further advance our projects and conduct our business. We have based these estimates on our current assumptions which may require future adjustments based on our ongoing business decisions as well as, in particular, exploration success at our mineral projects. Accordingly, we may require additional cash resources earlier than we currently expect or we may need to curtail currently planned activities.
Our significant operational expenses include the payments that we anticipate making under the various earn-in and option agreements to which we are a party. These agreements are structured to provide us with flexibility whereby our ability to continue to explore on a mineral project is contingent on funding agreed specified levels over specified time intervals.
We may seek additional financing at any time through debt, equity, project specific debt, and/or other means, including asset sales. Our continued operations are dependent on our ability to obtain additional financing or to generate future cash flows. However, there can be no assurance that we will be successful in our efforts to raise additional capital on terms favorable to us, or at all.
Cash Balances as of June 30, 2024
The table below discloses the amounts of cash disaggregated by currency denomination as of June 30, 2024 in each jurisdiction that our affiliated entities are domiciled.
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| Currency by Denomination (in USD Equivalents) | |||||||||||||||||||||||||||||||||||
| US dollars | Canadian dollars | Chinese Renminbi | Colombian Pesos | Other | Total | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Jurisdiction of Entity: | |||||||||||||||||||||||||||||||||||
| USA | $ | 106,402 | $ | 647 | $ | — | $ | — | $ | — | $ | 107,049 | |||||||||||||||||||||||
| Colombia | — | — | — | 14,878 | — | 14,878 | |||||||||||||||||||||||||||||
| France | 4,403 | — | — | — | 1 | 4,404 | |||||||||||||||||||||||||||||
| Canada | 2,135 | 1,875 | — | — | — | 4,010 | |||||||||||||||||||||||||||||
| Singapore | 1,793 | — | — | — | — | 1,793 | |||||||||||||||||||||||||||||
| China | — | — | 770 | — | — | 770 | |||||||||||||||||||||||||||||
| British Virgin Islands | 363 | — | — | — | — | 363 | |||||||||||||||||||||||||||||
| Other | 97 | 299 | — | — | 149 | 545 | |||||||||||||||||||||||||||||
| Total | $ | 115,192 | $ | 2,821 | $ | 770 | $ | 14,878 | $ | 150 | $ | 133,811 | |||||||||||||||||||||||
Our subsidiary VRB, domiciled in the Cayman Islands, is subject to certain foreign exchange restrictions with respect to its People's Republic of China ("PRC") subsidiaries. There are foreign exchange policies in the PRC that limit the amount of capital that can be directly transmitted offshore from VRB’s PRC subsidiaries to VRB. Since their incorporation, these PRC subsidiaries have had accumulated losses and have not declared or paid any dividends or made any distribution of earnings.
There were no cash transfers to or from our PRC subsidiaries in the form of intercompany loans during the six months ended June 30, 2024.
Refer to Note 17 of our consolidated financial statements in our 2023 Form 10-K which outlines other restrictions on transfers of net assets from our consolidated subsidiaries to the Company.
Convertible Bond — VRB
In 2021, VRB issued a convertible bond for gross proceeds of $24.0 million. The bond has a five-year term and interest accrues at a rate of 8% per annum. Prior to the maturity date, the convertible bond will be automatically converted into equity of VRB upon an equity financing or sale event, at a price per share equal to the lower of (A) the transaction price of the equity financing or sale event, and (B) the valuation cap price of $158.0 million divided by the total shares outstanding at the time of the event. If no equity financing or sale event occurs, VRB must repay the outstanding principal and interest on maturity.
Cash Flows
The following table presents our sources and uses of cash for the periods indicated:
| Six months ended June 30, 2024 | |||||||||||
| 2024 | 2023 | ||||||||||
| Net cash (used in) provided by: | |||||||||||
| Operating activities | (94,501) | (65,830) | |||||||||
| Investing activities | (2,716) | (40,872) | |||||||||
| Financing activities | 27,074 | 30,651 | |||||||||
| Effect of foreign exchange on cash | (1,089) | 192 | |||||||||
| Total change in cash | (71,232) | (75,859) | |||||||||
Operating activities
Net cash used in operating activities for all periods presented largely was spent on our exploration expenses and our general and administrative costs. We do not generate adequate cash from operations to cover our operating expenses and therefore rely on our financing activities to provide the cash resources to fund our operating and investing activities.
The net cash used in operating activities for the six months ended June 30, 2024 of $94.5 million primarily was the result of $78.8 million of cash exploration expenditures and $17.0 million of cash general and administrative costs. The net
22
cash used in operating activities for the six months ended June 30, 2023 of $65.8 million primarily was the result of $57.4 million of cash exploration expenditures and $14.0 million of cash general and administrative costs.
Investing activities
Our investing activities generally relate to acquisitions of mineral property interests, purchases of public company shares in companies that we may partner with and capital expenditures at our projects. To date, due to our mining projects being in the exploration stage we have not incurred material capital expenditures.
Net cash used in investing activities for the six months ended June 30, 2024 of $2.7 million was mainly attributable to $0.6 million related to payments for mineral interests, $1.1 million for the purchases of property, plant and equipment and $1.1 million for the purchase of investments that are subject to significant influence. In addition, we acquired cash of $0.2 million when we commenced consolidating SNC in March 2024.
Financing activities
During the six months ended June 30, 2024, there were no significant financing activities as we continued to fund our operations with the proceeds from our September 2023 public offering. Our subsidiary, Cordoba raised $26 million during six months ended June 30, 2024 in relation to financing its Alacran project through its strategic arrangement with JCHX.
Contractual Obligations
As of June 30, 2024, there have been no material changes, outside the ordinary course of business, in our contractual obligations since December 31, 2023. Refer to Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 26, 2024, for information regarding our contractual obligations.
Off Balance Sheet Arrangements
As of June 30, 2024, we were not involved in any off-balance sheet arrangements that have or are reasonably likely to have a material effect on our financial condition, results of operations, or liquidity.
Related Party Transactions
See Note 12 of our consolidated financial statements for the three and six months June 30, 2024.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities as of the date of our financial statements.
Below are the accounting matters that we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue, expense, gain or loss being reported. Actual results may vary from our estimates in amounts that may be material to the financial statements. An accounting estimate is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our financial statements.
We base our assumptions and estimates on historical experience and various other sources that we believe to be reasonable under the circumstances. Actual results may differ from the estimates we calculate due to changes in circumstances, global economics and politics and general business conditions. A summary of our significant accounting policies are detailed in Note 3 to our consolidated financial statements included in our 2023 Form 10-K. We have outlined below those policies identified as being critical to the understanding of our business and results of operations and that require the application of significant management judgment in developing estimates.
Recoverable value of exploration mineral interests
We review and evaluate exploration mineral interests for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of our exploration mineral interests and intangible assets did not involve significant estimation in the periods presented as circumstances did not indicate the
23
carrying amount of our assets may not be recoverable. However, the recoverability of our recorded mineral interests is subject to market factors that could significantly affect the recoverability of our assets, such as commodity prices, results of exploration activities that may affect our intentions to continue under option or earn-in agreements and geopolitical circumstances, particularly in Colombia. By nature, significant changes in these factors are reasonably possible to occur periodically, which could materially impact our financial statements.
Stock-based compensation
Compensation expense for options granted to employees, directors and certain service providers is determined based on estimated fair values of the options at the time of grant using the Black-Scholes option pricing model, which takes into account, as of the grant date, the fair market value of the shares, expected volatility, expected life, expected dividend yield and the risk-free interest rate over the expected life of the option. The use of the Black-Scholes option pricing model requires input estimation of the expected life of the option and volatility, which can have a significant impact on the valuation model and resulting expense recorded.
In March 2024 and April 2024, we granted 1.8 million stock options and 0.4 million stock options, respectively, to certain directors, officers and employees of the Company at an exercise price of $13.50 per share. The fair value of the option grants was determined using the Black-Scholes option-pricing model as $3.46 and $4.72, respectively. The following assumptions were used to compute the fair value of the options granted:
| March 11, 2024 Grant Date | April 8, 2024 Grant Date | |||||||
| Risk-free interest rate | 4% | 4.6% | ||||||
| Dividend yield | nil | nil | ||||||
| Estimated volatility | 61.6% | 60.1% | ||||||
| Expected option life | 4 years | 4 years | ||||||
The risk-free interest rate assumption was based on the U.S. treasury constant maturity yield at the date of the grant over the expected life of the option. No dividends are expected to be paid. We calculated the estimated volatility based on the historical volatility of a group of peer companies’ common stock and a group of relevant stock market indices over the expected option life as we only commenced publicly trading in June 2022. The computation of expected option life was determined based on a reasonable expectation of the option life prior to the option being exercised or forfeited.
Income taxes
We make estimates and judgments in determining the provision for income tax expense, deferred tax assets and liabilities and liabilities for unrecognized tax benefits, including interest and penalties. We are subject to income tax laws in many jurisdictions, including the United States, Canada, Colombia, Peru, Australia, the Ivory Coast and the PRC.
We report income tax in accordance with U.S. GAAP, which requires the establishment of deferred tax accounts for all temporary differences between the financial reporting and tax bases of assets and liabilities, using currently enacted tax rates. In addition, deferred tax accounts must be adjusted to reflect new rates if enacted into law.
Realization of deferred tax assets is contingent on the generation of future taxable income. As a result, we consider whether it is more likely than not that all or a portion of such assets will be realized during periods when they are available, and if not, we provide a valuation allowance for amounts not likely to be recognized. In determining our valuation allowance, we have not assumed future taxable income from sources other than the reversal of existing temporary differences. The extent to which a valuation allowance is warranted may vary as a result of changes in our estimates of future taxable income. In addition to the potential generation of future taxable income through the establishment of economic feasibility, development and operation of mines on our exploration assets, estimates of future taxable income could change in the event of disposal of assets, the identification of tax-planning strategies or changes in tax laws that would allow the benefits of future deductible temporary differences in certain entities or jurisdictions to be offset against future taxable temporary differences in other entities or jurisdictions.
We recognize the effect of uncertain income tax positions if those positions are more likely than not of being sustained. The amount recognized is subject to estimates and our judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately incurred for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. We had no uncertain tax positions as of June 30, 2024.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.
Item 4. Controls and Procedures.
Management’s Evaluation of our Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
As of June 30, 2024, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of June 30, 2024, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2024, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
25
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we and our subsidiaries may become subject to various legal proceedings that are incidental to the ordinary conduct of our business. Although we cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, we make a provision for potential liabilities when we deem them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments.
Our subsidiary Cordoba is currently involved in two legal proceedings. The first is a criminal lawsuit filed by Cordoba in late 2018 and in January 2019 with the Colombian prosecutors against nine members of former Colombian management alleging breach of fiduciary obligations, abuse of trust, theft and fraud. This proceeding is ongoing. In the second proceeding, Cordoba (along with the National Mining Agency, Ministry of Mines and Energy, the local environmental authority, the Municipality of Puerto Libertador and the State of Cordoba) were served with a class action claim by the Alacran Community. This class action seeks (i) an injunction against Cordoba´s operations in the Alacrán area and (ii) an injunction against the prior declaration by the authorities that the Alacran Community´s mining activities were illegal. The claim was initially filed with the Administrative Court of Medellín, which remanded the case to the Administrative Court of Montería, which contested it and submitted the case to the Council of State. The Council of State determined the Administrative Court of Montería as the competent tribunal, where the process is currently being conducted. The Administrative Court of Montería admitted the commencement of the class action on September 2021. The decision was challenged by Cordoba and other defendants and confirmed by the Court. Cordoba timely filed its: (i) response to the lawsuit and statement of defense; and (ii) opposition to the injunction requested by plaintiffs. The Court now should: (i) issue a decision on the injunction; and (ii) schedule date and time for the initial hearing. While the court matters proceed, Cordoba will incur additional costs that will negatively impact its financial position. As well, the litigation process is uncertain and it is possible that the second proceeding is resolved against Cordoba, which could have a material adverse effect on its business, results of operations, financial condition and prospects.
Item 1A. Risk Factors.
There have been no material changes to our risk factors previously disclosed in Part I, Item 1A. “Risk Factors” of our 2023 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities for the Three Months Ended June 30, 2024
There were no unregistered sales of equity securities during the three months ended June 30, 2024.
26
Item 6. Exhibits.
Exhibit Number | Description | ||||
| 10.1 | |||||
| 10.2## | |||||
| 10.3* | |||||
| 31.1* | |||||
| 31.2* | |||||
| 32.1* | |||||
| 32.2* | |||||
| 101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | ||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | ||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | ||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | ||||
*Filed herewith.
## Certain schedules or portions thereof are omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to provide on a supplemental basis a copy of any omitted schedule to the U.S. Securities and Exchange Commission or its staff upon request.
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 7, 2024 | By: | /s/ Taylor Melvin | ||||||
| Taylor Melvin | ||||||||
| Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
Date: August 7, 2024 | By: | /s/ Jordan Neeser | ||||||
| Jordan Neeser | ||||||||
| Chief Financial Officer | ||||||||
| (Principal Financial Officer) | ||||||||
28
Exhibit 10.3*
COMPUTATIONAL GEOSCIENCES INC.
AMENDED & RESTATED
2011 INCENTIVE STOCK OPTION PLAN
1.Purpose and Interpretation
1.1.Purpose. The purpose of this Incentive Stock Option Plan is to enhance the Issuer’s ability to attract and retain suitable Directors, Executive Officers, Employees and Consultants and to provide an incentive to them to acquire a proprietary interest in the Issuer, to continue their participation in the affairs of the Issuer and to increase their efforts on behalf of the Issuer.
1.2.Definitions. In this Plan, except as otherwise expressly provided or as the context otherwise requires:
(a) “Board” means the board of Directors of the Issuer, and includes any committee of the Board to which responsibilities with respect to the Plan have been delegated;
(b)“Consultant” has the same meaning as defined in NI 45‐106;
(c)“Director” has the same meaning as defined in NI 45‐106;
(d)“Eligible Person” means,
(i)an Employee, Executive Officer, Director or Consultant of the Issuer,
(ii)an Employee, Executive Officer, Director or Consultant of a related entity of the Issuer, or
(iii)a permitted assign of a person referred to in paragraphs (i) or (ii) above;
(e)“Employee” has the same meaning as set out under the ITA;
(f)“Executive Officer” has the same meaning as defined in NI 45‐106;
(g)“Exercise Price” means the amount payable per Share on the exercise of an Option, as determined in accordance with Paragraph 3.3;
(h)“Expiry Date” means the day on which an Option expires as specified in the Option Agreement;
(i)“Fair Market Value” means the highest price, expressed in dollars, that the Shares would bring in an open and unrestricted market between a willing buyer and a willing seller who are both knowledgeable, informed, and prudent, and who are acting independently of each other and who deal with each other at arm’s length for purposes of the ITA as determined, as of any date, in good faith by the Board;
(j)“Issuer” means Computational Geosciences Inc. and any successor thereof;
(k)“ITA” means the Income Tax Act (Canada);
(l)“NI 45‐106” means National Instrument 45‐106 ‐ Prospectus and Registration Exemptions of the Canadian Securities Administrators;
(m)“Option” means the option granted to an Optionee under this Plan and the Option Agreement;
(n)“Option Agreement” means the Notice of Option Grant and Option Agreement attached as Appendix “A” hereto or such option agreement or agreements as is approved from time to time by the Board and as is not inconsistent with the terms of this Plan;
(o)“Optionee” means an Eligible Person to whom an Option has been granted and includes any permitted assign;
(p)“permitted assign” has the same meaning as defined in NI 45‐106
(q)“Plan” means this 2011 Incentive Stock Option Plan, as amended and restated;
(r)“related entity” has the same meaning as defined in NI 45‐106;
(s)“Securities Act” means the Securities Act (British Columbia), as amended from time to time; and
(t)“Shares” means the common shares in the capital of the Issuer.
1.3.Interpretation. In this Plan, except as otherwise expressly provided or as the context otherwise requires,
(a)headings are solely for convenience of reference and are not intended to be complete or accurate descriptions of content or to be guides to interpretation of this Plan or any part of it,
(b)a reference to currency means Canadian currency,
(c)a reference to a statute includes all regulations made thereunder, all amendments to the statute or regulations in force from time to time, and every statute or regulation that supplements or supersedes such statute or regulation,
(d)a reference to an entity includes any successor to that entity,
(e)a word importing the masculine gender includes the feminine and neuter, a word in the singular includes the plural. A word importing a corporate entity includes an individual, and vice versa, and
(f)a reference to “approval”, “authorization” or “consent” means written approval, authorization or consent.
1.4.Applicable Law. This Plan and any related agreement or document executed pursuant to this Plan will be governed by and construed in accordance with the laws of the Province of British Columbia and the applicable federal laws of Canada and any grant of an interest herein shall be treated, in all respects, as a contract made in British Columbia. Each Optionee under this Plan irrevocably attorns to and submits to the exclusive jurisdiction of
the Courts of British Columbia with respect to any matter arising under or relating to this Plan and any related agreement or document executed pursuant to this Plan.
1.5.Rights of a Shareholder. No Optionee will have any rights of a shareholder with respect to any Shares until the Shares are issued as evidenced by the appropriate entry on the shareholders’ register of the Issuer.
1.6.Employment. Nothing contained in this Plan or any agreement shall confer upon any Executive Officer, Employee or Consultant any right with respect to employment or continuance of employment or a retainer for services or continuance of such retainer, as the case may be, with the Issuer or any related entity of the Issuer, or interfere in any way with the right of the Issuer to terminate such Optionee’s employment or retainer at any time. Participation in the Plan by an Optionee is voluntary.
2.Administration of the Plan
2.1.Administration. The Plan shall be administered by the Board, and subject to any restrictions imposed by law and except as provided for herein, the Board shall have full authority to:
(a)determine and designate from time to time those Optionees to whom Options are to be granted and the number of Shares to be optioned to each such Optionee;
(b)determine the time or times when, and the manner in which, each Option shall be exercisable and the duration of the exercise period;
(c)determine from time to time the Exercise Price, provided such determination is not inconsistent with this Plan; and
(d)interpret the Plan and to make such rules and regulations and establish such procedures as it deems appropriate for the administration of the Plan, taking into consideration the recommendations of management.
2.2.Board Discretion. Any determination made by the Board with respect to any Option will be made in its sole discretion at the time of grant of the Option or, unless in contravention of any express term of this Plan or any related agreement or document executed pursuant to this Plan, at a later time, and such determination will be final and binding on the Issuer and on all persons having an interest in this Plan or in any interest granted hereunder.
3.Shares Subject to the Plan
3.1.Aggregate Maximum Number of Shares Subject to Plan. The maximum aggregate number of Shares that may be reserved for issuance under this Plan shall not exceed 3,626,470 Shares.
3.2.Options. The Board may grant Options to Eligible Persons and will determine the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may be exercised, any vesting period of the Option, and all other terms and conditions of the Option, subject to the following:
(a)Date of Grant – The date of grant of an Option will be the date on which the Board makes the determination to grant such Option, unless otherwise specified by the Board. The Option Agreement and a copy of this Plan will be delivered to the Optionee within a reasonable time after the granting of the Option.
(b)Form of Grant – Each Option granted under this Plan will be evidenced by an Option Agreement in the form attached to this Plan as Exhibit “A”, or in such other form as may, from time to time, be approved by the Board.
(c)Price – The Exercise Price of any Option shall be determined by the Board, provided that such price shall not be lower than the Fair Market Value of the Shares on the date of grant of the Option.
(d)Term – The term of an Option will be such period after the date of grant thereof as the Board determines at the time of granting of the Option provided that such term does not exceed ten years.
(e)Vesting – The Board may provide for Options to become exercisable or vest at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as determined at the discretion of the Board at the time of the grant.
(f)Exercise of Options – Unless otherwise earlier terminated, Options may be exercisable up to the Expiry Date, by delivery of a signed exercise notice in the form attached to the Option Agreement or in such other form as may be approved by the Board. If someone other than the Optionee exercises the Option, then such person must submit documentation reasonably acceptable to the Issuer that such person has the right to exercise the Option.
(g)Issuance of Shares – Provided that the signed exercise notice and payment are in form and substance satisfactory to counsel for the Issuer, the Issuer shall issue the Shares registered in the name of the Optionee or Optionee’s legal representative and shall deliver certificates representing the Shares with the appropriate legends affixed thereto.
3.3.Effect of termination of employment or Death. Subject to earlier termination as specifically provided for herein and notwithstanding the exercise period set forth in the Option Agreement:
(a)if an Optionee is terminated for any reason other than for breach of contract or cause, or the Optionee’s death prior to the Expiry Date, such Option shall forthwith cease vesting as to such portion of the Option as has not previously vested and the Optionee may exercise such Option (but only to the extent that such Option has vested and become exercisable immediately prior to the date of Termination), for a period of 90 days from the date of termination;
(b)if an Optionee is terminated because of cause prior to the Expiry Date, such Option shall forthwith cease vesting as to such portion of the Option as has not previously vested and no Option held by such Optionee will, unless otherwise determined by the Board, be exercisable following the date of termination; and
(c)if an Optionee dies prior to the Expiry Date, such Option shall forthwith cease vesting as to such portion of the Option as has not previously vested and the Optionee’s legal representative may exercise such Option (but only to the extent that such Option has vested and become exercisable immediately prior to the date of death), for a period of one year from the date of the death.
For the purposes of section 3.3 (a) and (b) an Optionee is terminated effective as of the date of delivery of a written or oral notice of termination given by an Optionee to the Issuer or by the Issuer to the Optionee or such other date as is expressly set out in such notice, regardless of whether the termination is voluntary or involuntary or with or without cause and notwithstanding that the Optionee may or may not be entitled to additional notice of termination pursuant to statute or otherwise.
3.4.Restrictions on Transferability. Except as specifically provided for herein, Options granted under this Plan, and any interest therein, will not be transferable or assignable by the Optionee, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution. During the lifetime of the Optionee an Option will be exercisable, and any elections with respect to an Option may be made, only by the Optionee. The terms of the Option will be binding upon the executors, administrators and heirs of the Optionee.
3.5.Exchange and Buyout of Options. Subject to Section 4, the Board may, at any time or from time to time, authorize the Issuer, with the consent of the respective Optionees, to issue new Options in exchange for the surrender and cancellation of any or all outstanding Options and/or any outstanding stock options not granted under this Plan. The Board may at any time buy from an Optionee an option previously granted with payment in cash, Shares or other consideration, based on such terms and conditions as the Board and the Optionee may agree.
3.6.Dissolution and Liquidation. In the event of the proposed dissolution or liquidation of the Issuer, to the extent an Option has not been previously exercised, it will terminate immediately prior to the consummation of such proposed action. The Board may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Board and give each Optionee the right to exercise his or her Option as to all or part of the Shares thereof, including Shares as to which the Option would not otherwise be exercisable.
4.Adjustment Upon Capital Reorganization, Merger, Sale of Assets or Liquidation and Accelerated Vesting in Certain Events
4.1.Changes in Capitalization. Subject to any required action by the shareholders of the Issuer, the number of Shares covered by each outstanding Option, and the number of Shares which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the Exercise Price of each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a share subdivision or consolidation, stock dividend, combination or reclassification of the Shares, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Issuer (a “Capital Reorganization”);
provided, however, that conversion of any convertible securities of the Issuer shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Issuer of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or Shares subject to an Option or the Exercise Price thereof.
4.2.Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Issuer, to the extent that an Option has not been previously exercised, it will terminate immediately prior to the consummation of such proposed action. The Board may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Board and give each Optionee the right to exercise his or her Option as to all or any part of the Optioned Shares, including shares as to which the Option would not otherwise be exercisable.
4.3.Accelerated Vesting in the Event of Merger or Change of Control. In the event of:
(a)an ”acquisition transaction” of the Issuer, as defined in section 4.4, with or into another corporation, or
(b)a ʺchange in controlʺ of the Issuer, as defined in section 4.4,
unless otherwise determined by the Board prior to the occurrence of such acquisition transaction or change of control, any Options outstanding as of the date such acquisition transaction or change in control, as the case may be, is determined to have occurred that are not yet exercisable and vested on such date shall become fully exercisable and vested.
4.4.Transaction Definitions. For the purposes of this section 4.3
(a)ʺchange in controlʺ means the acquisition by any person or group of persons acting in concert by virtue of an agreement, arrangement, commitment or understanding, of direct or indirect beneficial ownership of or control over securities of the Issuer representing fifty percent (50%)
or more of the combined voting power of the Issuer’s then outstanding securities; and
(b)“acquisition transaction” includes the sale, transfer or other disposition of all or substantially all of the assets and undertaking of the Issuer to any other entity.
4.5.Transaction Notice. If at any time the Issuer:
(a)proposes to undertake any transaction referred to in sections 4.1, 4.2 or 4.3;
(b)receives notice of a bona fide offer for Shares made to shareholders generally or to a class of shareholders, which offer, if accepted in whole or in part, would result in a change in control of the Issuer;
then, and in each such case, the Issuer must mail personally deliver or cause to be mailed or personally delivered to an Optionee a notice specifying the full particulars of such transaction or offer . Such notice shall be mailed at least 15 days prior to the date therein specified.
4.6.Substantial Sale. If a shareholder or group of shareholders (the “Selling Shareholders”) of the Issuer agree to sell to a third party (or more than one third party acting in concert) (a “Purchaser”) shares representing more than 75% of the outstanding Shares of the Issuer (a “Substantial Sale”) and the Purchaser also offers to either: (a) buy the Options of the Optionee; or (b) have the Issuer cancel the Options by the Issuer making a payment to the Optionee, then the Optionee must sell his or her Options to the Purchaser or agree to the cancellation of the Option and receive a payment from the Issuer at a price equal to:
A (B – C)
Where
| A | = | number of Shares otherwise issuable upon exercise of the Optionee’s Option; | ||||||
| B | = | the price per Share being paid by the Purchaser to the Selling Shareholders; and | ||||||
| C | = | Exercise Price of the Optionee’s Option. | ||||||
and on otherwise similar terms and conditions as are applicable under the Substantial Sale. If the Purchaser has agreed to purchase only shares of a class or series which are convertible
into Shares (“Convertible Shares”), the price per Share applicable in the above formula shall be calculated on an as converted basis (and if there is more than one conversion rate applicable to different classes or series of Convertible Shares outstanding, the conversion shall be computed on a pro rata basis based upon the ratio of the number of Shares which the holders of each class or series of Convertible Shares may acquire to the total number of Shares which all holders of all classes and series of Convertible Shares may acquire).
If the Purchaser offers to buy the Options of an Optionee and the Optionee does not sell the Optionee’s Options to the Purchaser as contemplated above, then that Optionee’s Options will expire, terminate and be cancelled on completion of the Substantial Sale.
5.Amendments
5.1.Amendments to Plan. The Board may amend, modify or terminate the Plan at any time if and when it is advisable in the absolute discretion of the Board. However, any amendment of such Plan which would:
(a)materially increase the benefits under the Plan;
(b)increase the number of Shares which would be issued under the Plan; or
(c)materially modify the requirements as to eligibility for participation in the Plan,
shall, if required by law, be effective only upon the approval of the shareholders of the Issuer. No amendment, modification or termination of the Plan shall materially affect an Option already granted under this Plan without the written consent of the Optionee.
5.2.Amendments to Outstanding Options. The Board may amend, modify or terminate an Option with the written consent of the Optionee at any time if and when it is advisable in the absolute discretion of the Board. However, any amendment or modification of an outstanding Option held by an Optionee who is an “insider” of the Issuer as such term is defined in the Securities Act shall, if required by law, be effective only upon the approval of the requisite majority of shareholders of the Issuer.
6.General
6.1.Notice. Any notice, direction or other instrument or communication required to be given or delivered to the Issuer under the terms of this Plan shall be in writing and addressed to the Corporate Secretary of the Issuer at its principal corporate office address. Any notice, direction or other instrument or communication required to be given or delivered to an Optionee may be in writing and addressed to such Optionee at the last known address of the
Optionee as determined by the Issuer’s records or such other address as such Optionee may designate in writing from time to time to the Issuer. Any notice, direction or other instrument or communication if delivered shall be deemed to have been validly and effectively given on the date on which it was delivered and, if sent by facsimile transmission, shall be deemed to have been validly and effectively given on the next business day following the day on which it was sent; provided that, if the day of delivery is not a business day, such notice, waiver, direction or other instrument or communication shall be deemed to have been given and received on the next business day following such date.
6.2.Transferability. Any benefits, rights and options accruing to any Optionee in accordance with the terms and conditions of this Plan shall not be transferable unless specifically provided herein. During the lifetime of an Optionee all benefits, rights and options may only be exercised by the Optionee.
6.3.Shareholders’ Agreement. All Optionee’s shall, upon exercise of any Options, enter into and/or agree to be bound by such shareholders’ agreement or agreements as will be in force and effect at the time of issuance of the Shares on exercise of such Options, a copy of which will be provided to the Optionee upon exercise of any Options, as and when requested by the Issuer but in any case prior to the issuance of any Shares.
6.4.Tax Matters. Notwithstanding any other provision of this Plan, the Issuer’s obligation to issue Shares to Optionee pursuant to the exercise of an Option or otherwise pay an amount pursuant to the Plan or any Option shall be subject to the satisfaction of all federal, state, provincial, local and foreign tax obligations as may be required by applicable law, including, but not limited to, obligations to make withholdings, deductions or remittances in respect of any taxable benefits of a Optionee arising under this Plan or any Option (“tax withholding obligations”) and the Issuer shall have the power and right to:
(a)deduct or withhold from all amounts payable to a Optionee pursuant to this Plan, any Option, or otherwise in the course of the employment of the Optionee in respect of the Option with the Issuer or its Subsidiary, and
(b)require the Optionee to remit to the Issuer an amount sufficient to satisfy in full any tax withholding obligations as may be imposed on the Issuer by applicable law.
Further, the Issuer may require the Optionee to satisfy, in whole or in part, such deduction or any tax withholding obligation by instructing the Issuer to withhold Shares that would
otherwise have been received by the Optionee upon exercise of any Options, and sell such Shares by Issuer as a trustee on behalf of the Optionee, and remit the proceeds of such sale to the relevant taxing authority in satisfaction of the tax or withholding obligations. By participating in the Plan, the Participant consents to the foregoing and authorizes the Issuer or its related entity, as applicable, to effect the sale of such Shares on behalf of the Optionee and to remit the proceeds of such sale to the relevant taxing authority in satisfaction of the tax or withholding obligations. Neither the Issuer nor any applicable related entity shall be responsible for obtaining any particular price for the Shares nor shall the Issuer or any applicable related entity be required to issue any Shares under the Plan unless the Optionee has made suitable arrangements with the Issuer and any applicable related entity to fund any withholding obligation
6.5.Necessary Approvals. The obligation of the Issuer to allot, issue or deliver Shares in accordance with this Plan is subject to all applicable corporate and securities laws which may be required in connection with the allotment, issuance or delivery of such Shares by the Issuer. If any Shares cannot be issued to any Optionee for any reason including, without limitation, the failure to obtain such approval, the obligation of the Issuer to issue such Shares shall terminate and any payment made to the Issuer shall be returned to the Optionee.
6.6.Further Assurances. Each Optionee must from time to time execute and deliver all such further documents and instruments and do all acts and things as the other party may reasonably require to effectively carry out or better evidence or perfect the full intent and meaning of this Plan, any Option Agreement and any related agreement or document executed pursuant to this Plan.
6.7.Successors and Assigns. The Issuer may assign any of its rights under this Plan, any Option Agreement and any related agreement or document executed pursuant to this Plan and this Plan, any Option Agreement and any related agreement or document executed pursuant to this Plan shall be binding upon and enure to the benefit of the successors and assigns of the Issuer.
6.8.Nonexclusivity of the Plan. Neither the adoption of this Plan by the Board nor any provision of this Plan will be construed as creating any limitations of the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
APPENDIX “A”
FORM OF OPTION GRANT NOTICE, AGREEMENT & NOTICE OF EXERCISE
COMPUTATIONAL GEOSCIENCES INC.
NOTICE OF STOCK OPTION GRANT
Dear **:
You have been granted an option (the “Option”) to purchase common shares of
COMPUTATIONAL GEOSCIENCES INC. (the “Issuer”) as follows:
Date of Grant: | |||||
Exercise Price: | |||||
Number of Shares Granted: | |||||
Type of Option: | |||||
Term/Expiration Date: | |||||
Vesting Schedule: | |||||
YOU REPRESENT YOU ARE CURRENTLY A SERVICE PROVIDER WITHIN THE MEANING OF THE ISSUER’S AMENDED & RESTATED 2011 INCENTIVE STOCK OPTION PLAN (the “PLAN”). YOU FURTHER ACKNOWLEDGE AND AGREE THAT
NOTHING IN THIS AGREEMENT, NOR IN THE PLAN (the terms of which are incorporated herein by reference) CONFERS UPON YOU ANY RIGHT WITH RESPECT TO CONTINUATION OR STATUS AS A SERVICE PROVIDER, NOR SHALL IT INTERFERE IN ANY WAY WITH YOUR RIGHT OR THAT OF THE ISSUER TO TERMINATE YOUR STATUS AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Issuer’s representative below, you and the Issuer agree that this option is granted under and governed by the terms and conditions of the Issuer’s Amended & Restated 2011 Incentive Stock Option Plan and the Stock Option Agreement, all of which are attached and made a part of this document.
OPTIONEE: COMPUTATIONAL GEOSCIENCES INC.
[NAME OF OPTIONEE]
By:
Title:
Date: Date:
STOCK OPTION AGREEMENT
1.Grant of Option. COMPUTATIONAL GEOSCIENCES INC., incorporated under the laws of Canada (the “Issuer”), hereby grants to the Optionee named in the Notice of Grant (the “Optionee”), an option (the “Option”) to purchase the total number of Common Shares (the “Shares”) set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the “Exercise Price”) subject to the terms, definitions and provisions of the Issuer’s Amended & Restated 2011 Incentive Stock Option Plan (the “Plan”) adopted by the Issuer, which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option. To the extent there is any inconsistency between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall govern.
2.Exercise of Option. This Option shall be exercisable prior to expiration or termination, in accordance with the vesting schedule set out in the Notice of Grant and with the provisions of Section 3.3 of the Plan, by the delivery of the Notice of Exercise Form annexed hereto as Exhibit “A” and the Form of Acknowledgement annexed hereto as Exhibit “B”, duly completed and executed on behalf of the Optionee, at the office of the Issuer during its normal business hours together with payment of the Exercise Price in lawful funds of Canada.
3.Restrictions on Exercise. Exercise of this Option is restricted in accordance with the provisions of Section 3.3 of the Plan and as set out in the Notice of Grant. This Option may not be exercised until such time as the Plan has been approved by the shareholders of the Issuer, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any applicable laws or regulations. As a condition to the exercise of this Option, the Issuer may require the Optionee to make any representation and warranty to the Issuer as may be required by any applicable law or regulation.
4.Non‐Transferability of Option. The benefits, rights and options accruing to any Optionee with respect to any Option will not be transferable by the Optionee other than in the manner provided for in the Plan. During the lifetime of an Optionee, all benefits, rights and options may only be exercised by the Optionee or by his or her guardian or legal representative.
5.Restriction on Transfer. The Optionee agrees that following the date of the exercise of this Option, he or she shall not effect any sale or transfer of the Shares issued pursuant to such exercise without first obtaining the prior written consent of the Board of Directors of the Issuer (or any committee designated therefor), which consent shall be in the sole discretion of the Board. All transferees of Shares or any interest therein shall be required as a condition of such transfer to agree in writing in the form satisfactory to the Issuer that they will receive and hold such Shares or interests subject to the provisions of this Stock Option Agreement (the “Agreement”), including, insofar as applicable, the restriction on resale set forth in Section 6 below. Any sale or transfer of the Issuer’s Shares shall be void unless the provisions of this Agreement are met.
6.Legends. The Optionee understands and agrees that the Issuer shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by applicable securities laws or regulations or shareholders’ agreement:
“TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED PURSUANT TO THE ARTICLES OF THE ISSUER.”
“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) THE
DISTRIBUTION DATE (as that term is defined in Multilateral Instrument 45‐ 102 of the Canadian Securities Administrators), AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.”
7.Term of Option. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option.
8.Shareholders Agreement. All Shares issued on exercise of Options will be held in accordance with, and are subject to, such shareholders’ agreement or agreements to which the Optionee is a party, as are in force and effect at the time of issuance of the Shares.
9.Miscellaneous. This Agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia, and each of the parties hereby submits to the non‐exclusive jurisdiction of the courts of that province. Should any provision of this Agreement or any notice thereto be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.
10.Copy of Plan. The Optionee confirms receipt of a copy of the Plan and acknowledges the terms and conditions set out therein.
EXHIBIT A
NOTICE OF EXERCISE OF STOCK OPTION
TO: COMPUTATIONAL GEOSCIENCES INC.
1.Exercise of Option. Effective as of the date set out below the undersigned (“the Optionee”) hereby gives notice pursuant to the Issuer’s Amended & Restated 2011 Stock Option Incentive Plan (the “Plan”) and the Notice of Grant dated ** of the exercise of the options represented thereby and hereby subscribes for and purchases, such number of Common shares (the “Option Shares”) in the capital of COMPUTATIONAL GEOSCIENCES INC. (the “Issuer”) for such aggregate Exercise Price as set out below and encloses a certified cheque in the amount of Exercise Price set out below payable to the Issuer, representing payment in full for the Option Shares to be acquired.
2.Exempt Distribution. The Optionee hereby acknowledges that as the exercise of the Option and the issuance of the Option Shares to the Optionee is being completed pursuant to exemptions from the requirements to provide the Optionee with a prospectus and to sell the securities subscribed for herein through a person registered to sell securities under applicable securities legislation: (a) certain protections, rights and remedies provided by applicable securities legislation, including statutory rights of rescission or damages, shall not be available to the Optionee and the Optionee may not receive information that the Optionee would be entitled to under applicable securities legislation if no prospectus exemption was available; (b) the Issuer is relieved of certain obligations which would otherwise apply under applicable securities legislation; (c) various filings may be completed and disclosures made by the Issuer to the securities regulatory authorities and/or stock exchanges or quotations systems having jurisdiction over the securities of the Issuer; (d) no securities commission or similar regulatory authority has reviewed or passed on the merits of the Option Shares; and (e) there is no government or other insurance covering the Option Shares.
3.Restriction on Transfer. The Optionee represents and warrants to the Issuer that he or she has been independently advised as to the restrictions on the Optionee’s ability to transfer or re‐sell the Option Shares and, in particular, that the Option Shares may be subject to a hold period in accordance with applicable securities laws and that the certificates representing the Option Shares may bear legends denoting such re‐sale restrictions.
4.Shareholders’ Agreement. The Optionee covenants and agrees, which obligation shall survive the issuance of the Shares, to enter into the Issuer’s shareholders agreement dated March 14, 2011, as amended or such other shareholders’ agreement or agreements in the form prescribed by the Issuer (“Shareholder Agreement”) as will be in force and effect at the time of issuance of the Shares, a copy of which has been provided to the Optionee, as and when requested by the Issuer but in any case prior to the issuance of any underlying Shares. The Optionee has duly completed and executed, and herewith delivered, a Form of Acknowledgement as provided by the Issuer. Notwithstanding the foregoing, the Optionee irrevocably appoints the Chief Executive Officer of the Issuer, or failing him or her the Corporate Secretary of the Issuer, or failing either of them any Director of the Issuer, holding such office of the Issuer from time to time, as the Optionee’s attorney‐in‐fact and does hereby authorize him as such to make and sign on the Optionee’s behalf and to deliver such Shareholder Agreement or Form of Acknowledgement which such attorney in his or her discretion sees fit. The Optionee agrees that the Power of Attorney granted herein shall
survive the death, disability, incapacity, insanity or insolvency of the Optionee and shall extend to and be binding upon the heirs, executors, administrators, legal personal representatives, successors and assigns of the Optionee.
5.Pooling & Escrow. The Optionee shall enter into whatever pooling or escrow agreement (“Escrow Agreement”) is required under applicable securities laws, policies, notices or orders, under the rules or policies of any applicable stock exchange or stock quotation system or under any agreement between the Issuer and a selling agent or underwriter in connection with a public offering of the Issuer’s securities. Notwithstanding the foregoing, the Optionee irrevocably appoints the Chief Executive Officer of the Issuer, or failing him or her the Corporate Secretary of the Issuer, or failing either of them any Director of the Issuer, holding such office of the Issuer from time to time, as the Optionee’s attorney‐in‐fact and does hereby authorize him as such to make and sign on the Optionee’s behalf and to deliver such Escrow Agreement. The Optionee agrees that the Power of Attorney granted herein shall survive the death, disability, incapacity, insanity or insolvency of the Optionee and shall extend to and be binding upon the heirs, executors, administrators, legal personal representatives, successors and assigns of the Optionee.
6.Tax Consultation. The Optionee understands that the Optionee may suffer adverse tax consequences as a result of the Optionee’s purchase or disposition of the Option Shares. The Optionee represents that the Optionee has consulted with any tax consultants the Optionee deems advisable in connection with the purchase or disposition of the Option Shares and that the Optionee is not relying on the Issuer for any tax advice.
7.Miscellaneous. The Optionee acknowledges and agrees that the Plan and Notice of Grant are incorporated herein by reference and together with this Exercise Notice constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Issuer and the Optionee with respect to the subject matter hereof. This agreement shall be governed by and construed in accordance with the laws of British Columbia, and the Optionee hereby submits to the non‐exclusive jurisdiction of the courts thereof.
The Optionee acknowledges that unless designated to be picked‐up by the Optionee, all certificates representing the Option Shares so exercised shall be delivered by courier or registered mail at the option of the Issuer in accordance with the registration and delivery instructions set forth below. The Optionee acknowledges that it accepts the risks of such delivery and waives any claim against the Issuer and its directors, officers, employees and agents for theft or loss.
| Name of Optionee (please print) | Number of Option Shares: | |||||||
| Aggregate Exercise Price: | ||||||||
| Signature | Date: | |||||||
| REGISTRATION INSTRUCTIONS | SPECIAL DELIVERY INSTRUCTIONS | |||||||
| Certificates for the Option Shares are to be issued as follows: | To be completed ONLY if address for delivery is different from that appearing in the Registration Instructions. | |||||||
| Name | Name | |||||||
| Address | Address | |||||||
| ( ) | ||||||||
| Telephone Number | ☐ Hold certificates for pick‐up at the offices of the Issuer. | |||||||
EXHIBIT B
FORM OF ACKNOWLEDGEMENT
To: The parties to the Shareholders Agreement made as of March 14, 2011 among Computational Geosciences Inc. (the “Issuer”), I‐Pulse Geophysics Inc. (now High Power Exploration Inc.) and all other shareholders of the Issuer, as the same may be amended from time to time (the “Shareholder Agreement”)
The undersigned, , having purchased certain shares of the Issuer pursuant to the exercise of options granted pursuant to the Issuer’s Amended & Restated 2011 Incentive Stock Option Plan, in consideration of the issuance of such shares to the undersigned and other good and valuable consideration (receipt of which is hereby acknowledged) hereby agrees to be a party to and bound by all of the provisions of the Shareholder Agreement as if the undersigned were an original party thereto. Capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Shareholder Agreement.
DATED at , this day of , 20 .
SIGNED, SEALED AND DELIVERED )
in the presence of )
)
)
OR
•
Per:
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
OF 2002
I, Taylor Melvin, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2024 of Ivanhoe Electric 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 registrant as of, and for, the periods presented in this report; | ||||||||||||||||
| 4. | The registrant’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 registrant 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 registrant, including its consolidated subsidiaries, 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 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 registrant’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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |||||||
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’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 registrant’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 registrant’s internal control over financial reporting. | |||||||||||||||||||||||||
Date: August 7, 2024 | ||||||||||||||||||||||||||
| By: | /s/ Taylor Melvin | |||||||||||||||||||||||||
| Taylor Melvin | ||||||||||||||||||||||||||
| Chief Executive Officer (principal executive officer) | ||||||||||||||||||||||||||
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
OF 2002
I, Jordan Neeser, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2024 of Ivanhoe Electric 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 registrant as of, and for, the periods presented in this report; | ||||||||||||||||
| 4. | The registrant’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 registrant 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 registrant, including its consolidated subsidiaries, 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 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 registrant’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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |||||||
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’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 registrant’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 registrant’s internal control over financial reporting. | |||||||||||||||||||||||||
Date: August 7, 2024 | ||||||||||||||||||||||||||
| By: | /s/ Jordan Neeser | |||||||||||||||||||||||||
| Jordan Neeser | ||||||||||||||||||||||||||
| Chief Financial Officer (principal 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 Quarterly Report on Form 10-Q of Ivanhoe Electric Inc. (the “Company”) for the fiscal quarter ended June 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Taylor Melvin, as Chief Executive Officer of the Company, hereby certifies, pursuant to and solely for the purpose of 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge and belief, that:
(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.
Date: August 7, 2024 | ||||||||||||||||||||||||||
| By: | /s/ Taylor Melvin | |||||||||||||||||||||||||
| Taylor Melvin | ||||||||||||||||||||||||||
| Chief Executive Officer (principal executive officer) | ||||||||||||||||||||||||||
Exhibit 32.2
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 Quarterly Report on Form 10-Q of Ivanhoe Electric Inc. (the “Company”) for the fiscal quarter ended June 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Jordan Neeser, as Chief Financial Officer of the Company, hereby certifies, pursuant to and solely for the purpose of 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge and belief, that:
(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.
Date: August 7, 2024 | ||||||||||||||||||||||||||
| By: | /s/ Jordan Neeser | |||||||||||||||||||||||||
| Jordan Neeser | ||||||||||||||||||||||||||
| Chief Financial Officer (principal financial officer) | ||||||||||||||||||||||||||