6-K
LION COPPER & GOLD CORP. (LCGMF)
UNITED STATESSECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2021
Commission File Number: 0-55139
QUATERRA RESOURCES INC. (Translation of registrant's name into English)
1100-1199 West Hastings StreetVancouver, BC V6E 3T5 Canada (Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
[ x ] Form 20-F [ ] Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
SUBMITTED HEREWITH
Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| QUATERRA RESOURCES INC. | ||
|---|---|---|
| (Registrant) | ||
| Date: August 9, 2021 | By: | /s/ Lei Wang |
| Lei Wang | ||
| Title: | Chief Financial Officer |
Quaterra Resources Inc.: Exhibit 99.1 - Filed by newsfilecorp.com
(An Exploration Stage Company)
Condensed Interim Consolidated Financial Statements
June 30, 2021
(Unaudited - in U.S. Dollars)
Notice to Reader:
The Company's independent auditor has not reviewed these condensed interim consolidated financial statements. These statements have been prepared by and are the responsibility of the Company's management. This notice is being provided under National Instrument 51-102 - Continuous Disclosure Obligations.
| Quaterra Resources Inc. Condensed Interim Consolidated Statements of Financial Position<br><br> <br>(Unaudited-in thousands of U.S. Dollars) | |||||||
|---|---|---|---|---|---|---|---|
| Note | June 30, 2021 | December 31, 2020 | |||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Assets | |||||||
| Current assets: | |||||||
| Cash | $ | 621 | $ | 701 | |||
| Other receivables | 3 | 3 | |||||
| Marketable securities | 3 | 909 | 641 | ||||
| Prepaid and deposit | 5 | 5 | |||||
| 1,538 | 1,350 | ||||||
| Non-current assets: | |||||||
| Mineral properties | 4 | 29,208 | 28,236 | ||||
| Reclamation bonds | 34 | 34 | |||||
| 29,242 | 28,270 | ||||||
| Total Assets | $ | 30,780 | $ | 29,620 | |||
| Liabilities | |||||||
| Current liabilities: | |||||||
| Accounts payable and accrued liabilities | $ | 488 | $ | 222 | |||
| Water rights sale obligation | 4, 8 | 1,000 | - | ||||
| 1,488 | 222 | ||||||
| Non-current liability | |||||||
| Derivative liabilities | 5 | 108 | 51 | ||||
| Total Liabilities | 1,596 | 273 | |||||
| Shareholders' Equity | |||||||
| Share capital | 102,014 | 101,553 | |||||
| Contributed surplus | 19,956 | 19,406 | |||||
| Deficit | (92,786 | ) | (91,612 | ) | |||
| 29,184 | 29,347 | ||||||
| Total Liabilities and Shareholders' Equity | $ | 30,780 | $ | 29,620 |
See the accompanying notes to the condensed interim consolidated financial statements.
Nature of Operations and Going Concern (Note 1)
Subsequent Event (Note 8)
Approved on behalf of the Board of Directors on August 5, 2021:
| /s/ "Thomas Patton" | /s/"Terrence Eyton" |
|---|---|
| Director | Director |
Page 2 | 11
| Quaterra Resources Inc.<br><br> <br>Condensed Interim Consolidated Statements of Loss and Comprehensive Loss<br><br> <br>(Unaudited- In thousands of U.S. Dollars, except for shares and per share amounts) | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three months ended June 30, | Six months ended June 30, | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Note | 2021 | 2020 | 2021 | 2020 | |||||||||
| General administrative expenses | |||||||||||||
| General office | $ | 18 | 19 | $ | 31 | 28 | |||||||
| Insurance | 24 | 17 | 24 | 17 | |||||||||
| Investor relations and corporate development | 26 | 25 | 41 | 42 | |||||||||
| Professional fees | 43 | 7 | 49 | 17 | |||||||||
| Rent | 22 | 29 | 30 | 58 | |||||||||
| Salaries and benefits | 234 | 108 | 440 | 312 | |||||||||
| Transfer agent and regulatory | 17 | 11 | 44 | 32 | |||||||||
| (384 | ) | (216 | ) | (659 | ) | (519 | ) | ||||||
| Fair value (loss) gain on derivative liabilities | 5 | (38 | ) | 28 | (57 | ) | 80 | ||||||
| Foreign exchange gain (loss) | 15 | - | 18 | (2 | ) | ||||||||
| General exploration | - | - | (12 | ) | - | ||||||||
| Unrealized gain on marketable securities | 3 | 397 | 273 | 268 | 341 | ||||||||
| Interest expense and other | - | (31 | ) | - | (47 | ) | |||||||
| Share-based compensation | (732 | ) | (168 | ) | (732 | ) | (172 | ) | |||||
| (358 | ) | 102 | (515 | ) | 200 | ||||||||
| Loss and comprehensive loss for the period | $ | (742 | ) | $ | (114 | ) | $ | (1,174 | ) | $ | (319 | ) | |
| Loss per share - basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | |
| Weighted average number of common shares outstanding | 223,102,753 | 217,715,610 | 221,244,554 | 217,667,258 |
See the accompanying notes to the condensed interim consolidated financial statements.
Page 3 | 11
| Quaterra Resources Inc.<br><br> <br>Condensed Interim Consolidated Statements of Cash Flow<br><br> <br>(Unaudited- In thousands of U.S. Dollars) | ||||||
|---|---|---|---|---|---|---|
| Six months ended June 30, | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| 2021 | 2020 | |||||
| Operating activities | ||||||
| Net loss for the period | $ | (1,174 | ) | $ | (319 | ) |
| Items not involving cash: | ||||||
| Fair value loss (gain) on derivative liabilities | 57 | (80 | ) | |||
| Interest and convertible accretion | - | 66 | ||||
| Unrealized gain on marketable securities | (268 | ) | (341 | ) | ||
| Share-based compensation | 732 | 172 | ||||
| (653 | ) | (502 | ) | |||
| Changes in non-cash working capital | ||||||
| Other receivable | - | 1 | ||||
| Accounts payable and accrued liabilities | (63 | ) | (12 | ) | ||
| Water rights sale obligation | 1,000 | - | ||||
| 284 | (513 | ) | ||||
| Financing activities | ||||||
| Shares issued for cash | 279 | 19 | ||||
| 279 | 19 | |||||
| Investing activities | ||||||
| Expenditures on mineral properties | (643 | ) | (343 | ) | ||
| (643 | ) | (343 | ) | |||
| Decrease in cash | (80 | ) | (837 | ) | ||
| Cash, beginning of period | 701 | 1,812 | ||||
| Cash, end of period | $ | 621 | $ | 975 | ||
| Supplemental cash flow information | ||||||
| Exploration expenditures included in accounts payable | $ | 370 | $ | 31 |
See the accompanying notes to the condensed interim consolidated financial statements.
Page 4 | 11
| Quaterra Resources Inc.<br><br> <br>Condensed Consolidated Interim Statements of Changes in Equity<br><br> <br>(Unaudited - In thousands of U.S. Dollars, except for shares) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Number | Contributed | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| of shares | Share capital | surplus | Deficit | Total Equity | ||||
| Balance, December 31, 2019 | 217,215,610 | 101,424 | 19,212 | (90,629) | 30,007 | |||
| Stock options exercised | 500,000 | 35 | (16 | - | 19 | |||
| Share-based compensation | - | - | 172 | - | 172 | |||
| Net loss for the period | - | - | - | (319 | (319 | |||
| Balance, June 30, 2020 | 217,715,610 | $ | 101,459 | 19,368 | $ | (90,948 | $ | 29,879 |
| Balance, December 31, 2020 | 218,715,610 | $ | 101,553 | 19,406 | $ | (91,612 | $ | 29,347 |
| Stock options and warrants exercised | 5,300,000 | 461 | (182 | - | 279 | |||
| Share-based compensation | - | - | 732 | - | 732 | |||
| Net loss for the period | - | - | - | (1,174 | (1,174 | |||
| Balance, June 30, 2021 | 224,015,610 | $ | 102,014 | 19,956 | $ | (92,786 | $ | 29,184 |
All values are in US Dollars.
See the accompanying notes to the condensed interim consolidated financial statements.
Page 5 | 11
| Quaterra Resources Inc.<br><br> <br>Notes to Condensed Interim Consolidated Financial Statements<br><br> <br>For the six months ended June 30, 2021<br><br> <br>(Unaudited - In U.S. Dollars; tabular amounts in thousands except for shares) |
|---|
- Nature of Operations and Going Concern
Quaterra Resources Inc. (together with its subsidiaries, "Quaterra" or the "Company") is a copper exploration company working on its mineral properties located in Nevada and Alaska, United States. The Company is incorporated in British Columbia, Canada. Its head office is located at 1100 - 1199 West Hastings Street, Vancouver, British Columbia, Canada, V6E 3T5. The Company's common shares are listed on the TSX Venture Exchange ("TSXV") under the symbol "QTA" and trade on the OTCQB Market under the symbol "QTRRF."
The Company acquires its mineral properties through option or lease agreements and capitalizes all acquisition, exploration and evaluation costs related to the properties. The underlying value of the amounts recorded as mineral properties does not reflect current or future values. The Company's continued existence depends on discovering the economically recoverable mineral reserves and obtaining the necessary funding to complete the development of these properties.
These condensed interim consolidated financial statements are prepared on a going concern basis, which assumes that the Company will realize its assets and discharge its liabilities in the normal course of business. As of June 30, 2021, the Company had a working capital of $50,000 and had accumulated a deficit of $92,786,000.
The Company has no source of revenue and has significant cash requirements to maintain its mineral property interests and meet its administrative overheads. Although the Company has been successful in raising funds in the past, there can be no assurance that it will be able to do so in the future. In addition, if the Company fails in the water rights appeal and could not close the water rights sale announced on February 24, 2021 (Notes 4 & 8), the Company is obliged to return the $1,000,000 initial deposit to the buyer. These factors indicate material uncertainties that may cast significant doubt on the Company's ability to continue as a going concern. Should the Company be unable to continue as a going concern, the net realizable value of its assets may be materially less than the amounts on the condensed consolidated statements of financial position.
These condensed consolidated financial statements do not reflect adjustments to the carrying value and classification of assets and liabilities that might be necessary in the event of going concern. Such adjustments could be material.
Basis of Presentation and Accounting Policies
Statement of compliance
These condensed interim consolidated financial statements have been prepared under International Accounting Standard 34, Interim Financial Reporting, using accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. The Company's significant accounting policies and critical accounting estimates applied in these financial statements are consistent with those described in Note 2 of the Company's audited consolidated financial statements for the year ended December 31, 2020.
- Accounting estimates and judgments
The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the application of policies, reported amounts and disclosures. Actual results could differ from those estimates. Differences may be material.
Page 6 | 11
| Quaterra Resources Inc.<br><br> <br>Notes to Condensed Interim Consolidated Financial Statements<br><br> <br>For the six months ended June 30, 2021<br><br> <br>(Unaudited - In U.S. Dollars; tabular amounts in thousands except for shares) |
|---|
The critical judgments that the Company's management has made in the process of applying the Company's accounting policies, apart from those involving estimations, that have the most significant effect on the amounts recognized in the Company's consolidated financial statements are related to the economic recoverability of the mineral properties, liquidity risk and the assumption of no material restoration, rehabilitation and environmental exposure.
- Marketable Securities
On June 30, 2021, the Company held 1,942,795 common shares of Grande Portage Resources Ltd. with a market value of $909,000 (December 31, 2020 - $641,000). During the six months ended June 30, 2021, a $268,000 gain (June 30, 2020-$341,000) was recognized in the condensed interim consolidated statements of loss and comprehensive loss.
After the quarter-end, the Company sold 941,964 common shares of Grade Portage for total proceeds of Canadian Dollars ("CAD") 530,376.
- Mineral Properties
The Company owns a 100% interest in the MacArthur and Yerington properties. It has an option to earn a 100% interest in the Bear, Wassuk, and Butte Valley properties in Nevada and a 90% interest in the Groundhog property in Alaska.
On February 24, 2021, the Company announced a purchase and sale agreement to sell certain primary groundwater rights to Desert Pearl Farms LLC, a Yerington-based company involved in agriculture, for $2,910,000 (the "Agreement). In early March, the Company filed an application with the Nevada Engineer to change the manner of use of the water rights from mining to agriculture and their place of use. Under the terms of the Agreement, Desert Pearl made a $1,000,000 initial payment to the Company on March 5, 2021. The Agreement is subject to the State of Nevada Division of Water Resources' final approval (Note 8).
As of June 30, 2021, total mineral property maintenance and exploration costs are listed in the table below:
| (In thousands of U.S. Dollars) | MacArthur | Yerington | Bear | Wassuk | Groundhog | Butte Valley | Total |
|---|---|---|---|---|---|---|---|
| Balance, December 31, 2020 | 18,828 | 3,569 | 1,460 | 1,470 | 2,522 | 387 | 28,236 |
| Property maintenance | - | - | 93 | - | - | - | 93 |
| Geological & mapping | 20 | - | - | - | - | - | 20 |
| Geophysical & survey | 6 | - | - | - | 3 | - | 9 |
| Assay & labs | 13 | - | - | - | - | - | 13 |
| Drilling | 655 | - | - | - | - | - | 655 |
| Environmental | - | 56 | - | - | - | - | 56 |
| Field support & Other | 34 | 2 | - | - | 39 | - | 75 |
| Technical study | 51 | - | - | - | - | - | 51 |
| 779 | 58 | 93 | - | 42 | - | 972 | |
| Balance, June 30, 2021 | 19,607 | 3,627 | 1,553 | 1,470 | 2,564 | 387 | 29,208 |
Page 7 | 11
| Quaterra Resources Inc.<br><br> <br>Notes to Condensed Interim Consolidated Financial Statements<br><br> <br>For the six months ended June 30, 2021<br><br> <br>(Unaudited - In U.S. Dollars; tabular amounts in thousands except for shares) |
|---|
a) Bear Deposit, Nevada
The Company has five option agreements, entered from March 2013 to May 2015, to acquire a 100% interest in private land in Yerington, Nevada, known as the Bear deposit. Under the terms of these option agreements, as amended, the Company is required to make approximately $5,428,290 in cash payments over 15 years ($4,929,290 paid) to maintain the exclusive right to purchase the land, mineral rights and certain water rights and to conduct mineral exploration on these properties.
Outstanding payments due under the five option agreements by year are as follows:
- $193,000 due in 2021 ($93,000 paid);
- $193,000 due 2022;
- $201,000 due in 2023;
- $51,000 due in 2024; and
- $1,000 each due in 2025 to 2028.
b) Wassuk, Nevada
The Company has an option, as further amended, to earn a 100% interest in certain unpatented mining claims in Lyon County, Nevada, over ten years and is required to make $1,405,000 in cash payments ($1,155,000 paid) and incur a work commitment of $50,000 by December 31, 2021. Accordingly, a $125,000 option payment is due by August 1, 2021, and the final $125,000 is due by October 10, 2021.
The property is subject to a 3% NSR royalty upon commencing commercial production, which can be reduced to a 2% NSR royalty in consideration of $1,500,000.
c) Groundhog, Alaska
On April 25, 2017, the Company announced it signed a five-year lease agreement, extended, with Chuchuna Minerals Company ("Chuchuna") to earn a 90% interest in the Groundhog copper prospect, located 200 miles southwest of Anchorage, Alaska.
During the six months ended June 30, 2021, the lease agreement was further extended from six to seven years, providing the Company more time to make the required exploration expenditures and lump sum payment. To earn the 90% interest, the Company must fund a total of $5,000,000 ($2,564,000 funded) of exploration expenditure and make a lump sum payment to Chuchuna of $3,000,000 by the end of April 20, 2024. The Company can terminate the Agreement at its discretion.
The Company had met the annual work commitments up to year-end 2020 and is required to spend a minimum of $160,000 ($42,000 incurred) in 2021.
d) Butte Valley, Nevada
On August 22, 2019, the Company entered into an option agreement with North Exploration, LLC, to earn a 100% interest in 600 unpatented mining claims in White Pine County, Nevada, for $600,000 over five years. North Exploration will retain a 2.5% NSR, of which 1% can be purchased for $1,000,000. A further 0.5% NSR can be purchased within the first ten years for $5,000,000.
Page 8 | 11
| Quaterra Resources Inc.<br><br> <br>Notes to Condensed Interim Consolidated Financial Statements<br><br> <br>For the six months ended June 30, 2021<br><br> <br>(Unaudited - In U.S. Dollars; tabular amounts in thousands except for shares) |
|---|
On December 3, 2019, the Company entered another option agreement with Nevada Select Royalty, Inc., to purchase a 100% interest in 78 unpatented claims associated with the Butte Valley project for $250,000 over five years. Nevada Select Royalty will retain a 2% NSR, of which 1% can be purchased by Quaterra for $10,000,000.
Aggregate payments to maintaining the two option agreements by year are as follows:
$20,000 due 2019 (paid);
$80,000 due in 2020 (paid);
$100,000 due in 2021;
$150,000 due in 2022; and
$250,000 each due in 2023 and 2024.
Derivative Liabilities
The Company has certain warrants exercisable in a different currency from the Company's functional currency. These warrants are classified as derivative liabilities carried at fair value and revalued at each reporting date.
As of June 30, 2021, the derivative liabilities were related to 769,230 warrants with an exercise price denominated in Canadian dollars. They were revalued using the weighted average assumptions: volatility of 104%, the expected term of 1.2 years, a discount rate of 0.30% and a dividend yield of 0%.
- Share-based Compensation
a) Stock options
The Company has a stock option plan under which it is authorized to grant stock options of up to 10% of the number of common shares issued and outstanding of the Company at any given time.
| June 30, 2021 | December 31, 2020 | |||||||
|---|---|---|---|---|---|---|---|---|
| Weighted Average | Number of | Weighted Average | ||||||
| Number of | Exercise Price | Options | Exercise Price | |||||
| Options | (CAD) | (CAD) | ||||||
| Outstanding, beginning of period | 14,690,000 | 0.07 | 14,495,000 | 0.08 | ||||
| Granted | 4,950,000 | 0.245 | 3,175,000 | 0.080 | ||||
| Expired | (375,000 | ) | (0.065 | ) | (2,480,000 | ) | (0.13 | ) |
| Exercised | (4,300,000 | ) | (0.066 | ) | (500,000 | ) | (0.065 | ) |
| Outstanding, end of period | 14,965,000 | 0.13 | 14,690,000 | 0.07 | ||||
| Exercisable, end of period | 14,865,000 | 0.13 | 14,490,000 | 0.07 |
Page 9 | 11
| Quaterra Resources Inc.<br><br> <br>Notes to Condensed Interim Consolidated Financial Statements<br><br> <br>For the six months ended June 30, 2021<br><br> <br>(Unaudited - In U.S. Dollars; tabular amounts in thousands except for shares) |
|---|
The following table summarizes information about stock options outstanding by expiry dates with an exercise price in Canadian dollars:
| Exercise Price | Number of Options Outstanding | ||
|---|---|---|---|
| Expiry Date | (CAD) | June 30, 2021 | December 31, 2020 |
| April 14, 2021 | 0.065 | - | 2,795,000 |
| June 23, 2022 | 0.095 | 2,700,000 | 2,900,000 |
| September 20, 2023 | 0.06 | 1,690,000 | 2,370,000 |
| June 21, 2024 | 0.065 | 2,150,000 | 2,950,000 |
| August 8, 2024 | 0.06 | 500,000 | 500,000 |
| June 20, 2025 | 0.08 | 2,975,000 | 3,175,000 |
| June 18, 2026 | 0.245 | 4,950,000 | - |
| 14,965,000 | 14,690,000 |
On June 18, 2021, the Company granted 4,950,000 stock options to directors, officers, employees and consultants under the Company's stock option plan. The options are exercisable at CAD 0.245 per share for five years. The Company used the following assumptions in the Black-Scholes option pricing model: volatility 101.4%, risk-free interest rate 0.97%, expected life five years, forfeiture rate and expected dividend yield 0%.
After quarter-end, 300,000 stock options were exercised at CAD 0.095 for total proceeds of CAD 28,500.
a) Share purchase warrants
During the six months ended June 30, 2021, 1,000,000 warrants were exercised at CAD 0.065 for a procced of CAD 65,000. The table below lists the warrants outstanding:
| Expiry date | Exercise price | June 30, 2021 | December 31, 2020 | |
|---|---|---|---|---|
| August 28, 2022 | $ | 0.05 | 11,000,000 | 11,000,000 |
| August 28, 2022 | CAD | 0.065 | - | 1,000,000 |
| September 20, 2022 | CAD | 0.065 | 769,230 | 769,230 |
| 11,769,230 | 12,769,230 |
- Related Party Transactions
a) The Company's related parties include its directors and officers whose remuneration was as follows, subject to change of control provisions for officers:
| Three months ended June 30, | Six months ended June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands of U.S. Dollars) | 2021 | 2020 | 2021 | 2020 | ||||
| Salaries | $ | 163 | $ | 95 | $ | 262 | $ | 193 |
| Directors' fees | 9 | 9 | 18 | 18 | ||||
| Share-based compensation | 325 | 85 | 325 | 85 | ||||
| $ | 497 | $ | 189 | $ | 605 | $ | 296 |
Page 10 | 11
| Quaterra Resources Inc.<br><br> <br>Notes to Condensed Interim Consolidated Financial Statements<br><br> <br>For the six months ended June 30, 2021<br><br> <br>(Unaudited - In U.S. Dollars; tabular amounts in thousands except for shares) |
|---|
b) The Company has service agreements with two private companies owned by the Company's Corporate Secretary, Mr. Lawrence Page: Manex Resource Group Inc. ("Manex") and Advocate Services Ltd. ("Advocate"). Manex provides the Company with its Vancouver office space at CAD 7,500 per month, and Advocate provides investor communications at CAD 5,000 per month. Both agreements can be terminated at any time with advanced written notice from either party.
8. Subsequent Event
On July 23, 2021, the Company received notice from the State of Nevada that three water rights permits had been forfeited. Further that the application for an extension of time to prevent forfeiture of a fourth certificate was denied. The permits affected are components of the water rights agreement announced on February 24, 2021.
The basis for this decision includes increased demand on the users and non-use of the water by the Company for mining and milling purposes since 2011.
The Company has the right to appeal within 30 days from July 23, 2021, and has retained legal counsel to initiate the appeal process. Should the appeal be unsuccessful or Desert Pearl elects to terminate the Agreement, the Company will have to return the $1,000,000 initial payment to Desert Pearl. The $1,900,000 balance of the water rights proceeds will be forfeited.
Page 11 | 11
Quaterra Resources Inc.: Exhibit 99.2 - Filed by newsfilecorp.com
Management's Discussion and Analysis
Quarterly Highlights
For the six months ended June 30, 2021
Dated: August 5, 2021
(In U.S. dollars)
| Quaterra Resources Inc.<br><br> <br>MD&A – Quarterly Highlights<br><br> <br>For the six months ended June 30, 2021 |
|---|
This Management's Discussion and Analysis ("MD&A") of Quaterra Resources Inc. and its wholly-owned subsidiaries (collectively, "Quaterra" or the "Company"), dated August 5, 2021, should be read in conjunction with the condensed interim consolidated financial statements for the six months ended June 30, 2021 and the audited consolidated financial statements for the year ended December 31, 2020 and related notes thereto. These financial statements have been prepared following International Financial Reporting Standards ("IFRS"). All $ amounts in this MD&A are United States dollars unless otherwise noted.
Additional information about Quaterra, including the Company's press releases, quarterly and annual reports, is available through the Company's filings with the securities regulatory authorities in Canada at www.sedar.com or the United States Securities Exchange Commission at www.sec.gov/edgar. Information about mineral resources, as well as risks associated with investing in the Company's securities, is contained in the Company's most recently filed 20-F.
Performance Highlights
- Water Rights Sale
On February 24, 2021, the Company announced a water rights sale to Desert Pearl Farms LLC for $2,910,000 (the "Agreement"). An initial deposit of $1,000,000 was received on March 5, 2021, and funds were used for the Company's exploration programs and corporate expenses.
On July 26, 2021, the Company announced it received a notice from the State of Nevada declaring the forfeiture of three water rights permits, including the permit related to the Agreement, and denying the extension application submitted in November 2020 of the fourth water rights permit. The notice is based on increased demand for the available water from other users and non-use of the water by the Company for mining and milling purposes since 2011.
The Company has the right to appeal the State's decision within 30 days from the date of the notice. Accordingly, it has retained legal counsel to initiate and vigorously undertake the appeal process.
- Drilling at MacArthur Copper Oxide Property
On May 4, 2021, the Company began a 7,000-10,000-foot core drilling program at its MacArthur project in the Yerington District, Nevada. As of August 5, 2021, 9,633 ft has been drilled, with initial assay results from Skyline Assayers & Laboratories expected in August 2021. The focus of the drill program is to provide additional data required to complete a pre-feasibility study on the project, including representative metallurgical samples.
Review of Operations and Financial Results
The scale and nature of the Company's corporate and administrative activity have remained relatively consistent over the periods presented. Quarterly fluctuation in losses has mainly been caused by non-cash fair value changes in the derivative liabilities, unrealized gain or loss on the marketable securities, and share-based compensation.
The following table sets out the quarterly financial information for each of the last eight quarters:
Page 2 of 4
| Quaterra Resources Inc.<br><br> <br>MD&A – Quarterly Highlights<br><br> <br>For the six months ended June 30, 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands of U.S. dollars except for per share amount) | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Q2'21 | Q1'21 | Q4'20 | Q3'20 | Q2'20 | Q1'20 | Q4'19 | Q3'19 | |
| General administration | (384 | (275 | (298 | (326 | (216 | (303 | (302 | (364 |
| Fair value (loss) gain on derivative liabilities | (38 | (19 | 11 | (1 | 28 | 52 | (50 | 135 |
| Foreign exchange gain (loss) | 15 | 3 | (2 | 24 | - | (2 | (20 | (9 |
| Other expenses | - | (12 | (51 | (127 | (31 | (16 | (12 | (14 |
| Loss on settlement of convertible notes | - | - | - | (26 | - | - | (15 | 2 |
| Share-based compensation | (732 | - | - | (3 | (168 | (4 | - | (7 |
| (Loss) gain on marketable securities | 397 | (129 | (87 | 222 | 273 | 68 | (77 | 64 |
| Net loss | (742 | (432 | (427 | (237 | (114 | (205 | (476 | (193 |
| Basic loss per share | (0.00 | (0.00 | (0.00 | (0.00 | (0.00 | (0.00 | (0.00 | (0.00 |
All values are in US Dollars.
Liquidity and Capital Resources
The Company is an exploration stage company that has not earned any production revenue. As a result, its operations have been dependent mainly on proceeds from the sale of water rights in the last few years without diluting shareholders' value.
During the six months ended June 30, 2021, the Company spent $716,000 in operating activities (2020 - $513,000) and $643,000 (2020 - $343,000) in mineral property maintenance and technical work.
Under several mineral property option agreements, the Company is required to pay, at its discretion, a combined $753,000 ($260,000 paid year-to-date) in mineral property options and work commitment in 2021, plus annual mineral claim fees for its properties in Nevada (paid $347,000).
During the six months ended June 30, 2021, the Company received combined proceeds of Canadian Dollars (CAD) 350,100 from 4,300,000 stock options and 1,000,000 warrants exercises. After quarter-end, further 300,000 options were exercised at CAD 0.095 for CAD 28,500, and 941,964 common shares of Grande Portage were disposed of for CAD 530,376.
As of August 5, 2021, the Company has cash of $360,000 and 1,000,831 common shares of Grande Portage Resources Inc. worth approximately CAD 570,000.
Material increases or decreases in the Company's liquidity and capital resources will be determined by the success in water rights sale appeal and obtaining equity or other sources of financing. Should the appeal be unsuccessful and/or the buyer of the water rights elects to terminate the Agreement, the Company must return the $1,000,000 received in March 2021.
Please refer to Note 1, Nature of Operations and Going Concern, in the condensed interim consolidated financial statements for the period ended June 30, 2021, for details.
Related Party Information
Manex Resources Group ("Manex") and Advocate Services Ltd. ("Advocate") are private companies controlled by the Corporate Secretary of the Company, providing office premises and investor communications at a combined fee of CAD 12,500 per month.
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| Quaterra Resources Inc.<br><br> <br>MD&A – Quarterly Highlights<br><br> <br>For the six months ended June 30, 2021 |
|---|
On February 2, 2021, the Company announced the resignation of Gerald Prosalendis as President, CEO and Director. On May 13, 2021, the Company announced the appointment of Mr. Travis Naugle as CEO and Mr. Stephen Goodman as President.
Outstanding Share Data
As of August 5, 2021, the Company has:
- 224,315,610 common shares issued and outstanding;
- 11,000,000 and 769,230 warrants outstanding exercisable at $0.05 and CAD 0.065 until August 28, 2022, and September 20, 2022, respectively; and
- 14,665,000 stock options outstanding with a weighted exercise price of CAD 0.13.
Risks and Uncertainties
The Company is subject to many risks and uncertainties, each of which could have an adverse effect on the results, business prospects or financial position.
The Company's securities should be considered a highly speculative investment, and investors should carefully consider all of the information disclosed in the Company's regulatory filings before investing in the Company. For a comprehensive list of the risks and uncertainties applicable to the Company, please refer to the section entitled "Risk Factors" in the Company's most recent Form 20-F, available on the SEC website at www.sec.gov.
Forward-Looking Statements
Certain statements made and information contain "forward-looking statements" within the meaning of the United States Private Securities Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation (collectively, "Forward-Looking Statements").
Other than statements of historical fact, all statements that address activities, events or developments that the Company believes, expects or anticipates will, may, could or might occur in the future are Forward-Looking Statements. The words such as "believe", "anticipate", "expect", "estimate", "strategy", "plan", "intend", "may", "could", "would", "should", or similar expressions are intended to identify Forward-Looking Statements.
The forward-looking statements in this MD&A are based on the beliefs, expectations, and opinions of management when the statements are made. The Company undertakes no obligation to update any forward-looking statement should circumstances or estimates, or opinions change, except by applicable securities laws.
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Quaterra Resources Inc.: Exhibit 99.3 - Filed by newsfilecorp.com
Form 52-109FV2
Certification of Interim Filings
Venture Issuer Basic Certificate
I, C. Travis Naugle, Chief Executive Officer of Quaterra Resources Inc. certify the following:
Review**:** I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Quaterra Resources Inc. (the "issuer") for the interim period ended June 30, 2021.
No misrepresentations**:** Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
Date: August 9, 2021
| "C. Travis Naugle " |
|---|
| C. Travis Naugle<br><br> <br>Chief Executive Officer |
NOTE TO READER
In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of
i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
The issuer's certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.
Quaterra Resources Inc.: Exhibit 99.4 - Filed by newsfilecorp.com
Form 52-109FV2
Certification of Interim Filings
Venture Issuer Basic Certificate
I, Lei Wang, Chief Financial Officer of Quaterra Resources Inc. certify the following:
Review**:** I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Quaterra Resources Inc. (the "issuer") for the interim period ended June 30, 2021.
No misrepresentations**:** Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
Date: August 9, 2021
| "Lei Wang" |
|---|
| Lei Wang<br><br> <br>Chief Financial Officer |
NOTE TO READER
In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of
i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
The issuer's certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.