Engo Valley Pty Ltd.はオーストラリア民間資産持株会社であり、2024年2月9日に設立され、ナミビア民間会社ナミビア鉱物·投資持株(専有)有限会社の85%の株式を保有し、ナミビア私営会社はEPL-5887を保有している。EPL-5887はエンゴ谷ウランプロジェクトの所在地である。Engo Valley Pty Ltd.の多数の株式を買収する取引の詳細については以下でさらに検討する。雪湖探査(アメリカ)有限会社は2024年4月2日にデラウェア州に登録して設立され、資産持株会社であり、Engo Valley Pty Ltd.の多数の株式を持っている。
私たちの会社の住所はカナダウィニバーMb R 3 C 0 V 1 Main ST 30階360 Main ST 30 Flothです。*現在、コアサンプルに非現場ストレージ施設を提供しているほか、オフィスや運営施設は保持しておらず、象徴的な料金のみをいただいています。私たちは、私たちが未来の拡張計画に適応するために、主にレンタルを通じて十分な施設を得ることができると信じている。
The foregoing descriptions of the material terms of our acquisition of Global Uranium, and Global Uranium’s mineral property option agreement with Doctors Investment, are qualified in their entirety by reference to their respective agreements, each of which is filed as exhibits 4.14 and 4.13 to this Annual Report.
Lithium Market
Until recently, our Snow Lake Lithium™ Project constituted our sole material project. The lithium market currently remains depressed. Lithium prices continue to remain low after a stratospheric rise in 2022, followed by a precipitous 80% drop during 2023. Prices continue to drop in 2024. Demand for lithium continues to be weak, and a number of major global lithium producers continue to curtail production until the lithium market and lithium prices recover. Given the current state of the lithium markets, as mentioned above, our primary focus over the next year will be to advance the exploration of our two uranium projects, while taking a slower, more careful approach to exploring our two lithium projects described below.
At present, we do not consider our lithium projects to be material to our company.
41
Our Lithium Projects
The Shatford Lake Project
In January 2024, we signed an option agreement with ACME, pursuant to which ACME granted us the option to earn up to a 90% undivided interest in the mineral claims held by ACME at the Shatford Lake Project.
We may exercise the option by paying a total cash amount of C$500,000 and incurring a total of C$1.8 million in exploration and development expenditures, in each case over a two-year period.
Once we have earned a 90% undivided interest in the Shatford Lake Project, and completed a positive feasibility study, a joint venture between us and ACME will be formed for further development, the detailed market standard terms and conditions of which will be agreed at the time of formation of the joint venture.
Upon formation of the joint venture: (i) we will hold a 90% interest, and ACME will hold 10% interest in the joint venture, (ii) our interest will be a 90% participating interest in the joint venture, but will fund 100% of all expenditures until the completion of a positive feasibility study, and (iii) ACME will retain a 10% free carried interest, without the need to contribute to expenditures until the completion of a positive feasibility study on the Shatford Lake Project.
The Shatford Lake Project is comprised of 37 mineral claims located over three project areas, being Shatford Lake, Birse Lake, and Cat-Euclid Lake, totaling approximately 17,000 acres. The project is located in the Bird River Greenstone Belt in southeastern Manitoba, Canada. The region hosts hundreds of individual pegmatite bodies, many of which are classified as complex rare-element lithium-cesium-tantalum, or LCT, pegmatites. Thirty-one of the mineral claims are contiguous to the south of Sinomine Corporation’s Tanco Mine, an LCT producer since 1969.
Together with Critical Discoveries, a private geological services consulting company, we have designed a four-phase exploration program for 2024. Phase 1 consists of compiling and analyzing all past exploration data generated by ACME, including all geophysical and geochemical data, as well as past drilling results, in order to identify targets for field work in Phase 2. Phase 1 has been completed and Phase 2 has been initiated with the Critical Discoveries' exploration field team. Initial prospecting and mapping will focus on the northwest corner of the Shatford Lake Project and will then expand to cover the balance of the project. Initial prospecting activities to date have included the discovery of numerous pegmatites under heavy overburden. Samples have been taken and submitted to the assay lab for analysis.
Depending on assay results, Phase 3 is intended to be a program of up to 2,000 meters of diamond drilling, spread over approximately 10 holes of approximately 200 meters each, dependent upon appropriate drill target identification from Phase 2 of the program. Phase 4 will be compilation and evaluation of all field data, assay results, and drill results from the 2024 exploration program.
We do not consider the Shatford Lake Project material at this time.
The foregoing description of the material terms of our option agreement relating to the Shatford lake Project is qualified in its entirety by reference to the option agreement, dated January 29, 2024, between us and ACME, which is filed as exhibit 4.16 to this Annual Report.
The Snow Lake Lithium™ Project
The Snow Lake Lithium™Project is a 100%-owned exploration stage project located in the Snow Lake region of Northern Manitoba, Canada, comprising 122 mineral claims covering 24,515 hectares (approximately 60,577 acres). The Snow Lake Lithium™ Project consists of two deposits, the Thompson Brothers deposit and the Grass River deposit, which together have a measured, indicated and inferred resource estimate of approximately 8.2 million tonnes grading approximately 1% Li2O. To date, a total of 26,000 meters of drilling has been completed, of which approximately 20,000 meters are included in the current mineral resource estimate, with approximately 6,000 meters of drilling not included.
42
In July 2023, we completed the PEA, which considered a mine plan consisting of underground mining on both deposits, with an initial open pit on the Grass River deposit. Metallurgical testwork has demonstrated that conventional lithium process technologies of dense media separation and floatation will provide robust recoveries. The PEA contemplated that tailings would ultimately be backfilled underground, with no permanent tailing facility above ground. The PEA also looked at the possibility of direct shipping ore, or DSO, as an early cash flow generating opportunity to use revenue from DSO sales to offset initial capital costs to construct the mine and processing facility. We believe, but cannot assure you, that options exist to sell the DSO to a variety of parties. The PEA is preliminary in nature and is intended to provide an initial, high-level review of the Snow Lake Lithium™ Project's economic potential and design options. The projected economic results include numerous assumptions and are based on measured, indicated and inferred mineral resource estimates for the Snow Lake Lithium™ Project, as specified in the PEA. Inferred resources are considered to be too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the pea will be realized. Unlike mineral reserves, mineral resource estimates do not have demonstrated economic viability.
Due to a number of factors, including the current state of the lithium market and warmer than normal winter weather conditions in Northern Manitoba during early 2024, we did not undertake a planned winter drilling campaign. During 2024, we will complete our second year of environmental baseline data collection. Additional exploration, including additional infill drilling, and drilling of the open extensions of both the Thompson Brothers and Grass River deposits, is not planned to take place during 2024 due the factors described above.
We are of the view that the Snow Lake Lithium™ Project does not have the scale, size, grade or project economics to make it an attractive exploration project at the present time given the current lithium pricing environment. As such, our management has determined that the Snow Lake Lithium™ Project is no longer a material asset to the Company. While we do not intend to abandon the Snow Lake LithiumTM Project, further exploration activities have been limited until such time as the lithium market recovers, lithium prices recover, investor interest in the lithium sector returns, and capital once again becomes available to fund exploration and development of lithium projects.
We do not consider the Snow Lake Lithium™Project material at this time.
Our Competitive Strengths
We believe that the following competitive strengths will contribute to our success and differentiate us from our competitors:
·We have a unique portfolio of clean energy mineral projects including uranium and lithium projects.
·Our operations are located in the mining friendly jurisdictions of Canada and Namibia.
·Our uranium operations are located in Canada, the world’s second largest uranium producer, and Namibia, the world’s third largest uranium producer.
·Our uranium projects are considered to be top tier exploration projects with historical, non-modern mining code compliant uranium resources, that would benefit from modern exploration techniques and technology for uranium exploration.
·Our leadership team consists of experienced mining executives, with a track record of exploration, development and operations, as well as corporate financing and mergers and acquisitions.
Our Growth Strategies
We have a corporate strategy to assemble and develop a portfolio of clean energy mineral projects designed to support the clean energy transition and the EV transition. We continue to review North American opportunities in the clean
43
energy space, in an effort to identify additional sources of clean energy that have the potential to be commercialized, that would contribute to net zero, and that would complement our current portfolio of uranium and lithium projects.
We have developed a strategic plan for exploration and development of our projects that includes the following milestones:
·Undertake exploration activities on our uranium projects. We intend to conduct exploration activities on our Engo Valley Uranium Project and Black Lake Uranium Project to confirm the existence of historical uranium mineralization and to produce S-K 1300 compliant mineral resource estimates.
·Undertake preliminary exploration activities on our Shatford Lake Project. We intend to conduct initial exploration activities on our Shatford Lake Project to identify and confirm the potential existence of tantalum, cesium and lithium mineralization.
·Acquisitions of additional clean energy projects. In addition to our existing projects, our growth strategy includes the acquisition of other clean energy projects, including in areas of clean energy beyond uranium and uranium.
Marketing and Advertising
Given the current stage of development of our mineral resource projects, the company is not in a position to consider the form and terms and conditions of potential sale of products produced from our projects. Typically, in the uranium and lithium industries, primary uranium or lithium concentrate is sold under long term offtake agreements. Such arrangements typically specify quantities, price, product specifications and requirements, delivery schedules, together with other customary terms and conditions.
Our Customers
Given the current stage of development of our mineral resource projects, the company is not in a position to develop a customer base, as the company does not have sample products available for product qualification.
Competition
We face intense competition in the mineral exploration and exploitation industry on an international, national and local level. We compete with other mining and exploration companies, many of which possess greater financial resources and technical facilities than we do, in connection with the exploration and mining of suitable properties and in connection with the engagement of qualified personnel. The uranium and lithium exploration and mining industries are fragmented, and we are a very small participant in each sector. Many of our competitors explore for a variety of minerals and control many different properties around the world. Many of them have been in business longer than we have and have established more strategic partnerships and relationships and have greater financial accessibility than we have.
Intellectual Property
We do not have any registered intellectual property rights.
Facilities
Our corporate address is 360 Main St 30th Floor, Winnipeg, MB R3C 0V1, Canada. Currently, we do not maintain any office or operational facilities other than an off-site storage facility for our core samples, which we lease at a nominal fee. We believe that we will be able to obtain adequate facilities, principally through leasing, to accommodate our future expansion plans.
Employees
We have one employee at this time, our Chief Executive Officer Frank Wheatley. Other of our executive officers and advisers work for us as independent contractors under consulting agreements. These agreements, and the employment agreement with our Chief Executive Officer, typically include a confidentiality covenant that requires
44
consultants to protect our confidential information during their engagement with us. In addition, these consulting agreements include typical non-compete clauses that prohibit the consultants from entering into competitive consulting or employment relationships while they are working for us.
Insurance
We currently insure our directors and officers through a Directors and Officers insurance policy with Berkley Insurance Company. We currently do not insure against mine exploration and development risks.
Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business.
A group of concerned shareholders, including Nova, our largest shareholder, at the time holding approximately 37% of our issued and outstanding common shares, filed a Notice of Motion, or the Motion, in the Court of King’s Bench (Manitoba), or the Manitoba Court, seeking to prevent us from effecting the follow-on offering contemplated by the registration statement on F-1 (File No. 333-267600), initially filed with the SEC on September 19, 2022, as thereafter amended. Nova claimed that the offering was oppressive and was made for the improper purpose of diluting Nova’s shareholdings and entrenching the current management of the Company. On Thursday, September 29, 2022, at the request of the concerned shareholders of the Company, the Manitoba Court issued an order enjoining the Company from issuing any securities prior to October 27, 2022, the record date for the determination of the shareholders entitled to vote at the Company’s annual shareholder meeting set for December 15, 2022. The order also had the effect of forcing the Registrant to withdraw its public offering of common shares pursuant to the Registration Statement filed publicly on September 26, 2022. Accordingly, we withdrew the F-1 (File No. 333-267600) on October 3, 2022.
Government Regulation
Our business is subject a variety of laws and regulations applicable to companies conducting business in the mining industry. In Canada, mining law is divided between the federal and provincial governments. Ownership of lands and minerals generally belongs to the province in which they are located. Within the Province of Manitoba, mining activity is regulated by the Department of Agriculture and Resource Development and is governed primarily by provisions of The Mines and Minerals Act (Manitoba) together with its accompanying regulations and guidelines. The provinces have jurisdiction over mineral exploration, development, conservation and management. The federal government shares jurisdiction with the provinces on some related matters (taxation and the environment) and has exclusive jurisdiction over areas such as exports and foreign investment controls. Federal and provincial legislation affecting mining activities tends to fall into two main categories: (a) private matters of title and taxation; and (b) economic, social and environmental policies.
45
4.C. Organizational structure
The chart below presents our corporate structure:
46
4.D. Plants, Property and Equipment
Our corporate address is 360 Main St 30th Floor, Winnipeg, MB R3C 0V1, Canada. Currently, we do not maintain any office or operational facilities other than an off-site storage facility for our core samples, which we lease at a nominal fee. We believe that we will be able to obtain adequate facilities, principally through leasing, to accommodate our future expansion plans. For a description of the real property owned by us, please see “Item 4.B. Business Overview - Industry” herein.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report. This discussion may contain forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements because of various factors, including those set forth under Item 3 “Key Information—D. Risk Factors” or in other parts of this Annual Report. See also “Cautionary Statement Regarding Forward-looking Statements.”
5.A. Operating Results
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) of Snow Lake Resources Ltd., d/b/a Snow Lake Energy (“Snow Lake”, “we” or the “Company”) summarizes the significant factors affecting the Company’s operating results, financial condition, liquidity and cash flows as of and for the years ended June 30, 2024, 2023, and 2022. This MD&A should be read in conjunction with the Company’s consolidated financial statements and the related notes thereto for the years ended June 30, 2024, 2023 and 2022 (the “2024 Financials”). Amounts are expressed in Canadian dollars unless otherwise stated. This MD&A contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors.
The 2024 Financials and the financial information contained in this MD&A are prepared pursuant to International Financial Reporting Standards (“IFRS”) and in accordance with the standards of the United States Public Company Accounting Oversight Board. As permitted by the rules of the United States Securities and Exchange Commission (“SEC”) for foreign private issuers, we do not reconcile our financial statements to United States generally accepted accounting principles.
This MD&A reports the Company’s activities through October 22, 2024, unless otherwise indicated. All figures are expressed in Canadian dollars, unless otherwise noted.
During the year ended June 30, 2024, the Company remained at the exploration stage, had not placed any of its mineral properties into production, and has not generated any revenues. The Company’s planned exploration and development of mineral resources, primarily uranium and lithium, will require significant investment prior to commercial introduction and may never be successfully developed or commercially successful.
Business Outlook and Strategy
See “4.B. Business Overview - Industry” above.
Corporate Developments
See “4.A. History and Development of the Company - Recent Development” above.
47
Results of Operations
The following table sets forth a summary of our consolidated results of operations for the periods indicated. The information should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period.
2024
2023
2022
$
$
$
Expenses
Professional fees
1,563,678
6,971,520
698,209
Directors’ and officers’ consulting fees
915,768
3,840,915
687,585
Stock-based compensation
953,845
2,630,249
8,035,506
Insurance expense
540,364
924,834
681,504
Consulting fees
937,410
858,517
220,890
General and administrative expenses
380,746
518,824
129,415
Travel expenses
282,806
248,746
112,074
Transfer agent and regulatory fees
144,611
141,446
236,926
Bank fees and interest
7,097
13,577
9,343
Research expenses
41,066
12,000
33,733
Depreciation on right-of-use assets
31,680
2,640
-
Interest on loan and debentures
77
1,193
167,873
Amortization of transaction costs
-
-
56,512
Accretion expense
5,907
654
-
(5,805,055)
(16,165,115)
(11,069,570)
2024
2023
2022
$
$
Other Income
Loss on termination of Muskrat Dam Project
(4,652,894)
-
-
(Loss) gain on change in fair value of derivative liabilities
2,382,180
(246,460)
1,103,839
Loss on shares-for-debt settlement
56,924
(157,502)
-
Premium on flow-through shares
1,159,632
-
-
Grant income
-
109,750
109,745
Interest income
438
-
-
Foreign exchange gain (loss)
7,857
996,382
409,532
(1,045,863)
702,170
1,623,116
Net Loss and Comprehensive Loss
(6,850,918)
(15,462,945)
(9,446,454)
During Fiscal 2024, the Company incurred total operating expenses of $5,805,055, as compared to total operating expenses of $16,165,115 in 2023 and $11,069,570 in 2022. The substantial reduction in operating expenses in the current period is a direct result of a one-time addendum payment made to certain former officers of Snow Lake in 2022 (see below). Management has also been monitoring cash flows, and in an effort to reduce expenditure, the Company has seen a reduction in expenses such as professional fees, directors’ and officers’ consulting fees, among others.
·Professional fees totaled $1,563,678 (2023 – $6,971,520; 2022 - $698,209), for a decrease of $5,407,842 from 2023. Professional fees are comprised primarily of services from outside consultants, including legal counsel, accountants and auditors, which are all essential to the Company’s operations. In the 2023 comparative period, the Company incurred substantial legal expenses in relation to a proxy requisition among certain shareholders and the former management team, which culminated with the restructure which took place upon completion of an annual general and special meetings in January 2023.
·Consulting fees totaled $937,410 (2023 – $858,517; 2022 – $220,890), for an increase of $78,893 from 2023. Consulting fees are comprised of third-party work for marketing, investor relations and information technology. These fees are primarily related to promotional activities related to costs associated with the Company building its marketing strategy. In October 2023, the Company also issued 300,000 warrants to a third-party pursuant to a marketing services agreement. These warrants, while classified as derivative liabilities, were recorded as consulting fees in the amount of $171,631.
48
·Non-cash stock-based compensation totaled $953,845 (2023 – $2,630,249; 2022 - $8,035,506), for a decrease of $1,676,404 from 2023. The Company had previously granted restricted share units (“RSUs”) and stock options to certain officers and directors, including a grant of these securities to the CEO in July 2023. The amount of stock-based compensation recorded is dependent on the valuation of the grant date fair value of these securities, which is subject to various estimates, based on the application of the Black-Scholes valuation model which requires management to make various assumptions and estimates which are susceptible to uncertainty, including the expected volatility of the share price, expected forfeitures, expected dividend yield, expected term of the warrants or options, and expected risk-free interest rate. Changes in these input assumptions can significantly affect the fair value estimate.
·Directors’ and officers’ consulting fees totaled $915,768 (2023 – $3,840,915; 2022 - $687,585), for a decrease of $2,925,147 from 2023. As mentioned above, a one-time addendum payment was made to former executives of the Company in the comparative period. On November 1, 2022, the Company amended the consulting agreements with the entities controlled by the former CEO and COO with regards to the termination clause of their respective agreements. As a result of the addendum, the Company recorded fees of $1,672,988 (USD $1,224,040) and $881,842 (USD $648,020), respectively, of which the payout was made to the respective entities controlled by the former CEO and COO. Excluding the effect of the addendum payments, the Company was able to reduce these consulting fees, which is consistent to its current cash management approach.
·Insurance expense from directors’ and officers’ (“D&O”) insurance coverage totaled $540,364 (2023 –$924,834; 2022 - $681,504), for a decrease of $384,470 from 2023. Upon listing, the Company was required to obtain D&O insurance for its officers and directors, at a premium price due to its lack of history of operations. Since then, the Company has been able to renew its D&O insurance coverage at lower premiums.
·General and administrative (“G&A”) expenses totaled $380,746 (2023 – $518,824; 2022 - $129,415), for decrease of $138,078 from 2023. The decrease in G&A expenses is directly related to the emphasis placed by management to reduce expenditure.
·Travel expenses totaled $282,806 (2023 – $248,746; 2022 - $112,074) and remained relatively consistent from 2023 to 2024. Since travel restrictions from COVID began lifting in 2022, management had resumed travelling for business purposes.
·Other expenses include transfer agent and regulatory fees, research expenses, depreciation, bank fees, interest, and accretion expense. These expenses totaled $230,438 (2023 - $171,509; 2022 - $504,387) for an increase of $58,929 from 2023. The increase is primarily related to depreciation on the Company’s right-of-use assets.
The Company also recorded total other losses of $1,045,863 (2023 – other incomes of $702,170; 2022 – other incomes of $1,623,116). The other incomes and losses are comprised of changes in the fair value of derivatives for a gain of $2,382,179 (2023 – loss of $246,460; 2022 – gain of $1,103,839), premium on flow-through shares of $1,159,632 (2023 - $nil; 2022 - $nil), gain on debt settlement of $56,924 (2023 – loss of $157,502; 2022 - $nil), and gains or incomes from grants, interest and foreign exchange of $8,296 (2023 - $1,106,132, 2022 - $519,277), net of a loss on the termination of the Muskrat Dam Project of $4,652,894 (2023 - $nil; 2022 - $nil).
Overall, the Company recorded a net loss of $6,850,918 for the year ended June 30, 2024 (2023 – $15,462,945; 2022 - $9,446,454), which is a net loss per share of $0.34 (2023 – $0.86; 2022 - $0.60).
49
5.B. Liquidity and Capital Resources
The following table sets forth a summary of the Company’s consolidated cash flows for the periods indicated. The information should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report. Our historical results presented below are not necessarily indicative of cash flows that may be expected for any future period.
2024
2023
2022
$
$
$
Cash Flows used in Operating Activities
(3,742,326)
(10,298,791)
(3,098,972)
Cash Flows provided by (used in) Financing Activities
キャサリン·スクレットです彼は言いましたSkerrettさんはGardiner Roberts LLP証券グループの主席であり、専門的に顧客に設立、融資、維持と再編上場会社の提案を提供する。スクレットさんは1994年にトロント大学で法学学士号を取得した後、1996年にオンタリオ州で弁護士資格を取得した。彼女はまた1991年にトロント大学三一学院で商業学士号を取得し、カナダ証券課程を修了した。Skerrettさんは顧客に会社法と証券法を遵守するあらゆる面の提案を提供し、融資取引の構造、合併と買収、会社管理と持続的な開示報告を含む。Skerrettさんは製造、技術、金融、健康分野の顧客にコンサルティングサービスを提供することを含む幅広い業界経験を持っている。特に、彼女は資源業界で強い実践経験を形成し、採鉱に関する契約の構築とその業界の他の上場会社のコンプライアンス事項についてアドバイスを提供する上で専門知識を持っている。Skerrettさんはまた個人実体に様々な会社の事務に関する提案を提供した。スクレットさんはカナダのすべての証券取引所に上場している複数の上場企業の取締役および/または幹部を務めており、現在はカナダ国立バレエ学校基金会の取締役会のメンバーである。
(2)200，000個の制限株式単位(“RSU”)と250，000株の普通株を購入するオプションからなり，これらの単位は現在60日以内に行使できず，すべての普通株は60日以内に行使できない。RSUは、それぞれの数の普通株式で行使することができ、以下のように帰属することができる：33，000個のRSUは、出来高で平均価格を重み付けする(“VWAP(I)3.00ドル、(Ii)3.50ドル、(Iii)4.50ドル、および(Iv)5.50ドル、および34，000 RSUは、20取引日連続で上記の閾値を超える企業の普通株式を“VWAP”に帰属する：(I)6.50ドル、および(Ii)7.50ドル。これらのオプションの執行価格は1株2.25ドルで、期限は3年だ。これらのオプションの帰属期間は18ヶ月であり、そのうちの25%のオプションは2024年1月17日に帰属し、さらに25%のオプションは2024年7月17日に帰属し、残りの50%のオプションは2025年1月17日に帰属する。すべての選択権は本年度報告日から60日以内に行使されてはならない。陳奕礼さんは、カナダマニトバ州ウィニバー通り30階360 Main ST 30ビル当社のC/oアドレス、〒R 3 C 4 G 1です
There are no special voting rights attached to any of the Company’s issued and outstanding shares. Shares were issued for cash, finders fees (warrants, exercised), for debt settlement, for acquisitions, and pursuant to property option agreements.
The Company has financed its operations through the issuance of common shares through private placements, and the exercise of stock options. The changes in the Company’s share capital during the last 3 fiscal years are as follows:
On November 23, 2021, the Company completed the IPO through the issuance of 3,680,000 common shares, including 480,000 common shares issued under the underwriters’ over-allotment option, at a price of C $9.51 (USD $7.50) per share for gross proceeds of C $34,988,520 (USD $27,600,000). In connection with the IPO, the Company granted the underwriters 184,000 Finders’ Warrants with each Finders’ Warrant exercisable into one common share of the Company at the price of USD $9.375 until November 19, 2026. In addition, the Company paid total issuance costs of C $2,995,448 comprised of (i) a cash commission of C $2,624,139 to the underwriters, (ii) underwriters’ fees of C $304,248, and (iii) other closing expenses of C $67,061.
On November 23, 2021, the Company also issued 751,163 common shares for the conversion of all outstanding debentures at a conversion price of C $1.25 per common share.
On January 9, 2022, the Company issued 240,000 common shares as a result of the vesting of RSUs.
During the year ended June 30, 2022, 243,419 common shares were issued as a result of the exercise of warrants.
On January 25, 2023, the Company issued 240,000 common shares to settle a debt (the “Shares-for-Debt Settlement”) of USD $480,000 owed by a director to a third-party, in relation to services provided by the third-party related to the requisitioning of a shareholders’ meeting, which the Company had agreed to complete the settlement on behalf of the director.
During the year ended June 30, 2023, 21,052 common shares were also issued as a result of the exercise of Warrants.
On September 21, 2023, the Company issued 21,276 common shares to a third-party pursuant to a letter agreement.
On October 20, 2023, the Company issued 40,000 common shares to a third-party pursuant to a marketing agreement.
On February 8, 2024, the Company issued 500,000 common shares in connection with the Muskrat Dam Project option agreement.
On February 14, 2024, the Company issued 60,000 common shares upon the vesting of restricted share units.
On February 20, 2024, the Company issued 325,000 common shares to 10152300 Manitoba LTD. pursuant to a debt settlement agreement for legal expenses between the parties.
On June 21, 2024, the Company issued 1,000,000 common shares pursuant to an agreement for the acquisition of the Black Lake Uranium Project.
On June 28, 2024, the Company issued 3,500,000 common shares in consideration for the amendment and termination of the Muskrat Dam Option Agreement.
On August 7, 2024, the Company issued 2,024,496 common shares in connection with our acquisition of the First Stage Interest with respect to the Engo Valley Uranium Project.
Subsequent to June 30, 2024, the Company has sold 820,541 common shares under the ATM financing.
74
Flow Through Shares
Canadian tax legislation allows for investment tax credits, at a rate of 15%, applicable to certain mining exploration expenses in Canada pursuant to a Flow-through share issuance agreement. Common shares of exploration companies which are issued under the program are known as “Flow-Through” shares as the Company making the qualified expenditures flow-through such tax credits received to the purchasers of these specific common shares. A Flow-through share investor could apply this tax credit to reduce his or her Canadian Federal income tax payable. In order to apply for the credits, the flow-through shareholder must be resident in Canada and subject to Canada Federal Income Tax for the taxation year in which the credit is being claimed.
The mining exploration expenses that qualify for the investment tax credit under the Flow-through program must be incurred in the scope of mining exploration activities conducted from or above the ground surface in order to determine the existence or location of mineral materials. These minerals include the deposit of common metals or the deposit of minerals for which the Minister of Natural Resources has stated that the principal mineral extract is an industrial mineral contained in a non-stratified deposit. The mining exploration activities that qualify include expenses incurred in order to determine the existence, location, extent, or quality of a mineral resource in Canada, including the prospector costs, the geological, geophysical or geochemical study costs, the costs of steelhead or diamond drilling, by hammering or other methods, and the costs of digging trenches. It is not intended for expenses related to existing mines.
On September 21, 2023, the Company closed its best-efforts flow-through financing through the issuance of 2,133,979 common shares at a price of C $3.6117 (USD $2.67) per common share, for gross proceeds of C $7,707,292 (USD $5,697,710). In connection with the offering, the Company issued 86,000 agents’ warrants at USD $2.67 per share with an expiry of five years and paid fees and expenses to various agents in the amount of C $215,377.
Warrants
At October 29, 2024, an aggregate of 1,295,000 common shares were issuable upon the exercise of outstanding common share purchase warrants, with a weighted average exercise price of $5.13 per common share.
10.B. Memorandum and Articles of association
The description of certain terms and provisions of our articles of incorporation, as amended, and certain related sections of The Corporations Act (Manitoba) is incorporated by reference to our Registration Statement filed on Form F-1 (File No. 333-264098) filed with the SEC and as declared effective on April 7, 2022.
10.C. Material Contracts
All material contracts governing the business of the Company are described elsewhere in this Annual Report or in the information incorporated by reference herein.
10.D. Exchange Controls
Canada has no system of exchange controls. We are not aware of any governmental laws, decrees, regulations or other legislation in Canada that restrict the export or import of capital, including the availability of cash and cash equivalents for use by our affiliated companies, or that affect the remittance of dividends, interest, royalties or similar payments to non-resident holders of Company securities, although there may be Canadian and other foreign tax considerations. See Item 10(E) — “Taxation.”
10.E. Taxation
Canadian Income Tax Considerations
The following summary describes, as of the date hereof, the material Canadian federal income tax considerations generally applicable to a purchaser who acquires, as a beneficial owner, common shares pursuant to this Annual Report and who, at all relevant times, for the purposes of the application of the Income Tax Act (Canada) and the Income Tax Regulations (which we collectively refer to as the Canadian Tax Act), (i) is not, and is not deemed to be, resident in Canada for purposes of the Canadian Tax Act and any applicable income tax treaty or convention; (ii) deals at arm’s length with us; (iii) is not affiliated with us; (iv) does not use or hold, and is not deemed to use or hold, common shares
75
in a business or part of a business carried on in Canada; (v) is not an “insurer” as that term is defined in the Canadian Tax Act; (vi) has not entered into, with respect to the common shares, a “derivative forward agreement,” as that term is defined in the Canadian Tax Act; and (vii) holds the common shares as capital property (which we refer to as a Non-Canadian Holder). This summary does not apply to a Non-Canadian Holder that is an insurer carrying on an insurance business in Canada and elsewhere or an “authorized foreign bank”, as that term is defined in the Canadian Tax Act. Such Non-Canadian Holders should consult their tax advisors for advice having regards to their particular circumstances.
This summary is based on the current provisions of the Canadian Tax Act, and an understanding of the current administrative policies of the Canada Revenue Agency published in writing prior to the date hereof. It takes into account all specific proposals to amend the Canadian Tax Act and the Canada-United States Tax Convention (1980), as amended, or the Canada-U.S. Tax Treaty, publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (which we refer to as the Proposed Amendments) and assumes that all Proposed Amendments will be enacted in the form proposed. However, no assurances can be given that the Proposed Amendments will be enacted as proposed, or at all. This summary does not otherwise take into account or anticipate any changes in law or administrative policy or assessing practice whether by legislative, regulatory, administrative or judicial action nor does it take into account tax legislation or considerations of any province, territory or foreign jurisdiction, which may differ from those discussed herein.
This summary is of a general nature only and is not, and is not intended to be, legal or tax advice to any particular shareholder, and no representations with respect to the income tax consequences to any particular shareholder are made. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, you should consult your own tax advisor with respect to your particular circumstances.
Generally, for purposes of the Canadian Tax Act, all amounts relating to the acquisition, holding or disposition of the common shares must be converted into Canadian dollars based on the exchange rates as determined in accordance with the Canadian Tax Act. The amount of any dividends, capital gains or capital losses realized by a Non-Canadian Holder may be affected by fluctuations in the Canadian exchange rate.
Dividends
Dividends paid or credited on the common shares or deemed to be paid or credited on the common shares to a Non-Canadian Holder will be subject to Canadian withholding tax at the rate of 25%, subject to any reduction in the rate of withholding to which the Non-Canadian Holder is entitled under any applicable income tax treaty or convention between Canada and the country in which the Non-Canadian Holder is resident. For example, under the Canada-U.S. Tax Treaty, where dividends on the common shares are considered to be paid to or derived by a Non-Canadian Holder that is a beneficial owner of the dividends and is a U.S. resident for the purposes of, and is entitled to benefits of, the Canada-U.S. Tax Treaty, the applicable rate of Canadian withholding tax is generally reduced to 15% (or 5% in the case of a U.S. Holder that is a corporation beneficially owning at least 10% of all of the issued voting shares). We will be required to withhold the applicable withholding tax from any dividend and remit it to the Canadian government for the Non-Canadian Holder’s account. Non-Canadian Holders are urged to consult their own tax advisors to determine their entitlement to relief under an applicable income tax treaty.
Dispositions
A Non-Canadian Holder will not be subject to tax under the Canadian Tax Act on any capital gain realized on a disposition or deemed disposition of a common share, nor will capital losses arising therefrom be recognized under the Canadian Tax Act, unless (i) the common shares are “taxable Canadian property” to the Non-Canadian Holder for purposes of the Canadian Tax Act at the time of disposition; and (ii) the Non-Canadian Holder is not entitled to relief under an applicable income tax treaty or convention between Canada and the country in which the Non-Canadian Holder is resident.
Generally, the common shares will not constitute “taxable Canadian property” to a Non-Canadian Holder at a particular time provided that the common shares are listed at that time on a “designated stock exchange” (as defined in the Canadian Tax Act), which includes Nasdaq unless at any particular time during the 60-month period that ends at that time:
76
●
at least 25% of the issued shares of any class or series of our capital stock was owned by or belonged to any combination of (a) the Non-Canadian Holder, (b) persons with whom the Non-Canadian Holder does not deal at arm’s length, and (c) partnerships in which the Non-Canadian Holder or a person described in (b) holds a membership interest directly or indirectly through one or more partnerships, and
●
more than 50% of the fair market value of the common shares was derived, directly or indirectly, from one or any combination of: (i) real or immoveable property situated in Canada, (ii) “Canadian resource properties” (as that term is defined in the Canadian Tax Act), (iii) “timber resource properties” (as that term is defined in the Canadian Tax Act) and (iv) options in respect of, or interests in, or for civil law rights in, property in any of the foregoing whether or not the property exists.
Notwithstanding the foregoing, in certain circumstances, common shares could be deemed to be “taxable Canadian property.”
A Non-Canadian Holder’s capital gain (or capital loss) of a disposition or deemed disposition of common shares that constitute or are deemed to constitute taxable Canadian property (and are not “treaty-protected property” as defined in the Canadian Tax Act) generally will be computed and taxed as though the Canadian Holder were a Resident Holder. Such Non-Canadian Holder may be required to report the disposition or deemed disposition of common shares by filing a tax return in accordance with the Canadian Tax Act. Non-Canadian Holders whose common shares may be taxable Canadian property should consult their own tax advisors regarding the tax and compliance considerations that may be relevant to them.
U.S. Federal Income Taxation Considerations
The following discussion describes the material U.S. federal income tax consequences relating to the ownership and disposition of common shares by U.S. Holders (as defined below). This discussion applies to U.S. Holders that purchase our common shares pursuant to this Annual Report and hold such common shares as capital assets. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, U.S. Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion does not address all of the U.S. federal income tax consequences that may be relevant to specific U.S. Holders in light of their particular circumstances or to U.S. Holders subject to special treatment under U.S. federal income tax law (such as certain financial institutions, insurance companies, currency or securities dealers and traders in securities or other persons that generally mark their securities to market for U.S. federal income tax purposes, tax-exempt entities, retirement plans, regulated investment companies, real estate investment trusts, certain former citizens or residents of the United States, persons who hold our common shares as part of a “straddle”, “hedge”, “conversion transaction”, “synthetic security” or integrated investment, persons that have a “functional currency” other than the U.S. dollar, persons that own directly, indirectly or through attribution 10% or more of the voting power of our shares, corporations that accumulate earnings to avoid U.S. federal income tax, persons subject to special tax accounting rules under Section 451(b) of the Code, partnerships and other pass-through entities, and investors in such pass-through entities. This discussion does not address any U.S. state or local or non-U.S. tax consequences or any U.S. federal estate, gift or alternative minimum tax consequences.
As used in this discussion, the term “U.S. Holder” means a beneficial owner of our common shares that is, for U.S. federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source or (iv) a trust (x) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of its substantial decisions or (y) that has elected under applicable U.S. Treasury regulations to be treated as a domestic trust for U.S. federal income tax purposes.
If an entity treated as a partnership for U.S. federal income tax purposes holds our common shares, the U.S. federal income tax consequences relating to an investment in our common shares will depend in part upon the status and activities of such entity and the particular partner. Any such entity should consult its own tax advisor regarding the U.S. federal income tax consequences applicable to it and its partners of the purchase, ownership and disposition of our common shares. Persons considering an investment in our common shares should consult their own tax advisors as to the particular tax consequences applicable to them relating to the purchase, ownership and disposition of our common shares, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.
77
Passive Foreign Investment Company Consequences
In general, a corporation organized outside the United States will be treated as a passive foreign investment company, or PFIC, for any taxable year in which either (i) at least 75% of its gross income is “passive income” or (ii) on average at least 50% of its assets, determined on a quarterly basis, are assets that produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, dividends, interest, royalties, rents, and gains from the sale or exchange of property that gives rise to passive income. Assets that produce or are held for the production of passive income generally include cash, even if held as working capital or raised in a public offering, marketable securities, and other assets that may produce passive income. Generally, in determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.
Although we do not believe that we were a PFIC for the year ending June 30, 2024, our determination is based on an interpretation of complex provisions of the law, which are not addressed in a significant number of administrative pronouncements or rulings by the Internal Revenue Service, or IRS. Accordingly, there can be no assurance that our conclusions regarding our status as a PFIC for the 2024 taxable year will not be challenged by the IRS and, if challenged, upheld in appropriate proceedings. In addition, because PFIC status is determined on an annual basis and generally cannot be determined until the end of the taxable year, there can be no assurance that we will not be a PFIC for the current taxable year. Because we may continue to hold a substantial amount of cash and cash equivalents, and because the calculation of the value of our assets may be based in part on the value of our common shares, which may fluctuate considerably, we may be a PFIC in future taxable years. Even if we determine that we are not a PFIC for a taxable year, there can be no assurance that the IRS will agree with our conclusion and that the IRS would not successfully challenge our position. Our status as a PFIC is a fact-intensive determination made on an annual basis.
If we are a PFIC in any taxable year during which a U.S. Holder owns our common shares, the U.S. Holder could be liable for additional taxes and interest charges under the “PFIC excess distribution regime” upon (i) a distribution paid during a taxable year that is greater than 125% of the average annual distributions paid in the three preceding taxable years, or, if shorter, the U.S. Holder’s holding period for our common shares, and (ii) any gain recognized on a sale, exchange or other disposition, including a pledge, of our common shares, whether or not we continue to be a PFIC. Under the PFIC excess distribution regime, the tax on such distribution or gain would be determined by allocating the distribution or gain ratably over the U.S. Holder’s holding period for our common shares. The amount allocated to the current taxable year (i.e., the year in which the distribution occurs or the gain is recognized) and any year prior to the first taxable year in which we are a PFIC will be taxed as ordinary income earned in the current taxable year. The amount allocated to other taxable years will be taxed at the highest marginal rates in effect for individuals or corporations, as applicable, to ordinary income for each such taxable year, and an interest charge, generally applicable to underpayments of tax, will be added to the tax.
If we are a PFIC for any year during which a U.S. Holder holds our common shares, we must generally continue to be treated as a PFIC by that holder for all succeeding years during which the U.S. Holder holds our common shares, unless we cease to meet the requirements for PFIC status and the U.S. Holder makes a “deemed sale” election with respect to our common shares. If the election is made, the U.S. Holder will be deemed to sell our common shares it holds at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain recognized from such deemed sale would be taxed under the PFIC excess distribution regime. After the deemed sale election, the U.S. Holder’s common shares would not be treated as shares of a PFIC unless we subsequently become a PFIC.
If we are a PFIC for any taxable year during which a U.S. Holder holds our common shares and one of our non-U.S. corporate subsidiaries is also a PFIC (i.e., a lower-tier PFIC), such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC and would be taxed under the PFIC excess distribution regime on distributions by the lower-tier PFIC and on gain from the disposition of shares of the lower-tier PFIC even though such U.S. Holder would not receive the proceeds of those distributions or dispositions. Each U.S. Holder is advised to consult its tax advisors regarding the application of the PFIC rules to our non-U.S. subsidiaries.
If we are a PFIC, a U.S. Holder will not be subject to tax under the PFIC excess distribution regime on distributions or gain recognized on our common shares if such U.S. Holder makes a valid “mark-to-market” election for our common shares. A mark-to-market election is available to a U.S. Holder only for “marketable stock”.
Our common shares will be marketable stock so long as they remain listed on Nasdaq and are regularly traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. If a mark-to-market election is in effect,
78
a U.S. Holder generally would take into account, as ordinary income each year, the excess of the fair market value of our common shares held at the end of such taxable year over the adjusted tax basis of such common shares. The U.S. Holder would also take into account, as an ordinary loss each year, the excess of the adjusted tax basis of such our common shares over their fair market value at the end of the taxable year, but only to the extent of the excess of amounts previously included in income over ordinary losses deducted as a result of the mark-to-market election. The U.S. Holder’s tax basis in our common shares would be adjusted to reflect any income or loss recognized as a result of the mark-to-market election. Any gain from a sale, exchange or other disposition of our common shares in any taxable year in which we are a PFIC would be treated as ordinary income and any loss from such sale, exchange or other disposition would be treated first as ordinary loss (to the extent of any net mark-to-market gains previously included in income) and thereafter as capital loss.
A mark-to-market election will not apply to our common shares for any taxable year during which we are not a PFIC, but will remain in effect with respect to any subsequent taxable year in which we become a PFIC. Such election will not apply to any non-U.S. subsidiaries that we may organize or acquire in the future. Accordingly, a U.S. Holder may continue to be subject to tax under the PFIC excess distribution regime with respect to any lower-tier PFICs that we may organize or acquire in the future notwithstanding the U.S. Holder’s mark-to-market election for our common shares.
The tax consequences that would apply if we are a PFIC would also be different from those described above if a U.S. Holder were able to make a valid qualified electing fund, or QEF, election. At this time, we do not expect to provide U.S. Holders with the information necessary for a U.S. Holder to make a QEF election. Consequently, prospective investors should assume that a QEF election will not be available.
Each U.S. person that is an investor of a PFIC is generally required to file an annual information return on IRS Form 8621 containing such information as the U.S. Treasury Department may require. The failure to file IRS Form 8621 could result in the imposition of penalties and the extension of the statute of limitations with respect to U.S. federal income tax.
The U.S. federal income tax rules relating to PFICs are very complex. Prospective U.S. investors are strongly urged to consult their own tax advisors with respect to the impact of PFIC status on the purchase, ownership and disposition of our common shares, the consequences to them of an investment in a PFIC, any elections available with respect to our common shares and the IRS information reporting obligations with respect to the purchase, ownership and disposition of the common shares of a PFIC.
Distributions
Subject to the discussion above under “—Passive Foreign Investment Company Consequences”, a U.S. Holder that receives a distribution with respect to our common shares generally will be required to include the gross amount of such distribution in gross income as a dividend when actually or constructively received to the extent of the U.S. Holder’s pro rata share of our current and/or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent a distribution received by a U.S. Holder is not a dividend because it exceeds the U.S. Holder’s pro rata share of our current and accumulated earnings and profits, it will be treated first as a tax-free return of capital and reduce (but not below zero) the adjusted tax basis of the U.S. Holder’s common shares. To the extent the distribution exceeds the adjusted tax basis of the U.S. Holder’s common shares, the remainder will be taxed as capital gain. Because we may not account for our earnings and profits in accordance with U.S. federal income tax principles, U.S. Holders should expect all distributions to be reported to them as dividends. Distributions on our common shares that are treated as dividends generally will constitute income from sources outside the United States for foreign tax credit purposes and generally will constitute passive category income. Such dividends will not be eligible for the “dividends received” deduction generally allowed to corporate shareholders with respect to dividends received from U.S. corporations.
A U.S. Holder receiving a distribution from which the 25% Canadian withholding tax (as described above in “Canadian Income Tax Considerations – Dividends”) has been deducted may be entitled to a foreign tax credit in determining the U.S. Holder’s federal income tax liability for the year in which the distribution is received. The availability of a full or partial foreign tax credit in respect of such Canadian withholding tax is determined under rules of considerable complexity, and the foreign tax credit may not be available in all cases. Prospective U.S. investors are strongly urged to consult their own tax advisors with respect to the availability of the foreign tax credit with respect to distributions received from which Canadian tax has been withheld at source.
79
Dividends paid by a “qualified foreign corporation” are eligible for taxation for certain non-corporate U.S. Holders at a reduced capital gains rate rather than the marginal tax rates generally applicable to ordinary income provided that certain requirements are met. However, if we are a PFIC for the taxable year in which the dividend is paid or the preceding taxable year (see discussion above under “—Passive Foreign Investment Company Consequences”), we will not be treated as a qualified foreign corporation, and therefore the reduced capital gains tax rate described above will not apply. Each U.S. Holder is advised to consult its tax advisors regarding the availability of the reduced tax rate on dividends with regard to its particular circumstances.
A non-United States corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information provision, or (b) with respect to any dividend it pays on our common shares that are readily tradable on an established securities market in the United States. We believe that we qualify as a resident of Canada for purposes of, and are eligible for the benefits of, the U.S.-Canada Treaty, although there can be no assurance in this regard. Further, the IRS has determined that the U.S.-Canada Treaty is satisfactory for purposes of the qualified dividend rules and that it includes an exchange of information provision. Therefore, subject to the discussion above under “—Passive Foreign Investment Company Consequences”, if the U.S.-Canada Treaty is applicable, such dividends will generally be “qualified dividend income” in the hands of individual U.S. Holders, provided that certain conditions are met, including holding period and the absence of certain risk reduction transactions.
Sale, Exchange or Other Disposition of our Common Shares
Subject to the discussion above under “—Passive Foreign Investment Company Consequences”, a U.S. Holder generally will recognize capital gain or loss for U.S. federal income tax purposes upon the sale, exchange or other disposition of our common shares in an amount equal to the difference, if any, between the amount realized (i.e., the amount of cash plus the fair market value of any property received) on the sale, exchange or other disposition and such U.S. Holder’s adjusted tax basis in our common shares. Such capital gain or loss generally will be long-term capital gain taxable at a reduced rate for noncorporate U.S. Holders or long-term capital loss if, on the date of sale, exchange or other disposition, our common shares were held by the U.S. Holder for more than one year. Any capital gain of a non-corporate U.S. Holder that is not long-term capital gain is taxed at ordinary income rates. The deductibility of capital losses is subject to limitations. Any gain or loss recognized from the sale or other disposition of our common shares will generally be gain or loss from sources within the United States for U.S. foreign tax credit purposes.
Medicare Tax
Certain U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally are subject to a 3.8% tax on all or a portion of their net investment income, which may include their gross dividend income and net gains from the disposition of our common shares. If you are a United States person that is an individual, estate or trust, you are encouraged to consult your tax advisors regarding the applicability of this Medicare tax to your income and gains in respect of your investment in our common shares.
Information Reporting
U.S. Holders may be required to file certain U.S. information reporting returns with the IRS with respect to an investment in our common shares, including, among others, IRS Form 8938 (Statement of Specified Foreign Financial Assets). As described above under “Passive Foreign Investment Company Consequences”, each U.S. Holder who is a shareholder of a PFIC must file an annual report containing certain information. U.S. Holders paying more than US$100,000 for our common shares may be required to file IRS Form 926 (Return by a U.S. Transferor of Property to a Foreign Corporation) reporting this payment. Substantial penalties may be imposed upon a U.S. Holder that fails to comply with the required information reporting.
U.S. Holders should consult their own tax advisors regarding the information reporting rules.
10.F. Dividends and Paying Agents
Not applicable.
80
10.G. Statement by Experts
Not applicable.
10.H. Documents on Display
We have filed this Annual Report with the SEC under the Exchange Act. Statements made in this report as to the contents of any document referred to are not necessarily complete. With respect to each such document filed as an exhibit to this Annual Report, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference.
We are subject to the informational requirements of the Exchange Act as a foreign private issuer and file reports and other information with the SEC. Reports and other information filed by us with the SEC, including this Annual Report, may be viewed from the SEC’s Internet site at http://www.sec.gov. In addition, we will provide hardcopies of our annual report free of charge to shareholders upon request.
As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
10.I. Subsidiary Information
Not required.
10.J. Annual Report to Security Holders
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Our activities expose us to a variety of financial risks: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The overall risk management strategy focuses on the unpredictability of the finance markets and seeks to minimize the potential adverse effects on the financial performance. We use different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and beta analysis in respect of investment portfolios to determine market risk. Risk management is carried out under the direction of the Board. Please see note 21 to our consolidated financial statements included elsewhere in this Annual Report for further information with respect to certain of these risks.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
12.A. Debt Securities
Not applicable.
12.B. Warrants and Rights
Not applicable.
12.C. Other Securities
Not applicable.
12.D. American Depositary Shares
We do not have any American Depositary Shares.
81
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
14.A.-D. Material Modifications to the Rights of Security Holders.
There have been no material modifications to the rights of our security holders.
14.E. Use of Proceeds.
The following “Use of Proceeds” information relates to the registration statement on Form F-1 (File Number 333-254755) (the “F-1 Registration Statement”) in relation to our initial public offering of 3,680,000 common shares at a public offering price of US$7.50 per share. ThinkEquity LLC acted as the representative for the several underwriters of the offering.
The F-1 Registration Statement became effective on November 18, 2021. For the period from the effective date of the F-1 Registration Statement to June 30, 2022, the total expenses incurred for our company’s account in connection with our IPO was approximately $2.46 million, which included $2.07 million in underwriting discounts and commissions for the IPO and approximately $0.39 million in other costs and expenses. We received net proceeds of approximately $25.13 million from our initial public offering. None of the transaction expenses included payments to directors or officers of our company or their associates, persons owning more than 10% or more of our equity securities or our affiliates. None of the net proceeds from the initial public offering were paid, directly or indirectly, to any of our directors or officers or their associates, persons owning 10% or more of our equity securities or our affiliates.
For the period from July 1, 2022 to June 30, 2024, the total expenses incurred for our company’s account in connection with our IPO was approximately $3.0 million, which included $2.9 million in underwriting discounts and commissions for the IPO and approximately $0.1 million in other costs and expenses. We received net proceeds of approximately $32.0 million from our initial public offering. None of the transaction expenses included payments to directors or officers of our company or their associates, persons owning more than 10% or more of our equity securities or our affiliates. None of the net proceeds from the initial public offering were paid, directly or indirectly, to any of our directors or officers or their associates, persons owning 10% or more of our equity securities or our affiliates.
For the period from July 1, 2021, to June 30, 2024, the following is our reasonable estimate of the uses of the proceeds from the IPO:
●Approximately C$9.2 million was used for resource development activities such as drilling, soil sampling, as well as potential project acquisition;
●Approximately C$6.12 million was used for technical studies and reports such as preliminary economic assessment, preliminary feasibility study, resource modelling and/or technical reports such as an S-K 1300 compliant report;
●Approximately $C15.8 million was used for corporate purposes such as salaries, office, public company fees, audit fees, director and officer insurance premium payments or other similar uses; and
●Approximately C$0.9 million was used for general corporate expenses.
Other than the changes in percentages for each of the 4 uses described above that were anticipated when filed the F-1 Registration Statement, there has not been any material change in the planned use of proceeds from the initial public offering as described in the prospectus filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act dated November 18, 2021. As of the date of this Annual Report, all of the net proceed of the initial public offering have been expended.
82
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to management, including principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Our management carried out an evaluation, under the supervision of our chief executive officer and interim chief financial officer, of the effectiveness of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act as of June 30, 2024. Based on that evaluation, our management, including our chief executive officer and interim chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with U.S. GAAP and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of a company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of a company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to consolidated financial statements preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management evaluated the effectiveness of our internal control over financial reporting as of June 30, 2024. In making this evaluation, management used the framework established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The COSO framework summarizes each of the components of a company’s internal control system, including the control environment, risk assessment, control activities, information and communication, and monitoring activities. Based on this evaluation, our management determined that our internal control over financial reporting was effective as of June 30, 2024.
Attestation Report of Independent Registered Public Accounting Firm
Not required.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the year ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
83
It should be noted that while our management believes that our disclosure controls and procedures provide a reasonable level of assurance, our management does not expect that our disclosure controls and procedures or internal financial controls will prevent all errors or fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT.
Our board of directors has determined that each of Brian Imrie, Shlomo Kievman and Kathleen Skerrett qualifies as an “Audit Committee Financial Expert” as such term is defined in Item 407(d) of Regulation S-K promulgated by the SEC and also meets Nasdaq’s financial sophistication requirements. Each of Brian Imrie, Shlomo Kievman and Kathleen Skerrett is an “independent director” as defined by the rules and regulations of Nasdaq.
ITEM 16B. CODE OF ETHICS.
Our code of conduct and business ethics conforms to the rules and regulations of Nasdaq. The code of conduct and business ethics applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer, and addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, and reporting of violations of the code. A copy of our Code of Conduct is available at our website. Any future changes to the Code of Conduct will be posted on the Company’s website or filed as an exhibit to a report filed with the SEC within five business days of the change being effective.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table represents aggregate fees billed to the Company for fiscal years ended June 30, 2024, 2023, and 2022 by DeVisser Gray LLP, the Company’s principal accounting firm.
Accountant Fees and Services
2024
2023
2022
C$
C$
C$
Audit Fees
45,000
45,000
45,000
Audit Related Fees (F1 review)
9,500
9,500
9,500
Tax Fees
-
-
All Other Fees
8,000
8,000
8,000
62,000
62,000
62,000
Audit Fees
The audit fees for the years ended June 30, 2024, 2023, and 2022, are C$45,000 (approximately US$33,333), C$45,000 (approximately US$33,988), and C$45,000 (approximately US$34,922) respectively, which were paid for professional services rendered for the audits of our consolidated financial statements. Other fees of C$17,500 (approximately US$12,963), C$17,500 (approximately US$13,218), and C$17,500 (approximately USD$13,581) were paid for other services including half year reviews, consents, and assistance with review of documents filed with the SEC.
“Audit-related fees” means fees billed for professional services rendered by our principal auditors associated with certain due diligence projects.
Tax Fees
“Tax Fees” consisted of the aggregate fees billed for professional services rendered for tax compliance, tax advice and tax planning. Included in such Tax Fees were fees for tax consultancy and advice on other tax planning matters.
Our Board of Directors pre-approves all auditing services and permitted non-audit services to be performed for us by our independent auditor, including the fees and terms thereof (subject to the de minimums exceptions for
84
non-audit services described in Section 10A(i)(l)(B) of the Exchange Act that are approved by our Board of Directors prior to the completion of the audit). The percentage of services provided for which we paid audit-related fees, tax fees, or other fees that were approved by our Board of Directors pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X promulgated by the SEC was 100%.
Other Fees
Not applicable.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
There were no purchases of equity securities made by or on behalf of us or any “affiliated purchaser” as defined in Rule 10b-18 of the Exchange Act during the period covered by this Annual Report.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE.
We are incorporated in Manitoba, Canada and our corporate governance practices are governed by applicable laws of Manitoba and our certificate of incorporation and amendments. In addition, because our common shares are listed on the Nasdaq Stock Market, or Nasdaq, we are subject to Nasdaq’s corporate governance requirements.
Prior to April 7, 2022, we were a “controlled company” within the meaning of the Nasdaq Listing Rules, where more than 50% of the voting power of our securities for the election of directors was held by an individual, group or another company and, as a result, qualified for and relied on exemptions from certain Nasdaq corporate governance requirements, including, without limitation (i) the requirement that to hold an annual meeting of shareholders no later than one year after the end of its fiscal year; (ii) the requirement that the compensation of our officers be determined or recommended to our board of directors by a compensation committee that is comprised solely of independent directors, and (iii) the requirement that director nominees be selected or recommended to the board of directors by a majority of independent directors or a nominating and corporate governance committee comprised solely of independent directors. Since we relied on the “controlled company” exemption, we were not required to have either a compensation committee or a nominating and corporate governance committee composed solely of independent directors.
On April 7, 2022, we ceased to be a “controlled company” under the rules of Nasdaq due to a resale offering conducted by our largest shareholder Nova. However, as a foreign private issuer, Nasdaq Listing Rule 5615(a)(3) permits us to follow home country practices in lieu of certain requirements of Listing Rule 5600, provided that we disclose in our annual report filed with the SEC each requirement of Rule 5600 that we do not follow and describe the home country practice followed in lieu of such requirement.
We are currently following some Canadian corporate governance practices in lieu of Nasdaq corporate governance listing standards as follows:
●We are currently following Canadian corporate governance practice in lieu of Nasdaq Rule 5605(d)(2), which requires a compensation committee to compose entirely of independent directors. Nachum Labkowski and Peretz Schapiro serve as non-independent directors in the compensation committee.
·We are currently following Canadian corporate governance practice in lieu of Nasdaq Rule 5620(a), which requires a company to hold an annual meeting of shareholders no later than one year after the end of its fiscal year.
85
●We are currently following Canadian corporate governance practice in lieu of Nasdaq Rule 5605(e)(1)(B), which requires a nominating and corporate governance committee to compose entirely of independent directors. Nachum Labkowski and Peretz Schapiro serve as non-independent directors in our nominating and corporate governance committee.
●We are currently following Canadian corporate governance practice in lieu of Nasdaq Rule 5635(a), which requires shareholder approval prior to the issuance of securities in connection with the acquisition of the stock or assets of another company in certain circumstances.
·We are currently following Canadian corporate governance practice in lieu of Nasdaq Rule 5635(b), which requires shareholder approval prior to the issuance of securities when the issuance or potential issuance will result in a change of control of the Company.
●We are currently following Canadian corporate governance practice in lieu of Nasdaq Rule 5635(c), which requires shareholder approval for the establishment of or any material amendments to equity compensation or purchase plans or other equity compensation arrangements.
●We are currently following Canadian corporate governance practice in lieu of Nasdaq Rule 5635(d), which requires shareholder approval in order to enter into any transaction, other than a public offering, involving the sale, issuance or potential issuance by the Company of common shares (or securities convertible into or exercisable for common shares) equal to 20% or more of the outstanding share capital of the Company or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the common shares.
●We are currently following Canadian corporate governance practice in lieu of Nasdaq Rule 5605(b)(2), which requires the Company’s independent directors to have regularly scheduled meetings at which only independent directors are present.
ITEM 16H. MINE SAFETY DISCLOSURE.
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
ITEM 16J. INSIDER TRADING POLICIES
The Company has adopted a written insider trading policy, or the Stock Trading Policy, that is reasonably designed to promote compliance with applicable insider trading laws, rules, and regulations, and any listing standards applicable to the Company. The Stock Trading Policy provides guidance to the directors, officers, employees, consultants, and contractors, including agents, of the Company (“Company Personnel”) and its subsidiaries with respect to stock trading and assists the Company Personnel in understanding their obligations and responsibilities under Canadian and United States securities laws and regulations, as applicable.
A copy of the Stock Trading Policy, as currently in effect, is filed as exhibit 11.2 to this Annual Report.
ITEM 16K. CYBERSECURITY
Risk Management and Strategy
The Company uses a third-party information technology service provider to manage its information system, including cybersecurity risk assessment procedures to ensure effectiveness in cybersecurity management, strategy and governance, and reporting cybersecurity risks.
86
As of the date of this Annual Report, the Company has not experienced any material cybersecurity incidents or identified any material cybersecurity threats that have affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition.
Cybersecurity Governance
The Company’s Chief Financial Officer is responsible for assessing and managing material risks from cybersecurity threats. The Chief Financial Officer oversees the Company’s efforts to monitor the prevention, detection, mitigation, and remediation of cybersecurity incidents.
The Board has specific responsibility for overseeing cybersecurity risk management and evaluation and being informed on risks from cybersecurity threats. The Chief Financial Officer reports, with support of the third-party information technology service provider, to the Board on cybersecurity risk management matters as needed. Any material cybersecurity incidents would be reported to the Board by the CFO. In the case of a material cybersecurity incident, the Board is responsible for ensuring that the proposed action and disclosure of the incident is adequate and that measures are put in place to prevent further incidents.
87
PART III
ITEM 17. FINANCIAL STATEMENTS
The Company has elected to provide financial statements pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
Our audited Financial Statements are included as the “F” pages attached to this Annual Report.
All financial statements in this Annual Report, unless otherwise stated, are presented in accordance with IFRS.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*Filed herewith.
**Furnished herewith.
89
SIGNATURES
The Registrant hereby certifies that it meets all of the requirements for filing this Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Snow Lake Resources Ltd.,
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Snow Lake Resources Ltd. (the “Company”), which comprise the consolidated statements of financial position as at June 30, 2024 and 2023 and the consolidated statements of loss and comprehensive loss, changes in shareholders’ equity and cash flows for each of the years in the three year period ended June 30, 2024, and a summary of significant accounting policies and other explanatory information (collectively referred to as the “financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 2024 and 2023 and its financial performance and its cash flows for each of the years in the three-year period ended June 30, 2024, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has no current source of revenue, has incurred losses from inception, has a net capital deficiency and dependent upon its ability to secure new sources of financing that raise substantial doubt about the Company's ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement, whether due to fraud or error. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ De Visser Gray LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, Canada
October 29, 2024
We have served as the Company’s auditor since 2019.
F-3
Snow Lake Resources Ltd.
Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
As at
June 30, 2024
As at
June 30, 2023
$
$
Assets
Current Assets
Cash
2,526,957
3,840,880
Sales tax receivable (Note 4)
40,694
181,197
Prepaids and deposits (Note 5)
706,634
883,872
Due from related party (Note 18)
-
10,287
Total Current Assets
3,274,285
4,916,236
Exploration and evaluation assets (Note 6)
26,612,758
21,442,032
Right-of-use assets (Note 7)
29,040
60,720
Total Assets
29,916,083
26,418,988
Liabilities
Current Liabilities
Accounts payable and accrued liabilities (Note 8)
689,944
1,024,134
Due to related parties (Note 18)
141,144
86,616
Lease liabilities – current portion (Note 9)
31,107
29,921
Derivative liabilities (Note 10)
305,025
1,922,246
Other liabilities (Note 11)
773,891
820,612
Total Current Liabilities
1,941,111
3,883,529
Lease liabilities (Note 9)
-
31,107
Flow-through share liability (Note 12)
2,477,517
-
Total Liabilities
4,418,628
3,914,636
Shareholders’ Equity
Share capital (Note 13)
50,127,974
40,570,773
Reserve for restricted share units (Note 14)
-
86,638
Reserve for share-based payments (Note 15)
1,917,719
6,477,565
Reserve for warrants (Note 16)
-
65,099
Accumulated deficit
(26,548,238)
(24,695,723)
Total Shareholders’ Equity
25,497,455
22,504,352
Total Liabilities and Shareholders’ Equity
29,916,083
26,418,988
Nature of operations and going concern (Note 1)
Commitments and contingencies (Notes 22)
Subsequent events (Note 6 and 23)
Approved on behalf of the Board of Directors:
“Brian Imrie” (signed)
“Nochum Labkowski” (signed)
Director
Director
The accompanying notes are an integral part of these consolidated financial statements
F-4
Snow Lake Resources Ltd.
Consolidated Statements of Loss and Comprehensive Loss
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
2024
2023
2022
$
$
$
Expenses
Professional fees (Note 10)
1,563,678
6,971,520
698,209
Consulting fees (Note 10)
937,410
858,517
220,890
Stock-based compensation (Notes 11, 14, 15 and 18)
953,845
2,630,249
8,035,506
Directors’ and officers’ consulting fees (Note 18)
915,768
3,840,915
687,585
Insurance expense
540,364
924,834
681,504
General and administrative expenses
380,746
518,824
129,415
Travel expenses
282,806
248,746
112,074
Transfer agent and regulatory fees
144,611
141,446
236,926
Research expenses
41,066
12,000
33,733
Depreciation on right-of-use assets (Note 7)
31,680
2,640
-
Bank fees and interest
7,097
13,577
9,343
Accretion expense (Note 9)
5,907
654
-
Interest on loan and debentures
77
1,193
167,873
Amortization of transaction costs
-
-
56,512
(5,805,055)
(16,165,115)
(11,069,570)
Other Items
Loss on termination of Muskrat Dam Project (Note 6)
(4,652,894)
-
-
Gain (loss) on change in fair value of derivative liabilities (Note 10)
2,382,180
(246,460)
1,103,839
Gain (loss) on debt settlement
56,924
(157,502)
-
Premium on flow-through shares (Note 12)
1,159,632
-
-
Grant income
-
109,750
109,745
Interest income
438
-
-
Foreign exchange gain
7,857
996,382
409,532
(1,045,863)
702,170
1,623,116
Net Loss and Comprehensive Loss
(6,850,918)
(15,462,945)
(9,446,454)
Weighted Average Number of Outstanding Shares
Basic and diluted (Note 17)
20,238,794
18,033,851
15,884,041
Net Loss per Share
Basic and diluted (Note 17)
(0.34)
(0.85)
(0.60)
The accompanying notes are an integral part of these consolidated financial statements
F-5
Snow Lake Resources Ltd.
Consolidated Statements of Changes in Shareholders’ Equity
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
Number of Shares
Share Capital
Share-Based Payments Reserve
Restricted Share Units Reserve
Warrants Reserve
Accumulated Deficit
Total
#
$
$
$
$
$
$
Balance, June 30, 2021
13,010,176
5,750,252
1,154,905
-
119,233
(2,271,524)
4,752,866
Issuance of share on IPO (Note 13)
3,680,000
34,988,520
-
-
-
-
34,988,520
Share issue costs (Note 13)
-
(4,233,129)
-
-
-
-
(4,233,129)
Issuance on conversion of debentures (Note 13)
751,163
857,399
-
-
5,895
-
863,294
Issuance of share on vesting of RSUs (Note 13 and 14)
240,000
1,950,645
-
(1,950,645)
-
-
-
Stock-based compensation (Note 1 and 15)
-
-
6,084,861
1,950,645
-
-
8,035,506
Cancellation of stock options (Note 15)
-
-
(1,172,443)
-
-
1,172,443
-
Exercise of warrants (Notes 13 and 16)
243,419
419,946
-
-
(54,833)
-
365,113
Net loss for the year
-
-
-
-
-
(9,446,454)
(9,446,454)
Balance, June 30, 2022
17,924,758
39,733,633
6,067,323
-
70,295
(10,545,535)
35,325,716
Issuance of debt settlement
240,000
800,366
-
-
-
-
800,366
Stock-based compensation (Note 15)
-
-
1,722,999
86,638
-
-
1,809,637
Cancellation of stock options (Note 15)
-
-
(1,312,757)
-
-
1,312,757
-
Exercise of warrants (Notes 13 and 16)
21,052
36,774
-
-
(5,196)
-
31,578
Net loss for the year
-
-
-
-
-
(15,462,945)
(15,462,945)
Balance, June 30, 2023
18,185,810
40,570,773
6,477,565
86,638
65,099
(24,695,723)
22,504,352
Issuance of shares on financing (Note 13)
2,133,979
7,707,292
-
-
-
-
7,707,292
Flow-through share liability (Notes 12 and 13)
-
(3,637,149)
-
-
-
-
(3,637,149)
Share issue costs (Notes 13)
-
(355,016)
-
-
-
-
(355,016)
Issuance of shares per agreements (Note 13)
3,886,276
3,934,189
-
-
-
-
3,934,189
Issuance of shares per option agreements (Note 13)
1,500,000
1,728,380
-
-
-
-
1,728,380
Shares issued on vested RSUs (Notes 13 and 14)
60,000
179,505
-
(179,505)
-
-
-
Stock-based compensation (Notes 14 and 15)
-
-
361,081
105,244
-
-
466,325
Cancellation of RSUs (Note 14)
-
-
-
(12,377)
-
12,377
-
Cancellation of stock options (Note 15)
-
-
(4,920,927)
-
-
4,920,927
-
Expiry of warrants (Note 16)
-
-
-
-
(65,099)
65,099
-
Net loss for the year
-
-
-
-
-
(6,850,918)
(6,850,918)
Balance, June 30, 2024
25,766,065
50,127,974
1,917,719
-
-
(26,548,238)
25,497,455
F-6
Snow Lake Resources Ltd.
Consolidated Statements of Cash Flows
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
2024
2023
2022
$
$
$
Operating Activities
Net loss for the year
(6,850,918)
(15,462,945)
(9,446,454)
Adjustments for non-cash items:
Depreciation on right-of-use assets (Note 7)
31,680
2,640
-
Issuance of warrants for claims settlement
-
979,294
-
Interest expenses and accretion (Note 9)
5,907
1,841
148,406
Amortization of transaction costs
-
-
56,512
Issuance of warrants for services (Note 10)
171,631
409,495
-
Loss on termination of Muskrat Dam Project (Note 6)
4,652,894
-
-
Loss (gain) on change in fair value of derivative liabilities (Note 10)
(2,382,180)
246,460
(1,103,839)
Issuance of shares per option agreements
92,443
-
-
Loss on debt settled through the issuance of shares (Note 13)
74,684
-
-
Issuance of shares-for-debt-settlement
-
157,502
-
Premium on flow-through shares (Note 12)
(1,159,632)
-
-
Stock-based compensation (Notes 11, 14, 15 and 18)
953,845
2,630,249
8,035,506
Foreign exchange loss (gain)
12,235
(812)
(14,000)
(4,397,411)
(11,036,276)
(2,323,869)
Net change in non-cash working capital items:
Sales tax receivable
140,506
112,967
(283,520)
Prepaids and deposits
177,238
66,645
(864,177)
Due from related party
10,287
-
-
Accounts payable and accrued liabilities (Note 8)
272,526
581,531
552,249
Due to related parties
54,528
(23,658)
(179,655)
Cash Flows used in Operating Activities
(3,742,326)
(10,298,791)
(3,098,972)
Financing Activities
Proceeds from private placement financing (Note 13)
7,707,292
-
-
Proceeds from issuance of shares on IPO (Note 13)
-
-
34,988,520
Share issuance costs (Note 13)
(215,377)
-
(2,995,448)
Repayment on loan
-
(201,532)
193,636
Proceeds from exercise of warrants (Note 13)
-
31,578
365,114
Payment on redemption of restricted share units (Note 11)
(546,476)
-
-
Payments made on lease deposit
-
(18,367)
-
Lease payments (Note 9)
(35,828)
(2,986)
-
Cash Flows provided by (used in) Financing Activities
6,909,611
(191,307)
32,551,822
Investing Activities
Payments for exploration and evaluation assets
(4,481,208)
(9,461,430)
(5,979,286)
Cash Flows used in Investing Activities
(4,481,208)
(9,461,430)
(5,979,286)
Decrease
(1,313,923)
(19,951,528)
23,473,564
Cash, beginning of year
3,840,880
23,792,408
318,844
Cash, end of year
2,526,957
3,840,880
23,792,408
Supplemental Information
Exploration and evaluation assets in accounts payable
132,859
388,107
485,089
Fair value of agent’s warrants issued as share issue costs (Note 10)
139,639
-
-
The accompanying notes are an integral part of these consolidated financial statements
F-7
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
1. Nature of Operations and Going Concern
Snow Lake Resources Ltd., d/b/a Snow Lake Energy (“Snow Lake” or the “Company”) was incorporated in the Province of Manitoba, Canada under the Corporations Act (Manitoba) on May 25, 2018. The Company is a Canadian natural resource exploration company engaged in the exploration and development of mineral resources through its subsidiaries: Snow Lake Exploration Ltd., Snow Lake (Crowduck) Ltd., Global Uranium Acquisition Corp. PTY LTD., Snow Lake Exploration (US) Ltd., and Snow Lake Investments (US) Ltd. The corporate and registered office of the Company is 360 Main St, 30th Floor, Winnipeg, Manitoba, R3C 4G1, Canada.
On November 22, 2021, the Company was listed for trading under the NASDAQ Composite under the ticker symbol “LITM”.
Although the Company has taken steps to verify title to the mineral properties in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property title may be subject to government licensing requirements or regulations, unregistered prior agreements, undetected defects, unregistered claims, native land claims, and non-compliance with regulatory and environmental requirements.
For the year ended June 30, 2024, the Company incurred a net loss of $6,850,918 (2023 – $15,462,945; 2022 - $9,446,454) and negative cash flow from operations of $3,742,326 (2023 – $10,298,791; 2022 - $3,098,972), and as at June 30, 2024, the Company had an accumulated deficit of $26,548,238 (June 30, 2023 – $24,695,723; 2022 – $10,545,535). The Company has not yet placed any of its mineral properties into production and, as a result, the Company has no source of operating cash flow. The Company’s ability to continue as a going concern is dependent upon the Company achieving profitable operations to generate sufficient cash flows to fund continuing operations, or, in the absence of adequate cash flows from operations, obtaining additional financing to support operations for the foreseeable future. It is not possible to predict whether financing efforts will be successful or if the Company will attain profitable levels of operations. These conditions, and the unpredictability of the mining business, represent material uncertainties which may cast significant doubt upon the Company’s ability to continue as a going concern.
These consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, and do not reflect the adjustments to the carrying values of assets and liabilities and the reported revenues and expenses, and classifications of statements of financial position that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.
2. Basis of Presentation
(a) Statement of Compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The accounting policies set out below were consistently applied to all periods presented unless otherwise noted.
These consolidated financial statements were reviewed, approved and authorized for issuance by the Board of Directors (the “Board”) of the Company on October 29, 2024.
F-8
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
2. Basis of Presentation (continued)
(b) Basis of Measurement
These consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments carried at fair value, as explained in the accounting policies as set out in Note 3. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.
(c) Basis of Consolidation
Subsidiaries consist of entities over which the Company is exposed to, or has rights to, variable returns as well as the ability to affect those returns through the power to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date control is transferred to the Company and are-deconsolidated from the date control ceases. The consolidated financial statements include all the assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiaries after eliminating inter-entity balances and transactions.
(d) Functional Currency
These consolidated financial statements are presented in Canadian dollars (“$” or “CAD”), which is the Company’s functional currency. The functional currency is the currency of the primary economic environment in which the Company operates.
(e) Significant Accounting Judgments and Estimates
The preparation of these consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, revenue, and expenses. On an ongoing basis, management evaluates its judgments and estimates in relation to assets, liabilities, revenue, and expenses. Management uses historical experience and various other factors it believes to be reasonable under the given circumstances as the basis for its judgments and estimates. Actual outcomes may differ from these estimates under different assumptions and conditions. These estimates are reviewed periodically, and adjustments are made as appropriate in the period they become known.
Items for which actual results may differ materially from these estimates are described as follows:
Going concern
At each reporting period, management exercises judgment in assessing the Company’s ability to continue as a going concern by reviewing the Company’s performance, resources, and future obligations. The conclusion that the Company will be able to continue as a going concern is subject to critical judgments of management with respect to assumptions surrounding the short and long-term operating budgets, expected profitability, investment and financing activities and management’s strategic planning. The assumptions used in management’s going concern assessment are derived from actual operating results along with industry and market trends. Management believes there is sufficient capital to meet the Company’s business obligations for at least the next 12 months, after taking into account expected cash flows, including financing activities, and the Company's cash position at year-end.
F-9
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
2. Basis of Presentation (continued)
(e) Significant Accounting Judgments and Estimates (continued)
Fair value of financial assets and financial liabilities
Fair value of financial assets and financial liabilities on the consolidated statements of financial position that cannot be derived from active markets, are determined using a variety of techniques including the use of valuation models. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgment is required to establish fair values. Judgments include, but are not limited to, consideration of model inputs such as volatility, estimated life and discount rates.
Economic recoverability of future economic benefits of exploration and evaluation assets
Management has determined that exploration and evaluation (“E&E”) assets and related costs incurred, which have been recognized on the consolidated statements of financial position, are economically recoverable. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefit including geological data, scoping studies, accessible facilities, and existing and future permits.
Technical feasibility and commercial viability
Management exercises judgment, in accordance with IFRS 6 – Exploration for and Evaluation of Mineral Resources (“IFRS 6”), to determine an accounting policy specifying which expenditures, if any, are capitalized as E&E assets, and to apply the policy consistently. E&E expenditures not capitalized as E&E assets are expensed as incurred. Once the technical feasibility and commercial viability of extracting a mineral resource are demonstrable, an entity stops recording E&E expenditures for that mineral project, tests capitalized E&E assets (if any) for impairment and reclassifies those E&E assets to other applicable development-stage accounts. An assessment of technical feasibility and commercial viability is conducted on a project-by-project basis with regard to all relevant facts and circumstances. The nature and status of the mineral project is determined on the merits of the mineral project itself.
Provisions
Provisions recognized in the consolidated financial statements involve judgments on the occurrence of future events, which could result in a material outlay for the Company. In determining whether an outlay will be material, the Company considers the expected future cash flows based on facts, historical experience and probabilities associated with such future events. Uncertainties exist with respect to estimates made by management and as a result, the actual expenditure may differ from amounts currently reported.
Income taxes
Income taxes and tax exposures recognized in the consolidated financial statements reflect management’s best estimate of the outcome based on facts known at the reporting date. When the Company anticipates a future income tax payment based on its estimates, it recognizes a liability. The difference between the expected amount and the final tax outcome has an impact on current and deferred taxes when the Company becomes aware of this difference.
In addition, when the Company incurs losses that cannot be associated with current or past profits, it assesses the probability of taxable profits being available in the future based on its budgeted forecasts. These forecasts are adjusted to take account of certain non-taxable income and expenses and specific rules on the use of unused credits and tax losses. When the forecasts indicate the sufficient future taxable income will be available to deduct the temporary differences, a deferred tax asset is recognized for all deductible temporary differences.
F-10
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
2. Basis of Presentation (continued)
(e) Significant Accounting Judgments and Estimates (continued)
Options, restricted share units and warrants
Options, restricted share units (“RSUs”) and warrants, including finders’ warrants, are initially recognized at fair value using market-based valuation techniques. The fair value of the market-based and performance-based share awards are determined at the date of grant using generally accepted valuation techniques. Assumptions are made and judgments are used in applying the valuation techniques. These assumptions and judgments include the expected volatility of the share price, expected forfeitures, expected dividend yield, expected term of the warrants or options, and expected risk-free interest rate. Such assumptions and judgments are inherently uncertain. Changes in these assumptions can affect the fair value estimates of stock-based compensation.
Expected credit losses on financial assets
Determining an allowance for expected credit losses (“ECL”) for amounts receivable and all debt financial assets not held at fair value through profit or loss (“FVTPL”) requires management to make assumptions about the historical patterns for the probability of default, the timing of collection and the amount of incurred credit losses, which are adjusted based on management’s judgment about whether economic conditions and credit terms are such that actual losses may be higher or lower than what the historical patterns suggest.
Functional currency
The functional currency for the Company and its subsidiaries is the currency of the primary economic environment in which they operate. Determination of functional currency involves significant judgments and other entities may make different judgments based on similar facts. Periodically, the Company reconsiders the functional currency of its business if there is a change in the underlying transactions, events or conditions which determine its primary economic environment.
Shares issued for non-cash consideration
The Company is required to recognize these transactions at fair value which requires judgment in selecting valuation techniques and other factors.
3. Summary of Material Accounting Policies
(a) Current and Non-Current Classification
Assets and liabilities are presented in the consolidated statements of financial position based on current and non-current classification.
An asset is classified as current when it is either expected to be realized or intended to be sold or consumed in the normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realized within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
F-11
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
3. Summary of Material Accounting Policies (continued)
(a) Current and Non-Current Classification (continued)
A liability is classified as current when it is either expected to be settled in the normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.
(b) Cash
Cash in the consolidated statements of financial position comprises cash at a chartered bank in Canada and funds held in trust with the Company’s legal counsels which is available on demand.
(c) Exploration and Evaluation Assets
Title to E&E assets including mineral properties involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing historical characteristic of many properties. The Company has investigated title to all its mineral properties and, to the best of its knowledge, titles to all its mineral properties are in good standing.
The Company accounts for E&E assets in accordance with IFRS 6. Once the legal right to explore a property has been acquired, costs directly related to exploration and evaluation are recognized and capitalized, in addition to acquisition costs. These expenditures include but are not limited to acquiring licenses, researching and analyzing existing exploration data, conducting geological studies, exploration drilling and sampling and payments made to contractors and consultants in connection with the exploration and evaluation of the property. Costs not directly attributable to E&E activities, including general administrative overhead costs, are expensed in the period in which they occur.
Acquisition costs incurred in obtaining legal right to explore a mineral property are deferred until the legal right is granted and thereon reclassified to mineral properties. Transaction costs incurred in acquiring an asset are deferred until the transaction is completed and then included in the purchase price of the asset acquired.
When a project is deemed to no longer have commercially viable prospects to the Company, E&E expenditures in respect of that project are deemed to be impaired. As a result, those E&E expenditure costs, in excess of the estimated recoverable amount, are written off to the consolidated statements of loss and comprehensive loss.
The Company assesses E&E assets for impairment when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell (“FVLCS”) and value-in-use (“VIU”).
Once the technical feasibility and commercial viability of extracting the mineral resource has been determined, the property is considered a mine under development. E&E assets are also tested for impairment before the assets are transferred to development properties.
As the Company currently has no operational income, any incidental revenues earned in connection with exploration activities are applied as a reduction to capitalized exploration costs.
F-12
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
3. Summary of Material Accounting Policies (continued)
(d) Financial Instruments
The Company classifies and measures financial instruments in accordance with IFRS 9 – Financial Instruments (“IFRS 9”). A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. The Company recognizes financial assets and financial liabilities on the consolidated statements of financial position when it becomes a party to the financial instrument or derivative contract.
Classification
The Company classifies its financial assets in the following measurement categories: (a) those to be measured subsequently at FVTPL; (b) those to be measured subsequently at fair value through other comprehensive income (loss) (“FVTOCI”); and (c) those to be measured at amortized cost. The classification of financial assets depends on the business model for managing the financial assets and the contractual terms of the cash flows. Financial liabilities are classified as those to be measured at amortized cost unless they are designated as those to be measured subsequently at FVTPL (irrevocable election at the time of recognition). The Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities are not reclassified.
The Company’s financial assets include cash, other receivables excluding any sales tax amounts, and due from related party. The Company’s financial liabilities include its accounts payable, due to related parties, lease liabilities, derivative liabilities and other liabilities.
Fair value through profit or loss
This category includes derivative instruments as well as quoted equity instruments which the Company has not irrevocably elected, at initial recognition or transition, to classify at FVTOCI. This category would also include debt instruments whose cash flow characteristics do not meet the solely payment of principal and interest (“SPPI”) criterion or are not held within a business model whose objective is either to collect contractual cash flows, or to both collect contractual cash flows and sell. Financial assets in this category are recorded at fair value with changes recognized in the consolidated statements of loss and comprehensive loss.
Financial assets at fair value through other comprehensive income
Debt and equity instruments that are held for collection of contractual cash flows and for sale, and where the assets’ cash flows represent solely payments of principal and interest, are classified as FVTOCI. Movements in fair values are recognized in other comprehensive income (“OCI”) and accumulated in fair value reserve, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses, which are recognized in profit and loss.
F-13
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
3. Summary of Material Accounting Policies (continued)
(d) Financial Instruments (continued)
When the financial asset is derecognized, the cumulative gain or loss recognized in OCI is reclassified from equity to profit or loss and presented in “other gains and losses”. Interest income from these financial assets is recognized using the effective interest rate method and presented in “interest income”. As at June 30, 2024 and 2023, the Company did not have any financial assets at FVTOCI.
Amortized cost
Debt and equity instruments that are held for collection of contractual cash flows where those cash flows represent SPPI are measured at amortized cost. Interest income from these financial assets is included in interest income using the effective interest rate method.
The Company’s classification of financial assets and financial liabilities is summarized below:
Cash
FVTPL
Due to/from related parties
Amortized cost
Accounts payable
Amortized cost
Lease liabilities
Amortized cost
Derivative liabilities
FVTPL
Other liabilities
FVTPL
Measurement
All financial instruments are required to be measured at fair value on initial recognition, plus, in the case of a financial asset or financial liability not at FVTPL, transaction costs that are directly attributable to the acquisition or issuance of the financial asset or financial liability. Transaction costs of financial assets and financial liabilities carried at FVTPL are expensed in profit or loss. Financial assets and financial liabilities with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of the subsequent accounting periods. All other financial assets, including equity investments, are measured at their fair values at the end of subsequent accounting periods, with any changes taken through profit and loss or OCI (irrevocable election at the time of recognition). For financial liabilities measured subsequently at FVTPL, changes in fair value due to credit risk are recorded in OCI.
Expected credit loss impairment model
Under IFRS 9, the Company recognizes a provision for ECL on financial assets that are measured on amortized cost. The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. The Company considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Company in full or when the financial asset is more than 90 days past due.
The carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts.
F-14
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
3. Summary of Material Accounting Policies (continued)
(d) Financial Instruments (continued)
Derecognition
The Company derecognizes financial assets only when the contractual rights to cash flow from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity.
The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled, or expire. The Company also derecognizes a financial liability when the terms of the liability are modified such that the terms and/or cash flows of the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.
Gains or losses on derecognition are generally recognized in profit or loss.
Determination of fair value
The determination of fair value requires judgment and is based on market information, where available and appropriate. The Company classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.
(e) Impairment of Assets
At each reporting date, the Company reviews the carrying amounts of its assets to determine whether there are any indicators of impairment. If any such indicator exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any.
Where the asset does not generate cash inflows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit (“CGU”) to which the asset belongs. Any intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired. An asset’s recoverable amount is the higher of FVLCS and VIU. In assessing VIU, the estimated future cash flows are discounted to their present value, using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount is reduced to the recoverable amount and an impairment loss is recognized immediately in the consolidated statements of loss and comprehensive loss. Where an impairment subsequently reverses, the carrying amount is increased to the revised estimate of recoverable amount but only to the extent that this does not exceed the carrying value that would have been determined if no impairment had previously been recognized. A reversal of impairment is recognized in the consolidated statements of loss and comprehensive loss.
F-15
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
3. Summary of Material Accounting Policies (continued)
(f) Impairment of Non-Financial Assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s FVLCS and VIU. The VIU is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or CGU to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a CGU.
(g) Leased Assets
The Company is party to a lease of a mining analyzer which is used for its E&E activities. The Company assesses service arrangements to determine if an asset is explicitly or implicitly specified in the agreement and if it has the right to control the use of the identified asset.
At inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company then recognizes a right-of-use (“ROU”) asset and a lease liability at the lease commencement date. The ROU asset is initially measured based on the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The assets are depreciated to the earlier of the end of the useful life of the ROU asset or the lease term using the straight-line method. The lease term includes periods covered by an option to extend if the Company is reasonably certain to exercise that option. The Company elected to recognize expenses for leases with a term of 12 months or less on a straight-line basis over the lease term and lease of assets of low value, and not to recognize these short-term leases on the consolidated statements of financial position.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Company’s incremental borrowing rate, which was determined to be about 14%. The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, if there is a change in future lease payments arising from a change in an index or rate, or if the Company changes its assessment whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured, the amount of the remeasurement is recognized as a corresponding adjustment to the carrying amount of the ROU asset or is recorded in profit or loss if the carrying amount of the ROU asset has been reduced to zero.
(h) Provisions
A provision is recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be reliably estimated. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
F-16
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
3. Summary of Material Accounting Policies (continued)
(h) Provisions (continued)
A provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract.
(i) Income Taxes
Income tax expense consists of current and deferred tax expense. Current and deferred tax are recognized in profit or loss except to the extent that it relates to items recognized directly in equity or OCI.
Current income tax is recognized and measured at the amount expected to be recovered from, or payable to, the taxation authorities based on the income tax rates enacted or substantively enacted at the end of the reporting period and includes any adjustment to taxes payable in respect of previous years.
Deferred tax is recorded for temporary differences at the date of the consolidated statements of financial position between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The carrying amount of a deferred tax asset is reviewed at the end of the reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at the end of the reporting period and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of the reporting period.
Deferred tax assets and deferred tax liabilities are offset if, and only if, they relate to income taxes levied by the same taxation authority and the Company has the legal rights and intent to offset.
Estimates
Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that at some future date an additional liability could result from audits by taxing authorities. Where the final outcome of these tax‑related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made.
(j) Share Capital
Common shares are classified as share capital. Costs directly attributable to the issue of common shares are recognized as a deduction from share capital, net of any tax effects.
3. Summary of Material Accounting Policies (continued)
(k) Share-Based Payments Transactions
The Company operates a stock option plan (the “Option Plan”). Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received, or at the fair value of the equity instruments
F-17
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
issued, if it is determined the fair value of the goods or services cannot be reliably measured and are recorded at the date the goods or services are received. The fair value of options is determined based on the application of the Black-Scholes valuation model (“Black-Scholes”). The fair value of equity-settled stock-based compensation transactions is recognized as an expense with a corresponding increase in the share-based payments reserve.
If share-settled awards are modified, as a minimum an expense is recognized as if the modification has not been made. An additional expense is recognized, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification.
Amounts recorded for cancelled or expired unexercised options are transferred to accumulated deficit in the period of which the cancellation or expiry occurs.
The Company also operates a RSUs Plan, where RSUs are granted to directors, employees and consultants from time to time. RSUs are measured at the fair value of the date of grant, based on the closing price of the Company’s common shares on the date of grant. The fair value of stock-based compensation on RSUs is recognized as an expense with a corresponding increase in the reserve for RSUs over the vesting period.
From time to time, the Company may also grant RSUs with a put right option, which provides the grantee with the right (the “Put Right Option”), but not the obligation to cause the Company to purchase all or a portion of the vested RSUs at a put purchase price (the “Put Purchase Price”). As the grantee has the choice of settlement through cash or in shares, these RSUs with the Put Right Option are considered to be a compound financial instrument that includes both a liability component and an equity component. At the measurement date, the Company accounts for the two components separately i.e. applying the requirements for cash-settled share-based payments to the liability component and applying the requirements for equity-settled share-based payments to the equity component, if that component has a recognized value. Applying the requirements for equity-settled share-based payments, the value of the equity component is not remeasured subsequently. Applying the requirements for cash-settled share-based payments, the liability is remeasured at each reporting date and on settlement date to its fair value.
If the grantee chooses cash settlement, then the cash payment settles the liability. Any equity component previously recognized in equity remains in equity. If the grantee employee chooses settlement in equity instruments, then the liability is transferred to equity as consideration for issuing the equity instruments.
F-18
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
3. Summary of Material Accounting Policies (continued)
(l) Warrants
Share purchase warrants (each a “Warrant”) are classified as a component of equity. Warrants issued along with shares in an equity unit financing are measured using the residual approach, whereby the fair value of the Warrant is determined after deducting the fair value of the shares from the unit price less applicable financing costs. Warrants issued for broker/financing compensation, are recognized at the fair value using Black-Scholes at the date of issuance. Warrants are initially recorded as a part of the reserves in warrant in equity at the recognized fair value.
Upon exercise of the Warrants, the previously recognized fair value of the Warrants exercised is reallocated to share capital from warrants reserve. Proceeds generated from the payment of the exercise price are also allocated to share capital. Amounts recorded for expired unexercised warrants are transferred to accumulated deficit in the period of which the expiry occurs.
(m) Flow-Through Shares
Proceeds received from the issuance of flow-through shares are restricted to be used only for Canadian resource property exploration expenditures within a two-year period. The portion of the proceeds received but not yet expended at the end of the year is disclosed separately.
The issuance of flow-through common shares results in the tax deductibility of the qualifying resource expenditures funded from the proceeds of the sales of such common shares being transferred to the purchasers of the shares. On the issuance of such shares, the Company bifurcates the flow-through shares into a flow-through share premium, equal to the estimated fair value of the premium that investors pay for the flow-through tax feature, which is recognized as a liability, and equity values of share capital and/or warrants. As related exploration expenditures are incurred, the Company derecognizes the premium liability and recognizes the related recovery.
(n) Loss Per Share
Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted loss per share is calculated by the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding for the calculation of diluted (loss) earnings per share assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the period.
(o) Foreign Currency Translation
Monetary assets and liabilities denominated in currencies other than CAD are translated into CAD at the rate of the consolidated financial statements of the Company are prepared in its functional currency, determined on the basis of the primary economic environment in which the entity operates. Given that operations are in Canada, the presentation and functional currency of the Company is the Canadian dollar.
Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing at the transaction dates. At each reporting date, monetary items denominated in foreign currencies are translated into the entity’s functional currency at the then prevailing rates and non-monetary items measured at historical cost are translated into the entity’s functional currency at rates in effect at the date the transaction took place.
F-19
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
3. Summary of Material Accounting Policies (continued)
(o) Foreign Currency Translation (continued)
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are included in the consolidated statements of loss and comprehensive loss for the period in which they arise.
(p) Related Party Transactions
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. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
4. Sales Tax Receivable
The Company’s sales tax receivable balance represents amounts due from government taxation authorities in respect of the Good and Services Tax/Harmonized Sales Tax. The Company anticipates full recovery of these amounts and therefore no ECL has been recorded against these receivables, which are due in less than one year.
5. Prepaid Expenses
June 30,
2024
June 30,
2023
June 30,
2022
$
$
$
Prepaid insurance
-
283,307
483,278
Advances made to suppliers and deposits
706,634
600,565
448,872
706,634
883,872
932,150
6. Exploration and Evaluation Assets
The following summarizes the movement of the Company’s E&E assets for the years ended June 30, 2024, 2023 and 2022:
June 30,
2024
June 30,
2023
June 30,
2022
$
$
$
Balance, beginning of year
21,442,032
12,077,584
5,730,224
Exploration and evaluation expenditures
7,976,506
9,364,448
6,347,360
Disposal due to termination of Muskrat Dam Project
(2,805,780)
-
-
Balance, end of year
26,612,758
21,442,032
12,077,584
ACME Option Agreement
On January 29, 2024, the Company entered into an option agreement (the “ACME Option Agreement”) with ACME Lithium Inc. (“ACME”), pursuant to which ACME has granted the Company the option to earn up to a 90% undivided interest in the mineral claims held by ACME at its Manitoba lithium project areas, located in south eastern Manitoba,
F-20
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
Canada (the “Shatford Lake Project”), which is comprised of 37 mineral claims located over three project areas - Shatford Lake, Birse Lake, and Cat-Euclid Lake, totaling approximately 17,000 acres.
Pursuant to the ACME Option Agreement, the Company may exercise the option by paying a total of $800,000 and incurring a total of $1,800,000 in exploration and development (“E&D”) expenditures over a two-year period, as follows:
·Initial payment: Cash payment of $20,000 (paid);
·Upon execution: Cash payment of $130,000 (paid);
·First year: Cash payment of $150,000 and minimum E&D expenditures of $600,000; and
·Second year: Cash payment of $500,000 and minimum E&D expenditures of $1,200,000.
Once the Company has earned a 90% undivided interest in the Shatford Lake Project, and completed a positive feasibility study, a joint venture (the “Joint Venture”) between Snow Lake and ACME will be formed for further development, the detailed market standard terms and conditions of which will be agreed at the time of formation of the Joint Venture.
Muskrat Dam Option Agreement
On February 5, 2024, the Company entered into another option agreement (the “Muskrat Dam Option Agreement”) with a private Manitoba company (“Manco”) to acquire a 90% undivided interest in a group of mineral claims in the Muskrat Dam Lake area of Western Ontario, near Kenora and the border with Manitoba (the “Muskrat Dam Project”). Pursuant to the Muskrat Dam Option Agreement, Manco had granted the Company the option to earn up to a 90% undivided interest in the Muskrat Dam Project upon the following terms and conditions:
F-21
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
6. Exploration and Evaluation Assets (continued)
Pursuant to the Muskrat Dam Option Agreement, the Company paid $50,000, issued an aggregate of 500,000 common shares (Note 13), and granted 2,000,000 2024 Settlement Warrants (each a 2024 Settlement Warrant), whereby each 2024 Settlement Warrant is exercisable for a period of five years at an exercise price of USD $1.50 (see Note 10).
The option agreement was amended and terminated on June 28, 2024, and the Company issued an aggregate of 3,500,000 shares in consideration for the termination (see Note 13). The 2,000,000 2024 Settlement Warrants previously issued were cancelled (see Note 10). A loss on termination of the Muskrat Dam Option Agreement of $4,652,894 was recorded in the consolidated statements of loss and comprehensive loss, consisting of $3,415,591 related to the issuance of termination shares, $2,805,780 related to previously capitalized E&E assets that were written off, net of $1,568,557 related to the derecognition of the derivative liability associated with the cancelled 2024 Settlement Warrants.
Engo Valley Uranium Project
On February 20, 2024, the Company and a British Columbia company (the “Vendor”) entered into a binding letter of intent (the “LOI”) to acquire 100% of Engo Valley Pty Ltd. (“Engo Valley”), a private Australian company, pursuant to which Snow Lake will acquire up to 85% undivided indirect interest in Namibia Minerals and Investment Holdings (Proprietary) Limited (the “Project Company”), a private Namibian company, which in turn is the sole registered and beneficial owner of 100% of the right, title and interest in the Exclusive Prospecting License - 5887 (the “License”) for the Engo Valley Uranium Project.
In July 2024, subsequent to year end, the Company entered into a share purchase agreement to acquire Engo Valley in two stages, as follows:
(a) First Stage Interest
Snow Lake acquired an initial 80% undivided interest in Engo Valley, which represents a 68% undivided indirect interest in the Project Company (the “First Stage Interest”), upon:
·payment to the Vendor of USD $250,000 in cash (paid);
·incurring exploration expenditures of a minimum of USD $200,000 (incurred); and
·allotting and issuing to the Vendor 2,024,496 common shares (issued subsequent to year end).
(b) Second Stage Interest
The Company will acquire an additional 20% undivided interest in Engo Valley, which represents a 17% undivided indirect interest in the Project Company by (the “Second Stage Interest”), for a total undivided indirect interest of 85% in the Project Company, upon:
·incurring additional exploration expenditures of a minimum of USD $800,000 on or before June 30, 2025, provided, that any expenditures we incurred in excess of the USD $200,000 minimum exploration expenditures in connection with our acquisition of the First Stage Interest will be credited against the expenditure commitment for the Second Stage Interest.
F-22
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
6. Exploration and Evaluation Assets (continued)
After the Company acquires the Second Stage Interest, the Company will be obligated to make the following payments to the Vendor, in the form of our common shares, upon the achievement of the following milestones:
i)Milestone Payment No. 1: In the event an SK-1300 compliant technical report determines there is a uranium mineral resource on the Engo Valley Uranium Project of a minimum of 10 million pounds with a minimum average grade of 250 parts per million, or ppm, U3O8, the Company will issue an aggregate of 1,030,927 common shares; and
ii)Milestone Payment No. 2: In the event an SK-1300 compliant technical report determines there is a uranium mineral resource on the Engo Valley Uranium Project of a minimum of 25 million pounds with a minimum average grade of 250 ppm U3O8, the Company will issue an aggregate of 1,030,927 common shares.
Black Lake Uranium Project
On May 8, 2024, Snow Lake entered into a share purchase agreement to acquire 100% of Global Uranium Acquisition Corp (Pty) Ltd ("Global Uranium"), a private Australian company, which in turn, has entered into a mineral property option agreement (the "Option Agreement") with Doctors Investment Group Ltd. ("Doctors"), a private British Columbia company, pursuant to which Global can earn a 100% interest in the Black Lake Uranium Project.
Snow Lake agreed to acquire Global Uranium in consideration of:
·payment of $50,000 in cash (paid);
·issuance of 1,000,000 common shares upon execution of the share purchase agreement (issued); and
·issuance of 1,000,000 common shares in the event that an SK-1300 compliant technical report determines that there is a uranium mineral resource on the Black Lake Uranium Project of a minimum of 10 million pounds U3O8 with a minimum average grade of 500 ppm U3O8 per tonne.
The acquisition was completed on June 21, 2024, and was accounted for as an asset acquisition as Global Uranium does not meet the definition of a business under IFRS 3. As Global Uranium had net assets of $nil on the date of acquisition, the full value of the consideration given up by the Company has been allocated to exploration and evaluation assets.
The Option Agreement provides that Global Uranium can earn a 100% interest in the Black Lake Uranium Project as follows:
a.Cash Payments by Global Uranium to Doctors of the following amounts:
i.$50,000 within 2 days of signing the Option Agreement (paid);
ii.$150,000 within 30 days of signing the Option Agreement (paid);
iii.$250,000 on or before the first anniversary of signing the Option Agreement;
iv.$350,000 on or before the second anniversary of signing the Option Agreement;
v.$400,000 on or before the third anniversary of signing the Option Agreement; and
vi.$600,000 on or before the fourth anniversary of signing the Option Agreement.
F-23
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
6. Exploration and Evaluation Assets (continued)
b.Exploration Expenditures – Global Uranium incurring the following exploration expenditures on the Black Lake Uranium Project:
i.$500,000 in exploration expenditures on or before the first anniversary of the signing of the Option Agreement;
ii.$500,000 in exploration expenditures on or before the second anniversary of the signing of the Option Agreement; and
iii.$1,000,000 in exploration expenditures on or before the third anniversary of the signing of the Option Agreement.
Global Uranium has the right under the Option Agreement to accelerate both cash payments and/or the exploration expenditures prescribed under the Option Agreement.
7. Right-of-Use Assets
Effective June 15, 2023, the Company entered into a lease agreement for mining equipment used in its E&E activities, for a term of two years. As at June 30, 2024, 2023 and 2022, the Company’s leased equipment classified as right-of-use (“ROU”) assets are as follows:
June 30,
2024
June 30,
2023
June 30,
2022
$
$
$
Cost, beginning of year
63,360
-
-
Additions for right-of-use assets
-
63,360
-
Balance, end of year
63,360
63,360
-
Accumulated Amortization, beginning of year
2,640
-
-
Depreciation
31,680
2,640
-
Accumulated Amortization, end of year
34,320
2,640
-
Net Book Value
29,040
60,720
-
8. Accounts Payable and Accrued Liabilities
June 30,
2024
June 30,
2023
June 30,
2022
$
$
$
Trade payables
470,172
722,376
568,065
Accrued liabilities
219,772
301,758
614,384
689,944
1,024,134
1,182,449
Accounts payable of the Company are principally comprised of amounts outstanding for trade purchases incurred in the normal course of business.
F-24
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
9. Lease Liabilities
The movements and carrying amounts of the Company’s ROU assets under lease as per disclosed in Note 7, are summarized as follows:
$
Balance, June 30, 2022 and 2021
-
Additions of lease
63,360
Lease payments
(2,986)
Accretion on lease liabilities
654
Balance, June 30, 2023
61,028
Lease payments
(35,828)
Accretion on lease liabilities
5,907
Balance, June 30, 2024
31,107
$
Current
31,107
Non-current
-
31,107
10. Derivative Liabilities
Conversion feature of Debentures
Upon issuance of the Debentures in February 2021, the Company allocated the conversion feature component valued at $442,589 as a derivative liability.
During the year ended June 30, 2022, a gain on change in fair value on the conversion feature of $153,155 was recorded on the consolidated statements of loss and comprehensive loss up to the conversion of the Debentures. As a result of the conversion, a fair value of $256,758 was allocated to share capital.
IPO Finders’ Warrants
In connection with the IPO which closed on November 23, 2021, the Company issued 184,000 finders’ warrants (each a “Finders’ Warrants”) exercisable at USD $9.375 before November 19, 2026. The fair value of these Finders’ Warrants was estimated at $1,237,681 using the Black-Scholes valuation model (“Black-Scholes”) with the following assumptions: expected volatility of 100% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 1.58%, and an expected life of five years.
As at June 30, 2024, the derivative liability related to the Finders’ Warrants was measured at a fair value of $45,285 (2023 – $379,025; 2022 - $286,997) using Black-Scholes with the following assumptions: share price of USD $0.71, exercise price of USD $9.375, expected volatility of 129% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 4.02% and an estimated remaining life of 2.4 years.
During the year ended June 30, 2024, the Company recorded a fair value gain of $333,740 on the derivative liability related to the Finders’ Warrants (2023 – fair value loss of $92,028; 2022 – fair value gain of $950,684).
F-25
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
10. Derivative Liabilities (continued)
Incentive Warrants
On February 17, 2023, the Company issued 225,000 incentive warrants (each a “Incentive Warrant”) to a third-party pursuant to an engagement agreement between the parties, whereby each Incentive Warrant is exercisable for a period of two years at an exercise price of: (i) USD $3.00 for 75,000 Incentive Warrants; (ii) USD $4.00 for 75,000 Incentive Warrants; and (iii) USD $5.00 for 75,000 Incentive Warrants. On initial recognition, the fair value of these Incentive Warrants was estimated at $409,496 using Black-Scholes with the following assumptions: expected volatility of 148% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 4.15%, and an expected life of two years. The fair value of the Incentive Warrants was recorded as consulting fees on the consolidated statements of loss and comprehensive loss.
As at June 30, 2024, the derivative liability related to the Incentive Warrants was measured at a fair value of $11,754 (2023 – $401,544, 2022 - $nil) using Black-Scholes with the following assumptions: share price of USD $0.71, exercise price ranging from USD $3.00 to $5.00, expected volatility of 131% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 4.02% and an estimated remaining life of 0.64 years.
During the year ended June 30, 2024, the Company recorded a fair value gain of $389,790 (2023 – $7,952; 2022 - $nil) on the derivative liability related to the Incentive Warrants.
Settlement Warrants
On March 31, 2023, the Company issued 500,000 settlement warrants (each a “Settlement Warrant”) to two additional third-parties pursuant to an agreement for release and settlement of claims advanced against the Company, whereby each Settlement Warrant is exercisable for a period of three years at an exercise price of USD $2.50. On initial recognition, the fair value of these Settlement Warrants was estimated at $979,294 using Black-Scholes with the following assumptions: expected volatility of 140% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 3.51%, and an expected life of three years. The fair value of the Settlement Warrants was recorded as professional fees on the consolidated statements of loss and comprehensive loss.
As at June 30, 2024, the derivative liability related to the Settlement Warrants was measured at a fair value of $191,860 (2023 – $1,141,677; 2022 - $nil) using Black-Scholes with the following assumptions: share price of USD $0.71, exercise price of USD $2.50, expected volatility of 135% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 4.02% and an estimated remaining life of 1.75 years.
During the year ended June 30, 2024, the Company recorded a fair value gain of $949,817 (2023 – fair value loss of $162,383; 2022 - $nil) on the derivative liability related to the Settlement Warrants.
Agents’ Warrants
On September 21, 2023, the Company issued 86,000 agents’ warrants (each an “Agents’ Warrant”) in connection to the flow-through financing (the “Offering”), whereby each Agents’ Warrant is exercisable for a period of five years at an exercise price of USD $2.67. On initial recognition, the fair value of these Agents’ Warrants was estimated at $139,639 using Black-Scholes with the following assumptions: expected volatility of 139% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 4.25%, and an expected life of five years. The fair value of the Agents’ Warrants was recorded as share issuance costs and netted against share capital on the consolidated statements of financial position.
F-26
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
10. Derivative Liabilities (continued)
As at June 30, 2024, the derivative liability related to the Agents’ Warrants was measured at a fair value of $55,179 (2023 - $nil; 2022 - $nil) using Black-Scholes with the following assumptions: share price of USD $0.71, exercise price of USD $2.67, expected volatility of 124% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 3.51% and an estimated remaining life of 4.23 years.
During the year ended June 30, 2024, the Company recorded a fair value gain of $84,460 on the derivative liability related to the Agents’ Warrants (2023 - $nil; 2022 - $nil).
Performance Warrants
On October 2, 2023, the Company issued 300,000 performance warrants (each a “Performance Warrant”) to a third-party pursuant to a marketing services agreement (the “Marketing Agreement”) between the parties, whereby each Performance Warrant is exercisable for a period of one year at an exercise price of: (i) USD $2.00 for 100,000 Performance Warrants; (ii) USD $2.50 for 100,000 Performance Warrants; and (iii) USD $3.00 for 100,000 Performance Warrants. On initial recognition, the fair value of these Performance Warrants was estimated at $171,631 using Black-Scholes with the following assumptions: expected volatility of 137% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 4.83%, and an expected life of one year. The fair value of the Performance Warrants was recorded as consulting fees on the consolidated statements of loss and comprehensive loss.
As at June 30, 2024, the derivative liability related to the Performance Warrants was measured at a fair value of $946 (2023 - $nil; 2022 - $nil) using Black-Scholes with the following assumptions: share price of USD $0.71, exercise price ranging from USD $2.00 to $3.00, expected volatility of 100% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 4.02% and an estimated remaining life of 0.26 years.
During the year ended June 30, 2024, the Company recorded a fair value gain of $170,685 on the derivative liability related to the Performance Warrants (2023 - $nil; 2022 - $nil).
2024 Settlement Warrants
On February 8, 2024, the Company issued 2,000,000 2024 Settlement Warrants pursuant to the Muskrat Dam Option Agreement, whereby each 2024 Settlement Warrant is exercisable for a period of five years at an exercise price of USD $1.50. On initial recognition, the fair value of these 2024 Settlement Warrants was estimated at $2,022,244 using Black-Scholes with the following assumptions: expected volatility of 138% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 3.66%, and an expected life of five years. The fair value of the 2024 Settlement Warrants was recorded as exploration and evaluation assets on the consolidated statements of financial position.
On June 28, 2024, the Muskrat Dam Option Agreement was terminated resulting in the cancellation of the 2024 Settlement Warrants. On June 28, 2024, the derivative liability was measured at a fair value of $1,568,557 using Black-Scholes with the following assumptions: share price of USD $0.71, exercise price of USD $1.50, expected volatility of 135% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 3.52% and an estimated remaining life of 4.61 years. The balance was written off against the loss on termination of the Muskrat Dam Option Agreement in the consolidated statements of loss and comprehensive.
During the year ended June 30, 2024, the Company recorded a fair value gain of $453,687 on the derivative liability related to the 2024 Settlement Warrant (2023 - $nil; 2022 - $nil).
F-27
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
10. Derivative Liabilities (continued)
The changes to the derivative liabilities are as follows:
$
Balance, June 30, 2021
409,913
Fair value changes of derivative liability – conversion feature
(153,155)
Fair value allocated on conversion of Debentures
(256,758)
Fair value of derivative liabilities on date of issuance
1,237,681
Fair value changes of derivative liability – Finders’ Warrants
(950,684)
Balance, June 30, 2022
286,997
Fair value of derivative liabilities on date of issuance
1,388,790
Fair value changes of derivative liability – Finders’ Warrants
92,028
Fair value changes of derivative liability – Incentive Warrants
(7,952)
Fair value changes of derivative liability – Settlement Warrants
162,383
Balance, June 30, 2023
1,922,246
Fair value of derivative liabilities on date of issuance
2,333,515
Fair value changes of derivative liability – Finders’ Warrants
(333,740)
Fair value changes of derivative liability – Incentive Warrants
(389,790)
Fair value changes of derivative liability – Settlement Warrants
(949,817)
Fair value changes of derivative liability – Agents’ Warrants
(84,460)
Fair value changes of derivative liability – Performance Warrants
(170,685)
Fair value changes of derivative liability – 2024 Settlement Warrants
(453,687)
Disposal of 2024 Settlement Warrants
(1,568,557)
Balance, June 30, 2024
305,025
11. Other Liabilities
On January 30, 2023, the Company granted 470,000 RSUs to various directors, of which 400,000 RSUs contained a put right option (the “Put Right Option”) where the directors can elect to settle in cash or in equity. These RSUs vest at various stages pending conditions of certain milestones. These RSUs with the Put Right Option are classified as other liabilities on the consolidated statements of financial position.
As at June 30, 2023, these RSUs were measured at a fair value of $820,612 based on a put right exercise price of USD $2.50 (the “Put Right Exercise Price”). During the year ended June 30, 2023, an amount of $285,045 was recorded as stock-based compensation in relation to vesting of these RSUs on the consolidated statements of loss and comprehensive loss.
As at August 9, 2023, 160,000 RSUs with the Put Right Option had met certain milestones required to vest. On September 26, 2023, the Company paid $534,240 (USD $400,000) to redeem these 160,000 RSUs at the Put Right Exercise Price. As at June 30, 2024, the remaining RSUs with the Put Right Option were measured at a fair value of $773,891. During the year ended June 30, 2024, stock-based compensation of $487,520 was recorded in connection to the vesting of these RSUs on the consolidated statements of loss and comprehensive loss (2023 - $820,612; 2022 - $nil).
F-28
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
12. Flow-Through Share Liability
Flow-through share liability includes the liability portion of the flow-through shares issued. The flow-through common shares issued in the Offering (defined hereafter) completed on September 21, 2023 were issued at a premium to the market price in recognition of the tax benefits accruing to subscribers. The flow-through premium was calculated to be $3,637,149 and will be derecognized through income as eligible expenditures are incurred. For the period from September 21, 2023, to June 30, 2024, the Company incurred eligible expenditures of $2,457,316, satisfying $1,159,632 of such premium. As at June 30, 2024, the flow-through share liability is carried at a balance of $2,477,517.
The following is a continuity schedule of the liability of the flow-through share liability:
$
Balance, June 30, 2023 and 2022
-
Liability incurred on issuance of flow-through shares
3,637,149
Settlement of flow-through share liability on
incurred expenditures
(1,159,632)
Balance, June 30, 2024
2,477,517
13. Share Capital
Authorized share capital
The Company is authorized to issue an unlimited number of common shares without par value. Common shares issued and outstanding as at June 30, 2024, 2023 and 2022 are as follows:
Number of common shares
Amount
#
$
Balance, June 30, 2021
13,010,176
5,750,252
Shares issued on initial public offering
3,680,000
34,988,520
Share issue costs
-
(4,233,129)
Shares issued on conversion of debentures
751,163
857,399
Shares issued on vested RSUs
240,000
1,950,645
Shares issued from the exercise of warrants
243,419
419,946
Balance, June 30, 2022
17,924,758
39,733,633
Shares issued on debt settlement
240,000
800,366
Shares issued from the exercise of warrants
21,052
36,774
Balance, June 30, 2023
18,185,810
40,570,773
Shares issued on private placement financing
2,133,979
7,707,292
Flow-through premium
-
(3,637,149)
Share issue costs
-
(355,016)
Shares issued per agreements
3,886,276
3,934,189
Shares issued per option agreements
1,500,000
1,728,380
Shares issued on vested RSUs
60,000
179,505
Balance, June 30, 2024
25,766,065
50,127,974
F-29
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
13. Share Capital (continued)
Share capital transactions for the year ended June 30, 2022
a)On November 23, 2021, the Company completed the IPO through the issuance of 3,680,000 common shares, including 480,000 common shares issued under the underwriters’ over-allotment option, at a price of $9.51 (USD $7.50) per share for gross proceeds of $34,988,520 (USD $27,600,000). In connection with the IPO, the Company granted the underwriters 184,000 Finders’ Warrants with each Finders’ Warrant exercisable into one common share of the Company at the price of USD $9.375 until November 19, 2026. In addition, the Company paid total issuance costs of $2,995,448 comprised of (i) a cash commission of $2,624,139 to the underwriters, (ii) underwriters’ fees of $304,248, and (iii) other closing expenses of $67,061.
b)On November 23, 2021, the Company also issued 751,163 common shares for the conversion of all outstanding Debentures at a conversion price of $1.25 per common share. The total amount of $863,294 was transferred from derivative liabilities to share capital.
c)On January 9, 2022, the Company issued 240,000 common shares as a result of the vesting of RSUs. These common shares were valued at an amount of $1,950,645. See Note 14 for more details.
d)During the year ended June 30, 2022, 243,419 common shares were issued as a result of the exercise of Warrants for cash proceeds of $365,114.
Share capital transactions for the year ended June 30, 2023
e)On January 25, 2023, the Company issued 240,000 common shares with a fair value of $800,366 to settle a debt (the “Shares-for-Debt Settlement”) of USD $480,000 owed by a director to a third-party, in relation to services provided by the third-party related to the requisitioning of a shareholders’ meeting, which the Company had agreed to complete the settlement on behalf of the director. As a result of the Shares-for-Debt Settlement, the Company recorded a loss on settlement of $157,501 on the consolidated statements of loss and comprehensive loss.
f)During the year ended June 30, 2023, 21,052 common shares were also issued as a result of the exercise of Warrants for cash proceeds of $31,578.
Share capital transactions for the year ended June 30, 2024
g)On September 21, 2023, the Company closed its best-efforts flow-through financing through the issuance of 2,133,979 common shares at a price of $3.6117 (USD $2.67) per common share, for gross proceeds of $7,707,292 (USD $5,697,710) (the “Offering”). In connection with the Offering, the Company issued 86,000 Agents’ Warrants at USD $2.67 per share with an expiry of five years and paid fees and expenses to various agents in the amount of $215,377.
h)On September 21, 2023, the Company also issued 21,276 common shares to a third-party pursuant to a letter agreement between the parties. These common shares were valued at $40,457, based on the Company’s closing share price on the date of issuance, and the amount was recorded as consulting fees on the consolidated statements of loss and comprehensive loss.
i)On October 20, 2023, the Company issued 40,000 common shares to a third-party pursuant to a marketing agreement. These common shares were valued at $51,986, based on the Company’s closing share price on the date of issuance, and the amount was recorded as consulting fees on the consolidated statements of loss and comprehensive loss.
F-30
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
13. Share Capital (continued)
j)On February 8, 2024, the Company issued 500,000 common shares in connection with the Muskrat Dam Project option agreement. These common shares were valued at $733,615 based on the Company’s 30-day-volume-weighted-adjusted share price on the date of issuance.
k)On February 14, 2024, the Company issued 60,000 common shares upon the vesting of restricted share units valued at $179,505.
l)On February 20, 2024, the Company issued 325,000 common shares to 10152300 Manitoba LTD. pursuant to a debt settlement agreement for legal expenses between the parties. These common shares were valued at $426,155 based on the Company’s closing share price on the date of issuance.
m)On June 21, 2024, the Company issued 1,000,000 common shares pursuant to an agreement for the acquisition of the Black Lake Uranium Project. These common shares were valued at $994,765 based on the Company’s closing share price on the date of issuance.
n)On June 28, 2024, the Company issued 3,500,000 common shares in consideration for the amendment and termination of the Muskrat Dam Option Agreement. These common shares were valued at $3,415,591 based on the Company’s closing share price on the date of issuance.
14. Reserve for RSUs
On January 9, 2022, the Company granted 240,000 RSUs to a former officer, which vested immediately. The RSUs were settled and immediately converted into common shares. Stock-based compensation of $1,950,645 in connection with the vesting of these RSUs was recorded during the year ended June 30, 2022.
On January 30, 2023, the Company granted 470,000 RSUs to various directors. 70,000 of these RSUs vest on January 30, 2024. The grant date fair value attributable to these 70,000 RSUs was $209,422, of which $105,244 was recorded as stock-based compensation in connection with the vesting of these RSUs during the year ended June 30, 2024 (2023 - $86,638).
RSUs with the Put Right Option which vest at various stages pending conditions of certain milestones are classified under other liabilities on the consolidated statements of financial position (see Note 11 for details).
On July 17, 2023, the Company granted 200,000 RSUs to an officer. The RSUs will vest at various stages depending on the Company’s volume weighted average price exceeding certain thresholds. The grant date fair value attributable to these RSUs was $1,340,272. As no vesting conditions were met, no stock-based compensation was recorded on these RSUs during the year ended June 30, 2024.
On July 29, 2023, 10,000 RSUs were cancelled. As a result of this cancellation, an amount of $12,377 was reallocated from RSU reserve to accumulated deficit.
As at August 9, 2023, 160,000 RSUs with the Put Right Option had met certain milestones required to vest, and on September 26, 2023, the Company paid $534,240 (USD $400,000) to redeem these 160,000 RSUs (see Note 11 for details).
On February 14, 2024, 60,000 RSUs had met certain milestones required to vest and 60,000 common shares were issued for the redemption.
F-31
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
14. Reserve for RSUs (continued)
As at June 30, 2024, the Company had 440,000 RSUs outstanding (June 30, 2023 – 470,000 RSUs outstanding; June 30, 2022 - nil).
15. Reserve for Share-Based Payments
The Company maintains the Option Plan whereby certain key officers, directors and consultants may be granted stock options for common shares of the Company. The maximum number of common shares that are issuable under the Option Plan is limited to 2,406,732 common shares. Under the Option Plan, the exercise price of each option may not be lower than the greater of the closing price of the Company’s shares on the trading day prior to the grant date or the grant date itself, whichever is higher. Vesting of options is determined at the discretion of the Board. As at June 30, 2024, the Company had 1,598,961 common shares available for issuance under the Option Plan.
The following summarizes the stock option activity for the years ended June 30, 2024, 2023 and 2022:
2024
2023
2022
Number of options
Weighted average exercise price
Number of options
Weighted average exercise price
Number of options
Weighted average exercise price
#
$
#
$
#
$
Opening Balance
1,462,407
7.53
1,620,489
7.23
820,000
2.50
Granted
250,000
USD 2.25
350,000
USD 2.50
1,269,386
USD 7.50
Cancelled
(854,636)
USD 7.50
(148,082)
USD 7.50
(168,897)
USD 7.50
Cancelled
(50,000)
USD 2.50
(360,000)
USD 2.50
(300,000)
2.50
Ending Balance
807,771
3.96
1,462,407
7.53
1,620,489
7.23
Exercisable
620,271
4.23
1,462,407
7.53
1,070,246
6.08
Option activities for the year ended June 30, 2022
On November 18, 2021, the Company granted 1,269,386 options to various officers and directors at an exercise price of USD $7.50, expiring on November 18, 2026. The options vest in equal increments after three months, six months, nine months and 12 months until fully vested. The options were valued using Black-Scholes with the following assumptions: expected volatility of 100% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 1.47%, forfeiture rate of 20% and an expected life of five years. The grant date fair value attributable to these options was $7,167,552, of which $848,520 was recorded as stock-based compensation in connection with the vesting of these options during the year ended June 30, 2023 (2022 – $6,084,861).
On June 29, 2022, 168,897 of these options were cancelled. As a result of these cancellations, an amount of $1,172,443 was reallocated from share-based payments reserve to accumulated deficit.
Option activities for the year ended June 30, 2023
On January 30, 2023, the Company granted 350,000 options to various directors. The options are exercisable at a price of USD $2.50 per common share for a period of five years and vested immediately on grant. The options were valued using Black-Scholes with the following assumptions: expected volatility of 113% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 3.04%, forfeiture rate of 20% and an expected life of five years. The grant date fair value attributable to these options of $666,746 was recorded as stock-based compensation in connection with the vesting of these options during the year ended June 30, 2023.
F-32
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
15. Reserve for Share-Based Payments (continued)
On May 17, 2023, the Board extended the date of expiry of the remaining 160,000 options previously granted in May 25, 2019, from May 24, 2023 to May 24, 2029. The extension constituted a modification in accordance with the guidance of IFRS 2 – Share-Based Payments. As the modification increases the fair value of the options, measured immediately before and after the modification, the Company recorded the incremental fair value, the difference between the fair value of the modified options and that of the original grant. As a result, the Company recorded an additional stock-based compensation of $207,733, which is included in share-based payments reserve.
During the year ended June 30, 2023, 148,082 options exercisable at USD $7.50 and 360,000 options exercisable at $2.50, were cancelled. As a result of these cancellations, an amount of $1,312,757 was reallocated from share-based payments reserve to accumulated deficit.
Option activities for the year ended June 30, 2024
On July 14, 2023, the Company granted 250,000 options to an officer. The options are exercisable at a price of USD $2.25 per common share for a period of three years. 25% of the options will vest six months from the grant date, 25% will vest 12 months from the grant date, with the remainder to vest 18 months from the grant date. The options were valued using Black-Scholes with the following assumptions: expected volatility of 150% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 4.30%, forfeiture rate of 20% and an expected life of three years. The grant date fair value attributable to these options was $447,577, of which $361,081 was recorded as stock-based compensation in connection with the vesting of these options during the year ended June 30, 2024.
On July 29, 2023, 854,636 options exercisable at USD $7.50 and 50,000 options exercisable at USD $2.50, respectively, were cancelled. As a result, an amount of $4,920,927 was reallocated from share-based payments reserve to accumulated deficit.
The following table summarizes information of stock options outstanding and exercisable as at June 30, 2024:
Date of expiry
Number of
options outstanding
Number of
options exercisable
Exercise price
Weighted average remaining contractual life
#
#
$
Years
July 17, 2026
250,000
62,500
USD 2.25
2.04
November 18, 2026
97,771
97,771
USD 7.50
2.38
January 30, 2028
300,000
300,000
USD 2.50
3.58
May 24, 2029
160,000
160,000
2.50
4.90
807,771
620,271
3.96
3.22
F-33
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
16. Reserve for Warrants
The following summarizes the warrants activity for the years ended June 30, 2024, 2023 and 2022:
2024
2023
2022
Number of warrants
Weighted average exercise price
Number of warrants
Weighted average exercise price
Number of warrants
Weighted average exercise price
#
$
#
$
#
$
Opening Balance
1,525,054
4.00
821,106
3.93
880,525
1.55
Issuance of Finders’ Warrants
-
-
-
-
184,000
USD 9.375
Issuance of Agents’ Warrants
86,000
USD 2.67
-
-
-
-
Issuance of Incentive Warrants
-
-
75,000
USD 3.00
-
-
Issuance of Incentive Warrants
-
-
75,000
USD 4.00
-
-
Issuance of Incentive Warrants
-
-
75,000
USD 5.00
-
-
Issuance of Performance Warrants
100,000
USD 2.00
-
-
-
-
Issuance of Performance Warrants
100,000
USD 2.50
-
-
-
-
Issuance of Performance Warrants
100,000
USD 3.00
-
-
-
-
Issuance of Settlement Warrants
2,000,000
USD 1.50
500,000
USD 2.50
-
-
Exercised
-
-
(21,052)
1.50
(243,419)
1.50
Expired
(32,000)
1.25
-
-
-
-
Expired
(512,627)
1.50
-
-
-
-
Expired
(71,427)
2.25
-
-
-
-
Cancellation of Settlement Warrants
(2,000,000)
USD 1.50
-
-
-
-
Ending Balance
1,295,000
5.13
1,525,054
4.00
821,106
3.93
Warrant issuances for the year ended June 30, 2022
As part of the IPO which closed on November 23, 2021, the Company issued 184,000 Finders’ Warrants exercisable at USD $9.375 before November 19, 2026. As these Finders’ Warrants are denominated in USD, they are considered derivative liabilities hence classified as such (see Note 10 for details).
Warrant issuances for the year ended June 30, 2023
As part of an engagement agreement, the Company issued 225,000 Incentive Warrants exercisable at USD $3, $4 and $5, respectively, up to February 17, 2025, and as part of settlement 500,000 Settlement Warrants exercisable at USD $2.50 up to March 31, 2026. As the Incentive Warrants and Settlement Warrants are denominated in USD, they are considered derivative liabilities hence classified as such (see Note 10 for details).
Warrant issuances for the year ended June 30, 2024
As part of the Offering which closed on September 21, 2023, the Company issued 86,000 Agents’ Warrants exercisable at USD $2.67 for a period of five years. As the Agents’ Warrants are denominated in USD, they are considered derivative liabilities hence classified as such (see Note 10 for details).
As part of the Marketing Agreement, the Company issued 300,000 Performance Warrants exercisable at USD $2.00, $2.50 and $3.00, respectively, for a period of one year. As the Performance Warrants are denominated in USD, they are considered derivative liabilities hence classified as such (see Note 10 for details).
F-34
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
16. Reserve for Warrants (continued)
On February 8, 2024, the Company issued 2,000,000 2024 Settlement Warrants pursuant to a property option agreement, exercise price of USD $1.50 for a period of 5 years. As the 2024 Settlement Warrants are denominated in USD, they are considered derivative liabilities hence classified as such (see Note 10 for details). On June 28, 2024, the 2024 Settlement Warrants were cancelled.
The following table summarizes information of warrants outstanding as at June 30, 2024:
Date of expiry
Number of
warrants outstanding
Exercise price
Weighted average remaining contractual life
#
$
Years
October 2, 2024
100,000
USD 2.00
0.26
October 2, 2024
100,000
USD 2.50
0.26
October 2, 2024
100,000
USD 3.00
0.26
February 17, 2025
75,000
USD 3.00
0.63
February 17, 2025
75,000
USD 4.00
0.63
February 17, 2025
75,000
USD 5.00
0.63
March 31, 2026
500,000
USD 2.50
1.75
November 19, 2026
184,000
USD 9.375
2.40
September 21, 2028
86,000
USD 2.67
4.23
1,295,000
5.13
1.47
17. Basic and Diluted Loss per Share
The calculations of basic and diluted loss per share for the year ended June 30, 2024, were based on the net loss of $6,850,918 (2023 – net loss of $15,462,945; 2022 – net loss of $9,446,454) and the weighted average number of basic and diluted common shares outstanding of 20,238,794 (2023 – 18,033,851; 2022 – 15,884,041).
The details of the computation of basic and diluted loss per share are as follows:
2024
2023
2022
$
$
$
Net Loss for the year
(6,850,918)
(15,462,945)
(9,446,454)
#
#
#
Basic weighted-average number of shares outstanding
20,238,794
18,033,851
15,884,041
Assumed conversion of dilutive stock options and warrants
-
-
-
Diluted weighted-average number of shares outstanding
20,238,794
18,033,851
15,884,041
$
$
$
Basic and diluted loss per share
(0.34)
(0.85)
(0.60)
F-35
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
18. Related Party Transactions
In accordance with IAS 24 – Related Party Disclosures, key management personnel, including companies controlled by them, are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company. The remuneration of directors and key executives is determined by the compensation committee of the Board.
The remuneration of directors and other members of key management personnel during the years ended June 30, 2024, 2023 and 2022 were as follows:
2024
2023
2022
$
$
$
Directors’ and officers’ consulting fees
877,362
951,347
687,585
Cash payment
-
334,738
-
Exploration and evaluation expenditures
134,764
415,325
220,765
Addendum payments
-
2,554,830
-
1,012,126
4,256,240
908,350
Directors’ and officers’ consulting fees
During the year ended June 30, 2024, fees of $317,973 (2023 – $492,377; 2022 - $585,615) included in directors’ and officers’ consulting fees had been paid to companies controlled by officers of the Company.
Cash payment
During the year ended June 30, 2023, a payment of USD $250,000 ($334,738) (2022 - $nil) had been paid to a director of the Company.
Exploration and evaluation expenditures
During the year ended June 30, 2024, fees of $134,764 (2023 – $415,325, 2022 - $220,765) for services rendered by the Company’s VP of Exploration and its former VP of Resources Development, had been capitalized as E&E assets on the consolidated statements of financial position.
Addendum payments
On November 1, 2022, the Company purported to amend the consulting agreements with the entities controlled by the former Chief Executive Officer (“CEO”) and the former Chief Operating Officer (“COO”) of Snow Lake, with an addendum which amended the termination clause of their respective agreements. As a result of the addendum, the Company recorded fees of $1,672,988 (USD $1,224,040) and $881,842 (USD $648,020), respectively, which are included in directors’ and officers’ consulting fees during the year ended June 30, 2023.
On December 5, 2022, payout was made to the respective entities controlled by the former CEO and COO.
As of June 30, 2024, the Company has made a claim against these former officers (see Note 22 for more details).
Share-based compensation
During the year ended June 30, 2024, the Company had granted certain RSUs and options to various directors and officers. Total stock-based compensation of $953,845 (2023 – $2,422,516; 2022 - $8,035,506) was recorded in connection with the vesting of these securities.
F-36
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
18. Related Party Transactions (continued)
Other related party transactions
On January 25, 2023, the Company issued 240,000 common shares from the Shares-for-Debt Settlement. As a result of the Shares-for-Debt Settlement, the Company recorded a loss on settlement of $157,502 on the consolidated statements of loss and comprehensive loss for the year ended June 30, 2023.
As of August 9, 2023, 160,000 RSUs out of the 470,000 RSUs awarded on January 30, 2023 had met the milestones required to vest. On September 26, 2023, the Company paid $546,476 (USD $400,000) to redeem 160,000 of the vested RSUs at USD $2.50 each.
Related party balances
All related party balances, for services and business expense reimbursements rendered as at June 30, 2024, 2023 and 2022 are non-interest bearing and payable on demand, and are comprised of the following:
June 30,
2024
June 30,
2023
June 30,
2022
$
$
$
Payable to officers and directors
60,121
86,616
110,274
Payable (receivable) from Nova Minerals Ltd.
81,023
(10,287)
(10,287)
141,144
76,329
99,987
During the year ended June 30, 2024, Nova Minerals Ltd. charged the Company an amount of $220,348 (2023 – $nil; 2022 - $nil) for reimbursable legal fees, which are recorded as professional fees on the consolidated statements of loss and comprehensive loss.
19. Income Taxes
The reconciliation of the combined Canadian federal and provincial statutory income tax rate of 27% (2023 and 2022 – 27%) to the effective tax rate is as follows:
June 30,
2024
June 30,
2023
June 30, 2022
$
$
$
Net loss before income tax
(6,850,918)
(15,462,945)
(9,446,454)
Combined federal and provincial statutory income tax rates
27%
27%
27%
Expected income tax recovery at statutory rates
1,849,748
4,174,995
2,550,543
Non-deductible differences
1,195,284
(225,472)
(1,102,753)
Flow through expenditures
(663,475)
-
-
True-up of prior year amounts
578,598
-
-
Change in unrecognized deductible temporary differences
(2,960,155)
(3,949,523)
(1,447,790)
Total income tax recovery
-
-
-
F-37
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
19. Income Taxes (continued)
Unrecognized deductible temporary differences
The income tax benefit of the following deductible temporary differences has not been recorded in these financial statements because of the uncertainty of their recovery:
2024
2023
2022
$
$
$
Non-capital losses carried forward
7,155,193
5,226,507
1,110,151
Exploration and evaluation assets
916,213
(100,081)
(100,058)
Other items
508,668
493,493
660,396
8,580,074
5,619,919
1,670,489
Non-capital losses carried forward
The Company has non-capital tax losses available to reduce taxes in future years of approximately $26,500,000 (2023 – $19,357,000; 2022 - $4,112,000). These losses have expiry dates between 2038 and 2044.
Tax attributes are subject to review, and potential adjustment, by tax authorities.
20. Capital Management
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern such that it can provide returns for shareholders and benefits for other stakeholders. The management of the capital structure is based on the funds available to the Company in order to support the acquisition, exploration and development of mineral properties and to maintain the Company in good standing with the various regulatory authorities. In order to maintain or adjust its capital structure, the Company may issue new shares, sell assets to settle liabilities, issue debt instruments or return capital to its shareholders. The Company monitors its capital structure and makes adjustments in light of changes in economic conditions and the risk characteristics of the underlying assets.
The Company is not subject to any capital requirements imposed by a lending institution or regulatory body, other than the flow-through obligations from the Offering.
21. Financial Risks
The Company is exposed to various risks as it relates to financial instruments. Management, in conjunction with the Board, mitigates these risks by assessing, monitoring and approving the Company’s risk management process. There have not been any changes in the nature of these risks or the process of managing these risks from the previous reporting periods.
Credit risk
Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The Company’s credit risk is primarily attributable to cash and due from related party, which expose the Company to credit risk should the borrower default on maturity of the instruments. Cash is held with reputable chartered bank in Canada, which is closely monitored by management. Management believes that the credit risk concentration with respect to financial instruments included in cash and due from related party is minimal.
F-38
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
21. Financial Risks (continued)
Liquidity risk
Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due. The Company’s liquidity and operating results may be adversely affected if the Company’s access to the capital market is hindered, whether as a result of a downturn in stock market conditions generally or related to matters specific to the Company. The Company generates cash flow primarily from its financing and investing activities.
As at June 30, 2024, the Company had a cash balance of $2,526,957 (June 30, 2023 – $3,840,880; June 30, 2022 - $23,792,408) to settle current liabilities of $1,941,111 (June 30, 2023 – $3,883,529; June 30, 2022 - $1,780,877).
As at June 30, 2024, the Company had the following contractual obligations:
Less than 1 year
1 to 3 years
3 to 5 years
Total
$
$
$
$
Accounts payable and accrued liabilities
689,944
-
-
689,944
Due to related parties
141,144
-
-
141,144
Lease liabilities
31,107
-
-
31,107
Derivative liabilities
305,025
-
-
305,025
Other liabilities
773,891
-
-
773,891
Total
1,941,111
-
-
1,941,111
The Company manages liquidity risk by maintaining adequate cash reserves and by continuously monitoring forecasts and actual cash flows for a rolling period of 12 months to identify financial requirements. Where insufficient liquidity may exist, the Company may pursue various debt and equity instruments for short or long-term financing of its operations. Management believes there is sufficient capital to meet short-term business obligations, after taking into account cash flow requirements from operations and the Company’s cash position as at June 30, 2024.
Flow-through obligations
Pursuant to the terms of flow-through share agreements, the Company is also in the process of complying with its flow-through obligations to subscribers with respect to the Income Tax Act (Canada) requirements for flow-through shares. As of June 30, 2024, the Company had spent a total of $2,457,316 on eligible expenditures towards its flow-through obligations, with a remaining balance of $5,249,976 to be spent by December 31, 2024.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. As at June 30, 2024, the Company had no hedging agreements in place with respect to floating interest rates. Management believes that the interest rate risk concentration with respect to financial instruments is minimal.
F-39
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
21. Financial Risks (continued)
Foreign exchange risk
Foreign exchange risk is the risk that the Company will be subject to foreign currency fluctuations in satisfying obligations related to its foreign activities. The Company has from time to time, financial instruments and transactions denominated in foreign currencies, notably in USD. The Company’s primary exposure to foreign exchange risk is that transactions denominated in foreign currency may expose the Company to the risk of exchange rate fluctuations. Based on its current operations, management believes that the foreign exchange risk remains minimal.
Fair value
Fair value estimates of financial instruments are made at a specific point in time based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.
As at June 30, 2024 the Company’s financial instruments consisted of cash, due from related parties, accounts payable, due to related parties, lease liabilities, derivative liabilities and other liabilities.
The fair value of due from related party, accounts payable and due to related parties are approximately equal to their carrying value due to their short-term nature. The fair values of the lease liabilities approximate their carrying amounts as they were measured taking into consideration comparable instruments with similar risks in determining the rates at which to discount their amount in applying their respective measurement models.
The Company classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
·Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
·Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
·Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
June 30, 2024
Level 1
Level 2
Level 3
Total
$
$
$
$
Cash
2,526,957
-
-
2,526,957
Derivative liabilities
-
(305,025)
-
(305,025)
Other liabilities
-
(773,891)
-
(773,891)
As at June 30, 2024, the Company’s financial instruments carried at fair value consisted of its cash, which is classified as Level 1, and its derivative liabilities and other liabilities, which have been classified as Level 2. There were no transfers between Levels 2 and 3 for recurring fair value measurements during the years ended June 30, 2024, 2023 and 2022.
F-40
Snow Lake Resources Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended June 30, 2024, 2023 and 2022
(Expressed in Canadian Dollars)
22. Contingencies
The Company’s E&E activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. As at June 30, 2024, the Company believes its operations are materially in compliance with all applicable laws and regulations. The Company expects to make future expenditures to comply with such laws and regulations.
As of June 30, 2024, Snow Lake has made a claim against certain former directors of the Company and their holding companies for, among other things, breach of fiduciary duty as a result of, amongst other matters, of those directors approving changes to the consulting agreements between the former CEO and COO and their holding companies, for termination payments of USD $1,392,000 (to USD $1,872,000) during a time where it was clear that a change of control of the Company was imminent and increased the range of instances where they would be eligible for those payments. The Company takes the position that the amendments are void and that the former CEO and COO were not entitled to any payments under their consulting agreements. Snow Lake seeks to recover the payments made to the former CEO and COO.
As of the date of approval of these consolidated financial statements, all defendants have now filed Statements of Defence. All defendants have made counterclaims seeking indemnification for legal fees incurred in responding to this claim in relation to directors’ indemnity agreements they have with the Company. The Company takes the position that the defendants are not eligible for indemnity payments as a result of their breaches of fiduciary duties. The next step will be for the Company to file its Replies and Defences to Counterclaims, and then proceed to discovery. As at June 30, 2024, as the outcome of the claims remains uncertain, the Company had not recognized any contingent assets on the consolidated statements of financial position.
On July 13, 2023, the Company also filed an application against its former Manitoba law firm seeking to assess for reasonableness certain invoices of the law firm rendered between May 2022 and January 2023, as well as the repayment of any fees paid to the law firm which the Court finds to be unreasonable. During the year ended June 30, 2024, the Company received an aggregate amount of $150,000, relating to compensation against applications filed against certain former legal counsels.
23. Subsequent Events
On August 7, 2024, the Company issued 2,024,496 common shares in connection with our acquisition of the First Stage Interest with respect to the Engo Valley Uranium Project.
On August 22, 2024, the Company entered into an ATM Sales Agreement, as amended on October 18, 2024, with ThinkEquity LLC (the “Agent”), as sales agent, pursuant to which the Company may offer and sell, from time to time through the Agent, up to US$2,900,000 of common shares of the Company. As of the date of these consolidated financial statements, the Company has sold 820,541 common shares for gross proceeds of USD $327,847.
