Snow Lake Resources .(LITM) - 2024 Q4 - Annual Report

PART I This section covers the company's key information, including risk factors, business overview, and financial performance Key Information This section outlines significant risks for the exploration-stage company, including financing dependence, commodity price volatility, regulatory hurdles, potential Nasdaq delisting, and major shareholder influence, as it shifts focus to uranium Risk Factors - The company has a limited operating history, has not generated any revenue, and incurred a net loss of C$6.9 million in fiscal 2024, expecting to continue incurring significant losses[16] - Operations are in the exploration stage, with limited additional exploratory drilling at the Snow Lake Lithium™ Project due to a more than 80% drop in lithium prices in 2023, making it commercially unfeasible at present[17][41] - The company requires additional financing to implement its business plan, with cash and cash equivalents of C$2,526,957 as of June 30, 2024, and failure to obtain funding could force a reduction in exploration or cessation of operations[18] - The company received a notice from Nasdaq on May 24, 2024, for non-compliance with the minimum bid price requirement of US$1.00, facing a potential delisting risk if compliance is not regained by November 20, 2024[64] - A single major shareholder, Nova Minerals Limited, owned approximately 23.07% of outstanding common shares as of October 22, 2024, giving it significant influence over shareholder matters[77] - There is a risk the company will be classified as a Passive Foreign Investment Company (PFIC), which could result in adverse U.S. federal income tax consequences for U.S. investors[15][80] Information on the Company Snow Lake Resources, a Canadian clean energy exploration company, has strategically shifted its primary focus from lithium to advancing its newly acquired uranium projects in Canada and Namibia due to adverse lithium market conditions History and Development of the Company - The company was incorporated in Manitoba, Canada on May 25, 2018, and operates with five wholly-owned subsidiaries and a majority interest in Engo Valley Pty Ltd[81] - In July 2023, Frank Wheatley was appointed as the new CEO[85] - In September 2023, the company closed a flow-through financing, raising gross proceeds of C$7.7 million for exploration on its Canadian projects[85] - The company entered into option agreements to acquire two uranium projects: the Shatford Lake Project in Manitoba (January 2024) and the Engo Valley Uranium Project in Namibia (February 2024), also acquiring Global Uranium, which holds an option on the Black Lake Uranium Project in Saskatchewan (May 2024)[87][94][99] - The company determined that the Snow Lake Lithium™ Project is no longer a material asset due to the depressed lithium market, shifting its primary focus to its newly acquired uranium projects[109][111] - The company entered into an At-The-Market (ATM) Sales Agreement in August 2024, allowing it to sell up to US$2.9 million of its common shares[111] Business Overview - The company's corporate strategy is to develop a portfolio of clean energy mineral projects, with the primary focus for the next year on advancing its two uranium projects given the strong uranium market and weak lithium market[117] - The company's portfolio includes two uranium projects (Black Lake in Canada, Engo Valley in Namibia) and two hard rock lithium projects (Shatford Lake and Snow Lake Lithium™ in Canada), none of which are currently considered material[118] - The uranium market is viewed positively due to growing demand for nuclear energy, geopolitical events disrupting supply (e.g., Russia-Ukraine conflict, US ban on Russian uranium), and a forecast supply deficit, with uranium prices briefly exceeding US$100/lb in January 2024[121][122][125][128] - The lithium market remains depressed, with prices having dropped 80% in 2023 and demand remaining weak, making the company's lithium projects, particularly the Snow Lake Lithium™ Project, economically unattractive for significant near-term investment[139] - The company faces intense competition from larger, established mining companies with greater financial resources and access to capital[149] Organizational Structure - Snow Lake Resources Ltd. is the parent company with several subsidiaries, including Snow Lake Exploration Ltd., Snow Lake (Crowduck) Ltd., Global Uranium Acquisitions Corp Pty Ltd., and US-based holding companies for its international assets[158] Operating and Financial Review and Prospects For fiscal year 2024, the exploration-stage company reported no revenue and a net loss of C$6.9 million, a significant reduction from 2023, with liquidity dependent on future financing and a going concern risk identified Operating Results Results of Operations (in C$) | Description | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Total Operating Expenses | (5,805,055) | (16,165,115) | (11,069,570) | | 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 | | Other Income (Loss) | (1,045,863) | 702,170 | 1,623,116 | | Loss on termination of Muskrat Dam Project | (4,652,894) | - | - | | (Loss) gain in fair value of derivative liabilities | 2,382,180 | (246,460) | 1,103,839 | | Net Loss and Comprehensive Loss | (6,850,918) | (15,462,945) | (9,446,454) | | Net Loss per Share (Basic and diluted) | (0.34) | (0.86) | (0.60) | - Operating expenses decreased significantly to C$5.8 million in FY2024 from C$16.2 million in FY2023, mainly due to a C$5.4 million reduction in professional fees and a C$2.9 million decrease in directors' and officers' consulting fees, as the prior year included substantial one-time payments related to a proxy contest and executive severance[164][166] - The company recorded a total other loss of C$1.0 million, driven by a C$4.7 million loss on the termination of the Muskrat Dam Project, partially offset by a C$2.4 million gain on the change in fair value of derivative liabilities and a C$1.2 million premium on flow-through shares[164] Liquidity and Capital Resources Cash and Working Capital Summary (in C$) | Metric | June 30, 2024 | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | :--- | | Cash, end of year | 2,526,957 | 3,840,880 | 23,792,408 | | Current Assets | 3,274,285 | 4,916,236 | 25,029,009 | | Current Liabilities | 1,941,111 | 3,883,529 | 1,780,877 | | Working Capital | 1,333,174 | 1,032,707 | 23,248,132 | Cash Flow Summary (in C$) | Cash Flow | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Used in Operating Activities | (3,742,326) | (10,298,791) | (3,098,972) | | Provided by (used in) Financing Activities | 6,909,611 | (191,307) | 32,551,822 | | Used in Investing Activities | (4,481,208) | (9,461,430) | (5,979,286) | - Net cash from financing activities was C$6.9 million in FY2024, primarily from a C$7.7 million flow-through share offering closed in September 2023, contrasting with minimal financing activity in FY2023 and large IPO proceeds in FY2022[168] - The company's ability to continue as a going concern is dependent on obtaining additional financing, as it has no regular cash flow from operations[168] Directors, Senior Management and Employees The company's leadership, including CEO Frank Wheatley and a five-member board, received C$1.01 million in cash compensation in fiscal 2024, with Nova Minerals Limited holding 23.07% ownership, and governance following Canadian home country practices Compensation Aggregate Compensation for Directors and Senior Management (FY 2024) | Compensation Type | Amount (C$) | | :--- | :--- | | Salary or Fees (Cash) | 1,012,126 | | Option Awards | 361,081 | | Common Share Awards | 592,764 | | Total | 6,678,756 | - The company has a Stock Option Plan to grant options to directors, officers, employees, and consultants, with the total number of shares reserved under the plan not exceeding 10% of the outstanding common shares at the time of grant[194][196] Share Ownership Beneficial Ownership (as of report date) | Shareholder | Common Shares Beneficially Owned | Percent of Class (%) | | :--- | :--- | :--- | | All executive officers and directors (8 persons) | 524,882 | 1.83% | | Nova Minerals Limited | 6,600,000 | 23.07% | - Nova Minerals Limited is the largest shareholder, holding approximately 23.07% of the company's outstanding common shares[244][246] Major Shareholders and Related Party Transactions This section details related party transactions, including C$1.01 million in fiscal 2024 remuneration to key management and directors, C$2.55 million in prior-year addendum payments to former executives, and a C$81,023 payable to Nova Minerals Ltd Remuneration of Directors and Key Management (in C$) | Description | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Directors' and officers' consulting fees | 877,632 | 951,347 | 687,585 | | Exploration and evaluation expenditures | 134,764 | 415,325 | 220,765 | | Addendum payments | - | 2,554,830 | - | | Total | 1,012,126 | 4,256,240 | 908,350 | - In FY2023, the company made addendum payments totaling C$2.55 million to entities controlled by the former CEO and COO following an amendment to their consulting agreements, and the company is now in a legal dispute to recover these payments[251][251] Related Party Balances (in C$) | Description | 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) | Financial Information The company's IFRS financial statements show no dividends paid or planned, with significant post-year-end events including the issuance of over 5.4 million common shares for acquisitions and debt settlement, and new CEO equity grants - The company has not paid any dividends since its incorporation and does not plan to in the foreseeable future[256] - Subsequent to year-end, the company issued 2,133,979 shares in a flow-through financing for gross proceeds of C$7.7 million[257] - In 2024, the company issued a total of 4,885,000 common shares related to the Muskrat Dam Project (500,000 for option, 3,500,000 for termination) and the Black Lake Uranium Project acquisition (1,000,000)[259][260] Additional Information The company's authorized capital includes unlimited common and preferred shares, with 25,766,065 common shares outstanding as of June 30, 2024, and the report details Canadian and U.S. tax considerations, including PFIC risk for U.S. investors Outstanding Share Data (as of Oct 29, 2024) | Security Type | Number Outstanding | | :--- | :--- | | Common Shares | 28,611,102 | | Warrants | 1,295,000 | | Stock Options | 807,771 | | Restricted Share Units | 440,000 | | Fully Diluted | 31,153,873 | - Shareholders approved a potential reverse stock split at the May 2, 2024 meeting, to be executed at the board's discretion within three years[265] - For U.S. Holders, there is a risk that the company could be considered a Passive Foreign Investment Company (PFIC), which could lead to adverse U.S. federal income tax consequences, and the company does not expect to provide the information necessary for a QEF election[286][288] - Dividends paid to Non-Canadian Holders are subject to a 25% Canadian withholding tax, which may be reduced by an applicable tax treaty (e.g., to 15% for eligible U.S. residents)[280] PART II This section details material modifications to security holder rights, the use of IPO proceeds, and the company's controls and procedures, including corporate governance and cybersecurity risk management Material Modifications to the Rights of Security Holders and Use of Proceeds This section confirms no material modifications to security holder rights and details the full expenditure of approximately US$32.0 million in net proceeds from the November 2021 IPO on resource development, technical studies, and corporate purposes - The net proceeds from the November 2021 IPO were approximately US$32.0 million, all of which have been expended as of the date of this report[299] - The IPO proceeds were used for: C$9.2 million for resource development, C$6.12 million for technical studies, C$15.8 million for corporate purposes, and C$0.9 million for general corporate expenses[299][300] Controls and Procedures Management, including the CEO and interim CFO, concluded that both disclosure controls and internal control over financial reporting were effective as of June 30, 2024, with no material changes reported during the fiscal year - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024[301] - Based on the COSO framework, management concluded that the company's internal control over financial reporting was effective as of June 30, 2024[302] - No changes in internal control over financial reporting occurred during the year ended June 30, 2024, that materially affected, or are reasonably likely to materially affect, internal controls[303] Corporate Governance and Other Disclosures This section covers corporate governance, including the identification of audit committee financial experts, adherence to a code of ethics, reliance on Canadian home country practices for Nasdaq exemptions, and a cybersecurity risk management process with no material incidents reported Principal Accountant Fees (DeVisser Gray LLP) | Fee Type | 2024 (C$) | 2023 (C$) | 2022 (C$) | | :--- | :--- | :--- | :--- | | Audit Fees | 45,000 | 45,000 | 45,000 | | Audit Related Fees | 9,500 | 9,500 | 9,500 | | All Other Fees | 8,000 | 8,000 | 8,000 | | Total | 62,000 | 62,000 | 62,000 | - The company, as a foreign private issuer, relies on home country governance practices and is exempt from certain Nasdaq rules, including requirements for fully independent compensation and nominating committees, and shareholder approval for certain equity issuances[313][314] - The company has a cybersecurity risk management strategy managed by a third-party provider and overseen internally by the CFO and the Board, with no material cybersecurity incidents identified[317][318][319] PART III This section presents the company's consolidated financial statements, including the independent auditor's report with a going concern emphasis, statements of financial position, loss and comprehensive loss, and cash flows Financial Statements The consolidated financial statements, prepared in Canadian dollars under IFRS, include an auditor's 'Going Concern' paragraph due to recurring losses and financing dependence, with total assets of C$29.9 million and liabilities of C$4.4 million as of June 30, 2024 Report of Independent Registered Public Accounting Firm - The auditor, De Visser Gray LLP, issued an opinion that the financial statements present fairly, in all material respects, the financial position of the company in accordance with IFRS[330] - The audit report contains a 'Going Concern' paragraph, noting that the company's lack of revenue, history of losses, and dependence on securing new financing raise substantial doubt about its ability to continue as a going concern[331] Consolidated Statements of Financial Position Consolidated Statements of Financial Position (in C$) | | As at June 30, 2024 | As at June 30, 2023 | | :--- | :--- | :--- | | Total Assets | 29,916,083 | 26,418,988 | | Current Assets | 3,274,285 | 4,916,236 | | Exploration and evaluation assets | 26,612,758 | 21,442,032 | | Total Liabilities | 4,418,628 | 3,914,636 | | Current Liabilities | 1,941,111 | 3,883,529 | | Total Shareholders' Equity | 25,497,455 | 22,504,352 | Consolidated Statements of Loss and Comprehensive Loss Consolidated Statements of Loss and Comprehensive Loss (in C$) | | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Total Expenses | (5,805,055) | (16,165,115) | (11,069,570) | | Other Items (Income/Loss) | (1,045,863) | 702,170 | 1,623,116 | | Net Loss and Comprehensive Loss | (6,850,918) | (15,462,945) | (9,446,454) | | Net Loss per Share (Basic and diluted) | (0.34) | (0.85) | (0.60) | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (in C$) | | 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 | 6,909,611 | (191,307) | 32,551,822 | | Cash Flows used in Investing Activities | (4,481,208) | (9,461,430) | (5,979,286) | | Decrease in Cash | (1,313,923) | (19,951,528) | 23,473,564 | | Cash, end of year | 2,526,957 | 3,840,880 | 23,792,408 |