Brazil Potash Corp(GRO) - 2025 Q1 - Quarterly Report

Condensed Interim Consolidated Financial Statements This section presents the Company's financial performance and position for the interim period, including statements of financial position, loss, equity, and cash flows Condensed Interim Consolidated Statements of Financial Position As of March 31, 2025, Brazil Potash Corp.'s total assets increased slightly to $143.7 million from $141.1 million at December 31, 2024, primarily driven by an increase in exploration and evaluation assets, while cash and cash equivalents decreased Consolidated Statements of Financial Position | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | ASSETS | | | | Cash and cash equivalents | $13,730,112 | $18,861,029 | | Total current assets | $16,351,417 | $20,950,452 | | Exploration and evaluation assets | $125,916,366 | $118,785,555 | | Total assets | $143,692,942 | $141,055,466 | | LIABILITIES | | | | Total current liabilities | $3,008,797 | $3,087,293 | | Total liabilities | $5,696,735 | $5,635,180 | | EQUITY | | | | Total equity | $137,996,207 | $135,420,286 | | Deficit | $(176,975,026) | $(158,573,664) | - Total assets increased by approximately $2.6 million from December 31, 2024, to March 31, 2025, primarily due to an increase in exploration and evaluation assets[3] - Cash and cash equivalents decreased by over $5 million during the three months ended March 31, 2025[3] Condensed Interim Consolidated Statements of Loss and Other Comprehensive Loss For the three months ended March 31, 2025, the Company reported a significant increase in loss to $18.4 million, up from $1.45 million in the same period of 2024, largely driven by a substantial increase in share-based compensation and communications and promotions expenses Consolidated Statements of Loss and Other Comprehensive Loss | Expense Category | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Consulting and management fees | $1,195,319 | $577,465 | | Professional fees | $174,785 | $54,380 | | Share-based compensation | $14,982,999 | $629,033 | | Communications and promotions | $1,775,248 | $59,392 | | Operating Loss | $18,661,414 | $1,436,362 | | Loss for the period after income taxes | $18,401,362 | $1,452,605 | | Basic and diluted loss per share | $0.48 | $0.04 | - Share-based compensation increased dramatically from $629,033 in Q1 2024 to $14,982,999 in Q1 2025[5] - Basic and diluted loss per share increased from $0.04 in Q1 2024 to $0.48 in Q1 2025[5] Condensed Interim Consolidated Statement of Changes in Equity Total shareholders' equity increased from $135.4 million at December 31, 2024, to $138.0 million at March 31, 2025, primarily due to significant share-based payment activities, including restricted share units and deferred share units, partially offset by the loss for the period Consolidated Statement of Changes in Equity | Equity Component | Balance, December 31, 2024 | Activity (Q1 2025) | Balance, March 31, 2025 | | :-------------------------------- | :------------------------- | :----------------- | :---------------------- | | Common Shares (Stated Value) | $281,296,133 | $120,511 | $281,416,644 | | Share-based payments reserve | $93,515,510 | $16,319,567 | $109,754,566 | | Accumulated Other Comprehensive Income (Loss) | $(81,361,294) | $4,617,716 | $(76,743,578) | | Accumulated Deficit | $(158,573,664) | $(18,401,362) | $(176,975,026) | | Total Shareholders' Equity | $135,420,286 | $2,575,921 | $137,996,207 | - Share-based payments reserve increased by over $16 million in Q1 2025, reflecting new deferred and restricted share units[7] - The accumulated deficit grew by $18.4 million due to the loss incurred during the period[7] Condensed Interim Consolidated Statements of Cash Flows For the three months ended March 31, 2025, the Company experienced a net decrease in cash and cash equivalents of $5.13 million, primarily due to significant cash used in operating activities ($4.29 million) and investing activities ($0.88 million) Consolidated Statements of Cash Flows | Cash Flow Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(4,292,510) | $(656,357) | | Net cash from financing activities | $14,024 | $0 | | Net cash used in investing activities | $(883,166) | $(627,254) | | Net decrease in cash and cash equivalents | $(5,130,917) | $(1,307,055) | | Cash and cash equivalents, end of period | $13,730,112 | $1,143,184 | - Cash used in operating activities increased significantly from $656,357 in Q1 2024 to $4,292,510 in Q1 2025[9] - Investing activities primarily involved exploration and evaluation assets, with $1,064,726 used in Q1 2025[9] Notes to the Condensed Interim Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed interim consolidated financial statements, covering accounting policies, financial risks, and significant transactions 1. Reporting entity and going concern Brazil Potash Corp. is engaged in the exploration and development of potash properties in Brazil, specifically the Autazes Project, having largely resolved environmental and indigenous consultation challenges by securing all 21 Installation Licenses by August 2024; however, its ability to continue as a going concern is dependent on securing adequate financing due to ongoing operating losses and significant capital requirements - Brazil Potash Corp. was incorporated in 2006 and commenced trading on the NYSE under the symbol 'GRO' on November 27, 2024[11] - The Company received all 21 Installation Licenses required for the construction of the Autazes Project by August 2024, following successful consultations with Mura indigenous people[16] Going Concern Financial Metrics | Metric | March 31, 2025 | December 31, 2024 | | :----------------- | :------------- | :---------------- | | Loss for the period | $(18,401,362) | $(1,452,605) | | Accumulated deficit | $(176,975,026) | $(158,573,664) | | Working capital | $13,342,620 | $17,863,159 | | Cash | $13,730,112 | $18,861,029 | - The Company's continuance as a going concern is dependent on its ability to obtain adequate financing for working capital, exploration, development, and to reach profitable levels of operation, which raises substantial doubt[19][20] 2. Basis of preparation The condensed interim consolidated financial statements comply with IAS 34, Interim Financial Reporting, and were prepared using the same accounting policies as the 2024 annual statements, with the Company assessing the impact of new IFRS standards, IFRS 18 (effective Jan 1, 2027) and amendments to IFRS 9 and IFRS 7 (effective Jan 1, 2026), which aim to improve financial performance transparency and clarify financial instrument derecognition and characteristics - The financial statements are in compliance with IAS 34, Interim Financial Reporting, and should be read in conjunction with the Company's 2024 annual consolidated financial statements[22] - IFRS 18, effective January 1, 2027, will replace IAS 1 and aims to improve comparability of profit or loss statements, transparency of management-defined performance measures, and grouping of information[27] - Amendments to IFRS 9 and IFRS 7, effective January 1, 2026, clarify financial liability derecognition, assessment of contractual cash flow characteristics for financial assets with contingent features (including ESG-linked), and add new disclosure requirements[28] a) Statement of compliance The interim consolidated financial statements adhere to IAS 34 and were approved by the Board of Directors on May 9, 2025 - The condensed interim consolidated financial statements comply with IAS 34, Interim Financial Reporting, and were authorized for issue by the Board of Directors on May 9, 2025[22][24] b) Material accounting policies The financial statements apply consistent accounting policies with the 2024 annual statements, while new IFRS pronouncements are under assessment - The financial statements use the same accounting policies as the 2024 annual statements, with new pronouncements like IFRS 18 and amendments to IFRS 9/7 being assessed for future impact[25][27][28] 3. Amounts receivable Amounts receivable primarily consist of HST (Harmonized Sales Tax) and showed a slight increase from December 31, 2024, to March 31, 2025 Amounts Receivable Details | Category | March 31, 2025 | December 31, 2024 | | :--------------- | :------------- | :---------------- | | HST | $618,811 | $586,554 | | Other receivables | $0 | $8,386 | | Total | $618,811 | $594,940 | - Total amounts receivable increased by $23,871, with HST being the sole component as of March 31, 2025[30] 4. Property and equipment The net book value of property and equipment increased to $852,457 at March 31, 2025, from $791,597 at January 1, 2025, mainly due to the effect of foreign exchange on land value, as there were no additions during the period Property and Equipment Net Book Value | Category | Net Book Value (March 31, 2025) | Net Book Value (January 1, 2025) | | :--------------- | :------------------------------ | :------------------------------- | | Vehicles | $292 | $271 | | Office equipment | $13,336 | $13,370 | | Furniture and fixtures | $6,131 | $5,790 | | Land | $832,698 | $772,166 | | Total | $852,457 | $791,597 | - The increase in net book value is primarily attributable to the effect of foreign exchange on land, which increased by $60,532[31] 5. Leases The Company leases 15 rural properties for dry stacked tailings piles, recognizing a right-of-use asset and lease liability, which stood at $572,702 and $686,078 respectively as of March 31, 2025, with $23,445 in lease finance interest expense capitalized to exploration and evaluation assets for the three months ended March 31, 2025 - The Company entered into agreements to lease 15 rural properties for six years, primarily for dry stacked tailings piles, recognizing a right-of-use asset and lease liability of $778,479 at inception[32] Lease Assets and Liabilities Summary | Metric | March 31, 2025 | December 31, 2024 | | :------------------------ | :------------- | :---------------- | | Right-of-use asset balance | $572,702 | $527,862 | | Lease Liability - current | $80,447 | $70,305 | | Lease Liability - non-current | $605,631 | $535,300 | | Total Lease Liability | $686,078 | $605,605 | | Finance costs (Q1 2025) | $23,445 | N/A (Q1 2024: $0) | - Lease finance interest of $23,445 for Q1 2025 was capitalized to exploration and evaluation assets[33] 6. Exploration and evaluation assets Exploration and evaluation assets increased to $125.9 million at March 31, 2025, from $118.8 million at December 31, 2024, primarily driven by site operations, environmental, consulting, and technical costs, as well as share-based compensation and a significant positive effect of foreign exchange Exploration and Evaluation Assets Breakdown | Category | March 31, 2025 | December 31, 2024 | | :------------------------------------------ | :------------- | :---------------- | | Balance, beginning of period | $118,785,555 | $129,298,494 | | Mineral rights and land fees | $12,421 | $30,127 | | Site operations, environmental, consulting and technical costs | $1,108,437 | $4,885,615 | | Share-based compensation | $1,336,568 | $1,682,382 | | Effect of foreign exchange | $4,673,385 | $(16,111,063) | | Balance, end of period | $125,916,366 | $118,785,555 | - A significant positive effect of foreign exchange ($4,673,385) contributed to the increase in exploration and evaluation assets during Q1 2025[35] - Share-based compensation capitalized to exploration and evaluation assets was $1,336,568 for the three months ended March 31, 2025[35] 7. Trade payables and accrued liabilities Total trade payables and accrued liabilities decreased slightly to $2,928,350 at March 31, 2025, from $3,016,988 at December 31, 2024, due to a decrease in accruals, partially offset by an increase in trade payables Trade Payables and Accrued Liabilities Details | Category | March 31, 2025 | December 31, 2024 | | :--------------- | :------------- | :---------------- | | Trade payables | $2,419,088 | $1,271,484 | | Accruals | $509,262 | $1,745,504 | | Total | $2,928,350 | $3,016,988 | - Trade payables increased by over $1.1 million, while accruals decreased by over $1.2 million[36] 8. Share capital The Company's share capital increased slightly to $281,416,644 at March 31, 2025, from $281,296,133 at December 31, 2024, primarily due to the exercise of 10,000 options, following a 2024 IPO that included a 4:1 share consolidation and the issuance of 2,000,000 common shares - The Company has an unlimited number of common shares authorized without par value[37] Share Capital Activity Summary | Activity | Number of shares (March 31, 2025) | Stated Value (March 31, 2025) | | :-------------------------------- | :-------------------------------- | :---------------------------- | | Balance, beginning of period | 38,403,737 | $281,296,133 | | Option exercise | 10,000 | $120,511 | | Balance, end of period | 38,413,737 | $281,416,644 | - On October 18, 2024, the Company consolidated its common shares on a 4:1 basis, retrospectively updating all share and per-share amounts[39] - On November 29, 2024, the Company closed an IPO of 2,000,000 common shares at $15.00 per share, generating gross proceeds of $30,000,000[41] 9. Share-based payments The share-based payments reserve significantly increased to $109.8 million at March 31, 2025, from $93.5 million at December 31, 2024, primarily due to the vesting of Restricted Share Units (RSUs) and Deferred Share Units (DSUs), with substantial expenses recognized for these plans during the period Share-based Payments Reserve Activity | Activity | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Balance, beginning of period | $93,515,510 | $64,280,247 | | Vesting of DSUs | $751,359 | $11,100,686 | | Vesting of RSUs | $15,568,208 | $25,853,678 | | Option exercise | $(80,511) | $(3,961,898) | | Balance, end of period | $109,754,566 | $93,515,510 | - Total share-based compensation expense for the three months ended March 31, 2025, was $14,982,999, a significant increase from $629,033 in the prior year[5] a) Option plan The Company's incentive share option plan allows for the issuance of options up to 10% of its outstanding capital - The Company's incentive share option plan allows for the issuance of options to acquire up to 10% of the Company's issued and outstanding capital[45] Share Option Activity | Option Activity | March 31, 2025 (Number of options) | December 31, 2024 (Number of options) | | :---------------------- | :--------------------------------- | :---------------------------------- | | Balance, beginning of period | 913,125 | 1,455,625 | | Exercised | (10,000) | (489,166) | | Expired | — | (53,334) | | Balance, end of period | 903,125 | 913,125 | - During Q1 2025, 10,000 options were exercised for gross proceeds of $40,000[49] b) Deferred share units plan ("DSU") The DSU plan grants units convertible into common shares upon service cessation, with significant vesting expense recognized in Q1 2025 - The DSU plan allows for the grant of DSUs to employees, officers, or directors, with each DSU convertible into one common share upon cessation of service[50] Deferred Share Unit (DSU) Activity | DSU Activity | March 31, 2025 (Number of DSUs) | December 31, 2024 (Number of DSUs) | | :-------------------------- | :------------------------------ | :-------------------------------- | | Balance, beginning of period | 4,102,083 | 3,552,083 | | Granted | — | 806,250 | | Balance, end of period | 4,102,083 | 4,102,083 | | Vested DSUs outstanding | 3,510,417 | N/A | - Total expense related to DSU vesting for Q1 2025 was $751,359, with $1,243 capitalized to exploration and evaluation assets and $750,116 charged to the income statement[62] c) Restricted share units plan ("RSU") The RSU plan grants rights to common shares after a deferral period, incurring substantial vesting expense in Q1 2025 - The Incentive Compensation Plan allows for the grant of RSUs, conferring the right to common shares at the end of a specified deferral period[63] Restricted Share Unit (RSU) Activity | RSU Activity | March 31, 2025 (Number of RSUs) | December 31, 2024 (Number of RSUs) | | :-------------------------- | :------------------------------ | :-------------------------------- | | Balance, beginning of period | 4,425,625 | — | | Granted | 511,000 | 4,457,500 | | Balance, end of period | 4,936,625 | 4,425,625 | | Vested RSUs outstanding | 537,750 | N/A | - Total expense related to RSU vesting for Q1 2025 was $15,568,208, with $1,335,325 capitalized to exploration and evaluation assets and $14,232,883 charged to the income statement[73] 10. Warrants and warrant liability As of March 31, 2025, the Company had 358,188 outstanding warrants, with the warrant liability related to 100,000 broker warrants issued during the IPO significantly decreasing in fair value from $132,200 at December 31, 2024, to $11,800 at March 31, 2025, due to changes in market price and other Black-Scholes assumptions Outstanding Warrants | Warrant Type | Number of warrants | Exercise price | Expiry Date | | :---------------- | :----------------- | :------------- | :---------------- | | Broker warrants | 258,188 | $4.00 | November 27, 2025 | | Broker warrants | 100,000 | $19.50 | November 26, 2026 | | Total | 358,188 | $8.33 (weighted avg) | | Warrant Liability Fair Value | Warrant Liability | March 31, 2025 | December 31, 2024 | | :------------------ | :------------- | :---------------- | | Fair value | $11,800 | $132,200 | | Change in fair value | $(120,400) | $(386,900) | | Stock price used in valuation | $3.06 | $7.70 | | Expected volatility | 80.82% | 76.38% | | Risk-free interest rate | 2.46% | 2.93% | - The decrease in warrant liability fair value is primarily attributed to a decrease in the Company's stock price from $7.70 to $3.06[78] 11. Financial Risk Management Objectives and Policies The Company manages financial risks including credit, liquidity, and market risks (interest rate and foreign currency), with minimal credit risk due to cash held with high-quality financial institutions, liquidity risk managed by maintaining sufficient cash to meet liabilities, and unhedged foreign currency risk, primarily from Canadian dollars and Brazilian Reais, which could materially impact financial results - The Company's financial instruments include cash and cash equivalents, other receivables, trade payables, and accrued liabilities, primarily for funding operations[81] - Credit risk is considered remote as cash and cash equivalents are held with high credit quality financial institutions[84] Liquidity Position Summary | Metric | March 31, 2025 | December 31, 2024 | | :------------------------ | :------------- | :---------------- | | Cash and cash equivalents | $13,730,112 | $18,861,029 | | Current liabilities | $3,008,797 | $3,087,293 | - A $0.01 strengthening or weakening of the US dollar against the Brazilian Real would result in an increase or decrease in other comprehensive loss of approximately $3,905,000[90] a) Credit risk Credit risk is minimal due to the Company holding cash and cash equivalents with high credit quality financial institutions - Credit risk is minimal as cash and cash equivalents are held with high credit quality financial institutions[84] b) Liquidity risk The Company manages liquidity risk by maintaining sufficient cash to cover its liabilities, with a strong cash position relative to current liabilities - The Company manages liquidity risk by ensuring sufficient cash to meet liabilities, with cash and cash equivalents of $13,730,112 against current liabilities of $3,008,797 at March 31, 2025[85] c) Market risk Market risk encompasses minimal interest rate risk and unhedged foreign currency risk, primarily from Canadian dollar and Brazilian Real fluctuations - Market risk includes interest rate risk (minimal) and foreign currency risk, primarily from Canadian dollar and Brazilian Reais fluctuations, which are not hedged[86][87][88] - A $0.01 strengthening or weakening of the US dollar against the Brazilian Real would impact other comprehensive loss by approximately $3,905,000[90] d) Capital management The Company manages capital to ensure its going concern status, support development, and meet obligations, without external capital requirements or a dividend policy - The Company manages capital to ensure going concern status, support exploration and development, and meet ongoing obligations, including shareholders' equity, cash, and short-term investments[91] - The Company has no dividend policy and is not subject to externally imposed capital requirements[92] 12. Related Party Disclosures Related party transactions include significant compensation to key management personnel, primarily through share-based payments, and amounts owing to directors and officers for consulting fees and expense reimbursement, with these transactions measured at the exchange amount agreed upon by the parties Key Management Personnel Compensation | Compensation Type | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Directors & officers compensation | $1,027,597 | $403,856 | | Share-based payments | $11,608,985 | $112,115 | | Total Key Management Compensation | $12,636,582 | $515,971 | - Share-based compensation for directors and officers increased substantially from $112,115 in Q1 2024 to $11,608,985 in Q1 2025[93][95] - As of March 31, 2025, trade payables and accrued liabilities included $84,510 owing to directors and officers for consulting and directors fees[96] a) Key management personnel compensation Key management compensation primarily comprises contracted fees and participation in share option, DSU, and RSU plans, with a significant increase in share-based payments - Key management personnel compensation, including directors and executive officers, primarily consists of contracted fees and participation in share option, DSU, and RSU plans[93] - The significant increase in share-based compensation for Q1 2025 is related to the amortization of DSUs and RSUs granted in 2015, 2022, 2023, 2024, and 2025[95] b) Transactions with other related parties Amounts owing to directors and officers for consulting fees and expense reimbursement are included in trade payables and accrued liabilities, measured at agreed exchange amounts - Trade payables and accrued liabilities included amounts owing to directors and officers for consulting and directors fees ($84,510) and expense reimbursement ($2,035) as of March 31, 2025[96] - Transactions with related parties are measured at the exchange amount agreed to by the parties[98] 13. Commitments and contingencies The Company has significant commitments under management contracts, including potential payments of $20.57 million upon a change in control and $9.89 million upon termination, is involved in lawsuits challenging its environmental and construction licenses, and entered an option agreement with Franco-Nevada Corporation for a perpetual royalty on potash production, receiving $1 million, with further payments contingent on project financing and regulatory approvals - Management contracts entail potential payments of approximately $20,574,000 upon a change in control and $9,889,000 upon termination[99] - The Company has been involved in lawsuits challenging its environmental and construction licenses since 2016, with the outcome of recent counterclaims not yet determinable[100] - On November 1, 2024, the Company entered an option agreement with Franco-Nevada Corporation, receiving $1,000,000 for an option to purchase a 4% perpetual royalty on potash revenue from the Autazes Property[35][101] - The Royalty Purchase Price from Franco-Nevada is contingent on the Company obtaining full project financing and satisfying other conditions precedent[101] 14. Subsequent Events Subsequent to March 31, 2025, the Company filed a Form S-8 registration statement for up to 5,762,060 common shares under its 2024 Incentive Compensation Plan and entered into an Equity Line of Credit (ELOC) agreement with Alumni Capital LP, allowing the Company to sell up to $75 million worth of common shares over 24 months at market-based prices - On April 29, 2025, the Company filed a Form S-8 registration statement for up to 5,762,060 common shares under its 2024 Incentive Compensation Plan[103] - On May 1, 2025, the Company entered an Equity Line of Credit (ELOC) with Alumni Capital LP, granting the right to sell up to $75 million worth of common shares over 24 months[104] - The ELOC allows Brazil Potash to control the timing and amount of share sales, with prices based on market price at the time of sale[104]