Filed
by the Registrant [
X ]
Filed
by a Party other than the Registrant [ ]
NOTICE OF 2022 ANNUAL GENERAL AND
SPECIAL MEETING OF SHAREHOLDERS
TO
BE HELD ON FEBRUARY 15, 2023
To
the shareholders of I-Minerals Inc. (the “Shareholders”):
Notice
is hereby given that the 2022 Annual General and Special Meeting (the
“Meeting”) of the Shareholders of I-Minerals Inc. (the “Company”), a
corporation continued under the laws of the Canada
Business Corporations Act (“CBCA”), will be held at Suite
704, 595 Howe Street, Vancouver, BC,
Canada V6C 2T5 on February 15, 2023, commencing at 10:00 a.m.
(Pacific Standard Time), for the following purposes:
1. |
To consider and if deemed advisable, pass with or without variation, a special resolution, (the “Disposition Resolution”) pursuant to section 189(3) of the CBCA to authorize and approve the disposition of i-minerals usa, inc. (“i-minerals USA”) as described in the Proxy Statement (the “Disposition”). |
2. |
To set the number of directors for the ensuing year at four (4) persons. |
3. |
To elect John Theobald, W. Barry Girling, Gary Childress and Wayne Moorhouse as directors of the Company for the ensuing year. |
4. |
To appoint BDO Canada LLP as the auditors of the Company until the next annual general meeting of the Company and to authorize the directors of the Company to fix the remuneration to be paid to the auditors. |
5. |
To consider, and, if deemed advisable, pass a resolution ratifying and approving the Company’s 10% “rolling” Stock Option Plan as described in the Proxy Statement. |
6. |
To consider, and, if thought advisable, to pass a special resolution (the “Continuance Resolution”) authorizing the Company, following the Disposition, to continue under the laws of the Province of British Columbia under the Business Corporations Act (British Columbia) in accordance with the provisions of the Canada Business Corporations Act, as more particularly described in the Proxy Statement (the “Continuance”). |
7. |
To receive the audited financial statements of the Company for the fiscal year ended April 30, 2022 and the accompanying record for the audits. |
8. |
To transact such other business as may properly come before the Meeting or any adjournment or postponement thereof. |
Only
Shareholders of record at the close of business on December 20, 2022 are entitled
to notice of, and to vote at, the Meeting.
To facilitate voting
at the Meeting, the Company requests registered Shareholders of the Company to
complete, date and sign the accompanying form of proxy attached as Appendix “K”
to this Proxy Statement and deposit it with the Company’s transfer agent,
Computershare Investor Services Inc., 510 Burrard Street, 2nd Floor, Vancouver,
BC V6C 3B9 by mail or fax, no later than forty-eight (48) hours (excluding
Saturdays, Sundays and holidays) prior to the time of the Meeting, or
adjournment thereof.
Shareholders unable to
attend the Meeting in person are requested to read the enclosed proxy statement
and proxy and then complete and deposit the proxy in accordance with its
instructions. Unregistered shareholders must deliver their completed proxies in
accordance with the instructions given by their financial institution or other
intermediary that forwarded the proxy to them.
iii
Pursuant to the CBCA, Shareholders have the right to dissent in
respect of the Disposition. If the Company proceeds with the Disposition, a Shareholder
who dissents in respect of the Disposition (a “Dissenting Shareholder”) is entitled to be paid the fair value of
such Dissenting Shareholder’s shares, provided that such Dissenting Shareholder
has delivered to Company a written objection to the Disposition Resolution at
or before the Meeting and has otherwise complied strictly with the dissent
procedures described in the Proxy Statement, including the relevant provisions
of Section 190 of the CBCA. This right is described in detail in the Proxy
Statement under the heading “Rights of Dissenting Shareholders”. The text of
Section 190 of the CBCA, which will be relevant in any dissent proceeding, is
set forth in Appendix B to the Proxy Statement.
Failure to comply strictly with the dissent procedures described
in the Proxy Statement may result in the loss of any right of dissent.
BY ORDER OF THE
BOARD OF DIRECTORS OF
I-MINERALS INC.
/s/ John
Theobald
John
Theobald,
Chief
Executive Officer, President and Director
Vancouver,
British Columbia
December
29, 2022
iv
IMPORTANT
Whether
or not you expect to attend in person, the Company urges you to sign, date, and
return the enclosed proxy at your earliest convenience. This will help to
ensure the presence of a quorum at the Meeting. PROMPTLY SIGNING, DATING, AND
RETURNING THE PROXY WILL SAVE I-MINERALS INC. THE EXPENSE AND EXTRA WORK OF
ADDITIONAL SOLICITATION. Sending in your proxy will not prevent you from voting
your shares at the Meeting if you desire to do so, as your proxy is revocable
at your option.
v
PRELIMINARY COPY – SUBJECT TO CHANGE
SUMMARY TERM SHEET
This Summary Term Sheet includes what we
consider to be the most material terms of the proposed Disposition (defined
below). To understand the Disposition more fully and for a more complete
description of the legal terms of the Disposition, you should carefully read
this entire Proxy Statement, the annexes to this Proxy Statement and the
documents that we refer to in this Proxy Statement.
Because
the Disposition is a “going private” transaction within the meaning of
Securities and Exchange Commission (“SEC”) Rule 13e-3 under the Securities
Exchange Act of 1934, I-Minerals Inc., Allen L. Ball and BV Natural Resources,
LLC (“BV Natural”), an affiliate of BV Lending, LLC (“BV Lending”) have filed
with the SEC a Transaction Statement on Schedule 13E-3 with respect to the
Disposition, which, as amended from time to time, we refer to as the “Schedule
13E-3.” The Schedule 13E-3 is available on the SEC’s website. See “Where You
Can Find More Information” beginning on page 56. The information required in
the Schedule 13E-3 is incorporated by reference to the information in this
Proxy Statement.
Background and Purpose of the Disposition
• |
Beginning
in 2013, BV Lending has made loans to the Company from time to time to finance
Company operations and to explore, evaluate and develop industrial mining sites
near Bovill, Idaho, USA (the “Helmer-Bovill Property”). Loans extended by BV
Lending to the Company were in each case considered by the disinterested
members of the board of directors of the Company (the “Board”) and determined
to be in the best interests of the Company. |
• |
The
Company owes BV Lending approximately US$35.4 million, which is collateralized
by substantially all the assets of i-minerals USA, Inc., a wholly owned
subsidiary of the Company that owns rights in the Helmer-Bovill Property. |
• |
The
debt is due December 31, 2022, the Company does not have sufficient cash to
repay the debt, and the Company is entirely dependent on BV Lending extending
the due date of the debt in order to avoid defaulting on the debt. BV Lending
has extended the term of the debt numerous times since 2017 and, in addition to
the Company having no means of repaying the indebtedness, there is no assurance
or indication that BV Lending will continue to extend the due date of the
indebtedness. |
• |
The
Disposition will ultimately result in the Company being free of its long-term
indebtedness to BV Lending. Although the Disposition will result in the Company
having no assets other than a modest amount of cash and no substantive
operations, the Company will be relieved of its unserviceable debt obligations
to BV Lending in consideration of the sale to BV Lending of all of the
outstanding shares of i-minerals USA, Inc. Among other things, this will allow
the Company to avoid the risk of foreclosure proceedings by BV Lending, which
would likely result in BV Lending taking possession of the Helmer-Bovill
Property in any event, given its role as security to the indebtedness. Free of
its long-term debt obligations to BV Lending and listed on the TSXV, the
Company expects to explore new business opportunities to create value for its
shareholders. |
See sections titled “Special
Factors – Background to the Disposition, – Reasons for the Recommendation of
the Company’s Special Committee and the Company’s Board,” and “Certain
Relationships and Related Transactions—Loan Agreements with Affiliate of Shareholder.”
Terms and Consideration
• |
Immediately
before completing the Disposition, the Company will contribute to i-minerals
USA an intercompany debt owed by i-minerals USA to the Company in the amount of
approximately US$25.7 million, resulting in the cancellation of the indebtedness. |
• |
At the closing of
the Disposition, the Company will sell the shares of i-minerals USA to BV
Lending for an amount equal to US$3 million (the “Share Value”). |
• |
The Share Value
will be satisfied by BV Lending on a non-cash basis by the set off of an equal
amount of debt owed by the Company to BV Lending (the “Set Off”). |
vi
• |
Immediately
following the Set Off, BV Lending will transfer to the Company the balance of
the debt owed to BV Lending (which amount was approximately US$35.4 million
before the Set Off). |
• |
The Loan
Agreements dated June 1, 2016, September 11, 2018 and October 25, 2019 between
the Company, BV Lending and i-minerals USA, as amended from time to time
(collectively, the “Loan Agreements”), including all security interests granted
thereunder will be terminated and/or discharged. |
• |
The Company will
be subject to non-competition and non-solicitation covenants in favour of BV
Lending for a period of five years commencing on closing of the Disposition. |
• |
The Disposition
is subject to the approval of the Shareholders of the Company and the TSX
Venture Exchange. |
• |
BV Lending has
agreed to pay taxes that will become payable by the Company as a result of the
transaction (approximately US$450,000). In consideration for such payment by BV
Lending, the Company will issue a promissory note in favor of BV Lending for
the amount of the taxes so paid. The promissory note will be repaid out of any
refund received by the Company from the applicable government agency. |
See
the section titled “Proposal Number One – The Disposition – Terms of the Stock Purchase Agreement”. We refer to the transactions to be carried out
under the Stock Purchase Agreement collectively as the “Transaction.”
Fairness;
Recommendation of the Board
• |
The Company established
a Special Committee to consider alternatives to the Disposition (including continuing to develop the Helmer-Bovill Property, seeking
equity financing or replacement debt financing, or filing for credit protection
or bankruptcy) and charged
the Special Committee with negotiating the terms of the Disposition if it
determined that alternative was the most favorable to its shareholders. |
• |
In assessing the
fairness of the Disposition, the Special Committee and the Board considered a
variety of alternatives to the Disposition and consulted with legal, financial
and technical advisors. |
• |
The Special
Committee engaged RwE Growth Partners Inc. (“RwE”) to help it assess the
Disposition, and RwE determined that the Disposition would be fair, from a
financial point of view, to the Company’s unaffiliated shareholders. |
• |
The Board
determined that the Disposition is substantively and procedurally fair to the
Company and to its unaffiliated shareholders, and recommends that shareholders
vote “FOR” the Disposition. |
See sections titled “Special
Factors – Recommendation of the Company’s Special Committee, –
Recommendation of the Company’s Board and – Reasons for the
Recommendation of the Company’s Special Committee and the Company’s Board”.
Shareholder and
Regulatory Approval; Dissent Rights
• |
The Disposition
must be approved by: (1) two-thirds of the Shares voted
at the Meeting, in person or by proxy, on the Disposition Resolution pursuant
to section 189(3) of the CBCA; and (2) a majority of the Shares voted at the
Meeting, in person or by proxy, on the Disposition Resolution excluding the
votes from BV Natural, Mr. Ball, their respective affiliates and any other
person who is an “interested party”, pursuant to section 8.1 of MI 61-101. See
section titled “Proposal Number One – The Disposition – Required Approval –
Shareholder Approval”. |
• |
The Disposition
must be approved by the TSX Venture Exchange. See section titled “Proposal
Number One – The Disposition – Required Approval – Exchange Approval” |
• |
Shareholders who
do not vote to approve the Disposition may exercise Dissent and would be
entitled to receive the fair value of their shares. See section titled “Rights
of Dissenting Shareholders”. |
vii
Risks
• |
There
are risks relating to the Disposition, the Stock Purchase Agreement, the
business of the Company and the sale of the Shares, all of which should be
carefully considered by the Shareholders. See section titled “Risk Factors”. |
viii
I-MINERALS
INC.
Suite 1100 – 1199 West Hastings Street,
Vancouver,
British Columbia, Canada V6E 3T5
|
PROXY STATEMENT FOR THE 2022 ANNUAL GENERAL AND SPECIAL MEETING OF THE SHAREHOLDERS TO BE HELD ON FEBRUARY 15, 2023 |
|
This
Proxy Statement is being furnished in connection with the solicitation of
proxies by the Board of Directors of I-Minerals Inc. (the “Board”, “we”, “us”,
“our” and the “Company”) for use at the 2022 Annual General and Special Meeting
of the shareholders of the Company (the “Meeting”) to be held at Suite 704, 595
Howe Street, Vancouver, BC, Canada
V6C 2T5 on February 15, 2023, commencing at 10:00 a.m. (Vancouver
Time) for the purposes set forth in the preceding Notice of Annual General and
Special Meeting.
This
Proxy Statement, the Notice of Annual General and Special Meeting and the
enclosed proxy card are expected to be mailed to the Shareholders on or about January
18, 2023.
The
Company does not expect that any matters other than those referred to in this
Proxy Statement and the Notice of Annual General and Special Meeting will be
brought before the Meeting. However, if other matters are properly presented
before the Meeting, the persons named as proxy appointees will vote upon such
matters in accordance with their best judgment. The grant of a proxy also will
confer discretionary authority on the persons named as proxy appointees to vote
in accordance with their best judgment on matters incidental to the conduct of
the Meeting.
The
date of this Proxy Statement is December 29, 2022.
Important Notice Regarding the
Internet Availability of Proxy Materials for the Meeting to be held on February
15, 2023. This Proxy Statement to the shareholders is available on the
Company’s website at www.imineralsinc.com/s/investors/asp.
QUESTIONS AND ANSWERS ABOUT THE
PROXY MATERIALS AND THE MEETING
Questions and Answers Relating to
Matters of the Meeting
What matters am I voting on?
You are being asked to vote on the following matters:
1. |
To consider and if deemed advisable, pass with or without variation, a special resolution, (the “Disposition Resolution”) pursuant to section 189(3) of the CBCA to authorize and approve the disposition of i-minerals usa, inc. (“i-minerals USA”) as described in the Proxy Statement (the “Disposition”). |
2. |
To set the number of directors for the ensuing year at four (4) persons. |
3. |
To elect John Theobald, W. Barry Girling, Gary Childress and Wayne Moorhouse as directors of the Company for the ensuing year. |
4. |
To appoint BDO Canada LLP as the auditors of the Company until the next annual general meeting of the Company and to authorize the directors of the Company to fix the remuneration to be paid to the auditors. |
5. |
To consider, and, if deemed advisable, pass a resolution ratifying and approving the Stock Option Plan. |
6. |
To consider, and, if thought advisable, to approve a special resolution pursuant to section 188(5) of the CBCA authorizing the Continuance. A Dissenting Shareholder is entitled to be paid the fair value of his or her shares in accordance with section 190 of the CBCA. |
7. |
To receive the audited financial statements of the Company for the fiscal year ended April 30, 2022 and the accompanying record for the audits. |
8. |
To transact such other business as may properly come before the Meeting or any adjournment or postponement thereof. |
The
Company will also consider any other business that properly comes before the
Meeting.
What
vote is required to approve each item?
For a proposal to be approved, the number of votes
cast at the Meeting in favor of the proposal must be greater than the number of
votes cast against the proposal. As of the Record Date, there were 93,730,212 common shares
outstanding and entitled to vote.
The votes required to approve the
Disposition is as follows:
1. |
The affirmative vote of a special majority (two-thirds) of the Shares voted at the Meeting, in person or by proxy, on the Disposition Resolution pursuant to section 189(3) of the CBCA. |
2. |
The affirmative vote of a majority of the Shares voted at the Meeting, in person or by proxy, on the Disposition Resolution, excluding the votes from BV Natural, Mr. Ball, their respective affiliates and any other person who is an “interested party”, pursuant to section 8.1 of MI 61-101. |
The votes required to approve the
Continuation is the affirmative vote of a special majority of the shares of the
Company (the “Shares”) voted at the Meeting, in person or by proxy, on the Continuance
Resolution, pursuant to section 188(5) of the CBCA.
The affirmative vote of a majority of the Shares voted
at the Meeting in person or by proxy is required to pass the following
resolutions:
1. |
To set the number of directors for the ensuing year at four (4) persons. |
2. |
To elect John Theobald, W. Barry Girling, Gary Childress and Wayne Moorhouse as directors of the Company for the ensuing year. |
3. |
To appoint BDO Canada LLP as the auditors of the Company until the next annual general meeting of the Company and to authorize the directors of the Company to fix the remuneration to be paid to the auditors. |
4. |
To consider, and, if deemed advisable, approve a resolution ratifying and approving the Stock Option Plan. |
Therefore, the number of votes cast at the Meeting in
favor of each of the above proposals must be greater than the number of votes
cast against each respective proposal.
Does
the Company’s Board support the Disposition
Yes. Based upon a unanimous recommendation of the Company’s Special
Committee, the Board has unanimously determined that the Disposition is in the
best interests of the Company and that the consideration to be paid to the
Company is fair from a financial point of view to the Shareholders, and
recommends that the Shareholders vote FOR
the Disposition Resolution. Mr. Ball resigned as a member of the Board and as a
member of the board of directors of the Company before the Board approved the
Disposition and the Stock Purchase Agreement.
In making its recommendation, the Special Committee and the Board
considered a number of factors which are described in this Proxy Statement
under the heading “Special Factors - Reasons for the Recommendations of the Company’s
Special Committee and the Company’s Board”, including the opinion from RwE
as of September 13, 2022 that the Disposition is fair from a financial point of
view to the Shareholders.
Each of the directors and officers of the
Company, holding in aggregate 1,873,007 Shares, being approximately 2.0% of the
Company’s Shares (on an undiluted basis), have entered into voting support
agreements pursuant to which they have agreed, subject to the terms thereof,
to, among other things, vote FOR the Disposition Resolution (the “Voting
Support Agreements”).
See “Special Factors - Background to the Disposition”, “Special Factors -
Recommendation of the Company’s Special Committee”, “Special Factors -
Recommendation of the Company’s Board” and “Special Factors - Reasons for the
Recommendations of the Company’s Special Committee and the Company’s Board”.
What
other approvals are required for the Disposition?
The Disposition
and the transactions contemplated thereby are subject to regulatory approval
including the approval of the TSX Venture Exchange.
When
will the Disposition become effective?
Subject
to obtaining TSX Venture Exchange approval as well as the satisfaction of all
other conditions precedent, if the Company’s Shareholders approve the
Disposition Resolution, the Company expects to complete the Disposition in February
2023.
What
will happen to the Company after the Disposition is completed?
If the
Disposition is completed, the Company will have disposed of substantially all
of its assets, being the shares held in i-minerals USA, which holds the
Helmer-Bovill Property, to BV Lending, LLC (“BV Lending”). Until such time that
the Company is able to acquire a new mineral property or alternative business,
the TSX Venture Exchange will place the Company on notice to move to the NEX
Tier of the TSX Venture Exchange. The NEX Tier of the TSX Venture Exchange is
for companies that fail to meet continued listing standards.
See “Special
Factors – Certain Effects of the Disposition”.
What
will be the ongoing reporting requirements for the Company to maintain after completion of the
Disposition?
If the Disposition is completed, the Company must continue to comply
with reporting requirements under both the United States and Canadian
securities laws. However, these requirements should be reduced because we anticipate
that we will meet the definition of a “foreign private issuer”. The Company
plans to file a Form 15 to terminate and suspend its duty to file reports under
the Exchange Act after closing the Transaction.
See “Special
Factors – Certain Effects of the Disposition”.
Will I be entitled to appraisal rights under the CBCA?
Under the CBCA, a Shareholder who dissents to the Disposition Resolution
(the “Dissenting Shareholder”) will be entitled to be paid the fair value of
his or her Shares in accordance with section 190 of the CBCA.
See “See Rights of Dissenting
Shareholders”.
What will happen if the Disposition Resolution is
not approved or the Disposition is not completed for any reason?
If the Disposition Resolution is
not approved or the Disposition is not completed for any reason, the Stock
Purchase Agreement attached as Appendix “C” may be terminated. If the Company
is not able to repay amounts it owes to BV Lending, BV Lending may commence
foreclosure proceedings against us.
See “Proposal Number One – The
Disposition – Terms of the Stock Purchase Agreement – Termination of the Stock
Purchase Agreement.”
Questions and Answers on General
Matters and Proxy Voting of the Meeting
Why am I receiving this
Proxy Statement and proxy card?
You are receiving this Proxy
Statement and proxy card because you are a shareholder of record as at the
close of business on December 20, 2022, and are entitled to vote at this
Meeting. This Proxy Statement describes issues on which the Company would like you,
as a shareholder, to vote. It provides information on these issues so that you
can make an informed decision. You do not need to attend the Meeting to vote
your shares.
When
you sign the proxy card, you appoint the directors and/or officers (the “Designated
Persons”) who are named in the proxy card of the Company. The Designated
Persons will vote your shares at the Meeting (or any adjournments or
postponements) as you have instructed them on your proxy card. With proxy
voting, your shares will be voted whether or not you attend the Meeting. Even
if you plan to attend the Meeting, it is a good idea to complete, sign and
return your proxy card in advance of the Meeting, just in case your plans
change.
If no choice is specific in the proxy with respect
to a matter to be acted upon, the proxy confers discretionary authority with
respect to that matter upon the Designated Persons named in the proxy card. It
is intended that the Designated Persons will vote the common shares represented
by the proxy in favour of each matter identified in the proxy and for the
nominees of the Company’s Board of Directors and auditors.
If
an issue comes up for vote at the Meeting (or any adjournments or
postponements) that is not described in this Proxy Statement, the Designated
Persons will vote your shares, under your proxy, at their discretion, subject
to any limitations imposed by law.
Who is soliciting my vote?
The Board of
Directors of the Company is soliciting your proxy to vote at the Meeting.
Who pays for this proxy solicitation?
The Company will bear
the entire cost of solicitation of proxies, including preparation, assembly and
mailing of this proxy statement, the proxy and any additional information
furnished to shareholders. Copies of solicitation materials will be furnished
to banks, brokerage houses, depositories, fiduciaries and custodians holding
shares in their names that are beneficially owned by others to forward to these
beneficial owners. The Company may reimburse persons representing beneficial
owners for their costs of forwarding the solicitation material to the
beneficial owners of the shares at the Company's discretion. Original
solicitation of proxies by mail may be supplemented by telephone, facsimile,
electronic mail or personal solicitation by the Company’s directors, officers
or other regular employees. No additional compensation will be paid to directors,
officers or other regular employees for such services.
Who is entitled to attend and vote at the
Meeting?
Only Shareholders of
record at the close of business on December 20, 2022, will be entitled to vote
at the Meeting. Shareholders entitled to vote may do so by voting those shares
at the Meeting or by proxy.
How do I vote?
The
voting process is different depending on whether you are a registered
shareholder or a beneficial shareholder:
• |
You are a
registered shareholder if your common shares are registered in your name
(“Registered Shareholder”). |
• |
You are a
beneficial shareholder if your shares are held on your behalf by your
intermediary (“Beneficial Shareholder”). |
Registered Shareholder: Common
Shares Registered in Your Name
If
you are a Registered Shareholder, you are entitled to vote in person at the Meeting or by proxy whether or
not you attend the Meeting. You may vote by proxy:
• |
by signing your
proxy card and mailing it to the Company’s transfer agent at the address on the
proxy card; |
• |
by signing and
e-mailing your proxy card to the Company’s transfer agent for proxy voting at
the e-mail address provided on the proxy card; |
• |
by telephone by
following the instructions set out in the proxy card; and |
• |
through the
internet by following the instructions set out in the proxy card. |
If
you wish to submit a proxy, whether by paper, telephone, email, or internet,
you must complete and sign the proxy, and then return it to the Company’s
transfer agent, Computershare Investor Services Inc., in accordance with the
instructions set forth in the proxy card, no later than 48 hours (excluding
Saturdays, Sundays and holidays) prior to the time of the Meeting, or
adjournment thereof. The chair of the Meeting may waive the proxy cut-off
without notice. If the proxy is not dated, it will be deemed to be dated seven
calendar days after the date on which it was mailed to you (the Registered
Shareholder).
Beneficial Shareholder: Common
Shares Registered in the Name of an Intermediary such as a Brokerage Firm, Bank,
Dealer or other Similar Organization
The following information is of significant
importance to those shareholders who do not hold shares in their own name.
Beneficial Shareholders should note that only proxies deposited by shareholders
whose names appear on the records of the Company as the registered holders of
common shares can be recognized and acted upon at the Meeting
If
your common shares are listed in an account statement provided to you by a
broker, then in almost all cases your common shares will not be registered in
your name on the records of the Company. In such circumstances, your common
shares will more likely be registered under the names of your broker or an
agent of that broker. In Canada, the vast majority of such common shares are registered
under the name of CDS & Co., being the registration name for The Canadian
Depository for Securities Limited (which acts as nominee for many Canadian
brokerage firms), and in the United States, under the name of Cede & Co.,
as nominee for The Depository Trust Company (which acts a depository for many
U.S. brokerage firms and custodian banks). You should ensure that
instructions respecting the voting of your common shares are communicated to
the appropriate person well in advance of the Meeting.
Regulatory
polices require Intermediaries to seek voting instructions from Beneficial
Shareholders in advance of shareholder meetings. Beneficial Shareholders have
the option of not objecting to their Intermediary disclosing certain ownership
information about themselves to the Company (such Beneficial Shareholders are
designated as non-objecting beneficial owners, or “NOBOs”) or objecting to
their Intermediary disclosing ownership information about themselves to the
Company (such Beneficial Shareholders are designated as objecting beneficial
owners, or “OBOs”).
In
accordance with the requirements of National Instrument 54-101 – Communication with Beneficial Owners of
Securities of a Reporting Issuer, the Company has elected to send the Proxy
Statement, the Notice of Annual General and Special Meeting and a request for
voting instructions (a “VIF”), instead of a proxy (the Proxy Statement, the
Notice of Annual General and Special Meeting and VIF or proxy are collectively
referred to as the “Meeting Materials”) directly to the NOBOs. The Company will
not be paying to send the Meeting Materials to OBOs. OBOs will not receive a
copy of the Meeting Materials unless their Intermediaries (or their service
companies) assume the cost of delivery. A VIF enables a Beneficial Shareholder
to provide instructions to the registered holder of its common shares as to how
those shares are to be voted at the Meeting and allow the registered holder to
provide a Proxy voting the common shares in accordance with those instructions.
A VIF should be completed and returned in accordance with its instructions. The
results of the VIFs received from NOBOs will be tabulated and appropriate
instructions respecting voting of common shares to be represented at the
Meeting will be provided to the registered shareholders.
Intermediaries
are required to seek voting instructions from OBOs in advance of the Meeting.
Every Intermediary has its own mailing procedures and provides its own return
instructions, which should be carefully followed by OBOs to ensure that their
common shares are voted at the Meeting. Most brokers now delegate
responsibility for obtaining voting instructions from clients to Broadridge
Investor Communications Solutions (“Broadridge”), which mails the materials for
the Meeting to OBOs and asks them to return a VIF to Broadridge. An OBO
receiving a VIF from Broadridge may use that VIF to vote common shares directly
at the Meeting if the OBO inserts their name as the name of the person to
represent them at the Meeting. The VIF must be returned to Broadridge well in
advance of the Meeting in order to have the common shares voted.
In
either case, the purpose of this procedure is to permit Beneficial Shareholders
to direct the voting of the shares which they beneficially own. If you receive
a VIF, you cannot use it to vote your common shares directly at the Meeting. You
should carefully follow the instructions set out in the VIF including those
regarding when and where the VIF is to be delivered. If you wish to attend the
Meeting as a Beneficial Shareholder or have someone else attend on your behalf,
you will need to write their name (or their nominee’s name) in the space
provided in the VIF and return it in accordance with the instructions of the
VIF.
Only
Registered Shareholders have the right to revoke a proxy. As a Beneficial
Shareholder, you will need, at least seven days before the Meeting, to arrange
for your Intermediary to revoke your VIF on your behalf.
These securityholder materials are being sent to both Registered Shareholders
and Beneficial Shareholders. If you are a Beneficial Shareholder, and the
Company or its agent has sent these materials directly to you, your name and
address and information about your holdings of securities, have been obtained
in accordance with applicable securities regulatory requirements from the
intermediary holding on your behalf.
By choosing to send these materials to you
directly, the Company (and not the intermediary holding on your behalf) has
assumed responsibility for (i) delivering these materials to you, and (ii)
executing your proper voting instructions. Please return your voting
instructions as specified in the request for voting instructions.
What if I share an address with another person and
we received only one copy of the proxy materials?
The Company will only deliver one Proxy Statement to multiple
shareholders sharing an address unless it has received contrary instructions
from one or more of the shareholders. The Company will promptly deliver a
separate copy of this Proxy Statement to a shareholder at a shared address to
which a single copy of the document was delivered upon oral or written request
to:
|
Attention:
Matthew Anderson, Chief Financial Officer |
|
Suite 1100 – 1199 West Hastings Street, |
|
Vancouver, British Columbia, Canada V6E 3T5 |
Shareholders may also address future requests for separate delivery of
Proxy Statements and/or annual reports by contacting us at the address listed
above.
How do I appoint a proxyholder?
A
shareholder has the right to appoint a person or company (who need not be a
shareholder) to attend and act for or on behalf of that shareholder at the
Meeting, other than the Designated Persons named in the enclosed proxy card.
To exercise the right, the
shareholder may do so by striking out the printed names and inserting the name
of such other person and, if desired, an alternate to such person, in the blank
space provided in the proxy card. Such shareholder should notify the nominee of
the appointment, obtain the nominee’s consent to act as proxy and should
provide instruction to the nominee on how the shareholder’s shares should be
voted. The nominee should bring personal identification to the Meeting.
What if I change my mind after I return my
proxy?
You may revoke your proxy and
change your vote at any time before the polls close at the Meeting. You may do
this by:
1. |
executing and delivering a written notice of revocation of proxy to the office of the Company at any time before the taking of the vote at the Meeting; |
2. |
executing and delivering a later-dated proxy relating to the same shares to the office of the Company at any time before taking of the vote at the Meeting; or |
3. |
attending the Meeting in person and: |
|
(a) |
giving affirmative notice at the Meeting of your intent to revoke their proxy; and |
Any written revocation of proxy
or subsequent later-dated proxy should be delivered to the office of the
Company as follows: I-Minerals Inc., Attention: Matthew Anderson, Chief
Financial Officer, Suite 1100 – 1199 West Hastings Street,
Vancouver, British Columbia, Canada V6E 3T5. Attendance at the Meeting will not, by itself,
revoke a shareholder’s proxy without the giving of notice of intent to revoke
that proxy.
What constitutes a
quorum?
In
order to hold a valid meeting of the Company’s shareholders, a quorum equal to one
shareholder must be present at the meeting, in person or represented by proxy.
Shareholders
who abstain from voting on any or all proposals, but who are present at the Meeting
or represented at the Meeting by a properly executed proxy will have their
shares counted as present for the purpose of determining the presence of a
quorum. Broker non-votes will also be counted as present at the Meeting for the
purpose of determining the presence of a quorum. However, abstentions and
broker non-votes will not be counted either in favor or against any of the
proposals brought before the Meeting. A broker non-vote occurs when shares held
by a broker for the account of a beneficial owner are not voted for or against
a particular proposal because the broker has not received voting instructions
from that beneficial owner and the broker does not have discretionary authority
to vote those shares.
If a
quorum is not present at the Meeting, or if a quorum is present but sufficient
votes to approve the proposal are not received, the persons named as proxies on
the enclosed proxy card may propose one or more adjournments of the Meeting to
permit further solicitation of proxies. The persons named as proxies will vote
upon such adjournment after consideration of all circumstances that may bear
upon a decision to adjourn the Meeting. Any business that might have been
transacted at the Meeting originally called may be transacted at any such
adjourned session(s) at which a quorum is present. The Company will pay the
costs of preparing and distributing to shareholders additional proxy materials,
if required in connection with any adjournment. Any adjournment will require
the affirmative vote of a majority of those securities represented at the
Meeting in person or by proxy.
How are abstentions
and broker non-votes treated?
Shareholders may vote for or against the proposals or
they may abstain from voting. Abstentions and broker non-votes will be counted
for purposes of determining the presence of a quorum at the Meeting, but will
not be counted as either in favor or against the proposals.
Will my shares be voted if I do not sign and return
my proxy card?
If you are a Beneficial
Shareholder, your intermediary, under certain circumstances, may vote your
shares.
If you are a Registered
Shareholder, and you do not sign and return your proxy card, your shares will
not be voted at the Meeting.
When are the shareholder proposals due for the 2023
Annual General Meeting?
The deadline for submitting a
shareholder proposal for inclusion in the Company’s proxy statement and proxy
card for its 2023 Annual General Meeting of shareholders pursuant to Rule 14a-8
of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) is October
18, 2023; provided, however, that in the event the Company holds its 2023 Annual
General Meeting more than 30 days before or after the one year anniversary date
of the 2022 Annual General and Special Meeting, the Company will disclose the
new deadline by which proxies must be received under Item 5 of the Company’s
earliest possible Quarterly Report on Form 10-Q or, if impracticable, by any
means reasonably calculated to inform shareholders. In addition, shareholder
proposals must otherwise comply with the requirements of Rule 14a-8 of the
Exchange Act.
Any shareholders who wish to
submit a proposal are encouraged to seek independent counsel about requirements
of the SEC and the Canada Business
Corporations Act. The Company will not consider any proposals that do not
meet the SEC and Canada Business
Corporations Act requirements for submitting a proposal. Notices of
intention to present proposals for the Company’s next annual meeting should be
delivered to I-Minerals Inc., Suite 1100 – 1199 West Hastings Street,
Vancouver, British Columbia, Canada V6E 3T5, Attention: Matthew Anderson,
Chief Financial Officer.
SPECIAL
FACTORS
This “Special Factors” section
includes a summary of the purposes of the Disposition and how it would affect
the Company and its business, a discussion of the fairness of the Transaction
and how our Board assessed the fairness of the Transaction to the Company and
its unaffiliated shareholders, and a summary of various other matters. Certain
information below is required to be disclosed under the heading “Special
Factors” by SEC Rule 13e-3 because the proposed transaction constitutes a
“going private” transaction under that rule. You should read these Special
Factors in conjunction with the disclosures in the section titled “Proposal Number One – The Disposition
– Terms of the Stock Purchase Agreement” beginning on page 22, which
describe the material terms of the proposed Disposition and the Stock Purchase
Agreement. While we believe
the following description and the description under Proposal Number One cover
the material aspects of the Disposition, the descriptions may not contain all
of the information that is important to you. We encourage you to carefully read
this entire document, including the Stock Purchase Agreement, which is filed as
an exhibit to the Company Current Report on Form 8-K filed with the SEC on
September 19, 2022, for a more complete understanding of the Disposition. The
following description is subject to, and is qualified in its entirety by
reference to, the Stock Purchase Agreement. You may obtain additional
information without charge by following the instructions set forth in the section
titled “Where You Can Find More Information” beginning on page 56.
About the Company, i-minerals USA, BV Natural, BV
Lending and Allen L. Ball
The Company is engaged in the exploration, evaluation and development of
the Helmer-Bovill Property, in which the Company indirectly holds a 100%
interest through its wholly owned subsidiary, i-minerals USA, which is composed
of 8 mineral leases totaling 3,483.15 acres located approximately 6 miles
northwest of Bovill, Latah County, Idaho. The Helmer-Bovill Property is the
only material asset of i-minerals USA and the stock of i-minerals USA owned by
the Company is the only material asset of the Company.
The
Company’s largest shareholder is BV Natural Resources LLC (“BV Natural”). BV Natural is engaged in
commercial real estate investment and development, and private equity
investments. BV Lending is an affiliate of BV Natural and is the sole lender
and sole source of external debt financing to the Company. BV Natural and BV
Lending (collectively, “BV”) were founded by Allen L. Ball, a former director
of the Company. Mr. Ball is no longer affiliated with either BV Natural or BV Lending. BV
Natural beneficially owns 39.4% of the total common shares issued and
outstanding of the Company.
Mr.
Ball had been a director of the Company from March 2002 to September 2022, and
resigned from the board of directors of each of the Company and i-minerals USA
before the respective boards approved the proposed transaction and recommended
the transaction to the Shareholders. Mr. Ball has been involved in many
business ventures including farming, farm implement sales, vending machines,
cosmetics industry, mining, timber, construction and related materials, high
tech venture capital, commercial car washes, A/R factoring, septic system sales
/ installation / servicing, lending, real estate development, hospitality,
assisted living, pharmaceutical, firearms manufacturing, fishing
lodge/outfitting, and motorsports sales, but he is probably most known for his
involvement in forming Melaleuca, Inc, a manufacturer of wellness products
based in Idaho.
The
address of each of the Company and i-minerals USA is 1100 – 1199 West Hastings
Street, Vancouver, BC V6E 3T5; the address of each of BV Lending, BV Natural
and Mr. Ball is 2194 Snake River Pkwy Suite 300, Idaho Falls, ID 83402. None of
the Company, i-minerals USA, BV Lending or their respective directors and
executive officers or Mr. Ball have been convicted in a criminal proceeding
during the past five years (excluding traffic violations or similar
misdemeanors), and none of the aforementioned persons have been a party to any
judicial or administrative proceeding during the past five years that resulted
in a judgment, decree or final order enjoining the person from future
violations of, or prohibiting activities subject to, federal or state
securities laws, or a finding of any violation of federal or state securities
laws.
Background to the Disposition
Financial
Situation of the Company
As of the date of this Proxy
Statement, the Company is indebted to BV Lending in the amount of US$35.4 million under the Loan Agreements. As at October 31, 2022, the Company had limited cash of US$35,194 and
a working capital deficit of US $34,984,487. During the 6-month period ended October
31, 2022, the Company did not generate any revenues, incurred losses of $813,202
and used cash in operating activities of $555,137.
The Company cannot service its outstanding
debt obligations without new injections of debt or equity financing. The
Company has no source of financing apart from BV Lending and believes it has no
reasonable prospect of finding any other source of financing.
To continue operations, the Company
has regularly borrowed funds from BV Lending since 2013. The loans extended by
BV Lending to the Company were in each case considered by disinterested members
of the board oof directors of the Company and determined to be in the best
interests of the Company. BV Lending has agreed to numerous requested
extensions of the maturity dates of the outstanding indebtedness under the Loan
Agreements and a result of these extensions the Company has been able to avoid
defaulting under the Loan Agreements. However, while the extensions and
additional tranches of debt financing have enabled the Company to keep
operating, they have also increased the indebtedness of the Company to BV
Lending. The indebtedness currently becomes due and payable on December 31,
2022. There is no prospect that the Company will be able to repay the
indebtedness under the Loan Agreements when it becomes due. Moreover, as the
Company has no ability to meet its debt obligations under the Loan Agreements,
it also has no ability to develop the Helmer-Bovill Property. See the section titled “Certain
Relationships and Related Transactions - Loan
Agreements with Directors”. The Company is entirely
dependent on BV Lending extending the due date of the debt in order to avoid
defaulting on the debt and there is no assurance or indication that BV Lending
will continue to extend the due date of the indebtedness.
Proposed Disposition
In light of its financial and
operating circumstances, the Company has agreed to sell all of the issued and
outstanding shares of i-minerals USA to BV Lending pursuant to the terms of the
Stock Purchase Agreement attached as Appendix “C”, the terms of which are summarized
below in the section titled “Proposal Number One – The Disposition”.
Because the issued and outstanding shares of i-minerals USA are the only
material asset of the Company, the sale requires shareholder approval pursuant
to the corporate statute that governs the Company.
Discussions with BV
From 2017 to 2022, management of the Company negotiated
numerous extensions of the maturity dates of the outstanding indebtedness of
the Company with BV Lending under the Loan Agreements. BV Lending agreed to the
extensions for no consideration on most of the occasions and the last extension
granted to date was December 31, 2022. In each instance, Mr. Ball, the founder
of BV Lending and BV Natural, abstained from voting on all matters related to
the Loan Agreements. See the section titled “Certain Relationships
and Related Transactions - Loan Agreements with Directors”.
As the financial
prospects of the Company became increasingly constrained, on February 19, 2021,
the Company received an initial non-binding letter of interest (the “February
2021 Letter of Interest”) from BV Natural, an affiliate of BV Lending, to
acquire all of the issued and outstanding common shares of the Company not
already owned by BV Natural or its affiliates (the “Initially Proposed
Transaction”).
After entry into the
February 2021 Letter of Interest, BV Natural carried out legal and technical
due diligence on the Company, its subsidiaries and the Helmer-Bovill Property.
As a result of the due diligence carried out by BV Natural in connection with
the Initially Proposed Transaction, BV Natural concluded that an acquisition of
all of the issued and outstanding Common Shares not already owned by BV Natural
and its affiliates was undesirable. In addition, management of the Company
expressed its desire to maintain the Company as a standalone entity that could
be used to pursue other alternatives following the conclusion of any
acquisition by BV Natural and its affiliates and requested alternatives to the
Initially Proposed Transaction that would result in the Company remaining
independent and becoming debt free. Management of the Company proposed that BV
acquire i-minerals USA instead of the Company.
Aware of a possible conflict of
interest due to the fact that Mr. Ball, the founder of BV, was a director of
the Company and therefore could be considered an “interested party” to the
Disposition, on March 1, 2021, the Board established the Special Committee. The
Special Committee consists of Gary Childress and Wayne Moorhouse, each of whom
is an “independent director” as that term is defined in MI 61-101. Mr. Ball, being
an “interested party” in the Disposition, abstained from voting in approving
the resolution relating to the Special Committee and in any considerations of
any matters relating to the Initially Proposed Transaction and subsequently
proposed transactions at the Board level. See the section titled “Special
Factors – Reasons for the Recommendation of the Company’s Special Committee and
the Company’s Board – Fairness of the Disposition – Procedural Fairness”.
The purpose of the
Special Committee is to ensure that the interests of the Company are fairly
considered in the negotiation and review of the Disposition and to manage the
conflicts of interest that could arise in connection with the Disposition. In
that regard, its mandate is specifically to: (i) review and evaluate the
proposed structure, terms and conditions of the Disposition, (ii) consider any
alternative transactions available to the Company, (iii) supervise or engage in
negotiations on behalf of the Company with respect to the Disposition and (iv) consider
and provide recommendations to the Board as to whether the Disposition or any
alternative transaction is in the best interest of the Company.
Shortly after the
establishment of the Special Committee, in March 2021, the Company engaged RwE
to provide an independent fairness opinion regarding the fairness of the
Disposition to the Company’s shareholders, from a financial point of view.
On August 24, 2021, BV
submitted a revised non-binding bid letter to the Company. Based on further due
diligence conducted in the interim, BV concluded that the Disposition would be
a preferable transaction structure to the Initially Proposed Transaction and
would also allow the Company to remain intact as a publicly-traded company. The
Company and BV suspended further discussions as the Company and i-minerals USA
re-applied for the mineral leases for the Helmer-Bovill Property (being the
sole material asset of the Company and i-minerals USA) ahead of their 2023
expiry date.
On May 3, 2022, following the renewal of the
mineral leases and discussions between management of the Company and BV on the
objectives and the consideration payment method of the proposed Disposition,
the Company and BV entered into a non-binding letter of interest whereby BV
proposed to purchase all of the issued and outstanding shares of the Company’s
wholly-owned subsidiary, i-minerals USA, in consideration for the elimination
of the outstanding debt obligations of the Company under the Loan Agreements. Shortly
thereafter, the Company re-engaged RwE to provide a fairness opinion on a
proposed disposition in the form of the Disposition.
On July 7, 2022, BV Lending provided a draft of the
Stock Purchase Agreement to the Company. The draft Stock Purchase Agreement was
reviewed by the Special Committee and the Board. On July 20, 2022, the legal
representatives of the Company and BV Lending discussed the structure of the
Disposition issues over a telephone conference. Throughout July and August
2022, the Company, with the assistance of the Special Committee and its legal
counsel, made revisions to the Stock Purchase Agreement and reviewed revisions
carried out by BV Lending. On September 12, 2022, Mr. Ball resigned as a member
of the Board and resigned as a member of the board of directors of i-minerals
USA.
On September 13, 2022, the Special Committee
recommended that the Board approve the entry into the Stock Purchase Agreement.
The Board, which also met on September 13, 2022, approved the entry into the
Stock Purchase Agreement and the transactions to be carried out under the Stock
Purchase Agreement.
Throughout this time BV Lending extended the
maturity of the indebtedness owing by the Company under the Loan Agreements and
extended additional tranches of debt to BV Lending so that it could continue to
operate.
Recommendation of the Company’s
Special Committee
After careful consultation with its legal and financial advisors
and careful consideration of the Fairness Opinion and the other factors set out
below under the heading “Reasons for the Recommendation of the Company’s
Special Committee and the Company’s Board”, the Company’s Special Committee
unanimously determined that the Disposition is in the best interests of the
Company and is fair from a financial point of view to the Shareholders and resolved
to recommend that the Company’s Board approve the Disposition and recommend
that the Company’s Board recommend to the Shareholders that they vote their
Shares FOR the Disposition Resolution.
Recommendation of the Company’s
Board
After careful consideration of the Disposition, and following
unanimous recommendation of the Company’s Special Committee, the Company’s Board
unanimously determined that the Disposition is in the best interests of the
Company and is fair from a financial point of view to the Shareholders and that
the Stock Purchase Agreement and the performance of the transactions
contemplated therein be approved.
The Board of the Company unanimously recommends that the
shareholders of the Company vote FOR the Disposition Resolution.
Reasons for the Recommendation of
the Company’s Special Committee and the Company’s Board
Elimination of Indebtedness. The Company is indebted to BV Lending in
the amount of approximately US$35.4 million pursuant to the terms of the Loan Agreements.
The Loan Agreements are collateralized by the
Helmer-Bovill Property and the indebtedness under the Loan Agreements mature on
December 31, 2022. Considering the Company’s financial position, there is no
prospect that the Company will be able to repay the indebtedness under the Loan
Agreements when it becomes due. Consummating the Disposition will terminate all
of the outstanding indebtedness to BV Lending, and the Company will be able to
avoid the risk of foreclosure proceedings by BV Lending, which would likely
result in BV Lending taking possession of the Helmer-Bovill Property in any
event, given its role as security to the indebtedness.
No Alternatives to the Disposition. Aside from the Disposition, the Company has no other way to satisfy the
indebtedness under the Loan Agreements, and has been unsuccessful in finding an
alternative that does not involve insolvency or restructuring proceedings.
The Special Committee and the Board evaluated
potential strategic alternatives to the Disposition, including the possibility
of continuing to develop the Helmer-Bovill Property and seeking alternative
sources of equity or debt financing. In this regard, the Special Committee and
the Company took into account that the significant levels of secured
indebtedness to BV Lending made raising new capital through equity financing
infeasible as equity funds would likely be allocated to repaying its
indebtedness. In addition, the Special Committee noted the significant dilutive
effect that an equity offering of sufficient size would have, even if it was
possible.
The Special Committee and the Board also considered the current economic, industry and market trends affecting the Company,
information concerning the business, operations, property, assets, financial
condition, operating results and prospects of the Company, the historical
trading prices of the Company and the risks relating to the Disposition
including those matters described under the heading “Risk Factors”. The
Special Committee and the Board believe that the anticipated benefits of the
Disposition to the Company outweigh any of these risks.
The
Special Committee also considered the possibility of selling its assets to
another third party, but was unable to find (and is not aware of) any such
third party. Considering the current metal and silver industry, finding a buyer
to acquire a mineral property is challenging and involves a high cost.
Furthermore, the secured indebtedness that encumbers the Helmer-Bovill Property
makes it a very unattractive target for potential buyers.
Without a path to raise additional equity financing,
refinance its indebtedness, or sell the Helmer-Bovill Property to a third
party, the only alternative to the Disposition would be for the Company to
default on its significant debt to BV Lending.
Debt-Free
Listed Company and New Opportunities. Following the completion of the
Disposition, if approved by shareholders and subsequently consummated, the
Company will have no operations, a very small amount of cash and, critically,
no significant debt. The Company will migrate to the NEX tier of the TSXV,
reserved for listed companies that do not meet the minimum listing standards of
the TSXV. However, the Company's continued listed status and the absence of
debt will give the Company and management a chance to explore new opportunities
to take advantage of the listed status of the Company and create value for its
shareholders.
Support of Directors and Senior Officers. All of the
independent directors and senior officers of the Company have entered into the
Voting Support Agreements pursuant to which, and subject to the terms of which,
they have agreed, among other things, to vote their Shares in favour of the
Disposition Resolution. As of the date of the Stock Purchase Agreement, the directors
and officers collectively beneficially owned or exercised control or direction
over an aggregate of approximately 1,873,007 Shares representing approximately 2.0%
of the outstanding Shares.
Fairness of the Disposition. The Company believes that the Disposition is substantively and procedurally
fair to the Company and to its unaffiliated shareholders due to (i) the value
of the consideration being provided to the Company under the Disposition; and
(ii) the procedural safeguards put in place prior to the Disposition being
agreed.
Substantive Fairness
The Special Committee
and the Board received a fairness opinion from RwE to the effect that, as at September
13, 2022, and subject to the assumptions, limitations and qualifications set
out therein, the Disposition is fair, from a financial point of view, to the
Shareholders.
RwE was engaged by the Special Committee and the Board to act as
its financial advisor in connection with the Disposition.
On September 13, 2022, the Fairness Opinion provides that, as of September
13, 2022, based upon and
subject to the assumptions, limitations and qualifications set out therein, the
Disposition is fair, from a financial point of view, to the Company’s
Shareholders excluding shareholders related to BV Lending (i.e. “unaffiliated
securityholders” as defined under
Rule 13e-3 of the Exchange Act). The Fairness
Opinion was among a number of factors taken into consideration by the Board in
considering the Disposition. This summary is qualified in its entirety by
reference to the full text of the Fairness Opinion. The full text of the
Fairness Opinion, which set forth, among other things, the assumptions made,
matters considered and limitations on the review undertaken in connection with
the opinion, is attached as Appendix “D” to this Proxy Statement. The Company’s
shareholders are urged to, and should, read the Fairness Opinion in its
entirety. The Fairness Opinion is not a recommendation to any shareholder as to
how to vote with respect to the Disposition or any other matter at the Meeting.
Under the terms of
its engagement, RwE was paid a fee of $11,000 for delivery of the Fairness Opinion,
which is not contingent upon the opinion being favourable.
The Fairness Opinion considered a number of factors including, but
not limited to: (i) the relative amounts of known immediate exploration costs
and work commitments versus future contingent work commitments, (ii) the likely
development and exploration methods and the ongoing material development costs
of Helmer-Bovill Property, (iii) the fact that the Helmer-Bovill Property is
located in the United States, (iv) the infrastructure located at or near the
Helmer-Bovill Property, (v) new permits issued for the Helmer-Bovill Property,
(vi) the fact that the indebtedness is owed by the Company to BV Lending and
not tied directly to i-minerals USA, (vii) review of the financial statements
of the Company from 2017 to 2022, (viii) significant capital is required to
develop the project, (ix) received no offer better than the one received by BV
Lending, (x) industrial minerals have mixed demand, (xi) inability to obtain
off-take agreements, which is a cornerstone for realizing value in industrial
mineral projects, due to the long timeframe to production, (xii) the previously
disclosed mineral resources and mineral reserves on the Helmer-Bovill Property,
(xiii) other mineral resource companies listed on Canadian stock exchanges due
to perceived high risk, (xiv) the lack of certainty that the next stage of
development at Helmer-Bovill will occur on favorable terms, and (xv) additional
technical and mining development may be positive or negative from future work.
In completing the Fairness Opinion, RwE made the following
assumptions: (i) all assets and liabilities of the Company have been recorded
in their accounts and financial statements and follow U.S. GAAP standards, (ii)
relied on provided documentation by the Company, including data on the
historical development and exploration costs on the Helmer-Bovill Property,
(iii) the book value of the Company’s balance sheet used in the Fairness
Opinion equals their fair value, (iv) the Company and all of its related
parties and their principals had no contingent liabilities, unusual contractual
arrangements, or substantial commitments, other than in the ordinary course of
business, nor litigation pending or threatened, nor judgments rendered against,
other than those disclosed by management, (v) no material changes to the
audited financial statements for the year ended April 30, 2022, (vi) the
Company shareholders are to be treated equally, (vii) the Company owns the
Helmer-Bovill Property and all assets set out in its financial statements,
(viii) the Company has complied with all rules and regulations of the TSX
Venture Exchange, government taxation and regulatory practices as well as all
aspects of their contractual agreements that would have an effect on the
Fairness Opinion and there is no material agreement not disclosed in the
Fairness Opinion, (ix) all conditions to the Disposition will be completed or
waived by the parties, (x) no dilutive events at closing of the Disposition,
(xi) BV Lending has no other material information that would provide it
financial reasons to complete the Disposition, (xii) there are no unforeseen
and/or material negative tax consequences to the Company’s shareholders and/or
securityholders through the closing of the Disposition, (xiii) the Board has
advised that there are no other elements to the Disposition other than set out
in the Fairness Opinion, and (xiv) the Board is not aware of any other facts or
data involving the Disposition and other matters that would have a material
effect on the conclusions in the Fairness Opinion.
Based on the factors considered, RwE considered that the fair
market value the Company to be CAD $1.15 million as compared to the US $3
million of value received for i-minerals USA. The Fairness Opinion concluded
that subject to the assumptions, limitations and qualifications set out therein,
the transaction was fair, from a financial point of view, to the Shareholders. Subsequent
developments may affect the Fairness Opinion. RwE has disclaimed any obligation
to change or withdraw the Fairness Opinion, advise any person of any change
which may come or be brought to the attention of RwE or update the Fairness
Opinion after the date of the Fairness Opinion.
Neither RwE nor any
of its affiliates is an insider, associate or affiliate (as such terms are
defined in the applicable Canadian Securities Laws) of the Company or BV
Lending or any of their respective associates or affiliates.
Mr. Ball and BV
Natural, which may be considered “affiliates” of the Company required to file a
Schedule 13E-3, have adopted the analysis and conclusions of the Board as set
forth in this proxy statement regarding the material factors upon which it was
determined that the Disposition is substantively fair to the Company and all of
the unaffiliated shareholders of the Company.
Procedural Fairness
Under the SEC rules governing “going-private” transactions, including
Rule 13e-3 under the Exchange Act, Mr. Ball and BV Natural, an
affiliate of BV Lending, (collectively, the “BV Group”) may be an “affiliate”
of the Company and engaged in a “going-private” transaction and, therefore is
required to disclose its beliefs as to the fairness of the Disposition to the
Company’s “unaffiliated security holders” as defined under
Rule 13e-3 of the Exchange Act. BV Group is making the statements
included in this section of the Proxy Statement solely for the purpose of
complying with the requirements of Rule 13e-3 and related rules under
the Exchange Act. However, no member of the BV Group is making any
recommendation to any unaffiliated shareholder as to how that shareholder
should vote on any proposal, and the views of each member of the BV Group
should not be construed as a recommendation to any unaffiliated shareholder as
to how such shareholder should vote. Each member of the BV Group has interests
in the Disposition that are different from, and in addition to, those of the unaffiliated
shareholders.
The Company was represented by the Special Committee, which negotiated
the terms and conditions of the Stock Purchase Agreement on the Company’
behalf, with the assistance of the Special Committee’s independent financial
and legal advisors. The Disposition was negotiated by the Special Committee and
the Board with Mr. Ball in abstention and was approved after Mr. Ball’s
resignation. Mr. Ball was not a member of the Special Committee and did not
participate in the deliberations of the Special Committee regarding, or receive
advice from the Special Committee’s legal or financial advisors as to, the
substantive and procedural fairness of the Disposition to the unaffiliated shareholders.
BV Lending did not undertake any independent evaluation of the fairness of the Disposition
to the unaffiliated shareholders, nor did it request or obtain any opinion or
analysis with respect to the fairness of the Disposition to the unaffiliated shareholders. Mr. Ball resigned as a director of the Company on September 12, 2022,
prior to the meeting of the Board on September 13, 2022, at which the
Disposition and the Stock Purchase Agreement were approved. See “Fairness of the Disposition”
The
Company and BV Lending believes, based on the analysis and resulting
conclusions of the Special Committee and the Board described in this section
titled “Special Factors – Reasons for the Recommendations of the Company’s Special
Committee and the Company’s Board”, that the Disposition is fair, from a
financial point of view, to the unaffiliated shareholders.
In making its determinations and recommendations, the Special
Committee and the Board also observed that a number of procedural safeguards
were in place and are present to permit the Board to represent the interests of
the Company, the Shareholders and the Company’s other stakeholders. These
procedural safeguards include, among others:
Shareholder Approval. The Disposition must
be approved by (i) at least two-thirds of the votes cast on the Disposition
Resolution at the Meeting by the Shareholders, present in person or represented
by proxy and entitled to vote at the Meeting, and (ii) a simple majority of
votes cast by the Shareholders, excluding votes held by interested parties (as
defined in MI 61-101), related parties (as defined in MI 61-101) of such
interested parties and joint actors (as defined in MI 61-101) of such
interested parties or related parties.
Regulatory Approval. The
Disposition must be approved by the TSX Venture Exchange. The Stock Purchase Agreement
also contains a condition precedent that all regulatory approvals shall be
obtained prior to closing.
Dissent Rights. Section 190 of the CBCA provides that
any Registered Shareholders who oppose the Disposition may, upon compliance
with certain conditions, exercise Dissent Rights and, if the Disposition is ultimately
successful, receive the fair value of the Shares the Dissenting Shareholder
holds in accordance with the Disposition. See “Rights of Dissenting
Shareholders”.
The foregoing summary
of the information and factors considered by the Special Committee and the
Board is not intended to be exhaustive, but includes the material information
and factors considered by the Special Committee and the Board in their consideration of the
Disposition. In view of the variety of factors and the amount of information
considered in connection with the Special Committee and the Board’s evaluation
of the Disposition, the Special Committee and the Board did not find it
practicable to and did not quantify or otherwise attempt to assign any relative
weight to each of the specific factors considered in reaching its conclusions
and recommendations. In addition, individual members of the Special Committee
and the Board may have assigned different weights to different factors in
reaching their own conclusion as to the fairness of the Disposition.
Certain Effects of
the Disposition
If the Disposition Proposal receives the required approvals of the
Company’s Shareholders described elsewhere in this Proxy Statement and the
other conditions to the completion of the Disposition are either satisfied or
waived, the Company will transfer to BV Lending all of the issued and
outstanding shares of i-minerals USA. Accordingly, the Company will no longer
be the indirect owner of the Helmer-Bovill Property, which is its sole mineral
property, located in Idaho, USA.
Immediately prior to closing of the Disposition, the Company will
contribute to i-minerals USA an
intercompany debt owed by i-minerals USA to the Company in the amount of
approximately US $25.7 million, resulting in the cancellation of the
outstanding indebtedness. Further, on closing of the Disposition, BV Lending
will transfer to the Company the balance of the debt owed to BV Lending (which
amount was approximately US $35.4 million before the Set-Off). As a result of
the foregoing, the Company will no longer be indebted to BV Lending and
i-minerals USA will no longer be indebted to the Company.
Other
than cash on hand, the Company will own no assets after closing of the
Disposition. Until such time that the Company is able to acquire a new mineral
property or alternative business, the TSX Venture Exchange will place the
Company on notice to move to the NEX Tier of the TSX Venture Exchange. The NEX
Tier of the TSX Venture Exchange is for companies that fail to meet continued
listing standards.
Upon completion of the Disposition, the Company will still have to
comply with reporting requirements under both the United States and Canadian
securities laws. However, these requirements should be reduced because we would
no longer be a United States company.
The Company currently prepares its financial statements in accordance
with United States generally accepted accounting principles (“US GAAP”). We
file our audited annual financial statements with the Securities and Exchange
Commission on annual reports on Form 10-K and our unaudited interim financial
statements with the Securities and Exchange Commission on quarterly reports on
Form 10-Q. Additionally, we are a reporting issuer in the Provinces of British
Columbia and Alberta, Canada.
Upon completion of the Disposition, we anticipate that we will meet the
definition of a “foreign private issuer” under the Securities Exchange Act of
1934 (the “Exchange Act”). As a foreign private issuer, we will be required
file an annual report on Form 20-F for its audited annual financial statements.
We will also be required file our interim financial statements and management’s
discussion and analysis, in the form required by Canadian securities
legislation, with the Securities and Exchange Commission on Form 6-K. After
closing of the Transaction, we anticipate that we will prepare our financial
statements in accordance with International Financial Reporting Standards
(“IFRS”). Notwithstanding the foregoing, the Company plans to file a Form 15 to
terminate and suspend its duty to file reports under the Exchange Act
immediately after closing of the Transaction.
In addition, as a foreign private issuer, our directors, officers and
stockholders owning more than 10% of our outstanding common stock will no
longer be subject to the insider reporting requirements of Section 16(b) of the
Exchange Act and we will no longer be subject to the proxy rules of Section 14
of the Exchange Act. Furthermore, Regulation FD does not apply to non-United
States companies and will not apply to us upon completion of the Disposition.
We will continue to remain subject to Canadian disclosure requirements
including those requiring that we publish news releases and file reports about
material changes to or for our company, send you information circulars with
respect to meetings of our stockholders, file annual and quarterly financial
statements and related management’s discussion and analysis and those that
require that our officers, directors and major shareholders to file reports
about trading in our shares.
Selected
Financial Information
The following tables sets forth summary financial information for
the Company and for i-minerals USA for the years ended April 30, 2022 and 2021,
and for the 6-month period ended October 31, 2022. This information has been
summarized from the Company’s financial statements and should only be read in
conjunction with the Company’s and i-minerals USA’s financial statements,
including the notes thereto, attached as Schedule “F” to Schedule “J” to this
Proxy Statement. The Pro Forma financial information gives effect to the
Disposition. All references to “$” shall mean US dollars in the following
tables.
The Company
|
For
the 6-month period ended October 31, 2022 |
For
the year ended April 30, 2022 |
For
the year ended April 30, 2021 |
Total
Revenues |
$Nil |
$Nil |
$Nil |
Amortization |
$Nil |
$Nil |
$2,040 |
Management
and Consulting Fees |
$51,096 |
$103,893 |
$103,602 |
Mineral
Property Expenditures |
$Nil |
$Nil |
$Nil |
General
and Miscellaneous |
$30,106 |
$129,525 |
$144,210 |
Professional
Fees |
$161,888 |
$207,027 |
$156,821 |
Foreign
Exchange Gain |
$3,523 |
$2,280 |
$4,300 |
Interest
and Penalty Expense |
$204,011 |
$104,091 |
$3,725,237 |
Loss
for the Period From Continuing Operations |
$443,578 |
$542,256 |
$4,127,610 |
Loss
for the Period From Discontinued Operations |
$369,624 |
$812,668 |
$771,649 |
Net
Loss & Comprehensive Loss for the Period |
$813,202 |
$1,354,924 |
$4,899,259 |
Basic
& Diluted Loss per Common Share |
$0.00 |
$0.01 |
$0.05 |
Total
Assets |
$2,043,358 |
$2,008,704 |
$2,149,527 |
Working
Capital Deficit |
$(34,984,487) |
$(36,111,145) |
$(34,773,452) |
Total
Liabilities |
$37,027,845 |
$36,179,989 |
$34,965,888 |
Dividends
per Share |
$Nil |
$Nil |
$Nil |
i-minerals
USA
|
For
the 6-month period ended October 31, 2022 |
For
the year ended April 30, 2022 |
For
the year ended April 30, 2021 |
Total
Revenues |
$Nil |
$Nil |
$Nil |
Amortization |
$997 |
$2,534 |
$5,254 |
Management
and Consulting Fees |
$49,500 |
$99,000 |
$99,000 |
Mineral
Property Expenditures |
$291,402 |
$615,950 |
$605,219 |
General
and Miscellaneous |
$2,796 |
$81,477 |
$53,495 |
Professional
Fees |
$822 |
$13,328 |
$8,492 |
Foreign
Exchange Loss |
$1,060 |
$379 |
$189 |
Net
Loss & Comprehensive Loss for the Period |
$346,577 |
$812,668 |
$771,649 |
Total
Assets |
$1,979,098 |
$1,922,442 |
$1,964,230 |
Working
Capital Deficit |
$(25,926,636) |
$(25,561,678) |
$(24,766,241) |
Total
Liabilities |
$25,977,063 |
$25,573,830 |
$24,802,950 |
Dividends
per Share |
$Nil |
$Nil |
$Nil |
Pro
Forma Financial Information for the Company
|
For
the six month period ended October 31, 2022 and as at October 31, 2022 |
For the year ended April 30, 2022 and as at April 30, 2022 |
Total
Revenues |
$- |
$- |
Amortization |
$- |
$- |
Management
and Consulting Fees |
$51,096 |
$103,893 |
Mineral
Property Expenditures |
$- |
$- |
General
and Miscellaneous |
$30,106 |
$159,095 |
Professional
Fees |
$161,888 |
$327,027 |
Gain
on Sale of Subsidiary |
$- |
$33,347,785 |
Foreign
Exchange Gain |
$3,523 |
$2,280 |
Interest
Expenses |
$204,011 |
$104,091 |
Net
Income (Loss) for the Period from Continuing Operations |
$(443,578) |
$32,655,959 |
Net
Income (Loss) for the Period from Discontinued Operations |
$(369,624) |
$(812,668) |
Net
Income (Loss) for the Period |
$(813,202) |
$31,843,291 |
Total
Assets |
$154,690 |
|
Working
Capital (Deficit) |
$(1,786,272) |
|
Total
Liabilities |
$1,940,962 |
|
Dividends
per Share |
$- |
|
Financial Statements
A copy of the following financial statements are included in this
Proxy Statement:
1. |
Audited annual financial statements of the Company for the years ended April 30, 2022 and 2021 attached as Appendix “F”. |
2. |
Interim financial statements of the Company for the period ended October 31, 2022 and 2021 attached as Appendix “G”. |
3. |
Audited financial statements of i-minerals USA for the years ended October 30, 2022 and 2021 attached as Appendix “H”. |
4. |
Interim financial statements for i-minerals USA for the period ended October 31, 2022 and 2021 attached as Appendix “I”. |
5. |
Pro forma financial statements for the Company for the period ended October 31, 2022 and April 30, 2022 attached as Appendix “J”. |
Fees and Expenses
The estimate fees and
expenses incurred or expected to be incurred by the Company in connection with
the Disposition are as follows:
Description |
|
Amount |
Financial advisory
fees and expenses |
$ |
11,000 |
Legal, accounting
and other professional fees and expenses |
$ |
96,000 |
SEC filing fees |
$ |
500 |
Printing, proxy
solicitation and mailing costs |
$ |
7,500 |
Miscellaneous |
$ |
5,000 |
Total |
$ |
120,000 |
Transactions in Relation to Shares
Other than the Stock Purchase Agreement and the Voting
Support Agreement, the Company and its affiliates have not made any
transactions with respect to the Company’s Shares during the past two years.
Plans for i-minerals USA After the Disposition
Following the completion of the Disposition, BV Lending will own 100% of
the issued and outstanding shares of i-minerals USA. BV Lending expects to
retain the three employees of i-minerals USA, and to continue to use the assets
of i-minerals USA to explore, evaluate and develop the Helmer-Bovill Property.
I-MINERALS
INC. MEETING MATTERS
Time, Date and Place
The Meeting of the
Company will be held at Suite 704 - 595 Howe Street, Vancouver, British
Columbia on February 15, 2023 at 10:00 a.m.
(Vancouver time).
Record Date
The record date for
determining the Shareholders entitled to receive notice of and to vote at the
Meeting is December 20, 2022. Only Shareholders of record as of the close of
business (Vancouver time) on the Record Date are entitled to vote at the
Meeting.
Shareholder Approvals Required
The
votes required to approve the Disposition is as follows:
1. |
The affirmative vote of a special majority (two-thirds) of the Shares voted at the Meeting, in person or by proxy, on the Disposition resolution pursuant to section 189(3) of the CBCA. |
2. |
The affirmative vote of a majority of the Shares voted at the Meeting, in person or by proxy, on the Disposition Resolution, excluding the votes from Mr. Ball, his affiliates and any other person who is an “interested party”, pursuant to section 8.1 of MI 61-101. |
The
votes required to approve the Continuation is the affirmative vote of a special
majority of the Shares voted at the Meeting, in person or by proxy, on the Continuance
Resolution, pursuant to section 188(5) of the CBCA.
The affirmative vote of a majority of the Shares represented
at the Meeting in person or by proxy is required to pass the following
resolutions:
1. |
To set the number of directors for the ensuing year at four (4) persons. |
2. |
To elect John Theobald, W. Barry Girling, Gary Childress and Wayne Moorhouse as directors of the Company for the ensuing year. |
3. |
To appoint BDO Canada LLP as the auditors of the Company until the next annual general meeting of the Company and to authorize the directors of the Company to fix the remuneration to be paid to the auditors. |
4. |
To consider, and, if deemed advisable, approve a resolution ratifying and approving the Stock Option Plan. |
Voting by Proxies
The form of proxy
accompanying this Proxy Statement confers discretionary authority upon the
proxy nominee with respect to any amendments or variations to matters
identified in the Notice of Meeting and any other matters that may properly
come before the Meeting or any postponement or adjournment thereof. As at the
date of this Proxy Statement, the Company’s management is not aware of any such
amendments or variations, or of other matters to be presented for action at the
Meeting. However, if any amendments to matters identified in the accompanying
Notice of Meeting or any other matters which are not now known to management
should properly come before the Meeting or any postponement or adjournment
thereof, the Shares represented by properly executed proxies given in favour of
the person(s) designated by management of the Company in the enclosed form of
proxy will be voted on such matters pursuant to such discretionary authority.
If the instructions in a
proxy given to the Company’s management are specified, the Shares represented
by such proxy will be voted FOR or AGAINST in accordance with your instructions
on any poll that may be called for. If a choice is not specified, the Shares
represented by a proxy given to the Company’s management will be voted FOR the approval of the Disposition
Resolution as described in this Proxy Statement. A Shareholder has the right to appoint a person (who need not be a
Shareholder) to attend and act for him, her or it and on his, her or its behalf
at the Meeting other than the persons designated in the form of proxy and may
exercise such right by inserting the name in full of the desired person in the
blank space provided in the form of proxy and striking out the names now
designated.
Your vote is important
regardless of the number of Shares you own.
The Company intends to hold
the Meeting in person. However, in view of the current COVID-19 pandemic, the
Company requests that, in considering whether to attend the Meeting in person,
Shareholders follow the instructions of the Public Health Agency of Canada
(PHAC; www.canada.ca/en/public-health.html) and the B.C. Centre for Disease
Control (http://www.bccdc.ca/health-info/diseases-conditions/covid-19). Access
to the Meeting will, subject to the Company’s Articles, be limited to essential
personnel and registered Shareholders and proxyholders entitled to attend and
vote at the meeting.
The Company may take
additional precautionary measures in relation to the Meeting in response to any
further development with or governmental response to the COVID-19 outbreak. In
the event it is not possible or advisable to hold the Meeting in person, the
Company will announce alternative arrangements for the meeting as promptly as
practicable, which may include postponing the meeting or holding the meeting
entirely by electronic means, telephone or other communication facilities. If
you are planning to attend the meeting, please check the Company’s website one
week prior to the date of the meeting.
The Company encourages
Shareholders NOT to attend the meeting in person, particularly if they are
experiencing any of the described COVID-19 symptoms of fever, cough or
difficulty breathing, or have been in contact within the last 14 days with
anyone known or suspected to have COVID-19. Instead, the Company encourages
Shareholders to date and sign the enclosed form of proxy and return it in the
envelope provided, or, alternatively, to vote by telephone, or over the
internet, in each case in accordance with the enclosed instructions. To be used
at the Meeting, the completed proxy form must be deposited at the office of
Computershare Investor Services Inc. (“Computershare”),
Proxy
Department, 8th Floor, 100 University Avenue, Toronto, Ontario, M5J
2Y1 (Fax: 1-866-249-7779 (toll free within North
America) or (416) 263-9524 (outside North America)) by mail or fax or the proxy vote is otherwise registered in
accordance with the instructions included thereon. Non-registered Shareholders
who receive these materials through their broker or other intermediary should
complete and send the form of proxy or voting instruction form in accordance
with the instructions provided by their broker or intermediary. To be
effective, a proxy or voting instructions form, as applicable, must be received
by Computershare not later than 10:00 a.m.
(Vancouver time) on February 13, 2023, or in the
case of any postponement or adjournment of the Meeting, not less than 48 hours,
Saturdays, Sundays and holidays excepted, prior to the time of the postponed or
adjourned meeting. Late proxies may be
accepted or rejected by the Chair of the Meeting in his discretion, and the
Chair is under no obligation to accept or reject any particular late proxy.
Revocability of Proxies
In addition to revocation
in any other manner permitted by law, a Shareholder executing the enclosed form
of proxy has the power to revoke it by depositing an instrument in writing
executed by the Shareholder or his or her legal representative authorized in
writing or, where the Shareholder is a corporation, by the corporation or a
representative of the corporation. To be valid, an instrument of revocation
must be received at the Company’s principal and head office by mail or by hand
at Suite
1100 – 1199 West Hastings Street, Vancouver, British Columbia, Canada V6E 3T5 at any time up to and including the last business day preceding the
day of the Meeting, or in the case of any postponement or adjournment of the
Meeting, the last business day preceding the day of the postponed or adjourned
Meeting, or delivered to the Chair of the Meeting on the day fixed for the Meeting,
and prior to the start of the Meeting or any postponement or adjournment
thereof. A registered Shareholder may also revoke a proxy in any other manner
permitted by law. Only Registered Shareholders have the right to revoke a
proxy. Beneficial Shareholders who wish to change their vote must, in
sufficient time in advance of the Meeting, arrange for their respective
Intermediaries to change their vote and if necessary, revoke their proxy in
accordance with the revocation procedures.
Voting of Shares Owned by Beneficial Shareholders
Many shareholders are “Beneficial Shareholders” because the Shares
of the Company they own are not registered in their names but are instead
registered in the name of the brokerage firm, bank or trust company through
which they purchased the shares. If you are a
Beneficial Shareholder, you should read the information below on how to vote
your Shares at the Meeting.
Only shareholders
whose names appear on the records of the Company as the registered holders of
shares or duly appointed proxyholders are permitted to vote at the Meeting. Most shareholders of
the Company are "non-registered" shareholders because the shares they
own are not registered in their names but instead registered in the name of a
nominee such as a brokerage firm through which they purchased the shares; bank,
trust company, trustee or administrator of self-administered RRSP's, RRIF's,
RESP's and similar plans; or clearing agency such as The Canadian Depository
for Securities Limited, in Canada, and the Depository Trust Company, in the
United States(a "Nominee"). If you purchased your shares through a
broker, you are likely a non-registered holder.
If you,
as a non-registered holder, wish to vote at the Meeting in person, you should
appoint yourself as proxyholder by writing your name in the space provided on
the request for voting instructions or proxy provided by the Nominee and return
the form to the Nominee in the envelope provided. Do not complete the voting
section of the form as your vote will be taken at the Meeting.
Non-registered
holders who have not objected to their Nominee disclosing certain ownership
information about themselves to the Company are referred to as NOBOs. Those
non-registered holders who have objected to their Nominee disclosing ownership
information about themselves to the Company are referred to as OBOs.
In accordance with the
requirements of National Instrument 54-101, the Company has elected to send the
Meeting materials directly to NOBOs.
If the
Company or its agent has sent these materials directly to you (instead of
through a Nominee), your name and address and information about your holdings
of securities have been obtained in accordance with applicable securities
regulatory requirements from the Nominee holding on your behalf. By choosing to
send these materials to you directly, the Company (and not the Nominee holding
on your behalf) has assumed responsibility for (i) delivering these materials
to you and (ii) executing your proper voting instructions.
The Company does not intend to
pay for Nominees to deliver the Meeting materials and Form 54-101F7 – Request
for Voting Instructions Made by Intermediary to OBOs. As a result, OBOs
will not receive the Meeting materials unless their Nominee assumes the costs
of delivery.
The Company is not
sending the Meeting materials to shareholders using
"notice-and-access", as defined under NI 54-101.
Quorum
A quorum at meetings of the Shareholders of the Company consists of
one or more Shareholder present at the meeting in person or represented by
proxy.
Principal Holders of the Company
The authorized
share capital of the Company consists of an unlimited number of Shares. As at
the Record Date, 93,730,212 Shares were issued and outstanding. Each Share is
entitled to one vote at a meeting of Shareholders.
The Board has fixed the close of business on December 20, 2022 as
the Record Date for the purpose of determining the Shareholders entitled to
receive notice of the Meeting, but the failure of any Shareholder who was a
Shareholder on the Record Date to receive notice of the Meeting does not
deprive the Shareholder of the right to vote at the Meeting.
To the best of
the knowledge of the directors and executive officers of the Company, there are
no persons who, or corporations which, beneficially own, or control or direct,
directly or indirectly, voting shares carrying 10% or more of the voting rights
attached to any class of voting shares of the Company other than:
Shareholder |
Number of
Shares |
Percentage of
Issued Capital |
BV Natural Resources, LLC |
36,803,890(1) |
39.39%(2) |
Notes:
(1) |
The Company previously reported that Mr. Ball beneficially owned the shares of the Company held by BV Natural. As a result of trust ownership changes in September 2022, Mr. Ball is no longer the beneficial owner of such shares. |
(2) |
Percentages based on the 93,730,212 shares issued and outstanding as of December 20, 2022. |
Share Structure of the Company
The
authorized share capital of the Company consists of an unlimited number of
Shares. As at the Record Date, 93,730,212 Shares were issued and outstanding.
Market Price of Common Stock and Dividends
The Company’s Shares trade on the TSX Venture Exchange
under the symbol “IMA”, and over-the-counter in the United States on the OTC
Pink marketplace under the symbol “IMAHF”. The following table sets forth, for
the periods indicated, the high and low sales prices of the Shares and the
dividends declared on the Shares.
|
Market Price |
|
|
TSXV (CAD) |
OTC Pink (USD) |
|
Fiscal
Year |
High |
Low |
High |
Low |
Dividends |
Q1
ending Jul 31, 2020 |
$ 0.05 |
$ 0.03 |
$ 0.0387 |
$ 0.018 |
- |
Q2
ending Oct 31, 2020 |
$ 0.04 |
$ 0.025 |
$ 0.0383 |
$ 0.0171 |
- |
Q3
ending Jan 31, 2021 |
$ 0.045 |
$ 0.025 |
$ 0.0367 |
$ 0.013 |
- |
Q4
ending Apr 30, 2021 |
$0.06 |
$ 0.03 |
$ 0.047 |
$ 0.0263 |
- |
Q1
ending Jul 31, 2021 |
$ 0.04 |
$ 0.025 |
$ 0.03 |
$ 0.0196 |
- |
Q2
ending Oct 31, 2021 |
$ 0.035 |
$ 0.025 |
$ 0.026 |
$ 0.186 |
- |
Q3
ending Jan 31, 2022 |
$ 0.035 |
$ 0.025 |
$ 0.0316 |
$ 0.016 |
- |
Q4
ending Apr 30, 2022 |
$ 0.03 |
$ 0.02 |
$ 0.0258 |
$ 0.0148 |
- |
Q1
ending Jul 31, 2022 |
$ 0.025 |
$ 0.015 |
$ 0.01594 |
$ 0.0106 |
- |
Q2
ending Oct 31, 2022 |
$0.015 |
$0.015 |
$0.01 |
$0.01 |
|
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information concerning the number of shares
of the Company’s common shares owned beneficially as of December 20, 2022 by:
(i) each person (including any group) known to the Company to own more than
five percent (5%) of any class of the voting securities, (ii) each of the
Company’s directors and each of the named executive officers, and (iii)
officers and directors as a group. Unless otherwise indicated, the shareholders
listed possess sole voting and investment power with respect to the shares
shown.
Title Of Class |
Name And Address Of Beneficial Owner |
Amount And Nature
Of Beneficial Ownership |
Percentage Of Common Shares(1) |
DIRECTORS AND
OFFICERS |
Common Shares |
JOHN THEOBALD
Chief Executive Officer, President and Director |
1,250,000 Common Shares(2) Direct |
1.3% |
Common Shares |
MATTHEW ANDERSON
Chief Financial Officer |
150,000 Common Shares(3) Direct |
0.2% |
Common Shares |
W. BARRY GIRLING Director |
1,723,007 Common Shares(5) Direct and Indirect |
1.8% |
Common Shares |
GARY CHILDRESS Director |
- |
0.0% |
Common Shares |
WAYNE MOORHOUSE Director |
- |
0.0% |
|
All Officers and Directors as a
Group (5 persons) |
3,123,007 Common Shares |
3.3% |
HOLDERS OF MORE THAN 5% OF THE
COMPANY’S COMMON SHARES |
Common Shares |
BV NATURAL 2194 Snake River
Pkwy, Suite 300 Idaho Falls, ID
83402 |
36,803,890 Common Shares(4) Direct and Indirect |
39.4% |
Notes:
(1) |
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of our shares actually outstanding on December 20, 2022. As of December 20, 2022, there were 93,730,212 common shares issued and outstanding. |
(2) |
The number of shares listed as beneficially owned by Mr. Theobald consists of an option to purchase 1,250,000 common shares at a price of CAD$0.25 per share until August 9, 2023. |
(3) |
The number of shares listed as beneficially owned by Mr. Anderson consists of 150,000 common shares held directly by Mr. Anderson. |
(4) |
The number of shares listed as beneficially owned by Mr. Girling consists of 1,723,007 common shares. |
WHERE YOU CAN FIND MORE
INFORMATION
The Company is subject
to the informational requirements of the Securities Exchange Act of 1934, as
amended. The Company files reports, proxy statements and other information with
the SEC. You may read and copy these reports, proxy statements and other
information at the SEC’s Public Reference Section of the SEC, Room 1580, 100 F
Street NE, Washington D.C. 20549. You may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet website, located at www.sec.gov that contains
reports, proxy statements and other information regarding companies and
individuals that file electronically with the SEC.
Our
Annual Report on Form 10-K for the fiscal year ended April 30, 2022 accompanies
this Proxy Statement but does not constitute a part of the proxy soliciting
material. The Company recast its audited financial statements for the year
ended April 30, 2022, which are contained in the Current Report on Form 8-K
filed with the SEC on [*] (the “Current Report”). A copy of the Company’s Annual Report on Form
10-K for the fiscal year ended April 30, 2022, including financial statements
but without exhibits, and the Current Report are available without charge to
any person whose vote is solicited by this proxy upon written request to
I-Minerals Inc., Suite 1100 – 1199 West Hastings Street,
Vancouver, British Columbia, Canada V6E 3T5, Attention: Matthew
Anderson, Chief Financial Officer. Copies also may also be obtained through the
SEC’s web site at www.sec.gov.
You can
find more information about the Company on our website, which is located at http://www.imineralsinc.com but information
contained on our website does not form part of this proxy statement.
|
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BY ORDER OF THE BOARD OF
DIRECTORS OF I-MINERALS INC. |
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Date:
December 29, 2022 |
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/s/ John Theobald |
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John Theobald Chief Executive
Officer, President and Director |
APPENDIX
“A”
I-MINERALS
INC.
(the “Company”)
INCENTIVE
STOCK OPTION PLAN
(the
"Plan")
1. Purpose of the Plan
The
purpose of the Plan is to assist the Corporation in attracting, retaining and motivating
"Directors", "Employees" and "Consultants" of the
Corporation (as those terms are defined in TSX Venture Exchange Policy 4.4, and
which terms are hereinafter collectively referred to as "Directors,
Employees and Consultants") and any of its subsidiaries and to closely
align the personal interests of such Directors, Employees and Consultants with
those of the shareholders by providing them with the opportunity, through
options, to acquire common shares in the capital of the Corporation.
2. Implementation
The
Plan and the grant and exercise of any options under the Plan are subject to
compliance with the applicable requirements of each stock exchange
("exchanges") on which the shares of the Corporation are listed at
the time of the grant of any options under the Plan and of any governmental
authority or regulatory body to which the Corporation is subject.
3. Administration
The
Plan shall be administered by the Board of Directors of the Corporation which
shall, without limitation, subject to the approval of the exchanges, have full
and final authority in its discretion, but subject to the express provisions of
the Plan, to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it and to make all other determinations deemed
necessary or advisable for the administration of the Plan. The Board of
Directors may delegate any or all of its authority with respect to the
administration of the Plan and any or all of the rights, powers and discretions
with respect to the Plan granted to it hereunder to such committee of directors
of the Corporation as the Board of Directors may designate and upon such
delegation such committee of directors, as well as the Board of Directors,
shall be entitled to exercise any or all of such authority, rights, powers and
discretions with respect to the Plan. When used hereafter in the Plan,
"Board of Directors" shall be deemed to include a committee of
directors acting on behalf of the Board of Directors.
4. Shares Issuable Under the Plan
Subject
to the requirements of the TSX Venture Exchange:
(a) |
the aggregate number of shares (“Optioned Shares”) that may be issuable pursuant to options granted under the Plan will not exceed 10% of the number of issued shares of the Corporation at the time of the granting of options under the Plan; |
(b) |
no more than 5% of the issued shares of the Corporation, calculated at the date the option is granted, may be granted to any one Optionee (as hereinafter defined) in any 12 month period; |
(c) |
no more than 2% of the issued shares of the Corporation, calculated at the date the option is granted, may be granted to any one Consultant in any 12 month period; |
(d) |
no more than an aggregate of 2% of the issued shares of the Corporation, calculated at the date the option is granted, may be granted to Persons (as that term is defined in TSX Venture Exchange Policy 1.1) employed to provide "Investor Relations Activities" (as that term is defined in TSX Venture Exchange Policy 1.1) in any 12 month period. |
5. Eligibility
5.01 General
Options
may be granted under the Plan to Directors, Employees and Consultants of the
Corporation and any of its subsidiaries (collectively the “Optionees” and
individually an “Optionee”). Subject to the provisions of the Plan, the total
number of Optioned Shares to be made available under the Plan and to each
Optionee, the time or times and price or prices at which options shall be
granted, the time or times at which such options are exercisable, and any
conditions or restrictions on the exercise of options, shall be in the full and
final discretion of the Board of Directors.
5.02 Options
Granted to Employees, Consultants or Management Company Employees
The
Corporation represents that, in the event it wishes to grant options under the
Plan to Employees, Consultants or “Management Company Employees” (as that term
is defined in TSX Venture Exchange Policy 4.4), it will only grant such options
to Optionees who are bona fide Employees, Consultants or Management Company
Employees, as the case may be.
6. Terms and Conditions
All options under the Plan shall
be granted upon and subject to the terms and conditions hereinafter set forth.
6.01 Exercise
price
The
exercise price to each Optionee for each Optioned Share shall be determined by
the Board of Directors but shall not, in any event, be less than the
“Discounted Market Price” of the Corporation's common shares as traded on the
TSX Venture Exchange (as that term is defined in TSX Venture Exchange Policy
1.1), or such other price as may be agreed to by the Corporation and accepted
by the TSX Venture Exchange; provided
that the exercise price for each Optioned Share in respect of options
granted within 90 days of a “Distribution” by a “Prospectus” (as those terms
are defined in TSX Venture Exchange Policy 1.1) shall not be less than the
greater of the Discounted Market Price and the price per share paid by public
investors for listed shares of the Corporation under the Distribution.
6.02 Reduction
in the Exercise Price of Options Granted to Insiders
In
the event the Corporation wishes to reduce the exercise price of any options
held by “Insiders” (as that term is defined in TSX Venture Exchange Policy 1.1)
of the Corporation at the time of the proposed reduction, the approval of the
disinterested Shareholders of the Corporation will be required prior to the
exercise of any such options at the reduced exercise price.
6.03 Option Agreement
All
options shall be granted under the Plan by means of an agreement (the “Option
Agreement”) between the Corporation and each Optionee in the form attached
hereto as Schedule “A” or such other form as may be approved by the Board of
Directors, such approval to be conclusively evidenced by the execution of the
Option Agreement by any one director or officer of the Corporation, or
otherwise as determined by the Board of Directors.
6.04 Length
of Grant
Subject to sections 6.10, 6.11, 6.12, 6.13 and 6.14
all options granted under the Plan shall expire not later than that date which
is 5 years from the date such options were granted.
6.05 Non-Assignability
of Options
An
option granted under the Plan shall not be transferable or assignable (whether
absolutely or by way of mortgage, pledge or other charge) by an Optionee other
than by will or other testamentary instrument or the laws of succession and may
be exercisable during the lifetime of the Optionee only by such Optionee.
6.06 Vesting
Schedule for Options Granted to Consultants performing Investor Relations
Activities
An
Optionee who is a Consultant performing Investor Relations Activities who is
granted an option under the Plan will become vested with the right to exercise
one-quarter (1/4) of the option upon the conclusion of every 3 months
subsequent to the date of the grant of the option, such that that Optionee will
be vested with the right to exercise one hundred percent (100%) of his option
upon the conclusion of 12 months from the date of the grant of the option. (By
way of example, in the event that Optionee did not exercise one-quarter (1/4)
of his option at the conclusion of 3 months from the date of the grant of the
option, he would be entitled to exercise one-half (1/2) of his option upon the
conclusion of 6 months from the date of the grant of the option.)
6.07 Right
to Postpone Exercise
Each
Optionee, upon becoming entitled to exercise the option in respect of any
Optioned Shares in accordance with the Option Agreement, shall thereafter be
entitled to exercise the option to purchase such Optioned Shares at any time
prior to the expiration or other termination of the Option Agreement or the
option rights granted thereunder in accordance with such agreement.
6.08 Exercise and Payment
Any
option granted under the Plan may be exercised by an Optionee or, if
applicable, the legal representatives of an Optionee, giving notice to the
Corporation specifying the number of shares in respect of which such option is
being exercised, accompanied by payment (by cash or certified cheque payable to
the Corporation) of the entire exercise price (determined in accordance with
the Option Agreement) for the number of shares specified in the notice. Upon
any such exercise of an option by an Optionee the Corporation shall cause the
transfer agent and registrar of shares of the Corporation to promptly deliver
to such Optionee or the legal representatives of such Optionee, as the case may
be, a share certificate in the name of such Optionee or the legal
representatives of such Optionee, as the case may be, representing the number
of shares specified in the notice.
6.09 Rights of Optionees
The
Optionees shall have no rights whatsoever as shareholders in respect of any of
the Optioned Shares (including, without limitation, voting rights or any right
to receive dividends, warrants or rights under any rights offering) other than
Optioned Shares in respect of which Optionees have exercised their option to
purchase and which have been issued by the Corporation.
6.10 Third
Party Offer
If
at any time when an option granted under the Plan remains unexercised with
respect to any common shares, an offer to purchase all of the common shares of
the Corporation is made by a third party, the Corporation may upon giving each
Optionee written notice to that effect, require the acceleration of the time
for the exercise of the option rights granted under the Plan and of the time
for the fulfilment of any conditions or restrictions on such exercise.
6.11 Alterations
in Shares
In
the event of a stock dividend, subdivision, redivision, consolidation, share
reclassification (other than pursuant to the Plan), amalgamation, merger,
corporate arrangement, reorganization, liquidation or the like of or by the
Corporation, the Board of Directors may make such adjustment, if any, of the
number of Optioned Shares, or of the exercise price, or both, as it shall deem
appropriate to give proper effect to such event. If because of a proposed
merger, amalgamation or other corporate arrangement or reorganization, the
exchange or replacement of shares in the Corporation for those in another
corporation is imminent, the Board of Directors may, in a fair and equitable
manner, determine the manner in which all unexercised option rights granted
under the Plan shall be treated including, for example, requiring the
acceleration of the time for the exercise of such rights by the Optionees and
of the time for the fulfilment of any conditions or restrictions on such
exercise. All determinations of the Board of Directors under this section 6.11
shall be full and final.
6.12 Termination for Cause
Subject
to section 6.13, if an Optionee ceases to be either a Director, Employee,
Consultant or Management Company Employee of the Corporation or of any of its
subsidiaries as a result of having been dismissed from any such position for
cause, all unexercised option rights of that Optionee under the Plan shall
immediately become terminated and shall lapse, notwithstanding the original
term of the option granted to such Optionee under the Plan.
6.13 Termination
Other Than For Cause
If
an Optionee ceases to be either a Director, Employee, Consultant or Management
Company Employee of the Corporation or any of its subsidiaries for any reason
other than as a result of having been dismissed for cause as provided in
section 6.12 or as a result of the Optionee's death, such Optionee shall have
the right for a period of 90 days (or until the normal expiry date of the
option rights of such Optionee if earlier) from the date of ceasing to be
either a Director, Employee, Consultant or Management Company Employee to
exercise the option under the Plan with respect to all Optioned Shares of such
Optionee to the extent they were exercisable on the date of ceasing to be
either a Director, Employee, Consultant or Management Company Employee. Upon
the expiration of such 90 day period all unexercised option rights of that
Optionee shall immediately become terminated and shall lapse notwithstanding
the original term of the option granted to such Optionee under the Plan.
If
an Optionee engaged in performing Investor Relations Activities to the
Corporation ceases to be employed in performing such Investor Relations
Activities, such Optionee shall have the right for a period of 30 days (or
until the normal expiry date of the option rights of such Optionee if earlier)
from the date of ceasing to perform such Investor Relations Activities to
exercise the option under the Plan with respect to all Optioned Shares of such
Optionee to the extent there were exercisable on the date of ceasing to perform
such Investor Relations Activities. Upon the expiration of such 30-day period
all unexercised option rights of that Optionee shall immediately become
terminated and shall lapse notwithstanding the original term of the option
granted to such Optionee under the Plan.
6.14 Deceased
Optionee
In the event of the death of any Optionee, the legal
representatives of the deceased Optionee shall have the right for a period of
one year (or until the normal expiry date of the option rights of such Optionee
if earlier) from the date of death of the deceased Optionee to exercise the
deceased Optionee's option with respect to all of the Optioned Shares of the
deceased Optionee to the extent they were exercisable on the date of death. Upon
the expiration of such period all unexercised option rights of the deceased
Optionee shall immediately become terminated and shall lapse notwithstanding
the original term of the option granted to the deceased Optionee under the
Plan.
7. Amendment and Discontinuance of
Plan
Subject
to the acceptance of the exchanges, the Board of Directors may from time to
time amend or revise the terms of the Plan or may discontinue the Plan at any
time, provided that no such action may in any manner adversely affect the
rights under any options earlier granted to an Optionee under the Plan without
the consent of that Optionee.
8. No Further Rights
Nothing
contained in the Plan nor in any option granted hereunder shall give any
Optionee or any other person any interest or title in or to any shares of the
Corporation or any rights as a shareholder of the Corporation or any other
legal or equitable right against the Corporation whatsoever other than as set
forth in the Plan and pursuant to the exercise of any option, nor shall it
confer upon the Optionees any right to continue as a Director, Employee or
Consultant of the Corporation or of any of its subsidiaries.
9. Compliance with Laws
The
obligations of the Corporation to sell shares and deliver share certificates
under the Plan are subject to such compliance by the Corporation and the
Optionees as the Corporation deems necessary or advisable with all applicable
corporate and securities laws, rules and regulations.
SCHEDULE “A”
I-MINERALS INC.
INCENTIVE STOCK OPTION PLAN
OPTION AGREEMENT
OPTION EXERCISE FORM
Without prior written
approval of the TSX Venture Exchange and compliance with all applicable
securities legislation, the securities represented by this agreement and any
securities issued upon exercise thereof may not be sold, transferred,
hypothecated or otherwise traded on or through the facilities of the TSX
Venture Exchange or otherwise in Canada or to or for the benefit of a Canadian
resident until Error! AutoText entry not defined. Error! AutoText entry not
defined., Error! AutoText entry not defined. [four months and one day
after the Grant Date].
This Option Agreement
is entered into between I-Minerals Inc.
(the “Company”) and the Optionee named below pursuant to the Company’s
Incentive Stock Option Plan (the “Plan”), and confirms that:
1. on
_____ (the “Grant Date”);
2.
_____ (the “Optionee”);
3. was
granted the option (the “Option”) to purchase _____ Common Shares (the “Option
Shares”) of the Company;
4. for
the price (the “Option Price”) of $_____ per share;
5. which
shall be exercisable as fully Vested as follows: _____;
6. terminating
on _____(the “Expiry Date”);
all on the terms and
subject to the conditions set out in the Plan. For greater certainty, once
Option Shares have been granted, they continue to be exercisable until the
termination or cancellation thereof as provided in this Option Agreement and
the Plan.
By signing this Option
Agreement, the Optionee acknowledges that the Optionee has read and understands
the Plan and agrees to the terms and conditions of the Plan and this Option
Agreement.
By signing this Option Agreement, the Optionee also acknowledges
that, as required by the Canada Revenue Agency, the Optionee will be required
to provide the Company with the following payments:
|
(a) |
a payment for the number of Option Shares being exercised at the Option Price; |
|
(b) |
a payment equal to the income taxes due on the net stock option benefit, which amount is comprised of the full taxable employment benefit, less the 50% stock option benefit deduction to which the Optionee may be entitled; and |
|
(c) |
a payment equal to the Canada Pension Plan contribution due in respect of the full taxable employment benefit (without taking into consideration the 50% deduction) to be received by the Optionee through such exercise, notwithstanding that the Optionee may have already contributed the maximum amount of Canada Pension Plan contributions for the calendar year in which all or any portion of the Option is exercised, unless the Optionee provides the Company with a copy of the Election to stop paying into the Canada Pension Plan that has been filed with the Canada Revenue Agency, or the Optionee is over the age of 69. |
IN WITNESS WHEREOF the
parties hereto have executed this Option Agreement as of the _____.
(the Optionee) |
I-Minerals Inc. Per: Authorized Signatory |
|
|
APPENDIX
“B”
CANADA
BUSINESS CORPORATIONS ACT SECTION 190 – RIGHT TO DISSENT
Right to dissent
190 (1) Subject to sections 191
and 241, a holder of shares of any class of a corporation may dissent if the
corporation is subject to an order under paragraph 192(4)(d) that affects the
holder or if the corporation resolves to
|
(a) |
amend its articles under section 173 or 174 to add, change or remove any provisions restricting or constraining the issue, transfer or ownership of shares of that class; |
|
(b) |
amend its articles under section 173 to add, change or remove any restriction on the business or businesses that the corporation may carry on; |
|
(c) |
amalgamate otherwise than under section 184; |
|
(d) |
be continued under section 188; |
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(e) |
sell, lease or exchange all or substantially all its property under subsection 189(3); or |
|
(f) |
carry out a going-private transaction or a squeeze-out transaction. |
Further
right
(2) A holder of shares of
any class or series of shares entitled to vote under section 176 may dissent if
the corporation resolves to amend its articles in a manner described in that
section.
If
one class of shares
(2.1) The right to dissent
described in subsection (2) applies even if there is only one class of shares.
Payment
for shares
(3) In addition to any
other right the shareholder may have, but subject to subsection (26), a
shareholder who complies with this section is entitled, when the action
approved by the resolution from which the shareholder dissents or an order made
under subsection 192(4) becomes effective, to be paid by the corporation the
fair value of the shares in respect of which the shareholder dissents,
determined as of the close of business on the day before the resolution was
adopted or the order was made.
No
partial dissent
(4) A dissenting
shareholder may only claim under this section with respect to all the shares of
a class held by the dissenting shareholder.
Objection
(5) A dissenting
shareholder shall send to the corporation, at or before any meeting of
shareholders at which a resolution referred to in subsection (1) or (2) is to
be voted on, a written objection to the resolution, unless the corporation did
not give notice to the shareholder of the purpose of the meeting and of their
right to dissent.
Notice
of resolution
(6) The corporation shall,
within ten days after the shareholders adopt the resolution, send to each
shareholder who has filed the objection referred to in subsection (5) notice
that the resolution has been adopted, but such notice is not required to be
sent to any shareholder who voted for the resolution or who has withdrawn their
objection.
Demand
for payment
(7) A dissenting
shareholder shall, within twenty days after receiving a notice under subsection
(6) or, if the shareholder does not receive such notice, within twenty days
after learning that the resolution has been adopted, send to the corporation a
written notice containing
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(a) |
the shareholder’s name and address; |
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(b) |
the number and class of shares in respect of which the shareholder dissents; and |
|
(c) |
a demand for payment of the fair value of such shares. |
Share
certificate
(8) A dissenting
shareholder shall, within thirty days after sending a notice under subsection
(7), send the certificates representing the shares in respect of which the
shareholder dissents to the corporation or its transfer agent.
Forfeiture
(9) A dissenting
shareholder who fails to comply with subsection (8) has no right to make a
claim under this section.
Endorsing
certificate
(10) A corporation or its
transfer agent shall endorse on any share certificate received under subsection
(8) a notice that the holder is a dissenting shareholder under this section and
shall forthwith return the share certificates to the dissenting shareholder.
Suspension
of rights
(11) On sending a notice
under subsection (7), a dissenting shareholder ceases to have any rights as a
shareholder other than to be paid the fair value of their shares as determined
under this section except where
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(a) |
the shareholder withdraws that notice before the corporation makes an offer under subsection (12), |
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(b) |
the corporation fails to make an offer in accordance with subsection (12) and the shareholder withdraws the notice, or |
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(c) |
the directors revoke a resolution to amend the articles under subsection 173(2) or 174(5), terminate an amalgamation agreement under subsection 183(6) or an application for continuance under subsection 188(6), or abandon a sale, lease or exchange under subsection 189(9), |
in which case the
shareholder’s rights are reinstated as of the date the notice was sent.
Offer
to pay
(12) A corporation shall,
not later than seven days after the later of the day on which the action
approved by the resolution is effective or the day the corporation received the
notice referred to in subsection (7), send to each dissenting shareholder who
has sent such notice
|
(a) |
a written offer to pay for their shares in an amount considered by the directors of the corporation to be the fair value, accompanied by a statement showing how the fair value was determined; or |
|
(b) |
if subsection (26) applies, a notification that it is unable lawfully to pay dissenting shareholders for their shares. |
Same
terms
(13) Every offer made under
subsection (12) for shares of the same class or series shall be on the same
terms.
Payment
(14) Subject to subsection
(26), a corporation shall pay for the shares of a dissenting shareholder within
ten days after an offer made under subsection (12) has been accepted, but any
such offer lapses if the corporation does not receive an acceptance thereof
within thirty days after the offer has been made.
Corporation
may apply to court
(15) Where a corporation
fails to make an offer under subsection (12), or if a dissenting shareholder
fails to accept an offer, the corporation may, within fifty days after the
action approved by the resolution is effective or within such further period as
a court may allow, apply to a court to fix a fair value for the shares of any
dissenting shareholder.
Shareholder
application to court
(16) If a corporation fails
to apply to a court under subsection (15), a dissenting shareholder may apply
to a court for the same purpose within a further period of twenty days or
within such further period as a court may allow.
Venue
(17) An application under
subsection (15) or (16) shall be made to a court having jurisdiction in the place
where the corporation has its registered office or in the province where the
dissenting shareholder resides if the corporation carries on business in that
province.
No
security for costs
(18) A dissenting
shareholder is not required to give security for costs in an application made
under subsection (15) or (16).
Parties
(19) On an application to a
court under subsection (15) or (16),
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(a) |
all dissenting shareholders whose shares have not been purchased by the corporation shall be joined as parties and are bound by the decision of the court; and |
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(b) |
the corporation shall notify each affected dissenting shareholder of the date, place and consequences of the application and of their right to appear and be heard in person or by counsel. |
Powers
of court
(20) On an application to a
court under subsection (15) or (16), the court may determine whether any other
person is a dissenting shareholder who should be joined as a party, and the
court shall then fix a fair value for the shares of all dissenting shareholders.
Appraisers
(21) A court may in its
discretion appoint one or more appraisers to assist the court to fix a fair
value for the shares of the dissenting shareholders.
Final
order
(22) The final order of a
court shall be rendered against the corporation in favour of each dissenting
shareholder and for the amount of the shares as fixed by the court.
Interest
(23) A court may in its
discretion allow a reasonable rate of interest on the amount payable to each
dissenting shareholder from the date the action approved by the resolution is
effective until the date of payment.
Notice
that subsection (26) applies
(24) If subsection (26)
applies, the corporation shall, within ten days after the pronouncement of an
order under subsection (22), notify each dissenting shareholder that it is
unable lawfully to pay dissenting shareholders for their shares.
Effect
where subsection (26) applies
(25) If subsection (26)
applies, a dissenting shareholder, by written notice delivered to the
corporation within thirty days after receiving a notice under subsection (24),
may
|
(a) |
withdraw their notice of dissent, in which case the corporation is deemed to consent to the withdrawal and the shareholder is reinstated to their full rights as a shareholder; or |
|
(b) |
retain a status as a claimant against the corporation, to be paid as soon as the corporation is lawfully able to do so or, in a liquidation, to be ranked subordinate to the rights of creditors of the corporation but in priority to its shareholders. |
Limitation
(26) A corporation shall not
make a payment to a dissenting shareholder under this section if there are
reasonable grounds for believing that
|
(a) |
the corporation is or would after the payment be unable to pay its liabilities as they become due; or |
|
(b) |
the realizable value of the corporation’s assets would thereby be less than the aggregate of its liabilities. |
APPENDIX “C”
STOCK PURCHASE AGREEMENT
(See Attached)
Execution Version
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this “Agreement”), dated effective as of September
14, 2022, is entered into by and among I-Minerals Inc., a Canadian corporation
(“Seller”), BV Lending, LLC, an
Idaho limited liability company (“Buyer”),
and i-minerals USA, inc., an Idaho corporation and wholly owned subsidiary of
Seller (the “Company”). Capitalized
terms used in this Agreement have the meanings given to such terms below, as
such definitions are identified by the cross-references set forth in Exhibit
A to this Agreement.
RECITALS
A.
Seller owns all the issued and outstanding shares of capital stock (the “Shares”) of the Company. Seller desires to sell the Shares to Buyer,
and Buyer desires to accept the Shares from Seller (the “Transaction”), subject to the terms and conditions set forth
herein.
B.
Pursuant to the Loan Agreements dated June 1, 2016, September 11, 2018, and October
25, 2019, each among Buyer, Seller and the Company (as amended to date, collectively the “Loan Agreements”), Buyer
agreed to advance certain funds to Seller to develop that certain mining
project referred to as the Bovill Project and located in Latah County, Idaho,
U.S.A (the “Project”).
C.
As of the date hereof, the aggregate amount of
principal and interest outstanding and owed by Seller to Buyer under the Loan
Agreements is equal to $35,400,000 (the “Seller
Debt”).
D.
Pursuant to advances made by Seller to the Company
prior to the date hereof (together with any advances between the date hereof
and Closing, collectively, the “Company
Loan”), the Company owes Seller an aggregate amount of principal and
interest outstanding equal to $25,700,000 (as such debt exists on the Closing
Date, the “Company Debt”).
E.
Pursuant to that certain contribution agreement to be
entered into on or before the Closing between Seller and the Company (the “Contribution Agreement”), Seller will contribute
and assign all of Seller’s right, title and interest in and to the right to receive
payment of the Company Debt to the Company as a capital contribution to the
Company, and the Company Debt will thereby be cancelled in its entirety.
F.
Buyer
and Seller have agreed the fair market value of the Shares, after giving effect
to the Contribution Agreement, is $3,000,000 (the “Share Value”).
G.
The Shares constitute all or substantially all of the
property of Seller and, as such, the shareholders of Seller (“Seller
Shareholders”) must approve the Transaction in accordance with Section
189(3) of the Canada Business Corporations Act and Section 5.6 of Multilateral Instrument – 61-101 (the “Seller Shareholder Resolution”).
H.
Seller has received the opinion of RwE Growth Partners,
Inc. (the “Financial Advisor”) to the effect that, as of the date of such
opinion and based upon and subject to the qualifications set forth therein, the
consideration to be received by Seller pursuant to Section 1.1 of this Agreement is fair, from a financial
point of view, to the Seller Shareholders (the “Fairness Opinion”).
I.
The special committee of independent directors (the
“Special Committee”) established by the board
of directors of Seller (the “Seller
Board”) in connection with the
transactions contemplated
by this Agreement and the Seller Board have, after
consultation with their financial and legal advisors and reviewing the Fairness
Opinion, each unanimously (a) determined that this Agreement and the transactions
contemplated hereunder are fair to and in the best interests of Seller and its shareholders,
(b) declared it advisable for Seller to enter into this Agreement, (c) approved
the execution, delivery and performance of this Agreement by Seller and the
consummation by Seller of the transactions contemplated hereunder, and (d)
resolved to recommend that Seller Shareholders approve this Agreement and the
consummation by Seller of the transactions contemplated hereunder (the “Board Recommendation”).
J.
Buyer has entered into voting and support agreements
dated the date hereof with each director and officer of Seller that owns
securities of Seller (the “Supporting Seller
Shareholders”), pursuant to which such Supporting Seller Shareholders have
agreed, among other things, to vote the common shares in the Seller (the “Seller Shares”) beneficially owned by
them in favour of the Seller Shareholder Resolution in accordance with the
terms of such agreements.
The parties agree as follows:
AGREEMENT
1.
Purchase
and Sale.
1.1
Purchase and
Sale. Subject to the terms and conditions set forth herein, at
the Closing, Seller shall sell to Buyer, and Buyer shall purchase from Seller,
the Shares, free and clear of any mortgage, pledge, lien, charge, security interest,
claim, community property interest, option, equitable interest, restriction of
any kind (including any restriction on use, voting, transfer, receipt of
income, or exercise of any other ownership attribute), or other encumbrance
(each, an “Encumbrance”), for a
purchase price equal to the Share Value payable in the consideration specified in Section 1.2.
1.2
Consideration. As full consideration for the Shares, Buyer and Seller agree that (a) the Buyer’s obligation to
pay the purchase price in an amount equal to the Share Value, and (b) the
Seller’s obligation to pay an amount of principal owing under the Loan
Agreements equal to the Share Value shall be set-off against each other,
dollar-for-dollar, immediately following which the Buyer shall transfer and
assign to Seller all of Buyer’s right, title and interest in and to the
right to receive payment of the remainder of the outstanding Seller Debt
together with any additional interest thereon and any additional amounts loaned
to the Seller from Buyer from the date
hereof until the Closing Date (exclusive of any amounts loaned pursuant to the
FIRPTA Note) and any interest thereon, the balance of which shall be deemed written off and forgiven as of the Closing. As of the Closing Date, (i) the Loan
Agreements, (ii) that certain General Security Agreement dated December 5,
2019, as amended, (iii) that certain Continuing and Unconditional Guaranty
dated December 6, 2019, by the Company in favor of Buyer, as amended, and (iv)
that certain Mortgage and Security Agreement dated December 5, 2019, by the
Company in favor of Buyer, as amended, shall automatically without any action
on the part of any party be terminated and no longer effective.
1.3
FIRPTA Withholding. The parties agree that Section 1445 of the Internal Revenue Code of 1986,
as amended (the “Code”), will apply to the transfer of the Shares
pursuant to this Agreement and Seller is obligated to pay, and Buyer is
obligated to withhold and pay over to the Internal Revenue Service (the “IRS”),
an amount equal to fifteen percent (15%) of the Share Value (such amount, the “FIRPTA Withholding”). Buyer shall timely after the Closing remit the
FIRPTA Withholding, and such agreements, certificates, instruments and
other documentation in connection therewith, to the IRS as required under
applicable law. The FIRPTA Withholding
shall be funded from the following sources of
funds and in the following
priority: (i) first, from the proceeds of the Seller Debt, if any, on hand with
Seller as of the Closing Date, and (ii) second, from the proceeds of a
promissory note delivered by Seller in favor of Buyer, dated as of the Closing
Date, in such principal amount as necessary to fund the balance of the FIRPTA
Withholding and in such form and substance as mutually acceptable to the
parties (the “FIRPTA Note”). Within
three business days after receiving any refund of all or any portion of the
FIRPTA Withholding from the IRS (the “Refunded Amount”), Seller shall
remit the Refunded Amount to Buyer by wire transfer of immediately available
funds to an account designated in writing by Buyer, and promptly after receipt
of such remittance, the outstanding principal of the FIRPTA Note, if
applicable, shall be deemed paid and reduced in an amount equal to the Refunded
Amount. For the avoidance of doubt, the FIRPTA Note shall be deemed separate
from the Seller Debt and shall not be forgiven pursuant to Section 1.2 above. After
the date hereof, Seller shall provide Buyer with such assistance as may
reasonably be requested by Buyer in connection with (i) the determination of
Buyer’s withholding obligations under Section 1445 of the Code and the regulations promulgated
thereunder, (ii) the preparation and submission of any documents or materials
related to Buyer’s withholding obligations under Section 1445 of the Code and the regulations promulgated
thereunder, including, without limitation, any request for a refund of the FIRPTA
Withholding, and (iii) Buyer’s compliance with Section 1445 of the Code and the
regulations promulgated thereunder. Such assistance shall include, but not be
limited to, providing Buyer copies of relevant tax returns and supporting
materials, providing Buyer with any records or information that may be relevant
to the FIRPTA Withholding, and delivering such powers of attorney and other
documents as may be reasonably necessary to carry out the intent of this
Section 1.3.
1.4
Cancellation
of the Company Debt. The
consummation of the Contribution Agreement shall occur immediately prior to the
consummation of any other transaction under this Agreement on the Closing Date.
2.
Seller Meeting.
2.1
Holding
of Meeting.
Subject to the terms and conditions of this Agreement, the Seller will take all
action necessary in accordance with all applicable Laws to:
(a)
duly call, give notice of, convene and hold a
special meeting of Seller Shareholders (including any adjournment or
postponement of such special meeting in accordance with the terms of this
Agreement, the “Seller Meeting”) to
consider the Seller Shareholder Resolution as promptly as practicable, and in
any event not later than the date that is 45 days after the date a
definitive Proxy Statement (as defined below) is first mailed to the Seller
Shareholders;
(b)
not adjourn, postpone or cancel (or propose the
adjournment, postponement or cancellation of) the Seller Meeting without the
prior written consent of Buyer, except (i) as
required for quorum purposes (in which case the Seller Meeting shall be
adjourned and not cancelled) or by applicable law; or
(ii) if this Agreement is terminated as required or permitted under Section 10;
(c)
subject to the terms of this Agreement, solicit
proxies in favour of the approval of the Seller Shareholder Resolution and
against any resolution submitted by any Seller Shareholder that is inconsistent
with the Seller Shareholder Resolution and the completion of any of the transactions
contemplated by this Agreement, and, if requested by Buyer and at the expense
of Buyer, engage a dealer and proxy solicitation agent for such purpose (such
dealer and/or agent to be selected by Seller after consultation with Buyer),
and cooperate with any such agent or other Persons engaged by Buyer to solicit
proxies in favour of the approval of the Seller Shareholder Resolution;
(d)
provide Buyer with copies of or access to
information regarding the Seller Meeting generated by any dealer or proxy solicitation
services firm, as requested from time to time by Buyer;
(e)
consult with Buyer in fixing the record date for
the Seller Meeting and the date of the Seller Meeting, give notice to Buyer of
the Seller Meeting and allow Buyer’s representatives and legal counsel to
attend the Seller Meeting;
(f)
promptly advise Buyer, at such times as Buyer
may reasonably request and at least on a daily basis on each of the last
10 Business Days prior to the date of the Seller Meeting, as to the
aggregate tally of the proxies received by Seller in respect of the Seller
Shareholder Resolution;
(g)
promptly advise Buyer of any communication
(written or oral) from any Seller Shareholder in opposition to the Transaction,
written notice of dissent, purported exercise or withdrawal of dissent
rights, and written communications sent by or on behalf of Seller to any
Seller Shareholder exercising or purporting to exercise dissent
rights;
(h)
not make any payment or settlement offer, or
agree to any payment or settlement prior to the Effective Time with respect to dissent
rights without the prior written consent of Buyer;
(i)
not, without Buyer’s consent, change the record
date for the Seller Shareholders entitled to vote at the Seller Meeting in connection
with any adjournment or postponement of the Seller Meeting unless required by
Law;
(j)
ensure that the Seller Shareholder Resolution
will be the first substantive matter on the agenda for the Seller Meeting,
unless otherwise previously agreed to in writing by Buyer; and
(k)
at the request of Buyer from time to time,
provide Buyer with a list (in both written and electronic form) of (i) the
Seller Shareholders,
together with their addresses and respective holdings of Seller Shares,
(ii) the names, addresses and holdings of all Persons having rights issued
by Seller to acquire Seller Shares (including holders of options to purchase
Seller Shares) and (iii) participants and book‑based nominee registrants
such as CDS & Co., CEDE & Co. and Depository Trust Company, and non‑objecting
beneficial owners of Seller Shares, together with their addresses and
respective holdings of Seller Shares (the “Seller Shareholder Details”).
The Buyer shall only use the Seller
Shareholder Details in accordance with applicable securities laws in Canada and
the United States. The Seller shall from
time to time require that its registrar and transfer agent furnish Buyer with
such additional information, including updated or additional lists of Seller Shareholders,
and lists of securities positions and other assistance as Buyer may reasonably
request in order to be able to communicate with respect to the Transaction with
the Seller Shareholders and with such other Persons as are entitled to vote on
the Seller Shareholder Resolution.
2.2
Proxy Statement;
Schedule 13e-3.
(a)
Subject to Buyer’s compliance with Section 2.2(e), Seller shall promptly, and no later than 15
days after the date of this Agreement, (i) prepare and complete, in
consultation with Buyer, the notice of the Seller Meeting and the accompanying management
information circular, including all schedules, appendices and exhibits to, and
information incorporated by reference in, such management information circular,
to be sent to the Seller Shareholders in
connection with the Seller Meeting, as amended, supplemented or otherwise
modified from time to time in accordance with the terms of this Agreement (the
“Proxy Statement”), together with any other documents required by Law in
connection with the Seller Meeting and the Transaction and (ii) submit the Proxy
Statement and any other required documents for review and approval by the TSX
Venture Exchange.
(b)
Within five (5) business days following approval
of the Proxy Statement by the TSX Venture Exchange, Seller shall file the Proxy
Statement and any other required documents with the United States Securities
and Exchange Commission (“SEC”). Buyer
and Seller shall cooperate to, concurrently with the preparation and filing of
the Proxy Statement, jointly prepare and file with the SEC an SEC Rule 13e-3 transaction
statement on Schedule 13e-3 (such transaction statement, including any
amendment or supplement thereto, the “Schedule 13e-3”) relating to the
transactions contemplated by this Agreement.
(c)
As promptly as practicable after the occurrence
of the SEC Clearance Event (as defined below), Seller
shall cause the Proxy Statement, the Schedule 13e-3 and such other documents to
be filed with applicable Canadian securities regulatory authorities and sent to
each Seller Shareholder and other Person as required by Law. For the purposes of
this section, “SEC Clearance Event”
means the occurrence of the following (i) the passing of 10 calendar days
following the initial filing with the SEC of the Proxy Statement without notification
from SEC staff being received indicating that
the SEC will review the Proxy Statement, or (ii) notification from SEC staff
that the SEC has completed its review of the Proxy Statement.
(d)
Seller shall ensure that the Proxy Statement and
the Schedule 13e-3 comply in all material respects with Law, including without
limitation the requirements of the Exchange Act and the rules and regulations
promulgated thereunder, do not contain any untrue statement of a material fact
or an omission to state a material fact that is required to be stated or that
is necessary to make a statement not misleading in light of the circumstances
in which it was made (a “Misrepresentation”)
(except that Seller shall not be responsible for any information included in
the Proxy Statement and the Schedule 13e-3 related to Buyer or its respective
affiliates or managers that was furnished by Buyer for inclusion in the Proxy
Statement and the Schedule 13e-3) and provides the Seller Shareholders with
sufficient information to permit them to form a reasoned judgement concerning
the matters to be placed before the Seller Meeting. Without limiting the
generality of the foregoing, the Proxy Statement must include: (i) a copy
of the Fairness Opinion, (ii) a statement that the Special Committee has
received the Fairness Opinion, and has, after receiving legal and financial
advice, unanimously recommended that the Seller Board approve this Agreement
and that the Seller Shareholders vote in favour of the Seller Shareholder Resolution
and (iii) a statement that the Seller Board has received the Fairness
Opinion, and has unanimously, after receiving legal and financial advice and
the recommendation of the Special Committee, determined that the Seller
Shareholder Resolution is in the best interests of Seller and recommends that the
Seller Shareholders vote in favour of the Seller Shareholder Resolution.
(e)
Seller, Buyer and the Company will cooperate and
consult with each other in the preparation of the Proxy Statement and the
Schedule 13e-3. Seller shall give Buyer and its legal counsel a reasonable
opportunity to review and comment on drafts of the Proxy Statement and the
Schedule
13e-3 and other related documents, and shall give reasonable
consideration to any comments made by Buyer and its counsel, and agrees that
all information relating solely to Buyer included in the Proxy Statement and
the Schedule 13e-3 must be in a form and substance satisfactory to Buyer,
acting reasonably. Seller shall as soon as reasonably practicable: (i)
notify Buyer of the receipt of any comments from the SEC with respect to the
Proxy Statement or the Schedule 13e-3 and any request by the SEC for any
amendment to the Proxy Statement or the Schedule 13e-3 or for additional
information; and (ii) provide Buyer with copies of all written correspondence
between Seller and its Representatives, on the one hand, and the SEC, on the
other hand, with respect to the Proxy Statement and the Schedule 13e-3. Seller shall use its
reasonable best efforts to resolve, and each party agrees to consult and cooperate
with the other party in resolving, all SEC comments with respect to the Proxy
Statement and the Schedule 13e-3 as promptly as practicable after receipt
thereof and to cause the Proxy Statement in definitive form to be cleared by
the SEC as promptly as reasonably practicable. Seller shall consult with Buyer
prior to responding to SEC comments with respect to the preliminary Proxy
Statement and the Schedule 13e-3.
(f)
Buyer shall promptly provide all necessary
information concerning Buyer that is required by Law to be included by Seller in
the Proxy Statement and the Schedule 13e-3 or other related documents to Seller
in writing, and shall ensure that such information does not contain any
Misrepresentation.
(g)
Each Party shall promptly notify the other parties
if it becomes aware that the Proxy Statement or the Schedule 13e-3 contains a
Misrepresentation, or otherwise requires an amendment or supplement. The parties
shall co‑operate in the preparation of any such amendment or supplement as
required or appropriate, and Seller shall promptly mail, file or otherwise
publicly disseminate, as required or appropriate,
any such amendment or supplement to the Seller Shareholders and, if required by
law, file the same with the any applicable securities authorities or any other Governmental
Authority, as required.
3.
Closing.
The closing of the transactions
contemplated by this Agreement (the “Closing”)
shall take place remotely by email exchange of documents and signatures (or
their electronic counterparts) as may be appropriate within three (3) business
days following approval of the Seller Shareholder Resolution (the date upon
which the Closing takes place referred to herein as the “Closing Date”). The Closing
shall be deemed effective at 12:01 a.m. Mountain Time on the Closing Date,
immediately following the execution and consummation of the Contribution Agreement.
4.
Representations
and Warranties of Seller. Seller represents and warrants to Buyer that the statements
contained in this Section 4 are true and correct as of the date hereof. For purposes of this Section 4, “Seller's
knowledge,” “knowledge of Seller,”
and any similar phrases shall mean the actual knowledge of any director or
officer of Seller, after due and diligent inquiry. For purposes of
this Agreement, the term “Disclosure
Schedules” means the disclosure schedules delivered by Seller concurrently
with the execution and delivery of this Agreement.
4.1
Organization
and Authority of Seller. Seller
is a corporation duly organized, validly existing, and in good standing under
the Laws of Canada. Seller has full corporate power and authority to enter into
this Agreement and the other Transaction Documents to which Seller is a party,
to carry out Seller’s obligations hereunder and thereunder, and, subject to approval
of the Seller Shareholder Resolution, to consummate the transactions
contemplated hereby and thereby. Subject to approval of the Seller Shareholder
Resolution, the execution and delivery by Seller of this Agreement and any
other
Transaction Document to which Seller is a party, the performance by
Seller of its obligations hereunder and thereunder, and the consummation by
Seller of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate action on the part of Seller. The Seller
Shareholder Resolution is the only vote or consent of the holders of any class
or series of Seller’s capital stock necessary to approve and adopt this
Agreement and consummate the transactions contemplated hereby. This Agreement
and each Transaction Document to which Seller is a party constitute legal,
valid, and binding obligations of Seller enforceable against Seller in
accordance with their respective terms, except as the enforcement thereof may
be limited by bankruptcy, insolvency and other applicable Laws affecting the
enforcement of creditors’ rights generally and subject to the qualification
that equitable remedies may be granted only in the discretion of a court of
competent jurisdiction.
4.2
Organization,
Authority, and Qualification of the Company.
The Company is a corporation
duly organized, validly existing, and in good standing under the Laws of the
state of Idaho and has full corporate power and authority to own, operate, or
lease the properties and assets now owned, operated, or leased by it and to
carry on its business as it has been and is currently conducted. Section 4.2 of the Disclosure Schedules sets forth each
jurisdiction in which the Company is licensed or qualified to do business, and
the Company is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the properties owned or leased by it or
the operation of its business as currently conducted makes such licensing or
qualification necessary.
4.3
Capitalization.
(a)
The authorized shares of the Company consist of 10,000
shares of common stock, of which 100 shares are issued and outstanding and
constitute the Shares. All the Shares
have been duly authorized, are validly issued, fully paid and non-assessable,
and are owned of record and beneficially by Seller, free and clear of all
Encumbrances. Upon the transfer,
assignment, and delivery of the Shares and payment therefor in accordance with
the terms of this Agreement, Buyer shall own all of the Shares, free and clear
of all Encumbrances.
(b)
All the Shares were issued in compliance with
applicable Laws. None of the Shares were
issued in violation of any agreement or commitment to which Seller or the
Company is a party or is subject to or in violation of any preemptive or
similar rights of any individual, corporation, partnership, joint venture,
limited liability company, Governmental Authority, unincorporated organization,
trust, association, or other entity (each, a “Person”). For purposes of this Agreement, “Governmental
Authority” means any federal, state, local
or foreign government or political subdivision thereof, or any agency or
instrumentality of such government or political subdivision, or any
self-regulated organization or other non-governmental regulatory authority or
quasi-governmental authority (to the extent that the rules, regulations or
orders of such organization or authority have the force of Law), or any
arbitrator, court or tribunal of competent jurisdiction.
(c)
There are no outstanding or authorized options,
warrants, convertible securities, stock appreciation, phantom stock, profit
participation, or other rights, agreements, or commitments relating to the
shares of capital stock of the Company or obligating Seller or the Company to
issue or sell any shares of capital stock of, or any other interest in, the
Company. There are no voting trusts,
shareholder agreements, proxies, or other agreements in effect with respect to
the voting or transfer of any of the Shares.
4.4
No Subsidiaries. The
Company does not have, or have the right to acquire, an ownership interest in
any other Person.
4.5
No Conflicts or
Consents. Subject to approval
of the Seller Shareholder Resolution, the execution, delivery, and performance by Seller of this
Agreement and the other Transaction Documents to which it is a party, and the
consummation of the transactions contemplated hereby and thereby, do not and
will not: (a) violate or conflict with any provision of the articles of incorporation,
bylaws, or other governing documents of Seller or the Company; (b) violate or
conflict with any provision of any statute, law, ordinance, regulation, rule,
code, treaty, or other requirement of any Governmental Authority (collectively,
“Law”) or any order, writ, judgment,
injunction, decree, determination, penalty, or award entered by or with any
Governmental Authority (“Governmental
Order”) applicable to Seller or the Company; (c) require the consent,
notice, or filing with or other action by any Person or require any Permit (as
defined in Section 4.16(b)), license, or Governmental Order; (d) violate or
conflict with, result in the acceleration of, or create in any party the right
to accelerate, terminate, or modify any contract, lease, deed, mortgage,
license, instrument, note, indenture, joint venture, or any other agreement,
commitment, or legally binding arrangement, whether written or oral
(collectively, “Contracts”), to
which Seller or the Company is a party or by which Seller or the Company is
bound or to which any of their respective properties and assets are subject; or
(e) result in the creation or imposition of any Encumbrance on any properties
or assets of the Company.
4.6
Financial
Statements. True and complete copies of the following financial
statements (the “Financial Statements”)
have been delivered to Buyer:
(a)
The unaudited balance sheet of the Company as of
April 30 in each of the years 2020, 2021, and 2022 (such balance sheet as of
April 30, 2022 is referred to herein as the “Balance Sheet” and the date of April 30, 2022 as the “Balance Sheet Date”) and the related
statements of income and retained earnings for the years then ended.
The Financial Statements have been prepared in
accordance with generally accepted accounting principles in effect in the
United States from time to time (“GAAP”),
applied on a consistent basis throughout the period involved. The Financial Statements are based on the
books and records of the Company and fairly present in all material respects
the financial condition of the Company as of the respective dates they were
prepared and the results of the operations of the Company for the periods
indicated. The Company maintains a
standard system of accounting established and administered in accordance with
GAAP.
4.7
Undisclosed
Liabilities. The Company has no liabilities, obligations, or commitments
of any nature whatsoever, whether asserted, known, absolute, accrued, matured,
or otherwise (collectively, “Liabilities”),
except: (a) those which are adequately reflected or reserved against in the
Balance Sheet as of the Balance Sheet Date; and (b) those which have been
incurred in the ordinary course of business consistent with past practice since
the Balance Sheet Date and which do not, individually or in the aggregate, exceed
$10,000.
4.8
Cancellation
of the Company Debt. The
consummation of the Contribution Agreement as of the Closing Date immediately
prior to the consummation of this Agreement shall effectively (i) transfer from
Seller to the Company all of Seller’s right, title and interest in and to the
right to receive payment of the Company Debt, (ii) cancel and forgive in its
entirety the Company Debt, and (iii) release the Company from any and all
obligations under the Company Loan and with respect to the Company Debt. As of the Closing Date and after giving
effect to the closing of the Contribution Agreement, the Company shall have no
debts, liabilities or other obligations of any kind to Seller.
4.9
Absence of
Certain Changes, Events, and Conditions.
Since the Balance Sheet Date,
there has not been, with respect to the Company, any change, event, condition,
or development that is, or could reasonably be expected to be, individually or
in the aggregate, materially adverse to the business, results of operations,
condition (financial or otherwise), or assets of the Company and the Company has
operated its businesses only consistent with the past practices of the Company
and has taken action in the ordinary course of the normal day to day operations
of the business of the Company. Since
the Balance Sheet Date, the Company has not transferred, assigned, sold or
otherwise disposed of any material assets shown or reflected in its Financial
Statements or cancelled any material debts or entitlements, has not declared or
paid any dividends or declared or made any other payments or distribution on or
in respect of any of its shares or authorized, agreed or otherwise become
committed to do any of the foregoing.
4.10
Fairness
Opinion. As of the date hereof:
(a)
the Fairness Opinion has been delivered to the
Special Committee;
(b)
the Fairness Opinion has been delivered to the Seller
Board; and
(c)
the Company has been authorized by the Financial
Advisor to permit inclusion of the Fairness Opinion and reference thereto in
the Proxy Statement.
4.11
Material
Contracts.
(a)
Section 4.11(a) of the Disclosure Schedules lists each Contract that
is material to the Company (such Contracts, together with all Contracts
concerning the occupancy, management, or operation of any Real Property (as
defined in Section 4.12(a)), being “Material
Contracts”), including the following:
(a)
each Contract of the Company involving aggregate
consideration to be paid or received by the Company in excess of $10,000 and
which, in each case, cannot be cancelled by the Company without penalty or
without more than 90 days’ notice;
(b)
all Contracts that provide for the
indemnification by the Company of any Person or the assumption of any Tax (as
defined in Section 4.20(a)), environmental, or other Liability of any Person;
(c)
all Contracts relating to Intellectual Property
(as defined in Section 4.13(a)), including all licenses, sublicenses, settlements,
coexistence agreements, covenants not to sue, and permissions;
(d)
except for Contracts relating to trade
receivables, all Contracts relating to indebtedness (including, without
limitation, guarantees) of the Company;
(e)
all Contracts that limit or purport to limit the
ability of the Company to compete in any line of business or with any Person or
in any geographic area or during any period of time;
(f)
all Contracts relating to any joint venture,
partnership, limited liability company or other similar Contract relating to
the formation, creation, operation, management, sharing of profit or losses or
control of any partnership, strategic alliance or joint venture;
(g)
all Contracts relating to the acquisition or
disposition of any assets, business or real property (whether by merger, sale
of stock, sale of assets or otherwise) that are material to the Company, taken
as a whole, and with respect to which the Company has material obligations
remaining to be performed or material liabilities continuing after the date of
this Agreement;
(h)
all Contracts with a Governmental Authority or
with any other Person that is a subcontract relating to a Contract between such
Person and a Governmental Authority;
(i)
all employment
agreements and Contracts with independent contractors or consultants (or
similar arrangements) to which the Company is a party; and
(j)
any other Contract
that is material to the Company and not required to be disclosed pursuant to
the foregoing clauses (i) through (ix).
(b)
Each Material Contract is valid and binding on
the Company in accordance with its terms and is in full force and effect,
except as enforceability may be limited by general equitable principles. None of the Company or, to the best of
Seller’s knowledge any other party thereto, is in breach of or default under
(or is alleged to be in breach of or default under), any Material
Contract. None of Seller, the Company, or
any other party to any Material Contract has provided or received any notice of
any intention to terminate any Material Contract. Complete and correct copies of each Material
Contract (including all modifications, amendments, and supplements thereto and
waivers thereunder) have been made available to Buyer.
4.12
Real Property;
Title to Assets.
(a)
The Company does not own any real property. Section
4.12(a) of the Disclosure Schedules lists all real property
in which the Company has a leasehold (or sub-leasehold) interest (together with
all buildings, structures, and improvements located thereon, and all water and
water rights, mineral rights, easements and hereditaments appurtenant thereto, the
“Real Property”), including each
Contract relating to the Company’s leasehold interest in each parcel of Real
Property. Seller has delivered or made
available to Buyer true, correct, and complete copies of all Contracts, title
insurance policies, and surveys relating to the Real Property.
(b)
The Company has good and valid title to, or a
valid leasehold interest in, all Real Property and personal property and other
assets reflected in the Financial Statements or acquired after the Balance
Sheet Date (other than properties and assets sold or otherwise disposed of in
the ordinary course of business consistent with past practice since the Balance
Sheet Date). All Real Property and such
personal property and other assets (including leasehold interests) are free and
clear of Encumbrances except for those items set forth in Section 4.12(b) of the Disclosure Schedules. Each lease of Real Property is the legal,
valid, binding and enforceable obligation of the Company and, to Seller’s
knowledge, each other party thereto, and is in full force and effect, and the
Company has complied with the terms of each such lease through and including
the date of this Agreement.
(c)
Each of the Real Properties is in good standing
before all relevant Governmental Authorities with respect to: (i) all
obligations to file, register, or deliver any proof(s) of basic mining
forms,
mining and environmental bonds, mining permits, reports, responses to any
regulatory enquiries or inspections and assessment works or equivalent carried
out at or in connection with any Real Properties as required by applicable
Laws, (ii) any obligations to pay surface fees royalties, mining duties and/or
Taxes as required by applicable Laws, (iii) any requirements under the
environmental permits and the Environmental Laws, and (iv) all orders of a
Governmental Authority relating to a Real Property. To the knowledge of the
Company, there is no outstanding order from any Governmental Authority
requiring payment or compliance with any obligation related to any Real
Property and the Company has not received any communication in respect thereof.
(d)
To
the knowledge of Seller, the Real Properties are sufficient in duration,
scope, content and effect to permit the Company to conduct all activities
currently contemplated to be conducted by them.
(e)
The Company is not a sublessor or grantor under
any sublease or other instrument granting to any other Person any right to
possess, lease, occupy, or use any leased Real Property. The use of the Real Property in the conduct
of the Company's business does not violate any Law, covenant, condition,
restriction, easement, license, permit, or Contract and no improvements
constituting a part of the Real Property encroach on real property owned or
leased by a Person other than the Company.
(f)
No Real Properties or assets of the Company has
been taken or appropriated by any Governmental Authority, nor has any notice or
proceeding in respect hereof been given or commenced, nor, to the knowledge of
Seller, is there any intent or proposal to give any such notice or to commence
any such proceeding.
4.13
Intellectual
Property.
(a)
“Intellectual
Property” means any and all of the following in any jurisdiction throughout
the world: (i) issued patents and patent applications; (ii) trademarks, service
marks, trade names, and other similar indicia of source or origin, together
with the goodwill connected with the use of and symbolized by, and all
registrations, applications for registration, and renewals of, any of the
foregoing; (iii) copyrights, including all applications and registrations; (iv)
trade secrets, know-how, inventions (whether or not patentable), technology,
and other confidential and proprietary information and all rights therein; (v)
internet domain names and social media accounts and pages; and (vi) other
intellectual or industrial property and related proprietary rights, interests,
and protections.
(b)
Section 4.13(b) of the Disclosure Schedules lists all issued patents,
registered trademarks, domain names and copyrights, and pending applications
for any of the foregoing, that are owned by the Company (the “Company IP Registrations”) as well as
all material unregistered Intellectual Property. The Company owns or has the valid and
enforceable right to use all Intellectual Property used or held for use in or
necessary for the conduct of the Company’s business as currently conducted (the
“Company Intellectual Property”),
free and clear of all Encumbrances. All
the Company Intellectual Property is valid and enforceable, and all Company IP
Registrations are subsisting and in full force and effect. The Company has taken all reasonable and
necessary steps to maintain and enforce the Company Intellectual Property.
(c)
The conduct of the Company’s business as
currently and formerly conducted has not infringed, misappropriated, or
otherwise violated the Intellectual Property or other rights of any Person. To the best of Seller’s knowledge, no Person
has infringed, misappropriated, or otherwise violated any Company Intellectual
Property.
4.14
Insurance. Section
4.14 of the Disclosure Schedules sets forth a true and
complete list of all current policies or binders of insurance maintained by Seller
or the Company relating to the assets, business, operations, employees,
officers, or directors of the Company (collectively, the “Insurance Policies”). Such
Insurance Policies: (a) are in full force and effect; (b) are valid and binding
in accordance with their terms; (c) are provided by carriers who are
financially solvent; and (d) have not been subject to any lapse in coverage. Neither the Seller nor the Company has
received any written notice of cancellation of, premium increase with respect
to, or alteration of coverage under, any of such Insurance Policies. All premiums due on such Insurance Policies
have been paid. Neither the Seller nor
the Company is in default under, or has otherwise failed to comply with, in any
material respect, any provision contained in any Insurance Policy. The Insurance Policies are of the type and in
the amounts customarily carried by Persons conducting a business similar to the
Company and are sufficient for compliance with all applicable Laws and
Contracts to which the Company is a party or by which it is bound.
4.15
Legal
Proceedings; Governmental Orders.
(a)
There are no claims, actions, causes of action,
demands, lawsuits, arbitrations, inquiries, audits, notices of violation,
proceedings, litigation, citations, summons, subpoenas, or investigations of
any nature, whether at law or in equity (collectively, “Actions”) pending or, to Seller's knowledge, threatened against or
by the Company, Seller, or any Affiliate of Seller: (i) relating to or
affecting the Company or any of the Company's properties or assets; or (ii)
that challenge or seek to prevent, enjoin, or otherwise delay the transactions
contemplated by this Agreement. To the
best of Seller’s knowledge, no event has occurred or circumstances exist that
may give rise to, or serve as a basis for, any such Action. For purposes of
this Agreement: (x) “Affiliate” of a
Person means any other Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
such Person; and (y) the term “control”
(including the terms “controlled by” and “under common control with”) means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
(b)
There are no outstanding Governmental Orders
against, relating to, or affecting the Company or any of its properties or
assets.
4.16
Compliance with
Laws; Permits.
(a)
The Company has complied, and is now complying,
with all Laws applicable to it or its business, properties, or assets.
(b)
All permits, licenses, franchises, approvals,
registrations, certificates, variances, and similar rights obtained, or
required to be obtained, from Governmental Authorities (collectively, “Permits”) that are required for the
Company to conduct its business as it has been or is
currently conducted, including, without limitation, leasing or operating
any of the Real Property as it has been or is currently operated by the Company,
have been obtained and are valid and in full force and effect. Section 4.16(b) of the Disclosure Schedules list all current Permits
issued to the Company and no event has occurred that would reasonably be
expected to result in the revocation or lapse of any such Permit.
4.17
Environmental
Matters.
(a)
The Company has complied, and is now complying,
with all applicable Environmental Laws. Neither
the Company nor Seller has received notice from any Person that the Company,
its business or assets, or any real property currently or formerly owned,
leased, or used by the Company is or may be in violation of any applicable Environmental
Law or any applicable Law regarding Hazardous Substances.
(b)
There has not been any spill, leak, discharge,
injection, escape, leaching, dumping, disposal, or release by Seller, the Company
or any Affiliate of Seller of any kind of any Hazardous Substances in violation
of any Environmental Law: (i) with respect to the business or assets of the
Company; or (ii) at, from, in, adjacent to, or on any real property currently
or formerly owned, leased, or used by the Company. There are no, and have not
been, any Hazardous Substances unlawfully in, on, or about any real property
currently or formerly owned, leased, or used by the Company, during the period
that the Company owned, leased or used the real property or, to Seller’s
knowledge, during any period prior thereto. No real property owned, lease or
used by the Company is or was materially affected in any way by any Hazardous
Substances during the period it was owned, leased or used by the Company or, to
Seller’s knowledge, during any period prior thereto. To Seller’s knowledge,
there are no Hazardous Substances migrating to any real property currently or
formerly owned, leased, or used by the Company.
Schedule 4.17(b) sets forth the Operations and Reclamations Plan of the
Company.
(c)
As used in this Agreement: (i) “Environmental Laws” means all Laws, now
or hereafter in effect, in each case as amended or supplemented from time to
time, relating to the regulation and protection of human health, safety, the
environment, and natural resources, including any federal, state, or local
transfer of ownership notification or approval statutes; and (ii) “Hazardous Substances” means: (A) “hazardous
materials,” “hazardous wastes,” “hazardous substances,” “industrial wastes,” or
“toxic pollutants,” as such terms are defined under any Environmental Laws; (B)
any other hazardous or radioactive substance, contaminant, or waste; and (C) any
other substance with respect to which any Environmental Law or Governmental
Authority requires environmental investigation, regulation, monitoring, or
remediation.
4.18
Employee
Benefit Matters.
(a)
Except as set forth in Section 4.18(a) of the Disclosure Schedules, the Company has not
established, maintained, sponsored, or contributed to any “employee benefit
plan” as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974 (as amended, and including the regulations thereunder, “ERISA”), whether or not written and
whether or not subject to ERISA, nor any supplemental retirement, compensation,
employment, consulting, profit-sharing, deferred compensation, incentive,
bonus, equity, change in control, retention, severance, salary continuation, or
other similar agreement, plan, policy, program, practice, or arrangement (each,
a “Benefit Plan”).
(b)
The Company has not incurred, and does not reasonably
expect to incur: (i) any Liability under Title I or Title IV of ERISA, any
related provisions of the Code, or applicable Law
relating to any Benefit Plan; or (ii) any Liability to the Pension Benefit
Guaranty Corporation.
(c)
Neither the execution of this Agreement nor any
of the transactions contemplated by this Agreement will, either alone or in
combination with any other event: (i) entitle any current or former director,
officer, employee, independent contractor, or consultant of the Company to any
severance pay, increase in severance pay, or other payment, except for those
payments that have or
will be disclosed to Buyer; (ii) accelerate the time of
payment, funding, or vesting, or increase the amount of compensation (including
stock-based compensation) due to any such individual; (iii) limit or restrict
the right of the Company to amend or terminate any Benefit Plan; (iv) increase
the amount payable under any Benefit Plan; (v) result in any “excess parachute
payments” within the meaning of Section 280G(b) of the Code; or (vi) require a “gross-up”
or other payment to any “disqualified individual” within the meaning of Section
280G(c) of the Code.
4.19
Employment
Matters.
(a)
Section 4.19(a) of the Disclosure Schedules lists: (i) all employees,
independent contractors, and consultants of the Company; and (ii) for each
individual described in clause (i), (A) the individual's title or position,
hire date, and compensation, (B) any Contracts entered into between the Company
and such individual, and (C) all fringe benefits provided to each such
individual. All compensation payable to
all employees, independent contractors, or consultants of the Company for
services performed on or prior to the date hereof have been paid in full.
(b)
The Company is not, and has not been, a party to
or bound by any collective bargaining agreement or other Contract with a union
or similar labor organization (collectively, “Union”), and no Union has represented or purported to represent any
employee of the Company. There has never
been, nor has there been any threat of, any strike, work stoppage, slowdown,
picketing, or other similar labor disruption or dispute affecting the Company
or any of its employees.
(c)
The Company is and has been in compliance with:
(i) all applicable employment Laws and agreements regarding
hiring, employment, termination of employment, plant closings and mass layoffs,
employment discrimination, harassment, retaliation, and reasonable
accommodation, leaves of absence, terms and conditions of employment, wages and
hours of work, employee classification, employee health and safety, engagement
and classification of independent contractors, payroll taxes, and immigration
with respect to all employees, independent contractors, and contingent workers;
and (ii) all applicable Laws relating to the
relations between it and any labor organization, trade union, work council, or
other body representing employees of the Company.
4.20
Taxes.
(a)
Except as set forth in Schedule 4.20(a), all
returns, declarations, reports, information returns and statements, and other
documents relating to Taxes (including amended returns and claims for refund)
(collectively, “Tax Returns”)
required to be filed by the Company on or before the Closing Date have been
timely filed. Except as set forth in
Schedule 4.20(a), such Tax Returns are true, correct, and complete in all respects. All Taxes due and owing by the Company
(whether or not shown on any Tax Return) have been timely paid. No extensions or waivers of statutes of
limitations have been given or requested with respect to any Taxes of the
Company. Seller has delivered to Buyer
copies of all Tax Returns and examination reports of the Company and statements
of deficiencies assessed against, or agreed to by, the Company for all Tax
periods ending on or after December 31, 2017.
The term “Taxes” means all
federal, state, local, foreign, and other income, gross receipts, sales, use,
production, ad valorem, transfer, franchise, registration, profits, license,
lease, service, service use, withholding, payroll, employment, unemployment,
estimated, excise, severance, environmental, stamp, occupation, premium,
property (real or personal), real property gains, windfall profits, customs,
duties, or other taxes, fees, assessments, or charges of any kind whatsoever,
together with any interest, additions, or penalties with respect thereto.
(b)
The Company has no Liability for Taxes of any Person
(other than the Company) under Treasury Regulations Section 1.1502-6 (or any
corresponding provision of state, local, or foreign Law), as transferee or
successor, by contract, or otherwise.
(c)
There are no liens for Taxes (other than for
current Taxes not yet due and payable) upon the assets of the Company.
4.21
Books and
Records. All the minute books and share records and transfer books of the
Company are correct and complete, are currently maintained in accordance with
applicable Laws and have been made available to Buyer.
4.22
Anti-Money
Laundering. The activities of the Company are and have been conducted at all
times in compliance with the anti-money
laundering statutes of all applicable jurisdictions, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency to which they are subject
(collectively, the “Anti-Money Laundering Laws”) and no action, suit or
proceeding by or before any Governmental Authority or any arbitrator involving
the Company with respect to the Anti-Money Laundering Laws is, to the knowledge
of Seller, pending or
threatened.
4.23
Foreign Corrupt
Practices. With respect to the Foreign
Corrupt Practices Act of 1977, as amended, and the rules and regulations
thereunder (the “FCPA”) or the Corruption
of Foreign Public Officials Act (Canada) (the “CFPOA”):
(a)
the Company or,
to the knowledge of Seller,
any director, officer, agent, employee, affiliate or other person acting on
behalf of the Company, is not aware of or has not taken any action, directly or
indirectly, that would result in a violation by such persons of the FCPA or the
CFPOA, including making use of the mails or any means or instrumentality of
interstate commerce corruptly in furtherance of any money, or other property,
gift, promise to give, or authorization of the giving of anything of value to
any “foreign official” (as such term is defined in the FCPA) or any foreign
political party or official thereof or any candidate for foreign political
office, in contravention of the FCPA or the CFPOA;
(b)
the Company has
instituted and maintains policies and procedures designed to ensure compliance
with the FCPA and the CFPOA; and
(c)
the Company or,
to the knowledge of Seller,
any director, officer, agent, employee, affiliate or other person acting on
behalf of the Company, has not (i) conducted or initiated any review, audit or
internal investigation that concluded that the Company or any of its directors,
officers, agents, employees, affiliates or other persons acting on behalf of
the Company have violated the FCPA or the CFPOA, or (ii) made a voluntary or
involuntary disclosure to any Governmental Authority responsible for enforcing
the FCPA or the CFPOA, in each case with respect to any alleged act or omission
arising under or relating to non compliance with either the FCPA or the CFPOA,
or received any notice, request or citation from any Governmental Authority
alleging non compliance with the FCPA or the CFPOA, other than such actions
which have not had and would not reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect.
4.24
Material
Adverse Effect. Seller
does not have knowledge of any material fact or applicable Laws or governmental
position, or any announced, pending or contemplated change thereto or any
announced, pending or contemplated new law or regulation or governmental
position that, in any of these cases, would reasonably be expected to have a
Material Adverse Effect.
4.25
Brokers. No broker, finder, or
investment banker is entitled to any brokerage, finder's, or other fee or
commission in connection with the transactions contemplated by this Agreement
or any other Transaction Document based upon arrangements made by or on behalf
of Seller.
4.26
Full Disclosure. No
representation or warranty by Seller in this Agreement and no statement
contained in the Disclosure Schedules to this Agreement or any certificate or
other document furnished or to be furnished to Buyer pursuant to this Agreement
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make the statements contained therein, in light of the
circumstances in which they are made, not misleading.
5.
Representations
and Warranties of Buyer. Buyer represents and warrants to Seller that the statements
contained in this Section 5 are true and correct as of the date hereof. For purposes of this Section 5, “Buyer's
knowledge,” “knowledge of Buyer,”
and any similar phrases shall mean the actual knowledge of any director or
officer of Buyer, after due inquiry.
5.1
Organization
and Authority of Buyer. Buyer is a limited liability company duly organized,
validly existing, and in good standing under the Laws of the state of Idaho. Buyer has full limited liability company
power and authority to enter into this Agreement and the other Transaction
Documents to which Buyer is a party, to carry out its obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Buyer of this
Agreement and any other Transaction Document to which Buyer is a party, the
performance by Buyer of its obligations hereunder and thereunder, and the
consummation by Buyer of the transactions contemplated hereby and thereby have
been duly authorized by all requisite corporate action on the part of Buyer. This Agreement and each Transaction Document
to which Buyer is a party constitute legal, valid, and binding obligations of
Buyer enforceable against Buyer in accordance with their respective terms.
5.2
No Conflicts;
Consents. The execution, delivery, and performance by Buyer of this
Agreement and the other Transaction Documents to which it is a party, and the
consummation of the transactions contemplated hereby and thereby, do not and
will not: (a) violate or conflict with any provision of the articles of
organization, operating agreement, or other governing documents of Buyer; (b)
violate or conflict with any provision of any Law or Governmental Order
applicable to Buyer; or (c) require the consent, notice, declaration, or filing
with or other action by any Person or require any Permit, license, or
Governmental Order.
5.3
Investment
Purpose. Buyer is acquiring the Shares solely for its own account
for investment purposes and not with a view to, or for offer or sale in
connection with, any distribution thereof or any other security related thereto
within the meaning of the Securities Act of 1933, as amended (the “Securities Act”). Buyer acknowledges that Seller has not
registered the offer and sale of the Shares under the Securities Act or any
state securities laws, and that the Shares may not be pledged, transferred,
sold, offered for sale, hypothecated, or otherwise disposed of except pursuant
to the registration provisions of the Securities Act or pursuant to an
applicable exemption therefrom and subject to state securities laws and
regulations, as applicable.
5.4
Brokers. No
broker, finder, or investment banker is entitled to any brokerage, finder's, or
other fee or commission in connection with the transactions contemplated by
this Agreement or any other Transaction Document based upon arrangements made
by or on behalf of Buyer.
6.
Covenants.
6.1
Confidentiality. From
and after the date hereof, Seller shall, and shall cause its Affiliates and its
and their respective directors, officers, employees, consultants, counsel,
accountants, and other agents (collectively, “Representatives”) to, hold in confidence any and all information,
in any form, concerning the Company, except to the extent that Seller can show
that such information: (a) is generally available to and known by the public
through no fault of Seller, any of its Affiliates, or their respective
Representatives; or (b) is lawfully acquired by Seller, any of its Affiliates,
or their respective Representatives from and after the Closing from sources
which are not prohibited from disclosing such information by any obligation. If Seller or any of its Affiliates or their
respective Representatives are compelled to disclose any information by
Governmental Order or Law, Seller shall promptly notify Buyer in writing and
shall disclose only that portion of such information which is legally required
to be disclosed; provided, that Seller shall use reasonable best
efforts to obtain as promptly as possible an appropriate protective order or
other reasonable assurance that confidential treatment will be accorded such
information.
6.2
Non-Competition;
Non-Solicitation.
(a)
For a period of five (5) years commencing on the
Closing Date (the “Restricted Period”),
Seller shall not, and shall not permit any of its Affiliates to, directly or
indirectly: (i) own any interest in, manage, control, participate in (whether
as an officer, director, manager, employee, partner, member, agent,
representative or otherwise), consult with, render services for, or in any
other manner engage anywhere in the United States (the “Restricted Territory”) in any business engaged directly or
indirectly in a business substantially similar to, or competitive with, the
business of the Company as it is conducted or is proposed to be conducted as of
the date hereof, including, without limitation, the business of mining,
processing, selling and distributing clay, quartz, mica, feldspar, kaolinite
and halloysite; but excluding all other minerals, or (ii) intentionally
interfere in any material respect with the business relationships (whether
formed prior to or after the date of this Agreement) between the Company and
customers or suppliers of the Company. Seller acknowledges that the
Company’s business has been conducted or is proposed to be conducted as of the
date hereof throughout the Restricted Territory and that the geographic
restrictions set forth above are reasonable and necessary to protect the
goodwill of the Company’s business.
(b)
During the Restricted Period, Seller shall not,
and shall not permit any of its Affiliates to, directly or indirectly, hire or
solicit any current or former employee of the Company or encourage any employee
to leave the Company’s employment, except pursuant to a general solicitation
which is not directed specifically to any such employees; provided, that nothing in this Section 6.2(b) shall prevent Seller or any of its Affiliates from
hiring: (i) any employee terminated by the Company; or (ii) after one hundred
eighty (180) days from the date of resignation, any employee that has resigned
from the Company.
(c)
Seller acknowledges that a breach or threatened
breach of this Section 6.2 would give rise to irreparable harm to Buyer, for
which monetary damages would not be an adequate remedy, and hereby agrees that
in the event of a breach or a threatened breach by Seller of any such
obligations, Buyer shall, in addition to any and all other rights and remedies
that may be available to it in respect of such breach, be entitled to equitable
relief, including a temporary restraining order, an injunction, or specific
performance (without any requirement to post bond).
(d)
Seller acknowledges that the restrictions
contained in this Section 6.2 are reasonable and necessary to protect the
legitimate interests of Buyer and constitute a material inducement to Buyer to
enter into this Agreement and consummate the transactions contemplated by this
Agreement. In the event that any
covenant contained in this Section 6.2 should ever be adjudicated to exceed the time,
geographic, product or service, or other limitations permitted by applicable
Law in any jurisdiction or any Governmental Order, then any court is expressly
empowered to reform such covenant, and such covenant shall be deemed reformed,
in such jurisdiction to the maximum time, geographic, product or service, or
other limitations permitted by applicable Law or such Governmental Order. The covenants contained in this Section 6.2 and each provision hereof are severable and distinct
covenants and provisions. The invalidity
or unenforceability of any such covenant or provision as written shall not
invalidate or render unenforceable the remaining covenants or provisions hereof,
and any such invalidity or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such covenant or provision in any other
jurisdiction.
6.3
Further
Assurances. Following the Closing, each of the parties hereto shall,
and shall cause their respective Affiliates to, execute and deliver such
additional documents and instruments and take such further actions as may be
reasonably required to carry out the provisions hereof and give effect to the
transactions contemplated by this Agreement and the other Transaction Documents.
7.
Tax Matters.
7.1
Tax Covenants.
(a)
Without the prior written consent of Buyer, Seller
shall not take any of the following actions on behalf of the Company: (i) make,
change, or rescind any Tax election; (ii) amend any Tax Return; (iii) take any position
on any Tax Return; or (iv) take any action, omit to take any action, or enter
into any other transaction that would have the effect of increasing the Tax
liability or reducing any Tax asset of Buyer or the Company, in respect of any
taxable period that begins after the Closing Date or, in respect of any taxable
period that begins before and ends after the Closing Date (each such period, a “Straddle Period”), the portion of such
Straddle Period beginning after the Closing Date.
(b)
Except for the FIRPTA Withholding, all transfer,
documentary, sales, use, stamp, registration, value added, and other such Taxes
and fees (including any penalties and interest) incurred in connection with
this Agreement and the other Transaction Documents, if any, shall be borne and
paid by Seller when due. The FIRPTA
Withholding shall be paid as set forth in Section 1.3. Seller shall,
at its own expense, timely file any Tax Return or other document with respect
to such Taxes or fees (and Buyer shall cooperate with respect thereto as
necessary).
(c)
Buyer shall prepare, or cause to be prepared,
all Tax Returns required to be filed by the Company after the Closing Date with
respect to any taxable period or portion thereof ending on or before the
Closing Date and all Straddle Period Tax Returns. Any such Tax Return shall be prepared in a
manner consistent with past practice (unless otherwise required by Law) and
without a change of any election or any accounting method.
7.2
Straddle Period. In
the case of Taxes that are payable with respect to a Straddle Period, the
portion of any such Taxes that are allocated to Pre-Closing Tax Periods shall
be: (a) in the case of Taxes (i) based upon, or related to, income, receipts,
profits, wages, capital, or net worth, (ii) imposed in connection with the
sale, transfer, use or assignment of property, or (iii) required to be
withheld, the amount of Taxes which would be payable if the taxable year ended
with the Closing Date; and (b) in the case of other Taxes, the amount of such
Taxes for the entire period multiplied by a fraction, the numerator of which is
the number of days in the period ending on the Closing Date and the denominator
of which is the number of days in the entire period. For purposes of
this Agreement, a “Pre-Closing Tax
Period” means any taxable period ending on or before the Closing Date and,
with respect to any Straddle Period, the portion of such Straddle Period ending
on and including the Closing Date.
7.3
Termination of
Existing Tax Sharing Agreements. There are no Tax sharing agreements, Tax indemnity
agreements or other similar Contracts with respect to or involving the Company.
7.4
Tax
Indemnification. Seller shall indemnify the Company, Buyer, and each Buyer
Indemnitee (as defined in Section 9.1) and hold them harmless from and against (a) any
loss, damage, liability, deficiency, Action, judgment, interest, award,
penalty, fine, cost or expense of whatever kind (collectively, including
reasonable attorneys' fees and the cost of enforcing any right to
indemnification under this Agreement, “Losses”)
attributable to any breach of or inaccuracy in any representation or warranty
made in Section 4.20; (b) any Loss attributable to any breach or violation
of, or failure to fully perform, any covenant, agreement, undertaking, or
obligation in this Section 7; (c) all Taxes of the Company or relating to the
business of the Company for all Pre-Closing Tax Periods (as defined above)
except those Taxes set out in the Disclosure Schedule; (d) all Taxes of any
member of an affiliated, consolidated, combined, or unitary group of which the
Company (or any predecessor of the Company) is or was a member on or prior to
the Closing Date by reason of a liability under Treasury Regulation Section
1.1502-6 or any comparable provisions of foreign, state, or local Law; and (e)
any and all Taxes of any Person imposed on the Company arising under the
principles of transferee or successor liability or by contract, relating to an
event or transaction occurring before the Closing Date. In each of the above cases, together with any
out-of-pocket fees and expenses (including reasonable attorneys' and
accountants' fees) incurred in connection therewith, Seller shall reimburse
Buyer for any Taxes of the Company that are the responsibility of Seller
pursuant to this Section 7.4 within ten business days after payment of such Taxes
by Buyer or the Company and provision of such documentation by Buyer in
connection therewith, provided, however, Seller shall have no liability for any
Taxes paid by Buyer to the extent Seller is prejudiced by Buyer not providing
Seller with a commercially reasonable opportunity to evaluate, defend, dispute,
or otherwise negotiate with respect to such Taxes (it being agreed that thirty
(30) days advance written notice of any claims for Taxes shall be a sufficient,
but not necessarily minimum, notice period).
7.5
Cooperation and
Exchange of Information. Seller and Buyer shall provide each other with such
cooperation and information as either of them reasonably may request of the
other in filing any Tax Return pursuant to this Section 7 or in connection with any proceeding in respect of
Taxes of the Company, including providing copies of relevant Tax Returns and
accompanying documents. Each of Seller
and Buyer shall retain all Tax Returns and other documents in its possession
relating to Tax matters of the Company for any Pre-Closing Tax Period
(collectively, “Tax Records”) until
the expiration of the statute of limitations of the taxable periods to which
such Tax Records relate.
7.6
Survival. Notwithstanding anything in
this Agreement to the contrary, the provisions of Section 4.20 and this Section 7 shall survive for the full period of all applicable
statutes of limitations (giving effect to any waiver, mitigation, or extension
thereof) plus 90 days.
8.
Conditions
to Closing.
8.1
Conditions
to Obligations of All Parties. The respective obligations of each
party to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment or waiver (if permissible under applicable Law), at
or prior to the Closing, of each of the following conditions:
(a)
The Seller Shareholder Resolution shall have
been approved by the Seller
Shareholders at the Seller Meeting.
(b)
No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any Governmental Order which is in
effect and has the effect of making the transactions contemplated by this
Agreement illegal, otherwise restraining or prohibiting consummation of such
transactions or causing any of the transactions contemplated hereunder to be
rescinded following completion thereof.
8.2
Conditions
to Obligations of Buyer. The obligations of Buyer to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment
or Buyer's waiver, at or prior to the Closing, of each of the following
conditions:
(a)
The
representations and warranties of Seller contained in this Agreement and the
other Transaction Documents shall be true and correct in all material respects on
and as of the date hereof and on and as of the Closing Date with the same
effect as though made at and as of such date (except those representations and
warranties that address matters only as of a specified date other than the date
hereof, the accuracy of which shall be determined as of that specified date in
all material respects).
(b)
Seller
shall have duly performed and complied in all material respects with all
agreements, covenants and conditions required by this Agreement and the other
Transaction Documents to be performed or complied with by it prior to or on the
Closing Date.
(c)
No
Action shall have been commenced against Buyer, Seller or the Company, which
would prevent the Closing. No injunction or restraining order shall have been
issued by any Governmental Authority, and be in effect, which restrains or
prohibits any transaction contemplated hereby.
(d)
Since
the date of this Agreement, there has not
been, with respect to the Company, any change, event, condition, or development
that is, or could reasonably be expected to be, individually or in the
aggregate, materially adverse to the business, results of operations, condition
(financial or otherwise), or assets of the Company.
(e)
Seller shall have delivered to Buyer a stock
certificate evidencing the Shares, free and clear of all Encumbrances, duly
endorsed in blank or accompanied by stock powers or other instruments of
transfer duly executed in blank.
(f)
Seller shall have delivered to Buyer a
certificate of the secretary (or other officer) of Seller certifying: (i) that
attached thereto are true and complete copies of the resolutions of the Seller
Board, the Seller Shareholders, the Company and the shareholder of the Company,
authorizing the execution, delivery, and performance of this Agreement and the
other agreements, instruments, and documents required to be delivered in
connection with this Agreement or at the Closing (collectively, the “Transaction Documents”) to which Seller
is a party and the consummation of the transactions contemplated hereby and thereby,
and that such resolutions are in full force and effect; (ii) the names, titles,
and signatures of the officers of Seller authorized to sign this Agreement and
the other Transaction Documents; and (iii) that attached thereto are true and
complete copies of the governing documents of the Company, including any
amendments or restatements thereof, and that such governing documents are in
full force and effect.
(g)
Seller shall have delivered to Buyer
resignations of the directors and officers of the Company, effective as of the
Closing Date.
(h)
Seller shall have delivered to Buyer a good
standing certificate (or its equivalent) for the Company from the secretary of
state or similar Governmental Authority of the jurisdiction in which the
Company is organized and each jurisdiction where the Company is required to be
qualified, registered, or authorized to do business.
(i)
Seller shall have delivered to Buyer a copy of
the Contribution Agreement, dated as of the Closing Date, duly executed and
delivered by the parties thereto.
(j)
Any consent, waiver, permit, exemption, review,
order, decision or approval of, or any registration and filing with, any
Governmental Authority, or the expiry, waiver or termination of any waiting
period imposed by Law or a Governmental Authority, in each case in connection
with the Transaction shall have been obtained, including approval of the TSX
Venture Exchange.
(k)
Dissent rights
shall not have been validly exercised (and not withdrawn) with respect to more
than 5% of the issued and outstanding Seller Shares.
(l) No Material Adverse Effect shall have occurred.
For the purposes of this Agreement, a “Material Adverse Effect” is any change,
event, occurrence, effect, state of facts or circumstance that, individually or
in the aggregate with other such changes, events, occurrences, effects, states
of facts or circumstances that is or would reasonably be expected to be
material and adverse to the business, operations, results of operations,
assets, properties, capitalization, condition (financial or otherwise) or
liabilities (contingent or otherwise) of the Company, taken as a whole, except
any such change, event, occurrence, effect, or circumstance resulting from or
arising in connection with: (1) any change in general global economic,
business, regulatory, political or market conditions; (2) any change in GAAP or
laws that are of a generally applicable nature; (3) any changes in currency or
exchange rates; (4) any natural disaster, epidemic, pandemic, commencement or
continuation of war, armed hostilities or acts of terrorism; (5) any action
taken (or omitted to be taken) by the Company which is required to be taken (or
omitted to be taken) pursuant to this Agreement; (6) any actions taken (or
omitted to be taken) upon the written request or with the prior written consent
of the Buyer; (7) any change solely attributable
to the announcement of the transactions contemplated hereby; or (8) the failure
of the Company to meet any internal or published projections, forecasts,
guidance or estimates of revenues, earnings or cash flow for any period ending
on or after the date of this Agreement (it being understood that the causes
underlying such failure may be taken into account in determining whether a
Material
Adverse Effect has occurred); provided, however,
that (i) with respect to the
foregoing clauses
(1) through (4), such matter does not have a disproportionate effect on
the Company, taken as a whole, relative to other companies and entities
operating in the industry in which the Company operates; (ii) notwithstanding
anything to the contrary herein, any termination, suspension, revocation,
material limitation or similar action by any Governmental Authority with
respect to any of the Real Properties shall each be deemed to be a Material
Adverse Effect; and (iii) unless expressly provided in any particular section
of this Agreement, references in certain sections of this Agreement to dollar
amounts are not intended to be, and shall not be deemed to be, illustrative or
interpretive for purposes of determining whether a “Material Adverse Effect”
has occurred.
(m)
Seller
shall have delivered to Buyer a certificate, dated as of the Closing Date and
signed by a duly authorized officer of Seller, certifying that each of the
conditions set forth in Section 8.2(a) and Section 8.2(b) have been satisfied.
(n)
Seller shall have delivered to Buyer all other Transaction Documents to which Seller is a party as otherwise set forth in this Agreement and/or in a
closing checklist agreed upon by the parties in connection with this Agreement,
or as Buyer otherwise reasonably requests and are reasonably necessary to
consummate the transactions contemplated by this Agreement.
8.3
Conditions
to Obligations of Seller. The obligations of Seller to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment
or Seller’s waiver, at or prior to the Closing, of each of the following
conditions:
(a)
The representations and warranties of Buyer
contained in this Agreement and the other Transaction Documents shall be true
and correct in all material respects on and as of the date hereof and on and as
of the Closing Date with the same effect as though made at and as of such date
(except those representations and warranties that address matters only as of a
specified date other than the date hereof, the accuracy of which shall be
determined as of that specified date in all material respects).
(b)
Buyer shall have
duly performed and complied in all material respects with all agreements,
covenants and conditions required by this Agreement and the other Transaction
Documents to be performed or complied with by it prior to or on the Closing
Date.
(c)
Buyer
shall have delivered to Seller a certificate of the Secretary (or other
officer) of the manager of the sole member of Buyer certifying: (i) that
attached thereto are true and complete copies of all resolutions of the sole
member of Buyer authorizing the execution, delivery, and performance of this
Agreement and the Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby, and that such
resolutions are in full force and effect; and (ii) the names, titles, and
signatures of the officers of the manager of the sole member of Buyer
authorized to sign this Agreement and the other Transaction Documents to which
it is a party.
(d) Buyer shall have delivered to Seller a certificate, dated as of the Closing Date and signed by a duly authorized officer of Buyer, certifying that each of the conditions set forth in Section 8.3(a) and Section 8.3(b) have been satisfied.
(e) Buyer shall have delivered to Seller all other Transaction Documents to which Buyer is a party as otherwise set forth in this Agreement and/or in a closing checklist agreed upon by the parties in connection with this Agreement, or as Seller otherwise reasonably requests and are reasonably necessary to consummate the transactions contemplated by this Agreement.
9.
Indemnification.
9.1
Indemnification
by Seller. Subject to the other terms and conditions of this Section 9, Seller shall indemnify and defend each of Buyer and
its Affiliates (including the Company) and their respective Representatives
(collectively, the “Buyer Indemnitees”)
against, and shall hold each of them harmless from and against, and shall pay
and reimburse each of them for, any and all Losses incurred or sustained by, or
imposed upon, the Buyer Indemnitees based upon, arising out of, with respect
to, or by reason of:
(a)
any inaccuracy in or breach of any of the
representations or warranties of Seller contained in this Agreement or the
other Transaction Documents;
(b)
any breach or non-fulfillment of any covenant,
agreement, or obligation to be performed by Seller pursuant to this Agreement
or the other Transaction Documents; or
(c)
any third party claim based upon, resulting from
or arising out of (but only to the extent based upon, resulting from or arising
out of) the business, operations, properties, assets or obligations of the
Company conducted or arising on or prior to the Closing Date.
9.2
Indemnification
by Buyer. Subject to the other terms and conditions of this Section 9,, Buyer shall indemnify and defend each of Seller and
its Affiliates and their respective Representatives (collectively, the “Seller Indemnitees”) against, and shall
hold each of them harmless from and against, and shall pay and reimburse each
of them for, any and all Losses incurred or sustained by, or imposed upon, the
Seller Indemnitees based upon, arising out of, with respect to, or by reason
of:
(a)
any inaccuracy in or breach of any of the representations
or warranties of Buyer contained in this Agreement or the other Transaction
Documents; or
(b)
any breach or non-fulfillment of any covenant,
agreement, or obligation to be performed by Buyer pursuant to this Agreement or
the other Transaction Documents.
9.3
Indemnification
Procedures. Whenever any claim shall arise for indemnification
hereunder, the party entitled to indemnification (the “Indemnified Party”) shall promptly provide written notice of such
claim to the other party (the “Indemnifying
Party”). In connection with any
claim giving rise to indemnity hereunder resulting from or arising out of any
Action by a Person who is not a party to this Agreement, the Indemnifying
Party, at its sole cost and expense and upon written notice to the Indemnified
Party, may assume the defense of any such Action with counsel reasonably
satisfactory to the Indemnified Party.
The Indemnified Party shall be entitled to participate in the defense of
any such Action, with its counsel and at its own cost and expense. If the Indemnifying Party does not assume the
defense of any such Action, the Indemnified Party may, but shall not be
obligated to, defend against such Action in such manner as it may deem
appropriate, including settling such Action, after giving notice of such defense
or settlement to the Indemnifying Party, on such terms as the Indemnified Party
may deem appropriate and no action taken by the Indemnified Party in accordance
with such defense and settlement shall relieve the Indemnifying Party of its indemnification
obligations herein provided with respect to any damages resulting
therefrom. The Indemnifying Party shall
not settle any Action without the Indemnified Party’s prior written consent
(which consent shall not be unreasonably withheld or delayed).
9.4
Survival. Subject
to the limitations and other provisions of this Agreement, all representations
and warranties contained herein and all related rights to indemnification shall
survive the Closing and shall remain in full force and effect until the date
that is two years from the Closing Date; provided,
however, that the representations and warranties in (a) Section 4.1 (Authority of Seller), Section 4.3 (Capitalization), Section 4.21 (Seller Brokers), Section 5.1 (Authority of Buyer), and Section 5.4 (Buyer Brokers) shall survive indefinitely; (b) Section 4.17 (Environmental) shall survive for a period of three years
after the Closing; and (c) Section 4.18 (Employee Benefits) and Section 4.20 (Taxes) shall survive for the full period of all
applicable statutes of limitations (giving effect to any waiver, mitigation, or
extension thereof) plus 90 days. Subject
to Section 7, all covenants and agreements of the parties
contained herein shall survive the Closing indefinitely unless another period
is explicitly specified herein.
Notwithstanding the foregoing, any claims which are timely asserted in
good faith with reasonable specificity (to the extent known at such time) and
in writing by notice from the non-breaching party to the breaching party prior
to the expiration date of the applicable survival period shall not thereafter
be barred by the expiration of the relevant representation or warranty and such
claims shall survive until finally resolved.
9.5
Tax
Claims. Notwithstanding any other provision of this Agreement, the
control of any claim, assertion, event, or proceeding in respect of Taxes of
the Company (including, but not limited to, any such claim in respect of a
breach of the representations and warranties in Section 4.20 hereof or any breach or violation of or failure to fully
perform any covenant, agreement, undertaking, or obligation in Section 7) shall be governed exclusively by Section 7.
9.6
Effect of
Investigation. The representations, warranties and covenants of the
Indemnifying Party, and the Indemnified Party’s right to indemnification with
respect thereto, shall not be affected or deemed waived by reason of any
investigation made by or on behalf of the Indemnified Party (including by any
of its Representatives) or by reason of the fact that the Indemnified Party or
any of its Representatives knew or should have known that any such representation
or warranty is, was or might be inaccurate.
9.7
Cumulative
Remedies. The rights and remedies provided for in this Section 9 (and in Section 7) are cumulative and are in addition to and not in
substitution for any other rights and remedies available at Law or in equity or
otherwise.
10.
Termination.
10.1
Termination.
This Agreement may be terminated at any time prior to the Closing:
(a)
by the mutual written consent of the parties
hereto;
(b)
by Buyer by written notice to Seller if:
(a)
Buyer is not then in material breach of any
provision of this Agreement and there has been a breach, inaccuracy in or
failure to perform any representation, warranty, covenant or agreement made by
Seller pursuant to this Agreement that would give rise to the failure of any of
the conditions specified in Section 8 and such breach, inaccuracy or failure has not
been cured by Seller within ten (10) days of Seller's receipt of written notice
of such breach from Buyer;
(b)
the Seller Board or any committee of the Seller
Board fails to unanimously recommend or withdraws, amends, modifies or
qualifies, publicly proposes or states its intention to do so, or fails to
publicly reaffirm (without qualification) within three Business Days after
having been requested in writing by Buyer, acting reasonably, to do so, the
Board Recommendation, or the Seller Board or any committee of the Seller Board
resolves or proposes to take any of the foregoing actions; or
(c)
any of the conditions set forth in Section 8.1 or Section 8.2 shall not have been, or if it becomes apparent
that any of such conditions will not be, fulfilled by December 31, 2022, unless
such failure shall be due to the failure of Buyer to perform or comply with any
of the covenants, agreements or conditions hereof to be performed or complied
with by it prior to the Closing;
(c)
by Seller by written notice to Buyer if:
(a)
Seller is not then in material breach of any
provision of this Agreement and there has been a breach, inaccuracy in or
failure to perform any representation, warranty, covenant or agreement made by
Buyer pursuant to this Agreement that would give rise to the failure of any of
the conditions specified in Section 8 and such breach, inaccuracy or failure
has not been cured by Buyer within ten (10) days of Buyer's receipt of written
notice of such breach from Seller; or
(b)
any of the conditions set forth in Section 8.1 or Section 8.3 shall not have been, or if it becomes apparent
that any of such conditions will not be, fulfilled by December 31, 2022, unless
such failure shall be due to the failure of Seller to perform or comply with
any of the covenants, agreements or conditions hereof to be performed or
complied with by it prior to the Closing.
10.2
Effect of
Termination. In the event of the termination of this Agreement in
accordance with this Section 9, this Agreement shall forthwith become void and
there shall be no liability on the part of any party hereto except:
(a)
as set forth in this Section 10 and Section 6.1 and Section 11 hereof; and
(b)
that nothing herein shall relieve any party
hereto from liability for any fraud, intentional misrepresentations, or willful
breach of any provision hereof.
11.
Miscellaneous.
11.1
Expenses. All
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
costs and expenses.
11.2
United States Dollars. References
herein to “dollars” or “$” shall mean United States dollars.
11.3
Notices. All
notices, claims, demands, and other communications hereunder shall be in
writing and shall be deemed to have been given: (a) when delivered by hand
(with written confirmation of receipt); (b) when received by the addressee if sent
by a nationally recognized overnight courier (receipt requested); (c) on the
date shown on the applicable email when delivered by email transmission,
provided that no “bounce back” or similar error message is received with
respect to such email transmission, if sent during normal business hours of the
recipient, and on the next business day if sent after normal business hours of
the recipient; or (d) on the third day after the date mailed, by certified or
registered mail, return receipt requested, postage prepaid, if sent to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section 11.3):
If to Seller: |
I-Minerals
Inc. Suite
880, 580 Hornby Street Vancouver,
BC, V6C 3B6, Canada Attention:
John Theobald Email:
[redacted] |
with
a copy (which shall not constitute notice) to: |
O’Neill
Law LLP Suite
704, 595 Howe Street
Vancouver, BC V6C 2T5, Canada Attention:
Charles Hethey Email:
[redacted] |
If to Buyer: |
BV
Lending, LLC Attention: Cortney Liddiard 2194 Snake River Parkway, Suite 300 Idaho Falls, Idaho 83402 P.O. Box 51298 Idaho Falls, Idaho 83405 |
with
copies (which shall not constitute notice) to: |
BV
Lending, LLC Attention: Thel Casper 2194
Snake River Parkway, Suite 300 Idaho
Falls, Idaho 83402 P.O.
Box 51298 Idaho
Falls, Idaho 83405 |
|
Kris
Ormseth Stoel
Rives LLP 101
S. Capitol Blvd., Suite 1900 Boise, Idaho
83702 Email:
[redacted] |
11.4
Interpretation; Headings. This
Agreement shall be construed without regard to any presumption or rule
requiring construction or interpretation against the party drafting an
instrument or causing any instrument to be drafted. The headings in this Agreement are for
reference only and shall not affect the interpretation of this Agreement.
11.5
Disclosure
Schedules. A
qualification or exception set forth in the Disclosure Schedules to any
representation, warranty, or covenant contained in this Agreement shall not be
construed as a qualification or exception to any other representation, warranty,
or covenant contained in this Agreement unless the qualification or exception
expressly refers to the other representation, warranty, or covenant or it is
reasonably apparent on its face that such qualification or exception applies to
the other representation, warranty or covenant.
11.6
Severability. If
any term or provision of this Agreement is invalid, illegal, or unenforceable
in any jurisdiction, such invalidity, illegality, or unenforceability shall not
affect any other term or provision of this Agreement.
11.7
Entire
Agreement. This Agreement and the other Transaction Documents
constitute the sole and entire agreement of the parties to this Agreement with
respect to the subject matter contained herein and therein, and supersede all
prior and contemporaneous understandings and agreements, both written and oral,
with respect to such subject matter.
11.8
Successors and
Assigns. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Neither party may assign its
rights or obligations hereunder without the prior written consent of the other
party, which consent shall not be unreasonably withheld or delayed. No assignment shall relieve the assigning
party of any of its obligations hereunder.
11.9
Amendment and
Modification; Waiver. This Agreement may only be amended, modified, or
supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the
provisions hereof shall be effective unless explicitly set forth in writing and
signed by the party so waiving. No
failure to exercise, or delay in exercising, any right or remedy arising from
this Agreement shall operate or be construed as a waiver thereof. No single or partial exercise of any right or
remedy hereunder shall preclude any other or further exercise thereof or the
exercise of any other right or remedy.
11.10
Governing Law;
Submission to Jurisdiction. All matters arising out of or relating to this Agreement shall be governed by and
construed in accordance with the internal laws of the State of Idaho without
giving effect to any choice or conflict of law provision or rule (whether of
the State of Idaho or any other jurisdiction). Any legal suit, action, proceeding, or
dispute arising out of or related to this Agreement, the other Transaction
Documents, or the transactions contemplated hereby or thereby may be instituted
in the federal courts of the United States of America or the courts of the
State of Idaho in each case located in Ada County, Idaho, and each party
irrevocably submits to the exclusive jurisdiction of such courts in any such
suit, action, proceeding, or dispute.
11.11
Counterparts. This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall be deemed to be one and the same
agreement. A signed copy of this
Agreement delivered by email or other means of electronic transmission shall be
deemed to have the same legal effect as delivery of an original signed copy of
this Agreement.
[Signature Page Follows]
IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be executed as of the
date first written above by their respective officers thereunto duly
authorized.
|
SELLER: I-Minerals Inc., a Canadian corporation By: "John Theobald" Name: John Theobald Title: CEO, President and Director |
IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be executed as of the
date first written above by their respective officers thereunto duly
authorized.
|
BUYER: BV Lending, LLC, an Idaho limited liability company By: Ball Ventures, LLC Its: Member By: BV Management Services, Inc. Its: Manager By: "Cortney Liddiard” Name: Cortney Liddiard Title: President |
IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be executed as of the
date first written above by their respective officers thereunto duly authorized.
|
COMPANY: i-minerals USA, inc., an Idaho corporation By: "John Theobald" Name: John Theobald Title:
Director |
EXHIBIT A
Definitions Cross-Reference Table
The following terms have the
meanings set forth in the location in this Agreement referenced below:
Term |
Section |
Loan Agreements |
Recitals |
Actions |
Section
4.15(a) |
Affiliate |
Section
4.14 |
Agreement |
Preamble |
Anti-Money
Laundering Laws |
Section
4.22 |
Balance Sheet |
Section
4.6 |
Balance Sheet Date |
Section
4.6 |
Benefit Plan |
Section
4.18(a) |
Board Recommendation |
Recitals |
Buyer |
Preamble |
CFPOA |
Section
4.23 |
Closing |
Section
3 |
Closing Date |
Section
3 |
Code |
Section 4.18(b) |
Company |
Preamble |
Company Debt |
Recitals |
Company Loan |
Recitals |
Company Intellectual Property |
Section
4.13(b) |
Company IP Registrations |
Section
4.13(b) |
Contracts |
Section
4.5 |
Contribution Agreement |
Recitals |
Control |
Section
4.15 |
Disclosure Schedules |
Section
4 |
Encumbrance |
Section
1.1 |
Environmental Laws |
Section
4.17(c) |
ERISA |
Section
4.18(a) |
Fairness Opinion |
Recitals |
FCPA |
Section
4.23 |
Financial Advisor |
Recitals |
Financial Statements |
Section
4.6 |
FIRPTA
Note |
Section
1.3 |
FIRPTA
Withholding |
Section
1.3 |
GAAP |
Section
4.6 |
Governmental Authority |
Section 4.3(b) |
Governmental Order |
Section
4.5 |
Hazardous Substances |
Section
4.17(c) |
Insurance Policies |
Section
4.14 |
Intellectual Property |
Section
4.13(a) |
IRS |
Section
1.3 |
Law |
Section
4.5 |
Liabilities |
Section
4.7 |
Losses |
Section
7.4 |
Material Adverse Effect |
Section 8.2(l) |
Material Contracts |
Section
4.11(a) |
Misrepresentation |
Section 2.2(c) |
Permits |
Section
4.16(b) |
Person |
Section
4.3(b) |
Pre-Closing Tax Period |
Section
7.2 |
Proxy Statement |
Section 2.2(a) |
Purchase Price |
Section
1.2 |
Real Property |
Section
4.12(a) |
Refunded
Amount |
Section
1.3 |
Representatives |
Section
6.1 |
Restricted Period |
Section
6.2(a) |
Restricted Territory |
Section
6.2(a) |
SEC |
Section
2.2(a) |
SEC
Clearance Event |
Section
2.2(b) |
Securities Act |
Section
5.3 |
Seller |
Preamble |
Seller Board |
Recitals |
Seller Debt |
Recitals |
Seller Meeting |
Section 2.1(a) |
Seller Shareholders |
Recitals |
Seller Shareholder Resolution |
Recitals |
Seller Shares |
Recitals |
Shares |
Recitals |
Special Committee |
Recitals |
Straddle Period |
Section
7.1(a) |
Supporting Seller Shareholders |
Recitals |
Taxes |
Section
4.20(a) |
Tax Records |
Section
7.5 |
Tax Returns |
Section
4.20(a) |
Transaction |
Recitals |
Transaction Documents |
Section 8.2(f) |
Union |
Section
4.19(b) |
APPENDIX "D"
FAIRNESS OPINION
(See Attached)
FAIRNESS OPINION
Proposed Transaction between
I-Minerals Inc.
and
BV Lending LLC
Prepared for:
Independent Members of the Board and Special
Committee
of I-Minerals Inc.
1100 - 1199 West Hastings
Street
Vancouver, B.C.
V6E 3T5
September 13, 2022
Fairness Opinion I-Minerals Inc. / BV Lending LLC |
September 13,
2022 |
TABLE OF CONTENTS
Page
1.0 ASSIGNMENT AND PROPOSED TRANSACTION. |
1 |
|
|
2.0 .BACKGROUND. |
5 |
|
|
3.0 SCOPE OF THE REPORT. |
7 |
|
|
4.0 CONDITIONS AND RESTRICTIONS OF THE REPORT. |
10 |
|
|
5.0 ASSUMPTIONS OF THE REPORT. |
12 |
|
|
6.0 DEFINITION OF FAIR VALUE AND FAIR MARKET VALUE. |
13 |
|
|
7.0 VALUATION METHODOLOGIES. |
14 |
|
|
8.0 VALUATION METHOD USED. |
15 |
|
|
9.0 VALUATION OF THE COMPANY. |
22 |
|
|
10.0 FAIRNESS CONSIDERATIONS. |
23 |
|
|
11.0 CONCLUSION AS TO FAIRNESS. |
24 |
|
|
12.0 QUALIFICATIONS AND CERTIFICATE. |
25 |
APPENDIX AND SCHEDULES
Appendix 1.0 |
– NI 43-101 Technical Report – Bovill Project: Pre-Feasibility Study - March 31, 2021 - as prepared by Millcreek Mining Group, in conjunction with Mine Development Associates |
|
|
|
|
Schedule 1.0 |
– Balance Sheet |
|
|
Schedule 2.0 |
– Tangible Asset Backing Value |
|
|
Schedule 3.0 |
– Adjusted Book |
|
|
Schedule 4.0 |
– Trading Price Method |
|
|
Schedule 5.0 |
– Weighted Fair Value Method |
|
|
Schedule 6.0 |
– Fairness Calculations |
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 1 |
1.0 ASSIGNMENT AND PROPOSED
TRANSACTION
RwE Growth Partners, Inc. (“RwE” or the “authors
of the Report”) was engaged
by the independent members of the Board of Directors
(the “Board”) and special
committee of I-Minerals Inc. (hereinafter referred to as “I-Minerals”
or “IMA” or the “Company”) of Vancouver, British Columbia, Canada, to prepare
this Fairness Opinion (the “Report”) regarding a transaction being considered
by the Board of IMA.
The Report
opines as to the fairness of a planned transaction whereby BV Lending LLC
(“BVL”), an Idaho limited liability company, intends to acquire 100% of the
issued and outstanding shares of IMA. The
details of which are as follows (provided by the legal counsel to IMA)::
|
1. |
The Company has entered into a stock purchase agreement with BVL and I- Minerals USA, Inc. (“IMA-USA”). IMA-USA is a wholly owned subsidiary of the Company. |
|
2. |
IMA has agreed to sell all of the issued and outstanding shares of IMA- USA to BVL via a Stock Purchase Agreement (the “Agreement”). |
|
3. |
The Agreement specifies that: |
|
a. Immediately prior to closing of the Transaction, the Company will
contribute to i-minerals USA an intercompany debt owed by i-minerals USA in the amount of US $25.8 million, resulting in the cancellation of the
indebtedness. |
|
b. The Company will sell the shares of IMA-USA
to BVL for an amount
equal to US$3,000,000. |
|
c. With regard to b. above, the
US$3,000,000 will be satisfied on a non- cash
basis by the set-off of an equal amount of debt owed by the Company to BVL. |
|
d. BVL will also forgive the
balance of the debt, owed by the Company, not including the US$3,000,000
outlined in c. above. |
|
e. At the same time, previously
entered into loan agreements between the Company and BVL, including all
security granted thereunder, will be terminated and/or discharged. |
All of the
above is the “Proposed Transaction”. Readers
are advised to obtain from IMA the actual Agreement and to read all of it for a
thorough understanding of the Proposed Transaction. RwE has been advised by the Company
that the Agreement
will be available at IMA offices.
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 2 |
The Report
determines whether this is fair, from a financial point-of-view to the IMA
shareholders; i.e., where the IMA shareholders are defined in this Report as
those IMA shareholders that exclude BVL and any shareholders that are controlled
by BVL, or are BVL related parties (the “IMA shareholders”).
The Report
is intended for review by the Independent members of the Board to assist them in either supporting or not
supporting the Proposed Transaction.
I-Minerals Inc.
I-Minerals Inc. was incorporated under the laws of British
Columbia, Canada, in 1984.
The Company
is listed for trading on the TSX Venture Exchange
under the symbol
“IMA” and the OTCQB marketplace under the symbol “IMAHF”.
The Company’s
principal business is the development of the Helmer-Bovill industrial mineral
property (“the Property”) located in Latah County, Idaho. Since inception, the
Company has been in the exploration and evaluation stage but moved
into the development stage in fiscal 2018.
In fiscal
2019, the Company reverted back to the evaluation stage as management
determined that the Feasibility Study on the property should be considered
non-current.
The Helmer-Bovill property (the “Property” or the “Project”) was comprised of eleven mineral leases that host potentially economic deposits of feldspar, quartz and kaolinitic clays, primarily kaolinite and halloysite. The Company previously had an undivided 100% interest in 11 State of Idaho mineral leases. The State of Idaho mineral leases are subject to a 5% production royalty on gross sales.
In March 2022,
the Company amended the terms of the State of Idaho mineral leases through the
Idaho Department of Lands (the “IDL”) and acquired these amended leases at an
auction.
Of the 11
mineral leases that the Company held previously, 8 mineral leases were amended
and acquired at auction and the Company elected to relinquish 3 of
the mineral leases. The amended leases now expire in March 2042 and, upon commercial production on one lease, other
leases can be held through
mine development or exploration work.
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 3 |
In May 2017,
the Idaho Department of Lands accepted the Company’s operation and reclamation
plan.
Together with
a water rights permit from the Idaho Department of Water Resources, the Company
was able to proceed with development and construction of the mine, subject to
obtaining sufficient financing. As a result, management made the decision to
begin capitalizing all development expenditures directly related to the
Helmer-Bovill Property. In February 2019, the Company
determined that the Feasibility Study should be considered
non-current and accordingly, the Company has returned to the evaluation stage
for accounting purposes.
The Company
has debt obligations through a series of six promissory notes that it has in
place with a former director (i.e., Mr. Allen L. Ball – who controls BVL).
For readers
information, Mr. Mr. Ball is a successful Idaho business man and has been
involved in many business ventures including farming, farm implement sales,
vending machines, cosmetics industry,
mining, timber, construction and related materials, high tech venture
capital, commercial car washes, A/R factoring, septic system sales /
installation / servicing, lending, real estate development, hospitality,
assisted living, pharmaceutical, firearms manufacturing, fishing
lodge/outfitting, and motorsports sales, but he is probably most known for his involvement in forming Melaleuca, Inc. In 1983, Allen and his brother Roger started a business
formulated around “tea tree oil” which is obtained from the melaleuca plant.
This evolved into the privately held firm, which is now known as Melaleuca,
Inc. where Allen continues as a major shareholder and Chairman of the Board.
RwE has been
advised by the Board that they collectively believe that the Proposed
Transaction will maximize
the realizable value for the Company given
the fair value of its net assets less its material
liabilities.
Given this,
the Board and special committee of the Company is interested in obtaining an
independent opinion as to the fairness of the Proposed
Transaction, from a financial
point of view of the shareholders
of record of IMA at the completion of the Proposed Transaction.
IMA paid RwE a fixed professional fee, plus costs,
plus taxes to prepare this Report.
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 4 |
In preparing
the Report, RwE has used the updated CIMVAL Code for the Valuation of Mineral
Properties, as prepared by the Special Committee of the Canadian Institute of
Mining, Metallurgy and Petroleum on the Valuation of Mineral Properties
(CIMVAL), adopted by the CIM Council on November 29, 2019.
The CIMVAL Code
was adopted by the Canadian Institute of Mining, Metallurgy & Petroleum
(the "CIM") Council on November 29, 2019.
As part of
these standards, RwE has relied on the technical and geological information,
materials, findings and technical analysis / conclusions that were contained in
the National Instrument 43-101 Technical Report - Bovill Project:
Pre-Feasibility Study (the “Technical Report”).
The Technical
Report was prepared
by Mr. Steven B. Kerr, C.P.G., Principal
Consultant
- Geology,
Millcreek Mining Group Mr. Alister D. Horn, MMSA (QP), Principal Consultant –
Mining, Millcreek Mining Group, Effective
Date: February 18, 2020, Report Date: March 31, 2020 and Project Number:
190079. Readers are asked to
carefully review and read the Technical Report.
The Technical
Report is attached in the Appendix 1.0 and are available directly from the Company.
RwE, its
principals and partners, staff and associates, do not assume any type of
responsibility and/or business/financial liability for losses incurred by IMA / BVL
and/or any of IMA / BVL’s shareholders or securityholders, IMA / BVL directors
and/or its management, and/or any regulatory bodies and/or stock exchanges
and/or other parties as a result of
the circulation, publication, reproduction, or use of the Report, as well as
any as any use contrary to the provisions of the Report and the RwE engagement letter.
The Report is
based on the scope of work that has been undertaken, the data and information
provided by the Companies and the assumptions made.
RwE has not
audited the information and data provided
by IMA, nor has it
performed any forensic review, nor can it be expected to catch or identify any
fraud and/or misleading data or information from the Company.
Instead, RwE has relied on the fact that
IMA and its Board has provided
RwE accurate and reliable data. RwE also reserves the right to review all
calculations included or referred to in the Report and, if RwE considers it
necessary, to revise the Report in light of any information existing at the
Valuation Date (i.e., as at or near June 30,
2022, 60 days after the date of the latest financial information)
which becomes known to RwE after the date of the Report. Unless otherwise indicated, all monetary amounts are stated in
United States dollars (US$).
All U.S.
dollars (US$) are converted to C$ as at the rate of 1.263619, which was the
rate near the Valuation Date.
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 5 |
2.0 BACKGROUND
RwE has reviewed the Technical Report.
RwE found that the best way for readers to get a thorough understanding of the Company
and the Project is to view the Company’s corporate Website as at: https://www.imineralsinc.com/ and the full Technical Report:
https://www.imineralsinc.com/assets/docs/I-Minerals%20Bovill%20PFS%20Report_04062020.pdf
The Project
is described in the Technical
Report as:
“The Bovill Project is located in Latah county, in north-central Idaho,
within an area referred to as the ‘Idaho
Clay District’ which lies between
the towns of Moscow and Bovill.
Mining in the district began as early as 1910 and continues to this day. The Bovill
Project has been planned as an open-pit truck and excavator operation.
Only open-pit mining methods are considered for mining at Bovill. Material
being mined consists
of clays, sands, and soils, and no drilling or blasting is anticipated. Mining
operations will occur
in various smaller pits,
with the operations being performed by a mining
contractor. The mining
rate will average approximately 243 kilotons per year (ktpa). Waste will
be disposed of in external dumps, as well in backfill of the pits.
Halloysite grades average
8.3% and kaolinite grades average 17.7% through
the life-of-mine (LOM). The mine will be accessed and supplied using existing
forest roads with some modifications for safety and effectiveness. Electrical power and natural
gas will tie-into
existing nearby networks.
Process water will generally be available from run-off
from the tailing area, or provided by water wells or a surface reservoir, while potable water will be provided by
potable water wells. Tailings disposal will consist of a dry stack storage
facility located near the process plant. The Bovill Project has been the
subject of a number of comprehensive test-work programs extending back nearly a
decade. Previous test work, including additional test work completed by Ginn
Mineral Technology (GMT) in 2019, successfully processed material from the
resource using production scaled systems to generate metakaolin, a
standardgrade HalloPure® halloysite;
a high-purity ULTRA HalloPure® halloysite; and specialty sands.
(HalloPure® and ULTRA HalloPure® are registered trademarks of the branded
products that I-Minerals intend to produce and market. Any further reference to
‘HalloPure’ or ULTRA HalloPure within this report is to those trademarked
products.) Ore will be fed to the plant
with a front-end loader for comminution then fed to a sand/clay separation circuit using
cyclones. Sand will be sent to dry stack
tailing with the exception of
a screening operation to produce specialty sand. Clays will be split, with the
oversize fraction sent to waste and the halloysite and kaolin cyclone overflow
fraction transferred to a fractionation centrifuge to separate
the halloysite and kaolin fractions. The halloysite can
then subjected to differential flotation to upgrade standard halloysite to a
premium halloysite product, while the kaolin is conditioned, filtered, dried
and calcined to form metakaolin. The calcined metakaolin is milled to produce
the final product. A 3D block model of the deposit was generated and then audited
to confirm its validity. The portion of the
deposit with reasonable prospects for eventual
economic extraction was considered to be mineral resource.
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 6 |
Millcreek considers the kaolinite and halloysite mineralization at the Bovill Project to be amenable to extraction using open-pit mining methods. Since the previous resource report, the commodity quartz & K-spar sands are no longer considered resources. No cut-off grade has been applied to the resource because all recovered material in the resource estimation contains sufficient kaolinite or halloysite to be mined for a profit. The table below presents the Mineral Resource Statement for the Bovill Project, audited and confirmed by MMG:
Reasonable mining costs and plant recoveries were used as early-stage
inputs to the pitshell optimization model. Optimized pit shells were designed
accounting for bench design, ramps, dilution, etc. Mine planning and economic
modelling based on those pit shells were then found to demonstrate the
feasibility of economic recovery of a portion of the mineral resource. These
mineral reserves are summarized as follows:”
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 7 |
3.0 SCOPE OF THE REPORT
RwE has relied on the following
documents and information:
|
• |
Interviewed the Company’s
Board and management and collected data from IMA technical personnel. BVL did not provide access of its
management/Board to RwE. |
|
• |
Collected data on mining in Idaho and on the
Project. |
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 8 |
|
• |
Collected data from ASX and other companies exploring / industrial
minerals. The ASX companies included: Latin Resources Ltd, Red Mountain Mining
Ltd., Archer Materials Ltd., Accelerate Resources Limited, Technology Metals
Australia Limited, Andromeda Metals Limited
and the Industrial Minerals Association (https://www.ima- na.org/). |
|
• |
Reviewed data on the Company’s
Website. |
|
• |
Collected a quantity of data and information from the various online
sources and the Technical Report. This data provided
basic and current
geology and historical data that allowed us to gain a general
understanding of the Project as well as the various
technical opportunities and potential and the exploration and development plans going forward. |
|
• |
Collected data from companies exploring / mining
gold in the western U.S. |
|
• |
This included: Hycroft
Mining, Corp., Nevada
Gold Mines, LLC, SSR Mining,
Coeur Rochester, Inc., McEwen Mining Nevada, Inc., Hecla Mining Co., and
Jerritt Canyon Gold, LLC. |
|
• |
Reviewed valuation literature: |
|
• |
Bureau of Economic
Analysis. Accounting for Subsoil Mineral
Resources. Survey of Current
Business, February 2000. |
|
• |
Carson, Carol S. 1994. Accounting For Mineral Resources: Issues and BEA's
Initial Estimates. (Bureau of Economic Analysis). The updated website
link is now found at: https://www.nap.edu/read/9077/chapter/9 |
|
• |
De Vera, Benjamin and Bennagen, Ma. Eugenio C. 2000. Philippine Mineral
Accounts. |
|
• |
Environmental and Natural
Resources Accounting Project
(ENRAP 4). Department of Environment and Natural
Resources. Paper presented to the Conference on Resource Accounting and Policy,
February 3 and 4, 2000. |
|
• |
The International Valuation Standards Council (IVSC) has published
documentation on mineral properties. https://www.ivsc.org/files/file/view/id/939 |
|
• |
Farzin Y. Hossein. The Effect of the Discount Rate on Depletion of
Exhaustible Resources; The
Journal of Political Economy, Vol. 92, No. 5 (Oct.,
1984), pp. 841- 851. |
|
• |
M. del Mar Rubio Varas, 2005. "Value and Depreciation of Mineral
Resources Over the Very Long Run: An Empirical Contrast of Different Methods," Economics Working Papers 867, Department of Economics and Business, Universitat Pompeu Fabra. Updated link at: https://ideas.repec.org/p/upf/upfgen/867.html. |
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 9 |
|
• |
Roscoe, William E. Valuation of Mineral Exploration Properties Using
the Cost Approach. The updated link to this document can be found at the
following: http://www.rpacan.com/site_Files/Content/Valuation_of_Mineral_Exploration_Pr operties_Using_the_Cost_Approach.pdf |
|
• |
Additional link is: http://www.rpacan.com/site_Files/Content/Valuation_of_Non- Producing_Mineral_Properties.pdf |
|
• |
Rowthorn, Bob and Gardner Brown.
1999. When a High Discount
Rate Encourages Biodiversity.
International Economic Review 40 (2), 315–332. |
|
• |
Valuation of Exploration Properties. CIM Bulletin, v. 89, no. 1004, pp. 69-72. |
|
• |
Valuation of Mineral Assets: Accountancy or Alchemy? Paper presented at
the CIM Annual General Meeting, Quebec, May 2, 1989. |
|
• |
Review of glo0bal
mining disclosure can be found at the following website
link: https://www.lexology.com/library/detail.aspx?g=db67d372-e693-4c9f-b5d7- b7ab4fbea652 |
|
• |
Reviewed the audited IMA financial statements for the periods ending
April 30, 2018 to April 30, 2022 |
|
• |
Did not receive
any management compiled
financial statements of IMA
for the period since April 30,
2022. Readers are cautioned regarding
this. |
|
• |
Reviewed the MD&A
of IMA’s from 01/30/2020 to 04/30/2022 financial statements. |
|
• |
Reviewed a small sample of available industrial mineral companies and
their projects in Australia that was available on the ASX Website. |
|
• |
Reviewed available information on the mining and industrial mineral
exploration industries from google.ca searches as well as from various online
mining exploration sources. |
|
• |
Conducted limited due diligence on what other junior-stage exploration
and mine development companies’ experiences have been with regard to developing
their own properties and projects. Used information and data gathered here as a
basis of determining industry rules-of-thumb and opinions as to value related to previous work conducted and value related to future
work identified by the Technical Report, engineering studies and other
geological/expert work. |
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 10 |
|
• |
Reviewed and collected information on different valuation methods
accepted by the Canadian Institute of Chartered Business Valuators and the
American Society of Appraisers. Our
diligence did find that exploration companies can be valued on different
categories of resource, measured, indicated, inferred. |
|
• |
Also, collected data from IMA and online
sources regarding historical expenditures on the
Project. RwE then carefully analyzed
this data as compared to the findings in the documentation provided to it by
other parties and reached certain valuation and viability conclusions as to the
Project. |
|
• |
Reviewed market conditions regarding mining, which can be summarized as: |
|
• |
Reached out to the Idaho
Geological Survey (“IGS”).
https://www.idahogeology.org/ IGS is a non-regulatory
state agency that leads in the collection, interpretation, and dissemination of geologic
and mineral data for Idaho. The agency has served the state since 1919 and prior to 1984 was
named the Idaho Bureau of Mines and Geology. Gained an understanding of mining
within the State of Idaho. |
4.0 CONDITIONS AND RESTRICTIONS OF THE REPORT
|
• |
The Report is for the Board of the Company and for their use for
internal circulation purposes and only the final signed Report can be relied on
by the Company’s Board and related regulatory bodies. |
|
• |
RwE understands that a summary of the signed Report may be included in
the documentation advising IMA’s shareholders of such findings. |
|
• |
The signed Report may be used for inclusion in public disclosure
documents in Canada and the U.S. only. RwE will require that it review public
disclosure documents in order to ensure accuracy
and consistency with the Report. Such consent will not be unreasonably
withheld. |
|
• |
The Report cannot be submitted to any international stock exchanges and
or foreign regulatory authorities, or to the CRA or the IRS. |
|
• |
RwE did apply generally accepted CICBV valuation principles to the
financial information it did receive from the Company and followed CIMVal
Standards. |
|
• |
RwE has assumed that the information, which is contained in the Report,
is 100% accurate, correct and complete, and that there
are no material omissions of information
that would affect the conclusions contained in the Report that IMA, or their
representatives, are aware of. |
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 11 |
|
• |
RwE did not attempt to audit the accuracy or completeness of the financial,
technical, exploration, development and business data and information provided
to it. |
|
• |
This Report contains conclusions on fair value and on the fair market
value of assets based on the review and analysis undertaken. RwE provides no opinion as to the value
of the Company or any other parties. |
|
• |
This Report has been prepared in light of those standards of the
Canadian Institute of Chartered Business Valuators and the American Society of
Appraiser (both of which Richard W. Evans is a member in good standing). |
|
• |
Should the assumptions used in the Report be found to be incorrect, then the valuation and conclusions may be rendered invalid
and would likely
have to be reviewed in light
of correct and/or additional information. |
|
• |
The Report, and more specifically the assessments and views contained
therein, is meant as independent review of the Project and the Company
as at the Valuation Date respecting the scope outlined above. |
|
• |
The authors of the Report make no representations, conclusions, or
assessments, expressed or implied, regarding the Companies after the Valuation
Date. |
|
• |
The information/assessments contained in the Report pertain only to the
conditions prevailing at the time the Report was completed in July and August
of 2022. |
|
• |
RwE denies any responsibility, financial or legal or otherwise, for any
use and/or improper use of the Report however occasioned. |
|
• |
Any legal disputes
or legal action against RwE Growth Partners,
Inc. as a result of the
Report, or any other matter, is agreed by IMA and BVL, and heir management,
officers, directors and their respective shareholders are agreed
to be settled only in a Canadian court of law. |
|
• |
RwE as well as all of its principals, partner, staff or associates’
total liability for any errors, omissions or negligent acts, whether they are
in contract or in tort or in breach of fiduciary duty or otherwise, arising from any professional services
performed or not performed by RwE, its principals, partner,
any of its directors, officers, shareholders or
employees, shall be limited to the fees charged and paid for the Report. |
|
• |
No claim shall be brought
against any of the above parties, in contract or in tort, more than two years after the
date of the Report. |
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 12 |
5.0 ASSUMPTIONS OF THE REPORT
The authors of the Report have made the following assumptions in completing the Report:
|
(1) |
As at the Valuation Date all assets and liabilities of IMA have been recorded in their accounts and financial statements and follow U.S. GAAP standards. An additional audit of IMA’s financial statements – as set out and used in the Schedules of this Report - would not result in any material change to the provided financial statements to RwE. |
|
(2) |
RwE has relied on the provided documentation by the Company, including data on the historical development and exploration costs on the Project. RwE also assumed data collected from other parties’ and related corporate financial statements were accurate and reliable as well data in the Technical Report reviewed. |
|
(3) |
The book value of the Company’s balance sheet used in the Schedules to the Report equals their fair value unless otherwise noted in the Report. |
|
(4) |
The Company and all of their related parties and their principals had no contingent liabilities, unusual contractual arrangements, or substantial commitments, other than in the ordinary course of business, nor litigation pending or threatened, nor judgments rendered against, other than those disclosed by management and included in the Report that would affect the evaluation or comment. |
|
(5) |
RwE has used the financial statements of IMA as at April 30, 2022 and assumed that there was no material change from this date to the closing of the Proposed Transaction. |
|
(6) |
Critical Assumption. The IMA shareholders are assumed to be treated as one entity and RwE has assumed that this is reasonable as at the Valuation Date. These IMA shareholders exclude BVL, and/or shareholders that are directly or indirectly controlled/managed by BVL, and/or are non arms’ length from BVL. |
|
(7) |
Have assumed that the Company has ownership of the Project and all assets as set out in the IMA financial statements so that one can complete the Proposed Transaction. |
|
(8) |
The Company has complied with all rules and regulations of the TSX-V and the Exchange, government taxation and regulatory practices as well as all aspects of their contractual agreements that would have an effect on the Report and there are no other material agreements entered into by the Company that is not disclosed in the Report. |
|
(9) |
All conditions precedent to the closing of the Proposed Transaction have, or will be completed, or waived, as set out in the Report, as at or before the closing of the Proposed Transaction and that both parties’ complete the Proposed Transaction without any material change/concern/addition/deletion to the consideration issued by BVL as set out in Schedule 6.0, including forgiving of the stated debt. |
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 13 |
|
(10) |
There are no other dilutive events at the close of the Proposed Transaction other than what has been disclosed by the Company’s Board in the Report to the IMA shareholders. |
|
(11) |
BVL has no other material information, not stated within this Report, that would provide it financial reasons as to completing the Proposed Transaction. For example, has an offer from another party as to the sale of the Property and/or Company. RwE needed to make this assumption as BVL did not allow RwE to discuss the Proposed Transaction with BVL. |
|
(12) |
There will be no unforeseen and/or material negative tax consequences to the Company’s shareholders and/or securityholders through the closing of the Proposed Transaction. |
|
(13) |
RwE has been advised by the Board that there will be no other element(s) to the Proposed Transaction other then as is set out in the Report. |
|
(14) |
The Board has noted to RwE that it is not aware of any other facts or data involving the Proposed Transaction or and other matter that would have any material effect on the conclusions in the Report that has not been provided to RwE. |
RwE reserves
the right to review all information and calculations included
or referred to in
this Report and, if it considers it necessary, to revise its views in the light
of any information which becomes known to it during or after the date
of this Report.
6.0 DEFINITION OF FAIR VALUE AND FAIR MARKET VALUE
In preparing the Report, RwE had to consider IFRS 3; which states that,
at the acquisition date, the acquirer shall classify or designate, as
necessary, the identifiable assets acquired and the liabilities assumed, in
order to subsequently apply other IFRSs.
With respect
to identified intangible assets, the relevant standard is International
Accounting Standards (“IAS”)
No. 38, Intangible Assets
(“IAS 38”), wherein
an intangible asset shall be
measured initially at cost; it further explains that if an intangible asset is
acquired in a business combination, the cost of that intangible asset is its
fair value at the acquisition date, as defined within IFRS No. 13, Fair Value Measurement (“IFRS 13”).
Under IFRS 13, fair value is defined as
The price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
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Page 14 |
Fair value is
considered a market-based measurement, as opposed to an entity-specific
measurement. Underlying the definition of fair value is the presumption that it
reflects an exit price received by a market participant in an orderly
transaction.
Fair value
is not, therefore, the amount a market participant would receive or pay in a forced transaction, involuntary
liquidation, or distressed sale.
Fair value, as
defined above, may or may not equal the purchase or sale price in an actual
open market transaction.
In the open
market, there may exist special interest or strategic purchasers, who may be
willing to pay a price in excess of fair value because they can, or believe
they can, enjoy post acquisition synergies, economies of scale, or strategic
advantages by combining the acquired assets/liabilities with their own
operations. Such synergies, economies of scale, and strategic advantages are
referred to as net economic value added.
The
quantification of the premiums such purchasers may pay, if any, is difficult,
if not impossible, without identifying specific purchasers or exposing the
assets/liabilities for sale, on a standalone basis, to the open market.
Therefore, we have provided
our analysis of the acquired
assets and liabilities on a “stand- alone” basis without reference
to the prices that might be paid by purchasers who perceive
post-acquisition net economic value added.
As noted
above, special interest purchasers might be prepared to pay a price higher than
fair market value for the synergies noted above. Such special purchaser
consideration was not included
in the value of the acquired assets and liabilities.
7.0 VALUATION METHODOLOGIES
7.1 Overview
In valuing an
asset and/or a business, there is no single or specific mathematical formula.
The particular approach and the factors to consider will vary in each case.
Valuation
approaches are primarily income-based or asset-based. Income-based approaches are appropriate where an asset
and/or enterprise’s future
earnings are likely to support a
value in excess of the value of the net assets employed in its operation.
Commonly used income-based approaches are the
Capitalization of Indicated Earnings
or Capitalization of Maintainable Cash Flows or a Discounted Cash Flow.
Asset-based approaches can be founded on either going concern assumptions (i.e. an enterprise is viable as a going
concern but has no commercial goodwill) or liquidation assumptions (i.e. an
enterprise is not viable as a going concern, or going concern value is closely
related to liquidation value).
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Page 15 |
Standard
valuation methods applicable to determining value can be grouped into five
general categories:
|
(1) |
Cost approach; |
|
(2) |
Market approach (or sales comparison approach); |
|
(3) |
Income-based approach; |
|
(4) |
Rules-of-Thumb approach; and |
|
(5) |
Combination of any of the above approaches. |
As there are many definitions of cost, the Cost approach
generally reflects the original cost of the assets and/or business in
question or the cost to reproduce the intangible assets of the business itself.
This approach is premised on the principle that the most a notional purchaser and/or
an investor will pay for an investment is the cost to obtain an investment of equal utility (whether by
purchase or reproduction).
The Market
or Sales Comparison approach uses the sales price of comparable assets as the basis for determining value.
If necessary, the market transaction data is adjusted
to improve its comparability and applicability to the asset being valued.
The Income-Based Approach considers the earnings to be
derived through the use of the asset. The capitalized value of the Company’s earnings or cash flows is determined with the application of a capitalization rate, reflecting an
investor’s required rate of return on such an investment. The Rules-of- Thumb approach can be applied to certain assets to serve as a useful determination of value when
industry professionals provide specific information as to standard industry
characteristics and/or acknowledged and accepted rules. Rules-of-Thumb often involve the input of specific industry
competitors and professionals to indicate certain measurable criteria that can
be assessed and applied to as indications of value.
Lastly, a
combination of the above approaches may be necessary to consider the various
elements that are often found within specialized companies and/or are associated
with various forms of intangible assets.
8.0 VALUATION METHOD USED
8.1 Standards Approach
RwE has used
the updated CIMVAL Code for the Valuation of Mineral Properties, as prepared by
the Special Committee of the Canadian Institute of Mining, Metallurgy and
Petroleum on the Valuation of Mineral Properties (CIMVAL), adopted by the CIM Council
on November 29, 2019.
The CIMVAL
Code was adopted by the Canadian Institute of Mining, Metallurgy &
Petroleum (the "CIM") Council on November 29, 2019.
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Page 16 |
Per CIMVAL Code the Qualified Valuator
is an individual who
|
a. |
is a professional with demonstrated extensive experience in the Valuation of Mineral Properties. |
|
b. |
has experience relevant to the numerous mineral properties over the last twenty plus years – and is relying on the Technical Report as MGG can be considered as the Qualified Person for the Project. |
|
c. |
RwE is regulated by and is a member in good standing of a Professional Association or a Self-Regulatory Professional Organization; i.e., the Canadian Institute of Chartered Business Valuators and the American Society of Appraisers. |
In dealing with:
(a) RwE has conducted numerous valuations and fairness opinions of resource properties and companies in which its clients and their accountants have been satisfied and relied on RwE as a qualified valuator (some of which are Canadian, U.S. and International public companies).
A sample of companies that RwE has conducted work on are listed below. Though each of these firms explored
various kinds of minerals – each were at various stages of exploration and
faced similar exploration challenges:
|
Zimtu Capital |
Minco Gold / Silver |
|
Dunnedin Ventures Inc. |
GGX Gold |
|
Trans African Gold Corp. |
Ascot Mining plc. |
|
Sandstorm Resources Inc. |
Luna Gold Corp. |
|
Lowell Mineral Exploration |
Cosigo Resources Inc. |
|
Horseshoe Gold Mining Inc. |
Able Trust Inc. |
|
Imperial Metals Corp. |
Batero Gold Corp. |
|
Sandstorm Metals & Energy Ltd. |
Compass Gold Corp. |
|
Evolving Gold Corp. |
Columbus Gold Corp. |
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 17 |
|
CIC Resources Inc. |
CIC Resources Inc. |
|
Entrée Gold Corp. |
Columbus Silver Corp. |
|
Selkirk Metals Corp. |
Canex Minerals Inc. |
(b) RwE has relied upon the people in the Technical Report. Specifically, RwE has relied on the most current Technical Report writers as the Qualified Person(s).
(c) RwE is a member in good standing with both the Canadian Institute of Chartered Business Valuators and the American Society of Appraisers both of which are regulated and are self-regulatory professional organizations.
CIMVAL Code,
November 2019
The six fundamental principles in undertaking Valuations and Valuation Reports
are Competence, Materiality, Reasonableness, Transparency, Independence
and Objectivity.
Competence
A Qualified Valuator who is
not Competent in all aspects of a Valuation
assignment must seek assistance from one or more Qualified Valuators or other
Experts who are Competent
in the applicable field or discipline necessary to address those aspects. For
example, in a Valuation, a Qualified Valuator may rely on a Technical Report
prepared by a Qualified Person. That
has been done in this Report as noted above.
Materiality
A Valuation must address all Material information. All Material
information must be included or adequately referenced in the Valuation Report.
Materiality is the principle that determines whether certain
information is relevant to the Valuation.
Materiality applies to the nature of the items assessed and their
influence on the quantum of a Valuation. RwE has clearly set out all material
assumptions regarding the input parameters, risks, limitations, and the
associated effects in the Report.
Reasonableness
RwE is comfortable that the Report’s conclusions are reasonable. All
Assumptions are clearly outlined in the Report.
The Report’s valuation
methods relied upon are reasonable within the context of the
purpose of the Report and regarding fair value. The test of reasonableness is
to consider what appropriately qualified and experienced Qualified Valuators,
acting reasonably, would likely conclude in the circumstances.
RwE is of the view that our opinion is reasonable in the circumstances,
that is, what RwE believes is rational
and plausible in the circumstances and would be viewed as such if considered by other appropriately
qualified and experienced Qualified Valuators with the same information and at
the same time.
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Page 18 |
Transparency
The Valuation process and Valuation Report must be transparent, such
that its material assumptions and conclusions must be clear and unambiguous and therefore understandable to the reader. All material assumptions and any limitation to the Valuation that could affect the Valuation conclusion must be disclosed
in the Valuation Report. RwE has done this in the Report and Schedules.
Independence
For the Qualified Valuator to be able to develop a Valuation that users
can confidently accept as free from bias, it is preferred, and may be mandated
that the Qualified Valuator be Independent of the outcome of the Valuation, and
thus be objective in exercising their judgement. This is clearly set out in section 12.2.
Objectivity
The Qualified Valuator
should approach a Valuation with Objectivity. This is promoted
by an environment that is supported by data and minimizes the influence of subjective factors, such as the Valuator’s personal
bias, on the Valuation process.
The process of valuation requires the valuator to make impartial
judgements as to the reliability of inputs and assumptions. For a valuation to
be credible, it is important that those judgements are made in a way that
promotes transparency and minimizes the influence of any subjective factors on
the process. Judgement used in a valuation must be applied objectively to avoid biased
analyses, opinions and conclusions (Adapted
from IVS Framework, Section
40.1). RwE has carried out the
Report’s work, analysis and conclusions objectively.
Additional CIMVAL
Code Items:
Valuation Approaches
The Qualified Valuator has the responsibility to decide which Valuation
approaches and methods to use. The choice of the specific approaches and methods used,
or excluded, must be
justified and explained by the Qualified
Valuator. The limitations of each method
must be explained.
The three generally accepted Valuation approaches of Income, Market, and
Cost must be considered and discussed
in the Valuation Report. More than one approach should be used in the Valuation of each Mineral
Property if it is reasonably possible and appropriate to apply them. If a Qualified Valuator
is of the opinion that only one approach should be used in particular circumstances, the
Qualified Valuator must justify and explain why other approaches are not used in such circumstances. A Market Method was not used as no other reasonable comparable transactions
and/or companies were found by the Company’s management/Board (and given to
RwE) or by RwE.
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Page 19 |
Method Used by RwE:
Cost Method – RwE has used
the reported costs
of the Project as reported
on IMA’s April 30, 2022 balance sheet as the basis
of fair value of the leases/rights held on the Property by IMA. Doing this has
meant that RwE considered expenditures as recorded and stated by the Company’s
auditors on its April 30, 2022 year-end financial statements.
RwE has relied on these 2022 year-end IMA financial statement amounts as
the most indicative measure of the value
related to the leases/rights of the Project.
No other financial data related to the Property
appeared to be more reasonable or accurate as to account for the present value
related to the Project. While
historical costs have been incurred undertaking the work on the Property, RwE is of the view that the audited statements reflect what arms’ length
parties would recognize as fair value for such assets as at the Valuation
Date, especially given the materials costs still needed to be incurred.
Identification of the Property
and Interest Being Valued
The Mineral Property, including the interest or right that is the
subject of the Valuation, must be described in adequate detail to identify the
property, and the physical, legal, and economic characteristics relevant to the Valuation. This description is required in particular
when the subject of the Valuation is economically interdependent with other properties, in which case the assumptions used in the Valuation must be
stated. This is set out in the
Report, which IMA management has reviewed and confirmed is an accurate summary.
Using TSX-V
Guidelines
TSX Venture
Exchange Corporate Finance Bulletin dated January 28, 2020 clarifies that with
respect to the CIMVAL Code for the Valuation of Mineral Properties November 29,
2019, all references to a valuation report for a mineral property in the
Manual, and the associated guidance in respect of those reports, continue to be
a reference to a Comprehensive Valuation Report (as defined in the New CIMVAL
Code).
The Exchange
has reviewed the above report for compliance with Exchange Valuation Standards
and Guidelines for Minerals Properties, Appendix 3G: which incorporate Canadian
Institute of Mining, Metallurgy and Petroleum Standards and Guidelines for
Valuation of Mineral Properties Adopted by the CIM Council on November 29,
2019.
For properties without
mineral reserves:
|
• |
Comparable transactions whereby properties similar in all aspects are incorporated into the analysis, whereby fair market value can be determined. |
|
• |
Modified appraised value method whereby only the retained past expenditures (also known as “historical costs” or “replacement costs”) are included. The Exchange does not generally accept the inclusion of warranted future expenditures for the purposes of the appraised value method. Associated administrative costs will generally not be accepted.” |
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 20 |
Given all of the above, RwE has followed
CIMVAL, November 2019 Code and standards
and has used methods to value the Project based on these. The Report complies
with the CIMVAL Code and Standards, November 2019 in its entirety.
8.2 Overview
In valuing
a mineral property, especially previous
to resource estimates, there is no single or specific mathematical formula.
The particular approach
and the factors to consider
will vary in each case.
Where there
is evidence of open market transactions having occurred involving
the mineral property, those
transactions may often form the basis for establishing the value of the mineral
property.
In the absence
of comparable arms’ length open market transactions, the three basic,
generally-accepted approaches for valuing a business interest are:
|
(a) |
The Income / Cash Flow Approach; |
|
(b) |
The Market Approach; and |
|
(c) |
The Cost or Asset-Based Approach. |
A summary
of these generally-accepted valuation approaches is provided below.
The
Income/Cash Flow Approach is a general way of determining a value indication of
a mineral property once a clear economic assessment, using one or more methods
wherein a value is determined
by discounting anticipated future cash flows and benefits.
This approach
contemplates the continuation of the mining operation, as if it is a “going concern”.
With regards
to a company involved in exploration and development of a mineral
property, or the valuation of a mineral property itself, the Income
Approach generally relates to the current value of expected future income or
cash flow arising from the potential development of a mineral project. The
Market Approach to valuation is a general way of determining a value indication of a business
or an equity interest therein
using one or more
methods that compare the subject
entity to similar
mineral properties which has been sold.
Examples of methods applied under this approach
include, as appropriate: (a) the “Trading Price Method”, (b) the “Guideline
Public Company Method”, (c) the “Merger and Acquisition Method”; and (d)
analyses of prior transactions of ownership interests in the subject entity.
The Cost
Approach is based upon the economic principle of substitution. This basic
economic principle asserts that an informed, prudent purchaser will pay no more
for an asset than the cost to obtain an opportunity of equal utility
(that is, either
purchase or construct a
similar asset). From an economic
perspective, a purchaser will consider the costs that they will avoid and use
this as a basis for value. The Cost Approach typically includes a comprehensive
and all- inclusive definition of the cost to recreate an asset. Typically the
definition of cost includes the direct exploration costs, labour and all forms
of obsolescence applicable to the asset.
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Page 21 |
With regards
to mineral properties, the Cost Approach involves a review of the historical
exploration expenditures and their contribution to the current
value of the mineral property. Lastly, a combination of the
above approaches may be necessary (i.e., a “Weighted Approach”) to consider the
various elements that are often found within specialized companies and/or
are associated with various forms of intellectual property and where one
or two approaches to value is insufficient to capture the nature of the
business operations and its assets.
8.3 Mineral Assets – Stage
of Maturity
RwE reviewed
the Project within the mineral exploration fields and found that mineral assets
and mineral securities can be defined by their level of actual asset maturity:
|
i. |
“Exploration Areas” refer to properties where mineralization may or may not have been identified, but where a mineral resource has not been identified. |
|
ii. |
“Advanced Exploration Areas and Pre-Development Projects” are those where Mineral Resources have been identified and their extent estimated, but where a positive commercial development decision has not been made. |
|
iii. |
“Development Projects” refers to properties which have been committed to production, but which have not been commissioned or are not operating at design levels. |
|
iv. |
“Operating Mines” are those mineral properties which have been fully commissioned and are in production. |
The Project
falls within (ii)
above.
8.4 The Valuation Approach
Given the
approaches of valuation outlined above as well as section 8.1 above, it is the
view of the authors of the Report
that that the most appropriate method in determining the range of the fair market value for the Company is as set
out in Schedules 1.0 to 5.0.
At the same
time, RwE undertook a fairly detailed, in-depth and extensive review of various CSE and TSX-V and other market
comparable transactions in order
to get a sense of what the
actual mining exploration marketplace was placing on such identified firms and
resource transactions. It did appear
that the marketplace was not placing a premium on industrial mineral projects
at the current stage of development and for firms that had the debt level that IMA had. While RwE’s review
was limited, RwE also did not received
any information from IMA’s
Board that suggested any different conclusions from IMA’s
own Board regarding this. RwE
was comfortable with the method used as being the most realistic.
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Page 22 |
9.0 VALUATION OF THE COMPANY
The analysis
and work were carried out in Schedules 1.0 to 5.0. Readers are advised that
they should review and everyone of these Schedules.
In undertaking
the above described valuation approach, it was apparent that based on and
subject to all of the foregoing, it is reasonable for RwE to outline that the fair market value of a 100% of the equity of the
Company as at the Valuation Date, was in the range of C$1,150,000.
Our conclusions considered the facts that:
|
1. |
The relative amounts of known immediate exploration costs and work commitments versus future contingent work commitments. |
|
2. |
The likely development / exploration methods and the ongoing material Project development costs. |
|
3. |
The country in which the Project is located and the political environment. |
|
4. |
The infrastructure located at or near the Project. |
|
5. |
The new permitting of the Project. |
|
6. |
IMA ‘s Board advises RwE that the debt/promissory notes are tied directly to IMA, not just the Project, meaning that spinning-out the Project and retaining the public entity on a go-forward basis is not possible. |
|
7. |
Reviewed the financial statements of the Company from 2017 - 2022. Examined whether there should be any adjustment based on an appraised value method. Examined the NI 43-101 Technical Report and saw the stated resources/reserves. RwE then tried to assess whether any companies might be willing to pay a premium above its stated book value for access to such resources/reserves. RwE found no evidence that arms’ length parties / companies would pay a premium for such existing resources / reserves and/or work to-date. Multiple reasons existed for this: |
|
(1) |
uncertainty as to the costs to realize the resources/reserves. While the 43-101 Technical Report writers note that, "the economic viability of the Project" - there remains up to $500,000 that must be "spent to demonstrate the economic feasibility of the Project and develop a more detailed estimate of the Project's value to support major investment decisions". |
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Page 23 |
|
After which,
the Project still needs almost US$50 million of capital to realize the
build-out of the Project. |
|
While
technical/feasibility studies indicate potential to be realized from mining
exploration, build-out, material real financial risk remains as at the
Valuation Date as to whether
the Project can realize such potential. Even if
the promissory note debt was removed/forgiven at 100%, the adjusted BV of IMA
would only be in the range be nominal. In
other words, it would still not increase the realizable fair market value of
the Company beyond the valuation methods used. |
|
The
independent members of the IMA Board also advise RwE that it has received /
found no offer better than the one received from BVL after its own internal
review / search / assessment; |
|
(2) |
industrial minerals have experienced mixed demand in 2021/2022, while interest exists for some (especially halloysite, etc.), market demand has been mixed overall (Source: EvalueServe, 2022); and |
|
(3) |
off-take agreements (a cornerstone to realizing value from industrial minerals) can not yet be secured due to the long timeframe to production making measuring economic success currently very difficult. |
|
8. |
The Company could wait and not do a transaction now, however, there appeared to be no evidence that BVL would accept this, or that BVL would fund the Company further (this is based on IMA’s Board disclosure to RwE). This makes waiting impractical. |
|
9. |
The measured resources/reserves located on the Project. |
|
10. |
The potential forecasted by the Technical Report regarding the Project. |
|
11. |
Many CSE and TSX-V and other exploration stage projects are not being valued favorably due to the market’s perceived high risk to get such projects to actual revenues / earnings. |
|
12. |
There is no certainty that the next stage project development will occur on favorable terms for IMA and/or for BVL. |
|
13. |
Additional technical and mining development may be positive and/or negative from future work, there is no material certainty that can be applied to the Project. |
10.0 FAIRNESS
CONSIDERATIONS
The fairness of a Proposed Transaction for IMA’s
shareholders is tested
by:
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 24 |
|
i. |
assessing the latest available financial statements of IMA; |
|
ii. |
considering the fair value likely for the assets held by IMA; |
|
iii. |
considering the fair value of the BVL consideration; |
|
iv. |
the terms of the IMA acquisition by BVL – i.e., whereby IMA’s Board advises RwE that the Proposed Transaction will be exactly as is set out in Schedule 6.0 of the Report; and |
|
v. |
the material external debt/promissory notes that appears can never be serviced by the Company in the immediate and medium-term, making surviving extremely difficult. |
There are
many events that are assumed will occur between the Valuation Date and the closing
of the Proposed Transaction.
These events
are either conditions of the Proposed Transaction or are necessary (e.g. due
diligence, legal costs
and other cost incurred in connection with the Proposed
Transaction) aspects of the closing process.
Readers should
refer to Schedule
1.0 to 6.0.
11.0 CONCLUSION AS TO FAIRNESS
Based upon RwE’s valuation
work and subject to all of the foregoing, RwE is of the opinion, as at the Valuation Date,
that the terms of the Proposed Transaction is fair, from a financial point of view, to
the shareholders of IMA as is shown in Schedule 6.0.
In assessing the fairness of the Proposed
Transaction to the shareholders of IMA, RwE has
considered, inter alia, the
following:
|
1. |
Comparison of the Company’s value prior to completion of the Proposed Transaction and the fair value of the consideration issued for 100% of the equity of the Company as at the closing of the Proposed Transaction. |
The consideration offered for 100% of the equity
of the Company exceeds the fair
market value of the Company on a pre-Proposed Transaction basis.
|
2. |
Other potential issues related to not completing the Proposed Transaction: |
|
i. |
The acquisition of IMA appears to be the most viable option for IMA given that BVL will not continue to fund the Project/Company given the current corporate structure, costs related to a TSX-V listing and other future capital still needed to fund Project work. |
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 25 |
|
ii. |
Survivability of the Company appears challenging if BVL funds are not provided or available. |
|
iii. |
Even if the Company could be re-structured, private placements remain difficult for small mining and mineral exploration firms that do not yet have a producing property. |
|
Terms and conditions, although
improving, still do not appear as favorable to such companies as at the Valuation Date as they once did. This Project still requires material
capital (as set out in the Technical Report) and there is material risk as to the timing
of when such CAPEX and OPEX costs / capital can be recovered – if ever. |
|
iv. |
Private placements remain a viable financing option for more senior and strong larger companies, especially those with a focus on gold in this Western US region; however, financing for industrial mineral deals/transactions appears to be even more challenging. This is because the market for some of the Company’s possible future minerals do not appear as favorable as they once were (i.e., substitutes are now available). |
|
When one
considers all of the above together, it
is reasonable to conclude that the Proposed Transaction is fair, from a financial viewpoint
to the shareholders of IMA. |
12.0 QUALIFICATIONS AND CERTIFICATE
12.1 Qualifications
The Report
preparation, and related fieldwork and due diligence investigations, were
carried out by Richard W. Evans, MBA, CBV, ASA and other analysts of RwE, who were
fully supervised by Mr. Evans.
Since 1994 Richard W. Evans has been involved
in the financial services and management
consulting fields and has been involved in the preparation of over 3,000
technical and assessment reports, business plans, business valuations, and
feasibility studies.
Richard Evans
is a Principal of RwE. He has fifteen years of experience working in the areas
of valuation, litigation support, mergers & acquisitions and capital
formation.
He has more than 10 years
of management experience in the high-tech
field where he held
various positions in technical support,
development, marketing, project
manager, channels management
and senior management positions.
Prior to focusing on expanding and diversifying a small financial consulting firm, Richard was extensively involved in the
high technology sector in Western Canada and the U.S. Pacific Northwest
where he served
for two years as the General Manager
of Sidus Systems Inc. At Sidus
he was directly responsible for managing the firm’s
US$15 million business operation throughout Western Canada and the Pacific
Northwest.
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Page 26 |
Previous to
this, he spent almost nine years with Digital Equipment of Canada Limited where
he was involved in a technical support, sales, marketing, project management
and eventually channels management capacity.
RwE has conducted numerous
valuations and fairness
opinions of resource
properties and companies in which its clients, their advisors, buyers,
planners, accountants and the courts and regulatory bodies have been
satisfied and relied on RwE as a qualified valuator.
A sample of such engagements is:
|
Trans African Gold Corp. |
Ascot Mining plc. |
CIC Resources Inc. |
|
Sandstorm Resources Inc. |
Luna Gold Corp. |
Selkirk Metals Corp. |
|
Lowell Mineral Exploration |
Cosigo Resources
Inc. |
Entrée Gold Corp. |
|
Horseshoe Gold Mining
Inc. |
Able Trust Inc. |
Terra Mining Corp. |
|
Imperial Metals Corp. |
Batero Gold Corp. |
Canex Minerals
Inc. |
|
Sandstorm Metals &
Energy Ltd. |
Compass Gold Corp. |
Western Mountain
Index |
|
Evolving Gold
Corp. |
Columbus Gold Corp. |
Columbus Silver
Corp. |
Many of the reports
he has authored have been used by the court systems in B.C., Alberta and Ontario as well as in the U.S. and Europe.
He has also done work for public
regulatory boards and groups worldwide.
Richard has
been actively involved in the above professional services with hundreds of
companies and has served as a board member for a select number of public and
private firms. His area of professional expertise is in middle market and micro-cap companies, especially firms
needing advice and assistance with their business plans, operating plans and
valuations.
He has also undertaken work used on and relied upon by public companies and regulatory bodies in Canada, the United States, Europe and Asia. He has undertaken valuation work for the Courts in British Columbia, Alberta, Ontario and Australia as well as for the Family Court in B.C.
Richard is extensively involved in sports coaching management and volunteer work throughout BC helping young adults and volunteer associations.
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
Page 27 |
He obtained
his Bachelor of Business Administration degree from Simon Fraser University, British
Columbia in 1981 as well as completed
his Master’s degree in Business Administration at the University
of Portland, Oregon in 1984 (where he graduated with honors). Richard holds the
professional designations of Chartered Business Valuator and Accredited Senior
Appraiser. He is a member in good standing with both the Canadian Institute of
Chartered Business and the American Society of Appraisers.
12.2 Certification and Independence
The analyses, opinions, calculations and
conclusions were developed, and this
Report has been prepared in accordance with the standards set forth by the Canadian
Institute of Chartered Business Valuators and follows CIMVAL Code, November
2019 given the technical data and material provided.
RwE was paid
a professional fee, plus out-of-pocket disbursements for the preparation of the
Report by IMA. The fee established
for the Report has not been contingent upon the value or other opinions
presented. The authors
of the Report have no present or prospective
interest in the parties that have prepared
the Technical Report,
IMA and/or any other entity
/ company
that is the subject of this Report.
RwE and its principal has no personal
interest with respect to any of the parties involved with any of the
entities or properties described within this Report.
RwE has relied
on information and data provided to it by IMA’s Board and management. All
readers are advised to seek the advice from their own advisors as to the value
of the Project and the Company and the nature of BVL offer.
RwE can not
provide any assurance that outside parties, including shareholders from the Company
(excluding interested and non-arms’ length BVL parties that own IMA shares),
regulatory parties, the TSX-V and/or other parties
will agree with the conclusions of RwE – all readers
are cautioned regarding this.
RwE Growth
Partners, Inc.
Richard W. Evans, MBA, CBV, ASA
Chartered Business Valuator – Canadian Institute
of Chartered
Business
Valuators Accredited Senior Appraiser – American
Society of Appraiser
Telephone: (778) 373-5432
REPRESENTATION & WARRANTY LETTER
Independent Members of the Board of I-Minerals Inc.
Suite 880, 580 Hornby Street, Vancouver
British Columbia, Canada V6C 3B6
TO: |
RwE Growth Partners, Inc. |
Attention: Richard W. Evans |
|
4720 Kingsway Unit 2600 Metrotower 2 Burnaby, British Columbia Canada V5H 4N3 |
|
Dear Sir:
Disclosure of Information for the Fairness
Opinion (the "Report")
regarding the
Proposed Transactions involving
I-Minerals Inc.
&
BV Lending
LLC
We acknowledge and confirm that
I-Minerals Inc. (the “Company”) has provided all pertinent and necessary information, to the best of our knowledge and ability, to RwE
Growth Partners, Inc. (“RwE”) for their preparation of a ready to be issued Report, dated, for reference, September
13, 2022.
We further
acknowledge that we reviewed the entire September
13, 2022 DRAFT document and
thereafter provided all necessary feedback and information to RwE so that RwE
is now in a position to issue a final, signed Report.
In summary,
we and all representatives of the Company have made full, true and plain disclosure to RwE concerning the Company, its assets and liabilities, the terms
and conditions of the Proposed Transaction (all as stated in the Report) and
all elements related to the Proposed Transaction – as is reflected in the
Report.
We confirm,
to the best of our knowledge and belief, the following representations made to you during the
preparation of the Report:
1. |
We are responsible for the fair presentation of information regarding the history of the Company and all aspects related to its assets and liabilities as defined in the Report. The Company’s financial information provided by us is, to the best of our knowledge, accurate. The information contained in the Report represents accurately the history of the Company and all of its assets and liabilities and there are no material facts or omissions of information that would materially affect the disclosures contained therein. |
2. |
We have made available to you (to the best of your knowledge): |
|
• |
Financial records and related data on the Company and on all aspects of the Proposed Transaction and all related matters; |
|
|
|
|
• |
Available financial data; |
|
|
|
|
• |
Any material contracts and agreements; and |
|
|
|
|
• |
Existing and previous data, documentation, and other information required for the completion of the Report |
3. |
There have been, and are, no: |
|
• |
Irregularities involving the Company and/or any of its assets, the Company’s directors, management or anyone else involved in the Proposed Transaction. or with any of the related parties to either form that have not been entirely disclosed. |
|
• |
Communications from any government, court, commission or regulatory body or agency of the federal, provincial, or municipal governments or related bodies concerning any violations of any laws, regulations or rulings thereof concerning the assets of the Company or the Company or any matters involved in the Proposed Transaction (to the best of our knowledge) and any related parties. |
|
• |
Nor has there been any such violation or possible violations that could have any material effect on the Report. |
5. |
We have no plans or intentions that may cause the representations, disclosures and information made in the Report to be inaccurate or misleading. |
6. |
As at the date of the Report there are no issues of litigation threatened or implied, including any class action lawsuits or shareholder dissent remedies, actions against the Company or the planned go-forward entities not disclosed in the Report. |
7. |
As at the date of the Report no minority shareholder interests (to the best of our knowledge), or any related parties or non-arms’ length parties are presently being oppressed in any manner. |
8. |
The Company is in good standing with all securities regulators and there is no litigation(s) pending or threatened. |
Page 2 of 3
9. |
The Company (to the best of our knowledge) has satisfactory title to all of the assets as described in the Report, and there are no liens or encumbrances on such assets nor has any assets been pledged, except as disclosed in the Report. |
10. |
No events have occurred subsequent to the date of the Report that would require amendment, revision, or disclosure in the Report. |
11. |
There is no material facts, data or information regarding the Company and/or any of its assets that is not disclosed in the Report that would be material to its conclusions (to the best of our knowledge). |
We declare
that we have provided RwE complete, full, true, and plain disclosure about the
Company and all of its assets and liabilities as set out in the Report (to the
best of our knowledge).
Given that we
declare all of the above is accurate, complete and true, we are now in agreement
that RwE may immediately issue to the Independent Members
of the Board a final, signed
September 13, 2022 Report.
Yours very
truly,
Independent Member of the Board of I-Minerals Inc.
______________________________ Wayne Moorhouse
Signature Printed Name
I-Minerals, Inc Director
Entity Representing Title or Position
September 13, 2022
Date
Page 3 of 3
Fairness Opinion:
September 13, 2022 I-Minerals Inc. / BV Lending LLC |
|
APPENDIX 1.0
NI 43-101
Technical Report
Bovill Project
- Pre-Feasibility Study
- March 31, 2021
**
AVAILBLE DIRECTLY FROM I-MINERALS INC’S - BOARD OF DIRECTORS **
Fairness Opinion: September 13, 2022 I-Minerals Inc. / BV Lending LLC |
|
SCHEDULES 1.0 TO 6.0
I-Minerals Inc. |
|
Effective Date of the Valuation: June 30, 2022 |
|
Balance Sheet |
|
U.S. dollars |
Schedule 1.0 |
I-Minerals Inc. |
|
Effective Date of the Valuation:
June 30, 2022 |
|
Allocation of Adjusted Net Assets |
|
U.S. dollars |
Schedule 2.0 |
I-Minerals
Inc. |
|
Effective Date of the Valuation: June 30, 2022 |
|
Adjusted Book Value |
|
U.S. dollars converted to Canadian dollars |
Schedule 3.0 |
I-Minerals Inc. |
|
Effective Date of the Valuation: June 30, 2022 |
|
Trading Price Method |
|
Stock Volatility |
|
Canadian dollars |
Schedule 4.0 |
I-Minerals Inc. |
|
Weighted Valuation Approach |
|
Canadian dollars |
Schedule 5.0 |
Proposed Acquisition of 100% of the Equity of I-Minerals Inc. ("IMA") by BV Lending LLC ("BVL") - Proposed Transaction |
Fairness Calculation for the IMA Independent Board Members |
|
based on Fair Market
Value of the
IMA |
SUMMARY: to the I-Minerals Inc. shareholders, from a financial point of view |
Canadian dollars |
|
APPENDIX
“E”
I-MINERALS
INC.
(the “Company”)
AUDIT COMMITTEE CHARTER
PURPOSE OF THE COMMITTEE
The purpose of the Audit
Committee (the “Committee”) of the Board of Directors (the “Board”) of the
Company is to provide an open avenue of communication between management, the
Company’s independent auditor and the Board and to assist the Board in its
oversight of:
|
• |
the integrity, adequacy and timeliness of the Company’s financial reporting and disclosure practices; |
|
• |
the Company’s compliance with legal and regulatory requirements related to financial reporting; and |
|
• |
the independence and performance of the Company’s independent auditor. |
The Committee shall also perform
any other activities consistent with this Charter, the Company’s articles and
governing laws as the Committee or Board deems necessary or appropriate.
The Committee shall consist of at
least three directors. Members of the Committee shall be appointed by the Board
and may be removed by the Board in its discretion. The members of the Committee
shall elect a Chairman from among their number. A majority of the members of
the Committee must not be officers or employees of the Company or of an
affiliate of the Company. The quorum for a meeting of the Committee is a
majority of the members who are not officers or employees of the Company or of
an affiliate of the Company. With the exception of the foregoing quorum
requirement, the Committee may determine its own procedures.
The Committee’s role is one of
oversight. Management is responsible for preparing the Company’s financial
statements and other financial information and for the fair presentation of the
information set forth in the financial statements in accordance with generally
accepted accounting principles (“GAAP”). Management is also responsible for
establishing internal controls and procedures and for maintaining the
appropriate accounting and financial reporting principles and policies designed
to assure compliance with accounting standards and all applicable laws and
regulations.
The independent auditor’s
responsibility is to audit the Company’s financial statements and provide its
opinion, based on its audit conducted in accordance with generally accepted
auditing standards, that the financial statements present fairly, in all
material respects, the financial position, results of operations and cash flows
of the Company in accordance with GAAP.
The Committee is responsible for
recommending to the Board the independent auditor to be nominated for the
purpose of auditing the Company’s financial statements, preparing or issuing an
auditor’s report or performing other audit, review or attest services for the
Company, and for reviewing and recommending the compensation of the independent
auditor. The Committee is also directly responsible for the evaluation of and
oversight of the work of the independent auditor. The independent auditor shall
report directly to the Committee.
AUTHORITY AND RESPONSIBILITIES
In addition to the foregoing, in
performing its oversight responsibilities the Committee shall:
1. |
Monitor the adequacy of this Charter and recommend any proposed changes to the Board. |
2. |
Review the appointments of the Company’s Chief Financial Officer and any other key financial executives involved in the financial reporting process. |
3. |
Review with management and the independent auditor the adequacy and effectiveness of the Company’s accounting and financial controls and the adequacy and timeliness of its financial reporting processes. |
4. |
Review with management and the independent auditor the annual financial statements and related documents and review with management the unaudited quarterly financial statements and related documents, prior to filing or distribution, including matters required to be reviewed under applicable legal or regulatory requirements. |
5. |
Where appropriate and prior to release, review with management any news releases that disclose annual or interim financial results or contain other significant financial information that has not previously been released to the public. |
6. |
Review the Company’s financial reporting and accounting standards and principles and significant changes in such standards or principles or in their application, including key accounting decisions affecting the financial statements, alternatives thereto and the rationale for decisions made. |
7. |
Review the quality and appropriateness of the accounting policies and the clarity of financial information and disclosure practices adopted by the Company, including consideration of the independent auditor’s judgment about the quality and appropriateness of the Company’s accounting policies. This review may include discussions with the independent auditor without the presence of management. |
8. |
Review with management and the independent auditor significant related party transactions and potential conflicts of interest. |
9. |
Pre-approve all non-audit services to be provided to the Company by the independent auditor. |
10. |
Monitor the independence of the independent auditor by reviewing all relationships between the independent auditor and the Company and all non-audit work performed for the Company by the independent auditor. |
11. |
Establish and review the Company’s procedures for the: |
|
• |
receipt, retention and treatment of complaints regarding accounting, financial disclosure, internal controls or auditing matters; and |
|
• |
confidential, anonymous submission by employees regarding questionable accounting, auditing and financial reporting and disclosure matters. |
12. |
Conduct or authorize investigations into any matters that the Committee believes is within the scope of its responsibilities. The Committee has the authority to retain independent counsel, accountants or other advisors to assist it, as it considers necessary, to carry out its duties, and to set and pay the compensation of such advisors at the expense of the Company. |
13. |
Perform such other functions and exercise such other powers as are prescribed from time to time for the audit committee of a reporting company in Parts 2 and 4 of Multilateral Instrument 52-110 of the Canadian Securities Administrators, the Business Corporations Act (Canada) and the by-laws of the Company. |
APPENDIX "F"
I-MINERALS INC.
(the “Company”)
AUDITED FINANCIAL STATEMENTS OF
THE COMPANY FOR THE YEARS ENDED
APRIL 30, 2022 AND 2021
(See Attached)
I-Minerals Inc.
Consolidated Financial
Statements
April 30, 2022 and 2021
(Expressed in US
dollars)
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.
|
Tel: 604-688-5421 Fax: 604-688-5132 www.bdo.ca Vancouver, BC V6E 3P3 |
BDO Canada LLP 1100 – Royal Centre 1055 West Georgia Street
|
Report
of Independent Registered Public Accounting Firm
Shareholders
and Board of Directors
I-Minerals Inc.
Vancouver,
Canada
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance
sheets of I-Minerals Inc. (the “Company”) as of April 30, 2022 and 2021, the related
consolidated statements of loss, capital deficit, and cash flows for each of
the years then ended and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial
position of the Company at April 30, 2022 and 2021, and the results of its operations
and its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
Material Uncertainty Related to Going Concern
The accompanying consolidated financial statements have
been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its 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 consolidated financial statements are the
responsibility of the Company’s management.
Our responsibility is to express an opinion on the Company’s
consolidated 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 the 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 about whether the consolidated financial statements
are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its
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 consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.
/s/ “BDO CANADA LLP”
Chartered Professional Accountants
Vancouver,
Canada
July
21, 2022 except
for Notes 1, 2, 3, 4, 5, 6, 8, 12 and 13 as to which date is December 29, 2022
We have served as the Company's
auditor since 2004.
BDO
Canada LLP, a Canadian limited liability partnership, is a member of BDO
International Limited, a UK company limited by guarantee, and forms part of the
international BDO network of independent member firms.
I-Minerals Inc. Consolidated
Balance Sheets April 30,
2022 and 2021 |
(Expressed
in US dollars) (Prepared
in accordance with US GAAP) |
|
Notes |
2022 $ |
2021 $ |
ASSETS |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
|
14,029 |
89,120 |
Receivables |
|
19,584 |
5,819 |
Prepaids |
|
23,079 |
60,788 |
Assets held-for-sale |
12 |
1,952,012 |
1,993,800 |
|
|
|
|
TOTAL ASSETS |
|
2,008,704 |
2,149,527 |
|
|
|
|
LIABILITIES |
|
|
|
Current liabilities |
|
|
|
Accounts payable and accrued liabilities |
4,9 |
1,250,188 |
2,785,881 |
Promissory notes due to related party |
6 |
34,776,937 |
32,029,474 |
Liabilities held-for-sale |
12 |
152,864 |
150,533 |
|
|
|
|
TOTAL LIABILITIES |
|
36,179,989 |
34,965,888 |
|
|
|
|
CAPITAL DEFICIT |
|
|
|
Capital Stock |
|
|
|
Authorized: |
|
|
|
Unlimited common shares with no par value |
|
|
|
Issued and fully paid: 93,730,212 (April 30, 2021 – 93,730,212) |
7 |
19,225,087 |
19,225,087 |
Additional paid-in capital |
|
1,865,342 |
1,865,342 |
Deficit |
|
(55,261,714) |
(53,906,790) |
TOTAL CAPITAL DEFICIT |
|
(34,171,285) |
(32,816,361) |
|
|
|
|
TOTAL LIABILITIES AND CAPITAL DEFICIT |
|
2,008,704 |
2,149,527 |
Basis
of Presentation and Going Concern (Note 1)
Subsequent
events (Notes 6, 12 and 13)
On behalf
of the Board
“John Theobald” Director |
“W. Barry Girling” Director |
The accompanying
notes are an integral part of these consolidated financial statements.
I-Minerals Inc. Consolidated
Statements of Loss For the years
ended April 30, 2022 and 2021 |
(Expressed
in US dollars) |
|
|
2022 |
2021 |
|
Notes |
$ |
$ |
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
Amortization |
|
- |
2,040 |
Management and consulting fees |
9 |
103,893 |
103,602 |
General and miscellaneous |
|
129,525 |
144,210 |
Professional fees |
9 |
207,027 |
156,821 |
|
|
|
|
|
|
(440,445) |
(406,673) |
OTHER (EXPENSE) INCOME FROM CONTINUING OPERATIONS |
|
|
|
Foreign exchange gain |
|
2,280 |
4,300 |
Interest expense |
6 |
(104,091) |
(3,725,237) |
|
|
|
|
LOSS FOR THE YEAR FROM CONTINUING OPERATIONS |
|
(542,256) |
(4,127,610) |
|
|
|
|
Loss for the year from discontinued operations |
12 |
(812,668) |
(771,649) |
|
|
|
|
LOSS FOR THE YEAR |
|
(1,354,924) |
(4,899,259) |
|
|
|
|
Loss per share from continuing operations – basic and diluted |
|
(0.00) |
(0.00) |
Loss per share from discontinued operations – basic and diluted |
|
(0.01) |
(0.05) |
|
|
|
|
Weighted average number of shares outstanding |
|
93,730,212 |
93,730,212 |
The accompanying
notes are an integral part of these consolidated financial statements.
I-Minerals Inc. Consolidated
Statements of Cash Flows For the years
ended April 30, 2022 and 2021 |
(Expressed in US dollars) |
|
2022 $ |
2021 $ |
OPERATING ACTIVITIES |
|
|
Net loss for the year |
(1,354,924) |
(4,899,259) |
Items not involving cash: |
|
|
Amortization |
2,534 |
7,294 |
Change in non-cash operating working capital items: |
|
|
Receivables |
(13,765) |
3,365 |
Prepaids |
37,163 |
(47,151) |
Accounts payable and accrued liabilities |
138,764 |
3,749,427 |
|
|
|
Cash flows used in operating activities from continuing operations |
(406,542) |
(460,988) |
Cash flows used in operating activities from discontinued operations |
(783,686) |
(725,336) |
|
(1,190,228) |
(1,186,324) |
|
|
|
INVESTING ACTIVITIES |
|
|
Purchase of equipment |
- |
(879) |
|
|
|
Cash flows used in investing activities from discontinued operations |
- |
(879) |
|
|
|
FINANCING ACTIVITIES |
|
|
Proceeds from promissory notes received |
1,100,000 |
950,000 |
|
|
|
Cash flows from financing activities from continuing operations |
1,100,000 |
950,000 |
|
|
|
DECREASE IN CASH |
(90,228) |
(237,203) |
|
|
|
CASH, BEGINNING OF THE YEAR |
110,684 |
347,887 |
|
|
|
CASH, END OF THE YEAR |
20,456 |
110,684 |
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION (Note 11) |
|
|
|
|
|
Interest paid |
- |
- |
Taxes paid |
- |
- |
The accompanying
notes are an integral part of these consolidated financial statements.
I-Minerals Inc. Consolidated
Statements of Capital Deficit For the years ended
April 30, 2022 and 2021 |
(Expressed in US dollars) |
|
Number of Shares # |
Amount $ |
Commitment to Issue Shares $ |
Additional Paid-in Capital $ |
Accumulated Deficit $ |
Total Capital Deficit $ |
|
|
|
|
|
|
|
Balance at April 30, 2020 |
93,730,212 |
19,225,087 |
- |
1,865,342 |
(48,685,278) |
(27,594,849) |
Adoption of ASU 2018-07 adjustment (Note 2) |
- |
- |
- |
- |
16,541 |
16,541 |
Balance at May 1, 2020 |
93,730,212 |
19,225,087 |
- |
1,865,342 |
(48,668,737) |
(27,578,308) |
Balance at May 1, 2020 |
93,730,212 |
19,225,087 |
- |
1,865,342 |
(48,668,737) |
(27,578,308) |
|
|
|
|
|
|
|
Withholding tax (Note 6) |
- |
- |
- |
- |
(338,794) |
(338,794) |
Loss for the year |
- |
- |
- |
- |
(4,899,259) |
(4,899,259) |
|
|
|
|
|
|
|
Balance at April 30, 2021 |
93,730,212 |
19,225,087 |
- |
1,865,342 |
(53,906,790) |
(32,816,361) |
Balance at April 30, 2021 |
93,730,212 |
19,225,087 |
- |
1,865,342 |
(53,906,790) |
(32,816,361) |
|
|
|
|
|
|
|
Loss for the year |
- |
- |
- |
- |
(1,354,924) |
(1,354,924) |
|
|
|
|
|
|
|
Balance at April 30, 2022 |
93,730,212 |
19,225,087 |
- |
1,865,342 |
(55,261,714) |
(34,171,285) |
The accompanying
notes are an integral part of these consolidated financial statements.
I-Minerals Inc. Notes to the Consolidated
Financial Statements For the years ended
April 30, 2022 and 2021 |
(Expressed
in US dollars except where otherwise indicated) |
1. |
NATURE OF BUSINESS AND BASIS OF PRESENTATION AND LIQUIDITY: |
|
I-Minerals Inc. (the “Company”) was incorporated
under the laws of British Columbia, Canada, in 1984. The Company is listed for trading on the TSX
Venture Exchange under the symbol “IMA” and the OTCQB marketplace under the
symbol “IMAHF”. |
|
The
Company’s principal business is the development of the Helmer-Bovill industrial
mineral property (“the Property”) located in Latah County, Idaho. Since inception, the Company has been in the
exploration and evaluation stage but moved into the development stage in fiscal
2018. In fiscal 2019, the Company
reverted back to the evaluation stage as management determined that the
Feasibility Study on the property should be considered non-current. The Helmer-Bovill property is comprised of eleven
mineral leases that host potentially economic deposits of feldspar, quartz and
kaolinitic clays, primarily kaolinite and halloysite. |
|
Basis
of Presentation and Going Concern |
|
The
accompanying consolidated financial statements have been prepared by the
Company in accordance with accounting principles generally accepted in the
United States of America (“US GAAP”) on the basis that the Company will continue as a
going concern, which assumes that the Company will be able to meet
its obligations and continue its operations for the next year.
Realization values may be substantially different from carrying values
as shown and these financial statements do not give effect to adjustments that
would be necessary to the carrying values and classification of assets and
liabilities should the Company be unable to continue as a going concern. At April 30, 2022, the Company had not yet
achieved profitable operations, had an accumulated deficit of $55,261,714
since inception and expects to
incur further losses in the development of its business, all of which casts
substantial doubt upon the Company’s ability to continue as a going concern
and, therefore, that it may be unable to realize its assets and discharge its
liabilities in the normal course of business. |
|
The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary
financing to develop the Property and to meet its obligations and repay its liabilities arising from normal business
operations when they come due. Although the Company has been successful in the past in obtaining financing,
there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on
terms advantageous to the Company. The Company has been receiving funds from a company controlled by a
director of the Company through promissory notes (Note 6). Management considers that the Company will be
able to obtain additional funds by promissory notes; however, there is no assurance of additional funding being
available. The Company has historically satisfied its capital needs primarily by issuing equity securities and/or
promissory notes. Management plans to continue to provide for its capital needs by issuing promissory notes.
Upon completion of the sale, the Company plans to undertake a financing to fund its operations and reduce
monthly expenses in an effort to conserve cash. |
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: |
|
Basis of Presentation and Principles of
Consolidation |
|
The
consolidated financial statements include the accounts of the Company and its
subsidiaries, i-Minerals USA, Inc. and CKD Ventures Ltd. All inter-company accounts and transactions
have been eliminated. The Company’s
fiscal year-end is April 30th. |
|
The
preparation of these consolidated financial statements in conformity with US
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and
assumptions related to the useful life and recoverability of long-lived assets,
stock-based compensation, amortization of promissory notes financing fees, valuation
of derivative liabilities, and deferred income tax asset valuation allowances. The Company bases its estimates and
assumptions on current facts, historical experience and various other factors
that it believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities and the accrual of costs and expenses that are not readily apparent
from other sources. The actual results
experienced by the Company may differ materially and adversely from the
Company’s estimates. To the extent there
are material differences between the estimates and the actual results, future
results of operations will be affected. |
I-Minerals Inc. Notes to the Consolidated Financial Statements For the years ended April 30, 2022 and 2021 |
(Expressed in US dollars except where otherwise indicated) |
|
Cash and cash equivalents |
|
The
Company considers all highly liquid instruments with maturity of three months
or less at the time of issuance to be cash equivalents. As at April 30, 2022 and 2021, the Company had
no cash equivalents. |
|
Equipment
is carried at cost and is amortized over the estimated useful economic lives
using the declining balance method at an annual rate of 30%. |
|
Mineral Property Acquisition and Exploration Costs |
|
Mineral
property acquisition costs are capitalized when incurred. Acquisition costs include cash consideration
and the fair market value of shares issued on the acquisition of mineral
property claims. |
|
Costs related to the development of mineral
reserves are capitalized when it has been determined an ore body can be
economically developed. The development
stage begins when an ore body is determined to be economically recoverable
based on proven and probable reserves and appropriate permits are in place, and
ends when the production stage or exploitation of reserves begins. Major mine development expenditures are
capitalized, including primary development costs such as costs of building
access ways, tailings impoundment, development of water supply and
infrastructure developments. |
|
Exploration costs include those relating to
activities carried out (a) in search of previously unidentified mineral
deposits, or (b) at undeveloped concessions.
Pre-development activities involve costs incurred in the exploration
stage that may ultimately benefit production that are expensed due to the lack
of evidence of economic development, which is necessary to demonstrate future
recoverability of these expenses.
Secondary development costs are incurred for preparation of an ore body
for production in a specific ore block or work area, providing a relatively
short-lived benefit only to the mine area they relate to, and not to the ore
body as a whole. |
|
Once production has commenced, capitalized costs
will be depleted using the units-of-production method over the estimated life
of the proven and probable reserves. If mineral properties are subsequently
abandoned or impaired, any capitalized costs will be charged to the Consolidated
Statements of Loss in that period. |
|
We assess the carrying cost of our mineral
properties for impairment whenever information or circumstances indicate the
potential for impairment. Such
evaluations compare estimated future net cash flows with our carrying costs and
future obligations on an undiscounted basis.
If it is determined that the future undiscounted cash flows are less
than the carrying value of the property, a write down to the estimated fair
value is charged to the Consolidated Statements of Loss for the period. Where estimates of future net cash flows are
not available and where other conditions suggest impairment, management
assesses if the carrying value can be recovered. |
|
For
significant development projects, interest is capitalized as part of the
historical cost of developing and constructing assets in accordance with ASC
835-20. Interest is capitalized until the asset is ready for service.
Capitalized interest is determined by multiplying the Company’s
weighted-average borrowing cost on general debt by the average amount of
qualifying costs incurred. Once an asset subject to interest capitalization is
completed and placed in service, the associated capitalized interest is
expensed through depletion or impairment. |
I-Minerals Inc. Notes to the Consolidated Financial Statements For the years ended April 30, 2022 and 2021 |
(Expressed in US dollars except where otherwise indicated) |
|
Debt
issuance costs paid to the purchaser of the debt are considered to be a
reduction of the debt proceeds and a component of debt discount. Subsequently, the costs comprising this debt
discount are amortized as financing fees over the term of the promissory notes
using the effective interest method.
During the year ended April 30, 2022, the Company amortized financing
fees totaling $nil (2021 – $nil). |
|
Financial Instruments and Fair Value Measures |
|
The
book value of cash, receivables, accounts payable and accrued liabilities
approximate their fair values due to the immediate or short-term maturity of
those instruments. The fair value
hierarchy under US GAAP is based on three levels of inputs, of which the first
two are considered observable and the last unobservable, that may be used to
measure fair value which are the following: |
|
Level 1 - quoted
prices (unadjusted) in active markets for identical assets or liabilities; |
|
Level 2 - observable
inputs other than Level I, quoted prices for similar assets or liabilities in
active prices whose inputs are observable or whose significant value drivers
are observable; and |
|
Level 3 - assets
and liabilities whose significant value drivers are unobservable by little or
no market activity and that are significant to the fair value of the assets or
liabilities. |
|
The Company’s promissory
notes are carried at amortized cost. |
|
A
summary of the Company’s Level 3 liabilities for the years ended April 30, 2022
and 2021 is as follows: |
|
2022 $ |
2021 $ |
|
|
|
Non-employee options (Note 7) |
|
|
|
|
|
Beginning fair value |
- |
16,541 |
Transfer value on exercise |
- |
- |
Fair value of options on vesting |
- |
- |
Change in fair value |
- |
- |
Adoption of ASU 2018-07 adjustment |
- |
(16,541) |
|
|
|
Total Level 3 liabilities |
- |
- |
|
Certain
assets and liabilities are measured at fair value on a nonrecurring basis; that
is, the instruments are not measured at fair value on an ongoing basis but are
subject to fair value adjustments only in certain circumstances (for example,
when there is evidence of impairment). There were no assets or liabilities
measured at fair value on a nonrecurring basis during the years ended April 30,
2022 and 2021. |
I-Minerals Inc. Notes to the Consolidated Financial Statements For the years ended April 30, 2022 and 2021 |
(Expressed in US dollars except where otherwise indicated) |
|
The basic loss per common share is
computed by dividing net loss available to common stockholders by the weighted
average number of common shares outstanding. Diluted loss per common share is
computed similar to basic loss per common share except that the denominator is
increased to include the number of additional common shares that would have
been outstanding if the potential common shares had been issued and if the
additional common shares were dilutive. For the year ended April
30, 2022,
loss per share excludes 1,250,000 (2021 – 2,750,000) potentially dilutive
common shares (related to outstanding options and warrants) as their effect was
anti-dilutive. |
|
Foreign Currency Translation |
|
The
Company’s functional and reporting currency is the US dollar. Monetary assets and liabilities denominated
in foreign currencies are translated using the exchange rate prevailing at the
balance sheet date and non-monetary items are translated at exchange rates
prevailing when the assets were acquired or obligations incurred. Gains and losses arising on translation or
settlement of foreign currency denominated transactions or balances are
included in the determination of income. |
|
The
Company accounts for income taxes using the asset and liability method. The asset and liability method provides that
deferred tax assets and liabilities are recognized for the expected future tax
consequences of temporary differences between the financial reporting and tax
bases of assets and liabilities, and for operating loss and tax credit carry-forwards.
Deferred tax assets and liabilities are
measured using the currently enacted tax rates and laws that will be in effect
when the differences are expected to reverse. The Company records a valuation allowance to
reduce deferred tax assets to the amount that is believed more likely than not
to be realized. |
|
The
Company has adopted the provisions of FASB ASC 740 "Income Taxes"
regarding accounting for uncertainty in income taxes. The Company initially
recognizes tax positions in the financial statements when it is more likely
than not the position will be sustained upon examination by the tax
authorities. Such tax positions are initially and subsequently measured as the
largest amount of tax benefit that is greater than 50% likely of being realized
upon ultimate settlement with the tax authority, assuming full knowledge of the
position and all relevant facts. Application requires numerous estimates based
on available information. The Company considers many factors when evaluating
and estimating its tax positions and tax benefits, and its recognized tax
positions and tax benefits may not accurately anticipate actual outcomes. As
additional information is obtained, there may be a need to periodically adjust
the recognized tax positions and tax benefits. These periodic adjustments may
have a material impact on the consolidated statements of operations. When
applicable, the Company classifies penalties and interest associated with
uncertain tax positions as a component of income tax expense in its
consolidated Statement of Loss. |
|
The
Company accounts for all stock-based payments and awards under the fair value
based method. Stock-based payments to
non-employees are measured at the fair value of the consideration received, or
the fair value of the equity instruments issued, or liabilities incurred,
whichever is more reliably measurable. |
|
The fair
value of stock-based payments to non-employees is periodically re-measured
until the counterparty performance is complete, and any change therein is
recognized over the vesting period of the award and in the same manner as if
the Company had paid cash instead of paying with or using equity based
instruments. The cost of the stock-based
payments to non-employees that are fully vested and non-forfeitable as at the
grant date is measured and recognized at that date, unless there is a contractual term for services in which case such compensation would be amortized over the contractual term. |
I-Minerals Inc. Notes to the Consolidated Financial Statements For the years ended April 30, 2022 and 2021 |
(Expressed in US dollars except where otherwise indicated) |
|
The
Company accounts for the granting of stock options to employees using the fair
value method whereby all awards to employees will be recorded at fair value on
the date of the grant. The fair value of
all stock options is expensed over their vesting period with a corresponding
increase to additional paid-in capital. |
|
Compensation
costs for stock-based payments that do not include performance conditions are
recognized on a straight-line basis. Compensation cost associated with a share-based
award having a performance condition is only recognized over the requisite
service period if it is probable. Share based awards with a performance
condition are accrued on an award by award basis. |
|
The
Company uses the Black-Scholes option valuation model to calculate the fair
value of stock options at the date of the grant. Option pricing models require
the input of highly subjective assumptions, including the expected price
volatility. Changes in these assumptions can materially affect the fair value
estimates. |
|
The Company is
subject to interest rate risk on its debt financings. The Company generally uses fixed interest
rates. |
|
Held-for-sale
assets and liabilities |
|
Items are classified as being
held-for-sale once they meet criteria relating to the intention to sell and the
likelihood of a sale taking place. All of I-Minerals USA’s assets and
liabilities have been accounted for as held-for-sale. |
|
Adoption
of New Accounting Pronouncements |
|
In December 2019, the FASB issued
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes. ASU 2019-12 will simplify the accounting for income taxes by removing
certain exceptions to the general principles in Topic 740. The amendments also
improve consistent application of and simplify GAAP for other areas of Topic
740 by clarifying and amending existing guidance. For public business entities,
the amendments in this ASU are effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2020. Effective May 1, 2021, the Company adopted the
new standard.
The adoption of this ASU did not
result in any adjustments to the financial statements. |
|
Recently
Issued Accounting Pronouncements |
|
Financial Instruments
- Credit Losses |
|
In June 2016, the FASB issued ASU
2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments. ASU 2016-13 replaced the incurred loss
impairment methodology under current GAAP with a methodology that reflects
expected credit losses and requires consideration of a broader range of
reasonable and supportable information to inform credit loss estimates. ASU
2016-13 requires use of a forward-looking expected credit loss model for
accounts receivables, loans, and other financial instruments. ASU 2016-13 is
effective for fiscal years beginning after December 15, 2019, with early
adoption permitted. In October 2019, the FASB issued ASU No. 2019-10,
“Financial Instruments-Credit Losses (Topic 326): Effective Dates”, to finalize
the effective date delays for private companies, not-for-profits, and smaller
reporting companies applying the CECL standards. The ASU is effective for
reporting periods beginning after December 15, 2022 and interim periods within
those fiscal years. Early adoption is permitted. The Company has not early
adopted this update and it will become effective on April 1, 2023 assuming
the Company will remain an emerging growth company. The Company is currently
assessing the impact of adopting this standard on its consolidated financial
statements. |
I-Minerals Inc. Notes to the Consolidated Financial Statements For the years ended April 30, 2022 and 2021 |
(Expressed in US dollars except where otherwise indicated) |
3. |
MINERAL PROPERTY INTEREST AND DEFERRED DEVELOPMENT COSTS: |
|
Helmer-Bovill Property – Latah County, Idaho |
|
The Company previously had an
undivided 100% interest in 11 State of Idaho mineral leases. The State of Idaho mineral leases are subject
to a 5% production royalty on gross sales. |
|
In March 2022, the Company amended the
terms of the State of Idaho mineral leases through the Idaho Department of
Lands (the “IDL”) and acquired these amended leases at an auction. Of the 11 mineral leases that the Company
held previously, 8 mineral leases were amended and acquired at auction and the
Company elected to relinquish 3 of the mineral leases. The amended leases now expire in March 2042
and, upon commercial production on one lease, other leases can be held through
mine development or exploration work. |
|
In May 2017, the Idaho Department of Lands accepted the Company’s operation
and reclamation plan. Together with a
water rights permit from the Idaho Department of Water Resources, the Company
was able to proceed with development and construction of the mine, subject to
obtaining sufficient financing. As a result, management made the decision to begin capitalizing all
development expenditures directly related to the Helmer-Bovill Property. In February 2019, the Company determined that
the Feasibility Study should be considered non-current and accordingly, the
Company has returned to the evaluation stage for accounting purposes. |
|
A
portion of the balances are included on the balance sheet as either mineral
property interest and deferred development costs or as assets held-for-sale
(Note 12). At April 30, 2022 and 2021,
$nil is included as mineral property interest and deferred development
costs. At April 30, 2022 and 2021,
$1,892,410 is included in assets held-for-sale (Note 12). |
|
$ |
|
|
Balance at April 30, 2018 |
1,145,906 |
|
|
Engineering and consulting |
177,820 |
Metallurgy |
263,056 |
Permitting and environmental |
17,684 |
Interest on Promissory Notes |
207,266 |
Other direct costs |
80,678 |
|
746,504 |
|
|
Balance at April 30, 2019, 2020, 2021 and 2022 |
1,892,410 |
4. |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES: |
|
April 30, 2022 $ |
April 30, 2021 $ |
|
|
|
Trade payables |
189,615 |
160,503 |
Amounts due to related parties (Note 9) |
224,627 |
219,256 |
Withholding tax and interest on deemed dividends (Note 6) |
896,756 |
896,756 |
Interest payable on promissory notes (Note 6) |
78,579 |
1,621,951 |
|
|
|
Total accounts payable and accrued liabilities |
1,389,577 |
2,898,466 |
I-Minerals Inc. Notes to the Consolidated Financial Statements For the years ended April 30, 2022 and 2021 |
(Expressed in US dollars except where otherwise indicated) |
|
A
portion of the balances are included on the balance sheet as either accounts
payable and accrued liabilities or as liabilities held-for-sale (Note 12). At April 30, 2022, $1,250,188 is included as
accounts payable and accrued liabilities (2021 - $2,785,881). At April 30, 2022, $139,389 is included in
liabilities held-for-sale (2021 - $112,585) (Note 12). |
|
The Company has obtained an indemnification from BV
Lending, LLC for the Company’s withholding tax liability, interest and
penalties owing. |
|
A
portion of the balances are included on the balance sheet as either lease
liability or as liabilities held-for-sale (Note 12). At April 30, 2022 and 2021, $nil is included
as lease liability. At April 30, 2022,
$13,475 is included in liabilities held-for-sale (2021 - $37,948) (Note 12). |
|
The Company entered into a property lease in October
2020 and the Company recognized a lease obligation with respect to the
operating lease. The terms and the
outstanding balances as at April 30, 2022 and 2021 are as follows: |
|
April 30, 2022 $ |
April 30, 2021 $ |
|
|
|
Right-of-use asset from property lease repayable in monthly instalments of $2,332 and an interest rate of 13% per annum and an end date of October 15, 2022 |
13,475 |
37,948 |
Less: current portion |
(13,475) |
(27,982) |
|
|
|
Non-current portion |
- |
9,966 |
|
The following is a schedule of the Company’s
future minimum lease payments related to the office lease obligation: |
|
April 30, 2022 $ |
|
|
2022 |
- |
2023 |
13,991 |
Total minimum lease payments |
13,991 |
Less: imputed interest |
(516) |
Total present value of minimum lease payments |
13,475 |
Less: current portion |
(13,475) |
Non-current portion |
- |
6. |
PROMISSORY NOTES DUE TO RELATED PARTY: |
|
April 30, 2022 $ |
April 30, 2021 $ |
|
|
|
Third promissory notes |
27,736,602 |
26,404,927 |
Fifth promissory notes |
3,387,673 |
3,199,806 |
Sixth promissory notes |
3,652,662 |
2,424,741 |
|
|
|
Total promissory notes |
34,776,937 |
32,029,474 |
I-Minerals Inc. Notes to the Consolidated Financial Statements For the years ended April 30, 2022 and 2021 |
(Expressed in US dollars except where otherwise indicated) |
|
The Company has Third Promissory Notes, Fifth
Promissory Notes and Sixth Promissory Notes due to BV Lending, LLC,
a company controlled by a
director of the Company (the “Lender”).
The Third Promissory Notes were due on March 31, 2019. On March 27, 2019, an amending agreement was
entered into extending the maturity date of the Promissory Notes from March 31,
2019 to June 30, 2019 for no consideration.
On June 28, 2019, the Company entered into an amending agreement with
the Lender further extending this maturity date to October 31, 2019 for no
consideration. The Fifth Promissory
Notes were due on December 31, 2019. On October
25, 2019, the Company entered into an amending agreement with the Lender
extending the maturity date for both notes, for no consideration, to the
earlier of (i) June 30, 2020 and (ii) 60 days after a pre-feasibility study has
been filed on SEDAR. The Sixth
Promissory Notes have the same maturity date. On June 4, 2020, all three
promissory notes were extended to December 15, 2020 for no consideration. On December 3, 2020, the maturity date was
extended to March 15, 2021 for no consideration. On March 9, 2021 the maturity date was
extended to April 15, 2021 for no consideration. On April 15, 2021 the maturity
date was extended to May 15, 2021 for no consideration. On May 10, 2021 the
maturity date was extended to June 15, 2021 for no consideration. On June 15,
2021 the maturity date was extended to July 15, 2021 for no consideration. On
July 15, 2021 the maturity date was extended to August 15, 2021 for no
consideration. In addition, the interest
rate was decreased to 0.13% per annum effective May 1, 2021 from 12% to 14%. On August 13, 2021 the maturity date was
extended to September 15, 2021 for no consideration. On September 13, 2021 the maturity date was
extended to October 15, 2021 for no consideration. On October 13, 2021, the
maturity date was extended to November 15, 2021 for no consideration. On
November 15, 2021, the maturity date was extended to December 15, 2021 for no
consideration. On December 15, 2021, the maturity date was extended to January 15,
2022 for no consideration. On January 13, 2022, the maturity date was extended
to February 15, 2022 for no consideration.
On February 15, 2022, the maturity date was extended to April 15, 2022
for no consideration. On April 14, 2022,
the maturity date was extended to June 15, 2022 for no consideration. On June 14, 2022, the maturity date was
extended to September 15, 2022 for no consideration. On
September 15, 2022, the maturity date was extended to December 31, 2022 for no
consideration. |
|
In accordance with the guidance of ASC 470-50
and ASC 470-60, the Company determined that the March 27, 2019, June 28, 2019, October
25, 2019, June 4, 2020, December 3, 2020, March 9, 2021, April 15, 2021, May
10, 2021, June 15, 2021, July 15, 2021, August 13, 2021, September 13, 2021,
October 13, 2021, November 15, 2021, December 15, 2021, January 13, 2022, February
15, 2022 and April 14, 2022 extension agreements qualified as troubled debt
restructurings. However, as the
Company did not transfer assets or grant an equity interest to the Lender and since
the carrying amount of the promissory notes at the time of the restructurings did
not exceed the total future cash payments specified by the new terms, this
change was accounted for prospectively using the effective interest rate that
equates the carrying amount to the expected future cash flows. |
|
Certain conditions may result in early repayment
including immediate repayment in the event a person currently not related to
the Company acquires more than 40% of the outstanding common shares of the
Company. |
|
The Company
determined that accrued interest on the promissory notes are subject to
withholding taxes as the Lender controls over 25% of the common shares of the
Company and the Company’s debt to equity ratio exceeded certain statutory
limits that caused interest expense deductibility to be partially
restricted. The withholding taxes are
payable based on the amount of restricted interest, when such interest is paid
or at the end of a fiscal year and are accounted for as a deemed dividend in
accordance with ASC 740-10-15-4. As at
April 30, 2022, the Company had recorded $896,756 of withholding tax and
interest on the deemed dividends (2021 - $896,756) |
|
The Third Promissory Notes bear interest at the
rate of 0.13% per annum and during the year ended April
30, 2022, the Company recorded interest
of $32,880 (2021 - $3,048,758). Interest
is payable semi-annually as calculated on May 31st and November 30th
of each year. Interest is to be paid
either in cash, in common shares or deemed an advance of principal at the
option of the Lender. A 5% late
payment penalty may apply if payment is not paid within ten days after the due
date. During the year ended April
30, 2022, the Lender elected to have
interest payable from December 1, 2020 to November 30, 2021 of $1,331,675 deemed
as advances. |
I-Minerals Inc. Notes to the Consolidated Financial Statements For the years ended April 30, 2022 and 2021 |
(Expressed in US dollars except where otherwise indicated) |
|
On
September 11, 2018, the Company entered into a Loan Agreement with the Lender
pursuant to which up to $2,500,000 will be advanced to the Company in tranches
(the “Fifth Promissory Notes”). As at April 30,
2022, the Company had received $2,500,000
(2021 - $2,500,000) in advances pursuant to the Fifth Promissory Notes. The Fifth
Promissory Notes bear interest at the rate of 0.13% per annum and during the year ended April
30, 2022, the Company recorded interest
of $4,017 (2021 - $428,415). Interest is payable semi-annually
as calculated on May 31st and November 30th of each
year. Interest is to be paid either in
cash, in common shares or deemed an advance of principal at the option of the
Lender. A 5% late payment penalty may
apply if payment is not paid within ten days after the due date. During the year ended April 30, 2022, the Lender elected to have interest payable
from December 1, 2020 to November 30, 2021 of $187,867 deemed as advances. |
|
On October
25, 2019, the Company entered into a Loan Agreement with the Lender pursuant to
which up to $700,000 will be advanced to the Company in tranches (the “Sixth
Promissory Notes”). On January 20, 2020
and July 8, 2020, the Company entered into amending agreements whereby the
Lender agreed to advance an additional $600,000 and $1,200,000, respectively, under
the same terms as the Sixth Promissory Notes.
As at April
30, 2022, the Company had received $3,350,000
in advances pursuant to the Sixth Promissory Notes (2021 - $2,250,000). On
November 15, 2021, the Company entered into an amending agreement whereby the
Lender agreed to advance an additional $500,000, under the same terms as the
Sixth Promissory Notes. On March 21,
2022, the Company entered into an amending agreement whereby the Lender agreed
to advance an additional $250,000, under the same terms as the Sixth Promissory
Notes. On June 14, 2022, the Company
entered into an amending agreement whereby the Lender agreed to advance an
additional $450,000, under the same terms as the Sixth Promissory Notes. On
September 15, 2022, the Company entered into an amending agreement whereby the
Lender agreed to advance an additional $450,000, under the same terms as the
Sixth Promissory Notes. |
|
The Sixth
Promissory Notes bear interest at the rate of 0.13% per annum and during the year ended April
30, 2022, the Company recorded interest
of $3,725 (2021 - $248,064). Interest is payable semi-annually
as calculated on May 31st and November 30th of each
year. Interest is to be paid either in
cash, in common shares or deemed an advance of principal at the option of the
Lender. A 5% late payment penalty may
apply if payment is not paid within ten days after the due date. During the year ended April
30, 2022, the Lender elected to have
interest payable from December 1, 2020 to November 30, 2021 of $127,921 deemed
as advances. |
|
During the year ended April
30, 2022, the Company recorded accrued
interest of $60,000 with respect to the accrued withholding tax payable. |
|
The Third Promissory Notes, the Fifth Promissory
Notes and the Sixth Promissory Notes are collateralized by the Company’s
Helmer-Bovill Property. |
|
The following table outlines the estimated cash
payments required, by calendar year, in order to repay the principal balance of
the Third Promissory Notes, the Fifth Promissory Notes and the Sixth Promissory
Notes: |
2022 $ |
2023 $ |
2024 $ |
2025 $ |
2026 $ |
Total $ |
34,776,937 |
- |
- |
- |
- |
34,776,937 |
I-Minerals Inc. Notes to the Consolidated Financial Statements For the years ended April 30, 2022 and 2021 |
(Expressed in US dollars except where otherwise indicated) |
|
Unlimited
number of common shares, without par value. |
|
The
holders of common shares are entitled to receive dividends which are declared
from time to time, and are entitled to one vote per share at meetings of the
Company. All shares are ranked equally with regards to the Company’s residual
assets. |
|
During
the years ended April 30, 2022 and 2021, the
Company did not complete any stock transactions. |
|
The
Company has granted stock options under the terms of its Stock Option Plan (the
“Plan”). The Plan provides that the directors
of the Company may grant options to purchase common shares to directors,
officers, employees and service providers of the Company on terms that the
directors of the Company may determine are within the limitations set forth in
the Plan. The maximum number of shares
available under the Plan is limited to 10% of the issued common shares. The maximum term of stock options is ten
years. All stock options vest on the
date of grant, unless otherwise stated.
As at April 30, 2022, the Company had 8,123,021
stock options available for grant pursuant to the Plan (2021 – 6,623,021). |
|
The Company’s stock
options outstanding as at April 30, 2022 and 2021
and the changes for the years then ended are as follows: |
|
Number
Outstanding |
Weighted Average Exercise
Price (in
CAD$) |
|
|
|
Balance
outstanding at April 30, 2020 |
2,950,000 |
0.26 |
Expired |
(200,000) |
0.25 |
|
|
|
Balance
outstanding at April 30, 2021 |
2,750,000 |
0.26 |
Expired |
(1,500,000) |
0.26 |
|
|
|
Balance outstanding
at April 30, 2022 |
1,250,000 |
0.25 |
|
|
|
Balance exercisable
at April 30, 2022 |
- |
- |
|
Summary
of stock options outstanding at April 30, 2022: |
Security |
Number
Outstanding |
|
Number Exercisable |
|
Exercise
Price (CAD$) |
Expiry
Date |
Remaining
Contractual Life (years) |
|
|
|
|
|
|
|
|
Stock
options |
1,250,000 |
(1) |
- |
(1) |
0.25 |
August 9, 2023 |
1.28 |
|
(1) |
1,250,000 stock options vest on the completion of certain milestones including equity financing, project financing, mine construction and achieving commercial production. 200,000 stock options vested as to 25% every three months from the date of grant. |
I-Minerals Inc. Notes to the Consolidated Financial Statements For the years ended April 30, 2022 and 2021 |
(Expressed in US dollars except where otherwise indicated) |
|
Non-Employee
Stock Options |
|
In
accordance with the guidance of ASU 2018-07, the measurement and classification
of stock options awarded to non-employees is aligned with that for employees. The
ASU retains the existing cost attribution guidance, which requires entities to
recognize compensation cost for nonemployee awards in the same period and in
the same manner (i.e. capitalize or expense) they would if they paid cash for
the goods or services, but it moves the guidance to ASC 718. Effective May 1, 2020, the Company adopted the
new standard.
Upon adoption, the Company applied
the modified retrospective transition approach and recorded an adjustment on
May 1, 2020 to decrease derivative liabilities by $16,541 and decrease opening
deficit by $16,541. |
|
The
non-employee stock options are accounted for at their respective fair values
and are summarized as follows for the years ended April 30, 2022 and 2021: |
|
2022 $ |
2021 $ |
|
|
|
Fair value of non-employee options, beginning of the period |
- |
16,541 |
Transfer value on exercise of options |
- |
- |
Fair value of options on vesting |
- |
- |
Change in fair value of non-employee stock options during the period |
- |
- |
Adoption of ASU 2018-07 adjustment |
- |
(16,541) |
|
|
|
Fair value of non-employee options, end of the period |
- |
- |
|
As at April
30, 2022, the unamortized compensation
cost of options is $93,382 and the intrinsic value of options expected to vest
is $nil. |
|
A reconciliation of the income tax provision
computed at statutory rates to the reported income tax provision for the years
ended April 30, 2022 and 2021 is as follows: |
|
2022 $ |
2021 $ |
|
|
|
|
|
|
Statutory tax rate |
27% |
27% |
|
|
|
Loss before income taxes |
(1,354,925) |
(4,899,259) |
|
|
|
Expected income tax recovery |
(366,000) |
(1,323,000) |
Increase (decrease) in income tax recovery resulting from: |
|
|
Derivative liability |
|
- |
Other permanent differences |
23,000 |
599,000 |
Foreign income taxed at foreign rates |
49,000 |
46,000 |
Impact of under provision in previous year |
4,000 |
(18,000) |
Change in valuation allowance |
290,000 |
696,000 |
|
|
|
Income tax recovery (expense) |
- |
- |
|
As a result of tax legislation enacted in the U.S. at
the end of 2017, the federal U.S. corporate tax rate applicable to years
subsequent to 2017 was substantially reduced.
The Company recorded deferred income tax expense in respect of its U.S.
operations during the year ended April 30, 2022 using the federal rate of 21%
(2021 – 21%). |
I-Minerals Inc. Notes to the Consolidated Financial Statements For the years ended April 30, 2022 and 2021 |
(Expressed in US dollars except where otherwise indicated) |
|
The Company also revalued its deferred tax
assets in respect of its Canadian operations to reflect the increase in the
Canadian corporate income tax rate to 27% (2021 – 27%) for years subsequent to
2017. There was no impact on tax expense
as a full valuation allowance is provided for the deferred tax assets. |
|
The significant components of the Company’s
deferred income tax assets and liabilities after applying enacted corporate tax
rates as at April 30, 2022 and 2021 are as follows: |
|
2022 $ |
2021 $ |
|
|
|
Deferred income tax assets / (liabilities) |
|
|
Operating losses carried forward |
10,173,000 |
10,010,000 |
Resource property |
685,000 |
555,000 |
Share issuance costs |
7,000 |
19,000 |
Other |
21,000 |
12,000 |
Valuation allowance |
(10,886,000) |
(10,596,000) |
|
|
|
Net deferred income tax assets |
- |
- |
|
At April
30, 2022, the Company has accumulated non-capital losses $19,323,000 (2021 -
$18,804,000) in Canada and net operating losses of $23,599,000 (2021 -
$23,491,000) in the USA, which are available to carryforward and offset future
years’ taxable income. Losses arising
before January 1, 2018 will expire in various amounts from 2022 to 2038 and
will offset 100% of taxable income. As a result of tax legislation enacted in
the U.S. at the end of 2017, net operating losses in the US arising in tax year
beginning after December 31, 2017 can be carried forward indefinitely instead
of 20 years and carrybacks are no longer permitted. However, the net operating
loss carryforward is limited and can only offset 80% of taxable income. |
|
Included in
discontinued operations at April 30, 2022 are the accumulated federal and state
net operating losses of $23,599,000 (2021 - $23,491,000). |
|
The
Company has adopted certain provisions of ASC 740, “Income Taxes”, which
prescribes a recognition threshold and measurement attribute for the recognition
and measurement of tax positions taken or expected to be taken in income tax
returns. The provisions also provide guidance on the de-recognition of income
tax assets and liabilities, classification of current and deferred income tax
assets and liabilities, and accounting for interest and penalties associated
with tax positions. |
|
The
Company files income tax returns in the U.S. federal jurisdiction, various
state and foreign jurisdictions. The
Company’s tax returns are subject to tax examinations by U.S. federal and state
tax authorities, or examinations by foreign tax authorities until respective
statute of limitation. The Company
currently has no tax years under examination. The Company is subject to tax examinations
by tax authorities for all taxation years commencing after 2003. |
|
At
April 30, 2022, the Company does not have an accrual relating to uncertain tax
positions. It is not anticipated that unrecognized tax benefits would
significantly increase or decrease within 12 months of the reporting date. |
|
The
Company has recorded management’s estimate of a withholding tax liability in
the amount of $896,756 (Note 6). The
amount determined to be payable upon review by the taxation authorities may
vary materially from this current estimate. |
|
Provision
has not been made for U.S. or additional foreign taxes on undistributed
earnings of foreign subsidiaries. Such earnings have been and will continue to
be reinvested but could become subject to additional tax if they were remitted
as dividends or were loaned to the Company affiliate. It is not practicable to
determine the amount of additional tax, if any, that might be payable on the
undistributed foreign earnings. |
I-Minerals Inc. Notes to the Consolidated Financial Statements For the years ended April 30, 2022 and 2021 |
(Expressed in US dollars except where otherwise indicated) |
9. |
RELATED PARTY TRANSACTIONS: |
|
During
the year ended April 30, 2022, management and
consulting fees of $96,000 (2021 - $96,000) were charged by RJG Capital
Corporation, a wholly-owned company of W. Barry Girling, Director. Wayne Moorhouse, Director, charged $17,566 (2021
- $17,807) in management and consulting fees.
Gary Childress, Director, charged $14,326 (2021 - $13,796) in management
and consulting fees. $22,151 (2021 - $21,279)
was charged by Malaspina Consultants Inc. for the services of Matt Anderson,
CFO, and are included in professional fees. |
|
Included
in accounts payable and accrued liabilities are amounts owed to directors or
officers or companies controlled by them.
As at April 30, 2022, the amount was $224,627
(2021 – $219,256). All amounts are non-interest bearing,
unsecured, and due on demand. |
|
The promissory
notes received from a company controlled by a director (Note 6) are related
party transactions. |
|
The Company considers its business to comprise a single operating segment being the
exploration and development of its resource property. Substantially all of the Company’s long-term assets and operations
are located in Latah County, Idaho. |
11. |
NON-CASH TRANSACTIONS: |
|
Investing and financing activities that affect recognized assets or
liabilities but that do not result in cash receipts or cash payments are
excluded from the consolidated statements of cash flows. During the year ended April
30, 2022,
the following transactions were excluded from the consolidated statement of
cash flows: |
|
a) |
The transfer of $1,647,463 of interest payable on the Third, Fifth and Sixth Promissory Notes from accounts payable and accrued liabilities to promissory notes; and, |
|
b) |
Deferred mineral property expenditures of $40,062 included in accounts payable and accrued liabilities at April 30, 2022, less $40,062 included in accounts payable at April 30, 2021 (net inclusion of $nil). |
|
During
the year
ended April 30, 2021, the following transactions were excluded from
the consolidated statement of cash flows: |
|
a) |
The transfer of $3,489,856 of interest payable on the Third, Fifth and Sixth Promissory Notes from accounts payable and accrued liabilities to promissory notes; and, |
|
b) |
Deferred mineral property expenditures of $40,062 included in accounts payable and accrued liabilities at April 30, 2021, less $40,062 included in accounts payable at April 30, 2020 (net inclusion of $nil). |
12. |
DISCONTINUED OPERATIONS: |
|
Subsequent to April 30, 2022, on September 14,
2022, the Company entered into a Stock Purchase Agreement with BV Lending, LLC,
an Idaho limited liability company ("BV Lending") and the Company's
subsidiary, I-Minerals USA, Inc. ("I-Minerals USA"), an Idaho company
that owns the leases that comprise the Helmer-Bovill Property, (the "Stock
Purchase Agreement"), pursuant to which the Company has agreed to sell all
of the issued and outstanding common shares of I-Minerals USA to BV Lending
(the "Transaction"). BV
Lending is a non-arm's length party to the Company as it is a company
controlled by a former director of the Company. |
|
Key Terms of the Transaction: |
|
- |
Immediately prior to closing of the Transaction, the Company will contribute an intercompany debt owed by I-Minerals USA to the Company in the amount of approximately $25.7 million, resulting in the cancellation of the outstanding indebtedness. |
I-Minerals Inc. Notes to the Consolidated Financial Statements For the years ended April 30, 2022 and 2021 |
(Expressed in US dollars except where otherwise indicated) |
|
- |
At the closing of the Transaction, the Company will sell all of the shares of I-Minerals USA to BV Lending for an amount equal to $3,000,000 (the "Share Value"). |
|
- |
The Share Value will be satisfied by BV Lending on a non-cash basis by the set off of an equal amount of debt owed by the Company to BV Lending (the "Set Off"). |
|
- |
Immediately following the Set Off, BV Lending will transfer to the Company the balance of the debt owed by the Company to BV Lending (which debt was approximately $35.4 million before the Set Off). |
|
- |
Previously entered into loan agreements dated June 1, 2016, September 11, 2018 and October 25, 2019 among the Company, BV Lending and I-Minerals USA, including all security granted thereunder, will be terminated and/or discharged. |
|
- |
The Company will be subject to non-competition and non-solicitation covenants in favour of BV Lending for a period of five years commencing on closing of the Transaction. |
|
- |
The Transaction is subject to the approval of the Transaction by shareholders of the Company (the "Shareholders") and the TSX Venture Exchange. |
|
- |
As part of the Transaction, BV Lending has agreed to pay taxes that will become payable by the Company as a result of the Transaction (approximately $450,000). In consideration for such payment by BV Lending, the Company will issue a promissory note in favor of BV Lending for the amount of the taxes so paid. The promissory note will be repaid out of any refund received by the Company from the applicable government agency. |
|
The disposition of I-Minerals USA, which includes
the Company’s mineral exploration activities, is considered to be a discontinued
operation for the Company and accordingly, loss from discontinued operations is
included in the consolidated statements of loss for all periods presented. Included on the consolidated balance sheets
at April 30, 2022 and 2021 are assets and liabilities held-for-sale. The assets and liabilities of the
discontinued operation classified as held-for-sale are as follows: |
|
April 30, 2022 $ |
April 30, 2021 $ |
|
|
|
Cash and cash equivalents |
6,427 |
21,564 |
Prepaids |
5,725 |
5,179 |
Equipment and right-of-use asset |
18,242 |
45,439 |
Mineral property interest and deferred development costs (Note 3) |
1,892,410 |
1,892,410 |
Deposits |
29,208 |
29,208 |
|
|
|
Assets held-for-sale |
1,952,012 |
1,993,800 |
|
|
|
Account payable and accrued liabilities (Note 4) |
139,389 |
112,585 |
Lease liability (Note 5) |
13,475 |
37,948 |
|
|
|
Liabilities held-for sale |
152,864 |
150,533 |
I-Minerals Inc. Notes to the Consolidated Financial Statements For the years ended April 30, 2022 and 2021 |
(Expressed in US dollars except where otherwise indicated) |
|
|
|
|
For the year ended April 30, |
|
2022 |
2021 |
|
$ |
$ |
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
Amortization |
2,534 |
5,254 |
Management and consulting fees |
99,000 |
99,000 |
Mineral property expenditures |
615,950 |
605,220 |
General and miscellaneous |
81,477 |
53,494 |
Professional fees |
13,328 |
8,492 |
|
|
|
|
(812,289) |
(771,460) |
OTHER EXPENSE |
|
|
Foreign exchange loss |
(379) |
(189) |
|
|
|
Loss for the year from discontinued operations |
(812,668) |
(771,649) |
|
Subsequent to April
30, 2022: |
|
i) |
The Company entered into the Stock Purchase Agreement (Note 12), |
|
ii) |
On May 6, 2022, June 17, 2022, July 28, 2022, August 31, 2022, November
3, 2022 and December 1, 2022, the Company received $125,000, $150,000,
$150,000, $150,000, $120,000 and $120,000, respectively, pursuant to the Sixth
Promissory Notes, and, |
|
iii) |
On June 14, 2022, the
maturity date of the promissory notes was extended to September 15, 2022 for no
consideration. In addition, the Lender
agreed to advance an additional $450,000, under the same terms as the Sixth
Promissory Notes. |
APPENDIX "G"
I-MINERALS INC.
(the “Company”)
INTERIM FINANCIAL STATEMENTS OF
THE COMPANY FOR THE PERIOD ENDED
OCTOBER 31, 2022 AND 2021
(See Attached)
I-Minerals Inc.
Condensed Interim Consolidated
Financial Statements
For the three and six
months ended October 31, 2022 and 2021
(Unaudited - Expressed
in US dollars)
I-Minerals Inc. Condensed Interim Consolidated Balance Sheets October 31, 2022 and April 30, 2022 |
(Unaudited - Expressed in US dollars) (Prepared in accordance with US GAAP) |
|
Notes |
October 31, 2022 $ |
April 30, 2022 $ |
ASSETS |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
|
16,533 |
14,029 |
Receivables |
|
13,772 |
19,584 |
Prepaids |
|
4,385 |
23,079 |
Assets held-for-sale |
11 |
2,008,668 |
1,952,012 |
|
|
|
|
TOTAL ASSETS |
|
2,043,358 |
2,008,704 |
|
|
|
|
LIABILITIES |
|
|
|
Current liabilities |
|
|
|
Accounts payable and accrued liabilities |
4,8 |
1,490,962 |
1,250,188 |
Promissory notes due to related party |
6 |
35,374,376 |
34,776,937 |
Liabilities held-for-sale |
11 |
162,507 |
152,864 |
|
|
|
|
TOTAL LIABILITIES |
|
37,027,845 |
36,179,989 |
|
|
|
|
CAPITAL DEFICIT |
|
|
|
Capital Stock |
|
|
|
Authorized: |
|
|
|
Unlimited common shares with no par value |
|
|
|
Issued and fully paid: 93,730,212 (April 30, 2022 – 93,730,212) |
7 |
19,225,087 |
19,225,087 |
Additional paid-in capital |
|
1,865,342 |
1,865,342 |
Deficit |
|
(56,074,916) |
(55,261,714) |
TOTAL CAPITAL DEFICIT |
|
(34,984,487) |
(34,171,285) |
|
|
|
|
TOTAL LIABILITIES AND CAPITAL DEFICIT |
|
2,043,358 |
2,008,704 |
Basis
of Presentation and Going Concern (Note 1)
Subsequent
events (Note 12)
On behalf
of the Board
“John Theobald” Director |
“W. Barry Girling” Director |
The accompanying
notes are an integral part of these condensed interim consolidated financial
statements.
I-Minerals Inc. Condensed
Interim Consolidated Statements of Loss For the
three and six months ended October 31, 2022 and 2021 |
(Unaudited
- Expressed in US dollars) |
|
|
|
|
|
|
|
|
Three months ended October 31, |
Six months ended October 31, |
|
|
2022 |
2021 |
2022 |
2021 |
|
Notes |
$ |
$ |
$ |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
Management and consulting fees |
8 |
25,384 |
24,802 |
51,096 |
52,166 |
General and miscellaneous |
|
14,183 |
41,059 |
30,106 |
78,279 |
Professional fees |
8 |
102,861 |
44,561 |
161,888 |
143,681 |
|
|
|
|
|
|
|
|
(142,428) |
(110,422) |
(243,090) |
(274,126) |
OTHER (EXPENSE) INCOME FROM CONTINUING OPERATION |
|
|
|
|
|
Foreign exchange gain (loss) |
|
3,114 |
(507) |
3,523 |
596 |
Interest and penalty expense |
6 |
(11,211) |
(3,470) |
(204,011) |
(63,470) |
|
|
|
|
|
|
LOSS FOR THE PERIOD FROM CONTINUING OPERATIONS |
11 |
(150,525) |
(114,399) |
(443,578) |
(337,000) |
Loss for the period from discontinued operations |
11 |
(186,477) |
(200,268) |
(369,624) |
(388,237) |
|
|
|
|
|
|
NET LOSS FOR THE PERIOD |
|
(337,002) |
(314,667) |
(813,202) |
(725,237) |
|
|
|
|
|
|
Loss per share from continuing operations– basic and diluted |
|
(0.00) |
(0.00) |
(0.00) |
(0.00) |
Loss per share from discontinuing operation – basic and diluted |
|
(0.00) |
(0.00) |
(0.00) |
(0.00) |
Weighted average number of shares outstanding |
|
93,730,212 |
93,730,212 |
93,730,212 |
93,730,212 |
The accompanying
notes are an integral part of these condensed interim consolidated financial
statements.
I-Minerals Inc. Condensed
Interim Consolidated Statements of Cash Flows For the six
months ended October 31, 2022 and 2021 |
(Unaudited
- Expressed in US dollars) |
|
2022 $ |
2021 $ |
OPERATING ACTIVITIES |
|
|
Net loss for the period |
(813,202) |
(725,237) |
Items not involving cash: |
|
|
Amortization |
997 |
1,267 |
Change in non-cash operating working capital items: |
|
|
Receivables |
5,812 |
(7,090) |
Prepaids |
20,475 |
36,190 |
Accounts payable and accrued liabilities |
230,781 |
126,521 |
|
|
|
Cash flows used in operating activities from continuing operations |
(178,906) |
(209,977) |
Cash flows used in operating activities from discontinued operations |
(376,231) |
(358,372) |
|
(555,137) |
(568,349) |
INVESTING ACTIVITIES |
|
|
Purchase of equipment |
(5,125) |
- |
|
|
|
Cash flows used in investing activities from discontinued operations |
(5,125) |
- |
|
|
|
FINANCING ACTIVITIES |
|
|
Proceeds from promissory notes received |
575,000 |
475,000 |
|
|
|
Cash flows from financing activities from continuing operations |
575,000 |
475,000 |
|
|
|
CHANGE IN CASH EQUIVALENTS |
14,738 |
(93,349) |
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD |
20,456 |
110,684 |
|
|
|
CASH AND CASH EQUIVALENTS, END OF THE PERIOD |
35,194 |
17,335 |
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION (Note 10) |
|
|
|
|
|
Interest paid |
- |
- |
Taxes paid |
- |
- |
The accompanying
notes are an integral part of these condensed interim consolidated financial
statements.
I-Minerals Inc. Condensed Interim
Consolidated Statements of Capital Deficit For the six months
ended October 31, 2022 and 2021 |
(Unaudited
- Expressed in US dollars) |
|
Number of Shares # |
Amount $ |
Additional Paid-in Capital $ |
Accumulated Deficit $ |
Total Capital Deficit $ |
|
|
|
|
|
|
Balance at April 30, 2021 |
93,730,212 |
19,225,087 |
1,865,342 |
(53,906,790) |
(32,816,361) |
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
(410,570) |
(410,570) |
|
|
|
|
|
|
Balance at July 31, 2021 |
93,730,212 |
19,225,087 |
1,865,342 |
(54,317,360) |
(33,226,931) |
Balance at July 31, 2021 |
93,730,212 |
19,225,087 |
1,865,342 |
(54,317,360) |
(33,226,931) |
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
(314,667) |
(314,667) |
|
|
|
|
|
|
Balance at October 31, 2021 |
93,730,212 |
19,225,087 |
1,865,342 |
(54,632,027) |
(33,541,598) |
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
(629,687) |
(629,687) |
|
|
|
|
|
|
Balance at April 30, 2022 |
93,730,212 |
19,225,087 |
1,865,342 |
(55,261,714) |
(34,171,285) |
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
(476,200) |
(476,200) |
|
|
|
|
|
|
Balance at July 31, 2022 |
93,730,212 |
19,225,087 |
1,865,342 |
(55,737,914) |
(34,647,485) |
Balance at July 31, 2022 |
93,730,212 |
19,225,087 |
1,865,342 |
(55,737,914) |
(34,647,485) |
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
(337,002) |
(337,002) |
|
|
|
|
|
|
Balance at October 31, 2022 |
93,730,212 |
19,225,087 |
1,865,342 |
(56,074,916) |
(34,984,487) |
The accompanying
notes are an integral part of these condensed interim consolidated financial
statements.
I-Minerals Inc. Notes to the
Condensed Interim Consolidated Financial Statements For the six months
ended October 31, 2022 and 2021 |
(Unaudited
- Expressed in US dollars except where otherwise indicated) |
1. |
NATURE OF BUSINESS AND BASIS OF PRESENTATION AND LIQUIDITY: |
|
I-Minerals Inc. (the “Company”) was incorporated
under the laws of British Columbia, Canada, in 1984. The Company is listed for trading on the TSX
Venture Exchange under the symbol “IMA” and the OTCQB marketplace under the
symbol “IMAHF”. |
|
The
Company’s principal business is the development of the Helmer-Bovill industrial
mineral property (“the Property”) located in Latah County, Idaho. The
Helmer-Bovill property is comprised of eleven mineral leases that host
potentially economic deposits of feldspar, quartz and kaolinitic clays,
primarily kaolinite and halloysite. |
|
On September 14, 2022, the Company entered into
a Stock Purchase Agreement with BV Lending, LLC, an Idaho limited liability
company, controlled by a major shareholder and former director of the Company
and the Company's subsidiary, I-Minerals USA, Inc., an Idaho company that owns
the leases that comprise the Helmer-Bovill Property, to sell all of the issued
and outstanding common shares of I-Minerals USA Inc. to BV Lending, LLC (Note
11). |
|
Basis
of Presentation and Going Concern |
|
The
accompanying unaudited condensed interim consolidated financial statements have
been prepared by the Company in accordance with accounting principles generally
accepted in the United States of America (“US GAAP”) Article 10 of Regulation
S-X on the basis that the Company
will continue as a going concern, which assumes that the Company will be able to
meet its obligations and continue its operations for the next year.
Realization values may be substantially different from carrying values
as shown and these financial statements do not give effect to adjustments that
would be necessary to the carrying values and classification of assets and
liabilities should the Company be unable to continue as a going concern. At October 31, 2022, the Company had not yet
achieved profitable operations, had an accumulated deficit of $56,074,916
since inception and expects to
incur further losses in the development of its business, all of which casts
substantial doubt upon the Company’s ability to continue as a going concern
and, therefore, that it may be unable to realize its assets and discharge its
liabilities in the normal course of business. |
|
The Company’s ability to continue as a going
concern is dependent upon its ability to obtain the necessary financing to
develop the Property and to meet its obligations and repay its liabilities
arising from normal business operations when they come due. Although the Company has been successful in
the past in obtaining financing, there is no assurance that it will be able to
obtain adequate financing in the future or that such financing will be on terms
advantageous to the Company. The Company
has been receiving funds from a company controlled by a former director of the
Company through promissory notes (Note 6). Management considers that the Company will be
able to obtain additional funds by promissory notes; however, there is no
assurance of additional funding being available. The Company has historically satisfied its
capital needs primarily by issuing equity securities and/or promissory
notes. Management plans to continue to
provide for its capital needs by issuing promissory notes. Upon completion of
the sale, the Company plans to undertake a financing to fund its operations and
reduce monthly expenses in an effort to conserve cash. |
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: |
|
Basis of Presentation and Principles of
Consolidation |
|
The
consolidated financial statements include the accounts of the Company and its
subsidiaries, i-Minerals USA, Inc. and CKD Ventures Ltd. All inter-company accounts and transactions
have been eliminated. The Company’s
fiscal year-end is April 30th. |
I-Minerals Inc. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended October 31, 2022 and 2021 |
(Unaudited - Expressed in US dollars except where otherwise indicated) |
|
Financial Instruments and Fair Value Measures |
|
The
book value of cash, receivables, accounts payable and accrued liabilities
approximate their fair values due to the immediate or short-term maturity of
those instruments. The fair value
hierarchy under US GAAP is based on three levels of inputs, of which the first
two are considered observable and the last unobservable, that may be used to
measure fair value which are the following: |
|
Level 1 - quoted
prices (unadjusted) in active markets for identical assets or liabilities; |
|
Level 2 - observable
inputs other than Level I, quoted prices for similar assets or liabilities in
active prices whose inputs are observable or whose significant value drivers
are observable; and |
|
Level 3 - assets
and liabilities whose significant value drivers are unobservable by little or
no market activity and that are significant to the fair value of the assets or
liabilities. |
|
The Company’s promissory
notes are carried at amortized cost. |
|
Certain
assets and liabilities are measured at fair value on a nonrecurring basis; that
is, the instruments are not measured at fair value on an ongoing basis but are
subject to fair value adjustments only in certain circumstances (for example,
when there is evidence of impairment). There were no assets or liabilities
measured at fair value on a nonrecurring basis as
at October 31, 2022 and April 30, 2022. |
|
The basic loss per common share is
computed by dividing net loss available to common stockholders by the weighted
average number of common shares outstanding. Diluted loss per common share is
computed similar to basic loss per common share except that the denominator is
increased to include the number of additional common shares that would have
been outstanding if the potential common shares had been issued and if the
additional common shares were dilutive. For the six months ended October
31, 2022,
loss per share excludes 1,250,000 (2021 – 2,450,000) potentially dilutive
common shares (related to outstanding options and warrants) as their effect was
anti-dilutive. |
|
Held-for-sale assets and liabilities |
|
Items are classified as being
held-for-sale once they meet criteria relating to the intention to sell and the
likelihood of a sale taking place. All of I-Minerals USA’s assets and
liabilities have been accounted for as held-for-sale. |
|
Recently
Issued Accounting Pronouncements |
|
Financial Instruments
- Credit Losses |
|
In June 2016, the FASB issued ASU 2016-13, Financial
Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaced the incurred loss
impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader
range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 requires use of a forward-looking expected
credit loss model for accounts receivables, loans, and other financial instruments. ASU 2016-13 is effective for fiscal years beginning
after December 15, 2019, with early adoption permitted. In October 2019, the FASB issued ASU No. 2019-10, “Financial
Instruments-Credit Losses (Topic 326): Effective Dates”, to finalize the effective date delays for private companies, not-for-profits,
and smaller reporting companies applying the CECL standards. The ASU is effective for reporting periods beginning after December 15,
2022 and interim periods within those fiscal years. Early adoption is permitted. The Company has not early adopted this update and it
will become effective on April 1, 2023 assuming the Company will remain an emerging growth company. The Company is currently assessing
the impact of adopting this standard on its consolidated financial statements. |
I-Minerals Inc. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended October 31, 2022 and 2021 |
(Unaudited - Expressed in US dollars except where otherwise indicated) |
3. |
MINERAL PROPERTY INTEREST AND DEFERRED DEVELOPMENT COSTS: |
|
Helmer-Bovill Property – Latah County, Idaho |
|
The Company previously had an
undivided 100% interest in 11 State of Idaho mineral leases. The State of Idaho mineral leases are subject
to a 5% production royalty on gross sales. |
|
In March 2022, the Company amended the
terms of the State of Idaho mineral leases through the Idaho Department of
Lands (the “IDL”) and acquired these amended leases at an auction. Of the 11 mineral leases that the Company
held previously, 8 mineral leases were amended and acquired at auction and the
Company elected to relinquish 3 of the mineral leases. The amended leases now expire in March 2042
and, upon commercial production on one lease, other leases can be held through
mine development or exploration work. |
|
In May 2017, the Idaho Department of Lands accepted the Company’s operation
and reclamation plan. Together with a
water rights permit from the Idaho Department of Water Resources, the Company
was able to proceed with development and construction of the mine, subject to
obtaining sufficient financing. As a result, management made the decision to begin capitalizing all
development expenditures directly related to the Helmer-Bovill Property. In February 2019, the Company determined that
the Feasibility Study should be considered non-current and accordingly, the
Company has returned to the evaluation stage for accounting purposes. |
4. |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES: |
|
October 31, 2022 $ |
April 30, 2022 $ |
|
|
|
Trade payables |
191,862 |
189,615 |
Amounts due to related parties (Note 8) |
227,362 |
224,627 |
Withholding tax on deemed dividends (Note 6) |
896,756 |
896,756 |
Interest and penalties payable on promissory notes (Note 6) |
283,198 |
78,579 |
|
|
|
Total accounts payable and accrued liabilities |
1,599,178 |
1,389,577 |
|
The Company has obtained an indemnification from BV
Lending, LLC for the Company’s withholding tax liability, interest and
penalties owing. |
|
The Company entered into a
property lease in October 2020 and the Company recognized a lease obligation
with respect to the operating lease. The
terms and the outstanding balances as at October
31, 2022 and April 30, 2022 are as
follows: |
|
October 31, 2022 $ |
April 30, 2022 $ |
|
|
|
Right-of-use asset from property lease repayable in monthly instalments of $2,332 and an interest rate of 13% per annum and an end date of October 15, 2022 |
- |
13,475 |
Lease liability in held-for-sale liabilities (Note 11) |
- |
13,475 |
I-Minerals Inc. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended October 31, 2022 and 2021 |
(Unaudited - Expressed in US dollars except where otherwise indicated) |
|
The Company extended its property
lease in October 2022 and the Company recognized a lease obligation with
respect to the operating lease. The
terms and the outstanding balances as at October
31, 2022 are as follows: |
|
|
October 31, 2022 $ |
|
|
|
Right-of-use asset
from property lease repayable in monthly instalments of $2,382 and an
interest rate of 5% per annum and an end date of October 15, 2024 |
|
54,291 |
Lease liability in
held-for-sale liabilities (Note 11) |
|
54,291 |
|
The following is a schedule of the Company’s future
minimum lease payments related to the office lease obligation: |
|
|
October 31, 2022 $ |
|
|
|
2023 |
|
14,291 |
2024 |
|
28,582 |
2025 |
|
14,291 |
Total minimum lease payments |
|
57,164 |
Less: imputed interest |
|
(2,873) |
Total present value of minimum lease payments |
|
54,291 |
6. |
PROMISSORY NOTES DUE TO RELATED PARTY: |
|
October 31, 2022 $ |
April 30, 2022 $ |
|
|
|
Third promissory notes |
27,754,581 |
27,736,602 |
Fifth promissory notes |
3,389,869 |
3,387,673 |
Sixth promissory notes |
4,229,926 |
3,652,662 |
|
|
|
Total promissory notes |
35,374,376 |
34,776,937 |
|
The Company has Third Promissory Notes, Fifth
Promissory Notes and Sixth Promissory Notes due to BV Lending, LLC, a company
controlled by a former director of the Company (the “Lender”). The Third Promissory Notes were due on March
31, 2019. On March 27, 2019, an amending
agreement was entered into extending the maturity date of the Promissory Notes
from March 31, 2019 to June 30, 2019 for no consideration. On June 28, 2019, the Company entered into an
amending agreement with the Lender further extending this maturity date to
October 31, 2019 for no consideration.
The Fifth Promissory Notes were due on December 31, 2019. On October 25, 2019, the Company entered into
an amending agreement with the Lender extending the maturity date for both
notes, for no consideration, to the earlier of (i) June 30, 2020 and (ii) 60
days after a pre-feasibility study has been filed on SEDAR. The Sixth Promissory Notes have the same
maturity date. On June 4, 2020, all three promissory notes were extended to
December 15, 2020 for no consideration.
On December 3, 2020, the maturity date was extended to March 15, 2021
for no consideration. On March 9, 2021
the maturity date was extended to April 15, 2021 for no consideration. On April
15, 2021 the maturity date was extended to May 15, 2021 for no consideration.
On May 10, 2021 the maturity date was extended to June 15, 2021 for no
consideration. On June 15, 2021 the maturity date was extended to July 15, 2021
for no consideration. On July 15, 2021 the maturity date was extended to August
15, 2021 for no consideration. In
addition, the interest rate was decreased to 0.13% per annum effective May 1,
2021 from 12% to 14%. On August 13, 2021
the maturity date was extended to September 15, 2021 for no consideration. On September 13, 2021 the maturity date was
extended to October 15, 2021 for no consideration. On October 13, 2021, the
maturity date was extended to November 15, 2021 for no consideration. On
November 15, 2021, the maturity date was extended to December 15, 2021 for no
consideration. On December 15, 2021, the maturity date was extended to January
15, 2022 for no consideration. On January 13, 2022, the maturity date was
extended to February 15, 2022 for no consideration. On February 15, 2022, the maturity date was
extended to April 15, 2022 for no consideration. On April 14, 2022, the maturity date was
extended to June 15, 2022 for no consideration.
On June 14, 2022, the maturity date was extended to September 15, 2022
for no consideration. On September 15,
2022, the maturity date was extended to December 31, 2022 for no
consideration. |
I-Minerals Inc. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended October 31, 2022 and 2021 |
(Unaudited - Expressed in US dollars except where otherwise indicated) |
|
On October 13, 2021, the maturity date was extended to November 15, 2021
for no consideration. On November 15, 2021, the maturity date was extended to
December 15, 2021 for no consideration. On December 15, 2021, the maturity date
was extended to January 15, 2022 for no consideration. On January 13, 2022, the
maturity date was extended to February 15, 2022 for no consideration. On February 15, 2022, the maturity date was
extended to April 15, 2022 for no consideration. On April 14, 2022, the maturity date was
extended to June 15, 2022 for no consideration.
On June 14, 2022, the maturity date was extended to September 15, 2022
for no consideration. On September 15,
2022, the maturity date was extended to December 31, 2022 for no
consideration. |
|
In accordance with the guidance of ASC 470-50
and ASC 470-60, the Company determined that the March 27, 2019, June 28, 2019, October
25, 2019, June 4, 2020, December 3, 2020, March 9, 2021, April 15, 2021, May
10, 2021, June 15, 2021, July 15, 2021, August 13, 2021, September 13, 2021,
October 13, 2021, November 15, 2021, December 15, 2021, January 13, 2022, February
15, 2022 and April 14, 2022 extension agreements qualified as troubled debt
restructurings. However, as the
Company did not transfer assets or grant an equity interest to the Lender and since
the carrying amount of the promissory notes at the time of the restructurings did
not exceed the total future cash payments specified by the new terms, this
change was accounted for prospectively using the effective interest rate that
equates the carrying amount to the expected future cash flows. |
|
Certain conditions may result in early repayment
including immediate repayment in the event a person currently not related to
the Company acquires more than 40% of the outstanding common shares of the
Company. |
|
The
Company determined that accrued interest on the promissory notes are subject to
withholding taxes as the Lender controls over 25% of the common shares of the
Company and the Company’s debt to equity ratio exceeded certain statutory
limits that caused interest expense deductibility to be partially
restricted. The withholding taxes are
payable based on the amount of restricted interest, when such interest is paid
or at the end of a fiscal year and are accounted for as a deemed dividend in
accordance with ASC 740-10-15-4. As at October
31, 2022, the Company had recorded $896,756 of withholding tax on the deemed
dividends (April 30, 2022 - $896,756) and penalties and interest of $264,011
(April 30, 2022 - $60,000) for the unpaid withholding tax. As at October 31, 2022, accrued interest on
the promissory notes was $19,187 (April 30, 2022 – $18,579). |
|
During the six months ended October
31, 2022, the Company recorded accrued interest
of $114,335 (2021 - $60,000) and an estimate of penalties in the amount of $89,676
(2021- $nil) with respect to the accrued withholding tax payable (Note 4). |
|
The Third Promissory Notes bear interest at the
rate of 0.13% per annum and during the six months ended October
31, 2022, the Company recorded interest
of $18,196 (2021 - $15,011). During the
six months ended October 31, 2022 and 2021, the interest expense is included in
loss from discontinued operations. Interest
is payable semi-annually as calculated on May 31st and November 30th
of each year. Interest is to be paid
either in cash, in common shares or deemed an advance of principal at the
option of the Lender. A 5% late
payment penalty may apply if payment is not paid within ten days after the due
date. During the six months ended October
31, 2022, the Lender elected to have
interest payable from December 1, 2021 to May 31, 2022 of $17,979 deemed as
advances. |
|
On
September 11, 2018, the Company entered into a Loan Agreement with the Lender
pursuant to which up to $2,500,000 will be advanced to the Company in tranches
(the “Fifth Promissory Notes”). As at October 31,
2022, the Company had received $2,500,000
(April 30, 2022 - $2,500,000) in advances pursuant to the Fifth Promissory
Notes. The
Fifth Promissory Notes bear interest at the rate of 0.13% per annum and during the six months ended October
31, 2022, the Company recorded interest
of $2,221 (2021 - $1,833). During the six months ended October 31, 2022 and
2021, the interest expense is included in loss from discontinued
operations. Interest is payable
semi-annually as calculated on May 31st and November 30th
of each year. Interest is to be paid
either in cash, in common shares or deemed an advance of principal at the
option of the Lender. A 5% late payment
penalty may apply if payment is not paid within ten days after the due
date. During the six months ended October
31, 2022, the Lender elected to have
interest payable from December 1, 2021 to May 31, 2022 of $2,196 deemed as
advances. |
I-Minerals Inc. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended October 31, 2022 and 2021 |
(Unaudited - Expressed in US dollars except where otherwise indicated) |
|
On October
25, 2019, the Company entered into a Loan Agreement with the Lender pursuant to
which up to $700,000 will be advanced to the Company in tranches (the “Sixth
Promissory Notes”). On January 20, 2020
and July 8, 2020, the Company entered into amending agreements whereby the
Lender agreed to advance an additional $600,000 and $1,200,000, respectively, under
the same terms as the Sixth Promissory Notes.
As at October
31, 2022, the Company had received $3,925,000
in advances pursuant to the Sixth Promissory Notes (April 30, 2022 - $3,350,000).
On November 15, 2021, the Company entered into an amending agreement whereby
the Lender agreed to advance an additional $500,000, under the same terms as
the Sixth Promissory Notes. On March 21,
2022, the Company entered into an amending agreement whereby the Lender agreed
to advance an additional $250,000, under the same terms as the Sixth Promissory
Notes. On June 14, 2022, the Company
entered into an amending agreement whereby the Lender agreed to advance an
additional $450,000, under the same terms as the Sixth Promissory Notes. On September 15, 2022, the Company entered
into an amending agreement whereby the Lender agreed to advance an additional
$450,000, under the same terms as the Sixth Promissory Notes. |
|
The Sixth
Promissory Notes bear interest at the rate of 0.13% per annum and during the six months ended October
31, 2022, the Company recorded interest
of $2,630 (2021 - $1,546). During the six months ended October 31, 2022 and
2021, the interest expense is included in loss from discontinued
operations. Interest is payable
semi-annually as calculated on May 31st and November 30th
of each year. Interest is to be paid
either in cash, in common shares or deemed an advance of principal at the
option of the Lender. A 5% late payment
penalty may apply if payment is not paid within ten days after the due date. During the six months ended October
31, 2022, the Lender elected to have
interest payable from December 1, 2021 to May 31, 2022 of $2,264 deemed as
advances. |
|
The Third Promissory Notes, the Fifth Promissory
Notes and the Sixth Promissory Notes are collateralized by the Company’s
Helmer-Bovill Property. |
|
The following table outlines the estimated cash
payments required, by calendar year, in order to repay the principal balance of
the Third Promissory Notes, the Fifth Promissory Notes and the Sixth Promissory
Notes: |
2023 $ |
2024 $ |
2025 $ |
2026 $ |
2027 $ |
Total $ |
35,374,376 |
- |
- |
- |
- |
35,374,376 |
|
Unlimited
number of common shares, without par value. |
|
The
holders of common shares are entitled to receive dividends which are declared
from time to time, and are entitled to one vote per share at meetings of the
Company. All shares are ranked equally with regards to the Company’s residual
assets. |
|
During
the six months ended October 31, 2022 and 2021,
the Company did not complete any stock transactions. |
I-Minerals Inc. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended October 31, 2022 and 2021 |
(Unaudited - Expressed in US dollars except where otherwise indicated) |
|
The
Company has granted stock options under the terms of its Stock Option Plan (the
“Plan”). The Plan provides that the
directors of the Company may grant options to purchase common shares to
directors, officers, employees and service providers of the Company on terms
that the directors of the Company may determine are within the limitations set
forth in the Plan. The maximum number of
shares available under the Plan is limited to 10% of the issued common shares. The maximum term of stock options is ten years. All stock options vest on the date of grant,
unless otherwise stated. As at October
31, 2022,
the Company had 8,123,021 stock options available for grant pursuant to the
Plan (April 30, 2022 – 8,123,021). |
|
The
Company’s stock options outstanding as at October
31, 2022 and
the changes for the period then ended are as follows: |
|
Number
Outstanding |
Weighted Average Exercise
Price (in
CAD$) |
|
|
|
Balance outstanding
at April 30, 2021 |
2,750,000 |
0.26 |
Expired |
(1,500,000) |
0.26 |
|
|
|
Balance outstanding
at April 30, 2022 |
1,250,000 |
0.25 |
|
|
|
Balance outstanding
at October 31, 2022 |
1,250,000 |
0.25 |
|
|
|
Balance exercisable
at October 31, 2022 |
- |
- |
|
Summary
of stock options outstanding at October 31, 2022: |
Security |
Number
Outstanding |
|
Number Exercisable |
|
Exercise
Price (CAD$) |
Expiry
Date |
Remaining
Contractual Life (years) |
|
|
|
|
|
|
|
|
Stock
options |
1,250,000 |
(1) |
- |
(1) |
0.25 |
August 9, 2023 |
0.77 |
|
(1) |
1,250,000 stock options vest on the completion of certain milestones including equity financing, project financing, mine construction and achieving commercial production. 200,000 stock options vested as to 25% every three months from the date of grant. |
|
As at October
31, 2022, the unamortized compensation
cost of options is $93,382 and the intrinsic value of options expected to vest
is $nil. |
8. |
RELATED PARTY TRANSACTIONS: |
|
During
the six months ended October 31, 2022,
management and consulting fees of $48,000 (2021 - $48,000) were charged by RJG
Capital Corporation, a wholly-owned company of W. Barry Girling, Director. Wayne Moorhouse, Director, charged $8,236 (2021
- $8,924) in management and consulting fees.
Gary Childress, Director, charged $6,860 (2021 - $7,241) in management
and consulting fees. $16,762 (2021 - $13,227)
was charged by Malaspina Consultants Inc. for the services of Matt Anderson,
CFO, and are included in professional fees. |
|
Included
in accounts payable and accrued liabilities are amounts owed to directors or
officers or companies controlled by them.
As at October 31, 2022, the amount
was $227,362 (April 30, 2022 – $224,627). All amounts are non-interest bearing,
unsecured, and due on demand. |
I-Minerals Inc. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended October 31, 2022 and 2021 |
(Unaudited - Expressed in US dollars except where otherwise indicated) |
|
The
promissory notes received from a company controlled by a former director (Note 6)
are related party transactions. The
Stock Purchase Agreement (Note 11) with a company controlled by a former
director is a related party transaction. |
I-Minerals Inc. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended October 31, 2022 and 2021 |
(Unaudited - Expressed in US dollars except where otherwise indicated) |
|
The Company considers its business to comprise a
single operating segment being the exploration and development of its resource
property. Substantially all of the
Company’s assets and operations are located in Latah County, Idaho. |
10. |
NON-CASH TRANSACTIONS: |
|
Investing and financing activities that affect recognized assets or
liabilities but that do not result in cash receipts or cash payments are
excluded from the consolidated statements of cash flows. During the six months ended October
31, 2022,
the following transactions were excluded from the consolidated statement of
cash flows: |
|
a) |
The transfer of $22,439 of interest payable on the Third, Fifth and Sixth Promissory Notes from accounts payable and accrued liabilities to promissory notes; and, |
|
b) |
Deferred mineral property expenditures of $40,062 included in accounts payable and accrued liabilities at October 31, 2022, less $40,062 included in accounts payable at April 30, 2022 (net inclusion of $nil). |
|
During
the six months ended
October 31, 2021, the following transactions were excluded from
the consolidated statement of cash flows: |
|
a) |
The transfer of $1,625,421 of interest payable on the Third, Fifth and Sixth Promissory Notes from accounts payable and accrued liabilities to promissory notes; and, |
|
b) |
Deferred mineral property expenditures of $40,062 included in accounts payable and accrued liabilities at October 31, 2021, less $40,062 included in accounts payable at April 30, 2021 (net inclusion of $nil). |
11. |
DISCONTINUED OPERATIONS: |
|
On September 14, 2022, the Company entered into
a Stock Purchase Agreement with BV Lending, LLC, an Idaho limited liability
company ("BV Lending") and the Company's subsidiary, I-Minerals USA,
Inc. ("I-Minerals USA"), an Idaho company that owns the leases that
comprise the Helmer-Bovill Property, (the "Stock Purchase
Agreement"), pursuant to which the Company has agreed to sell all of the
issued and outstanding common shares of I-Minerals USA to BV Lending (the
"Transaction"). BV Lending is
a non-arm's length party to the Company as it is a company controlled by a
former director of the Company. |
|
Key Terms of the Transaction: |
|
- |
Immediately prior to closing of the Transaction, the Company will contribute an intercompany debt owed by I-Minerals USA to the Company in the amount of approximately $25.7 million, resulting in the cancellation of the outstanding indebtedness. |
|
- |
At the closing of the Transaction, the Company will sell all of the shares of I-Minerals USA to BV Lending for an amount equal to C$3,000,000 (the "Share Value"). |
|
- |
The Share Value will be satisfied by BV Lending on a non-cash basis by the set off of an equal amount of debt owed by the Company to BV Lending (the "Set Off"). |
|
- |
Immediately following the Set Off, BV Lending will transfer to the Company the balance of the debt owed by the Company to BV Lending (which debt was approximately $35.4 million before the Set Off). |
|
- |
Previously entered into loan agreements dated June 1, 2016, September 11, 2018 and October 25, 2019 among the Company, BV Lending and I-Minerals USA, including all security granted thereunder, will be terminated and/or discharged. |
|
- |
The Company will be subject to non-competition and non-solicitation covenants in favour of BV Lending for a period of five years commencing on closing of the Transaction. |
|
- |
The Transaction is subject to the approval of the Transaction by shareholders of the Company (the "Shareholders") and the TSX Venture Exchange. |
I-Minerals Inc. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended October 31, 2022 and 2021 |
(Unaudited - Expressed in US dollars except where otherwise indicated) |
|
- |
As part of the Transaction, BV Lending has agreed to pay taxes that will become payable by the Company as a result of the Transaction (approximately $450,000). In consideration for such payment by BV Lending, the Company will issue a promissory note in favor of BV Lending for the amount of the taxes so paid. The promissory note will be repaid out of any refund received by the Company from the applicable government agency. |
|
The disposition of I-Minerals USA, which
includes the Company’s mineral exploration activities, is considered to be a
discontinued operation for the Company and accordingly, loss from discontinued
operations is included in the consolidated statements of loss for all periods
presented. Included on the consolidated
balance sheets at October 31, 2022 and April 30, 2022 are assets and
liabilities held-for-sale. The assets
and liabilities of the discontinued operation classified as held-for-sale are
as follows: |
|
October 31, 2022 $ |
April 30, 2022 $ |
|
|
|
Cash and cash equivalents |
18,661 |
6,427 |
Prepaids |
3,944 |
5,725 |
Equipment and right-of-use asset |
64,445 |
18,242 |
Mineral property interest and deferred development costs (Note 3) |
1,892,410 |
1,892,410 |
Deposits |
29,208 |
29,208 |
|
|
|
Assets held-for-sale |
2,008,668 |
1,952,012 |
|
|
|
Account payable and accrued liabilities (Note 4) |
108,216 |
139,389 |
Lease liability (Note 5) |
54,291 |
13,475 |
|
|
|
Liabilities held-for sale |
162,507 |
152,864 |
|
|
|
|
|
|
Three months ended October 31, |
Six months ended October 31, |
|
2022 |
2021 |
2022 |
2021 |
|
$ |
$ |
$ |
$ |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
Amortization |
553 |
634 |
997 |
1,267 |
Management and consulting fees |
24,750 |
24,750 |
49,500 |
49,500 |
Mineral property expenditures |
160,357 |
148,559 |
291,402 |
284,650 |
General and miscellaneous |
12,839 |
14,581 |
27,796 |
29,885 |
Professional fees/ (recovery) |
(24,178) |
3,900 |
(24,178) |
4,100 |
|
|
|
|
|
|
(174,321) |
(192,424) |
(345,517) |
(369,402) |
OTHER EXPENSE |
|
|
|
|
Foreign exchange loss |
(583) |
(163) |
(1,060) |
(445) |
Interest expense |
(11,573) |
(7,681) |
(23,047) |
(18,390) |
|
|
|
|
|
Loss for the period from discontinued operations |
(186,477) |
(200,268) |
(369,624) |
(388,237) |
I-Minerals Inc. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended October 31, 2022 and 2021 |
(Unaudited - Expressed in US dollars except where otherwise indicated) |
|
Subsequent to October 31, 2022: |
|
i) |
On November 3, 2022 and December 1, 2022, the Company received $120,000 and $120,000, respectively, pursuant to the Sixth Promissory Notes. |
APPENDIX “H”
I-MINERALS INC.
(the “Company”)
AUDITED FINANCIAL STATEMENTS OF
I-MINERALS USA INC. FOR THE YEARS ENDED
APRIL 30, 2022 AND 2021
(See Attached)
I-Minerals USA Inc.
Financial Statements
For the years ended April
30, 2022 and 2021
(Expressed in US
dollars)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
shareholders and the board of directors of I-Minerals USA, Inc.
Opinion on the
Financial Statements
We have audited the accompanying balance
sheets of I-Minerals USA Inc. (the "Company") as of April 30, 2022
and 2021, and the related statements of loss, capital deficit
and cash flows for each of the years then ended, and the related notes
(collectively referred to as the "financial statements"). In our
opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of April 30,
2022 and 2021, and the results of its operations and its cash flows for each of
the years then ended, in conformity with accounting principles generally accepted in the United States of
America.
The Company’s Ability to Continue
as a 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 had an accumulated deficit since inception. This factor raises substantial
doubt about its ability to continue as a going concern. Management’s plans in
regard to this matter are also described in Note 1. The 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 the
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, and in accordance with generally accepted auditing
standards (“GAAS”). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its 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.
Critical Audit Matters
Critical audit matters are matters arising
from the current-period audits of the financial statements that were
communicated or required to be communicated to the audit committee and that (1)
relate to accounts or disclosures that are material to the financial statements
and (2) involved out especially challenging, subjective, or complex judgments.
We determined that there are no critical audit matters.
/s/ Assure CPA, LLC
Spokane,
Washington
December
6, 2022
I-Minerals USA Inc.
Balance
Sheets
April 30,
2022 and 2021
(Expressed
in US dollars)
|
Notes |
April 30, 2022 $ |
April 30, 2021 $ |
ASSETS |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
|
6,427 |
21,564 |
Prepaids |
|
5,725 |
5,179 |
|
|
12,152 |
26,743 |
|
|
|
|
Equipment and right-of-use asset |
|
18,242 |
45,439 |
Mineral property interest and deferred development costs |
3 |
1,863,947 |
1,863,947 |
Deposits |
3 |
28,101 |
28,101 |
|
|
|
|
TOTAL ASSETS |
|
1,922,442 |
1,964,230 |
|
|
|
|
LIABILITIES |
|
|
|
Current liabilities |
|
|
|
Accounts payable and accrued liabilities |
|
139,389 |
112,585 |
Lease liability – current |
4 |
13,475 |
27,982 |
Due to I-Minerals Inc. |
5 |
25,420,966 |
24,652,417 |
|
|
25,573,830 |
24,792,984 |
|
|
|
|
Lease liability – non-current |
|
- |
9,966 |
|
|
|
|
TOTAL LIABILITIES |
|
25,573,830 |
24,802,950 |
Commitments and contingencies (Notes 3, 6 and 8) |
|
|
|
CAPITAL DEFICIT |
|
|
|
Capital Stock |
|
|
|
Authorized: |
|
|
|
Unlimited common shares with no par value |
|
|
|
Issued and outstanding: 10,000 (April 30, 2021 – 10,000) |
|
- |
- |
Accumulated Deficit |
|
(23,651,388) |
(22,838,720) |
TOTAL CAPITAL DEFICIT |
|
(23,651,388) |
(22,838,720) |
|
|
|
|
TOTAL LIABILITIES AND CAPITAL DEFICIT |
|
1,922,442 |
1,964,230 |
Basis
of Presentation and Going Concern (Note 1)
Subsequent
Events (Note 8)
On behalf
of the Board
“John
Theobald” Director “W. Barry Girling” Director
The accompanying
notes are an integral part of these financial statements.
I-Minerals USA Inc.
Statements
of Loss
For the years
ended April 30, 2022 and 2021
(Expressed
in US dollars)
|
|
2022 |
2021 |
|
Notes |
$ |
$ |
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
Amortization |
|
2,534 |
5,254 |
Management and consulting fees |
|
99,000 |
99,000 |
Mineral property expenditures |
|
615,950 |
605,219 |
General and miscellaneous |
|
81,477 |
53,495 |
Professional fees |
|
13,328 |
8,492 |
|
|
|
|
|
|
(812,289) |
(771,460) |
OTHER (EXPENSE) INCOME |
|
|
|
Foreign exchange loss |
|
(379) |
(189) |
|
|
|
|
LOSS FOR THE YEAR |
|
(812,668) |
(771,649) |
|
|
|
|
Loss per share – basic and diluted |
|
(81.27) |
(77.16) |
Weighted average number of shares outstanding |
|
10,000 |
10,000 |
The accompanying
notes are an integral part of these financial statements.
I-Minerals USA Inc.
Statements
of Cash Flows
For the years
ended April 30, 2022 and 2021
(Expressed
in US dollars)
|
2022 $ |
2021 $ |
OPERATING ACTIVITIES |
|
|
Net loss for the year |
(812,668) |
(771,649) |
Items not involving cash: |
|
|
Amortization |
2,534 |
5,254 |
Change in non-cash operating working capital items: |
|
|
Prepaids |
(546) |
(698) |
Accounts payable and accrued liabilities |
26,994 |
41,757 |
|
|
|
Cash flows used in operating activities |
(783,686) |
(725,336) |
|
|
|
INVESTING ACTIVITIES |
|
|
Purchase of equipment |
- |
(879) |
Cash flows used for investing activities |
- |
(879) |
|
|
|
FINANCING ACTIVITIES |
|
|
Proceeds from loan from I-Minerals Inc. |
768,549 |
730,696 |
|
|
|
Cash flows from financing activities |
768,549 |
730,696 |
|
|
|
CHANGE IN CASH AND CASH EQUIVALENTS |
(15,137) |
4,481 |
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR |
21,564 |
17,083 |
|
|
|
CASH AND CASH EQUIVALENTS, END OF THE YEAR |
6,427 |
21,564 |
|
|
|
Significant non-cash investing and financing activities: Recognition of operating lease liabilities and right-of-use assets |
- |
51,380 |
|
|
|
The accompanying
notes are an integral part of these financial statements.
I-Minerals USA Inc.
Statements of Capital
Deficit
For the years ended
April 30, 2022 and 2021
(Expressed
in US dollars)
|
Number of Shares # |
Amount $ |
Accumulated Deficit $ |
Total Capital Deficit $ |
|
|
|
|
|
Balance at April 30, 2020 |
10,000 |
- |
(22,067,071) |
(22,067,071) |
|
|
|
|
|
Loss for the year |
- |
- |
(771,649) |
(771,649) |
|
|
|
|
|
Balance at April 30, 2021 |
10,000 |
- |
(22,838,720) |
(22,838,720) |
|
|
|
|
|
Loss for the year |
- |
- |
(812,668) |
(812,668) |
|
|
|
|
|
Balance at April 30, 2022 |
10,000 |
- |
(23,651,388) |
(23,651,388) |
The accompanying
notes are an integral part of these financial statements.
I-Minerals USA Inc.
Notes to the Financial
Statements
For the years ended
April 30, 2022 and 2021
(Expressed
in US dollars except where otherwise indicated)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION AND LIQUIDITY:
I-Minerals USA Inc. (the “Company” or
“I-Minerals USA”) was incorporated under the laws of the State of Idaho, United
States of America, on June 27, 2001. The
Company is a wholly owned subsidiary of I-Minerals Inc. (‘the Parent”), a
Canadian company.
The
Company’s principal business is the development of the Helmer-Bovill industrial
mineral property (“the Property”) located in Latah County, Idaho. The Helmer-Bovill property is comprised of eleven
mineral leases that host potentially economic deposits of feldspar, quartz and
kaolinitic clays, primarily kaolinite and halloysite.
On September 13, 2022, I-Minerals Inc. entered
into a Stock Purchase Agreement with BV Lending, LLC, an Idaho limited
liability company, controlled by a major shareholder and former director of the
Parent to sell all of the issued and outstanding common shares of the Company
to BV Lending, LLC (Note 8).
Basis
of Presentation and Going Concern
The
accompanying financial statements have been prepared by the Company in
accordance with accounting principles generally accepted in the United States
of America (“GAAP”). The financial statements include the accounts of I-Minerals
USA Inc. and were derived from the Parent’s consolidated financial statements
and are prepared in accordance with GAAP for the preparation of carved-out
financial statements. The Company’s fiscal year-end is April 30th.
The
financial statements have been prepared on the basis that the Company will continue as a going
concern, which
assumes that the Company will be able to meet its obligations and continue its
operations for the next year. Realization values may be
substantially different from carrying values as shown and these financial
statements do not give effect to adjustments that would be necessary to the
carrying values and classification of assets and liabilities should the Company
be unable to continue as a going concern.
At April 30, 2022, the Company had not yet achieved profitable
operations, had an accumulated deficit of $23,651,388 since inception and expects to incur further
losses in the development of its business, all of which casts substantial doubt
upon the Company’s ability to continue as a going concern and, therefore, that
it may be unable to realize its assets and discharge its liabilities in the
normal course of business.
The Company’s ability to continue as a going
concern is dependent upon its ability to obtain the necessary financing to
develop the Property and to meet its obligations and repay its liabilities
arising from normal business operations when they come due. Although the Company has been successful in
the past in obtaining financing, there is no assurance that it will be able to
obtain adequate financing in the future or that such financing will be on terms
advantageous to the Company. The Company
has been receiving funds from its parent company, I-Minerals Inc. Management considers that the Company will be
able to obtain additional funds; however, there is no assurance of additional
funding being available. The Company has
historically satisfied its capital needs primarily from loans from its Parent. Management plans to continue to provide for
its capital needs by receiving funding from stakeholders.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates
The
preparation of these financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. The Company regularly evaluates estimates and
assumptions related to the useful life and recoverability of long-lived assets
and deferred income tax asset valuation allowances. The Company bases its estimates and
assumptions on current facts, historical experience and various other factors
that it believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities and the accrual of costs and expenses that are not readily apparent
from other sources. The actual results
experienced by the Company may differ materially and adversely from the
Company’s estimates. To the extent there
are material differences between the estimates and the actual results, future
results of operations will be affected.
I-Minerals USA Inc.
Notes to the Financial Statements
For the years ended April 30, 2022 and 2021
(Expressed in US dollars except where otherwise indicated)
Cash and Cash Equivalents
The Company considers currency on hand, demand deposits, time deposits,
and all highly liquid investments with an original maturity of three months or
less at the date of purchase to be cash and cash equivalents. Cash and cash
equivalents are held in various financial institutions in the United States.
Equipment
Equipment
is carried at cost and is amortized over the estimated useful economic lives
using the declining balance method at an annual rate of 30%. Maintenance, repairs, and minor replacements are expensed as incurred.
Gains or losses on disposition or retirement of equipment are recognized in
operating expenses on the Statements of Loss.
Mineral Property Acquisition and Exploration Costs
Mineral
property acquisition costs are capitalized when incurred. Acquisition costs include cash consideration
and the fair value of the shares of the Parent’s common stock issued on the
acquisition of mineral property claims.
Costs related to the development of mineral
reserves are capitalized when it has been determined an ore body can be
economically developed. The development
stage begins when an ore body is determined to be economically recoverable
based on proven and probable reserves and appropriate permits are in place and
ends when the production stage or exploitation of reserves begins. Major mine development expenditures are
capitalized, including primary development costs such as costs of building
access ways, tailings impoundment, development of water supply and
infrastructure developments.
Exploration costs include those relating to
activities carried out (a) in search of previously unidentified mineral
deposits, or (b) at undeveloped concessions.
Pre-development activities involve costs incurred in the exploration
stage that may ultimately benefit production that are expensed due to the lack
of evidence of economic development, which is necessary to demonstrate future
recoverability of these expenses.
Secondary development costs are incurred for preparation of an ore body
for production in a specific ore block or work area, providing a relatively
short-lived benefit only to the mine area they relate to, and not to the ore
body as a whole.
Once production has commenced, capitalized costs
will be depleted using the units-of-production method over the estimated life
of the proven and probable reserves. If mineral properties are subsequently
abandoned or impaired, any capitalized costs will be charged to the Statements
of Loss in that period.
The Company assesses the carrying cost of its
mineral properties for impairment whenever information or circumstances
indicate the potential for impairment.
Such evaluations compare estimated future net cash flows with the
Company’s carrying costs and future obligations on an undiscounted basis. If it is determined that the future
undiscounted cash flows are less than the carrying value of the property, a
write down to the estimated fair value is charged to the Statement of Loss for
the period. Where estimates of future
net cash flows are not available and where other conditions suggest impairment,
management utilizes alternative valuation methods to assess if the carrying
value is impaired.
For
significant development projects, interest is capitalized as part of the
historical cost of developing and constructing assets in accordance with ASC
835-20. Interest is capitalized until the asset is ready for service.
Capitalized interest is determined by multiplying the Company’s
weighted-average borrowing cost on general debt by the average amount of qualifying
costs incurred. Once an asset subject to interest capitalization is completed
and placed in service, the associated capitalized interest is expensed through
depletion or impairment.
I-Minerals USA Inc.
Notes to the Financial Statements
For the years ended April 30, 2022 and 2021
(Expressed in US dollars except where otherwise indicated)
Leases
The Company accounts for its leases under ASC 842, Leases. Under this
guidance, arrangements meeting the definition of a lease are classified as
operating or financing leases and are recorded on the balance sheet as both a
right-of-use asset and lease liability, calculated by discounting fixed lease
payments over the lease term at the rate implicit in the lease or the Company’s
incremental borrowing rate. Lease liabilities are increased by interest and
reduced by payments each period, and the right-of-use asset is amortized over
the lease term. For operating leases, interest on the lease liability and the
amortization of the right-of-use asset result in straight-line rent expense
over the lease term. Variable lease expenses are recorded when incurred.
Financial Instruments and Fair Value Measures
The
book value of cash and cash equivalents and the loan due the Parent approximate
their fair values due to the immediate or short-term nature of those
instruments. The fair value hierarchy
under GAAP is based on three levels of inputs, of which the first two are
considered observable and the last unobservable, that may be used to measure
fair value which are the following:
Level 1 - quoted
prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - observable
inputs other than Level I, quoted prices for similar assets or liabilities in
active prices whose inputs are observable or whose significant value drivers
are observable; and
Level 3 - assets
and liabilities whose significant value drivers are unobservable by little or
no market activity and that are significant to the fair value of the assets or
liabilities.
Certain
assets and liabilities are measured at fair value on a nonrecurring basis; that
is, the instruments are not measured at fair value on an ongoing basis but are
subject to fair value adjustments only in certain circumstances (for example,
when there is evidence of impairment). There were no assets or liabilities
measured at fair value on a nonrecurring or a recurring basis during the years
ended April 30, 2022 and 2021.
Corporate Allocations
The Company has historically operated as part of its
parent, I-Minerals Inc. and not as a stand-alone company. Accordingly, certain
shared costs have been allocated to the Company and are reflected as expenses
in the accompanying financial statements. Management considers the allocation
methodologies used to be reasonable and appropriate reflections of the related
expenses attributable to the Company for purposes of the carved-out financial
statements; however, the expenses reflected in these financial statements may
not be indicative of the actual expenses that would have been incurred during
the periods presented if the Company had operated as a separate stand-alone
entity. In addition, the expenses reflected in the financial statements may not
be indicative of expenses that will be incurred in the future.
Loss Per Share
The basic loss per common share is
computed by dividing net loss available to the common stockholder by the weighted
average number of common shares outstanding. Diluted loss per common share is
computed similar to basic loss per common share except that the denominator is
increased to include the number of additional common shares that would have
been outstanding if the potential common shares had been issued and if the
additional common shares were dilutive. At April 30, 2022 and 2021, there were no
dilutive securities outstanding.
I-Minerals USA Inc.
Notes to the Financial Statements
For the years ended April 30, 2022 and 2021
(Expressed in US dollars except where otherwise indicated)
Foreign Currency Translation
The
Company’s functional and reporting currency is the US dollar. Monetary assets and liabilities denominated
in foreign currencies are translated using the exchange rate prevailing at the
balance sheet date and non-monetary items are translated at exchange rates
prevailing when the assets were acquired or obligations incurred. Gains and losses arising on translation or
settlement of foreign currency denominated transactions or balances are included
in the determination of loss.
Income Taxes
The
Company accounts for income taxes using the asset and liability method. The asset and liability method provides that
deferred tax assets and liabilities are recognized for the expected future tax
consequences of temporary differences between the financial reporting and tax
bases of assets and liabilities, and for operating loss and tax credit carry-forwards.
Deferred tax assets and liabilities are
measured using the currently enacted tax rates and laws that will be in effect
when the differences are expected to reverse. The Company records a valuation allowance to
reduce deferred tax assets to the amount that is believed more likely than not
to be realized.
The
Company has adopted the provisions of FASB ASC 740 "Income Taxes"
regarding accounting for uncertainty in income taxes. The Company initially
recognizes tax positions in the financial statements when it is more likely
than not the position will be sustained upon examination by the tax authorities.
Such tax positions are initially and subsequently measured as the largest
amount of tax benefit that is greater than 50% likely of being realized upon
ultimate settlement with the tax authority, assuming full knowledge of the
position and all relevant facts. Application requires numerous estimates based
on available information. The Company considers many factors when evaluating
and estimating its tax positions and tax benefits, and its recognized tax
positions and tax benefits may not accurately anticipate actual outcomes. As
additional information is obtained, there may be a need to periodically adjust
the recognized tax positions and tax benefits. These periodic adjustments may
have a material impact on the statements of operations. When applicable, the
Company classifies penalties and interest associated with uncertain tax
positions as a component of income tax expense in its Statement of Loss.
Adoption
of New Accounting Pronouncements
Income Taxes
In December 2019, the FASB issued
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes. ASU 2019-12 will simplify the accounting for income taxes by removing
certain exceptions to the general principles in Topic 740. The amendments also
improve consistent application of and simplify GAAP for other areas of Topic
740 by clarifying and amending existing guidance. For public business entities,
the amendments in this ASU are effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2020. Effective May 1, 2021, the Company adopted the
new standard.
The adoption of this ASU did not
result in any adjustments to the financial statements.
Recently
Issued Accounting Pronouncements
Financial Instruments
- Credit Losses
In June 2016, the FASB issued ASU
2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments. ASU 2016-13 replaced the incurred loss
impairment methodology under current GAAP with a methodology that reflects
expected credit losses and requires consideration of a broader range of
reasonable and supportable information to inform credit loss estimates. ASU
2016-13 requires use of a forward-looking expected credit loss model for accounts
receivables, loans, and other financial instruments. ASU 2016-13 is effective
for fiscal years beginning after December 15, 2019, with early adoption
permitted. In October 2019, the FASB issued ASU No. 2019-10,
“Financial Instruments-Credit Losses (Topic 326): Effective Dates”, to finalize
the effective date delays for private companies, not-for-profits, and smaller
reporting companies applying the CECL standards. The ASU is effective for
reporting periods beginning after December 15, 2022 and interim periods within
those fiscal years. Early adoption is permitted. The Company is currently
assessing the impact of adopting this standard on its financial statements.
I-Minerals USA Inc.
Notes to the Financial Statements
For the years ended April 30, 2022 and 2021
(Expressed in US dollars except where otherwise indicated)
3. MINERAL PROPERTY INTEREST AND DEFERRED DEVELOPMENT COSTS:
Helmer-Bovill Property – Latah County, Idaho
The Company previously had an
undivided 100% interest in eleven State of Idaho mineral leases. The State of Idaho mineral leases are subject
to a 5% production royalty on gross sales.
In March 2022, the Company amended the
terms of the State of Idaho mineral leases through the Idaho Department of
Lands (the “IDL”) and acquired these amended leases at an auction. Of the eleven mineral leases that the Company
held previously, eight mineral leases were amended and acquired at auction and
the Company elected to relinquish three of the mineral leases. The amended leases now expire in March 2042
and, upon commercial production on one lease, other leases can be held through
mine development or exploration work.
In May 2017, the Idaho Department of Lands accepted the Company’s operation
and reclamation plan. Together with a
water rights permit from the Idaho Department of Water Resources, the Company
was able to proceed with development and construction of the mine, subject to
obtaining sufficient financing. As a result, management made the decision to begin capitalizing all
development expenditures directly related to the Helmer-Bovill Property. In 2019, management determined that continuing
expenditures should be recognized as pre-development expenditures and
recognized in the Company’s Statement of Loss, based upon management’s review
and update of economic factors effecting the property.
As at April 30, 2022 the Company had reclamation deposits with Idaho
Department of Lands of $28,101 (2021 - $28,101).
4. LEASES:
The Company entered into a property lease in October
2020 and the Company recognized a lease obligation and a corresponding
right-of-use asset with respect to the operating lease. The property is a storage facility located in
Rathdrum, Idaho. The terms and the
outstanding balances as at April 30, 2022 and
2021 are as follows:
|
April 30, 2022 $ |
April 30, 2021 $ |
|
|
|
Right-of-use asset from property lease repayable in monthly instalments of $2,332 and an interest rate of 13% per annum and an end date of October 15, 2022 |
13,475 |
37,948 |
Less: current portion |
(13,475) |
(27,982) |
|
|
|
Non-current portion |
- |
9,966 |
The following is a schedule of the Company’s future
minimum lease payments related to the storage facility lease obligation:
|
|
Year ending April 30, $ |
|
|
|
2022 |
|
- |
2023 |
|
13,991 |
Total minimum lease payments |
|
13,991 |
Less: imputed interest |
|
(516) |
Total present value of minimum lease payments |
|
13,475 |
Less: current portion |
|
(13,475) |
Non-current portion |
|
- |
I-Minerals USA Inc.
Notes to the Financial Statements
For the years ended April 30, 2022 and 2021
(Expressed in US dollars except where otherwise indicated)
During the year ended April 30, 2022, the Company incurred
operating lease expenses of $26,971 included in mineral property expenditures
on the statement of loss (2021 - $29,969).
5. DUE TO I-MINERALS INC.:
The Company has a non-interest bearing, due on
demand loan payable to its parent company, I-Minerals Inc. As at April 30,
2022, the balance owing on the loan, was $25,420,966 (2021 - $24,652,417).
6. PROMISSORY NOTES OF I-MINERALS INC.:
The Company’s Parent, I-Minerals Inc. has various
promissory notes (“Notes”) that are collateralized by the Company’s
Helmer-Bovill Property. The Notes are due
to BV Lending, LLC, an Idaho limited liability company controlled by a major
shareholder and former director of the Parent (the “Lender”). As at April 30, 2022, the aggregate balances
of the Notes, including accrued interest, was $34,776,937 (2021 - $32,029,474).
On December 6, 2019, I-Minerals Inc. and the
Lender entered into a general security agreement pursuant to which the Lender
was granted a security interest in the assets of I-Minerals Inc. and I-Minerals
USA Inc. In addition, a continuing and
unconditional guaranty was signed by the Company, as well as a mortgage and
security agreement and a stock power of attorney. These agreements provide the Lender with the
right to all assets of I-Minerals Inc. and the Company in the event of default
on the promissory notes.
The Notes all have the same terms. The Notes have been extended on numerous
occasions and as at April 30, 2022, the Notes were due on June 15, 2022. On June 14, 2022, the maturity dates were
extended to September 15, 2022 for no consideration. On September 15, 2022, the maturity dates
were extended to December 31, 2022 for no consideration.
The Notes bore interest at the rate of 12% to
14% per annum up to May 1, 2021. On July
15, 2021, the interest rate of the promissory notes was amended to 0.13% per
annum effective May 1, 2021.
On September 13, 2022, I-Minerals Inc., entered
into a Stock Purchase Agreement with BV Lending, LLC, and the Company to sell
all of the Company’s issued and outstanding common shares to BV Lending, LLC
(Note 8).
7. INCOME TAXES:
A reconciliation of the income tax provision
computed at federal statutory rates to the reported income tax provision for
the years ended April 30, 2022 and 2021 is as follows:
|
2022 $ |
2021 $ |
|
|
|
|
|
|
Federal statutory tax rate |
21% |
21% |
|
|
|
Loss before income taxes |
(812,668) |
(771,649) |
|
|
|
Expected income tax recovery |
(171,000) |
(162,000) |
Increase (decrease) in income tax recovery resulting from: |
|
|
Other permanent differences |
7,000 |
- |
Impact of under provision in previous year |
(2,000) |
1,000 |
Expiry of loss carryforward |
(15,000) |
- |
Change in valuation allowance |
181,000 |
161,000 |
|
|
|
Income tax recovery (expense) |
- |
- |
I-Minerals USA Inc.
Notes to the Financial Statements
For the years ended April 30, 2022 and 2021
(Expressed in US dollars except where otherwise indicated)
As a result of tax legislation enacted in the U.S. at
the end of 2017, the federal U.S. corporate tax rate applicable to years
subsequent to 2017 was substantially reduced.
The Company calculated deferred income tax assets as at April 30, 2022
using the federal and state rate of 26% (2021 – 26%).
The significant components of the Company’s
deferred income tax assets and liabilities after applying enacted state and
federal corporate tax rates as at April 30, 2022 and 2021 are as follows:
|
2022 $ |
2021 $ |
|
|
|
Deferred income tax assets / (liabilities) |
|
|
Operating losses carried forward |
6,230,000 |
6,209,000 |
Resource property |
865,000 |
706,000 |
Other |
1,000 |
- |
Valuation allowance |
(7,096,000) |
(6,915,000) |
|
|
|
Net deferred income tax assets |
- |
- |
At April
30, 2022, the Company has accumulated federal and state net operating losses of
$23,650,000 which are available to carryforward and offset future years’
taxable income. Losses arising before
January 1, 2018 will expire in various amounts from 2022 to 2038 and will
offset 100% of taxable income. As a result of tax legislation enacted in the
U.S. at the end of 2017, net operating losses in the U.S. arising in tax year
beginning after December 31, 2017 can be carried forward indefinitely instead
of 20 years and carrybacks are no longer permitted. However, the net operating
loss carryforward is limited and can only offset 80% of taxable income.
Uncertain Tax
Positions
The
Company has adopted certain provisions of ASC 740, “Income Taxes”, which
prescribes a recognition threshold and measurement attribute for the
recognition and measurement of tax positions taken or expected to be taken in
income tax returns. The provisions also provide guidance on the de-recognition
of income tax assets and liabilities, classification of current and deferred
income tax assets and liabilities, and accounting for interest and penalties
associated with tax positions.
The
Company files income tax returns in the U.S. federal jurisdiction and the state
of Idaho. The Company’s tax returns are
subject to tax examinations by U.S. federal and state tax authorities until
respective statute of limitation. The
Company currently has no tax years under examination. The Company is subject to
tax examinations by tax authorities for all taxation years commencing after
2003.
At
April 30, 2022, the Company does not have an accrual relating to uncertain tax
positions. It is not anticipated that unrecognized tax benefits would
significantly increase or decrease within 12 months of the reporting date.
8. SUBSEQUENT EVENTS:
The Company has evaluated subsequent events
through December 6, 2022, the date which the financial statements were
available to be issued.
Subsequent to April 30, 2022:
|
• |
i) The Company received additional loans from I-Minerals Inc. of $562,450. |
I-Minerals USA Inc.
Notes to the Financial Statements
For the years ended April 30, 2022 and 2021
(Expressed in US dollars except where otherwise indicated)
|
• |
ii)
On
September 14, 2022, I-Minerals Inc. entered into a Stock Purchase Agreement
with BV Lending, LLC (“BV Lending”), (the "Stock Purchase
Agreement"), pursuant to which I-Minerals Inc. has agreed to sell all of
the issued and outstanding common shares of I-Minerals USA to BV Lending (the
"Transaction"). BV Lending is
a related party to I-Minerals Inc. as it is a company controlled by a former
director and major shareholder of I-Minerals Inc. |
Key Terms of the Transaction:
|
• |
-
Immediately prior to closing of the Transaction, I-Minerals Inc.
will contribute an intercompany debt owed by I-Minerals USA to I-Minerals Inc.
in the amount of approximately $25.7 million, resulting in the cancellation of
the outstanding indebtedness. |
|
• |
-
At the closing of the
Transaction, I-Minerals Inc. will sell all of the shares of I-Minerals USA to
BV Lending for an amount equal to $3,000,000 (the "Share Value"). |
|
• |
-
The Share Value will be
satisfied by BV Lending on a non-cash basis by the set off of an equal amount
of debt owed by I-Minerals Inc. to BV Lending (the "Set Off"). |
|
• |
-
Immediately following the
Set Off, BV Lending will transfer to I-Minerals Inc. the balance of the debt
owed by the Company to BV Lending (which debt was approximately $35.4 million
before the Set Off). |
|
• |
-
Previously entered into
loan agreements dated June 1, 2016, September 11, 2018 and October 25, 2019
among I-Minerals Inc., BV Lending and I-Minerals USA, including all security
granted thereunder, will be terminated and/or discharged. |
|
• |
-
I-Minerals Inc. will be
subject to non-competition and non-solicitation covenants in favour of BV
Lending for a period of five years commencing on closing of the Transaction. |
|
• |
-
The Transaction is subject
to the approval of the Transaction by shareholders of I-Minerals Inc. (the
"Shareholders") and the TSX Venture Exchange. |
|
• |
-
As part of the
Transaction, BV Lending has agreed to pay taxes that will become payable by I-Minerals
Inc. as a result of the Transaction (approximately $450,000). In consideration for such payment by BV
Lending, I-Minerals Inc. will issue a promissory note in favor of BV Lending
for the amount of the taxes so paid. The
promissory note will be repaid out of any refund received by I-Minerals Inc.
from the applicable government agency. |
APPENDIX “I”
I-MINERALS INC.
(the “Company”)
INTERIM FINANCIAL STATEMENTS OF
I-MINERALS USA INC. FOR THE PERIODS ENDED
OCTOBER 31, 2022 AND 2021
(See Attached)
I-Minerals USA Inc.
Condensed Interim Financial
Statements
For the three and six
months ended October 31, 2022 and 2021
(Unaudited - Expressed
in US dollars)
I-Minerals USA Inc.
Condensed
Interim Balance Sheets
October
31, 2022 and April 30, 2022
(Unaudited
- Expressed in US dollars)
|
Notes |
October 31, 2022 $ |
April 30, 2022 $ |
ASSETS |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
|
18,661 |
6,427 |
Prepaids |
|
3,944 |
5,725 |
|
|
22,605 |
12,152 |
|
|
|
|
Equipment and right-of-use asset |
|
64,445 |
18,242 |
Mineral property interest and deferred development costs |
2 |
1,863,947 |
1,863,947 |
Deposits |
|
28,101 |
28,101 |
|
|
|
|
TOTAL ASSETS |
|
1,979,098 |
1,922,442 |
|
|
|
|
LIABILITIES |
|
|
|
Current liabilities |
|
|
|
Accounts payable and accrued liabilities |
|
108,216 |
139,389 |
Lease liability – current |
3 |
26,469 |
13,475 |
Due to I-Minerals Inc. |
4 |
25,814,556 |
25,420,966 |
|
|
25,949,241 |
25,573,830 |
|
|
|
|
Lease liability – non-current |
|
27,822 |
- |
|
|
|
|
TOTAL LIABILITIES |
|
25,977,063 |
25,573,830 |
|
|
|
|
Commitments and contingencies (Notes 2, 5 and 6) |
|
|
|
|
|
|
|
CAPITAL DEFICIT |
|
|
|
Capital Stock |
|
|
|
Authorized: |
|
|
|
Unlimited common shares with no par value |
|
|
|
Issued and fully paid: 10,000 (April 30, 2022 – 10,000) |
|
- |
- |
Deficit |
|
(23,997,965) |
(23,651,388) |
TOTAL CAPITAL DEFICIT |
|
(23,997,965) |
(23,651,388) |
|
|
|
|
TOTAL LIABILITIES AND CAPITAL DEFICIT |
|
1,979,098 |
1,922,442 |
Basis
of Presentation and Going Concern (Note 1)
Subsequent
events (Note 6)
On behalf
of the Board
“John
Theobald” Director “W. Barry Girling” Director
The accompanying
notes are an integral part of these condensed interim financial statements.
I-Minerals USA Inc.
Condensed
Interim Statements of Loss
For the three
and six months ended October 31, 2022 and 2021
(Unaudited
- Expressed in US dollars)
|
|
Three months ended October 31, |
Six months ended October 31, |
|
|
2022 |
2021 |
2022 |
2021 |
|
Notes |
$ |
$ |
$ |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
Amortization |
|
553 |
634 |
997 |
1,267 |
Management and consulting fees |
|
24,750 |
24,750 |
49,500 |
49,500 |
Mineral property expenditures |
|
160,357 |
148,559 |
291,402 |
284,650 |
General and miscellaneous |
|
(12,161) |
14,581 |
2,796 |
29,885 |
Professional fees |
|
822 |
3,900 |
822 |
4,100 |
|
|
|
|
|
|
|
|
(174,321) |
(192,424) |
(345,517) |
(369,402) |
OTHER (EXPENSE) INCOME |
|
|
|
|
|
Foreign exchange loss |
|
(583) |
(163) |
(1,060) |
(445) |
|
|
|
|
|
|
LOSS FOR THE PERIOD |
|
(174,904) |
(192,587) |
(346,577) |
(369,847) |
|
|
|
|
|
|
Loss per share – basic and diluted |
|
(17.49) |
(19.26) |
(34.66) |
(36.98) |
Weighted average number of shares outstanding |
|
10,000 |
10,000 |
10,000 |
10,000 |
The accompanying
notes are an integral part of these condensed interim financial statements.
I-Minerals USA Inc.
Condensed
Interim Statements of Cash Flows
For the six
months ended October 31, 2022 and 2021
(Unaudited
- Expressed in US dollars)
|
2022 $ |
2021 $ |
OPERATING ACTIVITIES |
|
|
Net loss for the period |
(346,577) |
(369,847) |
Items not involving cash: |
|
|
Amortization |
997 |
1,267 |
Change in non-cash operating working capital items: |
|
|
Prepaids |
1,781 |
(5,502) |
Accounts payable and accrued liabilities |
(32,432) |
15,710 |
|
|
|
Cash flows used in operating activities |
(376,231) |
(358,372) |
|
|
|
INVESTING ACTIVITIES |
|
|
Purchase of equipment |
(5,125) |
- |
Cash flows used for investing activities |
(5,125) |
- |
|
|
|
FINANCING ACTIVITIES |
|
|
Proceeds from loan from I-Minerals Inc. |
393,590 |
342,521 |
|
|
|
Cash flows from financing activities |
393,590 |
342,521 |
|
|
|
CHANGE IN CASH |
12,234 |
(15,851) |
|
|
|
CASH, BEGINNING OF THE PERIOD |
6,427 |
21,564 |
|
|
|
CASH, END OF THE PERIOD |
18,661 |
5,713 |
|
|
|
Significant non-cash investing and financing activities: Recognition of operating lease liabilities and right-of-use assets |
56,673 |
- |
The accompanying
notes are an integral part of these condensed interim financial statements.
I-Minerals USA Inc.
Condensed Interim Statements
of Capital Deficit
For the three and
six months ended October 31, 2022 and 2021
(Unaudited
- Expressed in US dollars)
|
Three months ended October 31, 2022 |
|
Number of Shares # |
Amount $ |
Accumulated Deficit $ |
Total Capital Deficit $ |
|
|
|
|
|
Balance at July 31, 2022 |
10,000 |
- |
(23,823,061) |
(23,823,061) |
|
|
|
|
|
Loss for the period |
- |
- |
(174,904) |
(174,904) |
|
|
|
|
|
Balance at October 31, 2022 |
10,000 |
- |
(23,997,965) |
(23,997,965) |
|
Three months ended October 31, 2021 |
|
Number of Shares # |
Amount $ |
Accumulated Deficit $ |
Total Capital Deficit $ |
|
|
|
|
|
Balance at July 31, 2021 |
10,000 |
- |
(23,015,980) |
(23,015,980) |
|
|
|
|
|
Loss for the period |
- |
- |
(192,587) |
(192,587) |
|
|
|
|
|
Balance at October 31, 2021 |
10,000 |
- |
(23,208,567) |
(23,208,567) |
|
Six months ended October 31, 2022 |
|
Number of Shares # |
Amount $ |
Accumulated Deficit $ |
Total Capital Deficit $ |
|
|
|
|
|
Balance at April 30, 2022 |
10,000 |
- |
(23,651,388) |
(23,651,388) |
|
|
|
|
|
Loss for the period |
- |
- |
(346,577) |
(346,577) |
|
|
|
|
|
Balance at October 31, 2022 |
10,000 |
- |
(23,997,965) |
(23,997,965) |
|
Six months ended October 31, 2021 |
|
Number of Shares # |
Amount $ |
Accumulated Deficit $ |
Total Capital Deficit $ |
|
|
|
|
|
Balance at April 30, 2021 |
10,000 |
- |
(22,838,720) |
(22,838,720) |
|
|
|
|
|
Loss for the period |
- |
- |
(369,847) |
(369,847) |
|
|
|
|
|
Balance at October 31, 2021 |
10,000 |
- |
(23,208,567) |
(23,208,567) |
The accompanying
notes are an integral part of these condensed interim financial statements.
I-Minerals USA Inc.
Notes to the Condensed
Interim Financial Statements
For the three and six
months ended October 31, 2022 and 2021
(Unaudited
- Expressed in US dollars except where otherwise indicated)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION AND LIQUIDITY:
I-Minerals USA Inc. (the “Company” or
“I-Minerals USA”) was incorporated under the laws of the State of Idaho, United
States of America, on June 27, 2001. The
Company is a wholly owned subsidiary of I-Minerals Inc. (‘the Parent”), a
Canadian company.
The
Company’s principal business is the development of the Helmer-Bovill industrial
mineral property (“the Property”) located in Latah County, Idaho. The Helmer-Bovill property is comprised of
eleven mineral leases that host potentially economic deposits of feldspar, quartz
and kaolinitic clays, primarily kaolinite and halloysite.
On September 13, 2022, I-Minerals Inc. entered
into a Stock Purchase Agreement with BV Lending, LLC, an Idaho limited
liability company, controlled by a major shareholder and former director of the
Parent to sell all of the issued and outstanding common shares of the Company
to BV Lending, LLC (Note 6).
Basis
of Presentation and Going Concern
This
summary of significant accounting policies is presented to assist in
understanding the financial statements. The financial statements and notes are
representations of the Company’s management, which is responsible for their
integrity and objectivity. The accompanying unaudited financial statements have
been prepared by the Company in accordance with accounting principles generally
accepted in the United States of America for interim financial information.
Accordingly, the financial statements do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements.
In the
opinion of the Company’s management, all adjustments, consisting of only normal
recurring adjustments, considered necessary for a fair statement of the interim
financial statements have been included. The balance sheet at April 30, 2022
was derived from audited annual financial statements but does not contain all
the footnote disclosures from the annual financial statements. Operating
results for the three and six month periods ended October 31, 2022 are not
necessarily indicative of the results that may be expected for the full fiscal
year ending April 30, 2023.
The
accompanying unaudited condensed interim financial statements have been
prepared by the Company in accordance with accounting principles generally
accepted in the United States of America (“US GAAP”) Article 10 of Regulation
S-X on the basis that the Company
will continue as a going concern, which assumes that the Company will be able to
meet its obligations and continue its operations for the next year.
Realization values may be substantially different from carrying values
as shown and these financial statements do not give effect to adjustments that
would be necessary to the carrying values and classification of assets and
liabilities should the Company be unable to continue as a going concern. At October 31, 2022, the Company had not yet
achieved profitable operations, had an accumulated deficit of $23,997,965
since inception and expects to
incur further losses in the development of its business, all of which casts
substantial doubt upon the Company’s ability to continue as a going concern
and, therefore, that it may be unable to realize its assets and discharge its
liabilities in the normal course of business.
The Company has historically operated as part of its
parent, I-Minerals Inc. and not as a stand-alone company. Accordingly, certain
shared costs have been allocated to the Company and are reflected as expenses
in the accompanying financial statements. Management considers the allocation
methodologies used to be reasonable and appropriate reflections of the related
expenses attributable to the Company for purposes of the carved-out financial
statements; however, the expenses reflected in these financial statements may
not be indicative of the actual expenses that would have been incurred during
the periods presented if the Company had operated as a separate stand-alone
entity. In addition, the expenses reflected in the financial statements may not
be indicative of expenses that will be incurred in the future.
I-Minerals USA Inc.
Notes to the Condensed Interim Financial Statements
For the three and six months ended October 31, 2022 and 2021
(Unaudited - Expressed in US dollars except where otherwise indicated)
The Company’s ability to continue as a going
concern is dependent upon its ability to obtain the necessary financing to
develop the Property and to meet its obligations and repay its liabilities
arising from normal business operations when they come due. Although the Company has been successful in
the past in obtaining financing, there is no assurance that it will be able to
obtain adequate financing in the future or that such financing will be on terms
advantageous to the Company. The Company
has been receiving funds from its parent company, I-Minerals Inc. Management considers that the Company will be
able to obtain additional funds; however, there is no assurance of additional
funding being available. The Company has
historically satisfied its capital needs primarily from loans from its Parent. Management plans to continue to provide for
its capital needs by receiving funding from stakeholders.
2. MINERAL PROPERTY INTEREST AND DEFERRED DEVELOPMENT COSTS:
Helmer-Bovill Property – Latah County, Idaho
The Company previously had an
undivided 100% interest in eleven State of Idaho mineral leases. The State of Idaho mineral leases are subject
to a 5% production royalty on gross sales.
In March 2022, the Company amended the
terms of the State of Idaho mineral leases through the Idaho Department of
Lands (the “IDL”) and acquired these amended leases at an auction. Of the eleven mineral leases that the Company
held previously, eight mineral leases were amended and acquired at auction and
the Company elected to relinquish three of the mineral leases. The amended leases now expire in March 2042
and, upon commercial production on one lease, other leases can be held through
mine development or exploration work.
In May 2017, the Idaho Department of Lands accepted the Company’s
operation and reclamation plan. Together
with a water rights permit from the Idaho Department of Water Resources, the
Company was able to proceed with development and construction of the mine,
subject to obtaining sufficient financing.
As a result, management made the
decision to begin capitalizing all development expenditures directly related to
the Helmer-Bovill Property. In 2019,
management determined that continuing expenditures should be recognized as
pre-development expenditures and recognized in the Company’s Statement of Loss,
based upon management’s review and update of economic factors effecting the
property. As at October 31, 2022, the
Company had mineral property interest and deferred development costs of
$1,863,947 (April 30, 2022 - $1,863,947).
As at October 31, 2022 the Company had reclamation deposits with Idaho
Department of Lands of $28,101 (April 30, 2022 - $28,101).
3. LEASE LIABILITY:
The Company entered into a property lease in October
2020 and the Company recognized a lease obligation and a corresponding
right-of-use asset with respect to the operating lease. The property is a storage facility located in
Rathdrum, Idaho. The terms and the
outstanding balances as at October 31, 2022
and April 30, 2022 are as
follows:
|
October 31, 2022 $ |
April 30, 2022 $ |
|
|
|
Right-of-use asset from property lease repayable in monthly instalments of $2,332 and an interest rate of 13% per annum and an end date of October 15, 2022 |
- |
13,475 |
Lease liability |
- |
13,475 |
I-Minerals USA Inc.
Notes to the Condensed Interim Financial Statements
For the three and six months ended October 31, 2022 and 2021
(Unaudited - Expressed in US dollars except where otherwise indicated)
The Company extended its property lease in
October 2022, and recognized a lease obligation and associated right-of-use
asset with respect to the operating lease.
The terms and the outstanding balances as at October
31, 2022 are as follows:
|
|
October 31, 2022 $ |
|
|
|
Right-of-use asset from property lease repayable in monthly instalments of $2,382 and an interest rate of 5% per annum and an end date of October 15, 2024 |
|
54,291 |
Less: current portion |
|
(26,469) |
|
|
|
Non-current portion |
|
27,822 |
The following is a schedule of the Company’s future
minimum lease payments related to the storage facility lease obligation:
|
|
October 31, 2022 $ |
|
|
|
2023 |
|
14,291 |
2024 |
|
28,582 |
2025 |
|
14,291 |
Total minimum lease payments |
|
57,164 |
Less: imputed interest |
|
(2,873) |
Total present value of minimum lease payments |
|
54,291 |
Less: current portion |
|
(26,469) |
Non-current portion |
|
27,822 |
During the three and six months ended October 31,
2022, the Company incurred operating lease expenses of $5,900 and $12,132,
respectively, included in mineral property expenditures on the statement of
loss (2021 - $6,845 and $13,881, respectively).
4. DUE TO I-MINERALS INC.:
The Company has a non-interest bearing, due on
demand loan payable to its parent company, I-Minerals Inc. As at October 31,
2022, the balance owing on the loan, was $25,814,556 (April 30, 2022 - $25,420,966).
5. PROMISSORY NOTES OF I-MINERALS INC.:
The Company’s Parent, I-Minerals Inc. has
various promissory notes (“Notes”) that are collateralized by the Company’s
Helmer-Bovill Property. The Notes are due
to BV Lending, LLC, an Idaho limited liability company controlled by a major
shareholder and former director of the Parent (the “Lender”). As at October 31, 2022, the aggregate
balances of the Notes, including accrued interest, was $35,374,376 (April 30,
2022 - $34,776,937).
On December 6, 2019, I-Minerals Inc. and the
Lender entered into a general security agreement pursuant to which the Lender
was granted a security interest in the assets of I-Minerals Inc. and I-Minerals
USA Inc. In addition, a continuing and
unconditional guaranty was signed by the Company, as well as a mortgage and
security agreement and a stock power of attorney. These agreements provide the Lender with the
right to all assets of I-Minerals Inc. and the Company in the event of default
on the promissory notes.
I-Minerals USA Inc.
Notes to the Condensed Interim Financial Statements
For the three and six months ended October 31, 2022 and 2021
(Unaudited - Expressed in US dollars except where otherwise indicated)
The Notes all have the same terms. The Notes have been extended on numerous
occasions and as at April 30, 2022, the Notes were due on June 15, 2022. On June 14, 2022, the maturity dates were
extended to September 15, 2022 for no consideration. On September 15, 2022, the maturity dates
were extended to December 31, 2022 for no consideration.
The Notes bore interest at the rate of 12% to
14% per annum up to May 1, 2021. On July
15, 2021, the interest rate of the promissory notes was amended to 0.13% per
annum effective May 1, 2021.
On September 13, 2022, I-Minerals Inc., entered
into a Stock Purchase Agreement with BV Lending, LLC, and the Company to sell
all of the Company’s issued and outstanding common shares to BV Lending, LLC
(Note 6).
6. SUBSEQUENT EVENTS:
The Company has evaluated subsequent events
through December 6, 2022, the date which the condensed interim financial
statements were available to be issued.
Subsequent to October
31, 2022:
i) |
The Company received additional loans from I-Minerals Inc. of $160,879. |
ii) |
On September 14, 2022, I-Minerals Inc. entered into a Stock Purchase Agreement with BV Lending, LLC (“BV Lending”), (the "Stock Purchase Agreement"), pursuant to which I-Minerals Inc. has agreed to sell all of the issued and outstanding common shares of I-Minerals USA to BV Lending (the "Transaction"). BV Lending is a related party to I-Minerals Inc. as it is a company controlled by a former director and major shareholder of I-Minerals Inc. |
Key Terms of the Transaction:
|
- |
Immediately prior to closing of the Transaction, I-Minerals Inc.
will contribute an intercompany debt owed by I-Minerals USA to I-Minerals Inc.
in the amount of approximately $25.7 million, resulting in the cancellation of
the outstanding indebtedness. |
|
- |
At the closing of the
Transaction, I-Minerals Inc. will sell all of the shares of I-Minerals USA to
BV Lending for an amount equal to $3,000,000 (the "Share Value"). |
|
- |
The Share Value will be
satisfied by BV Lending on a non-cash basis by the set off of an equal amount
of debt owed by I-Minerals Inc. to BV Lending (the "Set Off"). |
|
- |
Immediately following the
Set Off, BV Lending will transfer to I-Minerals Inc. the balance of the debt
owed by the Company to BV Lending (which debt was approximately $35.4 million
before the Set Off). |
|
- |
Previously entered into
loan agreements dated June 1, 2016, September 11, 2018 and October 25, 2019
among I-Minerals Inc., BV Lending and I-Minerals USA, including all security
granted thereunder, will be terminated and/or discharged. |
|
- |
I-Minerals Inc. will be
subject to non-competition and non-solicitation covenants in favour of BV
Lending for a period of five years commencing on closing of the Transaction. |
|
- |
The Transaction is subject
to the approval of the Transaction by shareholders of I-Minerals Inc. (the
"Shareholders") and the TSX Venture Exchange. |
|
- |
As part of the
Transaction, BV Lending has agreed to pay taxes that will become payable by I-Minerals
Inc. as a result of the Transaction (approximately $450,000). In consideration for such payment by BV
Lending, I-Minerals Inc. will issue a promissory note in favor of BV Lending
for the amount of the taxes so paid. The
promissory note will be repaid out of any refund received by I-Minerals Inc.
from the applicable government agency. |
APPENDIX "J"
I-MINERALS INC.
(the “Company”)
PRO FORMA FINANCIAL STATEMENTS OF
THE COMPANY FOR THE PERIODS ENDED
OCTOBER 31, 2022 AND APRIL 30,
2022
(See Attached)
I-Minerals Inc.
PRO-FORMA
CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2022
(Unaudited –
Expressed in US Dollars)
I-Minerals
Inc.
PRO-FORMA
CONSOLIDATED BALANCE SHEET
As
at October 31, 2022
(Unaudited – Expressed in US Dollars)
|
I-Minerals Inc. at October 31, 2022 $ |
Notes |
Transaction Accounting Adjustments (1) $ |
Pro-forma Consolidated $ |
|
|
|
|
|
ASSETS |
|
|
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
16,533 |
2(a) |
240,000 |
136,533 |
|
|
2(f) |
(120,000) |
|
Receivables |
13,772 |
|
- |
13,772 |
Prepaids |
4,385 |
|
- |
4,385 |
Assets held-for-sale |
2,008,668 |
2(c) |
(18,661) |
- |
|
|
2(c) |
(3,944) |
|
|
|
2(c) |
(64,445) |
|
|
|
2(c) |
(1,863,947) |
|
|
|
2(c) |
(28,101) |
|
|
|
2(e) |
(28,463) |
|
|
|
2(e) |
(1,107) |
|
TOTAL ASSETS |
2,043,358 |
|
(1,888,668) |
154,690 |
|
|
|
|
|
LIABILITIES |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable and accrued liabilities |
1,490,962 |
|
- |
1,490,962 |
Promissory notes due to related party |
35,374,376 |
2(a) |
240,000 |
450,000 |
|
|
2(c) |
(35,614,376) |
|
|
|
2(d) |
450,000 |
|
Liabilities held-for-sale |
162,507 |
2(c) |
(108,216) |
- |
|
|
2(c) |
(54,291) |
|
|
|
|
|
|
TOTAL LIABILITIES |
37,027,845 |
|
(35,086,883) |
1,940,962 |
|
|
|
|
|
CAPITAL DEFICIT |
|
|
|
|
Capital stock |
19,225,087 |
|
- |
19,225,087 |
Additional paid-in capital |
1,865,342 |
|
- |
1,865,342 |
Deficit |
(56,074,916) |
2(c) |
33,797,785 |
(22,876,701) |
|
|
2(d) |
(450,000) |
|
|
|
2(e) |
(29,570) |
|
|
|
2(f) |
(120,000) |
|
|
(34,984,487) |
|
33,198,215 |
(1,786,272) |
|
|
|
|
|
TOTAL LIABILITIES AND CAPITAL DEFICIT |
2,043,358 |
|
(1,888,668) |
154,690 |
(1) |
There were no Autonomous Entity Adjustments. |
The
accompanying notes are an integral part of the pro-forma consolidated financial
statements.
I-Minerals
Inc.
PRO-FORMA
CONSOLIDATED STATEMENT OF (LOSS) INCOME
For
the six months ended October 31, 2022
(Unaudited – Expressed in US Dollars)
|
I-Minerals Inc. Six months ended October 31, 2022 $ |
Notes |
Transaction Accounting Adjustments (1) $ |
Pro-forma Consolidated $ |
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
Management and consulting fees |
51,096 |
|
- |
51,096 |
General and miscellaneous |
30,106 |
|
- |
30,106 |
Professional fees |
161,888 |
|
- |
161,888 |
|
(243,090) |
|
- |
(243,090) |
|
|
|
|
|
OTHER (EXPENSE) INCOME |
|
|
|
|
Foreign exchange gain |
3,523 |
|
- |
3,523 |
Interest expense |
(204,011) |
|
- |
(204,011) |
|
|
|
|
|
(LOSS) INCOME FOR THE PERIOD FROM CONTINUING OPERATIONS |
(443,578) |
|
- |
(443,578) |
(LOSS) FOR THE PERIOD FROM DISCONTINUED OPERATIONS |
(369,624) |
|
- |
(369,624) |
|
|
|
|
|
NET (LOSS) INCOME FOR THE PERIOD |
(813,202) |
|
- |
(813,202) |
|
|
|
|
|
LOSS PER SHARE – BASIC AND DILUTED |
(0.00) |
|
|
(0.00) |
(1) |
There were no Autonomous Entity Adjustments. |
The
accompanying notes are an integral part of the pro-forma consolidated financial
statements.
I-Minerals
Inc.
PRO-FORMA
CONSOLIDATED STATEMENT OF (LOSS) INCOME
For
the year ended April 30, 2022
(Unaudited – Expressed in US Dollars)
|
I-Minerals Inc. Year ended April 30, 2022 $ |
Notes |
Transaction Accounting Adjustments (1) $ |
Pro-forma Consolidated $ |
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
Management and consulting fees |
103,893 |
|
- |
103,893 |
General and miscellaneous |
129,525 |
2(e) |
29,570 |
159,095 |
Professional fees |
207,027 |
2(f) |
120,000 |
327,027 |
|
(440,445) |
|
(149,570) |
(590,015) |
|
|
|
|
|
OTHER (EXPENSE) INCOME |
|
|
|
|
Gain on sale of subsidiary |
- |
2(c) |
33,797,785 |
33,347,785 |
|
|
2(d) |
(450,000) |
|
Foreign exchange gain |
2,280 |
|
- |
2,280 |
Interest expense |
(104,091) |
|
- |
(104,091) |
|
|
|
|
|
(LOSS) INCOME FOR THE YEAR FROM CONTINUING OPERATIONS |
(542,256) |
|
33,198,215 |
32,655,959 |
(LOSS) FOR THE YEAR FROM DISCONTINUED OPERATIONS |
(812,668) |
|
- |
(812,668) |
|
|
|
|
|
NET (LOSS) INCOME FOR THE YEAR |
(1,354,924) |
|
33,198,215 |
31,843,291 |
|
|
|
|
|
(LOSS) INCOME PER SHARE – BASIC AND DILUTED |
(0.01) |
|
|
0.34 |
(1) |
There were no Autonomous Entity Adjustments. |
The
accompanying notes are an integral part of the pro-forma consolidated financial
statements.
I-Minerals
Inc.
NOTES TO THE
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
As
at October 31, 2022
(Unaudited – Expressed in US Dollars)
The unaudited pro-forma consolidated financial
statements of I-Minerals Inc. (the “Company”) have been prepared by its
management based on financial statements prepared in accordance with accounting principles
generally accepted in the United States of America (“US GAAP”) to give effect to the Transaction. On September 14, 2022, the
Company entered into a Stock Purchase Agreement with BV Lending, LLC, an Idaho
limited liability company ("BV Lending") and the Company's
subsidiary, I-Minerals USA, Inc. ("I-Minerals USA"), an Idaho company
that owns the leases that comprise the Helmer-Bovill Property (the "Stock
Purchase Agreement"), pursuant to which the Company has agreed to sell all
of the issued and outstanding common shares of I-Minerals USA to BV Lending
(the "Transaction"). BV
Lending is a non-arm's length party to the Company as it is a company
controlled by a former director of the Company.
It is management’s opinion that the pro-forma
consolidated financial statements include all adjustments necessary for fair
presentation, in all material respects, of the transactions described in Note 2
and are in accordance with US GAAP.
The unaudited pro-forma consolidated financial
statements should be read in conjunction with the financial statements thereon
included in this proxy statement, being the audited consolidated financial
statements of the Company for the years ended April 30, 2022 and 2021, the unaudited
interim consolidated financial statements of the Company for the three and six months
ended October 31, 2022 and 2021, the audited financial statements of I-Minerals
USA Inc. for the years ended April 30, 2022 and 2021 and the unaudited interim
financial statements of I-Minerals USA Inc. for the three and six months ended October
31, 2022 and 2021.
The unaudited pro-forma consolidated balance
sheet gives effect to the Transaction as if it had occurred on October 31, 2022.
The unaudited pro-forma consolidated statements of (loss) income for both the
annual period presented and the interim period presented gives effect to the
Transaction as if it had occurred on the first day of the financial year presented
(May 1, 2021). The unaudited pro-forma
consolidated financial statements have been prepared for illustrative purposes
only and may not be indicative of the I-Minerals Inc. resulting entity
financial position or operating results that would have occurred if the Transaction
had been in effect at the dates indicated. Actual amounts recorded upon
consummation of the Transaction will likely differ from those recorded in the
unaudited pro forma consolidated financial statements.
2. |
PRO-FORMA TRANSACTIONS AND ADJUSTMENTS |
|
The pro-forma consolidated financial statements reflect the following
assumptions and adjustments: |
|
(a) |
BV Lending has provided an additional $240,000 of advances from October 31, 2022 to the date of the proxy statement. |
|
(b) |
Immediately prior to closing of the Transaction, the Company will contribute an intercompany debt owed by I-Minerals USA to the Company in the amount of approximately $25.7 million, resulting in the cancellation of the outstanding indebtedness. On a consolidated basis, there is no accounting entry for this. |
|
(c) |
At the closing of the Transaction, the Company will sell all of the shares of I-Minerals USA to BV Lending for an amount equal to $3,000,000 (the "Share Value"). The Share Value will be satisfied by BV Lending on a non-cash basis by the set off of an equal amount of debt owed by the Company to BV Lending (the "Set Off"). Immediately following the Set Off, BV Lending will transfer to the Company the balance of the debt owed by the Company to BV Lending (which debt was approximately $35.4 million before the Set Off). Previously entered into loan agreements dated June 1, 2016, September 11, 2018 and October 25, 2019 among the Company, BV Lending and I-Minerals USA, including all security granted thereunder, will be terminated and/or discharged. |
|
(d) |
As part of the Transaction, BV Lending has agreed to pay taxes that will become payable by the Company as a result of the Transaction (approximately $450,000). In consideration for such payment by BV Lending, the Company will issue a promissory note in favor of BV Lending for the amount of the taxes so paid. The promissory note will be repaid out of any refund received by the Company from the applicable government agency. |
5
I-Minerals Inc.
NOTES TO THE PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
As at October 31, 2022
(Unaudited – Expressed in US Dollars)
|
(e) |
Immaterial balances remaining in I-Minerals Inc. are written-off to general and miscellaneous expenses. These are mineral property interest and deposits balances recorded in I-Minerals Inc. and relate to the Helmer-Bovill Property. |
|
(f) |
Costs in connection with completion of the Transaction are estimated at $120,000. |
|
The net assets to be
disposed of is as follows: |
Net assets (liabilities) disposed of |
$ |
Assets |
|
Cash and cash equivalents |
18,661 |
Prepaids |
3,944 |
Equipment and right-of-use asset |
64,445 |
Mineral property interest and deferred development costs |
1,863,947 |
Deposits |
28,101 |
Liabilities |
|
Accounts payable and accrued liabilities |
(108,216) |
Lease liability |
(54,291) |
Net liabilities disposed of |
1,816,591 |
|
|
Consideration received |
|
Set-off against promissory notes |
3,000,000 |
Remainder of promissory notes |
32,614,376 |
Promissory note to BV Lending for estimated taxes payable |
(450,000) |
Total consideration received |
35,164,376 |
|
|
Gain on disposition of subsidiary |
33,347,785 |
6
APPENDIX “K”
I-MINERALS INC.
(the “Company”)
FORM OF PROXY
(See Attached)