FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report Of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of August 2023
Commission File No. 000-16353
37 CAPITAL INC.
(Translation of registrant's name into English)
Suite 303, 570 Granville Street, Vancouver,
BC, Canada V6C 3P1
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒
Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1) ☐
Note: Regulation S-T Rule 101(b)(1) only permits the submission in
paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
SUBMITTED HEREWITH
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
37 Capital Inc.
“Jake H. Kalpakian”
Jake H. Kalpakian
President
August 30, 2023.
37
CAPITAL INC.
Condensed
Interim Financial Statements
Six
Months Ended June 30, 2023 and 2022
(Expressed
in Canadian Dollars)
(Unaudited)
Index |
Page |
Notice
of No Auditor Review |
1 |
Condensed
Interim Financial Statements |
|
Condensed
Balance Sheets |
2 |
Condensed
Statements of Comprehensive Income/Loss |
3 |
Condensed
Statements of Changes in Stockholders’ Deficiency |
4 |
Condensed
Statements of Cash Flows |
5 |
Notes
to Condensed Financial Statements |
6
– 20 |
Notice
of No Auditor Review of Condensed Interim Financial Statements
In
accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors
have not reviewed these unaudited condensed interim financial statements as at June 30, 2023 and for the six months ended June 30, 2023
and 2022.
1
37
CAPITAL INC.
Condensed
Balance Sheets
(Expressed
in Canadian Dollars)
(Unaudited)
| |
June
30, 2023 | |
December
31, 2022 |
| |
| |
(audited) |
Assets | |
| | | |
| | |
Current | |
| | | |
| | |
Cash | |
$ | 14,573 | | |
$ | 122 | |
GST
receivable | |
| 1,440 | | |
| 1,560 | |
Prepaid | |
| 5,000 | | |
| — | |
| |
| 21,013 | | |
| 1,682 | |
| |
| | | |
| | |
Mineral
Property Interests (note 5) | |
| 54,001 | | |
| 54,001 | |
Total
Assets | |
$ | 75,014 | | |
$ | 55,683 | |
| |
| | | |
| | |
Liabilities
and Stockholders’ Deficiency | |
| | | |
| | |
Current | |
| | | |
| | |
Accounts
payable and accrued liabilities (note 6) | |
$ | 53,726 | | |
$ | 176,163 | |
Due
to related parties (note 7) | |
| 69,300 | | |
| 103,200 | |
Loan
payable (note 8) | |
| 60,452 | | |
| 57,973 | |
Convertible
debentures (note 9) | |
| 504,589 | | |
| 489,589 | |
Total
Liabilities | |
| 688,067 | | |
| 826,925 | |
| |
| | | |
| | |
Stockholders’
Deficiency | |
| | | |
| | |
Capital
stock (note 10) | |
| 27,686,269 | | |
| 27,536,269 | |
Equity
portion of convertible debentures (note 9) | |
| 33,706 | | |
| 33,706 | |
Reserve | |
| 24,000 | | |
| 24,000 | |
Deficit | |
| (28,357,028 | | |
| (28,365,217 | ) |
Total
Stockholders’ Deficiency | |
| (613,053 | ) | |
| (771,242 | ) |
Total
Liabilities and Stockholders’ Deficiency | |
$ | 75,014 | | |
$ | 55,683 | |
Going
Concern (note 2)
Commitments
(note 11)
On behalf
of the Board:
”Jake
H. Kalpakian” (signed)
Jake
H. Kalpakian, Director
“Gregory
T. McFarlane” (signed)
Gregory
T. McFarlane, Director
The
accompanying notes form an integral part of these financial statements.
37
CAPITAL INC.
Condensed
Statements of Comprehensive Income/Loss
(Expressed
in Canadian Dollars)
| |
Three
Months Ended June 30, | |
Six
Months Ended June 30, |
| |
2023 | |
2022 | |
2023 | |
2022 |
Expenses | |
| |
| |
| |
|
Finance
and interest (notes 7 and 10) | |
$ | 9,115 | | |
$ | 8,895 | | |
$ | 18,589 | | |
$ | 17,628 | |
Legal,
accounting and audit | |
| — | | |
| — | | |
| — | | |
| 1,905 | |
Office,
rent and miscellaneous (note 7) | |
| 6,133 | | |
| 6,115 | | |
| 12,347 | | |
| 12,899 | |
Regulatory
and transfer fees | |
| 11,051 | | |
| 9,758 | | |
| 14,246 | | |
| 14,454 | |
Gain
on debt settlement | |
| (53,371 | ) | |
| — | | |
| (53,371 | ) | |
| — | |
| |
| (27,072 | ) | |
| 24,768 | | |
| (8,189 | ) | |
| 46,886 | |
Net
and Comprehensive Income/(Loss) for the Period | |
$ | 27,072 | | |
$ | (24,768 | ) | |
$ | 8,189 | | |
$ | (46,886 | ) |
Basic
and Diluted Income/(Loss) per Common Share | |
$ | 0.00 | | |
$ | (0.01 | ) | |
$ | 0.00 | | |
$ | (0.01 | ) |
Weighted
Average Number of Common Shares Outstanding | |
| 8,778,914 | | |
| 4,495,947 | | |
| 7,270,809 | | |
| 4,495,947 | |
The
accompanying notes form an integral part of these financial statements.
37
CAPITAL INC.
Condensed
Statements of Changes in Stockholders’ Deficiency
(Expressed
in Canadian Dollars)
| |
Common
Shares | |
Amount | |
Equity
Portion of Convertible Debentures Reserve | |
Warrants | |
Deficit | |
Total
Stockholders' Equity (Deficiency) |
Balance,
December 31, 2022 | |
| 4,495,947 | | |
$ | 27,511,269 | | |
$ | 33,706 | | |
$ | — | | |
$ | (28,240,181 | ) | |
$ | (695,206 | ) |
Net
loss for the period | |
| — | | |
| — | | |
| — | | |
| — | | |
| (46,886 | ) | |
| (46,886 | ) |
Balance,
June 30, 2022 | |
| 4,495,947 | | |
| 27,511,269 | | |
| 33,706 | | |
| — | | |
| (28,287,067 | ) | |
| (742,092 | ) |
Net
loss for the period | |
| — | | |
| — | | |
| — | | |
| — | | |
| (78,150 | ) | |
| (78,150 | ) |
Shares
issued for mineral property interests investment | |
| 50,000 | | |
| 1,000 | | |
| — | | |
| — | | |
| — | | |
| 1,000 | |
Private
placement, net of issuance of costs | |
| 1,200,000 | | |
| 24,000 | | |
| — | | |
| 24,000 | | |
| — | | |
| 48,000 | |
Balance,
December 31, 2022 | |
| 5,745,947 | | |
| 27,536,269 | | |
| 33,706 | | |
| 24,000 | | |
| (28,365,217 | ) | |
| (771,242 | ) |
Net
income for the period | |
| — | | |
| — | | |
| — | | |
| | | |
| 8,189- | | |
| 8,189 | |
Private
placement, net of issuance of costs | |
| 6,000,000 | | |
| 150,000 | | |
| — | | |
| | | |
| — | | |
| 150,000 | |
Balance,
June 30, 2023 | |
| 11,745,947 | | |
$ | 27,686,269 | | |
$ | 33,706 | | |
$ | 24,000 | | |
$ | (28,357,028 | ) | |
$ | (613,053 | ) |
The
accompanying notes form an integral part of these financial statements.
37
CAPITAL INC.
Condensed
Statements of Cash Flows
(Expressed
in Canadian Dollars)
| |
Six
Months Ended June 30, 2023 | |
Six
Months Ended June 30, 2022 |
Operating
Activities | |
| | | |
| | |
Net
income/(loss) | |
$ | 8,189 | | |
$ | (46,886 | ) |
Items
not involving cash: | |
| | | |
| | |
Gain
on debt settlement | |
| (53,371 | ) | |
| — | |
Interest
expense on loan and convertible debentures | |
| 18,589 | | |
| 17,628 | |
| |
| (26,593 | ) | |
| (29,258 | ) |
Changes
in non-cash working capital | |
| | | |
| | |
GST/HST
receivable | |
| 120 | | |
| 41 | |
Prepaids | |
| (5,000 | ) | |
| — | |
Accounts
payable and accrued liabilities | |
| (69,066 | ) | |
| (4,573 | ) |
Due
to related parties | |
| 6,472 | | |
| 17,553 | |
Cash
provided by (used in) operating activities | |
| (94,067 | ) | |
| (16,237 | ) |
| |
| | | |
| | |
Financing
Activities | |
| | | |
| | |
Private
placement, net of share issue costs | |
| 150,000 | | |
| — | |
Proceeds
from related party loan | |
| — | | |
| 17,000 | |
Repayment
of related party loan | |
| (41,482 | ) | |
| | |
Cash
provided by financing activities | |
| 108,518 | | |
| 17,000 | |
| |
| | | |
| | |
Net
increase (decrease) in cash | |
| 14,451 | | |
| 763 | |
| |
| | | |
| | |
Cash,
beginning of period | |
| 122 | | |
| 1,611 | |
Cash,
end of period | |
$ | 14,573 | | |
$ | 2,374 | |
The
accompanying notes form an integral part of these financial statements.
37
CAPITAL INC.
Notes
to Condensed Financial Statements
Six
Months Ended June 30, 2023 and 2022
(Expressed
in Canadian Dollars)
1.
NATURE OF BUSINESS
37
Capital Inc. (“37 Capital” or the “Company”) was incorporated on August 24, 1984 in British Columbia, Canada.
The principal business of the Company is the acquisition, exploration, and if warranted, the development of natural resource prospects.
The
common shares of the Company trade on the Canadian Securities Exchange (the “Exchange”) under the symbol “JJJ.X”,
and trade on the OTC Pink tier of the OTC markets in the United States of America under the symbol “HHHEF”. The Company’s
office is located at 303 – 570 Granville Street, Vancouver, British Columbia, Canada, V6C 3P1 and its registered office is located
at 3200 - 650 West Georgia Street, Vancouver BC V6B 4P7.
Effective
June 15, 2021, the Company consolidated its capital stock on the basis of 5 pre-consolidation common shares to 1 post-consolidation common
share. All the figures as to the number of common shares, stock options, warrants, prices of issued shares, exercise prices of stock
options and warrants, as well as loss per share, in the financial statements are post-consolidation amounts and the prior year comparatives
have been retroactively restated to present the post- consolidation amounts.
In
March 2020, the World Health Organization declared coronavirus (“COVID-19”) a global pandemic, which has caused significant
wide-spread adverse, financial impact. The novel strains of coronavirus have caused and are continuing to cause disruptions globally.
As the Company has no material operating income or cash flows, it is reliant on additional financing to fund its operations. An extended
disruption that may be caused by the novel strains of coronavirus can affect the Company’s ability to obtain additional financing.
The impact on the economy and the Company is not yet determinable.
2.
GOING CONCERN
These
condensed interim financial statements have been prepared on the basis of accounting principles applicable to a "going concern",
which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge
its liabilities in the normal course of operations.
Several
adverse conditions cast substantial doubt on the validity of this assumption. The Company has incurred an income/loss over the past six
months (June 30, 2023 – Income $8,189) (June 30, 2022 – Loss $46,886) (June 30, 2021 – Loss $50,865) and has incurred
significant losses over the past three fiscal years (December 31, 2022 - $125,036; December 31, 2021 - $1,044,863; December 31, 2020
- $133,379), has a deficit of $28,357,028 as at June 30, 2023 (December 31, 2022 - $28,365,217; December 31, 2021 - $28,240,181), a working
capital deficiency of $667,054 (December 31, 2022 - $825,243; December 31, 2021 - $695,206). As the Company has limited resources and
no sources of operating cash flow, there can be no assurances whatsoever that sufficient funding will be available for the Company to
continue operations for an extended period of time.
The
application of the going concern concept is dependent upon the Company’s ability to raise sufficient funding to pay creditors and
to satisfy its liabilities as they become due. Management is actively engaged in the review and due diligence on opportunities of merit
and is seeking to raise the necessary capital to meet its funding requirements. There can be no assurance whatsoever that management’s
plan will be successful.
If
the going concern assumption were not appropriate for these financial statements then adjustments may be necessary in the carrying value
of assets and liabilities, the reported expenses and the balance sheet classifications used. Such adjustments could be material.
37
CAPITAL INC.
Notes
to Condensed Interim Financial Statements
Six
Months Ended June 30, 2023 and 2022
(Expressed
in Canadian Dollars)
3.
BASIS OF PRESENTATION
(a)
Statement of compliance
These
condensed interim financial statements are prepared in accordance with the International Financial Reporting Standards (“IFRS”),
as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial
Reporting Interpretation Committee (“IFRIC”).
(b)
Basis of presentation
These
condensed interim financial statements were prepared in accordance with International Accounting Standard 34 Interim Financial Reporting.
They do not include all of the information required for full annual financial statements.
These
condensed interim financial statements have been prepared on a historical cost basis, except for certain financial instruments which
are measured at fair value.
In
addition, these condensed interim financial statements have been prepared on the accrual basis, except for cash flow information. These
financial statements are presented in Canadian dollars, which is the Company’s functional currency.
(c)
Approval of the financial statements
These condensed
interim financial statements were approved and authorized for issue by the Board of Directors on August 16, 2023.
(d)
Reclassification
Certain
prior period amounts in these condensed interim financial statements have been reclassified to conform to current period’s presentation.
These reclassifications had no net effect on the results of operations or financial position for any period presented.
(e)
Use of estimates and judgments
The
preparation of condensed interim financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
Estimates
and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances. Accounting estimates will, by definition, seldom equal the actual results.
Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
The
key area of judgment applied in the preparation of the condensed interim financial statements that could result in a material adjustment
to the carrying amounts of assets and liabilities is as follows:
• | | assessment
of the Company’s ability to continue as a going concern and whether there are events
or conditions that give rise to significant uncertainty; |
• | | the
classification/allocation of expenses as exploration and evaluation expenditures or operating
expenses; and |
• | | the
determination whether there have been any events or changes in circumstances that indicate
the impairment of its exploration and evaluations assets. |
37
CAPITAL INC.
Notes
to Condensed Interim Financial Statements
Six
Months Ended June 30, 2023 and 2022
(Expressed
in Canadian Dollars)
3.
BASIS OF PRESENTATION (Continued)
The
key estimates applied in the preparation of the condensed interim financial statements that could result in a material adjustment to
the carrying amounts of assets and liabilities are as follows:
• | | The
recoverability of the carrying value of exploration and evaluation assets; |
• | | The
provision for income taxes and recognition of deferred income tax assets and liabilities;
and |
• | | The
inputs in determining the liability and equity components of the convertible debentures. |
4.
SIGNIFICANT ACCOUNTING POLICIES
The
significant accounting policies of the Company include the following:
(a)
Financial instruments
(i)
Recognition and classification
The
Company classifies its financial instruments in the following categories:
• | | At
fair value through profit and loss (“FVTPL”): cash |
• | | At
fair value through other comprehensive income (loss) (“FVTOCI”) |
• | | Amortized
cost: accounts payable and accrued liabilities, due to related parties, refundable subscription,
loan payable and convertible debentures. |
The
Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by
the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments
that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable
election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost,
unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to
measure them at FVTPL.
(ii)
Measurement
Financial
assets and liabilities at amortized cost
Financial
assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently
carried at amortized cost less any impairment.
Financial
assets and liabilities at FVTPL
Financial
assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the statements of
comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities
held at FVTPL are included in the statements of comprehensive loss in the period in which they arise.
37
CAPITAL INC.
Notes
to Condensed Interim Financial Statements
Six
Months Ended June 30, 2023 and 2022
(Expressed
in Canadian Dollars)
4.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Debt
investments at FVTOCI
These
assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains
and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in other comprehensive loss (“OCI”).
On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
Equity
investments at FVTOCI
These
assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents
a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit
or loss.
(iii)
Impairment of financial assets at amortized cost
The
Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting
date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the
credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset
has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount
equal to the twelve month expected credit losses. The Company shall recognize in the statements of comprehensive loss, as an impairment
gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date
to the amount that is required to be recognized.
(iv)
Derecognition
Financial
assets
The
Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers
the financial assets and substantially all of the associated risks and rewards of ownership to another entity.
Financial
liabilities
The
Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also
derecognizes a financial liability when the terms of the liability are modified such that the terms and / or cash flows of the modified
instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.
Gains
and losses on derecognition are generally recognized in profit or loss.
(b)
Mineral property interests
Costs
directly related to the acquisition, exploration and evaluation of resource properties are capitalized once the legal rights to explore
the resource properties are acquired.
The
Exploration and evaluation assets are tested for impairment if facts or circumstances indicate that impairment exists:
• | | the
period for which the Company has the right to explore in the specific area has expired during
the period or will expire in the near future, and is not expected to be renewed; |
• | | an
obligation to incur decommissioning and site rehabilitation costs occurs when environmental
disturbance is substantive expenditure on further exploration for and evaluation of mineral
resources in the specific area is neither budgeted nor planned; |
• | | exploration
for and evaluation of mineral resources in the specific area have not led to the discovery
of commercially viable quantities of mineral resources and the entity has decided to discontinue
such activities in the specific area; and |
• | | sufficient
data exist to indicate that, although a development in the specific area is likely to proceed,
the carrying amount of the exploration and evaluation asset is unlikely to be recovered in
full from successful development or by sale. |
37
CAPITAL INC.
Notes
to Condensed Interim Financial Statements
Six
Months Ended June 30, 2023 and 2022
(Expressed
in Canadian Dollars)
4.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
If
it is determined that capitalized acquisition, exploration and evaluation costs are not recoverable, or the property is abandoned or
management has determined impairment in value, the property is written down to its recoverable amount. From time to time, the Company
acquires or disposes properties pursuant to the terms of option agreements. Options are exercisable entirely at the discretion of the
optionee, and accordingly, are recorded as mineral property costs or recoveries when the payments are made or received. After costs are
recovered, the balance of the payments received is recorded as a gain on option or disposition of mineral property.
Once
the technical feasibility and commercial viability of the extraction of mineral resources are demonstrable, mineral property interests
attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets
within property and equipment.
To
date, the Company’s mineral property interest has not demonstrated technical feasibility and commercial viability. The recoverability
of the carrying amount of any mineral property interests is dependent on successful development and commercial exploitation or, alternatively,
sale of the respective areas of interest.
(c)
Impairment
At
the end of each reporting period, the Company’s assets are reviewed to determine whether there is any indication that those assets
may be impaired. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment. The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount
that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated
to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is
recognized in profit or loss for the period. For an asset that does not generate largely independent cash flows, the recoverable amount
is determined for the cash-generating unit to which the asset belongs.
When
an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate
of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment
loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately
in profit or loss.
(d)
Decommissioning liabilities
An
obligation to incur decommissioning and site rehabilitation costs occurs when environmental disturbance is caused by exploration, evaluation,
development or ongoing production.
37
CAPITAL INC.
Notes
to Condensed Interim Financial Statements
Six
Months Ended June 30, 2023 and 2022
(Expressed
in Canadian Dollars)
4.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Decommissioning
and site rehabilitation costs arising from the installation of plant and other site preparation work, discounted to their net present
value, are provided when the obligation to incur such costs arises and are capitalized into the cost of the related asset. These costs
are charged against operations through depreciation of the asset and unwinding of the discount on the provision.
Depreciation
is included in operating costs while the unwinding of the discount is included as a financing cost. Changes in the measurement of a liability
relating to the decommissioning or site rehabilitation of plant and other site preparation work are added to, or deducted from, the cost
of the related asset. The costs for the restoration of site damage, which arises during production, are provided at their net present
values and charged against operations as extraction progresses.
Changes
in the measurement of a liability, which arise during production, are charged against operating profit. The discount rate used to measure
the net present value of the obligations is the pre-tax rate that reflects the current market assessment of the time value of money and
the risks specific to the obligation. To date the Company does not have any decommissioning liabilities.
(e)
Income taxes
Income
tax expense consisting of current and deferred tax expense is recognized to profit or loss. Current tax
expense
is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period-end, adjusted
for amendments to tax payable with regard to previous years.
Deferred
tax assets and liabilities and the related deferred income tax expense or recovery are recognized for deferred tax consequences attributable
to differences between the carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability
settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive
enactment occurs.
A
deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the asset
can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to
settle its current tax assets and liabilities on a net basis.
(f)
Share-based payments
The
Company grants stock options to directors, officers, employees and consultants of the Company. The fair value of share-based payments
to employees is measured at grant date, using the Black-Scholes Option Pricing Model, and is recognized over the vesting period using
the graded method. Fair value of share-based payments for non-employees is recognized and measured at the date the goods or services
are received based on the fair value of the goods or services received. If it is determined that the fair value of goods and services
received cannot be reliably measured, the share-based payment is measured at the fair value of the equity instruments issued using the
Black-Scholes Option Pricing Model.
For
both employees and non-employees, the fair value of share-based payments is recognized as either an expense or as mineral property interests
with a corresponding increase in option reserves. The amount to be recognized as expense is adjusted to reflect the number of share options
expected to vest. Consideration received on the exercise of stock options is recorded in capital stock and the related share-based payment
is transferred from the stock option reserve to capital stock. For unexercised options that expire, the recorded value is transferred
to deficit.
37
CAPITAL INC.
Notes
to Condensed Interim Financial Statements
Six
Months Ended June 30, 2023 and 2022
(Expressed
in Canadian Dollars)
4.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
(g)
Convertible debentures
The
liability component of convertible debentures is recognized initially at the fair value of a similar liability that does not have a conversion
option. The equity component is recognized initially, as the difference between the fair value of the convertible debenture as a whole
and the fair value of the liability component. Transaction costs are allocated to the liability and equity components in proportion to
their initial carrying amounts. Subsequent to initial recognition, the liability component of the convertible debenture is measured at
amortized cost using the effective interest method. The equity component is not re-measured subsequent to initial recognition.
(h)
Loss per share
Loss
per share is calculated by dividing net loss attributable to common shares of the Company by the weighted average number of common shares
outstanding during the year. The Company uses the treasury stock method for calculating diluted loss per share. Under this method, the
dilutive effect on earnings per share is calculated on the use of the proceeds that could be obtained upon exercise of options, warrants
and similar instruments. It assumes that the proceeds of such exercise would be used to purchase common shares at the average market
price during the period. However, the calculation of diluted loss per share excludes the effects of various conversions and exercise
of options and warrants that would be anti-dilutive.
(i)
Capital stock
Proceeds
from the exercise of stock options and warrants are recorded as capital stock. The proceeds from the issuance of units of the Company
are allocated between common shares and warrants based on the residual value method. Under this method, the proceeds are allocated first
to capital stock based on the fair value of the common shares at the time the units are issued and any residual value is allocated to
the warrants. When the warrants are exercised, the related value is transferred from the warrant reserve to capital stock. For unexercised
warrants that expire, the recorded value is transferred from the warrant reserves to deficit.
On
the issuance of flow-through shares, any premium received in excess of the market price of the Company’s common shares is initially
recorded as a liability (“flow-through tax liability”). Provided that the Company has renounced the related expenditures,
or that there is a reasonable expectation that it will do so, the flow-through tax liability is reduced on a pro-rata basis as the expenditures
are incurred. If such expenditures are capitalized, a deferred tax liability is recognized. To the extent that the Company has suitable
unrecognized deductible temporary differences, an offsetting recovery of deferred income taxes would be recorded.
(j)
Foreign currency translation
Amounts
recorded in foreign currency are translated into Canadian dollars as follows:
i. | | Monetary
assets and liabilities, at the rate of exchange in effect as at the balance sheet date; |
ii. | | Non-monetary
assets and liabilities, at the exchange rates prevailing at the time of the acquisition of
the assets or assumption of the liabilities; and |
iii. | | Revenues
and expenses (excluding amortization, which is translated at the same rate as the related
asset), at the rate of exchange on the transaction date. |
Exchange
differences are recognized in profit or loss in the period which they arise.
37
CAPITAL INC.
Notes
to Condensed Interim Financial Statements
Six
Months Ended June 30, 2023 and 2022
(Expressed
in Canadian Dollars)
4.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
(k)
Accounting standards issued but not yet effective
At
the date of the approval of the condensed interim financial statements, a number of standards and interpretations were issued but not
effective. The Company considers that these new standards and interpretations are either not applicable or are not expected to have a
significant impact on the Company’s condensed interim financial statements.
5. MINERAL
PROPERTY INTERESTS
| |
Acacia
Property | |
Extra
High Property | |
Total |
Balance,
December 31, 2020 | |
$ | 15,000 | | |
$ | 25,001 | | |
$ | 40,001 | |
Impairment | |
| (15,000 | ) | |
| (25,001 | ) | |
| (40,001 | ) |
Balance,
December 31, 2021 | |
$ | — | | |
$ | — | | |
$ | — | |
Acquisition
costs | |
| — | | |
| 54,001 | | |
| 54,001 | |
Balance,
December 31, 2022 and June 30, 2023 | |
$ | —
| | |
$ | 54,001 | | |
$ | 54,001 | |
Acacia
Property
On
September 30, 2019, the Company entered into a property option agreement (the “Option Agreement”) with Eagle Plains Resources
ltd. (“Eagle Plains”) to acquire a 60% interest in the Acacia Property (“Acacia Property”) in Adams Plateau Area
of the Province of British Columba.
On
October 15, 2020, the Company entered into an amendment agreement to the Option Agreement with Eagle Plains as the Company was not able
to incur the required amount of $100,000 in property related expenditure during the 1st Anniversary.
During
November 2021, by mutual consent, the Company and Eagle Plains terminated the Option Agreement dated
September
30, 2019 and the Amendment Agreement to the Option Agreement dated October 15, 2020. Accordingly, the Company recorded an impairment
loss of $15,000 during the year ended December 31, 2021.
Extra
High Property
Previously
the Company held a 33% interest in the Extra High Claims, located in the Kamloops Mining Division of the Province of British Columbia
(“Extra High Property”).
On
October 31, 2019, as amended on November 4, 2019, the Company entered into an agreement with Colt Resources Inc. (“Colt Resources”)
to purchase the remaining 67% right, interest and title in and to the Extra High Property. The following was required to complete the
purchase:
• | | a
cash consideration of $100,000 of which $25,000 was paid on the closing date and the remaining
balance of $75,000 was payable after eighteen months (unpaid); and |
• | | a
0.5% NSR from commercial production which may be purchased by the Company at any time by
making a payment of $500,000. |
37
CAPITAL INC.
Notes
to Condensed Interim Financial Statements
Six
Months Ended June 30, 2023 and 2022
(Expressed
in Canadian Dollars)
5. MINERAL
PROPERTY INTERESTS (Continued)
During
the year ended December 31, 2021, the Company recorded an impairment loss of $25,001 relating to the Extra High Property.
Pursuant
to the Company’s offer letter to Colt Resources dated July 6, 2022, the Company has made a cash payment of $15,000 and issued 50,000
common shares in the capital of the Company to Colt Resources as consideration for the full and final settlement of all matters between
the Company and Colt Resources in respect to the Extra High Property. The 50,000 common shares in the capital of the Company were subject
to a hold period from trading which expired on December 10, 2022.
During
the year ended December 31, 2022, the Company incurred $38,001 to extend the expiry date of the Extra High Property to June 30, 2023.
During
June 2023, the Company conducted exploration work on the Extra High Property. As a result, the expiration date of the Extra High property
has been extended from June 30, 2023 to September 10, 2025.
As
at June 30, 2023, the Company owns a 100% undivided right, interest and title in and to the Extra High Property.
The
Extra High Property is subject to a 1.5% Net Smelter Royalty (“NSR”) payable to a third party, 50% of which, or 0.75%, can
be purchased by the Company at any time by paying $500,000.
6.
ACCOUNTS PAYABLE AND ACCRUED LIABILITES
| |
June
30, 2023 | |
December
31, 2022 |
Trade
payables | |
$ | 15,315 | | |
$ | 90,195 | |
Accrued
liabilities | |
| 38,411 | | |
| 85,968 | |
| |
$ | 53,726 | | |
$ | 176,163 | |
7.
RELATED PARTY TRANSACTIONS
The
amounts due to related parties are unsecured, payable on demand which consist of the following:
| |
June
30, 2023 | |
December
31, 2022 |
Advances
from directors (interest at prime plus 1%) | |
$ | — | | |
$ | 40,372 | |
Entities
controlled by directors (non-interest-bearing) | |
| 69,300 | | |
| 62,828 | |
| |
$ | 69,300 | | |
$ | 103,200 | |
The
convertible debentures and accrued interest of $504,589 (December 31, 2022 - $489,589) is owed to the Chief Executive Officer, and to
a director of the Company (note 9).
37
CAPITAL INC.
Notes
to Condensed Interim Financial Statements
Six
Months Ended June 30, 2023 and 2022
(Expressed
in Canadian Dollars)
7.
RELATED PARTY TRANSACTIONS (Continued)
During
the six months period ended June 30, 2023, the following amounts were charged by related parties.
| |
2023 | |
2022 |
Interest
charged on amounts due to related parties | |
$ | 1,110 | | |
$ | 148 | |
Rent
charged by entities with common directors (note 11) | |
| 6,000 | | |
| 6,000 | |
Office
expenses charged by, and other expenses paid on behalf of the Company by a company with common directors (note 11) | |
| 8,660 | | |
| 6,553 | |
| |
$ | 15,770 | | |
$ | 12,701 | |
The
Company, together with Jackpot Digital Inc. (“Jackpot”), a related company with certain common directors, have entered into
an office lease agreement, and an office support services agreement (note 11).
8.
LOAN PAYABLE
During
the year ended December 31, 2016, the Company entered into an agreement with an arm’s length party whereby the arm’s length
party paid certain debts owed by the Company. The loan was non-interest bearing, unsecured and due on demand. On January 25, 2021, the
principal amount of $103,924 plus accrued interest were settled by the issuance of 415,697 common shares with a fair value of $0.55 per
share pursuant to a debt settlement agreement dated December 11, 2020. The Company recognized a loss of $124,709 during the year ended
December 31, 2021.
During
May 2021, an arm’s length party has lent the Company the amount of $50,000. As of June 30, 2023, the loan is outstanding and has
accrued interest in the amount of $10,452.
9.
CONVERTIBLE DEBENTURES FINANCING
Convertible
Debentures Financing 2015
On
January 6, 2015, the Company closed a convertible debenture financing with two directors of the Company for the amount of $250,000. The
convertible debentures matured on January 6, 2016, and bear interest at the rate of 12% per annum payable on a quarterly basis. The convertible
debentures are convertible into common shares of the Company at a conversion price of $1.50 per share. The liability component of the
convertible debentures was recognized initially at the fair value of a similar liability with no equity conversion option, which was
calculated based on the application of a market interest rate of 25%. On the initial recognition of the convertible debentures, the amount
of $222,006 was recorded under convertible debentures and the amount of $27,994 has been recorded under the equity portion of convertible
debenture reserve.
On
October 29, 2021, the Company entered into an Addendum to the convertible debentures whereby the maturity date of the principal amount
totaling $250,000 of the convertible debentures together with the accrued interest has been extended indefinitely, until mutual consent
of the Company and Lender has been reached.
At
June 30, 2023, the Company recorded interest expense of $15,000 (December 31,2022 - $30,000). As of June 30, 2023, $250,000 of the convertible
debentures are outstanding plus the accrued interest of $254,589 (December 31, 2022- $239,589).
37
CAPITAL INC.
Notes
to Condensed Interim Financial Statements
Six
Months Ended June 30, 2023 and 2022
(Expressed
in Canadian Dollars)
9. CONVERTIBLE
DEBENTURES FINANCING (Continued)
Convertible
Debentures Financing 2013
Pursuant
to debt settlement agreements dated December 11, 2020 in respect to the convertible debentures 2013, on January 25, 2021 the Company
issued an aggregate of 833,409 common shares of the Company with a fair value of $0.55 per share in settlement of the outstanding convertible
debentures 2013 totaling $100,000 plus accrued interest. The Company recognized a loss of $250,023 during the year ended December 31,
2021. The common shares issued were subject to a hold period which expired on May 26, 2021.
10.
CAPITAL STOCK
(a)
Authorized
Unlimited
number of common and preferred shares without par value.
As of June
30, 2023, there are no preferred shares issued.
(b) Issued
As of June
30, 2023, there are 11,745,947 common shares issued and outstanding.
On
May 15, 2023, the Company closed the non-brokered private placement financing which was announced in December 2022 for gross proceeds
of $150,000 through the issuance of 6,000,000 units of the Company at $0.025 per unit. Each unit consists of one common share in the
capital of the Company and one share purchase warrant to purchase an additional common share in the capital of the Company at the price
of $0.05 per common share for a period of 5 years. All securities issued in connection with this financing include a hold period in accordance
with applicable securities laws.
On
October 7, 2022 and October 31, 2022, the Company has closed the second, third and final tranches of the non-brokered private placement
financing which was announced on August 8, 2022 for gross proceeds of $38,000 through the issuance of 950,000 non-flow through units
of the Company at $0.04 per unit. Each non-flow through unit consists of one common share in the capital of the Company and one share
purchase warrant to purchase an additional common share in the capital of the Company at the price of $0.05 per common share for a period
of 5 years. All securities issued in connection with this financing included a hold period in accordance with applicable securities laws.
On
August 31, 2022 the Company closed the first tranche of the non-brokered private placement financing which was announced on August 8,
2022 for gross proceeds of $10,000 through the issuance of 250,000 non-flow through units of the Company at $0.04 per unit. Each non-flow
through unit consists of one common share in the capital of the Company and one share purchase warrant to purchase an additional common
share in the capital of the Company at the price of $0.05 per common share for a period of 5 years. All securities issued in connection
with this financing included a hold period in accordance with applicable securities laws.
On
January 15, 2021, the Company issued 80,000 flow-through units for proceeds of $20,000. Each flow-through unit consists of one flow-through
common share of the Company and one non-flow-through share purchase warrant to acquire one non-flow-through common share of the Company
at a price of $0.50 for a period of two years. During the year-ended December 31, 2022, the Company made a formal application to Canada
Revenue Agency and cancelled the Company’s flow-through share application which was submitted during the year ended December 31,
2020.
37
CAPITAL INC.
Notes
to Condensed Interim Financial Statements
Six
Months Ended June 30, 2023 and 2022
(Expressed
in Canadian Dollars)
10. CAPITAL
STOCK (Continued)
On
January 25, 2021, the Company issued 2,957,406 common shares of the Company at a price of $0.25 per common share in settlement of debts
totaling the amount of $739,351 to certain creditors, including to a related party and a director and officer of the Company. The fair
value of the 2,957,406 common shares was $1,626,573. As a result, the Company recorded a loss on debt settlement of $887,222.
(c)
Warrants
Warrants
activity is as follows:
| |
Number
of Warrants | |
Weighted
Average Exercise Price |
Balance,
December 31, 2020 | | |
| 964,997 | | |
| 0.60 | |
Expired | | |
| (100,000 | | |
| 0.675 | |
Issued | | |
| 80,000 | | |
| 0.50 | |
Balance,
December 31, 2021 | | |
| 944,997 | | |
| 0.59 | |
Issued | | |
| 1,200,000 | | |
| 0.05 | |
Expired | | |
| (864,997 | ) | |
| 0.12 | |
Balance,
December 31, 2022 | | |
| 1,280,000 | | |
| 0.08 | |
Expired | | |
| (80,000 | ) | |
| 0.50 | |
Issued | | |
| 6,000,000 | | |
| 0.05 | |
Balance,
June 30, 2023 | | |
| 7,200,000 | | |
| 0.05 | |
As
of June 30, 2023, the following warrants were outstanding:
Expiry
Date | |
Exercise
Price | |
Number
of Warrants Outstanding |
August
31, 2027 | |
$ | 0.05 | | |
| 250,000 | |
October
7, 2027 | |
$ | 0.05 | | |
| 750,000 | |
October
31, 2027 | |
$ | 0.05 | | |
| 200,000 | |
May
15, 2028 | |
$ | 0.05 | | |
| 6,000,000 | |
| |
| | | |
| 7,200,000 | |
The
weighted average remaining contractual life for warrants outstanding at June 30, 2023 is 4.78 years (June 30, 2022 – 0.58 years).
(d) Stock
options
The
Company’s 2015 Stock Option Plan provides that the Board of Directors of the Company may grant to directors, officers, employees
and consultants of the Company options to acquire up to 20% of the issued and outstanding common shares of the Company calculated from
time to time on a rolling basis. The terms of the options are determined at the date of grant.
As
of June 30, 2023, there were no stock options outstanding (June 30, 2022 – Nil).
37
CAPITAL INC.
Notes
to Condensed Interim Financial Statements
Six
Months Ended June 30, 2023 and 2022
(Expressed
in Canadian Dollars)
11.
COMMITMENTS
a) | | The
Company has an office lease agreement with Jackpot. Under the agreement, the Company is entitled
to have office space from Jackpot at a monthly rate of $1,000 plus applicable taxes. Furthermore,
Jackpot or the Company may terminate this agreement by giving each other a three months’
notice in writing. |
b) | | The
Company has an office support services agreement with Jackpot which has been extended until
September 30, 2023. Under the agreement, the Company is entitled to receive office support
services from Jackpot at a monthly rate of $1,000 plus applicable taxes. Either Jackpot or
the Company may terminate this agreement by giving each other a three months’ notice
in writing. |
c) | | In
relation to the flow-through private placement completed during January 2021, the Company
was committed to incur and renounce $20,000 in Canadian exploration expenditures by December
31, 2022. The Company was unable to incur the $20,000. The Company has agreed to indemnify
the flow-through shareholder for certain costs incurred by the shareholder as a result of
the Company not meeting its obligation to spend the flow-through share proceeds on qualifying
Canadian exploration expenditures in compliance with the applicable tax rules and pursuant
to the share subscription agreement. As at December 31, 2022 the Company has included a provision
for indemnification of the flow through shareholder for an amount of $10,000 in accounts
payable. |
12.
CAPITAL MANAGEMENT
The
Company considers its capital to be comprised of stockholders’ deficiency and convertible debenture.
The
Company’s objective when managing capital is to maintain adequate levels of funding to support the acquisition, exploration and,
if warranted, the development of mineral properties, to invest in non-mining related projects and to maintain the necessary corporate
and administrative functions to facilitate these activities. This is done primarily through equity and debt financing. Future financings
are dependent on market conditions and there can be no assurance that the Company will be able to raise funds in the future. There were
no changes to the Company’s approach to capital management during the six months ended June 30, 2023. The Company is not subject
to externally imposed capital requirements.
13.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(a)
Risk management overview
The
Company's activities expose it to a variety of financial risks including credit risk, liquidity risk and market risk. This note presents
information about the Company's exposure to each of the above risks, the Company's objectives, policies and processes for measuring and
managing risk, and the Company's management of capital. The Company employs risk management strategies and policies to ensure that any
exposure to risk is in compliance with the Company's business objectives and risk tolerance levels. While the Board of Directors has
the overall responsibility for the Company's risk management framework, the Company's management has the responsibility to administer
and monitor these risks.
(b)
Fair value of financial instruments
The
fair values of cash, accounts payable and accrued liabilities, due to related parties, refundable subscription, loan payable and convertible
debentures approximate their carrying values due to the short-term maturity of these instruments.
37
CAPITAL INC.
Notes
to Condensed Interim Financial Statements
Six
Months Ended June 30, 2023 and 2022
(Expressed
in Canadian Dollars)
13. FINANCIAL
INSTRUMENTS AND RISK MANAGEMENT (Continued)
IFRS
establishes a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy
has the following levels:
Level
1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level
2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
Level
3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
(c)
Credit risk
Credit
risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. The financial instruments that potentially subject the Company to a significant concentration of credit risk consist of
cash. The Company mitigates its exposure to credit loss associated with cash by placing its cash with a major financial institution.
(d)
Liquidity risk
Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they are due. The Company's approach to managing
liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due.
At
June 30, 2023, the Company had cash of $14,573 (December 31, 2022 - $122) available to apply against short-term business requirements
and current liabilities of $688,067 (December 31, 2022 - $826,925). All of the current liabilities are due within 90 days. Amounts due
to related parties are due on demand. As of June 30, 2023, two convertible debentures together with the accrued interest for a total
amount of $504,589 are outstanding, and the loan payable in the amount of $50,000 plus accrued interest in the amount of $10,452 are
due. Liquidity risk is assessed as high.
(e)
Market risk
Market
risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company's net earnings
or the value of financial instruments. As at June 30, 2023, the Company is not exposed to significant interest rate risk, currency risk
or other price risk on its financial assets and liabilities due to the short-term maturity of its financial liabilities and the fixed
interest rate on the outstanding convertible debentures.
14.
SUBSEQUENT EVENT
On
July 24, 2023, the Company closed the non-brokered private placement financing, which was announced on June 5, 2023 for gross proceeds
of $50,000 through the issuance of 2,000,000 flow-through units of the Company at $0.025 per unit. Each unit consists of one flow-through
common share in the capital of the Company and non-flow-through share purchase warrant to purchase an additional common share in the
capital of the Company at the price of $0.05 per common share for a period of 5 years. All securities issued in connection with this
financing include a hold period in accordance with applicable securities laws.
Form
51-102F1
37
CAPITAL INC.
Management’s
Discussion & Analysis
Condensed
Interim Financial Statements for the
Six
months end June 30, 2023
The
following discussion and analysis of the financial condition and financial position and results of operations of 37 Capital Inc. (the
“Company” or “37 Capital”) should be read in conjunction with the condensed interim unaudited financial statements
for the six months ended June 30, 2023 and 2022 and the notes thereto, and the audited financial statements and notes thereto for the
years ended December 31, 2022 and 2021. The condensed interim unaudited financial statements and the notes thereto for the six months
ended June 30, 2023 and 2022 have not been reviewed by the Company’s auditors.
The
condensed interim unaudited financial statements, including comparatives, have been prepared using accounting policies in accordance
with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
The Company’s condensed interim unaudited financial statements are expressed in Canadian (CDN) Dollars which is the Company’s
functional currency. All amounts in this MD&A are in CDN dollars unless otherwise stated.
The
following information is prepared as at August 17, 2023.
Forward-Looking
Statements
Certain
statements contained herein are “forward-looking” and are based on the opinions and estimates of management, or on opinions
and estimates provided to and accepted by management. Forward-looking statements may include, among others, statements regarding future
plans, costs, projections, objectives, economic performance, or the assumptions underlying any of the foregoing. In this MD&A, words
such as “may”, “would”, “could”, “will”, “likely”, “seek”, “project”,
“predict”, “potential”, “should”, “might”, “hopeful”, “objective”,
“believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”,
“optimistic” and similar words are used to identify forward-looking statements. Forward-looking statements are subject to
a variety of significant risks and uncertainties and other factors that could cause actual events or results to differ materially from
those expressed or implied. Although management believes that the expectations reflected in such forward-looking statements are based
on reasonable assumptions, projections and estimations, there can be no assurance that these assumptions, projections or estimations
are accurate. Readers, shareholders and investors are therefore cautioned not to place reliance on any forward-looking statements in
this MD&A as the plans, assumptions, intentions, estimations, projections, expectations or factors upon which they are based might
vary or might not occur. The forward-looking statements contained in this MD&A are made as of the date of this MD&A, and are
subject to change after such date. The Company undertakes no obligation to update or revise any forward-looking statements, except in
accordance with applicable securities laws.
Description
of Business
The Company
is a junior mineral exploration company.
The
Company was incorporated on August 24, 1984 in British Columbia, Canada. The principal business of the Company is the acquisition, exploration
and, if warranted, the development of natural resource prospects.
37
Capital is a reporting issuer in the Provinces of British Columbia, Alberta, Quebec and Ontario and files all public documents on www.Sedar.com.
The Company is a foreign private issuer in the United States of America and in this respect files, on EDGAR, its Annual Report on Form
20-F and other reports on Form 6K. The following link, http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=825171 will
give you direct access to the Company’s filings with the United States Securities and Exchange Commission (“U.S. SEC”).
Effective
June 15, 2021, the Company consolidated its capital stock on the basis of 5 pre-consolidation common shares to 1 post-consolidation common
share. The CUSIP number of the Company’s common shares is 88429G201. All the figures as to the number of common shares, stock options,
warrants, prices of issued shares, exercise prices of stock options and warrants, as well as loss per share, in the Company’s condensed
interim unaudited financial statements and in this Management Discussion and Analysis are post-consolidation amounts and the prior year
comparatives have been retroactively restated to present the post-consolidation amounts.
In
Canada, the common shares of the Company trade on the Canadian Securities Exchange (CSE) under the symbol “JJJ.X”, and in
the USA, the Company's common shares trade on the OTC Pink tier of the OTC markets under the trading symbol “HHHEF”. The
Company’s office is located at 303 – 570 Granville Street, Vancouver, British Columbia V6C 3P1 Canada, and its registered
and records office is located at Suite 3200 - 650 West Georgia Street, Vancouver, British Columbia V6B 4P7. The Company’s registrar
and transfer agent is Computershare Investor Services Inc., at 510 Burrard Street, Vancouver, British Columbia, V6C 3B9. The Company’s
auditors are Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants, at 1500-1140 West Pender Street, Vancouver, British
Columbia V6E 4G1. The facsimile number is (604) 689-2778.
Pursuant
to the policies of the CSE, the Company has been deemed to be inactive, and as a result, the Company’s current trading symbol is
“JJJ.X”.
Results
of Operations
For the
six months ended June 30, 2023:
• | | As
a result of a gain on debt settlement in the amount of $53,371, the Company recorded operating
expenses recovery of $8,189 as compared to operating expenses of $46,886 for the corresponding
period in 2022. |
• | | As
a result of a gain on debt settlement in the amount of $53,371, the Company recorded net
income and comprehensive income of $ 8,189 as compared to net loss and comprehensive loss
of $46,886 during the corresponding period in 2022. |
• | | As
a result of a gain on debt settlement in the amount of $53,371, the basic and diluted income
per common share was $0.00 as compared to a basic and diluted loss of $0.01 during the corresponding
period in 2022. |
• | | The
Company’s total assets were $75,014 as compared to total assets of $2,835 during the
corresponding period in 2022 (December 31, 2022: $55,683). |
• | | The
Company’s total liabilities were $688,067 as compared to total liabilities of $744,927
during the corresponding period in 2022 (December 31, 2022: $826,925). |
• | | The
Company had a working capital deficiency of $667,054 as compared to a working capital deficiency
of $742,092 during the corresponding period in 2022 (December 31, 2022: working capital deficiency
of $825,243). |
The Company
is presently not a party to any legal proceedings whatsoever.
Pursuant
to debt settlement agreements dated December 11, 2020 totaling the sum of $739,351.50 between the Company and certain creditors, including
Jackpot Digital Inc. (“Jackpot’) and the Company’s President and CEO, on January 25, 2021 the Company issued a total
of 2,957,406 common shares of the Company at a deemed price of $0.25 per common share (the “Debt Settlement Shares of the Company”),
of which Jackpot acquired 597,380 Debt Settlement Shares of the Company and the Company’s President and CEO acquired 615,395 Debt
Settlement Shares of the Company. As of the date of this MD&A, Jackpot owns 607,377 common shares of the Company representing 4.42%
of the issued and outstanding common shares of the Company. The Debt Settlement Shares of the Company were subject to a hold period which
expired on May 26, 2021.
Effective
as of May 1, 2021, Fred A.C. Tejada resigned from the Board of Directors of the Company, and effective as of May 25, 2021, Bedo H. Kalpakian
was appointed as a director of the Company.
At
the Company’s Annual General Meeting, which was held on November 14, 2022, the Company’s shareholders passed all the resolutions
presented including the re-election of Jake H. Kalpakian, Gregory T. McFarlane, Neil Spellman and Bedo H. Kalpakian as Directors of the
Company; re-appointed the Company’s Auditor, Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants for the
ensuing year and authorized the Directors to fix the remuneration to be paid to the Auditor; and re-approved the Company’s Stock
Option Plan.
During
2019 the Company had intended to issue up to 800,000 flow-through units of the Company at a price of $0.25 per unit for gross proceeds
to the Company of $200,000 in order to use the proceeds of this financing towards mineral exploration work expenditures located in the
Province of British Columbia. However, due to the Covid-19 pandemic the Company was able to raise only the amount of $20,000 for which
the Company has issued 80,000 flow-through units of the Company. Each flow-through unit consisted of one flow-through common share of
the Company and one non-flow-through share purchase warrant to acquire one non-flow-through common share of the Company at a price of
$0.50 for a period of two years. All securities issued in connection with this financing were subject to a hold period which expired
on May 16, 2021. During the year-ended December 31, 2022, the Company made a formal application to Canada Revenue Agency and cancelled
the Company’s flow-through share application which was submitted during the year ended December 31, 2020. On January 15, 2023,
the non-flow through share purchase warrants expired unexercised.
In
relation to the flow-through share private placement completed during January 2021, the Company was committed to incur and renounce $20,000
in Canadian exploration expenditures by December 31, 2022. The Company was unable to incur the $20,000. The Company has agreed
to indemnify the flow-through shareholder for certain costs incurred by the shareholder as a result of the Company not meeting its obligation
to spend the flow-through share proceeds on qualifying Canadian exploration expenditures in compliance with the applicable tax rules
and pursuant to the share subscription agreement. As at June 30, 2023 the Company has included a provision for indemnification
of the flow through shareholder for an amount of $10,000 in accounts payable.
On
August 8, 2022, the Company announced that it intended to offer a non-brokered private placement financing whereby the Company may raise
gross proceeds of up to $400,000 by issuing up to 10,000,000 units of the securities of the Company at the price of $0.04 per unit. During
August and October 2022, the Company closed the private placement financing in three tranches by the issuance in aggregate of 1,200,000
non-flow through units of the Company at $0.04 per unit for total gross proceeds of $48,000. Each Unit consists of one common share in
the capital of the Company and one share purchase warrant to purchase an additional common share in the capital of the Company at the
price of $0.05 per common share for a period of five years. All securities that have been issued were subject to a four-month and one
day hold period.
On
May 15, 2023, the Company closed the non-brokered private placement financing which was announced in December 2022 for gross proceeds
of $150,000 through the issuance of 6,000,000 units of the Company at $0.025 per unit. Each unit consists of one common share in the
capital of the Company and one share purchase warrant to purchase an additional common share in the capital of the Company at the price
of $0.05 per common share for a period of 5 years. All securities issued in connection with this financing include a hold period in accordance
with applicable securities laws.
On
June 1 & 5, 2023, the Company announced a non-brokered private placement of up to $100,000 through the issuance of up to 4,000,000
units of the Company at the price of $0.025 per unit whereby each unit would have consisted of one common share and one share purchase
warrant to purchase an additional common share in the capital of the Company at the price of $0.05 per share for a period of five years
from closing. The proposed private placement did not close.
On
June 5, 2023, the Company announced a non-brokered private placement offering to raise funds for gross proceeds of up to $100,000 by
the issuance of up to 4,000,000 flow-through units of the Company at the price of $0.025 per unit. On July 24, 2023, the Company closed
the flow-through share offering through the issuance of 2,000,000 flow-through units of the Company at $0.025 per unit for gross proceeds
of $50,000. Each flow-through unit consists of one flow-through common share of the Company and one non-flow-through share purchase warrant
to acquire one non-flow-through common share of the Company at a price of $0.05 for a period of five years. The funds raised from this
financing will be used towards exploration work expenditures on the Company’s mineral property located in the Province of British
Columbia. In the event that the Company’s shares trade on the CSE at $0.20 per share or above for a period of 10 consecutive trading
days, a forced exercise provision will come into effect for the warrants issued in connection with this financing. All securities issued
in connection with this financing include a hold period in accordance with applicable securities laws.
Mineral
Properties
1.
Extra High Claims
Previously
the Company held a 33% interest in the Extra High Claims which are located in the Kamloops Mining Division of the Province of British
Columbia (“Extra High Property”).
On
October 31, 2019, as amended on November 4, 2019, the Company entered into an agreement with Colt Resources Inc. (“Colt Resources”)
to purchase the remaining 67% right, interest and title in and to the Extra High Property. The following was required to complete the
purchase:
• | | a
cash consideration of $100,000 of which $25,000 was paid on the closing date and the remaining
balance of $75,000 was payable after eighteen months (unpaid); and |
• | | a
0.5% NSR from commercial production which may be purchased by the Company at any time by
making a payment of $500,000. |
During
the year ended December 31, 2021, the Company recorded an impairment loss of $25,001 relating to the Extra High Property.
Pursuant
to the Company’s offer letter to Colt Resources dated July 6, 2022 which was accepted by Colt Resources, the Company has made a
cash payment of $15,000 and, has issued 50,000 common shares in the capital of the Company to Colt Resources as consideration for the
full and final settlement of all matters between the Company and Colt Resources in respect to the Extra High Property. The 50,000 common
shares in the capital of the Company were subject to a hold period from trading which expired on December 10, 2022.
During
the year ended December 31, 2022, the Company incurred $38,001 to extend the expiry date of the Extra High Property to June 30, 2023.
During
June 2023 the Company conducted exploration work on the Extra High Property, and the expiration date of the Extra High Property has been
extended from June 30, 2023 to September 10, 2025.
As
of the date of this MD&A, the Company owns a 100% undivided right, interest and title in and to the Extra High Property.
The
Extra High Property is subject to a 1.5% Net Smelter Returns Royalty (“NSR”) payable to a third party, 50% of which, or 0.75%,
can be purchased by the Company at any time by paying $500,000.
2. Ontario
Mineral Leases (Lithium)
During
the year ended December 31, 2008, the Company sold all of its Ontario Mineral Leases (Lithium). In the event that at a future date the
Ontario Mineral Leases (Lithium) are placed into commercial production, then the Company is entitled to receive a 0.5% gross receipts
royalty after six months from the date of commencement of commercial production from the Ontario Mineral Leases (Lithium).
3. Acacia
Property
On
September 30, 2019, the Company entered into a property option agreement (the “Option Agreement”) with Eagle Plains Resources
ltd. (“Eagle Plains”) to acquire a 60% interest in the Acacia Property (“Acacia Property”) in Adams Plateau Area
of the Province of British Columbia. The following was required to exercise the option:
• | | Issuance
of 20,000 common shares (issued) to Eagle Plains upon receipt of the current Acacia Property
NI 43-101 Technical Report; |
• | | Incur
a total of $100,000 in property related expenditures on or before the first anniversary of
the Option Agreement; |
• | | Issuance
of 10,000 common shares to Eagle Plains and incur a total of $100,000 in property related
expenditures on or before the second anniversary of the Option Agreement; |
• | | Issuance
of 10,000 common shares to Eagle Plains and incur a total of $300,000 in property related
expenditures on or before the third anniversary of the Option Agreement; |
• | | Issuance
of 10,000 common shares to Eagle Plains and incur a total of $750,000 in property related
expenditures on or before the fourth anniversary of the Option Agreement; and |
• | | Issuance
of 10,000 common shares to Eagle Plains and incur a total of $1,250,000 in property related
expenditures on or before the fifth anniversary of the Option Agreement. |
Within
a period of 30 days after each annual anniversary of the Option Agreement, the Company was required to decide whether or not it wishes
to continue with the Option Agreement.
On
October 15, 2020, the Company entered into an amendment agreement to the Option Agreement with Eagle Plains as the Company was not able
to incur the required amount of $100,000 in property related expenditure during the 1st Anniversary. The following are the
amendments which were required to exercise the option:
• | | Issuance
of 20,000 common shares (issued) to Eagle Plans. |
• | | Commitment
to incur $200,000 in property related expenditures during the 2nd period of the agreement. |
During
November 2021, by mutual consent, the Company and Eagle Plains terminated the Option Agreement dated September 30, 2019 and the Amendment
Agreement to the Option Agreement dated October 15, 2020. Accordingly, the Company recorded an impairment loss of $15,000 at year-end
December 31, 2021.
Second
Quarter (June 30, 2023)
During
the three months [second quarter] period ended June 30, 2023:
• | | As
a result of a gain on debt settlement in the amount of $53,371, the Company had a net income
and comprehensive income of $ 27,072 or $0.00 per share as compared to a net loss and comprehensive
loss of $24,768 or $0.01 per share during the same three month [second quarter] period ended
June 30, 2022. |
• | | As
a result of a gain on debt settlement in the amount of $53,371, the Company’s had Operating
costs recovery of $27,072 as compared to operating costs of $24,768 for the same three month
[second quarter] period ended June 30, 2022. |
Summary
of Quarterly Results
For
the Quarterly Periods ended: |
|
June
30, 2023 |
|
March
31, 2023 |
|
December
31, 2022 |
|
September
30, 2022 |
Total
Revenues |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Net
income/(loss) and Comprehensive income/(loss) |
|
|
27,072 |
|
|
|
(18,883 |
) |
|
|
(57,456 |
) |
|
|
(20,694 |
) |
Income/(loss)
per share |
|
|
0.00 |
|
|
|
(0.00 |
) |
|
|
(0.01 |
) |
|
|
(0.00 |
) |
For
the Quarterly Periods ended: |
|
June
30, 2022 |
|
March
31, 2022 |
|
December
31, 2021 |
|
September
30, 2021 |
Total
Revenues |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Net
loss and comprehensive loss |
|
|
(24,768 |
) |
|
|
(22,118 |
) |
|
|
(969,942 |
) |
|
|
(24,056 |
) |
Loss
per share |
|
|
(0.01 |
) |
|
|
(0.00 |
) |
|
|
(0.22 |
) |
|
|
(0.01 |
) |
The
Company’s business is not of a seasonal nature.
Risks
related to our Business
The
Company, and the securities of the Company, should be considered a highly speculative investment. The following risk factors should be
given special consideration when evaluating an investment in any of the Company's securities:
• | | The
Company does not anticipate to generate any revenue in the foreseeable future. In the event
that the Company generates any revenues in the future, then the Company intends to retain
its earnings in order to finance growth. |
• | | There
are a number of outstanding securities and agreements pursuant to which common shares of
the Company may be issued in the future. This will result in further dilution to the Company's
shareholders. |
• | | Governmental
regulations, including those regulations governing the protection of the environment, taxes,
labour standards, occupational health, waste disposal, mine safety and other matters, could
have an adverse impact on the Company. |
• | | Trading
in the common shares of the Company may be halted or suspended or may be subject to cease
trade orders at any time and for any reason, including, but not limited to, the failure by
the Company to submit documents to the Regulatory Authorities within the required time periods. |
• | | The
exploration of mineral properties involves significant risks which even experience, knowledge
and careful evaluation may not be able to avoid. The prices of metals have fluctuated widely,
particularly in recent years as it is affected by numerous factors which are beyond the Company’s
control including international, economic and political trends, expectations of inflation
or deflation, currency exchange fluctuations, interest rate fluctuations, global or regional
consumptive patterns, speculative activities and increased production due to new extraction
methods. The effect of these factors on the price of metals, and therefore the economic viability
of the Company’s interest in its mineral exploration property cannot be accurately
predicted. Furthermore, changing conditions in the financial markets, and Canadian Income
Tax legislation may have a direct adverse impact on the Company’s ability to raise
funds for its interest in the Extra High mineral exploration property. A drop in the availability
of equity financings will likely impede spending on mineral properties which can affect the
Company. |
• | | The
Company has outstanding debts, has working capital deficiency, has no revenues, has incurred
operating losses, and has no assurances whatsoever that sufficient funding can be available
for the Company to continue its operations uninterruptedly. |
• | | The
market price of the Company’s common shares has experienced considerable volatility
and may continue to fluctuate in the future. Furthermore, there is a limited trading market
for the Company’s common shares and as such, the ability of investors to sell their
shares cannot be assured. |
• | | In
March 2020, the World Health Organization declared a global pandemic related to the coronavirus
known as COVID-19 which has caused significant wide-spread adverse financial impact. The
novel strains of coronavirus have caused and are continuing to cause disruptions globally.
As the Company has no material operating income or cash flows, it is reliant on additional
financing to fund its operations. An extended disruption that may be caused by the novel
strains of coronavirus can affect the Company’s ability to obtain additional financing.
As such, the Company may not be able to raise the required funds and may not be able to conduct
exploration works on its Extra High mineral property. The impact on the Company is not yet
determinable; however, the Company’s financial position, results of operations and
cash flows in future periods may be materially affected. In particular, there may be heightened
risk of asset impairment and liquidity thus creating further going concern uncertainty. |
Liquidity
and Capital Resources
The
Company has incurred operating losses over the past three fiscal years, has limited resources, and does not have any source of operating
cash flow.
During
2023, the Company shall require at least $400,000 to conduct its operations uninterruptedly. In order to meet this requirement, the Company
intends to seek equity and/or debt financings through private placements and/or public offerings and/or loans. In the past, the Company
has been successful in securing equity and debt financings in order to conduct its operations uninterruptedly. While the Company does
not give any assurances whatsoever that in the future it will continue being successful in securing equity and/or debt financings in
order to conduct its operations uninterruptedly, it is the Company’s intention to pursue these methods for future funding of the
Company.
As
at June 30, 2023:
• | | the
Company’s total assets were $75,014 as compared to $2,835 for the corresponding period
in 2022 (December 31, 2022: $55,683); |
• | | the
Company’s total liabilities were $688,067 as compared to $744,927 for the corresponding
period in 2022 (December 31, 2022: $826,925); |
• | | the
Company had $14,573 in cash as compared to $2,374 in cash for the corresponding period in
2022 (December 31, 2022: $122); and |
• | | the
Company had GST/HST receivable in the amount of $1,440 as compared to $461 for corresponding
period in 2022 (December 31, 2022: $1,560). |
Shares
for Debt Financing
Pursuant
to debt settlement agreements dated December 11, 2020 totaling the amount of $739,351.50 between the Company and certain creditors, on
January 25, 2021, the Company issued 2,957,406 common shares of the Company (the “Debt Settlement Shares of the Company”)
at a price of $0.25 per common share in settlement of debts totaling the amount of $739,351.50 to certain creditors, including to a related
party and a director and officer of the Company. The Debt Settlement Shares of the Company were subject to a hold period which expired
on May 26, 2021. The fair value of the 2,957,406 common shares was $1,626,573. As a result, the Company recorded a loss on debt settlement
of $887,222.
Private
Placement Financings
During
the six months ended June 30, 2023 and up to the date of the MD&A, the following transactions have occurred:
| i) | On
July 24, 2023, the Company closed the non-brokered private placement financing which was
announced on June 5, 2023 for gross proceeds of $50,000 through the issuance of 2,000,000
flow-through units of the Company at $0.025 per unit. Each unit consists of one flow-through
common share in the capital of the Company and non-flow-through share purchase warrant to
purchase an additional common share in the capital of the Company at the price of $0.05 per
common share for a period of 5 years. All securities issued in connection with this financing
include a hold period in accordance with applicable securities laws. |
| ii) | On
May 15, 2023, the Company closed the non-brokered private placement financing which was announced
in December 2022 for gross proceeds of $150,000 through the issuance of 6,000,000 units of
the Company at $0.025 per unit. Each unit consists of one common share in the capital of
the Company and one share purchase warrant to purchase an additional common share in the
capital of the Company at the price of $0.05 per common share for a period of 5 years. All
securities issued in connection with this financing include a hold period in accordance with
applicable securities laws. |
During
the year ended December 31, 2022, the following share transactions occurred:
i)
During August and October 2022, the Company issued in aggregate 1,200,000 non flow-through units of the Company. Each non flow-through
unit consists of one common share and one share purchase warrant to acquire one common share of the Company at a price of $0.05 for a
period of five years. All securities issued in connection with this financing were subject to four months and one day hold period.
ii)
On January 15, 2021, the Company issued 80,000 flow-through units of the Company. Each flow-through unit consists of one flow-through
common share of the Company and one non-flow-through share purchase warrant to acquire one non-flow-through common share of the Company
at a price of $0.50 for a period of two years. All securities issued in connection with this financing were subject to a hold period
which expired on May 16, 2021.
Loan
Payable
The
Company had borrowed the sum of $103,924 from an arm’s length party to pay certain amounts that were owed by the Company to some
of its creditors. The borrowed amount of $103,924 was non-interest bearing, unsecured and was payable on demand. Pursuant to a debt settlement
agreement dated December 11, 2020 with the Company and the arm’s length party, on January 25, 2021 the Company issued a total of
415,697 common shares of the Company with a fair value of $0.55 per shares in full settlement of the debt (the “Debt Settlement
Shares of the Company”). The Company recognized a loss of $124,709 during the year ended December 31, 2021. The Debt Settlement
Shares of the Company were subject to a hold period which expired on May 26, 2021.
During
May 2021, an arm’s length party has lent the Issuer the amount of $50,000. As of June 30, 2023, the loan is outstanding and has
accrued interest in the amount of $10,452.
Convertible
Debentures Financing 2015
On
January 6, 2015, the Company closed a convertible debenture financing with two directors of the Company for the amount of $250,000. The
convertible debentures matured on January 6, 2016, and bear interest at the rate of 12% per annum payable on a quarterly basis. The convertible
debentures are convertible into common shares of the Company at a conversion price of $1.50 per share. The liability component of the
convertible debentures was recognized initially at the fair value of a similar liability with no equity conversion option, which was
calculated based on the application of a market interest rate of 25%. On the initial recognition of the convertible debentures, the amount
of $222,006 was recorded under convertible debentures and the amount of $27,994 has been recorded under the equity portion of convertible
debenture reserve.
On
October 29, 2021 the Company entered into an Addendum to the convertible debentures whereby the maturity date of the principal amount
totaling $250,000 of the convertible debentures together with the accrued interest has been extended indefinitely, until mutual consent
of the Company and Lender has been reached.
At
as June 30, 2023, the Company recorded interest expense of $15,000 (December 31, 2022 - $30,000). As of June 30, 2023, $250,000 of the
convertible debentures are outstanding plus the accrued interest of $254,589 (December 31, 2022 - $239,589).
Convertible
Debentures Financing 2013
Pursuant
to debt settlement agreements dated December 11, 2020 in respect to the convertible debentures 2013, on January 25, 2021 the Company
issued an aggregate of 833,409 common shares of the Company with a fair value of $0.55 per share in settlement of the outstanding convertible
debentures 2013 totaling $100,000 plus accrued interest. The Company recognized a loss of $250,023 during the year ended December 31,
2021.
Warrants
As
at June 30, 2023, a total of 7,200,000 warrants exercisable at the price of $0.05 per warrant share were outstanding. Subsequent to the
six months ended June 30, 2023, a total of 2,000,000 warrants exercisable at the price of $0.05 per warrant share for five years have
been issued. As of the date of this MD&A, there are 9,200,000 share purchase warrants outstanding.
While
there are no assurances whatsoever that any warrants may be exercised, however if any warrants are exercised in the future, then any
funds received by the Company from the exercising of warrants shall be used for general working capital purposes.
Stock
Options
As
at June 30, 2023, there were no outstanding stock options (December 31, 2022 – Nil).
As
of the date of this MD&A there are no outstanding stock options.
Significant
Accounting Policies
The
condensed interim financial statements for the six months ended June 30, 2023 have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations
issued by the International Financial Reporting Interpretation Committee (“IFRIC”).
The
condensed interim financial statements for the six months ended June 30, 2023 were prepared in accordance with International Accounting
Standard 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements.
The
Significant Accounting Policies are detailed in Note 4 of the Company’s condensed interim financial statements for the six months
ended June 30, 2023.
On
transition to IFRS 16, the Company did not recognize any lease assets or liabilities as its operating leases had a remaining term of
less than 12 months from the date of initial application.
Off-Balance
Sheet Arrangements
The
Company does not have any off-balance sheet arrangements.
Trends
During
the last several years commodity prices have fluctuated significantly, and should this trend continue or should commodity prices remain
at current levels, then companies such as 37 Capital will have difficulty in raising funds and/or acquiring mineral properties of merit
at reasonable prices.
Related
Party Transactions
The
Company shares office space and certain employees with Jackpot, a company related by certain common key management personnel.
The
Company has an office lease agreement with Jackpot. Under the agreement, the Company is entitled to have office space from Jackpot at
a monthly rate of $1,000 plus applicable taxes. Furthermore, Jackpot or the Company may terminate this agreement by giving each other
a three months’ notice in writing.
The
Company has an office support services agreement with Jackpot which has been extended until September 30, 2023. Under the agreement,
the Company is entitled to receive office support services from Jackpot at a monthly rate of $1,000 plus applicable taxes. Either Jackpot
or the Company may terminate this agreement by giving each other a three months’ notice in writing.
Jackpot
is related to the Company by virtue of the fact that Jackpot has certain directors and officers who are also directors and officers of
the Company.
The
amounts due to related parties are unsecured, payable on demand which consist of the following:
| |
June
30, 2023 | |
December
31, 2022 |
Advances
from directors (interest at prime plus 1%) | |
| — | | |
| 40,372 | |
Entities
controlled by directors (non-interest-bearing) | |
$ | 69,300 | | |
$ | 62,828 | |
| |
$ | 69,300 | | |
$ | 103,200 | |
During
the six months ended June 30, the following amounts were charged by related parties.
| |
2023 | |
2022 |
Interest
charged on amounts due to related parties | |
$ | 1,110 | | |
$ | 148 | |
Rent
charged by entities with common directors | |
| 6,000 | | |
| 6,000 | |
Office
expenses charged by, and other expenses paid on behalf of the Company by a company with common directors | |
| 8,660 | | |
| 6,553 | |
| |
$ | 15,770 | | |
$ | 12,701 | |
On
January 6, 2015, the Company closed convertible debentures financing with two directors of the Company for the Principal amount of $250,000.
The convertible debentures have a maturity date of twelve months from the date of closing, and bear interest at the rate of 12% per annum
payable on a quarterly basis. The Principal amount of $250,000 together with the accrued interest of the convertible debentures became
due and payable on January 6, 2016 (the “Due Date”). However, on the Due Date the Company was unable to repay the Principal
amount and the accrued interest to the two directors. On October 29, 2021 the Company entered into an Addendum to the Convertible Debentures
whereby the maturity date of the principal amount of $250,000 of the convertible debentures together with the accrued interest has been
extended indefinitely, until mutual consent of the Company and Lender has been reached.
The
convertible debentures and accrued interest of $504,589 (December 31, 2022 - $489,589) is owed to the Chief Executive Officer, and to
a director of the Company.
As
of the date of this MD&A, Jackpot owns 607,377 common shares of the Company representing 4.42% of the Company’s issued and
outstanding common shares.
Insider
Participation
In
connection with the non-brokered private placement which was announced on June 5, 2023, two Insiders of the Company acquired 2,000,000
flow-through units at $0.025 per unit in the capital of 37 Capital. For further particulars please see Private Placement Financings on
page 9 of this MD&A.
In
connection with the non-brokered private placement which was announced on December 16, 2022, an Insider of the Company, a family member
and his private company, acquired in aggregate 2,600,000 units at $0.025 per unit in the capital of 37 Capital. For further particulars
please see Private Placement Financings on page 9 of this MD&A.
In
connection with the non-brokered private placement which was announced on August 8, 2022, an Insider of the Company and his private company,
acquired in aggregate 1,200,000 units at $0.04 per unit in the capital of 37 Capital. For further particulars please see Private Placement
Financings on page 9 of this MD&A.
FINANCIAL
INSTRUMENTS AND RISK MANAGEMENT
(a)
Risk management overview
The
Company's activities expose it to a variety of financial risks including credit risk, liquidity risk and market risk. This note presents
information about the Company's exposure to each of the above risks, the Company's objectives, policies and processes for measuring and
managing risk, and the Company's management of capital. The Company employs risk management strategies and policies to ensure that any
exposure to risk is in compliance with the Company's business objectives and risk tolerance levels. While the Board of Directors has
the overall responsibility for the Company's risk management framework, the Company's management has the responsibility to administer
and monitor these risks.
(b)
Fair value of financial instruments
The
fair values of cash, accounts payable and accrued liabilities, due to related parties, refundable subscription, loan payable and convertible
debentures approximate their carrying values due to the short-term maturity of these instruments.
IFRS
establishes a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy
has the following levels:
Level
1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level
2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
Level
3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
(c)
Credit risk
Credit
risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. The financial instruments that potentially subject the Company to a significant concentration of credit risk consist of
cash. The Company mitigates its exposure to credit loss associated with cash by placing its cash with a major financial institution.
(d)
Liquidity risk
Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they are due. The Company's approach to managing
liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due.
At
June 30, 2023, the Company had cash of $14,573 (December 31, 2022 - $122) available to apply against short-term business requirements
and current liabilities of $688,067 (December 31, 2022 - $826,925). All of the current liabilities, are due within 90 days. Amounts due
to related parties are due on demand. As of June 30, 2023, two convertible debentures, together with the accrued interest for a total
amount of $504,589, are outstanding, and the loan payable in the amount of $50,000 plus accrued interest in the amount of $10,452 are
due. Liquidity risk is assessed as high.
(e)
Market risk
Market
risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company's net earnings
or the value of financial instruments. As at June 30, 2023, the Company is not exposed to significant interest rate risk, currency risk
or other price risk on its financial assets and liabilities due to the short-term maturity of its financial liabilities and the fixed
interest rate on the convertible debentures.
Analysis
of expenses
For
a breakdown of general and administrative expenditures, please refer to the Statements of Comprehensive Loss in the Company’s Condensed
Interim Financial Statements for the six months ended June 30, 2023 and 2022.
Capital
Stock
Authorized
share capital: Unlimited number of common shares without nominal or par value
Unlimited
number of preferred shares without nominal or par value
Outstanding
Share Data |
No.
of Common Shares |
No.
of Preferred Shares |
Exercise
Price per Share |
Expiry
Date |
Issued
and Outstanding as at August 17, 2023 |
13,745,947 |
Nil |
N/A |
N/A |
Warrants
as at August 17, 2023 |
250,000
750,000
200,000
6,000,000
2,000,000
9,200,000 |
Nil |
$0.05
$0.05
$0.05
$0.05
$0.05 |
August
31, 2027
October
7, 2027
October
31, 2027
May
15, 2028
July
24, 2028 |
Fully
Diluted as at August 17, 2023 |
22,945,947 |
Nil |
|
|
Director
Approval
The
contents of this MD&A and the sending thereof to the Shareholders of the Company have been approved by the Company’s Board
of Directors.
Outlook
Management’s
efforts are directed towards pursuing opportunities of merit for the Company, and Management is hopeful that, in due course, the Company
shall be able to acquire an opportunity of merit. However, there are no assurances whatsoever that Management’s efforts shall succeed.
Form 52-109FV2
Certification of Interim Filings
Venture Issuer Basic Certificate
I, Jake H. Kalpakian, President and Chief Executive Officer of 37 Capital Inc.,
certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”)
of 37 Capital Inc. (the “issuer”) for the interim period ended June 30, 2023. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered
by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings. |
Date: August 17, 2023.
“Jake
H. Kalpakian”
Jake H. Kalpakian
President & CEO
NOTE TO READER
In contrast to the certificate required for non-venture issuers under
National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer
Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures
(DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing
this certificate are not making any representations relating to the establishment and maintenance of
| i) | controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in
its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized
and reported within the time periods specified in securities legislation; and |
| ii) | a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with the issuer’s GAAP. |
The issuer’s certifying officers are responsible for ensuring
that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate.
Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement
on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency
and timeliness of interim and annual filings and other reports provided under securities legislation.
Form 52-109FV2
Certification of Interim Filings
Venture Issuer Basic Certificate
I, Neil Spellman, Chief Financial Officer of 37 Capital Inc.,
certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”)
of 37 Capital Inc. (the “issuer”) for the interim period ended June 30, 2023. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered
by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings. |
Date: August 17, 2023.
“Neil Spellman”
Neil Spellman
CFO
NOTE TO READER
In contrast to the certificate required for non-venture issuers under
National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer
Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures
(DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing
this certificate are not making any representations relating to the establishment and maintenance of
| i) | controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in
its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized
and reported within the time periods specified in securities legislation; and |
| ii) | a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with the issuer’s GAAP. |
The issuer’s certifying officers are responsible for ensuring
that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate.
Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement
on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency
and timeliness of interim and annual filings and other reports provided under securities legislation.
51-102F3
Material Change Report
Item 1. Name and Address of Company
37 Capital Inc. (the “Company”)
Suite 303 – 570 Granville Street
Vancouver, BC V6C 3P1
Item 2. Date of Material Change
July 24, 2023
Item 3. News Release
The news release of the Company dated July 24, 2023 was
filed via SEDAR, and disseminated through Stockwatch and Bay Street News (Market News Publishing).
Item 4. Summary of Material Change
Further to the news release dated July
24, 2023, the Company has closed the non-brokered private placement financing (the “Private Placement Financing”) for gross
proceeds of $50,000 through the issuance of 2,000,000 flow-through units of the Company @ $0.025 per unit.
Two Insiders acquired 2,000,000 units
of the Private Placement Financing. The issuance of units to the Insiders is considered a related party transaction subject to Multilateral
Instrument 61-101.
Item 5. Full Description of Material Change
Please see the News Release of the Company dated July 24,
2023, attached hereto as Schedule “A”.
Item 6. Reliance on subsection 7.1(2) or (3) of National Instrument
51-102
Not Applicable
Item 7. Omitted Information
None
Item 8. Executive Officer
Mr. Jake H. Kalpakian, President, (604) 681-0204 ext. 6105
Item 9. Date of Report
August 1, 2023
![](https://www.sec.gov/Archives/edgar/data/825171/000160706223000424/image_001.jpg)
SCHEDULE “A”
NEWS RELEASE
Symbols: JJJ.X - CSE
HHHEF – OTC Pink
37 Capital
Announces Closing of the Flow-Through Financing
VANCOUVER, BRITISH COLUMBIA. July 24, 2023.
37 Capital Inc. (the “Company” or “37 Capital”) announces that further to its news release dated June 5,
2023, the Company has closed the flow-through financing (the “Private Placement Financing”) for gross proceeds of $50,000
through the issuance of 2,000,000 flow-through units of the Company. Each flow-through unit will consist of one flow-through common share,
and one non-flow-through share purchase warrant to acquire one non-flow-through common share of the Company at the price of $0.05 until
July 24, 2028. All securities issued in connection with this financing include a hold period in accordance with applicable securities
laws.
The funds raised will be used towards mineral
exploration expenditures on the Company’s mineral property in the Province of British Columbia.
Two Insiders acquired an aggregate of 2,000,000
flow-through units of the Private Placement Financing. The issuance of units to the Insiders is considered a related party transaction
subject to Multilateral Instrument 61-101. 37 Capital is relying on exemptions from the formal valuation and minority shareholder approval
requirements provided under section 5.5(c) and 5.7(1)(b) of Multilateral Instrument 61-101.
On Behalf of the Board,
37 Capital Inc.
“Jake H. Kalpakian”
Jake H. Kalpakian,
President and CEO
The CSE has not reviewed and does not accept
responsibility for the adequacy or accuracy of this news release.
Trading in the securities of the Company should
be considered speculative.
Certain statements contained herein are “forward-looking”.
Forward-looking statements may include, among others, statements regarding future plans, projected or proposed financings, costs, objectives,
economic or technical performance, or the assumptions underlying any of the foregoing. In this News Release, words such as “may”,
“would”, “could”, “will”, “likely”, “enable”, “feel”, “seek”,
“project”, “predict”, “potential”, “should”, “might”, “objective”,
“believe”, “expect”, “propose”, “anticipate”, “intend”, “plan”,
“plans” “estimate”, and similar words are used to identify forward-looking statements. Forward-looking statements
are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from
those expressed or implied. Although management believes that the expectations reflected in such forward-looking statements are based
on reasonable assumptions, projections and estimations, there can be no assurance that these assumptions, projections or estimations are
accurate. Readers, shareholders and investors are therefore cautioned not to place reliance on any forward-looking statements as the plans,
assumptions, intentions or expectations upon which they are based might not occur.
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