UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: July 31, 2016
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number: 000-55321
I-MINERALS INC.
(Exact name of registrant as specified in its charter)
British Columbia, Canada | 20-4644299 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Suite 880, 580 Hornby Street, Vancouver, BC,
Canada V6C 3B6
(Address of principal executive offices)(Zip Code)
(877) 303-6573
Registrant’s telephone number, including area code
Not applicable
(Former name or former address if changed since last
report)
Securities registered under section 12(g) of the Exchange Act: Common shares with no par value.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer | [ ] | Accelerated filer | [ ] |
Non-accelerated filer | [ ] | Smaller reporting company | [X] |
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of September 14, 2016, the registrant had 87,308,952 outstanding shares of common stock.
I-Minerals Inc.
INDEX
2
PART I – FINANCIAL INFORMATION
I-Minerals Inc.
Condensed
Consolidated Financial Statements
For
the three months ended July 31, 2016
(Unaudited
- Expressed in US dollars)
3
I-Minerals Inc.
Condensed Consolidated Balance Sheets |
(Unaudited - Expressed in US dollars) |
Notes |
July
31,
2016 $ |
April
30,
2016 $ |
|||||
ASSETS | |||||||
Current assets | |||||||
Cash | 403,665 | 128,353 | |||||
Receivables | 9,068 | 21,747 | |||||
Prepaids | 43,818 | 45,498 | |||||
456,551 | 195,598 | ||||||
Equipment | 7,386 | 7,985 | |||||
Mineral property interest | 3 | 305,850 | 305,850 | ||||
Deposits | 14,932 | 14,932 | |||||
TOTAL ASSETS | 784,719 | 524,365 | |||||
LIABILITIES | |||||||
Current liabilities | |||||||
Accounts payable and accrued liabilities | 4,8 | 1,340,129 | 1,023,137 | ||||
Promissory notes | 5 | 9,028,232 | 6,587,526 | ||||
Derivative liabilities | 2,6,7 | 716,886 | 515,802 | ||||
11,085,247 | 8,126,465 | ||||||
Promissory notes | 5 | 2,269,912 | 3,871,395 | ||||
TOTAL LIABILITIES | 13,355,159 | 11,997,860 | |||||
CAPITAL DEFICIT | |||||||
Capital Stock | |||||||
Authorized: | |||||||
Unlimited common shares with no par value | |||||||
Issued and fully paid: 87,308,952 (April 30, 2016 - 86,328,952) | 7 | 18,201,727 | 17,963,265 | ||||
Additional paid-in capital | 1,841,082 | 1,839,639 | |||||
Commitment to issue shares | 5 | 139,256 | 81,112 | ||||
Deficit | (32,752,505 | ) | (31,357,511 | ) | |||
TOTAL CAPITAL DEFICIT | (12,570,440 | ) | (11,473,495 | ) | |||
TOTAL LIABILITIES AND CAPITAL DEFICIT | 784,719 | 524,365 |
On behalf of the Board
“Thomas M. Conway” | Director | “W. Barry Girling” | Director |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
I-Minerals Inc.
Condensed Consolidated Statements of Loss For the three months ended July 31, 2016 and 2015 |
(Unaudited - Expressed in US dollars) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
I-Minerals Inc.
|
(Unaudited - Expressed in US dollars) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
I-Minerals Inc.
|
(Unaudited - Expressed in US dollars) |
Number
of Shares
# |
Amount
$ |
Commitment
to Issue Shares
$ |
Additional
Paid-in Capital
$ |
Accumulated
Deficit
$ |
Total
Capital Deficit
$ |
|||||||||||||
Balance at April 30, 2016 | 86,328,952 | 17,963,265 | 81,112 | 1,839,639 | (31,357,511 | ) | (11,473,495 | ) | ||||||||||
Issued during the period: | ||||||||||||||||||
Shares issued on exercise of options | 980,000 | 167,736 | - | - | - | 167,736 | ||||||||||||
Shares issuable as a debt discount | - | - | 58,144 | - | - | 58,144 | ||||||||||||
Share-based payments – vesting | - | - | - | 72,169 | - | 72,169 | ||||||||||||
Reallocation on exercise of options | - | 70,726 | - | (70,726 | ) | - | - | |||||||||||
Loss for the period | - | - | - | - | (1,394,994 | ) | (1,394,994 | ) | ||||||||||
Balance at July 31, 2016 | 87,308,952 | 18,201,727 | 139,256 | 1,841,082 | (32,752,505 | ) | (12,570,440 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
I-Minerals Inc.
|
(Unaudited - Expressed in US dollars except where otherwise indicated) |
1. | NATURE OF BUSINESS AND BASIS OF PRESENTATION AND LIQUIDITY: |
I-Minerals Inc. (the “Company”) was incorporated under the laws of British Columbia, Canada, in 1984. The Company is listed for trading on the TSX Venture Exchange under the symbol “IMA” and the OTCQX marketplace under the symbol “IMAHF”. |
The Company’s principal business is the development of the Helmer-Bovill industrial mineral property (“the Property”) located in Latah County, Idaho. The Helmer-Bovill property is comprised of eleven mineral leases that host potentially economic deposits of feldspar, quartz and kaolinitic clays, primarily kaolinite and halloysite. |
Basis of Presentation and Liquidity |
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information as well as Article 10 of Regulation S-X on the basis that the Company will continue as a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for the next year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At July 31, 2016, the Company had not yet achieved profitable operations, had an accumulated deficit of $32,752,505 since inception and expects to incur further losses in the development of its business, all of which casts substantial doubt upon the Company’s ability to continue as a going concern and, therefore, that it may be unable to realize its assets and discharge its liabilities in the normal course of business. |
The financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of our management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included. Operating results for the three months ended July 31, 2016 are not necessarily indicative of the results that may be expected for the full year ending April 30, 2017. All amounts presented are in US dollars except where otherwise indicated. For further information refer to the financial statements and footnotes thereto for the year ended April 30, 2016 included in the Company’s Annual Report on Form 10-K filed on July 27, 2016. |
The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to develop the Property and to meet its obligations and repay its liabilities arising from normal business operations when they come due. Although the Company has been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms advantageous to the Company. The Company is currently receiving funds from a company controlled by a director of the Company through promissory notes (Notes 5 and 11). Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or promissory notes; however there is no assurance of additional funding being available. The Company has historically satisfied its capital needs primarily by issuing equity securities and/or promissory notes. Management plans to continue to provide for its capital needs by issuing equity securities and/or promissory notes. |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: |
Financial Instruments and Fair Value Measures |
The book value of cash, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the immediate or short-term maturity of those instruments. The fair value hierarchy under US GAAP is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following: |
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I-Minerals Inc.
|
(Unaudited - Expressed in US dollars except where otherwise indicated) |
Level 1 - | quoted prices (unadjusted) in active markets for identical assets or liabilities; |
Level 2 - | observable inputs other than Level I, quoted prices for similar assets or liabilities in active prices whose inputs are observable or whose significant value drivers are observable; and |
Level 3 - | assets and liabilities whose significant value drivers are unobservable by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The Company’s Promissory Notes are based on Level 2 inputs in the ASC 820 fair value hierarchy. The Company calculated the fair value of these instruments by discounting future cash flows using rates representative of current borrowing rates. At July 31, 2016, the Promissory Notes had a fair value of $12,528,286 (April 30, 2016 – $10,703,836). |
The Company had certain Level 3 liabilities required to be recorded at fair value on a recurring basis in accordance with US GAAP as at July 31, 2016 and April 30, 2016. As at July 31, 2016, the Company’s Level 3 liabilities consisted of the warrants issued in connection with the Company’s offering of equity units in a private placement and warrants issued as financing fees as well as the grant of share purchase options to non-employees. |
The resulting Level 3 liabilities have no active market and are required to be measured at their fair value each reporting period based on information that is unobservable. |
A summary of the Company’s Level 3 liabilities for the three months ended July 31, 2016 and 2015 is as follows: |
2016
$ |
2015
$ |
||||||
Warrants (Note 6) | |||||||
Beginning fair value | 326,595 | 1,128,841 | |||||
Issuance | 27,750 | 75,324 | |||||
Change in fair value | 111,311 | 270,097 | |||||
Ending fair value | 465,656 | 1,474,262 | |||||
Non-employee options (Note 7(c)) | |||||||
Beginning fair value | 189,207 | 116,615 | |||||
Fair value of options on vesting | - | 5,219 | |||||
Change in fair value | 62,023 | 8,654 | |||||
Ending fair value | 251,230 | 130,488 | |||||
Total Level 3 liabilities | 716,886 | 1,604,750 |
Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). There were no assets or liabilities measured at fair value on a nonrecurring basis during the periods ended July 31, 2016 and April 30, 2016. |
Earnings (Loss) Per Share |
The basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. For the three months ended July 31, 2016, loss per share excludes 12,524,012 (2015 – 30,281,069) potentially dilutive common shares (related to outstanding options and warrants as well as shares committed to be issued pursuant to the Promissory Notes) as their effect was anti-dilutive. |
9
I-Minerals Inc.
|
(Unaudited - Expressed in US dollars except where otherwise indicated) |
3. | MINERAL PROPERTY INTEREST: |
Helmer-Bovill Property – Latah County, Idaho |
The Company has an undivided 100% interest in 11 State of Idaho mineral leases. The State of Idaho mineral leases are subject to a 5% production royalty on gross sales. |
4. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES: |
July
31,
2016 $ |
April
30,
2016 $ |
||||||
Trade payables | 269,866 | 307,316 | |||||
Amounts due to related parties (Note 8) | 189,191 | 189,501 | |||||
Interest payable on promissory notes | 881,072 | 526,320 | |||||
Total accounts payable and accrued liabilities | 1,340,129 | 1,023,137 |
5. | PROMISSORY NOTES: |
July
31,
2016 $ |
April
30,
2016 $ |
||||||
First promissory notes | 5,711,636 | 5,678,107 | |||||
Second promissory notes | 5,041,477 | 4,780,814 | |||||
Third promissory notes | 545,031 | - | |||||
Total promissory notes | 11,298,144 | 10,458,921 |
On September 13, 2013, January 27, 2014 and December 4, 2014, the Company entered into agreements with a company controlled by a director of the Company (the “Lender”) pursuant to which $5,787,280 was advanced to the Company in tranches (the “First Promissory Notes”). The First Promissory Notes were to mature as to $3,000,000 on December 2, 2016 and the balance due on December 31, 2016. |
On February 18, 2015 and December 1, 2015, the Company entered into agreements with the Lender pursuant to which $5,457,000 was advanced to the Company in tranches (the “Second Promissory Notes”). The Second Promissory Notes were to mature as to $1,000,000 on December 2, 2016, $2,000,000 on June 2, 2017 and the balance due on December 2, 2017. |
Effective August 31, 2016, the Company entered into an agreement with the Lender pursuant to which up to an additional $2,965,000 will be advanced to the Company in tranches (the “Third Promissory Notes”). In addition, the First Promissory Notes and the Second Promissory Notes were amended and combined with the Third Promissory Notes with a modified maturity date of December 2, 2017. All other terms of the First Promissory Notes and the Second Promissory Notes remained unchanged. (Note 11). |
During the three months ended July 31, 2016, the Company received $600,000 in advance of the effective date of the Third Promissory Notes and which will be subject to the terms and conditions of the Third Promissory Notes agreement. |
10
I-Minerals Inc.
|
(Unaudited - Expressed in US dollars except where otherwise indicated) |
The following table outlines the estimated cash payments required in order to repay the principal balance of the promissory notes. The table below does not take into consideration the amended maturity dates of the promissory notes that was effective subsequent to July 31, 2016. |
2017
$ |
2018
$ |
2019
$ |
2020
$ |
2021
$ |
Total
$ |
|
9,387,280 | 2,457,000 | - | - | - | 11,844,280 |
Certain conditions may result in early repayment including immediate repayment in the event a person currently not related to the Company acquires more than 40% of the outstanding common shares of the Company. Debt issuance costs will be amortized over the estimated maturity life of the promissory notes. |
The promissory notes bear interest at the rate of 12% per annum and during the three months ended July 31, 2016, the Company recorded interest of $354,752 (2015 - $248,451). Interest is payable semi-annually as calculated on May 31st and November 30th. Interest is to be paid either in cash or in common shares at the option of the Lender. As part of the Third Promissory Notes agreement entered into subsequent to July 31, 2016, interest payable of $640,130 will be transferred to the promissory notes balance. This balance will not be subject to bonus shares and bonus warrants. The interest payable amount remains in accounts payable and accrued liabilities as at July 31, 2016. The $640,130 of interest was for the period from December 1, 2015 to May 31, 2016. |
The Company and the Lender agreed that the Lender is to receive bonus shares equal to 7.5% of each loan tranche advanced divided by the Company’s common share market price. In addition, the Company will issue the Lender an equal number of share purchase warrants for each loan tranche advanced. Each bonus share purchase warrant will entitle the Lender to purchase one common share of the Company at a price equal to the greater of (a) the market price of the Company’s common shares on the date of the advance and (b) the volume weighted average price of the Company’s common shares over the twenty trading days immediately prior to the date of the advance. The bonus share purchase warrants expire on the earlier of (a) December 31, 2018 and (b) the date the advance has been repaid in full, including interest. |
At July 31, 2016, the Company was committed to issuing an additional 587,441 bonus shares to the Lender at the fair value of $139,256. The fair value of the bonus shares was determined by reference to the trading price of the Company’s common shares on the date the advances were received. |
The fair value of 269,359 bonus share purchase warrants committed to be issued (based on advances received during the period) during the three months ended July 31, 2016 of $27,750 was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: stock price – CAD$0.279; exercise price – CAD$0.290; expected risk-free interest rate – 1.15%; expected life – 2.54 years; expected volatility – 81% and expected dividend rate – 0%. |
The aggregate finance fees (bonus shares and bonus warrants) are recorded against the promissory notes balance and are being amortized to the Statement of Loss over the life of the promissory notes using the effective interest method. The accretion expense in respect of the debt discount recorded on the issuance of bonus shares and warrants totalled $125,117 for the three months ended July 31, 2016 (2015 - $72,679) The unamortized debt discount as at July 31, 2016 is $546,136 (April 30, 2016 – $585,359). |
The promissory notes are collateralized by the Company’s Helmer-Bovill Property. |
6. | WARRANT LIABILITIES: |
The Company has share purchase warrants exercisable into common shares at an exercise price denominated in Canadian dollars. As a variable amount of US dollars are exercisable into a fixed number of common shares, the share purchase warrants are classified as derivative liabilities. |
The Company records the fair value of the share purchase warrants in accordance with ASC 815, “Derivatives and Hedging”. The Company uses the Black-Scholes option pricing model to calculate the fair values of the derivative liabilities. The fair value of the derivative liability is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statement of loss. |
11
I-Minerals Inc.
|
(Unaudited - Expressed in US dollars except where otherwise indicated) |
$ | ||||
Balance, April 30, 2016 | 326,595 | |||
Bonus warrants issuable pursuant to promissory notes (Note 5) | 27,750 | |||
Change in fair value of warrant derivatives | 111,311 | |||
Balance, July 31, 2016 | 465,656 |
Warrant Derivative Liabilities |
At July 31, 2016, the Company determined the fair value of Warrant Derivative Liabilities to be $465,656 (April 30 2016 - $326,595) as estimated using the Black-Scholes option pricing model with the following weighted average assumptions: |
July 31,
2016 |
April 30,
2016 |
||||||
Stock price (CAD$) | 0.29 | 0.23 | |||||
Exercise price (CAD$) | 0.27 | 0.27 | |||||
Risk-free interest rate (%) | 0.97 | 0.96 | |||||
Expected life (years) | 1.20 | 1.41 | |||||
Expected volatility (%) | 67 | 76 | |||||
Expected dividends ($) | Nil | Nil |
7. | SHARE CAPITAL: |
Common shares |
a) | Authorized: |
Unlimited number of common shares, without par value. |
b) | Stock transactions: |
During the three months ended July 31, 2016, the Company completed the following stock transactions: |
i) | On June 14, 2016, the Company issued 980,000 common shares on the exercise of stock options with an exercise price of CAD$0.22 per common share resulting gross proceeds of CAD$215,600 ($167,736). |
c) | Stock options: |
The Company has granted stock options under the terms of its Stock Option Plan (the “Plan”). The Plan provides that the directors of the Company may grant options to purchase common shares to directors, officers, employees and service providers of the Company on terms that the directors of the Company may determine are within the limitations set forth in the Plan. The maximum number of shares available under the Plan is limited to 10% of the issued common shares. The maximum term of stock options is ten years. All stock options vest on the date of grant, unless otherwise stated. As at July 31, 2016, the Company had 2,875,895 stock options available for grant pursuant to the Plan (April 30, 2016 - 2,797,895). |
The Company’s stock options outstanding as at July 31, 2016 and April 30, 2016 and the changes for the years then ended are as follows: |
12
I-Minerals Inc.
|
(Unaudited - Expressed in US dollars except where otherwise indicated) |
Number
Outstanding |
Weighted
Average
Exercise Price (in CAD$) |
||
Balance outstanding at April 30, 2016 | 5,835,000 | 0.21 | |
Granted | 1,000,000 | 0.22 | |
Exercised | (980,000) | 0.22 | |
Balance outstanding at July 31, 2016 | 5,855,000 | 0.21 | |
Balance exercisable at July 31, 2016 | 5,245,000 | 0.21 |
The intrinsic value of options exercised during the three months ended July 31, 2016 was CAD$88,200 based on a stock price of CAD$0.31 on the date of exercise. |
Summary of stock options outstanding at July 31, 2016: |
Security | Number Outstanding |
Exercise
Price
(CAD$) |
Expiry Date |
Remaining
Contractual Life (years) |
|
Stock options | 1,300,000 | 0.10 | July 30, 2018 | 2.00 | |
Stock options | 260,000 | 0.15 | July 30, 2018 | 2.00 | |
Stock options | 300,000 | 0.25 | July 30, 2018 | 2.00 | |
Stock options | 200,000 | 0.25 | November 19, 2018 | 2.30 | |
Stock options | 150,000 | 0.25 | January 8, 2019 | 2.44 | |
Stock options | 300,000 | 0.25 | May 23, 2019 | 2.81 | |
Stock options | 150,000 | 0.25 | December 16, 2017 | 1.38 | |
Stock options | 1,975,000 | 0.25 | January 29, 2020 | 3.50 | |
Stock options | 200,000 | 0.25 | August 4, 2020 | 4.01 | |
Stock options | 1,000,000 | 0.25 | February 25, 2018 | 1.57 | |
Stock options | 20,000 | 0.22 | May 19, 2018 | 1.80 |
The weighted average grant date fair value of stock options granted during the three months ended July 31, 2016 of CAD$0.095 was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: stock price – CAD$0.22; exercise price – CAD$0.22; risk-free interest rate – 0.85%; expected life – 2.0 years; expected volatility – 79% and expected dividends - $nil. Expected volatility was determined by reference to the historical volatility of the Company’s common shares trading on the TSX Venture Exchange. |
Non-Employee Stock Options |
In accordance with the guidance of ASC 815-40-15, stock options awarded to non-employees that are fully vested and exercisable in Canadian dollars are required to be accounted for as derivative liabilities because they are considered not to be indexed to the Company’s stock due to their exercise price being denominated in a currency other than the Company’s functional currency. Stock options awarded to non-employees that are not vested are accounted for as equity awards until the terms associated with their vesting requirements have been met. As at July 31, 2016 and April 30, 2016, there were no non-employee stock option awards that had not vested. |
The non-employee stock options are accounted for at their respective fair values and are summarized as follows for the three months ended July 31, 2016 and 2015: |
13
I-Minerals Inc.
|
(Unaudited - Expressed in US dollars except where otherwise indicated) |
2016
$ |
2015
$ |
||||||
Fair value of non-employee options, beginning of the period | 189,207 | 116,615 | |||||
Fair value of options on vesting | - | 5,219 | |||||
Change in fair value of non-employee stock options during the period | 62,023 | 8,654 | |||||
Fair value of non-employee options, end of the period | 251,230 | 130,488 |
The Company determined the fair value of its non-employee stock options as at July 31, 2016 and April 30, 2016 using the Black-Scholes option pricing model with the following weighted average assumptions: |
July 31,
2016 |
April 30,
2016 |
||||||
Stock price (CAD$) | 0.29 | 0.23 | |||||
Exercise price (CAD$) | 0.23 | 0.23 | |||||
Risk-free interest rate (%) | 1.34 | 1.34 | |||||
Expected life (years) | 2.18 | 2.43 | |||||
Expected volatility (%) | 86 | 87 | |||||
Expected dividends ($) | Nil | Nil |
The non-employee options are required to be re-valued with the change in fair value of the liability recorded as a gain or loss on the change of fair value of derivative liability and included in other items in the Company’s Consolidated Statements of Loss at the end of each reporting period. The fair value of the options will continue to be classified as a liability until such time as they are exercised, expire or there is an amendment to the respective agreements that renders these financial instruments to be no longer classified as a liability. |
As at July 31, 2016, the unamortized compensation cost of options is $41,579 and the intrinsic value of options expected to vest is $304,752 (CAD$397,900). |
Share-based payments are classified in the Company’s Statement of Loss during the three months ended July 31, 2016 and 2015 as follows: |
2016
$ |
2015
$ |
||||||
Management and consulting fees | 72,169 | 4,556 | |||||
72,169 | 4,556 |
d) | Share purchase warrants: |
A summary of fully-exercisable share purchase warrants as at July 31, 2016 and April 30, 2016 and the changes for the years then ended are as follows: |
Number
Outstanding |
Weighted
Average
Exercise Price (CAD$) |
||
Balance at April 30, 2016 | 5,812,212 | 0.27 | |
Issued | 269,359 | 0.29 | |
Balance at July 31, 2016 | 6,081,571 | 0.27 |
14
I-Minerals Inc.
|
(Unaudited - Expressed in US dollars except where otherwise indicated) |
Summary of warrants outstanding and issuable at July 31, 2016: |
Security | Number Outstanding |
Exercise
Price
($CAD) |
Expiry Date | |
Warrants | 1,550,000 | 0.40 | January 31, 2017 | |
Warrants | 667,520 | 0.14 | December 1, 2016 (1) | |
Warrants | 122,142 | 0.14266 | December 1, 2016 (1) | |
Warrants | 104,119 | 0.165 | December 1, 2016 (1) | |
Warrants | 76,723 | 0.17 | December 1, 2016 (1) | |
Warrants | 87,818 | 0.17223 | December 1, 2016 (1) | |
Warrants | 111,762 | 0.185 | December 1, 2016 (1) | |
Warrants | 132,208 | 0.217 | December 1, 2016 (1) | |
Warrants | 62,002 | 0.222 | December 1, 2016 (1) | |
Warrants | 58,181 | 0.225 | December 1, 2016 (1) | |
Warrants | 165,326 | 0.23 | December 1, 2016 (1) | |
Warrants | 51,202 | 0.25 | December 1, 2016 (1) | |
Warrants | 92,357 | 0.276 | December 1, 2016 (1) | |
Warrants | 200,091 | 0.28 | December 1, 2016 (1) | |
Warrants | 45,439 | 0.29 | December 1, 2016 (1) | |
Warrants | 96,261 | 0.292 | December 1, 2016 (1) | |
Warrants | 52,459 | 0.305 | December 1, 2016 (1) | |
Warrants | 730,848 | 0.22 | December 31, 2018 (1) | |
Warrants | 242,545 | 0.23 | December 31, 2018 (1) | |
Warrants | 194,344 | 0.24 | December 31, 2018 (1) | |
Warrants | 37,203 | 0.245 | December 31, 2018 (1) | |
Warrants | 393,058 | 0.255 | December 31, 2018 (1) | |
Warrants | 192,206 | 0.259 | December 31, 2018 (1) | |
Warrants | 126,843 | 0.265 | December 31, 2018 (1) | |
Warrants | 198,750 | 0.272 | December 31, 2018 (1) | |
Warrants | 95,781 | 0.291 | December 31, 2018 (1) | |
Warrants | 101,095 | 0.298 | December 31, 2018 (1) | |
Warrants | 93,288 | 0.310 | December 31, 2018 (1) |
Notes: |
(1) | The warrants are exercisable until the earlier of the date disclosed or the date that the promissory note advance, including interest, is repaid (Note 5). |
8. | RELATED PARTY TRANSACTIONS: |
During the three months ended July 31, 2016, management and consulting fees of $24,026 (2015 - $23,929) were charged by RJG Capital Corporation, a wholly-owned company of W. Barry Girling, Director. Wayne Moorhouse, Director, charged $770 (2015 - $765) in management and consulting fees. $10,087 (2015 - $7,758) was charged by Malaspina Consultants Inc. for the services of Matt Anderson, CFO, and are included in professional fees. |
Included in accounts payable and accrued liabilities are amounts owed to directors or officers or companies controlled by them. As at July 31, 2016, the amount was $189,191 (April 30, 2016 – $189,501). All amounts are non-interest bearing, unsecured, and due on demand. |
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I-Minerals Inc.
|
(Unaudited - Expressed in US dollars except where otherwise indicated) |
The promissory notes received from a company controlled by a director (Notes 5 and 11) are related party transactions. |
9. | SEGMENT DISCLOSURES: |
The Company considers its business to comprise a single operating segment being the exploration of its resource property. Substantially all of the Company’s long-term assets and operations are located in Latah County, Idaho. |
10. | NON-CASH TRANSACTIONS: |
Investing and financing activities that affect recognized assets or liabilities but that do not result in cash receipts or cash payments are excluded from the consolidated statements of cash flows. During the three months ended July 31, 2016, the following transactions were excluded from the consolidated statement of cash flows: |
a) | The commitment to issue 269,359 common shares at the fair value of $58,144 and 269,359 warrants at the fair value of $27,750 pursuant to the promissory notes. |
During the three months ended July 31, 2015, the following transactions were excluded from the consolidated statement of cash flows: |
a) | The issuance by the Company of 1,980,840 common shares at the fair value of $373,142 as payment of interest on the Promissory Notes; |
b) | The issuance by the Company of 286,845 common shares at the fair value of $54,035 as payment of interest on the Second Promissory Notes; and, |
c) | The commitment to issue 590,474 common shares at the fair value of $139,740 and 590,474 warrants at the fair value of $75,324 pursuant to the Second Promissory Notes. |
11. | SUBSEQUENT EVENTS: |
Subsequent to July 31, 2016: |
a) | Effective August 31, 2016, the Company entered into an agreement with the Lender pursuant to which up to an additional $2,965,000 will be advanced to the Company in tranches (the “Third Promissory Notes”). In addition, the First Promissory Notes and the Second Promissory Notes were amended and combined with the Third Promissory Notes with a modified maturity date of December 2, 2017. All other terms of the First Promissory Notes (Note 5) and the Second Promissory Notes (Note 5) remained unchanged. | |
b) | As part of the Third Promissory Notes agreement entered into effective August 31, 2016, interest payable of $640,130 was transferred to the promissory notes balance. This balance is not subject to bonus shares and bonus warrants. The $640,130 of interest was for the period from December 1, 2015 to May 31, 2016. | |
c) | The Company received an aggregate of $200,000 of Third Promissory Notes. |
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Item 2. Management’s discussion and analysis of financial condition and results of operations
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report constitute "forward-looking statements.” These statements, identified by words such as “plan,” "anticipate,” "believe,” "estimate,” "should,” "expect" and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, general business, economic, competitive, political and social uncertainties; the actual results of current exploration activities; changes in project parameters as plans continue to be refined; changes in labour costs or other costs of production; future mineral prices; equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry, including but not limited to environmental hazards, cave-ins, pit-wall failures, flooding, rock bursts and other acts of God or unfavourable operating conditions and losses; delays in obtaining governmental approvals or financing or in the completion of development or construction activities, as well as those factors discussed in the section titled "Risk Factors" in our Annual Report on Form 10-K which was filed with the SEC on July 27, 2016.
Forward looking statements are based on a number of material factors and assumptions, including the results of exploration and drilling activities, the availability and final receipt of required approvals, licenses and permits, that sufficient working capital is available to complete proposed exploration and drilling activities, that contracted parties provide goods and/or services on the agreed time frames, the equipment necessary for exploration is available as scheduled and does not incur unforeseen break downs, that no labour shortages or delays are incurred and that no unusual geological or technical problems occur. While we consider these assumptions may be reasonable based on information currently available to it, they may prove to be incorrect. Actual results may vary from such forward-looking information for a variety of reasons, including but not limited to risks and uncertainties disclosed in the section titled “Risk Factors” in our Annual Report on Form 10-K which was filed with the SEC on July 27, 2016.
We intend to discuss in our Quarterly Reports and Annual Reports any events or circumstances that occurred during the period to which such documents relate that are reasonably likely to cause actual events or circumstances to differ materially from those disclosed in this Quarterly Report. New factors emerge from time to time, and it is not possible for management to predict all of such factors and to assess in advance the impact of each such factor on our business or the extent to which any factor, or combination of such factors, may cause actual results to differ materially from those contained in any forwarding looking statement.
CAUTIONARY NOTE TO U.S. INVESTORS REGARDING ESTIMATES OF MEASURED, INDICATED AND INFERRED RESOURCES AND PROVEN AND PROBABLE RESERVES
The terms “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” as used in this Quarterly Report are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) – CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended (the “CIM Definition Standards”). These definitions differ from the definitions in the United States Securities and Exchange Commission (“SEC”) Industry Guide 7 (“SEC Industry Guide 7”) under the United States Securities Act of 1933, as amended (the “Securities Act”). Under SEC Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves, and the primary environmental analysis or report must be filed with the appropriate governmental authority.
In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that all or any part of a mineral deposit in these categories will ever be converted into reserves. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all, or any part, of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Disclosure of unit measures in a resource is permitted disclosure under Canadian regulations; however, the SEC only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in place tonnage and grade without reference to unit measures.
Accordingly, information contained in this Quarterly Report and any documents incorporated by reference herein contain descriptions of our mineral deposits that may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.
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As used in this Quarterly Report, unless the context otherwise requires, “we,” “us,” “our,” the “Company” and “I-Minerals” refers to I-Minerals Inc. All dollar amounts in this registration statement are in U.S. dollars unless otherwise stated.
General
We were incorporated under the laws of British Columbia, Canada in 1984. In 2004, we changed our corporate jurisdiction from a British Columbia company to a Canadian corporation. In December 2011, we amended our articles to change our name from “i-minerals inc.” to “I-Minerals Inc.”
The Company engaged in the development of our Helmer-Bovill industrial minerals property (the “Helmer-Bovill Property”). The Helmer-Bovill Property, in which we hold a 100% interest, is comprised of 11 mineral leases totaling 5,140.64 acres located approximately 6 miles southwest of Bovill, Latah County, Idaho.
We acquired the Helmer-Bovill Property from Idaho Industrial Minerals (“IIM”) pursuant to an Assignment Agreement with Contingent Right of Reverter (the “IIM Agreement”) dated August 12, 2002, as amended August 10, 2005, August 10, 2008 and January 21, 2010, between I-Minerals USA (formerly Alchemy Kaolin Corporation), our wholly owned subsidiary, and IIM. Under the terms of the IIM Agreement, we issued a total of 1,800,000 common shares to IIM.
Our principal executive office is located at Suite 880, 580 Hornby Street, Vancouver, British Columbia, Canada and our telephone number is (877) 303-6573.
To date, we have not earned significant revenues from the operation of our mineral properties. Accordingly, we are dependent on debt and equity financing as its primary source of operating working capital. Our capital resources are largely determined by the strength of the junior resource markets and by the status of our projects in relation to these markets, and its ability to compete for investor support of its projects.
Our Principal Projects
Our activities at the Helmer-Bovill Property are focused on developing the Bovill Kaolin Project and the WBL Tailings Project.
The Bovill Kaolin Project
Our lead project, the Bovill Kaolin Project, is a strategically located long term resource of high purity quartz, potassium feldspar (“K-spar”), halloysite and kaolinite formed through weathering of a border phase of the Idaho Batholith causing all minerals to be contained within a fine white clay-sand mixture referred to as “primary clay.” The Bovill Kaolin Project is located within 5 miles of state highways with electricity and natural gas already at the property boundary.
Since 2010, our exploration work has focused diamond drilling on the Bovill Kaolin Project. To date, a total of 258 diamond drill holes have been drilled totaling 28,251 feet. As a result of these drill campaigns, four deposits have been identified: Kelly’s Hump, Kelly’s Hump South, Middle Ridge and WBL.
In June 2014, we completed an updated pre-feasibility study on the Bovill Kaolin Project (the “2014 PFS”) and on March 8, 2016, we announced the economic results of our full feasibility study (the “2016 FS”), which included the following highlights:
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Reserve | Proven | Probable | Total P&P |
Tons (1000s) | 4,155 | 4,548 | 8,702 |
Halloysite % | 4.8 | 4.0 | 4.4 |
Halloysite Tons (1000s) | 200 | 182 | 382 |
Kaolinite % | 11.1 | 12.5 | 11.8 |
Kaolinite Tons (1000s) | 460 | 568 | 1,028 |
Sand % | 77.8 | 76.8 | 77.3 |
Sand Tons (1000s) | 3,234 | 3,491 | 6,725 |
Note that values presented here have been rounded to reflect the level of accuracy. |
Proven and Probable Mineral Reserves are presented using a $57.00 NSR cutoff grade. |
The full Feasibility Study was filed on www.sedar.com on April 20, 2016 and is available on the Company’s website. Going forward our focus is to complete the longer lead time components of the detailed engineering, complete the permitting process with the Idaho Department of Lands and commence efforts to raise the capital necessary to build the mine.
The WBL Tailings Project
We also plan to continue limited seasonal mining operations at the WBL Tailings Project. The WBL Tailings Project is feldspathic sands deposited as tailings from clay mining operations during the period from 1961 to 1974. In September 2012, we received approval of our Mine Plan of Operations (“MPO”) from the Idaho Department of Lands. The MPO allows us to mine up to 50,000 tons per annum of feldspathic sands from June to October for a period of 10 years. Since 2013, approximately 5,000 tons of tailings was extracted and sold to a local cement company and a local contractor.
Plan of Operation
During the next twelve to eighteen months, our plan of operation is to complete the mine permitting and get all of the longer lead time engineering tasks such as the electricity and gas planning underway. In the interim we will continue to strengthen our customer list and continue discussions to raise the capital to fund the mine construction
Engineering work on the Bovill Kaolin Project
As recommended in the 2016 FS, we are about to begin the contemplated utility surveys and are undertaking additional pilot plant work to produce customer samples for marketing purposes and the related testwork for final equipment selection, as well as to finalize the process plant water balance and utilities consumptions. This work together with the General and Administrative expenses related in part to our continuing financing efforts are estimated to cost about US$2,440,000 before taking into consideration any possible land swap with the IDL.
Outlook
Our focus continues to be the detailed assessment of all of our mineral assets and advancing the Bovill Kaolin Project towards production. With the FS now completed, the next steps are the final permitting activities with the mine permit expected late in the third calendar quarter or early in the fourth calendar quarter of 2016.
A second bulk sample has been sent to Ginn Mineral Research with separation of the clay minerals (kaolin and halloysite) now complete. The sand fraction from the second bulk sample has been delivered to Minerals Research Laboratory at North Carolina State University (“MRL”). Processing of the sand fraction (quartz and K-spar) from the initial bulk sample is now completed at MRL. Samples of all quartz and K-spar products, including fine grind products, have been delivered to the Company for distribution to prospective customers for testing purposes. The current round of pilot scale
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has also confirmed grades and separation characteristics of all areas of the deposits. The earlier processing of the bulk samples at Ginn Mineral Research created halloysite and metakaolin products samples for marketing purposes that are also being distributed for testing purposes. Interest from companies pursuing research and development of life science and polymer applications with our halloysite is particularly encouraging, MRL is also undertaking some optimization work on a bench scale to see how high a K 2 O feldspar product can be produced. Results to date are very encouraging with select bench scale results exceeding 14% K 2 0, a very high potassium level for any K-spar. This work should be completed in the third calendar quarter of 2016 and is expected to transition to a multi-ton pilot plant.
Based upon opportunities identified in the Charles Rivers report, internal marketing efforts and customer leads generated through the website, strong interest has been generated in all of the Company’s mineral products with ever increasing interest in the K-spar. Samples continue to be sent to customers for testing and the response has generally been very favorable.
Results of Operation
Three months ended July 31, 2016
We recorded a loss of $1,394,994 for the three months ended July 31, 2016 as compared to a loss of $1,659,467 for the three months ended July 31, 2016. The decrease in the loss recorded for the three months ended July 31, 2016 as compared to the three months ended July 31, 2015 is the net result of changes to a number of expenses. Of note are the following items:
Liquidity and Capital Resources
Our aggregate operating, investing and financing activities during the three months ended July 31, 2016 resulted in a net cash inflow of $275,312 (2015 – inflow of $520,540). As at July 31, 2016, we had working capital deficiency of $10,628,696, including cash of $403,665. Subsequent to July 31, 2016, the maturity dates of the promissory notes were amended so that they are due on December 2, 2017.
During the three months ended July 31, 2016, we used $1,023,775 on cash flows from operations before changes in non-cash operating working capital items (2015 - $1,270,890). The decrease in these cash flows was due primarily to a
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decrease in mineral property expenditures. During the three months ended July 31, 2016, we spent $nil on investing activities (2015 - $nil) and we received $967,736 from financing activities (2015 - $1,500,000).
We are being financed by advances pursuant to promissory notes advanced by BV Lending LLC, an entity controlled by Allen L. Ball, a member of our Board of Directors and our largest shareholder (the “Lender”). During the year ended April 30, 2016, the Company was receiving advances pursuant to the First Promissory Notes and the Second Promissory Notes. As at April 30, 2016, the balance of the promissory notes was $11,044,280. The final tranche pursuant to the Second Promissory Notes was received in May 2016. Effective August 31, 2016, the Company entered into an agreement with the Lender pursuant to which up to an additional $2,965,000 will be advanced to the Company in tranches (the “Third Promissory Notes”). The August 31, 2016 agreement also amended the maturity date of the First Promissory Notes and the Second Promissory Notes. The promissory notes have a modified maturity date of December 2, 2017. Certain conditions may result in early repayment.
We do not have the ability to internally generate sufficient cash flows to support our operations for the next twelve months. We are currently receiving funds from a company controlled by a director of the Company through promissory notes. We have no formal plan in place to address this going concern issue but consider that we will be able to obtain additional funds by equity financing and/or debt financing; however, there is no assurance of additional funding being available. As a result, our auditors included an emphasis of matter note in their report on the financial statements for the year ended April 30, 2016 about our ability to continue as a going concern.
We remain dependent on additional financing to fund development requirements on the Helmer-Bovill property and for general corporate costs. With respect to funds required for capital cost items, State-sponsored debt financing instruments may be available on attractive terms, and we intend to pursue such financial instruments to cover portions of the capital costs associated with placing the Bovill Kaolin deposits into production. We have commenced efforts to raise the capital necessary to build the mine.
We do not have the ability to internally generate sufficient cash flows to support our operations for the next twelve months. We are currently receiving funds from a company controlled by a director of the Company through promissory notes. We have no formal plan in place to address this going concern issue but consider that we will be able to obtain additional funds by equity financing and/or debt financing; however, there is no assurance of additional funding being available. As a result, our auditors have expressed substantial doubt in their auditors’ report in the financial statements for the year ended April 30, 2016 about our ability to continue as a going concern.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders.
Critical Accounting Policies
Measurement Uncertainty
The preparation of these consolidated financial statements in conformity with US GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We regularly evaluate estimates and assumptions related to the useful life and recoverability of long lived assets, stock-based compensation, valuation of convertible debentures and derivative liabilities, and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to our condensed consolidated financial statements relate to the determination of fair values of derivative liabilities and stock-based transactions.
Stock-based Compensation
We account for all stock-based payments and awards under the fair value based method. Stock-based payments to non-employees are measured at the fair value of the consideration received, or the fair value of the equity instruments issued, or liabilities incurred, whichever is more reliably measurable.
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The fair value of stock-based payments to non-employees is periodically re-measured until the counterparty performance is complete, and any change therein is recognized over the vesting period of the award and in the same manner as if we had paid cash instead of paying with or using equity based instruments. The cost of the stock-based payments to non-employees that are fully vested and non-forfeitable as at the grant date is measured and recognized at that date, unless there is a contractual term for services in which case such compensation would be amortized over the contractual term.
We account for the granting of stock options to employees using the fair value method whereby all awards to employees will be recorded at fair value on the date of the grant. The fair value of all stock options is expensed over their vesting period with a corresponding increase to additional paid-in capital.
Compensation costs for stock-based payments that do not include performance conditions are recognized on a straight-line basis. Compensation cost associated with a share based award having a performance condition is recognized on the probable outcome of that performance condition during the requisite service period. Share based awards with a performance condition are accrued on an award by award basis.
We use the Black-Scholes option valuation model to calculate the fair value of stock options at the date of the grant. Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in these assumptions can materially affect the fair value estimates.
Derivative Liabilities
We evaluate our financial instruments and other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market at each balance sheet date and recorded as a liability and the change in fair value is recorded in the consolidated statement of loss. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instruments that become subject to reclassification are reclassified at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not settlement of the derivative instrument is expected within 12 months of the balance sheet date.
We use the Black-Scholes option valuation model to value derivative liabilities. This model uses Level 3 inputs in the fair value hierarchy established by ASC 820 Fair Value Measurement.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable
Item 4. Controls and Procedures.
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of July 31, 2016. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of July 31, 2016. There were no material changes in the Company’s internal control over financial reporting during the first quarter of 2017.
Part II – OTHER INFORMATION
Item 1. Legal Proceedings.
There have been no material developments on the legal proceeding previously disclosed in our Annual Report on Form 10-K for the financial year ended April 30, 2016.
Item 1A. Risk Factors
There have been no material changes from the risk factors as previously disclosure in our Annual Report on Form 10-K which was filed with the SEC on July 27, 2016.
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Item 2. Unregistered sales of equity securities and use of proceeds
All unregistered sales of equity securities during the period covered by the Quarterly Report were previously disclosed in our current reports on Form 8-K or our Annual Report on Form 10-K other than the following:
i) | On June 14, 2016, the Company issued 980,000 common shares on the exercise of stock options with an exercise price of CAD$0.22 per common share resulting gross proceeds of CAD$215,600 ($167,736). |
Item 3. Defaults upon senior securities
None
Item 4. Mine Safety Disclosures.
Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (The “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the three months ended July 31, 2016, our U.S. exploration properties were not subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the "Mine Act").
Item 5. Other Information
On September 2, 2016, we announced that we negotiated a new loan agreement with a company controlled by its President Allen L. Ball (the “Lender”), pursuant to which:
(a) | all funding provided by the Lender pursuant to previous loan agreements would be consolidated into the new loan agreement; and |
(b) | up to an additional $2,965,000 will be advanced to us by the Lender in tranches, such advances to be considered secured loans accruing interest at the rate of 12% per annum calculated and paid semi-annually from the date of each advance, such interest also to be considered advances pursuant to the new loan agreement unless the Lender elects otherwise. |
At the Lender’s election, it may direct that we pay the interest either in cash or in common shares of the Company; if interest is paid in shares, they will be issued at a deemed price per share equal to the greater of (i) the “Discounted Market Price” of our shares (as defined in TSX Venture Exchange – the “Exchange” - Policy 5.1) as of the date of the news release announcing the specific debt settlement; and (ii) the volume weighted average trading price (“VWAP”) of our shares over the 20 trading days prior to the date such interest becomes payable.
As additional consideration for such advances, we have agreed to issue the following securities to the Lender:
(a) | that number of common shares of the Company equal to 7.5% of the amount of each advance divided by the “Market Price” (as defined in Exchange Policy 1.1 – the “Market Price”) of our shares as of the date of the advance, subject to the minimum price per share and the maximum number of shares provided for in Exchange Policy 5.1, such shares to be considered “bonus shares” pursuant to the provisions of said Policy 5.1; and |
(b) | non-transferable share purchase warrants entitling the holder to purchase up to that number of common shares of the Company equal to 7.5% of the amount of each advance, divided by the “Market Price” of our shares as of the close of business on the date of the advance, subject to the minimum exercise price per share and the maximum number of share purchase warrants provided for in Exchange Policy 5.1, such share purchase warrants to be considered “bonus warrants” pursuant to the provisions of said Policy 5.1; |
provided that:
(c) | the issuance of the bonus shares and bonus warrants is subject to our receiving acceptance from the Exchange therefor; |
(d) | each bonus warrant will entitle the holder to purchase one common share of the Company at a price equal to the greater of: |
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(i) | the “Market Price” of the Company’s shares as of the close of business on the date of the advance; and |
(ii) | the VWAP of the Company’s shares over the 20 trading days immediately prior to the date of the advance; |
for a period expiring on the earlier of:
(e) | December 31, 2018; and |
(f) | the date the amount of the advance, together with all accrued interest thereon, has been repaid in full. |
While any of the principal amount of the indebtedness under the new loan agreement remains outstanding, we will, if requested by the Lender, include an individual designated by the Lender as a nominee for director at our next annual general meeting subsequent to said request.
The loan agreement also provides that we will repay the principal amount of each advance, together with all accrued and unpaid interest thereon, on the earlier of:
(a) | December 2, 2017; and |
(b) | in the event we receive the requisite financing for the capital expenditures to put its Bovill Kaolin Project into full commercial production, five business days following the closing of said financing. |
Item 6. Exhibits
3.1 | Certificate of Continuation. (2) |
3.2 | Articles of Continuance. (2) |
3.3 | Certificate of Amendment. (2) |
3.4 | Articles of Amendment. (2) |
3.5 | By-Laws. (2) |
10.1 | Assignment Agreement with Contingent Right of Reverter dated August 10, 2002, between the Company, Idaho Industrial Minerals, LLC and Northwest Kaolin Inc. (2) |
10.2 | Amendment and Ratifications of Assignment Agreement with Contingent Right of Reverter dated August 10, 2005, between the Company, Idaho Industrial Minerals, LLC and Northwest Kaolin Inc. (2) |
10.3 | Second Amendment and Ratifications of Assignment Agreement with Contingent Right of Reverter dated August 10, 2005, between the Company, Idaho Industrial Minerals, LLC and Northwest Kaolin Inc. (2) |
10.4 | Third Amendment and Ratifications of Assignment Agreement with Contingent Right of Reverter dated August 10, 2008, between the Company, Idaho Industrial Minerals, LLC and Northwest Kaolin Inc. (2) |
10.5 | Fourth Amendment and Ratifications of Assignment Agreement with Contingent Right of Reverter dated January 1, 2010, between the Company, Idaho Industrial Minerals, LLC and Northwest Kaolin Inc. (2) |
10.6 | Employment Agreement dated April 1, 2013 between the Company and Thomas M. Conway. (2) |
10.7 | Loan Agreement dated September 13, 2013 between the Company and BV Lending LLC. (2) |
10.8 | Stock Option Plan. (1) |
10.9 | Sales Agreement dated April 28, 2014 between I-Minerals USA, Inc. and Pre-Mix, Inc. (2) |
10.10 | Loan Agreement dated February 18, 2015 between the Company and BV Lending LLC. (3) |
10.11 | Amendment Agreement dated December 1, 2015 between the Company and BV Lending LLC. (4) |
10.12 | Loan Agreement dated June 1, 2016 between the Company and BV Lending LLC. |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002 (Rule 13a-14 and 15d-14 of the Exchange Act) |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002 (Rule 13a-14 and 15d-14 of the Exchange Act) |
32.1 | Certification of Chief Executive Officer pursuant to pursuant to Section 1350 of Title 18 of the United States Code |
32.2 | Certification of Chief Financial Officer pursuant to pursuant to Section 1350 of Title 18 of the United States Code |
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Notes: |
(1) | Filed as an exhibit to our Registration Statement on Form 10 filed with the SEC on November 17, 2014. |
(2) | Filed as an exhibit to our Registration Statement on Form 10/A filed with the SEC on December 24, 2014. |
(3) | Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on March 11, 2015. |
Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on December 7, 2015.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
I-MINERALS INC. | |||
Date: | September 14, 2016 | By: | /s/ Thomas M. Conway |
THOMAS M. CONWAY | |||
Chief Executive Officer and President | |||
(Principal Executive Officer) | |||
Date: | September 14, 2016 | By: | /s/ Matthew Anderson |
MATTHEW ANDERSON | |||
Chief Financial Officer | |||
(Principal Financial Officer and Principal Accounting Officer) |
Exhibit 31.1
CERTIFICATION
I, Thomas M. Conway, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of I-Minerals Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(c) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: September 14, 2016
/s/ Thomas M. Conway
THOMAS M. CONWAY Chief Executive Officer and President |
Exhibit 31.2
CERTIFICATION
I, Matthew Anderson, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of I-Minerals Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(c) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: September 14, 2016
/s/ Matthew Anderson
MATTHEW ANDERSON Chief Financial Officer |
Exhibit 32.1
CERTIFICATION
BY CHIEF EXECUTIVE OFFICER
PURSUANT
TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES
‑
OXLEY ACT OF 2002
In connection with the Quarterly Report of I-Minerals Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas M. Conway, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: September 14, 2016
/s/ Thomas M. Conway
THOMAS M. CONWAY Chief Executive Officer and President |
Exhibit 32.2
CERTIFICATION
BY CHIEF EXECUTIVE OFFICER
PURSUANT
TO 18 U.S.C. SECTION 1350,
ÀAS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES
‑
OXLEY ACT OF 2002
In connection with the Quarterly Report of I-Minerals Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Matthew Anderson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: September 14, 2016
/s/ Matthew Anderson
MATTHEW ANDERSON Chief Financial Officer |
THIS LOAN AGREEMENT (“this Agreement”) is dated June 1, 2016.
AMONG :
I-Minerals Inc. , a body corporate, continued under the laws of Canada, having its head office at Suite 880 – 580 Hornby Street, Vancouver, British Columbia, Canada V6C 3B6
(hereinafter called the “Company”)
OF THE FIRST PART
AND :
i-minerals USA Inc. , an Idaho limited liability company, having an office c/o the Company, at Suite 880 – 580 Hornby Street, Vancouver, British Columbia, Canada V6C 3B6
(hereinafter called the “Subsidiary”)
OF THE SECOND PART
AND :
BV Lending, LLC , an Idaho limited liability company, having its head office at Suite 201 – 901 Pier View Drive, Idaho Falls, Idaho, U.S.A. 83402
(hereinafter called “BV”)
OF THE THIRD PART
WHEREAS:
A. | Pursuant to an agreement among the parties made as of January 27, 2014, as amended by an amending agreement dated December 4, 2014 (hereinafter collectively called the “Amended and Restated Loan Agreement”), the parties revised certain of the terms and conditions of each of the Initial Agreement (as hereinafter defined) and the Second Agreement (as hereinafter defined), and provided that all cash advances to the Company pursuant to either the Initial Agreement and the Second Agreement, together with all future cash advances subsequent to the Effective Date thereof, were consolidated into one agreement (with capitalized terms used in this Recital A. having the definitions contained in the Amended and Restated Loan Agreement); |
B. | Pursuant to an agreement among the parties made as of February 18, 2015, as amended by an amending agreement dated December 1, 2015 (hereinafter collectively called the “Amended Loan Agreement”), BV agreed to provide additional funding to the Company to advance its Bovill Kaolin Project in the State of Idaho, U.S.A.; |
C. | As of May 31, 2016, BV had made cash advances to the Company of a total of $11,244,280 pursuant to the Initial Agreement, the Second Agreement, the Amended and Restated Loan Agreement and the Amended Loan Agreement; |
D. | The Company continues to require additional funding to advance its Bovill Kaolin Project in the State of Idaho, U.S.A.; |
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E. | BV has agreed to provide additional funding to the Company pursuant to the terms and conditions of this Loan Agreement; |
F. | The parties are desirous that all funding provided by BV to the Company pursuant to either the Initial Agreement, the Second Agreement, the Amended and Restated Loan Agreement, the Amended Loan Agreement and this Agreement be consolidated into one agreement, being this Agreement; and |
G. | The Subsidiary is a wholly-owned subsidiary of the Company and is the legal owner of the Helmer-Bovill Property hosting the Bovill Kaolin Project in the State of Idaho, U.S.A. referred to in Recitals B. and C. herein; |
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of these presents and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the parties, the parties hereby agree as follows:
1. | Definitions |
1.01 | In this Agreement, the following words and phrases shall have the following meanings, namely: |
(a) | “Advance” means the principal amount of cash advances from BV to the Company pursuant to any of the Initial Agreement, the Second Agreement, the Amended and Restated Loan Agreement, the Amended Loan Agreement and this Agreement, as well as interest owing under the Amended and Restated Loan Agreement (which includes interest owing under either the Initial Agreement or the Second Agreement) and interest owing under the Amended Loan Agreement, as well as interest owing under this Agreement, at BV’s election; |
(b) | “Amended and Restated Loan Agreement” has the meaning set out in Recital A. herein; |
(c) | “Amended Loan Agreement” has the meaning set out in Recital B. herein; |
(d) | “Bonus Shares” has the meaning set out in Exchange Policy 5.1; |
(e) | “Bonus Warrants” has the meaning set out in Exchange Policy 5.1; |
(f) | “Discounted Market Price” has the meaning set out in Exchange Policy 1.1; |
(g) | “Effective Date” means the date of this Agreement as set forth on the first page hereof; |
(h) | “Exchange” means the TSX Venture Exchange; |
(i) | “Exchange Policy 1.1” means TSX Venture Exchange Policy 1.1, entitled “Interpretation”; |
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(j) | “Exchange Policy 5.1” means TSX Venture Exchange Policy 5.1, entitled “Loans, Bonuses, Finder’s Fees and Commissions”; |
(k) | “Exchange Policy 5.9” means TSX Venture Exchange Policy 5.9, entitled “Protection of Minority Security Holders in Special Transactions”; |
(l) | “Exchange Rate” means the Bank of Canada Noon Rate for Canadian/U.S. dollars on the applicable dates provided for herein; |
(m) | “Indebtedness” means the principal amount of each cash Advance pursuant to any of the Initial Agreement, the Second Agreement, the Amended and Restated Loan Agreement, the Amended Loan Agreement and this Agreement, collectively, as well as interest which is considered an Advance in accordance with sections 3.01 and 3.02 hereof; |
(n) | “Initial Agreement” means the agreement among the parties dated September 19, 2012 pursuant to which BV agreed to advance up to $1,000,000 to the Company, in tranches; |
(o) | “Market Price” has the meaning set out in Exchange Policy 1.1; |
(p) | “Second Agreement” means the agreement among the parties dated September 13, 2013 pursuant to which BV agreed to advance up to an additional $3,133,000 to the Company in tranches (in addition to the advances listed in paragraph 2.01 thereof); |
(q) | “this Agreement” means this Loan Agreement. |
2. | Cancellation of Previous Agreements |
2.01 | The parties acknowledge and agree that each of the Initial Agreement, the Second Agreement, the Amended and Restated Loan Agreement and the Amended Loan Agreement are hereby considered to be cancelled and of no further force or effect, with all of the Company’s obligations thereunder that have not been previously fulfilled to be replaced by the Company’s obligations under this Agreement. With respect to any date or time period occurring or ending on or after the date hereof, the rights and obligations of the parties hereto with respect to all matters previously governed by the Initial Agreement, the Second Agreement, the Amended and Restated Loan Agreement and the Amended Loan Agreement shall be governed by this Agreement. |
2.02 | The parties acknowledge and agree that the amount of Indebtedness owing under this Agreement as of June 1, 2016 is $11,884,409.97, which amount is inclusive of all prior cash advances made under each of the Initial Agreement, the Second Agreement, the Amended and Restated Loan Agreement and the Amended Loan Agreement, inclusive of accrued interest in the amount of $640,130.36 owing by the Company to BV as of May 31, 2016, which interest shall be considered as an Advance hereunder. |
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3. | Additional Cash Advances to be made |
3.01 | BV hereby agrees to advance up to an additional $2,965,000 in cash to the Company in tranches in accordance with Schedule A attached hereto (individually an “Advance” and collectively “Advances”), with each Advance to be considered a secured loan accruing interest at the rate of twelve percent (12%) per annum calculated from the date of each Advance as at May 31 and as at November 30 of each year in which such interest is payable hereunder, such interest also to be considered Advances hereunder over and above the amounts set forth in Schedule A, unless BV elects otherwise, as provided for in paragraph 3.02 herein. If applicable this interest will be considered an Advance received on the date such interest is payable as provided for in paragraph 3.02 herein. (For greater certainty, the parties agree that interest in the total amount of $640,130.36 owing by the Company to BV as of May 31, 2016 will be considered as Advances hereunder.) |
The Company will repay to BV the principal amount of each Advance as provided for in paragraph 7.01 herein. Advances hereunder, other than interest when considered an Advance hereunder, will be made in accordance with Schedule A attached hereto. Advances are to be made on the first business day of each month in which Advances are to be made. |
3.02 | As provided for in paragraph 3.01 herein, interest owing on Advances will also be considered Advances, unless BV elects otherwise, in which event it may direct that the Company pay the interest owing on the Advances hereunder either in cash or in common shares in its capital stock (“Shares”). In the event BV elects to have the interest paid either in cash or in Shares, it will so notify the Company within ten (10) business days prior to the date such interest payments become due and payable. The interest will be due on or before June 30 and December 31 of each year in which such interest is payable hereunder. In the event interest is to be paid in Shares, they would be issued at a deemed price per Share equal to the greater of: |
(a) | the Discounted Market Price of the Company’s common shares as of the close of the market on the date of the Company’s news release announcing the proposed payment of interest in Shares, provided that said news release shall be issued on the date that BV elects to receive the payment of interest in Shares; and |
(b) | the volume weighted average trading price (the “VWAP”) of the Company’s common shares over the twenty (20) trading days prior to the date such interest is calculated (being May 31 and November 30 each year), with the VWAP to be calculated by dividing the total value of common shares of the Company as traded on the Exchange (or on such other stock exchange or quotation system where the majority of the Company’s trading takes place) by the total volume of shares traded, with the amount of interest to be calculated in Canadian funds based on the Exchange Rate as of the date such interest is calculated. |
3.03 | The Company shall pay to BV a late charge equal to five percent (5%) of each payment due under this Agreement, or under any other instrument evidencing or securing this Agreement, that is not paid in full within ten (10) days after the applicable due date as provided for in paragraph 7.01 herein. Such late charge shall accrue and be due as of the due date for such payment and represents a reasonable estimate of fair compensation for the loss that may be sustained by BV for the failure of the Company to make timely payment. Such late charge shall be paid without prejudice to the right of BV to collect any other amounts provided for hereunder or to pursue any other rights and remedies available to BV under this Agreement, under any documents securing and/or guaranteeing this Agreement, at law or in equity. |
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3.04 | All past due principal (whether in due course or by acceleration), past due interest and past due late charges shall, both before and after judgment, bear interest at the default rate of eighteen percent (18%) per annum compounded monthly from and after the applicable due date, as provided for in paragraph 7.01 herein, until paid in full. |
3.05 | The Company agrees to pay any and all reasonable costs and expenses (regardless of the particular nature thereof and whether incurred before or after the initiation of suit or before or after judgment) which may be incurred by BV in connection with the enforcement of any of its rights under this Agreement and/or any instrument securing or guaranteeing this Agreement, including but not limited to attorney fees and all costs and expenses of collection. |
3.06 | The Company, and all sureties, guarantors, and endorsers hereof, severally waive presentment for payment, demand, and notice of dishonor and nonpayment of this Agreement, and consent to any and all extensions of time, renewals, waivers, or modifications that may be granted by BV with respect to the payment or other provisions of this Agreement, and to the release of any security, or any part thereof, with or without substitution. |
3.07 | Notwithstanding any other provision contained in this Agreement or in any instrument given to evidence or secure the obligations evidenced hereby: |
(a) | the rates of interest and charges provided for herein and therein shall in no event exceed the rates and charges which would result in interest being charged at a rate equaling the maximum allowed by law; and |
(b) | if for any reason whatsoever BV ever receives as interest in connection with the transaction of which this Agreement is a part an amount which would result in interest being charged at a rate exceeding the maximum allowed by law, such amount or portion thereof as would otherwise be excessive interest shall automatically be applied toward reduction of the unpaid principal balance then outstanding hereunder and not toward payment of interest. |
4. | Bonus Shares and Bonus Warrants |
4.01 | As additional consideration for the cash Advances made by BV to the Company for which Bonus Shares and Bonus Warrants have not yet been issued, and for the cash Advances to be made by BV to the Company pursuant to paragraph 3.01 hereof, the Company agrees to issue to or as directed by BV the Bonus Shares and Bonus Warrants referred to in sub-paragraphs 4.01(a) and 4.01(b) herein as follows, with such Bonus Shares and Bonus Warrants to be issued within ten (10) business days of each of June 30 and December 31 of each year in which such securities are to be issued hereunder, with the number of Bonus Shares and Bonus Warrants to be calculated as set forth below: |
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(a) | that number of Bonus Shares in its capital equal to seven and one-half percent (7.5%) of the amount of the Advance, divided by the Market Price of the Company’s common shares as of the close of business on the date of the Advance, as adjusted by the Exchange Rate on the date of the Advance, subject to the minimum price per share and the maximum number of Bonus Shares provided for in Exchange Policy 5.1; and |
(b) | non-transferable Bonus Warrants in the form attached as Schedule B, entitling the holder to purchase up to that number of common shares of the Company equal to seven and one-half percent (7.5%) of the amount of the Advance, divided by the Market Price of the Company’s common shares as of the close of business on the date of the Advance, as adjusted by the Exchange Rate on the date of the Advance, subject to the minimum exercise price per share and the maximum number of Bonus Warrants provided for in Exchange Policy 5.1; |
provided that: |
(c) | each Bonus Warrant will entitle the holder to purchase one common share in the capital stock of the Company at an exercise price stated in U.S. funds determined by the Exchange Rate on the date of the Advance equal to the greater of: |
(i) | the Market Price of the Company’s common shares (subject to the minimum exercise price provided for in Exchange Policy 5.1) as of the close of business on the date of the Advance; and |
(ii) | the VWAP of the Company’s common shares over the twenty (20) trading days immediately prior to the date of the Advance; |
for a period expiring on the earlier of: |
(A) | December 31, 2018; and |
(B) | the date the amount of the Advance, together with all accrued interest thereon, has been repaid in full; |
(d) | pursuant to the provisions of subsection 2.2(e) of Exchange Policy 5.1, in the event the amount of the Advance pursuant to which the Bonus Warrants were issued is reduced or repaid during the first year of its term, the number of Bonus Warrants which have not been exercised will, on a pro rata basis, have their term reduced to the later of one year from the date of the issuance of those Bonus Warrants and 30 days from the date of reduction or repayment of that Advance; and |
(e) | for greater certainty, Bonus Shares and Bonus Warrants shall not be issuable in respect of interest which is deemed to be an Advance in accordance with sections 3.01 and 3.02 hereof. |
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5. | Security for Advances |
5.01 | As security for the repayment of the Advances made or deemed to have been made pursuant to any of the agreements which are to be considered cancelled and of no further force or effect pursuant to section 2.01 hereof, which prior Advances are considered Indebtedness under this Agreement, or pursuant to this Agreement, together with all accrued and unpaid interest thereon, the Company hereby grants, mortgages and charges in favour of BV, by way of a floating charge, its undertaking and all of its other property and assets for the time being, real and personal, movable and immovable, of whatsoever nature and kind, both present and in the future (the “Property”), including all of the issued and outstanding shares of the Subsidiary. For greater certainty, the parties specifically acknowledge and agree that the charges hereby created in favour of BV constitute a first charge and will rank pari passu with the floating charge granted in favour of BV in respect of cash advances made under the Initial Agreement, the Second Agreement, the Amended and Restated Loan Agreement and the Amended Loan Agreement, together with all accrued and unpaid interest thereon; the parties also acknowledge and agree that these charges are in priority to any and all specific or floating charges created by the Company in favour of any other creditors. The Company and the Subsidiary each agree to take all steps and actions as are reasonably necessary to assist BV with the registration of its interest in the Property in any provincial, state or federal property or title registries. It is also acknowledged by the parties that the Company shall be at liberty to, in the future, create or suffer to be created mortgages, charges, liens or encumbrances, by other specific charges or floating charges, ranking subsequent to the floating charges hereby created; it is also acknowledged by the parties that, unless otherwise specifically agreed to in writing by BV, the Company shall not be at liberty to, and shall not create or suffer to be created, any mortgage, charge, lien or encumbrance upon the Property or the issued and outstanding shares of the Subsidiary ranking in priority to or pari passu with the charges hereby created, or to sell or dispose of the same otherwise than in the ordinary course of its business as at present conducted. |
5.02 | The parties also agree that the security provided for in paragraph 5.01 herein will be cancelled and of no further force or effect in the event of the repayment of the Indebtedness. |
6. | Board Representation |
6.01 | During the period any portion of the Indebtedness remains outstanding, the Company, if requested to do so by BV, agrees to include an individual designated by BV as one of management’s nominees for director in the notice of meeting and information circular to be distributed to the shareholders of the Company in connection with the next annual general meeting of its shareholders held subsequent to its receipt of said request from BV. |
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7. | Repayment Provisions |
7.01 | The parties agree that the Company will repay the Indebtedness on the earlier of: |
(a) | December 2, 2017; and |
(b) | in the event the Company enters receives the requisite financing for the capital expenditures required to put the Bovill Kaolin Project into full commercial production, five (5) business days following the closing of said financing. |
8. | Participation Right |
8.01 | If at any time after the Effective Date hereof and for so long as any Advance is outstanding, the Company proposes to issue or sell any common shares or convertible securities (“Additional Securities”) other than: |
(a) | pursuant to the exercise of any stock options granted under the Company’s stock option plan; or |
(b) | pursuant to the exercise of any share purchase warrants issued pursuant to previously-completed private placements; or |
(c) | for property interests other than money; |
BV shall have the right to subscribe for and purchase (directly or through an affiliate) Additional Securities, at the price at which such Additional Securities are offered for sale to other purchasers, up to its then pro rata interest in the issued and outstanding common shares of the Company, in each case, prior to giving effect to the issuance or sale of such Additional Securities (the “Maximum Additional Securities”). |
8.02 | If the Company intends to authorize and/or issue Additional Securities that give rise to BV’s rights pursuant to paragraph 8.01, the Company shall provide notice to BV (the “Rights Notice”) no less than six business days before the date on which the Company intends to issue Additional Securities giving rise to BV’s rights pursuant to paragraph 8.01. |
8.03 | The Rights Notice shall provide the same information to BV regarding the particulars of the issuance or sale of the Additional Securities as is provided to other persons proposing to participate in the subscription for Additional Securities. BV shall give notice (an “Acceptance Notice”) to the Company not later than 5:00 p.m. (Vancouver time) on the fifth business day following the receipt of any Rights Notice, setting out the number of Additional Securities, if any, up to the Maximum Additional Securities, which BV intends to subscribe for and purchase. Following receipt of an Acceptance Notice, BV shall be entitled to participate in the subscription for Additional Securities in the same manner as other persons subscribing for Additional Securities and shall be entitled to subscribe for the number of Additional Securities specified in the Acceptance Notice under such subscription. |
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9. | Acceptances and Approvals |
9.01 | The Company agrees to make application to the Exchange for its acceptance for the issuance of any Shares payable in settlement of interest owing on any Advances as provided for in paragraph 2.02 herein, and for the issuance of the Bonus Shares and Bonus Warrants pursuant to paragraph 3.01 herein, which applications will include all required supporting documents and information and the applicable filing fees. The issuance of any such Shares, Bonus Shares and Bonus Warrants will in each case be subject to the Company receiving written acceptance from the Exchange therefor. |
9.02 | In the event the provisions of Exchange Policy 5.9 and Multilateral Instrument 61-101 (each entitled “Protection of Minority Security Holders in Special Transactions”) apply to any of the provisions of this Agreement, the Company also agrees to seek the required approval of its shareholders thereunder at its next annual general meeting of its shareholders, to be held on or before December 31, 2016, in order to seek the requisite approval from its shareholders for the provisions hereof requiring such approval. |
10. | Notices |
10.01 | All notices, payments and other communications given in connection with this Agreement shall be in writing, and the respective addresses of the parties for the service of any notice, payment or other communication shall be as follows: |
(a) | if to the Company: |
I-Minerals Inc. |
Suite 880 – 580 Hornby Street |
Vancouver, British Columbia, Canada |
V6C 3B6 |
Attention: Barry Girling, Director |
Email: wbg@imineralsinc.com |
(b) | if to the Subsidiary: |
i-minerals USA Inc. |
Suite 880 – 580 Hornby Street |
Vancouver, British Columbia, Canada |
V6C 3B6 |
Attention: Barry Girling, Director |
Email: wbg@imineralsinc.com |
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(c) | if to BV: |
BV Lending, LLC |
Suite 201 – 901 Pier View Drive |
Idaho Falls, Idaho, U.S.A. |
83402 |
Attention: Cortney Liddiard, Chief Executive Officer |
Email: flyfish@ballventures.com |
with a copy to: |
Thel W. Casper, Esq. |
General Counsel to Ball Ventures, LLC |
P. O. Box 51298 |
Idaho Falls, Idaho, U.S.A. |
83402 |
Email: tcasper@ballventures.com |
Any notice, payment or other communication shall be sufficiently given if delivered by email or by hand or by reputable courier service, or, absent postal disruption, if sent by registered mail, postage prepaid, posted within either Canada or the United States of America, to the parties at their respective addresses for service as set forth above. Any notice, payment or other communication shall be deemed to have been given and received on the first business day on which it is presented during normal business hours at the address for service of the addressee. Any party may change its address for service by notice in writing to the other parties. |
11. | Time of the Essence |
11.01 | Time shall be of the essence of this Agreement. |
12. | U.S. Dollars |
12.01 | All references herein to dollar amounts are to lawful currency of the United States of America, unless otherwise specifically provided for herein. |
13. | Headings |
13.01 | The headings contained herein are for convenience only and shall not affect the meaning or interpretation hereof. |
14. | Singular and Plural, etc. |
14.01 | Where the context so requires, words importing the singular number include the plural and vice versa, and words importing gender shall include the masculine, feminine and neuter genders. |
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15. | Entire Agreement |
15.01 | This Agreement constitutes the only agreement among the parties with respect to the subject matter hereof and shall supersede any and all prior negotiations and understandings. This Agreement may be amended or modified in any respect by written instrument only. |
16. | Severability |
16.01 | The invalidity or unenforceability of any particular provision of this Agreement shall not effect or limit the validity or enforceability of the remaining provisions of this Agreement. |
17. | Governing Law |
17.01 | This Agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein. The parties irrevocably attorn to the jurisdiction of the courts of British Columbia, which will have non-exclusive jurisdiction over any matter arising out of this Agreement. |
18. | Dispute Resolution |
18.01 | If any dispute arises between any of the Parties (the Parties in dispute being the “Participants”) concerning this Agreement or its interpretation or the respective rights, duties or liabilities of the Parties, then a Participant may give to the other Participants notice in writing of the existence of such dispute, specifying its nature and the point at issue and the Participants agree: |
(a) | to try to resolve the dispute by participating in a structured negotiation with a mediator under the Commercial Mediation Rules of British Columbia International Commercial Arbitration Centre (“BCICAC”); |
(b) | where a dispute is not resolved by mediation within a period of 30 days after the appointment of a mediator or within such further period of time to which the Participants agree, any Participant may refer the dispute to be finally resolved by arbitration under the BCICAC Rules.The appointing authority will be the BCICAC, the case shall be administered by the BCICAC in accordance with its “Procedures for Cases under the BCICAC Rules” and the place of arbitration shall be Vancouver, British Columbia. The appointment by the BCICAC is binding upon all of the Participants; |
(c) | the arbitrator will give his decision in writing within three weeks of his being appointed and the decision, both on the dispute and on the costs of the arbitration will be final and binding upon the Participants; |
(d) | the arbitrator will have full authority to rule on any question of law in the same manner as any Judge in any Court of the Province of British Columbia and the ruling of the arbitrator on any question of law will be final and binding upon the Participants; and |
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(e) | the failure of any Participant to abide by the decision of the arbitrator is considered a material breach of this Agreement. |
This paragraph shall survive any termination of this Agreement and continues in full force and effect notwithstanding any determination by a court or the Parties that one or more other provisions of this Agreement are invalid, contrary to law or unenforceable. |
19. | Successors and Assigns |
19.01 | The terms and provisions of this Agreement shall be binding upon and enure to the benefit of each of the parties and their respective successors and permitted assigns; provided that this Agreement shall not be assignable by any party without the written consent of each of the other parties hereto. |
20. | Further Assurances |
20.01 | Each of the parties hereto shall do or cause to be done all such acts and things and execute or cause to be executed all such documents, agreements and other instruments as may reasonably be necessary or desirable for the purpose of carrying out the provisions and intent of this Agreement. |
21. | Effective Date |
21.01 | This Agreement is intended to and shall take effect as of the date first set forth above, notwithstanding its actual date of execution or delivery. |
22. | Counterparts and Facsimile |
22.01 | This Agreement may be executed in any number of counterparts by original, facsimile or other form of electronic signature, each of which so executed shall constitute an original and all of which taken together shall form one and the same agreement. |
IN WITNESS WHEREOF the parties have executed and delivered this Agreement as of the day and year first above written.
Executed by
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/s/ Thomas M. Conway
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Executed by
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/s/ B. Girling
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Executed by
By: Ball Ventures, LLC, an Idaho limited liability company, the Member
Per:
/s/ Cortney Liddiard
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SCHEDULE A
2016 |
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Budget |
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June |
July |
August |
September |
October |
November |
December |
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$300,000 |
$305,000 |
$210,000 |
$305,000 |
$1,025,000 (1) |
$175,000 |
$125,000 |
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2017 |
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Budget |
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January |
February |
March |
April |
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$120,000 |
$150,000 |
$130,000 |
$120,000 |
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(1) | This amount includes a good faith payment to the Idaho Department of Lands to set the stage for a land swap. This good faith payment is estimated to be $880,000 and will be held in trust pending the completion of the land swap. BV will also be entitled to a lien or other security on said estimated deposit of $880,000 if and when said deposit is made. |
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SCHEDULE B
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE ♦ ♦, ♦.
Without prior WRITTEN approval of the TSX Venture Exchange and compliance with all applicable securities legislation, the securities represented by this certificate may not be sold, transferred, hypothecated or otherwise traded on or through the facilities of the TSX VENTURE Exchange or otherwise in Canada or to or for the benefit of a Canadian Resident until ♦ ♦, ♦.
THESE WARRANTS AND THE SHARES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF A U.S. PERSON OR A PERSON IN THE UNITED STATES UNLESS AN EXEMPTION IS AVAILABLE FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED IN REGULATION S UNDER THE 1933 ACT.
THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR ANY APPLICABLE STATE LAWS.
THIS WARRANT CERTIFICATE IS VOID IF NOT EXERCISED ON OR BEFORE
5:00 P.M. (Vancouver TIME) ON THE EXPIRY DATE (as defined in Article 1.1 herein).
WARRANT CERTIFICATE
I-Minerals Inc.
(Continued under the laws of Canada)
WARRANT CERTIFICATE NO. «cert_no» |
«number_of_warrants» WARRANTS entitling the holder to acquire, subject to adjustment, one Common Share for each Warrant represented hereby. |
THIS IS TO CERTIFY THAT
«registration»
(hereinafter referred to as the "holder" or the "Warrantholder") is entitled to acquire for each Warrant represented hereby, in the manner and subject to the restrictions and adjustments set forth herein, at any time and from time to time until 5:00 p.m. (Vancouver time) (the "Expiry Time") on the Expiry Date (as defined in Article 1.1 herein) one fully paid and non-assessable common share ("Common Share") in the capital of I-Minerals Inc. (the "Company").
The Warrants may only be exercised at the head office of the Company at I-Minerals Inc., Suite 880 – 580 Hornby Street, Vancouver, B.C. V6C 3B6 . The Warrants are issued subject to the terms and conditions appended hereto as Schedule "A" .
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be executed by a duly authorized officer.
DATED this ♦ day of ♦, ♦.
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I-Minerals Inc. |
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Per: |
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Authorized Signing Officer |
(See terms and conditions attached hereto)
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SCHEDULE "A"
TERMS AND CONDITIONS FOR WARRANTS
Terms and Conditions attached to the Warrants issued by I-Minerals Inc. and dated ♦ ♦, ♦.
ARTICLE 1
INTERPRETATION
1.1 | Definitions |
In these Terms and Conditions, unless there is something in the subject matter or context inconsistent therewith:
(a) | "Common Shares" means the common shares in the capital of the Company to be issued pursuant to the exercise of Warrants; |
(b) | "Company" means I-Minerals Inc. unless and until a successor corporation shall have become such in the manner prescribed in Article 6, and thereafter "Company" shall mean such successor corporation; |
(c) | "Company's Auditors" means an independent firm of accountants duly appointed as auditors of the Company; |
(d) | "Exchange" means the TSX Venture Exchange or such other stock exchange on which the Company's Common Shares are listed and posted for trading; |
(e) | "Exercise Price" means the price of $ «exercise_price» (U.S. funds) per share if exercised by 5:00 p.m. (Vancouver time) on the Expiry Date; |
(f) | “Expiry Date” means the earlier of: |
(i) | ♦ ♦, ♦; and |
(ii) | the date the amount of the Advance in respect of which the Warrants were issued, as provided for in the Loan Agreement between the Company and BV Lending, LLC dated ♦ ♦, ♦, together with all accrued interest thereon, has been repaid in full; |
(g) | "Expiry Time" means 5:00 p.m. (Vancouver time) on the Expiry Date; |
(h) | "herein" , "hereby" and similar expressions refer to these Terms and Conditions as the same may be amended or modified from time to time; and the expression "Article" and "Section" followed by a number refer to the specified Article or Section of these Terms and Conditions; |
(i) | "Issue Date" means the issue date of the Warrants shown on the face page of this Warrant Certificate; |
(j) | "person" means an individual, corporation, partnership, trustee or any unincorporated organization and words importing persons have a similar meaning; |
(k) | "Warrants" means the share purchase warrants to acquire Common Shares evidenced by this Warrant Certificate; and |
(l) | "Warrant Certificate" means the certificate to which these Terms and Conditions are attached. |
1.2 | Interpretation Not Affected by Headings |
(a) | The division of these Terms and Conditions into Articles and Sections, and the insertion of headings, are for convenience of reference only and shall not affect the construction or interpretation thereof. |
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(b) | Words importing the singular number include the plural and vice versa and words importing the masculine gender include the feminine and neuter genders. |
1.3 | Applicable Law |
The terms hereof and of the Warrants shall be construed in accordance with the laws of the Province of British Columbia and the laws of Canada.
ARTICLE 2
ISSUE OF WARRANTS
2.1 | Issue of Warrants |
That number of Warrants set out on this Warrant Certificate are hereby created and authorized to be issued.
2.2 | Additional Warrants |
Subject to any other written agreement between the Company and the Warrantholder, the Company may at any time and from time to time undertake further equity or debt financing and may issue additional Common Shares, warrants or grant options or similar rights to purchase Common Shares to any person.
2.3 | Issue in Substitution for Lost Warrants |
If this Warrant Certificate becomes mutilated, lost, destroyed or stolen:
(a) | the Company shall issue and deliver a new Warrant Certificate of like date and tenor as the one mutilated, lost, destroyed or stolen, in exchange for and in place of and upon cancellation of such mutilated, lost, destroyed or stolen Warrant Certificate; and |
(b) | the holder shall bear the cost of the issue of a new Warrant Certificate hereunder and in the case of the loss, destruction or theft of the Warrant Certificate, shall furnish to the Company such evidence of loss, destruction, or theft as shall be satisfactory to the Company in its discretion and the Company may also require the holder to furnish indemnity in an amount and form satisfactory to the Company in its discretion, and shall pay the reasonable charges of the Company in connection therewith. |
2.4 | Warrantholder Not a Shareholder |
The Warrants shall not constitute the holder a shareholder of the Company, nor entitle it to any right or interest in respect thereof except as may be expressly provided in this Warrant Certificate.
ARTICLE 3
EXERCISE OF THE WARRANTS
3.1 | Method of Exercise of the Warrants |
The right to purchase Common Shares conferred by this Warrant Certificate may be exercised, prior to the Expiry Time, by the holder surrendering it, with a duly completed and executed exercise form substantially in the form attached hereto as Schedule "B" and cash or a certified cheque payable to or to the order of the Company, at par in Vancouver, B.C. for the Exercise Price applicable at the time of surrender in respect of the Common Shares subscribed for in lawful money of the United States of America, to the Company.
3.2 | Effect of Exercise of the Warrants |
(a) | Upon surrender and payment as aforesaid the Common Shares so subscribed for shall be issued as fully paid and non-assessable shares and the holder shall become the holder of record of such Common Shares on the date of such surrender and payment; and |
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(b) | within three business days after surrender and payment as aforesaid, the Company shall forthwith cause the issuance to the holder a certificate for the Common Shares purchased as aforesaid. |
3.3 | Subscription for Less than Entitlement |
The holder may subscribe for and purchase a number of Common Shares less than the number which it is entitled to purchase pursuant to the surrendered Warrant Certificate. In the event of any purchase of a number of Common Shares less than the number which can be purchased pursuant to this Warrant Certificate, the holder shall be entitled to the return of this Warrant Certificate with a notation on the Grid attached hereto as Schedule "C" showing the balance of the Common Shares which it is entitled to purchase pursuant to this Warrant Certificate which were not then purchased.
3.4 | Expiration of the Warrants |
After the Expiry Time all rights hereunder shall wholly cease and terminate and the Warrants shall be void and of no effect.
3.5 | Hold Periods and Legending of Share Certificate |
If any of the Warrants are exercised prior to ♦ ♦, ♦ , the certificates representing the Common Shares to be issued pursuant to such exercise shall bear the following legends:
“ Unless permitted under securities legislation, the holder of this security must not trade the security before ♦ ♦, ♦.”
“Without prior written approval of the TSX Venture Exchange and compliance with all applicable securities legislation, the securities represented by this certificate may not be sold, transferred, hypothecated or otherwise traded on or through the facilities of the TSX Venture Exchange or otherwise in Canada or to or for the benefit of a Canadian resident until ♦ ♦, ♦.”
If any of the Warrants are exercised, the certificates representing the Common Shares to be issued pursuant to such exercise shall also bear the following legends:
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER THE 1933 ACT ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT AND IN COMPLIANCE WITH LOCAL LAWS AND REGULATIONS, (C) IN ANOTHER TRANSACTION OTHERWISE EXEMPT FROM REGISTRATION UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS AFTER PROVIDING A LEGAL OPINION OF COUNSEL OF RECOGNIZED STANDING TO SUCH EFFECT IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. |
SUBJECT TO APPLICABLE CANADIAN LAW, AND PROVIDED THAT THE COMPANY IS A "FOREIGN ISSUER" WITHIN THE MEANING OF REGULATION S AT THE TIME OF SALE, AND PROVIDED FURTHER THAT THE FOLLOWING PROCEDURE COMPLIES WITH U.S. SECURITIES LAWS AT THE TIME OF SALE, A NEW CERTIFICATE BEARING NO U.S. RESTRICTIVE LEGENDS MAY BE OBTAINED FROM THE COMPANY'S REGISTRAR AND TRANSFER AGENT UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO THE TRANSFER AGENT AND THE |
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COMPANY, TO THE EFFECT THAT SUCH SALE IS BEING MADE IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT.” |
ARTICLE 4
ADJUSTMENTS
4.1 | Adjustments |
The number of Common Shares purchasable upon the exercise of each Warrant and the Exercise Price shall be subject to adjustment as follows:
(a) | in the event the Company shall: |
(i) | pay a dividend in Common Shares or make a distribution in Common Shares; |
(ii) | subdivide its outstanding Common Shares; |
(iii) | combine its outstanding Common Shares into a smaller number of Common Shares; or |
(iv) | issue by reclassification of its Common Shares other securities of the Company (including any such reclassification in connection with a consolidation, merger, amalgamation or other combination in which the Company is the surviving corporation); |
the number of Common Shares (or other securities) purchasable upon exercise of each Warrant immediately prior thereto shall be adjusted so that the Warrantholder shall be entitled to receive the kind and number of Common Shares or other securities of the Company which it would have owned or have been entitled to receive after the happening of any of the events described above, had such Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this subsection (a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. |
(b) | In case the Company shall issue rights, options or warrants to all or substantially all holders of its outstanding Common Shares, without any charge to such holders, entitling them (for a period within 45 days after the record date mentioned below) to subscribe for or purchase Common Shares at a price per share which is lower than 95% of the current market price at the record date mentioned below than the then current market price per Common Share (as determined in accordance with subsection (d) below), the number of Common Shares thereafter purchasable upon the exercise of each Warrant shall be determined by multiplying the number of Common Shares theretofore purchasable upon exercise of each Warrant by a fraction, of which the numerator shall be the number of Common Shares outstanding on the date of issuance of such rights, options or warrants plus the number of additional Common Shares offered for subscription or purchase, and of which the denominator shall be the number of Common Shares outstanding on the date of issuance of such rights, options or warrants plus the number of shares which the aggregate offering price of the total number of Common Shares so offered would purchase at the current market price per Common Share at such record date. Such adjustment shall be made whenever such rights, options or warrants are issued, and shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights, options or warrants. |
(c) | In case the Company shall distribute to all or substantially all holders of its Common Shares evidences of its indebtedness or assets (excluding cash dividends or distributions payable out of consolidated earnings or earned surplus and dividends or distributions referred to in subsection (a) above or in subsection (d) below or rights, options or warrants, or convertible or exchangeable securities containing the right to subscribe for or purchase Common Shares (excluding those referred to in subsection (b) above)), then in each case the number of Common Shares thereafter purchasable upon the exercise of each Warrant shall be determined by multiplying the number of Common Shares theretofore purchasable upon the exercise of each Warrant by a fraction, of which the numerator shall be the then current market price per Common Share (as determined in accordance with subsection (d) below) on the date of such distribution, and of which the denominator shall be the then current market price per Common Share less the then fair value (as |
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determined by the board of directors of the Company, acting reasonably) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights, options or warrants, or of such convertible or exchangeable securities applicable to one Common Share. Such adjustment shall be made whenever any such distribution is made, and shall become effective on the date of distribution retroactive to the record date for the determination of shareholders entitled to receive such distribution. |
In the event of the distribution by the Company to all or substantially all of the holders of its Common Shares of shares of a subsidiary or securities convertible or exercisable for such shares, then in lieu of an adjustment in the number of Common Shares purchasable upon the exercise of each Warrant, the Warrantholder of each Warrant, upon the exercise thereof, shall receive from the Company, such subsidiary or both, as the Company shall reasonably determine, the shares or other securities to which such Warrantholder would have been entitled if such Warrantholder had exercised such Warrant immediately prior thereto, all subject to further adjustment as provided in this section 4.1 provided, however, that no adjustment in respect of dividends or interest on such shares or other securities shall be made during the term of a Warrant or upon the exercise of a Warrant. |
(d) | For the purpose of any computation under subsections (b) and (c) of this section 4.1, the current market price per Common Share at any date shall be the weighted average price per Common Share for 25 consecutive trading days, commencing not more than 45 trading days before such date on the stock exchange on which the Common Shares are then traded; provided if the Common Shares are then traded on more than one stock exchange, then on the stock exchange on which the largest volume of Common Shares were traded during such 25 consecutive trading day period. The weighted average price per Common Share shall be determined by dividing the aggregate sale price of all Common Shares sold on such exchange or market, as the case may be, during the said 25 consecutive trading days by the total number of shares so sold. For purposes of this subsection (d), trading day means, with respect to a stock exchange, a day on which such exchange is open for the transaction of business. Should the Common Shares not be listed on any stock exchange the current market price per Common Share at any date shall be determined by the board of directors of the Company, acting reasonably. |
(e) | In any case in which this Article 4 shall require that any adjustment in the Exercise Price be made effective immediately after a record date for a specified event, the Company may elect to defer until the occurrence of the event the issuance, to the holder of any Warrant exercised after that record date, of the Common Shares and other shares of the Company, if any, issuable upon the exercise of the Warrant over and above the Common Shares and other shares of the Company; provided, however, that the Company shall deliver to the holder an appropriate instrument evidencing the holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. |
(f) | No adjustment in the number of Common Shares purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the number of Common Shares purchasable upon the exercise of each Warrant; provided, however, that any adjustments which by reason of this subsection (f) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations shall be made to the nearest one-hundredth of a share. |
(g) | Wherever the number of Common Shares purchasable upon the exercise of each Warrant is adjusted, as herein provided, the Exercise Price payable upon exercise of each Warrant shall be adjusted by multiplying such Exercise Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of Common Shares purchasable upon the exercise of such Warrant immediately prior to such adjustment, and of which the denominator shall be the number of Common Shares purchasable immediately thereafter. |
(h) | No adjustment in the number of Common Shares purchasable upon the exercise of each Warrant need be made under subsections (b) and (c) if, the Company issues or distributes to the Warrantholder the rights, options, warrants, or convertible or exchangeable securities, or evidences of indebtedness or assets referred to in those subsections which the Warrantholder would have been entitled to receive had the Warrants been exercised prior to the happening of such event or the record date with respect thereto. |
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(i) | In the event that at any time, as a result of an adjustment made pursuant to subsection (a) above, the Warrantholder shall become entitled to purchase any securities of the Company other than Common Shares, thereafter the number of such other shares so purchasable upon exercise of each Warrant and the Exercise Price of such shares shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Shares contained in subsections (a) through (h), inclusive, above, and the provisions of sections 4.2 through 4.4, inclusive, of this Article 4 with respect to the Common Shares, shall apply on like terms to any such other securities. |
(j) | Upon the expiration of any rights, options, warrants or conversion or exchange privileges, if any thereof shall not have been exercised, the Exercise Price and the number of Common Shares purchasable upon the exercise of each Warrant shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) as if: |
(i) | the only Common Shares so issued were the Common Shares, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange rights; and |
(ii) | such Common Shares, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all such rights, options, warrants or conversion or exchange rights whether or not exercised; |
provided further, that no such readjustment shall have the effect of increasing the Exercise Price or decreasing the number of Common Shares purchasable upon the exercise of each Warrant by an amount in excess of the amount of the adjustment initially made with respect to the issuance, sale or grant of such rights, options, warrants or conversion or exchange rights. |
4.2 | Voluntary Adjustment by the Company |
Subject to requisite Exchange acceptance, the Company may, at its option, at any time during the term of the Warrants, reduce the then current Exercise Price to any amount deemed appropriate by the Board of Directors of the Company.
4.3 | Notice of Adjustment |
Whenever the number of Common Shares purchasable upon the exercise of each Warrant or the Exercise Price of such Common Shares is adjusted, as herein provided, the Company shall promptly send to the Warrantholder by first class mail, postage prepaid, notice of such adjustment or adjustments.
4.4 | No Adjustment for Dividends |
Except as provided in section 4.1 of this Article 4, no adjustment in respect of any dividends shall be made during the term of a Warrant or upon the exercise of a Warrant.
4.5 | Preservation of Purchase Rights Upon Merger, Consolidation, etc. |
In connection with any consolidation of the Company with, or amalgamation or merger of the Company with or into, another corporation (including, without limitation, pursuant to a "takeover bid", "tender offer" or other acquisition of all or substantially all of the outstanding Common Shares) or in case of any sale, transfer or lease to another corporation of all or substantially all the property of the Company, the Company or such successor or purchasing corporation, as the case may be, shall execute with the Warrantholder an agreement that the Warrantholder shall have the right thereafter, upon payment of the Exercise Price in effect immediately prior to such action, to purchase upon exercise of each Warrant the kind and amount of shares and other securities and property which it would have owned or have been entitled to receive after the happening of such consolidation, amalgamation, merger, sale, transfer or lease had such Warrant been exercised immediately prior to such action, and the Warrantholder shall be bound to accept such shares and other securities and property in lieu of the Common Shares to which it was previously entitled; provided, however, that no adjustment in respect of dividends, interest or
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other income on or from such shares or other securities and property shall be made during the term of a Warrant or upon the exercise of a Warrant. Any such agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Schedule "A". The provisions of this Article 4 shall similarly apply to successive consolidations, mergers, amalgamation, sales, transfers or leases.
4.6 | Determination of Adjustments |
If any questions shall at any time arise with respect to the Exercise Price, such question shall be conclusively determined, absent manifest error, by the Company's Auditors, or, if they decline to so act, any other firm of Chartered Accountants, in Vancouver, British Columbia, that the Company may designate and the Warrantholder, acting reasonably, may approve, and who shall have access to all appropriate records and such determination shall be binding upon the Company and the holder.
ARTICLE 5
COVENANTS BY THE COMPANY
5.1 | Reservation of Common Shares |
The Company will reserve and there will remain unissued out of its authorized capital a sufficient number of Common Shares to satisfy the rights of acquisition provided for in this Warrant Certificate.
ARTICLE 6
MERGER AND SUCCESSORS
6.1 | Company May Consolidate, etc. on Certain Terms |
Nothing herein contained shall prevent any consolidation, amalgamation or merger of the Company with or into any other corporation or corporations, or a conveyance or transfer of all or substantially all the properties and estates of the Company as an entirety to any corporation lawfully entitled to acquire and operate same, provided, however, that the corporation formed by such consolidation, amalgamation or merger or which acquires by conveyance or transfer all or substantially all the properties and estates of the Company as an entirety shall, simultaneously with such amalgamation, merger, conveyance or transfer, assume the due and punctual performance and observance of all the covenants and conditions hereof to be performed or observed by the Company.
6.2 | Successor Company Substituted |
In case the Company, pursuant to section 6.1 shall be consolidated, amalgamated or merged with or into any other corporation or corporations or shall convey or transfer all or substantially all of its properties and estates as an entirety to any other corporation, the successor corporation formed by such consolidation or amalgamation, or into which the Company shall have been consolidated, amalgamated or merged or which shall have received a conveyance or transfer as aforesaid, shall succeed to and be substituted for the Company hereunder and such changes in phraseology and form (but not in substance) may be made in this Warrant Certificate and herein as may be appropriate in view of such amalgamation, merger or transfer.
ARTICLE 7
AMENDMENTS
7.1 | Amendment, etc. |
This Warrant Certificate may only be amended by a written instrument signed by the parties hereto.
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ARTICLE 8
MISCELLANEOUS
8.1 | Time |
Time is of the essence of the terms of this Warrant Certificate.
8.2 | Notice |
Any notice or other communication to be given in connection with this Warrant Certificate must be in writing and given by personal delivery or by fax or email to the following addresses:
To the Company: |
I-Minerals Inc. |
Suite 880 – 580 Hornby Street |
Vancouver, British Columbia |
Canada V6C 3B6 |
Attention: Barry Girling, Director |
Fax: 604-684-0642 |
Email: wbg@imineralsinc.com |
To the Warrantholder: |
BV Natural Resources, LLC |
Suite 201 – 901 Pier View Drive |
Idaho Falls, Idaho |
U.S.A. 83402 |
Attention: Cortney Liddiard, Chief Executive Officer |
Email: flyfish@ballventures.com |
8.3 | Non-transferability of Warrants |
The Warrants evidenced hereby (or any portion thereof) may not be assigned or transferred by the holder except as permitted under the Securities Act (British Columbia), together with all regulations and rules promulgated thereunder and all administrative policy statements, instruments, blanket orders and rulings, notices and administrative directions issued by the British Columbia Securities Commission and any order granted by the British Columbia Securities Commission. In the event the Warrants evidenced hereby (or any portion thereof) are assignable or transferable as permitted herein, they may be assigned or transferred by the holder duly completing and executing the transfer form attached hereto as Schedule “D”. The rights and obligations of the parties hereunder shall be binding upon and enure to the benefit of their successors and permitted assigns.
SCHEDULE "B"
EXERCISE FORM
TO: I-Minerals Inc.
Terms which are not otherwise defined herein shall have the meanings ascribed to such terms in the Warrant Certificate held by the undersigned and issued by I-Minerals Inc. (the "Company").
The undersigned hereby exercises the right to acquire __________ Common Shares of the Company in accordance with and subject to the provisions of such Warrant Certificate and herewith makes payment of the purchase price in full for the said number of Common Shares.
The Common Shares are to be issued as follows:
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Note: If further nominees are intended, please attach (and initial) a schedule giving these particulars.
DATED this _____ day of _______________, 201____.
Signature Guaranteed |
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(Signature of Warrantholder) |
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Instructions :
1. | The registered holder may exercise its right to receive Common Shares by completing this form and surrendering this form and the Warrant Certificate representing the Warrants being exercised to the Company. |
2. | If the Exercise Form indicates that Common Shares are to be issued to a person or persons other than the registered holder of the Warrant Certificate, the signature of such holder of the Exercise Form must be guaranteed by an authorized officer of a chartered bank, trust company or an investment dealer who is a member of a recognized stock exchange. |
3. | If the Exercise Form is signed by a trustee, exercise, administrator, curator, guardian, attorney, officer of a corporation or any person acting in a judiciary or representative capacity, the certificate must be accompanied by evidence of authority to sign satisfactory to the Company. |
SCHEDULE "C"
WARRANT EXERCISE GRID
Common Shares Issued |
Common Shares Available |
Initials of Authorized Officer |
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SCHEDULE "D"
TRANSFER FORM
FOR VALUE RECEIVED the
undersigned hereby sells, assigns and transfers unto
(Please
print or typewrite name and address of assignee)
Warrant(s) represented by the within certificate, and do(es) hereby irrevocably constitute and appoint
the attorney of the undersigned to transfer the said Warrants maintained by the transfer agent of the Company with full power of substitution hereunder.
DATED this day of , .
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The signature of the Holder to this assignment must correspond exactly with the name of the Holder as set forth on the face of this Warrant certificate in every particular, without alteration or enlargement or any change whatsoever and the signature must be guaranteed by a Canadian chartered bank or by a Canadian trust company or by a medallion signature guarantee from a member of a recognized Signature Medallion Guarantee Program.
DATED: June 1, 2016
Among:
I-Minerals Inc.
OF THE FIRST PART
And:
i-minerals USA Inc.
OF THE SECOND PART
And:
BV Lending, LLC
OF THE THIRD PART
LOAN AGREEMENT
Tupper Jonsson & Yeadon
1710 - 1177 West Hastings Street
Vancouver, B. C.
V6E 2L3
Telephone: (604) 640-6355 |