PLAN corporate memory - 2 One of the 6 business segments I identified in the enterprise valuation model is the Investment in Private Companies. This segment traces it history from within the original Progressive Planet operations (prior to the APL purchase in 2022). In the current financial statements it lists only the investment in ZS2 Technologies which I will address in a moment. If you dig back to the April 30, 2021 financial statements you will see a second "Private Company" listed: this being Snow Lake Resources Limited.
The history of the Snow Lake Resources shares is traced back to the prior Exploration Property identified as the Thompson Bros Lithium Project. As at April 30, 2019 the Company had recorded its investment in this property at $255,388. In 2020, after cancelling shares previously issued and recorded as a cost of exploration of this property ($120,000) the carrying value of the Thompson property was reduced to $135,388.
Prior to April 30, 2020 the Company entered into a transaction to sell the Thompson Property and received in return 10,500,000 shares of Snow Lake Resources ("SLR"). The shares acquired were valued at the carrying cost of the Thompson Property that was exchanged for the shares ($135,388) or $0.0128936 per share.
During fiscal 2021, the Company sold 2,950,000 shares of SLR at a selling price of $0.04 per share as follows:
Cost of 2,950,000 SLR common shares $38,036
Proceeds of disposition $118,000
Realized gain on sale $79,964
The Company also agreed to 2 options to sell a total of an additional 7,050,000 SRL shares also at $0.04 per share, which was recorded at April 30, 2021 as an unrealized gain on all the remaining 7,550,000 shares of $204,650. The options were exercised in Q1 2022, leaving PLAN holding just 500,000 shares at an adjusted fair value of $20,000 or $0.04 cents per share.
On November 8, 2021 the Company sold the remaining 500,000 SLR shares (having been consolidated to 100,000 new SLR shares on a 1 for 5 consolidation) for a total price of $466,838 and a realized gain of $446,838. This calculates as a selling price of $0.933676 per old SLR share.
This final sales transaction suggests a staggering appreciation in value of the SLR shares over a very short period of time as shown below:
April 30, 2020 Original cost $0.0128936 per share
April 30, 2021 Adjusted fair value $0.0400000 per share
November 8, 2021 Final selling value $0.933676 per share
Had the 10,500,000 SLR shares acquired at April 30, 2020 been held and sold on November 8, 2021, 20 months later, they would have generated proceeds of disposition of $9,803,598 based on the final selling price realized. Instead, PLAN management agreed to sell the shares in 3 separate transactions for a total of only $886,878 or just under $9 million less than the implied actual fair value of this asset.
While I can understand the difference between the original incurred cost calculation of $0.0128936 per share and the fair value assessment of $0.04 shares shortly thereafter, I have trouble understanding what changed in the 8 months from April to November 2021 that saw the shares increase in value from $0.04 to $0.922676 per share. That is a 2,234% increase.
The question for the Corporate memory file is why did PLAN management agree to sell something worth $9,803,598 on November 8, 2021 for only $886,878? Why did shareholders not accrue the full value of the original Thompson Brothers Lithium Property investment when it was determined it was no longer an asset the Company wished to develop?
Based on this analysis of the transactions and numbers disclosed in the audit financial statements, it would not be surprising if investors might have some doubts regarding the Company's proven history in maximizing shareholder value from investing in "Private Companies".