Hey everyone,
Yes I'm still lurking, and still a 'big' shareholder (more shares than some of people on our BOD). My own company now keeps me extraordinarily busy. Thanks to a Nova Scotia snow day I've finally had time to read the PEA, the latest MD&A and latest finances in advance of the AGM.
First things I've noticed:
1. November 28, 2014 MD&A states:
- "The professional fees decreased by $75,588 in the in reason of the termination of the payment to the officers of the Corporation since July 1, 2014."
- "During the three-month period ended September 30, 2014, the Corporation
reduced its operating expenses to the minimum." - Important See Point #3 & 4 below why they suddenly stopped taking funds from the company
2. Latest SEDI reports show:
- All Options have expired for: Billings, Levesque, Poulin
- Levesque Warrants' reduced from 3,450,000 to 0
- Levesque then Gets 200,000 Warrants on Aug 29, 2014 (See Point #4 below)
- Michael Faucher owns 30,000 shares Faucher gets 160,000 Warrants on Aug 29, 2014 (See Point #4 below)
- Goddard's Options reduced to 300,000
- Poulin kept buying shares on the open market up to August 8 and now holds 1,818,000
- William Felderhoff owns 320,000 shares
- David Felderhoff owns 100,000 shares
- Note: I wonder if Mr. Faucher is somehow related to Guy Faucher who was formerly an insider
3. Financial Statements:
- As of June 30, 2014 (Annual Statements) the company had only $150,884 cash on hand while carefully stating another $140,000 was held in trust for the private placement.
- All of the warrants had finally expired as at June 30, 2014. (Note: 200,000 were issued to Levesque later in the year)
- The outstanding Options under Stock Option Plan have reduced from 4.85m to 2.8m due to expiry
- This means we finally have a significant amount of dilution potential eliminated from the company (but not all, see point #4 below)
- As of 30 Sep 2014 the company had reduced monthly cash burn rate to $78k/quarter
4. "Failed" Private Placement
- The press release of August 29, 2014 states the company raised $185,000 in the form of a debenture
- A debenture is a type of loan (while explicitly stated its a debenture, many people don't realize its a "loan")
- The loan interest rate is 10% per year and has a 5 year maturity (See Note 17 to Annual financial Statements, and Note 14 of the Interim Financial Statements of 28 Nov 2014)
- For every $1,000 loaned to the company, the lender received warrants for 8,000 common shares at a price of $0.05/share
- Levesque received 200,000 warrants on August 29, 2014 according to SEDI
- I deduce he therefore lent the company $25,000
- I imply he will therefore earn $2,500/year in interest
- Over five years he gets: $12,500 cash (& 200,000 shares @ 0.05 if we ever trade that high)
- Faucher received 160,000 warrants on August 29, 2014 according to SEDI
- I deduce he therefore lent the company $20,000
- I imply he will therefore earn $2,000/year in interest
- Over 5 years he gets $10,000 and 160,000 shares @ 0.05
- So $45,000 of the $185,000 was financed by insiders.
- Who put up the initial $140,000? Conveniently we don't know who now owns the other 1,120,000 outstanding Warrants -- they weren't an insider.
5. PEA
- We have a good PEA - the project is economical even with the recent decline of CAD to USD, and gold at $1200.
- However, the cost to start up is a staggering $23.7m
My Conclusions:
- Couldn't raise $500,000, CEO's term not renewed as a result
- Slashed expenses, $290k cash in the bank is only enough for the next 3 quarters.
- This company is on life support
I have no idea what they are going to do now but the coming AGM is critical.