Note: | | | (1) | Under IFRS applicable to junior mining exploration companies, mineral exploration expenditures can be deferred on prospective properties until such time as it is determined that further exploration is not warranted, at which time the property costs are written off. During the year ended March 31, 2009, the Company retrospectively changed its accounting policy for exploration expenditures to more appropriately align itself with policies adopted by other exploration companies at a similar stage in the mining industry. Prior to the year ended March 31, 2009, the Company capitalized all such costs to mineral property interests held directly or through an investment, and only wrote down capitalized costs when the property was abandoned or if the capitalized costs were not considered to be economically recoverable. |
Exploration expenditures are now charged to earnings as they are incurred until the mineral property interest reaches the development stage. Significant costs related to mineral property acquisitions, including allocations for undeveloped mineral property interests, are capitalized until the viability of the mineral property interest is determined. When it has been established that a mineral deposit is commercially mineable and an economic analysis has been completed, the costs subsequently incurred to develop a mine on the property prior to the start of mining operations are capitalized.
The expensing of exploration costs as incurred is now consistent with US GAAP, whereby all exploration expenditures are expensed until an independent feasibility study has determined that the property is capable of economic commercial production.
| | 7 | Exploration expenditures are now charged to earnings as they are incurred until the mineral property interest reaches the development stage. Significant costs related to mineral property acquisitions, including allocations for undeveloped mineral property interests, are capitalized until the viability of the mineral property interest is determined. When it has been established that a mineral deposit is commercially mineable and an economic analysis has been completed, the costs subsequently incurred to develop a mine on the property prior to the start of mining operations are capitalized. |
| | | The expensing of exploration costs as incurred is now consistent with US GAAP, whereby all exploration expenditures are expensed until an independent feasibility study has determined that the property is capable of economic commercial production. |
7
The tables below include the quarterly results for the years ended March 31, 2016 (“fiscal 2016”)2018 and 2015 (“fiscal 2015”).2017. | | | | | | | | | | | | | | | | (Cdn$) | | Year Ended March 31, 2018 | | | | | Statement of Operations Data | | Quarter 1 | Quarter 2 | | | Quarter 3 | | | Quarter 4 | | | Total | | Investment and other income | $ | - | | $ | 31 | | $ | - | | $ | - | | $ | 31 | | General and administrative expenses | | 31,408 | | | 54,402 | | | 31,715 | | | 146,098 | | | 263,623 | | Share-based payments | | - | | | 44,193 | | | - | | | - | | | 44,193 | | Write-down of mineral property interests | | - | | | - | | | - | | | 513,600 | | | 513,600 | | Exploration costs | | 1,128 | | | 6,910 | | | - | | | 32,929 | | | 40,967 | | Loss (gain) on sale of discontinued operations | | - | | | - | | | - | | | - | | | - | | Net loss (income) according to financial statements | | 32,536 | | | 105,474 | | | 31,715 | | | 692,627 | | | 862,352 | | Net loss from continuing operations per common share | | 0.00 | | | 0.02 | | | 0.00 | | | 0.07 | | | 0.09 | | | | | | | | | | | | | (Cdn$) | | Year Ended March 31, 2017 | | | | | Statement of Operations Data | | Quarter 1 | Quarter 2 | | | Quarter 3 | | | Quarter 4 | | | Total | | Investment and other income | $ | - | | $ | - | | $ | - | | $ | - | | $ | - | | General and administrative expenses | | 37,024 | | | 47,488 | | | 85,234 | | | 48,551 | | | 218,297 | | Share-based payments | | - | | | 131,412 | | | - | | | - | | | 131,412 | | Write-down of mineral property interests | | - | | | - | | | - | | | - | | | - | | Exploration costs | | 260 | | | - | | | - | | | 6,892 | | | 7,152 | | Loss (gain) on sale of discontinued operations | | - | | | - | | | - | | | - | | | - | | Net loss (income) according to financial statements | | 37,284 | | | 178,900 | | | 85,234 | | | 55,443 | | | 356,861 | | Net loss from continuing operations per common share | | 0.00 | | | 0.03 | | | 0.01 | | | 0.01 | | | 0.05 | |
(Cdn$) | Year Ended March 31, 2016 | | | Statement of Operations Data | Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | Total | Investment and other income | $ (129,121) | $ (707) | $ -- | $ -- | $ (129,828) | General and administrative expenses | 72,420 | 46,449 | 67,409 | 36,027 | 222,305 | Share-based payments | 21,006 | -- | -- | -- | 21,006 | Write-down of mineral property interests | -- | -- | -- | -- | -- | Exploration costs | (3,777) | 760 | -- | 1,127 | (1,890) | Loss (gain) on sale of discontinued operations | -- | -- | -- | -- | -- | Net loss (income) according to financial statements | (39,472) | 46,502 | 67,409 | 37,154 | 111,593 | Net loss from continuing operations per common share | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | | | | | | | | | |
| | B. | Capitalization and Indebtedness |
(Cdn$) | Year Ended March 31, 2015 | | | Statement of Operations Data | Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | Total | Investment and other income | $ -- | $ -- | $ -- | $ -- | $ -- | General and administrative expenses | 95,672 | 93,644 | 156,335 | 59,471 | 405,122 | Share-based payments | -- | -- | -- | -- | -- | Write-down of mineral property interests | -- | -- | -- | -- | -- | Exploration costs | 3,161 | 5,062 | (7,885) | 1,127 | 1,465 | Loss (gain) on sale of discontinued operations | 116,257 | 104,560 | 54,961 | (684,023) | (408,245) | Net loss (income) according to financial statements | 215,090 | 203,266 | 203,411 | (623,425) | (1,658) | Net loss (income) from continuing operations per common share | 0.01 | 0.01 | 0.00 | (0.02) | 0.00 | | | | | | | | | |
B. CapitalizationThis Form 20-F is being filed as an annual report under the Securities Exchange Act of 1934, and Indebtednessas such, there is no requirement to provide any information under this item.
Not applicable.
C.
| | C. | Reasons for the Offer and Use of Proceeds |
This Form 20-F is being filed as an annual report under the OfferSecurities Exchange Act of 1934, and Use of Proceedsas such, there is no requirement to provide any information under this item. Not applicable.
D. Risk Factors
The following is a brief discussion of those distinctive or special characteristics of Agave’sthe Company’s operations and industry which may have a material impact on Agave’sFirst Energy’s financial performance. Readers should carefully consider the risks and uncertainties described below before deciding whether to invest in shares of the Company’s common stock. 8
Financial Risk Factors AgaveFirst Energy has no source of operating cash flow, has a history of operating losses and has no assets of any significance with positive financial statement carrying values.In addition, all of the Company’s projects have a financial statement value of zero. AgaveThe Company has no revenues from operations and all of its mineral property interests are in the exploration stage. The Company will not receive revenues from operations at any time in the near future, and Agavethe Company has no prior years’ history of earnings or cash flow. AgaveThe Company has not paid dividends on its shares at any time since incorporation and does not anticipate doing so in the foreseeable future. Agave’s consolidatedThe Company’s financial statements have been prepared assuming Agaveit will continue on a going-concern basis. Should funding not be obtained, this assumption will change and Agave’sthe Company’s assets may be written down to realizable values. AgaveThe Company has incurred losses since inception (deficit at March 31, 2016,2018, is $34,302,758)$35,521,971), which casts doubt on the ability of Agavethe Company to continue as a going concern. AgaveThe Company has no revenue other than interest income. A mining project can typically require ten years or more between discovery, definition, development and construction and as a result, no production revenue is expected from any of the Company’s exploration properties in the near future. All of Agave’sthe Company’s short to medium-term operating and exploration expenses must be paid from its existing cash position or external financing. At March 31, 2016, Agave2018, the Company had working capital deficit of $237,139$136,728, compared to a working capital deficit of $355,003$31,069 at March 31, 2015.2017. Working capital is defined as current assets less current liabilities.
AgaveFirst Energy may be unable to obtain the funds necessary to expand exploration. Agave’sThe Company’s operations consist, almost exclusively, of cash consuming activities given that all of its mineral projects are in the early exploration stage. Agave has suspended exploration activities on all of its mineral properties. AgaveThe Company will need to receive additional equity capital or other funding from the joint venture of one or more properties or the sale of one or more properties for the next year, and failing that, may cease to be economically viable. To date, the only sources of funds that have been available to the Company are the sale of equity capital or the offering by the Company of an interest in its properties to be earned by another party or parties carrying out further development thereof.
The Company does not have sufficient financial resources to fund operations for the balance of fiscal 2017.2018. The Company has been successful in the past in obtaining financing through the sale of equity securities but as an exploration stage company, it is often difficult to obtain adequate financing when required, and it is not necessarily the case that the terms of such financings will be favourable. If Agavethe Company fails to obtain additional financing on a timely basis, the Company could forfeit its mineral property interests, dilute its interests in its properties, sell one or more properties and/or reduce or terminate operations. AgaveThe Company is continuously reviewing strategies for private placement equity financings as well as other forms of financing that would carry the Company through the next fiscal year. If a private equity financing were to be completed, it is expected that warrants may be included in the securities offered. Any such financings will result in dilution of existing shareholders.
Volatile gold and silvermetal prices and external market conditions can cause significant changes in the Company’s share price because as the prices of precious metals increase or decrease, the economic viability of the mineral properties is affected.Agave The Company has no history of mining or current source of revenue. The Company is exploring for silver and gold,metals and historically, the prices of the common shares of junior silver and gold exploration companies are very volatile. This volatility may be partly attributed to the volatility of silver and goldmetal prices, and also to the success or failure of the Company’s exploration programs. Market, financial and economic factors not directly related to mining activities can also affect the Company’s ability to raise equity financing. Below are the annual average, high and low prices of gold and silver from the year 2005 to 2015, and year 2016 to date.
Gold[1]
Year | Average Price per ounce (US$) | High Price per ounce (US$) | Low Price per ounce (US$) | 2005 | 444.74 | 536.50 | 411.10 | 2006 | 603.46 | 725.00 | 524.75 | 2007 | 695.39 | 841.10 | 608.40 | 2008 | 871.96 | 1011.25 | 712.50 | 2009 | 972.35 | 1212.50 | 810.00 | 2010 | 1224.53 | 1421.00 | 1058.00 | 2011 | 1,568.59 | 1,895.00 | 1,319.00 | 2012 | 1,668.98 | 1,791.75 | 1,540.00 | 2013 | 1,411.23 | 1,693.75 | 1,195.25 | 2014 | 1,266.40 | 1,385.00 | 1,142.00 | 2015 | 1,160.06 | 1,295.75 | 1,049.40 | 2016 – (Jan – July 5, 2016) | 1,226.46 | 1,366.25 | 1,077.00 |
Silver[2]
Year | Average Price per ounce (US$) | High Price per ounce (US$) | Low Price per ounce (US$) | 2005 | 7.22 | 9.23 | 6.39 | 2006 | 11.57 | 14.94 | 8.83 | 2007 | 13.39 | 15.82 | 11.67 | 2008 | 15.02 | 20.92 | 8.88 | 2009 | 14.66 | 19.18 | 10.51 | 2010 | 20.16 | 30.70 | 15.14 | 2011 | 35.11 | 48.70 | 26.16 | 2012 | 31.15 | 37.23 | 26.67 | 2013 | 23.84 | 32.23 | 18.61 | 2014 | 19.08 | 22.05 | 15.28 | 2015 | 15.68 | 18.23 | 13.71 | 2016 (Jan-July 5, 2016) | 15.98 | 20.43 | 14.06 |
Fluctuations in financial markets can negatively impact the Company’s ability to achieve sufficient funding. Over the last decade there have been periods of significant volatility in world financial markets. The volatility can negatively impact the company’sCompany’s ability to raise sufficient equity financing to sustain operations. Future financial market volatility is likely and it should not be assumed that adequate funding will be available to the Company in amounts or at times when it is required. Risks Associated with Mineral Exploration Agave’sFirst Energy’s exploration efforts may be unsuccessful in locating viable mineral resources.Resource exploration is a speculative business, characterized by a number of significant risks, including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but also from finding mineral deposits, which, though present, are insufficient in quantity and/or quality to return a profit from production.
9
There is no certainty that expenditures to be made by the Company on the exploration of its properties and prospects as described herein will result in discoveries of mineralized material in commercial quality and quantities. Mineral Resource Estimates Are Only Estimates and May Not Reflect the Actual Deposits or the Economic Viability of Gold and Silver Extraction.Although the Company has carefully preparedprepares its mineral resource figures, such figures are estimates only and no assurance can be given that the indicated tonnages and grade will be achieved. There is significant uncertainty in any mineral resource estimate. Estimates of inferred resources are the least certain of the resource categories and there is no assurance that such resources can or will be upgraded to another category of resource, or that further exploration will confirm or validate such estimates. Actual deposits encountered and the economic viability of, and returns from, a deposit (if mined) may differ materially from estimates disclosed by the Company or implied by estimates of mineral resources. The estimating of mineral resources is a subjective process and the accuracy of mineral resource estimates is a function of the quantity and quality of available data, the accuracy of statistical computations, and the assumptions used and judgments made in interpreting engineering and geological information. Mineral resource estimates are based on many things, including assumed commodity prices, continuity of mineralization, tonnage and grade of mineralization, metallurgy, estimated mineral recovery rates, cost of capital, mine development costs, operating costs and exchange rates. Changes in assumptions may result in a significant reduction in the reported mineral resources and thereby have a material adverse effect on the Company's results of operations and financial condition.
1 www.kitco.com Gold prices, London Fix US dollars per ounce
2www.silverinstitute.org/priceuk.php Silver prices, London Fix US dollars per ounce
Estimated mineral resources may also require downward revisions based on changes in metal prices and further exploration or development activity. This could materially and adversely affect estimates of the tonnage or grade of mineralization, estimated recovery rates or other important factors that influence mineral resource and reserve of estimates. Any reduction in estimated mineral reserves or estimated resources as a result could require material write downs in investment in the affected mining property, which could have a material and adverse effect on the Company's results of operations and financial condition. The Company has not established the presence of any proven and probable reserves at any of its mineral properties. There can be no assurance that subsequent testing or future studies will establish proven and probable reserves on the Company's properties. The failure to establish proven and probable reserves could severely restrict the Company's ability to successfully implement its strategies for long-term growth. There is Uncertainty Relating to Mineral Resources.Mineral resources that are not mineral reserves do not have demonstrated economic viability. Due to the uncertainty, which may attach to inferred mineral resources, there is no assurance that inferred mineral resources will be upgraded to indicated and measured mineral resources as a result of continued exploration. If mineral resources are not upgraded to proven and probable mineral reserves, it could materially and adversely affect and/or restrict the Company's ability to successfully implement its strategies for long-term growth. Agave’s projects have uncertain project realization values.Agave changed its accounting policy with respect to the deferral (capitalization) of exploration costs in fiscal 2009. The Company continues to defer (capitalize) acquisition costs incurred in connection with its projects on its balance sheet. Agave has written down all its properties to Nil. Although the current financial statement carrying value of each Company’s projects is zero, in the future the Company may have projects with positive financial statement carrying values. In such cases a diminution in the book value of shareholders’ equity would be the result.
AgaveFirst Energy may not be able to market minerals if any are acquired or discovered by the Company due to factors beyond the control of the Company.The marketability of minerals that could in the future be acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government regulation, including regulation relating to royalties, allowable production, importing and exporting of minerals and environmental protection, the combination of which factors may result in the Company not receiving an adequate return on investment capital.
Environmental and Regulatory Risk Factors Compliance with environmental regulations could affect future profitability and timeliness of operations.The current and anticipated future operations of the Company require permits from various federal, territorial and local governmental authorities. Companies engaged in the exploration and development of mines and related facilities must comply with applicable laws, regulations and permits. The Company’s exploration activities are subject to various laws governing land use, the protection of the environment, prospecting, development, commodity prices, exports, taxes, labour standards, occupational safety and health, waste disposal, toxic substances, mine safety and other matters. AgaveThe Company believes it is in substantial compliance with all material laws and regulations which currently apply to its activities. The Company may be unable to obtain all permits required for exploration and development, and the costs of obtaining these permits may not be commercially reasonable. Existing laws and regulations may be modified, which could have an adverse effect on any exploration project that the Company might undertake. 10
Failure to comply with environmental and reclamation rules could result in penalties.The Company’s activities are subject to laws and regulations controlling not only mineral exploration and exploitation activities but also the possible effects of such activities upon the environment. Environmental legislation may change and make mining uneconomic or result in significant environmental or reclamation costs. Environmental legislation provides for restrictions and prohibitions and a breach of environmental legislation may result in the imposition of fines and penalties or the suspension or closure of operations. In addition, certain types of operations require the submission of environmental impact statements and approval thereof by government authorities. Environmental legislation is evolving in a manner that may mean stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their directors, officers and employees. Permits from a variety of regulatory authorities are required for many aspects of mineral exploitation activities, including closure and reclamation. Future environmental legislation could cause additional expense, capital expenditures, restrictions, liabilities and delays in the development of the Company’s properties, the extent of which cannot be predicted. In the context of environmental permits, including the approval of closure and reclamation plans, the Company must comply with standards and laws and regulations that may entail costs and delays, depending on the nature of the activity to be permitted and how stringently the regulations are implemented by the permitting authority. The Company does not maintain environmental liability insurance. Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. The Company and its employees havehas been involved in the exploration of mineral properties for many years. Currently, the operations of the Company have been limited to exploration, and no mining activity has yet been undertaken. The mining industry is heavily regulated in North America, where the Company has its operations, so that permitting is required before any work is undertaken where there is any form of land disturbance. Exploration activity undertaken in Mexico is subject to the laws and regulations established and administered by the Federal government. To date, land disturbance has been minimal and all required reclamation has been completed. Other Risk Factors AgaveFirst Energy is dependent on its ability to recruit and retain key personnel.The success of the activities of Agavethe Company is dependent to a significant extent on the efforts and abilities of its management. Investors must be willing to rely to a significant extent on their discretion and judgment. Agave does not maintain key employee insurance for any of its employees. AgaveThe Company has relied on and will continue to rely on consultants and others for exploration, development and technical expertise. The ability of the Company to retain employeeskey personnel and its ability to continue to pay for services are dependent upon the ability of the Company to obtain adequate financing to continue operating as a going concern.
Agave’sFirst Energy’s title to mineral property interests may be challenged.Although Agavethe Company has done a review of titles to its mineral interests, it has not obtained title insurance with respect to its properties and there is no guarantee of title. The Company has obtained a land title review and legal opinion by a Mexican law firm which affirmed Agave’s title to Nuevo Milenio. However, theCompany’s mineral properties may be subject to prior unregistered agreements or transfers or native land claims, and title may be affected by undetected defects. Agave’sThe Company’s Canadian mineral property interests consist of mineral claims, which have not been surveyed, and therefore the precise area and location of such claims or rights may be in doubt. As there are unresolved native land claim issues in British Columbia, the Company’s properties and prospects in this jurisdiction may be affected in the future. The Company’s mineral properties in British Columbia are early stage exploration and have no known mineral resources or reserves.
Agave’sFirst Energy’s directors and officers serve as directors andand/or officers of other publicly traded junior resource companies.Some of the directors and officers of Agavethe Company serve as officers and/or directors of other resource exploration companies and are engaged and will continue to be engaged in the search for additional resource opportunities on their own behalf and on behalf of other companies, and situations may arise where these directors and officers will be in direct competition with Agave.the Company. Such potential conflicts, if any, will be dealt with in accordance with the relevant provisions of British Columbia corporate and common law. In order to avoid the possible conflict of interest which may arise between the directors’ and officers’ duties to Agavethe Company and their duties to the other companies on whose boards they serve, the directors and officers of Agavethe Company expect that participation in exploration prospects offered to the directors or officers will be allocated among or between the various companies that they serve on the basis of prudent business judgement and the relative financial abilities and needs of the companies.
AgaveFirst Energy may not be able to insure certain risks which could negatively impact the Company’s operating results.In the course of exploration, development and production of mineral properties, certain risks, and in particular unanticipated geological and operating conditions as well as fires, explosions, flooding, earthquakes,
11
power outages, labour disruptions, and the inability to obtain suitable or adequate machinery, equipment or labour may occur. It is not always possible to fully insure against such risks and the Company may decide not to take out insurance against such risks as a result of high premiums or other reasons. Should such liabilities arise, they could reduce or eliminate any future profitability and result in increasing costs and a decline in the value of the securities of the Company. U.S. investors may not be able to enforce their civil liabilities against the Company or its directors, controlling persons and officers. It may be difficult for U.S. investors to bring and enforce suits against the Company. The Company is a corporation incorporated in British Columbia under the Business Corporations Act (British Columbia) and, consequently, there is a risk that Canadian courts may not enforce judgements of U.S. courts or enforce, in an original action, liabilities directly predicated upon the U.S. federal securities laws. The Company’s directors and officers are residents of Canada or other countries other than the United States and all of the Company’s assets are located outside of the United States. Consequently, it may be difficult for United States investors to affect service of process upon those directors or officers who are not residents of the United States, or to realize in the United States upon judgements of United States courts predicated upon civil liabilities under United States securities laws. It is unlikely that an original action could be brought successfully in Canada against any of such persons or the Company predicated solely upon such civil liabilities under U.S. securities laws. Agave has been operating in Mexico, which has different risks than those of British Columbia, or Manitoba, Canada. Agave’s activities in Mexico may be subject not only to risks common to operations in the mining industry, but also to the political and economic uncertainties of operating in foreign jurisdictions, namely Mexico. This may result in misinterpretation of laws, unilateral modification of mining or exploration rights, operating restrictions, increased taxes or environmental regulation, any or all of which could have an adverse impact upon Agave. Agave’s operations may also be affected to varying degrees by political and economic instability, terrorism, crime, extreme fluctuations in currency exchange rates and inflation. Agave’s operations and exploration activities in Mexico are subject to Mexican federal and state laws and regulations governing protection of the environment. These laws are evolving and, as a general matter, are becoming more restrictive.
Mineral exploration and mining activities may be affected in varying degrees by political stability and government regulations relating to the mining industry and foreign investors. Any changes in regulations or shifts in political conditions are beyond the control of the Company and may adversely affect its business. Operations may be affected in varying degrees by government regulations, policies or directives with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, and repatriation of income, royalties, environmental legislation and mine safety.
Risks Relating to an Investment in the Securities of the Company AgaveFirst Energy could be deemed a Passive Foreign Investment Company which could have negative consequences for U.S. Holders. Holders.Potential investors who are U.S. Holders (defined below) should be aware that Agavethe Company expects to be a passive foreign investment company (“PFIC”) for the current fiscal year, may have been a PFIC in prior fiscal years and may continue to be a PFIC in subsequent years. If Agavethe Company were to be treated as a PFIC, U.S. Holders of the AgaveCompany’s common shares would be subject to adverse U.S. federal income tax consequences, including a substantially increased U.S. income tax liability and an interest charge upon the sale or disposition of the AgaveCompany’s common shares and upon the receipt of distributions on the AgaveCompany’s common shares to the extent such distributions are treated as “excess distributions” under the U.S. federal income tax rules relating to PFICs. U.S. Holders could potentially mitigate such consequences by making certain elections with respect to the AgaveCompany’s common shares. U.S. Holders are urged to consult their tax advisors regarding Agave’sthe Company’s PFIC classification, the consequences to them if Agavethe Company is a PFIC, and the availability and the consequences of making certain elections to mitigate such consequences. (See Item 10 Taxation -United States Tax Consequences).
Agave’sFirst Energy’s stock price may limit its ability to raise additional capital by issuing common shares.The low price of Agave’sthe Company’s common shares also limits Agave’sthe Company’s ability to raise additional capital by issuing additional shares. There are several reasons for this effect. First, the internal policies of certain institutional investors prohibit the purchase of low-priced stocks. Second, many brokerage houses do not permit low-priced stocks to be used as collateral for margin accounts or to be purchased on margin. Third, some brokerage house policies and practices tend to discourage individual brokers from dealing in low-priced stocks. Finally, broker’s commissions on low-priced stocks usually represent a higher percentage of the stock price than commissions on higher priced stocks. As a result, Agave’sthe Company’s shareholders pay transaction costs that are a higher percentage of their total share value than if Agave’sthe Company’s share price were substantially higher.
The liquidity of Agave’sFirst Energy’s shares in the United States markets may be limited or more difficult to effectuate because AgaveFirst Energy is a “Penny Stock” issuer. Agave’sThe Company’s stock is subject to U.S. “Penny Stock” rules which make the stock more difficult for U.S. shareholders to trade on the open market. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in “penny” stocks. Penny stocks are equity securities with a price of less than US$5.00 per share, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system provided that current prices and volume information with respect to transactions in such securities is provided by the exchange or system. The Penny Stock Rules require a broker-dealer, prior to effecting a transaction in a penny stock not otherwise exempt from such rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. In addition, the Penny Stock Rules require that prior to a transaction in a penny stock not otherwise exempt from such rules the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. At the present market prices, Agave’sthe Company’s common shares will (and in the foreseeable future are 12
expected to continue to) fall within the definition of a penny stock. Accordingly, United States broker-dealers trading in Agave’sFirst Energy’s shares will be subject to the Penny Stock Rules. Rather than complying with those rules, some broker-dealers may refuse to attempt to sell penny stocks. As a result, shareholders and their broker-dealers in the United States may find it more difficult to sell their shares of Agave,the Company, if a market for the shares should develop in the United States. The market for the Company’s stock has been subject to volume and price volatility which could negatively affect a shareholder’s ability to buy or sell the Company’s shares.The market for the common shares of the Company may be highly volatile for reasons both related to the performance of the Company or events pertaining to the industry (e.g. mineral price fluctuation/high production costs/accidents) as well as factors unrelated to the Company or its industry. Market demand for products incorporating minerals in their manufacture fluctuates over time, resulting in a change of demand for the mineral and an attendant change in the price for the mineral. The Company’s common shares can be expected to be subject to volatility in both price and volume arising from market expectations, announcements and press releases regarding the Company’s business, and changes in estimates and evaluations by securities analysts or other events or factors. In the last decade, securities markets in the United States and Canada and internationally have experienced periods of high price and volume volatility, and the market prices of securities of many companies, particularly small-capitalization companies such as the Company, have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values, or prospects of such companies. For these reasons, the Company’s common shares can also be expected to be subject to volatility resulting from purely market forces over which the Company will have no control. Further, despite the existence of a market for trading the Company’s common shares in Canada, shareholders of the Company may be unable to sell significant quantities of common shares in the public trading markets without a significant reduction in the price of the stock. The trading price of Agave’s shares has ranged between $0.05 and $4.80 in the last five calendar years. Significant potential equity dilution. A summary of Agave’s diluted share capital at June XX, 2016 is as follows:
Number of Warrants | Exercise Price | Expiry Date | | | | 5,000,000 | $0.10 | June 16, 2017 | 5,000,000 | | |
Agave had stock options outstanding (1,490,000 at March 31, 2016 and 1,450,000 at July 5, 2016), which are exercisable at prices ranging from $0.07 to $1.60 per share (retroactively adjusted to reflect share consolidation effective October 3, 2013) as at March 31, 2016 and $0.07 as at July 5, 2016. In the money options could be exercised prior to expiry while the higher priced options may not be exercised before expiry. In either case, the outstanding options could act as an upside damper on the price of Agave’s shares. There are no shares of Agave remaining subject to hold period restrictions in Canada or the United States as of March 31, 2016 or as at July 5, 2016, as such hold restrictions have expired. At March 31, 2016 and at July 5, 2016 there were 5,000,000 warrants exercisable at an average price of $0.10. The resale of outstanding shares from the exercise of dilutive securities would have a depressing effect on the market for Agave’s shares. Dilutive securities based on the trading range of Agave’s common shares at March 31, 2016, including the warrants and the stock options noted above, collectively represent approximately 20.17% of Agave’s issued shares as at March 31, 2016.
| | INFORMATION ON THE COMPANY |
In June 2015, the Company closed the first and final tranche of a non-brokered private placements of units at a price of $0.05 per unit by issuing an aggregate of 5,000,000 units for gross proceeds of $250,000. Each unit is comprised of one common share and one common share purchase warrant, with each warrant entitling the holder thereof to purchase one additional common share at a price of $0.10 for a term of 24 months after closing. The share purchase warrants were valued using the Black-Scholes pricing model with the following assumptions: weighted average risk free interest rate of 0.56%, volatility factor of 120% and an expected life of two years.
On December 2, 2014, the Company announced a proposed non-brokered private placement whereby it intends to offer up to 11,000,000 flow-through common shares at a price of $0.06 per flow-through common share and 9,000,000 non-flow-through units at a price of $0.05 per non-flow-through unit. Each non-flow-through unit will be comprised of one common share and one common share purchase warrant. Each whole non-flow-through warrant will entitle the holder to purchase one non-flow-through common shares at any time for a period of 24 months from the date the warrant is issued, at a price of $0.10.
There were no common shares issued during the year ended March 31, 2015.
During the year ended March 31, 2014 the Company completed, in two tranches, a non-brokered private placement for total proceeds of $1,030,000. The private placement was entirely subscribed by insiders, directors and officers of the Company. The private placement consisted of the issuance of 10,300,000 units of the Company at a price of $0.10 per Unit. Each Unit is comprised of one common share and one common share purchase warrant, each warrant entitling the holder thereof to purchase one additional common share at a price of $0.25 for a term of two years after closing. The share purchase warrants were valued using a Black-Scholes pricing model using the following assumptions: weighted average risk free interest rate of 1.08-1.18%, volatility factors ranging from 135.38% to 136.66% and an expected life of two years.
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
| | A. | History and Development of the Company |
The Company’s executive office is located at: Suite 1601-675 West Hastings1206- 588 Broughton Street Vancouver, British Columbia, Canada, V6B 1N2
Telephone: (604) 558-3908
Facsimile: (604) 687-4212
375-6005 Email: info@agavesilver.com info@firstenergymetals.com Website: www.agavesilver.com The contact person in Vancouver, British Columbia, is Ronald Lang, President, CEO, and Director.www.firstenergymetals.com
The mailing address of the Company is the Company’s executive office at the address noted above. AgaveThe Company operated directly and also, until February 12, 2015, through one wholly-owned subsidiary in Mexico, Cream Minerals de Mexico, S.A. de C.V. (“Cream de Mexico”). ReferencesThe Company’s name changed from Agave Silver Corp. to “Agave” or to “the Company” include Cream de Mexico except where otherwise indicated.First Energy Metals Limited was approved on December 16, 2016, at the Company’s Annual General Meeting. The Company’s fiscal year end is March 31. The Company’s common shares are listed on the TSX Venture Exchange under the symbol “FE” and prior to December 20, 2016, its common shares were trading under the symbol “AGV.” AgaveThe Company was quoted on the Over the Counter Bulletin Board in the United States under the symbol “CRMXF”, until July 26, 2012 at which time Agave’sthe Company’s shares began being exclusively quoted on the OTCQB, (also under the symbol “CRMXF”), an electronic trading platform operated by the OTC Markets Group Inc. On October 3, 2013 the symbol was changed to “ASKDF” and effective May 1, 2014 the Company was listed on OTC “Pink”. The Company’s common shares are also quoted on the Frankfurt market under the symbol “DFL”“A2JC89”. The Company was incorporated under the laws of the Province of British Columbia, Canada as Cream Silver Mines N.P.L. on October 12, 1966, with an authorized capital of 300,000 shares, each having a par value of $5.00. By Special Resolution passed on July 12, 1974, Agave cancelled its Memorandum and Articles and substituted a new Memorandum and Articles therefore providing for the limited liability of members and the increase of the authorized capital to 1,000,000 shares with a par value of $5.00 each. By Special Resolution passed September 24, 1987, Agave again altered its Memorandum, changing its name to Cream Silver Mines Ltd. in its English form and "Mines Cream Silver Ltee." in its French form and amending its authorized share capital to 3,000,000 common shares without par value. By Special Resolution passed September 15, 1994, Agave altered its Memorandum to consolidate its authorized and issued share capital of 3,000,000 common shares on a five-for-one basis into 600,000 common shares authorized, and issued common shares were consolidated from 1,870,794 common shares on a five-for-one basis into 374,158 common shares; to further increase its authorized capital to 50,000,000 common shares without par value (the "Common Shares"); and to change its name to Cream Minerals Ltd. Agave has been listed on the TSX Venture Exchange (the "TSX Venture"), formerly the Vancouver Stock Exchange (“VSE”), since June 3, 1970. The Company subsequently altered its Memorandum to increase its authorized capital to 50,000,000 common shares. At Agave’s request, the VSE placed the Company on inactive status on August 12, 1994. Agave had requested inactive status in order to reorganize its affairs after the government of the Province of British Columbia placed Agave’s Vancouver Island mineral claims adjoining those of Westmin Resources Ltd. in moratorium, and refused to grant Agave a permit to explore these claims. The claims, in Strathcona Park on Vancouver Island, were placed in moratorium in connection with the Strathcona Park area being declared a provincial park in 1972. These actions by the provincial government left Agave with no viable project at the time and with little working capital. The claims currently remain in moratorium. Throughout the early to mid-1970s, Agave initiated several court cases seeking compensation for these claims. The matter was ultimately decided by a decision of the British Columbia Court of Appeal denying Agave’s right to compensation. Leave to appeal this decision to the Supreme Court of Canada was refused and Agave was then advised that it was without further legal recourse with respect to its Vancouver Island claims. The British Columbia Court of Appeal specifically overruled its previous decision in the Agave case. The Company reviewed its legal position in the light of this development, but has been advised that it remains bound by the previous decision.
Following Agave’s entry into inactive status, Agave embarked on a reorganization program that included a consolidation of its issued and outstanding share capital and subsequent increase of authorized capital (as described above); a restructuring of the board of directors and appointment of new officers; a review of its financial affairs which included completing two private placements for the issuance of a total of 68,000 units, each consisting of one common share and one warrant, at a price of $3.50 per unit, which raised a total of $231,000; and a review of its property holdings. During Agave’s inactive period, certain of its claim groups in British Columbia were allowed to lapse, and others were sold off. Following completion of this reorganization, Agave resumed active status on April 11, 1996.
1966. Effective March 29, 2004, theCompany Act (British(British Columbia) was replaced by theBusiness Corporations Act (British(British Columbia). TheBusiness Corporations Act (British(British Columbia) does not require a company’s Notice of Articles to contain a numerical limit on the authorized capital with respect to each class of shares. Effective September 21, 2004, the Company altered the authorized capital of the Company from 50,000,000 shares without par value to an unlimited number of shares without par value. By Special Resolution effective June 23, 2011, shareholders approved the adoption of new articles for Agave.the Company. See Item 10B – Memorandum and Articles of Association. 13
Effective October 3, 2013,February 1, 2018, the Company completed a share consolidation on the basis of ten (10)five (5) pre-consolidation common shares for one (1) post-consolidation common share. The periods presented prior to the consolidation have not been retroactively adjusted to reflect this consolidation unless otherwise stated. Since its incorporation in 1966, the Company has been in the business of acquiring and exploring mineral properties. For most of the past three completed years, and prior thereto, the Company has been principally attempting to locate deposits of precious metals in Mexico, and the Provinces of British Columbia, Manitoba, Ontario and Manitoba, Canada.Quebec, Canada and Nevada, USA. Mexico The Company’sCompany had an exploration project in Mexico iscalled Nuevo Milenio, located south of Tepic in the municipality of Xalisco,Jalisco, State of Nayarit, Mexico, having denounced (staked) the property in 2000 and receiving title to the property in 2001. Mineral licenses in Mexico have a term of 50 years following which an application can be made to extend the term. Carrying costs are comprised of annual taxes of approximately $50,000. Work requirements are nominal Between 2001 and cash payment can be made2005 and again in lieu of work requirements. In 2001, Agave entered into anFebruary 2011, the Company conducted exploration programprograms on Nuevo Milenio. Agave explored the property until the year ended March 31, 2005, at which time it wrote it down by $1,523,030 to a nominal carrying value of $1. No acquisition costs are associated with the property, as it was denounced (staked). In 2006, the Company re-commenced exploration.
On July 24, 2009, the Company entered into an option agreement with Roca Mines Inc. (“Roca”) that would have allowed Roca to earn up to a 70% interest in the project. In order to acquire a 50% legal and beneficial interest in the Nuevo Milenio, Roca was to spend a cumulative US$12,000,000 for exploration work by July 24, 2013.
On April 30, 2010, the Company signed a letter of intent (“LOI”), pursuant to which it acquired an option from an arm's length party on the Las Habas Project, comprised of 336 hectares (“Ha”) located in the State of Sinaloa, Mexico. The LOI was for a period of three months. The proposed option agreement outlined in the LOI called for total payments of US$1 million over a 5-year period and a 2% NSR royalty, payable out of production. On June 1, 2010, Agave filed an application to denounce approximately 700 hectares adjoining the Las Habas property. The Company let the LOI lapse and has not pursued title to the adjacent 700 Ha’s. On July 22, 2010, Roca notified the Company that it was not proceeding with the option agreement and the agreement was terminated.
On December 7, 2010, Agave agreed to a bought deal financing of $5 million with the provision of an overallotment of $1 million. The terms of the bought deal were $1.60 per unit with a full warrant exercisable at $2.40 for two years from the date of closing. The Company subsequently closed the bought deal financing on December 21, 2010, and received gross proceeds of $6 million.
The Company initiated a 20,000 metre drill program in February 2011 which was completed in September 2011. Following completion of the drill program during calendar year 2011 (the “2011“2011 Drill Program”Program”), the Company engaged an independent consulting firm to prepare an independent NI 43-101-compliant resource estimate (the “2012 Report”“2012 Report”) based on review of the Company’s previously compiled exploration data as well as exploration data collected during the 2011 Drill Program. The 2012 Report was filed on SEDAR on October 2, 2012.
The board of directors initiated a review of Agave’s strategic alternatives intended to maximize shareholder value and a Special Committee of independent directors (the “Special Committee”) was appointed in the first quarter of the fiscal year. Following completion of the Independent Mineral Resource the Board upon consideration of the poor market conditions and challenging financing environment for junior resource exploration companies determined that alternatives to potentially very dilutive equity financings be considered. The review includes, but is not limited to, the sale or strategic merger of the Company, the joint venture or sale of non-core assets, or the sale or joint venture of a primary asset.
On March 25, 2013, the Company filed an independent NI 43-101 Technical Report on the Nuevo Milenio project (the “2013 Report”“2013 Report”) co-authored by Dr. Derek McBride, P.Eng, and Al Workman of Watts, Griffis and McQuatt Limited (“WGM”WGM”).The 2013 Report replaces the 2012 Report in its entirety. The 2013 Report addresses the concerns raised by the British Columbia Securities Commission with respect to the 2012 Report as outlined in the Company’s news release dated October 23, 2012. The 2013 Report contains an updated independent mineral resource estimate on the Nuevo Milenio project (the “Mineral“Mineral Resource Estimate”Estimate”) and replaces in its entirety all previous resource estimates filed by Agave and the previous resource estimates can no longer be relied upon. TheOn November 14, 2014, the Company entered into a share purchase agreement, dated November 14, 2014 among Frank Lang and Ferdinand Holcapek (collectively, the “Purchasers”), Cream Minerals de Mexico, S.A. de C.V. (“Cream Mexico) and the Company (the “Share Purchase Agreement”), pursuant to which the Company agreed to sell the Company’s interest in the Nuevo Milenio Property, in Nayarit State, Mexico, to the Purchasers via the sale of all of the securities of Cream Mexico held by the Company (the “Transaction”).
Pursuant to the terms of the Share Purchase Agreement the Purchasers purchased all of the Cream Mexico shares held by the Company in exchange for the aggregate sum of $686,000, payable as the forgiveness of the debts owed by the Company to Frank Lang (or other entities controlled by Frank Lang) and Ferdinand Holcapek. The Company closed the transaction for the sale of its interest in the Nuevo Milenio project on February 12, 2015. Canada British Columbia The Goldsmith Property Prior to May 6, 2013, the Company had a 100% interest in the Goldsmith Property (“Goldsmith”) (comprised of the Goldsmith and Lucky Jack Properties) located near Kaslo, British Columbia. Small scale underground mines operated on the property in the early 1900’s. Quartz veins are contained in the intrusive rocks and contain quantities of free gold. Higher grade gold mineralization was reported in the quartz veins which range in width from a few centimetres to five metres. The Company held an option to acquire a 100% interest in the Goldsmith property. The option agreement called for the issuance of 20,000 common shares (issued) and cash payments totaling $110,000 (paid) over six years. The optionors retain a 2% Net Smelter Royalty (NSR) on all metals. The Company was able to acquire 50% of the NSR for $1,000,000 upon commencement of commercial production or sooner. The Company wrote down the carrying value of Goldsmith Property to $Nil in fiscal 2012 as there were no plans to continue exploration. During the year ended March 31, 2014, the Company transferred title to the Goldsmith and Lucky Jack properties to the optionors. The Kaslo Property The 100% owned 4,000 Ha Kaslo Silver Property (“Kaslo”), a silver target, hosts eleven historic high-grade silver mineralized zones within 14 kilometres of favourable horizon. Nine high-grade silver-lead-zinc mines operated on Kaslo at various times from 1895 to 1966. The property is located 12 kilometres west of Kaslo in southern British Columbia. The Company has no plans to conduct exploration work at this time. 14
The Kootenay Lithium Project Dr. Derek McBride, P.Geo,On October 7, 2016 the Company entered into an agreement to purchase (the “Agreement”) a 100% interest in certain mineral claims (the “Property”) covering 4,050 hectares located in the Revelstoke and Nelson Mining Divisions, southeastern British Columbia.
Under the terms of the Agreement, the Company has supervisedpurchased a 100% interest in the Company’s previousProperty by issuing 6,000,000 common shares of the Company. The Property is subject to a 2.0% Net Smelter Return (“NSR”) mineral royalty and a 24.0% Gross Overriding Royalty (“GOR”) on gemstones produced from the Property and with the option to reduce the NSR to 1.0% by paying $2,500,000.00. The Company also has the option to purchase one half (50%) of the GOR for $2,000,000. During the year ended March 31, 2018, the Company wrote down the carrying value of Kootenay Lithium Property to $Nil as the Company does not plan to complete further exploration programs summarized above and ison the Company’s supervisor and “Qualified Person” with respect to this propertyforproperty. As such, in April 2018, the purpose of NI 43-101.Company relinquished its property’s mineral claims by not paying their annual mineral claim maintenance fees. Manitoba The Wine Property Prior to April 22, 2013, the Company held a 100% interest in the Wine Claim (comprised of the Wine and Wine 1 claims) located approximately 60 kilometres south of Flin Flon, Manitoba. The Wine claim is a high grade nickel-copper target. During fiscal 2007 and in fiscal 2008, the Company entered into option agreements to acquire up to 100% interest in two mineral property interests in the Province of Manitoba, the Wine claims and the Grand Nickel Project. In March 2006, the Company entered into an option agreement, subsequently amended, to acquire 100% interest in the Wine Claim, MB 3964 and Wine 1 Claim (the “Wine” claims), all located approximately 60 km southeast of Flin Flon, Manitoba. The Company earned its interest by making payments totaling $105,000 (paid) and issuing 20,000 common shares over a 48-month period (issued). The Company also incurred required exploration expenditures on the property of $5,000 annually for four years. On completion of these obligations, the property was subject only to a 2.0% NSR royalty payable to the optionor from the production of gold, silver and all base metals and other minerals. The Company had the right to reduce the NSR royalty to 1.0% by the payment of $1,000,000 to the optionor at any time up to and including the commencement of commercial production. During the year ended March 31, 2014 the Company sold the Wine Claim Property to the optionor for the amount of $50,000 cash.
In October 2007, the Company entered into an agreement to acquire 100% interest in the Grand Nickel Project, being the Cedar 1, MB7355 and MEL 324B claims (the “Cedar” claims), located in the Thompson Nickel Belt, approximately 40 km north-west of the town of Grand Rapids, Manitoba. After a short exploration program, the Company determined that the property did not meet its expectations, returned the property to the optionor and recorded a write-down of acquisition costs of $34,250 in fiscal 2009. The Grand Nickel project was written off in the year ended March 31, 2009.
The Blueberry Property
Ontario In November 2009, the Company entered into an option agreement to acquire the Blueberry property from W.S. Ferreira Ltd. and the Company staked additional claims which have been appended to the option agreement. The property is located approximately 20 km north-east of Flin Flon, Manitoba. The option agreement provided for a cash payment of $100,000 ($40,000 paid) and the issuance of 40,000 shares (16,000 issued) over five years with a down payment of $10,000 (paid). The cash payments were to be made as follows: $10,000 on regulatory approval (paid), $10,000 on the first anniversary (paid), and $20,000 on each of the second (paid) to the fifth anniversary dates. The shares were to be issued as follows: 4,000 on regulatory approval (completed) and 4,000 on the first anniversary of regulatory approval (completed), and 0,000 common shares on each of the second (completed) to the fifth anniversary dates.
The Company was required to incur cumulative exploration expenditures totaling $30,000 following the date of regulatory approval, commencing with expenditures of $5,000 prior to the first anniversary date and a minimum of $5,000 annually by each anniversary date on or prior to the fifth anniversary. The total incurred to March 31, 2013 was $156,411. On completion of these obligations, the property will be subject only to a 2.0% NSR royalty payable to the optionor from the production of gold, silver and all base metals and other minerals. The Company had the right to reduce the NSR royalty to 1.0% by the payment of $1,000,000 to the optionor at any time up to and including the commencement of commercial production.
In November 2012 the Company elected not to make the required $20,000 option payment and issue 8,000 common shares to the optionor. Title to the Blueberry Property has since been transferred to the optionor. In addition, title to the Blue 1 to Blue 4 claims which were staked following the optioning of the Blueberry Property have been assigned to the optionor as these claims were appended to the original option agreement.
Ontario
Hastings Highland Property Effective May 9, 2015 the Company and Hastings Highland Resources Limited (“Hastings”) entered into an agreement with respect to the exclusive option to earn a 90% interest in Hastings’ Limerick Township nickel-copper property located in Ontario, Canada, however the Company was unable to secure the requisite was unable to secure the requisite financing and terminated the option on September 3, 20152015. Phyllis Cobalt Property On February 19, 2015January 29, 2018, the Company announced that itentered into an option agreement to acquire (the “Phyllis Agreement”) a 100% interest in certain mineral claims (the “Phyllis Property”) covering 1,750 hectares located in the Kenora Mining District in northwestern Ontario. Under the terms of the Phyllis Agreement, the Company has signed a letter agreement (the “Letter”) with Hastings Highland Resources Limited (“Hastings”) for an exclusivethe option to earnacquire a 90 percent100% interest in Hastings’ Limerick Township nickel-copper propertythe Phyllis Property by making the following option payments, common shares issuances and exploration expenditures: | | | | | | | | Minimum | Cumulative | | Option payments | Issuance of First Energy | exploration | exploration | Due Dates | ($) | common shares | expenditures | expenditure | | | | ($) | ($) | On signing | 20,000 | 100,000 | Nil | Nil | Year 1 | 35,000 | 150,000 | 75,000 | 75,000 | Year 2 | 35,000 | 150,000 | 25,000 | 100,000 | Year 3 | 50,000 | 200,000 | 125,000 | 125,000 |
The Phyllis Property is subject to a royalty equal to 3% NSR upon commencement of commercial production. The Company will have the option to reduce the NSR to 2.0% by paying $1,000,000. 15
Quebec Russel Graphite Property On May 4, 2018, the Company entered into an option agreement under which the Company can earn 100% interest in the Russel Graphite Property which consists of thirty (30) mineral claims, located in Ontario, Canada (the “Property”).Gatineau area of Quebec Province. Under the terms of the Russel Graphite Property agreement, the Company has the option to acquire a 100% interest in the Phyllis Property by making the following option payments, common shares issuances and exploration expenditures: (i) | $7,500 in cash and issuance of 75,000 common shares of the Company (“Common Shares”) as soon as practical following the signing of this agreement and receipt of TSX Venture Exchange approval; | (ii) | $10,000 in cash and issuance of 100,000 Common Shares on or before the first anniversary date of this agreement, conditional on exploration expenditures of not less than $50,000 being incurred on or before December 31, 2018; | (iii) | $20,000 in cash and issuance of 125,000 Common Shares on or before the second anniversary date of this Agreement, conditional on cumulative exploration expenditures of not less than $150,000 being incurred on or before January 31, 2019; and, | (iv) | 3% NSR with a 2% buy-out at $1 million cash for each percent. |
Nevada, USA B. Business OverviewHighway 95 Property
On June 20, 2018, First Energy entered into an option agreement under which the Company can acquire a 100% interest in the Highway 95 Property, subject to TSX Venture Exchange approval, by making the following cash payments, issuing shares and carrying out exploration work as follows: (i) | $10,000 in cash and issuance of 100,000 common shares of the Company (“Common Shares”) as soon as practical following the signing of this agreement and receipt of TSX Venture Exchange approval; | (ii) | $20,000 in cash and issuance of 200,000 Common Shares on or before the first anniversary date of this agreement, conditional on exploration expenditures of not less than $50,000 being incurred on or before July 31, 2019; | (iii) | $40,000 in cash and issuance of 300,000 Common Shares on or before the second anniversary date of this Agreement, conditional on cumulative exploration expenditures of not less than $150,000 being incurred on or before July 31, 2020; and, | (iv) | 3% NSR with a 1% buy-out for a $1 million cash payment. |
General Agave has historically been a mineral exploration company. The Company is currently focused on exploration and development of Silver-Nickel-Copper properties. Agave has a portfolio, or option, of early-stage mineral exploration projects in British Columbia and Ontario that may contain silver, nickel, copper and other mineralization. These properties have been explored by a number of companies over the years, with further work being completed by Agave since their acquisition.
| (i) | (ii) | The Company has historically been a junior resource company engaged in the exploration and development of mineral properties. It currently maintains early stage exploration properties in Canada. | | | (iii) | Principal Markets: Not Applicable. |
| (ii) | (iv) | Seasonality: Not Applicable. |
| (iii) | (v) | Raw Materials: Not Applicable. |
| (iv) | (vi) | Marketing Channels: Not Applicable. |
| (v) | (vii) | Dependence: Not Applicable. |
16
| (vi) | Competitive Position: Not Applicable. | | | (ix) | Material Effect of Government Regulation: The Company’s exploration activities and its potential mining and processing operations are subject to various laws governing land use, the protection of the environment, prospecting, development, production, contractor availability, commodity prices, exports, taxes, labour standards, occupational safety and health, waste disposal, toxic substances, safety and other matters. The Company believes it is in substantial compliance with all material laws and regulations which currently apply to its activities. There is no assurance that the Company will be able to obtain all permits required for exploration, any future development and construction of mining facilities and conduct of mining operations on reasonable terms or that new legislation or modifications to existing legislation, would not have an adverse effect on any exploration or mining project which the Company might undertake. |
(vii) Material Effect of Government Regulation: The Company’s exploration activities and its potential mining and processing operations are subject to various laws governing land use, the protection of the environment, prospecting, development, production, contractor availability, commodity prices, exports, taxes, labour standards, occupational safety and health, waste disposal, toxic substances, safety and other matters. The Company believes it is in substantial compliance with all material laws and regulations which currently apply to its activities. There is no assurance that the Company will be able to obtain all permits required for exploration, any future development and construction of mining facilities and conduct of mining operations on reasonable terms or that new legislation or modifications to existing legislation, would not have an adverse effect on any exploration or mining project which the Company might undertake.
C. Organizational Structure
| | C. | Organizational Structure |
Until February 12, 2015 the Company had one direct subsidiary, Cream Minerals de Mexico, S.A. de C.V., incorporated in Mexico. Unless | | D. | Property, Plant and Equipment |
Data disclosed in this Annual Report on Form 20-F, including sampling, analytical and test data, have been reviewed and verified by the context otherwise requires, references herein to the “Company” or “Agave” includes the subsidiaryCompany’s V.P. of the Company. D. Property, PlantExploration, Dr. Muzaffer Sultan, Ph.D - Geology and Equipment
The Company has mineral exploration interests in one property: the Kaslo Property (British Columbia).Qualified Person as defined by National Instrument 43-101.
The Company’s mineral property interests in Canada are in good standing and all payments on the properties are up to date.date, except as noted above under Item 4 A. None of the Company’s projects have known reserves, and exploration work is exploratory in nature. Nuevo Milenio Project The Nuevo Milenio Property, in Nayarit State, Mexico, is owned by Cream de Mexico. All interest to the Nuevo Milenio Project were sold along with the sale of the subsidiary, Cream de Mexico on February 12, 2015. Exploration Expenditures
Expenditures incurred by the Company on Nuevo Milenio in fiscal 2016 (fiscal 2015 numbers in parentheses) include the following: assays and analysis - $Nil ($Nil); drilling – $Nil ($Nil); geological and geophysical - $Nil ($106,680); site activities - $Nil ($116,114) and travel and accommodation- $Nil ($2,984).
Exploration Projects - British Columbia, Ontario and Quebec Properties The Company has twothree early-stage exploration projectsproperties located in Canada. The Kaslo Property is located in British Columbia, Canada. the Phyllis Property is located in Ontario and the Russel Graphite Property is located in Quebec. The locations are shownCompany has also entered into an option agreement on June 20, 2018, under which the map below, with details ofCompany can acquire a 100% interest in the projects following.Highway 95 Property located in Nevada, USA. This option agreement is subject to TSX Venture Exchange approval. Exploration activities on the Kaslo properties have been planned and carried out under the supervision of Dr. Derek McBride, P.Geo and is the Company’s “Qualified Person” for the purpose of NI 43-101, “Standards of Disclosure for Mineral Projects”.
(1) Kaslo Property, British Columbia Introduction The Kaslo property is without known mineral resources and reserves and the proposedprevious exploration programs arewere exploratory in nature. In fiscal 2012, the Company wrote down the value of the property to $nil. Property Location and Geology
The 100% owned property encompasses nine former high-grade silver-lead-zinc historic small scale mines located in southeastern British Columbia, Canada. The various mines operated at different times during the period from 1895 to 1966. The property currently consists of 7 modified grid claims, 13 crown grants, 8 reverted crown grants, 37 two-post claims and one mining lease of three units, for a total 160 units.
In October 2004 Agave commenced a diamond drill program on Kaslo. This two-hole drill program was designed to test the lateral and down dip extensions of the high grade silver mineralization found within the strongly faulted Silver Bear shear structure. Diamond drilling was suspended after attempts to drill through the highly mineralized fault zone were unsuccessful. The initial drill hole was abandoned at 34 metres when the drill proved incapable of coring the shear zone. A second steeper angled drill hole was successful in intersecting the hanging wall of the mineralized shear structure. However, the second hole did not penetrate the entire width of the shear zone and did not intersect the high-grade footwall mineralization.
Prior drilling by Agave in 1998 returned values up to 2,271 g/t silver over 0.51 metres within a 3.25 metre interval that assayed 390.05 g/t silver from drill hole 98SB-05. The highest silver values intersected in the previous drill program were obtained from the strongest part of the shear zone tested during that program. These step-out holes intersected what appears to be broader and more intense shearing that may be related to higher-grade silver values.
Location and Access The 4,000-hectare property is located 12 km west of the town of Kaslo in southern British Columbia. Access to the property is via Highway 31A for seven km west from Kaslo, then 4.5 km southwest along Keen Creek Road to the property boundary. The property lies along the Keen Creek Road for approximately 10 km. Logging roads and numerous old mining roads and trails, some of which are heavily overgrown, bisect the property. Power lines come to within 4 km of the property boundary, and water is abundant throughout. 17
Physiography Kaslo is located in an area of rugged mountainous terrain. Topography on the property is steep with elevations ranging from 1,050 metres along the Keen Creek valley to 2,200 metres on the Gold Cure ridge. The Keen Creek valley runs along the northwest boundary of the property, with numerous tributaries crossing the property and emptying into Keen Creek. The major tributaries, from northeast to southwest are Ben Hur, Briggs, Klawala, Kyawats and Desmond Creeks. History Kaslo includes nine former, small mines, which were originally discovered and worked for high-grade silver ores during the heyday of the Slocan Mining Camp at the end of the 19th century. Intermittent exploration, development and production have taken place at various locations on the property since that time, most notably in the 1920s and 1950s. The Cork-Province Mine was consolidated in 1914 and was the longest-lived producer in the camp when it closed in 1966. Five former workings, the Silver Bear, Hartford, Gibson, Gold Cure, and Bismark are situated along the Gold Cure Shear zone, which has been traced northeast across the property for 7.1 km. Five additional workings, the Black Bear, Cork, Province, Dublin and Black Fox workings lie along the parallel 4.1 km long Cork Shear zone, located in the Keen Creek valley approximately 1 km north of the Gold Cure Shear zone. Both shears are open along strike to the north and at depth. Geophysics Since it acquired the property, AgaveCompany’s acquisition, the Company has completed 51.7 km of VLF-EM geophysical coverage over the mineralized Cork and Gold Cure Shear zones. The geophysical surveys clearly define the location and extent of the controlling shears, as they are very conductive by nature. In 1999, a gravity geophysical survey was conducted over the Cork North zone to define which of the several limestone beds have the best potential to host massive sulphide mineralization. Targets generated by the gravity survey have not been drill tested. Geochemistry Soil geochemical surveys have been completed over the length of the Cork and Gold Cure Shear zones. Linear trends of anomalous values for silver, lead and zinc in soil have been found running coincident with the shear zones. Occasionally gold, arsenic, cadmium and other elements occur with the silver, lead and zinc anomalies. Black Bear Group(2) Phyllis Cobalt Property, Ontario
Description Located in the Kenora Mining District of ClaimsOntario, the property consists of 112 mineral claim units totalling 1750 hectares in Grummett and Cathcart townships. The property has year-round access 192km northwest of Thunder Bay, ON via Hwy 17 and 9km south on a gravel forestry road. For18
Geology The Phyllis Property claim block occupies the central portion of an ENE-WSW trending greenstone belt, consisting of Mesoarchean to Neoarchean age mafic to ultramafic rocks. These are bound by granite of varying composition -ranging from tonalite to biotite-granodiorite (Atikokan-Lakehead Sheet Map 2065) as shown in Figure 1. Recent mapping undertaken by the Ontario Geological Survey (Gulliver River Sheet, Map 3370), which includes a descriptionsmall portion of Agave’s interestthe Phyllis claims, suggests that there is a greater abundance of ultramafic metavolcanics than previously indicated. The regional foliation follows the general trend of the greenstone belt. Mineralization The initial cobalt discovery was made in this property, see “Kaslo Silver Property” under Item 4 above.2010 by Don Dobransky, named the “Phyllis Central” occurrence. This discovery is characterized by an 80m x 60m outcrop and appears as a fairly structureless gabbro, with the exception of an array of narrow quartz veins and veinlets, which have sharp contacts with the country rock and trend roughly NE-SW, and appear to have been intruded relatively recently. The gabbro itself is fine-to medium grained and appears highly altered. The exposed outcrop follows the northern flank of a gentle hill. Earlier excavations focussed in the uppermost parts of the topographic profile. The sampling as seen in Figure 2. This worked confirmed the presence of economic grades of cobalt mineralization up to 0.33% Co (including 1.2% Cu and 0.39% Ni). (3) Russel Graphite, Quebec Description Consists of 30 mineral claims in one contiguous block totaling 1,798.06 hectares land on NTS map 31G13, located in Gatineau area of Quebec Province, approximately 50 kilometres to the north of Ottawa, Canada. Historical Historical geological work carried out by Gatineau Graphite Company, during 1916-1919 period, included prospecting and diamond drilling 30 short holes (reference report GM13866). Historical data from North Low showing indicate a bulk sample of 30 tons of rock produced 1,500 kilograms of high quality graphite at 38.18% graphitic carbon (Cg); 3,670 kilograms at 18.10% Cg; and 22,169 kilograms at 4.33%% Cg. Mineralization is mostly 19
associated with irregular bands of graphite along the contact of gabbro dikes in crystalline limestone. It is also found in small graphite veins within gabbroic rocks. Location and Access The Black Bear claimsProperty has excellent infrastructure support, is road accessible via Provincial Highway 105 from Ottawa, located 150 kilometres from Montreal; water, power and manpower available locally. Village of North Low is a small community located one kilometers to the east of the Property. It is located in a very active graphite exploration and production area, about 50 kilometres to the southwest of TIMCAL’s Lac des Iles graphite mine in Quebec which is a world class deposit with a production capacity of 25,000 tonnes of graphite annually. There are located immediately north ofseveral other graphite showings and are contiguous with the Bismark Claims. past producing mines in its vicinity. Geology The property is composedunderlain by suitable geological environment for flake graphite type mineralization, consisting of Metasedimentary Belt of the Grenville Province which includes quartzofeldspathic rocks, quartzite, biotite gneiss, limestone/marble, gabbro dikes, and plagioclase pyroxene. The graphite mineralization is in the form of bands and irregular veins along the contact of gabbro dikes in the crystalline limestone indicating a three-claim mining leaseskarn type mineralization related to contact metamorphism and three reverted, crown-granted mineral claims situated just 600 metres along strikemetasomatism. There are two main large flake graphite showings on the Property i.e., North Low and Russel showings. At the Russel showing, the graphite mineralization is in the form of lenticular bands less than 1 metre thick mostly occurring as skarn type deposit at the contact of gabbro and crystalline limestone / dolomite. Historical drilling data indicates 15% Cg of 0.91 m thick (see survey in 28 paper MNR, GM- 13866). Several sections of drill holes completed for water resource down to 245 feet deep (105 feet of overburden) intersected graphite and phlogopite in 20
marble. (4) Highway 95 Property, Nevada, USA Description The Highway 95 Property (HWY 95) is located astride to the northsouthwest of the former Cork-Province Mine on the adjacent Bismark Claims. The Black Bear claims can be accessed through the Kaslo property,Interstate Highway 95, which is located 12 km westprovides access, 30 kilometres northwest of the town of KasloBeatty in southern British Columbia. Access to KasloNye County in western Nevada and comprises of 120 lode claims representing an aggregate area of land covering 3.75 miles2 (10 km2). Topography in the area is via Highway 31Atypical of the Basin and range area of Nevada with flat basins represented by salt flats at approximately 1200 meters, a dry desert hot or cold, climate depending on the season and time of day. Nevada has been a major mining since the 19th century and is one of the major producers of lithiumbrines for 7 km west from Kaslo, then 4.5 km southwest along Keen Creek Road tolithium extraction in the property boundary.world. History
Basin and Range faulting initiated 16 million years ago created several enclosed basins in Nevada. Before and during this faulting caldera related volcanism deposited large volumes of quartzrich tuffs and ash flows containing anomalous amounts of lithium. Erosion and deposition in these basins formed brines, some rich in lithium, in permeable host rocks The property encompasses three former silver producers, the Mastodon, Liberty, and Black Bear workings. The Mastodon and Liberty workings were discovered and operated in the late 1890s. The Black Bear was probably discovered at the same time but the only government reports of this occurrence are from 1920 when the mine was rehabilitated to explorecovers a 48-centimetre wide vein that yielded 2.74 g/t gold, 181.7 g/t silver, 15.0% lead and 3.6% zinc. The Liberty and Mastodon workings were on adjacent crown grants that were initially worked in 1899. Workings consist of eight or more short adits and shafts that explore two or more fissure-vein lodes striking northeast and in part conforming with the structure of the host metasediments. Exploration completed by Agave in 1997 on the adjacent Bismark Claims suggests that the Black Bear workings are probably hosted by the same shear structure that hosts the Cork-Province Mine. The Liberty and Mastodon workings are believed to be on parallel structures.
Agave completed a preliminary program of geological mapping, geochemical surveys, VLF electro-magnetometre surveys, a reconnaissance gravity geophysical survey, excavator trenching and 110 metres of diamond drilling in three short holes over the Black Bear Claims in 1998 and 1999. The trenching program successfully encountered several small massive sulphide bodies that were tested with three short, wide spaced, diamond drill holes. Sulphides were primarily pyrite, arsenopyrite and sphalerite containing low-grade silver values.
Black Fox Claims
In June 1998, Agave purchased a 100% interest in the Black Fox Claims located near Kaslo, British Columbia. The property comprises three crown-granted mineral claims: the Daisy, Black Fox and California. The former Black Fox mine workings are located on the Daisy Claim, immediatelymain salt flat playa basin adjacent to the Cork-Province areaBonnie Claire Valley which has reported lithium. No outcrops or other information on Agave’s Bismark Claims. The claims liethese playas is available No geology is outlined and no lithium mineralization has been identified on the southwest extensionProperty but the adjacent mountains are reported to have lithium values that feeding drainages and sampling of salt flats within the Cork Shear zone.
adjacent basin, have found lithium values. There was no material work carried outLithium is found in three main types of deposits, pegmatites, clays and continental brines. The continental brines are the most important of first-order characteristics: (1) arid climate; (2) closed basin; (3) subsidence; (4) igneous or geothermal activity; (5) lithium source-rocks; (6) aquifers; and (7) sufficient time to concentrate a brine.”
No exploration for lithium has been conducted on the property in fiscal 2003and no sampling program or 2004 as Agave did not have sufficient working capitaldrilling has been conducted. The property fits all the criteria for the formation of an economic lithium brine and needs to conduct a full-scale exploration program onbe investigated. It is recommended that the properties that make up Kaslo. As a result, in 2003, Agave wrote down deferred acquisition and exploration costs to a nominal carrying value of $1 to reflect the extended period of inactivity on the property. The claims remain in good standing and the property is considered a long-term assetpotential of the Company. Exploration costs incurred sincearea of the year ended March 31, 2005, to March 31, 2008 of $162,099 have been expensed. Additional costs of $359 were expensed in fiscal 2009. The property was written down to $Nil during fiscal 2012.Property be delineated by geochemical sampling, geophysics and trenching and evaluated. Proposed Exploration
No significant exploration work is proposed for fiscal 2017.
Dr. Derek McBride, has supervised the Company’s Canadian exploration programs summarized above and is the Company’s supervisor and “Qualified Person” for the purpose of NI 43-101.
Goldsmith Property, British Columbia
During the year ended March 31, 2014, the Company transferred title to the Goldsmith and Lucky Jack properties to the optionors.
Exploration Projects, Manitoba Properties
Blueberry Property, Manitoba
In November 2012 the Company elected not to make the required $20,000 option payment and issuance of 80,000 common shares to the optionor. Title to the Blueberry Property has since been transferred to the optionor. In addition title to the Blue 1 to Blue 4 claims which were staked following the optioning of Blueberry Property have also been assigned to the optionor as these claims were appended to the original option agreement.
Wine Nickel-Copper Property, Manitoba
During the year ended March 31, 2014 the Company sold the Wine Claim to the optionor for the amount of $50,000 cash.
Capital Expenditures and write-downs
Agave’s principal capital expenditures and write-downs over the two fiscal years ended March 31, 2016 and 2015, are as follows:
Year | Mineral Property Acquisitions | Equipment Acquisitions | Mineral Property Write-downs | 2016 | $ -- | $ -- | $ -- | 2015 | -- | -- | -- |
Amounts Expensed
Exploration expenses in the five fiscal years ended March 31: Year | Nuevo Milenio | Kaslo Silver Property, British Columbia | Goldsmith and Other Properties, British Columbia | Manitoba Properties | Total | | | | | | | 2016 | $ Nil | $ (1,890) | Nil | Nil | $ (1,890) | 2015 | 275,778 | 1,465 | Nil | Nil | 277,243 | 2014 | 443,448 | 40,107 | Nil | Nil | 483,555 | 2013 | 706,186 | 7,065 | Nil | 3,935 | 717,186 | 2012 | 2,721,792 | 39,027 | Nil | 2,300 | 2,763,119 |
| | | | | | | | | | | | | | | | | | | | | | | | Kaslo Silver | | | Kootenay | | | | | | | | | | | Year | | Nuevo Milenio | | | Property, | | | Lithium, | | | Phyllis Cobalt, Ontario | | | Other Properties | | | Total | | | | | British | | | British | | | | | | | | | | | | | Columbia | | | Columbia | | | | | | | | | | | 2018 | $ | Nil | | $ | 260 | | $ | 868 | | $ | 32,929 | | $ | Nil | | $ | 40,967 | | 2017 | | Nil | | | 260 | | | 6,892 | | | Nil | | | Nil | | | 7,152 | | 2016 | | Nil | | | (1,890) | | | Nil | | | Nil | | | Nil | | | (1,890) | | 2015 | | 275,778 | | | 1,465 | | | Nil | | | Nil | | | Nil | | | 277,243 | | 2014 | | 443,448 | | | 40,107 | | | Nil | | | Nil | | | Nil | | | 483,555 | |
The Company’s sole source of funding has been the issuance of equity securities for cash, primarily through private placements to sophisticated investors and institutions. The Company has issued common shares in each of the past few years, pursuant to private placement financings and the exercise of warrants and options. ITEM 4A. unresolved staff comments
| | ITEM 4A. | UNRESOLVED STAFF COMMENTS |
Not applicable. | | ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
item 5. Operating and financial review and prospects
The followingManagement’s discussion and analysis should be readis presented in conjunction withrelation to the audited consolidated financial statements of Agave for the years ended March 31, 2016 and 2015 and the related notes thereto. Agave’s consolidated financialFirst Energy, which statements have beenare prepared as a going concern in accordance with IFRS as issued by the IASB.IFRS.
21
Overview
AgaveThe Company is a mineral exploration company with no producing properties and consequently has no current operating income or cash flow. All of Agave’sthe Company’s short to medium-term operating and exploration cash flow must be derived from external financing.
Critical accounting policies and changes in accounting policies
The preparation of financial statements requires management to establish accounting policies, estimates and assumptions that affect the timing and reported amounts of assets, liabilities, revenues and expenses. These estimates are based upon historical experience and on various other assumptions that management believes to be reasonable under the circumstances, and require judgment on matters which are inherently uncertain. A summary of the Company’s significant accounting policies is set out in Note 2 of the Company’s consolidated financial statements forreferred to in this Annual Report have been prepared in accordance with IFRS issued by the yearsInternational Accounting Standards Board ("IASB") and Interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"). The policies applied in the consolidated financial statements are based on the IFRS issued and outstanding as at March 31, 2018. Year ended March 31, 2016 and 2015. Recent accounting pronouncements
A summary of recent accounting pronouncements issued which may affect the Company in the future are set out in Note 2 (p) of the Company’s consolidated financial statements for the years2018 compared to year ended March 31, 2016 and 2015.2017
A. Operating Results
Year EndedThe net loss for the year ended March 31, 2016 (“fiscal 2016”2018 (the “Current Year”), Compared was $862,352 compared to Year Endeda net loss for the year ended March 31, 2015 (“fiscal 2015”2017 (the “Comparative Year”)
In fiscal 2016, Agave incurred a of $356,861. The increase in net loss of $111,593,$505,491 was primarily due to the following:
Consulting fees increased by $50,720 from $6,850 in the Comparative Year to $57,570 in the Current Year. The increase was primarily due to consulting fees incurred with respect to corporate development and potential transactions and acquisitions; Exploration and evaluations expenditures increased by $33,815 from $7,152 in the Comparative Year to $40,967 in the Current Year. The increase was primarily due to $32,929 of exploration expenditures incurred as part of the Phyllis Cobalt property exploration program; Salaries, fees and benefits increased by $23,323 to $80,750 in the Current Year from $57,427 in the Comparative Year. The increase is due primarily to an increase in salaries being paid to the CEO and CFO; Shareholder communications increased by $8,878 from $38,856 in the Comparative Year to $47,734 in the Current Year. The increase was primarily due to costs associated with the Company’s completion of its share consolidation during the Current Year; and In the Current Year, the Company had a per common share$513,600 exploration and evaluation write-down of $0.00,its Kootenay Lithium Property as the Company will not be completing further exploration work on the property and therefore will no longer maintain the property’s mineral claims.
The increases noted above were offset by decreases in other operating expenses which were consistent with the Company’s activities. Notable decreases were realized on the following expense items: General and administrative decreased by $5,490 from $32,091 in the Comparative Year to $26,601 in the Current Year; Professional fees decreased by $32,140 from $83,108 in the Comparative Year to $50,968 in the Current Year. The decrease was due primarily to a reduction in legal fees incurred for the Current Year as compared to an incomethe Comparative Year; and Share-based payments decreased by $87,219 from $131,412 in the Comparative Year to $44,193 in the Current Year. The decrease in expense is due to both the Company issuing fewer stock options and the estimated fair value of $1,658, or $0.00 per common sharethe stock options granted being lower in fiscal 2015.the Current Year over the Comparative Year.
Exploration costs of $1,890 were recovered in fiscal 2016,Year ended March 31, 2017 compared to exploration costs of $1,465 in fiscal 2015, contributing toyear ended March 31, 2016
The net loss for the loss/income in each year. The costs and recoveries in both years were related to the Kaslo project. The recovery in fiscal 2016year ended March 31, 2017 was a result of the reversal of costs charged in fiscal 2015. Total expenses other than exploration costs and gain on sale of discontinued operations totaled $113,483 in fiscal 2016,$356,861 compared to $405,122 in fiscal 2015. Significant differences between the levels of expenditures in the two fiscal years include the following:
Finance feesa net loss for the year ended March 31, 2016 were $25,000, compared to $Nil for the year ended March 31, 2015. This amount represents a non-refundable fee paid to a third party firm who had been hiredof $111,593. The increase in February, 2015 to complete a financing for the Company. This amount had been recorded as a deferred finance fee until Q3 2016 at which time itnet loss of $245,268 was recorded as an expense as it became obvious to the Company that the financing would not be completed.
General and administrative expenses, consisting of depreciation, office and administration, travel and conferences decreased from $76,951 to $43,796 in expenses. The decrease is primarily a result of decreased directors’ and officers’ liability insurance costs and reduced travel expenses.
Professional fees, which include legal, accounting and audit fees, decreased from $113,335 to $39,785 primarily as a result of reduced legal fees. In the year ended March 31, 2015 the Company incurred legal fees related to its Mexican subsidiary, with no comparable expenses in the year ended March 31, 2016. Further reduced legal fees related to the review of the Company’s US Annual Information Report (20-F).
Salaries and benefits decreased from $191,087 to $85,181 primarily due to the following:
Professional fees increased by $43,323 from $39,785 in fiscal year 2016 to $83,108 fiscal year 2017. The increase was primarily due to legal fees incurred with respect to the acquisition of the Kootenay Lithium Property, the Company’s Annual General Meeting, a reduction in staff.potential transaction and legal advice on general matters; Shareholder communications increased by $9,977 from $20,786$28,879 in fiscal year 2016 to $28,879.$38,856 for fiscal year 2017. The increase was primarily due to costs in both years are primarily associated with statutory listing costs, filing feesthe Company’s name change, creation of a new website, news releases, and news release dissemination.the Company’s annual general meeting; Stock-basedShare-based compensation increased by $110,406 from $21,006 in fiscal year 2016 to $131,412 for fiscal year 2017. Albeit the year ended March 31, 2016 was $21,006, compared to $Nil for the year ended March 31, 2015. The Company granted, pursuant to its stock option plan and TSX Venture Exchange approval, 1,450,000issued less stock options to directors, officers and consultants ofin 2017, the Company at an exercise price of $0.07 per share, expiring on June 3, 2020. Theestimated fair value of the stock options granted has been calculated usingfor 2017 was higher; hence, resulting in a higher expense; and
22
Gain on settle of debt decreased from $129,121 in fiscal year 2016 to $nil for fiscal year 2017. The Company did not settle debts with shares during the Black-Scholes pricing model, based2017 fiscal year.
The increases noted above were offset by decreases in other operating expense line items which were consistent with the Company’s activities and continued efforts to scale back and reduce overhead costs given the current and prolonged unfavorable market conditions to raise capital. Notable decreases were realized on the following assumptions: weighted average risk free interest rateexpense items: Finance fees were $Nil for the 2017 fiscal year, a decrease of 1.01%, volatility factor of 126% and expected life of five years. There were no stock options granted$25,000 from $25,000 in the year ended March 31, 2015. During the year ended March 31, 2016 the Company settled all debts owing to officers and directors, with the exception of partial salaries payable to the President,fiscal year;
General administrative decreased by issuance of cash payments totaling $68,281 and by the issuance of 1,147,500 shares for a total of $22,950. These settlements resulted in a gain on settlement of debt of $129,121. There was no comparable gain$11,354 from $43,445 in the 2016 fiscal year ended March 31, 2015. Year Ended March 31, 2015 (“to $32,091 for the 2017 fiscal 2015”), Compared to Year Ended March 31, 2014 (“fiscal 2014”)year; and
In fiscal 2015, Agave earned income of $1,658, a per common share of $0.00, compared to a loss $1,199,620, a loss of $0.06 per common share in fiscal 2014.
Exploration costs of $1,465 were incurred in fiscal 2015, compared to $40,107 in fiscal 2014, contributing to the loss in each year. Expenditures in both years were related to the Kaslo project.
Total expenses other than exploration costs and gain on sale of discontinued operations totaled $405,122 in fiscal 2015, compared to $766,569 in fiscal 2014. Significant differences between the levels of expenditures in the two fiscal years include the following:
General and administrative expenses, consisting of depreciation, office and administration, travel and conferences increased from $56,916 to $76,951 in expenses. Expenses in the year ended March 31, 2014 were reduced as a result of recoveries of previously recognized Quorum expenses.
Professional fees, which include legal, accounting and audit fees, decreased from $174,741 to $113,335 primarily as a result of increased legal fees related to the reorganization of the Company effective October 3, 2013.
Salaries, fees and benefits decreased by $27,754 to $57,427 for the 2017 fiscal year from $394,530$85,181 in fiscal year 2016.
The Company’s projects are at the exploration stage and have not yet generated any revenue from production to $191,087 primarily duedate. Readers should refer to the decrease in executive salaries uponnotes to the reorganizationconsolidated financial statements for details regarding all the mineral leases and option to joint venture agreements for each of the Company effective October 3, 2013 and the severances paid during the year-ended March 31, 2014 related to the reorganization. Shareholder communications decreased from $95,860 to $20,786, due to the decreases in salary and services related to investor relations, and the decrease in advertising costs, filing costs and news release disseminated.
Agave conducted most of its exploration activities in Mexico and in Canada in fiscal 2015, and as such, the Company has foreign exchange risks associated with exploration in foreign jurisdictions. The Company had a foreign exchange loss of $2,963 in fiscal 2015, compared to a foreign exchange loss of $6,022 in fiscal 2014. The Company’s cash balances were primarily held in Canadian dollars with nominal funds held in United States dollars and in Mexican pesos.properties.
B. Liquidity and Capital Resources
| | B. | Liquidity and Capital Resources |
Financial Conditions for the year ended March 31, 20162018 The Company’s major source of funding has been the issuance of equity securities for cash, primarily through private placements to sophisticated investors and institutions. The Company has issued common shares induring each of the past fewlast several years, pursuant to private placement financings and the exercise of warrants and options. There is no assurance that the Company will be continue to be successful with any financing ventures. Please refer to Item 3 – Key Information – section D - Risk Factors in this document. At March 31, 2016,2018, the Company had a working capital deficit of $237,139,$136,728, defined as current assets less current liabilities, compared with a working capital deficit of $355,003$31,069 at March 31, 2015. 2017. First Energy began the year ended March 31, 2018, with $36,026 in cash. During the year ended March 31, 2018, the Company expended $46,195 on operating activities, net of working capital changes, expended $3,000 on investing activities and generated $389,544 from financing activities which was attributable to $465,981 as net proceeds from a private placement and $76,437 in loan borrowing, net of loan borrowings repayments, to end at March 31, 2018 with $376,375 in cash. The Company’s consolidated financial statements were prepared using IFRS applicable to a going concern. Several adverse conditions cast substantial doubt on the validity of this assumption – see “Going Concern” disclosure below. When theThe Company has unused cash, it primarily investsholds its unused cash in guaranteed investment certificates which are redeemable in full after 30 days withbank accounts that earn interest or in treasury bills. There have been no investments in commercial paper. Where the initial term of the guaranteed investment certificate is greater than 90 days, it is recorded as a short-term investment.at variable interest rates. Operations for the year ended March 31, 2016,2018, have been funded primarily from loans and share subscriptions made by insiders, officers and directors. Investing Activities
As at March 31, 2016, Agave has capitalized $Nil (2015 - $Nil).
directors and through the issuance of equity. Capital Resources As discussed above, at March 31, 2016, Agave’s2018, the Company’s working capital deficit was $237,139$136,728 compared to a working capital deficit of $355,003$31,069 at March 31, 2015.2017. The Company’s continued operations are dependent upon the Company’s ability to obtain sufficient financing to carry on planned operations. The Company does not have sufficient working capital to meet its obligations in the ordinary course of business but is attempting to generate sufficient amounts of cash and cash equivalents in the short and long term, to maintain the Company’s operations and meet obligations by reviewing all options including the sale of one or more properties, a joint venture of one or more properties, or an equity financing. The Company will select whichever funding options are available and are in the best interest of the shareholders. At March 31, 2016,On February 1, 2018, the Company completed a share consolidation of its share capital on the basis of five (5) existing common shares for one (1) new common share consolidation. All common shares, per common share
23
amounts, stock options and share purchase warrants in these financial statements have been retroactively restated to reflect the Share Consolidation. The Company had 31,981,55912,236,638 common shares issued and outstanding as at March 31, 2018 (March 31, 2017 -8,903,308). Share Capital The Company’s continued operations are dependent upon the Company’s ability to obtain sufficient financing to carry on planned operations. Fiscal 2018 and subsequent to July 30, 2018 On February 22, 2018, the Company completed a non-brokered private placement for gross proceeds of $500,000 by way issuing 2,666,665 common shares at a price of $0.15 per common share for gross proceeds of $400,000 and issuing an additional 666,665 flow-through shares at a price of $0.15 for gross proceeds $100,000. The Company paid finder’s fees of $11,175 and incurred additional cash share issue costs $22,844. On May 7, 2018, the Company issued 140,000 common shares pursuant to the exercise of options at $0.25 per share for total proceeds of $35,000. On May 30, 2018, the Company issued 75,000 common shares pursuant to Russel Graphite Property option agreement and issued 100,000 common shares pursuant to Phyllis Cobalt Property option. 2016Fiscal 2017
On January 24, 2017, the Company closed the first and final tranche of its non-brokered private placement with the issuance of 1,189,142 units at a price of $0.35 per unit for gross proceeds of $416,200. Each unit is comprised of one common share of the Company and one non-transferable common share purchase warrant exercisable to purchase one additional common share of the Company at a price of $0.40 for a period of two years expiring January 24, 2019. On January 4, 2017, the Company issued 20,000 common shares as part of a debt settlement agreement with the Company’s former CFO. On October 28, 2016, the Company issued 1,200,000 common shares at a value of $0.40 per share pursuant to the Kootenay Agreement as well as issuing finder’s fee totaling 84,000 common shares in regards to the transaction, which amount has also been capitalized as an acquisition cost. During the year end March 31, 2017, the Company issued 14,000 common shares pursuant the exercise of options at an exercise price of $0.35 per common share for total proceeds of $4,900. Fiscal 2016 In June 2015, the Company closed the first and final tranche of a non-brokered private placement (“Private Placement”) of units “(“Units”) of the Company at a price of $0.05 per Unit by issuing an aggregate of 5,000,0001,000,000 Units for gross proceeds of $250,000. Each Unit is comprised of one common share of the Company and one common share purchase warrant (“Warrant”), each Warrant entitling the holder thereof to purchase onone additional common share of the Company at a price of $0.10 for a term of 24 months after the closing of the Private Placement. In June, 2015 the Company issued 1,147,500229,500 shares at a deemed price of $0.05$0.25 in partial settlement of $52,500 of deferred salary payable to Ron Lang since his appointment as President in October, 2013 and settlement in full of director’s fees arrears incurred prior to his appointment as President. 2015
On December 2, 2014, the Company announced a proposed non-brokered private placement whereby it intends to offer up to 11,000,000 flow-through common shares at a price of $0.06 per flow-through common share and 9,000,000 non-flow-through units at a price of $0.05 per non-flow-through unit. Each non-flow-through unit will be comprised of one common share and one common share purchase warrant. Each whole non-flow-through warrant will entitle the holder to purchase one non-flow-through common shares at any time for a period of 24 months from the date the warrant is issued, at a price of $0.10. The Company intends to raise up to $1,110,000 through the private placements. As at March 31, 2015, share subscriptions of $100,000 had been received.
2014
Effective October 3, 2013, the Company completed a share consolidation on the basis of ten (10) pre-consolidation common shares for one (1) post-consolidation common share. The periods presented prior to the consolidation have been retroactively adjusted to reflect this consolidation unless otherwise stated.
During the year ended March 31, 2014 the Company completed, in two tranches, a non-brokered private placement for total proceeds of $1,030,000. The private placement was entirely subscribed by insiders, directors and officers of the Company. The private placement consisted of the issuance of 10,300,000 units of the Company at a price of $0.10 per Unit. Each Unit is comprised of one common share and one common share purchase warrant, each warrant entitling the holder thereof to purchase one additional common share at a price of $0.25 for a term of two years after closing. The share purchase warrants were valued using a Black-Scholes pricing model using the following assumptions: weighted average risk free interest rate of 1.08-1.18%, volatility factors ranging from 135.38% to 137% and an expected life of two years.
2011-2013
On April 13, 2010, the Company completed a private placement of a total of 2,296,321 units at a price of $0.70 per unit for gross proceeds of $1,607,425. Each unit is comprised of one common share and one non-transferable share purchase warrant. Each warrant entitles the holder to purchase one additional common share of the Company for a period of 24 months at the exercise price of $1.00 for a period of 12 months from the date of issue of the warrant and at a price of $1.50 for the remaining 12-month period. Compensation was paid to certain eligible arms-length parties in an amount equal to 10% of the total proceeds raised from the sale of the units to subscribers, and payable at their election in cash or units of the Company or a combination thereof. A cash commission of $59,185 was paid, and a total of 14,400 finder's units were issued. The finder's units have the same terms as the units. The finder’s warrants and share purchase warrants were valued using a Black Scholes option pricing model using the following assumptions: weighted average risk free interest rate of 1.15%-1.98%, volatility factors of 94%-131% and an expected life of 2 years. The total value ascribed to the finder’s warrants and share purchase warrants was $659,782.
If the Company's common shares trade at or above $3.00 per share for 10 consecutive trading days, the Company may, at its discretion, accelerate the expiration of the warrants (and including the warrants forming part of the finder's units) by providing notice in writing to the holders of such securities, whereby such warrants will expire within 30 days from the date of such written notice. Mr. Frank A. Lang, a former President and director and the former Non-Executive Chairman of the Company who resigned subsequent to the fiscal year end, acquired 510,000 units in the private placement for the subscription price of $357,000.
On December 21, 2010, the Company completed a bought deal financing of a total of 3,750,000 units at a price of $1.60 per unit for gross proceeds of $6,000,000. Each unit consisted of one common share of the Company and one common share purchase warrant. Each warrant entitles the holder thereof to acquire one common share of the Company at an exercise price of $2.40 per common share until December 21, 2012, provided that if after four months and one day following the Closing Date, the closing price of the common shares of the Company traded on the TSX Venture Exchange, close at a price in excess of $6.00 per common share for 20 consecutive days, the Company will be able to accelerate the expiry of the warrants to the date that is 30 days after notice of the new expiry date is provided to the holders of the warrants. The share purchase warrants were valued using a Black Scholes option pricing model using the following assumptions: weighted average risk free interest rate of 1.64%, volatility factors of 102.24% and an expected life of 2 years. The total value ascribed to the share purchase warrants was $2,073,168.
Compensation was paid to certain eligible arms-length parties in an amount equal to 8% of the total proceeds raised from the sale of the units to subscribers, and payable in cash. A cash commission of $480,000 was paid, and a total of 375,000 finder's units were issued. Each finder’s warrant entitles the warrant holder to acquire one common share and warrant at a price of $1.60 until December 21, 2012. The warrant entitles the holder to acquire an additional warrant at a price of $2.40 until December 21, 2012. The finder’s warrants were valued using a Black Scholes option pricing model using the following assumptions: weighted average risk free interest rate of 1.33%-1.64%, volatility factors of 97.46%-102.24% and an expected life of 2 years. The total value ascribed to the finder’s warrants was $755,565.
The securities offered have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an available exemption from the registration requirements. 24
Stock Options and Warrants In April 2010, the Company issued 2,296,321 share purchase warrants relating to a private placement. Each warrant entitles the holder to subscribe for one common share for a period of 24 months following the date of issue, exercisable at $1.00 in the first 12 month period, and $1.50 in the remaining 12 month period. Finder’s warrants totaling 14,400 were awarded in relation to the financing. The finder’s warrants have the same terms as the warrants included in the units sold to purchasers. If the Company's common shares trade at or above $3.00 per share for 10 consecutive trading days, the Company may, at its discretion, accelerate the expiration of the warrants (and including the warrants forming part of the finder's units) by providing notice in writing to the holders of such securities, whereby such warrants will expire within 30 days from the date of such written notice. The shares and warrants issued in connection with this non-brokered private placement are subject to a minimum hold period of four months.
On December 21, 2010, the Company issued 3,750,000 share purchase warrants relating to a private placement. Each warrant entitles the holder to subscribe for one common share for a period of 24 months following the date of issue, exercisable at $2.40. Finder’s warrants totaling 375,000 were awarded in relation to the financing. The finder’s warrants entitle the holder to acquire one common share and warrant at a price of $1.60 until December 21, 2012. The warrant entitles the holder to acquire an additional warrant at a price of $2.40 until December 21, 2012. The shares and warrants issued in connection with this non-brokered private placement are subject to a minimum hold period of four months. Following expiry of the four month hold period, if the closing price of the common shares of the Company traded on the TSX Venture Exchange, close at a price in excess of $6.00 per common share for 20 consecutive days, the Company will be able to accelerate the expiry of the warrants to the date that is 30 days after notice of the new expiry date is provided to the holders of the warrants.
During the year ended March 31, 2011,2018, pursuant to the Company’s stock option plan and TSXV approval, the Company granted a total of 657,500180,000 incentive stock options to directors and officers employeesat an exercise price of $0.25 per share, expiring on July 11, 2022. During the year ended March 31, 2017, pursuant to the Company’s stock option plan and TSXV approval, the Company granted 250,000 stock options to directors, officers and consultants of the Company exercisable over a five year period expiring March 4, 2016 valued at aan exercise price of $3.80$0.55 per share, using the Black-Scholes valuation model, in accordance with the Company’s 10% rolling stock option plan. expiring on August 1, 2021. During the year ended March 31, 2016, pursuant to the Company’s stock option plan and TSXV approval, the Company granted 1,450,000290,000 stock options to directors, officers and consultants of the Company at an exercise price of $0.07$0.35 per share, expiring on June 3, 2020. The fair value of the stock options granted has been calculated using the Black-Scholes pricing model, based on the following assumptions: weighted average risk free interest rate of 1.01%, volatility factor of 126% and an expected life of five years. Financing Activities FurtherThe Company estimates that it will require additional financing will be required for generalto carry out its exploration plans and administrative costs.operations through the next twelve months. This could involve joint venture, equity financing, sale of assets, or other forms of financing.
Going Concern At March 31, 2016,2018, the Company has a working capital deficit. Additional financing is required. Theof $136,728. Management estimates that these funds will provide the Company with sufficient financial resources to carry out currently planned exploration and operations through the next twelve months. However, the Company has incurred operating losses since inception, has no source of operating cash flow, minimal income from short-term investments, and there can be no assurances that sufficient funding, including adequate financing will be available to explore its mineral properties and to cover general and administrative expenses necessary for the maintenance of a public company. The ability of the Company to arrange additional financing in the future depends in part, on the prevailing capital market conditions and mineral property exploration success. These factors cast substantial doubt on the Company’s ability to continue as a going concern.
The consolidated financial statements do not include any adjustments to the recoverability and classification of recorded assets, or the amounts of, and classification of liabilities that would be necessary if the going concern assumption were not appropriate. Such adjustments could be material. Plans for Fiscal 20172019 The Board of Directors has and will continue the review of all available strategic alternatives intended to maximize shareholder value. It has not determined whether its mineral property interests contain mineral reserves that are economically recoverable. The Company’s continuing operations and the underlying value and recoverability of the amounts shown for mineral property interests are entirely dependent upon the existence of economically recoverable mineral reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of the mineral property interests and on future profitable production or proceeds from the disposition of the mineral property interests. As at July 30, 2018, there were no outstanding stock options pursuant to the Plan, and there were 1,189,142 share purchase warrants outstanding, none of which were “in-the-money”. On January 24, 2019, all of these warrants will expire. | | | | | | | | | | Authorized: an unlimited number of common shares without par value. | | Common shares issued and outstanding | | | Stock options | | | Warrants | | Outstanding at March 31, 2018 | | 12,236,638 | | | 140,000 | | | 1,189,142 | | Shares issued pursuant to option agreement | | 175,000 | | | - | | | - | | Stock options exercised | | 140,000 | | | (140,000) | | | - | | Outstanding at July 30, 2018 | | 12,551,638 | | | - | | | 1,189,142 | |
Contractual Obligations in 201725
| | C. | Research and Development, patents and licenses |
See Item 5 (d) forAs First Energy is a table of contractual obligations at March 31, 2016.mineral exploration company with no producing properties, the information required by this item is inapplicable.
Trend information
As a mineral resource exploration company, Agave’sthe Company’s activities are mainly in response to metal prices and the availability of equity financings. Historically AgaveFurther, we consider that our ability to raise additional funding in order to complete our exploration programs and the plan of operations for its mineral properties for the current fiscal year and beyond will be impacted by prevailing prices for metals. As a mineral resource exploration company, the interest in First Energy’s stock, and our ability to raise financing and conduct work programs, has strategically focusedbeen cyclical as it is related to metal prices that, traditionally, have been cyclical in nature. The Company is a mineral exploration company. At this time, any issues of seasonality or market fluctuations have no material impact other than our ability to raise additional equity capital on terms that are acceptable to the Company. The Company currently defers its mineral property acquisition costs. The Company expenses its exploration activities on potential silver and gold projects. project investigation and general and administration costs and these amounts are included in the net loss for each quarter. The recent trend for metal prices has been somewhat volatile for gold and silver. The mineral exploration industry has been through a very difficult period with low prices for both precious and base metals over the period from 1999 to 2004. Beginning in 2004 prices for both gold and silver began a sustained increase in price that has largely persisted through mid-2012, at which time prices began to decline. However, during the period from 2004 and, in particular, from the 2008 financial crisis onward, such financing has been available periodically. The factors cited above have acted to restrict the availability of funding at certain times. Agave’sCompany’s Management and board of directors are not financial or commodity analysts and therefore cannot and should not forecast prices for silver and gold.metal prices. Management and the directors do monitor silver and goldthe metals industry trends, specifically demand supply data and believe that the silver and gold markets shouldmetals market may continue to experience positive fundamentals. As such Agavethe Company will continue to advance its properties, subject to available funds.
| | E. | Off-statement of financial position arrangements |
See the risk section for average, high and low gold and silver prices to the date of the filing of this Annual Report on Form 20-F.
C. Off-statement of financial position arrangements
The CompanyFirst Energy does not have any off-statement of financial position arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.off-balance sheet arrangements.
| | F. | 29Tabular disclosure of contractual obligations |
D. Tabular disclosure of contractual obligations
The following table summarizes the Company’s short-term and long-term obligations as at March 31, 2016:2018: | | | | | | | | | | | | | | 5thand | | | | | | | | subsequent | | | Less than one year | 1-2 years | 2-3 years | 3-4 years | 4-5 years | 5th and subsequent years(1) | Total | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| (1) | Mineral property option payments are made at the option of the Company, however non-payment of mineral property leases may result in forfeiture of Agave’sFirst Energy’s rights to a particular property. |
Certain statements contained in the foregoing Operating Results and elsewhere in this Annual Report on Form 20-F constitutes forward-looking statements. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of First Energy to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statements were made, and readers are advised to consider such forward-looking statements in light of the risks set forth below. Risk factors that could affect our future results include, but are not limited to, risks inherent in mineral exploration activities and other operating and development risks, no revenue from commercial operations, no assurance that any of our mineral properties possess commercially mineable bodies of ore, financial risk, shareholder dilution from additional equity financings, competition, environmental regulations, changes to reclamation requirements, volatility and sensitivity to market prices for precious and base metals, the impact of changes in foreign currencies' exchange rates, political risk, changes in government regulation and policies including trade laws and policies, demand for precious and base metals, and receipt of permits and approvals from governmental authorities. Safe Harbour26
See above – “Cautionary Statement Regarding Forward-Looking Information.”
ITeM 6. Directors, senior management and employees
| | ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
A. Directors and Senior Management
| | A. | Directors and Senior Management |
The following table lists the directors and senior management of the Company.Company as at March 31, 2018. The directors have served in their respective capacities since their election and/or appointment and will serve until the next AGM or until a successor is duly elected, unless the office is vacated in accordance with the Articles/By-Laws of the Company. Mr. Ronald Lang was appointed President and Chief Executive Officer on October 3, 2013, and Ms. Sherri Odribege was appointed as Chief Financial Officer on June 3, 2015. Ms. Angela Yap was appointed Chief Financial Officer on May 30, 2011 and resigned on June 3, 2015. Ms. Shannon Ross resigned as Chief Financial Officer on May 30, 2011. Mr. Gerald Feldman was appointed as a director on December 21, 2010. Mr. Christopher Hebb, Mr. Ronald Lang and Mr. Dwayne Melrose were appointed directors on June 23, 2011. Mr. Frank Lang resigned as a director of the Company on June 23, 2011. Mr. Ferdinand Holcapek did not stand for re-election at the Company’s December 13, 2012 AGM. Messrs. O’Connor, Hebb, Berner, Feldman, Merrifield and Melrose did not stand for re-election at the Company’s September 27, 2013 AGM, at which time Mr. Benjamin Ainsworth and Dr. A. Darryl Drummond were appointed. On July 7, 2014 Dr. Drummond retired and on July 8, 2014 Dr. Derek McBride and Mr. Robert Paul were appointed. Mr. Ainsworth did not stand for re-election at the Company’s December 14, 2014 AGM at which time Mr. Navin Varshney was elected. | | | | Name and Position | Other Principal Directorships | Shares Beneficially Owned as at July 5, 201630, 2018 | Principal Business Activities Outside the Company | Ronald M. LangGurminder Sangha(1) Director, President and Chief Executive Officer | NoneMetron Capital Corp. Barrel Energy Inc. | 17,143,03086,000 | Businessman and consultant to companies in the junior resource sector | Sherri OdribegeJurgen Wolf(2) Director, Chief Financial Officer and Corporate Secretary | Metron Capital Corp. Altima Resources Ltd. Curlew Lake Resources Inc. Iconic Minerals Ltd. Petrichor Energy Inc. Transamerican Energy Inc. Gainey Resources Ltd. Barrel Energy Inc. | Nil | Consultant to companies in the junior resource sector | Dr. Muzaffer Sultan(3) Director, and VP of Exploration | None | Nil | Controller – Dauntless Developments Ltd.Geology consultant to companies in the junior resource sector | Derek McBride
Director Paul Taggar(4) | None | Nil33,333 | Consulting GeologistConsultant to companies in the junior resource sector |
Robert Paul
Director
| None | Nil | Corporate Communications Professional | Navin Varshney
Director (1) | Earny Resources Ltd.
Jaxon Minerals Inc.Gurminder was appointed to the Company’s board of directors on December 22, 2017 and appointed President and Chief Executive Officer on March 26, 2018. Mr. Sangha is an independent business advisor to the resources industry and brings over twelve years of management and financing expertise in both public and private companies.
| Nil | President – N.K.V. Engineering & Consulting Ltd. |
| | 30(2) | Jurgen Wolf was appointed to the Company’s board of directors on February 22, 2018 and appointed Chief Financial Officer and Corporate Secretary of the Company on February 28, 2018. Mr. Wolf has been involved in the oil and gas industry for more than 15 years, assisting public companies with investor relations and administration. Mr. Wolf was President and a director of former US Oil and Gas Resources Inc., which amalgamated to form Petrichor Energy Inc. in 2005. Mr. Wolf is a director of several public companies. |
| | (3) | Dr. Muzaffer Sultan was appointed VP Exploration and Director of the Company on March 26, 2018. Dr. Sultan brings extensive experience in mineral exploration, 3D modelling, surface and underground exploration of mineral properties. Dr. Sultan holds a Ph.D. in Geology and Masters of Science from the University of South Carolina. | | | (4) | Paul Taggar was appointed to the Company’s board of director on December 11, 2017 and resigned June 15, 2018 due to other business commitments. Mr. Taggar is a Chartered Professional Accountant with over 15 years of professional experience. Mr. Taggar is currently the Chief Financial Officer for a private commodities firm. Mr. Taggar is a Member of the Canadian Institute of Chartered Accountants and has a BBA from Simon Fraser University. |
Ronald M. Lang has been President and Chief Executive Officer since October 2013. Mr. Lang is a businessman and consultant with over twenty years' experience working with companies in the junior resource sector.
Sherri Odribege was appointed Chief Financial Officer on June 3, 2015. Ms. Odribege brings over 25 years of industry accounting and financial management experience. This experience includes successively senior positions with Breakwater Resources Ltd., Hunter Dickinson Inc., ValGold Resources Ltd, Emgold Mining Corporation, Sultan Minerals Inc. and Cream Minerals Ltd. Prior to her appointment as Chief Financial Officer, Ms. Odribege had served as the Company’s Corporate Controller since 2012.
Dr. Derek McBride, P.Eng. (Ontario/British Columbia) graduated from the Haileybury School of Mines with a diploma in mining technology, obtained B.Sc. and M.Sc. Degrees in geological engineering from Queen’s University, and a Ph.D. in geology from the University of New Brunswick. Dr. McBride has taught at St. Francis Xavier University, and for the past 35 years worked throughout the world in mineral exploration, authoring reports on mineral deposits in 16 countries.
Robert Paul has worked within the Canadian mineral industry for over 20 years, serving as a director and corporate communications professional for numerous TSX Venture listed companies.
Mr. Navin Varshney is the President of N.K.V Engineering & Consulting Ltd., a private company that has provided structural and geotechnical engineering services for residential projects for the last 25 years. Mr. Varshney obtained a Bachelor of Science degree in Engineering from the Aligarh Muslim University in India in 1982, a Diploma from the Faculty of Civil Engineering at the University of Calgary in 1985, and his P. Eng. designation from the Association of Professional Engineers & Geoscientists of British Columbia in 1988. Mr. Varshney has been involved in the equity market since 1988. He has vast experience in investing in public companies as well as in acting as Director and/or Officer for public companies traded on the Vancouver Stock Exchange and TSX Venture.
Executive officers are appointed by the board of directors to serve until terminated by the board of directors or until their successors are appointed. Certain of the directors serve as directors of other reporting companies and if a conflict of interest arises at a meeting of the board of directors, any director in a conflict will declare his interest and abstain from voting on such matter. All directors have a term of office expiring at the next AGM. Family Relationships There are no family relationships among any of the persons named above. Arrangements There are no arrangements or understandings regarding the selection of any of the persons named above. 27 B. Compensation and Discussion Analysis
Compensation of Executive Officers “Named Executive Officer” (“NEO”) means each of the following individuals: (a) | (a) | A Chief Executive Officer (“CEO”) or one who acted in a capacity similar to a CEO, for any part of the financial year ended March 31, 2016;2018; |
| | (b) | A Chief Financial Officer (“CFO”) or one who acted in a capacity similar to a CFO, for any part of the financial year ended March 31, 2016;2018; |
| | (c) | Each of the three most highly compensated executive officers, or the three most highly compensated individuals acting in a similar capacity, other than the CEO and CFO, at the end of the most recently completed financial year whose total compensation was, individually, more than $150,000 for that financial year; and |
| | (d) | Each individual who would be a NEO under paragraph (c) but for the fact that the individual was neither an executive officer of the Company, nor acting in a similar capacity, as at the financial year ended March 31, 2016.2018. |
The Company had twosix NEOs during the year. The following disclosure sets out the compensation that the Board intended to pay, make payable, award, grant, give or otherwise provide to each NEO and director for the financial year ended March 31, 2016.2018. Compensation of Directors and NEOs The Company’s Corporate Governance and Compensation Committee (“CGCC”) has responsibility for reviewing compensation for the Company’s directors and senior management. The independent directors are encouraged to meet at any time they consider necessary without any members of management including the non-independent directors being present. The Company's auditors, legal counsel and employees may be invited to attend. The independent directors exercise their responsibilities for independent oversight of management through a strong CGCC. The Board has appointed Dr. Derek McBride as Chairman of the Corporate Governance and Compensation Committee to assist the Board in being effective, cohesive and independent from management. To determine compensation payable, the CGCC reviews compensation paid for directors and NEOs of companies of similar size and stage of development in the mineral exploration industry and determines an appropriate compensation reflecting the need to provide incentive and compensation for the time and effort expended by the directors and senior management while taking into account the financial and other resources of the Company. In setting the compensation, the CGCC annually reviews the performance of the NEOs in light of the Company's objectives and considers other factors that may have impacted the success of the Company in achieving its objectives and financial resources. The Company’s compensation policies and its stock option plan are intended to assist the Company in attracting, retaining and motivating directors, officers and employees of the Company and of its subsidiaries and to closely align the personal interests of such directors, officers and employees with those of the shareholders by providing them with the opportunity, through stock options, to acquire shares in the capital of the Company. Option-Based Awards The board of directors of the Company implementedadopted a stock option plan, as amended (the “Plan”), effective September 23, 2013,December 8, 2018, which has been was approved by the TSX Venture Exchange and the shareholders of the Company on September 23, 2013,December 8, 2018, at the Company’s AGM on that date.date and submitted to the TSX Venture Exchange for approval. The number of shares in respect of which options may be issued pursuant to options previously granted and those granted under the Plan is a maximumplan shall not exceed 10% of 2,723,500the issued and outstanding common shares of the Company.Company at the relevant grant date. In addition, the number of shares which may be reserved for issuance to any one individual may not exceed 5% of the issued shares on a yearly basis or 2% if the optionee is engaged in investor relations activities or is a consultant. In accordance with good corporate governance practices and as recommended by Canadian National Policy 51-201Disclosure Standards, the Company imposes black-out periods restricting the trading of its securities by directors, officers, employees and consultants during periods surrounding the release of annual and interim financial statements and at other times when deemed necessary by management and the Board. In order to ensure that 28
optionees are not prejudiced by the imposition of such black-out periods, the Plan includes a provision to the effect that any outstanding options with an expiry date that falls during a management imposed black-out period or within five days thereafter will be automatically extended to a date that is ten trading days following the end of the black-outblackout period. The Plan provides that if a change of control (as defined therein) occurs, or if the Company is subject to a take-over bid, all shares subject to stock options shall immediately become vested and may thereupon be exercised in whole or in part by the optionees. The Board may also accelerate the expiry date of outstanding stock options in connection with a take-over bid. The Plan contains a provision that, if pursuant to the operation of the plan's adjustment provisions, in respect of options granted under the Plan (the "Subject Options"), an optionee receives options to purchase securities of another company (the "New Company"), such new options shall expire on the earlier of: (i) the expiry date of the Subject Options; (ii) if the optionee does not become an eligible person in respect of the New Company, the date that the Subject Options expire pursuant to the applicable provisions of the Plan relating to expiration of options in cases of death, disability or termination of employment discussed in the preceding paragraph above (the "Termination Provisions"); (iii) if the optionee becomes an eligible person in respect of the New Company, the date that such new options expire pursuant to the terms of the New Company's stock option plan that correspond to the Termination Provisions; and (iv) the date that is one (1) year after the Optionee ceases to be an eligible person in respect of the New Company or such shorter period as determined by the Board. The Plan allows the board to impose vesting provisions and provides that, unless otherwise specified at the time of grant, all options shall vest and become exercisable in full immediately upon grant of such options. However, as required by the policies of the Exchange, options granted to optionees performing Investor Relations Activities must vest in stages over 12 months with no more than ¼ of such options vesting in any three month period. The purpose of the Plan is to allow the Company to grant options to directors, officers, employees and service providers, as an incentive for performance, and as an opportunity to participate in the success of Agave.First Energy. The granting of such options is intended to align the interests of such persons with that of the shareholders. Options are exercisable over periods of up to ten years as determined by the board of directors of AgaveFirst Energy and are required to have an exercise price no less than the market price as defined in the Plan prevailing on the day that the option is granted. Pursuant to the Plan, the board of directors may from time to time authorize the issue of options to directors, officers and employees of and consultants to AgaveFirst Energy and its subsidiaries or employees of companies providing management services to AgaveFirst Energy or its subsidiaries. At March 31, 2016,2018, and at July 5, 2016,30, 2018, the maximum number of common shares which may be issued pursuant to stock options granted under the Plan is equal to 2,723,5001,083,664 and 2,763,500,1,255,164 respectively, of the issued and outstanding common shares at the respective dates. A total of 1,490,000140,000 stock options were outstanding at March 31, 20162018 and 1,450,000Nil stock options were outstanding at July 5, 2016.30, 2018. During the year ended March 31, 2016, there2018, 180,000 options were 1,450,000granted, and 370,000 options granted. None were exercised, 167,500 expired and 170,000 were forfeited.forfeited or expired. Subsequent to March 31, 2016, there2018, 140,000 options were none granted or exercised and 40,000 expired.exercised. The board of directors generally grants options to corporate executives on the recommendation of the CGCC. As part of its annual work plan, the CGCC reviews, among other things, executive compensation and makes appropriate recommendations to the board regarding such compensation, including but not limited to the grant of options. Options may be granted at other times of the year to individuals commencing employment with the Company. 29
Summary Compensation Table The compensation paid to the NEOs during the yearsyear ended March 31, 2018 is as set out below: NEO Name and Principal Position | Year(1) | Salary ($) | Share-Based Awards ($) | Option-Based Awards(2) ($) | Non-Equity Incentive Plan Compensation ($) | Pension Value ($) | All Other Compen-sation ($(3)) | Total Compen-sation ($) | Annual Incentive Plans | Long-term Incentive Plans | Ronald M. Lang President and CEO | 2016 | 60,000 | N/A | 3,622 | N/A | N/A | N/A | Nil | 63,622 | 2015 | 60,000 | N/A | Nil | N/A | N/A | N/A | 1,004 | 61,004 | 2014 | 15,000 | N/A | Nil | N/A | N/A | N/A | 6,250 | 36,250 | Michael E. O'Connor(4) President and CEO | 2016 | Nil | N/A | Nil | N/A | N/A | N/A | Nil | Nil | 2015 | Nil | N/A | Nil | N/A | N/A | N/A | Nil | Nil | 2014 | 52,500 | N/A | Nil | N/A | N/A | N/A | 144,159 | 196,659 | Angela Yap(4) CFO and Corporate Secretary | 2016 | Nil | N/A | Nil | N/A | N/A | N/A | 3,453 | 3,453 | 2015 | Nil | N/A | Nil | N/A | N/A | N/A | 26,538 | 26,538 | 2014 | 64,485 | N/A | Nil | N/A | N/A | N/A | 23,705 | 88,190 | Sherri Odribege CFO and Corporate Secretary | 2016 | Nil | N/A | 3,622 | N/A | N/A | N/A | Nil | 3,622 | 2015 | Nil | N/A | Nil | N/A | N/A | N/A | Nil | Nil | 2014 | Nil | N/A | Nil | N/A | N/A | N/A | Nil | Nil |
| | | | | | | | | | NEO Name and Principal Position | Year (1) | Salary/Fees ($) | Share- Based Awards ($) | Option- Based Awards(2) ($) | Non-Equity Incentive Plan Compensation ($) | Pension Value ($) | All Other Compen- sation ($(3)) | Total Compen- sation ($) | Annual Incentive Plans | Long- term Incentive Plans | | | | GurminderSangha(4) President and CEO | 2018 | 18,000 | N/A | Nil | N/A | N/A | N/A | Nil | Nil | JurgenWolf(5) CFO and Corporate Secretary | 2018 | Nil | N/A | Nil | N/A | N/A | N/A | Nil | Nil | ErnestPeters(6) Former President and CEO | 2018 | 16,750 | N/A | 9,821 | N/A | N/A | N/A | Nil | Nil | RonaldLang(7) Former President and CEO | 2018 | Nil | N/A | Nil | N/A | N/A | N/A | Nil | Nil | DennisCojuco(8) Former CFO and Corporate Secretary | 2018 | 45,000 | N/A | 9,821 | N/A | N/A | N/A | Nil | 54,821 | AngelaYap(9) Former CFO and Corporate Secretary | 2018 | Nil | N/A | Nil | N/A | N/A | N/A | Nil | Nil | 2017 | Nil | N/A | Nil | N/A | N/A | N/A | Nil | Nil | 2016 | Nil | N/A | Nil | N/A | N/A | N/A | 3,453 | 3,453 |
(1) | (1) | Financial years ended March 31, 2014, March 31, 2015 and March 31, 2016, respectively.31. |
(2) | (2) | The "grant date fair value" of options granted during the year is determined by using the Black-Scholes model, as described below, and the following assumptions: For 2018: stock price - $0.05, exercise price - $0.05, an option life of 5.0 years, a risk-free interest rate of 1.45% and a volatility of 210.50%. For 2017: stock price - $0.11, exercise price - $0.11, an option life of 5.0 years, a risk-free interest rate of 0.68% and a volatility of 179.27%. For 2016: stock price - $0.07 (post-consolidation), exercise price - $0.07, an option life of 5.0 years, a risk-free interest rate of 1.01% and a volatility of 125.64%. Please see the table under "Incentive Plan Awards" for the 'in-the-money' value of these options. |
(3) | (3) | Includes any health, dental, parking, group plan insurance benefits and professional fees paid by the Company on behalf of the NEO. |
(4) | (4)Gurminder was appointed to the Company’s board of directors on December 22, 2017 and appointed President and Chief Executive Officer on March 26, 2018. | (5) | Jurgen Wolf was appointed to the Company’s board of directors on February 22, 2018 and appointed Chief Financial Officer and Corporate Secretary of the Company on February 28, 2018. | (6) | Ernest Peters was appointed to the Company’s board of directors and as the Company’s President and Chief Executive Officer on July 11, 2017. Mr. Peters resigned as director and President and Chief Executive Officer on March 26, 2018. | (7) | Ron Lang resigned as director and President and Chief Executive Officer on July 11, 2017. | (8) | Dennis Cojuco resigned as Chief Financial Officer on February 28, 2018. | (9) | Includes salary paid through Quorum Management and Administrative Services Inc. |
In the year ended March 31, 2016, $Nil- (2015- $Nil; 2014 - $40,456) in management, administrative, geological and other services were provided by Quorum on a cost recovery basis to the various entities sharing certain personnel costs, office space, and overhead with the Company until August 31, 2012.30
As part of its annual work plan, the CGCC reviews, among other things, executive compensation and makes appropriate recommendations to the board regarding such compensation. Incentive Plan Awards Outstanding Share-Based Awards and Option-Based Awards The following table sets out all share-based awards and option-based awards outstanding as at the financial year ended March 31, 2016,2018, for each NEO: | Option-based Awards | Share-based Awards | Name | Number of Securities Underlying Unexercised Options(1) | Option Exercise Price ($) | Expiry Date | Value of Unexercised in-the money Options(1) ($) | Number of Shares or Units of Shares that have not Vested (#) | Market or Payout Value of Share-based Payments that have not Vested ($) | Ronald M.. Lang | 250,000 | 0.07 | June 3, 2020 | Nil | N/A | N/A | 40,000 | 1.60 | June 23, 2016 | Nil | N/A | N/A | Sherri Odribege | 250,000 | 0.07 | June 3, 2020 | Nil | N/A | N/A | Angela Yap | Nil | N/A | N/A | Nil | N/A | N/A |
| | | | | | | | Option-based Awards | Share-based Awards | | Number of | | | Value of | Number of | Market or | | Securities | Option | | Unexercised | Shares or | Payout Value | | Underlying | Exercise | | in-the | Units of | of Share-based | Name | Unexercised | Price | Expiry Date | money | Shares that | Payments that | | Options(1) | ($) | | Options(1) | have not | have not | | | | | ($) | Vested | Vested | | | | | | (#) | ($) | Ernie Peters(2) | 60,000 | 0.25 | June 30, 2018 | 900 | Nil | Nil | Dennis Cojuco(3) | 40,000 | 0.25 | May 28, 2018 | 600 | Nil | Nil |
(1) | (1) | This amount is calculated based on the difference between the market value of the shares underlying the options at March 31, 2016,2017, the end of the most recently completed financial year, which was $0.03,$0.05, and the exercise price of the options. | (2) | Ernest Peters was appointed to the Company’s board of directors and as the Company’s President and Chief Executive Officer on July 11, 2017. Mr. Peters resigned as director and President and Chief Executive Officer on March 26, 2018. | (3) | Dennis Cojuco resigned as Chief Financial Officer on February 28, 2018. |
Incentive Plan Awards – Value Vested or Earned During the Year The following table sets out all incentive plans (value vested or earned) during the financial year ended March 31, 2016,2018, for each NEO: Name
|
| | | | Option-based awards – | Share-based awards – | Non-equity incentive plan | | Value vested during the year(1)($)
| Share-based awards – Value vested during the year
($)
| Non-equity incentive plan compensation – Value
| Name | year(1) | year | earned during the year(2) ($)
| Ronald M.. Lang | ($) | ($) | ($) | Ernie Peters(3) | Nil(2) | N/A | N/A | Sherri OdribegeDennis Cojuco(4) | Nil(2) | N/A | N/A | Angela Yap | Nil(2) | N/A | N/A |
Notes:
(1) | (1) | The aggregate dollar value that would have been realized if the options had been exercised on the vesting date, based on the difference between the market price of the underlying securities at exercise and the exercise price of the options on the vesting date. |
(2) | (2) | The Company does not have Incentive Plan Awards in place other than option-based awards. | (3) | Ernest Peters was appointed to the Company’s board of directors and as the Company’s President and Chief Executive Officer on July 11, 2017. Mr. Peters resigned as director and President and Chief Executive Officer on March 26, 2018. | (4) | Dennis Cojuco resigned as Chief Financial Officer on February 28, 2018. |
Discussion The Company accounts for stock options issued to employees at the fair value determined on the grant date using the Black-Scholes option pricing model. The fair value of the options is recognized as an expense using the graded vesting method where the fair value of each tranche is recognized over its respective vesting period. When stock options are forfeited prior to becoming fully vested, any expense previously recorded is reversed. Share-based payments made to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued, if it is determined that the fair value of the goods or services cannot be reliably measured. These payments are recorded at the date the goods and services are received. Warrants issued are recorded at estimated fair values determined on the grant date using the Black-Scholes model. If and when the stock options or warrants are ultimately exercised, the applicable amounts of their fair values in the reserves account are transferred to share capital. See “Option Based Awards” and “Securities Authorized for Issuance under Equity Compensation Plans” for further information on the Stock Option Plan. 31
The Company does not have Incentive Plan Awards, pursuant to which cash or non-cash compensation intended to serve as an incentive for performance (whereby performance is measured by reference to financial performance or the price of the Company’s securities) was paid. Pension Plan Benefits Defined Benefit Plan or Defined Contribution Plan The Company has no pension plans for NEOs that provide for payment or benefits at, following, or in connection with retirement. Deferred Compensation Plans The Company has no deferred compensation plan for NEOs. Termination and Change in Control Benefits The Company hasehas no contract, agreement plan or arrangement that provides for payment to a NEO at, following or in connection with any termination (whether voluntary, involuntary or constructive), resignation, retirement, a change in control of the Company or a change in a NEO’s responsibilities, with the exception of the following: The contract of Angela Yap provided for payment to Ms. Yap of a minimum severance allowance if the Company should terminate the employment agreement without cause or Ms. Yap should terminate the agreement for good cause. The minimum severance allowance would be calculated as one year’s salary as in effect as at the termination date plus benefits will be covered, other than disability insurance coverage or comparable alternate benefits, for the same period as the severance. Additionally, the contract provides for payment to Ms. Yap of the same severance allowance in certain circumstances in the event of an acquisition or change of control by another company or other similar form of transaction. Ms. Yap’s employment was terminated effective June 3, 2015 and a lump sum payment in the amount of $42,000 was negotiated as severance.
Director Compensation On June 23, 2011 the board of directors approvedThe Company does not have a resolution to compensate all directors of the Company, with the exception of one non-independent director, Mr. O’Connor:
Chairman and Chair of the Audit Committee $15,000 per year
Other Directors $10,000 per year
Attendance at directors meetings $ 250 per meeting
In addition, directors are entitled to reimbursementcompensation plan for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the board of directors. The board of directors may award special remuneration to any director undertaking any special services on behalf of the Company other than services ordinarily required of a director. This is subject to recommendation by the Compensation and Corporate Governance committee.
Payment of directors’ fees have been deferred as of Q2-2013 due to the company’s cash situation.
Effective September 27, 2013 the Company has ceased payment or accrual of directors’ fees.
Director Compensation Table The following table sets out all amounts of compensation provided to the directors who are not NEOs for the Company’s most recently completed financial year: | | | | | | | | | | Share- | Option- | Non-equity | | | | | Fees | based | based | incentive plan | Pension | All other | | | earned | awards | awards | compensation | value | compensation | Total | Name | ($) | ($) | ($) | ($) | ($) | ($) | ($) | Paul Taggar(1) | Nil | Nil | Nil | Nil | Nil | 5,000 | 5,000 | Muzaffer Sultan | Nil | Nil | Nil | Nil | Nil | 1,000 | 1,000 | Richard Haines(2) | Nil | Nil | 9,821 | Nil | Nil | Nil | 9,821 | Warren Mirko(3) | Nil | Nil | 14,731 | Nil | Nil | 6,120 | 20,851 |
Name
(1) | Fees earned
($)
| Share-based awards
($)
| Option-based awards
($)
| Non-equity incentive plan compensation
($)
| Pension value
($)
| All other compensation
($)
| Total
($)
Mr. Taggar resigned as a director on June 15, 2018 | Derek McBride(2) | Nil | Nil | 3,622 | Nil | Nil | Nil | 3,622Mr. Haines resigned as director on December 11, 2017. | Robert Paul(3) | Nil | Nil | 3,622 | Nil | Nil | 15,000 | 18,622 | Navin VarshneyMr. Mirko resigned as director on December 22, 2017.
| Nil | Nil | 3,622 | Nil | Nil | Nil | 3,622 |
Outstanding Share-based Awards and Option-based Awards The following table sets out all option-based awards outstanding as at the financial year ended March 31, 20162018 each director, excluding one director whose awards are already provided in the disclosure for NEOs for the Company: | Option-based Awards | Share-based Awards | Name | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration Date | Value of Unexercised in-the-money Options(1) ($) | Number of Shares or Units of Shares that have not Vested(2) (#) | Market or Payout Value of Share-based Awards that have not Vested(2) ($) | Derek McBride | 250,000 | 0.07 | June 3, 2020 | Nil | Nil | Nil | Robert Paul | 250,000 | 0.07 | June 3, 2020 | Nil | Nil | Nil | Navin Varshney | 250,000 | 0.07 | June 3, 2020 | Nil | Nil | Nil |
| | | | | | | | Option-based Awards | Share-based Awards | Name | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration Date | Value of Unexercised in-the- money Options(1) ($) | Number of Shares or Units of Shares that have not Vested(2) (#) | Market or Payout Value of Share- based Awards that have not Vested(2) ($) | Warren Mirko(3) | 40,000 | 0.25 | May 2, 2018 | 600 | Nil | Nil | Ernie Peters(4) | 60,000 | 0.25 | June 30, 2018 | 900 | Nil | Nil |
(1) | (1) | This amount is calculated based on the difference between the market value of the shares underlying the options at March 31, 20162018 the end of the most recently completed financial year, which was $0.03,$0.265, and the exercise price of the options. |
(2) | (2) | The Company does not have incentive plan awards in place other than option-based awards. |
32
(3) | Mr. Mirko resigned as director on December 22, 2017. | (4) | 37Mr. Peters resigned as director and President and Chief Executive Officer on March 26, 2018. |
Incentive Plan Awards – Value Vested or Earned During the Year The following table sets out all incentive plans (value vested or earned) during the financial year ended March 31, 2015,2018, for each director, excluding a director who is already set out in disclosure for a NEO for the Company: Name
| | | | Name | Option-based Awards – Value Vested During the Year(1)(2)(3) ($) | Share-based Awards – Value Vested During the Year(3) ($) | Non-equity Incentive Plan Compensation – Value Earned During the Year(3) ($) | Derek McBrideWarren Mirko(4) | Nil | N/A | N/A | Robert Paul Taggar(5) | Nil | N/A | N/A | Navin VarshneyMuzaffer Sultan | Nil | N/A | N/A | Richard Haines(6) | Nil | N/A | N/A |
(1) | (1) | The aggregate dollar value that would have been realized if the options had been exercised on the vesting date, based on the difference between the market price of the underlying securities at exercise and the exercise price of the options on the vesting date. |
(2) | (2) | Under the terms of the Plan, all options vest upon the grant date. |
(3) | (3) | The Company does not have incentive plan awards in place other than option-based awards. | (4) | Mr. Mirko resigned as director on December 22, 2017. | (5) | Mr. Taggar resigned as a director on June 15, 2018 | (6) | Mr. Haines resigned as director on December 11, 2017. |
Securities Authorized for Issuance under Equity Compensation Plans Equity Compensation Plan Information | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | Plan Category(1) | (a) | (b) | (c) | (a) | (b) | (c) | Equity compensation plans approved by security holders(2) | 1,490,000 | $0.11 | 1,233,500 | 1,329,142 | $0.38 | 1,083,664 | Equity compensation plans not approved by security holders | NIL | NIL | NIL | Total | 1,490,000 | $0.11 | 1,233,500 | 1,329,142 | $0.38 | 1,083,664 |
(1) | (1) | The only “equity compensation plan” in place is the Company’s stock option plan. See “Option Based Awards” above. |
(2) | (2) | As at March 31, 2016.2018. |
Indebtedness of Directors and Executive Officers None of the directors, executive officers, or associates of any such person, has been indebted to the Company at any time during the most recently completed financial year. Aggregated Options Exercises during the Most Recently Completed Financial Year None. C. Board Practices
The Company has four directors as of July 30, 2018, namely: Gurminder Sangha, Jurgen Wolf, Muzaffer Sultan and Laurie Stevenson. Mr. Sangha, Mr. Wolf, Dr. Sultan and Mr. Stevenson were appointed on December 22, 2017, February 22, 2018, March 26, 2018 and June 26, 2018, respectively. All directors of Agave at July 5, 2016 were elected at the December 18, 2015 AGMwill serve for a term of office expiring at the next AGM of Agave.the Company. All officers have a term of office lasting until their removal or replacement by the board of directors. 33
An “independent” director under the TSX governance guidelines is a director who is independent from management and is free from any interest and any business or other relationship which could materially interfere with his or her ability to act in the best interest of the Company other than interests arising from shareholding. Where a company has a significant shareholder, in addition to a majority of “independent” directors, the Board should include a number of directors who do not have interest or relationships with either the Company or the significant shareholder. The Board currently consists of sevenfour directors, sixtwo of whom are independent based upon the tests for independence set forth in Canadian National Instrument 52-110. Derek McBride, Robert Paul and Navin Varshney are independent. Ronald LangMr. Sangha is not independent as he is the President and CEO of the Company, Mr. Wolf is not independent as he is the CFO of the Company. The Company is currently seeking to add an additional independent director. Except as set out below, no director and/or executive officer has been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court of competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he is a director and/or executive officer, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he is an officer or director from engaging in or continuing any conduct, practice or employment in connection with the purchase or sale of securities, or convicting such person of any felony, or misdemeanor involving a security or in any aspect of the securities business of theft. There are no director’s services contracts with the Company providing for benefits upon termination of employment except. Agaveemployment. The Company has no compensatory plan or arrangement in respect of compensation received or that may be received by the directors of the Company in its most recently completed or current financial year to compensate such directors in the event of termination as director (resignation, retirement) or in the event of a change in control. There are no arrangements or understandings with any two or more directors or executive officers pursuant to which he was selected as a director or executive officer. Other than as disclosed in related party transactions, fees payable to directors as disclosed above under "Director Compensation", and salaries for executive officers, there is no compensation paid to outside directors other than stock-based compensation. The following information is provided with respect to the Company’s directors, and members of its administrative, supervisory or management body and includes the date of expiration of the current term of office and the period during which the person has served in that office.
Name | | Position(s) with Company | | Term of Office/Period of Service | Ronald M. Lang | | President and Chief Executive Officer
Director
| | Since October 3, 2013
Since June 23, 2011
1989 to 2005
| Sherri Odribege | | Chief Financial Officer
Corporate Secretary
| | Since June 3, 2015
Since June 3, 2015
| Angela Yap | | Chief Financial Officer
Corporate Secretary
| | May 30, 2011 to June 3, 2015
February 24, 2012 to June 3, 2015
| Derek McBride | | Director | | Since July 8, 2014 | Robert Paul | | Director | | Since July 8, 2014 | Navin Varshney | | Director | | Since December 18, 2014 | Darryl Drummond | | Director | | September 27, 2013to July 8, 2014 | Ben Ainsworth | | Director | | September 27, 2013 to December 18, 2014 | Christopher H. Hebb | | Chairman
Director
| | June 23, 2011 to September 27, 2013
June 23, 2011 to September 27, 2013
| Michael E. O’Connor | | President
Chief Executive Officer
Director
| | October 2, 2008 to October 3, 2013
October 2, 2008 to October 3, 2013
October 2, 2008 to September 27, 2013
| Ferdinand Holcapek | | Director
Sole Administrator, Cream Minerals de Mexico, S.A. de C.V. (sold effective February 12, 2015)
| | Since October 10, 2001 to December 13, 2012
Since December 1999
| Robin Merrifield | | Director
Chair, Audit Committee
| | September 21, 2004 to September 27, 2013
September 21, 2004 to September 27, 2013
| Sargent H. Berner | | Director
Chair – Corporate Governance & Compensation Committee
| | January 23, 1996 to August 12, 2013
January 23, 1996 to August 12, 2013
| Gerald Feldman | | Director | | December 21, 2010 to September 27, 2013 | Dwayne Melrose | | Director | | June 23, 2011 to September 27, 2013 | Frank A. Lang | | Non-Executive Chairman
President &
Chief Executive Officer
Director
| | October 2, 2008 to June 23, 2011 October 12, 1966 to October 2, 2008
September 25, 2002 to October 2, 2008
October 12, 1966 to June 23, 2011
| C. Douglas Lang | | Director | | May 30, 2006 to November 9, 2010 | Arthur G. Troup | | Vice President, Exploration
Director
| | September 24, 1987 to November 8, 2010
September 25, 1997 to November 8, 2010
| Shannon M. Ross | | Chief Financial Officer &
Corporate Secretary
| | January 31, 2000 to May 30, 2011 |
Audit Committee Navin Varshney, Ronald LangAs of July 30, 2018, Gurminder Sangha, Muzaffer Sultan and Robert PaulLaurie Stevenson are the members of Agave’s audit committee. Thethe Company’s audit committee is appointed annually by the directors of Agave at the first meeting of the board held after Agave’s AGM.and with Mr. Stevenson acting as Chair. Its primary function is to review the financial statements of Agavethe Company before they are submitted to the board for approval. The audit committee is also available to assist the board if required with matters relating to the appointment of Agave’sthe Company’s auditor and the overall scope and results of the audit, internal financial controls, and financial information for publication for various purposes.
Corporate Governance and Executive Compensation Committee Members of the Corporate Governance and Executive Compensation Committee are Derek McBride, Navin VarshneyGurminder Sangha, Muzaffer Sultan and Robert Paul.Laurie Stevenson. The committee was formed for makingto make recommendations to the board with respect to developments in the area of corporate governance, the practices of the board, finding appropriate candidates for nomination to the board and for evaluating the performance of the board, and senior executives and making recommendations as to their compensation. D. Employees
At March 31, 2016, Agave had one employees, Ronald Lang,2018, the President and CEO. Company did not have any employees. E. Share Ownership
See Item 6A. – “Directors and Senior Management”. The following table sets forth, as at March 31, 2016,2018, all stock options held by the directors and members of senior management of the Company, including the number of common shares issuable upon the valid exercise of the options, the exercise price and expiration date of the options. The following table sets forth, as of July 30, 2018, the number of First Energy’s common shares beneficially owned by the directors and members of senior management of First Energy, individually, and as a group, and the percentage of ownership of the outstanding common shares represented by such shares. 34 Name and Title of Optionholder | Number of Shares Underlying Options | Title of Class | Exercise Price ($) | Expiry Date | Directors and Officers of Agave | Ronald M. Lang, President and Chief Executive | 250,000 40,000 | Common Common | 0.07 1.60 | June 3, 2020 June 23, 2016 | Sherri Odribege Chief Financial Officer | 250,000 | Common | 0.07 | June 3, 2020 | Robert Paul Director | 250,000 | Common | 0.07 | June 3, 2020 | Derek McBride Director | 250,000 | Common | 0.07 | June 3, 2020 | Navin Varshney Director | 250,000 | Common | 0.07 | June 3, 2020 | Total Directors/Officers (5 persons) | 1,290,000 | Common | | | Total Employees/Consultants (2 persons) | 200,000 | Common | 0.07 | June 3, 2020 | Total Directors/Officers/ Employees/ Consultants (7 persons) | 1,490,000
| Common | $0.07 to $1.60 | June 23, 2016 to June 3, 2020 | | | | | | |
The shareholders listed below possess sole voting and investment power with respect to the shares shown. Directors and Senior Management Share Ownership as at July 30, 2018 | | | Name of Shareholder | Number of Shares held, directly and indirectly, at July 30, 2018* | % of Issued and Outstanding Shares at July 30, 2018 * | Gurminder Sangha | 86,000 | 0.69% | Jurgen Wolf | Nil | Nil | Laurie Stevenson | Nil | Nil | Muzaffer Sultan | Nil | Nil |
*Based on 12,551,638 common shares issued and outstanding, and no warrants and stock options held by officer and directors as at July 30, 2018. | | ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
ITEM 7. Major shareholders and related party transactions
A. Major Shareholders
The Company is a publicly traded corporation, incorporated in the province of British Columbia, the registered shareholders of which include residents of the United States, residents of Canada and other foreign residents. To the extent known by the directors and executive officers of the Company, the Company is not directly or indirectly owned or controlled by another corporation. To the knowledge of the directors and executive officers of the Company as at July 5, 2016,30, 2018, there are no holders of 5% or more of the common shares of Agave, except as set out below:First Energy. Name of Shareholder | | Number of Shares held, directly and indirectly, at July 5, 2016 | % of Issued and Outstanding Shares at July 5, 2016 | Ronald M. Lang | | 17,143,030 | 53.60% |
The above information was obtained from SEDI and SEDAR. All shareholders, including major and/or controlling shareholders have the same voting rights with respect to the issued common shares. Agave’sThe Company’s securities are recorded on the books of its transfer agent in registered form, however, the majority of such shares are registered in the name of intermediaries such as brokerage houses and clearing houses on behalf of their respective brokerage clients, and AgaveFirst Energy does not have knowledge of or access to information about the beneficial owners thereof. To the best of its knowledge, AgaveFirst Energy is not directly or indirectly owned or controlled by a corporation or foreign government. As of July 5, 2016 Agave30, 2018, the Company had authorized an unlimited number of common shares without par value of which 31,981,55912,551,638 were issued and outstanding.
As of July 5, 2016, there were 581 registered shareholders of record holding a total of 31,981,559 common shares of Agave. To the best of Agave’s knowledge there were 188 registered shareholders of record with registered addresses in Canada, 378 shareholders of record with registered addresses in the United States and 15 shareholders of record with registered addresses in other countries holding approximately 31,802,245 (99.44%), 168,793 (0.53 %) and 10,521 (0.03%) of the outstanding common shares, respectively. Shares registered in the name of intermediaries are assumed to be held by residents of the same country in which the clearing-house was located.
The Company is not aware of any arrangements between shareholders or other persons which may result in a change of control of the Company. | | B. | Related Party Transactions |
B. Related Party Transactions
No director or senior officer, and no associate or affiliate ofDuring the foregoing persons, and no insider has or has had any material interest, direct or indirect, in any transactions, or in any other proposed transaction, during the yearyears ended March 31, 2016, except as noted below.
In December, 2014, the Company signed a Debt Settlement and Assumption Agreement with Angela Yap and Quorum Management and Administrative Services Inc. (“Quorum”) whereby in full settlement of the debt owed from the Company to Quorum, the Company has assumed Quorum’s debt payable to Angela Yap to the extent of the amount the Company owed to Quorum, $60,822. The Company’s indebtedness to Quorum is fully and finally satisfied with no further claim or indebtedness owed by the Company to Quorum and the assumed indebtedness to Angela Yap represents all claims and indebtedness owed to Angela Yap.
During the year ended March 31,2018, 2017, 2016, the Company settled all debts owing to officers and directors, with the exception of partial salaries payable to the President, by cash payments totaling $68,281 and the issuance of 1,147,500 shares for a total of $22,950. These settlements resulted in a gain on settlement of debt in the amount of $129,121. Also, the Company accrued rent payable to Lang Mining in the amount of $24,000.Company:
a) | paid $80,750 (2017 - $50,000; 2016 - $70,182) to director and officers of the Company pursuant to contract for consulting fees by the Company’s former CFO and corporate secretary; | | | 42b) | paid or accrued office rent of $Nil (2017 - $18,000; 2016 - $24,000) to a private company controlled by the Company’s former president and CEO. |
| | c) | paid fees to independent directors of $11,120 (2017 - $Nil; 2016 - $Nil). |
As at March 31, 2016, the balance payable2018, an amount of $42,071 for fees and/or expenses owed to directors and officers is composed entirely of salary arrears payable to the President. Balances payableare included in amounts due to related parties (March 31, 2017 - $56,629; March 31, 2016 - $228,431). These amounts were settled in the ordinary course of business.
Other than as disclosed above, there have been no transactions during the 2018 fiscal year which have materially affected or will materially affect First Energy in which any director, executive officer, or beneficial holder of more 35
than 5% of the outstanding common stock, or any of their respective relatives, spouses, associates or affiliates has had or will have any direct or material indirect interest. Management believes the transactions referenced above were on terms at least as favorable to First Energy as First Energy could have obtained from unaffiliated parties. | | C. | Interests of Experts and Counsel |
This Form 20-F is being filed as an annual report under the Securities Exchange Act of 1934, and, balances receivable from related parties are non-interest bearing and due on demand.as such, there is no requirement to provide any information under this sub-item. C. Interests of Experts and Counsel
Not applicable.
| | ITEM 8. | FINANCIAL INFORMATION |
item 8. Financial information
| | A. | Consolidated Statements and Other Financial Information |
Statements A. Consolidated Statements and Other Financial Information
See “Item 17 - Financial Statements”. The consolidatedfinancial statements required as part of this Annual Report are filed under Item 18 of this Annual Report. The financial statements as required are found at Exhibit F-1 to this Annual Report. The audit report of Morgan & CompanyDeVisser Gray LLP, Chartered Professional Accountants, is included immediately preceding the consolidated financial statements.statements for the years ended March 31, 2018 and 2017 as well as the audit report from the Company’s former auditors’ report for the fiscal year ended March 31, 2016.
Legal Proceedings AgaveThe Company is not involved in any litigation or legal proceedings and to Agave’sthe Company’s knowledge no material legal or arbitration proceedings involving Agave or its subsidiary arethe Company is threatened.
Dividend Policy AgaveFirst Energy has not paid any dividends on its outstanding common shares since its incorporation and does not anticipate that it will do so in the foreseeable future. All funds of AgaveFirst Energy are being retained for working capital and exploration of its projects.
B. Significant Changes
There are no significant changes of financial conditionhave occurred since the date of First Energy’s most recent audited financial statements, filed withMarch 31, 2018, other than disclosed in this Annual Report. Interim financial statements are incorporated intoReport on Form 20-F, items represented in Note 15 to the financial statements, included herein.and property update activities as reported in Note 5 to the financial statements for the year ended March 31, 2018. ITEM 9. THE OFFER AND LISTING
A. Offer and Listing Details
| i) | ITEM 9. | Trading MarketsTHE OFFER AND LISTING |
| | A. | Offer and Listing Details |
First Energy’s common shares trade on the TSX.V under the trading symbol “FE” and CUSIP # 32016U Trading Markets The tables below list the high and low prices for common shares of the Company on the TSX Venture Exchange and the OTCBB to July 22, 2014 then the OTCQB, for the past five yearsmost recent full financial: | | | TSX Venture Exchange: FE (formerly AGV) – Trading in Canadian Dollars | | High | Low | | ($) | ($) | Annual | | | March 2018 | 0.35 | 0.15 | March 2017 | 0.70 | 0.15 | March 2016 | 0.20 | 0.10 | March 2015 | 0.20 | 0.05 | March 2014 | 0.45 | 0.03 |
36
The following table lists the volume of trading and high, low and maximum closing sales prices on an annual basis, two years on a quarterly basisthe TSX.V for shares of First Energy’s common stock for the last eight fiscal quarters and for the most recent six months up to the filing date of this Annual Report (June XX, 2016): TSX Venture Exchange: AGV – Trading in Canadian Dollars | | High | Low | | | ($) | ($) | | Annual | | | | 2016 (to July 5, 2016) | 0.09 | 0.02 | | 2015 | 0.04 | 0.01 | | 2014 | 0.09 | 0.03 | | 2013 | 0.50 | 0.06 | | 2012 | 2.90 | 0.30 | | 2011 | 4.80 | 1.40 | | | | | |
TSX Venture Exchange: AGV – Trading in Canadian Dollars | | High | Low | | | ($) | ($) | | Calendar 2016 | | | | First Quarter | 0.03 | 0.02 | | Second Quarter | 0.09 | 0.03 | | | | | | Calendar 2015 | | | | First Quarter | 0.04 | 0.02 | | Second Quarter | 0.04 | 0.02 | | Third Quarter | 0.03 | 0.01 | | Fourth Quarter | 0.02 | 0.02 | | Calendar 2014 First Quarter Second Quarter Third Quarter Fourth Quarter | 0.09 0.07 0.07 0.07 | 0.05 0.05 0.04 0.03 | | | | | | Month ended | | | | June 30, 2016 | 0.09 | 0.06 | | May 31, 2016 | 0.09 | 0.04 | | April 30, 2016 | 0.05 | 0.03 | | March 31, 2016 | 0.03 | 0.02 | | February 28, 2016 | 0.03 | 0.02 | | January 31, 2016 | 0.03 | 0.02 | |
months. | | | TSX Venture Exchange: FE (formerly AGV) – Trading in Canadian Dollars | | High | Low | | ($) | ($) | Fiscal 2019 | | | First Quarter | 0.43 | 0.23 | | | | Fiscal 2018 | | | Fourth Quarter | 0.31 | 0.17 | Third Quarter | 0.25 | 0.15 | Second Quarter | 0.28 | 0.20 | First Quarter | 0.35 | 0.20 | | | | Fiscal 2017 | | | Fourth Quarter | 0.40 | 0.25 | Third Quarter | 0.50 | 0.30 | Second Quarter | 0.70 | 0.35 | First Quarter | 0.45 | 0.15 | | | | Month ended | | | June 30, 2018 | 0.41 | 0.35 | May 31, 2018 | 0.43 | 0.35 | April 30, 2018 | 0.41 | 0.23 | March 31, 2018 | 0.31 | 0.22 | February 28, 2018 | 0.27 | 0.17 | January 31, 2018 | 0.28 | 0.20 |
The high, low and closing price of the Company’s common stock on the TSX Venture Exchange on July 5, 2016, was Cdn$0.012, Cdn$0.08 and Cdn$0.09 respectively. The Company’s common stock is issued in registered form.
OTCBB: ASKDF – Trading in US Dollars | | High | Low | | | ($) | ($) | | Annual | | | | 2016 (to July 5, 2016) | 0.08 | 0.01 | | 2015 | 0.03 | 0.01 | | 2014 | 0.07 | 0.02 | | 2013 2012 | 0.05 3.00 | 0.01 0.30 | | 2011 | 4.60 | 1.40 | |
OTCBB: ASKDF – Trading in US Dollars | | High | Low | | | ($) | ($) | | | | | | Calendar 2016 | | | | First Quarter | 0.01 | 0.01 | | Second Quarter | 0.07 | 0.01 | | | | | | Calendar 2015 | | | | First Quarter | 0.03 | 0.02 | | Second Quarter | | | | Third Quarter | | | | Fourth Quarter | | | | | | | | Calendar 2014 | | | | First Quarter | 0.07 | 0.05 | | Second Quarter | 0.07 | 0.04 | | Third Quarter | 0.06 | 0.04 | | Fourth Quarter | 0.05 | 0.02 | | | | | | Month ended | | | | June 30, 2016 | 0.07 | 0.04 | | May 31, 2016 | 0.07 | 0.02 | | April 30, 2016 | 0.02 | 0.01 | | March 31, 2016 | 0.01 | 0.01 | | February 29, 2016 | 0.01 | 0.01 | | January 31, 2016 | 0.01 | 0.01 | |
The high, lowThis Form 20-F is being filed as an annual report under the Securities Exchange Act of 1934, and closing price of the Company’s common stock on the OTCBB on July 5, 2016, was Cdn$0.08, Cdn$0.08 and Cdn$0.08 respectively. The Company’s common stockas such, there is issued in registered form.
B. Plan of Distribution
Not applicable.
C. Markets
The shares of Agave have traded in Canada on the TSX Venture Exchange (formerly the Canadian Venture Exchange and successorno requirement to the Vancouver Stock Exchange) since June 3, 1970, (symbol-AGV). Since October 5, 1999, Agave’sprovide any information under this item.
First Energy shares have traded on the over-the-counter market (“OTC-BB”) in the United States (symbol-ASKDF.OB) to July 26, 2012 at which time Agave’s shares were exclusively quoted on the OTCQB. Effective May 1, 2014 the Company was listed on the OTCBB “Pink”, (symbol ASKDF) an electronic trading platform operated by the OTC Markets Group Inc. They also trade on the Frankfurtfollowing stock exchanges and other regulated markets: | | Stock Exchange or other regulated market | Company symbol | TSX Venture Exchange | FE | Frankfurt Stock Exchange | A2JC89 | OTC Bulletin Board | ASKDF |
This Form 20-F is being filed as an annual report under the symbol “DFL”. D. Selling Shareholders
Not applicable.Securities Exchange Act of 1934, and as such, there is no requirement to provide any information under this item.
E. DilutionThis Form 20-F is being filed as an annual report under the Securities Exchange Act of 1934, and as such, there is no requirement to provide any information under this item.
This Form 20-F is being filed as an annual report under the Securities Exchange Act of 1934, and as such, there is no requirement to provide any information under this item. Not applicable.37
F. Expenses of the Issue
Not applicable.
item 10. additional information
| | ITEM 10. | ADDITIONAL INFORMATION |
Shareholder Rights Plan
Effective May 24, 2011,This Form 20-F is being filed as an annual report under the Board of Agave adopted a Shareholder Rights Plan (the "Rights Plan"). The Rights Plan has been implemented by way of a shareholder rights plan agreement (the "Rights Plan Agreement") datedSecurities Exchange Act 1934, and as of May 24, 2011 between the Company and Computershare Investor Services Inc., as rights agent. The Board adopted the Rights Plan to ensure, to the extent possible, that all shareholders of the Company are treated equally and fairly in connection with any take-over bid or similar offer for all or a portion of the outstanding common shares of the Company.
Background to the Rights Plan Agreement
The Rights Plan Agreementsuch, there is designed to protect shareholders from unfair, abusive or coercive take-over strategies including the acquisition of control of the Company by a bidder in a transaction or series of transactions that may not treat all shareholders fairly nor afford all shareholders an equal opportunity to share in the premium paid upon an acquisition of control. The Rights Plan Agreement was adoptedno requirement to provide the Board with sufficient time, in the event of a public take-over bid or tender offer for the common shares of the Company, to pursue alternatives which could enhance shareholder value. These alternatives could involve the review of other take-over bids or offers from other interested parties to provide shareholders desiring to sell the Company's common shares with the best opportunity to realize the maximum sale price for their common shares. In addition, with sufficient time, the Board would be able to explore and, if feasible, advance alternatives to maximize share value through possible corporate reorganizations or restructuring. The directors need time in order to have any real ability to consider these alternatives.
Potential Advantages of the Rights Plan Agreement
The Board believes thatinformation under the current rules relating to take-over bids and tender offers in Canada there is not sufficient time for the directors to explore and develop alternatives for the shareholders such as possible higher offers or corporate reorganizations or restructurings that could maximize shareholder value. Under current rules, a take-over bid must remain open in Canada for a minimum of 35 days. Accordingly, the directors believe the Rights Plan Agreement continues to be an appropriate mechanism to ensure that they will be able to discharge their responsibility to assist shareholders in responding to a take-over bid or tender offer.
In addition, the Board believes that the Rights Plan Agreement will encourage persons seeking to acquire control of the Company to do so by means of a public take-over bid or offer available to all shareholders. The Rights Plan Agreement will deter acquisitions by means that deny some shareholders the opportunity to share in the premium that an acquirer is likely to pay upon an acquisition of control. By motivating would-be acquirers to make a public take-over bid or offer or to negotiate with the Board, shareholders will have the best opportunity of being assured that they will participate on an equal basis, regardless of the size of their holding, in any acquisition of control of the Company.
The Rights Plan Agreement is not intended to prevent a take-over or deter fair offers for securities of the Company. The Board believes that the Rights Plan Agreement will not adversely limit the opportunity for shareholders to dispose of their common shares through a take-over bid or tender offer which provides fair value to all shareholders. The directors will continue to be bound to consider fully and fairly any bona fide take-over bid or offer for common shares of the Company and to discharge that responsibility with a view to the best interests of the shareholders.this item.
| | Memorandum and articles of association |
Potential Disadvantages of the Rights Plan Agreement
Because the Rights Plan Agreement may increase the price to be paid by an acquirer to obtain control of the Company and may discourage certain transactions, confirmation of the Rights Plan Agreement may reduce the likelihood of a take-over bid being made for the outstanding common shares of the Company. Accordingly, the Rights Plan Agreement may deter some take-over bids that shareholders might wish to receive.
Term
The Rights Plan will remain in effect until termination of the annual meeting of shareholders of the Company in 2014 unless the term of the Rights Plan Agreement is terminated earlier. The Rights Plan may be extended beyond 2014 by resolution of shareholders at such meeting. Issue of Rights
One right (a "Right") has been issued by the Company pursuant to the Rights Plan Agreement in respect of each Common Share outstanding at 4:00 p.m. (Pacific Time) onMay 24, 2011 (the "Record Time"). One Right will also be issued for each additional Common Share issued after the Record Time and prior to the earlier of the Separation Time (as defined below) and the Expiration Time (as defined in the Rights Plan Agreement).
Rights Exercise Privilege
The Rights will separate from the common shares to which they are attached and become exercisable at the time (the "Separation Time") which is 10 trading days following the date a person becomes an Acquiring Person (as defined below) or announces an intention to make a take-over bid that is not an acquisition pursuant to a take-over bid permitted by the Rights Plan (a "Permitted Bid").
Any transaction or event in which a person (an "Acquiring Person"), including associates and affiliates and others acting in concert, acquires (other than pursuant to an exemption available under the Rights Plan or a Permitted Bid) Beneficial Ownership (as defined in the Rights Plan Agreement) of 20% or more of the voting shares of the Company is referred to as a "Flip-in Event". Any Rights held by an Acquiring Person on or after the earlier of the Separation Time or the first date of public announcement by the Company or an Acquiring Person that an Acquiring Person has become such, will become void and the Rights (other than those held by the Acquiring Person) will permit the holder to purchase common shares at a 50% discount to their market price. A person, or a group acting in concert, who is the beneficial owner of 20% or more of the outstanding common shares as of the Record Time is exempt from the dilutive effects of the Rights Plan.
The issuance of the Rights is not dilutive until the Rights separate from the underlying common shares and become exercisable or until the exercise of the Rights. The issuance of the Rights will not change the manner in which shareholders currently trade their common shares.
Certificates and Transferability
Prior to the close of business on the earlier of the Separation Time and the Expiration Time, the Rights will be evidenced by a legend imprinted on certificates for common shares issued after the Record Time. Rights are also attached to common shares outstanding at the Record Time, although share certificates issued prior to the Record Time will not bear such a legend. Shareholders are not required to return their certificates in order to have the benefit of the Rights. Prior to the Separation Time, Rights will trade together with the common shares and will not be exercisable or transferable separately from the common shares. From and after the Separation Time and prior to the Expiration Time, the Rights will become exercisable, will be evidenced by Rights certificates and will be transferable separately from the common shares.
Permitted Bid Requirements
The requirements of a Permitted Bid include the following:
| (a) | the take-over bid must be made by means of a take-over bid circular; |
| (b) | the take-over bid is made to all holders of voting shares as registered on the books of the Company, other than the offeror for all of the voting shares held by them; |
| (c) | the take-over bid contains, and the take-up and payment for securities tendered or deposited is subject to, an irrevocable and unqualified provision that no voting shares will be taken up or paid for pursuant to the take-over bid prior to the close of business on the date which is not less than 60 days following the date of the take-over bid and only if at such date more than 50% of the voting shares held by independent shareholders shall have been deposited or tendered pursuant to the take-over bid and not withdrawn; |
| (d) | the take-over bid contains an irrevocable and unqualified provision that, unless the take-over bid is withdrawn, voting shares may be deposited pursuant to such take-over bid at any time during the period of time between the date of the take-over bid and the date on which voting shares may be taken up and paid for and that any voting shares deposited pursuant to the take-over bid may be withdrawn until taken up and paid for; and |
| (e) | the take-over bid contains an irrevocable and unqualified provision that if, on the date on which voting shares may be taken up and paid for, more than 50% of the voting shares held by independent shareholders shall have been deposited pursuant to the take-over bid and not withdrawn, the offeror will make a public announcement of that fact and the take-over bid will remain open for deposits and tenders of voting shares for not less than ten business days from the date of such public announcement. |
The Rights Plan allows for a competing Permitted Bid (a "Competing Permitted Bid") to be made while a Permitted Bid is in existence. A Competing Permitted Bid must satisfy all of the requirements of a Permitted Bid except that it must expire prior to the expiry of that Permitted Bid, subject to the requirement that it be outstanding for a minimum period of 35 days in accordance with applicable securities legislation.
Waiver and Redemption
If a potential offeror does not desire to make a Permitted Bid, it can negotiate with, and obtain the prior approval of, the Board to make a take-over bid by way of a take-over bid circular sent to all holders of voting shares on terms which the Board considers fair to all shareholders. In such circumstances, the Board may waive the application of the Rights Plan thereby allowing such bid to proceed without dilution to the offeror. Any waiver of the application of the Rights Plan in respect of a particular take-over bid shall also constitute a waiver of any other take-over bid which is made by means of a take-over bid circular to all holders of voting shares while the initial take-over bid is outstanding. The Board may also waive the application of the Rights Plan in respect of a particular Flip-in Event that has occurred through inadvertence, provided that the Acquiring Person that inadvertently triggered such Flip-in Event reduces its beneficial holdings to less than 20% of the outstanding voting shares of the Company at the time of the granting of the waiver by the Board. With the prior consent of the holders of voting shares, the Board may, prior to the occurrence of a Flip-in Event that would occur by reason of an acquisition of voting shares otherwise than pursuant to a take-over made by means of a take-over bid circular to holders of voting shares, waive the application of the Rights Plan to such Flip-in Event.
The Board may, at any time prior to the occurrence of a Flip-in Event, elect to redeem all but not less than all of the then outstanding Rights at a redemption price of $0.00001 per Right. Rights are deemed to be redeemed following completion of a Permitted Bid, a Competing Permitted Bid or a take-over bid in respect of which the Board has waived the application of the Rights Plan.
Board of Directors
Adoption of the Rights Plan does not in any way lessen or affect the duty of the Board to act honestly and in good faith with a view to the best interests of the Company. The Board, when a take-over bid or similar offer is made, will continue to have the duty and power to take such actions and make such recommendations to shareholders as are considered appropriate. It is not the intention of the Board to secure the continuance of existing directors or officers to avoid an acquisition of control of the Company in a transaction that is fair and in the best interests of the Company and its shareholders, or to avoid the fiduciary duties of the Board or of any director. The proxy mechanism of theBusiness Corporations Act(British Columbia) is not affected by the Rights Plan Agreement, and a shareholder may use his, her or its statutory rights to promote a change in the management or direction of the Company, including the right of shareholders holding not less than 5% of the outstanding common shares to requisition the Board to call a meeting of shareholders.
Amendment
The Company may, with the prior approval of shareholders (or the holders of Rights if the Separation Time has occurred), supplement, amend, vary or delete any of the provisions of the Rights Plan Agreement. The Company may make amendments to the Rights Plan Agreement at any time to correct any clerical or typographical error or, subject to confirmation at the next meeting of shareholders, make amendments which are required to maintain the validity of the Rights Plan Agreement due to changes in any applicable legislation, rules or regulations.
Existing Charter Provisions
The Notice of Articles and Articles of the Company do not contain any provisions intended by the Company to have, or, to the knowledge of the Board having, an anti-takeover effect. However, the power of the Board to issue additional common shares could be used to dilute the share ownership of person seeking to obtain control of the Company.
A copy of the Shareholder Rights Plan dated May 24, 2011 is attached as an exhibit to this Annual Report.
Agave’sCompany’s original corporate constituting documents comprising Articles of Association and Memorandum are registered with the British Columbia Registrar of Companies under Corporation No. 71412. A copy of the Articles of Association and Memorandum then in effect were filed as an exhibit with Agave’sthe Company’s initial registration statement on Form 20-F. In 2004 the Company's existing Memorandum was replaced by a Notice of Articles. Subsequent amendments to the Company's Articles have been also filed as exhibits subsequent to the initial registration statement. On June 23, 2011, Agavethe Company adopted new Articles of Association, and these Articles are attached as an exhibit to this Annual Report.
Objects and Purposes Agave’sThe Company’s Articles of Incorporation do not specify objects or purposes. Under British Columbia law, a British Columbia corporation has all the legal powers of a natural person. British Columbia corporations may not undertake certain limited business activities such as operating as a trust company or railroad without alterations to its form of articles and specific government consent.
Directors – Powers and Limitations Agave’sThe Company’s articles do not specify a maximum number of directors (the minimum under British Columbia law for a public company is three). Shareholders at the annual shareholders meeting determine the number of directors annually and all directors are elected at that time. There are no staggered directorships. Under the British Columbia Business Corporations Act, (“BCA”) directors are obligated to abstain from voting on matters in which they may be financially interested after fully disclosing such interest. Directors’ compensation is not a matter on which they must abstain. Directors must be of the age of majority (18), and meet eligibility criteria including not being mentally infirm, an undischarged bankrupt, no fraud related convictions in the previous five years and a majority of directors must be ordinarily resident in Canada. There is no mandatory retirement age either under Agave’sthe Company’s Articles or under the BCA.
Directors’ borrowing powers are not generally restricted where the borrowing is in Agave’sthe Company’s best interests. Directors need not own any shares of Agavethe Company in order to qualify as directors. The Articles specify the number of directors shall be the number of directors fixed by shareholders annually, or the number that are actually elected at a general shareholders meeting. Shareholders at the annual shareholders’ meeting determine the number of directors annually and all directors are elected at that time. Under the Articles the directors are entitled between successive AGMs to appoint one or more additional directors but not more than one-third of the number of directors fixed at a shareholders meeting or actually elected at the preceding annual shareholders’ meeting. Directors automatically retire at the commencement of each annual meeting but may be re-electedreelected thereat. A director or senior office who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual's duty or interest as a director or senior officer, is required under the BCA to disclose the nature and extent of the conflict as required by the Business Corporations Act, and may be counted for the purpose of quorum requirements is required to abstain from voting on any directors' resolution to approve a contract or transaction in which he has a disclosable interest. The new form of articles adopted by the Company in June 2011 ("Articles") update some of the terminology therein as well as incorporating some of the more flexible provisions of the BCA. The major changes from the existing Articles are: 1. certain changes to the Notice of Articles, Articles and share structure may be able to be made by directors' resolution or ordinary resolution of the Company's shareholders, in each case as determined by the directors. A more detailed description of this changes is provided below; 2. the directors may, by directors' resolution, approve a change of name of the Company without the necessity for shareholder approval; 3. shareholder meetings may be held by electronic means; 4. the quorum for shareholder meetings is changed from two 38
shareholders or proxyholders present to one shareholder present in person or represented by proxy; 5. shareholder meetings may, if authorized by directors' resolution, be held in jurisdictions outside British Columbia; and 6. the Chairman of a directors' meeting does not have a casting vote, in the event of an equality of votes. AgaveThe Company is subject to the policies of the TSX Venture Exchange (the “Exchange”) and compliance with Exchange policy may supersede powers granted to the Board pursuant to the Articles.
Descriptions of rights, preferences and restrictions attaching to each class of shares Common Shares AgaveThe Company has only one class of shares, common shares without par value of which an unlimited number are authorized and 31,981,55912,551,638 are outstanding as of July 5, 2016.30, 2018. All common shares rank pari passu for the payment of dividends and distributions in the event of wind-up.
Some of the significant provisions under British Columbia law and Agave’sthe Company’s Articles relating to the common shares may be summarized as follows: Capital increases and Other Changes The Company may alter its Notice of Articles, Articles and share structure in the following manner: 1. by directors' resolution or ordinary resolution of the shareholders of the Company, in each case as determined by the directors, (a) create one or more classes or series of shares and, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares and alter the identifying name of any of its shares; (b) establish, increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares; (c) if the Company is authorized to issue shares of a class of shares with par value, decrease the par value of those shares or, if none of the shares of that class of shares are allotted or issued, increase the par value of those shares; (d) change all or any of its unissued shares with par value into shares without par value or vice versa or change all or any of its fully paid issued shares with par value into shares without par value; (e) create, attach, vary or delete special rights or restrictions for the shares of any class or series of shares, if none of those shares have been issued; (f) subdivide or consolidate all or any of its unissued, or fully paid issued, shares; (g) authorize alterations to the Articles that are procedural or administrative in nature or are matters that pursuant to the Articles are solely within the directors' powers, control or authority; and (h) alter the identifying name of any of its shares. 2. if the BCBCA does not specify the type of resolution and the Articles do not specify another type of resolution, by ordinary resolution of the shareholders otherwise alter its shares or authorized share structure and, if applicable, alter its Notice of Articles and, if applicable, alter its Articles accordingly. Certain changes such as amalgamations, re-domiciling may also give rise to rights of dissent and appraised (the right subject to meeting certain conditions, to be paid the “fair value” determined in accordance with the BCA for their shares in cash if the matter is proceeded with). Shares Fully Paid All AgaveThe Company’s shares must, when issued be fully paid for in cash, property or services. The common shares, when validly issued are non-assessable and not subject to further calls for payment.
Redemption AgaveThe Company has no redeemable securities authorized or issued.
Pre-emptive Rights There are no pre-emptive rights under the Articles of the Company which provide a right to existing shareholders to participate in offerings of Agave’sthe Company’s securities. Liquidation All common shares of Agavethe Company are entitled to participate ratably in, if any, available for distribution assets in the event of a winding up or other liquidation of the Company. 39
No Limitation on Foreign Ownership There are no limitations under Agave’sthe Company’s Articles or in the BCA on persons who are not citizens of Canada holding or exercising their voting rights as holders of common shares. (See also “Exchange Controls”) Dividends Dividends may be declared by the Board out of available assets and are paid ratably to holders of common shares. No dividend may be paid if Agavethe Company is, or would thereby become, insolvent. Voting Rights Each Agaveof the Company’s share is entitled to one vote on matters on which common shares ordinarily vote including the election of directors, appointment of auditors and approval of corporate changes. There are no cumulative voting rights applicable to Agave.the Company. Shareholder Meetings Shareholders’ meetings are governed by the Articles of Agavethe Company but many important shareholder protections are also contained in the Securities Act (British Columbia) and the BCA. The Articles provide that Agavethe Company will hold an annual shareholders’ meeting, will provide at least 21 days’ notice and will provide for certain procedural matters and rules of order with respect to the conduct of the meeting. Under British Columbia securities legislation and policies, Agavethe Company is required to conduct advanced searches to facilitate delivery of meeting materials and proxy to beneficial shareholders. The form and content of information circulars and proxies and like matters are governed by the Securities Act (British Columbia) and the BCA. This legislation specifies the disclosure requirements for the proxy materials and various corporate actions, background information on the nominees for election for director, executive compensation paid in the previous year, unusual matters or related party transactions. AgaveThe Company must hold determination general meeting of shareholders within 15 months of the previous annual shareholders’ meeting. A quorum for a shareholders’ meeting is one shareholder present in person or by proxy. Change in Control Other then as disclosed under Item 6.B "Termination and Change of Control Benefits”, Agavethe Company does not have any agreements which are triggered by a take-over or other change of control, except that a takeover or change of control may result in the vesting of stock options previously granted. There are no provisions in its Articles triggered by or affected by a change in outstanding shares which gives rise to a change in control. There are no provisions in Agave’sthe Company’s material agreements giving special rights to any person on a change of control. As discussed in Item 10.A, effective May 24, 2011, the Board of Agave adopted the Rights Plan which was implemented by way of the Rights Plan Agreement. The Board adopted the Rights Plan to ensure, to the extent possible, that all shareholders of the Company are treated equally and fairly in connection with any take-over bid or similar offer for all or a portion of the outstanding common shares of the Company. For more information on the Shareholder Rights Plan please see Item 10.A, Share Capital.
Insider Share Ownership Reporting The articles of Agavethe Company do not require disclosure of share ownership. Share ownership of director nominees must be reported annually in proxy materials sent to Agave’sthe Company’s shareholders. There are no requirements under British Columbia corporate law to report ownership of shares of Agavethe Company but the Securities Act (British Columbia) requires disclosure of trading by insiders (generally officers, directors and holders of 10% of voting shares) within 5 days of the trade. Controlling shareholders (generally those in excess of 20% of outstanding shares) must provide 3 days advance notice of share sales. Securities Act (British Columbia) This statute applies to Agavethe Company and governs matters typically pertaining to public securities such as continuous disclosure, quarterly financial reporting, immediate disclosure of material changes, insider trade reporting, take-over protections to ensure fair and equal treatment of all shareholders, exemption and resale rules pertaining to non-prospectus securities issuances as well as civil liability for certain misrepresentations, disciplinary, appeal and discretionary ruling maters. Other than the Shareholder Rights Plan AgaveC. Material Contracts
The Company is not party to any contracts that are material to its operations, business or assets, other than those entered into in the ordinary course of business for the two years preceding the date of this document. 40
The CompanyFirst Energy is not awarea corporation incorporated pursuant to the laws of anythe Province of British Columbia, Canada. Canada has no system of exchange controls. There are no Canadian federal or provincial laws, decrees or regulations that restrictrestrictions on the export or importrepatriation of capital including foreignor earnings of a Canadian public company to non-resident investors. There are no laws in Canada or exchange controls, or that affectrestrictions affecting the remittance of dividends, profits, interest, orroyalties and other payments to a non-resident holderholders of common shares, other than withholding tax requirements. Any such remittances to United States residents are generally subject to withholding tax, however no such remittances are likelythe Issuer’s securities, except as discussed in the foreseeable future. See “Taxation”,“E. Taxation” below.
There isare no limitation imposed bylimitations under the laws of Canada or byin the charter or other constituentorganizing documents of Agavethe Company on the right of a non-residentforeigners to hold or vote securities of the common shares, other than as provided inCompany, except that the Investment Canada Act (the “Investment Act”)may require review and approval by the Minister of Industry (Canada) of certain acquisitions of "control" of the Company by a "non-Canadian". The following discussion summarizes the material featuresthreshold for acquisitions of control is generally defined as being one-third or more of the Investment Act for a non-residentvoting shares of the Company. "Non-Canadian" generally means an individual who proposes to acquire the common shares. It is general only, it is not a substitute for independent advice from an investor’s own advisor, and it does not anticipate statutoryCanadian citizen, or regulatory amendments. Agave does not believe the Investment Act will have any effect on it or on its non-Canadian shareholders due to a number of factors including the nature of its operations and Agave’s relatively small capitalization. The Investment Act generally prohibits implementation of a “reviewable” investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture (each an “entity”) that is not a “Canadian” as defined in the Investment Act (a “non-Canadian”), unless after review the Director of Investments appointed by the minister responsible for the Investment Act is satisfied that the investment is likely to be of net benefit to Canada. The size and nature of a proposed transaction may give rise to an obligation to notify the Director to seek an advance ruling. An investment in Agave’s common shares by a non-Canadian other than a “WTO Investor” (as that term is defined in the Investment Act and which term includes entities which are nationals of or areultimately controlled by nationals of member states of the World Trade Organization) when Agave was not controlled by a WTO Investor, would be reviewable under the Investment Act if it was an investment to acquire control of Agave and the value of the assets of Agave, as determined in accordance with the regulations promulgated under the Investment Act, was over a certain figure, or if an order for review was made by the federal cabinet on the grounds that the investment related to Canada’s cultural heritage or national identity, regardless of the value of the assets of Agave. An investment in the common shares by a WTO Investor, or by a non-Canadian when Agave Agave was controlled by a WTO Investor, would be reviewable under the Investment Act if it was an investment to acquire control of Agave and the value of the assets of Agave, as determined in accordance with the regulations promulgated under the Investment Act, was not less than a specified amount, which for 2009 is Cdn$295 million. A non-Canadian would acquire control of Agave for the purposes of the Investment Act if the non-Canadian acquired a majority of the common shares. The acquisition of less than a majority but one-third or more of the common shares would be presumed to be an acquisition of control of Agave unless it could be established that, on the acquisition, Agave was not controlled in fact by the acquirer through the ownership of the common shares.non-Canadians.
The foregoing assumes Agave will not engage in the production of uranium or own an interest in a producing uranium property in Canada, or provide any financial service or transportation service, as the rules governing these businesses are different.
Certain transactions relating to the common shares would be exempt from the Investment Act, including:
i. an acquisition of the common shares by a person in the ordinary course of that person’s business as a trader or dealer in securities,
ii. an acquisition of control of Agave in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions of the Investment Act, and
iii. an acquisition of control of Agave by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of Agave, through the ownership of the common shares, remained unchanged.
E. Taxation
All prospective investors are advised to consult their own tax advisors with respect to the specific tax consequences of purchasing the common shares of the Company. Canadian Federal Income Tax Consequences for United States Residents The followingdiscussion under this heading summarizes the materialprincipal Canadian federal income tax consequences generally applicable to theof acquiring, holding and dispositiondisposing of shares of our common stock for a shareholder of ours who is not a resident of Canada but is a resident of the U.S. and who will acquire and hold our common shares by a holder (in this summary, a “U.S. Holder”) who, (a)as capital property for the purposes of the Income Tax Act (Canada) (the “Tax“Canadian Tax Act”), is not resident in Canada, deals at arm’s length with Agave, holds the common shares as capital property and does not use or hold the common shares in the course of carrying on, or otherwise in connection with, a business in Canada, and (b) for the purposes of the Canada-United States Income Tax Convention, 1980 (the “Treaty”), is a resident solely of the United States, has never been a resident of Canada, and has not held or used (and does not hold or use) common shares in connection with a permanent establishment or fixed base in Canada.. This summary does not apply to tradersa shareholder who carries on business in Canada through a “permanent establishment” situated in Canada or dealersperforms independent personal services in securities, limited liability companies, tax-exempt entities, insurers, financial institutions (including those to whichCanada through a fixed base in Canada if the mark-to-market provisions of the Tax Act apply),shareholder’s holding in First Energy Minerals Ltd. is effectively connected with such permanent establishment or any other U.S. Holder to which special considerations apply. fixed base. This summary is based on the current provisions of the Canadian Tax Act including alland the regulations thereunder the Treaty, all proposed amendments to the Tax Act, the regulations and the Treaty publicly announced by the Governmenton an understanding of Canada to the date hereof, and the current administrative practices of Canada Revenue Agency and takes into account all specific proposals to amend the Canadian Tax Act or regulations made by the Minister of Finance of Canada Customs and Revenue Agency.as of the date hereof. It has been assumed that all currently proposed amendments will be enacted as proposed and that there will be no other relevant change inamendment of any governing law or administrative practice, although no assurancesassurance can be given in these respects.this respect. This summary does not take into account provincial, U.S., state or other foreign income tax law or practice. The tax consequences to any particular U.S. Holder will vary according to the status of that holder as an individual, trust, corporation, partnership or other entity, the jurisdictions in which that holderdiscussion is subject to taxation, and generally according to that holder’s particular circumstances. Accordingly, this summary is not,general only and is not, nor is it intended to be construed as, Canadianprovide a detailed analysis of the income tax advice toimplications of any particular shareholder’s interest. Investors are advised to obtain independent advice from a shareholder’s own Canadian and U.S. Holder. tax advisors with respect to income tax implications pertinent to their particular circumstances. The provisions of the Canadian Tax Act are subject to income tax treaties to which Canada is a party, including the Canada-United States Income Tax Convention (1980), as amended (the “Convention”). Dividends Dividends paid or deemed to be paid to a U.S. Holder by AgaveThe Company will be subject to Canadian withholding tax. Under the Treaty, the rate of withholding tax on dividends paid to a U.S. Holder is generally limited to 15% of the gross amount of the dividend (or 5% if the U.S. Holder is a corporation and beneficially owns at least 10% of Agave’sThe Company’s voting shares). AgaveThe Company will be required to withhold the applicable withholding tax from any such dividend and remit it to the Canadian government for the U.S. Holder’s account. Disposition A U.S. Holder is not subject to tax underUnder the Canadian Tax Act, in respect of a taxpayer’s capital gain realized on the disposition of a Common Share in the open market unless the share is “taxable Canadian property” to the holder thereof and the U.S. Holder is not entitled to relief under the Treaty. A Common Share will be taxable Canadian property to a U.S. Holder if, at any time during the 60 months preceding the disposition, the U.S. Holder or persons with whom the U.S. Holder did not deal at arm’s length alone or together owned, or had rights to acquire, 25% or more of Agave’s issued shares of any class or series. If the shares of Agave constitute taxable Canadian property to the holder, the holder may be subject to Canadian income tax on the gain. The taxpayer’s taxable capital gain or loss from a disposition of thea share of our common stock is the amount, if any, by which thehis or her proceeds of disposition exceed (or are exceeded by)by, respectively) the aggregate of thehis or her adjusted cost base of the share and reasonable expenses of disposition. One-halfThe capital gain or loss must be computed in Canadian currency using a weighted average adjusted cost base for identical properties. The capital gains net of losses included in income are as follows: for gains net of losses realized after October 17, 2000, as to 50%. There are special transitional rules to apply capital losses against capital gains that arose in different periods. The amount by which a shareholder’s capital loss exceeds the capital gain is included in income and one-half ofa year may be deducted from a capital gain realized by the capital loss is deductible from capital gains realizedshareholder in the same year. Unused capital losses may be carried back three taxationprevious years or forward indefinitely and appliedany subsequent year, subject to reduce capital gains realizedcertain restrictions in those years. It should be noted that Canada requires a withholding tax on the gross proceedscase of a salecorporate shareholder. Under the Canadian Tax Act, a non-resident of taxable Canadian property by a non-resident. The withholding tax may be reduced on completion of a Clearance Certificate Request. If the disposition of the shareCanada is subject to Canadian tax in Canada, the non-resident must also fileon taxable capital gains, and may deduct allowable capital losses, realized on a disposition of “taxable Canadian income tax return reporting the disposition.
A U.S. Holder whoseproperty.” Shares of our common shares dostock will constitute taxable Canadian property of a shareholder at a particular time if the shareholder used the shares in carrying on business in Canada, or if at any time in the five years immediately preceding the disposition 25% or more of the issued shares of any class or series in our
41
capital stock belonged to one or more persons in a group comprising the shareholder and who might therefore be liablepersons with whom the shareholder and persons with whom the shareholder did not deal at arm’s length and in certain other circumstances. The Convention relieves U.S. residents from liability for Canadian income tax under the Tax Act, will generally be relieved from such liability under the Treaty unlesson capital gains derived on a disposition of shares unless: (a) the value of suchthe shares at the time of disposition is derived principally from real“real property” in Canada, including the right to explore for or exploit natural resources and rights to amounts computed by reference to production; (b) the shareholder was resident in Canada for 120 months during any period of 20 consecutive years preceding, and at any time during the 10 years immediately preceding, the disposition and the shares were owned by him when he or she ceased to be resident in Canada; or (c) the shares formed part of the business property situatedof a “permanent establishment” that the holder has or had in Canada. The value of Agave’s common shares is not currently derived principally from real property situated in Canada. Canada within the 12 months preceding the disposition. United States Tax Consequences United States Federal Income Tax Consequences Certain United States Federal Income Tax Consequences This summary is for general information only and is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of common shares of Agave and no opinion or representation with respect to the U.S. federal income tax consequences to any such holder or prospective holder is made.
The following is a discussion of certain material United StatesU.S. federal income tax consequences under current law, generally applicable to a U.S. Holder (as hereinafter defined) of our common shares of Agave.under current law. This discussion does not address all potentially relevant federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local or non-U.S.foreign tax consequencesconsequences. (see “Taxation – Material Canadian–Canadian Federal Income Tax Consequences for United States Residents” above for Canadian tax consequences)Consequences” above).Accordingly, we strongly recommend that holders and prospective holders of our common shares of Agaveare urged to consult their own tax advisors about the specific U.S. federal, state, local, and non-U.S.foreign tax consequences to them of purchasing, owning and disposing of our common shares, of Agave, based upon their individual circumstances. The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently in effect as of the date hereof. Anyapplicable, any or all of these authoritieswhich could be materially and/orand adversely changed, possibly on a retroactive basis, at any time and which are subject to differing interpretations. We haveThis discussion does not requested,consider the potential effects, both adverse and will not request,beneficial, of any proposed legislation which, if enacted, could be applied, possibly on a ruling from the IRS with respect toretroactive basis, at any of the U.S. federal income tax consequences described below, and as a result there can be no assurance that the IRS will not disagree with or challenge any of the conclusions we have reached and described herein.time. US Holders As used herein,in this annual report, a “U.S. Holder” means a holder of our common shares of Agave who is (i) a citizen or individual resident of the United States, as determined for U.S. federal income tax purposes, (ii) a corporation or partnership created or organized in or under the laws of the United States or of any political subdivision thereof, (iii)an entity created or organized in or under the laws of the United States or of any political subdivision thereof which has elected to be treated as a corporation for U.S. federal income tax purposes (under Treasury Regulation Section 301.7701-3), an estate whose income is taxable in the United StatesU.S. irrespective of source or (iv) a trust (A) that is subject to the primary supervision of a court within the United StatesU.S. and one or morecontrol of a U.S. persons have authority to control all substantial decisionsfiduciary as described in Section 7701(a)(30) of the trust or (B) that has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.Code. This summary does not address the tax consequences to, special classesand U.S. Holder does not include, persons subject to specific provisions of U.S. Holders,federal income tax law, such as tax-exempt organizations, qualified retirement plans, individual retirement accounts and other tax-deferred accounts, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals, U.S. expatriates, persons or entities that have a “functional currency” other than the U.S. dollar, shareholders subject to the alternative minimum tax, shareholders who hold common shares as part of a straddle, hedging or conversion transaction, and shareholders who acquired their common shares through the exercise of employee stock options or otherwise as compensation for services. This summary is limited to U.S. Holders thatwho own Agave common shares as capital assets, within the meaning of Section 1221 of the Code, and thatwho own (directly and indirectly, pursuant to applicable rules of constructive ownership) lessno more than 10%5% of the value of our total combined voting power of all classes of Agave stock entitled to vote.outstanding stock. This summary does not address the consequences to a person or entity holding an interest in a shareholder or the consequences to a person of the ownership, exercise or disposition of any options, warrants or other rights to acquire common shares. In addition, this summary does not address special rules applicable to U.S. persons (as defined in Section 7701(a) (30) of the Code) holding common shares through a foreign partnership or to foreign persons holding common shares through a partnership, or other pass-through entity. If an investor is a partner (or other owner) of a pass-through entity that acquires Agave common shares, the investor should consult its tax advisor regarding the tax consequences of acquiring, owning and disposing of Agave common shares. domestic partnership. 42
Passive Foreign Investment Company ConsiderationsDistributions on Our Common Shares
United States income tax law contains rules governing “passive foreign investment companies” (“PFIC”) which can have significant tax effects on U.S. Holders of foreign corporations. Section 1297 of the Code defines a PFIC as a non-U.S. corporation if, for any taxable year, either (i) 75% or more of its gross income is “passive income,” which includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if the corporation is not publicly traded and either is a controlled foreign corporation or makes an election, by adjusted tax basis), of its assets that produce or are held for the production of “passive income” is 50% or more. Agave appears to have been a PFIC for the fiscal year ended March 31, 2014, and at least certain prior fiscal years. In addition, Agave may qualify as a PFIC in future fiscal years. Each U.S. Holders is encouraged consult a tax advisor with respect to how the PFIC rules affect such U.S. Holder.
If Agave were a PFIC during any year and Agave owns an indirect interest in any lower-tier PFICs during such year (a “Lower-Tier PFIC”), U.S. Holders will be treated as owning directly such proportionate amount (by value) of Agaves direct or indirect interests in the Lower-Tier PFICs. Accordingly, a U.S. Holder will be subject to the adverse tax consequences described below with respect to any excess distributions made by such Lower-Tier PFIC, any gain on the disposition by Agave of Agave’s equity interest in such Lower-Tier PFIC treated as indirectly realized by a U.S. Holder, and any gain treated as indirectly realized by a U.S. Holder on the disposition of such U.S. Holder’s ownership of Agave common shares which may arise even if the U.S. Holder realizes an overall net loss on such disposition. Such amount will not be reduced by Agave’s expenses or losses, but any income recognized may increase a U.S. Holder’s tax basis in Agave common shares. Furthermore, any gain realized on the direct or indirect disposition by a U.S. Holder of an interest in a Lower-Tier PFIC will not be able to be offset by any loss realized on the direct or indirect disposition of other lower-tier PFICs.
Accordingly, a U.S. Holder should be aware that such U.S. Holder could be subject to tax even if no distributions from Agave are received and no redemptions or other dispositions of Agave common shares are made.
In the absence of a timely election described below, if a U.S. Holder’s holding period in the Agave common shares includes any period during a taxable year of Agave in which Agave is or will be a PFIC, the rules described below in “The ‘No Election’ Alternative” generally apply to gain realized on a disposition of Agave common shares and certain distributions received with respect to Agave common shares. If certain requirements are met, a U.S. Holder may mitigate certain of the consequences of those rules by timely making an election to treat Agave as a “qualified electing fund” (a “QEF”), described below in “The QEF Election Alternative” or to mark its Agave common shares to market, described below in “The Mark-to-Market Election Alternative”.
The QEF Election Alternative
A U.S. Holder that makes a timely and effective QEF election (an “Electing Holder”) generally would not be subject to the rules discussed below in “The ‘No Election’ Alternative”. However, an Electing Holder will be subject to United States federal income tax on such Electing Holder’s pro rata share of Agave’s (a) net capital gain, which will be taxed as long-term capital gain to such Electing Holder, and (b) ordinary earnings, which will be taxed as ordinary income to such Electing Holder, in each case regardless of whether such amounts are actually distributed to such Electing Holder. However, an Electing Holder may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such Electing Holder is not a corporation, any such interest paid will be treated as “personal interest,” which is not deductible.
An Electing Holder generally (a) may receive a tax-free distribution from Agave to the extent that such distribution represents “earnings and profits” that were previously included in income by the Electing Holder because of such QEF election and (b) will adjust such Electing Holder’s tax basis in the Agave common shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF election. In addition, an Electing Holder generally will recognize capital gain or loss on the sale or other taxable disposition of Agave common shares.
The procedure for making a QEF election, and the United States federal income tax consequences of making a QEF election, will depend on whether such QEF election is timely. A QEF election will be treated as “timely” if such QEF election is made for the first taxable year in the U.S. Holder’s holding period for the Agave common share in which Agave is a PFIC. If a U.S. Holder makes a QEF election after the first taxable year in the U.S. Holder’s holding period for the common shares in which Agave is a PFIC, then in addition to filing the QEF election documents, a U.S. Holder may elect to recognize gain (which will be taxed under the rules discussed below in “The ‘No Election’ Alternative”) as if the Agave common shares were sold on the qualification date (a “purging election”). The “qualification date” is the first day of the first taxable year in which Agave is a QEF with respect to such U.S. Holder. The election to recognize such gain can only be made if such U.S. Holder’s holding period for the Agave common shares includes the qualification date. By electing to recognize such gain, such U.S. Holder will be deemed to have made a timely QEF election. In addition, under very limited circumstances, a U.S. Holder may make a retroactive QEF election if such U.S. Holder failed to file the QEF election documents in a timely manner. If a U.S. Holder fails to make a QEF election for the first taxable year in the U.S. Holder’s holding period for the Agave common shares in which Agave is a PFIC, and does not make a purging election, such holder will not be treated as having made a “timely” QEF election and will continue to be subject to the special taxation rules discussed below in “The ‘No Election’ Alternative”.
A QEF election will apply to the taxable year for which such QEF election is made and to all subsequent taxable years, unless such QEF election is invalidated or terminated or the IRS consents to revocation of such QEF election. If a U.S. Holder makes a QEF election and, in a subsequent taxable year, Agave ceases to be a PFIC, the QEF election will remain in effect (although it will not be applicable) during those taxable years in which Agave is not a PFIC. Accordingly, if Agave becomes a PFIC in another subsequent taxable year, the QEF election will be effective and the U.S. Holder will be subject to the QEF rules described above during any such subsequent taxable year in which Agave qualifies as a PFIC.
A QEF election applies only to the non-U.S. corporation for which it is made. If Agave were a PFIC, a U.S. Holder likely would remain subject to the excess distribution rules discussed below in "The 'No Election' Alternative" in respect of its indirectly owned shares in each Lower-Tier PFIC regardless of a QEF election in respect of Agave, unless such U.S. Holder has made a QEF election in respect of such Lower-Tier PFIC.
Each U.S. Holder should consult its own tax advisor regarding the availability of, and procedure for making, a QEF election. A U.S. Holder cannot make and maintain a valid QEF election unless Agave provides certain U.S. tax information necessary to make such an election. In order for a U.S. Holder to make (or maintain) a valid QEF election, Agave must provide certain information regarding its net capital gains and ordinary earnings and permit its books and records to be examined to verify such information.
The Mark-to-Market Election Alternative
A U.S. Holder that holds “marketable stock” in a PFIC may avoid the imposition of the additional tax and interest described below by making a mark-to-market election in the first year of its holding period in such PFIC’s shares. Agave’s common shares will be marketable securities if they are regularly traded on a qualifying exchange that is either (i) a national securities exchange which is registered with the Securities and Exchange Commission or the national market system established pursuant to the Exchange Act or (ii) any exchange or other market that the United States Treasury Department determines is adequate. Agave believes that the TSX Venture Stock Exchange meets this test, and accordingly, provided that the common shares are regularly traded on the TSX Venture Stock Exchange, a U.S. Holder should be able to make a mark-to-market election with respect to the common shares if Agave is classified as a PFIC.
If a U.S. Holder were to make a timely mark-to-market election with respect to Agave common shares that it will own at the close of its taxable year, such electing U.S. Holder would include as ordinary income in that taxable year any excess of the fair market value of its Agave common shares as of the close of such year over its adjusted tax basis in the Agave common shares. In addition, the U.S. Holder may claim an ordinary loss deduction for the excess, if any, of its adjusted tax basis in the common shares over the fair market value of the common shares at the close of the taxable year, but only to the extent of any prior net mark-to-market gains. An electing U.S. Holder’s tax basis in its Agave common shares will be adjusted to reflect any such income or loss. Any gain or loss on the sale of Agave common shares will be ordinary income or loss, except that any loss will be ordinary loss only to the extent of the previously included net mark-to-market gain. U.S. Holders considering the mark-to-market election should note that although it generally avoids the interest charge associated with PFICs, as described below, the application of the rules regarding indirect interests in Lower-Tier PFICs to the mark-to-market election is not entirely clear under current law. Accordingly, it may well be that a mark-to-market election would not be effective with respect to interests in a Lower-Tier PFIC. If the mark-to-market election is not effective with respect to interests in a Lower-Tier PFIC, then a U.S. Holder may be subject to the adverse tax consequences described below with respect to any interests in a Lower-Tier PFIC. An election to mark-to-market applies to the year for which the election is made and to subsequent years unless the PFIC shares cease to be marketable or the IRS consents to the revocation of the election. If Agave were to cease being a PFIC, a U.S. Holder that marked its common shares to market would not include mark-to-market gain or loss with respect to its Ordinary Shares for any taxable year that Agave was not a PFIC.
The “No Election” Alternative
If a U.S. Holder does not make a timely QEF or mark-to-market election (a “Non-Electing Holder”) and Agave is a PFIC, then special taxation rules will apply to (i) gains realized on the disposition of such U.S. Holder’s Agave common shares and (ii) certain “excess distributions” (generally, distributions received in the current taxable year that are in excess of 125% of the average distributions received during the three preceding years or, if shorter, such U.S. Holder’s holding period) by Agave. Pursuant to these rules, a Non-Electing Holder generally would be required to pro rate all gains realized on the disposition of any of its Agave common share and all excess distributions on its Agave common shares over its entire holding period. All gains or excess distributions allocated to prior years of a U.S. Holder (other than any year before the first taxable year of Agave during such U.S. Holder’s holding period for which it was a PFIC) would be taxed at the highest tax rate for each such prior year applicable to ordinary income.
A Non-Electing Holder also would be liable for interest on the foregoing tax liability for each such prior year calculated as if such liability had been due with respect to each such prior year but had not been paid until the taxable year within which the gains or excess distributions have occurred. A Non-Electing Holder that is not a corporation would be required to treat this interest charge as “personal interest” which would be nondeductible. The balance of the gain or the excess distribution would be treated as ordinary income in the year of the disposition or distribution, and no interest charge would be incurred with respect to such balance.
Considerations if PFIC Rules Do Not Apply
Distribution on Common Shares of Agave
Subject to the rules discussed under PFIC above, in general, U.S. Holders receiving dividend distributions (including constructive dividends) with respect to our common shares of Agave are required to include in gross income for United StatesU.S. federal income tax purposes the gross amount of such distributions, equal to the U.S. dollar value of such distributions on the date of receipt (based on the exchange rate on such date), to the extent that Agave haswe have current or accumulated earnings and profits, (as determined under United States federal income tax principles), without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder’s federal taxable income by those who itemize deductions. The rules governing the foreign tax credit are complex and involve the application of rules that depend upondeductions (See more detailed discussion at “Foreign Tax Credit” below). Dividends received from us by a U.S. Holder’s particular circumstances. Accordingly, anon-corporate U.S. Holder is urgedduring taxable years beginning before January 1, 2011, generally, will be taxed at a maximum rate of 15% provided that such U.S. Holder has held to consult its tax advisor regardingshares for more than 60 days during the availability of120-day period beginning 60 days before the foreign tax credit under its particular circumstances.
Toex-dividend date and that certain other conditions are met (“qualified dividend income”). For this purpose, dividends will include any distribution paid by us with respect to our common shares but only to the extent that distributions exceed Agave’ssuch distribution is not in excess of our current and accumulated earnings and profits, as determined under U.S. federalFederal income tax principles,principles.
To the extent that distributions exceed our current or accumulated earnings and profits, they will be treated first as a return of capital up to the U.S. Holder’s adjusted basis in the common shares causing a reduction in such U.S. Holder’s adjusted basis in the common shares (thereby increasing the amount of gain, or decreasing the amount of loss, to be recognized upon subsequent disposition of the common shares) and thereafter as gain from the sale or exchange of property. (discussedFor this purpose, “qualified dividend income” generally includes dividends paid on stock in further detail below under “DispositionU.S. corporations as well as dividends paid on stock in certain non-U.S. corporations if, among other things, (i) the shares of Common Shares of Agave”). However, Agave does not maintain calculations of earnings and profitsthe non-U.S. corporation (including ADRs backed by such shares) are readily tradable on an established securities market in accordance withthe U.S. federal income tax principles, and U.S. Holders should therefore assume that any distribution, or (ii) the non-U.S. corporation is eligible with respect to the Agave common shares will constitute ordinary dividend income. Subject to applicable exceptions with respect to short-term and hedged positions, certain dividends received by non-corporate U.S. Holders prior to January 1, 2013 from a “qualified foreign corporation” may be eligible for reduced ratessubstantially all of taxation. A qualified corporation includes a foreign corporation that is eligibleits income for the benefits of a comprehensive income tax treaty with the United States that the U.S. Treasury Department determines to be satisfactory for these purposes and that includeswhich contains an exchange of information provision. Theprogram. We currently anticipate that if we were to pay any dividends with respect to our shares, they should constitute “qualified dividend income” for U.S. Treasury has determinedfederal income tax purposes and that the Treaty meets these requirements, and we believe that we are eligible for the benefits of the Treaty. Dividends received by U.S. Holders from a foreign corporation that was a PFIC in eitherwho are individuals should be entitled to the taxable yearreduced rates of the distribution or the preceding taxable year will not constitute qualified dividends. As discussed above in “Passive Foreign Investment Company,” Agave believes that it is a PFIC, and accordingly, dividends paid on our Agave common shares will not constitute qualified dividends.
tax, as applicable. In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally, any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss.loss and will not be eligible for the special tax rate applicable to qualified dividend income. However, an individual whose realized gain does not exceed $200 will not recognize that gain, provided that there are no expenses associated with the transaction that meet the requirements for deductibility as a trade or business expense (other than travel expenses in connection with a business trip) or as an expense for the production of income. Dividends paid on our common shares will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations. A U.S. Holder that is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from us (unless we qualify as a “foreign personal holding company” or a “passive foreign investment company”, as defined below) if such U.S. Holder owns shares representing at least 10% of our voting power and value, or to a 85% deduction if the U.S. Holder owns shares representing at least 20% of the voting power and value of the Company. The availability of this deduction is subject to several complex limitations that are beyond the scope of this discussion. Under current Treasury Regulations, dividends paid on our common shares, if any, generally will not be subject to information reporting and generally will not be subject to U.S. backup withholding tax. However, for dividends and the proceeds from a sale of our common shares paid in the U.S. through a U.S. or a U.S. related paying agent (including a broker) a U.S. Holder will be subject to U.S. information reporting requirements and may also be subject to the 28% (tax years beginning in 2006 and 2007) U.S. backup withholding tax, unless the paying agent is furnished with a duly completed and signed Form W-9. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS. Foreign Tax Credit A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of our common shares may be entitled, at the option of the U.S. Holder, to either receive a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces U.S. federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax. This election is made on a year-by-year basis and generally applies to all foreign taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations which apply to the 43
credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s U.S. income tax liability that the U.S. Holder’s foreign source income bears to his or its worldwide taxable income. In the determination of the application of this limitation, various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. In addition, this limitation is calculated separately with respect to specific categories of income. For tax years beginning after December 31, 2006, the foreign tax credit is limited separately with respect to passive category income and general category income. Dividends distributed by us will generally constitute “passive income” or, in the case of certain U.S. Holders, “financial services income,” which for tax years beginning after December 31, 2006, is in certain cases treated as general category income. Additionally, the rules regarding U.S. foreign tax credits include limitations that apply to individuals receiving dividends eligible for the 15% maximum tax rate on dividends described above. For tax years beginning after December 31, 2004, U.S. Holders can reduce their alternative minimum tax (“AMT”) liability by an AMT foreign tax credit without the limitation. Under the pre-2006 Act Law, the AMT foreign tax credit was limited to 90% of AMT. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific, and U.S. Holders of our common shares should consult their own tax advisors regarding their individual circumstances. Disposition of Our Common Shares of Agave Subject to the rules discussed under “Passive Foreign Investment Company Considerations” above, inIn general, U.S. Holders will recognize gain or loss upon the sale of our common shares of Agave equal to the difference, if any, between (i) the amount of cash plusand the fair market value of any property received, and (ii) the shareholder’s tax basis in theour common shares of Agave. Currently, preferentialshares. Preferential tax rates apply to long-term capital gains of U.S. Holders whichthat are individuals, estates or trusts. In general, gain or loss on the sale of our common shares of Agave will be long-term capital gain or loss if theour common shares are a capital asset in the hands of the U.S. Holder and are held for more than one year. Deductions for net capital losses are subject to significant limitations. For U.S. Holders that are not corporations, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders that are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years preceding the loss year and carried forward five years following the loss year to be offset against capital gains until such net capital loss is thereby exhausted.
Other Considerations GainSet forth below are certain material exceptions to the above-described general rules describing the U.S. federal income tax consequences resulting from the holding and disposition of common shares:
Foreign Personal Holding Company The Foreign Personnel Holding Company (“FPHC”) rules have been repealed for tax years of foreign corporations beginning after December 31, 2004, and tax years of U.S. Holders whose tax year ends with or loss,within the FPHC’s tax year. Prior to repeal, if at any time during a taxable year more than 50% of the total combined voting power or the total value of our outstanding shares was owned, directly or indirectly (pursuant to applicable rules of constructive ownership), by five or fewer individuals who were citizens or residents of the U.S. and 60% or more of our gross income for such year was derived from certain passive sources (e.g., from certain interest and dividends), we may have been a FPHC. In that event, U.S. Holders that hold common shares would have been required to include in gross income as a dividend for such year their allocable portions of such passive income to the extent we did not actually distribute such income. Each U.S. Holder should consult his own tax advisor about this change of law. Foreign Investment Company The rule relating to foreign investment companies have been repealed for tax years of foreign corporations beginning after December 31, 2004, and tax years of U.S. Holders whose tax year end with or within the corporation’s tax year. Prior to repeal, if 50% or more of the combined voting power or total value of our outstanding shares was held, directly or indirectly, by citizens or residents of the U.S., U.S. domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by Code Section 7701(a)(31)), and we were found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interests therein, it is possible that we were a “foreign investment company” as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder realizesselling or exchanging common shares to be treated as ordinary income rather than capital gain. Each U.S. Holder should consult his own tax advisor about this change of law. 44
Passive Foreign Investment Company As a foreign corporation with U.S. Holders, the Company could potentially be treated as a passive foreign investment company (“PFIC”), as defined in Section 1296 of the Code, depending upon the percentage of the Company’s assets that are held for the purpose of producing passive income. Certain United States income tax legislation contains rules governing PFICs, which can have significant tax effects on U.S. Shareholders of foreign corporations. These rules do not apply to non-U.S. shareholders. Section 1296 of the Code defines a sale, exchangePFIC as a corporation that is not formed in the United States and, for any taxable year, either (i) 75% or othermore of its gross income is “passive income”, which includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value or, if the Company is a controlled foreign corporation or makes an election, by adjusted tax basis, of its assets that produce or are held for the production of “passive income”, is 50% or more. A U.S. shareholder who holds stock in a foreign corporation during any year in which such corporation qualifies as a PFIC is subject to U.S. Federal income taxation under one of two alternative tax regimes at the election of each such U.S. shareholder. The following is a discussion of such two alternative tax regimes applied to such U.S. shareholders of the Company. A U.S. shareholder who elects in a timely manner to treat the Company as a Qualified Electing Fund (“QEF”), as defined in the Code (an “Electing U.S. Shareholder”), will be subject, under Section 1293 of the Code, to current federal income tax for any taxable year in which the Company qualifies as a PFIC on his pro-rata share of the Company’s (i) “net capital gain” (the excess of net long-term capital gain over net short-term capital loss), which will be taxed as long-term capital gain to the Electing U.S. Shareholder and (ii) “ordinary earnings” (the excess of earnings and profits over net capital gain), which will be taxed as ordinary income to the Electing U.S. Shareholder, in each case, for the shareholder’s taxable year in which (or with which) the Company’s taxable year ends, regardless of whether such amounts are actually distributed. The effective QEF election also allows the Electing U.S. Shareholder to (i) generally treat any gain realized on the disposition of Agavehis Common Shares (or deemed to be realized on the pledge of his Common Shares) as capital, (ii) treat his share of the Company’s net capital gain, if any, as long-term capital gain instead of ordinary income, and (iii) either avoid interest charges resulting from PFIC status altogether, or make an annual election, subject to certain limitations, to defer payment of current taxes on his share of the Company’s annual realized net capital gain and ordinary earnings subject, however, to an interest charge on the deferred taxes. If the Electing U.S. Shareholder is not a corporation, such an interest charge would be treated generally as “personal interest” that can be deducted only when it is paid or accrued and is only 10% deductible in taxable years beginning in 1990 and not deductible at all in taxable years beginning after 1990. The procedures a U.S. Shareholder must comply with in making an effective QEF election will depend on whether the year of the election is the first year in the U.S. Shareholder’s holding period in which the Company is a PFIC. If the U.S. Shareholder makes a QEF election in such first year, i.e. a timely QEF election, then the U.S. Shareholder may make the QEF election by simply filing the appropriate documentation at the time the U.S. Shareholder files its tax return for such first year. If, however, the Company qualified as a PFIC in a prior year during such shareholder’s holding period, then in addition to filing documents, the U.S. Shareholder must elect to recognize (i) (under the rules of Section 1291 discussed below), any gain that he would otherwise recognize if the U.S. Shareholder sold his stock on the application date or (ii) if the Company is a controlled foreign corporation, and such shareholder so elects, his/her allocable portion of the Company’s post-1986 earnings and profits. When a timely QEF election is made, if the Company no longer qualifies as a PFIC in a subsequent year, normal code rules will apply. It is unclear whether a new QEF election is necessary if the Company thereafter re-qualifies as a PFIC. U.S. Shareholders should seriously consider making a new QEF election under those circumstances. If a U.S. Shareholder does not make a timely QEF election in the year in which it holds (or is deemed to have held) the shares in question and the Company is a PFIC (a “Non-resident U.S. shareholder”), then special taxation rules under Section 1291 of the Code will apply to (i) gains realized on disposition (or deemed to be realized by reason by of a pledge) of his/her common shares and (ii) certain “excess contributions”, as specially defined, by the Company. Non-electing U.S. shareholders generally would be required to pro-rata all gains realized on the disposition of his/her common shares and all excess distributions over the entire holding period for the common shares. All gains or excess distributions allocated to prior years of the U.S. shareholder (other than years prior to the first taxable year of the Company during such U.S. Shareholder’s holding period and beginning after January 1, 1987 for which it was 45
a PFIC) would be taxed at the highest tax rate for each such prior year applicable to ordinary income. The Non-electing U.S. Shareholder also would be liable for interest on the foregoing tax liability for each such prior year calculated as if such tax liability had been due with respect to each such prior year. A Non-electing U.S. Shareholder that is not a corporation must treat this interest charge as “personal interest” which, as discussed above, is partially or wholly non-deductible. The balance of the gain or the excess distribution will be treated as ordinary income in the year of the disposition or distribution, and no interest charge will be incurred with respect to such balance. If the Company is a PFIC for any taxable year during which a Non-electing U.S. Shareholder holds common shares, then the Company will continue to be treated as a PFIC with respect to such common shares, even if it is no longer, by definition, a PFIC. A Non-electing U.S. Shareholder may terminate this deemed PFIC status by electing to recognize a gain (which will be taxed under the rules discussed above for Non-electing U.S. Shareholders) as if such common shares had been sold on the last day of the last taxable year for which it was a PFIC. Under Section 1291(f) of the Code, the Department of the Treasury has issued proposed regulations that would treat as taxable certain transfers of PFIC stock by Non-electing U.S. Shareholders that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. Certain special, generally adverse, rules will apply with respect to the common shares while the Company is a PFIC whether or not it is treated as a QEF. For example, under Section 1297(b)(6) of the Code, a U.S. shareholder who uses PFIC stock as security for a loan (including a margin loan) will, except as may be provided in regulations, be treated as having made a taxable disposition of such stock. The foregoing discussion is based on existing provisions of the Code, existing and proposed regulations thereunder, and current administrative ruling and court decisions, all of which are subject to change. Any such change could affect the validity of this discussion. In addition, the implementation of certain aspects of the PFIC rules requires the issuance of regulations which in many instances have not been promulgated and which may have retroactive effect. There can be no assurance any of these proposed regulations will be enacted or promulgated, and if so, the form they will take or the effect that they may have on this discussion. Accordingly, and due to the complexity of the PFIC rules, U.S. persons who are shareholders of the Company are strongly urged to consult their own tax advisors concerning the impact of these rules on their investment in the Company. Controlled Foreign Corporation If more than 50% of the total combined voting power of all classes of shares entitled to vote or the total value of our common shares is owned, actually or constructively, by citizens or residents of the United States, source for U.S. domestic partnerships or corporation, or estates or trusts other than foreign estates or trusts (as defined by Code Section 7701(a)(31)), each of which owns, actually or constructively, 10% or more of our total combined voting power of all classes of shares entitled to vote (“U.S. Shareholder”), we would be treated as a controlled foreign corporation (“CFC”) under Subpart F of the Code. This classification could affect many complex results, one of which is the inclusion by the U.S. shareholders of certain income of a CFC, which is subject to current U.S. tax. The United States generally taxes U.S. Shareholders of a CFC currently on their pro rata shares of the Subpart F income of the CFC. Such U.S. Shareholders are generally treated as having received a current distribution out of the CFC’s Subpart F income and are also subject to current U.S. tax on their pro rata shares of increases in the CFC’s earnings invested in U.S. property. The foreign tax credit limitation purposes. Consequently,described above may reduce the U.S. Holders may not be able to use any foreign tax credits arisingon these amounts. In addition, under Section 1248 of the Code, gain from any Canadian tax imposed on the sale or exchange or other taxable disposition of Agave common shares unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources or unless an applicable treaty provides otherwise. Ifof the CFC by a U.S. Holder receiveswhich is or was a U.S. Shareholder at any foreign currencytime during the five year period ending on the sale of Agave common shares, such U.S. Holder may recognize ordinary income or loss as a result of currency fluctuations between the date of the sale or exchange is treated as ordinary income to the extent of Agave commonearnings and profits of the CFC attributable to the shares sold or exchanged. If a foreign corporation is both a PFIC and a CFC, the date the sale proceeds are converted into U.S. dollars.
United States Information and Backup Withholding Tax
Under current Treasury Regulations, dividends paid on Agave’s common shares, if any,foreign corporation generally will not be treated as a PFIC with respect to U.S. Shareholders of the CFC. This rule generally is effective for taxable years of U.S. Shareholders beginning after 1997 and for taxable years of foreign corporations ending with or within such taxable years of U.S. Shareholders. Special rules apply to U.S. Shareholders who are subject to information reporting and generallythe special taxation rules under Section 1291 discussed above with respect to a PFIC. Because of the complexity of Subpart F, a more detailed review of these rules is outside of the scope of this discussion. We do not believe that we currently qualify as a CFC. However, there can be no assurance that we will not be subject to U.S. backup withholding tax. However, dividends andconsidered a CFC for the proceeds from a sale of Agave’s common shares paid in the U.S. through a U.S.current or U.S. related paying agent (including a broker) will be subject to U.S. information reporting requirements and may also be subject to U.S. backup withholding tax (currently at 26% rate), if a U.S. Holder does not provide its taxpayer identification number and otherwise comply with the backup withholding rules. Backup withholdingany future taxable year.
| | F. | Dividends and Paying Agents |
This Form 20-F is not an additional tax. Amounts withheld under the backup withholding rules are available to be credited against a U.S. Holder’s United States federal income tax liability and may be refunded by the IRS to the extent they exceed such liability, provided the required information is furnished to the IRS in a timely manner. Under United States federal income tax law and regulations, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. Penalties for failure to file certain of these information returns are substantial. U.S. Holders of Agave common shares should consult with their own tax advisors regarding the requirements are imposed of filing information returns. U.S. Holders should be aware that reporting requirements with respect to the holding of certain foreign financial assets, including stock of foreign issuers that is not held in an account maintained by certain types of financial institutions, if the aggregate value of all of such assets exceeds U.S. $50,000. IRS guidance suspends this annual filing requirement pending the release of new forms. Filings will eventually be required with respect to any year for which the obligation is suspended.
United States person who directly or indirectly own an interest in a PFIC to filebeing filed as an annual report withunder the IRSSecurities Exchange Act of 1934, and failureas such, there is no requirement to fileprovide any information under this item.
46
This Form 20-F is being filed as an annual report under the Securities Exchange Act of 1934, and as such, report could result in the imposition of penalties on such United States person. Thisthere is no requirement has been suspended for certain United States persons for tax years beginning after March 18, 2010 pending the release of a revised form. Filings will eventually be required with respect to provide any year in which the obligation is suspended. U.S. Holders should consult their tax advisors regarding the application of the information reporting rules to Agave common shares and the application of these requirements to their particular situation.
under this item. Additional Tax on Investment Income
For taxable years beginning after December 31, 2012, U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally will be subject to a 3.8% Medicare contribution tax on unearned income, including, among other things, dividends on, and capital gains from the sale or other taxable disposition of, Agave’s common shares, subject to certain limitations and exceptions.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
Exhibits attached to this Form 20-F are also available for viewing at the head office of the Company, Suite 1601-675 West Hastings1206 – 588 Broughton Street, Vancouver, British Columbia V6B 1N2, or on request of Agave at 604-558-3908.V6G 3E3 during normal business hours. Copies of Agave’s consolidatedFirst Energy’s financial statements and other disclosure documents required under the British ColumbiaSecurities Actare available for viewing onat www.sedar.com. This information is not required for reports filed in the internet at www.sedar.com during normal business hours.United States. I. Subsidiary Information Cream Minerals de Mexico, S.A., de C.V.
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A. Quantitative Information about Market Risk
The Company has not hedged its exposure to currency fluctuations. At March 31, 2016 and 2015, the Company is exposed to currency risk through the following assets and liabilities denominated in U.S. dollars and Mexican pesos.
| March 31, 2016 | March 31, 2015 | U.S. Dollars | | | Cash and cash equivalents | $ -- | $ 2,315 | Accounts payable and accrued liabilities | -- | (16,090) | Mexican Pesos | | | Cash and cash equivalents | -- | -- | Value added taxes recoverable | -- | -- | Accounts payable and accrued liabilities | -- | -- |
Based on the above net exposures at March 31, 2016, and assuming that all other variables remain constant a 10% appreciation or depreciation of the Canadian dollar against the U.S. dollar would result in an increase/decrease of $Nil (2015 - $2,318), in the Company’s loss from operations, and a 10% appreciation or depreciation of the Canadian dollar against the Mexican Pesos would result in an increase/decrease of $Nil (2015 - $Nil in the Company’s loss from operations.
B. Qualitative Information about Market Risk
Transaction Risk and Currency Risk Management
Agave’s operations do not employ financial instruments or derivatives. The Company has no long-term debt or source of revenue as the Company is in the resource exploration and development stage on its mineral property interests.
The Company is exposed to potential loss from various risks including commodity price risk, interest rate risk, currency risk, credit risk and liquidity risk.
| (a) | ITEM 11. | Commodity price riskQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The Company’s ability to raise capital to fund exploration or development activitiesFirst Energy is subject to risk associated with fluctuations in the market prices of golda “small business issuer”, and silver and the outlook for these metals. The Companyas such, does not have any hedging or other derivative contracts with respectneed to its operations.
Market prices for gold and silver historically have fluctuated widely and are affectedprovide the information required by numerous factors outside of the Company’s control, including, but not limited to, levels of worldwide production, short-term changes in supply and demand, industrial and retail demand, central bank lending, central bank sales, investment demand and forward sales by producers and speculators. The Company has elected not to actively manage its commodity price risk.
Financial instruments that potentially subject the Company to significant cash flow interest rate risk are financial assets with variable interest rates. The Company has no financial assets with this risk.
Financial assets and financial liabilities that bear interest at fixed rates are subject to fair value interest rate risk. The Company had no cash equivalents at March 31, 2016. In respect of financial assets, the Company’s policy is to invest cash at floating rates of interest in short term cash GIC’s issued by a major Canadian chartered bank, in order to maintain liquidity, while achieving a satisfactory return. Fluctuations in interest rates impact on the value of cash equivalents. Interest rate risk is not significant to the Company as it has no cash equivalents at year end. As at March 31, 2015, with other variables unchanged, a 1% change in the variable interest rate would have had an insignificant impact on the Company.
The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company operates in Canada and Mexico and a portion of its expenses are incurred in United States dollars and in Mexican pesos. A significant change in the currency exchange rates between the Canadian dollar and these currencies could have an effect on the Company’s results of operations, financial position or cash flows.
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations.
Given their short-term maturity, the fair value of cash and sundry receivables are based on going-concern assumptions and are recorded at their carrying value.
The Company’s financial assets comprise cash, short-term investments, marketable securities and accounts receivable. These financial instruments potentially subject the Company to credit risk. The Company’s maximum exposure to credit risk as at March 31, 2016 is the carrying value of its financial assets. The Company manages credit risk by maintaining bank accounts with reputable banks and financial institutions and investing only in GIC’s issued by a major Canadian chartered bank. Cash is held at a major Canadian Chartered Bank and the risk of default is considered to be remote.
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company manages liquidity risk through the management of its capital structure and financial leverage as outlined in Note 14 to the consolidated financial statements.
The Company attempts to manage its significant liquidity risk by maintaining sufficient cash and short-term investment balances. Liquidity requirements are managed based on expected cash flow to ensure there is sufficient capital to meet short-term obligations. The Company has been dependent on small private placement financings and advances from a major shareholder to maintain liquidity. All of the Company’s financial liabilities are due within one year.
C. Management of Capital
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the development of its mineral property interests in Canada and Mexico and to maintain a flexible capital structure which optimizes the costs of capital.
In the management of capital, the Company includes the components of total shareholders’ equity. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its underlying assets. To maintain or adjust the capital structure, the Company may issue new shares, issue debt or acquire or dispose of assets.
In order to facilitate the management of its capital requirements, the Company prepares annual expenditure budgets that are updated as necessary depending on various factors, including successful capital deployment and general industry conditions.
Although the Company has been successful at raising funds in the past through the issuance of share capital, it is uncertain whether it will be able to continue this form of financing due to a number of factors beyond its control. The Company’s investment policy is to invest its excess cash in highly liquid short-term interest-bearing investments with maturities of 90 days or less from the original date of acquisition, selected with regards to the expected timing of expenditures from continuing operations.
Exchange Rate Sensitivity
The Company is engaged in mineral exploration and related activities, including exploration, and reclamation. Changes in the price of foreign exchange rates could significantly affect the Company’s profitability and cash flows. See “Key Information” under Item 3 above, for a description of factors relating to foreign exchange and currency fluctuations. Its liabilities are all denominated in Canadian dollars.11.
Although, there were no exploration activities conducted in fiscal 2016, exploration in fiscal 2015 was primarily conducted in Mexico, and its administrative operations are in Canada. The Company’s operations are affected by exchange rate risk, as the equity financings by the Company to date have been denominated in Canadian dollars. Excess cash is invested and may be affected by exchange rate risk for United States dollar expenditures. In the future, it will be necessary to do further equity or other forms of financing. The funds are usually received in Canadian dollars. Funds received in U.S. dollars will likely remain in U.S. dollars and be used for expenditures in U.S. dollars, to reduce exchange risk. The risk that the Company is subject to arises when expenses are incurred in U.S. dollars or other currencies, but primarily U.S. dollars, with large fluctuations in the Canadian-U.S. dollar exchange rate at that time of the transaction. The Company had an exchange gain of $336, compared to exchange losses were incurred in fiscal 2015 of $2,963 on cash expenditures of $0.68 million, an amount primarily related to administrative and exploration activities in Mexico.
Interest Rate Risk and Equity Price Risk
Agave does not have any debt that is subject to interest rate change risks.
ITEM 12. description of securities other than equity securities
| | ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
Not applicable. PART II ITEM 13. defaults, dividend arrearages and DELINQUENCIES
| | ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
Not applicable. ITEM 14. material modifications to the rights of security holders and use of proceeds
| | ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
Not applicable. item 15.
| | ITEM 15. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures The issuer’s certifying officers are responsibleAt the end of the period covered by this Form 20-F Annual Report for ensuring that processes are in place to provide themthe fiscal year ended March 31, 2018, an evaluation was carried out under the supervision of and with sufficient knowledge to support the representations they are making. Investors should be aware that inherent limitations onparticipation of the abilityCompany's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of certifying officersthe effectiveness of an issuer tothe design and implement on a cost effective basis relating tooperation of the establishment and maintenance ofCompany's disclosure controls and procedures (as defined in Rule 13a-15(e) and internal controls over financial reporting may result in additional risks toRule 15d-15(e) under the quality, reliability, transparencyExchange Act). Based on that evaluation, the CEO and timelinessthe CFO have concluded that as of interim and annual filings and other reports provided under securities legislation. As such, the certifying officer filingend of the period covered by this annual report, does not make any representations relating to the establishment and maintenance ofCompany's disclosure controls and other procedures designed to provide reasonable assurance thatwere effective in ensuring that: (i) information required to be disclosed by the issuerCompany in its annual filings, interim filingsreports that it files or other reports filed or submittedsubmits to the SEC under securities legislationthe Exchange Act is recorded, processed, summarized, and reported within the time periods specified in securities legislation;applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting The management of First Energy is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company's principal executive and principal financial officers and effected by the Company's Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s IFRS. Disclosure controls and procedures are designed to ensure that material information relating to the Company, and its consolidated subsidiaries, is accumulated and communicated on a timely basis to appropriate members of the Company’s management, including the Company’s CEO and CFO, to allow timely decisions regarding required disclosure. Disclosure controls and procedures apply to various disclosures, including reports filed with securities regulatory agencies.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial information. Internalgenerally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures thatthat:
47
• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. The evaluationsprinciples, and that receipts and expenditures of internal controls were conductedthe Company are being made only in accordance with authorizations of management and directors of the frameworkCompany; and • provide reasonable assurance regarding prevention or timely detections of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of March 31, 2018. In making this assessment, they used the criteria establishedset forth in the Internal Control –- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), a recognized control model, and the requirements(COSO). Based on this assessment, management concluded that, as of National Instrument 52-109, Certification of Disclosures in Issuers’ Annual and Interim Filings. An evaluation was carried out under the supervision of and with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of our disclosure controls and procedures and internal controls over financial report (as defined in rules adopted by the SEC) as at March 31, 2016. Based on that evaluation,2018, the CEO and CFO concluded that the Company’s disclosure controls and procedures andCompany's internal control over financial reporting werewas and is effective, based on those criteria.
The SEC has defined a material weakness as at March 31, 2016. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance with respect to the reliabilitya deficiency, or a combination of financial reporting and financial statement preparation. Accordingly, the Company’s management, including the CEO and the CFO, does not expect that the Company’sdeficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual financial statements will preventnot be prevented or detect all error and all fraud. Also, projections of any evaluation of effectiveness to future periods and subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may change.
The Company will continue to periodically review its disclosure controls and procedures and internal control over financial reporting and may make modifications from time to time as considered necessary or desirable.
detected on a timely basis Attestation Report of registered public accounting firm This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report. Changes in internal controls over financial reporting No changes in the Company’s internal control over financial reporting occurred during the year ended March 31, 20162018, that materially affected or are reasonably likely to materially affect, the Company’s internal control over financial reporting. | | ITEM 15T | CONTROLS AND PROCEDURES |
Not applicable ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Composition of the Audit Committee
| | ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
The members of the audit committee are Navin Varshney, Ronald Lang and Robert Paul. The Company’s board of directorsBoard has determined that it has more than oneLaurie Stevenson, a member of its audit committee, qualifies as an “audit committee financial expert” on the Audit Committee: A memberas defined in Item 16.A. of the audit committee is independent if the member has no direct or indirect material relationship with the Company. A material relationship means a relationship which could, in the view of the Company’s board of directors, reasonably interfere with the exercise of a member’s independent judgment. None of the current members of the audit committee have a material relationship with the Company.
At the date of this Annual Report on Form 20-F, the Company is in compliance with the audit committee composition rule set out in National Instrument 52-110Audit Committees(“NI 52-110”), the Canadian regulatory policy respecting audit committees, as a majority of the members of the audit committee are considered independent.20-F.
ITEM 16B. CODE OF ETHICS
The Company has adopted a code of ethics that applies to the Company’s CEO, the CFO and other members of senior management. The Company’s Code of Ethics is filed as an exhibit to this Form 20-F. There have been no amendments to the code of ethics and no waivers during the year ended March 31, 2016,2018, and to the date of filing of this Form 20-F. ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES48
| | ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The following table discloses the aggregate fees billed for each of the last two fiscal years for professional services rendered by the Company’s audit firm for various services. | Years ended March 31, | Services: | 2016 | 2015 | Audit fees | $ 8,000 | $ 15,000 | Audit-related fee(1) | -- | -- | Tax fees | Nil | Nil | All other fees(2) | -- | -- | Total fees | $ 8,000 | $ 15,000 |
(1) “Audit-Related
| | | | | | | | | Years ended March 31, | | Services: | | 2018(3) | | | 2017 | | Audit fees | $ | 7,500 | | | $ 9,500 | | Audit-related fee(1) | | 1,000 | | | 1,500 | | Tax fees | | Nil | | | Nil | | All other fees(2) | | - | | | - | | Total fees | $ | 8,500 | | | $11,000 | |
(1) | “Audit-Related Fee” includes services that are traditionally performed by the auditor. These audit-related services include review of SEC documentation and audit services not required by legislation or regulation. (2) Canadian Public Accounting Board Fees.
| (2) | Canadian Public Accounting Board Fees. | (3) | Estimated audit fees for the year ended March 31, 2018 |
From time to time, management of the Company recommends to and requests approval from the audit committee for non-audit services to be provided by the Company’s auditors. The audit committee routinely considers such requests at committee meetings, and if acceptable to a majority of the audit committee members, pre-approves such non-audit services by a resolution authorizing management to engage the Company’s auditors for such non-audit services, with set maximum dollar amounts for each itemized service. During such deliberations, the audit committee assesses, among other factors, whether the services requested would be considered “prohibited services” as contemplated by the United States Securities and Exchange Commission and whether the services requested and the fees related to such services could impair the independence of the auditors. All of the non-audit related services provided by the Company’s audit firm were pre-approved by the audit committee. During the year ended March 31, 2016,2018, all of the services described above under “Principal Accountant Fees and Services” under the captions “Audit-Related Fees”, “Tax Fees”, and “All Other Fees” were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
| | ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
Not applicable. ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
| | ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATEDPURCHASERS |
There were no purchases of equity securities by the issuer and affiliated purchasers. ITEM 16F. Change in registrant’s certifYing accountant
| | ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT |
Not applicable. ITEM 16g. corporate governance
| | ITEM 16G. | CORPORATE GOVERNANCE |
Not applicable. | | ITEM 16H | MINE SAFETY DISCLOSURE |
Not applicable PART III | | ITEM 17. | FINANCIAL STATEMENTS |
item 17. FINANCIAL STATEMENTS
The Company’s consolidatedFirst Energy is furnishing financial statements are stated in Canadian dollars and are prepared in accordance with IFRS as issued by the IASB.
The financial statements and notes thereto as required under Item 17 are attached as Exhibit F-1 to this Annual Report and are incorporated by reference herein. The audit report of Morgan & Company LLP, Chartered Professional Accountants, is included therein immediately preceding the consolidated financial statements and is also incorporated by reference herein.18.
49
item 18.
| | ITEM 18 | FINANCIAL STATEMENTS |
The Company’s financial statements are stated in Canadian dollars and are prepared in accordance with IFRS as issued by the IASB. The financial statements and notes thereto as required under Item 18 are attached as Exhibit F-1 to this Annual Report and are incorporated by reference herein. The auditor’s report of DeVisser Gray LLP, Chartered Professional Accountants, is included therein immediately preceding the financial statements and is also incorporated by reference herein. Not applicable. See Item 17.This annual report on Form 20-F includes the following financial statements of First Energy:
a) | Auditors’ Report on the Statements of Financial Position as at March 31, 2018 and 2017 and the Statements of Operations and Comprehensive Loss, Statement of Changes in Shareholder’s Equity, and Statements of Cash Flows for years ended March 31, 2018, 2017 and 2016; | | | 64b) | Statements of Financial Position as at March 31, 2018 and 2017; |
| | c) | Statements of Loss and Comprehensive Loss for the years ended March 31, 2018, 2017 and 2016; | | | d) | Statement of Changes in Shareholder’s Equity for the years ended March 31, 2018, 2017 and 2016; | | | e) | Statements of Cash Flows for years ended March 31, 2018, 2017 and 2016; and | | | f) | Notes to Financial Statements for the years ended March 31, 2018, March 31, 2017, and March 31, 2016. |
ITEM 19. EXHIBITS
Financial Statements:
| a. | ITEM 19. | Auditors’ Report on the consolidated statements of financial position as at March 31, 2016 and 2015 and the consolidated statements of operations and comprehensive loss, changes in equity (deficiency), and cash flows for years ended March 31, 2016, 2015 and 2014;EXHIBITS |
| b. | Consolidated statements of financial position as at March 31, 2016 and 2015; |
| c. | Consolidated statements of operations and comprehensive loss for the years ended March 31, 2016, 2015 and 2014; |
| d. | Consolidated statement of changes in equity (deficiency) for the years ended March 31, 2016, 2015 and 2014; |
| e. | Consolidated statements of cash flows for years ended March 31, 2016, 2015 and 2014; |
| f. | Notes to the consolidated financial statements; |
| g. | Shareholder Rights Plan and Articles. |
Index to Exhibits
The following exhibits are filed with this Annual Report on Form 20-F in respect of the current year: Exhibit Number |
Description | Exhibit | | Number | Description | F-1 | Consolidated Financial Statements for the Years Ended March 31, 2016, 20152018, 2017 and 2014, including Management’s Responsibility for Financial Reporting2016, and Auditors’ Report from DeVisser Gray LLP, Chartered Professional Accountants for the years ended March 31, 2018 and 2017 and from Morgan & Company LLP Chartered Professional Accountantsfor the year ended March 31, 2016. | 1.1* | Certified Copies of Transition Application and Notice of Articles and Notice of Articles - post transition | 2.1***2.1 | 20112017 Stock Option Plan (10% Rolling), as approved by shareholders on June 23, 2011 and December 13, 2012 | 4.2**** | Option agreement between Roca Mines Inc. and the Company, dated July 24, 2009, on the Nuevo Milenio Project, Municipality of Xalisco, Tepic Area, Nayarit State, Mexico8, 2017 | 6.1 | Calculation of earnings per share – N/A | 7.1 | Explanation of calculation of ratios – N/A | 8.1*** | List of subsidiaries | 11.1* | Code of ethics | 11.2 | Shareholder Rights Plan Agreement dated May 24, 2011 | 12.1 | Certification pursuant to Rule 13a-14(A)/15d-14(a) of Chief Executive Officer | 12.2 | Certification pursuant to Rule 13a-14(A)/15d-14(a) of Chief Financial Officer | 13.1 | Certification pursuant to 18 U.S.C. Section 1350 of Chief Executive Officer | 13.2 | Certification pursuant to 18 U.S.C. Section 1350 of Chief Financial Officer | A* | A technical report titled, “Geological Report on the Dos Hornos and Once Bocas Gold Silver Structure, Nuevo Milenio Project, Municipality of Xalisco, Tepic Area, Nayarit State, Mexico Latitude: 21º21’35” North, Longitude: 104 º46’53” West”, dated February 16, 2006. | B** | A Technical Report on the Casierra alluvial diamond properties EPL 1/94 (Hima prospecting license area) and EPL 5/94 in Sierra Leone, West Africa, dated November 15, 2005, as amended January 18, 2006. | | | | |
*These exhibits were included as exhibits to, and are incorporated herein by reference to, the Company’s Annual Report filed on Form 20-F with the Commission on September 30, 2005. ** This exhibit was previously filed via Form 6-K on EDGAR on December 9, 2005, was subsequently amended and filed via Form 6-K on EDGAR on February 6, 2006 and is incorporated by reference herein.
|