For the transition period from _____________
to _____________.
Securities registered or to be registered pursuant to
Section 12(b) of the Act.
Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act.
None
Number of outstanding shares of First Energy’s only
class of issued capital stock as at March 31, 2022:
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer or an emerging growth company.
Indicate by check mark whether the registrant has filed a report on and attestation
to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:
International Financial Reporting Standards as issued by the International
Accounting Standards Board þ
If other has been checked in response to the previous
question, indicate by check mark which financial statement item Registrant has elected to follow:
If this report is an Annual Report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Indicate by check mark whether the registrant has filed
all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a court.
Certain statements in this Annual Report on Form 20-F
(this “Annual Report”) under the captions “Item 3 - Risk Factors”, “Item 4 – “Business Overview”,
Item 5 - “Operating and Financial Review and Prospects” and “Item 11 - Quantitative and Qualitative Disclosures about
Market Risk” and elsewhere in this Annual Report and the documents incorporated herein by reference constitute “forward-looking
statements” within the meaning of the U.S. Securities Litigation Reform Act of 1995 and "forward-looking information”
under applicable Canadian securities legislation. Some forward-looking statements may be identified by such terms as “believes”,
“anticipates”, “intends” or “expects” collectively “forward-looking statements”. Forward-looking
information in this Annual Report include statements regarding the Company's plans for its projects, statements relating to mineral resources,
as they are based on various assumptions that are inherently forward-looking, statements regarding the anticipated timing by which the
Company will require additional funds. These forward-looking statements are based on the Company’s current expectations and projections
about future events and financial trends affecting the financial condition of its business and the industry in which it operates. Such
forward-looking statements are based on assumptions regarding future events and other matters and are subject to known and unknown risks,
uncertainties and other factors including the factors set forth in other filings with the Canadian securities commissions and the United
States Securities and Exchange Commission (the “Commission”), which may cause the actual results, performance or achievements
of the Company or industry results to be materially different from any future results, performance, or achievements expressed or implied
by such forward-looking statements. Assumptions on which forward-looking statements are based include the assumptions underlying mineral
resource estimates and in the technical reports supporting such estimates, the assumption that the Company will continue as a going concern
and will continue to be able to access the capital required to advance its projects and continue operations. Such risks and the assumptions
that accompany them, uncertainties and other factors include, among others, the following: general economic and business conditions, which
will, among other things, impact the demand for gold and silver and other precious metals explored for by the Company; industry capacity;
the ability of the Company to raise the capital required to implement its business strategy; changes in, or the unintentional failure
to comply with, government regulations (especially safety and environmental laws and regulations); changes in the uses of gold, silver
and other precious metals; silver and gold price volatility; increased competition; risks of the mining industry; exploration programs
not being successful; inability to obtain financing; inability to obtain, or cancellation of, government permits; changes to regulations
and mining law; increased reclamation obligations; title defects with respect to properties; risks associated with international operations;
and foreign exchange and currency fluctuations. There can be no assurance that forward-looking statements in this Annual Report will prove
to be accurate and actual results and future events could vary materially from those implied by such statements. Consequently, all of
the forward-looking statements made in this Annual Report are qualified by these cautionary statements. The Company disclaims any obligation
to update or revise any written forward-looking statements whether as a result of new information, future events or otherwise except as
required by applicable laws.
This Annual Report may use the terms “measured resources”
and “indicated resources.” We advise U.S. investors that while such terms are recognized and permitted under Canadian regulations,
the U.S. Securities and Exchange Commission does not recognize them. U.S. investors are cautioned not to assume that any part or all of
the mineral deposits in these categories will ever be converted into reserves.
This Annual Report may use the terms “inferred resources.”
We advise U.S. investors that while such term is recognized and permitted under Canadian regulations, the U.S. Securities and Exchange
Commission does not recognize it. “Inferred resources” have a great amount of uncertainty as to their existence, as well as
to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded
to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or other economic
studies. U.S. investors are cautioned not to assume that any part or all of an inferred resource exists or is economically or legally
mineable.
PART 1
| ITEM 1. | identity of DIRECTORS, SENIOR management and advisers |
| A. | Directors and Senior Management |
This Form 20-F is being filed as an annual report under
the Securities Exchange Act of 1934, as amended 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, as amended 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, as amended and as such, there is no requirement to provide any information under this item.
| ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
This Form 20-F is being filed as an annual report under
the Securities Exchange Act of 1934, as amended and as such, there is no requirement to provide any information under this item.
| A. | Selected Financial Data |
The selected financial data of First Energy Metals Limited.
(“First Energy” or the “Company”) for the years ended March 31, 2022, 2021, and 2020, was derived from the Company’s
financial statements as audited by DeVisser Gray LLP, Chartered Professional Accountants. The selected financial data set forth for the
years ended March 31, 2019 and 2018 was derived from the Company’s financial statements, not included herein.
The Selected Financial Data should be read in conjunction
with the financial statements and other financial information included elsewhere in this Annual Report.
The financial statements of the Company have been prepared
in accordance and compliance with International Financial Reporting Standard as issued by the International Accounting Standards Board
(“IFRS”).
The basis of preparation is described in Note 2 of the
financial statements.
The Company has not declared any dividends on its common
shares since incorporation and does not anticipate that it will do so in the foreseeable future. The present policy of the Company is
to retain future earnings for use in its operations and the expansion of its business.
The following table sets forth selected financial information
with respect to the Company for the periods indicated and is extracted from the more detailed financial statements included herein. The
following constitutes selected financial data for the Company for the last five fiscal years ended March 31, 2022, in Canadian dollars,
presented in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards
Board (“IASB”) for the years 2022, 2021, 2020, 2019, and 2018. The following table should be read in conjunction with “Item
5: Operating and Financial Review and Prospects”, and the financial statements included in Item 18.
(Canadian Dollars in Thousands Except Per Share Amounts)
| (Cdn$) |
As at March 31, |
| Statement of Financial Position Data |
2022 |
2021 |
2020 |
2019 |
2018 |
| Total assets according to financial statements |
$ 6,904 |
$ 3,180 |
$ 372 |
$ 327 |
$ 413 |
| Total liabilities |
429 |
704 |
226 |
126 |
255 |
| Share capital |
45,944 |
38,713 |
36,251 |
35,713 |
35,189 |
| Warrant reserve, share-based payment reserve, share subscriptions |
4,325 |
2,865 |
538 |
683 |
491 |
| Deficit (IFRS) |
(43,794) |
(39,102) |
(36,643) |
(36,195) |
(35,522) |
| (Cdn$) |
As at March 31, |
| Period End Balances (as at) |
2022 |
2021 |
2020 |
2019 |
2018 |
| Working capital (deficiency) |
$ 459,010 |
$ 1,578 |
$ 4 |
$ 107 |
$ 137 |
| Mineral property interests |
6,004,875 |
886 |
131 |
83 |
- |
| Shareholders’ equity |
6,474,885 |
2,475 |
146 |
201 |
158 |
| Number of outstanding shares |
78,238,894 |
49,522,670 |
29,631,003 |
17,631,003 |
12,236,638 |
No cash or other dividends have been declared.
| |
|
| (Cdn$) |
As at March 31 |
| Statement of Operations Data |
2022 |
2021 |
2020 |
2019 |
2018 |
| General and administrative expenses (including Share-based payments) |
$ 2,602 |
$ 2,051 |
$ 418 |
$ 521 |
$ 307 |
| Exploration costs |
1,609 |
246 |
3 |
152 |
41 |
| Write-down of mineral property interests |
480 |
163 |
(27) |
- |
514 |
| Net loss according to financial statements (IFRS) |
(4,691) |
(2,460) |
(477) |
(673) |
(862) |
The tables below include the quarterly results for the years
ended March 31, 2022 and 2021.
(Canadian Dollars in Thousands Except Per Share Amounts)
| (Cdn$) |
Year Ended March 31, 2022 |
| Statement of Operations Data |
Quarter 1 |
Quarter 2 |
Quarter 3 |
Quarter 4 |
Total |
| General and administrative expenses |
$ 481 |
$ 643 |
$ 857 |
$ (11) |
$ 1,970 |
| Share-based payments |
277 |
168 |
- |
187 |
632 |
| Exploration costs |
978 |
68 |
120 |
443 |
1,609 |
| Write-down of mineral property interests |
- |
130 |
- |
350 |
480 |
| Net loss according to financial statements |
1,736 |
1,009 |
977 |
969 |
4,691 |
| Net loss from continuing operations per common share |
0.03 |
0.02 |
0.01 |
0.01 |
0.07 |
| (Cdn$) |
Year Ended March 31, 2021 |
| Statement of Operations Data |
Quarter 1 |
Quarter 2 |
Quarter 3 |
Quarter 4 |
Total |
| General and administrative expenses |
$ 157 |
$ 250 |
$ 299 |
$ 355 |
$ 1,061 |
| Exploration costs |
36 |
62 |
8 |
140 |
246 |
| Write-down of mineral property interests |
- |
- |
- |
163 |
163 |
| Net loss (income) according to financial statements |
193 |
312 |
307 |
1,648 |
2,460 |
| Net loss from continuing operations per common share |
0.01 |
0.01 |
0.01 |
0.04 |
0.07 |
| B. | Capitalization and Indebtedness |
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.
| C. | Reasons for the Offer and Use of Proceeds |
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.
The following is a brief discussion of those distinctive
or special characteristics of the Company’s operations and industry which may have a material impact on First 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.
Financial Risk Factors
First 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. The 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 the Company has no prior years’ history of earnings or cash flow. The Company has not paid dividends on
its shares at any time since incorporation and does not anticipate doing so in the foreseeable future. The Company’s financial statements
have been prepared assuming it will continue on a going-concern basis. Should funding not be obtained, this assumption will change and
the Company’s assets may be written down to realizable values. The Company has incurred losses since inception (deficit at March
31, 2022, is $43,793,680), which casts doubt on the ability of the Company to continue as a going concern. The 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 the
Company’s short to medium-term operating and exploration expenses must be paid from its existing cash position or external financing.
At March 31, 2022, the Company had working capital of $459,010, compared to working capital of $1,578,243 at March 31, 2021. Working capital
is defined as current assets less current liabilities.
First Energy may be unable to obtain the funds necessary
to expand exploration. The Company’s operations consist, almost exclusively, of cash consuming activities given that all
of its mineral projects are in the early exploration stage. The 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 2022. 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 the 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.
The 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 metal prices and external market conditions
can cause significant changes in the Company’s share price because as the prices of metals increase or decrease, the economic viability
of the mineral properties is affected. The Company has no history of mining or current source of revenue. The Company is exploring
for metals and historically, the prices of the common shares of junior exploration companies are very volatile. This volatility may be
partly attributed to the volatility of metal 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.
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’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
First 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.
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 Extraction. Although the Company
carefully prepares 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.
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.
First 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. The 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.
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 has 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. To date, land disturbance has been minimal and all required reclamation has been completed.
Other Risk Factors
First Energy business operations could be adversely
affected by the continued outbreak of COVID-19. In March 2020, the World Health Organization declared coronavirus COVID-19,
a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments,
have adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. To date, the Company has
not experienced any significant impact to its business, results of operations, financial position and cash flows as result of the pandemic.
However, it is not possible for the Company to predict the duration or magnitude of the adverse results of the pandemic and its impact
on the Company’s future business or results of operations.
First Energy is dependent on its ability to recruit
and retain key personnel. The success of the activities of the 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. The 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 key 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.
First Energy’s title to mineral property interests
may be challenged. Although the 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’s mineral properties may be subject to prior unregistered
agreements or transfers or native land claims, and title may be affected by undetected defects. The 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.
First Energy’s directors and officers serve
as directors and/or officers of other publicly traded junior resource companies. Some of the directors and officers of the 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 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 the Company and their duties to the other companies on whose boards they serve,
the directors and officers of the 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.
First Energy may not be able to ensure 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, 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.
Risks Relating to an Investment in the Securities
of the Company
First Energy could be deemed a Passive Foreign
Investment Company which could have negative consequences for U.S. Holders. Potential
investors who are U.S. Holders (defined below) should be aware that the 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 the Company
were to be treated as a PFIC, U.S. Holders of the Company’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 Company’s
common shares and upon the receipt of distributions on the Company’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 Company’s common shares. U.S. Holders are urged to consult their
tax advisors regarding the Company’s PFIC classification, the consequences to them if the 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).
First Energy’s stock price may limit its ability
to raise additional capital by issuing common shares. The low price of the Company’s common shares also limits the 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, the Company’s shareholders pay transaction
costs that are a higher percentage of their total share value than if the Company’s share price were substantially higher.
The liquidity of First Energy’s shares in
the United States markets may be limited or more difficult to effectuate because First Energy is a “Penny Stock” issuer.
The 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, the Company’s common shares will (and in the foreseeable future are expected to continue
to) fall within the definition of a penny stock. Accordingly, United States broker-dealers trading in First 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 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.
| ITEM 4. | INFORMATION ON THE COMPANY |
| A. | History and Development of the Company |
The Company’s executive office is located at:
700 West Georgia Street, 25th Floor
Vancouver, British Columbia, Canada, V7Y 1B3
Telephone: (604) 375-6005
Email: info@firstenergymetals.com
Website: www.firstenergymetals.com
The mailing address of the Company is Suite 2421, 1055 West
Georgia Street, Vancouver, British Columbia, Canada, V6E 3P3. The Company’s fiscal year end is March 31.
The Company’s common shares are listed on the Canadian
Securities Exchange (“CSE” or the “Exchange”) under the symbol “FE”. Prior to March 1, 2019, the Company’s
common shares were trading on the TSX Venture Exchange (“TSX-V”) under the symbol “FE”. The Company shares are
quoted on the OTCQB, (also under the symbol “FEMFF”), an electronic trading platform operated by the OTC Markets Group Inc.
The Company’s common shares are also quoted on the Frankfurt market under the symbol “A2JC89”.
The Company was incorporated under the laws of the Province
of British Columbia, Canada on October 12, 1966. Effective March 29, 2004, the Company Act (British Columbia) was replaced by the
Business Corporations Act (British Columbia). The Business Corporations Act (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 the Company.
See Item 10B – Memorandum and Articles of Association.
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, the Company has been principally
attempting to locate deposits of precious metals in the Canadian provinces of British Columbia, Ontario and Quebec.
Canada
Ontario
Phyllis Cobalt Property
On January 29, 2018, the Company entered into an option
agreement to acquire a 100% interest in certain mineral claims (the “Phyllis Property”) covering 1,750 hectares located in
the Kenora Mining District in northwestern Ontario, Canada.
On January 29, 2019, and again on March 15, 2019, the
Company entered into an amended option agreement (the “Phyllis Amendment Agreement”) which amended the due dates for certain
cash payments, share issuances and exploration expenditure requirements of the Phyllis Cobalt Agreement, as noted below.
Under the terms of the Phyllis Amendment Agreement, the
Company has the option to acquire a 100% interest in the Phyllis Property by completing the following: issuing $140,000 in option payments,
issuance of 600,000 common shares of the Company and completing $125,000 in exploration expenditures by June 2021. The Phyllis Property
is subject to a royalty equal to 3% Net Smelter Return (“NSR”) royalty upon commencement of commercial production. The Company
will have the option to reduce the NSR to 2.0% by paying $1,000,000.
The Company is currently in default of certain cash payments
and share issuances under the Phyllis Amended Option Agreement and as result wrote-off all deferred costs incurred to date, while the
Company and the Optionor continues negotiations for an amended agreement.
Red Lake Property
On September 14, 2020, the Company entered in an option
agreement to acquire a 100% interest in the Red Lake Property (“Red Lake”). The Red Lake property is located in the Red Lake
Mining District of North-western Ontario and consists of 94 mining cell claims covering 1,880 hectares in the Ball and Todd townships.
Pursuant to the September 14, 2020, Red Lake Property
Option Agreement, which was amended on February 28, 2021, and again on August 13, 2021, the Company acquired a 100% interest in the Red
Lake Property by issuing 2,775,000 common shares during fiscal 2022.
The Red Lake property is subject to a 2.5% NSR royalty,
with the Company having the option to reduce the NSR by 1% to 1.5% by paying $1,000,000.
Scramble Mine Gold Property
On June 2, 2020, the Company entered into an option agreement
to acquire a 100% interest in certain mineral claims (the “Scramble Mine Gold Property”) located in the Kenora Mining District
in northwestern Ontario, Canada.
Under the terms of the Scramble Mine Option Agreement,
the Company has the option to acquire a 100% interest in the Scramble Mine Gold Property by completing the following: completing $100,000
in cash option payments, issuing 1,000,000 common shares of the Company as well completing $250,000 in cumulative exploration expenditures
on the property by June 2023.
The Scramble Mine Gold Property is subject to a 3% NSR
royalty. The Company will have the option to reduce the NSR to 2.0% by paying $500,000.
The Company is currently in default of certain share issuances
and exploration expenditure commitments under the Scramble Mine Gold Property Agreement and as result has wrote-off all deferred costs
incurred to date, while the Company negotiates an amended agreement with the Optionor.
Shaw Gold Property
On September 18, 2020, the Company entered into an option
agreement with Gravel Ridge Resources Ltd. to acquire a 100% interest in the Shaw Gold Property (“Shaw Gold”). Shaw Gold is
located in Timmins Area Ontario, Canada and is comprised of 18 claims covering approximately 693 hectares in the Shaw, Eldorado and Whitney
Townships near Timmins, Ontario.
During the year ended March 31, 2022, the Company decided
it would not be pursuing any further exploration work on the Shaw Gold property and as a result has written-off all deferred costs incurred
to date.
British Columbia
Kokanee Creek and Independence Gold Properties
On March 17, 2020, the Company entered in an option agreement
to acquire a 100% interest in the Kokanee Creek and Independence Gold Properties (the “Properties”). The Properties are located
in British Columbia and consist of 5 claims covering 2690 hectares.
On February 28, 2021 and again on August 13, 2021, the
Company entered into an amended option agreements which amended the due dates for certain cash payments, share issuances and exploration
expenditure requirements of the option agreement. During fiscal 2022, the Company completed the obligations under the amended option agreement
to acquire a 100% interest in the Kokanee Creek Gold Property. The property is subject to a 2.0% NSR royalty of which the Company will
have the option to reduce the NSR by 1.0% by paying $1,000,000 for each 1% of the NSR.
The Company has decided not to pursue further exploration
work on the Independence Gold Property following assay results from its July 2020 exploration work on the property which indicated low
values of gold, silver, and base metals and wrote-down deferred costs related to the property.
Bald Eagle Silver Property
The Bald Eagle property is located in the Alberni Mining
Division of British Columbia and consists of 3 mining claims covering 1,014 hectares.
On August 11, 2020, the Company entered into a purchase
agreement with Geomap Exploration Inc. to acquire a 100% interest in the Bald Eagle Silver property (“Bald Eagle”). On February
28, 2021, the Company entered into an amended option agreement which amended the due date for the share issuance under the Bald Eagle
Agreement. Under the terms of the amended purchase agreement, the Company acquired a 100% interest in the Bald Eagle Silver Property,
by way of issuing 550,000 common shares of the Company on April 20, 2021. Bald Eagle is subject to a 2.0% NSR royalty of which the Company
will have the option to reduce the NSR to 1.0% by paying $500,000.
During the year ended March 31, 2022, the Bald Eagle claims
were allowed to lapse and as a result the Company has written-off all deferred costs incurred to date as it works to re-stake the claims.
Kaslo Property
The 100% Company 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.
Kootenay Lithium Project
In March 2017, the Company purchased a 100% interest in
the Kootenay Lithium Property which consists of a 100% interest in certain mineral claims covering 4,050 hectares located in the Revelstoke
and Nelson Mining Divisions of southeastern British Columbia.
The Kootenay Lithium Property is subject to a 2.0% Net
Smelter Return (“NSR”) mineral royalty and a 24% Gross Overriding Royalty (“GOR”) on gemstones produced from the
Kootenay Property.
Under the original Kootenay Lithium Property purchase
agreement, the Company is required to keep the Kootenay Lithium Property claims in good standing. As the Company had allowed certain annual
mineral claim maintenance fees to lapse, the Company is in default of the agreement. The Company has refiled certain annual mineral claim
maintenance fees of the property claims and will attempt to refile the remainder of the claims to restore the property agreement to good
standing.
Quebec
Abitibi Lithium Property
On March 12, 2021, the Company entered into a purchase
agreement to acquire a 100% interest in the Abitibi Lithium property (“Abitibi Agreement”). The Abitibi Lithium property is
comprised of 241 mineral claims covering over 12,779 hectares located in the Abitibi area of western Quebec.
The Company entered into a purchase agreement to acquire
a 100% interest in the Abitibi Lithium Property on March 12, 2021. Under the terms of the Abitibi Agreement, the Company will acquire
a 100% interest in the Abitibi Lithium Property by way of issuing 4,100,000 common shares of the Company and by paying $250,000, which
were issued and paid as of April 30, 2021. The Abitibi Lithium Property is subject to a 3% NSR, which the Company will have the option
to reduce the NSR to 2% by paying $1,000,000.
Titan Gold Property
On October 2, 2020, the Company entered into an option
agreement with Gravel Ridge Resources Ltd. to acquire a 100% interest in the Titan Gold Property (“Titan Gold”). Shaw Gold
is located in the Abitibi Greenstone Belt, Quebec, Canada and is comprised of 80 mining claims covering approximately 4,402 hectares in
the regional county municipal of Jamesie in Quebec.
Under the terms of the option agreement, , the Company
holds an option to acquire a 100% interest in the Titan Gold Property by paying cash payments of $98,500 and the issuance of 600,000 common
shares over a 3-year period.
The Titan Gold property is subject to a 1.5% NSR royalty.
The Company will have the option to reduce the NSR by 0.5% to 1.0% by paying $500,000.
Augustus Lithium Property
On January 18, 2021, the Company entered into an option
agreement to acquire a 100% interest in the Augustus Lithium property (“Augustus Agreement”). The Augustus Lithium property
is comprised of 21 mineral claims covering over 937 hectares located in the Abitibi area of western Quebec.
Pursuant the option agreement, the Company holds the option
to acquire a 100% interest in the property by completing the following: make $180,000 in cash option payments, the issuance of 2,000,000
common shares of the Company and the completion of $550,000 in cumulative exploration expenditures on the property by January 2024.
The Augustus Lithium Property is subject to a 2% NSR royalty.
The Company will have the option to reduce the NSR by 1.0% to 1.0% by paying $1,000,000.
Canadian Lithium Property
On February 3, 2021, the Company entered into an option
agreement to acquire a 100% interest in the Canadian Lithium property (“Canadian Lithium Agreement”). The Canadian Lithium
property is comprised of 12 mineral claims covering over 671 hectares located in the Landrienne Township area of Quebec.
Pursuant the option agreement, the Company holds the option
to acquire a 100% interest in the property by completing the following: make $60,000 in cash option payments, the issuance of 875,000
common shares of the Company by February 2023.
The Canadian Lithium Property is subject to a 2% NSR royalty.
The Company will have the option to reduce the NSR by 1.0% to 1.0% by paying $1,000,000.
McNeely Lithium Property, Quebec
Pursuant to the McNeely Lithium Property purchase agreement
entered on June 7, 2021, the Company acquired a 100% interest in the McNeely Lithium Property, located in Quebec, by issuing 2,000,000
common shares and paying $250,000. The McNeely Lithium Property is subject to a 3.0% Gross Metal Royalty (“GMR”). Certain
of the claims are subject to a pre-existing 1.0% NSR. The Company will have the option to purchase the NSR by paying $200,000 to the NSR
holder.
Falcon Lake Property
On January 3, 2022, the Company entered into an option
agreement to acquire a 100% interest in the Falcon Lake property (“Falcon Lake Agreement”). The Falcon Lake property is comprised
of 48 mineral claims covering approximately 987 hectares located in the Thunder Bay Mining Division, Ontario.
Under the terms of the Falcon Lake Agreement, the Company
has the option to acquire a 100% interest in the property by way of issuing 600,000 common shares, paying $85,000 in cash option payments
and the completion of $450,000.
Electron Lithium Property
On March 2, 2022, the Company entered into a purchase
agreement to acquire a 100% interest in the Electron Lithium property (“Electron Agreement”). The Electron Lithium property
is comprised of 435 mineral claims covering approximately 20,357 hectares of prospective land around the Augustus Lithium Property in
western Quebec.
Under the terms of the Electron Lithium Agreement, the
Company has the right to acquire a 100% interest in the Electron Lithium property by issuing an aggregate 3,750,000 common shares of the
Company and by paying an aggregate $300,000. The Electron Lithium Property is subject to a 3% GMR royalty, which the Company will have
the option to reduce the GMR by 1.0% to 2.0% by paying $1,000,000.
Russel Graphite Property
On May 3, 2018, the Company entered into an option agreement
to acquire a 100% interest in the Russel Graphite Property which is comprised of 30 mineral tenures covering a contiguous block of 1,798
hectares of land located in the Gatineau area of Quebec, Canada.
In fiscal 2020, the Company announced the termination
of its option agreement on the Russel Graphite property and wrote down the carrying value of the property down to a $Nil carrying value.
USA
Nevada,
Highway 95 Property
On June 20, 2018, the Company entered into an
option agreement (the “Highway 95 Agreement”) to acquire a 100% interest in the Highway 95 Property by making certain option
payments of cash and shares. The property is comprised of 2,400 acres located in Nye County Nevada, USA.
On November 9, 2018 the Company and the optionor
mutually agreed to terminate the Highway 95 Agreement, with no option payments having been issued or owing.
General
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.
| (ii) | Principal Markets: Not Applicable. |
| (iii) | Seasonality: Not Applicable. |
| (iv) | Raw Materials: Not Applicable. |
| (v) | Marketing Channels: Not Applicable. |
| (vi) | Dependence: Not Applicable. |
| (vii) | Competitive Position: Not Applicable. |
| (viii) | 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 |
Not Applicable.
| 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 Afzaal Pirzada, P.Geo.,
the Company’s 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, except as noted above under Item 4 A.
None of the Company’s projects have known reserves,
and exploration work is exploratory in nature.
Exploration Projects - British Columbia, Ontario and
Quebec Properties
The Company has several early-stage exploration properties
located in Canada. The Kokanee Creek Property, Kaslo Property, Bald Eagle Silver and Kootenay Lithium Project are located in British Columbia,
the Phyllis Cobalt Property, Red Lake Gold, and Scramble Gold Property, Falcon Lake are located in Ontario and Titan Gold, Abitibi Lithium
Augustus Lithium, Canadian Lithium, McNeely Lithium Property and Electron Lithium are located in Quebec.
| (1) | Augustus Lithium Property, Quebec, Canada |
The Augustus Lithium Property is located in Landrienne
& Lacorne-Townships, Quebec, Canada. The Augustus Lithium property is comprised of 21 mineral claims covering over 937 hectares located
in the Abitibi area of western Quebec.
The Property is a part of the Preissac–Lacorne pegmatite
fields where spodumene bearing lithium pegmatites were discovered in 1940s'. The geology and the mineralization of the Augustus property
are similar to the geology and mineralization of the Quebec Lithium Mine located approximately 6 kilometers to the southeast of the property.
It has excellent infrastructure support with road network, railway, electricity, water, and trained manpower available locally. Geologically
the Preissac-Lacorne area lies within a belt of volcanic and sedimentary rocks intruded to the north by LaMotte batholiths and to the
south by the Preissac batholiths and Moly Hill pluton.
There are several historical and currently active lithium
and molybdenum prospects/mines located approximately 3 km to 20 km from the Property. Some of the important prospects/mines are: Mine
Quebec Lithium which was formerly owned by RB Energy, Authier Lithium owned by Sayona Mining of Australia, Valor Lithium, Duval Lithium,
Lacorne Lithium, International Lithium, Vallee Lithium, and Moly Hill Mine. All these projects / prospects are at various stages of exploration
and development, out of which Mine Quebec Lithium is the most advanced project followed by Authier lithium project.
2022 Exploration Highlights:
| · | Completed Phase 1 drill program of 5,847.15 meters consisting of 32 drill holes; |
| · | On December 6, 2021, the Company commenced Phase 2 drill program; with the following drill hole results: |
| o | Drill hole LC21-09 intersected a 39 meters spodumene pegmatite in which a 7-meter-wide zone assayed 1.12
percent (%) lithium oxide (Li2O) at 11 metres (m) drilled depth; |
| o | Drill hole LC21-18 intersected several spodumene bearing lithium pegmatite intercepts from 58.2 metres
(m) to 160 m drilled depth; of which the most promising intercept grading 1.56 percent (%) lithium oxide (Li2O) over 6 m at 114 m drilled
depth, and a second 19 m wide intercept grading 0.48% Li2O at 141 m drilled depth; |
| o | Drill hole LC21-17 intersected two spodumene bearing lithium pegmatite intercepts, of which the first
is 5.2 metres (m) wide zone grading 0.93 percent (%) lithium oxide (Li2O) at 214 m drilled depth, and a second 4.0 m wide intercept grading
0.30% Li2O at 292 m drilled depth; and |
| o | Drill hole LC21-19 intersected 1.26 percent (%) lithium oxide (Li2O) or 5,849 parts per million (ppm)
lithium over 2.7 m at 61 m drilled depth. |
| (2) | Canadian Lithium Property, Quebec, Canada |
The Canadian Lithium property is comprised of 12 mineral
claims covering over 671 hectares located in the Landrienne and La Corne Township areas approximately 40 kilometres northwest of the town
of Val d'Or, Quebec.
The Canadian Lithium Property is a worked deposit located
in Range 1 lot 25-26 in the Landrienne Township at G.P.S 284861 E - 5368288 N. The main outcrop was discovered in 1948 near the boundary
line separating the Landrienne and Lacorne Townships. A group of parallel pegmatite dykes associated with Lacorne Batholith contains aggregates
of spodumene, lepidolite, quartz and feldspar accompanied by traces of beryl, clevelandite, colombo-tantalite. Historical drilling in
1955 on claim CDC-2196058 documented on the Quebec Ministry of Energy and Natural Resources (MERN) database indicate a total of 12 drill
holes with a cumulative drilling 1,454 metres indicating extension of Canadian Lithium deposit to the west on this newly acquired claim.
2022 Exploration Highlights:
| · | April 27, 2021 announced assay results of channel samples at the Beluga Pegmatite of the Canadian Lithium
Prospect cut a 32-meter-wide section with an average of 0.74% Li2O which includes 14 meters of spodumene pegmatite with 1.61 percent lithium
oxide; |
| · | May 4, 2021 announced assay results of the "Channel 21-2E" samples at the Beluga Pegmatite of
the Canadian Lithium Prospect cut a 31-meter-wide section with an average of 0.37% lithium oxide which includes 4 meters of spodumene
pegmatite at 1.20 percent Li2O; |
| · | May 6, 2021 announced results drill hole LC21-003 intersected a six-meter-wide zone with 0.62 percent
(%) lithium oxide (Li2O) at 45 metres (m) depth including a two metres wide intersection with 1.35% Li2O at 48 m depth. A second two-meter-wide
pegmatite intersection assayed 0.63% Li2O at 73 m depth. |
| · | June 15, 2021 announced assay results of the north extension of the "Channel 21-2E" samples
at the Beluga Pegmatite of the Canadian Lithium Prospect cut an 8-meter-wide section with an average of 1.44% lithium oxide (Li2O); |
| (3) | Abitibi Lithium Property, Quebec, Canada |
The Abitibi Lithium property is comprised of 241 mineral
claims covering over 12,779 hectares located in the Abitibi area of western Quebec, approximately 40 kilometres northwest of the town
of Val d'Or, Quebec. The Abitibi Lithium Property claims are spread in several claim blocks of which some of the claims are located adjacent
to the Augustus Lithium Property claims.
| (4) | McNeely Lithium Property, Quebec, Canada |
The McNeely Lithium Property is comprised of 66 mining
claims covering a total area of 2,276 hectares located in LaCorne, Landrienne and Figuery Townships, Province of Quebec, Canada. These
claims are spread out in several claim blocks along the Quebec Lithium Mine horizon. Some of the claims are located adjacent to the Augustus
Lithium Property claims.
| (5) | Kokanee Creek Gold Property, British Columbia, Canada |
Kokanee Creek Gold Property
The Kokanee Creek Gold Property consists of three mineral
claims covering approximately 1,590 hectares area in Nelson Mining Division in British Columbia, Canada. It is located 18 km to the east
of Nelson on NTS map 082F055. The Property is part of a very active mining area with several historical and current gold, silver and base
metals deposits located in the region. Nelson is a historical mining town dating back to the discovery of Toad Mountain Silver deposit
in 1886. The Blue Bell Mine, located near the town of Riondel approximately 20 km NE of the Kokanee Creek Claims, is a manteau-type base
metal deposit hosted by the Badshot limestones of the Lardeau Group. Closer to the Kokanee Claims are historical past producers the Molly
Gibson and the Alpine.
2021 Exploration Highlights:
| · | Silver (Ag) values are in the range of 0.19 grams per tonne (g/t) to 43.69 g/t with average of 27 samples
is 7.95 g/t, while seven samples are over 10 g/t, and two samples are 43.69 g/t. |
| · | Gold (Au) values are 0.006 g/t to 0.211 g/t with average 0.054 g/t. |
| · | Zinc is from 29.3 parts per million (ppm) to over 10,000 ppm (>1% Zn), where three samples are over the
laboratory's method detection limits of 10,000 ppm. |
| · | Cobalt (Co) is from one ppm to over 2,000 ppm (>0.2%) where one sample is over the laboratory's method
detection limits of 2,000 ppm. |
| · | Tungsten (W) is from less than 0.1 ppm to over 100 ppm (>100ppm) where one sample is over the laboratory's
method detection limits of 100 ppm. |
Historical work highlights for the property are provided
below:
| · | The Kokanee Creek Claims were staked by Eagle Plains Resources and Miner River Resources in 1996 after
base metal mineralization was found on the Lower Kokanee Creek Road. Eagle Plains Resources completed silt and soil geochemical surveying,
diamond drilling, chip sampling and 3.5 kilometres of horizontal loop electromagnetic geophysical surveying. |
| · | A 5-hole drill program consisting of 1500 feet (457 m) drilling in February-March 1997 resulted in the
discovery of near surface gold mineralization. Hole KC97-02 (Azimuth 052°/ Dip -45°) returned 26.11 g/t gold over 0.7m from 7.0-7.7m,
and 13.52 g/t gold over 1.4m from 21.8-23.2m. All five holes returned encouraging gold, silver, lead or zinc mineralization at shallow
depths. Fieldwork conducted during 1997 indicated the extension of the mineralized zone to the north, south and west. |
| · | In addition, rock samples within the zone returned values of 3.54% zinc, 4.22 g/t gold, and 48.0 g/t silver.
A continuous chip rock sample taken along a road cut returned 0.3% zinc over 55 m, and 2.26 g/t gold over 5m. |
| · | An airborne electromagnetic geophysical survey was flown over the property by Eagle Plains Resources Ltd.
in 2004. The results indicated two magnetic high features in the south western part of the property, in the area of the Big M / Kokanee
Creek Minfile showing and another feature northeast of the Home Minfile occurrence. |
Cautionary Statement: Readers are cautioned that the
above information for the Kokanee Creek Gold Property and Independence Gold Property has been taken from the BC Government’s database
at following websites: https://www.mtonline.gov.bc.ca/mtov/home.do.
The Company has not verified the information and the information is not necessarily indicative of the mineralization on these properties.
The Company is in the process of compiling geological and historical exploration work on each property and will provide an update as soon
as the information is available.
The Company will not pursue completing any further exploration
work on the Independence Gold Property following assay results from its July 2020 exploration work on the property which indicated low
values of gold, silver, and base metals.
| (6) | Scramble Gold Property, Ontario, Canada |
The Scramble Mine Gold property is comprised of six mining
claims covering approximately 140 hectares land, located in Jaffray Township, Kenora Mining District, approximately 8 kilometres east
of the town of Kenora in Northwestern Ontario. The mine was discovered in 1894 but after an initial exploration phase remained essentially
dormant until 1984 when Boise Cascade Canada Ltd. commenced an evaluation of the property. Since 1984, approximately 5,200 metres of diamond
drilling, 250 metres of surface stripping with sampling and 450 metres of underground development have taken place. The zone of mineralization,
including pyrite-gold enriched biotite-rich schist felsic units and veins, extends on surface and in drill holes for about 550 metres.
Size of the deposit is 915 meters (m) long along strike, 3.7 m wide and 366 m to 475 m deep. Historical resource at the
Property is estimated at 150,000 tons at an average grade of 0.24 ounces per ton (opt) (6.8 grams/ton) (having grades of up to 9.15 opt
(259 grams/ton). The deposit is documented to have 70,000 ounces of contained gold using a cut-off grade of 0.05 opt (1.42 grams/ton).
2021 Exploration Highlights of Phase 1 and Phase 2 exploration
programs:
| · | Average value of gold in grab samples from the Phase 2 samples was 29.34 grams per tonne (1.03 ounces per
tonne); |
| · | Phase 2 gold assays ranged from 5.03 grams per tonne (0.18 oz/t) to 82.30 (2.90 oz /t) with two |
samples assaying over 2 oz/t, with all samples
assaying over 5 grams per tonne gold;
| · | Phase 1 exploration intersected 2 meters of average 4.69 grams per ton (g/t) gold (Au) in channel samples
(Samples #294304 and 294305), with one-meter channel sample (#294304) assayed 3.24 g/t gold and 5.93 g/t silver, and second one-meter
channel sample (#294305) assayed 6.15 g/t gold; |
| · | Phase 1 average of four-meter-thick channel sampling across quartz vein material is 2 g/t gold; |
| · | The Phase 1 channel samples were collected 320m along strike from the historic shaft of the Scramble mine
indicating continuity reports and data. |
The Company wants to caution that grab samples from the
Phase 2 work are selected samples and are not necessarily representative of the mineralization hosted on the property.
Cautionary Statement: Investors are cautioned that
the above information has been taken from Ontario Ministry of Energy, Northern Development and Mines (MNDM) online database. The reference
for Scramble Mine information as documented in MNDM records is: “Parr, M. and Kuehnbaum, R. 1990. The Scramble Mine Gold Deposit;
Field Trip No.2, Canadian Institute Mining, Metallurgy and Petroleum, Exploration and Mining Geology, 14th Annual Meeting, pp. 41-65”.
The Company has not verified the information available. A qualified person from the Company has not done sufficient work to classify the
historical estimate as current mineral resources or mineral reserves; and the Company is not treating the historical estimate as current
mineral resources or mineral reserves. The Company believes that the historic estimate is relevant to an appraisal of the merits of the
property and forms a reliable basis upon which to develop future exploration programs. The Company will need to conduct further exploration
which will include drill testing the project, and there is no guarantee that the results obtained will reflect the historical estimate.
| (7) | Phyllis Cobalt Property, Ontario, Canada |
Description
Located in the Kenora Mining District of Ontario, the
property consists of 112 mineral claim units totalling 1,750 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.
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 small portion of the
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 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).
Assay results from recent drill program in March 2019
for two drill holes had the following results: Drill hole PC-19-02 intersected 12.1m with 0.10% Cobalt (Co), 0.79% Copper (Cu), and 0.08%
Nickel (Ni); and the second drill hole PC-19-01 intersected 4.4m with 0.09% Co, 0.54% Cu, 0.16% Ni.
| (8) | Bald Eagle Silver Property, British Columbia, Canada |
The Bald Eagle Property consists of three mining claims
covering approximately a 1,014-hectare area in Alberni Mining Division, British Columbia, Canada is located 30 km to the northeast of
Ucluelet and approximately 57km by road west of Port Alberni in the west coast of Vancouver Island.
| (9) | Titan Gold Property, Quebec, Canada |
The Titan Gold property is comprised of 80 mining claims
covering approximately 11,000 acres land in the "municipalité régionale de comté" "regional county
municipal" ("MRC") of Jamesie in Quebec.
| (10) | Red Lake Gold Property, Ontario, Canada |
The Red Lake Gold Property is located in the Red Lake
Mining District, Northwestern Ontario, Canada. The Property is comprised of 94 mining cell claims covering approximately 1,880 hectares
land in Ball and Todd townships. Geologically, the area is underlain by the Red Lake greenstone belt of Ontario, an accumulation of Archean-age
metavolcanic, metasedimentary, and intrusive rocks comprising a portion of the Uchi Sub-province of the Superior Province of the Canadian
Shield.
The Red Lake Gold Property is located in the prolific
Red Lake gold mining camp which is one of the largest gold camps in North America with a 457 square kilometres land package famous for
its high-grade gold deposits with historical production exceeding 30 million ounces of gold, mostly from the iconic Campbell and Red Lake
gold mines and ten smaller mines.
| (11) | Kaslo Property, British Columbia, Canada |
The Kaslo property is without known mineral resources
and reserves and previous exploration programs were exploratory in nature. In fiscal 2012, the Company wrote down the value of the property
to $nil.
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.
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.
Exploration Amounts Expensed
Exploration expenses in the five fiscal years ended March
31:
|
Year |
2022 |
2021 |
2020 |
2019 |
2018 |
| |
|
|
|
|
|
| British Columbia |
|
|
|
|
|
| Kokanee Creek |
$74,500 |
$48,820 |
$Nil |
$Nil |
$Nil |
| Kaslo Silver |
Nil |
Nil |
Nil |
Nil |
260 |
| Kootenay Lithium |
Nil |
Nil |
3,028 |
5,038 |
868 |
| Ontario |
|
|
|
|
|
| Phyllis Cobalt |
21,047 |
Nil |
Nil |
119,813 |
32,929 |
| Scramble Gold |
Nil |
49,229 |
Nil |
Nil |
Nil |
| Shaw Gold |
Nil |
713 |
Nil |
Nil |
Nil |
| Quebec |
|
|
|
|
|
| Titan Gold |
75 |
50,637 |
Nil |
Nil |
Nil |
| Augustus Lithium |
1,502,261 |
68,352 |
Nil |
Nil |
Nil |
| Canadian Lithium |
Nil |
14,750 |
Nil |
Nil |
Nil |
| General exploration |
11,238 |
13,600 |
Nil |
5,995 |
6,910 |
| Total |
$1,609,121 |
$246,101 |
$3,028 |
$151,846 |
$40,967 |
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 |
Not applicable.
| item 5. | Operating and financial review and prospects |
Management’s discussion and analysis is presented
in relation to the consolidated financial statements of First Energy, which statements are prepared as a going concern in accordance with
IFRS.
The Company is a mineral exploration company with no producing
properties and consequently has no current operating income or cash flow. All of the Company’s short to medium-term operating and
exploration cash flow must be derived from external financing.
The consolidated financial statements referred to in this
Annual Report have been prepared in accordance with IFRS issued by the International 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, 2022.
Fiscal 2022 compared to Fiscal 2021
The net loss and comprehensive loss for the year ended
March 31, 2022 (the “Current Year”) was $4,691,322, a $2,231,661 increase over the net loss of $2,459,661 for the year ended
March 31, 2021 (the “Comparative Year”). The significant variances for the Current Year and Comparative Year are as follows:
| · | Consulting fees were $127,833 in the Current Year, a decrease
of $225,918 over $353,751 for the Comparative Year. Consulting fees consist primarily of corporate advisory and development fees; |
| · | Exploration and evaluation expenditures were $1,609,121 in the
Current Year, an increase of $1,363,020 over $246,101 for the Comparative Year. The increase is due primarily to exploration drill programs
on its Quebec lithium prospects carried out during the Current Year; |
| · | Investor relations were $988,025 in the Current Year, an increase
of $790,013 over $198,012 for the Comparative Year. Investor relations consist on North American and European Investor Marketing programs; |
| · | Professional fees were $87,168 in the Current Year, an increase
of $26,798 over the Comparative Year. The increase in professional fees corresponded with the increase in the Company’s activities
during the Current Year; |
| · | Salaries, fees and benefits were $188,021 in the Current Year,
an increase of $41,521 over the Comparative Year. The increase in compensation is due primarily to the increase in the Company’s
operating activities; |
| · | Shareholder communications was $763,095 for the Current Year,
an increase of $474,071 over $289,024 for the Comparative Year. The increase is primarily due to multiple shareholder and investor programs
initiated during the Current Year. In Fiscal 2022, the Company initiated additional shareholder communication programs focused on increasing
market and investor awareness of the Company by engaging several groups to assist in growing the Company’s online and digital media
presence throughout North America and European markets. The normal course of business expenses such as transfer agent fees, exchange
listing fees, website maintenance and news release costs were also higher due to the increase in the Company’s activities in the
Current Year; |
| · | Share-based compensation was $632,450 in the Current Year, while
the Comparative Year was $990,321 expense. Share-based compensation expense is the estimated fair value of the stock options granted
and vested to directors, officers and consultants during the year; |
| · | Recovery of flow-through premium liability was $200,691 in the
Current Year (2021 - $Nil) due to the flow through recovery during the current year; and |
| · | Write-down of exploration and evaluation assets was $480,250 for the Current Year (Comparative Year -
$163,375) was due to the Company’s write down of the deferred costs on certain properties for which the Company is either negotiating
amendment agreements, re-staking claims or has decided not to continue with further exploration work on the property. |
Fiscal 2021 compared to Fiscal 2020
The net loss and comprehensive loss for the year ended
March 31, 2021 (the “Current Year”) was $2,459,661 compared to a net loss for the year ended March 31, 2020 (the “Comparative
Year”) of $447,629. The increase in net loss of $2,012,032 was primarily due to the following:
| · | Consulting fees were $353,751 in the Current Year, an increase
of $80,251 over the Comparative Year. The increase for the Current Year was primarily the result of corporate advisory and development
fees incurred; |
| · | Exploration and evaluation expenditures were $246,101 in the
Current Year, an increase of $243,073 over the Comparative Year. The increase is due to several exploration programs conducted during
the Current Year on its lithium and gold prospects; |
| · | Professional fees were $60,370 in the Current Year, an increase
of $20,119 over the Comparative Year. The increase was primarily due to legal fees associated with the increase in the Company’s
activities during the Current Year; |
| · | Salaries, fees and benefits were $146,500 in the Current Year,
an increase of $76,500 over the Comparative Year. The increase in compensation is due primarily to the increase in the Company’s
operating activities; |
| · | Shareholder communications increased by $465,237 from $21,799
in the Comparative Year to $487,036 in the Current Year. The increase is primarily due to multiple shareholder and investor programs
initiated during the Current Year. In Fiscal 2021, the Company initiated shareholder communication programs focused on increasing market
and investor awareness of the Company by engaging several groups to assist in growing the Company’s online and digital media presence
throughout North America and European markets. Additionally, the Company’s incurred costs associated with the initial listing of
the Company on the OTCQB as well as on their ongoing filing fees. The normal course of business expenses such as transfer agent fees,
website maintenance and news release costs were also higher due to the increase in the Company’s activities in the Current Year; |
| · | Share-based compensation was $990,321 in the Current Year, while
the Comparative Year had $Nil expense. The increase in expense was the estimated fair value of the stock options granted to director,
officers and consultants during the Current Year; |
| · | Write-down of exploration and evaluation assets was $163,375
for the Current Year (Comparative Year - $27,000) was due to the Company’s write down all the deferred costs of the Independence
Gold Property as it will not be pursuing any further exploration work on the property. |
The Company’s projects are at the exploration stage
and have not yet generated any revenue from production to date.
Readers should refer to the notes to the consolidated
financial statements for details regarding all the mineral leases and option to joint venture agreements for each of the Company’s
properties.
| B. | Liquidity and Capital Resources |
Financial Conditions for the year ended March 31,
2022
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 during each of the last 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, 2022, First Energy had working capital of
$459,010 compared to working capital of $1,578,243 at March 31, 2021. As at March 31, 2022, the amount of flow-through proceeds remaining
in cash to be expended is approximately $775,247 (March 31, 2021 - $1,300,000).
First Energy began the year ended March 31, 2022, with
$2,158,688 in cash. During the year ended March 31, 2022, the Company expended $4,503,760 on operating activities, net of working capital
changes, expended $675,000 on investing activities through the issuance of purchase and option payments for exploration and evaluation
assets and generated $3,131,558 from financing activities which was attributable to proceeds from share issuances, net of share issue
costs, to end at March 31, 2022 with $111,486 in cash.
The Company’s 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. The Company holds its cash in bank accounts that earn interest at variable interest
rates.
Operations for the year ended March 31, 2022, have been
funded primarly through non-brokered private placement financings with the issuance of equity.
Capital Resources
As discussed above, at March 31, 2022, the Company’s
working capital was $459,010 compared to a working capital of $1,578,243 at March 31, 2021. The Company’s continued operations are
dependent upon the Company’s ability to obtain sufficient financing to carry on planned operations. The Company estimates that these
funds will not be sufficient to provide the Company with the financial resources to carry out currently planned exploration and operations
through the next twelve months and will therefore will need to seek additional sources of financing to meet all exploration expenditures
for its property commitments as well its ongoing operations.
The Company had 78,238,894 common shares issued and outstanding
as at March 31, 2022 (March 31, 2021 – 49,522,670).
Share Capital
The Company’s continued operations are dependent
upon the Company’s ability to obtain sufficient financing to carry on planned operations.
Fiscal 2022 and subsequently up to July 27, 2022
During fiscal year 2022, the Company issued
232,000 common shares pursuant to the exercise of share purchase warrants for total proceeds of $49,200. Fair value of the warrants exercised
was $11,150.
On June 3, 2021, the Company closed non-brokered
private placements for aggregate gross proceeds of $1,000,000 and through the issuance of 2,003,376 flow-through units ("FT Units")
at $0.385 per FT Unit for proceeds of $771,300 and through the issuance of 682,687 units ("Units") at $0.335 per Unit for gross
proceeds of $228,700. Share issue costs were $67,727, which included a finder's fee of 8% paid in connection with the above noted private
placement of $64,384 cash and $3,343 in other share issue costs.
On November 26, 2021, the Company closed a non-brokered
private placement for aggregate proceeds of $2,200,000 from the sale 8,800,000 units at a price of $0.25 cents per unit (the "Unit").
Share issue costs were $14,715, which included a finder's fee of 5% paid in connection with the above noted private placement of $13,750
cash.
On May 2, 2022, the Company closed a non-brokered
private placement, consisting of 3,448,571 flow-through units (“FT Units”) priced at $0.245 per FT Unit and 2,750,000 non-flow
through units (“NFT Units”) priced at $0.20 per NFT Unit for aggregate gross proceeds of $1,394,900. Each FT Unit consists
of one flow-through common share and one-half of one common share purchase warrant (each a “Flow Through Warrant”). Each whole
Flow Through Warrant entitles the holder to purchase one common share at a price of $0.45 for a period of two years from the issue date.
Each NFT Unit consists of one non-flow-through common share and one non-flow-through common share purchase warrant. Each NFT warrant entitles
the holder to purchase one common share at a price of $0.50 for a period of one year from the issue date. The Company also paid finder’s
fees of $25,350 and issued 126,750 finder’s shares.
Fiscal 2021
During fiscal year 2021, 6,698,667 share purchase warrants
were exercised for the issuance of 6,698,667 common shares for total proceeds from the exercise was of $1,137,600. Fair value of the warrants
exercised for the share issued was $239,467.
On December 31, 2020, the Company closed the first tranche
of a non-brokered private placement, consisting of 1,000,000 Flow-Through Units (“FT Units”) for gross proceeds of $250,000.
On January 27, 2021, the Company closed the second and
final tranche of balance a non-brokered private placement, consisting of 400,000 Flow-Through Units (“FT Units”) and 1,250,000
non-flow through units (“NFT Units”) for gross proceeds of $350,000.
On March 4, 2021, the Company closed a non-brokered private
placement, consisting of 4,000,000 Flow-Through Units (“FT Units”) and 2,950,000 non-flow through units (“NFT Units”)
for gross proceeds of $1,550,000.
Fiscal 2020
During fiscal 2020, the Company issued 750,000 common
shares pursuant to the exercise of 750,000 common share purchase warrants at the exercise price of $0.12 for total proceeds of $90,000.
At March 31, 2020, the $90,000 in proceeds were included in share subscriptions receivable. The full amount has subsequently been received
in fiscal 2021.
On March 31, 2020, the Company completed a non-brokered
private placement, consisting of 8,000,000 non-flow-through units and 2,000,000 flow-through shares for gross proceeds of $500,000.
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.
Stock Options
During the year ended March 31, 2022, pursuant to the
Company’s stock option plan, the Company granted 850,000 stock options at an exercise price of $0.35 per share, expiring on May
14, 2026, 900,000 stock options at an exercise price $0.25, expiring on July 13, 2026, 750,000 stock options at an exercise price $0.40,
expiring on January 5, 2023, and 240,000 stock options at an exercise price $0.35, expiring on January 6, 2027. The Company granted stock
options to directors, officers and consultants.
During the year ended March 31, 2021, pursuant to the
Company’s stock option plan, the Company granted 2,640,000 stock options at an exercise price of $0.21 per share, expiring on February
9, 2026 and 1,300,000 stock options at an exercise price $0.35, expiring on February 11, 2026. The Company granted stock options to directors,
officers and consultants.
During the years ended March 31, 2020, the Company did
not issue or have any issued and outstanding stock options.
Financing Activities
The Company estimates that it will require additional
financing to carry out its exploration plans and operations through the next twelve months. This could involve joint venture, equity financing,
or other forms of financing.
Going Concern
At March 31, 2022, the Company has working capital of
$459,010. Management estimates that these funds will not be sufficient to provide the Company with the financial resources to carry out
currently planned exploration and operations through the next twelve months. Therefore, the Company will need to seek additional sources
of financing to meet all exploration expenditures for its property commitments as well its ongoing operations. While the Company was successful
in obtaining its most recent financing, there is no assurance that it will be able to obtain adequate financing in the future or that
such financing will be on terms acceptable to the Company. These material uncertainties may cast significant doubt upon the Company’s
ability to continue as a going concern.
The 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 2022
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 27, 2022, the Company had the following common
shares issued and outstanding
|
Authorized: an unlimited number of common shares without
par value. |
Common shares issued and outstanding |
Share purchase warrants |
Stock options |
| Outstanding at July 27, 2022 |
84,564,215 |
24,927,492 |
6,680,000 |
| C. | Research and development, patents and licenses |
As First Energy is a mineral exploration company with
no producing properties, the information required by this item is inapplicable.
As a mineral resource exploration company, the Company’s
activities are mainly in response to metal prices and the availability of equity financings. Further, 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 been 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 and project investigation and general and administration costs and these amounts are included in the net loss for each
quarter.
The Company’s Management and board of directors
are not financial or commodity analysts and therefore cannot and should not forecast metal prices. Management and the directors do monitor
the metals industry trends, specifically demand supply data and believe that the metals market may continue to experience positive fundamentals.
As such the Company will continue to advance its properties, subject to available funds.
| E. | Off-statement of financial position arrangements |
First Energy does not have any off-balance sheet arrangements.
| F. | Tabular disclosure of contractual obligations |
The following table summarizes the Company’s short-term
and long-term obligations as at March 31, 2022:
|
|
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 First 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.
| ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
| A. | Directors and Senior Management |
The following table lists the directors and senior
management of the Company as at March 31, 2022. 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.
| Name and Position |
Other Principal Directorships |
Shares
Beneficially
Owned as at
July 27, 2022 |
Principal Business Activities
Outside the Company |
Gurminder Sangha (1)
Director, President and Chief Executive Officer |
Targeted Microwave Solutions Inc. |
904,801 |
Businessman and consultant to companies in the junior resource sector |
|
Jurgen Wolf (2)
Director, Chief Financial Officer and Corporate Secretary |
Medgold Resources Corp.
Iconic Minerals Ltd.
Petrichor Energy Inc.
Adastra Holdings Ltd.
Altima Resources Inc.
Consolidated Odyssey Exploration Inc.
American Biofuels Inc.
Odyssey Petroleum Corporation |
Nil |
Consultant to companies in the junior resource sector |
|
Craig Alford (3)
Director |
Barrel Energy Inc.
Evergreen- Agra Inc.
Verde Science Inc. |
Nil |
Geologist |
| Jason Grewal |
None |
220,000 |
Lawyer |
| Jodie Gibson (5) |
None
|
Nil |
Geologist |
| (1) | 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. |
| (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) | Craig Alford was appointed Director of the Company on October 7, 2019. Mr. Alford holds both a Bachelor
of Science (Hons) and a Master of Science in Geology. He is a registered Professional Geoscientist (P. Geo) in Ontario and is a Qualified
Person, as defined in National Instrument 43-101. During his 30 years of experience worldwide, Mr. Alford has designed, managed and provided
technical direction for projects throughout North and South America, China, Central Asia, Russia, Australia and Africa. Mr. Alford’s
experience has included senior positions for a number of large mining companies including, Zijin Mining Group, China Railway, and Teck
Mining Ltd. |
| (4) | Jason Grewal was appointed to the Company’s board of director on October 23, 2019. Mr. Grewal is
a solicitor in England and Wales and admitted as an attorney in the state of New York. He has studied law at the London School of Economics,
and holds a law degree from the University of London, an LLM in international business law from the IE Law School in Madrid and an MSc
in global finance from Cass Business School in London. He has experience working in Canada, the United States and the United Kingdom,
and in Europe. He has advised on various capital market transactions in various jurisdictions, and has experience working with both international
law firms and multinational corporations. |
| (5) | Jodie Gibson was appointed to the Company’s board of director on March 23, 2021. Mr. Gibson is an
exploration geologist with over 14 years mineral exploration experience throughout the North American Cordillera from Alaska to Mexico;
including syngenetic and epigenetic precious and base metal systems. He was the Project Manager of the Underworld Resources Inc. exploration
team that discovered and defined the Golden Saddle and Arc deposits. Prior to joining the Company, Mr. Gibson was serving as Vice President
Exploration for White Gold Corp where he oversaw over $30 million in exploration activities over the previous three years with highlights
including expansion of the Golden Saddle and Arc deposits and five new discoveries across the White Gold district: including the high-grade
Vertigo discovery on the JP Ross property. Mr. Gibson holds a Bachelor of Science Degree and a Master of Science Degree from Indiana State
University and is a member of the Association of Professional Engineers and Geoscientists of British Columbia. |
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.
Compensation of Executive Officers
“Named Executive Officer” (“NEO”)
means each of the following individuals:
| (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, 2022; |
| (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, 2022; |
| (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, 2022. |
The Company had two 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, 2022.
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.
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.
Share-based awards
The board of directors adopted a Restricted Share
Unit Plan (“RSU Plan”) dated for reference December 31, 2021 providing for the issuance of RSUs to directors, officers,
employees, and consultants (“Eligible Persons”).
Nature and Administration of the RSU Plan
All Eligible Persons (as defined in the RSU Plan)
of the Company are eligible to participate in the RSU Plan (as "RSU Plan Participants"), though the Company reserves the right
to restrict eligibility or otherwise limit the number of persons eligible for participation in the RSU Plan at any time. Eligibility to
participate in the RSU Plan does not confer upon any person a right to receive an award of RSUs.
Subject to certain restrictions, the Board can,
from time to time, grant RSUs to Eligible Persons. RSUs will be credited to an account maintained for each RSU Plan Participant on the
books of the Company as of the award date. The grant of an RSU Award shall entitle the Participant to the conditional right to receive
for each RSU credited to the Participant’s Account, at the election of the Company, either one Common Share or an amount in cash,
net of applicable taxes and contributions to government sponsored plans, as determined by the Board, equal to the Market Price of one
Common Share for each RSU credited to the Participant’s Account on the Settlement Date, subject to the conditions set out in the
RSU Grant Letter and in the Plan, and subject to all other terms of this Plan
Each award of RSUs vests on the date(s) (each
a "Vesting Date") specified by the Board on the award date and reflected in the applicable Award Notice (as defined in the RSU
Plan). Additionally, the term of the RSUs shall be determined by the Board on the date of the award of RSUs. Each RSU outstanding and
all rights thereunder shall expire at the expiry time determined by the Board, subject to earlier termination in accordance with the RSU
Plan.
Rights and obligations under the RSU Plan can
be assigned by the Company to a successor in the business of the Company, any company resulting from any amalgamation, reorganization,
combination, merger or arrangement of the Company, or any corporation acquiring all or substantially all of the assets or business of
the Company. The RSUs are non-transferable and non-assignable by the RSU Plan Participant.
Notwithstanding any other
provision of the RSU Plan:
| (a) | the aggregate number of Shares reserved for issuance pursuant to RSUs granted under the RSU Plan and other
Security Based Compensation Arrangements (as defined in the RSU Plan) cannot exceed 10% of the issued and outstanding Shares as at the
date of grant (on a non-diluted basis); |
| (b) | the aggregate number of Shares reserved for issuance pursuant to RSUs granted to any one individual in any
12 month period shall not exceed 1% of the issued and outstanding Shares, unless disinterested shareholder approval is obtained; |
| (c) | the aggregate number of Shares reserved for issuance pursuant to RSUs granted to Insiders (as defined in
the policies of the Exchange) shall not exceed 2% of the issued and outstanding Shares, unless disinterested shareholder approval is obtained;
and |
| (d) | all RSUs granted pursuant to the RSU Plan are subject to the policies of the Exchange. |
At March 31, 2022, and at July 27, 2022, the maximum
number of common shares which may be issued pursuant to share-based awards under the RSU Plan is equal to 7,823,889 and 8,456,422 of the
issued and outstanding common shares at the respective dates. There were Nil share-based awards outstanding at March 31, 2022 and July
27, 2022 respectively.
Option-Based Awards
The board of directors of the Company adopted
a stock option plan, as amended (the “Plan”), effective December 8, 2018, which has been most recently approved by the shareholders
of the Company on December 4, 2020, at the Company’s AGM on that date. The number of shares in respect of which options may be granted
under the plan shall not exceed 10% of the issued and outstanding common shares of the 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 51-201 Disclosure 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 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-out 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 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 First 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 First Energy and its subsidiaries or employees of companies providing management services to First Energy or its subsidiaries.
At March 31, 2022, and at July 27, 2022, the maximum
number of common shares which may be issued pursuant to stock options granted under the Plan is equal to 1,143,889 and 1,776,422 of the
issued and outstanding common shares at the respective dates. There were 6,440,000 and 6,440,000 stock options outstanding at March 31,
2022 and July 27, 2022 respectively.
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.
Summary Compensation Table
The compensation paid to the NEOs during the years
ended March 31, 2022, 2021 and 2020 is as set out below:
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
Compensation
($(3)) |
Total
Compensation
($) |
Annual
Incentive
Plans |
Long-term
Incentive
Plans |
|
|
|
|
Gurminder Sangha (4)
President and
CEO |
2022
2021
2022 |
188,021
146,500
68,500 |
Nil
Nil
Nil |
Nil
161,328
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
188,021
307,828
68,500 |
|
Jurgen Wolf (5)
CFO and Corporate Secretary |
2022
2021
2020 |
2,500
1,500
1,500 |
Nil
Nil
Nil |
Nil
37,470
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
2,500
38,970
1,500 |
| (1) | Financial years ended March 31. |
| (2) | The "grant date fair value" of options granted during the year is determined by using the Black-Scholes
model, please see the table under "Incentive Plan Awards" for the 'in-the-money' value of these options. |
| (3) | Includes any health, dental, parking, group plan insurance benefits and professional fees paid by the
Company on behalf of the NEO. |
| (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. |
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 share-based awards and option-based awards
outstanding for the NEOs, as at the financial year ended March 31, 2022, is as set out below:
| |
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
Pay-out Value
of Share-based
Payments that
have not
Vested
($) |
| Gurminder Sangha |
775,000 |
0.21 |
February 9, 2026 |
31,000 |
Nil |
N/A |
| Jurgen Wolf |
180,000 |
0.21 |
February 9, 2026 |
7,200 |
Nil |
N/A |
| (1) | This amount is calculated based on the difference between the market value of the shares underlying the
options at the end of the most recently completed financial year. |
Incentive Plan Awards – Value Vested or
Earned During the Year
There were no share-based awards and option-based
awards that vested or were earned by the NEOs during the during the financial year ended March 31, 2022.
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 “Share-Based Awards” for further
information on the Restricted Share Unit Plan.
See “Option-Based Awards” and “Securities
Authorized for Issuance under Equity Compensation Plans” for further information on the Stock Option Plan.
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 has 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.
Director Compensation
The Company does not have a compensation plan
for directors.
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:
| Name |
Year (1) |
Fees
earned
($) |
Share-
based
awards
($) |
Option-
based
awards
($) |
Non-equity
incentive plan
compensation
($) |
Pension
value
($) |
All other
compensation
($) |
Total
($) |
| Craig Alford |
2022
2021
2020 |
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
41,633
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
12,000
8,500
Nil |
12,000
50,133
Nil |
| Jason Grewal |
2022
2021
2022 |
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
31,225
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
49,500
Nil
Nil |
49,500
31,225
Nil |
Lyle
McLennan (1) |
2022
2021
2020 |
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
26,021
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
5,000 |
Nil
31,021
Nil |
| Jodie Gibson |
2022
2021
2020 |
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
52,041
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
52,041
Nil |
| (1) | Mr. McLennan resigned as a director on March 23, 2021. |
Outstanding Share-based Awards and Option-based
Awards
The share-based awards and option-based awards
outstanding for the NEOs, as at the financial year ended March 31, 2022, is as set out below:
| |
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
Pay-out Value
of Share-based
Payments that
have not
Vested
($) |
| Craig Alford |
200,000 |
0.21 |
February 9, 2026 |
8,000 |
Nil |
N/A |
| Jason Grewal |
150,000 |
0.21 |
February 9, 2026 |
6,000 |
Nil |
N/A |
| Lyle McLennan (1) |
125,000 |
0.21 |
February 9, 2026 |
5,000 |
Nil |
N/A |
| Jodie Gibson |
250,000 |
0.21 |
February 9, 2026 |
10,000 |
Nil |
N/A |
| (1) | This amount is calculated based on the difference between the market value of the shares underlying the
options at the end of the most recently completed financial year. |
Incentive Plan Awards – Value Vested
or Earned During the Year
There were no share-based awards and option-based
awards that vested or were earned by the directors during the during the financial year ended March 31, 2022.
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)) |
| Plan Category |
(a) |
(b) |
(c) |
| Options-Based Award approved by security holders (2) |
6,680,000 |
$0.29 |
1,143,889 |
| Share-Based Award approved by security holders (2) |
Nil |
Nil |
7,823,889 |
| Equity compensation plans not approved by security holders |
Nil |
Nil |
Nil |
| Total |
6,680,000 |
$0.29 |
8,967,778 |
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.
The Company has five directors as of July 27,
2022, namely: Gurminder Sangha, Jurgen Wolf, Craig Alford, Jason Grewal and Jodie Gibson. Mr. Sangha, Mr. Wolf, Dr. Alford, Mr. Grewal
and Mr. Gibson were appointed on December 22, 2017, February 22, 2018, October 7, 2019, October 23, 2019 and March 23, 2021, respectively.
All directors will serve for a term of office expiring at the next AGM of the Company. All officers have a term of office lasting until
their removal or replacement by the board of directors.
An “independent” director under the
CSE 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 five directors, three of whom are independent based upon the tests for independence set forth in Canadian
National Instrument 52-110. Mr. 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. 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.
Audit Committee
As of July 27, 2022, Gurminder Sangha, Jason Grewal
and Jodie Gibson are the members of the Company’s audit committee and with Mr. Grewal acting as Chair. Its primary function is to
review the financial statements of the 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 the 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 Gurminder Sangha, Jason Grewal 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.
At March 31, 2022, the Company did not have any
employees.
See Item 6A. – “Directors and Senior
Management”.
See Item 6B. for stock options held by the directors
or members of senior management of the Company as at March 31, 2022.
The following table sets forth, as of July 27,
2022, 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.
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 27, 2022
| Name of Shareholder |
Number of Shares held, directly and
indirectly, at July 27, 2022 (1) |
% of Issued and Outstanding
Shares at July 27, 2022(1) |
| Gurminder Sangha |
904,801 |
0.01% |
| Jurgen Wolf |
Nil |
Nil |
| Jodie Gibson |
Nil |
Nil |
| Craig Alford |
Nil |
Nil |
| Jason Grewal |
220,000 |
Nil |
(1) Based on 78,238,894 common shares issued
and outstanding, and no warrants and stock options were held by officers and directors as at July 27, 2022.
| ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
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 27, 2022, there are no holders of 5% or more of the common shares of First Energy.
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.
The 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 First Energy does not have knowledge
of or access to information about the beneficial owners thereof. To the best of its knowledge, First Energy is not directly or indirectly
owned or controlled by a corporation or foreign government. As of July 27, 2022, the Company had authorized an unlimited number of common
shares without par value of which 84,564,215 were issued and outstanding.
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 |
During the years ended March 31, 2022, 2021, and
2020, the Company:
| a) | paid $188,021 (2021 - $148,000, 2020 - $70,000) to non-independent director and officers of the Company; |
| b) | paid fees to independent directors of $64,000 (2021 - $13,500, 2020 - $1,000); |
| c) | made share-based payments of $Nil (2021 - $292,472, 2020 - $Nil). |
As at March 31, 2022, an amount of $36,923 for
fees and/or expenses owed to directors and officers are included in amounts due to related parties (March 31, 2021 - $90,365; March 31,
2020 - $50,716). These amounts were settled in the ordinary course of business.
Other than as disclosed above, there have been
no transactions during the 2021 fiscal year which have materially affected or will materially affect First Energy in which any director,
executive officer, or beneficial holder of more 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, as such, there is no requirement to provide any information under this sub-item.
| item 8. | Financial information |
| A. | Consolidated Statements and Other Financial Information |
Statements
The financial 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 DeVisser Gray LLP, Chartered Professional Accountants, is included immediately preceding the financial statements
for the years ended March 31, 2022, 2021, and 2020.
Legal Proceedings
The Company is not involved in any litigation
or legal proceedings and to the Company’s knowledge no material legal or arbitration proceedings involving the Company is threatened.
Dividend Policy
First 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 First
Energy are being retained for working capital and exploration of its projects.
There are no significant changes have occurred
since the date of First Energy’s most recent audited financial statements, March 31, 2022, other than disclosed in this Annual Report
on Form 20-F, items represented in Note 5 to the financial statements for the year ended March 31, 2022.
| ITEM 9. | THE OFFER AND LISTING |
| A. | Offer and Listing Details |
First Energy’s common shares trade on the
CSE 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 for the five most recent full financial. The Company’s common shares began trading on the Canadian
Securities Exchange as of March 1, 2019 and prior to that date, the common shares were traded on the TSX Venture Exchange.
| CSE/TSX-V: FE
– Trading in Canadian Dollars |
| |
High |
Low |
|
| |
($) |
($) |
|
| Annual |
|
|
|
| March 2022 |
0.40 |
0.14 |
|
| March 2021 |
0.62 |
0.06 |
|
| March 2020 |
0.295 |
0.35 |
|
| March 2019 |
0.43 |
0.075 |
|
| March 2018 |
0.35 |
0.15 |
|
The following table lists the volume of trading
and high, low and maximum closing sales prices for shares of First Energy’s common stock for the last eight fiscal quarters and
for the most recent six months. The Company’s common shares began trading on the Canadian Securities Exchange as of March 1, 2019
and prior to that date, the common shares were traded on the TSX Venture Exchange.
| CSE/TSX-V: FE
– Trading in Canadian Dollars |
| |
High |
Low |
|
| |
($) |
($) |
|
| Fiscal 2022 |
|
|
|
|
Fourth Quarter
Third Quarter |
0.39
0.385 |
0.20
0.14 |
|
| Second Quarter |
0.325 |
0.16 |
|
| First Quarter |
0.40 |
0.215 |
|
| |
|
|
|
| Fiscal 2021 |
|
|
|
| Fourth Quarter |
0.62 |
0.135 |
|
|
Third Quarter |
0.235 |
0.135 |
|
| Second Quarter |
0.255 |
0.15 |
|
| First Quarter |
0.295 |
0.06 |
|
| |
|
|
|
| Month ended |
|
|
|
| June 30, 2022 |
0.18 |
0.11 |
|
| May 30, 2022 |
0.21 |
0.15 |
|
| April 30, 2022 |
0.275 |
0.17 |
|
| March 31,2022 |
0.36 |
0.22 |
|
| February 28, 2022 |
0.34 |
0.20 |
|
| January 31, 2022 |
0.37 |
0.25 |
|
The Company’s common stock is issued in
registered form.
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.
First Energy shares trade on the following stock
exchanges and other regulated markets:
| Stock Exchange or other regulated market |
Company symbol |
| Canadian Securities Exchange |
FE |
| Frankfurt Stock Exchange |
A2JC89 |
| OTC Bulletin Board |
FEMFF |
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.
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.
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.
| item 10. | additional information |
This Form 20-F is being filed as an annual report
under the Securities Exchange Act 1934, and as such, there is no requirement to provide any information under this item.
| B. | Memorandum and articles of association |
The Company’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 the 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, the Company
adopted new Articles of Association.
Securities Registrar
Computershare Inc. is the transfer agent and registrar
for the shares at its principal office in Vancouver, BC.
Objects and Purposes
The 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
The 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 the Company’s Articles or under the BCA.
Directors’ borrowing powers are not generally
restricted where the borrowing is in the Company’s best interests. Directors need not own any shares of the 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-elected 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 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.
The Company is subject to the policies of the
Canadian Securities 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
The Company has only one class of shares, common
shares without par value of which an unlimited number are authorized and 84,564,215 are outstanding as of July 27, 2022. 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 the 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
The 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
The 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 the Company’s securities.
Liquidation
All common shares of the 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.
No Limitation on Foreign Ownership
There are no limitations under the 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 the Company is, or would thereby become,
insolvent.
Voting Rights
Each of 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 the Company.
Shareholder Meetings
Shareholders’ meetings are governed by the
Articles of the Company but many important shareholder protections are also contained in the Securities Act (British Columbia) and the
BCA. The Articles provide that the 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, the 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. The 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”, the 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 the Company’s material agreements giving special rights to any person on a change of control.
Insider Share Ownership Reporting
The articles of the Company do not require disclosure
of share ownership. Share ownership of director nominees must be reported annually in proxy materials sent to the Company’s shareholders.
There are no requirements under British Columbia corporate law to report ownership of shares of the 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 the 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.
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.
First Energy is a corporation incorporated pursuant
to the laws of the Province of British Columbia, Canada. Canada has no system of exchange controls. There are no Canadian restrictions
on the repatriation of capital or earnings of a Canadian public company to non-resident investors. There are no laws in Canada or exchange
restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-resident holders of the Issuer’s
securities, except as discussed in “E. Taxation” below.
There are no limitations under the laws of Canada
or in the organizing documents of the Company on the right of foreigners to hold or vote securities of the Company, except that the Investment
Canada 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 threshold for acquisitions of control is generally defined as being one-third or more of the
voting shares of the Company. "Non-Canadian" generally means an individual who is not a Canadian citizen, or a corporation,
partnership, trust or joint venture that is ultimately controlled by non-Canadians.
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 discussion under this heading summarizes the
principal Canadian federal income tax consequences of acquiring, holding and disposing 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 as capital property
for the purposes of the Income Tax Act (Canada) (the “Canadian Tax Act”). This summary does not apply to a shareholder who
carries on business in Canada through a “permanent establishment” situated in Canada or performs independent personal services
in Canada through a fixed base in Canada if the shareholder’s holding in First Energy Minerals Ltd. is effectively connected with
such permanent establishment or fixed base. This summary is based on the provisions of the Canadian Tax Act and the regulations thereunder
and on an understanding of the 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 as of the date hereof. It has been assumed that there will
be no other relevant amendment of any governing law although no assurance can be given in this respect. This discussion is general only
and is not, nor is it intended to provide a detailed analysis of the income tax implications of any particular shareholder’s interest.
Investors are advised to obtain independent advice from a shareholder’s own Canadian and U.S. 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 The 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 The Company’s voting shares). The 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
Under the Canadian Tax Act, a taxpayer’s
capital gain or capital loss from a disposition of a share of our common stock is the amount, if any, by which his or her proceeds of
disposition exceed (or are exceeded by, respectively) the aggregate of his or her adjusted cost base of the share and reasonable expenses
of disposition. The 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 in a year may be deducted from a capital gain realized by the shareholder
in the three previous years or any subsequent year, subject to certain restrictions in the case of a corporate shareholder. Under the
Canadian Tax Act, a non-resident of Canada is subject to Canadian tax on taxable capital gains, and may deduct allowable capital losses,
realized on a disposition of “taxable Canadian property.” Shares of our common stock 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 capital stock belonged to one
or more persons in a group comprising the shareholder and persons 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 tax on capital gains derived on a disposition of shares unless:
(a) the value of the shares is derived principally
from “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
of a “permanent establishment” that the holder has or had in 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
The following is a discussion of material U.S.
federal income tax consequences generally applicable to a U.S. Holder (as hereinafter defined) of our common shares 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 foreign tax consequences. (see “Taxation – Canadian
Federal Income Tax Consequences” above). Accordingly, holders and prospective holders of our common shares are urged to consult
their own tax advisors about the specific federal, state, local, and foreign tax consequences to them of purchasing, owning and disposing
of our common shares, 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 applicable, any or all of which could be materially
and adversely changed, possibly on a retroactive basis, at any time and which are subject to differing interpretations. This discussion
does not consider the potential effects, both adverse and beneficial, of any proposed legislation which, if enacted, could be applied,
possibly on a retroactive basis, at any time.
US Holders
As used in this annual report, a “U.S. Holder”
means a holder of our common shares who is a citizen or individual resident of the United States, a corporation or partnership created
or organized in or under the laws of the United States or of any political subdivision thereof, 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 U.S. irrespective of source
or a trust subject to the primary supervision of a court within the U.S. and control of a U.S. fiduciary as described in Section 7701(a)(30)
of the Code. This summary does not address the tax consequences to, and U.S. Holder does not include, persons subject to specific provisions
of 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, 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 who own common shares as capital assets, within the meaning of Section 1221 of the Code, and who
own (directly and indirectly, pursuant to applicable rules of constructive ownership) no more than 5% of the value of our total 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 domestic partnership.
Distributions on Our Common Shares
In general, U.S. Holders receiving dividend distributions
(including constructive dividends) with respect to our common shares are required to include in gross income for U.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 we have current or accumulated earnings and profits, 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 (See more detailed discussion at “Foreign Tax Credit” below). Dividends received from us by
a non-corporate U.S. Holder during 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 shares for more than 60 days during the 120-day period beginning 60 days before the ex-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 such distribution is not in excess of our current and accumulated
earnings and profits, as determined under U.S. Federal income tax 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 and thereafter as gain from the sale or exchange of property. For this purpose, “qualified dividend income”
generally includes dividends paid on stock in U.S. corporations as well as dividends paid on stock in certain non-U.S. corporations if,
among other things, (i) the shares of the non-U.S. corporation (including ADRs backed by such shares) are readily tradable on an established
securities market in the U.S., or (ii) the non-U.S. corporation is eligible with respect to substantially all of its income for the benefits
of a comprehensive income tax treaty with the U.S. which contains an exchange of information program. 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. federal
income tax purposes and that U.S. Holders who are individuals should be entitled to the reduced rates of 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 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 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
In general, U.S. Holders will recognize gain or
loss upon the sale of our common shares equal to the difference, if any, between (i) the amount of cash and the fair market value of any
property received, and (ii) the shareholder’s tax basis in our common shares. Preferential tax rates apply to long-term capital
gains of U.S. Holders that are individuals, estates or trusts. In general, gain or loss on the sale of our common shares will be long-term
capital gain or loss if our 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
Set 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 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 selling 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.
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 PFIC as a corporation that is not formed in the United States and, 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 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 his 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 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, 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 described above may reduce the U.S. tax on these amounts. In
addition, under Section 1248 of the Code, gain from the sale or exchange of shares of the CFC by a U.S. Holder which is or was a U.S.
Shareholder at any time during the five-year period ending on the date of the sale or exchange is treated as ordinary income to the extent
of earnings and profits of the CFC attributable to the shares sold or exchanged. If a foreign corporation is both a PFIC and a CFC, the
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 the 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
considered a CFC for the current or any future taxable year.
| F. | Dividends and Paying Agents |
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.
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.
Exhibits attached to this Form 20-F are available
for viewing at the head office of the Company, Suite 1206 – 588 Broughton Street, Vancouver, British Columbia V6G 3E3 during normal
business hours. Copies of First Energy’s financial statements and other disclosure documents required under the British Columbia
Securities Act are available for viewing at www.sedar.com.
This information
is not required for reports filed in the United States.
| ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
First Energy is a “small business issuer”,
and as such, does not need to provide the information required by Item 11.
| ITEM 12. | description of securities other than equity securities |
Not applicable.