Western Magnesium Corp. [MLYF] Filings

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

10-Q 1 form10-q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-56323

WESTERN MAGNESIUM CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		61-1934413
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

8180 Greensboro Drive, Suite 720

McLean, Virginia

22102

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (571) 378-0762

Securities registered pursuant to Section 12(b) of the Act:

None.

Securities registered pursuant to Section 12(g) of the Act:

Title of each class

Common Stock, $0.001 par value

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of September 6, 2022, the registrant had 450,265,776 shares of Common Stock outstanding.

WESTERN MAGNESIUM CORPORATION

Quarterly Report on Form 10-Q

For the Quarterly Period Ended July 31, 2022

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Loss and Comprehensive Loss	4
	Condensed Consolidated Statements of Shareholders’ Deficit	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	58

PART II.	OTHER INFORMATION	59

Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3.	Defaults Upon Senior Securities	62
Item 4.	Mine Safety Disclosures	62
Item 5.	Other Information	62
Item 6.	Exhibits	62
	Signatures	63

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WESTERN MAGNESIUM CORPORATION

Condensed Consolidated Balance Sheets

				July 31, 2022			October 31, 2021
	Note		$			$
			(Unaudited)			(Audited)
ASSETS
Current assets
Cash				16,700			462,360
Other receivables				94,696			151,485
Prepayments				337,525			133,647
Deposits held by related parties		8[a]		349,338			486,462
Total Current assets				798,259			1,233,954
Non-current assets
Property, plant and equipment, net		4		4,488,001			2,574,704
Right-of-use assets, net		5		405,321			598,575
Mineral property costs		7		93,453			93,453
Reclamation and other deposits				12,729			12,826
TOTAL ASSETS				5,797,763			4,513,512

LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities				3,434,539			1,989,316
Due to related parties		8[b]		1,520,834			1,026,817
Lease obligations – current		6		259,936			192,045
Provision for flow through share issuances		11		225,284			233,285
Convertible debenture, net		12		1,942,838			7,449,807
Warrant liability		13		57,080			–
Total Current liabilities				7,440,511			10,891,270
Non-current liabilities
Lease obligations – non-current		6		195,813			392,280
Total liabilities				7,636,324			11,283,550

Commitments and contingencies [note 9]				-

Shareholders’ deficit
Capital stock
Authorized: 1 billion common stock at par value of $0.001
Issued and paid: 449,265,776 (2021 – 392,943,398)		14		41,811,321			29,842,167
Capital stock Authorized: 1 billion common stock at par value of $0.001 Issued and paid: 449,265,776 (2021 – 392,943,398		14		41,811,321			29,842,167
Additional paid-in-capital		14		23,188,545			15,186,480
Obligations to issue shares		14		–			209,827
Accumulated other comprehensive income				352,345			121,109
Accumulated deficit				(67,190,772	)		(52,129,621	)
Total shareholders’ deficit				(1,838,561	)		(6,770,038	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT				5,797,763			4,513,512

Nature of operations and going concern [note 1]

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

WESTERN MAGNESIUM CORPORATION

Condensed Consolidated Statements of Loss and Comprehensive Loss

				2022			2021			2022			2021
			Three Months Ended July 31,						Nine Months Ended July 31,
			2022			2021			2022			2021
	Note		$			$			$			$

Operating expenses
Bank charges				3,792			4,890			12,444			11,044
Business development				66,883			–			144,212			–
Computer system and software				23,766			11,854			63,120			83,639
Consulting and management fees		8[d]		181,193			274,094			594,829			613,048
Depreciation		4, 5		193,926			62,781			436,253			159,774
Due diligence expenses				–			2,010			–			3,974
Engineering expenses				101,617			17,295			218,425			72,749
Foreign exchange loss (gain)				30,282			(35,499	)		256,417			(121,726	)
Interest and accretion		12		372,295			28,242			1,021,443			64,576
Investor relations				12,872			131,739			228,706			202,675
Legal and professional fees				320,665			257,648			1,897,719			545,234
Office and general				266,407			23,794			343,765			83,405
Property maintenance fees				15,100			15,069			15,100			15,069
Rent and facilities				119,625			68,635			295,746			153,910
Salaries and benefits		8[c]		1,151,045			809,253			3,347,884			2,176,185
Stock-based compensation		14[d]		32,539			1,057,013			466,368			1,057,013
Shareholder communications				7,500			(36,722	)		48,201			49,512
Subsidies and recoveries				223			(477	)		(78,996	)		(41,724	)
Transfer agent and regulatory fees				95,618			37,508			184,355			61,138
Travel expenses				137,548			107,546			359,491			218,222
Total operating expenses				3,132,896			2,836,673			9,855,482			5,407,717

Other income (expense)
Change in fair value of derivative liability		12[e]		–			(806,853	)		359,643			(790,197	)
Loss on recognition of debt host liability		12[e]		–			(140,909	)		(341,553	)		(140,909	)
Change in fair value of warrant liability		13		1,837,031			–			(5,223,759	)		–
Total other income (expense)				1,837,031			(947,762	)		(5,205,669	)		(931,106	)

Net loss				(1,295,865	)		(3,784,435	)		(15,061,151	)		(6,338,823	)

Other comprehensive income (loss)
Foreign currency translation				17,273			16,068			231,236			(174,981	)

Comprehensive loss				(1,278,592	)		(3,768,367	)		(14,829,915	)		(6,513,804	)

Basic and diluted loss per common share				(0.00	)		(0.01	)		(0.03	)		(0.02	)

Weighted average number of common shares outstanding – basic and diluted				444,004,303			365,235,017			494,284,490			340,461,383

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

WESTERN MAGNESIUM CORPORATION

Condensed Consolidated Statements of Shareholders’ Deficit

	Number		$			$			$			$			$			$
	Common shares					Additional paid-in capital			Obligation to issue shares			Accumulated other comprehensive income (loss)			Accumulated deficit			Shareholders’ deficit
	Number		$			$			$			$			$			$

Balance, October 31, 2020		323,419,527		21,322,022			4,182,037			596,872			399,175			(28,580,009	)		(2,079,903	)
Shares issued pursuant to private placements [note 14[b]]		53,151,881		5,754,705			–			(596,872	)		–			–			5,157,833
Shares issued on warrants exercised [note 14[b]]		524,901		33,131			(4,291	)		–			–			–			28,840
Shares issued on options exercised [note 14[b]]		300,000		36,150			(23,879	)		–			–			–			12,271
Shares issued upon conversion of convertible debenture [notes 12[b], 12[c] and 14[b]]		1,360,959		162,829			–			–			–			–			162,829
Shares issued for equipment [note 14[b]]		1,538,461		305,832			–			–			–			–			305,832
Share issue costs [note 14[b]]		–		(573,289	)		–			–			–			–			(573,289	)
Stock-based compensation [note 14[d]]		–		–			1,057,013			–			–			–			1,057,013
Foreign currency translation		–		–			–			–			(174,981	)		–			(174,981	)
Net loss		–		–			–			–			–			(6,338,823	)		(6,338,823	)
Balance, July 31, 2021		380,295,729		27,041,380			5,210,880			–			224,194			(34,918,832	)		(2,442,378	)

Balance, October 31, 2021		392,943,398		29,842,167			15,186,480			209,827			121,109			(52,129,621	)		(6,770,038	)
Shares issued pursuant to private placements [note 14[b]]		3,842,499		1,373,274			–			(598,528	)		–			–			774,746
Shares issued on warrants exercised [notes 13 and 14[b]]		32,633,121		9,604,902			–			–			–			–			9,604,902
Shares issued on options exercised [note 14[b]]		1,750,000		162,443			(70,263	)		–			–			–			92,180
Shares issued upon conversion of convertible debenture [notes 12[b], 12[c] and 14[b]]		8,933,333		888,178			–			–			–			–			888,178
Shares issued for finder’s fees [notes 8[d][v] and 14[b]]		9,163,425		–			–			–			–			–			–
Share issue costs [note 14[b]]		–		(59,643	)		–			–			–			–			(59,643	)
Stock-based compensation [note 14[d]]		–		–			466,368			–			–			–			466,368
Beneficial conversion feature on convertible debentures [note 12[d]]		–		–			240,000			–			–			–			240,000
Effects of change in functional currency on convertible debentures [note 12[e]]		–		–			7,370,158			–			–			–			7,370,158
Effects of change in functional currency on broker warrants [note 13]		–		–			(4,198	)		–			–			–			(4,198	)
Share subscriptions [note 14[f]]		–		–			–			388,701			–			–			388,701
Foreign currency translation		–		–			–			–			231,236			–			231,236
Net loss		–		–			–			–			–			(15,061,151	)		(15,061,151	)
Balance, July 31, 2022		449,265,776		41,811,321			23,188,545			–			352,345			(67,190,772	)		(1,838,561	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

WESTERN MAGNESIUM CORPORATION

Condensed Consolidated Statements of Cash Flows

		2022			2021
	Nine Months Ended July 31,
	2022			2021
	$			$

OPERATING ACTIVITIES
Net loss		(15,061,151	)		(6,338,823	)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of derivative liability		(359,643	)		790,197
Loss on recognition of debt host liability		341,553			140,909
Change in fair value of warrant liability		5,223,759			–
Cashless warrant exercise		(113,765	)		–
Accrued interest and accretion		196,115			32,124
Amortization of debt discount		814,729			–
Depreciation of property, plant and equipment		258,515			22,355
Depreciation of right-of-use assets		177,738			137,419
Foreign exchange loss (gain)		23,535			(27,812	)
Interest expense on lease obligations		25,905			16,946
Shares issued for equipment		–			165,659
Stock-based compensation		466,368			1,057,013
Changes in operating assets and liabilities:
Other receivables		51,963			(118,276	)
Prepayments		(209,967	)		(32,436	)
Deposits held by related parties		121,301			(653,915	)
Accounts payable and accrued liabilities		1,524,962			877,574
Due to related parties		532,489			(85,623	)
Cash used in operating activities		(5,985,595	)		(4,016,689	)

INVESTING ACTIVITIES
Purchase of property, plant and equipment		(2,252,600	)		(1,779,316	)
Cash used in investing activities		(2,252,600	)		(1,779,316	)

FINANCING ACTIVITIES
Proceeds from issuance of shares, net of share issuance costs		5,943,775			4,773,200
Proceeds from convertible debenture		2,000,000			1,579,475
Payments of promissory note		–			(65,745	)
Payments of lease obligations		(143,672	)		(153,145	)
Cash provided by financing activities		7,800,103			6,133,785

Change in cash for the period		(438,092	)		337,780
Cash, beginning of the period		462,360			39,571
Effect of foreign exchange on cash		(7,568	)		5,892
Cash, end of the period		16,700			383,243
Other non-cash transactions:
Shares issued for conversion of debt and interest		888,178			–
Shares issued for payment of finder’s fees		4,796,832			–

Other cash flow disclosures:
Cash paid during the period for interest		10,581			–

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

WESTERN MAGNESIUM CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

1. NATURE OF OPERATIONS AND GOING CONCERN

Western Magnesium Corporation (the “Company”, or “WMC”) was incorporated under the laws of British Columbia on March 24, 1966. On May 14, 2019, the Company discontinued from the jurisdiction of the Business Corporations Act (British Columbia) and domesticated under the General Corporation Law of the State of Delaware under the name “Western Magnesium Corporation”. The Company is a reporting issuer in Canada and in the United States, listed for trading in Canada on the TSX Venture Exchange (the “TSX-V”) under the symbol “WMG.V”, in the United States on the OTCQB tier of the OTC Markets (the “OTCQB”) under the symbol “MLYF”, and in Germany on the Frankfurt Stock Exchange under the symbol “3WM”. The Company has developed proprietary magnesium production technology with the aim of becoming a premier low-cost producer of green primary magnesium metal.

As at July 31, 2022, the Company had an accumulated deficit of $67,190,772 (October 31, 2021 – $52,129,621) and working capital deficiency of $6,642,252 (October 31, 2021 – $9,657,316). For the nine months ended July 31, 2022, the Company reported a comprehensive loss of $14,829,915 (2021 – $6,513,804). The Company has not yet achieved profitable operations and expects to incur further losses from operations. The Company has financed its activities and operations through equity issuances and debt financing and expects to continue to do so to the extent such financing is available. There can be no assurance that such financing will be available under terms acceptable to the Company or at all.

These unaudited condensed consolidated financial statements (the “Financial Statements”) have been prepared under the assumption that the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will be able to meet its obligations and continue its operations for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. If future financing through share or debt issuances is unavailable or if for any reason the Company is unable to continue as a going concern, it could impact the Company’s ability to realize its assets at their recognized values and to meet its obligations in the ordinary course of business at the amounts stated in these Financial Statements. These Financial Statements do not give effect to adjustments that would be necessary to the carrying values and classifications of assets and liabilities should the Company be unable to continue as a going concern. If the going concern assumption is not used, the adjustments required to report the Company’s assets and liabilities on a liquidation basis could be material to these Financial Statements.

The Company’s management has evaluated whether there is substantial doubt about the Company’s ability to continue as a going concern and has determined that substantial doubt existed as of July 31, 2022. This determination was based on the following factors: (i) the Company used cash of approximately $6 million in operations during the nine months ended July 31, 2022; (ii) the Company’s available cash as of July 31, 2022 will not be sufficient to fund its anticipated level of operations for the next 12 months; (iii) the Company will require additional financing for the fiscal year ending October 31, 2022 to continue at its expected level of operations; and (iv) if the Company fails to obtain the needed capital, it will be forced to delay, scale back, or eliminate some or all of its development activities or perhaps cease operations. In the opinion of management, these factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for at least one year from the date of these Financial Statements are issued.

In March 2020, the World Health Organization declared COVID-19 a global pandemic. In order to combat the spread of COVID-19, governments worldwide, including the Unites States and Canada, have enacted emergency measures including travel bans, legally enforced or self-imposed quarantine periods, social distancing and business and organization closures. These measures have adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. The impact on the Company has not been significant but could affect the Company’s ability to raise financings in the future and restrict travel. Management continues to monitor the situation.

2. BASIS OF PRESENTATION

These Financial Statements comprise the financial statements of Western Magnesium Corporation and its wholly owned subsidiaries, Western Magnesium Corp., incorporated in Nevada, United States and Western Magnesium Canada Corporation, incorporated in British Columbia, Canada.

[a] Accounting standards

The accompanying Financial Statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) on the basis that the Company will continue as a going concern, which assumes that the Company will be able to meet its obligations as they become due and continue its operations for at least one year from the date these Financial Statements are issued. Realization values may be substantially different from carrying values as shown and these Financial Statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.

These Financial Statements have been prepared on a historical cost basis except for financial instruments that have been measured at fair value. In addition, these Financial Statements have been prepared using the accrual basis of accounting, except for cash flow information. They do not include all the information required for complete annual financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended October 31, 2021 (the “Fiscal 2021 Financial Statements”).

[b] Functional and presentation currency

These Financial Statements are presented in United States dollars (“US dollars” or “US$”), except where otherwise indicated. The functional currency of each entity of the Company is as follows:

Entity		Functional Currency
Western Magnesium Corporation		United States dollars
Western Magnesium Corp.		United States dollars
Western Magnesium Canada Corporation		Canadian dollars (“CA$”)

During the three months ended January 31, 2022, significant changes in economic facts and circumstances have occurred in Western Magnesium Corporation’s operations which resulted in the change of its functional currency to the United States dollar from the Canadian dollar effective November 1, 2021. For both monetary and non-monetary assets and liabilities, translated balances at the end of the prior period became the new accounting basis. The rate on the date of change became the historical rate at which non-monetary assets and liabilities were translated in subsequent years. There was no effect on the cumulative translation adjustment on the consolidated basis. Previously recorded cumulative translation adjustments were not reversed. Effects of change in functional currency included the reclassifications of convertible debentures and warrants and broker warrants [notes 12[d] and [e]].

The accounts of the Company’s subsidiary Western Magnesium Canada Corporation have been translated to United States dollars with the exchange translation adjustments recorded in other comprehensive income (loss).

[c] Critical accounting estimates and judgments

The preparation of these Financial Statements in accordance with US GAAP requires the Company to make estimates and assumptions concerning the future that affect the amounts reported in the Financial Statements and accompanying notes. Management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised.

Estimates and assumptions where there is potential risk of material adjustments to assets and liabilities in future accounting periods include the useful lives of property, plant and equipment, recoverability of the carrying value of exploration and evaluation assets, fair value measurements for financial instruments, discount rates for leases, recoverability and measurement of deferred tax assets and liabilities, and contingent liabilities.

Significant Judgments

The preparation of these Financial Statements in accordance with US GAAP requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying the Company’s Financial Statements include:

-	the assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that may give rise to substantial doubt;
-	whether there are indicators of impairment of the Company’s exploration and evaluation assets and other non-current assets;
-	the classification of financial instruments; and
-	determination of functional currency.

3. RECENT ACCOUNTING PRONOUNCEMENTS

New Accounting Standards Adopted During the Periods

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Effective November 1, 2021, the Company adopted the new standard. There was no material impact or adjustment to these Financial Statements.

In January 2020, the FASB issued ASU 2020-01, Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”), which is intended to clarify the interactions of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Effective November 1, 2021, the Company adopted the new standard. There was no material impact or adjustment to these Financial Statements.

New Accounting Standards Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments and supersedes the respective guidance within ASC 470-20 and ASC 740-10-55-51, which will result in more instruments to be accounted for as a single instrument rather than having their proceeds allocated between liability and equity accounting units. As smaller reporting companies as defined by the United States Securities and Exchange Commission (the “SEC”), ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its Financial Statements.

4. PROPERTY, PLANT AND EQUIPMENT

	Computer Equipment		Furniture			Leasehold Improvement			Furnace & Plant Equipment			Vehicle			Total
	$		$			$			$			$			$

Cost
Balance, October 31, 2021		109,629		53,542			139,481			2,344,726			–			2,647,378
Property, plant and equipment cost, beginning balance		109,629		53,542			139,481			2,344,726			–			2,647,378
Additions		14,370		2,171			159,065			2,047,779			29,215			2,252,600
Foreign exchange effect		10		(314	)		(5,708	)		(76,255	)		(374	)		(82,641	)
Balance, July 31, 2022		124,009		55,399			292,838			4,316,250			28,841			4,817,337
Property, plant and equipment cost, ending balance		124,009		55,399			292,838			4,316,250			28,841			4,817,337

Accumulated Depreciation
Balance, October 31, 2021		27,821		16,514			14,147			14,192			–			72,674
Property, plant and equipment accumulated depreciation, beginning balance		27,821		16,514			14,147			14,192			–			72,674
Depreciation expense		28,402		5,777			81,553			137,294			5,084			258,515
Foreign exchange effect		403		(52	)		(856	)		(906	)		(37	)		(1,853	)
Balance, July 31, 2022		56,626		22,239			94,844			150,580			5,047			329,336
Property, plant and equipment accumulated depreciation, ending balance		56,626		22,239			94,844			150,580			5,047			329,336

Net Book Value
Balance, October 31, 2021		81,808		37,028			125,334			2,330,534			–			2,574,704
Balance, July 31, 2022		67,383		33,160			197,994			4,165,670			23,794			4,488,001

5. RIGHT-OF-USE ASSETS

As at July 31, 2022, the right-of-use assets were leases for the Company’s offices in Vancouver, British Columbia and McLean, Virginia, and its research and development pilot plant located in Burnaby, British Columbia. These leases terminate on March 31, 2023, February 28, 2025 and September 30, 2023, respectively. The lease for the Company’s office in Las Vegas, Nevada ended on May 31, 2021.

SCHEDULE OF RIGHT-OF-USE ASSETS

	Vancouver Office		Virginia Office			Nevada Office		Pilot Plant			Total
	$		$			$		$			$

Cost
Balance, October 31, 2021		156,881		292,391			24,580		384,946			858,798
Beginning balance, Cost		156,881		292,391			24,580		384,946			858,798
Foreign exchange effect		–		(3,038	)		–		(13,208	)		(16,246	)
Balance, July 31, 2022		156,881		289,353			24,580		371,738			842,552
Ending balance, Cost		156,881		289,353			24,580		371,738			842,552

Accumulated Depreciation
Balance, October 31, 2021		90,277		15,529			24,580		129,837			260,223
Beginning balance, Accumulated Depreciation		90,277		15,529			24,580		129,837			260,223
Depreciation expense		33,456		50,562			–		93,720			177,738
Prepaid expense		–		4,557			–		–			4,557
Foreign exchange effect		–		(162	)		–		(5,125	)		(5,287	)
Balance, July 31, 2022		123,733		70,486			24,580		218,432			437,231
Ending balance, Accumulated Depreciation		123,733		70,486			24,580		218,432			437,231

Net Book Value
Balance, October 31, 2021		66,604		276,862			–		255,109			598,575
Balance, July 31, 2022		33,148		218,867			–		153,306			405,321

6. LEASE OBLIGATIONS

On adoption of ASU 2016-02 on November 1, 2019, the Company recognized lease liabilities of $83,549 which had previously been classified as operating leases. The lease liabilities were measured at the present value of the remaining lease payments and discounted using the lessee’s incremental borrowing rate of approximately 7%.

During the year ended October 31, 2020, the Company entered into a new operating lease with respect to its research and development pilot plant located in Burnaby, British Columbia and recognized a lease liability of $354,263, which was measured by discounting lease payments using an incremental borrowing rate of approximately 6%.

During the year ended October 31, 2021, the Company renewed its operating lease with respect to its office in Vancouver, British Columbia and recognized a lease liability of $91,237, which was measured by discounting lease payments using an incremental borrowing rate of approximately 7%.

During the year ended October 31, 2021, the Company entered into a new operating lease with respect to its corporate head office in McLean, Virginia and recognized a lease liability of $260,649, which was measured by discounting lease payments using an incremental borrowing rate of approximately 7%.

SCHEDULE OF OPERATING LEASE

	Vancouver Office			Virginia Office			Nevada Office		Pilot Plant			Total
	$			$			$		$			$

Balance, October 31, 2021		66,604			262,612			–		255,109			584,325
Lease obligation, beginning		66,604			262,612			–		255,109			584,325
Lease payments		(36,087	)		(4,557	)		–		(103,028	)		(143,672	)
Interest expense		2,631			13,967			–		9,307			25,905
Foreign exchange effect		–			(2,728	)		–		(8,081	)		(10,089	)
Balance, July 31, 2022		33,148			269,294			–		153,307			455,749
Lease obligation, ending		33,148			269,294			–		153,307			455,749

Which consist of:
Current lease obligation		33,148			96,043			–		130,745			259,936
Non-current lease obligation		–			173,251			–		22,562			195,813
Balance, July 31, 2022		33,148			269,294			–		153,307			455,749
Lease obligation, ending		33,148			269,294			–		153,307			455,749

7. MINERAL PROPERTY COSTS

As at July 31, 2022, the Company had the following mining claims:

[a] Silverado Property, Nevada, United States

The Silverado property is located in the Pinto mining district of Nevada, consists of 3 patented mining claims totaling approximately 120 hectares, and is 100% owned by the Company. The carrying value of the property is $1.

[b] Tami Mosi Property, Nevada, United States

The Company holds a 100% interest in 81 unpatented lode mining claims totaling approximately 1,637 acres located in White Pine County, Nevada and four unpatented lode mining claims totaling approximately 10 acres located in the Moor Mining District, Elko County, Nevada. These mining claims are subject to a 2% net smelter royalty in favor of the prior owner of the claims. The carrying value of the property is $93,452.

8. RELATED PARTY TRANSACTIONS

[a] Deposits held by related parties

Pursuant to vendor agreements entered on January 1, 2021, the Company provided related parties with advances that were held as deposits for anticipated future costs related to the Company’s planned magnesium research and development pilot plant and other administrative expenses (the “Pilot Plant Advances”). As at July 31, 2022, the Company had the following deposits held by related parties:

	Related Party A ^[i]			Related Party B ^[ii]			Total
	$			$			$

Balance, October 31, 2021		291,481			194,981			486,462
Beginning balance		291,481			194,981			486,462
Advances		354,459			1,225,118			1,579,577
Costs and expenses		(312,820	)		(1,420,829	)		(1,733,649	)
Foreign exchange effect		16,218			730			16,948
Balance, July 31, 2022		349,338			–			349,338
Ending balance		349,338			–			349,338

[i]

Related Party A is a company controlled by a director and officer.

[ii]

Related Party B is a company controlled by an officer.

[b] Due to related parties

As at July 31, 2022, balances due to related parties totaled $1,520,834 (October 31, 2021 – $1,026,817). All advances are unsecured, non-interest bearing, and have no stated terms of repayment.

SCHEDULE OF DUE TO RELATED PARTIES

	July 31, 2022		October 31, 2021
	$		$
Wages payable to directors and officers		505,544		357,500
Benefits payable to directors and officers		725,261		539,209
Fees and expenses payable to directors and officers		290,029		127,878
Interest due to a shareholder		–		2,230
Total		1,520,834		1,026,817

[c] Key management compensation

As at July 31, 2022, the Company had eleven executives including nine senior management members. Their aggregate annualized compensation is approximately $3.3 million. During the nine months ended July 31, 2022, the Company incurred salaries, benefits, and consulting fees totaling $2,605,352 to directors and officers, and stock-based compensation of $160,700 for options granted to an officer of the Company.

[d] Transactions with related parties

[i] During the nine months ended July 31, 2022, the Company incurred consulting fees of $27,489 (CA$35,000) to a former member of senior management.

[ii] During the nine months ended July 31, 2022, the Company incurred consulting fees of $60,000 to a company controlled by an executive.

[iii] During the nine months ended July 31, 2022, the Company incurred consulting fees of $29,600 to a company controlled by an executive.

[iv] In June 2021, the Company renewed its sublease agreement with a company controlled by a director and officer for its office in Vancouver, British Columbia with a lease term from April 1, 2021 to March 31, 2023 at a monthly rent of $7,656 (CA$9,794).

[v] Pursuant to an agreement entered on August 29, 2018 and which was approved by the TSX-V on September 12, 2018, a company controlled by a director and officer is eligible to receive up to 5% of the issued and outstanding common shares of the Company as at August 28, 2018 for up to $5 million raised. The agreement was amended on January 2, 2019, extending the term from six months to three years and six months. During the year ended October 31, 2021, the commitment was met. On November 3, 2021, the Company issued 9,163,425 common shares at a price of CA$0.65 per share with a total fair value of $4,796,832 (CA$5,956,226) as share issue costs.

9. CONTINGENT LIABILITIES AND COMMITMENTS

[a] Contingent liabilities

[i] On September 29, 2020, James Sever filed a Notice of Civil Claim against the Company in the Supreme Court of British Columbia (the “Sever Claim”). The Sever Claim alleges that Mr. Sever had an employment and/or other similar contractual relationship with the Company, and that the Company breached such contractual relationship by way of constructive dismissal or similar conduct. The Sever Claim seeks damages in excess of $2.5 million, certain equity compensation, prejudgment garnishment, costs, interest and other non-monetary relief. On July 27, 2021, the Company filed a response to the Sever Claim. On April 5, 2022, the Company filed an amended response to the Sever Claim, which included the following pleadings: (a) British Columbia is an inappropriate and inconvenient forum for the Sever Claim; (b) to the extent that British Columbia is the appropriate forum for the Sever Claim, nonetheless: (i) the Sever Claim is barred in whole or in part by applicable doctrines of delay / statute of limitations, (ii) the Company did not constructively dismiss Mr. Sever and, instead, it was Mr. Sever that abandoned, quit or resigned from his obligations to the Company, (iii) the Company has no debts, liabilities or obligations to Mr. Sever. The Company intends to vigorously defend against the Sever Claim, and believes that the Sever Claim is without merit. As the Company cannot predict the outcome of the Sever Claim, no provision has been recognized as there is no present obligation and the probability of an outcome cannot be determined.

[ii] On December 31, 2020, GEM Yield Bahamas Limited (“GEM”) served the Company with a Notice of Intention to Arbitrate (the “New York Arbitration Notice”) before the American Arbitration Association in New York (the “GEM New York Arbitration”). The New York Arbitration Notice alleges the Company breached a Share Subscription Agreement dated November 15, 2019 entered into between the Company and GEM (the “GEM Agreement”), among other things, claiming damages of approximately $3.4 million (CA$4.2 million). On January 19, 2021, the Company filed a petition in the New York Supreme Court to stay the GEM New York Arbitration claiming the GEM Agreement was not valid. On March 19, 2021, the Court in the New York State Action ruled that there was an arbitration clause in the GEM Agreement but it was up to the arbitrator to determine if the arbitration clause was valid. Following this ruling, the New York State Action was closed. In June 2021, GEM filed a Statement of Claim in the GEM New York Arbitration, and the Company filed a Statement of Answer denying the existence of any binding agreement between the Company and GEM, among other defenses. In January 2022, the Company filed a Modified Statement of Defense and Counterclaims. On April 8, 2022, the parties agreed to consolidate this arbitration with the GEM Montreal Arbitration. The parties then filed consolidated pleadings, and both matters will be decided via arbitration in Montreal. The Company intends to vigorously defend itself in the GEM New York Arbitration and believes the allegations lack merit. As the Company cannot predict the outcome of this arbitration proceeding, no provision has been recognized in respect to the GEM New York Arbitration as there is no present obligation and the probability of an outcome cannot be determined.

[iii] On February 8, 2021, GEM instituted another arbitration against the Company before the International Centre for Dispute Resolution in Montreal Canada (the “GEM Montreal Arbitration”) and joined GEM’s affiliate, GEM Global Yield LLC SCS (“GEM Global Yield” together with GEM, the “GEM Parties”). The Statement of Claim filed by the GEM Parties alleges the Company breached a Share Subscription Agreement dated November 15, 2019 and promissory note, among other things, claiming damages of approximately $3.9 million (CA$4.9 million), in addition to costs and expenses, stemming from the Company’s alleged failure to issue to GEM Global Yield warrants to purchase up to 33 million shares of the Company’s common stock. The Company filed a Statement of Defense denying the existence of any binding agreement between the Company and GEM, among other defenses. In January 2022, the Company filed an Amended Statement of Defense and Cross-claim. On April 8, 2022, the parties agreed to consolidate this arbitration with the GEM New York Arbitration. The parties then filed consolidated pleadings, and both matters will be decided via arbitration in Montreal. The Company intends to vigorously defend itself in the GEM Montreal Arbitration and believes the allegations lack merit. As the Company cannot predict the outcome of this arbitration proceeding, no provision has been recognized in respect to the GEM Montreal Arbitration as there is no present obligation and the probability of an outcome cannot be determined.

[iv] On April 19, 2021, Lampert Advisors, LLC (“Lampert”) filed a Verified Complaint against the Company’s wholly owned subsidiary Western Magnesium Corp., a Nevada corporation (“Western Magnesium – Nevada”) in the Supreme Court of the State of New York, County of New York (the “Lampert Lawsuit”). The complaint filed in the Lampert Lawsuit alleges that Lampert entered into an agreement with Western Magnesium – Nevada to provide various financial advisory services including acquisition advisory services and act as an exclusive placement agent for a combination of debt and equity securities (the “Lampert Agreement”), that it performed all services required under that agreement and that it is owed $367,227 plus interest at the rate of 9% from February 3, 2021 and that it has a right of first refusal to act as financial advisor in connection with any debt, equity or debt restructuring assignments on terms, conditions and compensation customary for Lampert for a transaction of the type contemplated. Although Lampert claims to have personally served Western Magnesium – Nevada, the Company never received the Summons and Complaint and therefore, never submitted a response. On September 9, 2021, Lampert filed a Motion seeking the entry of a default judgment (the “Motion”). The Company opposed the Motion and filed a cross-motion to compel Lampert to accept the Company’s answer. The Court granted the Company’s cross-motion and denied Lampert’s Motion as moot. On March 4, 2022, the Company filed a Verified Amended Answer, Affirmative Defenses, and Counterclaims. The counterclaims seek at least $120,000 in damages from Lampert. The Company intends to vigorously defend against the Lampert Lawsuit and prosecute its counterclaims, and the Company believes that the claims asserted by Lampert are without merit. As the Company cannot predict the outcome of the Lampert Lawsuit, no provision has been recognized as there is no present obligation and the probability of an outcome cannot be determined.

[b] Commitments

[i] On November 1, 2016, the Company signed a contract services agreement with Lodestar Management Group, LLC (“Lodestar”), a US corporate logistics company. Lodestar provides advisory, consulting, negotiation and other management services relating to corporate management, administrative and/or operational activities of the Company. The term of the contract was for one year and has been renewed under the same terms on January 1, 2018 and 2019. The Company has agreed to compensate Lodestar in the amount of $1,800 or CA$2,500 per month by issuance of shares up until December 2019, and by cash from January 2020 onwards. The number of shares issued will be based on the share price on the day of issuance that is not lower than the CA$0.05 per share minimum requirement and will not exceed $1,800 or CA$2,500 in value. The shares will be issued on the last working day of each month for a period of twelve months. During the nine months ended July 31, 2022, the Company did not issue any shares (2021 – nil) and paid $30,624 in cash (2021 – $16,200) to Lodestar. As at July 31, 2022, outstanding owing Lodestar were 634,072 shares and $38,593 (October 31, 2021 – $53,491).

[ii] During the year ended October 31, 2020, the Company entered into a lease agreement for its research and development pilot plant in Burnaby, British Columbia with a lease term from October 1, 2020 to September 30, 2023 at a monthly rent of $16,154 (CA$20,715). In June 2021, the Company renewed its sublease agreement with a company controlled by a director and officer for its office in Vancouver, British Columbia with a lease term from April 1, 2021 to March 31, 2023 at a monthly rent of $7,637 (CA$9,794). In September 2021, the Company entered into a lease agreement for its corporate head office in McLean, Virginia with a lease term from September 14, 2021 to February 28, 2025 at a monthly rent of $9,113. The Company was abated for the first five months and was entitled to a tenant allowance of $41,010 [notes 5 and 6].

10. PROMISSORY NOTE

During the year ended October 31, 2019, the Company received a loan of $112,895 (CA$150,000) from a related party. The loan was unsecured, bore interest at 18% and was due on demand. During the year ended October 31, 2020, the loan was increased by an additional $44,588 (CA$60,000) to $157,483 (CA$210,000), and was due on September 24, 2021. During the year ended October 31, 2021, the Company accrued interest expense of $1,639 (2020 – $16,655) and repaid the entire balance and interest totaling $65,761 (2020 – $101,066).

11. PROVISION FOR FLOW THROUGH SHARE ISSUANCES

The Company has recorded a provision in the amount of $225,284 (October 31, 2021 – $233,285) for tax and related obligations relating to flow through share issuances from prior years. The flow through share issuances were a Canadian tax-based financing incentive and the provision was in relation to a tax liability with the Federal Government of Canada and had no statute of limitations.

12. CONVERTIBLE DEBENTURE

[a] July 2020 Convertible Debenture

On July 27, 2020, the Company closed a non-brokered private placement of an unsecured convertible note in the principal amount of $112,124 (CA$150,000, the “July 2020 Convertible Debenture”). The note bears interest at 12% per annum and is due on the date that is one year following the closing date. The note is convertible into common shares of the Company at the price which is the greater of CA$0.15 per common share and the market price on the date of the conversion notice. Any accrued but unpaid interest will be payable on the earlier of the maturity date and the date of conversion in cash or common shares. No finder’s fees were paid in connection with this private placement. On May 18, 2021, the Company issued a total of 1,360,959 common shares on the conversion of the July 2020 Convertible Debenture including conversion of accrued interest, and 263,973 common shares valued at $26,286 in transaction costs. The July 2020 Convertible Debenture had an effective interest rate of 37%.

[b] July 2021 Convertible Debenture

On July 15, 2021, the Company closed a non-brokered private placement of an unsecured convertible note in the principal amount of $79,542 (CA$100,000, the “July 2021 Convertible Debenture”) which it received on April 22, 2021. The note bears interest at 12% per annum and is due on the date that is one year following the closing date. The note is convertible at a price of CA$0.12 per unit, where each unit is comprised of one common share and one common share purchase warrant exercisable at a price of CA$0.20 per common share for a period of two years. Any accrued but unpaid interest will be payable on the earlier of the maturity date and the date of conversion in cash or common shares. On April 22, 2022, the Company issued a total of 933,333 units on the conversion of the July 2021 Convertible Debenture including conversion of accrued interest. The July 2021 Convertible Debenture had an effective interest rate of 594%.

[c] June 2021 Convertible Debenture

On June 15, 2021, the Company closed a non-brokered private placement of an unsecured convertible note in the principal amount of $1,500,000 (the “June 2021 Convertible Debenture”). The note bears interest at 12% per annum and matures on December 10, 2022. The June 2021 Convertible Debenture is convertible into 15,000,000 units, where each unit consists of (i) one share of the Company’ common stock, (ii) one-half of one Class A common stock purchase warrant, with each whole warrant being exercisable at a price of $0.13 until June 10, 2026, and (iii) one-half of one Class B common stock purchase warrant, with each whole warrant being exercisable at a price of $0.19 until June 10, 2026 (collectively, the “Class A and B Warrants”). In addition, the conversion price for accrued interest is the greater of (i) $0.10 and (ii) the minimum conversion price permitted by the TSX-V at the time of conversion.

As part of the offering of the June 2021 Convertible Debenture, the Company also entered into a securities purchase agreement dated June 10, 2021 (the “2021 Securities Purchase Agreement”), whereby the Company agreed to use commercially reasonable efforts to file a registration statement with the United States Securities and Exchange Commission (the “SEC”) by August 14, 2021, covering the public resale of the shares of common stock underlying such debenture and, upon its conversion, the Class A and B Warrants issuable upon such conversion (the “Underlying Shares”), and to use its best efforts to cause the registration statement to be declared effective on October 13, 2021. On December 13, 2021, the Company’s Form 10 Registration Statement filed with the SEC was declared effective.

In addition to certain covenants contained in the 2021 Securities Purchase Agreement, the terms of the June 2021 Convertible Debenture contain certain negative covenants by the Company, including, among others, sell or offer to sell any securities with non-fixed or floating price features, issue any common stock or common stock equivalents at a price lower than the conversion price herein then in effect, or issue any equity or debt instruments with anti-dilution provisions.

In the event the Company issues or sells any common stock or common stock equivalents with terms that the purchaser holding the outstanding June 2021 Convertible Debenture or the Class A and B Warrants reasonably believes are more favorable to such holder than the terms of the June 2021 Convertible Debenture or the Class A and B Warrants, then upon notice to the Company by such holder within five trading days after notice to such holder by the Company, the Company will use commercially reasonable efforts to obtain the approval of the TSX-V and any additional required regulatory approval to amend the terms of the June 2021 Convertible Debenture or the Class A and B Warrants as required, as the case may be, so as to give such holder the benefit of such more favorable terms or conditions.

The conversion price of the June 2021 Convertible Debenture and the exercise price of the Class A and B Warrants are subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events, including merger or consolidation of the Company or in a “Fundamental Transaction” as defined in the June 2021 Convertible Debenture.

The Company has granted the holders certain rights of first refusal on its future offerings for as long as the June 2021 Convertible Debenture or the Class A and B Warrants are outstanding.

The Company may prepay and satisfy the June 2021 Convertible Debenture so long as an event of default has not occurred, upon 20 days’ prior written notice received by the Company to the holder, by paying 125% of the amounts owed on the June 2021 Convertible Debenture, including all principal, interest and other fees. The holder of this debenture may, however, convert all or a portion of the debenture during the 20-day notice period.

During the nine months ended July 31, 2022, the Company issued an aggregate 8,000,000 units on partial conversion of the June 2021 Convertible Debenture, for a total of 8,000,000 common shares, 4,000,000 Class A Warrants exercisable at a price of $0.13 until June 10, 2026, and 4,000,000 Class B Warrants exercisable at a price of $0.19 until June 10, 2026 [note 13[b]]. As at July 31, 2022, the Company incurred contractual interest of $165,140 (October 31, 2021 – $70,521). The June 2021 Convertible Debenture has an effective interest rate of 1,113%.

[d] April 2022 Convertible Debenture

On April 14, 2022, the Company entered into a securities purchase agreement (the “2022 Securities Purchase Agreement”) and closed a non-brokered private placement of an unsecured convertible note in the principal amount of $2,000,000 (the “April 2022 Convertible Debenture”). The note bears interest at 15% per annum and matures on October 14, 2023. The April 2022 Convertible Debenture is convertible into 6,666,667 units, where each unit consists of one share of the Company’ common stock and one common stock purchase warrant exercisable at a price of $0.40 per share for a period of five years from the date of issuance.

The April 2022 Convertible Debenture may not be prepaid prior to maturity and contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the 2022 Securities Purchase Agreement or the April 2022 Convertible Debenture.

In the event of default under the April 2022 Convertible Debenture, the interest rate shall increase to the lesser of 20% per annum or the maximum rate permitted under applicable law until paid and the following “Mandatory Default Amount” shall be paid, if demanded by the purchaser: the sum of (a) the greater of (i) the outstanding principal amount of the April 2022 Convertible Debenture divided by the conversion price on the date the Mandatory Default Amount is either (A) demanded (if demand or notice is required to create an event of default) or otherwise due or (B) paid in full, whichever has a lower conversion price, multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded, (y) due, or (z) paid in full, whichever is highest, or (ii) 125% of the outstanding principal amount of the April 2022 Convertible Debenture plus (b) all other amounts, costs, expenses and liquidated damages due in respect of the April 2022 Convertible Debenture.

Pursuant to the terms of the 2022 Securities Purchase Agreement, the Company also entered into a registration rights agreement dated April 14, 2022 (the “2022 Registration Rights Agreement”). Pursuant to the terms of the 2022 Registration Rights Agreement, the Company agreed to prepare and file with the SEC a registration statement covering the resale of all shares issued or issuable upon conversion of the April 2022 Convertible Debenture, upon exercise of the respective warrants of the April 2022 Convertible Debenture, upon conversion of the June 2021 Convertible Debenture, and upon exercise of the respective warrants of the June 2021 Convertible Debenture. The Company agreed to file the registration statement with the SEC within 30 days following April 14, 2022 and to use best efforts to have the registration statement declared effective by the SEC within 60 days following April 14, 2022 if the SEC does not review it or by August 12, 2022 if the SEC reviews it. In the event the Company fails to file the registration statement or such registration statement is not declared effective within the time periods noted above or such registration statement is not kept effective while any of the securities registered pursuant to such registration statement, the Company will be obligated to pay the holder of the debentures a penalty in cash, in the amount of $20,000 on the date of such failure and on the 30th day of each month following such failure. The 2022 Registration Rights Agreement contains customary indemnification provisions. On May 25, 2022, the Company filed a Form S-1 Registration Statement with the SEC. On July 12, 2022, the Company’s Form S-1 Registration Statement filed with the SEC was declared effective.

As at July 31, 2022, the Company incurred contractual interest of $88,767 (October 31, 2021 – $nil). The April 2022 Convertible Debenture has an effective interest rate of 22%.

[e] Debt Host Liability and Embedded Derivative Liability

Certain of the Company’s convertible debentures were determined to be hybrid financial instruments comprised of a debt host liability and an embedded derivative liability, as under the conversion feature the number of shares that will or may be issued to settle the notes may vary. The Company uses the Black-Scholes Option Pricing Model based on different default risks and assumptions. The debt host liability of the convertible note will be measured at amortized cost, with the embedded derivative liability measured at fair value.

On issuance date of the July 2020 Convertible Debenture, the fair value of its debt host liability was determined to be $87,083 and the respective embedded derivative liability was valued at $25,041. Fair value adjustments were made to the embedded derivative liability of the July 2020 Convertible Debenture on conversion date of May 18, 2021, resulting in a fair value of $nil.

On issuance date of the July 2021 Convertible Debenture, it was determined to be a convertible debt instrument with a beneficial conversion feature accounted for in accordance with ASU 470-20. The Company allocated the intrinsic value of the beneficial conversion feature of the July 2021 Convertible Debenture capped at the face value of $79,542 (CA$100,000) to additional paid-in capital. On November 1, 2021, the Company’s functional currency change resulted in the reclassification of the July 2021 Convertible Debenture to a hybrid financial instrument accounted for in accordance with ASU 815-15. The embedded derivative liability was valued at $421,095 (CA$529,400), the previous beneficial conversion feature was reversed out of additional paid-in capital, and a loss of $341,553 (CA$429,400) was recognized in the statements of loss and comprehensive loss. Fair value adjustments were made to the embedded derivative liability of the July 2021 Convertible Debenture on conversion date of April 22, 2022, resulting in a fair value of $nil.

On issuance date of the June 2021 Convertible Debenture, it was determined to be a hybrid financial instrument comprised of a debt host liability and an embedded derivative liability. The embedded derivative liability was valued at $1,646,600 which exceeded the face value of the note itself of $1,500,000, the debt host liability was then assigned a face value of $1, with an immediate loss of $146,601 on recognition of the debt host liability. As at October 31, 2021, its combined value was $7,449,744. On November 1, 2021, the Company’s functional currency change resulted in the reclassification of the June 2021 Convertible Debenture from a hybrid financial instrument accounted for in accordance with ASU 815-15 to a convertible debt instrument with a beneficial conversion feature accounted for in accordance with ASU 470-20. The value of the embedded derivative liability was reclassified to additional paid-in capital. The corresponding debt discount is amortized as interest expense over the period from the issuance date to the stated maturity date using the effective interest method. During the nine months ended July 31, 2022, the Company recorded interest expense on debt discount of $814,717 which includes the full amortization of the portions of the debt which were converted in the period. As at July 31, 2022, the debt discount had a carrying value of $685,283.

On issuance date of the April 2022 Convertible Debenture, it was determined to be a convertible debt instrument with a beneficial conversion feature accounted for in accordance with ASU 470-20. The Company allocated the intrinsic value of the beneficial conversion feature of the April 2022 Convertible Debenture of $240,000 to additional paid-in capital, and the corresponding debt discount is amortized as interest expense over the period from the issuance date to the stated maturity date using the effective interest method. During the nine months ended July 31, 2022, the Company recorded interest expense on debt discount of $12. As at July 31, 2022, the debt discount had a carrying value of $239,988.

SCHEDULE OF DERIVATIVE INSTRUMENTS

July 2020 Convertible Debenture

July 2021 Convertible Debenture

June 2021 Convertible Debenture

April 2022 Convertible Debenture

Total

Western Magnesium Corp. [MLYF] Filings
10-Q	[2022-10-31]
10-Q	[2022-06-14]
S-1	[2022-05-25]
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