Condensed Unaudited Interim Consolidated … › 429708605 › files › doc_financials › ...LSC Lithium Corporation Condensed Unaudited Interim Consolidated Financial Statements

LSC Lithium Corporation

Condensed Unaudited Interim Consolidated Financial Statements

For the three months to November 30, 2016 and 2015

(Expressed in US Dollars)

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS Under National Instrument 51-102, part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the condensed interim consolidated financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor. The accompanying unaudited condensed interim consolidated financial statements of LSC Lithium Corporation (the “Company”) have been prepared by management and approved by the Audit Committee of the Company. They include appropriate accounting principles, judgment and estimates in accordance with IFRS for interim financial statements. The Company’s independent auditors have not performed a review of these condensed unaudited interim consolidated financial statements in accordance with the standards established by the Canadian institute of Chartered Accountants for a review of condensed interim financial statements by an entity’s auditors.

Table of Contents Consolidated Statements of Financial Position...................................................................... 2 Consolidated Statements of Loss and Comprehensive Loss ................................................. 3 Consolidated Statements of Changes in Shareholders’ Equity .............................................. 4 Consolidated Statements of Cash Flows ............................................................................... 5 Notes to the Consolidated Financial Statements ............................................................ 6 - 21

LSC Lithium Corporation Condensed Unaudited Interim Consolidated Statements of Financial Position (Expressed in US Dollars)

2

As at

Note

November 30, 2016

August 31, 2016

$ $ ASSETS Current assets Cash - 1,720,284

Funds held in escrow 452,469 -

Exploration advance 4 17,600 50,000 Prepaid expenses 3 20,535 45,035 Financial Assets at fair value through profit and loss 1,294,738 - 1,785,342 1,815,319 Non-current assets Exploration and evaluation 5 8,530,561 748,850 Investments 6 337,486 19,285 8,868,047 768,135

TOTAL ASSETS 10,653,389 2,583,454

Current liabilities

Bank overdraft 247,333 -

Accounts payable and accrued liabilities

7

2,149,174

370,218

2,396,507 370,218 Non current liabilities Warrants 8(b) 1,738,761 - TOTAL LIABILITIES 4,135,268 370,218 SHAREHOLDERS’ EQUITY Share capital 8 (a) 10,071,790 3,397,290 Reserve for warrants 8 (b) 107,381 - Deficit (3,661,050) (1,184,054) TOTAL EQUITY 6,518,121 2,213,236

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 10,653,389

2,583,454

Going concern (Note 2) Subsequent events (Note 14)

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

LSC Lithium Corporation Condensed Unaudited Consolidated Statements of Loss and Comprehensive Loss (Expressed in US Dollars)

3

Three

months ended

November 30, 2016

Three months ended

November 30, 2015

Note

$

$ Operating Expenses

Legal fees 1,483,974 -

Travel and accommodation 317,608 -

Directors and management remuneration 12 232,500 -

Auditors remuneration 119,791 -

Consulting fees 70,224 -

Administration expenses 49,715 - Net loss on financial assets and liabilities at fair value through the profit and loss

66,414

Foreign exchange loss 150,192 -

Operating loss (2,490,418) -

Interest revenue 3 13,422 -

Net Loss and total comprehensive loss (2,476,996) -

Basic and diluted loss per share (0.08) -

Weighted average number of common shares – basic and diluted

30,556,799

-

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

LSC Lithium Corporation Condensed Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the three months ended November 30, 2016 and 2015 (Expressed in US Dollars)

4

Share Capital

Notes Number of

Shares Amount

Reserve for

Warrants Deficit

Total shareholder

s’ equity $ $ $ $ As at August 31, 2015 and November 30,2015

1 1 - - 1

Share Capital

Note

s Number of

Shares Amount

Reserve for

Warrants Deficit

Total shareholder

s’ equity $ $ $ $ As at August 31, 2016 24,939,493 3,397,290 - (1,184,054) 2,213,236

Transaction with Lithium S Corporation

1,8(a)

(24,939,493

)

-

-

-

-

Transaction with Lithium S Corporation

1,8(a)

24,939,493

-

- - -

Issued on incorporation on September 1, 2016 1 1 - - - -

Private placement 8(a) 2,716,798 1,776,370 - - 1,776,370

Shares to be issued 8(a) 3,552,741 3,552,741 - - 3,552,741

Share issue costs 8(a) - (566,451) - - (566,451)

Warrants issued 8 (b) - (42,511) 42,511 - -

Private placement 8(a) 1,115,686 729,487 - - 729,487

Shares to be issued 8(a) 1,458,974 1,458,974 - - 1,458,974

Share issue costs 8(a) - (214,603) - - (214,603)

Warrants issued 8 (b) - (19,507) 19,507 - -

Warrants issued Dajin 8 (b) - - 45,363 - 45,363

Loss and total comprehensive loss - - - (2,476,996) (2,476,996)

As at November 30, 2016 33,783,693 10,071,790 107,381 (3,661,050) 6,518,121


LSC Lithium Corporation Condensed Unaudited Consolidated Statements of Cash Flows (Expressed in US Dollars)

5

Three months ended

November 30, 2016

Three months ended

November 30, 2015

$ $

Cash flows from operating activities

Net loss (2,476,996) - Adjustments:

Foreign exchange loss 150,192 -

Unrealized loss on Investments 66,414 -

Changes in non-cash working capital items:

Increase in accounts payables and accrued liabilities 1,778,956 - Increase in funds held escrow (452,469) - Decrease (increase) in exploration advance 32,400 - Decrease (increase) in prepaid expenses 24,500 -

Net cash used in operating activities (877,003) - Cash flows from investing activities

Acquisition of assets at fair value through profit and loss (1,281,316)

Acquisition of investments (384,615) -

Acquisition of exploration and evaluation assets (6,161,201) -

Net cash used in investing activities (7,827,132) - Cash flows from financing activities Proceeds from issue of ordinary share capital 2,505,857 - Proceeds from issue of ordinary subscription receipts 5,011,715 - Share issue costs (781,054) -

Net cash provided by financing activities 6,736,518 -

Decrease in cash (1,967,617) Cash beginning of the period 1,720,284 -

Cash end of period (247,333) -


LSC Lithium Corporation Notes to the Condensed Unaudited Consolidated Financial Statements (Expressed in US Dollars)

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1. Corporate information

LSC Lithium Corporation, formerly Oakham Capital Corp., (the “Company” or “LSC”) through its subsidiary companies, including LSC Lithium Subco Inc. (“LSC Lithium”) and Lithium S Corporation (“Lithium S”), is principally engaged in acquiring exploration interests in various lithium brine properties in Argentina. LSC’s registered office is 666 Burrard Street, Suite 1700, Vancouver, BC, V6C 2X8.

LSC Lithium acquired Lithium S on September 8, 2016 pursuant to the Share Exchange Agreement (defined below) and LSC acquired LSC Lithium on February 22, 2017 pursuant to the Amalgamation (defined below).

LSC was incorporated on October 30, 2009 as 0865144 BC Ltd. and changed its name on February 2, 2010 to Oakham Capital Corp (“Oakham”) and changed its name again on February 16, 2017 to LSC Lithium Corporation. LSC Lithium was incorporated as Direct Lithium Inc. pursuant to the provisions of the Business Corporations Act (British Columbia) on September 1, 2016, changing its name to LSC Lithium Inc. on September 7, 2016. On February 22, 2017, LSC Lithium Inc. amalgamated with 1093470 B.C. Limited to form LSC Lithium Subco Inc., and continued as one corporation pursuant to the Amalgamation (defined below).

Lithium S was incorporated in the British Virgin Islands as E-Can Petroleum Limited on December 5, 2013, changing its name to Rinstar Ventures Limited on October 15, 2015. Rinstar Ventures Limited subsequently changed its name again on April 25, 2016 to Lithium S Corporation which is the date it commenced its activities. Prior to this date, the Lithium S Corporation was inactive. On September 8, 2016, LSC Lithium entered into a Share Exchange Agreement (“SEA”) with the shareholders of Lithium S, whereby LSC Lithium acquired all of the issued and outstanding shares of Lithium S, being 24,939,493 shares, in consideration for shares of LSC Lithium on a 1 for 1 basis. Upon closing of the transaction, the former shareholders of Lithium S owned 100% of the shares of LSC Lithium. LSC Lithium and Lithium S had the same controlling parties before and after the transaction and accordingly was a related party transaction. For accounting purposes for the SEA, Lithium S is considered the acquirer and LSC the acquiree. On February 22, 2017, LSC acquired all of the issued and outstanding common shares in the capital of LSC Lithium by way of a “three-cornered amalgamation” pursuant to the provisions of the Business Corporations Act (British Columbia) (the “Amalgamation”) whereby LSC Lithium amalgamated with 1093470 B.C. Limited, a wholly-owned subsidiary of the Company. Pursuant to the Amalgamation, (i) each outstanding LSC Lithium common share was exchanged for LSC common shares on a one-for-one basis, and (ii) each outstanding LSC Lithium warrant was exchanged for LSC warrants on a one-for-one basis on the same terms and conditions as contained in the LSC Lithium warrants. Prior to the Amalgamation, the Company filed articles of amendment to effect the consolidation of its issued and outstanding common shares on the basis of 1 new share for every 6.5 outstanding shares. As the former shareholders of LSC Lithium acquired control of LSC, the Amalgamation is accounted for as though LSC Lithium is the acquirer and LSC is the acquiree. Accordingly, the results of LSC will only be reflected in the consolidated financial statements since the date of the Amalgamation. The unaudited condensed interim consolidated financial statements of LSC include the results of operations of Lithium S from the date of incorporation and LSC Lithium from September 8, 2016 (the date of the acquisition by Lithium S). They do not include the results of operations of LSC as the Amalgamation was completed subsequent to the date of the financial statements of November 30, 2016. These financial statements are a continuation of the financial statements of Lithium S and LSC Lithium.


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2. Basis of preparation and continuation of business

Statement of compliance with IFRS

The condensed interim consolidated financial statements have been prepared in compliance with International Financial Reporting Standard 34 Interim Financial Reporting (“IAS 34”) following the same accounting policies and methods of application as those disclosed in the annual audited consolidated financial statements for the year ended August 31, 2016. The condensed interim consolidated financial statements should be read in conjunction with the annual financial statements of LSC Lithium for the year ended August 31, 2016, which have been prepared in accordance with International Financial Reporting Standards ("IFRS"). The condensed unaudited consolidated financial statements of the Company for the three months ended November 30, 2016 have been prepared by management, and approved and authorized for issue by the Audit Committee of the Board of Directors on March 6, 2017.

Going concern

The consolidated financial statements have been prepared on a going concern basis, under the historical cost basis, except for certain financial instruments which are presented at fair value. The Company reported a net loss of $2,474,227 for the three months ended November 30,2016 (three months ended November 30, 2015: Nil) LSC Lithium’s ability to continue operations in the normal course of business is dependent on several factors, including its ability to secure additional funding. In addition to a financing that was closed on December 7 and December 12, 2016 for $5,500,000 (Note 15) and the entering into of an agency agreement with Cormark Securities Inc. and NewGen Asset Management Limited, as agents, to raise up to C$40 million, management is exploring all available options to secure additional funding, including equity financing and strategic partnerships. There exists an uncertainty as to LSC Lithium’s ability to raise additional funds on favourable terms.

In addition, the recoverability of the amount shown for exploration and evaluation assets is dependent upon the existence of economically recoverable reserves, the ability of LSC Lithium to obtain financing to continue to perform exploration activity or complete the development of the properties where necessary, or alternatively, upon LSC Lithium’s ability to recover its incurred costs through a disposition of its interests, all of which are uncertain. These material uncertainties may cast significant doubt as to the ability of LSC Lithium to continue operations into the foreseeable future as a going concern and, accordingly, the ultimate appropriateness of the use of accounting principles applicable to a going concern. The consolidated financial statements do not include any additional adjustments to the recoverability and classification of certain recorded asset amounts, classification of certain liabilities and changes to the statement of loss and comprehensive loss that might be necessary if LSC Lithium was unable to continue as a going concern.

Basis of consolidation

Subsidiaries are entities controlled by LSC Lithium. Control exists when LSC Lithium has power over an entity, exposure or rights to variable returns from LSC Lithium’s involvement with the entity, and the ability to use its power over the entity to affect the amount of LSC Lithium’s returns. The financial statements of subsidiaries are included in the consolidated financial statements of LSC Lithium from the date that control commences until the date that control ceases. The consolidated financial statements include the accounts of LSC Lithium and its subsidiaries (Note 11). Inter-company balances, transactions, and any unrealized income and expenses, are eliminated in preparing the consolidated financial statements.

Foreign currency

The consolidated financial statements are presented in U.S. dollars. For presentation purposes the assets and liabilities of LSC Lithium are translated to U.S. dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to U.S. dollars at the average exchange rate for the period in which the transaction arose.


8

2. Basis of preparation and continuation of business (continued)

New/Revised International Financial Reporting Standards (IAS/IFRS)

At the reporting date of these consolidated financial statements, the following standard, interpretation and amendment, which have not been applied in these condensed unaudited consolidated financial statements, were in issue but not yet effective:

Amendments to IAS 12

Amends IAS 12 Income Taxes are amended to clarify the following aspects:

• Unrealized losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument's holder expects to recover the carrying amount of the debt instrument by sale or by use;

• The carrying amount of an asset does not limit the estimation of probable future taxable profits;

• Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences; and

• An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.

This amendment is applicable to annual periods beginning on or after January 1, 2017.

Disclosure Initiative (Amendments to IAS 7)

Amends IAS 7 Statement of Cash Flows to improve information provided to users of financial statements about an entity’s financial activities by making the following changes:

The following changes in liabilities arising from financing activities are disclosed (to the extent

necessary): (i) changes from financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses; (iii) the effect of changes in foreign exchange rates; (iv) changes in fair values; and (v) other changes;

The IASB defines liabilities arising from financing activities as liabilities "for which cash flows were, or future cash flows will be, classified in the statement of cash flows as cash flows from financing activities". It also stresses that the new disclosure requirements also relate to changes in financial assets if they meet the same definition; and changes in liabilities arising from financing activities must be disclosed separately from changes in other assets and liabilities.

This amendment is applicable to annual periods beginning on or after January 1, 2017.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 was issued by the IASB in May 2014 and specifies how and when revenue should be recognized based on a five-step model, which is applied to all contracts with customers. On April 12, 2016, the IASB published final clarifications to IFRS 15 with respect to identifying performance obligations, principal versus agent considerations, and licensing. IFRS 15 becomes effective for annual periods beginning on or after January 1, 2018 with early adoption permitted.


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2. Basis of preparation and continuation of business (continued) IFRS 9 Financial Instruments ("IFRS 9")

IFRS 9 was issued by the International Accounting Standards Board ("IASB") in November 2009 and October 2010 and will replace IAS 39. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Two measurement categories continue to exist to account for financial liabilities in IFRS 9, fair value through profit or loss ("FVTPL") and amortized cost. Financial liabilities held-for-trading are measured at FVTPL, and all other financial liabilities are measured at amortized cost unless the fair value option is applied. The treatment of embedded derivatives under the new standard is consistent with IAS 39 and is applied to financial liabilities and non-derivative hosts not within the scope of the standard. The effective date of IFRS 9 is January 1, 2018.

New/Revised International Financial Reporting Standards (IAS/IFRS) (continued)

IFRS 16 Leases

IFRS 16 was issued by the IASB in January 2016 and specifies the requirements to recognize, measure, present and disclose leases. IFRS 16 is effective for annual periods beginning on or after January 1, 2019 with early adoption permitted.

The Company is assessing the impact of the new or revised IFRS standards in issue but not yet effective on its financial position and financial performance.

3. Financial Assets at fair value through profit and loss

November 30, 2016 August 31, 2016

$ $

LitheA Inc – Debenture 1,275,816 -

LitheA Inc – Debenture interest 13,422 -

LitheA Inc – Grid Loan 5,500 -

1,294,738 -

On November 14, 2016 Lithium S (on its own behalf and as agent for the other members of a syndicate of lenders) entered into a loan agreement under which a secured loan of $14,275,816 (the “BMC Loan”) was advanced to BMC Holdings Limited (“BMC Holdings”). Lithium S advanced $1,275,816 under the BMC Loan. The BMC Loan matures on March 14, 2017, is subject to the right of Lithium S to extend the maturity date to June 30, 2017, bears interest at 24% per annum, is guaranteed by BMC Global Limited (“BMC”) and LitheA Inc. (“LitheA”), a British Virgin Islands company, and is secured by, among other things, a pledge of all the shares of LitheA, and a mortgage over LitheA’s mineral tenements.

On December 22, 2016 Lithium S entered into a Grid Loan agreement (the “Grid Loan”) under which Lithium S agreed to advance a secured loan of up to $500,000 to LitheA under which LitheA acknowledged that an advance of $5,500 had been made to it on November 29,2016. The Grid Loan is repayable on demand, bears interest at 10% per annum and is secured by a second ranking fixed and floating charge over the assets of LitheA.

4. Exploration advance

On July 23, 2016 and October 10, 2016 Lithium S made advances to Enirgi Group Corporation (“Enirgi”) of $50,000 each against acquisition and exploration expenditures to be paid on behalf of LSC Lithium of which $82,400 was incurred during the quarter.


10

5. Exploration and evaluation assets

The following table summarizes LSC Lithium’s exploration and evaluation expenditures with respect to its projects in Argentina.

Balance at August 31,

2016

Additions

Balance at November

30, 2016

Mining rights: $ $ $ Diabllios Salar 510,000 - 510,000 Dajin 38,850 976,993 1,015,843 Jama 200,000 3,150,000 3,350,000 Navidad & San Jose - 77,250 77,250 LitheA Inc. - 2,390,903 2,390,903

Moncholi I & II - 88,065 88,065

Avestruz - 324,100 324,100 Haddad - 112,000 112,000 La Buscada - 202,400 202,400 Mina Leoncia - 270,000 270,000 Mina Maria Luisa II - 190,000 190,000 Total 748,850 7,781,711 8,530,561

Diabillios Salar

On June 1, 2016, Lithium S entered into a binding agreement with Alvarez Hnos. S.A.C.e I. to acquire 100% of a percentage of the mining property rights and title property rights over several ‘salars’ in the Province of Catamarca, Argentina. As consideration for the sale, transfer and assignment of rights, LSC Lithium is required to pay a total $535,000 in two phases. An advance payment of $510,000 was paid upon execution of the agreement. The remaining balance of $25,000 is to be paid after the completion of the formal transfer of rights from Alvarez Hnos. S.A.C.e I. to LSC Lithium. The advance payment was made on June 13, 2016, the rights were transferred to the company on February 20, 2017 and the remaining balance paid on February 28, 2017.

Dajin

Pursuant to a share purchase agreement dated October 25, 2016 among, inter alia, Lithium H (as purchaser) and Dajin Resources S.A., and Dajin Resources (US) Corp (both (as sellers), Lithium H acquired 51% of the issued shares in Dajin Resources S.A. for a purchase price of $800,773 (C$1,000,000). In connection with such agreement, Lithium H and Dajin entered into a shareholders’ agreement regarding Dajin SA, and Lithium Argentina entered into an operating agreement with Dajin Resources S.A. Pursuant to the share purchase agreement, Lithium H agreed to incur expenditures of C$2,000,000 on tenements and applications held by Dajin Resources S.A., prior to the earlier of October 25, 2020 or twenty four (24) months after Dajin Resources S.A. has obtained all the necessary permits allowing access and development of onsite activities in order to start exploration work in one or more of its tenements provided the aggregate surface area granted to exploration work covers at least 2,000 adjacent hectares. If such expenditures are not incurred or funded before such deadline, Lithium H's shareholding interest will be reduced. Lithium H has incurred expenditure totalling $169,705 during the quarter ended November 30, 2016 which has been included in the costs of acquisition of the Dajin Property.


11

5. Exploration and evaluation assets (continued) Jama

On October 27, 2016, pursuant to a share purchase agreement (the “Jama Agreement”) between Lithium H (as purchaser) and Miguel Jorge Mitre (“Mitre”) and Maria Laura Alonzo (as sellers), Lithium H acquired 51% of the issued shares in Cuper S.A. (“Cuper”) for a purchase price of US$3,250,000. In connection with such agreement, Lithium H and Mitre entered into a shareholders’ agreement respecting Cuper, and Lithium S Corporation S.A. entered into an operating agreement with Cuper. Pursuant to the Jama Agreement, Lithium H agreed to incur expenditures of US$9 million on Salar Jama prior to the third anniversary of the date upon which Cuper has obtained all necessary concessions and permits to permit it to conduct exploration and development activities on Salar Jama (the “Earn–in Period”). In the event that such expenditures are not incurred prior to such deadline and Lithium H does not pay to Cuper the amount of un-incurred expenditures, the shareholding interest of Lithium H will be reduced on the basis of one percent of the issued and outstanding shares of Cuper for each US$240,196 shortfall. Pursuant to the shareholders agreement, following completion of these expenditures, each of Mitre and Lithium H will be required to fund all exploration, development and other expenditures of Cuper on a proportionate basis based on their respective shareholdings from time to time. In the event that either shareholder fails to fund any expenditures, its shareholding interest in Cuper will be diluted on a straight-line basis. Lithium H has appointed Lithium S Corporation S.A. as operator of all exploration and development programs on Salar Jama during the Earn-in Period and thereafter it will remain the operator unless a shareholder holding more than a 50% shareholding interest exercises its right to become or appoint the operator. Lithium H has committed to pay $100,000 as a finder’s fee which has been included in the costs of acquisition.

Navidad & San Jose

On September 15, 2016, Lithium S received a binding offer from Cooperativa de Trabajo Minero Produccion Boratos Jujenos Ltda (the “seller”) for the acquisition of mining rights known as Navidad & San Jose in the Province of Jujuy, Argentina and made two payments of $37,500 each. In consideration for the acquisition, Lithium S has also paid a further $300,000 on December 9, 2016 upon the re-opening of the Administrative Court in Mines in the Province of Jujuy, a payment of $330,000 on June 20, 2017 and a final payment of $470,000 on December 18, 2017. In the event the Lithium S defaults on a payment and fails to correct such a default within forty five business days of being served notice of default, the seller has the right to terminate the contract and the mining rights will revert to the seller. The seller will retain any amounts previously paid under the contract as the only compensation for the termination of the agreement but retains no further right to make any further claims against Lithium S. LSC Lithium has committed to pay a finder’s fee of 3% of the purchase consideration which is included in the costs of acquisition.

LitheA Inc.

Pursuant to an agreement dated November 14, 2016 (the “LitheA Put/Call Agreement”), as amended, LSC Lithium granted the syndicate of lenders (excluding Lithium S) the right to exchange, following the delivery of the notice of exercise under the LitheA Option (as defined below), the principal amount of US$13 million owing to them under the BMC Loan (see note 3) for common shares of LSC Lithium (valued at $0.965 each), exercisable until approximately March 1, 2017 (subject to extension until no later than approximately June 9, 2017). Any interest accrued on the principal amount of the loan being exchanged shall be paid by LSC Lithium in cash. If, and to the extent that such exchange rights are exercised, LSC Lithium may assign the portion of the BMC Loan held by it to BMC in satisfaction of an equivalent portion of the amount payable by LSC Lithium upon the exercise of the LitheA Option (as defined below). As consideration for the grant of such rights, LSC Lithium issued to such lenders an aggregate of 6,735,749 common share purchase warrants of LSC Lithium, exercisable at C$1.50 per common share of LSC Lithium until November 14, 2017.


12

5. Exploration and evaluation assets (continued) LitheA Inc.(continued)

The value of the warrants issued as consideration for the grant of such rights of $1,221,832 (C$1,659,268) was estimated using the Black-Scholes option pricing model and the following variables: stock price of C$1.30, expected life of 1 year, NIL dividends, 60% volatility and risk free interest rate of 1.60%. The consideration for the grant of such rights has been included in the cost of acquisition of exploration properties.

Pursuant to an option agreement dated November 23, 2016 between, among others, BMC and LSC Lithium (the “LitheA Option Agreement”), as amended, LSC Lithium has been granted an option (the “LitheA Option”) to purchase from BMC all of the issued shares of LitheA. The LitheA Option expires on June 30, 2017. Upon execution of the LitheA Option Agreement, LSC Lithium issued to BMC 2,849,740 common share purchase warrants of LSC Lithium, exercisable at C$1.50 per common shares from the settlement date under the LitheA Option until November 23, 2017. The value of warrants issued as the consideration for the grant of LitheA Option of $516,929 (C$701,998) was estimated using the Black-Scholes option pricing model and the following variables: stock price of C$1.30, expected life of 1 year, NIL dividends, 60% volatility and risk free interest rate of 1.60%. The consideration payable by LSC Lithium upon the exercise of the LitheA Option will be approximately $44 million, of which $38.5 million will be payable to BMC (in exchange for all of the outstanding shares of LitheA) and $5.5 million (plus interest) will be payable to a beneficial shareholder of BMC (in exchange for a US$ 5.5 million promissory note issued by LitheA to such shareholder). The $38.5 million payment will be satisfied, as to $14,275,816 plus interest at the rate of 24% per annum from November 14, 2016 by a cash payment and/or the assignment of all or part of the BMC Loan and as to the balance by the issuance of common shares of LSC Lithium (valued at $0.964 each). The payment of the $5.5 million (plus interest at the rate of 12% per annum from November 14, 2016) will be satisfied as to cash in the amount of any accrued and unpaid interest, and the balance either in cash and/or through the issuance of common shares of LSC Lithium (valued at $0.964 each) at the option of the lender.

Moncholi I & II

On September 15, 2016, Lithium S received a binding offer from Mario Angel Blas Moncholi (“Moncholi”) for the acquisition of mining rights known as Maria Clara, Blas, Yoc, Yoc I and Yoc II in the Province of Jujuy, Argentina and made an initial payment of $30,000. In consideration for the acquisition, Lithium S has committed to make four further payments of $425,000 on December 10, 2016, April 10, 2017, August 10, 2017 and December 10, 2017. In the event Lithium S defaults on a payment and fails to correct such a default within thirty Business Days of the dates of being served notice of default, Moncholi has the right to terminate the contract and the mining rights will revert to Moncholi. Moncholi will retain any amounts previously paid under the contract as the only compensation for the termination of the agreement but retains no further right to make any further claims against Lithium S. This agreement was subsequently amended (see Subsequent Events).

On September 16, 2016, Lithium S received a binding offer from Moncholi for the acquisition of further mining rights known as Tadeo and Tadeo 1 in the Province of Jujuy, Argentina and made an initial payment of $55,500. In consideration for the acquisition, Lithium S has committed to make four further payments of $400,000 on December 10, 2016, April 10, 2017, August 10, 2017 and December 10, 2017 and two payments of $220,000 on April 10, 2018 and July 10, 2018. In the event Lithium S defaults on a payment and fails to correct such a default within thirty Business Days of being served notice of default, Moncholi has the right to terminate the contract and the mining rights revert to Moncholi. Moncholi will retain any amounts previously paid under the contract as the only compensation for the termination of the agreement but retains no right to make any further claims against Lithium S. This agreement was subsequently terminated (see Subsequent Events).

Lithium S has committed to pay a finder’s fee of 3% of the purchase consideration which is included in the costs of acquisition.


13

5. Exploration and evaluation assets (continued) Avestruz

On September 21, 2016, Lithium S received a binding offer from Raymundo Sosa Quintana (“Sosa”) for the acquisition of the mining rights known as Avestruz located in the Province of Salta, Argentina and made a payment of $324,100 in the quarter. In consideration for the acquisition, Lithium S made an additional instalment payment of $324,100 on December 5, 2016 and committed to make two further payments of $324,100 on April 28, 2017 and September 15, 2017. Lithium S has the right to terminate the contract upon giving fifteen days’ notice. In the event of termination in accordance with the foregoing, Sosa will retain any amounts previously paid under the contract as the only compensation for the termination of the agreement but retains no right to make any further claims against Lithium S. Sosa retains a 1.5% Net Smelter Return on the mining properties, to be calculated in the terms and conditions detailed thereto. In the event the concession is terminated, Lithium S shall pay to Sosa a US$ 3,000,000 penalty for the loss of the royalty, plus any portion of the purchase price that may be outstanding under the agreement. Lithium S has agreed to pay the ITI (transfer tax on real estate) applicable to Sosa (deductible from the last installment).

Haddad

On October 11, 2016, Lithium S received a binding offer from Minera Santa Rita Srl for the acquisition of mining rights known as San Cayetano I in the Province of Salta, Argentina. In consideration for the acquisition, Lithium S has made payments $112,000. In consideration for the acquisition, Lithium S committed to make a further payment of $84,000 within 180 days of signing the contract and $84,000 within 360 days of signing the contract. In the event of termination, Minera Santa Rita Srl will retain any amounts previously paid under the contract as compensation for the termination of the agreement but retains no right to make any further claims against Lithium S.

La Buscada

On October 24, 2016 Lithium S received an offer of acceptance from Frederico Gaston Stucky and Erika Ebelen Stucky to acquire a 100% interest in the tenement Mina La Buscada, on salar Pastos Grandes, Province of Salta. According to the terms of the agreement, Lithium S agreed and paid an aggregate of $202,400 for the assignment and transfer of the tenement in several installments, the last of which was paid on January 10, 2017.

Mina Leoncia On November 7, 2016 Lithium S entered into an agreement with Martin Viveros for the acquisition of mining rights known as Mina Leoncia in the Province of Salta, Argentina. In consideration for the acquisition, Lithium S paid $216,000 for the assignment and transfer. A finders’ fee of $54,000 was also paid to Erika Stucky and a 2.5% net smelter royalty was granted to Martin Viveros. Mina Maria Luisa II

On October 25, 2016 Lithium S received an offer of acceptance from Erika Ebelen Stucky as assignee of Miguel Ignacio Ponce, Luis Orlando Ponce, Carlos Alberto Ponce and Luis Orlando Ponce to acquire a 100% interest in the tenement Mina Maria Luisa II on salar Pastos Grandes, Province of Salta. According to the terms of the agreement, Lithium S agreed to pay an aggregate of $190,000 for the assignment and transfer, of which $80,000 has been paid and the balance is payable in instalments, the last of which is due on May 10, 2017.


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6. Investments

On June 9, 2016, Lithium S purchased 333,333 shares representing 0.006% of the issued capital of 0995237 B.C. Ltd, a British Columbia private company which owns the Kenville Mine in British Columbia at a total cost of $19,285. The company is currently updating feasibility and engineering studies with a view to restart the Kenville mine at the earliest possible date.

On September 23, 2016, LSC Lithium subscribed for 2,777,777 units in Dajin Resources Corp (“Dajin Corp”) at a total cost of $384,615 (C$500,000). Each unit comprises one share of Dajin Corp and one half warrant. The warrant has a term of 2 years, is non transferable, entitling LSC Lithium to purchase one additional share in the capital of Dajin Corp at an exercise price of C$0.25 per share. The units had a fair value of $318,200 at November 30,2016 and an unrealized loss on financial assets designated at fair value of $66,414 was reflected in statement of loss and comprehensive loss.

7. Accounts payable and accrued liabilities

November 30, 2016 August 31, 2016

$ $

Auditor’s remuneration 97,802 74,900

Legal fees 1,499,231 187,841

Directors and management fees and expenses 29,598 107,477

Mining tenement acquisition 484,749 -

Consulting fees 37,794 -

2,149,174 370,218

8. Share capital and warrants (a) Share capital

LSC Lithium is authorized to issue an unlimited number of common shares without par value.

On September 1, 2016 (date of incorporation), LSC Lithium Inc. issued 1 common share having an ascribed value of C$0.01.

On September 8, 2016, LSC Lithium issued 24,939,493 common shares having an ascribed value of $3,397,290, as consideration for the acquisition of 100% of the share capital of Lithium S (see note 1).

On the same date, shareholders holding 20,000,000 shares entered into a voluntary pooling agreement replacing the one they had entered into as shareholders of Lithium S under which they agreed to subject their shares in LSC Lithium to certain resale and transfer restrictions for a period of up to five years. Also on the same date, shareholders holding 4,939,493 shares entered into a lock-up agreement pursuant to which they deposited the shares with an escrow agent to be held in escrow until they are released in connection with a “going public transaction”, with one third being immediately released upon listing, one third released three months after the listing date and one third released 6 months after the listing date.


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8. Share capital and warrants (continued) (a) Share capital (continued)

On September 30, 2016, LSC Lithium issued 2,716,798 common shares, valued at C$0.85 per share for gross proceeds of $1,776,370 (C$2,309,278) and 3,552,744 subscription receipts at C$1.30 per subscription receipt for gross proceeds of $3,552,741 (C$4,618,567). Each subscriber for common shares was required to purchase subscription receipts for an aggregate subscription price equal to at least two times the subscription commitment for common shares. Each subscription receipt is exercisable for one common share at no additional consideration. Pursuant to the terms of the subscription agreement for common shares, each of the investors was also required to waive all release conditions provided for in the subscription receipt indenture, and as such, the proceeds of the subscription receipt financing were not held in escrow by the escrow agent. Also on the same date, each of the investors entered into an escrow agreement under which they deposited their common shares with an escrow agent to be held in escrow until they are released in connection with a “going public transaction”, with one third being immediately released upon listing, one third released three months after the listing date and one third released 6 months after the listing date.

Share issue costs incurred are recorded against share capital and comprise broker commissions, on both share capital and subscription receipts issued, of $316,977 and professional fees of $249,474.

On October 11, 2016, LSC Lithium completed of a private placement of 1,115,686 common shares, at a price of C$0.85 per share for aggregate gross proceeds of $729,487 (C$948,333) and 1,458,974 subscription receipts at a price of C$1.30 per subscription receipt for aggregate gross proceeds of $1,458,974 (C$1,896,666). Each subscriber for common shares was required to purchase subscription receipts for an aggregate subscription price equal to at least twice the subscription commitment for common shares. Each subscription receipt is automatically convertible upon the satisfaction of certain conditions, including the approval of the Acquisition by the TSX-V, for one common share. However, pursuant to the terms of the subscription agreement for common shares, each of the investors was also required to waive all release conditions provided for in the subscription receipt indenture and, as such, the proceeds of the subscription receipt financing were not held in escrow by the escrow agent but are held to LSC Lithium’s order. Share issue costs incurred are recorded against share capital and comprise broker commissions, on both share capital and subscription receipts issued, of $131,678 (C$170,700) and professional fees of $82,925.

The holders of common shares are entitled to receive notice of and to attend all meetings of the shareholders of LSC Lithium and shall have one vote for each common share held at all meetings of shareholders of LSC Lithium.

The holders of the common shares are entitled to (a) receive any dividend as and when declared by the Board of Directors, out of the assets of LSC Lithium properly applicable to payment of dividends, in such amount and in such form as the Board of Directors may from time to time determine, and (b) receive the remaining property of LSC Lithium in the event of any liquidation, dissolution or winding up of LSC Lithium.

(b) Warrants

On September 30, 2016, LSC Lithium issued 175,692 broker warrants entitling the holders to acquire one common share of LSC Lithium for each broker warrant issued, at an exercise price of C$1.30, until September 30, 2017. The value of the broker warrants of $42,511 was estimated using the Black-Scholes option pricing model and the following variables: stock price of C$1.30, expected life of 1 year, NIL dividends, 60% volatility and risk free interest rate of 1.60%.

On October 11, 2016, LSC Lithium issued 81,384 broker warrants entitling the holders to acquire one common share of LSC Lithium for each broker warrant issued, at an exercise price of C$1.30, until October 11, 2017. The value of the broker warrants of $19,507 (C$25,600) was estimated using the Black-Scholes option pricing model and the following variables: stock price of C$1.30, expected life of 1 year, NIL dividends, 60% volatility and risk free interest rate of 1.60%.

Pursuant to the share purchase agreement dated October 25, 2016 among, inter alia, Lithium H (as purchaser) and Dajin Resources S.A., and Dajin Resources (US) Corp (both (as sellers), LSC Lithium issued 384,615 share purchase warrants to Dajin at an exercise price of C$1.30 each and expiring


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8. Share capital and warrants (continued)

(b) Warrants (continued) approximately 15 days prior to the completion of the qualifying transaction of Oakham Capital Corp. The value of the warrants of $45,363 (C$60,302) was estimated using the Black-Scholes option pricing model and the following variables: stock price of C$1.30, expected life of 3 months, NIL dividends, 60% volatility and risk free interest rate of 1.60%. The consideration of the warrants has been included in the costs of acquisition of the Dajin Property. As consideration for granting rights under the LitheA Put/Call Agreement (see note 5), LSC Lithium issued to such lenders an aggregate of 6,735,749 common share purchase warrants of LSC Lithium, exercisable at C$1.50 per common share of LSC Lithium until November 14, 2017. The value of the warrants issued as consideration for the grant of such rights of $1,221,832 (C$1,659,268) was estimated using the Black-Scholes option pricing model and the following variables: stock price of C$1.30, expected life of 1 year, NIL dividends, 60% volatility and risk free interest rate of 1.60%. The consideration for the grant of such rights has been included in the cost of acquisition of exploration properties. A financial liability is recorded as the exercise price of the warrants is in a currency that is different from the functional currency of LSC Lithium.

Under the terms of the LitheA Option Agreement (see note 5), LSC Lithium issued to BMC 2,849,740 common share purchase warrants of LSC Lithium, exercisable at C$1.50 per common shares until November 23, 2017. The value of warrants issued as the consideration for the grant of LitheA Option of $516,929 (C$701,998) was estimated using the Black-Scholes option pricing model and the following variables: stock price of C$1.30, expected life of 1 year, NIL dividends, 60% volatility and risk free interest rate of 1.60%. A financial liability is recorded as the exercise price of the warrants is in a currency that is different from the functional currency of LSC Lithium.

9. Financial instruments

LSC Lithium uses financial instruments comprising cash, and debtors/creditors that arise from its operations. LSC Lithium holds cash as a liquid resource to fund its obligations. LSC Lithium’s cash balances are held in US Dollars.

LSC Lithium carefully considers on an ongoing basis the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk.

To date, LSC Lithium has relied upon equity funding to finance operations. The Board of Directors is confident that adequate cash resources can be raised to finance operations to commercial exploitation and controls exist over expenditures to carefully manage LSC Lithium’s cash.

The fair value of financial assets and liabilities approximates the carrying values disclosed in the consolidated financial statements. The financial assets comprise US Dollar cash balances in current and interest earning bank accounts at call, and proceeds from private placement held in trust, subscription receipts, and funds held in trust for acquisition of exploration assets. The financial assets earn a range of interest rates throughout the period depending on rates available and ongoing cash commitments at any one point in time.


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10. Financial risk management objectives and policies

(a) Fair value of financial assets and liabilities

The consolidated statement of financial position carrying amounts for cash, exploration advance, and other payable approximate fair value due to their short-term nature.

Fair value hierarchy

The following provides a description of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The following table provides information about financial assets and liabilities measured at fair value in the consolidated statement of financial position and categorized by level according to the significance of the inputs used in making the measurements:

Level 1 Level 2 Level 3 $ $ $

Financial assets at fair value through the profit and loss Bank overdraft Funds held in escrow Investments

- - - -

1,294,736

(247,333)

452,469

337,486

- - - -

(b) Risk management policies

LSC Lithium is sensitive to changes in commodity prices and foreign exchange. LSC Lithium’s Board of Directors has overall responsibility for the establishment and oversight of LSC Lithium’s risk management framework. Although LSC Lithium has the ability to address its price-related exposures through the use of options, futures and forward contracts, it currently does not typically enter into such arrangements.

(c) Foreign currency risk

Foreign currency risk is the risk that a variation in exchange rates between the United States dollar and Canadian dollar or other foreign currencies will affect LSC Lithium’s operations and financial results. A portion of LSC Lithium’s transactions are denominated in Canadian dollars, Argentine Pesos, and British pounds. LSC Lithium is also exposed to the impact of currency fluctuations on its monetary assets and liabilities. Significant foreign exchange gains or losses are reflected as a separate component of the consolidated statement of loss and comprehensive loss. LSC Lithium does not use derivative instruments to reduce its exposure to foreign currency risk.

At the statement of financial position date LSC Lithium held no assets in foreign currencies and therefore a 10% adverse movement of the US Dollars against foreign currencies as identified would have had no impact on LSC Lithium’s net loss. A 10% weakening of the US Dollar against the same foreign currencies would also have had no impact.


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10. Financial risk management objectives and policies (continued)

(d) Credit risk

The carrying amount of financial assets represents the maximum credit exposure. Credit risk is the risk that a third party might fail to fulfill its performance obligations under the terms of a financial instrument. Financial instruments, which are potentially subject to credit risk for LSC Lithium, consist primarily of cash and prepayment. Cash is maintained with a financial institution of reputable credit and may be redeemed upon demand. Cash is held in Bermuda.

(e) Liquidity risk

Liquidity risk is the risk that LSC Lithium will not be able to meet its financial obligations as they become due. LSC Lithium attempts to ensure that there is sufficient cash to meet its liabilities when they are due and manages this risk by regularly evaluating its liquid financial resources to fund current and long-term obligations and to meet its capital commitments in a cost-effective manner. Temporary surplus funds of LSC Lithium are invested in cash accounts.

(f) Mineral property risk

The Group has entered several definitive agreements regarding the acquisition of interests in material mining projects. The Group is conducting due diligence on prospective properties to the extent practical, prior to acquiring an interest therein, following which the Group may decide not complete the acquisition. Even if the Group conducts such due diligence and invests in such prospective properties, there is no guarantee that they will not have title, environmental or other issues which could materially and adversely impact the Group’s business and operations.

(g) Foreign operations risk

At present, LSC Lithium is focused on acquiring and exploring lithium interests in Argentina, in relation to which it may or may not be the operator. LSC Lithium’s operations will be exposed to various levels of political, economic and other risks and uncertainties associated with operating in foreign jurisdictions. These risks and uncertainties include, but are not limited to, currency exchange rates currency controls, high rates of inflation, labour unrest, war, terrorism, crime, extreme weather conditions, famine, drought, illegal mining, corruption and uncertainty of the rule of law, renegotiation or nullification of existing concessions, licenses, permits and contracts, changes in taxation policies, restrictions on foreign exchange, changing political conditions, and governmental regulations that may require the awarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction.

Changes, if any, in mining or investment policies or shifts in political attitudes in Argentina or any other jurisdiction in which LSC Lithium invests may adversely affect the operations or profitability of LSC Lithium. Operations may be affected in varying degrees by government regulations including with respect to, but not limited to, restrictions on production, price controls, import or export controls, currency remittance, income taxes, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. Failure to comply strictly with applicable laws, regulations and local practices relating to mineral right applications and tenure, could result in loss, reduction or expropriation of entitlements. The occurrence of these various factors and uncertainties cannot be accurately predicted and could have an adverse effect on the operations and profitability of LSC Lithium.

Further it is the case that the legal system in Argentina or such other foreign jurisdiction may not be as developed or may be complex and time-consuming, which leads to a higher level of uncertainty in the application and determination of legal issues, which can lead to regulatory delays, ill-motivated use of courts or regulatory bodies and inconsistency in interpretation and enforcement of applicable laws. Such risks are part of overall risks of doing business in a foreign jurisdiction and should be taken into account by any potential investor.


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10. Financial risk management objectives and policies (continued)

(h) Commercially viable economic deposits

LSC Lithium is an exploration-stage company and cannot give assurance that a commercially viable deposit, or “reserve,” exists in relation to any of its properties or any property in which it may acquire an interest. Therefore, determination of the existence of a commercially viable reserve depends on appropriate and sufficient exploration and development work and the evaluation of legal, economic, and environmental factors. If LSC Lithium fails to find a commercially viable deposit in relation to any of its proposed investments, its financial condition and results of operations will be materially adversely affected.

11. Subsidiaries

The consolidated financial statements of the Group include:

Principal activities

Country of incorporation

% of equity interest

November 30, 2016

August 31, 2016

Lithium S Corporation (“Lithium S”)

Lithium exploration

British Virgin Islands

100 100

Lithium S Holdings Corporation, (“Lithium H’)

Investment holding

British Virgin Islands

100 100

Lithium S Corporation S.A.

Operations Argentina 100 -

12. Related party transactions

Until April 26, 2016, all expenses incurred by LSC Lithium were borne by Regent Mercantile Holdings Limited, a company wholly-owned by the trustee of a trust, under which Stephen Dattels is a discretionary beneficiary and both Stephen Dattels and Ian Burns, directors and officers of LSC Lithium Inc., are directors of Regent Mercantile Holdings Limited. Prior to April 26, 2016, Regent Mercantile Holdings Limited was the sole shareholder of LSC Lithium.

Regent Mercantile Holdings Limited is a member of the syndicate of lenders which entered into a loan agreement under which a secured loan was advanced to BMC Holdings Limited (see Note 3). Pursuant to the LitheA Put/Call Agreement (see Note 5) LSC Lithium granted Regent Mercantile Holdings Limited the right to exchange, following the delivery of the notice of exercise under the LitheA Option (see note 3), the principal amount of US$1.75 million owing to Regent Mercantile Holdings Limited under the BMC Loan (see note 3) for common shares of LSC Lithium (valued at $0.965 each), exercisable until approximately March 1, 2017 (subject to extension until no later than approximately June 9, 2017).

LSC Lithium incurred costs of $267,900 (three months ended November 30, 2015: $nil) with Regent Aviation Inc. for air travel to and within Argentina. Regent Aviation Inc. is a company wholly owned by the trustee of a trust, under which Stephen Dattels, a director and officer of LSC Lithium, is a discretionary beneficiary and Ian Burns, a director and officer of LSC Lithium, is a director.

The related party transactions incurred during the accounting periods were in the normal course of operations and were measured at the exchange value, which represented the amount of consideration established and agreed by the related parties.

Three months ended November 30, 2016

Three months ended November 30, 2015

$ $

Salaries and benefits 232,500 -


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13. Segment

For management purposes, LSC Lithium is organized into one operating and reporting segment which is exploration for lithium brines in Argentina.

14. Subsequent events

On December 7 and December 12, 2016, LSC Lithium completed a Unit Private Placement of 5,623,327 Units at a price of C$1.30 each for gross proceeds of ($5,500,000) C$7,310,325, each Unit consisting of one common share of LSC Lithium and one common share purchase warrant of LSC Lithium. Each common share purchase warrant of LSC Lithium is exercisable for one common share of LSC Lithium at an exercise price of C$1.50 per share for a period ending 18 months from the closing date. On December 12, 2016 Lithium S Corporation S.A. (“Lithium Argentina”) and ADY Resources Limited (“ADY”, a wholly-owned subsidiary of Enirgi) entered into a purchase agreement (the “ADY Tenement Purchase Agreement”) pursuant to which on December 22, 2016 ADY sold, and Lithium Argentina purchased, ADY’s 100% undivided interest in certain mineral rights in the Provinces of Jujuy and Salta, Argentina including interests in Salar Jama, Salar Pastos Grandes, Salar Rio Grande and Salar Salinas Grande (the “ADY Tenements”) in consideration for 4,504,130 common shares of LSC Lithium with a fair value of C$1.30 per common share for total consideration of $4,361,079 (C$5,855,369). On December 12, 2016 Lithium Argentina and ADY entered into a tenement purchase agreement (the “Olaroz Tenement Purchase Agreement”) pursuant to which Lithium Argentina agreed to purchase ADY’s interest in certain mineral rights located in the Province of Jujuy in consideration for 80,714 common shares of LSC Lithium with a fair value of C$1.30 per common share for total consideration of $78,150 (C$104,928). On December 12, 2016, LSC Lithium, Lithium Argentina, ADY and Enirgi entered into a memorandum of understanding (the “Processing MOU”) respecting their future lithium processing and marketing arrangements which will be formalized at a later date pursuant to definitive documentation. On December 12, 2016 LSC Lithium, Lithium S Corporation S.A., Enirgi and ADY entered into a side letter agreement (“Side Letter Agreement”). Under the terms of the Side Letter Agreement, subject to approval of the Exchange, Enirgi will have the one-time right (the “Top Up Right”), to be exercised at the time LSC exercises its proportionate shareholding interest option to purchase all the issued shares of LitheA, to subscribe for such number of common shares of LSC at the lowest price per common share permitted by the TSX Venture Exchange at the time of exercise such that, after such subscription, its pro rata interest in LSC shall not exceed 20%. On December 12, 2016 Lithium Argentina and ADY Resources Limited, Sucursal Argentina (“ADY Argentina”) entered into a mining management support agreement (“Mining Management Support Agreement”) on December 12, 2016. Under the terms of the Mining Management Support Agreement, ADY Argentina may provide management support services to Lithium Argentina in Argentina relating to the management of day to day operations of Lithium Argentina, as may be mutually agreed upon by Lithium Argentina and ADY Argentina from time to time and to the extent that ADY Argentina can reasonably provide the services. On December 21, 2016, the agreement with Moncholi for the acquisition of mining rights known as Maria Clara, Blas, Yoc, Yoc I and Yoc II in the Province of Jujuy, Argentina was amended to exclude the properties located at Laguna de Guaytayoc (Yoc, Yoc I and Yoc II) and to adjust the price for the properties located in Salinas Grandes (María Clara and Blas). The purchase price was adjusted to $335,500, with $85,500 duly paid and the balance of $250,000 paid on January 6th 2017. On December 21, 2016, the agreement with Moncholi for the acquisition of the mining rights known as Tadeo and Tadeo 1 in the Province of Jujuy, Argentina was terminated and a rescission agreement was signed. The payment made by virtue of the payment of the first installment for the purchase agreement for the mines Tadeo and Tadeo I, in the amount of US$55,500 was applied to the sale of the properties known as Blas and María Clara described above.


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14. Subsequent events (continued) On December 22, 2016 LSC Lithium entered into a relationship agreement (“Relationship Agreement”) with Enirgi. Under the Relationship Agreement, Enirgi will be entitled to nominate that number of individuals equal to fifty percent (50%) of the total number of directors of LSC Lithium for appointment or election as a director of LSC. Enirgi shall also be entitled to nominate the CEO of LSC Lithium for ultimate review and approval by the board of directors of LSC Lithium. The Relationship Agreement provides for strategic cooperation between Enirgi and LSC Lithium. On December 22, 2016, each of Angstrom Capital Ltd., Iso Capital Ltd., Modulus Capital Ltd., Regent Mercantile Holdings Limited, Juan Carlos Grosso, Analogue Capital Ltd., David Dattels, Graham Dattels, Smoke Rise Holdings Limited, Tudorcroft Investments Inc., Enirgi and LSC Lithium entered into a voting and support agreement on December 22, 2016. On December 22, 2016, LSC Lithium and ADY entered into a mining data purchase agreement concurrently with the transfer of the ADY Tenements pursuant to the ADY Tenement Purchase Agreement. Under the terms of the mining data purchase agreement, ADY transferred to LSC Lithium its records, files, reports, data and documents directly relating to the mining data and all work done thereon (which may include maps, drill logs and other drilling data, core tests, pulps, reports, surveys, assays, analyses, production reports, operations, technical, and other material information developed by or on behalf of ADY or, where it is available, a previous holder of the ADY Tenements). LSC Lithium issued to ADY 10,822,181 common shares of LSC Lithium as consideration for the mining data with a fair value of C$1.30 per common share for total consideration of $10,478,469 (C$14,068,835). On December 22, 2016, LSC Lithium and Enirgi entered into a management support agreement (the “Head Office Management Support Agreement”). Pursuant to the terms of the Head Office Management Support Agreement, Enirgi and LSC Lithium agreed to share the premises located at 3001-1 Adelaide Street East, Toronto, Ontario, Canada M5C 2V9 as well as certain employee resources on a cost plus ten percent (10%) basis. Under the Head Office Management Support Agreement, Enirgi will provide management support services to LSC Lithium, as may be mutually agreed upon by LSC Lithium and Enirgi from time to time and to the extent that Enirgi can reasonably provide such services. On February 13, 2017, LSC Lithium issued 384,615 common shares, following Dajin exercising 384,615 share purchase warrants at an exercise price of C$1.30 each for total consideration of C$499,999.50. On February 22, 2017, LSC announced the closing of a qualifying transaction involving the acquisition of all the issued and outstanding common shares of LSC Lithium by way of the Amalgamation. Prior to the closing of the Amalgamation, LSC Lithium completed its financing of 30,769,231 subscription receipts (the “Subscription Receipts”) at a price of C$1.30 each for aggregate gross proceeds of C$40,000,000. The financing was completed in two tranches. At the closing of the Amalgamation, the holders of the Subscription Receipts received 30,769,231 common shares of LSC. In connection with the private placement, agents’ commissions and finder’s fees totaling C$2,343,286 and warrants to purchase 1,802,526 LSC common shares exercisable at a price of C$1.30 per share for a period of 12 months following the applicable closing were issued. Pursuant to the Amalgamation, (i) each outstanding LSC Lithium common share was exchanged for LSC common shares on a one-for-one basis, and (ii) each outstanding LSC Lithium warrant was exchanged for LSC warrants on a one-for-one basis on the same terms and conditions as contained in the LSC Lithium warrants. In addition, the Relationship Agreement, Head Office Management Services Agreement, Side Letter Agreement and Voting and Support Agreement were assigned from LSC Lithium to LSC.

Documents

Condensed Unaudited Interim Consolidated … › 429708605 › files › doc_financials › ...LSC Lithium Corporation Condensed Unaudited Interim Consolidated Financial Statements