IC CAPITALIGHT CORP.
Management's Discussion and Analysis (MD&A)
For the nine and three months ended September 30, 2022 and 2021
Expressed in Canadian Dollars
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this document constitute forward-looking information within the meaning of applicable Canadian securities legislation. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "plans," "expects," or "does not expect," "is expected," "budget," "scheduled," "goal," "estimates," "forecasts," "intends," "anticipates," or "does not anticipate," or "believes" or variations of such words and phrases or statements that certain actions, events or results "may," "could," "would," "might," or "will be taken," "occur," or "be achieved".
Forward-looking information includes, but is not limited to, information with respect to certain expectations regarding the fair value of the Company's investments and management's expectations regarding our future growth, results of operations, performance and business prospects and opportunities including statements related to the development of existing and future property interests, availability of financing and projected costs and expenses. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future. Such statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits we will obtain from them. These forward-looking statements reflect management's current views and are based on certain assumptions and speak only as of the date of this report. These are based on current expectations, estimates and assumptions that involve known and unknown risks, uncertainties and other factors that could cause actual results to vary and, in some instances, to differ materially from those anticipated by the Company and described in the forward-looking statements. These risks include, but are not limited to, access to sufficient capital, legal and accounting risks, potential loss of key personnel, sales and marketing issues, operating cost overruns, technology issues, title disputes and compliance with various regulators. A number of risks and uncertainties could cause our actual results to differ materially from those expressed or implied by the forward-looking statements, including: (1) a downturn in general economic conditions, (2) a decreased demand or price of our research products (3) a decreased value of our investments, (4) inability to locate, acquire or divest of mineral property interests, (5) the uncertainty of our operating costs, (6) potential negative financial impact from regulatory investigations, claims, lawsuits and other legal proceedings and challenges, and (7) other factors beyond our control. There is a significant risk that such forward-looking statements will not prove to be accurate.
Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have been used. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward- looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. The forward-looking information contained herein is presented for the purposes of assisting investors in understanding the Company's expected financial and operating performance and the Company's plans and objectives and may not be appropriate for other purposes.
The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.
Additional information about these and other assumptions, risks and uncertainties are set out in the section entitled "Risk Factors" below.
INTRODUCTION
This Management's Discussion and Analysis ("MD&A") dated November 29, 2022 of IC Capitalight Corp. ("Capitalight", "we", "our" or "the Company") should be read in conjunction with Company's Consolidated Financial Statements ("Financial Statements") for the six and three months ended June 30, 2022 and 2021 that were prepared in accordance with International Financial Reporting Standards ("IFRS") International Accounting Standard as issued by the International Accounting Standards Board ("IASB").
All amounts are in Canadian dollars, unless otherwise indicated.
EXECUTIVE SUMMARY
Capitalight is incorporated under the British Columbia Business Corporations Act and its common shares are listed on the Canadian Securities Exchange (the "Exchange") under the symbol "IC". The Company has a fiscal year-end of December 31, and its registered office is at 2200 HSBC Building, 885 West Georgia Street, Vancouver, BC, V6C 3E8.
Capitalight is a merchant bank that pursues value-based investment opportunities in accordance with its investment policies. Business investments consist of Capitalight Research Inc. ("Capitalight Research"), a wholly owned subsidiary that publishes proprietary subscription-based research focused on (1) equity technical analysis, (2) gold, silver, and critical metals sectors, and (3) bonds, and economics. Capitalight Research generates recurring revenues and is expected to generate positive operating cash flows. Mineral exploration investments consist of the exploration and evaluation stage Blue Lake Cu-Ni-Pt-Pd property near Schefferville, Quebec. Investments held for trading consist of the equities of a gold exploration company.
Business Strategy
The business strategy consists of the following:
- Realize value from its investment in Capitalight Research.
- Realize value from its investment in mineral properties.
- Capitalize on other investment opportunities as they arise.
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The Company accepts the risks that are inherent to pursuing investment returns. These risks are discussed in greater detail in the Risk Factors section of this MD&A.
HIGHLIGHTS AND MILESTONES
The following section contains "forward-looking statements" and "forward-looking information" within the meaning of applicable securities laws. The Company continues to monitor the implications of the Covid-19 Pandemic. The manner and extent that the pandemic, and measures taken as a result of the pandemic by governments and others, will affect the Company in ways that cannot be predicted with certainty. See the Cautionary Statement Regarding Forward-LookingInformation and Uncertainty due to the Covid-19Pandemic in this MD&A for a discussion of assumptions and risks relating to such statements and information and a discussion of certain risks facing the Company relating to the pandemic.
Highlights
On February 16, 2022, the Company's wholly owned subsidiary, Capitalight Research Inc., completed the acquisition of all the business assets of Phases & Cycles Inc. ("P&C"), a private corporation that publishes subscription-based market research, in return for a cash consideration of $270,000 (the "Transaction"). The primary reason for the acquisition was an expansion of Capitalight Research's subscription-based research business.
On July 19, 2022, the Company disposed of Stone debentures for gross proceeds of $3,519,952 that included a payment of $183,625 used for the reimbursement of legal expenses and realized a gain of $1,403,517 on the investment.
Milestones
During the next 12 months, the Company will focus on the following:
- Grow the Capitalight Research subscriber-base to achieve profitability in 2022.
- Initiate an exploration program at the Blue Lake property.
- Realize value from the investment in held-for-trading equities.
RESULTS OF OPERATIONS
The Company has three operating segments, consisting of the research business, mineral exploration properties and securities investments.
Financial Results for the nine and three months ended September 30, 2022 and 2021
Nine months ended | Nine months ended | Three months ended | Three months ended | |
September 30, | September 30, | September 30, | September 30, | |
2022 | 2021 | 2022 | 2021 | |
Research business segment | ||||
Research revenues | $ 519,586 | $ 296,750 | $ 185,842 | $ 102,733 |
Research expenses | ||||
Payroll and benefits | 231,055 | 212,877 | 45,038 | 74,478 |
Consultants and services | 154,089 | 107,774 | 41,542 | 40,204 |
Share-based compensation | - | 61,110 | - | 7,810 |
Office and administrative | 72,273 | 19,068 | 26,180 | 5,776 |
Sales and marketing | 36,356 | - | 22,012 | - |
Rent | 13,557 | - | 13,557 | - |
Professional and legal fees | 11,126 | - | - | - |
Travel expenses | 11,742 | 1,538 | 3,940 | 1,233 |
Bad debts | 8,857 | 21,016 | 3,646 | 9,722 |
Amortization of brand value | 7,842 | 9,450 | 3,137 | 3,150 |
Depreciation | 293 | - | 110 | - |
Total research expenses | 547,190 | 432,833 | 159,162 | 142,373 |
Research business segment income (loss) | (27,604) | (136,083) | 26,680 | (39,640) |
Exploration properties segment | ||||
Realized gain on sale of mineral property | - | 459,999 | - | - |
Exploration and evaluation expenses | ||||
Mineral claim renewal fees | 5,803 | 561 | 5,720 | - |
Total exploration and evaluation expenses | 5,803 | 561 | 5,720 | - |
Exploration properties segment income (loss) | (5,803) | 459,438 | (5,720) | - |
Investment segment | ||||
Consulting revenues | 27,900 | 11,137 | - | - |
Realized gain on investments | 1,403,517 | 107,500 | 1,403,517 | 107,500 |
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Unrealized gain on investments | (667,549) | 497,393 | (1,327,239) | (16,842) |
Investments income | 63,690 | 145,525 | 7,619 | 48,598 |
Total investment segment income (loss) | 827,558 | 761,555 | 83,897 | 139,256 |
Total segments income (loss) | 794,151 | 1,084,910 | 104,857 | 99,616 |
General and administrative expenses | ||||
Consulting fees | 210,805 | 169,800 | 80,050 | 52,950 |
Professional and legal fees | 205,498 | 63,139 | 29,409 | 17,054 |
Office and administrative | 24,372 | 3,849 | 10,081 | 1,630 |
Public filing fees | 15,557 | 16,148 | 15,557 | 2,043 |
Insurance expenses | 2,563 | 5,430 | 2,194 | 1,230 |
Rent | - | 15,300 | - | 5,100 |
Total general and administrative expenses | 458,795 | 273,666 | 137,291 | 80,007 |
Interest (income) | (10) | (10) | ||
Interest expense | 310,672 | 296 | 21,319 | 173 |
Accretion | 204,969 | 22,230 | 32,930 | 7,562 |
Share-based compensation | 113,108 | 95,570 | 113,108 | - |
Flow through obligation | 11,825 | - | 11,825 | - |
Loss on remeasurement of credit facility | 55,499 | - | - | - |
Foreign exchange (gain) loss | (1,754) | 2,272 | (2,793) | 2,236 |
Net income (loss) and comprehensive income (loss) | $ (358,953) | $ 690,876 | $ (208,813) | $ 9,638 |
Discussion of the nine months ended September 30, 2022 and 2021
The Company realized a net loss and comprehensive loss of $358,953 (2021: net income and comprehensive income of $690,876).
The research business segment generated a loss of $27,604 (2021: loss of $136,083). Research revenues increased to $519,586 (2021: $296,750) due to increased subscription research fees as compared to the prior year and the acquisition of Phases and Cycles. Research expenses increased to $547,190 (2021: $432,833) due to increased payroll and benefits, consultants and services, legal fees, and sales and marketing expenses.
The exploration segment generated a loss of $5,803 (2021: income of $459,438). The prior year period included the realized gain from the sale of a mineral property.
The investment segment realized income of $827,558 (2021: income of $761,555) that included investment income of $63,690 (2021:
$145,525), realized gains of $1,403,517 (2021: $107,500) from the disposition of Stone debentures, and unrealized gains of $667,549
(2021: unrealized gain of $497,393).
General and administrative costs increased to $458,795 (2021: $273,666) due to an increase in professional and legal fees to $205,498
(2021: $63,139). The increase in professional costs were related to the disposition of Stone debentures.
Interest expense increased to $310,672 (2021: $296) due to the credit facility interest and prepayment fees. Accretion increased to $204,969
(2021: $22,230) related to the credit facility obligation. The Company also recognized a loss on remeasurement of the credit facility of
$55,499 (2021: $nil).
Share-based compensation increased to $113,108 (2021: $95,570).
Discussion of the three months ended September 30, 2022 and 2021
The Company realized a net loss and comprehensive loss of $208,813 (2021: net income and comprehensive income of $9,638).
The research business segment generated income of $26,680 (2021: loss of $39,640). Research revenues increased to $185,842 (2021:
$102,733) due to increased subscription research fees. Research expenses increased to $159,162 (2021: $142,373) due to increased payroll and benefits, consultants, and services, rent and sales and marketing.
The exploration segment generated a loss of $5,720 (2021: $nil).
The investment segment realized income of $83,897 (2021: income of $139,256).
General and administrative costs increased to $137,291 (2021: $80,007) due to an increase in consulting fees and professional and legal fees.
Interest expense increased to $21,319 (2021: $173) due to the credit facility interest and prepayment fees. Accretion increased to $32,930
(2021: $7,562) related to the credit facility obligation.
Share-based compensation increased to $113,108 (2021: $nil).
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STATEMENT OF FINANCIAL POSITION
Cash and Cash Equivalents
Cash and cash equivalents increased to $2,248,424 (2021: $422,719) and are deposited with major financial institutions in Canada.
Accounts Receivable, Amounts Receivable and Prepaid Expenses
Accounts receivables decreased to $4,484 (December 31, 2021: $10,630). All accounts receivable over 90 days are fully provisioned as bad debts until subsequently collected.
Amounts receivables increased to $137,374 (December 31, 2021: $50,067) due to an increase in Canadian sales tax receivables and receivables due from the vendor of the business of Phases and Cycles. Prepaid expenses increased to $35,093 (December 31, 2021: $18,669).
Investments
As of September 30, 2022, the investment portfolio consisted of:
- 409,333 common shares of Prospector Metals Corp. (TSXV: PPP) with a market value of $83,912 based on the closing price that were held for trading.
As at | As at | ||||||
December 31, | Purchases | Purchases | Net | Realized | Unrealized | September 30, | |
2021 | (Non-Cash) | (Cash) | Proceeds | Gains (Losses) | Gains (Losses) | 2022 | |
Common shares | $ 442,294 | $ - | $ - | $ - | $ - | $ (358,382) | $ 83,912 |
Debentures | 2,425,602 | - | - | (3,519,952) | 1,403,517 | (309,167) | 0 |
Total | $ 2,867,896 | $ - | $ - | $ (3,519,952) | $ 1,403,517 | $ (667,549) | $ 83,912 |
On July 19, 2022, the Company disposed of Stone debentures for gross proceeds of $3,519,952 that included a payment of $183,625 used for the reimbursement of legal expenses and realized a gain of $1,403,517 on the investment.
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities decreased to $331,300 (December 31, 2021: $624,255).
Short-Term and Long-Term Debt
Short-term debt of $40,000 (2021: $40,000) for the CEBA loan.
Deferred Revenues
Deferred revenues decreased to $138,956 (2021: $162,378) and will be recognized into revenue over the next 12 months.
LIQUIDITY AND CAPITAL RESOURCES
There were no changes in the Company's approach to capital management during the nine months ended September 30, 2022.
The Company's investment policy is to invest excess cash in very low risk financial instruments such as term deposits or by holding funds in high yield savings accounts with major Canadian banks and to provide shareholders with long-term capital growth by investing in a portfolio of undervalued companies, assets, or equity investment vehicles in the subscription research, mineral exploration and asset management sectors of the North American market, but may also include investments in other sectors.
The Company is not subject to any externally imposed capital requirements.
The Company is generating revenues from the research business but has not generated any revenues from mineral property interests, which are still in the exploration & evaluation stage. To date, the Company has funded its operations by raising equity. To minimize liquidity risk, the Company implemented an operating budget for the research business and limited discretionary expenditures related to the exploration property.
The Company manages its capital structure (consisting of shareholders' equity) on an ongoing basis and in response to changes in economic conditions and risk characteristics of its underlying assets. Changes to the capital structure could involve the issuance of new equity, obtaining working capital loans, issuing debt, the acquisition or disposition of assets, or adjustments to the amounts held in cash, cash equivalents and investments.
Capital resource analysis
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IC Capitalight Corp. published this content on 29 November 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 November 2022 02:54:42 UTC.