Enertopia Corp. 10-K

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to; those discussed below and elsewhere in this annual report, particularly in the section entitled Risk Factors beginning on page 10 of this annual report. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. Plan of Operation During the next twelve month period (beginning September 1, 2021), we intend to: • identify and secure sources of equity and/or debt financing for property payments; • identify and secure sources of equity and/or debt financing for resource acquisitions; • identify and secure sources of equity and/or debt financing for continued testing for Lithium technology • identify and secure sources of equity and/or debt financing for clean technology acquisitions; 25 We anticipate that we will incur the following operating expenses during this period: Estimated Funding Required During the 12 Months beginning September 1, 2021 Expense Amount ($) Mineral Costs 5,000 Bench Tests for Lithium Technology 10,000 Resource Acquisitions and or Drilling 100,000 Management Consulting Fees 120,000 Technology Acquisition and Development 100,000 Professional fees 75,000 Rent 12,500 Other general administrative expenses 30,000 Total $ 452,500 As at the date of this annual report, we do not have sufficient cash on hand to finance our entire potential and estimated $452,500 cash obligation to the proposed spending for the 12 months beginning September 1, 2021. Based on our current cash position of $350,000, we anticipate that we will require approximately $102,500 in additional cash to execute our business plan. In the event that we are unable raise sufficient cash we intend to reduce our planned expenditures to accommodate our means with a view toward prioritizing revenue generating activity and fulfilling our public reporting obligations. As at the date of this registration statement we have no financing arrangements in place. Results of Operations for our Years Ended August 31, 2021 and 2020 Our net income (loss) and comprehensive income (loss) for our year ended August 31, 2021, for our year ended August 31, 2020 and the changes between those periods for the respective items are summarized as follows: Year Ended August 31, 2021 $ Year Ended August 31, 2020 $ Change Between Year Ended August 31, 2021 and Year Ended August 31, 2020 $ Revenue $ - $ - $ - Cost of Goods Sold - - - Non-operating (Income) Expenses (225,414) (204,268) (21,146) Exploration Costs 7,888 16,732 (8,844) Consulting Fees 85,338 26,822 58,516 Professional Fees 127,962 57,002 70,960 Fees and dues 35,828 19,851 15,977 Investor relations 34,268 22,510 11,758 Research and Development 12,566 1,702 10,864 Stock-based Compensation 297,691 17,308 280,383 Other administrative costs 13,241 8,209 5,032 Net (income) loss 389,368 (34,132) (423,500) 26 During the year ended August 31, 2020, we signed a 1% Royalty agreement with respect to any future commercial lithium production from our Clayton Valley, Nevada claims in exchange for $250,000. This $250,000 will assist the Company with its future exploration plans and was recognized as income. Our financial statements report a net loss of $389,368 for the year ended August 31, 2021. This is comparison to a net income of $34,132 for the year ended August 31, 2020. The loss in the current year was mainly due to a stock-based compensation expense of $297,691 that was incurred in the current year as a result of more stock options that were granted in the current year. Apart from the stock-based compensation, our other operating costs during the year ended August 31, 2021 were $164,263 higher than the year ended August 31, 2020 which increased the loss incurred in the current year. The increase in costs were primarily attributable to the higher level of activity for the year ended August 31, 2021 compared to August 31, 2020. The Company incurred significantly higher costs for its legal and consulting expenses (2021 - $83,307; 2020 - $8,688). Liquidity and Financial Condition Working Capital At At August 31 August 31 2021 2020 Current assets $ 415,095 $ 86,214 Current liabilities 420,936 479,170 Working capital deficit $ (5,841 ) $ (392,956 ) Cash Flows Year Ended August 31 August 31, 2021 2020 Cash flows used in operating activities $ (408,202 ) (127,109 ) Cash flows from investing activities 307,168 178,847 Cash flows from (used in) financing activities 409,792 (15,968 ) Net increase in cash during year $ 308,758 $ 35,770 Operating Activities Net cash used in operating activities was $408,202 for the year ended August 31, 2021 compared with cash used in operating activities of $127,109 in 2020. The increase in net cash used in operating activities is due to the overall increase in cost as described above. Investing Activities Net cash provided in investing activities was $307,168 for the year ended August 31, 2021 compared to $178,847 in the same period in 2020. The net cash inflow was primarily the result of the Company's 1% Royalty agreement with respect to any future commercial lithium production from our Clayton Valley, Nevada claims. 27 Financing Activities Net cash provided in financing activities was $409,792 for the year ended August 31, 2021, compared to net cash used in financing activities of $15,968 in the same period in 2020. Contractual Obligations As a "smaller reporting company", we are not required to provide tabular disclosure obligations. Going Concern Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company had a working capital deficit of $5,841 as at August 31, 2021 (2020 - $392,956). As at August 31, 2021, the Company has incurred cumulative losses of $14,669,395. We require additional funds to maintain our existing operations and to acquire new business assets. These conditions raise substantial doubt about our Company's ability to continue as a going concern. Management's plans in this regard are to raise equity and debt financing as required, but there is no certainty that such financing will be available or that it will be available at acceptable terms. The outcome of these matters cannot be predicted at this time and the financing environment is exceptionally difficult. The Company's financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty. At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months. We do not have any arrangements in place for any future debt or equity financing. Off-Balance Sheet Arrangements We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders. Critical Accounting Policies The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements. Mineral Properties Acquisition costs of mineral rights are initially capitalized as incurred while exploration and pre-extraction expenditures are expensed as incurred until such time proven or probable reserves are established for that project. Acquisition costs include cash consideration and the fair market value of shares issued on the acquisition of mineral properties. Expenditures relating to exploration activities are expensed as incurred and expenditures relating to pre-extraction activities are expensed as incurred until such time proven or probable reserves are established for that project, after which subsequent expenditures relating to development activities for that particular project are capitalized as incurred. Where proven and probable reserves have been established, the project's capitalized expenditures are depleted over proven and probable reserves using the units-of-production method upon commencement of production. Where proven and probable reserves have not been established, the project's capitalized expenditures are depleted over the estimated extraction life using the straight-line method upon commencement of extraction. The Company has not established proven or probable reserves for any of its projects. The carrying values of the mineral rights are assessed for impairment by management on a quarterly basis and as required whenever indicators of impairment exist. An impairment loss is recognized if it is determined that the carrying value is not recoverable and exceeds fair value. 28 Long-Lived Assets Impairment In accordance with ASC 360, "Accounting for Impairment or Disposal of Long Lived Assets", the carrying value of long lived assets are tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. Revenue Recognition The Company recognizes revenue from product sales when persuasive evidence of an arrangement exists, title to product and associated risk of loss has passed to the customer, the price is fixed or determinable, collection from the customer is reasonably assured, the Company has no further performance obligation, and returns can be reasonably estimated. Going Concern We have suffered recurring losses from operations. The continuation of our Company as a going concern is dependent upon our Company attaining and maintaining profitable operations and/or raising additional capital. The financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our Company discontinue operations. The continuation of our business is dependent upon us raising additional financial support and/or attaining and maintaining profitable levels of internally generated revenue. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. Recently Issued Accounting Standards In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses". The standard, including subsequently issued amendments (ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10 and ASU 2019-11), requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In November 2019, the FASB issued ASU No. 2019-10 to postpone the effective date of ASU No. 2016-13 for public business entities eligible to be smaller reporting companies defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact of this guidance on its consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes: ASU No. 2019-12 is effective as for public business entities, for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. This ASU removes specific exceptions to the general principles in Topic 740 in Generally Accepted Accounting Principles (GAAP). It eliminates the need for an organization to analyses whether the following apply in a given period: -Exception to the incremental approach for intra period tax allocation; 29 -Exceptions to accounting for basis differences when there are ownership changes in foreign investments; and -Exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The ASU also improves financial statement preparers' application of income tax-related guidance and simplifies GAAP for: - Franchise taxes that are partially based on income; - Transactions with a government that result in a step up in the tax basis of goodwill; - Separate financial statements of legal entities that are not subject to tax; and - Enacted changes in tax laws in interim periods. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company's financial statements upon adoption. Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company", we are not required to provide the information required by this Item.