What changed in this filing

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Item 1. Financial Statements

2023-07-14 compared with 2023-04-05 · 98 added, 96 removed, 264 unchanged (42% of the section changed)

3 unchanged sentences

in thousands of US dollars

February 28, 2023

November 30, 2022

14 unchanged sentences

Contributed surplus

Contributed surplus – options (note 6(a))

Contributed surplus – units (note 6(b))

Contributed surplus – options (note 6(b))

Contributed surplus – units (note 6(c))

Total shareholders' equity

3 unchanged sentences

/s/ Tony Giardini, President, CEO and Director

/s/ Kalidas Madhavpeddi, Director

/s/ Diana Walters, Director

Approved on behalf of the Board of Directors

Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

Trilogy Metals Inc.

3 unchanged sentences

For the three months ended

February 28, 2023

February 28, 2022

For the six months ended

Exploration expenses

7 unchanged sentences

Share of loss on equity investment (note 3(b))

Write off mineral properties

Loss and comprehensive loss for the period

5 unchanged sentences

Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

Trilogy Metals Inc.

11 unchanged sentences

Balance – February 28, 2022

Exercise of options

Restricted Share Units

Stock-based compensation

Loss for the period

Balance – May 31, 2022

Balance – November 30, 2022

6 unchanged sentences

Balance – February 28, 2023

Shares issued for private placement, net of share issue cost

Exercise of options

Restricted Share Units

Deferred Share Units conversion

Services settled by common shares

Stock-based compensation

Loss for the period

Balance – May 31, 2023

(See accompanying notes to the interim consolidated financial statements)

Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

Trilogy Metals Inc.

1 unchanged sentence

in thousands of US dollars

For the three months ended

February 28, 2023

February 28, 2022

For the six months ended

Cash flows used in operating activities

6 unchanged sentences

Stock-based compensation

Write off mineral properties

Net change in non-cash working capital

Decrease (increase) in accounts receivable

Decrease in deposits and prepaid amounts

(Decrease) increase in accounts payable and accrued liabilities

Decrease in accounts receivable

Decrease (increase) in deposits and prepaid amounts

Increase (decrease) in accounts payable and accrued liabilities

Total cash flows used in operating activities

Cash flows from financing activities

Issuance of common shares, net of share issue cost (note 6(a))

Proceeds from exercise of options

2 unchanged sentences

Total cash flows from investing activities

Decrease in cash

Increase (decrease) in cash

Effect of exchange rate on cash

3 unchanged sentences

Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements

1) Nature of operations and Going Concern

1) Nature of operations

Trilogy Metals Inc.

2 unchanged sentences

The Company also conducts early-stage exploration through a wholly owned subsidiary, 995 Exploration Inc.

These interim consolidated financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.

At February 28, 2023, we had a working capital surplus of $ 1.0 million (2022 - $ 2.4 million) and an accumulated deficit of $ 71.9 million (2022 - $ 66.9 million).

The Company has no recurring source of cash inflows at its current stage.

The Company’s cash outflow from operations was $ 0.9 million for the first quarter ended February 28, 2023.

The Company intends to finance its future requirements through a combination of debt and/or equity issuance.

There is no assurance that the Company will be able to obtain such financings or obtain them on favourable terms.

These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern.

These interim consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

Such adjustments could be material.

2) Summary of significant accounting policies

7 unchanged sentences

References to CDN$ refer to amounts in Canadian dollars.

These interim consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s financial position as of February 28, 2023 and our results of operations and cash flows for the three-month period ended February 28, 2023 and February 28, 2022.

The results of operations for the three-month period ended February 28, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2023.

These interim consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s financial position as of May 31, 2023 and our results of operations and cash flows for the six-month period ended May 31, 2023 and May 31, 2022.

The results of operations for the six-month period ended May 31, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2023.

As these interim consolidated financial statements do not contain all of the disclosures required by U.S.

1 unchanged sentence

Securities and Exchange Commission (“SEC”) and Canadian securities regulatory authorities on February 14, 2023.

These interim consolidated financial statements were approved by the Company’s Audit Committee on behalf of the Board of Directors for issue on April 4, 2023.

These interim consolidated financial statements were approved by the Company’s Audit Committee on behalf of the Board of Directors for issue on July 13, 2023.

Use of estimates and measurement uncertainties

1 unchanged sentence

GAAP requires management to make estimates and assumptions of future events that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of expenditures during the period.

Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements

judgments include the assessment of potential indicators of equity method investments where key judgement is the delay on the Ambler Access Project is temporary and the delay was considered when assessing indicators of impairment.

Significant judgments include the assessment of potential indicators of equity method investments where key judgement is the delay on the Ambler Access Project is temporary and the delay was considered when assessing indicators of impairment.

Significant estimates include the measurement of income taxes, and the valuation of stock-based compensation.

4 unchanged sentences

Management considers several factors in considering if an indicator of impairment has occurred, including but not limited to, sustained losses by the investment, the absence of the ability to recover the carrying amount of the investment, significant changes in the legal, business or regulatory environment, significant adverse changes impacting the investee and internal reporting indicating the economic performance of an investment is, or will be, worse than expected.

Trilogy Metals Inc.

For the Quarter Ended May 31, 2023

Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements

These factors are subjective and require consideration at each period end.

14 unchanged sentences

Our investment in Ambler Metals was initially measured at its fair value of $ 176 million upon recognition.

Our maximum exposure to loss in this entity is limited to the carrying amount of our investment in Ambler Metals, which, as at February 28, 2023, totaled $ 141.4 million.

Our maximum exposure to loss in this entity is limited to the carrying amount of our investment in Ambler Metals, which, as at May 31, 2023, totaled $ 139.8 million.

Carrying value of equity method investment

Trilogy recognized, based on its 50 % ownership interest in Ambler Metals, an equity loss equivalent to its pro rata share of Ambler Metals’ comprehensive loss of $ 1.6 million for the three-month period ending May 31, 2023 (2022 - $ 2.5 million) and $ 3.1 million for the six-month period ending May 31, 2023 (2022 - $ 4.4 million).

During the six-month period ending May 31, 2023, Trilogy made a $ 111,000 equity contribution to Ambler Metals through the issuance of 143,505 common shares of the Company as part of the long-term incentive compensation for Ambler Metals executives.

Likewise, South32 made an equivalent equity contribution to Ambler Metals for $ 111,000 in cash for their 50 % share.

The carrying value of Trilogy’s 50 % investment in Ambler Metals as at May 31, 2023 is summarized on the following table.

Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements

Trilogy recognized, based on its 50 % ownership interest in Ambler Metals, an equity loss equivalent to its pro rata share of Ambler Metals’ comprehensive loss of $ 3.0 million for the three-month period ending February 28, 2023 (2022 - $ 3.8 million).

During the three-month period ending February 28, 2023, Trilogy made a $ 111,000 equity contribution to Ambler Metals through the issuance of 143,505 common shares of the Company as part of the long-term incentive compensation for Ambler Metals executives.

Likewise, South32 made an equivalent equity contribution to Ambler Metals for $ 111,000 in cash for their 50 % share.

The carrying value of Trilogy’s 50 % investment in Ambler Metals as at February 28, 2023 is summarized on the following table.

in thousands of dollars

1 unchanged sentence

Joint venture equity contribution

Share of loss on equity investment for the three month period ending February 28, 2023

February 28, 2023, Investment in Ambler Metals

The following table summarizes Ambler Metals’ Balance Sheet as at February 28, 2023.

Share of loss on equity investment for the six month period ending May 31, 2023

May 31, 2023, Investment in Ambler Metals

The following table summarizes Ambler Metals’ Balance Sheet as at May 31, 2023.

in thousands of dollars

February 28, 2023

November 30, 2022

3 unchanged sentences

Members' equity (total assets less total liabilities)

Members’ cash is held at one bank, the majority of cash is uninsured as at February 28, 2023.

(d) The following table summarizes Ambler Metals' loss for the three-month period ending February 28, 2023.

Members’ cash is held at one bank, the majority of cash is uninsured as at May 31, 2023.

(d) The following table summarizes Ambler Metals' loss for the six-month period ending May 31, 2023.

in thousands of dollars

For the three months ended

February 28, 2023

February 28, 2022

Three months ended

Six months ended

Corporate salaries and wages

6 unchanged sentences

Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

Trilogy Metals Inc.

2 unchanged sentences

in thousands of dollars

February 28, 2023

November 30, 2022

3 unchanged sentences

Accounts payable and accrued liabilities

Included in accrued salaries and vacation approximately $ 155,000 was settled, subsequent to the end of the first quarter, on March 1, 2023 through the issuance of common shares of the Company.

Of the accrued salaries and vacation approximately $ 155,000 was settled, subsequent to the end of the second quarter, on June 1, 2023 through the issuance of common shares of the Company.

(a) Right-of-use asset

2 unchanged sentences

Net amortization

Balance as at February 28, 2023

Balance as at May 31, 2023

(b) Lease liabilities

3 unchanged sentences

in thousands of dollars

Three months ended

February 28, 2023

February 28, 2022

Six months ended

Operating lease costs

2 unchanged sentences

Variable lease costs consist primarily of the Company’s portion of operating costs associated with the office space lease as the Company elected to apply the practical expedient not to separate lease and non-lease components.

As of February 28, 2023, the weighted-average remaining lease term is 1.2 years and the weighted-average discount rate is 8 % .

As at May 31, 2023, the weighted-average remaining lease term is 0.9 years and the weighted-average discount rate is 8 % .

Significant judgment was used in the determination of the incremental borrowing rate which included estimating the Company’s credit rating.

Supplemental cash and non-cash information relating to our leases during the six-month period ending May 31, 2023 are as follows:

● Cash paid for amounts included in the measurement of lease liabilities was $ 98,298 .

Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements

Supplemental cash and non-cash information relating to our leases during the three-month period ending February 28, 2023 are as follows:

● Cash paid for amounts included in the measurement of lease liabilities was $ 49,310 .

Future minimum payments relating to the lease recognized in our balance sheet as of February 28, 2023 are as follows:

Future minimum payments relating to the lease recognized in our balance sheet as of May 31, 2023 are as follows:

in thousands of dollars

February 28, 2023

Total undiscounted lease payments

7 unchanged sentences

November 30, 2022

Private Placement, net of share issue cost

Restricted Share Units

Deferred Share Units

Services settled by common shares

Joint venture equity contribution (note 4(b))

February 28, 2023, issued and outstanding

May 31, 2023, issued and outstanding

On April 30, 2012, under the NovaGold Arrangement, Trilogy committed to issue common shares to satisfy holders of NovaGold deferred share units (“NovaGold DSUs”), once vested, on record as of the close of business April 27, 2012.

When vested, Trilogy committed to deliver one common share to the holder for every six shares of NovaGold the holder is entitled to receive, rounded down to the nearest whole number.

As of February 28, 2023, a total of 9,293 NovaGold DSUs remain outstanding representing a right to receive 1,549 Common Shares in Trilogy, which will settle upon certain directors retiring from NovaGold’s board.

As at May 31, 2023, a total of 9,293 NovaGold DSUs remain outstanding representing a right to receive 1,549 Common Shares in Trilogy, which will settle upon certain directors retiring from NovaGold’s board.

Common shares issuance

On April 25, 2023, the Company completed a non-brokered private placement of 5,854,545 common shares of the Company (the “Common Share”) at a price of $ 0.55 per Common Share for gross proceeds of $ 3.2 million and net proceeds of $ 3.1 million.

Financing costs consisted of legal and stock exchange fees.

Stock options

During the three-month period ended February 28, 2023, the Company granted 3,230,000 stock options (2022 - 1,734,500 stock options) at an exercise price of CDN$ 0.78 (2022 - CDN$ 2.21 ) to employees, consultants and directors exercisable for a period of five years with various vesting terms from immediate vesting to vesting over a two-year period.

The fair value attributable to options granted in the period was CDN$ 0.37 (2022 - CDN$ 0.90 ).

For the three-month period ended February 28, 2023, Trilogy recognized a stock-based compensation charge of $ 0.5 million (2022 - $ 0.86 million) for options granted to directors, employees and service providers, net of estimated forfeitures.

The fair value attributable to this option grants was CDN$ 0.37 (2022 - CDN$ 0.90 ).

There were no stock options granted during the three-month period ended May 31, 2023.

Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements

For the six-month period ended May 31, 2023, Trilogy recognized a stock-based compensation charge of $ 0.6 million (2022 - $ 1.2 million) for options granted to directors, employees and service providers, net of estimated forfeitures.

The fair value of the stock options recognized in the period has been estimated using the Black-Scholes option pricing model.

Assumptions used in the pricing model for the three-month period ended February 28, 2023 are as provided below.

February 28, 2023

Assumptions used in the pricing model for the six-month period ended May 31, 2023 are as provided below.

Risk-free interest rates

3 unchanged sentences

Expected dividends

As of February 28, 2023, there were 2,148,424 non-vested options outstanding with a weighted average exercise price of CDN$ 1.03 ;

As at May 31, 2023, there were 2,131,757 non-vested options outstanding with a weighted average exercise price of CDN$ 1.02 ;

the non-vested stock option expense not yet recognized was $ 0.36 million.

This expense is expected to be recognized over the 22 months .

A summary of the Company’s stock option plan and changes during the three-month period ended February 28, 2023 is as follows:

February 28, 2023

This expense is expected to be recognized over the next 19 months .

A summary of the Company’s stock option outstanding and changes during the six-month period ended May 31, 2023 is as follows:

Weighted average

2 unchanged sentences

Balance – beginning of the period

( 1,120,000 )

Balance – end of the period

There were no stock options exercised during the first quarter 2023.

The following table summarizes information about the stock options outstanding at February 28, 2023.

There were no stock options exercised during the six-month period ended May 31, 2023.

The following table summarizes information about the stock options outstanding at May 31, 2023.

average years

6 unchanged sentences

$ 3.01 to $ 3.41

The aggregate intrinsic value of vested stock options (the market value less the exercise price) at February 28, 2023 was $ 0.02 million (2022 - $ 0.15 million) and the aggregate intrinsic value of exercised options for the three-month period ending February 28, 2023 was $Nil million (2022 - $ 0.03 million).

Restricted Share Units and Deferred Share Units

The Company has a Restricted Share Unit Plan (“RSU Plan”) to provide long-term incentives to employees and consultants and a Non-Executive Director Deferred Share Unit Plan (“DSU Plan”) to offset cash payments for fees to directors.

Awards under the RSU Plan and DSU Plan have been settled in common shares of the Company with each restricted share unit

The aggregate intrinsic value of vested stock options (the market value less the exercise price) at May 31, 2023 was $Nil (2022 - $ 0.13 million) and the aggregate intrinsic value of exercised options for the six-month period ending May 31, 2023 was $Nil (2022 - $ 0.05 million).

Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements

(“RSU”) and deferred share unit (“DSU”) entitling the holder to receive one common share of the Company.

Restricted Share Units and Deferred Share Units

Awards under the RSU Plan and DSU Plan have been settled in common shares of the Company with each restricted share unit (“RSU”) and deferred share unit (“DSU”) entitling the holder to receive one common share of the Company.

All units are accounted for as equity-settled awards.

A summary of the Company’s unit plans and changes during the three-month period ending February 28, 2023 is as follows:

A summary of the Company’s unit plans and changes during the six-month period ending May 31, 2023 is as follows:

Number of RSUs

1 unchanged sentence

Balance – beginning of the period

Vested/Converted

( 2,630,716 )

Balance – end of the period

For the three-month period ending February 28, 2023, Trilogy recognized a combined RSU and DSU stock-based compensation charge of $ 1.1 million (2022 - $ 1.0 million), net of estimated forfeitures.

For the six-month period ending May 31, 2023, Trilogy recognized a combined RSU and DSU stock-based compensation charge of $ 1.8 million (2022 - $ 1.2 million), net of estimated forfeitures.

7) Financial instruments

9 unchanged sentences

The Company operates in the United States and Canada.

The Company’s exposure to currency risk at February 28, 2023 is limited to the Canadian dollar balances consisting of cash of approximately CDN$ 71,000 , accounts receivable of approximately CDN$ 35,000 and accounts payable of approximately CDN$ 320,000 .

The Company’s exposure to currency risk at May 31, 2023 is limited to the Canadian dollar balances consisting of cash of approximately CDN$ 51,000 , accounts receivable of approximately CDN$ 22,000 and accounts payable of approximately CDN$ 360,000 .

Based on a 10 % change in the US-Canadian exchange rate, assuming all other variables remain constant, the Company’s net loss would change by approximately $ 21,000 .

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations.

The Company holds cash with a Canadian chartered financial institution of which the majority is uninsured as at February 28, 2023.

The Company holds cash with a Canadian chartered financial institution of which the majority is uninsured as at May 31, 2023.

The Company’s only significant exposure to credit risk is equal to the balance of cash as recorded in the financial statements.

Trilogy Metals Inc.

For the Quarter Ended May 31, 2023

Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements

Liquidity risk

2 unchanged sentences

therefore, the Company manages liquidity risk through the management of its capital structure and financial leverage.

Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements

Contractually obligated undiscounted cash flow requirements as at February 28, 2023 are as follows:

Contractually obligated undiscounted cash flow requirements as at May 31, 2023 are as follows:

in thousands of dollars

Accounts payable and accrued liabilities

Included in accounts payable and accrued liabilities approximately $ 155,000 is for accrued salaries that were settled, subsequent to the end of the first quarter, on March 1, 2023 through the issuance of common shares of the Company (note 9).

Included in accounts payable and accrued liabilities approximately $ 155,000 is for accrued salaries that were settled, subsequent to the end of the second quarter, on June 1, 2023 through the issuance of common shares of the Company (note 9).

Interest rate risk

1 unchanged sentence

The Company is exposed to interest rate risk with respect to interest earned on cash.

Based on balances as at February 28, 2023, a 1 % change in interest rates would result in a negligible change in net loss, assuming all other variables remain constant.

Based on balances as at May 31, 2023, a 1 % change in interest rates would result in a negligible change in net loss, assuming all other variables remain constant.

As we are currently in the exploration phase none of our financial instruments are exposed to commodity price risk;

3 unchanged sentences

9) Subsequent event

On March 1, 2023 the Board of Directors and senior management were granted 213,463 RSUs and 162,469 DSUs in settlement of approximately $ 247,000 of director fees and accrued salaries, all vesting immediately.

On June 1, 2023, the Board of Directors were granted 163,142 DSUs in settlement of approximately $ 79,000 of director fees and senior management were granted 248,531 RSUs in lieu of cash salaries of approximately $ 155,000 , all vesting immediately.

The grants were in support of an effort to preserve cash and increase share ownership by settling director fees and a portion of senior management salaries in shares of the Company.

Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements