What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-09 compared with 2023-02-14 · 100 added, 180 removed, 476 unchanged (37% of the section changed)

27 unchanged sentences

We have audited the accompanying consolidated balance sheets of Trilogy Metals Inc.

and its subsidiaries (together, the Company) as of November 30, 2022 and 2021, and the related consolidated statements of earnings (loss) and comprehensive earnings (loss), changes in shareholders’ equity and cash flows for each of the three years in the period ended November 30, 2022, including the related notes (collectively referred to as the consolidated financial statements).

and its subsidiaries (together, the Company) as of November 30, 2023 and 2022, and the related consolidated statements of loss and comprehensive loss, changes in shareholders' equity and cash flows for each of the three years in the period ended November 30, 2023, including the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2023 in conformity with accounting principles generally accepted in the United States of America.

1 unchanged sentence

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company incurred recurring losses from operations and negative cash flows from operating activities that raise substantial doubt about its ability to continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has no recurring source of operating cash inflows at its current stage and is dependent on its ability to obtain additional financing or to generate future operating cash inflows.

These material uncertainties raise substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

16 unchanged sentences

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of impairment indicators related to the Investment in Ambler Metals LLC

Impairment indicator assessment of the Investment in Ambler Metals LLC

As described in Notes 2 and 3 to the consolidated financial statements, the Company has an investment in Ambler Metals LLC (Ambler) accounted for using the equity method of accounting.

1 unchanged sentence

Management assesses impairment indicators whenever changes in facts and circumstances indicate there is an other than temporary loss in value of the investment.

Management applies judgment in assessing whether facts and circumstances indicate an other than temporary loss in value has occurred that could give rise to the requirement to conduct an impairment test.

Factors such as (i) sustained losses by the investment, (ii) an absence of the ability to recover the carrying amount of the investment, and (iii) deterioration of market conditions, are evaluated by management in determining whether there are any indicators of impairment.

The principal considerations for our determination that performing procedures relating to the assessment of impairment indicators related to the investment in Ambler is a critical audit matter are that there was judgment by management when assessing whether indicators of impairment exist, specifically related to assessing:

Management applies significant judgment in assessing whether facts and circumstances indicate an other than temporary loss in value has occurred that could give rise to the requirement to conduct an impairment test.

Factors such as (i) an absence of the ability to recover the carrying amount of the investment, and (ii) whether there was a deterioration of market conditions are evaluated by management in determining whether there are any indicators of impairment.

The principal considerations for our determination that performing procedures relating to the impairment indicator assessment of the investment in Ambler is a critical audit matter are:

the significant judgment by management when assessing whether indicators of impairment exist, specifically related to assessing:

(i) an absence of the ability to recover the investment in Ambler, and (ii) a deterioration of market conditions.

This in turn led to a high degree of auditor judgment and subjectivity in performing procedures to evaluate audit evidence relating to the judgements made by management in their assessment of indicators of impairment related to the investment in Ambler.

This in turn led to a high degree of auditor judgment and subjectivity in performing procedures to evaluate audit evidence relating to the significant judgments made by management in their assessment of indicators of impairment related to the investment in Ambler.

The audit effort also involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, evaluating the reasonableness of management’s assessment of indicators of impairment related to the investment in Ambler, which included (i) evaluating whether there was an absence of the ability to recover the carrying amount of the investment by considering changes in Trilogy Metals market capitalization, and (ii) evaluating whether there was a deterioration of market conditions and assessing the completeness of facts and circumstances that could be considered as impairment indicators of the Investment in Ambler by performing an audit of the financial statements of Ambler as of November 30, 2022.

These procedures included, among others, evaluating the reasonableness of management's assessment of impairment indicators related to the investment in Ambler, which included (i) with the assistance of professionals with specialized skill and knowledge evaluating whether there was an absence of the ability to recover the carrying amount of the investment by considering the implied in situ value of recent market transactions of comparable mineral properties, and (ii) evaluating whether there was a deterioration of market conditions and assessing the completeness of facts and circumstances that could be considered as impairment indicators of the Investment in Ambler by performing an audit of the financial statements of Ambler as of November 30, 2023.

Performing an audit of the financial statements of Ambler as of November 30, 2023 included (i) evaluating whether there were significant adverse changes in the business climate including significant decreases in copper, zinc, and other metal prices, (ii) evaluating whether there were significant adverse changes in legal factors with respect to mineral property title matters, and (iii) evaluating whether there was an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of Ambler's mineral properties.

11 unchanged sentences

Current assets

Accounts receivable (note 3)

Accounts receivable

Deposits and prepaid amounts

1 unchanged sentence

Investment in Ambler Metals LLC (note 3)

Fixed assets (note 5)

Mineral properties (note 6)

Right of use asset (note 5(a))

3 unchanged sentences

Total current liabilities

Long-term portion of lease liability (note 8 (b))

Long-term portion of lease liability

Total liabilities

2 unchanged sentences

Contributed surplus

Contributed surplus – options (note 9(a))

Contributed surplus – units (note 9(b))

Contributed surplus – options (note 6(b))

Contributed surplus – units (note 6(c))

Total shareholders' equity

4 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.

Consolidated Statements of Earnings (Loss) and Comprehensive Earnings (Loss )

Consolidated Statements of Loss and Comprehensive Loss

For the Years Ended November 30

1 unchanged sentence

Exploration expenses

Feasibility study (note 6(d))

Foreign exchange (gain) loss

Foreign exchange loss (gain)

General and administrative

Investor relations

Mineral properties expense (note 6(d))

Professional fees

Salaries – technical services (note 4(e))

Salaries and directors expense – stock-based compensation

2 unchanged sentences

Interest and other income

Services agreement income (note 4(e))

Services agreement income

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

Write off mineral properties

Comprehensive (loss) earnings for the year

Basic (loss) earnings per common share

Diluted (loss) earnings per common share

Loss and comprehensive loss for the year

Basic loss per common share

Diluted loss per common share

Basic weighted average number of common shares outstanding

10 unchanged sentences

Exercise of options

Restricted share units

Stock-based compensation

Earnings for the year

Loss for the year

Balance – 2021

Exercise of options

Restricted share units

Joint venture contribution

Services settled by common shares

Stock-based compensation

1 unchanged sentence

Balance – 2022

Exercise of options

Private Placement, net of share issue cost

Restricted share units

Deferred share units

Joint venture contribution

Services settled by common shares

NovaGold DSU conversion

Stock-based compensation

7 unchanged sentences

Cash flows used in operating activities

(Loss) earnings for the year

Loss for the year

Adjustments to reconcile net loss to cash flows in operating activities

Professional fees settled by common shares

Unpaid interest earned

Consulting fees settled by common shares

Office lease accounting

Loss on working capital written-off upon joint venture formation

Gain on disposal of mineral property

Loss on equity investment in Ambler Metals LLC (note 3(b))

Unrealized foreign exchange (gain) loss

Unrealized foreign exchange loss (gain)

Stock-based compensation

6 unchanged sentences

Cash flows from financing activities

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

Proceeds from exercise of options

1 unchanged sentence

Cash flows from investing activities

Mineral claims

Proceeds from disposition of mineral property

Total cash flows from (used in) investing activities

Decrease in cash

Total cash flows from investing activities

Increase (decrease) in cash

Effect of exchange rate on cash

9 unchanged sentences

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

These 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.

As at November 30, 2022, the Company had a working capital surplus of $ 2.4 million (2021 - $ 5.6 million) and an accumulated deficit of $ 66.9 million (2021 - $ 42.6 million).

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

The Company’s cash outflow from operations was $ 3.9 million for the year ended November 30, 2022.

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 a favourable terms.

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

As at November 30, 2023, the Company had a working capital of $ 2.4 million (2022 - $ 2.4 million) and an accumulated deficit of $ 81.8 million (2022 - $ 66.9 million).

The Company recorded a loss of $ 15.0 million and cash outflow from operations of $ 3.1 million for the year ended November 30, 2023.

The continued operations of the Company are dependent on its ability to obtain additional financing or to generate future cash flows.

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

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

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

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

These 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.

10 unchanged sentences

These financial statements were approved by the Company’s Board of Directors for issue on February 8, 2024.

Cash consists of cash held in banking institutions.

Cash and cash equivalents

Cash and cash equivalents consist of bank deposits and term deposits that are readily convertible into a known amount of cash.

Investment in affiliates

4 unchanged sentences

The Company’s maximum exposure to loss is its investment in Ambler Metals.

Management assesses the possibility of impairment in the carrying value of its equity method investment in Ambler Metals whenever events or circumstances indicate that the carrying amount of the investment may not be recoverable.

Significant judgments are made in assessing the possibility of impairment.

Factors that may be indicative of an

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

impairment include a loss in the value of an investment that is not temporary.

Significant judgments are made in assessing the possibility of impairment.

Factors that may be indicative of an impairment include a loss in the value of an investment that is not temporary.

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, deterioration of market conditions inclusive of 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.

1 unchanged sentence

If an indicator of impairment is determined to exist, the fair value of the impaired investment is determined based on the valuation of cohort companies with similar projects or upon the present value of expected future cash flows using discount rates and other assumptions believed to be consistent with those used by principal market participants and observed market earnings multiples of comparable companies.

Management calculates the estimated undiscounted future net cash flows relating to the asset or asset group using estimated future prices, proven and probable reserves and other mineral resources, and operating, capital and reclamation costs.

When the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated fair value, which is usually determined using discounted future cash flows.

Management’s estimates of mineral prices, mineral resources, foreign exchange rates, production levels operating, capital and reclamation costs are subject to risk and uncertainties that may affect the determination of the recoverability of the long-lived asset.

It is possible that material changes could occur that may adversely affect management’s estimates.

Plant and equipment are recorded at cost and amortization begins when the asset is put into service.

9 unchanged sentences

Capitalized costs will be amortized following commencement of production using the unit of production method over the estimated life of proven and probable reserves.

The acquisition of title to mineral properties is a complicated and uncertain process.

The Company has taken steps, in accordance with industry standards, to verify the title to mineral properties.

Although the Company has made efforts to ensure that legal titles to its mining assets are properly recorded through the 50/ 50 joint venture (the “Joint Venture”) named Ambler Metals with South32 Limited (“South32”), there can be no assurance that such title will be secured indefinitely.

Impairment of long-lived assets

Management assesses the possibility of impairment in the carrying value of long-lived assets whenever events or circumstances indicate that the carrying amounts of the asset or asset group may not be recoverable.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

calculates the estimated undiscounted future net cash flows relating to the asset or asset group using estimated future prices, proven and probable reserves and other mineral resources, and operating, capital and reclamation costs.

When the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated fair value, which is usually determined using discounted future cash flows.

It is possible that material changes could occur that may adversely affect management’s estimates.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement.

1 unchanged sentence

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.

The Company typically only includes an initial lease term in its assessment of a lease arrangement.

It also considers termination options and factors those into the determination of lease payments.

3 unchanged sentences

The interest rate implicit in lease contracts is typically not readily determinable.

As a result, the Company utilizes its incremental borrowing rate, which reflects the fixed rate at which it could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

As a result, the Company utilizes its incremental borrowing rate, which reflects the fixed rate at which it could borrow on a collateralized

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

7 unchanged sentences

Financial instruments

Valuation models require the use of assumptions which may include the expected life of the instrument, the expected volatility, dividend payouts, and interest rates.

In determining these assumptions, management uses readily observable market inputs where available or, where not available, inputs generated by management.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

Loans and receivables are recorded initially at fair value, net of transaction costs incurred, and subsequently at amortized cost using the effective interest rate method.

12 unchanged sentences

Stock-based compensation

Compensation expense for options granted to employees, directors and certain service providers is determined based on estimated fair values of the options at the time of grant using the Black-Scholes option pricing model, which takes into account, as of the grant date, the fair market value of the shares, expected volatility, expected dividend yield, the risk-free interest rate, and the expected life of the option.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

risk-free interest rate, and the expected life of the option.

The compensation cost is recognized using the graded attribution method over the vesting period of the respective options.

9 unchanged sentences

Significant judgments include the assessment of potential indicators of impairment of mineral properties and investments in affiliates 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 the South32 property

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

acquisition option and subsequent equity method investment, income taxes, and the valuation of stock-based compensation.

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

Actual results could differ materially from those reported.

3) Accounts receivable

in thousands of dollars

November 30, 2022

November 30, 2021

GST input tax credits

Accounts receivable

3) Investment in Ambler Metals LLC

2 unchanged sentences

As part of the formation of the Joint Venture, Trilogy contributed all its assets associated with the UKMP, including the Arctic and Bornite Projects, while South32 contributed $ 145 million, resulting in each party’s subsidiaries directly owning a 50 % interest in Ambler Metals.

To assist Ambler Metals during the initial set up phase, Trilogy paid all of Ambler Metals’ invoices and was being reimbursed pursuant to a services agreement (the “Services Agreement”) between Trilogy and Ambler Metals until the back office transitioned to a new permanent team employed by the Joint Venture.

The Services Agreement ended on December 31, 2020.

Ambler Metals is an independently operated company jointly controlled by Trilogy and South32 through a four -member board, of which two members are currently appointed by Trilogy based on its 50 % equity interest.

3 unchanged sentences

As we have significant influence over Ambler Metals through our representation on its board, we use the equity method of accounting for our investment in Ambler Metals.

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 totaled $ 142.8 million at November 30, 2022.

The following table summarizes the gain on derecognition of the UKMP assets upon transfer to the Ambler Metals Joint Venture on February 11, 2020.

in thousands of dollars

Fair value ascribed to Ambler Metals LLC interest

carrying value of contributed /eliminated assets

Mineral properties

Property, plant and equipment located in Alaska

Elimination of Fairbanks warehouse right of use asset

Elimination of prepaid State of Alaska mining claim fees

Reimbursement of claims staking

Demobilization costs of drills

Cancellation of Fairbanks warehouse lease liability

Fair value of mineral properties purchase option

Gain on derecognition

Carrying value of investment in Ambler Metals

During the year ended November 30, 2023, Trilogy recognized, based on its 50 % ownership interest in Ambler Metals, an equity loss equivalent to its pro rata share of Ambler Metals' net loss of $ 15.7 million for the year ended November

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

Carrying value of investment in Ambler Metals

During the year ended November 30, 2022, Trilogy recognized, based on its 50 % ownership interest in Ambler Metals, an equity loss equivalent to its pro rata share of Ambler Metals' net loss of $ 34.7 million for the year ended November 30, 2022 ( 2021 - $ 26.2 million).

30, 2023 (2022 - $ 34.7 million).

The carrying value of Trilogy’s 50 % investment in Ambler Metals as at November 30, 2023 is summarized on the following table.

in thousands of dollars

February 11, 2020, fair value ascribed to Ambler Metals interest

Share of loss on equity investment from February 11, 2020 to November 30, 2020

November 30, 2021, Investment in Ambler Metals

Joint venture equity contribution

Share of loss on equity investment for the year ending November 30, 2022

7 unchanged sentences

November 30, 2022

Loan receivable from South32 (current and long-term)

Mineral properties

2 unchanged sentences

Members' equity (total assets less total liabilities)

The following table summarizes Ambler Metals’ net loss for the years ended November 30, 2022 and November 30, 2021.

The following table summarizes Ambler Metals’ net loss for the years ended November 30, 2023, November 30, 2022 and November 30, 2021.

in thousands of dollars

1 unchanged sentence

November 30, 2022

November 30, 2021

Corporate salaries and wages

3 unchanged sentences

Foreign exchange (gain)/loss

Interest income

Interest and other income

Comprehensive loss

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

Related party transactions

During the fiscal year 2023, the Company received $ 27,000 (2022 - $ nil ) related to operating expenses paid on behalf of Ambler Metals.

During the fiscal year 2022, the Company transferred a mineral claim to Ambler Metals and received net proceeds of approximately $ 140,000 .

During the fiscal year 2021, the Company charged $ 22,000 of expenses related to technical services, including geological, engineering, environmental and human resources and accounting services in connection with the Services Agreement.

In addition, the Company received payments $ 4,000 related to operating expenses paid on behalf of Ambler Metals.

5) Fixed assets

in thousands of dollars

British Columbia, Canada

Furniture and

November 30, 2020

ROU asset reclass

November 30, 2021

Write off fully depreciated assets

November 30, 2022

Accumulated amortization

November 30, 2020

ROU asset reclass

November 30, 2021

Write off fully depreciated assets

November 30, 2022

Net Book Value

November 30, 2021

November 30, 2022

6) Mineral properties and development costs

in thousands of dollars

November 30, 2021

November 30, 2022

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

Mineral properties expense

The following table summarizes mineral properties expense for the UKMP, Alaska, USA for the years ended November 30, 2022, 2021 and 2020, and includes expenditures funded by South32 up to the formation of the Joint Venture on February 11, 2020, as applicable.

In thousands of dollars

Environmental

Geochemistry and geophysics

Land and permitting

Project support

Wages and benefits

Mineral property expenses consisted of direct drilling, personnel, community, resource reporting and other exploration expenses as outlined above, as well as indirect project support expenses such as fixed wing charters, helicopter support, fuel, and other camp operation costs.

Other than the feasibility costs related to the Arctic project funded directly by the Company, no additional mineral properties expenses were incurred subsequent to the formation of the Joint Venture, as on February 11, 2020, upon the formation of the Joint Venture with South32, all mineral properties previously held by the Company were contributed to Ambler Metals.

The Company funded the Arctic Project feasibility study costs of $ 1.1 million since the formation of the Joint Venture on February 11, 2020.

Prior to the formation of the Joint Venture, the Company had also incurred $ 0.7 million in Arctic Project feasibility costs that are included in the mineral properties expense balance of $ 1.5 million for the year ended November 30, 2020.

Cumulative mineral properties expense in Alaska from the initial earn‐in agreement on the property in 2004 to the formation of the Joint Venture on February 11, 2020 was $ 115.3 million and cumulative acquisition costs were $ 30.6 million.

Cumulative spend to date totaled $ 147 million.

On February 11, 2020, upon the formation of the Joint Venture with South32, the acquisition costs of $ 30.6 million were derecognized upon the contribution of the mineral properties to Ambler Metals.

Derecognition

As part of the formation of the Joint Venture with South32 on February 11, 2020, Trilogy contributed all its assets associated with the UKMP, including the Arctic and Bornite projects.

As a result, machinery and equipment with a carrying value of $ 0.62 million as well as $ 30.6 million of mineral properties related to the UKMP were derecognized by Trilogy on February 11, 2020.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

4) Accounts payable and accrued liabilities

6 unchanged sentences

Accounts payable and accrued liabilities

Of the accrued salaries and vacation approximately $ 155,000 was settled, subsequent to the end of the year, on December 1, 2023 through the issuance of common shares of the Company (the “Common Shares”).

(a) Right-of-use asset

2 unchanged sentences

Net amortization

Previously classified in fixed assets

Balance as at November 30, 2022

14 unchanged sentences

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 year ended November 30, 2022 are as follows:

● Cash paid for amounts included in the measurement of lease liabilities was $ 203,001 .

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

Supplemental cash and non-cash information relating to our leases during the year ended November 30, 2023 are as follows:

● Cash paid for amounts included in the measurement of lease liabilities was $ 198,912 .

Future minimum payments relating to the lease recognized in our balance sheet as of November 30, 2023 are as follows:

10 unchanged sentences

November 30, 2022

Exercise of options

November 30, 2021

Exercise of options

Private Placement, net of share issue cost

Restricted Share Units

Deferred Share Units

NovaGold deferred share units conversion

Services settled by common shares

4 unchanged sentences

As of November 30, 2023, a total of 5,144 NovaGold DSUs remain outstanding representing a right to receive 859 Common Shares in Trilogy, which will settle upon certain directors retiring from NovaGold’s board.

Stock options

(a) Common shares issuance

On April 25, 2023, the Company completed a non-brokered private placement of 5,854,545 Common Shares 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.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

(b) Stock options

The Company has a stock option plan providing for the issuance of options with a rolling maximum number equal to 10 % of the issued and outstanding Common Shares at any given time.

3 unchanged sentences

The options are exercisable for a maximum of five years from the date of grant and may be subject to vesting provisions.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

During the year ended November 30, 2023, the Company granted 3,230,000 stock options (2022 – 1,734,500 stock options, 2021 – 3,374,150 ) at an exercise price of CDN$ 0.78 (2022 - CDN$ 2.21 , 2021 – CDN$ 2.52 ) to employees, consultants and directors exercisable for a period of five years with various vesting terms from immediate vesting to over a two-year period.

The fair value attributable to options granted in 2023 was $ 0.27 (2022 -$ 0.71 , 2021 - $ 0.84 ).

The fair value of the stock options recognized for the year ended November 30, 2022 has been estimated using the Black-Scholes option pricing model.

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

Assumptions used in the pricing model for the year are as provided below.

7 unchanged sentences

2021 - $ 3.3 million), net of forfeitures.

As of November 30, 2022, there were 1,379,836 non-vested options outstanding with a weighted average exercise price of CDN$ 2.35 .

The non-vested stock option expense not yet recognized was $ 0.1 million.

As of November 30, 2023, there were 2,131,757 unvested options outstanding with a weighted average exercise price of CDN$ 1.02 .

The unvested stock option expense not yet recognized was $ 0.2 million.

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

5 unchanged sentences

Balance – beginning of the year

Cancelled/forfeited

( 1,170,000 )

Balance – end of the year

1 unchanged sentence

Notes to Consolidated Financial Statements

During the year ended November 30, 2022, the Company received net proceeds of $ 54,295 upon the exercise of 81,674 options.

There were no stock options exercised during the year ended November 30, 2023.

The following table summarizes information about the stock options outstanding at November 30, 2023.

7 unchanged sentences

$ 3.01 to $ 3.41

The aggregate intrinsic value of vested share options (the market value less the exercise price) at November 30, 2022 was $nil (2021 - $ 0.8 million, 2020 - $ 2.4 million) and the aggregate intrinsic value of exercised options for the year ended November 30, 2022 was $ 0.04 million (2021 - $ 1.4 million, 2020 - $ 2.6 million).

The aggregate intrinsic value of vested share options (the market value less the exercise price) at November 30, 2023 was $nil (2022 - $nil, 2021 - $ 0.8 million) and the aggregate intrinsic value of exercised options for the year ended November 30, 2023 was $nil (2022 - $ 0.04 million, 2021 - $ 1.4 million).

Restricted Share Units and Deferred Share Units

2 unchanged sentences

All units are accounted for as equity-settled awards.

There were 1,359,349 RSUs granted during the fiscal year ended November 30, 2022 (2021 – nil , 2019 – nil ).

There were 4,640,089 RSUs granted during the fiscal year ended November 30, 2023 (2022 – 1,359,349 , 2021 – nil ).

Directors were granted 1,283,023 DSUs throughout the year ended November 30, 2023 (2022 – 283,289 , 2021 – 58,925 ) based on their election to receive 100 % of their annual retainer in DSUs.

3 unchanged sentences

Balance – beginning of the year

Vested/Converted

( 3,286,719 )

25 unchanged sentences

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 Canadian chartered financial institutions.

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

The Company holds cash and cash equivalents with Canadian chartered financial institutions.

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

The majority of the Company’s cash and cash equivalents held at November 30, 2023 is uninsured.

The Company does not consider any of its financial assets to be impaired as of November 30, 2023.

Liquidity risk

19 unchanged sentences

Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The Company did not have any financial assets and liabilities that were measured and recognized at fair value as at November 30, 2022.

The Company did no t have any financial assets and liabilities that were measured and recognized at fair value as at November 30, 2023.

Trilogy Metals Inc.

10 unchanged sentences

Difference in foreign tax rates

Effect of foreign exchange changes

Non-deductible expenditures

Income from option payments applied as proceeds of sale

Change in estimates in respect of prior years

Impact of new lease accounting rules (ASC 842 adoption)

Change in valuation allowance

22 unchanged sentences

Net deferred income tax assets

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

The Company has loss carry-forwards of approximately $ 214 million that may be available for tax purposes.

1 unchanged sentence

Prior to the NovaGold Arrangement, the Company undertook a tax reorganization in order to preserve the future deductibility of these losses for the Company, subject to the limitations below.

Deferred tax assets have been recognized to the extent of future taxable income and the future taxable amounts related to taxable temporary differences for which a deferred tax liability is recognized can be offset.

Deferred tax assets have been recognized to the extent of future taxable income and the future taxable amounts related to taxable

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

temporary differences for which a deferred tax liability is recognized can be offset.

A valuation allowance has been provided against deferred income tax assets where it is not more likely than not that the Company will realize those benefits.

13 unchanged sentences

As at November 30, 2023 the Company has approximately $ 30.8 million in operating losses that can be carried forward indefinitely.

On June 19, 2015, we completed the Sunward acquisition which resulted in an acquisition of control of Sunward Resources ULC under of the Income Tax Act in Canada.

Therefore, the Company’s ability to use approximately $ 15.2 million of losses in Canada may be limited.

10) Commitment

The Company has commitments with respect to an office lease requiring future minimum lease payments as summarized in note 5(b).

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

11) Subsequent events

On December 1, 2022, senior management and the Board of Directors were granted 392,497 RSUs and 60,519 DSUs in settlement of approximately $ 170,000 for salaries and $ 35,000 for director fees.

On December 1, 2023, senior management and the Board of Directors were granted 358,826 RSUs and 194,819 DSUs, respectively in settlement of approximately $ 155,000 for management salaries and $ 82,750 for director fees.

On December 7, 2023, the Company granted 1,566,940 RSUs for short term incentives to executive and employees, all vesting immediately.

Directors were granted 700,000 DSUs and 580,000 stock options, all vesting immediately.

Employees and consultants were granted 2,650,000 stock options and 2,250,000 RSUs with vesting schedule one-third vesting immediately, one-third to vest on the one year anniversary of the grant date and one-third to vest on the second year anniversary of the grand date.

Directors received an annual grant of 600,000 RSUs and 300,000 stock options, all vesting immediately.

Employees and consultants received an annual grant of 2,475,000 stock options and 2,315,000 RSUs with a vesting schedule of one-third vesting immediately on the grant date, one-third to vest on the one year anniversary of the grant date and one-third to vest on the second year anniversary of the grand date.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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What changed 10-K

Item 8. Financial Statements and Supplementary Data