Western Magnesium Corp. - Quarter Report: 2022 April (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-56323

WESTERN MAGNESIUM CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		61-1934413
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

8180 Greensboro Drive, Suite 720

McLean, Virginia

22102

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (571) 378-0762

Securities registered pursuant to Section 12(b) of the Act:

None.

Securities registered pursuant to Section 12(g) of the Act:

Title of each class

Common Stock, $0.001 par value

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 8, 2022, the registrant had 443,477,132 shares of Common Stock outstanding.

WESTERN MAGNESIUM CORPORATION

Quarterly Report on Form 10-Q

For the Quarterly Period Ended April 30, 2022

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Loss and Comprehensive Loss	4
	Condensed Consolidated Statements of Shareholders’ Deficit	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 4.	Controls and Procedures	59

PART II.	OTHER INFORMATION	60

Item 1.	Legal Proceedings	60
Item 1A.	Risk Factors	62
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	63
Item 6.	Exhibits	64
	Signatures	65

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WESTERN MAGNESIUM CORPORATION

Condensed Consolidated Balance Sheets

		April 30, 2022			October 31, 2021
	Note	$			$
		(Unaudited)			(Audited)
ASSETS
Current assets
Cash			774,409			462,360
Other receivables			50,765			151,485
Subscription receivable			185,000			–
Prepayments			119,970			133,647
Deposits held by related parties	8[a]		388,757			486,462
Total Current assets			1,518,901			1,233,954
Non-current assets
Property, plant and equipment, net	4		3,977,619			2,574,704
Right-of-use assets, net	5		469,821			598,575
Mineral property costs	7		93,453			93,453
Reclamation and other deposits			12,736			12,826
Deferred costs			2,973			–
TOTAL ASSETS			6,075,503			4,513,512

LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities			2,715,924			1,989,316
Due to related parties	8[b]		1,253,280			1,026,817
Lease obligations – current	6		244,592			192,045
Provision for flow through share issuances	11		225,833			233,285
Convertible debenture, net	12		1,783,584			7,449,807
Warrant liability	12[e]		2,468,261			–
Total Current liabilities			8,691,474			10,891,270
Non-current liabilities
Lease obligations – non-current	6		254,147			392,280
Total liabilities			8,945,621			11,283,550

Commitments and contingencies [note 9]			-

Shareholders’ deficit
Capital stock
Authorized: 1 billion common stock at par value of $0.001 Issued and paid: 434,866,801 (2021 – 392,943,398)	13		39,096,950			29,842,167
Capital stock Authorized: 1 billion common stock at par value of $0.001 Issued and paid: 434,866,801 (2021 – 392,943,398)	13		39,096,950			29,842,167
Additional paid-in-capital	13		23,204,066			15,186,480
Obligations to issue shares	13		388,701			209,827
Accumulated other comprehensive income			335,072			121,109
Accumulated deficit			(65,894,907	)		(52,129,621	)
Total shareholders’ deficit			(2,870,118	)		(6,770,038	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT			6,075,503			4,513,512

Nature of operations and going concern [note 1]

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

WESTERN MAGNESIUM CORPORATION

Condensed Consolidated Statements of Loss and Comprehensive Loss

		2022			2021			2022			2021
		Three Months Ended April 30,						Six Months Ended April 30,
		2022			2021			2022			2021
	Note	$			$			$			$

Operating expenses (recoveries)
Bank charges			5,388			3,591			8,652			6,154
Business development			31,777			–			77,329			–
Computer system and software			27,703			11,697			39,354			71,785
Consulting and management fees	8[d]		215,709			271,853			413,636			338,954
Depreciation	4, 5		132,987			45,666			242,327			96,993
Due diligence expenses			–			1,964			–			1,964
Engineering expenses (recoveries)			(1,565	)		119,066			116,808			55,454
Foreign exchange loss (gain)	12		58,661			(152,518	)		226,135			(86,227	)
Interest and accretion			326,868			17,760			649,148			36,334
Investor relations			109,456			19,060			215,834			70,936
Legal and professional fees			970,206			263,841			1,577,054			287,586
Office and general			21,278			22,158			77,358			59,611
Facilities and rent			112,452			70,190			176,121			85,275
Salaries and benefits	8[c]		1,201,297			631,284			2,196,839			1,366,932
Stock-based compensation	13[d]		302,254			(1,060,085	)		433,829			–
Shareholder communications			7,500			86,234			40,701			86,234
Subsidies and recoveries			(48,117	)		(41,247	)		(79,219	)		(41,247	)
Transfer agent and regulatory fees			65,720			14,747			88,737			23,630
Travel expenses			137,827			109,839			221,943			110,676
Total operating expenses			3,677,401			435,100			6,722,586			2,571,044

Other income (expense)
Change in fair value of derivative liability	12		4,858,644			31,190			(6,701,147	)		16,656
Loss on recognition of debt host liability	12		–			–			(341,553	)		–
Total other income (expense), net			4,858,644			31,190			(7,042,700	)		16,656

Net income (loss)			1,181,243			(403,910	)		(13,765,286	)		(2,554,388	)

Other comprehensive income (loss)
Foreign currency translation			49,183			(114,645	)		213,963			(191,049	)

Comprehensive income (loss)			1,230,426			(518,555	)		(13,551,323	)		(2,745,438	)

Basic and diluted income (loss) per common share			0.00			(0.00	)		(0.03	)		(0.01	)

Weighted average number of common shares outstanding – basic and diluted			425,430,900			344,627,567			443,272,627			330,018,463

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

WESTERN MAGNESIUM CORPORATION

Condensed Consolidated Statements of Shareholders’ Deficit

	Number		$			$			$			$			$			$
	Common shares					Additional paid-in capital			Obligation to issue shares			Accumulated other comprehensive income (loss)			Accumulated deficit			Shareholders’ deficit
	Number		$			$			$			$			$			$

Balance, October 31, 2020		323,419,527		21,322,022			4,182,037			596,872			399,175			(28,580,009	)		(2,079,903	)
Shares issued pursuant to private placements [note 13[b]]		25,724,955		2,621,314			–			(596,872	)		–			–			2,024,442
Shares issued on warrants exercised [note 13[b]]		400,000		16,113			–			–			–			–			16,113
Shares issued on options exercised [note 13[b]]		100,000		4,002			–			–			–			–			4,002
Share subscriptions [note 13[f]]		–		–			–			45,446			–			–			45,446
Share issue costs [note 13[b]]		–		(194,584	)		–			–			–			–			(194,584	)
Foreign currency translation		–		–			–			–			(191,049	)		–			(191,049	)
Net loss for the period		–		–			–			–			–			(2,554,388	)		(2,554,388	)
Balance, April 30, 2021		349,644,482		23,768,867			4,182,037			45,446			208,126			(31,134,397	)		(2,929,921	)

Balance, October 31, 2021		392,943,398		29,842,167			15,186,480			209,827			121,109			(52,129,621	)		(6,770,038	)
Shares issued pursuant to private placements [note 13[b]]		1,375,499		756,524			–			(209,827	)		–			–			546,697
Shares issued on warrants exercised [notes 12[f] and 13[b]]		23,701,146		7,794,624			–			–			–			–			7,794,624
Shares issued on options exercised [note 13[b]]		750,000		51,918			(22,203	)		–			–			–			29,715
Shares issued upon conversion of convertible debenture [notes 12[b], 12[c] and 13[b]]		6,933,333		688,178			–			–			–			–			688,178
Shares issued for finder’s fees [note 13[b]]		9,163,425		–			–			–			–			–			–
Share issue costs [note 13[b]]		–		(36,461	)		–			–			–			–			(36,461	)
Stock-based compensation [note 13[d]]		–		–			433,829			–			–			–			433,829
Beneficial conversion feature on convertible debentures [note 12[d]]		–		–			240,000			–			–			–			240,000
Effects of change in functional currency on convertible debentures [note 12[e]]		–		–			7,370,158			–			–			–			7,370,158
Effects of change in functional currency on broker warrants [note 12[f]]		–		–			(4,198	)		–			–			–			(4,198	)
Share subscriptions [note 13[f]]		–		–			–			388,701			–			–			388,701
Foreign currency translation		–		–			–			–			213,963			–			213,963
Net loss for the period		–		–			–			–			–			(13,765,286	)		(13,765,286	)
Balance, April 30, 2022		434,866,801		39,096,950			23,204,066			388,701			335,072			(65,894,907	)		(2,870,118	)

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

WESTERN MAGNESIUM CORPORATION

Condensed Consolidated Statements of Cash Flows

	2022			2021
	Six Months Ended April 30,
	2022			2021
	$			$

OPERATING ACTIVITIES
Net loss		(13,765,286	)		(2,554,388	)
Adjustments to reconcile net loss to net cash used in operating activities:
Accrued interest and accretion		50,819			21,317
Amortization of debt discount		600,771			–
Change in fair value of derivative liability		6,701,147			(16,656	)
Loss on recognition of debt host liability		341,553			–
Depreciation of property, plant and equipment		123,961			8,645
Depreciation of right-of-use assets		118,366			88,348
Foreign exchange loss		204,106			73,637
Interest expense on lease obligations		17,897			10,821
Stock-based compensation		433,829			–
Cashless warrant exercise		(113,765	)		–
Changes in operating assets and liabilities:
Other receivables		96,860			(58,815	)
Prepayments		9,509			(23,000	)
Deposits held by related parties		83,022			(235,682	)
Accounts payable and accrued liabilities		798,064			1,114,588
Due to related parties		261,840			294,115
Cash used in operating activities		(4,037,307	)		(1,335,724	)

INVESTING ACTIVITIES
Purchase of property, plant and equipment		(1,601,999	)		(397,869	)
Cash used in investing activities		(1,601,999	)		(397,869	)

FINANCING ACTIVITIES
Proceeds from issuance of shares, net of share issuance costs		3,851,614			1,856,336
Deferred financing costs		(2,973	)		(25,179	)
Proceeds from share subscriptions		203,701			45,446
Proceeds from convertible debenture		2,000,000			78,566
Payments of promissory note		–			(64,993	)
Payments of lease obligations		(93,244	)		(99,573	)
Cash provided by financing activities		5,959,098			1,790,603

Change in cash for the period		319,792			57,010
Cash, beginning of the period		462,360			39,571
Effect of foreign exchange on cash		(7,743	)		(26,216	)
Cash, end of the period		774,409			70,365
Other non-cash transactions:
Shares issued for conversion of debt and interest		688,178			–
Shares issued for payment of finder’s fees		4,796,832			–

Other cash flow disclosures:
Cash paid during the period for interest		5,549			–

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

WESTERN MAGNESIUM CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

1.	NATURE OF OPERATIONS AND GOING CONCERN

Western Magnesium Corporation (the “Company”, or “WMC”) was incorporated under the laws of British Columbia on March 24, 1966. On May 14, 2019, the Company discontinued from the jurisdiction of the Business Corporations Act (British Columbia) and domesticated under the General Corporation Law of the State of Delaware under the name “Western Magnesium Corporation”. The Company is a reporting issuer in Canada and in the United States, listed for trading in Canada on the TSX Venture Exchange (the “TSX-V”) under the symbol “WMG.V”, in the United States on the OTCQB tier of the OTC Markets (the “OTCQB”) under the symbol “MLYF”, and in Germany on the Frankfurt Stock Exchange under the symbol “3WM”. The Company has developed proprietary magnesium production technology with the aim of becoming a premier low-cost producer of green primary magnesium metal.

As at April 30, 2022, the Company had an accumulated deficit of $65,894,907 (October 31, 2021 – $52,129,621) and working capital deficiency of $7,172,573 (October 31, 2021 – $9,657,316). For the six months ended April 30, 2022, the Company reported a comprehensive loss of $13,551,323 (2021 – $2,745,438). The Company has not yet achieved profitable operations and expects to incur further losses from operations. The Company has financed its activities and operations through equity issuances and debt financing and expects to continue to do so to the extent such financing is available. There can be no assurance that such financing will be available under terms acceptable to the Company or at all.

These unaudited condensed consolidated financial statements (the “Financial Statements”) have been prepared under the assumption that the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will be able to meet its obligations and continue its operations for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. Management believes that the going concern assumption is appropriate for these Financial Statements based on its continuing ability to raise financings through share and debt issuances. If future financing is unavailable or if for any reason the Company is unable to continue as a going concern, it could impact the Company’s ability to realize its assets at their recognized values and to meet its obligations in the ordinary course of business at the amounts stated in these Financial Statements. These Financial Statements do not give effect to adjustments that would be necessary to the carrying values and classifications of assets and liabilities should the Company be unable to continue as a going concern. If the going concern assumption is not used, the adjustments required to report the Company’s assets and liabilities on a liquidation basis could be material to these Financial Statements.

The Company’s management has evaluated whether there is substantial doubt about the Company’s ability to continue as a going concern and has determined that substantial doubt existed as of April 30, 2022. This determination was based on the following factors: (i) the Company used cash of approximately $4.0 million in operations during the six months ended April 30, 2022; (ii) the Company’s available cash as of April 30, 2022 will not be sufficient to fund its anticipated level of operations for the next 12 months; (iii) the Company will require additional financing for the fiscal year ending October 31, 2022 to continue at its expected level of operations; and (iv) if the Company fails to obtain the needed capital, it will be forced to delay, scale back, or eliminate some or all of its development activities or perhaps cease operations. In the opinion of management, these factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for at least one year from the date of these Financial Statements are issued.

In March 2020, the World Health Organization declared COVID-19 a global pandemic. In order to combat the spread of COVID-19, governments worldwide, including the Unites States and Canada, have enacted emergency measures including travel bans, legally enforced or self-imposed quarantine periods, social distancing and business and organization closures. These measures have adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. The impact on the Company has not been significant but could affect the Company’s ability to raise financings in the future and restrict travel. Management continues to monitor the situation.

2.	BASIS OF PRESENTATION

These Financial Statements comprise the financial statements of Western Magnesium Corporation and its wholly owned subsidiaries, Western Magnesium Corp., incorporated in Nevada, United States and Western Magnesium Canada Corporation, incorporated in British Columbia, Canada.

[a] Accounting standards

The accompanying Financial Statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) on the basis that the Company will continue as a going concern, which assumes that the Company will be able to meet its obligations as they become due and continue its operations for at least one year from the date these Financial Statements are issued. Realization values may be substantially different from carrying values as shown and these Financial Statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.

These Financial Statements have been prepared on a historical cost basis except for financial instruments that have been measured at fair value. In addition, these Financial Statements have been prepared using the accrual basis of accounting, except for cash flow information. They do not include all the information required for complete annual financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended October 31, 2021 (the “Fiscal 2021 Financial Statements”).

[b] Functional and presentation currency

These Financial Statements are presented in United States dollars (“US dollars” or “US$”), except where otherwise indicated. The functional currency of each entity of the Company is as follows:

Entity		Functional Currency
Western Magnesium Corporation		United States dollars
Western Magnesium Corp.		United States dollars
Western Magnesium Canada Corporation		Canadian dollars (“CA$”)

During the three months ended January 31, 2022, significant changes in economic facts and circumstances have occurred in Western Magnesium Corporation’s operations which resulted in the change of its functional currency to the United States dollars from the Canadian dollar effective November 1, 2021. For both monetary and non-monetary assets and liabilities, translated balances at the end of the prior period become the new accounting basis. The rate on the date of change becomes the historical rate at which non-monetary assets and liabilities are translated in subsequent years. There is no effect on the cumulative translation adjustment on the consolidated basis. Previously recorded cumulative translation adjustments are not reversed. Effects of change in functional currency included the reclassifications of convertible debentures and warrants and broker warrants [notes 12[d] and [e]].

The accounts of the Company’s subsidiary Western Magnesium Canada Corporation have been translated to United States dollars with the exchange translation adjustments recorded in other comprehensive income (loss).

[c] Critical accounting estimates and judgments

Significant Estimates and Assumptions

The preparation of these Financial Statements in accordance with US GAAP requires the Company to make estimates and assumptions concerning the future that affect the amounts reported in the Financial Statements and accompanying notes. Management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised.

Estimates and assumptions where there is potential risk of material adjustments to assets and liabilities in future accounting periods include the useful lives of property, plant and equipment, recoverability of the carrying value of exploration and evaluation assets, fair value measurements for financial instruments, discount rates for leases, recoverability and measurement of deferred tax assets and liabilities, and contingent liabilities.

Significant Judgments

The preparation of these Financial Statements in accordance with US GAAP requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying the Company’s Financial Statements include:

-	the assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that may give rise to substantial doubt;

-	whether there are indicators of impairment of the Company’s exploration and evaluation assets and other non-current assets;

-	the classification of financial instruments; and

-	determination of functional currency.

3.	RECENT ACCOUNTING PRONOUNCEMENTS

New Accounting Standards Adopted During the Periods

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Effective November 1, 2021, the Company adopted the new standard. There was no material impact or adjustment to these Financial Statements.

In January 2020, the FASB issued ASU 2020-01, Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”), which is intended to clarify the interactions of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Effective November 1, 2021, the Company adopted the new standard. There was no material impact or adjustment to these Financial Statements.

New Accounting Standards Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments and supersedes the respective guidance within ASC 470-20 and ASC 740-10-55-51, which will result in more instruments to be accounted for as a single instrument rather than having their proceeds allocated between liability and equity accounting units. As smaller reporting companies as defined by the United States Securities and Exchange Commission (the “SEC”), ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its Financial Statements.

4.	PROPERTY, PLANT AND EQUIPMENT

	Computer Equipment			Furniture			Leasehold Improvement			Furnace & Plant Equipment			Vehicle			Total
	$			$			$			$			$			$

Cost
Balance, October 31, 2020		32,318			38,916			7,610			28,413			–			107,257
Additions		77,955			11,510			129,257			2,278,205			–			2,496,927
Write-off of equipment		(4,245	)		–			–			–			–			(4,245	)
Foreign exchange effect		3,601			3,116			2,614			38,108			–			47,439
Balance, October 31, 2021		109,629			53,542			139,481			2,344,726			–			2,647,378
Additions		7,008			2,171			107,014			1,456,591			29,215			1,601,999
Foreign exchange effect		–			(288	)		(5,306	)		(70,509	)		(302	)		(76,405	)
Balance, April 30, 2022		116,637			55,425			241,189			3,730,808			28,913			4,172,972

Accumulated Depreciation
Balance, October 31, 2020		14,677			8,326			4,818			–			–			27,821
Depreciation expense		13,907			7,443			8,827			13,971			–			44,148
Write-off of equipment		(2,057	)		–			–			–			–			(2,057	)
Foreign exchange effect		1,294			745			502			221			–			2,762
Balance, October 31, 2021		27,821			16,514			14,147			14,192			–			72,674
Depreciation expense		18,236			3,833			15,217			83,755			2,920			123,961
Foreign exchange effect		–			(48	)		(404	)		(801	)		(29	)		(1,282	)
Balance, April 30, 2022		46,057			20,299			28,960			97,146			2,891			195,353

Net Book Value
Balance, October 31, 2020		17,641			30,590			2,792			28,413			–			79,436
Balance, October 31, 2021		81,808			37,028			125,334			2,330,534			–			2,574,704
Balance, April 30, 2022		70,580			35,126			212,229			3,633,662			26,022			3,977,619

5.	RIGHT-OF-USE ASSETS

As at April 30, 2022, the right-of-use assets are leases for the Company’s offices in Vancouver, British Columbia and McLean, Virginia, and its research and development pilot plant located in Burnaby, British Columbia. These leases terminate on March 31, 2023, February 28, 2025 and September 30, 2023, respectively. The lease for the Company’s office in Las Vegas, Nevada ended on May 31, 2021.

SCHEDULE OF RIGHT- OF - USE ASSETS

	Vancouver Office		Virginia Office			Nevada Office		Pilot Plant			Total
	$		$			$		$			$

Cost
Balance, October 31, 2020		59,701		–			22,856		357,949			440,506
Additions		91,237		287,847			–		–			379,084
Foreign exchange effect		5,943		4,544			1,724		26,997			39,208
Balance, October 31, 2021		156,881		292,391			24,580		384,946			858,798
Foreign exchange effect		–		(3,038	)		–		(12,278	)		(15,316	)
Balance, April 30, 2022		156,881		289,353			24,580		372,668			843,482

Accumulated Depreciation
Balance, October 31, 2020		42,142		–			14,434		9,943			66,519
Depreciation expense		44,259		15,288			8,915		117,292			185,754
Foreign exchange effect		3,876		241			1,231		2,602			7,950
Balance, October 31, 2021		90,277		15,529			24,580		129,837			260,223
Depreciation expense		22,229		33,790			–		62,347			118,366
Foreign exchange effect		–		(162	)		–		(4,766	)		(4,928	)
Balance, April 30, 2022		112,506		49,157			24,580		187,418			373,661

Net Book Value
Balance, October 31, 2020		17,559		–			8,422		348,006			373,987
Balance, October 31, 2021		66,604		276,862			–		255,109			598,575
Balance, April 30, 2022		44,375		240,196			–		185,250			469,821

6.	LEASE OBLIGATIONS

On adoption of ASU 2016-02 on November 1, 2019, the Company recognized lease liabilities of $83,549 which had previously been classified as operating leases. The lease liabilities were measured at the present value of the remaining lease payments and discounted using the lessee’s incremental borrowing rate of approximately 7%.

During the year ended October 31, 2020, the Company entered into a new operating lease with respect to its research and development pilot plant located in Burnaby, British Columbia and recognized a lease liability of $354,263, which was measured by discounting lease payments using an incremental borrowing rate of approximately 6%.

During the year ended October 31, 2021, the Company renewed its operating lease with respect to its office in Vancouver, British Columbia and recognized a lease liability of $91,237, which was measured by discounting lease payments using an incremental borrowing rate of approximately 7%.

During the year ended October 31, 2021, the Company entered into a new operating lease with respect to its corporate head office in McLean, Virginia and recognized a lease liability of $260,649, which was measured by discounting lease payments using an incremental borrowing rate of approximately 7%.

SCHEDULE OF OPERATING LEASE

	Vancouver Office			Virginia Office			Nevada Office			Pilot Plant			Total
	$			$			$			$			$

Balance, October 31, 2020		18,123			–			12,211			350,593			380,927
Additions		91,237			260,649			–			–			351,886
Lease payments		(47,931	)		(5,137	)		(9,457	)		(139,037	)		(201,562	)
Interest expense		3,076			3,019			219			19,005			25,319
Prior period adjustment		–			–			(3,065	)		–			(3,065	)
Foreign exchange effect		2,099			4,081			92			24,548			30,820
Balance, October 31, 2021		66,604			262,612			–			255,109			584,325
Lease payments		(24,187	)		–			–			(69,057	)		(93,244	)
Interest expense		1,958			9,230			–			6,711			17,899
Foreign exchange effect		–			(2,728	)		–			(7,513	)		(10,241	)
Balance, April 30, 2022		44,375			269,114			–			185,250			498,739

Which consist of:
Current lease obligation		44,375			71,092			–			129,125			244,592
Non-current lease obligation		–			198,022			–			56,125			254,147
Balance, April 30, 2022		44,375			269,114			–			185,250			498,739

7.	MINERAL PROPERTY COSTS

As at April 30, 2022, the Company had the following mining claims:

[a] Silverado Property, Nevada, United States

The Silverado property is located in the Pinto mining district of Nevada, consists of 3 patented mining claims totaling approximately 120 hectares, and is 100% owned by the Company. The carrying value of the property is $1.

[b] Tami Mosi Property, Nevada, United States

The Company holds a 100% interest in 81 unpatented lode mining claims totaling approximately 1,637 acres located in White Pine County, Nevada and four unpatented lode mining claims totaling approximately 10 acres located in the Moor Mining District, Elko County, Nevada. These mining claims are subject to a 2% net smelter royalty in favor of the prior owner of the claims. The carrying value of the property is $93,452.

8.	RELATED PARTY TRANSACTIONS

[a] Deposits held by related parties

The Company provided related parties with advances that were held as deposits for anticipated future costs related to the Company’s planned magnesium research and development pilot plant and other administrative expenses (the “Pilot Plant Advances”). As at April 30, 2022, the Company had the following deposits held by related parties:

	Related Party A ^[i]			Related Party B ^[ii]			Total
	$			$			$

Balance, October 31, 2020		–			–			–
Advances		987,912			2,292,912			3,280,824
Costs and expenses		(696,431	)		(2,097,931	)		(2,794,362	)
Balance, October 31, 2021		291,481			194,981			486,462
Advances		330,930			1,225,118			1,556,048
Costs and expenses		(249,872	)		(1,420,829	)		(1,670,701	)
Foreign exchange effect		16,218			730			16,948
Balance, April 30, 2022		388,757			–			388,757

[i]

Related Party A is a company controlled by a director and officer.

[ii]

Related Party B is a company controlled by an officer.

[b] Due to related parties

As at April 30, 2022, balances due to related parties totaled $1,253,280 (October 31, 2021 – $1,026,817). All advances are unsecured, non-interest bearing, and have no stated terms of repayment.

SCHEDULE OF DUE TO RELATED PARTIES

	April 30, 2022		October 31, 2021
	$		$
Wages payable to directors and officers		357,500		357,500
Benefits payable to directors and officers		730,810		539,209
Fees and expenses payable to directors and officers		164,970		127,878
Interest due to a shareholder		–		2,230
Total		1,253,280		1,026,817

[c] Key management compensation

As at April 30, 2022, the Company had twelve executives including seven key senior management members. Their aggregate annualized compensation is approximately $3.1 million. During the six months ended April 30, 2022, the Company incurred salaries, benefits, and consulting fees totaling $1,626,279 to directors and officers, and stock-based compensation of $160,700 for options granted to an officer of the Company.

[d] Transactions with related parties

[i] During the six months ended April 30, 2022, the Company incurred consulting fees of $27,630 (CA$35,000) to a member of senior management.

[ii] During the six months ended April 30, 2022, the Company incurred consulting fees of $30,000 to a company controlled by an executive.

[iii] In June 2021, the Company renewed its sublease agreement with a company controlled by a director and officer for its office in Vancouver, British Columbia with a lease term from April 1, 2021 to March 31, 2023 at a monthly rent of $7,656 (CA$9,794).

[iv] Pursuant to an agreement entered on August 29, 2018 and which was approved by the TSX-V on September 12, 2018, a company controlled by a director and officer is eligible to receive up to 5% of the issued and outstanding common shares of the Company as at August 28, 2018 for up to $5 million raised. During the year ended October 31, 2021, the commitment was met. On November 3, 2021, the Company issued 9,163,425 common shares at a price of CA$0.65 per share with a total fair value of $4,796,832 (CA$5,956,226) as share issue costs.

9.	CONTINGENT LIABILITIES AND COMMITMENTS

[a] Contingent liabilities

[i] On September 29, 2020, James Sever filed a Notice of Civil Claim against the Company in the Supreme Court of British Columbia (the “Sever Claim”). The Sever Claim alleges that Mr. Sever had an employment and/or other similar contractual relationship with the Company, and that the Company breached such contractual relationship by way of constructive dismissal or similar conduct. The Sever Claim seeks damages in excess of $2.5 million, certain equity compensation, prejudgment garnishment, costs, interest and other non-monetary relief. On July 27, 2021, the Company filed a response to the Sever Claim. On April 5, 2022, the Company filed an amended response to the Sever Claim, which included the following pleadings: (a) British Columbia is an inappropriate and inconvenient forum for the Sever Claim; (b) to the extent that British Columbia is the appropriate forum for the Sever Claim, nonetheless: (i) the Sever Claim is barred in whole or in part by applicable doctrines of delay / statute of limitations, (ii) the Company did not constructively dismiss Mr. Sever and, instead, it was Mr. Sever that abandoned, quit or resigned from his obligations to the Company, (iii) the Company has no debts, liabilities or obligations to Mr. Sever. The Company intends to vigorously defend against the Sever Claim, and believes that the Sever Claim is without merit. As the Company cannot predict the outcome of the Sever Claim, no provision has been recognized as there is no present obligation and the probability of an outcome cannot be determined.

[ii] On December 31, 2020, GEM Yield Bahamas Limited (“GEM”) served the Company with a Notice of Intention to Arbitrate (the “New York Arbitration Notice”) before the American Arbitration Association in New York (the “GEM New York Arbitration”). The New York Arbitration Notice alleges the Company breached a Share Subscription Agreement dated November 15, 2019 entered into between the Company and GEM (the “GEM Agreement”), among other things, claiming damages of approximately $3.4 million (CA$4.2 million). On January 19, 2021, the Company filed a petition in the New York Supreme Court to stay the GEM New York Arbitration claiming the GEM Agreement was not valid. On March 19, 2021, the Court in the New York State Action ruled that there was an arbitration clause in the GEM Agreement but it was up to the arbitrator to determine if the arbitration clause was valid. Following this ruling, the New York State Action was closed. In June 2021, GEM filed a Statement of Claim in the GEM New York Arbitration, and the Company filed a Statement of Answer denying the existence of any binding agreement between the Company and GEM, among other defenses. In January 2022, the Company filed a Modified Statement of Defense and Counterclaims. On April 8, 2022, the parties agreed to consolidate this arbitration with the GEM Montreal Arbitration. The parties then filed consolidated pleadings, and both matters will be decided via arbitration in Montreal. The Company intends to vigorously defend itself in the GEM New York Arbitration and believes the allegations lack merit. As the Company cannot predict the outcome of this arbitration proceeding, no provision has been recognized in respect to the GEM New York Arbitration as there is no present obligation and the probability of an outcome cannot be determined.

[iii] On February 8, 2021, GEM instituted another arbitration against the Company before the International Centre for Dispute Resolution in Montreal Canada (the “GEM Montreal Arbitration”) and joined GEM’s affiliate, GEM Global Yield LLC SCS (“GEM Global Yield” together with GEM, the “GEM Parties”). The Statement of Claim filed by the GEM Parties alleges the Company breached a Share Subscription Agreement dated November 15, 2019 and promissory note, among other things, claiming damages of approximately $3.9 million (CA$4.9 million), in addition to costs and expenses, stemming from the Company’s alleged failure to issue to GEM Global Yield warrants to purchase up to 33 million shares of the Company’s common stock. The Company filed a Statement of Defense denying the existence of any binding agreement between the Company and GEM, among other defenses. In January 2022, the Company filed an Amended Statement of Defense and Cross-claim. On April 8, 2022, the parties agreed to consolidate this arbitration with the GEM New York Arbitration. The parties then filed consolidated pleadings, and both matters will be decided via arbitration in Montreal. The Company intends to vigorously defend itself in the GEM Montreal Arbitration and believes the allegations lack merit. As the Company cannot predict the outcome of this arbitration proceeding, no provision has been recognized in respect to the GEM Montreal Arbitration as there is no present obligation and the probability of an outcome cannot be determined.

[iv] On April 19, 2021, Lampert Advisors, LLC (“Lampert”) filed a Verified Complaint against the Company’s wholly owned subsidiary Western Magnesium Corp., a Nevada corporation (“Western Magnesium – Nevada”) in the Supreme Court of the State of New York, County of New York (the “Lampert Lawsuit”). The complaint filed in the Lampert Lawsuit alleges that Lampert entered into an agreement with Western Magnesium – Nevada to provide various financial advisory services including acquisition advisory services and act as an exclusive placement agent for a combination of debt and equity securities (the “Lampert Agreement”), that it performed all services required under that agreement and that it is owed $367,227 plus interest at the rate of 9% from February 3, 2021 and that it has a right of first refusal to act as financial advisor in connection with any debt, equity or debt restructuring assignments on terms, conditions and compensation customary for Lampert for a transaction of the type contemplated. Although Lampert claims to have personally served Western Magnesium – Nevada, the Company never received the Summons and Complaint and therefore, never submitted a response. On September 9, 2021, Lampert filed a Motion seeking the entry of a default judgment (the “Motion”). The Company opposed the Motion and filed a cross-motion to compel Lampert to accept the Company’s answer. The Court granted the Company’s cross-motion and denied Lampert’s Motion as moot. On March 4, 2022, the Company filed a Verified Amended Answer, Affirmative Defenses, and Counterclaims. The counterclaims seek at least $120,000 in damages from Lampert. The Company intends to vigorously defend against the Lampert Lawsuit and prosecute its counterclaims, and the Company believes that the claims asserted by Lampert are without merit. As the Company cannot predict the outcome of the Lampert Lawsuit, no provision has been recognized as there is no present obligation and the probability of an outcome cannot be determined.

[b] Commitments

[i] On November 1, 2016, the Company signed a contract services agreement with Lodestar Management Group, LLC (“Lodestar”), a US corporate logistics company. Lodestar provides advisory, consulting, negotiation and other management services relating to corporate management, administrative and/or operational activities of the Company. The term of the contract was for one year and has been renewed under the same terms on January 1, 2018 and 2019. The Company has agreed to compensate Lodestar in the amount of $1,800 or CA$2,500 per month by either cash or arrangement of the issuance of shares. The number of shares issued will be based on the share price on the day of issuance that is not lower than the CA$0.05 per share minimum requirement and will not exceed $1,800 or CA$2,500 in value. The shares will be issued on the last working day of each month for a period of twelve months. During the six months ended April 30, 2022, the Company paid $30,624 in cash (2021 – $nil) and did not issue any shares (2021 – nil) to Lodestar. As at April 30, 2022, the outstanding amounts payable to Lodestar was $32,716 (October 31, 2021 – $53,491).

[ii] During the year ended October 31, 2020, the Company has entered into a lease agreement for its research and development pilot plant in Burnaby, British Columbia with a lease term from October 1, 2020 to September 30, 2023 at a monthly rent of $16,194 (CA$20,715). In June 2021, the Company renewed its sublease agreement with a company controlled by a director and officer for its office in Vancouver, British Columbia with a lease term from April 1, 2021 to March 31, 2023 at a monthly rent of $7,656 (CA$9,794). In September 2021, the Company entered into a lease agreement for its corporate head office in McLean, Virginia with a lease term from September 14, 2021 to February 28, 2025 at a monthly rent of $9,113. The Company will be abated for the first five months and is entitled to a tenant allowance of $41,010 [notes 5 and 6].

10.

PROMISSORY NOTE

During the year ended October 31, 2019, the Company received a loan of $112,895 (CA$150,000) from a related party. The loan was unsecured, bore interest at 18% and was due on demand. During the year ended October 31, 2020, the loan was increased by an additional $44,588 (CA$60,000) to $157,483 (CA$210,000), and was due on September 24, 2021. During the year ended October 31, 2021, the Company accrued interest expense of $1,639 (2020 – $16,655) and repaid the entire balance and interest totaling $65,761 (2020 – $101,066).

11.

PROVISION FOR FLOW THROUGH SHARE ISSUANCES

The Company has recorded a provision in the amount of $225,833 (October 31, 2021 – $233,285) for tax and related obligations relating to flow through share issuances from prior years.

12.

CONVERTIBLE DEBENTURE AND DERIVATIVE LIABILITY

[a] July 2020 Convertible Debenture

On July 27, 2020, the Company closed a non-brokered private placement of an unsecured convertible note in the principal amount of $112,124 (CA$150,000, the “July 2020 Convertible Debenture”). The note bears interest at 12% per annum and is due on the date that is one year following the closing date. The note is convertible into common shares of the Company at the price which is the greater of CA$0.15 per common share and the market price on the date of the conversion notice. Any accrued but unpaid interest will be payable on the earlier of the maturity date and the date of conversion in cash or common shares. No finder’s fees were paid in connection with this private placement. On May 18, 2021, the Company issued a total of 1,360,959 common shares on the conversion of the July 2020 Convertible Debenture including conversion of accrued interest and 263,973 common shares valued at $26,286 in transaction costs. The July 2020 Convertible Debenture had an effective interest rate of 37%.

[b] July 2021 Convertible Debenture

On July 15, 2021, the Company closed a non-brokered private placement of an unsecured convertible note in the principal amount of $79,542 (CA$100,000, the “July 2021 Convertible Debenture”) which it received on April 22, 2021. The note bears interest at 12% per annum and is due on the date that is one year following the closing date. The note is convertible at a price of CA$0.12 per unit, where each unit is comprised of one common share and one common share purchase warrant exercisable at a price of CA$0.20 per common share for a period of two years. Any accrued but unpaid interest will be payable on the earlier of the maturity date and the date of conversion in cash or common shares. On April 22, 2022, the Company issued a total of 933,333 Units on the conversion of the July 2021 Convertible Debenture including conversion of accrued interest. The July 2021 Convertible Debenture had an effective interest rate of 594%.

[c] June 2021 Convertible Debenture

On June 15, 2021, the Company closed a non-brokered private placement of an unsecured convertible note in the principal amount of $1,500,000 (the “June 2021 Convertible Debenture”). The note bears interest at 12% per annum and matures on December 10, 2022. The June 2021 Convertible Debenture is convertible into 15,000,000 units, where each unit consists of (i) one share of the Company’ common stock, (ii) one-half of one Class A common stock purchase warrant, with each whole warrant being exercisable at a price of $0.13 until June 10, 2026, and (iii) one-half of one Class B common stock purchase warrant, with each whole warrant being exercisable at a price of $0.19 until June 10, 2026 (collectively, the “Class A and B Warrants”). In addition, the conversion price for accrued interest is the greater of (i) $0.10 and (ii) the minimum conversion price permitted by the TSX-V at the time of conversion.

As part of the offering of the June 2021 Convertible Debenture, the Company also entered into a securities purchase agreement dated June 10, 2021 (the “2021 Securities Purchase Agreement”), whereby the Company agreed to use commercially reasonable efforts to file a registration statement with the United States Securities and Exchange Commission (the “SEC”) by August 14, 2021, covering the public resale of the shares of common stock underlying such debenture and, upon its conversion, the Class A and B Warrants issuable upon such conversion (the “Underlying Shares”), and to use its best efforts to cause the registration statement to be declared effective on October 13, 2021. On December 13, 2021, the Company’s Form 10 Registration Statement filed with the SEC was declared effective.

In addition to certain covenants contained in the 2021 Securities Purchase Agreement, the terms of the June 2021 Convertible Debenture contain certain negative covenants by the Company, including, among others, sell or offer to sell any securities with non-fixed or floating price features, issue any common stock or common stock equivalents at a price lower than the conversion price herein then in effect, or issue any equity or debt instruments with anti-dilution provisions.

In the event the Company issues or sells any common stock or common stock equivalents with terms that the purchaser holding the outstanding June 2021 Convertible Debenture or the Class A and B Warrants reasonably believes are more favorable to such holder than the terms of the June 2021 Convertible Debenture or the Class A and B Warrants, then upon notice to the Company by such holder within five trading days after notice to such holder by the Company, the Company will use commercially reasonable efforts to obtain the approval of the TSX-V and any additional required regulatory approval to amend the terms of the June 2021 Convertible Debenture or the Class A and B Warrants as required, as the case may be, so as to give such holder the benefit of such more favorable terms or conditions.

The conversion price of the June 2021 Convertible Debenture and the exercise price of the Class A and B Warrants are subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events, including merger or consolidation of the Company or in a “Fundamental Transaction” as defined in the June 2021 Convertible Debenture.

The Company has granted the holders certain rights of first refusal on its future offerings for as long as the June 2021 Convertible Debenture or the Class A and B Warrants are outstanding.

The Company may prepay and satisfy the June 2021 Convertible Debenture so long as an event of default has not occurred, upon 20 days’ prior written notice received by the Company to the holder, by paying 125% of the amounts owed on the June 2021 Convertible Debenture, including all principal, interest and other fees. The holder of this debenture may, however, convert all or a portion of the debenture during the 20-day notice period.

During the six months ended April 30, 2022, the Company issued an aggregate 6,000,000 units on partial conversion of the June 2021 Convertible Debenture, for a total of 6,000,000 common shares, 3,000,000 Class A Warrants exercisable at a price of $0.13 until June 10, 2026, and 3,000,000 Class B Warrants exercisable at a price of $0.19 until June 10, 2026 [note 13[b]]. As at April 30, 2022, the Company incurred contractual interest of $140,942 (October 31, 2021 – $70,521). The June 2021 Convertible Debenture has an effective interest rate of 1,240%.

[d] April 2022 Convertible Debenture

On April 14, 2022, the Company entered into a securities purchase agreement (the “2022 Securities Purchase Agreement”) and closed a non-brokered private placement of an unsecured convertible note in the principal amount of $2,000,000 (the “April 2022 Convertible Debenture”). The note bears interest at 15% per annum and matures on October 14, 2023. The April 2022 Convertible Debenture is convertible into 6,666,667 units, where each unit consists of one share of the Company’ common stock and one common stock purchase warrant exercisable at a price of $0.40 per share for a period of five years from the date of issuance.

The April 2022 Convertible Debenture may not be prepaid prior to maturity and contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the 2022 Securities Purchase Agreement or the April 2022 Convertible Debenture.

In the event of default under the April 2022 Convertible Debenture, the interest rate shall increase to the lesser of 20% per annum or the maximum rate permitted under applicable law until paid and the following “Mandatory Default Amount” shall be paid, if demanded by the purchaser: the sum of (a) the greater of (i) the outstanding principal amount of the April 2022 Convertible Debenture divided by the conversion price on the date the Mandatory Default Amount is either (A) demanded (if demand or notice is required to create an event of default) or otherwise due or (B) paid in full, whichever has a lower conversion price, multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded, (y) due, or (z) paid in full, whichever is highest, or (ii) 125% of the outstanding principal amount of the April 2022 Convertible Debenture plus (b) all other amounts, costs, expenses and liquidated damages due in respect of the April 2022 Convertible Debenture.

Pursuant to the terms of the 2022 Securities Purchase Agreement, the Company also entered into a registration rights agreement dated April 14, 2022 (the “2022 Registration Rights Agreement”). Pursuant to the terms of the 2022 Registration Rights Agreement, the Company agreed to prepare and file with the SEC a registration statement covering the resale of all shares issued or issuable upon conversion of the April 2022 Convertible Debenture, upon exercise of the respective warrants of the April 2022 Convertible Debenture, upon conversion of the June 2021 Debenture, and upon exercise of the respective warrants of the June 2021 Convertible Debenture. The Company agreed to file the registration statement with the SEC within 30 days following April 14, 2022 and to use best efforts to have the registration statement declared effective by the SEC within 60 days following April 14, 2022 if the SEC does not review it or by August 12, 2022 if the SEC reviews it. In the event the Company fails to file the registration statement or such registration statement is not declared effective within the time periods noted above or such registration statement is not kept effective while any of the securities registered pursuant to such registration statement, the Company will be obligated to pay the holder of the debentures a penalty in cash, in the amount of $20,000 on the date of such failure and on the 30th day of each month following such failure. The 2022 Registration Rights Agreement contains customary indemnification provisions. On May 25, 2022, the Company filed a Form S-1 Registration Statement with the SEC.

As at April 30, 2022, the Company incurred contractual interest of $13,151 (October 31, 2021 – $nil). The April 2022 Convertible Debenture has an effective interest rate of 22%.

[e] Debt Host Liability and Embedded Derivative Liability

Certain of the Company’s convertible debentures were determined to be hybrid financial instruments comprised of a debt host liability and an embedded derivative liability, as under the conversion feature the number of shares that will or may be issued to settle the notes may vary. The Company uses the Black-Scholes Option Pricing Model based on different default risks and assumptions. The debt host liability of the convertible note will be measured at amortized cost, with the embedded derivative liability measured at fair value.

On issuance date of the July 2020 Convertible Debenture, the fair value of its debt host liability was determined to be $87,083 and the respective embedded derivative liability was valued at $25,041. Fair value adjustments were made to the embedded derivative liability of the July 2020 Convertible Debenture on conversion date of May 18, 2021, resulting in a fair value of $nil.

On issuance date of the July 2021 Convertible Debenture, it was determined to be a convertible debt instrument with a beneficial conversion feature accounted for in accordance with ASU 470-20. The Company allocated the intrinsic value of the beneficial conversion feature of the July 2021 Convertible Debenture capped at the face value of $79,542 (CA$100,000) to additional paid-in capital. On November 1, 2021, the Company’s functional currency change resulted in the reclassification of the July 2021 Convertible Debenture to a hybrid financial instrument accounted for in accordance with ASU 815-15. The embedded derivative liability was valued at $421,095 (CA$529,400), the previous beneficial conversion feature was reversed out of additional paid-in capital, and a loss of $341,553 (CA$429,400) was recognized in the statements of loss and comprehensive loss. Fair value adjustments were made to the embedded derivative liability of the July 2021 Convertible Debenture on conversion date of April 22, 2022, resulting in a fair value of $nil.

On issuance date of the June 2021 Convertible Debenture, it was determined to be a hybrid financial instrument comprised of a debt host liability and an embedded derivative liability. The embedded derivative liability was valued at $1,646,600 which exceeded the face value of the note itself of $1,500,000, the debt host liability was then assigned a face value of $1, with an immediate loss of $146,601 on recognition of the debt host liability. As at October 31, 2021, its combined value was $7,449,744. On November 1, 2021, the Company’s functional currency change resulted in the reclassification of the June 2021 Convertible Debenture from a hybrid financial instrument accounted for in accordance with ASU 815-15 to a convertible debt instrument with a beneficial conversion feature accounted for in accordance with ASU 470-20. The value of the embedded derivative liability was reclassified to additional paid-in capital. The corresponding debt discount is amortized as interest costs over the period from the issuance date to the stated maturity date using the effective interest method. During the six months ended April 30, 2022, the Company recorded interest expense on debt discount of $600,769 which includes the full amortization of the portions of the debt which were converted in the period. As at April 30, 2022, the debt discount had a carrying value of $899,231.

On issuance date of the April 2022 Convertible Debenture, it was determined to be a convertible debt instrument with a beneficial conversion feature accounted for in accordance with ASU 470-20. The Company allocated the intrinsic value of the beneficial conversion feature of the April 2022 Convertible Debenture of $240,000 to additional paid-in capital, and the corresponding debt discount is amortized as interest costs over the period from the issuance date to the stated maturity date using the effective interest method. During the six months ended April 30, 2022, the Company recorded interest expense on debt discount of $2. As at April 30, 2022, the debt discount had a carrying value of $239,998.

SCHEDULE OF DERIVATIVE INSTRUMENTS

	July 2020 Convertible Debenture			July 2021 Convertible Debenture			June 2021 Convertible Debenture			April 2022 Convertible Debenture			Total
	$			$			$			$			$

Debt Host Liability
Balance, October 31, 2020		96,318			–			–			–			96,318
Fair value of debt host liability recognized		–			–			1			–			1
Accretion and interest expense		23,587			63			43			–			23,693
Conversion		(125,560	)		–			–			–			(125,560	)
Foreign currency translation		5,655			–			–			–			5,655
Balance, October 31, 2021		–			63			44			–			107
Effects of functional currency change		–			–			1,500,000			–			1,500,000
Fair value at inception		–			–			–			2,000,000			2,000,000
Accretion and interest expense		–			28,050			5,610			17,159			50,819
Conversion		–			(28,031	)		(600,000	)		–			(628,031	)
Foreign currency translation		–			(82	)		–			–			(82	)
Balance, April 30, 2022		–			–			905,654			2,017,159			2,922,813

Embedded Derivative Liability
Balance, October 31, 2020		20,123			–			–			–			20,123
Fair value of embedded derivative liability recognized		–			–			1,646,600			–			1,646,600
Fair value adjustment		(16,058	)		–			5,717,328			–			5,701,270
Conversion		(5,247	)		–			–			–			(5,247	)
Foreign currency translation		1,182			–			85,772			–			86,954
Balance, October 31, 2021		–			–			7,449,700			–			7,449,700
Effects of functional currency change		–			421,094			(7,449,700	)		–			(7,028,606	)
Fair value adjustment		–			(259,447	)		–			–			(259,447	)
Conversion		–			(158,169	)		–			–			(158,169	)
Foreign currency translation		–			(3,478	)		–			–			(3,478	)
Balance, April 30, 2022		–			–			–			–			–

Debt Discount
Balance, October 31, 2021		–			–			–			–			–
Effects of functional currency change		–			–			(1,500,000	)		–			(1,500,000	)
Inception		–			–			–			(240,000	)		(240,000	)
Amortization		–			–			600,769			2			600,771
Balance, April 30, 2022		–			–			(899,231	)		(239,998	)		(1,139,229	)

Combined Value of Convertible Debenture
Balance, October 31, 2020		116,441			–			–			–			116,441
Balance, October 31, 2021		–			63			7,449,744			7,449,744			7,449,807
Balance, April 30, 2022		–			–			6,423			1,777,161			1,783,584

The inputs used in the Black-Scholes Option Pricing Model are as follows:

SCHEDULE OF OPTION PRICING MODEL

	April 22,			November 1,			October 31,			June 15,			July 27,
	2022			2021			2021			2021			2020
Risk free rate of interest		2.65	%		1.07	%		1.08	%		0.31	%		0.26	%
Expected life in years		0.23 years			0.70 years			1.11 years			1.50 year			0.74 year
Conversion exercise price		CA$0.12			CA$0.12		$	0.10		$	0.10			CA$0.15
Underlying share price of the Company		CA$0.36			CA$0.75		$	0.59		$	0.19			CA$0.13
Expected volatility		99.90	%		124.34	%		107.62	%		87.17	%		82.54	%
Expected dividend rate		Nil			Nil			Nil			Nil			Nil

[f] Derivative Liability – Warrants and Broker Warrants

On November 1, 2021, the Company’s functional currency change resulted in the reclassification of its outstanding warrants and broker warrants denominated in Canadian dollars as derivative liabilities measured at fair value. The previous value of outstanding broker warrants was reversed out of additional paid-in capital, and the derivative liability of warrants and broker warrants were valued at $26,956,177 and $76,811, respectively. During the six months ended April 30, 2022, upon exercise of common share purchase warrants, $4,482,962 was reclassified from derivative liability to stockholders’ deficit. The Company recognized a loss of $7,060,790 in the change in fair value of the derivative liability. As at April 30, 2022, the derivative liability of warrants and broker warrants were valued at $2,465,603 and $2,658, respectively. The Company uses the Black-Scholes Option Pricing Model based on default risks and assumptions as appropriate to value its warrants.

13.

SHARE CAPITAL

[a] Authorized capital

The authorized share capital consists of 1,000,000,000 common voting shares at par value of $0.001.

[b] Common shares issued

Fiscal 2021

[i] In connection with the non-brokered private placement announced on September 10, 2020:

On November 20, 2020, the Company closed the first tranche of the non-brokered private placement, issuing 5,599,171 units at a price of CA$0.13 per unit for gross proceeds of $556,876 (CA$727,892), which had been received prior to October 31, 2020 and recorded as an obligation to issue shares.

On January 15, 2021, the Company closed the second tranche of the non-brokered private placement, consisting of 7,337,914 units at a price of CA$0.13 per unit for gross proceeds of $749,435 (CA$953,930), of which $39,996 had been received prior to October 31, 2020 and recorded as an obligation to issue shares.

On January 29, 2021, the Company closed the third tranche of the non-brokered private placement consisting of 5,382,303 units at a price of CA$0.13 per unit for gross proceeds of $547,496 (CA$699,699).

On March 24, 2021, the Company closed the fourth tranche of the non-brokered private placement consisting of 6,554,172 units at a price of CA$0.13 per unit for gross proceeds of $678,270 (CA$852,042).

On April 27, 2021, the Company closed the fifth and final tranche of the non-brokered private placement consisting of 851,395 units at a price of CA$0.13 per unit for gross proceeds of $89,237 (CA$110,681).

In total, the Company issued an aggregate 25,724,955 units at a price of CA$0.13 per unit for aggregate gross proceeds of $2,621,314 (CA$3,344,244). Each unit issued consists of one common share and one common share purchase warrant entitling the holder to acquire a further common share at a price of CA$0.19 for a period of one year from the closing date of the respective financing tranche. The Company incurred aggregate share issue costs of $195,614.

[ii] On May 5, 2021, the Company announced a non-brokered private placement priced at CA$0.13 per unit to raise gross proceeds of up to CA$3,000,000. On May 28, 2021, the Company closed the first tranche of the non-brokered private placement issuing 5,223,420 units at a price of CA$0.13 per unit for gross proceeds of $561,844 (CA$679,044). On June 17, 2021, the Company closed the second and final tranche of the non-brokered private placement consisting of 17,853,506 units at a price of CA$0.13 per unit for gross proceeds of $1,880,687 (CA$2,320,956). The Company issued total of 23,076,926 units at a price of CA$0.13 per unit for total gross proceeds of $2,442,531 (CA$3,000,000). Each unit issued consists of one common share and one common share purchase warrant entitling the holder thereof to acquire a further common share at a price of CA$0.19 for a period of one year from the date of closing of the respective financing tranche. The Company incurred aggregate share issue costs of $154,336.

[iii] On May 18, 2021, the Company issued a total of 1,360,959 common shares on the conversion of the July 2020 Convertible Debenture including accrued interest and 263,973 common shares valued at $26,286 in transaction costs.

[iv] On June 7, 2021, the Company issued 1,538,461 common shares at a price of CA$0.24 per share with a total fair value of $305,832 (CA$369,231) for equipment.

[v] On July 16, 2021, the Company closed a non-brokered private placement and issued 4,350,000 units at a price of CA$0.20 per unit for gross proceeds of $690,860 (CA$870,000). Each unit consists of one common share and one common share purchase warrant entitling the holder thereof to acquire a further common share at a price of CA$0.30 for a period of one year from the date of closing. The Company incurred aggregate share issue costs of $48,319.

[vi] On August 11, 2021, the Company closed a non-brokered private placement and issued 3,827,601 units at a price of CA$0.55 per unit for gross proceeds of $1,683,336 (CA$2,105,180). Each unit consists of one common share and one common share purchase warrant entitling the holder thereof to acquire a further common share at a price of CA$0.65 for a period of eighteen months from the date of closing. The Company incurred aggregate share issue costs of $124,923.

[vii] During the year ended October 31, 2021, the Company issued a total of 7,014,969 common shares on the exercise of common share purchase warrants at a price ranging from CA$0.05 to CA$0.21 per share for gross proceeds of $887,520 (CA$1,120,130). A total of 525,173 warrants expired unexercised.

[viii] During the year ended October 31, 2021, the Company issued a total of 2,630,000 common shares on the exercise of stock options at a price ranging from CA$0.05 to CA$0.16 per share for gross proceeds of $140,734 (CA$175,800).

[ix] With respect to the exercises of common share purchase warrants and options, the Company reclassified $4,291 and $121,932, respectively, from additional paid-in capital to share capital during the year ended October 31, 2021.

Fiscal 2022

[i] Pursuant to an agreement entered on August 29, 2018 and which was approved by the TSX-V on September 12, 2018, a company controlled by a director and officer was eligible to receive up to 5% of the issued and outstanding common shares of the Company as at August 28, 2018 for up to $5 million raised. During the year ended October 31, 2021, the commitment was met. On November 3, 2021, the Company issued 9,163,425 common shares at a price of CA$0.65 per share with a total fair value of $4,796,832 (CA$5,956,226) as share issue costs.

[ii] On November 4, 2021, the Company issued 1,000,000 units on partial conversion of the June 2021 Convertible Debenture, for a total of 1,000,000 common shares, 500,000 Class A Warrants exercisable at a price of $0.13 until June 10, 2026, and 500,000 Class B Warrants exercisable at a price of $0.19 until June 10, 2026. On December 13, 2021, the Company issued a further 1,000,000 units on partial conversion of the June 2021 Convertible Debenture, for a total of 1,000,000 common shares, 500,000 Class A Warrants exercisable at a price of $0.13 until June 10, 2026, and 500,000 Class B Warrants exercisable at a price of $0.19 until June 10, 2026. On January 20, 2022, the Company issued a further 1,000,000 units on partial conversion of the June 2021 Convertible Debenture, for a total of 1,000,000 common shares, 500,000 Class A Warrants exercisable at a price of $0.13 until June 10, 2026, and 500,000 Class B Warrants exercisable at a price of $0.19 until June 10, 2026. The Company incurred aggregate share issue costs of $1,361.

[iii] On November 26, 2021, the Company closed a non-brokered private placement and issued 1,375,499 units at a price of $0.55 per unit for gross proceeds of $756,524. Each unit consists of one common share and one common share purchase warrant entitling the holder thereof to acquire a further common share at a price of $0.75 for a period of one year from the date of closing. The Company incurred aggregate share issue costs of $26,656.

[iv] During the three months ended January 31, 2022, upon exercise of common share purchase warrants, the Company issued an aggregate 15,159,448 common shares at a price CA$0.19 per share for gross proceeds of $2,279,136 (CA$2,880,295), 200,000 common shares at a price of CA$0.05 per share for gross proceeds of $7,830 (CA$10,000), and 30,000 common shares at a price of CA$0.30 per share for gross proceeds of $6,981 (CA$9,000). The Company issued a total of 15,389,448 common shares for gross proceeds of $2,293,946 (CA$2,899,295). A total of 2,428,363 warrants expired unexercised.

[v] On March 10, 2022, the Company issued 1,000,000 units on partial conversion of the June 2021 Convertible Debenture, for a total of 1,000,000 common shares, 500,000 Class A Warrants exercisable at a price of $0.13 until June 10, 2026, and 500,000 Class B Warrants exercisable at a price of $0.19 until June 10, 2026. On April 27, 2022, the Company issued a further 2,000,000 units on partial conversion of the June 2021 Convertible Debenture, for a total of 2,000,000 common shares, 1,000,000 Class A Warrants exercisable at a price of $0.13 until June 10, 2026, and 1,000,000 Class B Warrants exercisable at a price of $0.19 until June 10, 2026.

[vi] On April 22, 2022, the Company issued a total of 933,333 common shares and 933,333 common share purchase warrants exercisable at a price of CA$0.20 for a period of two years on the conversion the July 2021 Convertible Debenture including CA$100,000 principal amount and CA$12,000 accrued interest.

[vii] During the three months ended April 30, 2022, upon the exercise of common share purchase warrants, the Company issued an aggregate 929,005 common shares at a price of CA$0.19 per share for gross proceeds of $929,005 (CA$1,177,755), 2,082,025 common shares at a price of CA$0.05 per share for gross proceeds of $81,354 (CA$104,101), and 30,960 common shares at a price of CA$0.30 per share for gross proceeds of $7,357 (CA$9,288). A total of 3,191,933 warrants and 40,000 broker warrants expired unexercised.

[viii] During the three months ended April 30, 2022, the Company issued a total of 750,000 common shares on the exercise of stock options at a price of CA$0.05 per share for gross of $29,715 (CA$37,500), and reclassified $22,203 from additional paid-in capital to share capital.

[c] Common share purchase warrants

A summary of the changes in the Company’s common share purchase warrants during the six months ended April 30, 2022 are as follows:

Expiry Date	Exercise Price ($)	Weighted Average Life (Years)		October 31, 2021		Granted		Exercised			Expired/ Cancelled			April 30, 2022
Expiry Date	Exercise Price ($)	Weighted Average Life (Years)		October 31, 2021		Granted		Exercised			Expired/ Cancelled			April 30, 2022
November 22, 2021	CA$0.19		–		4,160,021		–		(4,080,573	)		(79,448	)		–
January 17, 2022	CA$0.19		–		7,267,914		–		(5,959,396	)		(1,308,518	)		–
January 31, 2022	CA$0.19		–		5,382,303		–		(4,341,906	)		(1,040,397	)		–
February 21, 2022	CA$0.05		–		1,505,200		–		(200,000	)		(1,305,200	)		–
March 24, 2022	CA$0.19		–		6,341,872		–		(4,515,139	)		(1,826,733	)		–
March 27, 2022	CA$0.05		–		982,025		–		(882,025	)		(100,000	)		–
April 27, 2022	CA$0.19		–		791,395		–		(791,395	)		–			–
May 9, 2022	CA$0.05		0.02		1,813,725		–		(1,000,000	)		–			813,725
May 30, 2022	CA$0.19		0.08		5,223,420		–		(276,675	)		–			4,946,745
June 17, 2022	CA$0.19		0.13		17,703,506		–		(1,393,077	)		–			16,310,429
July 18, 2022	CA$0.30		0.22		4,350,000		–		(60,960	)		–			4,289,040
August 14, 2022	CA$0.05		0.29		200,000		–		(200,000	)		–			–
February 13, 2023	CA$0.65		0.79		3,827,601		–		–			–			3,827,601
April 22, 2024	CA$0.20		1.98		–		933,333		–			–			933,333
Subtotal					59,548,982		933,333		(23,701,146	)		(5,660,296	)		31,120,873
Weighted average exercise price					CA$0.22		CA$0.20		CA$0.18			CA$0.16			CA$0.26

November 27, 2022	US$0.75		0.58		–		1,375,499		–			–			1,375,499
June 10, 2026	US$0.13		4.12		–		3,000,000		–			–			1,500,000
June 10, 2026	US$0.19		4.12		–		3,000,000		–			–			1,500,000
Subtotal					–		7,375,499		–			–			4,375,499
Weighted average exercise price					–		US$0.27		–			–			US$0.27

Total					59,548,982		8,308,832		(23,701,146	)		(5,660,296	)		38,496,372

A summary of the changes in the Company’s common share purchase warrants during the six months ended April 30, 2021 are as follows:

Expiry Date

Exercise

Price
($)

Weighted Average Life (Years)

October 31,

2020

Granted

Exercised

Expired/

Cancelled

April 30,

2021

August 31, 2021^*

CA$0.21

0.34

3,643,791

–

3,643,791

November 22, 2021

CA$0.19

0.56

–

5,599,171

–

5,599,171

January 17, 2022

CA$0.19

0.71

–

7,337,914

–

7,337,914

January 31, 2022

CA$0.19

0.75

–

5,382,303

–

5,382,303

February 21, 2022

CA$0.05

0.81

1,505,200

–

1,505,200

March 24, 2022

CA$0.19

0.90

–

6,554,172

–

6,554,172

March 27, 2022

CA$0.05

0.91

1,482,025

–

1,482,025

April 27, 2022

CA$0.19

0.99

–

851,395

–

851,395

May 9, 2022

CA$0.05

1.02

2,368,626

–

2,368,626

August 14, 2022

CA$0.05

1.29

1,110,000

–

(400,000

)

–

710,000

Total

10,109,642

25,724,955

(400,000

)

–

35,434,597

Weighted average exercise price

CA$0.11

CA$0.19

CA$0.05

–

CA$0.17

The Company received approval of the TSX-V on January 13, 2021 and amended the expiry date of 3,643,791 warrants, extending the expiry date from January 17, 2021 to August 31, 2021, subject to acceleration if the closing price of the Company’s shares exceeds CA$0.30 per common share for at least 10 consecutive trading days.

[d] Stock options

The Company has adopted an incentive stock option plan, effective on August 8, 2017 and as amended on August 8, 2018, under the rules of the TSX-V pursuant to which it is authorized to grant stock options to executive officers, directors, employees and consultants, enabling them to acquire up to 20% of the total shares outstanding of the Company (the “2017 Stock Option Plan”). Under the 2017 Stock Option Plan, the option exercise price of any option granted shall not be less than the discounted market price of the Company’s common shares. For the purposes of the 2017 Stock Option Plan, the discounted market price is calculated in accordance with the policies of the TSX-V at the time of the grant of the options. Stock options granted are subject to a maximum term of 5 years. All options granted shall vest immediately, except for those options granted to persons performing investor relations activities for the Company. Pursuant to the policies of the TSX-V, shares issued upon the exercise of options are restricted from trading during the 4-month period subsequent to the exercise of options.

On June 11, 2021, the Company adopted the 2021 Equity Incentive Plan which replaces the 2017 Stock Option for providing stock-based compensation to directors, officers, employees, consultants, and advisors of the Company and no further options will be granted under the 2017 Stock Option Plan. Under the 2021 Equity Incentive Plan, the Company is authorized to issue up 27,312,368 shares of the Company. In addition, any common shares reserved for issuance under the 2017 Stock Option Plan that are forfeited as a result of the expiration or termination of any awards under that plan after the date of adoption of the 2021 Equity Incentive Plan will be added to the 2021 Equity Incentive Plan. As of April 30, 2022, 5,980,000 stock options forfeited under the 2017 Stock Option Plan were added to the 2021 Equity Incentive Plan (October 31, 2021 – 1,730,000), resulting in 33,292,368 stock options as the maximum number of common shares available under the 2021 Equity Incentive Plan (October 31, 2021 – 2,9,042,368). The 2021 Equity Incentive Plan provides for various equity-based and cash-based incentive awards, including incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and restricted stock units, performance awards, dividend equivalents and other equity-based or cash-based awards.

On December 30, 2020, the Company granted 15,650,000 stock options pursuant to its 2017 Stock Option Plan to its directors, officers, employees and consultants at a price of CA$0.13 per share, of which 9,500,000 were exercisable for a period of five years and 6,150,000 were exercisable for a period of two years. However, these options exceeded the maximum allowed under the Company’s 2017 Stock Option Plan. On June 11, 2021, the Company received shareholders’ approval to amend the Company’s 2017 Stock Option Plan to increase the number of common shares reserved for issuance under such plan and rectified the grant of these options.

On August 30, 2021, the Company granted 21,700,000 incentive stock options pursuant to its 2021 Equity Incentive Plan to its directors, officers, employees and consultants. These options are exercisable at a price of CA$0.70 per share for a period of five years.

On October 1, 2021, the Company granted 1,450,000 incentive stock options pursuant to its 2021 Equity Incentive Plan to its officer and employee and consultants. These options are exercisable at a price of CA$0.50 per share for a period of five years.

On December 3, 2021, the Company granted 250,000 incentive stock options pursuant to its 2021 Equity Incentive Plan to an employee. These options are exercisable at a price of CA$0.58 per share for a period of five years.

On March 7, 2022, the Company granted 500,000 incentive stock options pursuant to its 2021 Equity Incentive Plan to an officer. These options are exercisable at a price of CA$0.40 per share for a period of five years.

On April 8, 2022, the Company granted 500,000 incentive stock options pursuant to its 2021 Equity Incentive Plan to employees. These options are exercisable at a price of CA$0.40 per share for a period of five years.

As at April 30, 2022, 9,092,368 common shares remained available for grant under the 2021 Equity Incentive Plan.

During the six months April 30, 2022, the Company recognized a stock-based compensation totaling $433,829 (2021 – $nil) in relation to the grant of its stock options.

The weighted average grant date fair value of the stock options granted during the six months ended April 30, 2022 was CA$0.37 (2021 – CA$0.09) per option. Option pricing models require the use of highly subjective estimates and assumptions including expected stock price volatility. Changes in the underlying assumptions can materially affect the fair value estimates. The fair value of stock options was estimated on the measurement date using the Black-Scholes Option Pricing Model. The assumptions used to calculate the fair value were as follows:

SCHEDULE OF FAIR VALUE ASSUMPTIONS

	2022		2021
Risk free rate of interest		1.34 – 2.59%		0.20% – 1.07%
Expected life of options		5 years		2 to 5 years
Exercise price of options		CA$0.40 – CA$0.58		CA$0.13 – CA$0.70
Expected annualized volatility		134.93% – 136.08%		130.88% – 140.05%
Expected dividend rate		Nil		Nil

A summary of the changes in the Company’s stock options during the six months ended April 30, 2022 are as follows:

SCHEDULE OF STOCK OPTIONS ACTIVITY

Expiry Date	Exercise Price (CA$)		Weighted Average Life (Years)		Outstanding as at October 31, 2021		Granted		Exercised			Expired/ Cancelled			Outstanding as at April 30, 2022			Vested as at April 30, 2022
March 27, 2022		0.05		–		1,500,000		–		(750,000	)		(750,000	)		–			–
December 30, 2022		0.13		0.67		6,000,000		–		–			(150,000	)		5,850,000			5,850,000
August 12, 2023		0.05		1.28		2,290,000		–		–			(750,000	)		1,540,000			1,540,000
December 3, 2023		0.05		1.59		6,450,000		–		–			(1,000,000	)		5,450,000			5,450,000
May 22, 2024		0.12		2.06		7,900,000		–		–			(850,000	)		7,050,000			7,050,000
November 3, 2024		0.15		2.52		700,000		–		–			–			700,000			700,000
November 24, 2024		0.16		2.57		320,000		–		–			(300,000	)		20,000			20,000
March 26, 2025		0.11		2.91		100,000		–		–			–			100,000			100,000
April 23, 2025		0.12		2.98		3,350,000		–		–			(250,000	)		3,100,000			3,100,000
December 30, 2025		0.13		3.67		9,500,000		–		–			–			9,500,000			9,500,000
August 30, 2026		0.70		4.34		21,700,000		–		–			(200,000	)		21,500,000			21,350,000
October 1, 2026		0.50		4.42		1,450,000		–		–			–			1,450,000			1,450,000
December 3, 2026		0.58		4.60		–		250,000		–			–			250,000			250,000
March 7, 2027		0.40		4.85		–		500,000		–			–			500,000			500,000
April 8, 2027		0.40		4.94		–		500,000		–			–			500,000			500,000
Total						61,260,000		1,250,000		(750,000	)		(4,250,000	)		57,510,000			57,360,000
Weighted average exercise price						CA$0.33		CA$0.44		CA$0.05			CA$0.11			CA$0.34			CA$0.33
Aggregate intrinsic value					$	19,994,025									$	(2,149,050	)	$	(2,102,148	)
Weighted average remaining life						3.46										3.15			3.15

A summary of the changes in the Company’s nonvested stock options during the six months ended April 30, 2022 are as follows:

SCHEDULE OF NONVESTED STOCK OPTIONS

Expiry Date	Fair Value Per Share (CA$)		Weighted Average Life (Years)		Nonvested as at October 31, 2021		Granted		Vested			Expired/ Cancelled		Nonvested as at April 30, 2022
December 30, 2022		0.07		1.16		162,500		–		(162,500	)		–		–
August 30, 2026		0.56		4.83		300,000		–		(150,000	)		–		150,000
Total						462,500		–		(312,500	)		–		150,000
Weighted average grant date fair value – per option						CA$0.39		–		CA$0.30			–		CA$0.56
Weighted average grant date fair value – total					$	144,131		–	$	74,063			–	$	65,463

A summary of the changes in the Company’s stock options during the six months ended April 30, 2021 are as follows:


Expiry Date	Exercise Price (CA$)		Weighted Average Life (Years)		Outstanding as at October 31, 2020		Granted		Exercised			Expired/ Cancelled			Outstanding as at April 30, 2021		Vested as at April 30, 2021
February 11, 2021		0.05		0.03		800,000		–		–			(800,000	)		–		–
August 16, 2021		0.05		0.54		600,000		–		–			–			600,000		600,000
March 27, 2022		0.05		1.15		1,750,000		–		–			–			1,750,000		1,750,000
August 26, 2022		0.13		–		500,000		–		–			(500,000	)		–		–
December 30, 2022		0.13		1.91		–		6,150,000		–			(6,150,000	)		–		–
April 19, 2023		0.05		2.21		800,000		–		–			–			800,000		800,000
August 12, 2023		0.05		2.53		3,120,000		–		(100,000	)		–			3,020,000		3,020,000
December 3, 2023		0.05		2.84		7,000,000		–		–			–			7,000,000		7,000,000
May 22, 2024		0.12		3.31		7,950,000		–		–			–			7,950,000		7,950,000
November 3, 2024		0.15		3.76		700,000		–		–			–			700,000		700,000
November 24, 2024		0.16		3.82		900,000		–		–			–			900,000		900,000
March 26, 2025		0.11		4.15		300,000		–		–			–			300,000		300,000
April 23, 2025		0.12		4.23		4,000,000		–		–			(300,000	)		3,700,000		3,700,000
December 30, 2025		0.13		4.92		–		9,500,000		–			(9,500,000	)		–		–
Total						28,420,000		15,650,000		(100,000	)		(17,250,000	)		26,720,000		26,720,000
Weighted average exercise price						CA$0.09		CA$0.13		CA$0.05			CA$0.13			CA$0.09		CA$0.09
Aggregate intrinsic value					$	801,922									$	597,721	$	597,721
Weighted average remaining life						3.18										2.78		2.78

[e] Share-based payments and other reserves

The share-based payments and other reserves are used to recognize the fair value of stock options granted to directors, officers, employees and consultants as part of their remuneration, as well as those of broker warrants issued in relation to the Company’s financings. When stock options and broker warrants are subsequently exercised, the fair value of such stock options and broker warrants in additional paid-in capital is credited to share capital.

Common share purchase warrants attached to units as part of a unit placement were assigned a $nil value. The residual method is used to calculate the fair value of the warrant component of units issued, whereby the residual of the private placement proceeds less the fair value of the share component is assigned as the fair value of the warrants.

[f] Obligations to issue shares

As at April 30, 2022, the Company received advance share subscriptions in the amount of $388,701 (October 31, 2021 – $209,827) in respect of the non-brokered private placement closed subsequent to the period.

[g] Dilutive common shares

As at April 30, 2022, potentially dilutive common shares relating to common share purchase warrants and options outstanding totaling 96,006,372 (October 31, 2021 – 120,808,982) were not included in the computation of loss per share as the effect would be anti-dilutive.

14.

FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

The Company’s classification of its financial instruments is as follows:

Financial Instruments	Measurement Method	Associated Risk	Fair Value at April 30, 2022 ($)
Cash	FVTPL	Credit and currency		774,409
Other receivables	Amortized cost	Credit and currency		50,765
Subscription receivable	Amortized cost	Credit and currency		185,000
Deposits held by related parties	Amortized cost	Credit and currency		388,757
Accounts payable and accrued liabilities	Amortized cost	Currency		2,715,924
Due to related parties	Amortized cost	Currency		1,253,280
Convertible debenture, net	Amortized cost and FVTPL	Currency		1,783,584
Warrant liability	FVTPL	Currency		2,468,261

[a] Fair value

The fair value of financial instruments is the amount of consideration that would be agreed upon in an arm’s length transaction between knowledgeable, willing parties who are under no compulsion to act. The fair value of current financial instruments except derivative liability approximates their carrying values as long as they are short-term in nature or bear interest at market rates.

[b] Fair value hierarchy

Financial instruments that are held at fair value are categorized based on a valuation hierarchy which is determined by the valuation methodology utilized. The fair value hierarchy under US GAAP is based on the following three levels of inputs, of which the first two are considered observable and the last unobservable:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 – Observable inputs other than Level 1, quoted prices for similar assets or liabilities in active prices whose inputs are observable or whose significant value drivers are observable; and

Level 3 – Assets and liabilities whose significant value drivers are unobservable by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company evaluates its financial instruments and other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market at each balance sheet date and recorded as a liability and the change in fair value is recorded in the consolidated statements of loss and comprehensive loss. Upon conversion or exercise of a derivative instrument, the instrument is marked to market at the conversion date and then that fair value is reclassified to equity.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instruments that become subject to reclassification are reclassified at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified on the consolidated balance sheets as current or non-current based on whether or not settlement of the derivative instrument is expected within 12 months of the balance sheet date.

The Company uses the Black-Scholes Option Pricing Model to value derivative liabilities. This model uses Level 3 inputs in the fair value hierarchy established by ASC 820 Fair Value Measurement. The inputs used in determining the fair value of the embedded derivative are disclosed in note 12[e].

[c] Financial risk management

The Company’s board of directors has the overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and in response to the Company’s activities. Management regularly monitors compliance with the Company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.

In the normal course of operations, the Company is exposed to various risks such interest rate, foreign exchange, commodity, credit, and liquidity. To manage these risks, management determines what activities must be undertaken to minimize potential exposure to risks. The objectives of the Company in managing risks are as follows:

●	Maintaining sound financial condition:
●	Financing operations; and
●	Ensuring liquidity to all operations.

In order to satisfy these objectives, the Company has adopted the following policies:

●	Prepare budget documents at prevailing market rates to ensure clear corporate alignment to performance management and achievement of targets;
●	Recognize and observe the extent of operating risk within the business; and
●	Identify the magnitude of the impact of market risk factors on the overall risk of the business and take advantage of natural risk reductions that arise from these relationships.

[i] Interest rate risk

Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in the market interest rates. The Company is exposed to interest rate risk on its cash on deposits with banks and, from time to time, on its holdings of short-term investments. As of April 30, 2022, the Company had $774,409 (October 31, 2021 − $462,360) of cash on deposits with banks. The Company had no short-term investment as at April 30, 2022 and October 31, 2021. Given the level of cash held by the Company, fluctuations in the market interest rates had no significant impact on its interest income for the six months ended April 30, 2022.

[ii] Foreign currency risk

The Company is exposed to foreign currency risk on fluctuations related to cash, other receivables, accounts payable, due to related parties and convertible debenture that are denominated in Canadian dollars. The Company has not entered into foreign exchange derivative contracts. A significant change in the currency exchange rates between the US dollar relative to the Canadian dollar could have a material effect on the Company’s financial position, results of operations, or cash flows.

Based on the Company net exposures as at April 30, 2022, assuming that all other variables remain constant, a 5% appreciation or deterioration of the Canadian dollar against the US dollar would result in an increase or decrease of $78,312 in the Company’s net income (loss) and comprehensive income (loss).

The Company had the following assets and liabilities denominated in Canadian dollars:

SCHEDULE OF FOREIGN CURRENCY RISK

	April 30, 2022
	CA$
Cash		208,683
Other receivables		64,930
Accounts payable and accrued liabilities		(1,511,845	)
Due to related parties		(765,409	)
Total		(2,003,641	)

[iii] Commodity price risk

The value of the Company’s magnesium production business and its exploration and evaluation assets are dependent on the price of magnesium and the outlook for this mineral. Market prices for these metals historically have fluctuated widely and are affected by numerous factors outside the Company’s control, including but not limited to, levels of worldwide production, short-term changes in supply and demand, industrial and retail demand, as well as certain other factors related specifically to magnesium. If magnesium prices decline for a prolonged period below the cost of production, it may not be economically feasible to continue towards production.

[iv] Credit risk

Credit risk is the risk of loss if counterparties do not fulfill their contractual obligations and arises principally from trade receivables. The Company’s credit risk is primarily attributable to cash, and deposits held by related parties. The Company limits its exposure to credit risk on cash as these financial instruments are held with major Canadian and international banks. Other receivables consist primarily of GST due from the Federal Government of Canada. Management believes the credit risk concentration with respect to other receivables is remote. The carrying amount of financial assets recorded in the financial statements, net of any allowances, represents the Company’s maximum exposure to credit risk.

[v] Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company’s exposure to liquidity risk is dependent on its purchasing commitments and obligations and its ability to raise funds to meet commitments and sustain operations. The Company manages liquidity risk by continuously monitoring its actual and forecasted working capital requirements to ensure there is capital to meet short-term and long-term obligations.

As of April 30, 2022 and October 31, 2021, the Company had working capital deficiency of $7,172,573 and $9,657,316, respectively. As disclosed in note 1 to these Financial Statements, the ability of the Company to continue as a going concern is dependent on many factors. The Company’s management has evaluated whether there is substantial doubt about the Company’s ability to continue as a going concern and has determined that substantial doubt existed for at least one year from the date of these Financial Statements are issued. The Company has financed its activities and operations through equity issuances and debt financing and expects to continue to do so to the extent such financing is available. There can be no assurance that such financing will be available under terms acceptable to the Company or at all. Liquidity risk has been assessed as high.

15.

SEGMENTED INFORMATION

The Company focuses on plant operations and magnesium production and continues to move towards the buildout of its pilot plant facility and the development of a full-scale commercial magnesium production facility. The Company also owns mining claims for the exploration and development of mineral property interests. Geographic information for the Company’s assets is as follows:

SCHEDULE OF ASSETS INFORMATION

	April 30, 2022		October 31, 2021
	$		$

Canada – property, plant and equipment		3,946,315		2,546,383
United States – property, plant and equipment		31,304		28,321
United States – mineral property costs		93,453		93,453
Property, plant and equipment net		4,071,072		2,668,157

Canada – other assets		392,853		1,554,827
United States – other assets		1,611,578		290,528
Other assets		2,004,431		1,845,355

Total Assets		6,075,503		4,513,512

16.

SUBSEQUENT EVENTS

Subsequent to April 30 2022, upon exercise of common share purchase warrants, the Company issued an aggregate 3,793,331 common shares at a price CA$0.19 per share for gross proceeds of CA$720,733, and 800,000 common shares at a price of CA$0.05 per share for gross proceeds of CA$40,000. A total of 1,153,414 warrants and 13,725 broker warrants expired unexercised.

Subsequent to April 30, 2022, upon exercise of stock options, the Company issued 300,000 common shares at a price of CA$0.05 per share for gross proceeds of CA$15,000 and 250,000 common shares at a price of CA$0.13 per share for gross proceeds of CA$32,500.

On May 9, 2022, the Company closed the first tranche of a non-brokered private placement and issued 1,727,000 units at a price of $0.25 per unit for gross proceeds of $431,750. On June 3, 2022, the Company closed the second and final tranche of the non-brokered private placement and issued 740,000 units at a price of $0.25 per unit for gross proceeds of $185,000. The Company issued a total of 2,467,000 units for total gross proceeds of $616,750. Each unit consists of one common share and one common share purchase warrant entitling the holder thereof to acquire a further common share at a price of $0.45 for a period of one year from the date of closing.

On June 8, 2022, the Company issued 1,000,000 units on partial conversion of the June 2021 Convertible Debenture, for a total of 1,000,000 common shares, 500,000 Class A Warrants exercisable at a price of $0.13 until June 10, 2026, and 500,000 Class B Warrants exercisable at a price of $0.19 until June 10, 2026.

ITEM 2. MANAEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and accompanying notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021, filed with the Securities and Exchange Commission, or SEC, on February 15, 2021 (the “2021 Form 10-K”). This discussion contains forward-looking statements and involves numerous risks and uncertainties, including but not limited to those described in the “Risk Factors” section of this Quarterly Report on Form 10-Q and in “Part I, Item 1A—Risk Factors” in our 2021 Form 10-K. Actual results may differ materially from those contained in any forward-looking statements. You should read “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” contained herein and in our 2021 Form 10-K. Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Financial information presented in this MD&A is presented in United States dollars (“$” or “US$”), unless otherwise indicated.

The information about us provided in this MD&A, including information incorporated by reference, may contain “forward-looking statements” and certain “forward-looking information” as defined under applicable United States securities laws and Canadian securities laws. All statements, other than statements of historical fact, made by us that address activities, events or developments that we expect or anticipate will or may occur in the future are forward-looking statements, including, but not limited to, statements preceded by, followed by or that include words such as “may”, “will”, “would”, “could”, “should”, “believes”, “estimates”, “projects”, “potential”, “expects”, “plans”, “intends”, “anticipates”, “targeted”, “continues”, “forecasts”, “designed”, “goal”, or the negative of those words or other similar or comparable words and includes, among others, information regarding: our ability to become profitable and generate cash in our operating activities; our need for substantial additional financing to operate our business and difficulties we may face acquiring additional financing on terms acceptable to us or at all; our significant indebtedness and significant restrictions on our operations; our ability to construct and operate our planned magnesium research and development pilot plant and obtain necessary permits and authorizations to construct and operate the facility; the impact of global climate change on our ability to conduct future operations; our lack of a diversified portfolio of assets; our dependence on key inputs, suppliers and skilled labor for the production of magnesium; our ability to attract and retain key personnel; growth-related risks, including capacity constraints and pressure on our internal systems and controls; the adverse consequences of litigation we are currently involved in and litigation we may face from time to time; risk related to the protection of our intellectual and our exposure to infringement or misappropriation claims by third parties; risks related to competition; risks related to our lack of internal controls over financial reporting and their effectiveness; increased costs we are subject to as a result of being a public company in Canada and the United States; and other events or conditions that may occur in the future.

Forward-looking statements may relate to future financial conditions, results of operations, plans, objectives, performance or business developments. These statements speak only as at the date they are made and are based on information currently available and on the then current expectations of the party making the statement and assumptions concerning future events, which are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from that which was expressed or implied by such forward-looking statements, including, but not limited to, risks and uncertainties described in the “Risk Factors” section of this Quarterly Report on Form 10-Q and in “Part I, Item 1A—Risk Factors” in our 2021 Form 10-K.

Although we believe that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements, because no assurance can be given that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to the risks described in the “Risk Factors” section of this Quarterly Report on Form 10-Q and in “Part I, Item 1A—Risk Factors” in our 2021 Form 10-K.

Consequently, all forward-looking statements made in this MD&A and other documents, as applicable, are qualified by such cautionary statements, and there can be no assurance that the anticipated results or developments will actually be realized or, even if realized, that they will have the expected consequences to or effects on us. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that we and/or persons acting on its behalf may issue. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required under securities legislation.

We are on a fiscal year, as such the three-month period ending April 30, 2022 is our second quarter and the three-month period ending April 30 is referred to as the “three months” or “second quarter”. The six-month period ending April 30 is referred to as the “six months” or “year-to-date”. The fiscal year ended October 31, 2021 is referred to as “Fiscal 2021” and the coming fiscal year ending October 31, 2022 is referred to as “Fiscal 2022”.

Overview of the Business

We are a reporting issuer in Canada and in the United States. We are listed for trading on the TSX Venture Exchange (the “TSXV”) under the symbol “WMG”. Our common stock is also traded in the United States on the OTCQB tier of the OTC Markets (the “OTCQB”) under the symbol “MLYF” and in Germany on the Frankfurt Stock Exchange under the symbol “3WM”.

We have developed proprietary magnesium production technology with the aim of becoming a premier low-cost producer of green primary magnesium metal. We are in the final stages of construction and commencing test production of magnesium at a research and development pilot plant in metropolitan Vancouver, British Columbia, Canada. We have commenced testing at this facility in the last calendar quarter of 2021, and our proprietary continuous reactor has begun operation and has produced magnesium metal under our target temperature and pressure in the second calendar quarter of 2022. The remainder of the equipment is undergoing final checks which will allow the plant to enter the demonstration phase. Our proprietary technology utilizes a continuous silicothermic process that is expected to produce high grade magnesium with low labor and energy costs while generating minimal waste and toxic by-products.

In addition, we own a 100% interest in 81 unpatented lode mining claims totaling approximately 1,673 acres (the “Tami Mosi Mining Claim”), four unpatented lode mining claims totaling approximately 10 acres located in the Moor Mining District in Elco County, Nevada and a 100% interest in three patented mining claims located in the Pinto mining district of Nevada totaling approximately 296 acres (the “Silverado Mining Claim”). We do not plan on commencing extraction of minerals at this time from any mining claims we hold because we have identified alternative sources of supply of dolomite and ferrosilicon, the primary raw materials used to produce pure magnesium. We may in the future, however, commence extraction of minerals from the Tami Mosi Mining Claim if we are unable to purchase raw materials from the alternative sources we have identified at commercially reasonable rates. In addition, we do not consider our mining claims to be material to our business or financial condition.

Corporate History

We were incorporated under the Company Act (British Columbia) on March 24, 1966 as “Ft. Lauderdale Resources Inc.” We changed our name to Amcorp Industries Inc. on July 20, 1990, to Molycor Gold Corporation on May 17, 1996, to Nevada Clean Magnesium Inc. on April 16, 2012 and to Western Magnesium Corporation on May 14, 2019. On May 14, 2019, we discontinued from the jurisdiction of the Business Corporations Act (British Columbia) and domesticated under the General Corporation Law of the State of Delaware under the name “Western Magnesium Corporation.” In connection with the name change, we also changed our stock symbol to “WMG” on the TSXV. We have two wholly-owned subsidiaries: Western Magnesium Corp., incorporated in the State of Nevada in the United States which owns our mining claims in the Schell Creek Range located southeast of Ely, Nevada and manages the Company’s Nevada properties; and Western Magnesium Canada Corp., incorporated on May 3, 2019 in British Columbia, Canada which manages our Canadian operations.

General Development of Our Business

In 2006, we acquired the Silverado Mining Claim. During the year ended October 31, 2013, an impairment was recorded on this claim for $412,793 reducing its book value to $1.

In 2009, we acquired 27 mining claims totaling approximately 1,744 acres on property located southeast of Beaverdell, British Columbia (the “Beaverdell Mining Claim”). During the year ended October 31, 2013, an impairment was recorded on this claim for $335,133 reducing its book value to $1. During the year ended October 31, 2020, we sold our interest in the Beaverdell Mining Claim for $50,000 and recognized a gain on sale of $37,156.

On October 9, 2006, we acquired the Tami Mosi Mining Claim. On May 1, 2009, an Initial Resource Estimate was completed by Norm Tribe & Associates, Ltd. On June 11, 2010, a Phase 1 Process Development Study for Exploitation of the Tami Mosi Mining Claim was completed by Haze Research, Inc. On August 3, 2011, an updated resource estimate was completed by Tetra Tech, Inc. (“Tetra Tech”), on September 15, 2011 a Preliminary Economic Assessment and Technical Report of the Tami-Mosi Magnesium Project was completed by Tetra Tech and amended on July 4, 2014.

On April 4, 2017, we completed construction of a bench scale test furnace that employed our proprietary continuous silicothermic process and in October 2017, we successfully completed furnace preparations - a major milestone in the testing of our bench scale pilot furnace.

In November 2017, we completed “proof of concept” in the production of magnesium metal from our bench scale test furnace. The metal produced was a result from a partial test charge being conducted in order to identify any operational deficiencies in the furnace prior to a full charge test of dolime material.

In January 2018, we received a final assay report assessing the purity of the raw magnesium metal produced from our bench scale pilot furnace test program. In accordance with ASTM International standard ASTM E1479-16, the testing was analyzed via inductively coupled plasma (ICP). This unrefined magnesium metal was found to have a very good metal purity capable of producing ASTM B92 grade metal with minimal treatment. No impurities were found which would impact food grade applications.

In July 2018, we entered into an agreement with Industrial Surplus Ltd. (“ISL”) to build a silicothermic reduction furnace based on our bench scale test furnace.

In December 2018, our technical team produced a magnesium ingot from dolomite obtained from the Tami Mosi Mining Claim. This accomplishment completed the proof-of-concept stage allowing us to develop a pilot magnesium furnace based on the bench scale furnace.

Plan of Operations

In order to complete construction and testing at our planned research and development pilot plant, the following are the key milestones that we expect to achieve over the next 12 months following the date of this Quarterly Report on Form 10-Q:

	●	Commission the plant and complete final training of operations staff;
	●	Commence metal production under various scenarios to ensure sufficient data is collected;
	●	Begin the request for proposal process for commercial engineering, procurement and construction management (“EPCM”) firm;
	●	Select EPCM firm;
	●	Review all pilot data with chosen EPCM firm and validate proposed required operational scenarios; and
	●	Begin geotechnical assessments of proposed full-scale magnesium production facility in Harrison County, Ohio.

We estimate that the costs to complete this work will be approximately $8,000,000. We have commenced testing of the pilot reactor in the last calendar quarter of 2021, and our proprietary continuous reactor has begun operation and has produced magnesium metal under our target temperature and pressure in the second calendar quarter of 2022. Continuous demonstration phase operation will take place throughout the third calendar quarter of 2022.

Following completion of our magnesium research and development pilot plant, we intend to construct a full-scale magnesium production facility with expected capacity to produce 100,000 metric tons per year that will be scalable for greater production levels located on 122 acre property located in Harrison County, Ohio. The proposed plant will be adjacent to the future home of a modern mixed fuels power plant which is expected to provide power to our planned magnesium production plant. The proposed Harrison County, Ohio location is close to a dolomite supply and has an infrastructure of rail and highway that is capable of transporting our magnesium finished product to industries across the United States. Our plans will require a significant amount of additional capital. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.” We have no current plans to extract minerals from any of our mining claims.

Magnesium and Its Production

Magnesium is the lightest and strongest of the structural metals, just one-fourth the weight of steel, two-fifths the weight of titanium, and two-thirds the weight of aluminum. Magnesium has multiple industrial and consumer applications. Magnesium ingots are a prime raw material input for the production of titanium and aluminum alloys and magnesium alloys. Magnesium powder and granules are used to remove sulfur in the production of steel. Due to their unique light weight and high strength properties, magnesium alloys are used in a variety of aircraft and automobile parts, as well as in electronic equipment such as computers, cameras and cellular phones.

Most magnesium produced globally comes from natural minerals such as dolomite and magnesite in the form of magnesium carbonate. It can also be found in seawater and in salt lakes brines or underground mineral salt deposits. Magnesium can be produced through several different methods including the electrolytic process or thermal-reduction as practiced in the most commonly used Pidgeon process.

The electrolytic process involves the electrolysis of molten magnesium chloride which produces molten magnesium and chlorine. The metal is cast into ingots for further processing as needed and the chlorine by product may be sold for use in the production of polymers such as polyvinyl chloride pipe (PVC).

In the thermal-reduction method, calcined magnesium containing ores (magnesite and dolomite) are broken down into fine powder and mixed with reducing agents and catalyst agent. The mixture is heated in a vacuum chamber producing magnesium vapors which later condense into crystals. The crystals are then melted, refined and poured into ingots for further processing.

The Pidgeon process, using ferrosilicon as a catalyst, is most commonly used for production of magnesium as its operation is relatively easy and has a low capital cost. The traditional process using horizontal retorts is high in energy consumption and has low productivity.

Selected Financial Information

The following table summarizes our consolidated financial condition as at April 30, 2022 and October 31, 2021. The selected consolidated financial information set out below may not be indicative of our future performance.

	April 30, 2022			October 31, 2021
	$			$
Total assets		6,075,503			4,513,512
Current liabilities		8,691,474			10,891,270
Non-current liabilities		254,147			32,280
Shareholders’ deficit		(2,870,118	)		(6,770,038	)
Deficit		(65,894,907	)		(52,129,621	)
Working capital deficiency		(7,172,573	)		(9,657,316	)

Results of Operations

For the three months ended April 30, 2022 (“Q2 2022”), the Company recorded net income of $1,181,243 ($0.00 per common share), as compared to net loss of $403,910 ($0.00 per common share) for the same period in the preceding year (“Q2 2021”). The variance of $1,585,153 in Q2 2022 compared to Q2 2021 was attributable primarily to a $4,858,644 gain due to a change in fair value of derivative liability, partially offset by a $3,242,301 increase in operating expenditures. On a year-to-date basis, net loss for the six months ended April 30, 2022 (“YTD 2022”) was $13,765,286 ($0.03 per common share), as compared to $2,554,388 ($0.01 per common share) for the same period in the preceding year (“YTD 2021”). The increase of $11,210,898 in net loss in YTD 2022 compared to YTD 2021 was due primarily to a $7,059,356 increase in non-operating expenses and a $4,151,542 increase in operating expenses.

The following table summarizes our results of operations for Q2 2022 and YTD 2022, compared to the same periods in the preceding year. The selected consolidated financial information set out below may not be indicative of our future performance.

	Three Months Ended						Six Months Ended
	April 30,						April 30,
	2022			2021			2022			2021
	$			$			$			$
Operating expenses		(3,677,401	)		(435,100	)		(6,722,586	)		(2,571,044	)
Other income (expense)		4,858,644			31,190			(7,042,700	)		16,656
Net income (loss)		1,181,243			(403,910	)		(13,765,286	)		(2,554,388	)
Net income (loss) per share		0.00			(0.00	)		(0.03	)		(0.01	)

Three Months Ended April 30, 2022 Compared to Three Months Ended April 30, 2021

Operating Expenses

Operating expenses were $3,677,401 for Q2 2022, as compared to $435,100 for Q2 2021. The increase of 3,242,301 in operating expenditures was due primarily to increases in stock-based compensation, legal and professional fees, salaries and benefits, and interest, partially offset by a decrease in engineering expenses. The variances were primarily comprised of:

Stock-based compensation [Q2 2022 – $302,254; Q2 2021 – ($1,060,085); Variance – $1,362,339]

Stock-based compensation fluctuated depending on timing of option grant. During Q2 2022, the Company recorded stock-based compensation of $302,254 upon the grant of 1,000,000 stock options to an officer and certain employees. During Q2 2021, the Company reversed stock-based compensation of $1,060,085 for 15,650,000 stock options granted to certain directors, officers, employees and consultants on December 30, 2020 which were then nullified as they exceeded the maximum allowed under the Company’s stock option plan. This resulted in a non-cash variance of $1,362,339 between the two reporting periods. Subsequent to Q2 2021, the Company received shareholders’ approval on the amendment to the Company’s stock option plan to increase the number of common shares reserved for issuance under such plan and rectified the grant of these options.

Legal and professional fees (Q2 2022 – $970,206; Q2 2021 – $263,841; Variance – $706,365)

The Company incurred legal and professional fees of $970,206 during Q2 2022, as compared to $263,841 during Q2 2021. The increase of $706,365 in legal and professional fees was attributable mainly to litigations discussed elsewhere in this Quarterly Report on Form 10-Q, the Company’s registration of its Common Stock with the US Securities and Exchange Commission and other securities related matters, the setup of the new headquarter and management team in McLean, Virginia close to the Washington DC metropolitan area, U.S. site selection and government incentives advance strategies, as well as for audit and valuation services rendered during Q2 2022.

Salaries and benefits (Q2 2022 – $1,201,297; Q2 2021 – $631,284; Variance – $570,013)

The Company incurred salaries and benefits of $1,201,297 during Q2 2022, as compared to $631,284 during Q2 2021, representing an increase of $570,013. This was due mainly to increased personnel headcount as the Company set up its new headquarters and management team in McLean, Virginia close to the Washington DC metropolitan area and its continued effort in the buildout of its research and development pilot plant. As at April 30, 2022, the Company had 31 employees including 10 senior management members. At April 30, 2021, the Company had 22 employees including 5 senior management members. Certain senior management members’ salaries were also adjusted to be in line with industry standards.

Interest (Q2 2022 – $326,868; Q2 2021 – $17,760; Variance – $309,108)

The Company incurred interest of $326,868 during Q2 2022, as compared to $17,760 during Q2 2021. On November 1, 2021, the Company’s functional currency change resulted in the reclassification of the June 2021 Convertible Debenture from a hybrid financial instrument to a convertible debt instrument with a beneficial conversion feature. The Company allocated the intrinsic value of the beneficial conversion feature of the June 2021 Convertible Debenture capped at the face value of $1,500,000 to additional paid-in capital and recognized a debt discount of the same amount to be amortized as interest expense over the period from issuance date to maturity date using the effective interest method. During Q2 2022, the Company also allocated the intrinsic value of the beneficial conversion feature of the April 2022 Convertible Debenture of $240,000 to additional paid-in capital and recognized a debt discount of the same amount to be amortized as interest expense until its maturity. The increase of $309,108 in interest during Q2 2022 was attributable primarily to the interest expense of $300,735 from the amortization of the debt discount on partial conversion of the June 2021 Convertible Debenture during the period.

Engineering expenses [Q2 2022 – ($1,565); Q2 2021 – $119,066; Variance – ($120,631)]

For Q2 2022, the Company recorded a net recovery of $1,565 in engineering expenses due to a reclassification of certain expenses as capital assets. Engineering expenses was $119,066 for Q2 2021, which resulted in a variance of $120,631 between the two reporting periods.

Other Income (Expense)

Other income was $4,858,644 for Q2 2022, as compared to $31,190 for Q2 2021. The increase of $4,827,454 in other income was non-cash and was due mainly to the gain in the change in fair value of derivative liability of warrants and broker warrants, which were reclassified as derivative liabilities upon the Company’s functional currency change on November 1, 2021. The variance was comprised of:

Change in fair value of derivative liability (Q2 2022 – $4,858,644; Q2 2021 – $31,190; Variance – $4,827,454)

On November 1, 2021, the Company’s functional currency change resulted in the reclassification of its outstanding warrants and broker warrants denominated in Canadian dollars as derivative liabilities measured at fair value through other income (expense) in the Company’s consolidated statements of loss and comprehensive loss at the end of each reporting period. For Q2 2022, the Company recognized a non-cash gain of $4,704,451 on re-measurement of its derivative liability of warrants and broker warrants.

The Company’s functional currency change also resulted in the reclassification of the July 2021 Convertible Debenture from a convertible debt instrument with a beneficial conversion feature to a hybrid financial instrument comprised of a debt host liability and an embedded derivative liability. The debt host liability of the convertible note will be amortized at cost, with the embedded derivative liability measured at fair value through profit and loss at the end of each reporting period. For Q2 2022, the Company recognized a non-cash gain of $154,193 on re-measurement of its July 2021 Convertible Debenture on its conversion on April 22, 2021. For Q2 2021, the Company recognized a non-cash gain of $31,190 on re-measurement of its July 2020 Convertible Debenture.

The above resulted in a variance of $4,827,454 between the two reporting periods.

Six Months Ended April 30, 2022 Compared to Six Months Ended April 30, 2021

Operating Expenses

Operating expenses were $6,722,586 for YTD 2022, as compared to $2,571,044 for YTD 2021. The increase of $4,151,542 in operating expenditures was due primarily to increases in legal and professional fees, salaries and benefits, interest, stock-based compensation, depreciation, and investor relations expenses. The variances were primarily comprised of:

Legal and professional fees (YTD 2022 – $1,577,054; YTD 2021 – $287,586; Variance – $1,289,468)

The Company incurred legal and professional fees of $1,577,054 for YTD 2022, as compared to $287,586 for YTD 2021. The significant increase of $1,289,468 in legal and professional fees was attributable mainly to litigations discussed elsewhere in this Quarterly Report on Form 10-Q, the Company’s registration of its Common Stock with the US Securities and Exchange Commission and other securities related matters, the setup of the new headquarter and management team in McLean, Virginia close to the Washington DC metropolitan area, U.S. site selection and government incentives advance strategies, as well as for audit and valuation services rendered during YTD 2022.

Salaries and benefits (YTD 2022 – $2,196,839; YTD 2021 – $1,366,932; Variance – $829,907)

The Company incurred expenses for salaries and benefits of $2,196,839 for YTD 2022, as compared to $1,336,932 for YTD 2021, representing an increase of $829,907. This was due mainly to increased personnel headcount as the Company set up its new headquarters and management team in McLean, Virginia close to the Washington DC metropolitan area and its continued effort in the buildout of its research and development pilot plant. As at April 30, 2022, the Company had 31 employees including 10 senior management members. While at April 30, 2021, the Company had 22 employees including 5 senior management members. Certain senior management members’ salaries were also adjusted to be in line with industry standards.

Interest (YTD 2022 – $649,148; YTD 2021 – $36,334; Variance – $612,814)

The Company incurred interest of $649,148 during YTD 2022, as compared to $36,334 during YTD 2021. On November 1, 2021, the Company’s functional currency change resulted in the reclassification of the June 2021 Convertible Debenture from a hybrid financial instrument to a convertible debt instrument with a beneficial conversion feature. The Company allocated the intrinsic value of the beneficial conversion feature of the June 2021 Convertible Debenture capped at the face value of $1,500,000 to additional paid-in capital and recognized a debt discount of the same amount to be amortized as interest expense over the period from issuance date to maturity date using the effective interest method. During Q2 2022, the Company also allocated the intrinsic value of the beneficial conversion feature of the April 2022 Convertible Debenture of $240,000 to additional paid-in capital and recognized a debt discount of the same amount to be amortized as interest expense until its maturity. The increase of $612,814 in interest in YTD 2022 was attributable primarily to the interest expense of $600,769 from amortizing the debt discount on partial conversion of the June 2021 Convertible Debenture during the period.

Stock-based compensation (YTD 2022 – $433,829; YTD 2021 – $nil; Variance –$433,829)

In YTD 2022, the Company recorded stock-based compensation of $433,529 upon the grant of 1,250,000 stock options to an officer and certain employees. While in YTD 2021, the Company recorded $nil in stock-based compensation, resulting in a non-cash variance of $433,829 between the two reporting periods. The adoption of our 2021 Equity Incentive Plan which was approved by our shareholders during Fiscal 2021 is intended to promote our long-term financial interests and growth by attracting and retaining management and other personnel and key service providers with the training, experience and ability to enable them to make a substantial contribution to the success of our business. Moreover, our 2021 Equity Incentive Plan aims to align the interests of eligible participants with those of our shareholders through opportunities for increased equity-based ownership in our company.

Depreciation (YTD 2022 – $242,327; YTD 2021 – $96,993; Variance – $145,334)

In YTD 2022, the Company recorded $242,327 in depreciation expense, of which $118,366 were in relation to its right-of-use assets and $123,961 were in relation to property, plant and equipment purchased. While in YTD 2021, the Company recorded $96,993 in depreciation expense, of which $88,348 were right-of-use assets related and $5,645 were property, plant and equipment related. The increase of $145,334 in depreciation expense was due to the new right-of-use assets recognized in association with its new corporate head leased in September 2021 as well as increased capital expenditures as the Company continued to invest in the buildout of its research and development pilot plant facility.

Investor relations (YTD 2022 – $215,834; YTD 2021 – $70,936; Variance – $144,898)

Investor relations expenses were $215,834 in YTD 2022, as compared to $70,936 in YTD 2021. The increase of $144,898 in investor relations was a result of the Company’s increased financing activities, the development of a shareholders’ program to increase the Company’s name recognition and to grow shareholders’ value, as well as the preparation and promotion for up listing on other major exchanges.

Other Income (Expense)

Other expense was $7,042,700 for YTD 2022, as compared to other income of $16,656 for YTD 2021. The variance of $7,059,356 in other income (expense) was non-cash and was due mainly to the reclassification of warrants and broker warrants as derivative liability and the subsequent fair value re-measurement, and the accounting treatment of its convertible debentures resulted from the Company’s functional currency change. The variances were comprised of:

Change in fair value of derivative liability [YTD 2022 – ($6,701,147); YTD 2021 –$16,656; Variance – ($6,717,803)]

On November 1, 2021, the Company’s functional currency change resulted in the reclassification of its outstanding warrants and broker warrants denominated in Canadian dollars as derivative liabilities measured at fair value through other income (expense) in the Company’s consolidated statements of loss and comprehensive loss at the end of each reporting period. For YTD 2022, the Company recognized a non-cash loss of $7,060,790 on reclassification and re-measurement of its derivative liability of warrants and broker warrants.

The Company’s functional currency change also resulted in the reclassification of the July 2021 Convertible Debenture from a convertible debt instrument with a beneficial conversion feature to a hybrid financial instrument comprised of a debt host liability and an embedded derivative liability. The debt host liability of the convertible note will be amortized at cost, with the embedded derivative liability measured at fair value through other income (expense) in the Company’s consolidated statements of loss and comprehensive loss at the end of each reporting period. For YTD 2022, the Company recognized a non-cash gain of $359,643 on re-measurement and conversion of its July 2021 Convertible Debenture. For YTD 2021, the Company recognized a non-cash loss $45,724 on re-measurement of its July 2020 Convertible Debenture.

The above resulted in a variance of $6,717,803 between the two reporting periods.

Loss on recognition of debt host liability [YTD 2022 – ($341,553); YTD 2021 – $Nil; Variance – ($341,553)]

On November 1, 2021, the Company’s functional currency change resulted in the reclassification of the July 2021 Convertible Debenture from a convertible debt instrument with a beneficial conversion feature to a hybrid financial instrument. The embedded derivative liability was valued at $421,095 (CA$529,400) which exceeded the face value of the note itself of $79,542 (CA$100,000), the debt host liability was then assigned a face value of $1, with an immediate loss of $341,553 (CA$429,400) on recognition of the debt host liability.

Components of our Results of Operations

Operating Expenses

Operating expenses consist of general and administrative, research and development, business development, stock-based compensation, interest and accretion, and depreciation and amortization.

General and administrative expenses primarily include salaries and benefits, legal and professional fees, consulting, management, travel expenses, investor relations, shareholder communications, regulatory fees, facilities and rent, computer system and software, and office and other general and administrative expenses.

Research and development expenses include engineering expenses which are in relation to the design and modeling of the magnesium pilot plant facility and the magnesium furnace reactor, as well as the commercialization of our technology, and due diligence expenses which pertain to those incurred in the potential acquisition of a smelter site for magnesium metal production.

Business development expenses include expenses in relation to U.S. site selection, government incentives advance strategies, and other federal and industry advocacy to accelerate the development of the Company’s pioneering technologies and efforts to manufacture magnesium metal in the U.S. in an eco-friendly manner that will help meet the U.S. demand for magnesium metal.

Stock-based compensation on stock options issued to directors, officers and employees is measured at the fair value on the date of grant and expensed over the vesting period. For stock options issued to consultants, the fair value is periodically re-measured until the counterparty performance is complete.

Interest and accretion relate to convertible debt instruments, right-of-use assets, and other general vendor accounts.

Depreciation and amortization includes recognition of depreciation of property, plant and equipment and right-of-use assets over their depreciable lives.

Other Income (Expense)

Other income (expense) consists of non-cash change in fair value of derivative liability and non-cash loss on recognition of debt host liability.

Working Capital Deficiency

The calculation of working capital deficiency provides additional information and is not defined under GAAP. We define working capital deficiency as current assets less current liabilities. This measure should not be considered in isolation or as a substitute for any standardized measure under GAAP. This information is intended to provide investors with information about our liquidity. Other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

Liquidity and Capital Resources

As of April 30, 2022 and October 31, 2021, we had total current liabilities of $8,691,474 and $10,891,270, respectively, and current assets of $1,518,901 and $1,233,954, respectively, to meet our current obligations. As of April 30, 2022, we had working capital deficiency of $7,172,573, an increase of working capital of $2,484,743 as compared to October 31, 2021, driven primarily by non-cash items including the reclassification of warrants and broker warrants as derivative liabilities resulted from the Company’s functional currency change and the periodic re-measurement at fair value with changes in fair value through other income (expense) in the Company’s consolidated statements of loss and comprehensive loss, partly offset by a decrease in derivative liabilities due to reclassifications of convertible debentures also resulted from the Company’s functional currency change.

On November 1, 2021, the Company’s functional currency change resulted in the reclassification of its outstanding warrants and broker warrants denominated in Canadian dollars as derivative liabilities measured at fair value with changes in fair value reported in earnings as they occur at the end of each reporting period. As at April 30, 2022, the derivative liability of warrants and broker warrants were valued at $2,465,603 (October 31, 2021 – $nil) and $2,658 (October 31, 2021 – $nil), respectively.

On November 1, 2021, the Company’s functional currency change resulted in the reclassification of the June 2021 Convertible Debenture from a hybrid financial instrument accounted for in accordance with ASU 815-15 to a convertible debt instrument with a beneficial conversion feature accounted for in accordance with ASU 470-20. The value of the embedded derivative liability of $7,449,700 was reclassified to additional paid-in capital. The Company’s functional currency change also resulted in the reclassification of the July 2021 Convertible Debenture from a convertible debt instrument with a beneficial conversion feature accounted for in accordance with ASU 470-20 to a hybrid financial instrument accounted for in accordance with ASU 815-15. Fair value adjustments were made to the embedded derivative liability of the July 2021 Convertible Debenture on conversion date of April 22, 2022, resulting in a value of $nil.

We have a history of operating losses. We have not yet achieved profitable operations and expect to incur further losses. We have funded our operations primarily from equity and debt financing. As of April 30, 2022, cash generated from financing activities was not sufficient to fund operations and, in particular, to fund our growth strategy in the short-term or long-term. As a result, we raised additional funds from equity and debt financing transactions during YTD 2022 and Fiscal 2021 as discussed below under “Recent Financing Transactions.” The primary need for liquidity is to fund working capital requirements of the business, including operational and business development expenses, develop and construct our planned research and development pilot magnesium production facility and the capital expenditures associated with that project. The primary source of liquidity has primarily been private financing transactions. The ability to fund operations, to make planned capital expenditures, to execute on the development and operation of our planned research and development pilot facility, to develop a full-scale commercial magnesium production facility and to make scheduled debt and rent payments and to repay or refinance indebtedness depends on our ability to raise funds from debt and/or equity financing which is subject to prevailing economic conditions and financial, business and other factors, some of which are beyond our control. There can be no assurance that additional financing will be available to us when needed or at all, or obtained on commercially reasonable terms acceptable to us.

As of April 30, 2022, there have not been any meaningful impact or disruptions to our operations as a result of the COVID-19 pandemic. We continue to assess the impact of COVID-19 on an ongoing basis.

Recent Financing Transactions

On September 10, 2020, we announced a non-brokered private placement of up to 53,846,154 units priced at CAD$0.13 per unit (the “Unit”) for an aggregate offering of up to CAD$7,000,000 (the “September 2020 Private Placement”). Each Unit is comprised of one share of our common stock and one common share purchase warrant exercisable at CAD$0.19 per share for a period of one year from the date of issuance. On November 20, 2020, we closed the first tranche of the September 2020 Private Placement of 5,599,171 Units for gross proceeds of $556,876 (CAD$727,892). On January 15, 2021, we closed the second tranche of the September 2020 Private Placement consisting of 7,337,914 Units for gross proceeds of $749,435 (CAD$953,930). On January 29, 2021, we closed the third tranche of the September 2020 Private Placement consisting of 5,382,303 Units for gross proceeds of $547,496 (CAD$699,699). On March 24, 2021, we closed the fourth tranche of this offering and issued 6,554,172 Units for gross proceeds of $678,270 (CAD$852,042). On April 27, 2021, we closed the fifth and final tranche of this offering and issued 851,395 Units for gross proceeds of $89,237 (CAD$110,681). We closed an aggregate 25,724,955 Units for aggregate gross proceeds of $2,621,314 (CAD$3,344,244) and incurred aggregate share issue costs of $195,614 in connection to this offering.

On May 5, 2021, we announced a non-brokered private placement priced at CAD$0.13 per unit (the “Unit”) to raise gross proceeds of up to CAD$3,000,000 (the “May 2021 Private Placement”). Each Unit in this offering consists of one share of our common stock and one common share purchase warrant exercisable at a price of CAD$0.19 per share for a period of one year from the date of issuance. On May 28, 2021, we closed the first tranche of the May 2021 Private Placement issuing 5,223,420 Units for gross proceeds of $561,844 (CAD$679,044). On June 17, 2021, we closed the second and final tranche of this offering consisting of 17,853,506 Units for gross proceeds of $1,880,687 (CAD$2,320,956). We closed at the maximum offering and issued an aggregate 23,076,926 Units for aggregate gross proceeds of $2,442,531 (CAD$3,000,000). We incurred aggregate share issue costs of $154,336 in connection with this offering.

On May 18, 2021, we issued 1,360,959 common shares on the conversion of the July 2020 Convertible Debenture including conversion of accrued interest and 263,973 common shares valued at $26,286 in transaction costs.

On June 7, 2021, we received final approval from the TSX-V for an agreement with Industrial Surplus Supplies Ltd. (“ISL”), pursuant to which ISL will build a prototype internally heated testing lab furnace for the testing of a magnesium production process. We issued 1,538,461 common shares at a price of CAD$0.24 per share with a total fair value of $305,832 (CAD$369,231) for equipment.

On June 15, 2021, we closed a non-brokered private placement of an unsecured convertible note in the principal amount of $1,500,000 (the “June 2021 Convertible Debenture”). The June 2021 Convertible Debenture bears interest at 12% per annum and matures on December 10, 2022. The June 2021 Convertible Debenture is convertible into 15,000,000 units, where each unit consists of (I) one share of our common stock, (ii) one-half of one Class A common stock purchase warrant, with each whole warrant being exercisable at a price of $0.13 until June 10, 2026, and (iii) one-half of one Class B common stock purchase warrant, with each whole warrant being exercisable at a price of $0.19 until June 10, 2026 (collectively, the “Class A and B Warrants”). In addition, the conversion price for accrued interest is the greater of (i) $0.10 and (ii) the minimum conversion price permitted by the TSX Venture Exchange at the time of conversion (should our common stock then be listed on such exchange).

Under the terms of the June 10, 2021 Securities Purchase Agreement we entered into as part of the offering of the June 2021 Convertible Debenture (the “2021 Securities Purchase Agreement”), we agreed to use commercially reasonable efforts to file a registration statement with the SEC by August 14, 2021, covering the public resale of the shares of common stock underlying such debenture and, upon its conversion, the Class A and Class B Warrants issuable upon such conversion (the “Underlying Shares”), and to use our best efforts to cause the registration statement to be declared effective on October 13, 2021. In addition, we agreed to provide the holder to the June 2021 Convertible Debenture certain piggy-back registration rights if we do not have an effective registration statement covering the Underlying Shares and we propose to file any registration statement under the Securities Act with respect to our common stock. We will pay all costs associated with the registration statements, other than underwriting commissions and discounts. On December 13, 2021, our Form 10 Registration Statement filed with the SEC was declared effective.

In addition to certain covenants contained in the 2021 Securities Purchase Agreement, the terms of the Convertible Debenture contain certain negative covenants by us, including:

●

other than certain permitted indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, including, but not limited to, a guarantee, on or with respect to any of our property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

●

other than certain permitted liens, enter into, create, incur, assume or suffer to exist any liens of any kind, on or with respect to any of our property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

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amend our charter documents, including, without limitation, our certificate of incorporation and bylaws, in any manner that materially adversely affects any rights of the Convertible Debenture Holder (notwithstanding the foregoing, we are entitled to proceed with the amendments to the charter documents as set out in our proxy materials for our shareholder meeting to be held in 2021);

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repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of our common stock or common stock equivalents other than as to the Underlying Shares;

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redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any of our indebtedness (other than the Convertible Debentures if on a pro-rata basis), whether by way of payment in respect of principal of (or premium, if any) or interest on, such indebtedness, in any case unless such indebtedness or interest is due and payable in accordance with the initial terms of such debt prior to any default thereunder;

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declare or make any dividend or other distribution of our assets or rights to acquire our assets to holders of shares of our common stock, preferred stock, or any other equity security by way of return of capital or otherwise including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction;

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sell or offer to sell any securities with non-fixed or floating price features, issue any common stock or common stock equivalents at a price lower than the conversion price herein then in effect, or issue any equity or debt instruments with anti-dilution provisions; or

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enter into any agreement with respect to any of the foregoing.

In the event we issue or sell any common stock or common stock equivalents with terms that the purchaser then holding outstanding June 2021 Convertible Debenture (the “Convertible Debenture Holder”) or the Class A and B Warrants reasonably believes are more favorable to such holder than are the terms of the June 2021 Convertible Debenture or the Class A and B Warrants (the “MFN Securities”), then upon notice to us by such holder within five trading days after notice to such holder by us, we will use commercially reasonable efforts to obtain the approval of the TSX-V and any additional required regulatory approval to amend the terms of the June 2021 Convertible Debenture or the Class A and B Warrants as required, as the case may be, so as to give such holder the benefit of such more favorable terms or conditions. If we fail to obtain such regulatory approvals and the approval of the TSX-V, then absent such approval we are forbidden to issue the MFN Securities.

The conversion price of the June 2021 Convertible Debenture is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events.

In addition, if, at any time while the June 2021 Convertible Debenture is outstanding, we, directly or indirectly, effect any merger or consolidation of our company with or into another person or engage in a “Fundamental Transaction” as defined in the June 2021 Convertible Debenture, the Convertible Debenture Holder shall have the right to receive, for each conversion share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the number of shares of our Common Stock of the successor or acquiring corporation or us, if we are the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of our Common Stock for which the June 2021 Convertible Debenture is convertible immediately prior to such Fundamental Transaction. In addition, the conversion price will be subject to certain adjustments so that the economic value of such shares and such conversion price are protected and which is reasonably satisfactory in form and substance to the Convertible Debenture Holder. Alternatively, the Convertible Debenture Holder may demand that we redeem the June 2021 Convertible Debenture at a rate equal to 125% of the principal and interest due thereon, to be paid in full contemporaneously with consummation of the Fundamental Transaction.

We granted the investors certain rights of first refusal on our future offerings for so long as the June 2021 Convertible Debenture or the Class A and B Warrants are outstanding.

We may prepay and satisfy the June 2021 Convertible Debenture so long as an event of default has not occurred, upon 20 days’ prior written notice received by us to the holder, by paying 125% of the amounts owed on the June 2021 Convertible Debenture, including all principal, interest and other fees. The holder of this debenture may, however, convert all or a portion of the debenture during the 20 day notice period.

The June 2021 Convertible Debenture is not exercisable if the number of shares to be issued to the holder upon such exercise, together with all other shares then owned by the holder and our affiliates, would result in the holder beneficially owning more than 9.99% of our outstanding common stock. The holder may increase or decrease this ownership limitation to any percentage not exceeding 9.99% upon 61 days prior written notice to us.

Class A and Class B Warrants

Upon conversion of the June 2021 Convertible Debenture, we will issue the Class A and B Warrants. The holders may exercise the Class A and B Warrants on a cashless basis at any time that there is not an effective registration statement covering the underlying shares of common stock and the volume weighted average price of our common stock is greater than the exercise price at the time of exercise. The Class A and Class B Warrants are not exercisable, however, if the number of shares to be issued to the holder upon such exercise, together with all other shares then owned by the holder and our affiliates, would result in the holder beneficially owning more than 9.99% of our outstanding common stock. The holder may increase or decrease this ownership limitation to any percentage not exceeding 9.99% upon 61 days prior written notice to us.

The exercise price of the Class A and Class B Warrants is subject to proportional adjustment in the event of stock splits, recapitalizations and similar corporate events. In addition, the exercise price are each subject to adjustment if we issue or sell shares of our common stock for a consideration per share less than the exercise price then in effect, or issue options, warrants or other securities convertible or exchange for shares of our common stock at an exercise price less than the exercise price then in effect. If any of these events should occur, the exercise price each will be reduced to the lowest price at which these securities were issued or are exercisable.

In addition, if, at any time while the Class A and Class B Warrants are outstanding, we engage in a Fundamental Transaction, the exercise price thereof is subject to adjustment similar to the adjustment as provided for in the June 2021 Convertible Debenture. In addition, we may not enter into a Fundamental Transaction unless the holders of our common stock receive securities of an entity that is listed on a stock exchange in Canada or the United States, or cash, equal to the Black Scholes value of the remaining unexercised portion of the Class A and Class B Warrants on the date of the consummation of such Fundamental Transaction.

On July 15, 2021, we closed a non-brokered private placement of an unsecured convertible note in the principal amount of $79,542 (CAD$100,000, the “July 2021 Convertible Debenture”). The note bears interest at 12% per annum and is due on the date that is one year following the closing date. The note is convertible into common shares of the Company at the price of CAD$0.12 per share and will have warrants exercisable for a price of CAD$0.20 for a period of two years. Any accrued but unpaid interest will be payable on the earlier of the maturity date and the date of conversion in cash or common shares. No finder’s fees were paid in connection with this offering.

On July 16, 2021, we closed a non-brokered private placement and issued 4,350,000 units at a price of CAD$0.20 per unit (the “Unit”) for gross proceeds of $690,860 (CAD$870,000, the “July 2021 Private Placement”). Each Unit in this offering consists of one share of our common stock and one common share purchase warrant exercisable at a price of CAD$0.30 per share for a period of one year from the date of issuance. We incurred aggregate share issue costs of $48,319 in connection with this offering.

On August 11, 2021, we closed a non-brokered private placement and issued 3,827,601 units at a price of CAD$0.55 ($0.44) per unit (the “Unit”) for gross proceeds of $1,683,336 (CAD$2,105,180, the “August 2021 Private Placement”). Each Unit in this offering consists of one share of our common stock and one common share purchase warrant exercisable at a price of CAD$0.65 ($0.52) per share for a period of eighteen months from the date of issuance. We incurred aggregate share issue costs of $124,923 in connection with this offering.

During the fiscal year ended October 31, 2021, upon the exercise of common share purchase warrants we issued an aggregate 1,964,901 common shares at a price of CAD$0.05 per share for gross proceeds of $77,896 (CAD$98,245), an aggregate 1,931,450 common shares at a price of CAD$0.19 per share for gross proceeds of $292,890 (CAD$366,976), and an aggregate 3,118,618 common shares at a price of CAD$0.21 per share for gross proceeds of $516,735 (CAD$654,910). Upon exercise, $4,291 (CAD$5,333) previously recorded in additional paid-in capital was reclassified to share capital.

During the fiscal year ended October 31, 2021, upon the exercise of options we issued an aggregate 2,000,000 common shares at a price of CAD$0.05 per share for gross proceeds of $80,058 (CAD$100,000), an aggregate 200,000 common shares at a price of CAD$0.11 per share for gross proceeds of $17,456 (CAD$22,000), an aggregate 300,000 common shares at a price of CAD$0.12 per share for gross proceeds of $29,096 (CAD$36,000), an aggregate 100,000 common shares at a price of CAD$0.13 per share for gross proceeds of $10,315 (CAD$13,000), and an aggregate 30,000 common shares at a price of CAD$0.16 per share for gross proceeds of $3,809 (CAD$4,800). Upon exercise, $121,932 (CAD$152,218) previously recorded in additional paid-in capital was reclassified to share capital.

Pursuant to an agreement entered on August 29, 2018 and which was approved by the TSX-V on September 12, 2018, a company controlled by Sam Ataya, a director and officer of our Company, is eligible to receive up to 5% of the issued and outstanding common shares of the Company as at August 28, 2018 for up to $5 million raised. During the fiscal year ended October 31, 2021, the commitment was met. On November 3, 2021, the Company issued 9,163,425 common shares at a price of CAD$0.65 per share for a fair value of $4,796,832 (CAD$5,956,226) as share issue costs.

On November 4, 2021, we issued 1,000,000 units on partial conversion of the June 2021 Convertible Debenture, for a total of 1,000,000 common shares, 500,000 Class A Warrants exercisable at a price of $0.13 until June 10, 2026, and 500,000 Class B Warrants exercisable at a price of $0.19 until June 10, 2026. On December 13, 2021, we issued a further 1,000,000 units on partial conversion of the June 2021 Convertible Debenture, for a total of 1,000,000 common shares, 500,000 Class A Warrants exercisable at a price of $0.13 until June 10, 2026, and 500,000 Class B Warrants exercisable at a price of $0.19 until June 10, 2026. On January 20, 2022, we issued a further 1,000,000 units on partial conversion of the June 2021 Convertible Debenture, for a total of 1,000,000 common shares, 500,000 Class A Warrants exercisable at a price of $0.13 until June 10, 2026, and 500,000 Class B Warrants exercisable at a price of $0.19 until June 10, 2026. We incurred aggregate share issue costs of $1,361.

On November 26, 2021, we closed a non-brokered private placement and issued 1,375,499 units at a price of $0.55 per unit (the “Unit”) for gross proceeds of $756,524 (the “November 2021 Private Placement”). Each Unit in this offering consists of one share of our common stock and one common share purchase warrant exercisable at a price of $0.75 per share for a period of one year from the date of issuance. We incurred aggregate share issue costs of $26,656 in connection with this offering.

During the three months ended January 31, 2022, upon the exercise of common share purchase warrants we issued an aggregate 15,159,448 common shares at a price of CAD$0.19 per share for gross proceeds of $2,279,136 (CAD$2,880,295), 200,000 common shares at a price of CAD$0.05 per share for gross proceeds of $7,830 (CAD$10,000), and 30,000 common shares at a price of CAD$0.30 per share for gross proceeds of $6,981 (CAD$9,000). We issued a total of 15,389,448 common shares for gross proceeds of $2,293,946 (CAD$2,899,295). A total of 2,428,363 warrants expired unexercised.

On March 10, 2022, we issued 1,000,000 units on partial conversion of the June 2021 Convertible Debenture, for a total of 1,000,000 common shares, 500,000 Class A Warrants exercisable at a price of $0.13 until June 10, 2026, and 500,000 Class B Warrants exercisable at a price of $0.19 until June 10, 2026. On April 27, 2022, the Company issued a further 2,000,000 units on partial conversion of the June 2021 Convertible Debenture, for a total of 2,000,000 common shares, 1,000,000 Class A Warrants exercisable at a price of $0.13 until June 10, 2026, and 1,00,000 Class B Warrants exercisable at a price of $0.19 until June 10, 2026.

On April 14, 2022, we entered into a securities purchase agreement (the “2022 Securities Purchase Agreement”) and closed a non-brokered private placement of an unsecured convertible note in the principal amount of $2,000,000 (the “April 2022 Convertible Debenture”). The note bears interest at 15% per annum and matures on October 14, 2023. The April 2022 Convertible Debenture is convertible into 6,666,667 units, where each unit consists of one share of the Company’ common stock and one common stock purchase warrant exercisable at a price of $0.40 per share for a period of five years from the date of issuance.

In event of default under the April 2022 Convertible Debenture, the interest rate shall increase to the lesser of 20% per annum or the maximum rate permitted under applicable law until paid and the following “Mandatory Default Amount” shall be paid, if demanded by the purchaser: the sum of (a) the greater of (i) the outstanding principal amount of the April 2022 Convertible Debenture divided by the conversion price on the date the Mandatory Default Amount is either (A) demanded (if demand or notice is required to create an event of default) or otherwise due or (B) paid in full, whichever has a lower conversion price, multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded, (y) due, or (z) paid in full, whichever is highest, or (ii) 125% of the outstanding principal amount of the April 2022 Convertible Debenture plus (b) all other amounts, costs, expenses and liquidated damages due in respect of the April 2022 Convertible Debenture.

Pursuant to the terms of the 2022 Securities Purchase Agreement, we also entered into a registration rights agreement dated April 14, 2022 (the “2022 Registration Rights Agreement”). Pursuant to the terms of the 2022 Registration Rights Agreement, we agreed to prepare and file with the SEC a registration statement covering the resale of all shares issued or issuable upon conversion of the April 2022 Convertible Debenture, upon exercise of the respective warrants of the April 2022 Convertible Debenture, upon conversion of the June 2021 Debenture, and upon exercise of the respective warrants of the June 2021 Convertible Debenture. We agreed to file the registration statement with the SEC within 30 days following April 14, 2022 and to use best efforts to have the registration statement declared effective by the SEC within 60 days following April 14, 2022 if the SEC does not review it or by August 12, 2022 if the SEC reviews it. In the event we fail to file the registration statement or such registration statement is not declared effective within the time periods noted above or such registration statement is not kept effective while any of the securities registered pursuant to such registration statement, we will be obligated to pay the holder of the debentures a penalty in cash, in the amount of $20,000 on the date of such failure and on the 30^th day of each month following such failure. The 2022 Registration Rights Agreement contains customary indemnification provisions. On May 25, 2022, we filed a Form S-1 Registration Statement with the SEC.

On April 22, 2022, we issued a total of 933,333 common shares and 933,333 common share purchase warrants exercisable at a price of CAD$0.20 for a period of two years on the conversion the July 2021 Convertible Debenture including CAD$100,000 principal amount and CAD$12,000 accrued interest.

During the three months ended April 30, 2022, upon the exercise of common share purchase warrants, we issued an aggregate 929,005 common shares at a price of CAD$0.19 per share for gross proceeds of $929,005 (CAD$1,177,755), 2,082,025 common shares at a price of CAD$0.05 per share for gross proceeds of $81,354 (CAD$104,101), and 30,960 common shares at a price of CAD$0.30 per share for gross proceeds of $7,357 (CAD$9,288). A total of 3,191,933 warrants and 40,000 broker warrants expired unexercised.

During the three months ended April 30, 2022, we issued a total of 750,000 common shares on the exercise of stock options at a price of CAD$0.05 per share for gross of $29,715 (CAD$37,500), and reclassified $22,203 from additional paid-in capital to share capital.

Cash Flows

Cash Used in Operating Activities

Net cash used in operating activities for the six months ended April 30, 2022 and 2021, were as follows:

	Six Months Ended
	April 30,
	2022			2021
	$			$
Net Cash Used in Operating Activities		(4,037,307	)		(1,335,724	)

Cash Used in Investing Activities

Net cash used in investing activities for the six months ended April 30, 2022 and 2021, were as follows:

	Six Months Ended
	April 30,
	2022			2021
	$			$
Net Cash Used in Investing Activities		(1,601,999	)		(397,869	)

Cash Flow from Financing Activities

Net cash provided by financing activities for the six months ended April 30, 2022 and 2021, were as follows:

	Six Months Ended
	April 30,
	2022		2021
	$		$
Net Cash Provided by Financing Activities		5,959,098		1,790,603

Off-Balance Sheet Arrangements

As of the date of this Quarterly Report on Form 10-Q, we do not have any off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on our results of operations or financial condition, including, and without limitation, such considerations as liquidity and capital resources.

Contractual Obligations

As of April 30, 2022, we have the following obligations to make future payments, representing contracts and other commitments that are known and committed.

	Payments Due by Period
	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		More than 5 Years
	$		$		$		$		$
Lease obligations – premises		660,138		366,977		293,161		–		–
Lease obligations – machines		26,974		15,640		9,953		1,381		–
Debt and interest obligations		3,620,658		1,170,247		2,450,411		–		–
Total		4,307,770		1,552,864		2,753,525		1,381		–

Real Estate Option Agreement

Effective as of August 4, 2021, we entered into a Real Estate Option Agreement (the “Option”) with Harrison County Community Improvement Corporation, an unrelated party (the “Seller”), to purchase a parcel of land comprising approximately 122 acres in the Village of Cadiz, Harrison County, Ohio (the “Property”). We are entitled to exercise the Option at any time up until its expiration on August 3, 2023. The Option contains covenants, representations and warranties that are customary of real estate purchase and sale agreements including, but not limited to, completion of title work and a survey of the Property, an environmental audit, an engineering feasibility study of the Property, availability of certain utilities, obtaining permits, approval of the Option by our Board of Directors, our exercise of the Option and obtaining certain state and local economic incentives and tax abatements.

Transactions with Related Parties

Deposits held by related parties

Included in our current assets are the following amounts due from related parties:

	As of April 30, 2022		As of October 31, 2021
	$		$
Deposits held by a director and officer		388,757		291,481
Deposits held by an officer		–		194,981
Deposits held by related parties		388,757		486,462

Due to related parties

Included in our current liabilities are the following amounts due to related parties:

	As of April 30, 2022		As of October 31, 2021
	$		$
Wages payable to directors and officers		357,500		357,500
Benefits payable to directors and officers		730,810		539,209
Fees and expenses payable to directors and officers		164,970		127,878
Interests due to a shareholder		–		2,230
Total due to related parties		1,253,280		1,026,817

Leases

We have entered into a sublease agreement with a company controlled by Sam Ataya, a director and officer of our Company, for our Canadian office at 580 Hornby Street, Suite 900, Vancouver, British Columbia, Canada V6C 3B6. The lease had a two-year term from April 1, 2021 to March 31, 2023 and required a monthly payment of CAD$9,794 for a total of CAD$235,056.

Scope of Work Agreement

Pursuant to an agreement entered on August 29, 2018 and which was approved by the TSX-V on September 12, 2018, a company controlled by Sam Ataya, a director and officer of our Company, is eligible to receive up to 5% of the issued and outstanding common shares of the Company as at August 28, 2018 for up to $5 million raised. During Fiscal 2021, the commitment was met. On November 3, 2021, the Company issued 9,163,425 common shares at a price of CAD$0.65 per share for a fair value of $4,796,832 (CAD$5,956,226) as share issue costs.

Recent Accounting Pronouncements

The following GAAP standards have been recently issued by the Financial Accounting Standards Board (the “FASB”). We are assessing the impact of these new standards on future consolidated financial statements. We have elected to take advantage of the extended transition period allowed for emerging growth companies for complying with new or revised accounting guidance as allowed by Section 107 of the JOBS Act and Section 7(a)(2)(B) of the Securities Act. Pronouncements that are not applicable or where it has been determined do not have a significant impact on us have been excluded herein.

(i)

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires the measurement of current expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Adoption of ASU 2016-13 will require financial institutions and other organizations to use forward-looking information to better formulate their credit loss estimates. In addition, the ASU amends the accounting for credit losses on available for sale debt securities and purchased financial assets with credit deterioration. In May 2019, the FASB issued ASU 2019-05, Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”), which provides transition relief to entities adopting ASU 2016-13. As smaller reporting companies as defined by the SEC, these updates are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the effect of adoption of these updates on its Financial Statements.

(ii)

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 adds, modifies, and removes certain fair value measurement disclosure requirements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. Effective November 1, 2020, the Company adopted the new standard. There was no material impact or adjustment to its Financial Statements.

(iii)

(iv)

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments and supersedes the respective guidance within ASC 470-20 and ASC 740-10-55-51, which will result in more instruments to be accounted for as a single instrument rather than having their proceeds allocated between liability and equity accounting units. As smaller reporting companies as defined by the United States Securities and Exchange Commission (the “SEC”), ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the effect of adopting these updates on its Financial Statements.

Critical Accounting Estimates

The preparation of our consolidated financial statements requires management to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

Significant judgments, estimates and assumptions that have the most significant effect on the amounts recognized in our consolidated financial statements are described below.

Functional Currency

The functional currency of each entity of the Company is as follows:

Entity		Functional Currency
Western Magnesium Corporation		United States dollars
Western Magnesium Corp.		United States dollars
Western Magnesium Canada Corporation		Canadian dollars (“CA$”)

Significant changes in economic facts and circumstances have occurred in Western Magnesium Corporation’s operations which resulted in the change of its functional currency to the United States dollars from the Canadian dollars effective November 1, 2021. For both monetary and non-monetary assets and liabilities, translated balances at the end of the prior period become the new accounting basis. The rate on the date of change becomes the historical rate at which non-monetary assets and liabilities are translated in subsequent years. There is no effect on the cumulative translation adjustment on the consolidated basis. Previously recorded cumulative translation adjustments are not reversed. Effects of change in functional currency included the reclassifications of convertible debentures and warrants and broker warrants.

Estimated Useful Lives of Property Plant and Equipment

Depreciation of property, plant and equipment is dependent upon estimates of useful lives which are determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic and market conditions and the useful lives of assets.

Estimated Useful Lives of and Amortization of Intangible Assets

Amortization of intangible assets is recorded over their estimated useful lives which do not exceed any contractual periods, if any. Intangible assets that have indefinite useful lives are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.

Consolidation

Judgment is applied in assessing whether we exercise control and have significant influence over entities in which we directly or indirectly own an interest. We have control when we have the power over the subsidiary, have exposure or rights to variable returns, and have the ability to use our power to affect the returns. Significant influence is defined as the power to participate in the financial and operating decisions of the subsidiaries. Where we are determined to have control, these entities are consolidated. Additionally, judgment is applied in determining the effective date on which control was obtained.

Stock-Based Compensation

Valuation of stock-based compensation and warrants requires management to make estimates regarding the inputs for option pricing models, such as the expected life of the option, the volatility of our stock price, the vesting period of the option and the risk-free interest rate are used. Actual results could differ from those estimates. The estimates are considered for each new grant of stock options or warrants.

Leases

We use the following policies to evaluate our leases:

Determining a lease: At contract inception, we review the facts and circumstances of the arrangement to determine if the contract is or contains a lease. We follow the guidance in ASU 2016-02, Leases (Topic 842), ASU 2018-11, Leases (Topic 842): Targeted Improvements, and ASU 2019-01, Leases (Topic 842): Codification Improvements to evaluate if:

	●	the contract has an identified asset;
	●	we have the right to obtain substantially all economic benefits from the asset; and
	●	we have the right to direct the use of the underlying asset.

When determining if a contract has an identified asset, we consider both explicit and implicit assets, and whether the vendor has the right to substitute the asset. When determining if we have the right to direct the use of an underlying asset, we consider if we have the right to direct how and for what purpose the asset is used throughout the period of use and if we control the decision-making rights over the asset.

Discount rate: At commencement, lease-related assets and liabilities are measured at the present value of future lease payments over the lease term using an incremental borrowing rate. As most of our leases do not provide an implicit rate, we exercise judgment in determining the incremental borrowing rate based on information available at the time the lease commences.

Rent increases or escalation clauses: Certain leases contain scheduled rent increases or escalation clauses. We assess each contract individually and apply appropriate payments based on the terms of the agreement.

Renewal, purchase and termination options: Our lease terms may include options to extend or terminate the lease. We exercise judgment in determining the term of these leases when extension or termination options are present and include such options in the calculation of the lease terms when it is reasonably certain that we will exercise these options.

Recognizing leases: We do not recognize leases with a contractual term of less than 12 months or low value leases on our financial statements. Lease payments are expensed on a straight-line basis over the lease terms.

Residual value guarantees, restrictions or covenants: Our lease agreements do not contain residual value guarantees, restrictions or covenants.

Other Estimates and Assumptions

Other estimates and assumptions where there are potential risk of material adjustments to assets and liabilities in future accounting periods include the recoverability of the carrying value of exploration and evaluation assets, fair value measurements for financial instruments, the recoverability and measurement of deferred tax assets and liabilities and contingent liabilities.

Significant Judgments

The most significant judgments, apart from those involving estimates, in applying accounting policies in our consolidated financial statements include:

-	the assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that may give rise to substantial doubt;
-	whether there are indicators of impairment of the Company’s exploration and evaluation assets and other non-current assets;
-	the classification of financial instruments; and
-	determination of functional currency.

Financial Instruments and Financial Risk Management

Our financial instruments consist of cash, other receivables, deposits held by related parties, accounts payable, due to related parties, convertible debenture, and derivative liability.

The fair value of financial instruments is the amount of consideration that would be agreed upon in an arm’s length transaction between knowledgeable, willing parties who are under no compulsion to act. The fair value of current financial instruments approximates their carrying values as long as they are short-term in nature or bear interest at market rates.

Financial instruments recorded at fair value are classified using a fair value hierarchy that prioritizes inputs used in determining the fair value and depending on the extent to which they are observable. The three levels of hierarchy are:

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 — Inputs other than quoted prices that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. from derived prices); and

Level 3 — Inputs for the asset or liability that are not based on observable market data.

There were no transfers between the levels during the reporting periods.

Financial Risk Management

In the normal course of operations, the Company is exposed to various risks such as interest rate, foreign exchange, commodity, credit, and liquidity. To manage these risks, management determines what activities must be undertaken to minimize potential exposure to risks. The objectives of the Company in managing risks are as follows:

	●	Maintaining sound financial condition;
	●	Financing operations; and
	●	Ensuring liquidity to all operations.

In order to satisfy these objectives, the Company has adopted the following policies:

	●	Prepare budget documents at prevailing market rates to ensure clear corporate alignment to performance management and achievement of targets;
	●	Recognize and observe the extent of operating risk within the business; and
	●	Identify the magnitude of the impact of market risk factors on the overall risk of the business and take advantage of natural risk reductions that arise from these relationships.

There have been no changes in risks that have arisen or how the Company manages those risks during the six months ended April 30, 2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of April 30, 2022. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of April 30, 2022.

The ineffectiveness of our disclosure controls and procedures was due to material weaknesses, which we identified, in our report on internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Company expects to implement changes to its internal control over financial reporting to enhance the evaluation of accounting transactions and its financial reporting process over the next year. The Company is in the process of hiring additional resources, either in the form of an independent counsel or as consultants, to help identify processes that will strengthen our internal controls.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Except as set forth below, there are no actual or to our knowledge contemplated legal proceedings material to us or to which any of our or any of our subsidiaries’ property is the subject matter.

As of the date of this Quarterly Report on Form 10-Q, to our knowledge, there are no legal proceedings or regulatory actions material to us to which we are a party, or have been a party to, or of which any of our property is or was the subject matter of, and no such proceedings or actions are known by us to be contemplated except as provided below:

James Sever Claim. On September 29, 2020, James Sever filed a Notice of Civil Claim against us in the Supreme Court of British Columbia (Court File No. S-209728) (the “Sever Claim”). The Sever Claim alleges that Mr. Sever had an employment and/or other similar contractual relationship with us, and that we breached such contractual relationship by way of constructive dismissal or similar conduct. The Sever Claim seeks damages in excess of $2,500,000, certain equity compensation, prejudgment garnishment, costs, interest and other non-monetary relief. On July 27, 2021, we filed a response to the Sever Claim. On April 5, 2022, we filed an amended response to the Sever Claim, which included the following pleadings: (a) British Columbia is an inappropriate and inconvenient forum for the Sever Claim; (b) to the extent that British Columbia is the appropriate forum for the Sever Claim, nonetheless: (i) the Sever Claim is barred in whole or in part by applicable doctrines of delay / statute of limitations, (ii) the Company did not constructively dismiss Mr. Sever and, instead, it was Mr. Sever that abandoned, quit or resigned from his obligations to the Company, (iii) the Company has no debts, liabilities or obligations to Mr. Sever.

We intend to vigorously defend against the Sever Claim, and we believe that the Sever Claim is without merit. We cannot predict the outcome of the claim, however.

GEM Yield Bahamas Limited Arbitration. On December 31, 2020, GEM Yield Bahamas Limited (“GEM”) served us with a Notice of Intention to Arbitrate (the “New York Arbitration Notice”) before the American Arbitration Association in New York, New York (Case No. 01-21-0004-2162) (the “GEM New York Arbitration”). The New York Arbitration Notice alleges we breached a Share Subscription Agreement dated November 15, 2019 entered into between us and GEM (the “GEM Agreement”), among other things, claiming damages of $3.4 million (CAD$4.2 million). On January 19, 2021, we filed a petition in the New York Supreme Court (Index No. 650401/2021 (the “New York State Action”) to stay the GEM New York Arbitration claiming the GEM Agreement was not valid. The Court in the New York State Action ruled on March 19, 2021 that there is an arbitration clause in the GEM Agreement but it is up the arbitrator in the GEM New York Arbitration to determine if the arbitration clause is valid. Following this ruling, the New York State Action was closed. GEM filed a Statement of Claim in the GEM New York Arbitration on June 9, 2021 and on June 25, 2021, we filed a Statement of Answer denying the existence of any binding agreement between us and GEM, among other defenses. In January 2022, we filed a Modified Statement of Defense and Counterclaims. On April 8, 2022, the parties agreed to consolidate this arbitration with the GEM Montreal Arbitration. The parties then filed consolidated pleadings, and both matters will be decided via arbitration in Montreal. Furthermore, we intend to vigorously defend ourselves and believe the allegations against us in the GEM New York Arbitration lack merit. We cannot predict the outcome of this arbitration proceeding, however.

There have been no substantive motions or pleadings in the GEM New York Arbitration aside from the Statement of Claim and Statement of Answer discussed above.

GEM Yield Bahamas Limited and GEM Global Yield LLC SC Arbitration. On or about February 8, 2021, GEM instituted another arbitration against us before the International Centre for Dispute Resolution in Montreal Canada (Case No. 01-21-0001-1245) (the “GEM Montreal Arbitration”) and joined, GEM’s affiliate, GEM Global Yield LLC SCS (“GEM Global Yield” together with GEM, the “GEM Parties”). Similar to the allegations in the GEM New York Arbitration, the Statement of Claim filed by the GEM Parties alleges we breached a Share Subscription Agreement dated November 15, 2019 and promissory note, among other things, claiming damages of $3.9 million (CAD$4.9 million), in addition to costs and expenses stemming from our alleged failure to issue to GEM Global Yield warrants to purchase up to 33,000,000 shares of our common stock. We filed a Statement of Defense, denying the existence of any binding agreement between us and GEM, among other defenses. In January 2022, we filed an Amended Statement of Defense and Cross-claim. On April 8, 2022, the parties agreed to consolidate this arbitration with the GEM New York Arbitration. The parties then filed consolidated pleadings, and both matters will be decided via arbitration in Montreal. We intend to vigorously defend ourselves in the GEM Montreal Arbitration and believe the allegations against us in this arbitration proceeding lack merit. We cannot predict, however, the outcome of this arbitration proceeding.

There have been no substantive motions or pleadings or rulings aside from the Statement of Claim and Statement of Answer.

Lampert Advisors, LLC Claim. On April 19, 2021, Lampert Advisors, LLC (“Lampert”) filed a Verified Complaint against our wholly owned subsidiary Western Magnesium Corporation, a Nevada corporation (“Western Magnesium – Nevada”) in the Supreme Court of the State of New York, County of New York (Index No. 652738/2021) (the “Lampert Lawsuit”). The complaint filed in the Lampert Lawsuit alleges that Lampert entered into an agreement with Western Magnesium – Nevada to provide various financial advisory services including acquisition advisory services and act as an exclusive placement agent for a debt and equity securities (the “Lampert Agreement”), that it performed all services required under that agreement and such services were received and accepted by our subsidiary, that it is owed $367,227.32 plus interest at the rate of 9% from February 3, 2021 and that it has a right of first refusal to act as financial advisor in connection with any debt, equity or debt restructuring assignments on terms, conditions and compensation customary for Lampert for a transaction of the type contemplated. Although Lampert claims to have personally served Western Magnesium – Nevada, the company never received the Summons and Complaint and therefore, never submitted a response.

On September 9, 2021, Lampert filed a Motion seeking the entry of a default judgment (the “Motion”) alleging that Western Magnesium – Nevada failed to file an answer or motion with respect to the complaint in this lawsuit within the time period provided under the civil rules of procedure. We opposed Lampert’s motion for entry of a default judgment and filed a cross-motion to compel Lampert to accept our answer. The Court granted our cross-motion seeking to compel Lampert to accept our answer and denied Lampert’s Motion seeking the entry of a default judgment as moot. On March 4, 2022, the Company filed a Verified Amended Answer, Affirmative Defenses, and Counterclaims. The counterclaims seek at least $120,000 in damages from Lampert.

We intend to vigorously defend ourselves and believe the allegations against us in the Lampert Lawsuit lack merit. We cannot predict the outcome of this lawsuit, however.

Litigation Assessment

We have evaluated the foregoing claims to assess the likelihood of any unfavorable outcome and to estimate, if possible, the amount of potential loss as it relates to the litigation discussed above. Based on this assessment and estimate, which includes an understanding of our intention to vigorously defend the claims against us, we believe that the claims of any of the plaintiffs lack merit, however, and we cannot predict the likelihood of any recoveries by any of the plaintiffs against us. This assessment and estimate is based on the information available to management as of the date of this Quarterly Report on Form 10-Q and involves a significant amount of management judgment, including the inherent difficulty associated with assessing litigation matters in their early stages. As a result, the actual outcome or loss may differ materially from those envisioned by the current assessment and estimate. Our failure to successfully defend or settle these claims could have a material adverse effect on our financial condition, revenue and profitability and could cause the market value of our common stock to decline.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in the 2021 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following information represents securities sold by us during the quarter ended April 30, 2022 which were not registered under the Securities Act. Included are new issues, securities issued in exchange for property, services or other securities, securities issued upon conversion from our other share classes and new securities resulting from the modification of outstanding securities. We sold all of the securities listed below pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act, or Regulation D or Regulation S promulgated thereunder and Section 3(a)(10) of the Securities Act.

Common Stock

On March 10, 2022, in connection with a partial conversion of the June 2021 Convertible Debenture, we issued 1,000,000 units to a private investor for a total of 1,000,000 common shares, 500,000 Class A Warrants exercisable at a price of $0.13 until June 10, 2026, and 500,000 Class B Warrants exercisable at a price of $0.19 until June 10, 2026.

On April 22, 2022, in connection with the conversion of the July 2021 Convertible Debenture including accrued interest, we issued 933,333 units to a private investor for a total of 933,333 common shares and 933,333 common share purchase warrants exercisable at a price of CAD$0.20 for a period of two years.

On April 27, 2022, in connection with a partial conversion of the June 2021 Convertible Debenture, we issued 2,000,000 units to a private investor for a total of 2,000,000 common shares, 1,000,000 Class A Warrants exercisable at a price of $0.13 until June 10, 2026, and 1,000,000 Class B Warrants exercisable at a price of $0.19 until June 10, 2026.

Debt Securities

Other Issuances

On March 7, 2022, 500,000 options to purchase common shares were granted to an officer as additional compensation pursuant to our 2021 Equity Incentive Plan at an exercise price of CAD$0.40 per share. These options vest immediately on the grant date and expire 5 years after the grant date.

On April 8, 2022, 500,000 options to purchase common shares were granted to certain employees as additional compensation pursuant to our 2021 Equity Incentive Plan at an exercise price of CAD$0.40 per share. These options vest immediately on the grant date and expire 5 years after the grant date.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).

Exhibit Number		Description
4.1		Form of Convertible Debenture Due October 14, 2023, Principal Amount $2,000,000 issued on April 14, 2022 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 20, 2022).

10.1		Securities Purchase Agreement between Western Magnesium Corporation and an investor dated April 14, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 20, 2022).

10.2		Form of 2022 Warrant (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 20, 2022).

10.3		Registration Rights Agreement between Western Magnesium Corporation and an investor dated April 14, 2022 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on April 20, 2022).

31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (embedded within the Inline XBRL document).

Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	WESTERN MAGNESIUM CORPORATION

Date: June 14, 2022	By:	/s/ Sam Ataya
		Sam Ataya
		Chief Executive Officer (Principal Executive Officer)

Date: June 14, 2022	By:	/s/ Robert Ramsey Hamady
		Robert Ramsey Hamady
		Chief Financial Officer (Principal Financial and Accounting Officer)