Announcement PDF Fulcrum Lithium Ltd and its controlled entities ABN: 23 665 528 307 Financial Statements For the Period Ended 30 June 2023 Fulcrum Lithium Ltd and its controlled entities ABN: 23 665 528 307 Contents For the Period Ended 30 June 2023 Page Directors' Report 1 Auditor's Independence Declaration under Section 307C of the Corporations Act 2001 5 Consolidated Statement of Profit or Loss and Other Comprehensive Income 6 Consolidated Statement of Financial Position 7 Consolidated Statement of Changes in Equity 8 Consolidated Statement of Cash Flows 9 Notes to the Consolidated Financial Statements 10 Directors' Declaration 22 Independent Auditor’s Report 23 FULCRUM LITHIUM LTD and its controlled entities Directors' Report The Directors present their report together with the consolidated financial statements of the Group, comprising Fulcrum Lithium Ltd (‘Fulcrum’ or ‘the Company’) and its controlled entities, for the period from 6 February 2023, being the date of incorporation of the Company, to 30 June 2023. Directors The names of each person who has been a Director of the Company during the period and to the date of this report are: • • • • Norman Alfred Seckold Peter James Nightingale Anthony Sgro Foster Vance Wilson Appointed 6 February 2023 Appointed 6 February 2023 Appointed 6 February 2023 Appointed 6 February 2023 Directors have been in office since 6 February 2023 to the date of this report. Principal activities The principal activities of Fulcrum since its incorporation have been the acquisition of a number of lode claims focused on exploration for lithium in the state of Nevada, USA. Operating results The loss of the Group amounted to $17,309, after providing for income tax. Review of operations On 6 February 2023, Fulcrum was incorporated with the issue of 5 ordinary shares with an issue price of $0.01 per share. On 10 March 2023, the Company incorporated Fulcrum Nevada LLC (‘Fulcrum Nevada’), a wholly owned subsidiary incorporated in Nevada. On 17 March 2023, the Company, via Fulcrum Nevada, acquired a 100% interest in Last Basin LLC (‘Last Basin’), a Nevada corporation, which owned the Alkali Flats lithium exploration project in Nevada, by the issue of 48,000,000 ordinary shares for a total consideration of $412,103. At the date of acquisition, Last Basin was the holder of 1,914 lode claims on Federal land, which include rights to explore, develop and mine all locatable subsurface minerals without payments of production royalties to the USA government. In June 2023, Last Basin claim staked a further 362 lode claims at the Alkali Flats project, increasing the project to 2,276 lode claims being an area of approximately 190 km2. The Alkali Flats project is located in the Clayton Valley, the heart of Nevada’s lithium belt hosting the only lithium producing mine in the USA (Albemarle Corporation’s Silver Peak lithium brine mine) and on trend with significant lithium projects at various stages of development. On 14 April 2023, the Company completed a placement of 26,000,000 ordinary shares at an issue price of $0.10 to raise $2,600,000 before costs. On 20 July 2023, the Company incorporated Flasher LLC (‘Flasher’), a Nevada corporation wholly owned by Fulcrum Nevada. Flasher has entered an agreement to acquire 327 lode claims, being approximately 27 km2 and known as the Fairway lithium exploration project. In August 2023, Last Basin claim staked 160 lode claims, being approximately 13 km2 and known as the Summit lithium exploration project. Significant changes in state of affairs Other than as described in the Review of operations above, there have been no significant changes in the state of affairs of the Group during the period. 1 FULCRUM LITHIUM LTD and its controlled entities Directors' Report Dividends paid or recommended No dividends were paid or declared during the period. Future developments and results Likely developments in the operations of the Group and the expected results of those operations in future financial years have not been included in this report as the inclusion of such information is likely to result in unreasonable prejudice to the Group. Environmental issues The operations and proposed activities of the Group are subject to State and Federal laws and regulations in the USA concerning the environment. As with most exploration projects and mining operations, the Group's activities are expected to have an impact on the environment, particularly if advanced exploration or field development proceeds. It is the Group's intention to conduct its activities to the highest standard of environmental obligation, including compliance with all applicable environmental laws. Subsequent events after the reporting date On 20 July 2023, the Company incorporated Flasher LLC (‘Flasher’), and on 31 July 2023, Flasher entered an agreement with Foster Wilson (a Company Director) to acquire the Fairway lithium exploration project for consideration totaling US$75,000 and, upon evidence that the Fairway project lode claims are registered under the name of Flasher, the issue of 7,100,000 ordinary Fulcrum shares. A Quitclaim Deed has been filed with the USA Bureau of Land Management (‘BLM’) to give effect to the registration of the Fairway project lode claims in the name of Flasher. In August 2023, Last Basin claim staked 160 lode claims, the Summit project. The lode claims have been filed with the BLM and are in the process of being recorded by the County Recorder’s Office. Other than the matters detailed above, no matters or circumstances have arisen since the end of the reporting period which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. Directors Norman A. Seckold (Executive Chairman) Norman Seckold graduated with a Bachelor of Economics degree from the University of Sydney and has spent more than 40 years in the full time management of natural resource companies, both in Australia and overseas. Mr. Seckold has been the Chairman of a number of publicly listed companies including Moruya Gold Mines (1983) N.L., which acquired the Golden Reward heap leach gold deposit in South Dakota, USA, Pangea Resources Limited, which acquired and developed the Pauper's Dream gold mine in Montana, USA, Timberline Minerals, Inc. which acquired and completed a feasibility study for the development of the MacArthur copper deposit in Nevada, USA, Perseverance Corporation Limited, which discovered and developed the Nagambie gold mine in Victoria, Valdora Minerals N.L., which developed the Rustler's Roost gold mine in the Northern Territory and the Ballarat East Gold Mine in Victoria, Viking Gold Corporation, which discovered a high grade gold deposit in northern Sweden, Mogul Mining N.L., which drilled out the Magistral and Ocampo gold deposits in Mexico and Bolnisi Gold N.L, which discovered and developed the Palmarejo and Guadalupe gold and silver mines in Mexico. Mr. Seckold is currently Chairman of ASX-listed companies Alpha HPA Limited, Nickel Industries Limited, and Sky Metals Limited. Interest in Shares 29,928,005 ordinary fully paid shares. 2 FULCRUM LITHIUM LTD and its controlled entities Directors' Report Peter J. Nightingale (Executive Director, CFO and Company Secretary) Peter Nightingale graduated with a Bachelor of Economics degree from the University of Sydney and is a member of Chartered Accountants Australia & New Zealand. He has worked as a chartered accountant in both Australia and the USA. As a director or company secretary Mr. Nightingale has, for more than 35 years, been responsible for the financial control, administration, secretarial and in-house legal functions of a number of private and public listed companies in Australia and the including Bolnisi Gold N.L. and Nickel Industries Limited. Mr. Nightingale is currently a director of ASX listed Alpha HPA Limited and Prospech Limited. Interest in Shares 3,000,000 ordinary fully paid shares. Anthony Sgro (Independent, Non-Executive Director) Mr. Sgro is a Chemical Engineer, graduating from the University of Sydney. His studies included a thesis on Minerals Chlorination, which focused on the application of chlorination techniques to the extractive metallurgy of various minerals including titanium, nickel, chromium and tungsten ores. He also completed a Graduate Diploma in Marketing from Macquarie University School of Business. In a career spanning 45 years, Mr. Sgro was involved in the technical and commercial aspects of supply of specialised equipment to the major process industries including oil and gas, petrochemical, chemical and mining industries, including equipment specification, material selection, commercial and technical aspects of large tenders, contract negotiation and contract management. Mr Sgro is currently a director of ASX listed Alpha HPA Limited. Interest in Shares 1,000,000 ordinary fully paid shares Foster V. Wilson (Non-Executive Director) Mr Wilson has over 40 years of experience, with a focus on lithium claystone and brine exploration projects, in roles ranging from reserve drilling and estimation, feasibility studies, mine permitting and development. He has worked in various capacities for Placer Dome Inc., Echo Bay Mines Ltd., American Bonanza Gold Corp. and various junior exploration companies. Mr. Wilson currently serves as a director of TSX-V listed Alpha Lithium Corporation and Atomic Minerals Corp. and is President of Mesa Exploration Corporation. Interest in Shares 14,112,000 ordinary fully paid shares Meetings of directors During the financial period, 3 meetings of Directors were held. Attendances by each Director during the period were as follows: Directors’ Meetings Norman Seckold Peter Nightingale Anthony Sgro Foster Wilson Number eligible to attend 3 3 3 3 Number attended 3 3 3 1 Indemnification and insurance of officers and auditors No indemnities have been given or insurance premiums paid, during the reporting period or since the end of the financial year, for any person who is or has been an officer or auditor of Fulcrum Lithium Ltd. Proceedings on behalf of company No person has applied for leave of court under Section 237 of the Corporations Act 2001 to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. 3 FULCRUM LITHIUM LTD and its controlled entities Directors' Report Auditor’s independence declaration The auditor's independence declaration in accordance with section 307C of the Corporations Act 2001 for the period ended 30 June 2023 has been received and can be found on page 5 of the financial report. This Directors’ Report is signed in accordance with a resolution of the Board of Directors. Signed at Sydney this 29th day of September 2023 Norman A. Seckold Peter J. Nightingale 4 To the Directors of Fulcrum Lithium Ltd I declare that, to the best of my knowledge and belief, in relation to the audit of Fulcrum Lithium Ltd for the period ended 30 June 2023 there have been: KPMG i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. Adam Twemlow Partner Brisbane 29 September 2023 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independed member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 5 FULCRUM LITHIUM LTD and its controlled entities CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 JUNE 2023 Period from 6 February 2023 to 30 June 2023 Notes $ Continuing operations Filing and incorporation costs (6,062) Other expenses from ordinary activities (20,661) Operating loss before financing income (26,723) Interest income 9,414 Interest expense - Net financing income/(expense) 9,414 Loss (17,309) Income tax expense 4 Loss for the period (17,309) Other comprehensive income Exchange differences on translation of foreign operations 20,730 Total comprehensive profit for the period 3,421 Basic and diluted loss per share (cents) 5 (0.035) cents The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 6 FULCRUM LITHIUM LTD and its controlled entities CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2023 Notes 2023 $ Current assets Cash and cash equivalents 6 1,539,214 Other assets 7 277,751 Total current assets 1,816,965 Non-current assets Exploration and evaluation expenditure 8 1,227,295 Total non-current assets 1,227,295 Total assets 3,044,260 Current liabilities Trade and other payables 9 28,736 Total current liabilities 28,736 Total liabilities 28,736 Net assets 3,015,524 Equity Issued capital 10 3,012,103 Reserves 11 20,730 Accumulated loss (17,309) Total equity 3,015,524 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 7 FULCRUM LITHIUM LTD and its controlled entities CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30 JUNE 2023 Attributable to equity holders of the Company Notes Balance at 6 February 2023 Issued Capital $ Reserves $ Accumulated Losses $ Total $ - - - - Loss for the year - - (17,309) (17,309) Other comprehensive income - 20,730 Total comprehensive profit/(loss) for the period - 20,730 (17,309) 3,421 3,012,103 - - 3,012,103 - - - - 3,012,103 20,730 (17,309) 3,015,524 Total comprehensive income for the period 20,730 Transactions with owners, recorded directly in equity Contribution by and distribution to owners Ordinary shares issued Transaction costs on issue of shares and options Balance at 30 June 2023 10,11 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 8 FULCRUM LITHIUM LTD and its controlled entities CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 JUNE 2023 Notes 2023 $ Cash flows from operating activities (258,137) Cash payments in the course of operations 9,414 Interest received Net cash used in operating activities 13 (248,723) Cash flows from investing activities Payments for exploration and development expenditure (812,063) Net cash used in investing activities (812,063) Cash flows from financing activities Proceeds from share issues 2,600,000 Net cash from financing activities 2,600,000 Net increase in cash held 1,539,214 Cash and cash equivalents at 6 February Cash and cash equivalents at 30 June 6 1,539,214 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 9 FULCRUM LITHIUM LTD and its controlled entities NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2023 Fulcrum Lithium Ltd (the ‘Company’) is a for-profit company limited by shares, incorporated and domiciled in Australia. The consolidated financial statements as at 30 June 2023 and for the period from 6 February 2023 to 30 June 2023 comprise the Company and its controlled entities (together referred to as the ‘Group’). Fulcrum Lithium Ltd was incorporated on 6 February 2023 and accordingly, this is the first financial report presented. The financial report was authorised for issue by the Directors on 29 September 2023. 1 Basis of Preparation (a) Statement of compliance The consolidated financial statements are general purpose financial statements that have been prepared in accordance with the Australian Accounting Standards and the Corporations Act 2001. These financial statements comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. (b) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for certain financial assets which are measured at fair value. (c) Functional and presentation currency These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency. (d) Going Concern The consolidated financial statements have been prepared on a going concern basis, which contemplates the continuation of normal business operations and the realisation of assets and settlement of liabilities in the normal course of business. For the period ended 30 June 2023 the Group has incurred a loss and has accumulated losses of $17,309 as at 30 June 2023. The Group used $248,723 of cash in operations, in addition to $812,063 of cash for exploration and evaluation expenditure for the period ended 30 June 2023. Subsequent to period end, the Group has continued to expend its available resources on its existing and new exploration projects. The Directors have prepared cash flow projections for the period from 1 July 2023 to 30 September 2024 that support the ability of the Group to continue as a going concern. These cash flow projections assume the Group continues substantial exploration activities in the areas of interest, which will require additional funding from shareholders or other parties that is yet to be secured at the date of this report. The Group have successfully raised funding during the current period, however future projected cash inflows from funding are inherently uncertain until secured. The Group’s trade and other payables at 30 June 2023 of $28,736 include accruals and creditors. The Group has sufficient funds available to enable repayment of the outstanding amounts without adversely impacting the Group’s ability to continue as a going concern. Further, the Group has the ability to significantly reduce all discretionary expenditure until such time that there are sufficient funds to continue with the exploration and evaluation activities as planned in the cash flow projections. The ongoing operations of the Group are dependent upon the Group raising additional funding from shareholders or other parties and continuing to significantly reduce discretionary expenditure until additional funding has been secured. These conditions give rise to a material uncertainty that may cast significant doubt upon the Group’s ability to continue as a going concern. In the event that the Group does not obtain additional funding, the achievement of which is inherently uncertain, it may not be able to continue its operations as a going concern and therefore may not be able to release its assets, including capitalised exploration and evaluation expenditure of $1,227,295, and extinguish its liabilities in the ordinary course of operations and at the amounts stated in the consolidated financial report. 10 FULCRUM LITHIUM LTD and its controlled entities NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2023 2 Summary of Significant Accounting Policies (a) Basis of consolidation Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Loss of control When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost. Transactions eliminated on consolidation Intra-group balances and any unrealised gains and losses or income and expenses arising from intragroup transactions are eliminated in preparing the consolidated financial statements. (b) Foreign operations The assets and liabilities of foreign operations are translated to Australian dollars at foreign exchange rates ruling at the reporting date. The income and expenses of foreign operations are translated to Australian dollars at rates approximating the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised directly in the foreign currency translation reserve ('FCTR'), a separate component of equity. Foreign exchange gains and losses arising from a monetary item receivable or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised directly in the FCTR. Any references to functional currency, unless otherwise stated, are to the functional currency of the Company, Australian dollars. When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to profit or loss as part of the profit or loss on disposal. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income and are presented within equity in the FCTR. (c) Exploration and development expenditure Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves and active and significant operations in, or in relation to, the area on interest are continuing. As the asset is not available for use it is not depreciated or amortised. Accumulated costs in relation to an abandoned area are written off in full against profit or loss in the period in which the decision to abandon that area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. 11 FULCRUM LITHIUM LTD and its controlled entities NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2023 2 Summary of Significant Accounting Policies (cont’d) (d) Income tax Current tax and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or in other comprehensive income. Current tax Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: • • • temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; temporary differences related to investments in subsidiaries to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; or taxable temporary differences arising on the initial recognition of goodwill. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (e) Goods and services tax (GST) Revenue, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. Receivables and payable are stated inclusive of GST. Cash flows in the statement of cash flows are included on a gross basis and the GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. 12 FULCRUM LITHIUM LTD and its controlled entities NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2023 2 Summary of Significant Accounting Policies (cont’d) (f) Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the normal operating cycle; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the normal operating cycle; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. (g) Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. (h) Financial instruments Non-derivative financial assets Recognition and initial measurement The Group initially recognises trade receivables on the date that they are originated. All other financial assets are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. Classification and subsequent measurement On initial recognition, a financial asset is classified as measured at: • • • amortised cost; fair value through other comprehensive income – equity investment; or fair value through profit or loss. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. 13 FULCRUM LITHIUM LTD and its controlled entities NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2023 2 Summary of Significant Accounting Policies (cont’d) (h) Financial instruments (cont'd) A financial asset is measured at amortised cost if it meets both the following conditions and is not designated as fair value through profit or loss: • • it is held within a business model whose objective is to hold assets to collect contractual cash flows; and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair va