International Battery Metals Ltd (IBATF)

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6. Lithium Extraction Technology Asset Purchase On April 12, 2018, the Company closed an asset purchase agreement with North American Lithium Inc. (“NAL”) and SAL, a company formerly controlled by shareholders of NAL, pursuant to which the Company acquired (i) NAL’s data, analysis and reports related to lithium extraction from oilfield brines for petrolithium extraction projects for consideration of US$875,000 cash and (ii) 100% of the outstanding shares of SAL, which holds intellectual property for consideration of up to 25,309,488 common shares of the Company (the “Acquisition”). As part of the exchange, the Company granted a 5% gross profits royalty to NAL.

The 25,309,488 in share-based consideration for the acquisition is in the form of performance shares will be issued upon SAL achieving certain milestones (the “Milestones”) as follows:

Milestone
Number of performance shares to be issued Shares on closing date (issued on April 12, 2018) 4,700,000 Shares on SAL and the Company filing three U.S. or foreign patent applications with respect to intellectual property 4,000,000 Shares on SAL the Company filing three additional patents with respect to intellectual property 5,536,496 Shares on SAL the Company filing three additional patents with respect to intellectual property 5,536,496 Shares upon the Company completing either of the following: one or more private placement financing(s) resulting in the issuance of an aggregate of no less than 5,000,000 common shares in the Company; or completing a laboratory – scale pilot plant for the processing of lithium or lithium concentrates (issued on November 7, 2018) 5,536,496

During the year ended January 31, 2019, the Company applied deferred acquisition costs of $703,277, inclusive of an initial cash payment of US$575,000, to the asset purchase and the balance of the US$875,000 consideration for the Acquisition being $459,025 (US $350,000) was paid. The Company issued 4,700,000 common shares with a fair value of $2,256,000 on the date of closing the acquisition.

The remaining shares are contingently issuable, and their fair value was estimated using a probabilityweighted analysis based on the probability of achieving the Milestones. The resulting valuation was recorded as obligation to issue shares of $3,201,185. On November 7, 2018, the Company issued 5,536,496 Milestone shares and transferred $2,657,734 from obligation to issue shares to share capital

6. Lithium Extraction Technology Asset Purchase (continued)

The Company incurred an additional $50,000 in costs associated with the closing of the Acquisition and is required to issue a finder’s fee of 100,000 common shares, valued at $48,000. As at July 31, 2019, the Company has yet to issue these shares and has recorded an obligation to issue shares of $48,000 (January 31, 2019 - $48,000).

The Acquisition was considered an acquisition of assets for accounting purposes and the acquisition of the net assets of SAL and accounted for using the acquisition method, whereby the purchase consideration was allocated to the estimated fair values of the identifiable assets and liabilities acquired at the date of the Acquisition.

The purchase price was allocated to the net assets acquired in the acquisition as follows:
Total Purchase price: Performance shares $ 2,256,000 Shares contingently issuable on achieving milestones 3,201,185 Finder’s fee 98,000 Transaction costs 1,162,302 $ 6,717,487 Net assets acquired: Intellectual property $ 6,717,487 $ 6,717,487

In November 2018, the Company entered into licensing agreements with Ensorcia Metals Corporation (“Ensorcia”) and its wholly-owned subsidiaries, Sorcia Minerals LLC (“Sorcia”) and Ensorcia Argentina LLC (“EAL”) whereby the Company issued lithium extraction technology licenses to Sorcia and EAL in exchange for a six percent royalty (6%) on the gross sales price of all products produced and sold, less selling costs, using the Licensed Technology and a ten percent (10%) common membership interest in Sorcia and EAL. As a signing incentive, the Company issued 1,000,000 common share purchase warrants valued at $103,512 to Ensorcia for the agreement with Sorcia (note 10) which were expensed as a share-based payment expense to obtain a contract.

The investments in Sorcia and EAL are accounted for as investments carried at FVTPL. As the entities are shell holding companies, their fair value at initial recognition and July 31, 2019 are $nil.
7. Intangible Assets

On April 12, 2018, upon completion of the Acquisition (Note 6), the Company acquired certain intellectual property (the “Intellectual Property”), from the shareholders of SAL. The Intellectual Property was recorded at $6,717,487. During the six months ended July 31, 2019, the Company recorded amortization of $333,113 based on an estimated useful life of 10 years. As of July 31, 2019, the Intellectual Property was $5,841,454.

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