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Monaghan Capital Fund Ltd. — Management Reports 2025
Jan 29, 2025
48345_rns_2025-01-29_e9da0e8f-b1a9-4a29-ad6d-2e56aca66293.pdf
Management Reports
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Monaghan Capital Fund Ltd.
Management’s Discussion and Analysis
For the three and nine months ended November 30, 2024
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MANAGEMENT'S DISCUSSION AND ANALYSIS
The following Management Discussion and Analysis ("MD&A") is prepared as of January 29, 2025, and is intended to assist in the understanding of the results of the operations and financial condition of Monaghan Capital Fund Ltd. (the "Company").
This MD&A should be read in conjunction with the audited financial statements and accompanying notes ("Interim Financial Statements") of the Company for the three and nine months ended November 30, 2024, and 2023, and the related notes thereto, and the audited financial statements for the year ended February 29, 2024, and the related notes thereto. These condensed interim financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standard Board ("IASB"). This MD&A contains forward-looking statements that are subject to risk factors set out in a cautionary note contained herein. All figures are in Canadian dollars unless otherwise noted.
Additional information related to the Company, including the Company's most recent Management Information Circular, and financial statements referred to herein are available on the Canadian Securities Administrator's website at www.sedarplus.ca.
FORWARD LOOKING STATEMENTS
This MD&A may contain "forward looking statements" that reflect the Company's current expectations and projections about its future results. When used in this MD&A, words such as "estimate", "intend", "expect", "anticipate" and similar expressions are intended to identify forward-looking statements, which, by their very nature, are not guarantees of the Company's future operational or financial performance, and are subject to risks and uncertainties and other factors that could cause the Company's actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this MD&A or as of the date otherwise specifically indicated herein. Due to risks and uncertainties, including the risks and uncertainties identified under the heading "Risks and Uncertainties", actual events may differ materially from current expectations. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise except as required by securities regulations.
COMPANY OVERVIEW
The Company was incorporated under the Business Corporations Act (British Columbia) on July 6, 2021. The Company was formed for the primary purpose of completing an Initial Public Offering ("IPO") on the TSX Venture Exchange ("Exchange") as a Capital Pool Company ("CPC"), as defined in Policy 2.4 of the Exchange. The principal business of the Company is the identification and evaluation of assets or businesses with a view to completing a Qualifying Transaction ("QT"), as defined under the policies of the Exchange.
The registered and head office of the Company is located at 2600 - 1066 West Hastings Street, Vancouver, BC V6E 3X1.
The Company has not commenced operations and has no assets other than cash. The Company's continuing operations, as intended, are dependent on its ability to identify and evaluate potential acquisitions of businesses, and once identified and evaluated, to negotiate an acquisition thereof or participation therein.
The Company filed a preliminary prospectus dated March 21, 2022, which was receipted by the British Columbia Securities Commission, as its principal regulator, on March 24, 2022. The Company subsequently filed a final prospectus dated May 20, 2022, which was receipted by the British Columbia Securities Commission on May 30, 2022.
On August 15, 2022, the Company completed its Initial Public Offering ("IPO"). The common shares of the
Company are traded on the TSX Venture Exchange. Effective July 12, 2023, the trading symbol was changed from “TRIG.P” to “EIRE.P”.
On January 16, 2023, the Company announced the results of its Annual General Meeting which took place on January 6, 2023. The nominees listed in the Management Information Circular dated December 5, 2022, were elected as directors of the Company, being Drew Green, Maruf Raza and Ted Hastings, who will hold office until the close of the next annual general meeting of the Company, or until their successors are appointed. Shareholders also adopted the resolution to approve the Company's 10% rolling stock option plan, which allows the board of directors to grant up to 10% of the outstanding common shares of the Company.
On March 10, 2023, the Company entered into a non-binding letter of intent (“Matador LOI”) with Matador Gold Technologies Inc. (“Matador”), whereby the Company was anticipated to acquire the business of Matador, which operates a mobile application that allows users to buy and sell gold from their smartphone. The Matador LOI outlined the terms and conditions pursuant to which the Company and Matador were anticipated to complete a three-cornered amalgamation, whereby a wholly owned subsidiary of the Company will amalgamate with Matador.
During the year ended February 29, 2024, the deadline to enter into a definitive agreement pursuant to the Matador LOI dated March 10, 2023 lapsed and the Matador LOI was terminated. The Company continued to pursue and evaluate other businesses and assets with a view to competing a QT.
On October 26, 2024, the Company entered into a non-binding letter of intent (“Hangr3 LOI”) with Hangr3 Entertainment Corp. (“Hangr3”), whereby the Company is anticipated to acquire the business of Hangr3, which operates a fan engagement agency. The Company and Hangr3 are expected to complete a three-cornered amalgamation, whereby a wholly-owned subsidiary of the Company will amalgamate with Hangr3 under the Business Corporations Act. If completed, the Proposed Transaction will constitute the Company's QT. Upon completion of the Proposed Transaction, the resulting issuer will carry on the business of Hangr3 and intends to list on the Exchange.
The completion of the Proposed Transaction is subject to the satisfaction of various conditions as are standard for a transaction of this nature, including, but not limited to, the negotiation of a Definitive Agreement by January 31, 2025; obtaining required shareholder and regulatory approvals; filing a disclosure document with securities authorities; receiving conditional approval from the Exchange for the transaction and listing; and completing the transaction by March 1, 2025, or another mutually agreed-upon date. There is no assurance that the transaction will be completed as planned.
OVERALL PERFORMANCE
The Company does not have any operations and, until it completes a QT, will not conduct any business other than the identification and evaluation of businesses and assets for potential acquisition.
As at November 30, 2024, the Company has an accumulated deficit of $376,240 (February 29, 2024 - $362,935). The Company incurred net loss and comprehensive loss for the three and nine months ended November 30, 2024, of $10,443 and $13,305, respectively (three and nine months ended November 30, 2023 - net income and comprehensive income of $1,914 and net loss and comprehensive loss of $77,515, respectively). The expenses for the three and nine months ended November 30, 2024, comprised of professional fees, filing fees, and general and administrative expenses.
The Company's recurring operating losses, working capital needs, and potential acquisition of a QT may require it to obtain additional capital to continue its operation. Such outside capital may include the sale of additional common shares of the Company. There can be no assurance that capital will be available as necessary to meet the Company's needs or, if the capital is available, that it will be on terms acceptable to the Company. The issuance of additional equity securities by the Company may result in a significant dilution in the equity interests of its current shareholders.
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DISCUSSION OF OPERATIONS
For the three months ended November 30, 2024 compared to the three months ended November 30, 2023
The Company incurred a net loss and comprehensive loss during the three months ended November 30, 2024, of $10,443 compared to a net income and comprehensive income of $1,914 during the three months ended November 30, 2023. The increase in net loss and comprehensive loss is primarily attributable to a $11,689 increase in professional fees, stemming from additional costs associated with the Hangr3 LOI. The net loss and comprehensive loss incurred by the Company are as follows:
| For the three months ended November 30, 2024 | For the three months ended November 30, 2023 | |
|---|---|---|
| Expenses | ||
| Professional fees | $ 19,086 | $ 7,397 |
| Filing fees | 1,606 | 3,237 |
| General and administrative | 352 | 151 |
| Total expenses | (21,044) | (10,785) |
| Interest income | 10,601 | 12,699 |
| Net income (loss) and comprehensive income (loss) | $ (10,443) | $ 1,914 |
Professional fees primarily consist of legal and accounting fees incurred during the three months ended November 30, 2024, and the three months ended November 30, 2023.
Filing fees relate to monthly services incurred with the TSX Venture Exchange. These services include other filing-related expenses such as TSX and Sedar filing fees.
Interest income relates to interest earned on the Company's bank accounts and interest accrued on Guaranteed Investment Certificates ("GICs").
For the nine months ended November 30, 2024, compared to the nine months ended November 30, 2023
The Company incurred a net loss and comprehensive loss during the nine months ended November 30, 2024, of $13,305 compared to a net loss and comprehensive loss of $77,515 during the nine months ended November 30, 2023. The decrease in net loss and comprehensive loss is primarily attributable to a $63,620 decrease in professional fees relating to audit fees due to Baker Tilly and legal fees as the Company was performing due diligence in connection with the Matador LOI in the comparative period prior to the lapse of the Matador LOI.
The net loss and comprehensive loss incurred by the Company are as follows:
| For the nine months ended November 30, 2024 | For the nine months ended November 30, 2023 | |
|---|---|---|
| Expenses | ||
| Professional fees | $ 39,040 | $ 102,660 |
| Filing fees | 7,394 | 11,679 |
| General and administrative | 1,102 | 470 |
| Total expenses | (47,536) | (114,809) |
| Interest income | 34,231 | 37,294 |
| Net loss and comprehensive loss | $ (13,305) | $ (77,515) |
Professional fees primarily consist of legal and accounting fees incurred during the nine months ended November 30, 2024, and the nine months ended November 30, 2023.
Filing fees relate to monthly services incurred with the TSX Venture Exchange. These services include other filing-related expenses such as TSX and Sedar filing fees.
Interest income relates to interest earned on the Company's bank accounts and interest accrued on GICs.
Summary of Quarterly Results
The following financial data was derived from the Company's interim financial statements for each of the eight most recently completed financial quarters:
| For the three months ended, | November 30, 2024 ($) | August 31, 2024 ($) | May 31, 2024 ($) | February 29, 2024 ($) |
|---|---|---|---|---|
| Total revenue | - | - | - | - |
| Net income (loss) and comprehensive income (loss) | (10,443) | (2,655) | (207) | (18,958) |
| Loss per share – basic and diluted | (0.00) | (0.00) | 0.00 | (0.00) |
| For the three months ended, | November 30, 2023 ($) | August 31, 2023 ($) | March 31, 2023 ($) | February 28, 2023 ($) |
| --- | --- | --- | --- | --- |
| Total revenue | - | - | - | - |
| Net income (loss) and comprehensive income (loss) | 1,914 | (20,582) | (58,847) | (23,177) |
| Income (loss) per share – basic and diluted | 0.00 | (0.00) | (0.00) | (0.00) |
During the three months ended November 30, 2024, the net loss and comprehensive loss increased by $7,788 compared to the previous quarter. This is primarily due to an increase in professional fees of $8,621 and a decrease of interest income of $1,792, partially offset by a decrease in filing fees of 2,575.
During the three months ended August 31, 2024, the net loss and comprehensive loss increased by $2,448 compared to the previous quarter. This is primarily due to an increase in professional fees and filing fees of $976 and $2,574, respectively.
During the three months ended May 31, 2024, the net loss and comprehensive loss decreased by $18,751 compared to the previous quarter. This is primarily due to a decrease in professional fees and filing fees of $13,888 and $6,261, respectively.
During the three months ended February 29, 2024, the net loss and comprehensive loss increased by $20,872 compared to the previous quarter. This is primarily due to an increase in professional fees and filing fees of $23,377 and $7,868, respectively.
During the three months ended November 30, 2023, the net income and comprehensive income increased by $22,496 compared to the previous quarter. This is primarily due to a decrease in professional fees and filing fees of $18,802 and $3,516, respectively. Furthermore, the Company earned interest income of $12,699 during the three months ended November 30, 2023.
During the three months ended August 31, 2023, the net loss and comprehensive loss decreased by $38,264 compared to the previous quarter. The decrease is primarily due to a $42,865 decrease in professional fees, offset by a $5,064 increase in filing fees.
During the three months ended May 31, 2023, the net loss and comprehensive loss increased by $35,669 compared to the previous quarter. The increase is primarily due to a $68,676 increase in professional fees, offset by a $10,912 decrease in share-based payments, a $10,093 decrease in filing fees, and a $10,942 decrease in listing fees.
During the three months ended February 28, 2023, the net loss and comprehensive loss increased by $19,932 compared to the previous quarter. The increase is primarily due to a $11,782 increase in filing fees, a $10,912 increase in share-based compensation, and a $9,071 increase in listing fees, which is partially offset by a $8,572 decrease in professional fees, a $1,978 decrease in consulting fees and a $1,431 increase in interest income.
LIQUIDITY & CAPITAL RESOURCES
The Company completed private placements of its common shares during the period from incorporation on July 6, 2021 to February 28, 2022, raising aggregate gross proceeds of $1,000,000.
During the year ended February 28, 2023, as part of its IPO, the Company issued an aggregate of 2,288,000 common shares in the capital of the Company at a purchase price of $0.20 per share for gross proceeds of $457,600.
In accordance with Policy 2.4 of the Exchange, the proceeds raised from the sale of securities of a CPC may only be used to identify and evaluate assets or businesses for future investment, with the exception that up to $3,000 per month may be used for reasonable general and administrative expenses of the Company. These restrictions apply until the completion of a QT by the Company. There is no assurance that the Company will be able to identify a suitable business, asset or property as its QT. Furthermore, even if a QT is identified, there can be no assurance that the Company will be able to complete the transaction. If the Company identifies a QT, it may be necessary for the Company to seek additional financing. Capital markets may not always be receptive to offerings of new equity from treasury or debt, whether by way of private placements or public offerings, under terms that would be acceptable for the Company.
As at November 30, 2024, the Company had working capital of $1,088,172 (February 29, 2024 - $1,101,477).
As at November 30, 2024, the shareholders' equity of $1,088,172 (February 29, 2024 - $1,101,477) consisted of share capital of $1,298,012 (February 29, 2024 - $1,298,012), share-based payments reserve of $166,400 (February 29, 2024 - $166,400), and an accumulated deficit of $376,240 (February 29, 2024 - $362,935).
OFF BALANCE SHEET TRANSACTIONS
The Company does not have any off-balance sheet arrangements as at November 30, 2024 or as of the date of this MD&A.
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TRANSACTIONS WITH RELATED PARTIES
Key management personnel
Key management personnel are persons responsible for planning, directing, and controlling the activities of an entity, and include executive management and non-executive directors. During the three and nine months ended November 30, 2024, and 2023, there was no share-based compensation or cash remuneration paid to key management personnel.
Other Related party transactions
During the three and nine months ended November 30, 2024, the Company incurred legal fees of $8,922 and $17,118 (November 30, 2023 - $8,197 and $85,617) to MLT Aikins LLP, a law firm of which a partner, Madhi Shams, is corporate secretary and a shareholder of the Company through a holding company. These legal fees related to work done and listing fees.
Related party balances
As at November 30, 2024, a balance of $10,265 (February 29, 2024 - $3,265) was owing to MLT Aikins LLP, the law firm of which a partner, Madhi Shams, is corporate secretary of the Company. As at November 30, 2024, a balance of $4,853 (February 29, 2024 - $4,120) was held in trust with the law firm.
PROPOSED TRANSACTIONS
On October 26, 2024, the Company entered into a non-binding letter of intent with Hangr3, whereby the Company is anticipated to acquire the business of Hangr3, which operates a fan engagement agency. The Company and Hangr3 are expected to complete a three-cornered amalgamation, whereby a wholly-owned subsidiary of the Company will amalgamate with Hangr3 under the Business Corporations Act. If completed, the Proposed Transaction will constitute the Company's QT. Upon completion of the Proposed Transaction, the resulting issuer will carry on the business of Hangr3 and intends to list on the Exchange.
The completion of the Proposed Transaction is subject to the satisfaction of various conditions as are standard for a transaction of this nature, including, but not limited to, the negotiation of a Definitive Agreement by January 31, 2025; obtaining required shareholder and regulatory approvals; filing a disclosure document with securities authorities; receiving conditional approval from the Exchange for the transaction and listing; and completing the transaction by March 1, 2025, or another mutually agreed-upon date. There is no assurance that the transaction will be completed as planned.
CRITICAL ESTIMATES
The Company makes estimates, judgements and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
In the future, actual experience may differ from these estimates, judgements and assumptions. The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income in the period of the change, if the change affects that period only, or in the period of the change and future years, if the change affects both.
In preparing the Company's Condensed Interim Financial Statements, the material estimates and critical judgments were the same as those applied to the audited annual financial statements for the year ended February 29, 2024.
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ACCOUNTING POLICIES
A detailed summary of all of the Company's material accounting policies is included in Note 3 to the audited financial statements for the year ended February 29, 2024.
ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE
The Company has reviewed new and revised accounting pronouncements that have been issued but are not yet effective. The Company has not early adopted any new standards and determined that there are no new standards that are relevant to the Company.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Capital Management
As at November 30, 2024, the capital structure of the Company consists of $1,088,172 in shareholders' equity (February 29, 2024 - $1,101,477).
The Company's objectives when managing capital are to maintain financial strength, to protect its ability to meet its on-going liabilities, to continue as a going concern, to maintain credit worthiness and to maximize returns for shareholders over the long term. The Company does not have any externally imposed capital requirements to which it is subject to. Capital of the Company comprises of cash and shareholders' equity.
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares.
The Company's investment policy is to invest its cash in financial instruments in high credit quality financial institutions with terms to maturity selected with regards to the expected timing of expenditures from continuing operations.
FINANCIAL INSTRUMENTS
Measurement – initial recognition
The Company recognizes financial assets and financial liabilities on the date the Company becomes a party to the contractual provisions of the instruments. On initial recognition, the Company measures a financial asset and financial liability at its fair value plus, in the case of a financial asset and liability not at fair value through profit or loss ("FVTPL"), transaction costs that are directly attributable to the acquisition of the financial instrument. The directly attributable transaction costs of financial assets and liabilities are classified as at FVTPL are expensed in the period in which they are incurred.
Measurement – subsequent recognition
Subsequent measurement of financial assets and financial liabilities depends on the classifications of such assets and liabilities. The Company classifies its financial assets and financial liabilities in the following measurement categories: i) those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss), and ii) those to be measured at amortized cost. The classification of financial assets depends on the business model for managing the financial assets and the contractual terms of the cash flows. Financial liabilities are classified as those to be measured at amortized cost unless they are designated as those to be measured subsequently at fair value through profit or loss (irrevocable election at the time of recognition).
For assets and liabilities measured at fair value, gains and losses are either recorded in profit or loss or other comprehensive income.
The Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities are not reclassified.
Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments or principal and interest on the principal outstanding are generally measured at amortized cost at the end of the subsequent accounting periods. All other financial assets, including equity investments, are measured at their fair values at the end of subsequent accounting periods, with any changes taken through profit and loss or other comprehensive income (irrevocable election at the time of recognition).
Additional fair value measurement disclosure includes classification of financial instrument fair values in a fair value hierarchy comprising three levels reflecting the significance of the inputs used in making the measurements which are as follows:
Level 1: Valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Valuations based on directly or indirectly observable inputs in active markets for similar assets or liabilities, other than Level 1 prices, such as quoted interest or currency exchange rates; and;
Level 3: Valuations based on significant inputs that are not derived from observable market data, such as discounted cash flow methodologies based on internal cash flow forecasts.
The classification of the Company's financial instruments under IFRS 9 is as follows:
| Cash and cash equivalents | FVTPL |
|---|---|
| Other receivables | Amortized cost |
| Accounts payable and accrued liabilities | Amortized cost |
Risk Management
It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The key to success in managing liquidity is the degree of certainty in the cash flow projections.
The Company monitors its cash flows to meet the Company's normal operating requirements on an ongoing basis and its planned capital expenditures. All of the Company's financial liabilities have contractual maturities of 30 days or are due on demand and are subject to normal trade terms. As at November 30, 2024, the Company had a working capital of $1,088,172 (February 29, 2024 - $1,101,477).
Foreign currency risk
Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is not exposed to foreign exchange risk.
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Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's current policy is to invest excess cash in guaranteed investment certificates or interest-bearing accounts of major Canadian chartered banks. The Company regularly monitors compliance to its cash management policy. Management believes interest rate risk to be minimal.
Other price risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is not exposed to other price risks.
Credit Risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Financial instruments that potentially expose the Company to credit risk is cash. To minimize the credit risk on cash the Company places the instrument with a high credit quality financial institution. The maximum exposure to loss arising from these advances is equal to their total carrying amounts.
DISCLOSURE OF OUTSTANDING SHARE DATA
As at November 30, 2024 and the date of this MD&A, the Company had 12,288,000 common shares and 1,434,720 stock options outstanding. The stock options outstanding comprise 1,205,920 incentive options and 228,800 options issued to the Company's Agent ("Agent Options"). As such, the Company has not exceeded its limit of issuing up to 10% of the total number of issued and outstanding shares under the Option Plan.
Escrow
Since the completion of the Company's IPO, 10,000,000 of the currently issued and outstanding common shares are subject to a CPC Escrow Agreement. Under the CPC Escrow Agreement, 25% of the escrowed common shares will be released from escrow on the issuance of the Final QT Exchange Bulletin (as defined in the policies of the Exchange) (the "Initial Release") and an additional 25% will be released on each of the dates which are 6 months, 12 months, and 18 months following the Initial Release. As at November 30, 2024 10,000,000 common shares were held in escrow (February 29, 2024 - 10,000,000).
All common shares acquired on exercise of stock options granted to directors and officers of the Company prior to the completion of a QT must also be deposited in escrow until the Final Exchange Bulletin is issued. In addition, all common shares acquired in the secondary market prior to the completion of a QT by a Control Person, as defined in the policies of the Exchange, are required to be deposited in escrow. Subject to certain permitted exemptions, all securities of the Company held by principals of the resulting issuer will also be subject to escrow.
RISKS & UNCERTAINTIES
The Company's financial performance is likely to be subject to the following risks and uncertainties:
- The Company has not commenced commercial operations and has no assets other than cash and other receivables. The Company has no history of earnings, will not generate earnings to pay dividends until at least after the completion of the QT, and does not intend to pay dividends in the foreseeable future.
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Until completion of the QT, the Company is not permitted to carry on any business other than the identification and evaluation of potential QTs.
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The Company only has limited funds with which to identify and evaluate potential QTs and there can be no assurance that the Company will be able to identify or complete a suitable QT.
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If a QT is completed, there can be no assurance that an active and liquid market for the Company's common shares will develop, and investors may find it difficult to resell the common shares.
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There can be no assurance that the Company will be able to obtain additional financing in the future on terms acceptable to the Company or at all.
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The Company's success depends to a certain degree upon key members of the management. It is expected that these individuals will be a significant factor in the growth and success of the Company. The loss of the service of members of the management team or certain key employees could have a material adverse effect on the Company.
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