How might the issuance of flow‑through shares impact the company’s eligibility for future Canadian tax incentives or SR&ED credits?

The issuance of flow‑through (FT) shares gives Rocky Shore a “tax‑shield” that can be used to offset current and future taxable income. By directing a portion of the $1.5 m raise into FT shares, the company can raise capital while simultaneously qualifying for the federal and provincial tax incentives that accompany “flow‑through” financing, such as the 15% federal refundable tax credit on eligible expenses and the provincial “exploration and development” (E&D) credits that many provinces—including Ontario, Quebec and British Columbia—offer for qualified mining expenditures. Moreover, the FT structure automatically generates eligible scientific research and experimental development (SR&ED) expenditures, which can be claimed under the Canada Revenue Agency’s SR&ED program, boosting refundable tax credits (currently up to 35% for Canadian‑controlled private corporations). Because the FT shares are treated as a cost‑recovery vehicle, the company can deduct the amount raised (up to the $1.5 M) from its taxable income in the year the shares are issued, preserving or expanding its future SR&ED claim base.

From a trading perspective, the FT component improves the company’s cash‑flow profile without diluting shareholders as heavily as a straight equity raise would. The tax refunds and credits increase net cash‑flow and lower the effective cost of capital, which can be reflected in a higher enterprise‑value multiple versus peers lacking FT financing. Technically, Rocky Shore’s shares have been trading near the $0.05 placement price; the added liquidity and tax‑credit upside may provide support around that level, but the stock remains highly volatile (low float, CSE listing). Traders should watch for two catalysts: (1) the issuance close date, when the cash infusion and tax credit filings become imminent—this could trigger a short‑term rally as investors price in the tax shield; and (2) any regulatory or audit flags regarding the eligibility of the FT expenses for SR&ED, because a rejection would strip the tax benefit and could pressure the stock. In practice, buying on dips near the $0.05‑$0.07 band with a stop‑loss just below the placement price, while monitoring the company’s SR&ED claim filings and any provincial incentive confirmations, offers a risk‑controlled way to capture the upside from the tax‑advantaged financing.