CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTH PERIOD ENDED JANUARY 31, 2017
(Unaudited)
(Expressed in Canadian Dollars)
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT
(Unaudited)
(Expressed in Canadian Dollars)
JANUARY 31, 2017 | APRIL 30, 2016 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 867,453 | $ | 1,651,472 | ||||
Loan receivable (Note 11) | 215,529 | 117,513 | ||||||
Other receivables | 11,794 | 24,263 | ||||||
Prepaid expenses | 26,682 | 41,893 | ||||||
1,121,458 | 1,835,141 | |||||||
Available-for-sale investment (Note 5) | 200,000 | 200,000 | ||||||
Deposit (Note 10) | 100,000 | 100,000 | ||||||
Reclamation bonds (Note 7) | 10,815 | 10,416 | ||||||
$ | 1,432,273 | $ | 2,145,557 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Payables and accrued liabilities | $ | 225,731 | $ | 199,687 | ||||
Due to related parties (Note 10) | 252,645 | 255,244 | ||||||
478,376 | 454,931 | |||||||
Future reclamation provisions (Note 8) | 20,807 | 20,807 | ||||||
499,183 | 475,738 | |||||||
Equity | ||||||||
Capital stock (Note 9) | 90,663,999 | 90,663,999 | ||||||
Reserves | 21,475,351 | 21,475,351 | ||||||
Deficit | (111,206,260 | ) | (110,469,531 | ) | ||||
933,090 | 1,669,819 | |||||||
$ | 1,432,273 | $ | 2,145,557 |
Nature of operations and going concern (Note 1)
Subsequent events (Note 16)
Approved on March 30, 2017 on behalf of the Board of Directors:
"Mark Lotz" | Director | "John Sutherland" | Director |
Mark Lotz | John Sutherland |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
1
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(Expressed in Canadian Dollars)
THREE MONTH PERIODS ENDED JANUARY 31, | NINE MONTH PERIODS ENDED JANUARY 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
OPERATING ITEMS | ||||||||||||||||
Business development | $ | 65,063 | $ | - | $ | 231,565 | $ | - | ||||||||
Depreciation (Note 6) | - | - | - | 5,013 | ||||||||||||
Exploration and evaluation (Note 7) | 7,567 | 7,722 | 22,165 | 45,496 | ||||||||||||
Finance income | (6,518 | ) | (4,291 | ) | (21,096 | ) | (16,537 | ) | ||||||||
Foreign exchange loss (gain) | (1,862 | ) | 1,282 | 392 | 2,986 | |||||||||||
Investor relations | 4,085 | 572 | 6,177 | 5,451 | ||||||||||||
Office and administration | 10,350 | 21,761 | 23,375 | 74,383 | ||||||||||||
Professional fees | 8,536 | 8,580 | 33,227 | 24,250 | ||||||||||||
Transfer agent and filing fees | 29,436 | 23,005 | 108,035 | 59,373 | ||||||||||||
Wages and salaries | 136,273 | 34,490 | 332,889 | 100,859 | ||||||||||||
(252,930 | ) | (93,121 | ) | (736,729 | ) | (301,274 | ) | |||||||||
Impairment of property and equipment (Note 6) | - | - | - | (1,802 | ) | |||||||||||
Loss on sale of property and equipment (Note 6) | - | - | - | (33,773 | ) | |||||||||||
Net loss and comprehensive loss for the period | $ | (252,930 | ) | $ | (93,121 | ) | $ | (736,729 | ) | $ | (336,849 | ) | ||||
Basic and diluted loss per common share | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.04 | ) | $ | (0.02 | ) | ||||
Weighted average number of common shares outstanding | 18,812,301 | 18,812,301 | 18,812,301 | 18,812,301 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements. |
2
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED JANUARY 31,
(Unaudited)
(Expressed in Canadian Dollars)
2017 | 2016 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss for the period | $ | (736,729 | ) | $ | (336,849 | ) | ||
Items not affecting cash: | ||||||||
Depreciation | - | 5,013 | ||||||
Finance income | (14,416 | ) | - | |||||
Impairment of property and equipment | - | 1,802 | ||||||
Loss on sale of property and equipment | - | 33,773 | ||||||
Unrealized gain on foreign exchange | (399 | ) | (5,059 | ) | ||||
Non-cash working capital item changes: | ||||||||
Other receivables | 12,469 | 14,733 | ||||||
Prepaid expenses | 15,211 | 823 | ||||||
Payables and accrued liabilities | 26,044 | 11,037 | ||||||
Due to related parties | (2,599 | ) | (81,349 | ) | ||||
Net cash used in operating activities | (700,419 | ) | (356,076 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Loan receivable | (83,600 | ) | - | |||||
Proceeds from sale of property and equipment | - | 35,000 | ||||||
Net cash provided by (used in) investing activities | (83,600 | ) | 35,000 | |||||
Net change in cash and cash equivalents during the period | (784,019 | ) | (321,076 | ) | ||||
Cash and cash equivalents, beginning of the period | 1,651,472 | 2,350,202 | ||||||
Cash and cash equivalents, end of the period | $ | 867,453 | $ | 2,029,126 | ||||
Cash and cash equivalents | ||||||||
Cash | $ | 44,453 | $ | 106,126 | ||||
Liquid short term investments | 823,000 | 1,923,000 | ||||||
$ | 867,453 | $ | 2,029,126 | |||||
Cash (paid) received for | ||||||||
Interest | $ | 12,582 | $ | 27,176 | ||||
Taxes | $ | - | $ | - |
Supplemental disclosures with respect to cash flows (Note 12)
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
3
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
(Expressed in Canadian Dollars)
Capital Stock | ||||||||||||||||||||
Number of Shares | Amount | Reserves | Deficit | Total | ||||||||||||||||
Balance, April 30, 2015 | 18,812,301 | $ | 90,663,999 | $ | 21,475,351 | $ | (107,350,922 | ) | $ | 4,788,428 | ||||||||||
Loss for the period | - | - | - | (336,849 | ) | (336,849 | ) | |||||||||||||
Balance, January 31, 2016 | 18,812,301 | 90,663,999 | 21,475,351 | (107,687,771 | ) | 4,451,579 | ||||||||||||||
Loss for the period | - | - | - | (2,781,760 | ) | (2,781,760 | ) | |||||||||||||
Balance, April 30, 2016 | 18,812,301 | 90,663,999 | 21,475,351 | (110,469,531 | ) | 1,669,819 | ||||||||||||||
Loss for the period | - | - | - | (736,729 | ) | (736,729 | ) | |||||||||||||
Balance, January 31, 2017 | 18,812,301 | $ | 90,663,999 | $ | 21,475,351 | $ | (111,206,260 | ) | $ | 933,090 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
4
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2017
(Unaudited)
(Expressed in Canadian Dollars)
1. NATURE OF OPERATIONS AND GOING CONCERN
Canada Jetlines Ltd. (formerly "Jet Metal Corp.") (the "Company" or "Jetlines") was in the business of acquiring, exploring and evaluating mineral resource properties in North America. Subsequent to the nine month period ended January 31, 2017, the Company completed an amalgamation and change of business to the airline industry and changed its name to "Canada Jetlines Ltd." (Notes 11 and 16). Effective February 28, 2017, the Company's principal business activity is the start-up of an ultra-low cost carrier ("ULCC") scheduled airline service.
The Company was incorporated under the laws of British Columbia and continued as a Federal corporation pursuant to the Canada Business Corporations Act effective February 28, 2017 (Notes 11 and 16). The address of the Company's registered office is #1240 – 1140 West Pender Street, Vancouver, British Columbia, Canada V6E 4G1. The Company's common shares trade on the TSX Venture Exchange (the "Exchange") under the symbol "JET".
Subsequent to the nine month period ended January 31, 2017, the Company consolidated its outstanding common shares on the basis of one post-consolidation common share for every one and one-half (1.5) pre-consolidation common shares (Notes 9, 11 and 16). All references to share and per share amounts have been retroactively restated to reflect this share consolidation.
These condensed interim consolidated financial statements have been prepared using International Financial Reporting Standards ("IFRS") on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. At present, the Company has no current operating income or cash flows. The continuing operations of the Company are dependent upon the Company's ability to continue to raise adequate financing and to commence profitable operations in the future. The Company intends to finance its future requirements through a combination of debt and/or equity issuance. There is no assurance that the Company will be able to obtain such financings or obtain them on favorable terms.
As at January 31, 2017, the Company had working capital of $643,082 and a deficit of $111,206,260. As a result of financing completed subsequent to the nine month period ended January 31, 2017 (Notes 11 and 16), management has assessed that working capital is sufficient for the Company to maintain its operations and activities for the next 12 months.
These condensed interim consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and statement of financial position classifications that would be necessary were the going concern assumption deemed to be inappropriate. These adjustments could be material.
2. BASIS OF PRESENTATION
a) | Significant accounting judgements and estimates |
The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, shareholders' equity, and the disclosure of contingent assets and liabilities, as at the date of the consolidated financial statements, and expenses for the periods reported.
Critical Judgements
The preparation of these condensed interim consolidated financial statements requires management to make judgements regarding the going concern of the Company, as previously discussed in Note 1, as well as the determination of functional currency. The functional currency is the currency of the primary economic environment in which an entity operates, and has been determined for each entity within the Company. The functional currency for the Company and its subsidiaries has been determined to be the Canadian dollar.
5
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2017
(Unaudited)
(Expressed in Canadian Dollars)
2. BASIS OF PRESENTATION (continued)
a) | Significant accounting judgements and estimates (continued) |
Key Sources of Estimation Uncertainty
Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates and such differences could be significant.
Significant estimates made by management affecting these condensed interim consolidated financial statements include:
Share-based Payments
Estimating fair value for granted stock options and compensatory warrants requires determining the most appropriate valuation model which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the option or warrant, volatility, dividend yield, and rate of forfeitures and making assumptions about them.
Deferred Tax Assets and Liabilities
The estimation of income taxes includes evaluating the recoverability of deferred tax assets and liabilities based on an assessment of the Company's ability to utilize the underlying future tax deductions against future taxable income prior to expiry of those deductions. Management assesses whether it is probable that some or all of the deferred income tax assets and liabilities will not be realized. The ultimate realization of deferred tax assets and liabilities is dependent upon the generation of future taxable income, which in turn is dependent upon the successful discovery, extraction, development and commercialization of mineral reserves. To the extent that management's assessment of the Company's ability to utilize future tax deductions changes, the Company would be required to recognize more or fewer deferred tax assets or liabilities, and deferred income tax provisions or recoveries could be affected.
Recoverability of Exploration and Evaluation Assets
The Company has not yet determined whether its exploration and evaluation assets contain mineral reserves that are economically recoverable. The recoverability of the amounts shown for exploration and evaluation assets are dependent upon the existence of economically recoverable mineral reserves, the ability of the Company to obtain necessary financing to complete the development of those mineral reserves and upon future production or proceeds from the disposition thereof.
The estimation of income taxes includes evaluating the recoverability of deferred tax assets and liabilities based on an assessment of the Company's ability to utilize the underlying future tax deductions against future taxable income prior to expiry of those deductions. Management assesses whether it is probable that some or all of the deferred income tax assets and liabilities will not be realized. The ultimate realization of deferred tax assets and liabilities is dependent upon the generation of future taxable income, which in turn is dependent upon the successful discovery, extraction, development and commercialization of mineral reserves. To the extent that management's assessment of the Company's ability to utilize future tax deductions changes, the Company would be required to recognize more or fewer deferred tax assets or liabilities, and deferred income tax provisions or recoveries could be affected.
Recoverability of Exploration and Evaluation Assets
The Company has not yet determined whether its exploration and evaluation assets contain mineral reserves that are economically recoverable. The recoverability of the amounts shown for exploration and evaluation assets are dependent upon the existence of economically recoverable mineral reserves, the ability of the Company to obtain necessary financing to complete the development of those mineral reserves and upon future production or proceeds from the disposition thereof.
Useful Life of Property and Equipment
Property and equipment is depreciated over its estimated useful life. Estimated useful lives are determined based on current facts and past experience, and take into consideration the anticipated physical life of the asset, the potential for technological obsolescence, and regulations.
Property and equipment is depreciated over its estimated useful life. Estimated useful lives are determined based on current facts and past experience, and take into consideration the anticipated physical life of the asset, the potential for technological obsolescence, and regulations.
6
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2017
(Unaudited)
(Expressed in Canadian Dollars)
2. BASIS OF PRESENTATION (continued)
a) | Significant accounting judgements and estimates (continued) |
Key Sources of Estimation Uncertainty (continued)
Future Reclamation Provision
The Company assesses its provision for reclamation related to its exploration and evaluation activities at each reporting period or when new material information becomes available. Accounting for reclamation obligations requires management to make estimates of the future costs that will be incurred to complete the reclamation to comply with existing laws and regulations. Actual future costs that will be incurred may differ from those amounts estimated as a result of changes to environmental laws and regulations, timing of future cash flows, changes to future costs, technical advances, and other factors. In addition, the actual work required may prove to be more extensive than estimated because of unexpected geological or other technical factors. The measurement of the present value of the future obligation is dependent on the selection of a suitable discount rate and the estimate of future cash outflows. Changes to either of these estimates may materially affect the present value calculation of the obligation.
b) Approval of the condensed interim consolidated financial statements
The Board of Directors has delegated the responsibility for approval and authorization for issue of the condensed interim consolidated financial statements of the Company to the Audit Committee.
c) Basis of presentation
These condensed interim consolidated financial statements are presented in Canadian dollars, which is the functional currency of the Company and its subsidiaries, and have been prepared on a historical cost basis, except for certain financial instruments classified as fair value through profit or loss, and available-for-sale, which are stated at their fair value. In addition, these condensed interim consolidated financial statements have been prepared using the accrual basis of accounting, except for certain cash flow information.
d) Statement of compliance
These condensed interim consolidated financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Boards ("IASB") and in accordance with International Accounting Standards ("IAS") 34, Interim Financial Reporting. The condensed interim consolidated financial statements do not include all the information required for full annual financial statements.
These condensed interim consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements for the year ended April 30, 2016.
e) Basis of consolidation
These condensed interim consolidated financial statements include the accounts of the Company, and its wholly owned subsidiaries, Target Exploration and Mining Corp. ("Target"), Crosshair Energy USA, Inc. ("Crosshair USA"), Gemini Metals Corp. ("Gemini") as well as The Bootheel Project LLC ("BHP LLC") in which the Company has a 81% interest. A wholly owned subsidiary is an entity in which the Company has control, directly or indirectly, where control is defined as the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. All intercompany transactions and balances have been eliminated on consolidation.
7
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2017
(Unaudited)
(Expressed in Canadian Dollars)
2. BASIS OF PRESENTATION (continued)
e) Basis of consolidation (continued)
Details of the Company's subsidiaries are as follows:
Name | Place of incorporation | Interest % | Principal activity |
Target Exploration and Mining Corp. | British Columbia, Canada | 100% ownership by the Company | Exploration and evaluation of mineral properties |
Crosshair Energy USA, Inc. | Nevada, United States | 100% ownership by Target | Exploration and evaluation of mineral properties |
Bootheel Project LLC | Colorado, United States | 81% ownership by Crosshair USA | Exploration and evaluation of mineral properties |
Gemini Metals Corp. | British Columbia, Canada | 100% ownership by the Company | Inactive subsidiary |
Subsequent to the nine month period ended January 31, 2017, the Company incorporated a wholly owned subsidiary to complete an amalgamation with Canada Jetlines Operations Ltd. (formerly "Canada Jetlines Ltd.") (Notes 11 and 16).
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by the Company are set out in Note 3 to the audited consolidated financial statements for the year ended April 30, 2016 and have been consistently followed in the preparation of these condensed interim consolidated financial statements.
New Accounting Pronouncement
The following accounting pronouncement has been made, but is not yet effective for the Company as at January 31, 2017. The Company is currently evaluating the impact of the amended standards on its consolidated financial statements.
In November 2009 and October 2010, the IASB issued IFRS 9, Financial Instruments ("IFRS 9"), which represents the completion of the first part of a three-part project to replace IAS 39, Financial Instruments: Recognition and Measurement, with a new standard. Per the new standard, an entity choosing to measure a liability at fair value will present the portion of the change in its fair value due to changes in the entity's own credit risk in the other comprehensive income or loss section of the entity's statement of comprehensive loss, rather than within profit or loss. Additionally, IFRS 9 includes revised guidance related to the derecognition of financial instruments. IFRS 9 applies to financial statements for annual periods beginning on or after January 1, 2018, with early adoption permitted.
4. MARKETABLE SECURITIES
As at January 31, 2017 and April 30, 2016, the Company held 120,000 common shares of Ausroc Metals Ltd. with a cost of $97,024 and fair value of $Nil.
5. AVAILABLE-FOR-SALE INVESTMENT
On February 27, 2015, the Company purchased 1,000,000 common shares of Voleo, Inc. ("Voleo") at a price of $0.20 per common share for an aggregate purchase price of $200,000. Voleo is developing mobile applications and software platforms to meet the investment expectations of millennial investors. It has built a functional prototype and designed a consumer version which is in development.
The Executive Chairman and former President and Chief Executive Officer of the Company is also a director and the Executive Chairman of Voleo. The former Chief Financial Officer of the Company was appointed the Chief Financial Officer of Voleo on October 18, 2016.
8
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2017
(Unaudited)
(Expressed in Canadian Dollars)
6. PROPERTY AND EQUIPMENT
Exploration Equipment | Storage Containers | Total | ||||||||||
Cost | ||||||||||||
Balance at April 30, 2015 | $ | 298,586 | 3,000 | 301,586 | ||||||||
Disposals | (289,086 | ) | (3,000 | ) | (292,086 | ) | ||||||
Impairment | (9,500 | ) | - | (9,500 | ) | |||||||
Balance at April 30, 2016 and January 31, 2017 | - | - | - | |||||||||
Accumulated Depreciation | ||||||||||||
Balance at April 30, 2015 | 225,773 | 225 | 225,998 | |||||||||
Depreciation | 4,920 | 93 | 5,013 | |||||||||
Disposals | (222,995 | ) | (318 | ) | (223,313 | ) | ||||||
Impairment | (7,698 | ) | - | (7,698 | ) | |||||||
Balance at April 30, 2016 and January 31, 2017 | - | - | - | |||||||||
Net Book Value | ||||||||||||
At April 30, 2016 | $ | - | $ | - | $ | - | ||||||
At January 31, 2017 | $ | - | $ | - | $ | - |
During the year ended April 30, 2016, the Company sold exploration equipment and storage containers located in Newfoundland and Labrador with net book values of $66,091 and $2,682, respectively, for proceeds of $35,000, resulting in a loss on disposal of $33,773.
During the year ended April 30, 2016, the Company recorded an impairment of property and equipment in relation to obsolete exploration equipment with a net book value of $1,802 and recoverable amount of $Nil, resulting in an impairment loss of $1,802. The exploration equipment was previously used in the Company's operations in the United States.
7. EXPLORATION AND EVALUATION ASSETS
Exploration and Evaluation Assets
The following table illustrates acquisition costs:
Central Mineral Belt ("CMB") | ||||
Silver Spruce | ||||
Balance at April 30, 2015 | $ | 2,509,791 | ||
Impairment | (2,509,791 | ) | ||
Balance at April 30, 2016 and January 31, 2017 | $ | - |
9
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2017
(Unaudited)
(Expressed in Canadian Dollars)
7. EXPLORATION AND EVALUATION ASSETS (continued)
Exploration and Evaluation Expenditures
The following table illustrates the exploration and evaluation expenditures incurred during the nine month period ended January 31, 2017:
Bootheel Project | ||||
Administration | $ | 25,360 | ||
Recovery – JV Partner | (3,195 | ) | ||
$ | 22,165 |
The following table illustrates the exploration and evaluation expenditures incurred during the nine month period ended January 31, 2016:
Bootheel Project | CMB Silver Spruce | Total | ||||||||||
Administration | $ | 22,549 | $ | 17,950 | $ | 40,499 | ||||||
Reporting | 9,980 | - | 9,980 | |||||||||
Recovery – JV Partner | (4,983 | ) | - | (4,983 | ) | |||||||
$ | 27,546 | $ | 17,950 | $ | 45,496 |
Central Mineral Belt ("CMB")
Moran Lake Property
Pursuant to an agreement dated October 14, 2004, the Company acquired an option to earn a 90% interest, subject to a 2% net smelter royalty ("NSR") and a 10% carried interest to the vendor, in the Moran Lake Property, a uranium prospect located in Central Labrador, Newfoundland and Labrador, Canada. The agreement was amended on March 1, 2005 to include additional claims adjacent to the Moran Lake Property, known as Moran Heights.
On November 1, 2013, the Company exercised its right to abandon those mineral claims that form the Moran Lake Property and terminated the related agreement to discharge the Company from any further obligations with respect to the Moran Lake Property.
The Company has recorded a provision for future reclamation costs in relation to the Moran Lake Property (Note 8).
Silver Spruce Property Amalgamation
In July 2008, the Company entered into an agreement with Expedition Mining Inc. ("Expedition"), formerly known as Universal Uranium Ltd., and acquired all of Expedition's interest (60%) in its joint venture project with Silver Spruce Resources Inc. in Labrador. Currently the Company has a 100% interest in the property subject to a 2% NSR payable to Silver Spruce and a 2% NSR payable to Expedition Mining Inc. on 60% of any production from the Silver Spruce Property.
On the basis that the Company has no immediate plans to advance the Silver Spruce Property, the Company recorded an impairment loss in the amount of $2,509,791 during the year ended April 30, 2016.
10
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2017
(Unaudited)
(Expressed in Canadian Dollars)
7. EXPLORATION AND EVALUATION ASSETS (continued)
Bootheel Project
On March 31, 2009, the Company acquired an interest in the Bootheel Property in Wyoming, USA through the acquisition of Target. Under a series of agreements between UR-Energy USA Inc. ("URE"), several of its subsidiaries, Target and Crosshair USA, a wholly owned subsidiary of Target, the Company could earn a 75% interest in BHP LLC, subject to certain royalties, by completing expenditures totalling US$3,000,000 on or before June 7, 2011. The Company made these expenditures, and additional expenditures, which increased its holdings to 81%. The Company, through Target, has earned an 81% interest in BHP LLC, representing an 81% interest in the underlying Bootheel Property.
Reclamation Bonds
As at January 31, 2017, the balance of reclamation bonds consists of a bond in the amount of US$8,300 (April 30, 2016 – US$8,300) related to the Bootheel Property and registered with the Wyoming Department of Environmental Quality and State Office of Lands and Investment.
During the year ended April 30, 2016, the Company recorded an impairment loss of reclamation bonds in the amount of $21,961 due to collectability concerns.
8. FUTURE RECLAMATION PROVISIONS
As at January 31, 2017 and April 30, 2016, the balance of future reclamation provisions in the amount of $20,807 relates to the Moran Lake Property which the Company abandoned during the year ended April 30, 2014 (Note 7). Although the Company no longer has title to the Moran Lake Property, it may be required to incur cleanup costs in the future. The timing of the cleanup costs is uncertain.
The total undiscounted amount of estimated cash flows required to settle the obligations is approximately $20,000, which was adjusted for inflation at the rate of 2% and discounted at 8% to April 30, 2015.
9. CAPITAL STOCK AND RESERVES
Authorized
Unlimited number of common shares without par value. Subsequent to the nine month period ended January 31, 2017, the Company restructured its share capital (Note 16).
Common share and share purchase warrant issuances
There were no common share or share purchase warrant issuances during the nine month period ended January 31, 2017 or the year ended April 30, 2016.
Subsequent to the nine month period ended January 31, 2017, the Company consolidated its outstanding common shares on the basis of one post-consolidation common share for every one and one-half (1.5) pre-consolidation common shares (Notes 1, 11 and 16). All references to share and per share amounts have been retroactively restated to reflect this share consolidation.
11
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2017
(Unaudited)
(Expressed in Canadian Dollars)
9. CAPITAL STOCK AND RESERVES (continued)
Share purchase warrants
There were no activities with respect to share purchase warrants during the nine month period ended January 31, 2017 or the year ended April 30, 2016.
As at January 31, 2017, the Company had the following warrants exercisable for common shares outstanding:
Number of Common Shares Issuable on Exercise | Exercise Price | Remaining Life (Years) | Expiry Date |
13,333,333 | $0.375 | 2.64 | September 16, 2019 |
Stock options
The Company's Stock Option Plan is a 10% rolling plan that allows a maximum 10% of the issued common shares to be reserved for issuance under the plan. Options granted under the plan may not have a term exceeding 10 years and vesting provisions are at the discretion of the Board of Directors.
The following is a summary of stock option activities during the nine month period ended January 31, 2017 and the year ended April 30, 2016:
Number of Stock Options | Weighted Average Exercise Price | |||||||
Outstanding, April 30, 2015 | 17,333 | $ | 17.93 | |||||
Forfeited | (4,000 | ) | $ | 5.70 | ||||
Expired | (13,333 | ) | $ | 21.60 | ||||
Outstanding, April 30, 2016 and January 31, 2017 | - | - |
Share-based compensation
The Company recognizes share-based payment expense for all stock options granted using the fair value based method of accounting. The Company recorded no share-based compensation for the nine month periods ended January 31, 2017 or 2016.
No stock options were granted during the nine month period ended January 31, 2017 or the year ended April 30, 2016.
10. RELATED PARTY TRANSACTIONS
Related parties and related party transactions impacting the condensed interim consolidated financial statements not disclosed elsewhere in these condensed interim consolidated financial statements are summarized below and include transactions with the following individuals or entities:
12
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2017
(Unaudited)
(Expressed in Canadian Dollars)
10. RELATED PARTY TRANSACTIONS (continued)
Key management personnel
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of members of the Company's Board of Directors, corporate officers, including the Company's Chief Executive Officer, Chief Financial Officer, and Vice Presidents.
Remuneration attributed to key management personnel for the nine month periods ended January 31, 2017 and 2016 is summarized as follows:
January 31, 2017 | January 31, 2016 | |||||||
Short-term benefits(1) | $ | 69,722 | $ | 47,127 |
(1) | include base salaries and directors' fees, pursuant to contractual employment or consultancy arrangements, management and consulting fees |
Other related party transactions and balances
King & Bay West Management Corp. ("King & Bay West"): King & Bay West is an entity owned by Mark Morabito, the Executive Chairman and former President and Chief Executive Officer of the Company, and provides administrative, management, finance, legal, regulatory, business development and corporate communications services to the Company.
Transactions entered into with related parties other than key management personnel during the nine month periods ended January 31, 2017 and 2016 include the following:
January 31, 2017 | January 31, 2016 | |||||||
King & Bay West | $ | 326,098 | $ | 131,246 |
Deposit as at January 31, 2017 and April 30, 2016 consists of a security deposit in the amount of $100,000 paid to King & Bay West in accordance with the management services agreement between King & Bay West and the Company (the "Management Services Agreement"). Upon termination of the Management Services Agreement, the security deposit will be applied to the final invoice rendered by King & Bay West to the Company.
Amounts due to related parties as at January 31, 2017 include the following:
· | King & Bay West - $247,162 (April 30, 2016 - $254,123). The amount due to King & Bay West includes a term loan in the amount of $206,810 (April 30, 2016 - $206,810) which becomes due on March 31, 2017 (Note 16). |
· | MJM Consulting Corp., an entity owned by Mark Morabito, the Executive Chairman and former President and Chief Executive Officer of the Company - $5,483 (April 30, 2016 - $1,121). |
The amounts due to related parties are non-interest bearing.
13
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2017
(Unaudited)
(Expressed in Canadian Dollars)
10. RELATED PARTY TRANSACTIONS (continued)
Debt settlement
On September 16, 2014, the Company entered into a debt settlement agreement with King & Bay West and MJM Consulting Corp. (the "Debt Settlement Agreement"). As of the date of the Debt Settlement Agreement, Mark Morabito was not an executive or director of the Company. Under the terms of the Debt Settlement Agreement, King & Bay West agreed to forgive $246,063, including Goods and Services Tax of $20,911, payable by the Company, restructure $246,063 payable by the Company into a non-interest bearing two year term loan (the "Term Loan"), and convert $154,187 payable by the Company into 685,277 fully paid and non-assessable common shares of the Company. These common shares were valued at $179,885 and resulted in a loss on settlement of debt in the amount of $25,698. In addition, MJM Consulting Corp. agreed to convert $91,875 payable by the Company into 408,333 fully paid and non-assessable common shares of the Company. These common shares were valued at $107,188 and resulted in a loss on settlement of debt in the amount of $15,313. The common shares were issued on December 9, 2014.
During the year ended April 30, 2015, the Company applied payments in the amount of $39,253 to the Term Loan. No additional payments have been applied as of January 31, 2017.
On September 16, 2016, the Company and King & Bay West amended the terms of the Debt Settlement Agreement to revise the repayment date of the Term Loan to March 31, 2017.
Subsequent to the nine month period ended January 31, 2017, the Company settled the outstanding balance of the Term Loan by paying cash in the amount of $106,810 and issuing 333,333 common shares of the Company at a deemed price of $0.30 per common share (Note 16).
11. AMALGAMATION AND CHANGE OF BUSINESS
Amalgamation Agreement
On April 12, 2016, the Company entered into a definitive agreement (the "Amalgamation Agreement") with Canada Jetlines Operations Ltd. (formerly "Canada Jetlines Ltd.") ("Jetlines Operations") with respect to the amalgamation of Jetlines Operations and a wholly owned subsidiary of the Company (the "Transaction"). Jetlines Operations is a start-up airline aiming to become Canada's first ultra-low cost carrier. Subsequent to the nine month period ended January 31, 2017, the Company and Jetlines Operations closed the Transaction (Note 16).
Pursuant to the Amalgamation Agreement, prior to closing the Transaction the Company agreed to consolidate its issued and outstanding common shares on the basis of one post-consolidation common share for every one and one-half (1.5) pre-consolidation common shares; effect a continuance as a Federal corporation governed by the Canada Business Corporations Act; and issue one and one-half (1.5) common shares of the Company in exchange for every one common share of Jetlines Operations ("Jetlines Operations Share") held, provided that holders of Jetlines Operations Shares that are not Canadian shall receive variable voting common shares of the Company and holders of Jetlines Operations Shares that are Canadian shall receive common voting shares of the Company.
Outstanding warrants and stock options of the Company and Jetlines Operations automatically become exercisable for or can be exchanged for common shares of the Company, subject to all necessary adjustments to reflect the terms of the Transaction and subject to the terms governing the warrants and stock options. As a result of the Transaction, all of the tangible and intangible assets of Jetlines Operations are owned by and held in the entity formed through the amalgamation of Jetlines Operations and a wholly owned subsidiary of the Company.
14
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2017
(Unaudited)
(Expressed in Canadian Dollars)
11. AMALGAMATION AND CHANGE OF BUSINESS (continued)
Amalgamation Agreement (continued)
The Transaction was subject to financing which was completed by way of a public offering subsequent to the nine month period ended January 31, 2017 and the sale of 22,778,700 subscription receipts at a price of $0.30 per subscription receipt for gross proceeds in the amount of $6,833,610 (the "Public Offering"). The Company issued 22,778,700 units upon receipt of the net proceeds from the Public Offering on February 28, 2017 (Note 16).
Loan Receivable
On February 24, 2016, the Company entered into a loan agreement with Jetlines Operations (the "Loan Agreement") to lend the principal amount of up to $150,000 which was amended to the principal amount of up to $200,000 on June 23, 2016 (the "Bridge Loan"). The Loan Agreement provides for advances in tranches based on agreed upon budgeted expenditures of Jetlines Operations (the "Budget"). The Bridge Loan is secured by a general security agreement. The proceeds of the Bridge Loan were to be used solely to fund the expenditures of Jetlines Operations set forth in the Budget.
The Bridge Loan bears interest on the principal amount outstanding at the rate of ten percent (10%) per annum from the date of advance of the Bridge Loan until the principal amount of the Bridge Loan is repaid in full, and shall be payable in cash on the earlier to occur of (a) the closing of the Transaction, and (b) the date that is 60 days following the termination of the Amalgamation Agreement in accordance with its terms (except where the termination of the definitive agreement is based on a default by the Company, in which case the amounts advanced to Jetlines under the Bridge Loan shall no longer be due and payable by Jetlines Operations to the Company).
All amounts owed by Jetlines Operations to the Company which are not paid when due shall bear interest from the date on which such amount is due until such amount is paid in full, payable on demand and compounded monthly at the interest rate of ten percent (10%).
During the nine month period ended January 31, 2017, the Company advanced Jetlines Operations $83,600 (January 31, 2016 - $Nil) and accrued interest in the amount of $14,416 (January 31, 2016 - $Nil).
As at January 31, 2017, the balance of loan receivable consists of the principal amount of $200,000 (April 30, 2016 - $116,400) and accrued interest receivable in the amount of $15,529 (April 30, 2016 - $1,113) due from Jetlines Operations.
On November 18, 2016, the Loan Agreement was further amended to increase the principal amount of the Bridge Loan to $350,000 subject to the completion of the Public Offering. The additional principal in the amount of $150,000 was to be advanced by the Company to Jetlines Operations within one business day of the completion of the Public Offering. Subsequent to the nine month period ended January 31, 2017, the Company advanced Jetlines an additional $50,000 in accordance with the Loan Agreement, as amended (Note 16).
12. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS
There were no significant non-cash transactions affecting cash flows from investing or financing activities during the nine month periods ended January 31, 2017 or 2016.
15
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2017
(Unaudited)
(Expressed in Canadian Dollars)
13. SEGMENTED INFORMATION
As at January 31, 2017 and April 30, 2016, the Company operated in one reportable operating segment, being the acquisition, exploration and evaluation of mineral properties in North America.
January 31, 2017 | April 30, 2016 | |||||||
Reclamation bonds | ||||||||
United States | $ | 10,815 | $ | 10,416 |
14. CAPITAL MANAGEMENT
The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to advance its strategic investments, and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk. In the management of capital, the Company includes its components of 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, issue debt, acquire assets or dispose of assets. In order to maximize ongoing development efforts, the Company does not pay out dividends. Management reviews its capital management approach on an ongoing basis and believes that this approach is reasonable given the relative size of the Company.
The Company currently is not subject to externally imposed capital requirements. There were no changes in the Company's approach to capital management during the nine month period ended January 31, 2017.
15. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
The fair value of the Company's loan receivable, other receivables, payables and accrued liabilities, and amounts due to related parties approximate carrying value, due to their short-term nature. The Company's cash and cash equivalents and marketable securities are measured at fair value under the fair value hierarchy based on level one quoted prices in active markets for identical assets or liabilities. The Company's available-for-sale investment is measured at cost on the basis that the common shares do not have a quoted market price in an active market and the fair value cannot be reliably measured. The Company's other financial instruments, being reclamation bonds, are measured at amortized cost.
The Company's financial instruments are exposed to certain financial risks, including currency risk, credit risk, liquidity risk, interest rate risk and price risk.
Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations.
The Company is subject to credit risk on its cash and cash equivalents, loan receivable and other receivables. The Company limits its exposure to credit loss by placing its cash and cash equivalents with major financial institutions. The Company has no investments in asset-backed commercial paper. The Company's other receivables consist mainly of Goods and Services Tax receivable due from the Government of Canada and accrued interest receivable due from a major financial institution. Loan receivable is due from Jetlines Operations and is secured by a general security agreement (Note 11). The Company does not believe it is exposed to significant credit risk.
16
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2017
(Unaudited)
(Expressed in Canadian Dollars)
15. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.
The Company manages liquidity risk through its capital management as outlined in Note 14. As a result of closing the Transaction and Public Offering subsequent to the nine month period ended January 31, 2017, management believes the Company has sufficient funds to support ongoing operating expenditures and meet its liabilities as they fall due (Notes 11 and 16).
Market Risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, commodity and equity prices, and foreign exchange rates.
(a) | 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 risk that the Company will realize a loss as a result of a decline in the fair value of any short-term investments included in cash and cash equivalents is minimal because these investments generally have a fixed yield rate. The principal balance of the loan receivable bears interest at a fixed yield rate.
(b) | Price risk |
The Company is exposed to price risk with respect to commodity prices and equity prices, since the Company possesses investments in publicly traded securities. The Company closely monitors those prices to determine the appropriate course of action to be taken by the Company. However, there can be no assurance that the Company can exit these positions if required, resulting in proceeds approximating the carrying value of these securities.
(c) | Currency risk |
The Company's expenditures are predominantly in Canadian dollars, and any future equity raised is expected to be predominantly in Canadian dollars. As at January 31, 2017, the Company has accounts payable denominated in US dollars of US$62,184, cash of US$3,740 and reclamation bonds of US$8,300. A 10% change in the Canadian dollar versus the US dollar would give rise to a gain/loss of approximately $6,500.
16. SUBSEQUENT EVENTS
The following reportable events occurred subsequent to the nine month period ended January 31, 2017:
· | On February 2, 2017, the Company paid King & Bay West $106,810 which was applied to the Term Loan (Note 10). |
· | On February 14, 2017, the Company closed the Public Offering pursuant to which it sold 22,778,700 Subscription Receipts at a price of $0.30 per Subscription Receipt for gross proceeds in the amount of $6,833,610 (Note 11). |
· | On February 20, 2017, the Company advanced Jetlines Operations an additional $50,000 in accordance with the Loan Agreement, as amended (Note 11). |
17
CANADA JETLINES LTD.
(FORMERLY "JET METAL CORP.")
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2017
(Unaudited)
(Expressed in Canadian Dollars)
16. SUBSEQUENT EVENTS (continued)
· | On February 28, 2017, the Company issued 333,333 common shares at a deemed price of $0.30 per common share to King & Bay West to settle the remaining balance of the Term Loan in the amount of $100,000 (Note 10). |
· | On February 28, 2017, the Company and Jetlines Operations closed the Transaction (Note 11), including: |
o | The Company consolidated its outstanding common shares on the basis of one post-consolidation common share for every one and one-half (1.5) pre-consolidation common shares. It also restructured its share capital into two classes of shares: common voting shares and variable voting shares. |
o | The Company continued as a Federal corporation pursuant to the Canada Business Corporations Act and changed its name to "Canada Jetlines Ltd." |
o | The Company issued 15,268,638 voting shares in exchange for all of the issued and outstanding common shares of Jetlines Operations. Jetlines Operations became a wholly owned subsidiary of the Company. |
o | The Company issued 22,778,700 units upon receipt of the net proceeds from the Public Offering in the amount of $6,502,970. Each unit consists of one voting share and one-half of one share purchase warrant. 11,389,350 share purchase warrants were issued with an exercise price of $0.50 and expiry of February 28, 2019. In connection with the Public Offering, the Company issued 443,544 voting shares and paid cash in the amount of $44,354 to a third party for finder's fees. The Company also issued 1,708,401 agent warrants with an exercise price of $0.30 and expiry of February 28, 2019. |
· | On February 28, 2017, the Company issued 4,475,000 stock options with an exercise price of $0.30 and expiry of February 28, 2022. |
· | On February 28, 2017, the Company issued 675,000 stock options with an exercise price of $0.34 and expiry of July 22, 2020. |
18