Exhibit 99.1
QUARTZ MOUNTAIN RESOURCES LTD.
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2021 AND 2020
(Unaudited - Expressed in Canadian Dollars)
NOTICE TO READERS
In accordance with subsection 4.3(3) of National Instrument 51-102, management of the Company advises that the Company's auditors have not performed a review of these condensed consolidated interim financial statements.
QUARTZ MOUNTAIN RESOURCES LTD. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited - Expressed in Canadian Dollars) | |
| | | | |
| | | | |
Assets | | | |
| Current assets Cash | | $60,331 | $206,529 |
| Amounts receivable and other assets | 3 | 14,608 | 12,029 |
| | | 74,939 | 218,558 |
| | | |
| Mineral property interests | 4 | 1 | 1 |
| Total assets | | $74,940 | $218,559 |
| Liabilities and Shareholders' Equity | | | |
Current liabilities Amounts payable and other liabilities | 6 | $11,384 | $4,176 |
| Due to related parties | 7(a) & (b) | 7,775 | 75,832 |
| Total liabilities | | 19,159 | 80,008 |
| Shareholders' equity | | | |
| Share capital | 5(a) | 27,213,442 | 27,158,423 |
| Reserves | | 592,011 | 592,011 |
| Accumulated deficit | | (27,749,672) | (27,611,883) |
| Total shareholders' equity | | 55,781 | 138,551 |
| Total liabilities and shareholders' equity | | $74,940 | $218,559 |
Nature and continuance of operations (note 1) Event after the reporting date (note 9)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| /s/ Trevor Thomas | /s/ Leonie Tomlinson |
| | |
| Trevor Thomas | Leonie Tomlinson |
| Director | Director |
QUARTZ MOUNTAIN RESOURCES LTD.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited - Expressed in Canadian Dollars, except for weighted average number of common shares)
| | | Three months ended January 31, | Six months ended January 31, |
| | | | | | |
| Expenses | | | | | |
| Exploration and evaluation | | $3,628 | $– | $59,920 | $– |
| Assays and analysis | | 2,779 | – | 4,769 | – |
| Geological | | – | – | 11,200 | – |
| Helicopter and fuel | | – | – | 29,520 | – |
| Site activities | | 849 | – | 13,252 | – |
| Travel and accommodation | | – | – | 1,179 | – |
| | | | |
| 39,251 | 64,454 | 78,946 | 108,779 |
| Administrative fees | 7(a) | 11,438 | 19,984 | 21,043 | 34,742 |
| Insurance | | 7,995 | – | 15,990 | – |
| IT Services | | 3,000 | – | 6,000 | – |
| Legal, accounting and audit | | 8,964 | 9,613 | 18,276 | 17,113 |
| Office and miscellaneous | | 805 | 14,508 | 1,127 | 26,793 |
| Regulatory, trust and filing | | 7,049 | 20,349 | 16,510 | 30,131 |
| | | | | | |
| Operating expenses | | (42,879) | (64,454) | (138,866) | (108,779) |
| | | | | | |
| Other items | | | | | |
| Interest income | | 250 | 9 | 720 | 326 |
| Interest expense | | – | (2,636) | – | (5,210) |
| Foreign exchange gain (loss) | | – | (159) | 357 | (437) |
| Gain on settlement of debt | 7(b) | – | 2,779,882 | – | 2,779,882 |
| Loss and comprehensive loss for the period | | $(42,629) | $2,712,642 | $(137,789) | $2,665,782 |
| | | | | | |
| Basic (loss) per common share | | $(0.00) | $0.23 | $(0.01) | $0.23 |
| | | | | | |
| Diluted (loss) per common share | | $(0.00) | $0.23 | $(0.00) | $0.23 |
| | | | | | |
| Weighted average number of common shares outstanding (note 5(c)) | | | | | |
| | | | | | |
| Basic | | 26,677,776 | 11,841,411 | 26,514,733 | 11,841,411 |
| | | | | | |
| Diluted | | 39,114,141 | 11,841,411 | 39,114,141 | 11,841,411 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
QUARTZ MOUNTAIN RESOURCES LTD.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOLDERS' EQUITY (DEFICIENCY)
(Expressed in Canadian Dollars, except for share information)
| | | | | | |
| | | | | | Equity-settled share-based payments | | Total shareholders' equity (deficiency) |
| | | | | | | | |
| Balance at August 1, 2019 | | 10,041,411 | $26,548,981 | $– | $592,011 | $(30,136,646) | $(2,995,654) |
| Shares issued for settlement of debt | 7(b) | 1,800,000 | 126,000 | – | – | – | 126,000 |
| Subscription receipts issued | | – | – | 8,200 | – | – | 8,200 |
| Loss for the period | | – | – | – | – | 2,665,782 | 2,665,782 |
| Balance at January 31, 2020 | | 11,841,411 | $26,674,981 | $8,200 | $592,011 | $(27,470,864) | $(195,672) |
| | | | | | | | |
| Balance at July 31, 2020 | | 25,477,776 | $27,158,423 | $– | $592,011 | $(27,611,883) | $138,551 |
| Shares issued through exercise of warrants | 5(a) | 1,200,000 | 60,000 | – | – | – | 60,000 |
| Share issuance costs | | – | (4,981) | – | – | – | (4,981) |
| Loss for the period | | – | – | – | – | (137,789) | (137,789) |
| Balance at January 31, 2021 | | 26,677,776 | $27,213,442 | $– | $592,011 | $(27,749,672) | $55,781 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
QUARTZ MOUNTAIN RESOURCES LTD.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - Expressed in Canadian Dollars)
| | Six months ended January 31, |
| | | | |
| Operating activities | | | |
| (Loss) for the period | | $(137,789) | $2,665,782 |
| Adjusted for: | | | |
| Interest income | | (720) | (326) |
| Interest expense | | – | 5,210 |
| | | | |
| Changes in working capital items: | | | |
| Amounts receivable and other assets | | (2,579) | (8,188) |
| Amounts payable and other liabilities | | 7,208 | 25,637 |
| | (68,057) | (2,769,167) |
| Net cash used in operating activities | | (201,937) | (81,052) |
| | | | |
| Investing activities | | | |
| Interest received | | 720 | 326 |
| Net cash provided by investing activities | | 720 | 326 |
| | | | |
| Financing activities | | | |
| Proceeds from exercise of warrants | 5(a) | 60,000 | – |
| Proceeds from related party loan | | – | 870 |
| Proceeds from private placement | | – | 8,200 |
| Share issuance costs | | (4,981) | – |
| Net cash provided by financing activities | | 55,019 | 9,070 |
| | | | |
| Increase (decrease) in cash | | (146,198) | (71,656) |
| Cash, beginning of the year | | 206,529 | 72,373 |
| Cash, end of the period | | $60,331 | $717 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
QUARTZ MOUNTAIN RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2021 AND 2020
(Unaudited – Expressed in Canadian Dollars, unless otherwise stated)
1.
NATURE AND CONTINUANCE OF OPERATIONS
Quartz Mountain Resources Ltd. is a Canadian public company incorporated in British Columbia on August 3, 1982. The Company's corporate office is located at 1040 West Georgia Street, 15th Floor, Vancouver, British Columbia, Canada. The Company most recently focused on evaluating mineral prospects for potential acquisition and exploration in British Columbia. The Company continues to investigate potential opportunities.
These condensed consolidated interim financial statements (the "Financial Statements") of the Company as at and for the three and six months ended January 31, 2021, include Quartz Mountain Resources Ltd. and its subsidiaries (together referred to as the "Company"). Quartz Mountain Resources Ltd. is the ultimate parent entity of the group.
These Financial Statements have been prepared on a going concern basis, which contemplates the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future. As at January 31, 2021, the Company had an accumulated deficit of $27,749,672, and has a working capital of $55,780. The Company's continuing operations are dependent upon new projects, the ability of the Company to obtain the necessary financing to complete exploration of any new projects, the ability to obtain the necessary permits to explore, develop, and mine new projects, and the future profitable production of any mine. These material uncertainties raise substantial doubt on the ability of the Company to continue as a going concern.
Additional debt or equity financing will be required to fund acquisition of mineral property interests. There can be no assurance that the Company will be able to obtain additional financial resources or achieve positive cash flows. If the Company is unable to obtain adequate additional financing, it will need to curtail its expenditures further, until additional funds can be raised through financing activities.
These Financial Statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern.
Effective May 27, 2020, the Company completed a forward share split (the “Share Split”) on the basis of two additional common shares for every common share outstanding prior to the Share Split. Outstanding warrants were adjusted by the same share split ratio. All references to shares and per share amounts have been retroactively restated to give effect to the Share Split.
COVID-19
Given the ongoing and dynamic nature of the circumstances surrounding the COVID-19 pandemic, it is difficult to predict how significant the impact of COVID-19, including any responses to it, will be on the global economy and the business of the Company or for how long any disruptions are likely to continue. The extent of such impact will depend on future developments, which are highly uncertain, rapidly evolving and difficult to predict, including new information which may emerge about COVID- 19 and additional actions which may be taken to contain it.
QUARTZ MOUNTAIN RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2021 AND 2020
(Unaudited – Expressed in Canadian Dollars, unless otherwise stated)
Such developments could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flow, and exposure to credit risk.
The Company is constantly evaluating the situation and monitoring any impacts or potential impacts to its business.
2.
SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these Financial Statements are described below. These policies have been consistently applied for all years presented, unless otherwise stated.
(a)
Statement of compliance
These Financial Statements have been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting ("IAS 34"), as issued by the International Accounting Standards Board ("IASB") and its interpretations. Accordingly, they do not include all of the information and note disclosures as required by International Financial Reporting Standards ("IFRS") for annual financial statements.
The accounting policies and methods of computation applied by the Company in these Financial Statements are the same as those applied by the Company in its most recent annual consolidated financial statements filed on the Company's profile on SEDAR at www.sedar.com. These Financial Statements should be read in conjunction with the Company’s financial statements as at and for the year ended July 31, 2020. Results for the period ended January 31, 2021, are not necessarily indicative of future results.
The Company’s Board of Directors authorized issuance of these Financial Statements on March 29, 2021.
(b)
Basis of presentation and consolidation
These Financial Statements have been prepared on a historical cost basis, except for financial instruments measured at fair value. In addition, these Financial Statements have been prepared using the accrual basis of accounting, except for cash flow information.
These Financial Statements include the accounts of the Company and the subsidiaries that it controls. Control is achieved when the Company is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Intercompany balances and transactions including any unrealized income and expenses arising from intercompany transactions are eliminated upon consolidation.
At January 31, 2021 and July 31, 2020, the Company held a 100% interest in QZMG Resources Ltd., a company that holds a 100% interest in Wavecrest Resources Inc.
QUARTZ MOUNTAIN RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2021 AND 2020
(Unaudited – Expressed in Canadian Dollars, unless otherwise stated)
(c)
Significant accounting estimates and judgments
The preparation of these Financial Statements in conformity with IAS 34 involved use of judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from such estimates.
In preparing these Financial Statements, significant judgements made by management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended July 31, 2020.
3.
AMOUNTS RECEIVABLE AND OTHER ASSETS
| | | |
| Sales tax receivable | $1,859 | $4,820 |
| Prepaid insurance | 12,749 | 7,209 |
| Total | $14,608 | $12,029 |
4.
MINERAL PROPERTY INTERESTS
| | | |
| Angel's Camp royalty | $1 | $1 |
(a)
Angel's Camp Property
The Company retains a 1% net smelter return royalty payable to the Company on any production from the Angel's Camp property located in Lake County, Oregon. The royalty is recorded at a nominal amount of $1. The royalty was sold to an arms-length purchaser in February 2021 (note 9).
(a)
Authorized share capital
At January 31, 2021 and January 31, 2020, the authorized share capital of the Company comprised an unlimited number of common shares without par value and an unlimited number of preferred shares without par value.
No preferred shares have been issued to date. All issued common shares are fully paid.
On May 27, 2020, the Company completed the Share Split on the basis of two additional common shares for every common share outstanding prior to the Share Split.
On August 25, 2020, the Company issued 1,200,000 flow-through common shares on the exercise of the warrants at an exercise price of $0.05 for gross proceeds of $60,000.
QUARTZ MOUNTAIN RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2021 AND 2020
(Unaudited – Expressed in Canadian Dollars, unless otherwise stated)
The continuity of the warrants during the period ended January 31, 2021 is as follows:
| | | Weighted average exercise price ($) |
| Balance July 31, 2019 | – | $– |
| Granted | – | – |
| Balance January 31, 2020 | – | $– |
| Balance July 31, 2020 | 13,636,365 | $0.05 |
| Exercised | (1,200,000) | 0.05 |
| 12,436,365 | $0.05 |
The outstanding warrants at January 31, 2021 are as follows: | | |
| Expiry Date | | |
| March 26, 2025 | $0.05 | 12,436,365 |
(c)
Basic and Diluted Earnings (Loss)
| | | |
| Weighted average common shares outstanding | 26,351,689 | 11,841,411 |
| Plus net incremental shares from assumed conversions: Warrants | 12,762,452 | – |
| Diluted weighted average common shares outstanding | 39,114,141 | 11,841,411 |
For the periods where the Company records earnings, the Company calculates diluted earnings per share using the basic weighted average number of shares. If the diluted weighted average number of shares was used, the result would be a reduction in the earnings, which would be anti-dilutive.
6.
AMOUNTS PAYABLE AND OTHER LIABILITIES
| | | |
| Accounts payable | $11,384 | $4,176 |
QUARTZ MOUNTAIN RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2021 AND 2020
(Unaudited – Expressed in Canadian Dollars, unless otherwise stated)
7.
RELATED PARTY BALANCES AND TRANSACTIONS
(a)
Transactions with Key Management Personnel
Key management personnel are those persons that have the authority and responsibility for planning, directing and controlling the activities of the Company, directly and indirectly, and by definition include the directors of the Company.
The Company compensated key management personnel as follows:
| | Three months ended January 31, | Six months ended January 31, |
| | | | | |
| Short-term employee benefits, including salaries | 5,075 | 10,150 | 8,100 | 17,825 |
Short-term employee benefits include salaries, director’s fees, and amounts paid to Hunter Dickinson Services Inc. (“HDSI”) (note 7(b)) for services provided to the Company by certain HDSI personnel who serve as directors or officers of the Company and the fees paid to the new Chief Financial Officer who is independent of HDSI appointed on August 15, 2020.
During the six months ended January 31, 2021, the Company incurred $5,500 for the fees to an entity controlled by the new Chief Financial Officer (January 31, 2020 - $NIL).
As at January 31, 2021, the balance payable to the new Chief Financial Officer was $1,050 (July 31, 2020 - $NIL). The balance was settled in February 2021.
(b)
Entities with Significant Influence over the Company
Hunter Dickinson Inc. (“HDI”) and its wholly-owned subsidiary HDSI are private companies established by a group of mining professionals. HDSI provides services under contracts for a number of mineral exploration and development companies, and also to companies that are outside of the mining and mineral development space. The Company acquires services from a number of related and arms-length contractors, and it is at the Company’s discretion that HDSI provides certain contract services.
The Company’s Chief Executive Officer, President, Chairman, Former Chief Financial Officer, and Corporate Secretary are employees of HDSI and work for the Company under an employee secondment arrangement between the Company and HDSI.
Pursuant to an agreement dated June 1, 2008, HDSI provides certain technical, geological, corporate communications, regulatory compliance, and administrative and management services to the Company, on a non-exclusive basis as needed and as requested by the Company. As a result of this relationship, the Company has ready access to a range of diverse and specialized expertise on a regular basis, without having to engage or hire full-time employees or experts.
The Company is not obligated to acquire any minimum amount of services from HDSI. The monetary amount of the services received from HDSI in a given period of time is a function of annually set and agreed charge-out rates for and the time spent by each HDSI employee engaged by the Company.
QUARTZ MOUNTAIN RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2021 AND 2020
(Unaudited – Expressed in Canadian Dollars, unless otherwise stated)
HDSI also incurs third-party costs on behalf of the Company. Third- party costs are billed at cost, without markup.
There are no ongoing contractual or other commitments resulting from the Company's transactions with HDSI, other than the payment for services already rendered and billed. The agreement may be terminated upon 60 days' notice by either the Company or HDSI.
The following is a summary of transactions with HDSI that occurred during the reporting period:
| | | |
| | | |
| | | | | |
| Services received based on management services agreement | $11,437 | $19,984 | $21,738 | $34,742 |
| Reimbursement of third party expenses paid | 2,964 | 4,825 | 4,605 | 8,305 |
| Total | $14,401 | $24,809 | $26,343 | $43,047 |
Outstanding balances were as follows:
| | | |
| Balance payable to HDSI | $6,725 | $75,832 |
In January 2016, the Company and HDSI reached a settlement agreement whereby HDSI agreed to forgive the balance due to HDSI in the net amount of $3,086,089 if the Company completes the following:
●
makes a cash payment of $180,207; and
●
issues 1,800,000 shares (pre-forward split basis of 600,000 shares) valued at $126,000.
The cash payment of $180,207 was paid during the year ended July 31, 2018 and the shares were issued to HDSI during the year ended July 31, 2020, completing the settlement and resulting in a gain on settlement of debt of $2,779,882 for the fiscal year ended July 31, 2020.
In December 2018, the Company entered into a loan agreement with United Mineral Services Ltd. (the “Lender”), a company owned by a former director, pursuant to which the Lender advanced to the Company a principal sum of $100,000 with a six-month term, at an interest rate of 10% per annum calculated monthly and payable quarterly. The principal amount and related interest were repaid during the year ended July 31, 2020.
The Company operates in a single reportable operating segment – the acquisition, exploration, and evaluation of mineral property interests. The Company is currently focused on the acquisition and exploration of mineral property interests in Canada. The Company’s only long-term asset is located in the USA.
9.
EVENT AFTER THE REPORTING PERIOD
On February 1, 2021, the Company entered into an agreement for the sale of 100% of the Company’s 1% Net Smelter Return Royalty (the “Royalty”) on the Quartz Mountain Gold Property, located in Oregon for US$150,000 to an arms-length purchaser. This transaction was closed on February 4, 2021. The Company acquired the Royalty when it sold the Quartz Mountain Gold Property to Seabridge Resources Inc. in 2001.
