Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The terms "mineral reserve," "proven mineral reserve" and "probable mineral reserve" used in our disclosure are Canadian mining terms that are defined in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects ("NI 43-101") under the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM") Best Practice Guidelines for the Estimation of Mineral Resource and Mineral Reserves (the "CIM Standards"), adopted by the CIM Council on December 11, 2005. These definitions differ from the definitions in the United States Securities and Exchange Commission (the "SEC" or the "Commission") Industry Guide 7 under the U.S. Securities Act of 1933, as amended (the "Securities Act"). Under Industry Guide 7 standards, a "final" or "bankable" feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.
Canadian standards, including NI 43-101, differ significantly from the requirements of the Commission, and reserve and resource information contained herein may not be comparable to similar information disclosed by U.S. companies. In particular, and without limiting the generality of the foregoing, the term "resource" does not equate to the term "reserves". Under U.S. standards, mineralization may not be classified as a "reserve" unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. The Commission's disclosure standards normally do not permit the inclusion of information concerning "measured mineral resources", "indicated mineral resources" or "inferred mineral resources" or other descriptions of the amount of mineralization in mineral deposits that do not constitute "reserves" by U.S. standards in documents filed with the Commission. U.S. investors should also understand that "inferred mineral resources" have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an "inferred mineral resource" will ever be upgraded to a higher category. Under Canadian rules, estimated "inferred mineral resources" may not form the basis of feasibility or pre-feasibility studies. Investors are cautioned not to assume that all or any part of an "inferred mineral resource" exists or is economically or legally mineable. Disclosure of "contained ounces" in a resource is permitted disclosure under Canadian regulations; however, the Commission normally only permits issuers to report mineralization that does not constitute "reserves" by the Commission's standards as in place tonnage and grade without reference to unit measures. The requirements of NI 43-101 for identification of "reserves" are also not the same as those of the Commission. Accordingly, information concerning descriptions of mineralization and resources contained in this Annual Report on Form 20-F or in the documents incorporated by reference may not be comparable to information made public by U.S. companies subject to the reporting and disclosure requirements of the Commission.
Certain statements in this document constitute "forward-looking statements" under applicable securities laws. Forward-looking statements can be identified by the use of terminology such as "anticipate," "believe," "plan," "estimate," "expect," and "intend," and statements that an action or event "may," "might," "could," or "should," be taken or occur, or other similar expressions. Forward looking statements contained in this document include, but are not limited to, statements with respect to: (i) the estimation of inferred and indicated mineral resources; (ii) details and goals of exploration activities; (iii) estimations of future costs and expenditures; (iv) currency fluctuations; (v) requirements for additional capital and the sufficiency of working capital; (vi) government regulation of mining operations; (vii) environmental risks; (viii) unanticipated reclamation expenses; and (ix) increases in mineral resource estimates. These forward-looking statements are not guarantees or predictions of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control and which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following risks:
Forward-looking information and forward-looking statements are in addition based on various assumptions including, without limitation, the expectations and beliefs of management, the assumed long term price of commodities; that the Company can access financing, appropriate equipment and sufficient labour availability and that the political environment will continue to support the development and operation of mining projects. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further in "Item 3. Key Information—D. Risk Factors." Accordingly, readers are advised not to place undue reliance on forward-looking statements. The Company does not intend to update forward-looking statements or information, except as may be required by applicable law. Except as required by applicable regulations or by law, we do not undertake any obligation to publicly update or review any forward-looking statements whether as a result of new information, future events or otherwise.
In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars ("CDN$" or "$"). The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable
ITEM 3. KEY INFORMATION
3.A.
Selected Financial Data
Our selected financial data for the fiscal years ended April 30, 2016, 2015, 2014, 2013 and 2012 was derived from our financial statements that have been audited by Davidson & Company LLP, independent Chartered Professional Accountants, as indicated in their audit reports. Davidson & Company LLP is a member of the Chartered Professional Accountants of Canada.
The selected financial data should be read in conjunction with and is qualified in its entirety by reference to the financial statements and notes thereto included elsewhere in this Annual Report.
To date, we have not generated sufficient cash flow from operations to fund ongoing operational requirements and cash commitments. We have financed our operations principally through the sale of our equity securities. While we believe we have sufficient capital and liquidity to finance current operations, nevertheless, our ability to continue operations is dependent on our ability to obtain additional financing. See "Item 3. Key Information—D. Risk Factors."
The information for years ended April 30, 2016, 2015, 2014, 2013 and 2012 in the following table is derived from our financial statements, which have been prepared in accordance with the International Financial Reporting Standards ("IFRS").
|
|
|
For the Year Ended April 30,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
|
|
IFRS
1
|
|
|
IFRS
1
|
|
|
IFRS
1
|
|
|
IFRS
1
|
|
|
IFRS
1
|
|
|
Revenue
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Income (Loss) for the Period
|
|
$
|
(3,118,609
|
)
|
|
$
|
(357,729
|
)
|
|
$
|
(3,967,283
|
)
|
|
$
|
(11,674,061
|
)
|
|
$
|
(11,977,829
|
)
|
|
Basic and Diluted Income (Loss)
Per Share
2 3
|
|
$
|
(0.11
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.60
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.24
|
)
|
|
Dividends Per Share
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Weighted Average Shares (#)
2 3
|
|
|
28,218,451
|
|
|
|
19,659,075
|
|
|
|
6,578,035
|
|
|
|
65,782,178
|
|
|
|
50,377,698
|
|
|
Period-end Shares (#)
2 3
|
|
|
28,218,451
|
|
|
|
28,218,451
|
|
|
|
6,578,035
|
|
|
|
65,782,178
|
|
|
|
65,782,178
|
|
|
Working Capital (Deficit)
|
|
$
|
1,380,210
|
|
|
$
|
2,099,399
|
|
|
$
|
(716,619
|
)
|
|
$
|
94,253
|
|
|
$
|
5,466,961
|
|
|
Exploration and Evaluation Assets
|
|
|
--
|
|
|
$
|
2,509,791
|
|
|
$
|
2,509,791
|
|
|
$
|
5,670,409
|
|
|
$
|
11,592,105
|
|
|
Long-Term Debt
|
|
$
|
20,807
|
|
|
$
|
227,617
|
|
|
$
|
19,267
|
|
|
$
|
37,161
|
|
|
$
|
558,742
|
|
|
Capital Stock
|
|
$
|
90,663,999
|
|
|
$
|
90,663,999
|
|
|
$
|
87,411,032
|
|
|
$
|
87,411,032
|
|
|
$
|
87,457,513
|
|
|
Shareholders' Equity
|
|
$
|
1,669,819
|
|
|
$
|
4,788,428
|
|
|
$
|
1,893,190
|
|
|
$
|
5,905,723
|
|
|
$
|
16,999,901
|
|
|
For the Year Ended April 30,
|
|
$2,145,557`
|
|
|
$
|
5,325,176
|
|
|
$
|
2,801,407
|
|
|
$
|
6,635,616
|
|
|
$
|
17,997,243
|
|
|
1
|
The financial information for years ended April 30, 2016, 2015, 2014, 2013 and 2012 are prepared using the International Financial Reporting Standards ("IFRS"). The Company's transition date was May 1, 2010. The cumulative net loss under IFRS at April 30, 2016 is approximately $110
million.
|
|
2
|
Under IFRS, basic loss per share is calculated using the weighted average number of common shares outstanding during the year.
|
|
3
|
On October 28, 2010, the common shares of the Company were consolidated on the basis of four pre-consolidation shares for one post-consolidation share. The numbers presented for fiscal 2013, 2012 and 2011 are presented on the four to one post-consolidated basis. On September 17, 2013, the common shares of the Company were further consolidated on a ten pre-consolidation shares for one post-consolidation share. The numbers presented for fiscal 2016, 2015 and 2014 are presented on the ten to one post-consolidation basis.
|
Exchange Rates
The following table sets forth the high and low rates of exchange for the Canadian Dollar for each month during the previous six months. The table also sets forth the average exchange rates for the Canadian Dollar for the five most recent fiscal years ended April 30th. The yearly average rate means the average of the exchange rates based on the daily rates during each fiscal period.
For purposes of this table, the rates of exchange are those quoted by the Bank of Canada. The table sets forth the number of Canadian Dollars required under that formula to buy one U.S. Dollar.
|
Period
|
|
High
(1)
|
Low
(1)
|
|
|
|
|
|
|
July 2016
|
|
1.3225
|
1.2844
|
|
June 2016
|
|
1.3091
|
1.2645
|
|
May 2016
|
|
1.3136
|
1.2548
|
|
April 2016
|
|
1.3170
|
1.2544
|
|
March 2016
|
|
1.3468
|
1.2962
|
|
February 2016
|
|
1.4040
|
1.3523
|
|
|
|
|
|
|
|
Average
(2)
|
|
|
|
Fiscal year ended April 30, 2016
|
1.3162
|
|
|
|
Fiscal year ended April 30, 2015
|
1.1570
|
|
|
|
Fiscal year ended April 30, 2014
|
1.0602
|
|
|
|
Fiscal year ended April 30, 2013
|
1.0054
|
|
|
|
Fiscal year ended April 30, 2012
|
0.9928
|
|
|
The exchange rate was $1.2857 on August 19, 2016.
|
(1)
|
Means the intra-day high/low rate during the period.
|
(2)
Means the average of the noon day rates on the last day of each month during the period.
|
3.B.
|
Capitalization and Indebtedness
|
Not applicable
3.C.
Reasons for the Offer and Use of Proceeds
Not applicable
We are subject to a number of risks due to the nature of our business, including our present exploration state. The following describes the material risks that could affect us.
There has been significant economic uncertainty since the second half of 2008 and it has affected the Company's operations.
The unprecedented events in global financial markets that have occurred since mid-2008 have had a profound impact on the global economy. Many industries, including the mining industry, are impacted by these market conditions. Some of the key impacts of the current financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations and high volatility in global equity, commodity, foreign exchange and precious metal markets, and a lack of market liquidity. A continued or worsened slowdown in the financial markets or other economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates, and tax rates may adversely affect the Company's growth and profitability. Specifically:
•
the global credit/liquidity crisis could impact the cost and availability of financing and the Company's overall liquidity;
•
the volatility of mineral prices would impact the Company's revenues, profits, losses and cash flow potential;
•
volatile energy prices, commodity and consumables prices and currency exchange rates would impact the Company's production costs; and
•
the devaluation and volatility of global stock markets would impact the valuation of the Company's equity and other securities.
These factors could have a material adverse effect on the Company's financial condition and results of operations. As a result, the Company will consider its plans and options carefully in fiscal 2016.
No known reserves
Our properties are in the exploration stage and are without a known body of mineral reserves.
We have no mineral producing properties at this time. Only those mineral deposits that we can economically and legally extract or produce, based on a comprehensive evaluation of cost, grade, recovery and other factors, are considered "reserves". We have not defined or delineated any proven or probable reserves on any of our properties. Although the mineralized material and mineralized deposit estimates included herein have been carefully prepared by us, or, in some instances have been prepared, reviewed or verified by independent mining experts, these amounts are estimates only and no assurance can be given that any particular level of recovery of uranium, and other minerals from mineralized material will in fact be realized or that an identified mineralized deposit will ever qualify as a commercially mineable (or viable) reserve.
Our planned exploration programs may not result in profitable commercial mining operations
Our operations involve exploration, and there is no guarantee that any of our activities will result in commercial production of any mineral deposits. The exploration for and development of mineral deposits involves significant financial and other risks which even a combination of careful evaluation, experience and knowledge may not
eliminate. Most exploration projects do not result in the discovery of commercially mineable deposits. Major expenses are required to locate and establish mineral reserves, to develop metallurgical processes, and to construct mining and processing facilities at a particular site. Our planned exploration programs may not result in a profitable commercial mining operation. Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are: the particular attributes of the deposit, such as quantity and quality of the minerals, costs and efficiency of the recovery methods that can be employed; proximity to infrastructure; financing costs; mineral prices, which are highly cyclical; and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals, and environmental protection. The exact effect of these factors cannot be accurately predicted but could have a material adverse effect upon our operations and/or our ability to receive an adequate return on our invested capital. There is no certainty that our expenditures made towards the search and evaluation of uranium, and other minerals result in discoveries of mineral resources, mineral reserves or any other mineral occurrences, or in profitable commercial mining operations.
Mining operations generally involve a high degree of risk
Our operations are subject to all the hazards and risks normally encountered in the exploration, development and production of uranium and other minerals, including environmental pollution, accidents or spills, industrial accidents, labor disputes, changes in the regulatory environment, natural phenomena, unusual and unexpected geologic formations, seismic activity, rock bursts, cave-ins, flooding and other conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction of, mines and other producing facilities, damage to life or property, environmental damage, delays in or cessation of production, exploration or development, monetary losses and cost increases which could make us uncompetitive, and could lead to possible legal liability. Although adequate precautions to minimize risk will be taken, mining operations are subject to hazards such as equipment failure or failure of retaining dams around tailings disposal areas which may result in environmental pollution and consequent liability. In addition, due to the radioactive nature of the materials handled in uranium mining, applicable regulatory requirements result in additional costs that must be incurred.
Our resource estimates may not be reliable
There is no certainty that any of our mineral resources will be economically mineable. Until a deposit is actually mined and processed the quantity of mineral resources and grades must be considered as estimates only. Valid estimates made at a given time may significantly change when new information becomes available. In addition, the quantity of mineral resources may vary depending on, among other things, metal prices. Any material change in quantity of mineral resources, grade or stripping ratio may affect the economic viability of our properties or any project we undertake. In addition, there can be no assurance that mineral or other metal recoveries in small scale laboratory tests will be duplicated in a larger scale test under on-site conditions or during production.
Fluctuations in prices of uranium, and other minerals, results of drilling, metallurgical testing and production and the evaluation of studies, reports and plans subsequent to the date of any estimate may require revision of such estimate. Any material reductions in estimates of mineral resources could have a material adverse effect on our results of operations and financial condition.
We rely on a limited number of properties
Our only properties of interest are currently the Central Mineral Belt property in Labrador, and the Bootheel property in Wyoming, USA. As a result, unless we acquire additional property interests, any adverse developments affecting these properties could have a material adverse effect upon our business and would materially and adversely affect our potential mineral resource production, profitability, financial performance and results of operations.
Competition from other energy sources and public acceptance of nuclear energy may affect the demand for uranium
Nuclear energy competes with other sources of energy, including oil, natural gas, coal and hydro-electricity. These other energy sources are to some extent interchangeable with nuclear energy, particularly over the longer term. Lower prices of oil, natural gas, coal and hydro-electricity may result in lower demand for uranium concentrate and uranium conversion services. Furthermore, the growth of the uranium and nuclear power industry beyond its current level will depend upon continued and increased acceptance of nuclear technology as a means of generating electricity. Because of unique political, technological and environmental factors that affect the nuclear industry, the industry is subject to public opinion risks which could have an adverse impact on the demand for nuclear power and increase the regulation of the nuclear power industry.
We face strong competition for the acquisition of mining properties
The mining industry is competitive in all of its phases. We face strong competition from other mining companies in connection with the acquisition of properties producing, or capable of producing, uranium and other minerals. Many of these companies have greater financial resources, operational experience and technical capabilities than we do. As a result of this competition, we may be unable to maintain or acquire attractive mining properties on terms we consider acceptable, if at all. Consequently, our revenues, operations and financial condition could be materially adversely affected.
We do not have a history of mineral production or operations
There is no assurance that commercial quantities of minerals will be discovered at our current properties or any future properties, nor is there any assurance that our exploration programs thereon will yield any positive results. Even if commercial quantities of minerals are discovered, there can be no assurance that any of our properties will ever be brought to a stage where mineral resources can profitably be produced thereon. Factors which may limit our ability to produce mineral resources from our properties include, but are not limited to, the price of the mineral resources which are being explored for, availability of additional capital and financing and the nature of any mineral deposits.
We do not have an extensive operating history and there can be no assurance of our ability to operate our projects profitably in the future.
Our insurance will not cover all the potential risks associated with our operations
Our business is subject to a number of risks and hazards generally, including adverse environmental conditions, industrial accidents, labor disputes, unusual or unexpected geological conditions, ground or slope failures, cave-ins, changes in the regulatory environment and natural phenomena such as inclement weather conditions, floods and earthquakes. Such occurrences could result in damage to mineral properties or production facilities, personal injury or death, environmental damage to our properties or other properties, delays in mining, monetary losses and possible legal liability.
Our insurance will not cover all the potential risks associated with a mining company's operations. We may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not be available or may not be adequate to cover any resulting liability. Moreover, there are risks against which we cannot insure or against which we may elect not to insure. Insurance against risks such as environmental pollution or other hazards as a result of exploration and production is not generally available to us or to other companies in the uranium mining industry. We might also become subject to liability for pollution or other hazards which we may not be insured against or which we may elect not to insure against because of premium costs or other reasons. Losses from these events may cause substantial delays and require us to incur significant costs that could have a material adverse effect upon our financial condition, results of operations, competitive position and potentially our financial viability.
Our operations are subject to environmental regulation
All phases of our operations are subject to environmental regulation in the various jurisdictions in which we operate or may operate in the future. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner that will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect our operations. Environmental hazards may exist on the properties on which we hold interests which are unknown to us at present and which have been caused by previous or existing owners or operators of the properties.
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations or in the exploration or development of mineral properties may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.
Our operations are dependent on adequate infrastructure
Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges, power sources and water supply are important determinants, which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure could adversely affect our operations, financial condition and results of operations.
Our properties may be subject to undetected title defects
It is possible there may still be undetected title defects affecting our properties. Title insurance generally is not available, and our ability to ensure that we have obtained secure claim to individual mineral properties or mining concessions may be severely constrained. Furthermore, we have not conducted surveys of the claims in which we hold interests and, therefore, the precise area and location of such claims may be in doubt. Accordingly, our properties may be subject to prior unregistered liens, agreements, transfers or claims, and title may be affected by, among other things, undetected defects which could have a material adverse impact on our operations. In addition, we may be unable to operate our properties as permitted or to enforce our rights with respect to our properties.
We may be subject to additional costs for land reclamation
It is difficult to determine the exact amounts which will be required to complete all land reclamation activities in connection with our properties. Reclamation bonds and other forms of financial assurance represent only a portion of the total amount of money that will be spent on reclamation activities over the life of a mine. Accordingly, it may be necessary to revise planned expenditures and operating plans in order to fund reclamation activities. Such costs may have a material adverse impact upon our financial condition and results of operations.
The inability to obtain necessary permits would adversely affect our ability to operate our business
We may not receive the necessary permits or receive them on acceptable terms, if at all, in order to conduct further exploration and to develop our properties. The failure to obtain such permits, or delays in obtaining such permits, could adversely affect our operations.
Government approvals, approval of aboriginal people and permits are currently and may in the future be required in connection with our operations. To the extent such approvals are required and not obtained; we may be curtailed or
prohibited from continuing our mining operations or from proceeding with planned exploration or development of mineral properties.
We will require additional capital for our operations
The development and exploration of our properties will require substantial additional financing. Failure to obtain sufficient financing may result in the delay or indefinite postponement of exploration, development or production on our properties or even a loss of property interest. There can be no assurance that additional capital will be available when needed or that, if available, the terms of financing such capital will be acceptable to us. In addition, any future financing may be dilutive to our existing shareholders.
Future production from our mining properties, if any, is dependent upon the prices of uranium and other minerals being adequate to make these properties economically viable
Mineral and base metals prices received, if any, could be such that our properties cannot be mined at a profit. The price of our common shares, and our financial results and exploration, development and mining activities may in the future be significantly and adversely affected by declines in the price of uranium, and other minerals. The price of uranium, and other minerals fluctuates widely and is affected by numerous factors beyond our control such as the sale or purchase of commodities by various central banks and financial institutions, interest rates, exchange rates, inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, global and regional supply and demand, the political and economic conditions and production costs of major mineral-producing countries throughout the world, and the cost of substitutes, inventory levels and carrying charges. With respect to uranium, such factors include the demand for nuclear power, political and economic conditions in uranium producing and consuming countries, uranium supply from secondary sources, uranium production levels and costs of production. Future serious price declines in the market value of uranium, and other minerals could cause development of and commercial production from our properties to be impracticable. Depending on the price of uranium, and other minerals, cash flow from mining operations may not be sufficient and we could be forced to discontinue production and may lose our interest in, or may be forced to sell, some of our properties. Future production from our mining properties, if any, is dependent upon the prices of uranium, and other minerals being adequate to make these properties economically viable.
In addition to adversely affecting our reserve estimates, if any, and our financial condition, declining commodity prices can impact operations by requiring a reassessment of the feasibility of a particular project. Such a reassessment may be the result of a management decision or may be required under financing arrangements related to a particular project. Even if a project is ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays or may interrupt operations until the reassessment can be completed.
Exchange rate fluctuations may effectively increase our costs of exploration and production
Exchange rate fluctuations may affect the costs that we incur in our operations. Uranium, and other minerals are generally sold in U.S. dollars and our costs are incurred principally in Canadian dollars. We also maintain a mineral exploration project in the United States that require payments to be made in U.S. dollars. The appreciation of non-U.S. dollar currencies against the U.S. dollar can increase the cost of exploration and production in U.S. dollar terms, which could materially and adversely affect our profitability, results of operations and financial condition.
Our operations are subject to extensive governmental regulation that may adversely affect our operating costs
Our mining, processing, development and mineral exploration activities are subject to various laws governing prospecting, development, production, taxes, labor standards and occupational health, mine safety, toxic substances, land use, water use, land claims of local people, and other matters. Although our exploration and development activities are currently carried out in accordance with all applicable rules and regulations, new rules and regulations may be enacted or existing rules and regulations may be applied in a manner which could limit or curtail production or development. Amendments to current laws and regulations governing operations and activities of mining and
milling or more stringent implementation thereof could have a substantial adverse impact on our operations. Worldwide demand for uranium is directly tied to the demand for energy produced by the nuclear electric industry, which is also subject to extensive government regulations and policies.
Amendments to current laws, regulations and permits governing operations and activities of mining and exploration companies, or more stringent implementation thereof, could have a material adverse impact on our operations and cause increases in exploration expenses, capital expenditures or production costs, or reduction in levels of production at producing properties, or require abandonment or delays in development of new mining properties.
Uncertainties associated with the Jetlines Transaction
The Jetlines Transaction will involve the integration of companies that previously operated independently. An important factor in the success of the Jetlines Transaction will be the ability of the management of the Resulting Issuer to integrate all or part of the operations, systems and technologies of the Company and Jetlines following completion of the Jetlines Transaction. The Jetlines Transaction and/or the integration of the two businesses can result in unanticipated operational problems and interruptions, expenses and liabilities, the diversion of management attention and the loss of key employees. There can be no assurance that the Jetlines Transaction and business integration will be successful or that the combination will not adversely affect the business, financial condition or operating results of the Company or Jetlines. In addition, the Company or Jetlines may incur costs related to the Jetlines Transaction and related to the Amalgamation. There can be no assurance that the Company, Jetlines or the Resulting Issuer will not incur additional material costs in subsequent quarters to reflect additional costs associated with the Jetlines Transaction or that that the benefits expected from the Jetlines Transaction will be realized.
The Company and Jetlines expect to incur significant costs associated with the Jetlines Transaction
The Company and Jetlines will collectively incur significant direct transaction costs in connection with the Jetlines Transaction. Actual direct transaction costs incurred in connection with the Jetlines Transaction may be higher than expected. Moreover, certain of the Company's and Jetlines' costs related to the Jetlines Transaction, including legal, financial advisory services, accounting, printing and mailing costs, must be paid even if the Jetlines Transaction is not completed. There are also opportunity costs associated with the diversion of management attention away from the conduct of the Company and Jetlines' respective businesses in the ordinary course.
The Amalgamation Agreement may be terminated in certain circumstances
Each of the Company and Jetlines has the right to terminate the Amalgamation Agreement in certain circumstances. Accordingly, there is no certainty, nor can either of Jetlines or the Company provide any assurance, that the Amalgamation Agreement will not be terminated by either Jetlines or the Company before the completion of the Jetlines Transaction. For instance, the Company and Jetlines have the right, in certain circumstances, to terminate the Amalgamation Agreement if changes occur that have a material adverse effect. There is no assurance that a material adverse effect will not occur before the closing date, in which case either the Company or Jetlines could elect to terminate the Amalgamation Agreement and the Jetlines Transaction would not proceed.
There can be no assurance that all conditions precedent to the Jetlines Transaction will be satisfied
The completion of the Jetlines Transaction is subject to a number of conditions precedent, certain of which are outside the control of the Company and Jetlines. There is no certainty, nor can Jetlines or the Company provide any assurance, that these conditions will be satisfied or, if satisfied, when they will be satisfied. The requirement to take certain actions or to agree to certain conditions to satisfy such requirements or obtain any such approvals may have a material adverse effect on the business and affairs of the Company or Jetlines or the trading price of the the Company common shares. If for any reason the Jetlines Transaction is not completed, the market price of the the Company common shares may be adversely affected. Moreover, if the Amalgamation Agreement is terminated, there is no assurance that the Company Board will be able to find another similar transaction to pursue.
Entry into New Business Activities
Completion of the Jetlines Transaction will result in a combination of the current business activities carried on by each of the Company and Jetlines as separate entities. While the Company has had minimal operations for several years, the combination of these activities into the merged entity may expose the Company's shareholders and creditors to different business risks than those to which they were exposed prior to the Jetlines Transaction. In particular, shareholders will gain exposure to the business of Jetlines.
If the Jetlines Transaction is not completed, the Company's future business and operations could be harmed
If the Jetlines Transaction is not completed, the Company may be subject to a number of additional material risks, including the following:
|
·
|
the Company may have lost opportunities that would have otherwise been available had the Amalgamation Agreement not been executed, including, without limitation, opportunities not pursued as a result of affirmative and negative covenants made by it in the Amalgamation Agreement, such as covenants affecting the conduct of its business outside the ordinary course of business;
|
|
·
|
the Company may be unable to obtain additional sources of financing or conclude another sale, merger or amalgamation on terms as favourable as those of the Jetlines Transaction, in a timely manner, or at all.
|
The market price of our common shares may experience substantial volatility
In recent years, the securities markets in the United States and Canada have experienced a high level of price and volume volatility, and the market price of securities of many mineral exploration companies have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. The price of our common shares is also likely to be significantly affected by short-term changes in prices of uranium, and other minerals, or in our financial condition or results of operations as reflected in our quarterly earnings reports. Other factors unrelated to our performance that may have an effect on the price of our common shares include the following: the extent of analytical coverage available to investors concerning our business may be limited if investment banks with research capabilities do not follow our securities; lessening in trading volume and general market interest in our securities may affect an investor's ability to trade significant numbers of our common shares; the size of our public float may limit the ability of some institutions to invest in our securities; and a substantial decline in the price of our common shares that persists for a significant period of time could cause our securities to be delisted from such exchange, further reducing market liquidity.
We have not paid dividends in the past and do not expect to pay dividends in the foreseeable future
No dividends on our common shares have been paid to date as we have no earnings. We currently plan to retain all future earnings and other cash resources, if any, for the future operation and development of our business. Payment of future dividends, if any, will be at the discretion of our Board of Directors after taking into account many factors, including our operating results, financial condition, and current and anticipated cash needs.
Future sales of common shares by existing shareholders could adversely affect the trading price of our common shares
Sales of a large number of our common shares in the public markets, or the potential for such sales, could decrease the trading price of the common shares and could impair our ability to raise capital through future sales of common shares.
We are dependent upon the services of our key executives
We are dependent upon the services of key executives, including our directors and a small number of highly skilled and experienced executives and personnel. Due to our relatively small size, the unanticipated and/or unplanned loss
of our Chief Executive Officer or our Chairman or our inability to attract and retain additional highly-skilled employees may adversely affect our future operations.
Our directors and officers have certain conflicts of interest
Certain of our directors and officers also serve as directors and/or officers of other companies involved in natural resource exploration and development and, consequently, there exists the possibility for such directors and officers to be in a position of conflict.
We have no positive cash flow and no recent history of earnings and we are dependent upon public and private contributions of equity to obtain capital in order to sustain our operations
None of our properties have advanced to the commercial production stage and we have no history of earnings or positive cash flow from operations. Our cumulative loss, as of the year ended April 30, 2016 determined in accordance with IFRS is approximately $110 million. We do not know if we will ever generate material revenue from mining operations or if we will ever achieve self-sustaining commercial mining operations. Historically, the only source of funds available to us has been through the sale of our equity securities. Any future additional equity financing would cause dilution to current shareholders.
Dilution through employee, director and consultant stock options and warrants could adversely affect our shareholders by decreasing shareholder value
Because our success is highly dependent upon our employees, we have granted to some or all of our key employees, directors and consultants options to purchase common shares as non-cash incentives. In addition we have also issued share purchase units and warrants to investors and brokers in connection with equity financings. To the extent that significant numbers of such options, warrants and share purchase units may be granted and exercised, the interests of our other shareholders may be diluted.
As of August 19, 2016 we had no share purchase options, and 20,000,000 share purchase warrants outstanding. If all of these securities were exercised, the number of common shares issued and outstanding would increase from 28,218,451 to 48,218,451. This represents an increase of 70.88% in the number of shares issued and outstanding and would result in some dilution to current shareholders.
U.S. investors may not be able to enforce their civil liabilities against us or our directors, controlling persons and officers
It may be difficult to bring and enforce suits against us. We are incorporated in the province of British Columbia under the
Business Corporations Act
(British Columbia). The majority of our directors and officers are residents of Canada, and all or substantial portions of their assets are located outside of the United States, predominately in Canada. As a result, it may be difficult for U.S. holders of our common shares to effect service of process on these persons within the United States or to realize in the United States upon judgments rendered against them. In addition, a shareholder should not assume that the courts of Canada (i) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or other laws of the United States, or (ii) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or other laws of the United States.
However, U.S. laws would generally be enforced by a Canadian court provided that those laws are not contrary to Canadian public policy, are not foreign penal laws or laws that deal with taxation or the taking of property by a foreign government and provided that they are in compliance with applicable Canadian legislation regarding the limitation of actions. Also, a Canadian court would generally recognize a judgment obtained in a U.S. Court except, for example, where:
|
a)
|
the U.S. court that rendered the judgment had no jurisdiction according to applicable Canadian law;
|
|
b)
|
the judgment was subject to ordinary remedy (appeal, judicial review and any other judicial proceeding which renders the judgment not final, conclusive or enforceable under the laws of the applicable state) or not final, conclusive or enforceable under the laws of the applicable state;
|
|
c)
|
the judgment was obtained by fraud or in any manner contrary to natural justice or rendered in contravention of fundamental principles of procedure; or
|
|
d)
|
a dispute between the same parties, based on the same subject matter has given rise to a judgment rendered in a Canadian court or has been decided in a third country and the judgment meets the necessary conditions for recognition in a Canadian court.
|
As a "foreign private issuer", we are exempt from the Section 14 proxy rules and Section 16 reporting rules under the Exchange Act which may result in shareholders having less complete and timely data
The submission of proxy and annual shareholder meeting information (prepared to Canadian standards) on Form 6-K may result in shareholders having less complete and timely data than if we were subject to the SEC's domestic issuer proxy rules under Section 14 of the Exchange Act. The exemption from Section 16 rules under the Exchange Act that require the reporting of acquisitions and disposition of our equity securities by our officers, directors and greater than 10% shareholders also may result in shareholders having less data.
The Company believes that it may be a "passive foreign investment company" for the current taxable year which would likely result in materially adverse U.S. federal income tax consequences for U.S. investors
The Company believes that it may have been classified as a passive foreign investment company ("PFIC") for the taxable year ending April 30, 2016, and, based on current business plans and financial expectations, the Company expects that it may be classified as a PFIC for the current taxable year and in future taxable years. If the Company is a PFIC for any taxable year during which a U.S. Holder (as defined under "Item 10.E. Taxation—U.S. Federal Income Tax Considerations") holds the Common Shares, it would likely result in adverse U.S. federal income tax consequences for such U.S. Holder. U.S. holders should carefully read "Item 10.E. Taxation – U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Rules" for more information and consult their own tax advisors regarding the likelihood and consequences of the Company being treated as a PFIC for U.S. federal income tax purposes, including the advisability of making a "qualified electing fund" election, which may mitigate certain possible adverse U.S. federal income tax consequences but may result in an inclusion in gross income without receipt of such income. U.S. Holders are urged to consult their own tax advisers as to whether the Company may be treated as a PFIC and the tax consequences thereof.
Litigation
Due to the nature of our business, we may become subject to regulatory investigations, claims, lawsuits and other proceedings in the ordinary course of its business. The results of these legal proceedings cannot be predicted with certainty due to the uncertainty inherent in litigation, including the effects of discovery of new evidence or advancement of new legal theories, the difficulty of predicting decisions of judges and juries and the possibility that decisions may be reversed on appeal. There can be no assurances that these matters will not have a material adverse effect on our business.
|
ITEM 4.
|
INFORMATION ON THE COMPANY
|
4.A.
History and Development of the Company
Introduction
Jet Metal Corp. (formerly Crosshair Energy Corporation) (the "Company" or "Jet Metal") was incorporated as a specially limited company pursuant to the
Company Act
(British Columbia) (replaced by the
Business Corporations Act
(British Columbia) effective March 29, 2004) on September 2, 1966 under the name
Shasta Mines & Oil Ltd.
(Non-Personal Liability). We converted from a Private Company to a Public Company on February 20, 1967. On
February 4, 1975 we changed our name to
International Shasta Resources Ltd.
(Non-Personal Liability) and consolidated our share capital on the basis of one new share for five old shares and increased our share capital from 600,000 common shares to 3,000,000 common shares. On September 14, 1977 we increased our authorized share capital from 3,000,000 common shares to 5,000,000 common shares. On April 5, 1982, we increased our authorized share capital from 5,000,000 common shares to 10,000,000 common shares by Special Resolution. On March 5, 1986 we converted from a Specially Limited Company into a Limited Company under the name of International Shasta Resources Ltd. and increased our authorized share capital from 10,000,000 common shares to 30,000,000 common shares. On May 20, 1994, we changed our name to
Consolidated Shasta Resources Inc
.
and consolidated our share capital on the basis of one new share for ten old shares and increased our authorized share capital from 3,000,000 common shares to 20,000,000 common shares. On November 23, 1994 we changed our name to
Lima Gold Corporation
and on September 21, 1999 we changed our name to
International Lima Resources Corp.
and consolidated our share capital on the basis of one new share for three old shares and increased our authorized share capital from 6,666,667 common shares to 20,000,000 common shares. On November 5, 2003 we increased our authorized share capital from 20,000,000 common shares to 100,000,000 common shares. On March 1, 2004 we changed our name to
Crosshair Exploration & Mining Corp.
On June 1, 2004 we replaced our Memorandum with a Notice of Articles as required by the
Business Corporations Act
(British Columbia). On March 11, 2005 we changed our authorized capital to an unlimited number of common shares. On December 15, 2010, we consolidated our share capital on the basis of one new share for four old shares. On October 28, 2011 we changed our name from Crosshair Exploration & Mining Corp. to
Crosshair Energy Corporation
. On September 17, 2013, we consolidated our share capital on the basis of one new share for ten old shares and changed our name from Crosshair Energy Corporation to
Jet Metal Corp
.
Our executive office is located at:
Suite 1240 - 1140 West Pender Street
Vancouver, British Columbia, Canada V6E 4G1
Telephone: (604) 681-8030
Facsimile: (604) 681-8039
Website:
www.jetmetalcorp.com
Email:
mmorabito@kingandbay.com
The contact person is: Mr. Mark J. Morabito, Chief Executive Officer and President.
Our fiscal year ends April 30th.
Our common shares first began trading on the Vancouver Stock Exchange under the name Shasta Mines & Oil Ltd. on March 14, 1969. Our common shares began trading on the TSX Venture Exchange with the trading symbol "CXX" on March 1, 2004. On February 10, 2006, we graduated to Tier 1 on the TSX Venture Exchange. On May 7, 2007, our common shares began trading on the American Stock Exchange (now NYSE MKT) with the trading symbol "CXZ." On May 12, 2008, our common shares began trading on the Toronto Stock Exchange with the trading symbol "CXX" and ceased trading on the TSX Venture Exchange. On June 18, 2013 the Company filed a Form 25 – Notice of Removal from Listing and/or Registration under section 12(b) of the Securities Exchange Act of 1934 with the United States Securities and Exchange Commission ("SEC"). Our common shares were voluntarily delisted from NYSE MKT on July 1, 2013 and began trading on the OTC Market Group's OTCQB Marketplace on July 1, 2013 with the trading symbol "CRHRF". On October 22, 2013, our trading symbol on OTCQB was changed to "JETMF" to reflect the Company's name change to Jet Metal Corp. On January 17, 2014, our common shares were voluntarily delisted from the Toronto Stock Exchange and on January 20, 2014 began trading on the TSX Venture Exchange under the trading symbol "JET". On February 24 2016, due to the fact that the Company's shares were halted for trading on the TSX Venture Exchange and the OTCQB for longer than a period of four trading days, the Company's common shares were removed from trading on the OTCQB.
On January 19, 2015, 20,000,000 warrants ("
Warrants
") began trading on the TSX Venture Exchange under the symbol "JET.WT". The Warrants were issued on September 16, 2014 to accredited investors pursuant to a non-brokered private placement of units ("
Units
") for gross proceeds of $3,000,000. Each Unit comprised one common
share and one Warrant, with each Warrant exercisable to acquire one common share at an exercise price of $0.25 for a period of five years following closing of the private placement.
On March 29, 2004, the
Company Act
(British Columbia) (the "Company Act") was replaced by the
Business Corporations Act
(British Columbia) (the "BCBCA"). Accordingly, we are now subject to the BCBCA and are no longer governed by the Company Act. There are a number of differences under the BCBCA, which differences are designed to provide greater flexibility and efficiency for British Columbia companies.
Under the BCBCA, every company incorporated under the Company Act was required to complete a mandatory transition rollover under the BCBCA to substitute a Notice of Articles for its Memorandum within two years of March 29, 2004. On June 1, 2004 we replaced our Memorandum with a Notice of Articles as is required by the BCBCA. The only information contained in the Notice of Articles is the authorized share structure of the Company, the name of the Company, the address of the registered and records office of the Company, and the names and addresses of the directors of the Company.
On March 31, 2009, the Company and Target Exploration and Mining Corp. ("Target") successfully closed a plan of arrangement whereby the Company acquired all the outstanding common shares of Target and Target has become a wholly owned subsidiary of the Company. Target shareholders received approximately 14.7 million common shares of the Company (1.2 Company shares for each Target common share outstanding) with an estimated market value of approximately $2.6 million. In addition, each outstanding Target warrant and stock option which gave the holder the right to acquire common shares of Target was exchanged for a warrant or stock option which gave the holder the right to acquire common shares of the Company on the exchange ratio of 1.2 Company shares for each Target warrant or stock option exercised, with all other terms of such warrants and options (such as term and expiry) remaining unchanged. As a result of the acquisition of Target, the Company acquired an interest in the Bootheel and Sinbad projects in Wyoming and Utah, USA respectively. During fiscal 2010, we allowed all 62 mineral claims on the Sinbad property located in Emery County, Utah, to lapse, and the State Lease with the State of Utah was not renewed.
Property Acquisitions
Since the beginning of fiscal 2016, we have acquired no additional properties.
Property Terminations
Since the beginning of fiscal 2016, we have dropped no mineral claims from the CMB project.
Capital Expenditures
Our capital expenditures, excluding property, plant and equipment, for the last three fiscal years were as follows:
|
Fiscal Year
|
|
Expenditures
|
|
|
Fiscal 2014
|
|
$
|
--
|
(1)
|
|
Fiscal 2015
|
|
$
|
--
|
(2)
|
|
Fiscal 2016
|
|
$
|
--
|
(3)
|
(1)
These funds were spent as outlined below:
|
Expense ($)
|
CMB Moran Lake
|
CMB
Silver Spruce
|
Bootheel Project
|
Golden Promise
|
Juniper Ridge
|
Other Claims
|
|
Acquisition costs
|
--
|
--
|
--
|
--
|
--
|
--
|
(2)
These funds were spent as outlined below:
|
Expense ($)
|
CMB Moran Lake
|
CMB
Silver Spruce
|
Bootheel Project
|
Golden Promise
|
Juniper Ridge
|
Other Claims
|
|
Acquisition costs
|
--
|
--
|
--
|
--
|
--
|
--
|
(3)
These funds were spent as outlined below:
|
Expense ($)
|
CMB Moran Lake
|
CMB
Silver Spruce
|
Bootheel Project
|
Golden Promise
|
Juniper Ridge
|
Other Claims
|
|
Acquisition costs
|
--
|
--
|
--
|
--
|
--
|
--
|
We do not expect to incur any significant capital expenditures with respect to the Company's existing properties for fiscal year 2017. Our capital expenditures are financed through sales of our common shares.
Exploration and evaluation expenses
The Company recorded the following exploration and evaluation expenses in relation to its mineral properties:
|
Fiscal Year
|
|
Expenditures
|
|
|
Fiscal 2014
|
|
$
|
34,225
|
(1)
|
|
Fiscal 2015
|
|
$
|
21,481
|
(2)
|
|
Fiscal 2016
|
|
$
|
50,857
|
(3)
|
|
(1)
|
These funds were spent as outlined below:
|
|
Expense ($)
|
|
CMB Moran Lake
|
|
|
CMB
Silver Spruce
|
|
|
Bootheel Project
|
|
|
Golden Promise
|
|
|
Juniper Ridge
|
|
|
Other Claims
|
|
|
Drilling and trenching
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
Geology
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Geophysics
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Geochemistry
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Metallurgy
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Administration
|
|
|
560
|
|
|
|
--
|
|
|
|
34,673
|
|
|
|
--
|
|
|
|
(392
|
)
|
|
|
--
|
|
|
Permitting
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
376
|
|
|
Hydrology
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Technical analysis
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Reclamation Costs
|
|
|
--
|
|
|
|
--
|
|
|
|
10,921
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Pre-acquisition cost
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
JCEAP refunds
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Recovery
|
|
|
--
|
|
|
|
--
|
|
|
|
(11,913
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
(2)
|
These funds were spent as outlined below:
|
|
Expense ($)
|
|
CMB Moran Lake
|
|
|
CMB
Silver Spruce
|
|
|
Bootheel Project
|
|
|
Golden Promise
|
|
|
Juniper Ridge
|
|
|
Other Claims
|
|
|
Drilling and trenching
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
Geology
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Geophysics
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Geochemistry
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Metallurgy
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Administration
|
|
|
--
|
|
|
|
--
|
|
|
|
27,367
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Permitting
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Hydrology
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Technical analysis
|
|
|
--
|
|
|
|
--
|
|
|
|
1,925
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Reclamation Costs
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Pre-acquisition cost
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
JCEAP refunds
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Recovery
|
|
|
--
|
|
|
|
--
|
|
|
|
(7,811
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
(3)
|
These funds were spent as outlined below
:
|
|
Expense ($)
|
|
CMB Moran Lake
|
|
|
CMB
Silver Spruce
|
|
|
Bootheel Project
|
|
|
Golden Promise
|
|
|
Juniper Ridge
|
|
|
Other Claims
|
|
|
Drilling and trenching
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
Geology
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Geophysics
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Geochemistry
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Metallurgy
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Administration
|
|
|
--
|
|
|
|
17,930
|
|
|
|
30,033
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Permitting
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Hydrology
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Technical analysis
|
|
|
--
|
|
|
|
--
|
|
|
|
9,980
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Reclamation Costs
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Pre-acquisition cost
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
JCEAP refunds
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Recovery
|
|
|
--
|
|
|
|
--
|
|
|
|
(7,106
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
4.B.
Business Overview
Corporate Development
We are a mineral exploration company engaged in the acquisition and exploration of mineral properties (primarily uranium, base and precious metals). We do not have any producing mineral properties at this time. Our business is presently focused on the exploration and evaluation of various mineral deposits in North America. See "Item 4.D – Property, Plants and Equipment" below for a detailed description of the Company's properties.
We are currently focusing our exploration and evaluation activities in the Province of Newfoundland and Labrador and the State of Wyoming on the following properties:
|
·
|
CMB property located in Labrador, Canada.
|
|
·
|
The Bootheel Project located in Wyoming, U.S.A.
|
On April 12, 2016, the Company entered into a definitive agreement (the "
Amalgamation Agreement
") with Canada Jetlines Ltd. ("
Jetlines
") with respect to the amalgamation of Jetlines and a wholly owned subsidiary of the Company (the "
Jetlines Transaction
"). Jetlines is a start-up airline aiming to become Canada's first ultra-low cost carrier ("
ULCC
").
Prior to the closing of the Transaction, the Company has 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 and effect a continuance as a Federal corporation governed by the
Canada Business Corporations Act.
Pursuant to the Amalgamation Agreement one and one-half (1.5) common shares of the Company will be issued in exchange for every one common share of Jetlines ("
Jetlines Share
") held, provided that holders of Jetlines Shares that are not Canadian shall receive variable voting common shares of the Company and holders of Jetlines Shares that are Canadian shall receive common voting shares of the Company.
Outstanding warrants of the Company and Jetlines and the outstanding stock options of the Company and Jetlines will automatically become exercisable for or shall be exchanged for common shares of the Company, subject to all necessary adjustments to reflect the terms of the Jetlines Transaction and subject to the terms governing the warrants and options. After the Jetlines Transaction is complete, all of the tangible and intangible assets of Jetlines will be owned by and held in the entity formed through amalgamation of Jetlines and a wholly owned subsidiary of the Company.
The Jetlines Transaction remains subject to the following key conditions:
|
·
|
the Company will complete a private placement (the "
Concurrent Financing
") of units ("
Units
") for gross proceeds of up to $6,000,000. Each Unit will consist of one common share of the Company and one half of one share purchase warrant. Each whole share purchase warrant shall be exercisable into a common share of the Company for 24 months. Subject to Exchange approval, the Company may pay commissions or finder's fees in connection with the Concurrent Financing and may appoint a broker to assist with the Concurrent Financing. The Concurrent Financing will close immediately prior to or concurrently with the Jetlines Transaction; and
|
|
·
|
the Jetlines Transaction will have received shareholder approval and the approval of the Exchange. Subsequent to the year ended April 30, 2016, the shareholders of the Company approved the Jetlines Transaction on July 27, 2016 and conditional approval from the Exchange was received.
|
Prior to the closing of the Jetlines Transaction, Jetlines may complete a financing for a maximum of $250,000 on the same terms as the Concurrent Financing.
For further details regarding the Jetlines Transaction please refer to the Company's Information Circular dated June 17, 2016.
Material Effects of Government Regulations
Our current and anticipated future operations, including further exploration activities, require permits from various Canadian Federal and Provincial and U.S. Federal and State governmental authorities. Such operations are subject to various laws governing land use, the protection of the environment, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, well safety and other matters. Unfavorable amendments to current laws, regulations and permits governing operations and activities of resource exploration companies, or more stringent implementation thereof, could have a materially adverse impact on us and cause increases in capital expenditures which could result in our ceasing operations. We have had no material costs related to compliance and/or permits in recent years, and anticipate no material costs in the next year.
Field work is prohibited on certain parts of the Bootheel Project due to the presence of sage grouse mating areas during the period March 15
th
to June 30
th
.
Seasonality
We can only carry out exploration when weather is favorable. Typically, we cannot carry out any work at a reasonable cost during the months of November and December for winter freeze-up and March and April for spring break-up on our Canadian properties.
Dependency upon Patents/Licenses/Contracts/Processes
Not applicable
Sources/Availability of Raw Materials
Not applicable
|
4.C.
|
Organization Structure
|
The Company is a corporation subject to the BCBCA. Jet Metal owns 100% of the issued and outstanding shares in each of the following subsidiaries:
|
1.
|
Target Exploration and Mining Corp. ("Target"), a British Columbia corporation.
|
|
a.
|
Target owns all of the issued and outstanding shares in Crosshair Energy USA, Inc. (formerly 448018 Exploration Inc.), a Nevada Corporation.
|
|
i.
|
Crosshair Energy USA, Inc. holds an 81% interest in The Bootheel Project LLC.
|
|
2.
|
Gemini Metals Corp., a British Columbia corporation.
|
|
4.D.
|
Property, Plants and Equipment
|
Our properties are in the exploration stage and a substantial amount of capital will have to be spent on each property before we will know if they contain commercially viable mineral deposits. Our properties are located in the Province of Newfoundland and Labrador, Canada and Wyoming, USA. Our properties are without known reserves and the work being done by us is exploratory in nature.
Our executive offices are located in shared office premises of approximately 10,630 square feet at Suite 1240, 1140 West Pender Street, Vancouver, British Columbia Canada. We have occupied these facilities since 2006. Beginning on January 1, 2010 (revised on October 1, 2010 and September 16, 2014), we entered into a management services agreement with King & Bay West Management Corp. ("King & Bay West") under which King & Bay West provides shared office space for the Company and other companies that King & Bay West
provides management services to. As part of this agreement, King & Bay West has assumed the lease for the office facilities occupied by the Company.
National Instrument 43-101 Compliance
Except as otherwise indicated, C. Stewart Wallis, P.Geo., having a business address at 4923 1
st
Avenue, Delta, British Columbia, V4M 1B4, a Director of the Company and a Qualified Person as defined by NI 43-101, has reviewed and is responsible for the technical information contained in this Annual Report on Form 20-F. Mr. Wallis has consented to the inclusion of his name and the statements attributed to him in this Annual Report on Form 20-F. Further information about the Company's mineral properties can be found in the following technical reports which are available on SEDAR at
www.sedar.com
:
|
·
|
CMB Uranium Project
: The Technical Report titled "Technical Report on the Central Mineral Belt (CMB) Property, Labrador Canada" dated April 16, 2015 (filed as an exhibit to our Form 6-K on April 17, 2015).
|
|
·
|
Bootheel Uranium Project
: The Technical Report titled "Technical Report on the Bootheel Project for Jet Metal Corp. and The Bootheel Project, LLC" dated May 20, 2015 (filed as an exhibit to our Form 6-K on June 24, 2015).
|
Newfoundland
Golden Promise Property and Agreements
The Company entered into the Golden Promise Option and Joint Venture Agreement dated April 8, 2009 between the Company and Paragon, pursuant to which it acquired a 60% interest in the Golden Promise Gold Project in Central Newfoundland, Canada with an option to acquire up to a 70% interest.
Work completed on the property to date confirmed the exploration prospectivity of the area, however, the current poor state of the junior resource market renders financing such early stage projects virtually impossible. As a result, the decision was made to drop this ground and expend no additional funds. The property has since been returned to the vendor.
South Golden Promise Property and Agreements
The South Golden Promise Property agreement included two separate blocks of licenses, South Golden Promise and Victoria Lake, which collectively covered 1,975 hectares in 79 map-staked claims, each 500 by 500 metres in size.Under the terms of an agreement dated February 14, 2003 with Paragon, the Company earned a 60% interest in the South Golden Promise Property in consideration for issuing a total of 100,000 common shares and incurring a minimum of $1,750,000 in exploration expenditures.
As was the case with the Golden Promise project, work completed on the South Golden Promise project to date confirmed the exploration prospectivity of the area, however, the current poor state of the junior resource market renders financing such early stage projects virtually impossible. As a result, the decision was made, in conjunction with our JV partner to expend no additional funds on this project and to drop the claims that constitute the South Golden Promise Property.
Victoria Lake Property and Agreements
Paragon acquired an option to earn a 100% interest in the South Golden Promise Property pursuant to an underlying option agreement, dated January 8, 2003, with Al Keats, Calvin Keats and Kevin Keats. The vendors were entitled to a 2.5% Net Smelter Return. Paragon could repurchase a 1.5% Net Smelter Return for $1,500,000 and had a right of first refusal with respect to the remaining 1.0%. As of September 2005, Paragon completed its obligations under its option agreement with the vendors and held a 100% interest in the South Golden Promise Property subject to the 2.5% Net Smelter Return.
As was the case for the Golden Promise and South Golden Promise Properties, the current poor state of the junior resource market precludes further expenditure on the Victoria Lake Property. As a result, the decision was made to
cease funding this project and the property has since been dropped, as the original vendors did not want the property returned to them.
Labrador—Central Mineral Belt
The Company has been conducting mineral exploration activities in the Central Mineral Belt of Newfoundland and Labrador since 2004. The Central Mineral Belt is a geological province comprising six Proterozoic sequences of volcanic, sedimentary and plutonic rocks ranging in age from about 2.0 to 1.3 billion years and include, from oldest to youngest, the Post Hill, Moran Lake, Aillik, Bruce River, Letitia Lake and Seal Lake Groups. The Central Mineral Belt includes portions of 4 major tectonic provinces, these being the Nain, Makkovik and Grenville provinces, and the Hopedale Block of the Archean Nain Province. The Company's initial foray into this area was through an option agreement with local prospector Lewis Murphy. This first property was referred to as the CMB property and was a focus of the Company's activities from 2004 until 2012. The option agreement with Mr. Murphy was terminated on October 31, 2013. In addition to this initial property, during the summer of 2008 an opportunity arose such that the Company was able to acquire an interest in an adjacent property. This acquired interest was a component of an existing joint venture (JV) agreement between Expedition Mining Inc. ("Expedition") and Silver Spruce Resources Inc. ("Silver Spruce"). As it was part of a pre-existing JV, with a separate JV-specific budget, it was kept separate from the original CMB property and was subsequently referred to as the CMB-JV property. From 2008 until 2012, the Company actively explored on both properties and continued to budget and report each separately. As a result of Silver Spruce exercising their non-participation right during the 2012 field season, their interest in the CMB-JV property was reduced to a 2% Net Smelter Return Royalty and the Company acquired 100% ownership of the entire property. With the termination of the JV and acquisition of 100% ownership of the property, there was no longer any need to budget and report the two properties separately. From the 2012 field season onward, the two properties were amalgamated under a single budget and henceforth referred to simply as the CMB project.
CMB Property and Agreement
As previously mentioned, in July 2008, the Company acquired a 60% interest in the property from Expedition by paying CDN $500,000 and issuing 2,500,000 common shares and 1,875,000 warrants to Expedition. The claims were part of a property agreement between Expedition and Silver Spruce, under which Expedition had earned a 60% interest. The claims are host to the Two Time deposit.
Silver Spruce declined to participate in the 2012 exploration program and as a result, had its interest in the property diluted to a 2% Net Smelter Return Royalty. With the acquisition of 100% of this property and the dissolution of the JV agreement as a consequence of this dilution, there was no longer any need to budget and report the CMB and CMB-JV properties separately. From the 2012 field season onward, the two properties were amalgamated under a single budget and henceforth referred to simply as the CMB project.
Property Description and Location
The CMB Project comprises a total of 359 map-staked claims in 2 mineral licenses, covering a total area of 8,975 ha. The property is located in the Central Mineral Belt of Labrador, approximately 140 km north of the town of Happy Valley-Goose Bay and 85 km southwest of the coastal community of Postville on Kaipokok Bay. In a direct line, the property is about 75 km from tidewater to the northeast. The undeveloped Michelin uranium deposit, owned by Paladin Energy Ltd., is approximately 65 km east-northeast of the Moran Lake Property. The property area is within the Naskaupi Electoral District of Labrador.
Accessibility
Helicopter and fixed wing service out of Goose Bay are the most efficient means of access to the property. Local infrastructure is confined to the limited facilities of the community of Postville, which has commercial airline service from Goose Bay and commercial ferry service from St John's, Newfoundland. Coastal boats are available to convey goods and passengers from Happy Valley to Postville. Most necessary goods and services, including charter aircraft, can be obtained in Goose Bay, which has excellent commercial airline connections to St John's, Halifax and Montreal.
This portion of central Labrador has a sub-Arctic climate, with strong seasonal contrasts marked by short cool summers and long cold winters. Freeze-up typically begins in late October and lasts until early to mid-June. Snow cover is relatively heavy and usually lasts seven to eight months. Daytime temperatures during the winter typically range from -15º Celsius to -30º Celsius, while daytime summer temperatures typically range from 15º Celsius to 25º Celsius.
The topography of the area consists of rolling highlands with maximum relief approaching 300m. The hilltops can be partly barren while the slopes and valleys are covered in vegetation, mostly scrubby black spruce and some deciduous trees with a thick intervening growth of alders. Almost everywhere there is a thick ground cover of moss. The valleys are steep sided at many locations and are often host to boggy ground with small ponds or lakes.
Property Geology
The CMB Project is situated within the Central Mineral Belt of Labrador which includes portions of 4 major tectonic provinces, these being the Nain, Makkovik and Grenville provinces, and the Hopedale Block of the Archean Nain Province. The easternmost claims lie within the Makkovik Province, while the westernmost claims generally lie along the boundary between the Nain, Churchill and Grenville Province. The property is underlain by the Kanairitok Intrusive Suite has an approximate age of 2800 Ma and consists mainly of Archean gneiss, schistose metavolcanics and granitoids. The main types of lithologies observed include monzodiorite (predominant unit), diorite, amphibolite and mafic dykes, pegmatites as well as more minor granites, monzonites and granodiorites
Exploration
Initial exploration activities executed by Silver Spruce and Expedition included an airborne magnetic and radiometric survey covering the entire property. Interpretation of the data from this survey identified a high-priority radiometric anomaly. Much of the subsequent exploration activities were focused on follow-up investigations of this anomaly and included line cutting, ground scintillometer surveying, soil, till, lake, and stream sediment sampling, ground radon (RadonEx) surveying, prospecting, trenching, geological mapping, and diamond drilling. The uranium mineralization identified from this concentrated exploration effort is referred to as the Two Time zone. This zone of mineralization is hosted within brecciated and fractured granitic to dioritic intrusive rocks of the Kanairiktok Intrusive Suite characterized by hematite, carbonate, and chlorite alteration. A number of other showings and prospects have also been discovered on the property, including the Firestone Showing, Doucette, HF, J, F, and W occurrences.
Drilling
Prior to the Company acquiring Expedition's 60% interest in the property, Silver Spruce and Expedition completed a total of 11,196 metres of drilling in 44 holes. Highlights include 0.118% U
3
O
8
over 28.00 metres in hole CMB-07-06, 0.101% U
3
O
8
over 33.00 metres in hole CMB-07-14, and 0.112% U
3
O
8
over 19.00 metres in hole CMB-07-34. The Silver Spruce/Expedition work on the Two Time zone culminated in a NI 43-101 compliant resource estimate of 2.33 million pounds of U
3
O
8
(1.82 million tonnes grading 0.058% U
3
O
8
) in the indicated category and 3.73 million pounds of U
3
O
8
(3.16 million tonnes grading 0.053% U
3
O
8
) in the inferred category using a cut-off grade of 0.03% U
3
O
8
. The Two Time zone remains open to depth and along strike to the south.
Subsequent to the Company acquiring its 60% interest in the property, it spent the 2009 and 2010 field seasons carrying out geological mapping, prospecting and sampling programs to evaluate priority targets generated from the earlier airborne surveys. Several new uranium showings were discovered, with follow-up activity executed in the 2011 and 2012 field seasons.
Drilling on the Two Time zone in 2011 and 2012 successfully intersected mineralization in several holes, including drill hole CMB-12-49, indicating the mineralization is continuous to the south along strike and along dip. This hole represents a minimum 50m step out to the south from previous holes into the deposit. Four shallow holes drilled north of the Two Time zone to evaluate radon anomalies did not intersect uranium mineralization. Drilling on the Blue Star prospect tested coincident airborne geophysical and rock geochemical anomalies; four out of the ten holes drilled intersected uranium mineralization. The best hole was 3 metres of 0.05%
U
3
O
8
.
Five holes, totalling 740 metres, tested the northeast extension of the Firestone showing failed to intersect mineralization.
A revised Technical Report dated April 16, 2015, is available on Sedar (
www.sedar.com
).
The report confirmed the existing Two Time resource at a cut-off grade of 0.03% U
3
O
8
as an Indicated Mineral Resource of 1.82 million tonnes grading 0.058% U
3
O
8
containing 2.33 million pounds U
3
O
8
. In addition, Inferred Mineral Resources are estimated to total 3.16 million tonnes grading 0.053% U
3
O
8
containing 3.73 million pounds U
3
O
8.
Wyoming – Bootheel Project
The Bootheel property is currently controlled by the Bootheel Project LLC and consists of 81 Federal Mining claims and one State lease. The Company currently has an 81% interest in The Bootheel Project LLC, subject to certain royalties. Under the terms of an agreement dated June 7, 2007, as amended December 21, 2007 and February 28, 2008, between UR-Energy USA Inc. ("URE"), several of its subsidiaries, Target Exploration and Mining Corp. ("Target"), a wholly owned subsidiary of the Company, and Crosshair Energy USA, Inc. ("Crosshair USA"), a wholly owned subsidiary of Target, the Company was able to earn an initial 75% interest in the Bootheel Project LLC, by completing expenditures totalling US$3 million and issuing 12,500 common shares on or before June 7, 2011. All the common shares have been issued and as of July 31, 2009, the Company exceeded US$3 million in expenditures on the property, thereby earning its initial 75% interest. As URE declined to participate in the fiscal 2012 exploration program, its participating interest was diluted from 25% to approximately 19%, and the Company's participating interest increased from 75% to approximately 81%.
Property Location
The Bootheel property is located in Albany County on the southeast edge of the Shirley Basin approximately 60 miles southeast of Casper, Wyoming and 25 miles southeast of Medicine Bow.
The Bootheel property currently comprises 81 Federal lode mining claims and one 640 acre Wyoming State Mineral Lease, No. 0-040774 totalling approximately 2,013 acres. The lode mining claims control the subsurface mineral rights and are administered by the U.S. Bureau of Land Management (BLM).
Accessibility
The Shirley Basin property is readily accessible year-round by an extensive system of county gravel and unimproved ranch roads extending east from U.S. Highways 30 and 287 and Wyoming Road 487. The all season maintained gravel County Road Number 61 (Fetterman Road) crosses the Bootheel property.
History
Uranium was discovered in the Shirley Basin in 1955 by Teton Exploration Drilling Co., who found ore-grade material by drilling west of the Little Medicine Bow River in the western part of the Shirley Basin, 30 mi south of Casper. In the summer of 1957, several thousand claims were staked over 150 square mi. By the end of 1959, over 1,000,000 ft of drilling had been completed through the mineralized Wind River Formation, and into underlying pre-Tertiary rocks. In 1959, Utah Mining Corp. later Utah Construction and Mining Co. (Utah) sank a shaft on their property and the first uranium was produced in March 1960, with ore shipped to the Lucky Mc mill in the Gas Hills area west of Casper. Late in 1964, the company stopped underground mining and commenced an in-situ leach operation using sulphuric acid and ion exchange for recovery. Production amounted to approximately 200,000 pounds of U
3
O
8
per year through 1970. In 1970, the ISR operation was replaced by a conventional mine and mill.
In July 1960, Petrotomics Co. commenced an open-pit operation in the same area and in 1962 a solvent extraction facility was built on the property. A second pit commenced operation in 1966. By late 1969, there were three operating mines in the Shirley Basin, those of Petrotomics and Utah, as well as Kerr McGee Corp. ("Kerr-McGee").
Total production from the Basin amounted to about 34 million lbs of uranium. The last mine closed in 1992 and most of the pits have been reclaimed. Cogema Mining Inc. retains one pit, which is used for the disposal of low-level radioactive waste from the ISR operations in the Powder River Basin.
The Bootheel property specifically, was originally staked in 1958 by Kerr McGee Corp. In the subsequent decades the property has been explored by a number of different companies including Kerr McGee, Rocky Mountain Energy Corporation, Cherokee Exploration Inc., Uranium Resources and Development Company ("URADCO"), Nuclear Assurance Corporation, Cameco Corporation and Power Resources Inc. Total drilling on the property is estimated to be over 600,000 feet. The known uranium zones on the property remain open for expansion.
Property Geology
The Bootheel Project is located at the south-eastern margin of the Shirley Basin, along the western flank of the Laramie Mountains. Tertiary sediments occupy the entire surface area of the property and unconformably overlie a gently dipping, relatively undisturbed sequence of Paleozoic and Mesozoic sediments. A moderate degree of block faulting and some gentle folding are the main structural features and mostly affect pre-Tertiary rocks.
Uranium mineralization occurs within seven different sandstone beds within the gently dipping Jurassic and Cretaceous stratigraphy and within the overlying Tertiary Wind River Formation. Five horizons host significant mineralization and have the potential to host economic resources: 1) Jurassic Sundance Formation containing the Canyon Springs B and D Beds, 2) Cretaceous Dakota Sandstone, 3) Cretaceous Rusty Beds Sandstone, 4) Cretaceous Muddy Sandstone and 5) Tertiary Wind River Formation. Three other Cretaceous horizons (Lakota
Sandstone, Fuson Shale and Wall Sandstone) contain scattered weak mineralization, but are not considered exploration targets at this time.
Two major zones of mineralization are recognized within the Sundance Formation. The main zone in Sections 36 and 1 stretches for over 7,000 ft in length and reaches widths of up to 400 ft and is described as a series of tabular zones. In Sections 6 and 7 the mineralization shows the characteristic roll front shape with the main northeast –trending nose extending approximately 1,900 ft in length. These zones vary from 2 to 60 ft in thickness, averaging from 0.017% to 0.216% eU
3
O
8
occurring at depths of 158 to 585 ft. Length of the individual bodies ranges from 300 to 1,300 ft.
Three Cretaceous sandstone units host uranium mineralization. The Dakota Sandstone ranges from 4 to 47 ft thick and contains abundant pyrite and carbonaceous material. Uranium mineralization ranging from 2 to 14 ft thick, grades from 0.026% to 0.23% eU
3
O
8
and occurs from 163 to 325 ft below the surface. The main zone is about 300 ft wide and 1,000 ft long. The Rusty Beds range from 5 to 87 ft thick, and contain abundant pyrite and carbonaceous debris. Mineralization is 2 to 18 ft thick, grades from 0.020% to 0.11% eU
3
O
8
and occurs from 232 to 297 ft below the surface. Mineralization occurs in three small zones, 300 to 400 ft in size. The Muddy Sandstone is 18 to 45 ft thick and is the least well mineralized of the Cretaceous units, with only one zone, about 200 ft by 400 ft in dimension, drilled to date. This zone ranges from 2 to 6 ft thick, grades from 0.145% to 0.157% eU
3
O
8
and is relatively shallow at 138 to 149 ft below the surface.
Tertiary Wind River Formation mineralization is typically thin, high grade, meandering and somewhat laterally discontinuous. The Wind River ranges from 25 to 270 ft thick, averaging 150 ft. The mineralized zones are typically 2 to 24 ft thick, averaging 5 ft, from 0.016% to 0.520% eU
3
O
8
and occur from 50 to 215 ft below the surface. The two main zones are up to 700 ft in width and 1,670 ft in length.
Exploration and Development
The Bootheel Project LLC acquired a database from Power Resources Inc. that includes reports, gamma logs, drill logs and other data which primarily cover the Federal mining claim but also include some historic data from the surrounding fee land. In early 2009, the Bootheel Project LLC acquired additional data from Cameco which included historical geological and gamma logs covering 660 drill holes totalling approximately 290,000 feet. These data were compiled by the Company's geological team and were combined with the results from over 50,000 feet of drilling completed by Target at Bootheel during calendar year 2008. This compilation formed the basis for the Company's 2011 drilling program which saw the completion of 76 bore holes, totaling 35,760 feet (10,900 metres).
A synthesis of all of these data enabled the Company to generate an Indicated Mineral Resource estimate of 1.12 million pounds of U
3
O
8
(1.570M tons @0.036%) and an Inferred Mineral Resource of 1.05 million pounds of U
3
O
8
(1.315M tons @ 0.040%) for the 81 Federal lode claims and single Wyoming State lease that currently comprise the Bootheel Property. Further details are found in the Technical Report dated
May 20, 2015, available on Sedar (
www.sedar.com
).
While the above stated mineral resource estimates are encouraging, the continuing downward pressure on the uranium price, in addition to the overall poor state of the junior resource market, has led the Bootheel Project LLC to put the project on care and maintenance, enabling it to keep its expenditures to a minimum, while maintaining the integrity of its data and land package. A reversal in the deflated state of the uranium price, as well as the junior resource market in general, may afford the Bootheel Project LLC the opportunity to further assess and evaluate its options for the future.
|
ITEM 4A.
|
UNRESOLVED STAFF COMMENTS
|
Not applicable
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion for the fiscal years ended April 30, 2016, 2015 and 2014 should be read in conjunction with our audited consolidated financial statements for the referenced periods and the notes thereto. Our consolidated financial statements for the year ended April 30, 2016 have been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC"). The functional currency of the Company and its subsidiaries is the Canadian Dollar and therefore our consolidated financial statements are reported in Canadian dollars.
Overview
The Company is a mineral exploration company engaged in acquiring, exploring and developing mineral properties and its focus is primarily uranium, base and precious metals. The Company does not have any producing mineral properties at this time. The Company's business is presently focused on the exploration and evaluation of various mineral deposits in North America. The Company's shares trade on TSX Venture Exchange.
The Company is currently focusing on exploration and evaluation activities in the province of Newfoundland and Labrador, Canada and the State of Wyoming USA on the following properties:
|
·
|
CMB property located in Labrador, Canada
|
|
·
|
The Bootheel Project located in Wyoming, U.S.A.
|
For fiscal year ended April 30, 2016, the Company reported a net loss of $3,118,609 or $011 per common share, compared with a net loss of $357,729 or $0.02 per common share for the prior fiscal year. While figures have been prepared using IFRS applicable to a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business as they come due, certain conditions and events cast significant doubt on the validity of this assumption. As of April 30, 2016 the Company had working capital of $1,380,210 and an accumulated deficit of $110,469,531. The Company's ability to continue as a going concern is dependent upon its ability to obtain additional funding from loans or equity financings or through other arrangements. To raise funds for operations, the Company is pursuing merger and acquisition opportunities, in conjunction with private or institutional financing. However, there can be no assurance that these activities will be successful.
Accounting Standards
The Company's significant accounting policies are detailed in Note 3 to the accompanying annual audited consolidated financial statements for the year ended April 30, 2016.
The following accounting pronouncements have been made, but are not yet effective for the Company as at April 30, 2016. The Company is currently evaluating the impact of these 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.
5.A.
Operating Results
Results of Operations for the fiscal year ended April 30, 2016 compared to the fiscal year ended April 30, 2015
For the year ended April 30, 2016, the Company reported a net loss of $3,118,609 or $0.11 per common share, compared to a net loss of $357,729 or $0.02 per common share for the prior year. The increase in net loss of $2,760,880 is discussed in detail below.
Operating Items
Total operating items for the year ended April 30, 2016 totaled $3,061,073, representing an increase of $2,521,052 compared to the prior year, as discussed in detail below.
The Company incurred business development expenses in the amount of $89,641 during the year ended April 30, 2016 in connection with the proposed transaction with Jetlines, as discussed in detail under the heading "Proposed Transaction". Business development expenses include amounts relating to due diligence, external consulting and travel. There were no business development expenses incurred during the previous year ended April 30, 2015.
During the year ended April 30, 2016, the Company incurred exploration and evaluation expenses in the amount of $50,857 (2015 - $21,481) of which $17,950 (2015 - $Nil) related to claims maintenance for the CMB Project and $32,907 (2015 - $21,481) related to the net costs of the Bootheel Uranium Project. The total increase in exploration and evaluation expenses of $29,376 is due to the Company updating technical reports and renewing property claims during the year ended April 30, 2016. Details of exploration and evaluation activities are further discussed under the heading "Exploration and Evaluation Assets".
The Company earned finance income during the year ended April 30, 2016 in the amount of $21,373 (2015 - $17,599). Finance income related primarily to excess cash on hand from equity financing completed in September 2014 which is held in short-term investments. The increase in finance income of $3,774 for the year ended April 30, 2016 compared to the prior year is due to the length of time excess cash on hand was invested in each year. In addition, the Company accrued finance income in the amount of $1,113 during the year ended April 30, 2016 related to a loan receivable from Jetlines.
During the year ended April 30, 2016, the Company recorded a foreign exchange gain in the amount of $125 (2015 – loss of $4,059) in relation to transactions and balances denominated in US dollars and the effects of fluctuations of the US dollar relative to the Canadian dollar.
During the year ended April 30, 2016, the Company recorded an impairment of exploration and evaluation assets in the amount of $2,509,791 with respect to the CMB Property. Refer to "Exploration and Evaluation Assets" above for further details. No impairment losses were recorded during the year ended April 30, 2015.
Investor relations for the year ended April 30, 2016 decreased to $3,642 from $15,058 incurred in the prior year. Investor relations expenses consist of the cost of news releases, website maintenance and hosting and printing. During the year ended April 30, 2015, the Company incurred additional costs in connection with the private placement which closed in September 2014.
Office and administration expenses for the year ended April 30, 2016 in the amount of $114,312 (2015 - $151,403) decreased by $37,091 compared to the prior year and is attributable to reductions in insurance costs, usage of shared office facilities, offsite storage costs and overall corporate activities.
During the year ended April 30, 2016, the Company incurred professional fees in the amount of $33,656 (2015 - $18,838) which includes accounting and audit fees and legal fees. The increase in professional fees of $14,818 is due to a recovery of audit fees recorded during the year ended April 30, 2015 as previous invoices received by the Company were revised. The increased audit fees incurred during the year ended April 30, 2016 were partially offset by reduced legal costs as a result of reduced corporate activity.
Transfer agent and filing fees decreased to $80,827 for the year ended April 30, 2016 compared to $110,088 for the prior year. The decrease in transfer agent and filing fees of $29,261 is attributable to decreased overall public company listing fees as the Company voluntarily delisted from the NYSE MKT Stock Exchange and the Toronto Stock Exchange in prior years. During the year ended April 30, 2015, the Company incurred initial costs in listing share purchase warrants which further explains the decreased transfer agent and filing fees incurred during the year ended April 30, 2016.
The Company incurred wages and salaries and consulting fees for the year ended April 30, 2016 in the amounts of $194,134 (2015 - $213,310) and $698 (2015 - $3,415), respectively. The decrease in personnel costs of $21,893 is a result of decreased overall corporate activities. During the year ended April 30, 2015, increased personnel services were required in connection with the private placement completed in September 2014.
Other Income (Expenses)
During the year ended April 30, 2016, the Company sold exploration equipment and storage containers 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. The Company also 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.
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.
During the year ended April 30, 2015, the Company realized a gain on forgiveness and settlement of debt in the amount of $184,141 as a result of a debt settlement agreement between King & Bay West Management Corp. ("King & Bay West"), MJM Consulting Corp. and the Company. The details of the debt settlement agreement are summarized in "Related Party Transactions".
The Company sold property and equipment with a net book value of $Nil for proceeds of $600, resulting in a gain on disposal of $600 for the year ended April 30, 2015.
During the year ended April 30, 2015, the Company recorded a loss on marketable securities in the amount of $2,449 in relation to fair market value adjustments at year end.
Results of operations for the year ended April 30, 2015 compared to the year ended April 30, 2014:
For the year ended April 30, 2015, the Company reported a net loss of $357,729 or $0.02 per common share, compared to a net loss of $3,967,283 or $0.60 per common share for the previous year. The decrease in net loss of $3,609,554 is discussed in detail below.
Operating Items
Total operating items for the year ended April 30, 2015 totaled $540,021, representing a decrease of $3,356,907 compared to the prior year primarily as a result of an impairment of exploration and evaluation assets recorded during the year ended April 30, 2014. In addition, the Company experienced decreased overall activity during the year ended April 30, 2015 compared to the previous year.
Consulting expense of $3,415 (2014 - $142,533) and wages and salaries of $213,310 (2014 - $252,999) totalled $216,725 for the year ended April 30, 2015 (2014 - $395,532) which represents a total decrease of $178,807 compared to the prior year as a result of decreased Company activities and personnel providing services to the Company. During the year ended April 30, 2014, a consulting agreement between the Company and the former Chief Executive Officer and a consulting agreement between the Company and the former Executive Chairman were both terminated which also contributed to decreased personnel costs for the year ended April 30, 2015.
During the year ended April 30, 2015, the Company incurred exploration and evaluation expenses in the amount of $21,481 (2014 - $34,225), including $21,481 (2014 - $33,681) on the Bootheel Uranium Project, $Nil (2014 - $560) on the CMB Project and $Nil (2014 – recovery of $16) on other projects. The decrease in exploration and evaluation expenses of $12,744 for the year ended April 30, 2015 compared to the prior year is due to the Company pursuing fewer projects as well as the Bootheel Uranium Project land package being reduced.
During the year ended April 30, 2014, the Company relinquished a number of mineral claims that had formed a portion of the CMB Project and recorded an impairment of exploration and evaluation assets in the amount of $3,160,618. No such impairment losses were recorded during the year ended April 30, 2015.
The Company earned finance income during the year ended April 30, 2015 in the amount of $17,599 (2014 - $314). The increase in finance income of $17,285 for the year ended April 30, 2015 is due the Company completing financing for gross proceeds of $3,000,000 on September 16, 2014 and investing excess cash on hand in short-term investments.
During the year ended April 30, 2015, the Company recorded a foreign exchange loss in the amount of $4,059 (2014 – gain of $1,097) in relation to transactions and balances denominated in US dollars and the effects of fluctuations of the US dollar relative to the Canadian dollar.
Investor relations for the year ended April 30, 2015 increased to $15,058 from $11,122 incurred in the prior year. The increase in investor relations of $3,936 for the year ended April 30, 2015 was a result of increased activity related to raising financing. Investor relations expenses also include the cost of news releases, website maintenance and hosting, and printing.
Office and administration expenses for the year ended April 30, 2015 in the amount of $151,403 (2014 - $161,251) decreased by $9,848 due to reductions in insurance costs and overall corporate activities.
During the year ended April 30, 2015, the Company incurred professional fees in the amount of $18,838 (2014 - $31,764) which includes accounting and audit fees and legal fees. The decrease in professional fees of $12,926 is due to a recovery of audit fees recorded during the year ended April 30, 2015 as previous invoices received by the Company were revised. The decreased audit fees incurred during the year ended April 30, 2015 were partially offset by increased legal costs in relation to US securities matters and procedures to list the Company's warrants for trading. During the year ended April 30, 2014, the Company incurred legal costs in relation to the Company's transition from the NYSE MKT to the OTC Markets Group's OTCQB Marketplace.
During the year ended April 30, 2015, the Company recorded share-based payment expense of $Nil as all outstanding stock options fully vested during the year ended April 30, 2014 and no stock options were issued during the year ended April 30, 2015. During the year ended April 30, 2014, the Company recorded a recovery of share-based payment expense of $45,250 as a result of forfeitures of unvested stock options during the year. The recovery of share-based payment expense had no effect on the Company's cash flows.
Transfer agent and filing fees decreased to $110,088 for the year ended April 30, 2015 compared to $124,896 for the prior year, a decrease of $14,808. During the year ended April 30, 2014, the Company incurred increased costs as it transitioned from the NYSE MKT to the OTC Markets Group's OTCQB Marketplace, changed its name and consolidated its common shares on a 10 for 1 basis.
Other Income (Expenses)
The Company sold property and equipment with a net book value of $Nil for proceeds of $600, resulting in a gain on disposal of $600 for the year ended April 30, 2015.
During the year ended April 30, 2015, the Company realized a gain on forgiveness and settlement of debt in the amount of $184,141 as a result of a debt settlement agreement between King & Bay West, MJM Consulting Corp. and the Company. The details of the debt settlement agreement are summarized in "Related Party Transactions".
During the year ended April 30, 2015, the Company recorded a loss on marketable securities in the amount of $2,449 (2014 - $28,503) in relation to fair market value adjustments at year end.
During the year ended April 30, 2014, the Company recorded an impairment loss in the amount of $41,852 due to collectability concerns in relation to reclamation bonds for properties that have been abandoned.
Results of Operations for the fiscal year ended April 30, 2014 compared to the fiscal year ended April 30, 2013
For the year ended April 30, 2014, the Company reported a net loss of $3,967,283 or $0.60 per common share, compared to a net loss of $11,674,061 or $1.77 per common share for the year ended April 30, 2013.
The Company did not issue any common shares during fiscal 2014 and as such, the weighted average number of common shares is the same as the total number of common shares outstanding as of April 30, 2014. During the year ended April 30, 2014, the Company cancelled 183 common shares due to fractional rounding in connection with a share consolidation on the basis of one post-consolidated share for every ten pre-consolidated common share.
Expenses
Total operating items for the year ended April 30, 2014 were $3,896,928, representing a decrease of $7,993,424 compared to the prior year as a direct result of decreased overall Company activity during fiscal 2014. All administrative expenses for the year ended April 30, 2014 decreased compared to the prior year with the exception of transfer agent and filing fees and are discussed below.
Audit and accounting fees of $22,775 (2013 - $124,087) decreased for the year ended April 30, 2014 compared to the prior year due to the Company incurring additional fees in the prior period in relation to Sarbanes-Oxley ("SOX") compliance and additional tax filings.
Consulting expense of $Nil (2013 - $308,570), management fees of $142,533 (2013 - $411,368) and wages and salaries of $252,999 (2013 - $705,024) total $395,532 for fiscal 2014 (2013 - $1,424,962) which represents a total decrease of $1,029,430 compared to the prior year as a result of decreased Company activities and personnel providing services to the Company. During the year ended April 30, 2014, a consulting agreement between the Company and the former Chief Executive Officer and a consulting agreement between the Company and the former Executive Chairman were both terminated.
Director fees of $Nil (2013 - $39,467) decreased by $39,467 compared to the prior year as a result of the Company cancelling its director compensation program in light of financial conditions faced by the Company during the prior year.
During the year ended April 30, 2014, the Company spent a total of $34,225 (2013 - $2,835,066) on exploration and evaluation expenditures, including $560 (2013 - $1,910,312) on exploration of the CMB Project, $33,681 (2013 - $66,619) on the Bootheel Project, $Nil (2013 - $47,265) on the Golden Promise Project, recovered $392 (2013 - $810,870 expense) on the Juniper Ridge Project and $376 on other projects (2013 - $Nil). Exploration and evaluation expenses for the year ended April 30, 2014 primarily related to minimal administrative costs and recoveries to maintain claims and insurance policies on the Bootheel Project. In addition, the Company incurred reclamation costs to reclaim the land on which the Bootheel Project sits. The fiscal 2014 decrease in exploration and evaluation expense of $2,800,841 in exploration and evaluation expenditures compared to the prior year is due to the Company no longer pursuing the CMB, Golden Promise and Juniper Ridge projects as well as decreased activities on the Bootheel Project.
During the year ended April 30, 2014, the Company recorded finance income of $314 compared to $22,158 in the prior year which relates to interest earned on excess cash on hand. The decrease in finance income is attributable to the Company's decreased cash and cash equivalents balance.
During the year ended April 30, 2014, the Company recorded an impairment of exploration and evaluation assets in the amount of $3,160,618 which relates to the CMB Project. During the year ended April 30, 2013, the Company recorded an impairment of exploration and evaluation assets in the amount of $6,043,241 relating to the Bootheel, Golden Promise and Juniper Ridge projects.
Insurance expense decreased from $51,415 for the year ended April 30, 2013 to $33,036 for the year ended April 30, 2014 as a result of the Company adjusting its insurance policy to reflect corporate changes such as property abandonments and the Company's stock exchange listings as previously discussed.
Interest expense incurred during the year ended April 30, 2014 in the amount of $1,427 (2013 - $10,402) relates to non-cash accretion of the Company's future reclamation provisions. The decrease in interest expense of $8,975 is a result of the balance of future reclamation provisions decreasing during the year ended April 30, 2014.
Investor relations expense of $11,122 (2013 - $180,786), legal costs of $8,989 (2013 - $35,950), office and administrative expenses of $87,331 (2013 - $167,188), project development costs of $Nil (2013 - $66,471), rent of $40,632 (2013 - $123,066) and travel expenses of $252 (2013 - $48,547) all decreased compared to the prior year as a direct result of decreased overall Company activities, including fewer marketing initiatives, no new project development and closure of the Company's office in Colorado during fiscal 2014.
During the year ended April 30, 2014, the Company recorded a recovery of $45,250 related to share-based compensation as a result of forfeitures of unvested stock options during the year. During the year ended April 30, 2013, the Company recorded share-based compensation of $626,364 according to vesting schedules of certain grants issued in 2011 and 2012. This expense (recovery) had no effect on the Company's cash flows.
Transfer agent and filing fees increased to $124,896 for the year ended April 30, 2014 compared to $109,625 for the prior year as a result of the Company voluntarily delisting its common shares from the NYSE MKT, transitioning from the TSX to the TSX Venture Exchange, changing its name and consolidating its common shares on a 10 for 1 basis during fiscal 2014.
Other Income (Expenses)
Other expenses amounted to $70,355 for the year ended April 30, 2014 compared to other income of $216,291 for the year ended April 30, 2013.
The Company recorded an impairment loss in the amount of $41,852 due to collectability concerns in relation to reclamation bonds for properties that have been abandoned. No such impairment loss was recorded during the prior year.
During the year ended April 30, 2014 the Company recorded an unrealized loss on marketable securities of $28,503 (2013 - $173,005) in relation to fair value adjustments for marketable securities the Company holds.
During the year ended April 30, 2013, the Company recorded a flow through premium in the amount of $428,712 in relation to flow through shares issued in prior years and attributable to the qualified exploration expenditures incurred. The Company also recorded a loss on asset disposition of $39,416 during the year ended April 30, 2013. No such transactions occurred during the year ended April 30, 2014.
Exploration and Evaluation Assets
During the years ended April 30, 2016, 2015 and 2014, the Company did not incur any acquisition costs in relation to exploration and evaluation assets. The Company recorded impairment losses in the amounts of $2,509,791 and $3,160,618 during the years ended April 30, 2016 and 2014, respectively, as discussed above.
Working Capital
As at April 30, 2016, the Company had working capital of $1,380,210 compared to working capital of $2,099,399 as at April 30, 2015. The decrease in working capital of $719,189 is attributable to cash used in operating activities for the year ended April 30, 2016 and the classification of a related party term loan as a current liability as of April 30, 2016.
5.B.
Liquidity and Capital Resources
Liquidity – April 30, 2016, April 30, 2015 and April 30, 2014
As of April 30, 2016, the Company had cash and cash equivalents of $1,651,472 (April 30, 2015 - $2,350,202; April 30, 2014 - $78,541) and working capital of $1,380,210 (April 30, 2015 - $2,099,399; April 30, 2014 – working capital deficit of $716,619). The decrease in working capital of $719,189 is primarily attributable to cash used in operating activities for the year ended April 30, 2016 and the classification of a related party term loan as a current liability as of April 30, 2016.
The Company's cash flows for the years ended April 30, 2016, 2015 and 2014 are summarized as follows:
|
|
|
April 30, 2016
|
|
|
April 30, 2015
|
|
|
April 30, 2014
|
|
|
Cash used in operating activities
|
|
$
|
(617,330
|
)
|
|
$
|
(405,290
|
)
|
|
$
|
(502,716
|
)
|
|
Cash used in investing activities
|
|
|
(81,400
|
)
|
|
|
(149,690
|
)
|
|
|
(15,193
|
)
|
|
Cash provided by financing activities
|
|
|
-
|
|
|
|
2,826,641
|
|
|
|
-
|
|
|
Change in cash and cash equivalents during the year
|
|
|
(698,730
|
)
|
|
|
2,271,661
|
|
|
|
(517,909
|
)
|
|
Cash and cash equivalents, beginning of the year
|
|
|
2,350,202
|
|
|
|
78,541
|
|
|
|
596,450
|
|
|
Cash and cash equivalents, end of the year
|
|
$
|
1,651,472
|
|
|
$
|
2,350,202
|
|
|
$
|
78,541
|
|
Operating Activities
Cash used in operating activities adjusts loss for the year for non-cash items including, but not limited to, depreciation of property and equipment, accrued interest, forgiveness of debt, impairment losses, and unrealized gains and losses. Cash used in operating activities also reflects changes in working capital items, such as amounts receivable, prepaid expenses and amounts payable, which fluctuate in a manner that does not necessarily reflect predictable patterns for the overall use of cash, the generation of which depends almost entirely on sources of external financing to fund operations.
Investing Activities
During the year ended April 30, 2016, investing activities consisted of a loan advanced to Jetlines in the amount of $116,400, net of proceeds received on the sale of property and equipment in the amount of $35,000.
During the year ended April 30, 2015, investing activities consisted of the acquisition of an investment in Voleo, Inc. in the amount of $200,000 and the acquisition of property and equipment in the amount of $3,000. The asset acquisitions were partially offset by the sale of marketable securities and property and equipment for proceeds of $52,710 and $600, respectively.
During the year ended April 30, 2014, investing activities consisted of reclamation costs for the Bootheel Uranium Project in the amount of $17,268, net of proceeds from the sale of marketable securities in the amount of $2,075.
Financing Activities
There were no financing activities for the year ended April 30, 2016.
Financing activities for the year ended April 30, 2015 consisted of net proceeds in the amount of $2,965,894 received by the Company upon closing equity financing for gross proceeds of $3,000,000, net of finders' fees and share issue costs of $6,450 and $27,656, respectively. Refer to "Capital Stock" for additional details of the equity financing completed. The proceeds received were partially offset by a payment in the amount of $39,253 applied to a term loan payable and payment of a security deposit in the amount of $100,000 to King & Bay West.
There were no financing activities for the year ended April 30, 2014.
Capital Resources
At present the Company has no producing properties and consequently has no current operating income or cash flows. Without additional financing the Company will not be able to fund both its exploration programs and ongoing operations for the next 12 months. 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. To date, the Company's operations, exploration and development activities have been almost entirely financed from equity financings. The Company will continue to identify financing opportunities in order to provide additional financial flexibility and to continue the development of its property portfolio, meet land claim expenditure requirements and other commitments. While the Company has been successful raising the necessary funds in the past, there can be no assurance it can do so in the future. The Company currently does not have any material commitments for capital expenditures.
The Company currently is not subject to externally imposed capital requirements.
Financial Instruments
The Company's financial assets and liabilities are recorded and measured as follows:
|
Asset or Liability
|
Category
|
Measurement
|
|
Cash and cash equivalents
|
Fair value through profit or loss
|
Fair value
|
|
Marketable securities
|
Fair value through profit or loss
|
Fair value
|
|
Available-for-sale investment
|
Available-for-sale
|
Cost
|
|
Other receivables
|
Loans and receivables
|
Amortized cost
|
|
Loan receivable
|
Loans and receivables
|
Amortized cost
|
|
Reclamation bonds
|
Held to maturity
|
Amortized cost
|
|
Payables and accrued liabilities
|
Other liabilities
|
Amortized cost
|
|
Due to related parties
|
Other liabilities
|
Amortized cost
|
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 amortized 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 in connection with the proposed transaction and is secured by a general security agreement. The Company does not believe it is exposed to significant credit risk.
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 the notes to the accompanying consolidated financial statements. As a result of financing and debt restructuring completed during the year ended April 30, 2015, management believes the Company has sufficient funds to support ongoing operating expenditures and meet its liabilities as they fall due.
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, particularly uranium, 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 April 30, 2016, the Company has accounts payable denominated in
US dollars of US$57,156, cash of US$18,361 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 $3,800.
Material Commitments
As of the most recent fiscal year end, the Company does not have any material outstanding commitments.
5.C.
Research and Development, Patents and Licenses, etc.
We are a mineral exploration company and do not engage in conventional research and development. We have not incurred research and development expenses or adopted research on development policies within the last three fiscal years.
5.D.
Trend Information
We are a mineral exploration company. Consequently, we have no production, sales, or inventory in the conventional sense. Our financial success will be dependent upon the extent to which we can discover mineralization and the economic viability of developing such properties. Such development, if initiated, may take years to complete and the amount of resulting income, if any, is difficult to determine with any certainty. We have no mineral reserves and to date have not produced any revenues. The sales value of any mineralization discovered by us is largely dependent upon factors beyond our control such as the market value of the metals produced.
In addition to the foregoing, during the year ended April 30, 2016, the Company entered into a definitive agreement with respect to an amalgamation and change of business to the airline industry. The proposed transaction is subject to conditions customary for a transaction of this nature. See "Item 4.B. – Business Overview – Corporate Development" below for a detailed description of the proposed transaction. In the event that the transaction is completed, the Company will be subject to new trends, risks and uncertainties which are disclosed in "Item 3.D. – Risk Factors".
Other than as disclosed herein, we are not aware of any trends, uncertainties, demands, commitments or events which are reasonably likely to have a material effect upon our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.
The major factors that caused significant variations in net loss were the recording of share-based payments expense for stock option vesting and impairment of exploration and evaluation assets based on a periodic review of such assets, both of which have no identifiable trend.
5.E.
Off-Balance Sheet Arrangements
Not applicable
5.F.
Tabular Disclosure of Contractual Obligations
|
|
|
Payments due by period
|
|
|
Contractual Obligations
|
|
Total
|
|
|
Less than 1 year
|
|
|
1-3 years
|
|
|
3-5 years
|
|
|
more than 5 years
|
|
|
Operating Lease Obligation
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
Total
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
5.G.
Safe Harbor
The Company seeks safe harbor for its forward-looking statements contained in Items 5.E and F. See the heading "Cautionary Note Regarding Forward-Looking Statements" above.
|
ITEM 6.
|
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|
6.A.
Directors and Senior Management
|
Name
|
Position
|
|
C. Stewart Wallis
1 2 3
|
Director
|
|
Ken Brophy
1 2 3
|
Director
|
|
Jim Crawford
4
|
Chief Executive Officer, President and Director
|
|
Kate-Lynn Genzel
|
Chief Financial Officer
|
|
Mark Lotz
1 2
|
Director
|
|
Mark Morabito
3, 5
|
Chief Executive Officer, President and Director
|
1
Member of Audit Committee.
2
Member of Compensation Committee.
3
Member of Corporate Governance Committee.
4
Mr. Crawford resigned as Chief Executive Officer and President on November 27, 2015.
|
|
5
|
Mr. Morabito was appointed Chief Executive Officer and President on November 27, 2015, and elected a Director on December 10, 2015.
|
We are an exploration stage junior exploration company. Our needs will be dependent upon our level of exploration programs and financial condition. From 2006 to 2009, we entered into employment agreements with our senior officers and all of our full-time employees. In August 2009, we began entering into consulting agreements with our senior management and currently have no consulting agreements or employment agreements in effect with senior management or full-time employees. On January 1, 2010, we entered into a management services agreement with King & Bay West under which King & Bay West provides shared office, administration and payroll services to the Company and as of January 1, 2010, we do not employ any senior management or staff full-time. The management services agreement was amended on October 1, 2010 and September 16, 2014. See Item 7.B – Related Party Transactions and Exhibit 4.8 for a description of this agreement.
Set forth below are brief descriptions of recent employment and business experience of our directors and senior management.
Mark J. Morabito, B.A., J.D.
Mr. Morabito
has been a Director of the Company since December 10, 2015 and Chief Executive Officer and President since November 27, 2015. He also served as a Director of the Company from November 1998 to August 2013 and as Executive Chairman of the Company from March 2011 to August 2013. Mr. Morabito is also the founder, Chief Executive Officer and director of King & Bay West, a private company which specializes in identifying, funding, developing and managing resource-based opportunities, with a special interest in the junior mining sector. Mr. Morabito has over 15 years' experience in public markets with a strong focus on junior mining with extensive experience in capital-raising and corporate development. Mr. Morabito serves as Chief Executive Officer and a Director of Alderon Iron Ore Corp. and also serves on the Board of Directors of Excelsior Mining Corp. and Roughrider Exploration Limited. Mr. Morabito graduated from Simon Fraser University in Vancouver, British Columbia with a B.A. in 1990 and completed his J.D. at the University of Western Ontario in London, Ontario in 1993.
C. Stewart Wallis, P.Geo.
,
was a member of our Board of Directors from June 2003 until July 27, 2008. Mr. Wallis was re-appointed to our Board of Directors and was appointed President of the Company on March 31, 2009. On March 1, 2010 Mr. Wallis was appointed as our CEO. Mr. Wallis resigned as President and CEO of the Company on April 30, 2012. Up to the time of his resignation as President and CEO of the Company, Mr. Wallis devoted substantially all of his time during a typical work week to our business. On February 16, 2015, Mr. Wallis
was appointed Non-Executive Chairman of the Company. Mr. Wallis is the President of Sundance Geological Ltd., a private entity owned and controlled by him, which provides geological services, including evaluations and prefeasibility studies, for individuals and mining companies based throughout the world. Mr. Wallis also serves as President and Director of Logan Resources Ltd. He received his Bachelor of Science Degree in Geology from McMaster University, located in Hamilton, Ontario. He is a member of the Association of Professional Engineers and Geoscientists of British Columbia. Mr. Wallis continues to be a Director of the Company.
Jim Crawford
, until his resignation as President, Chief Executive Officer and a Director on November 27, 2016, served as President and Chief Executive Officer of the Company from June 7, 2013 and as a Director of the Company from August 29, 2013. He has also served as our Vice President, Corporate Development from September 2012 until September 2014. Prior to his resignation, Mr. Crawford devoted 50% of his time during a typical work week to our business. Mr. Crawford has over 15 years' experience in international mineral exploration and prior to joining the Company, he held a number of corporate and field-based positions including Manager, Investor Relations for Peregrine Diamonds; Field Manager for Kennecott Canada Exploration's Western Canadian Coal Project; and Senior Mineralogist for Golden Star Resources in their Georgetown, Guyana office. Mr. Crawford holds an MBA in finance from Pepperdine University and an M.Sc. in geology from Queen's University.
Kate-Lynn Genzel
was appointed our Chief Financial Officer on January 13, 2014. Ms. Genzel began her career at a mid-sized accounting firm where she provided accounting, audit, tax and advisory services to both public and private entities, focussing on junior resource companies publically listed in Canada and the United States. Ms. Genzel is a Chartered Professional Accountant and holds a legacy Chartered Accountant designation. She is a member of the Chartered Professional Accountants of British Columbia. Ms. Genzel received her Bachelor of Commerce (Honours) degree from the Sauder School of Business at the University of British Columbia in May 2010.
Mark Lotz
joined our Board of Directors on April 1, 2014. Mr. Lotz is a Chartered Professional Accountant with 18 years of experience primarily in the minerals industry and related securities businesses. He has held CFO positions with several well-known mining and exploration companies including African Queen Mines, Sacre-Coeur Minerals, Ltd., and Prophecy Resources Corp. He has also served as a senior executive officer for two Vancouver based securities firms and a financial compliance officer for the Vancouver Stock Exchange, the predecessor to the TSX Venture Exchange. Mr. Lotz holds a legacy Chartered Accountant (CA) designation and is a member of the Chartered Professional Accountants of British Columbia. Mr. Lotz received his Bachelor of Business Administration from Simon Fraser University in June 1989.
Ken Brophy
joined our Board of Directors on February 16, 2015. Mr. Brophy has over 18 years of experience in the mining and energy sectors with a focus on exploration and development stage projects in Canada. His experience within both the mineral exploration and energy industries includes Government relations, strategic planning for Environmental Assessments and sustainability requirements, which include regulatory compliance, Aboriginal, community and stakeholder engagement. Mr. Brophy has been directly involved with the Company's exploration activities for many years, most recently as the Director of Operations. In this role, he was responsible for all operational related activities including managing procurement obligations (i.e. diamond drilling, aircraft support, etc.), negotiating contracts and agreements, and all remote logistical requirements and maintenance programs. Mr. Brophy was actively involved in the permitting processes, responsible exploration and sustainability stewardship, and the implementation of the Company's Health, Safety and Environment policies and procedures.
There are no family relationships between any of the Directors or senior management. There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a Director or member of senior management.
6.B.
Compensation
Compensation of Executive Officers and Directors
The following table sets out the compensation information for the fiscal year ended April 30, 2016, for our directors and executive officers.
Compensation of Executive Officers/Directors in Fiscal 2016
|
Name and
Principal Position
|
Fiscal
Year
|
Annual Compensation
|
|
|
|
Salary
($)
|
Bonus
($)
|
Other Annual Compensation
($)
|
|
|
|
|
|
Securities Under Options
Granted (#)
|
Option Exercise Price
|
Option Expiration Date
|
|
|
Mark J. Morabito
1
Chief Executive Officer, President and Director
|
2016
|
--
|
--
|
25,000
|
|
--
|
--
|
--
|
|
|
Stewart Wallis
Director
|
2016
|
--
|
--
|
--
|
|
--
|
--
|
--
|
|
|
Jim Crawford
2
Chief Executive Officer, President and Director
|
2016
|
--
|
--
|
--
|
|
--
|
--
|
--
|
|
|
Kate-Lynn Genzel
Chief Financial Officer
|
2016
|
--
|
--
|
--
|
|
--
|
--
|
--
|
|
|
Mark Lotz
Director
|
2016
|
--
|
--
|
--
|
|
--
|
--
|
--
|
|
|
Ken Brophy
Director
|
2016
|
--
|
--
|
--
|
|
--
|
--
|
--
|
|
|
1
|
Mr. Morabito was appointed Chief Executive Officer and President on November 27, 2015 and elected a director on December 10, 2015.
|
|
2
|
Mr. Crawford resigned as Chief Executive Officer, President and a director on November 27, 2015
|
Director Compensation
From May 1, 2011 until April 30, 2013, the Company had a formal director compensation program under which non-executive directors of the Company received an annual board retainer of $20,000 and a fee of $1,500 for each Board meeting attended, the Chair of the Audit Committee received an annual fee of $6,000 and each of the Chairs of the Compensation and other Committees of the Board received an annual fee of $2,500. Each of the aforementioned fees was paid quarterly.
In light of financial conditions faced by the Company, the Company cancelled its director compensation program in fiscal 2014.
Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors. The Board of Directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. Directors are also eligible to receive options to purchase Common Shares pursuant to the terms of the Company's Stock Option Plan.
Employment and Consulting Agreements
Currently, the Company does not have any employment or consulting agreements with executive officers or directors.
Post-Employment Compensation
No funds were set aside or accrued by us during fiscal 2016 to provide pension, retirement or similar benefits for Directors, Executive Officers or Senior Management.
Other than as described above, we do not have any plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation would exceed US$60,000 per person.
6.C.
Board Practices
The Board of Directors presently consists of four directors, all of whom were elected at our annual general and special meeting of shareholders held on July 29, 2016. The directors have served in their respective capacities since their election and/or appointment and will serve until the next annual general meeting or until a successor is duly elected, unless the office is vacated in accordance with our Articles. The Board of Directors appoints senior management who serve at the discretion of the Board of Directors.
The following table indicates the date on which each of our directors was appointed a director of our company:
|
Name of Director
|
Director since
|
|
Stewart Wallis
1
|
March 31, 2009
|
|
Mark J. Morabito
2
|
December 10, 2015
|
|
Mark Lotz
|
April 1, 2014
|
|
Ken Brophy
|
February 16, 2015
|
|
1
|
Mr. Wallis served as a director from June 19, 2003 to July 29, 2008. He was re-appointed as a director on March 31, 2009.
|
|
2
|
Mr. Morabito served as a director from November 12, 1998 to August 29, 2013. He was re-elected as a director at the Company's annual general meeting held on December 10, 2015
|
There are no service contracts with the Directors providing for benefits upon termination of employment.
Board of Director Committees
Audit Committee
We have an Audit Committee, which recommends to the Board of Directors the engagement of our independent auditors and reviews with the independent auditors the scope and results of our audits, our internal accounting controls, and the professional services furnished to us by our independent auditors. The following disclosure is required pursuant to National Instrument 52-110 ("NI 52-110") adopted by the Canadian Securities Administrators.
The Audit Committee's Charter
Following is a copy of the charter of our audit committee:
Purpose
The Audit Committee (the "
Committee
") is a committee of and appointed by the Board of Directors (the "
Board
") of Jet Metal Corp. (the "
Corporation
") to assist the Board in fulfilling its oversight responsibilities relating to financial accounting and reporting process and internal controls for the Corporation. The Committee's primary duties and responsibilities are to:
|
·
|
conduct such reviews and discussions with management and the external auditors relating to the audit and financial reporting as are deemed appropriate by the Committee;
|
|
·
|
assess the integrity of internal controls and financial reporting procedures of the Corporation and ensure implementation of such controls and procedures;
|
|
·
|
ensure that there is an appropriate standard of corporate conduct including, if necessary, adopting a corporate code of ethics for senior financial personnel;
|
|
·
|
review the quarterly and annual financial statements and management's discussion and analysis of the Corporation's financial position and operating results and report thereon to the Board for approval of same;
|
|
·
|
select and monitor the independence and performance of the Corporation's external auditors, including attending at private meetings with the external auditors and reviewing and approving all renewals or dismissals of the external auditors and their remuneration;
|
|
·
|
establish procedures for the receipt of complaints and submissions relating to accounting matters;
|
|
·
|
except as set forth below, pre-approve all audit and non-audit services provided by the Corporation's external auditors; and
|
|
·
|
provide oversight to related party transactions entered into by the Corporation.
|
The Committee has the authority to conduct or authorize any investigation appropriate to its responsibilities, and it may request the external auditors, as well as any officer of the Corporation, or outside counsel for the Corporation, to attend a meeting of the Committee or to meet with any members of, or advisors to, the Committee to provide pertinent information as necessary. The Committee shall have unrestricted access to the books and records of the Corporation and has the authority to retain, at the expense of the Corporation, special legal, accounting, or other consultants or experts to assist in the performance of the Committee's duties.
The Committee shall review and assess the adequacy of this Charter annually and submit any proposed revisions to the Board for approval.
In fulfilling its responsibilities, the Committee will carry out the specific duties set out in Part IV of this Charter.
Authority of the Audit Committee
The Committee shall have the authority to:
(a)
engage independent counsel and other advisors as it determines necessary to carry out its duties;
(b)
set and pay the compensation for advisors employed by the Committee;
(c)
communicate directly with the internal and external auditors.
Composition and Meetings
|
1.
|
The Committee and its membership shall meet all applicable legal, regulatory and listing requirements, including, without limitation, those of the British Columbia Securities Commission, the TSX Venture Exchange, the U.S. Securities and Exchange Commission, OTCQB, the
Business Corporations Act
(British Columbia) and all applicable securities regulatory authorities.
|
|
2.
|
The Committee shall be composed of three or more directors as shall be designated by the Board from time to time. The members of the Committee shall appoint from among themselves a member who shall serve as Chair.
|
|
3.
|
Each member of the Committee shall be "independent" and "financially literate", for the purposes of Multilateral Instrument 52-110 ("MI 52-110"), as it may be amended from time to time. MI 52-110 currently provides that a member is independent if the member has no direct or independent material relationship with the Corporation. A "material" relationship is one which could, in the view of the Board, be reasonably expected to interfere with the exercise of a member's judgment. There are certain relationships that are, however, deemed to be "material" under MI 52-110. In assessing a proposed nominee to the Committee, the Board shall refer to MI 52-110 and any other requirements or guidelines under applicable securities laws and any stock exchanges on which the Corporation's securities are listed.
|
|
4.
|
The Committee shall meet at least quarterly, at the discretion of the Chair or a majority of its members, as circumstances dictate or as may be required by applicable legal or listing requirements. A minimum of two and at least 50% of the members of the Committee present either in person or by telephone shall constitute a quorum.
|
|
5.
|
If within one hour of the time appointed for a meeting of the Committee, a quorum is not present, the meeting shall stand adjourned to the same hour on the next business day following the date of such meeting at the same place. If at the adjourned meeting a quorum as hereinbefore specified is not present within one hour of the time appointed for such adjourned meeting, such meeting shall stand adjourned to the same hour on the second business day following the date of such meeting at the same place. If at the second adjourned meeting a quorum as hereinbefore specified is not present, the quorum for the adjourned meeting shall consist of the members then present.
|
|
6.
|
If and whenever a vacancy shall exist, the remaining members of the Committee may exercise all of its powers and responsibilities so long as a quorum remains in office.
|
|
7.
|
The time and place at which meetings of the Committee shall be held, and procedures at such meetings, shall be determined from time to time by, the Committee. A meeting of the Committee may be called by letter, telephone, facsimile, email or other communication equipment, by giving at least 48 hours notice, provided that no notice of a meeting shall be necessary if all of the members are present either in person or by means of conference telephone or if those absent have waived notice or otherwise signified their consent to the holding of such meeting.
|
|
8.
|
Any member of the Committee may participate in the meeting of the Committee by means of conference telephone or other communication equipment, and the member participating in a meeting pursuant to this paragraph shall be deemed, for purposes hereof, to be present in person at the meeting.
|
|
9.
|
The Committee shall keep minutes of its meetings which shall be submitted to the Board. The Committee may, from time to time, appoint any person who need not be a member, to act as a secretary at any meeting.
|
|
10.
|
The Committee may invite such officers, directors and employees of the Corporation and its subsidiaries as the Committee may see fit, from time to time, to attend at meetings of the Committee.
|
|
11.
|
Any matters to be determined by the Committee shall be decided by a majority of votes cast at a meeting of the Committee called for such purpose. Actions of the Committee may be taken by an instrument or instruments in writing signed by all of the members of the Committee, and such actions shall be effective as though they had been decided by a majority of votes cast at a meeting of the Committee called for such purpose. All decisions or recommendations of the Committee shall require the approval of the Board prior to implementation.
|
The Committee members will be elected annually at the first meeting of the Board following the annual general meeting of shareholders.
Responsibilities
Financial Accounting and Reporting Process and Internal Controls
|
1.
|
The Committee shall review the annual audited financial statements and interim financial statements of the Corporation to satisfy itself that they are presented in accordance with applicable generally accepted accounting principles ("IFRS" as required) and report thereon to the Board and recommend to the Board whether or not same should be approved prior to their being filed with the appropriate regulatory authorities. The Committee shall also review the interim financial statements of the Corporation. With respect to the annual audited financial statements, the Committee shall discuss significant issues regarding accounting policies, principles, practices, estimates, reserves and judgments of management with management and the external auditors, as and when the Committee deems it appropriate to do so, and shall satisfy itself that the annual audited financial statements are
|
|
|
accurate, complete and represent fairly the Corporation's financial position and performance and that the audit function has been effectively carried out. If desirable, the Committee may engage the Corporation's external auditors to carry out a review of the interim financial statements.
|
|
2.
|
The Committee shall review management's discussion and analysis relating to the Corporation's annual and interim financial statements ("MD&A") MD&A and any other public disclosure documents, including annual and interim earnings press releases, required to be reviewed by the Committee under any applicable laws before the Corporation publicly discloses this information or files this information with securities regulatory authorities.
|
|
3.
|
The Committee shall be satisfied that adequate procedures are in place for the review of the Corporation's public disclosure of financial information extracted or derived from the Corporation's annual and interim financial statements, MD&A and annual and interim earnings press releases, and periodically assess the adequacy of these procedures.
|
|
4.
|
The Committee shall review the annual budget.
|
|
5.
|
The Committee shall review any internal control reports prepared by management and the evaluation of such reports by the external auditors, together with management's response.
|
|
6.
|
The Committee shall evaluate whether management is setting the appropriate "control culture" by communicating the importance of internal control and the management of risk and ensuring that all employees have an understanding of their roles and responsibilities.
|
|
7.
|
The Committee shall consider how management is held to account for security of computer systems and applications, and the contingency plans for processing financial information in the event of a systems breakdown.
|
|
8.
|
The Committee shall review, in consultation with the external auditors, the integrity of the Corporation's financial reporting processes, both internal and external.
|
|
9.
|
The Committee shall consider the external auditors' judgments about the quality and appropriateness, not just the acceptability, of the Corporation's accounting principles and financial disclosure practices, as applied in its financial reporting, particularly about the degree of aggressiveness or conservatism of its accounting principles and underlying estimates and whether those principles are common practices or are minority practices.
|
|
10.
|
The Committee shall meet no less frequently than annually with the external auditors and the Chief Financial Officer or, in the absence of a Chief Financial Officer, with the officer of the Corporation in charge of financial matters, to review accounting practices, internal controls and such other matters as the Committee, Chief Financial Officer or, in the absence of a Chief Financial Officer, the officer of the Corporation in charge of financial matters, deem appropriate.
|
|
11.
|
The Committee shall consider and approve, if appropriate, major changes to the Corporation's accounting principles and practices as suggested by management with the concurrence of the external auditor and ensure that the management's reasoning is described in determining the appropriateness of changes in accounting principles and disclosure.
|
|
12.
|
The Committee shall inquire of management and the external auditors about significant risks or exposures, both internal and external, to which the Corporation may be subject and assess the steps management has taken to minimize such risks, including by obtaining the external auditors' opinion of how effectively such risks are being managed or controlled.
|
|
13.
|
The Committee shall review the post-audit or management letter containing the recommendations of the external auditors and management's response and subsequent follow-up to any identified weaknesses.
|
|
14.
|
The Committee shall provide oversight to related party transactions entered into by the Corporation.
|
|
15.
|
The Committee shall review policies and procedures with respect to officers' expense accounts and management perquisites and benefits, including their expenditures related to executive travel and entertainment, and review the results of the procedures performed in these areas by the external auditor, based on terms of reference agreed upon by the external auditor and the Committee.
|
Independent Auditors
|
1.
|
The Committee shall recommend to the Board the external auditors to be nominated, for the purpose of preparing or issuing an auditor's report or performing other audit, review or attest services for the Corporation, and the compensation of the external auditors.
|
|
2.
|
The Committee shall instruct the external auditors to report directly to the Committee and ensure that significant findings and recommendations made by the external auditors are received and discussed by the Committee on a timely basis.
|
|
3.
|
The Committee shall be directly responsible for overseeing the work of the external auditors, including the resolution of disagreements between management and the external auditors regarding financial reporting, and shall review the performance of the external auditors and approve any proposed discharge of the external auditors when circumstances warrant.
|
|
4.
|
The Committee shall periodically consult the external auditors out of the presence of management about any matters that the Committee or the external auditors believes should be discussed privately, including, without limitation, significant risks or exposures, internal controls and other steps that management has taken to control such risks, and the fullness and accuracy of the Corporation's financial statements. Particular emphasis should be given to the adequacy of internal controls to expose any payments, transactions or procedures that might be deemed illegal or otherwise improper.
|
|
5.
|
Except as otherwise indicated in this Charter, the Committee shall pre-approve all audit and non-audit services not prohibited by Canadian securities laws and regulations to be provided by the external auditors and delegate, if desirable, to one or more of its members the authority to pre-approve any such audit or permitted non-audit services, provided that any such pre-approval is presented to the Committee at its next scheduled meeting following the pre-approval.
|
|
6.
|
The Committee shall monitor and assess the relationship between management and the external auditors, including reviewing any management letters or other reports of the external auditors and discussing and resolving any material differences of opinion between management and the external auditors.
|
|
7.
|
The Committee shall monitor, review, confirm and discuss with the external auditors, on an annual basis, all significant relationships the external auditors have with the Corporation and the range of services provided to determine the independence and objectivity of the external auditors.
|
|
8.
|
Prior to the audit, the Committee shall review the external auditors' audit plan, including the scope, procedures, timing and staffing of the audit, and the Committee may authorize the external auditors to perform supplemental reviews or audits as the Committee may deem desirable.
|
|
9.
|
The Committee shall review with the external auditors the results of the annual audit and, if applicable, the results of the quarterly review, including matters related to the conduct of the audit and the review, as the case may be.
|
|
10.
|
The Committee shall obtain timely reports from the external auditors describing critical accounting policies and practices, alternative treatments of information within IFRS that were discussed with management, their ramifications, and the external auditors' preferred treatment and material written communications between the Corporation and the external auditors.
|
|
11.
|
The Committee shall review fees paid by the Corporation to the external auditors and other professionals in respect of audit and non-audit services on an annual basis.
|
|
12.
|
The Committee shall review and approve the Corporation's hiring policies regarding partners, employees and former partners and employees of the present and former external auditors of the Corporation.
|
Process Improvement
|
1.
|
The Committee shall establish regular and separate systems of reporting to the Committee by each of management and the external auditors regarding any significant judgments made in management's preparation of the financial statements and the view of each as to appropriateness of such judgments.
|
|
2.
|
Following completion of the annual audit and quarterly reviews (if applicable), the Committee shall review separately with each of management and the external auditors any significant changes to planned procedures, any difficulties encountered during the course of the audit and reviews, including any restrictions on the scope of work or access to required information and the cooperation that the external auditors received during the course of the audit and reviews.
|
|
3.
|
The Committee shall review and resolve any significant disagreements among management and the external auditors in connection with the preparation of the financial statements and, where there are significant unsettled issues, the Committee shall ensure that there is an agreed course of action for the resolution of such matters.
|
|
4.
|
The Committee shall review with the external auditor and management significant findings during the year and the extent to which changes or improvements in financial or accounting practices, as approved by the Committee, have been implemented. This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as decided by the Committee.
|
Ethical and Legal Compliance
|
1.
|
The Committee shall establish procedures for the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters.
|
|
2.
|
The Committee shall review the effectiveness of the system for monitoring compliance with laws and regulations and the results of management's investigation and follow-up of any non-compliance.
|
|
3.
|
The Committee shall review management's monitoring of the Corporation's system that is in place to ensure that the Corporation's financial statements, reports and other financial information disseminated to governmental organizations and the public satisfy legal requirements.
|
|
4.
|
The Committee shall ensure that there is an appropriate standard of corporate conduct including, if necessary, adopting a corporate code of ethics for senior financial personnel.
|
|
5.
|
The Committee shall obtain regular updates from management and others, including internal and external auditors and legal counsel, concerning the Corporation's compliance with financial related laws and regulations such as tax and financial reporting laws and regulations, legal withholding requirements, occupational health and safety laws and personal information and protection of privacy laws.
|
|
6.
|
The Committee shall be satisfied that all regulatory compliance matters have been considered in the preparation of financial statements.
|
|
7.
|
The Committee shall review the findings of any examination by regulatory agencies.
|
Other Responsibilities
While the Committee has the responsibilities and duties set out in this Charter, it is not the duty of the Committee to plan or conduct audits, to prepare or audit financial statements or to design or implement an effective system of internal controls. Such matters are the responsibility of management and the internal and external auditors of the Corporation, as the case may be. In addition to the responsibilities and duties of the Committee set out in this Charter, the Committee shall perform any other activities consistent with this Charter and all applicable legal, regulatory and listing requirements (including those of the applicable securities regulatory authorities and the stock exchanges on which the Corporation's securities are listed), as the Committee or the Board deems necessary or appropriate.
Procedures for Receipt of Complaints and Submission
s
Relating to Accounting Matter
s
|
1.
|
The Corporation shall inform employees on the Corporation's intranet, if there is one, or via a newsletter or e-mail that is disseminated to all employees at least annually, of the individual (the "Complaints Officer") designated from time to time by the Committee to whom complaints and submissions can be made regarding accounting, internal accounting controls or auditing matters or issues of concern regarding questionable accounting or auditing matters.
|
|
2.
|
The Complaints Officer shall be informed that any complaints or submissions so received must be kept confidential and that the identity of employee(s) making complaints or submissions shall be kept confidential and shall only be communicated to the Committee or the Chair of the Committee.
|
|
3.
|
The Complaints Officer shall be informed that he or she must report to the Committee as frequently as such Complaints Officer deems appropriate, but in any event no less frequently than on a quarterly basis prior to the quarterly meeting of the Committee called to approve interim and annual financial statements of the Corporation.
|
|
4.
|
Upon receipt of a report from the Complaints Officer, the Committee shall discuss the report and take such steps as the Committee may deem appropriate.
|
The Complaints Officer shall retain a record of a complaint or submission received for a period of six years following resolution of the complaint or submission.
Procedures for Approval of Non-Audit Service
s
|
1.
|
The Corporation's external auditors shall be prohibited from performing for the Corporation the following categories of non-audit services:
|
|
(a)
|
bookkeeping or other services related to the Corporation's accounting records or financial statements;
|
|
(b)
|
financial information systems design and implementation;
|
|
(c)
|
appraisal or valuation services, fairness opinion or contributions-in-kind reports;
|
|
(e)
|
internal audit outsourcing services;
|
|
(f)
|
management functions;
|
|
(h)
|
broker or dealer, investment advisor or investment banking services;
|
|
(j)
|
expert services unrelated to the audit; and
|
|
(k)
|
any other service that the Canadian Public Accountability Board or any other applicable regulatory authority determines is impermissible.
|
|
2.
|
In the event that the Corporation wishes to retain the services of the Corporation's external auditors for tax compliance, tax advice or tax planning, the Chief Financial Officer of the Corporation shall consult with the Chair of the Committee, who shall have the authority to approve or disapprove on behalf of the Committee, such non-audit services in accordance. All other non-audit services shall be approved or disapproved by the Committee as a whole as set forth herein.
|
|
3.
|
The Chief Financial Officer of the Corporation shall maintain a record of non-audit services approved by the Chair of the Committee or the Committee for each fiscal year and provide a report to the Committee no less frequently than on a quarterly basis.
|
Composition of the Audit Committee
The current members of our Audit Committee are Ken Brophy, Stewart Wallis and Mark Lotz. Each of Mr. Brophy and Mr. Lotz is an independent director and financially literate. Mr. Wallis is not considered independent due to his serving as Chief Executive Officer and President of the Company until his resignation on April 30, 2012. Mr. Wallis is financially literate.
Relevant Education and Experience
Stewart Wallis
. Mr. Wallis is the President of Sundance Geological Ltd., a private entity owned and controlled by him, which provides geological services, including evaluations and prefeasibility studies, for individuals and mining companies based throughout the world. Mr. Wallis also serves as a Director and as a member of the audit committees of Logan Resources Ltd. He received his Bachelor of Science Degree in Geology from McMaster University, located in Hamilton, Ontario. His is a member of the Association of Professional Engineers and Geoscientists of British Columbia.
Mark Lotz
. Mr. Lotz is a Chartered Professional Accountant with 18 years of experience primarily in the minerals industry and related securities businesses. He has held CFO positions with several well-known mining and exploration companies including African Queen Mines, Sacre-Coeur Minerals, Ltd., and Prophecy Resources Corp. He has also served as a senior executive officer for two Vancouver based securities firms and a financial compliance officer for the Vancouver Stock Exchange, the predecessor to the TSX Venture Exchange. Mr. Lotz holds a legacy Chartered Accountant (CA) designation and is a member of the Chartered Professional Accountants of British Columbia. Mr. Lotz received his Bachelor of Business Administration from Simon Fraser University in June 1989.
Ken Brophy
. Mr. Brophy is the President of Accession Management and Consulting Ltd., a private entity owned and controlled by him, which provides operational and sustainable development services, for mining companies predominately based in North America. Mr. Brophy also serves on the board of directors and audit committee of Golden Raven Resources Ltd. He is currently Vice President, Sustainable Development for Ram River Coal Corp., a private entity based in Vancouver. From April 2004 to September 2009, Mr. Brophy also served as Director of Operations for the Company.
Reliance on Certain Exemptions
At no time since the commencement of the Company's most recently completed financial year, has the Company relied on any of the exemptions contained in the followings sections of NI 52-110: section 2.4 (De Minimis Non-audit Services), section 3.2 (Initial Public Offerings), section 3.4 (Events Outside Control of Member), section 3.5 (Death, Disability or Resignation of Audit Committee Member) or an exemption from NI 52-110, in whole or in part, granted under Part 8 (Exemptions) of NI 52-110.
Reliance on Exemption in Subsection 3.3(2) or Section 3.6
At no time since the commencement of the Company's most recently completed financial year, has the Company relied on any of the exemptions contained in the followings sections of NI 52-110: subsection 3.3(2) (Controlled Companies) or section 3.6 (Temporary Exemption for Limited and Exceptional Circumstances).
Reliance on Section 3.8
At no time since the commencement of the Company's most recently completed financial year, has the Company relied on section 3.8 (Acquisition of Financial Literacy) of NI 52-110.
Audit Committee Oversight
At no time since the commencement of the Company's most recently completed financial year, has the Company's Board of Directors failed to adopt a recommendation of the Audit Committee to nominate or compensate an external auditor.
Pre-Approval Policies and Procedures
All services to be performed by our auditor must be approved in advance by the Audit Committee. The Audit Committee has considered whether the provision of services other than audit services is compatible with maintaining the auditors' independence and has adopted a policy governing the provision of these services. This policy requires the pre-approval by the Audit Committee of all audit and non-audit services provided by the external auditor, other than any
de minimis
non-audit services allowed by applicable law or regulation.
Pre-approval from the Audit Committee can be sought for planned engagements based on budgeted or committed fees. No further approval is required to pay pre-approved fees. Additional pre-approval is required for any increase in scope or in final fees.
External Auditor Service Fees
See Item 16.C. Principal Accountant Fees and Services.
Compensation Committee
We have established a Compensation Committee, which currently consists of Stewart Wallis, Mark Lotz and Ken Brophy. The Compensation Committee does not operate pursuant to a written charter.
The mandate established for the Compensation Committee is for the purposes of:
|
1.
|
considering appropriate levels of compensation for our directors and officers and making recommendations to the Board as to the remuneration and other compensation to be provided to our Directors, the President and our other officers; and
|
|
2.
|
carrying out periodic performance assessments of the President and CEO.
|
6.D.
Employees
The following table sets out the number of full-time employees who worked for us at the end of the last three completed fiscal years as well as the maximum number of temporary workers who worked for us during each fiscal year:
|
Fiscal year ended
|
Number of Full Time Employees at the end
of the fiscal year
|
Maximum number of Temporary Workers
during the fiscal year
|
|
April 30, 2016
|
0
(1)
|
0
(1)
|
|
April 30, 2015
|
0
(1)
|
0
(1)
|
|
April 30, 2014
|
0
(1)
|
0
(1)
|
|
1
|
Pursuant to the Management Services Agreement with King & Bay West dated September 16, 2014, King & Bay West provides shared office, administration and payroll services to the Company. See Item 7.B – Related Party Transactions and Exhibit 4.8 for a description of this agreement. As such, the Company no longer employs any full-time staff or temporary staff.
|
6.E.
Share Ownership
The following table presents the beneficial ownership of the directors and those persons named in Item 6.B Compensation above as of April 30, 2016. As of August 19, 2016, we had 28,218,451 common shares issued and outstanding. The number of common shares beneficially owned by the persons listed below includes those securities exercisable into common shares within 60 days of August 19, 2016.
|
Name
|
Number of
Common Shares
|
Percent of Outstanding Common Shares
|
|
Stewart Wallis
|
203,150
1
|
*
|
|
Mark J. Morabito
2
|
4,313,306
3
|
15.29%
|
|
Jim Crawford
4
|
N/A
|
*
|
|
Kate-Lynn Genzel
|
0
|
*
|
|
Mark Lotz
|
0
|
*
|
|
Ken Brophy
|
200,630
5
|
*
|
|
Directors and Executive Officers as a group
|
414,780
|
*
|
*
Indicates less than one percent.
|
1
|
Includes warrants to purchase 100,000 common shares exercisable within 60 days of August 19, 2016.
|
|
2
|
Mr. Morabito was appointed Chief Executive Officer and President on November 27, 2015 and elected a director on December 10, 2015.
|
3
Includes warrants to purchase 1,333,335 common shares exercisable within 60 days of August 19, 2016.
|
4
|
Mr. Crawford resigned as Chief Executive Officer, President and a director on November 27, 2015..
|
|
5
|
Includes warrants to purchase 100,000 common shares exercisable within 60 days of August 19, 2016.
|
The following table presents the stock options granted to the aforementioned persons and unexercised as of August 19, 2016. The stock options are for common shares.
|
Name
|
Date of Grant
|
Number of Underlying Common Shares
|
Vested
1
|
Exercise Price
|
Expiration Date
|
|
Stewart Wallis
|
|
0
|
0
|
|
|
|
Mark J. Morabito
2
|
|
0
|
0
|
|
|
|
Jim Crawford
|
|
0
|
0
|
|
|
|
Kate-Lynn Genzel
|
|
0
|
0
|
|
|
|
Mark Lotz
|
|
0
|
0
|
|
|
|
Ken Brophy
3
|
|
0
|
0
|
|
|
|
1
|
Includes those options that are exercisable within 60 days of August 19, 2016.
|
|
2
|
Mr. Morabito was appointed Chief Executive Officer and President on November 27, 2015 and elected as a director on December 10, 2015.
|
|
2
|
Mr. Crawford resigned as Chief Executive Officer, President and a director on November 27, 2015 and held no options at the time of his resignation.
|
We do not have any arrangements for involving our employees in our capital. We do not have a share purchase plan or dividend reinvestment plan for our directors, officers and employees. However, we will, from time to time,
grant individual stock options to our directors, officers or employees as an incentive pursuant to our stock option plan. As at August 19, 2016, there were no stock options granted to any directors, officers or employees.
Stock Option Plan
We may grant stock options to directors, senior management and employees pursuant to our stock option plan dated January 2, 2014 (the "Plan"). Under the Plan, we may grant stock options to purchase up to a maximum of 10% of the common shares issued and outstanding from time to time. As at May 1, 2015, the beginning of the fiscal year ended April 30, 2016, there were 2,795,845 common shares available for grant and 2,821,845 common shares available for grant under the Plan as at April 30, 2016. During the fiscal year ended April 30, 2015, no stock options were granted. During the fiscal year ended April 30, 2015, no stock options to purchase common shares were exercised and stock options to purchase an aggregate of 26,000 common shares were cancelled or expired.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7.A.
Major Shareholders
Other than as set forth below, to the knowledge of the directors and senior officers of the Company, as at
August 19, 2016
no person beneficially owns or controls, directly or indirectly, 5% or more of the Company's issued and outstanding common shares:
|
·
|
Mark J. Morabito ("
Morabito
") is the beneficial owner, directly and indirectly, of 2,979,971 common Shares representing approximately 10.56% of the issued and outstanding common shares.
|
|
·
|
KCR, LLC ("
KCR
") is the beneficial owner of 2,665,000 common shares representing approximately 9.41% of the issued and outstanding common shares.
|
|
·
|
Morabito Family Trust ("
MFT
") is the beneficial owner of 2,000,000 Common Shares representing approximately 7.09% of the issued and outstanding common shares.
|
At May 1, 2012, Morabito or entities controlled by him held 135,480 common shares or 2.1% of the then issued and outstanding common shares. From May 1, 2012 to April 30, 2014, Morabito or entities controlled by him acquired and disposed of common shares over the public market. As at April 30, 2014, Morabito or entities controlled by him held 6,220 common shares or less than one-tenth of one percent of the then issued and outstanding common shares. The issuance in fiscal 2015 of 2,973,751 common shares to Morabito or entities controlled by him, resulted in a significant change to the percentage ownership held by Morabito during the past three years.
Other than the issuance in fiscal 2015 of the above-noted common Shares to KCR and MFT, respectively, there have been no significant changes to the percentage ownership held by either KCR or MFT during the past three years.
All of our Common Shares, both, issued and unissued, are common shares of the same class and rank equally as to dividends, voting powers and participation of powers. Accordingly, there are no special voting powers held by our major shareholders.
On August 19, 2016, we had 28,218,451 common shares issued and outstanding to approximately 276 shareholders of record. We believe that the number of beneficial owners is substantially greater than the number of record holders because a large portion of our outstanding common shares are held in broker "street" names for the benefit of individual investors or other nominees. Management believes that there are 85 shareholders of record located in the U.S., who own an aggregate of approximately 17.34% of our outstanding common shares. In addition to these record holders there may be more persons located in the U.S. holding our common shares in "street" name.
We are a publicly owned Canadian corporation, with shareholders in Canada, the United States and other foreign jurisdictions. We are not controlled by any foreign government or other person. We are not aware of any arrangements that would result in a change of control of our company.
7.B.
Related Party Transactions
Other than as disclosed below, for the year ended April 30, 2016 and the period from May 1, 2016 to the date of this annual report, we have not entered into any transactions or loans between us and any: (a) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, us; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of us that gives them significant influence over us, and close members of any such individuals' family; (d) key management personnel and close members of such individuals' families; or (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence.
During the year ended April 30, 2016, the Company had the following transactions with related parties:
|
·
|
In January 2010, the Company entered into a contract with King & Bay West (which was amended on October 1, 2010 and September 16, 2014) with a director and officer (Mark Morabito) in common, whereby the management company will provide shared office and payroll services to the Company. During the year ended April 30, 2016, the Company incurred administrative/office costs of $243,393 included in office and administration, wages and salaries, rent, travel, consulting, and investor relations to this management company for such services. In addition, the Company incurred key management personnel wages and salaries of $44,050 provided by King & Bay West. At April 30, 2016, $254,123 was still owing to this company included in due to related parties.
|
|
·
|
Commencing on December 1, 2015, the Board of Directors ratified the payment of $5,000 per month to MJM Consulting Corp., a company controlled by Mark J. Morabito, for the services of Mr. Morabito acting as Chief Executive Officer of the Company. During the year ended April 30, 2016, the Company paid a MJM Consulting Corp. total of $25,000 for such services.
|
The amounts due to the related parties are non-interest bearing. With the exception of the term loan payable to King & Bay West, the amounts due to related parties have no fixed terms of repayment. The fair value of the amounts due to related parties approximate fair carrying value due to the short-term nature.
7.C.
Interests of Experts and Counsel
Not applicable
ITEM 8. FINANCIAL INFORMATION
8.A.
Consolidated Statements and Other Financial Information
Financial Statements
Our financial statements are stated in Canadian Dollars and are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the Company on May 1, 2010.
See our audited financial statements for the fiscal years ended April 30, 2016 and April 30, 2015 included under Item 18 of this annual report.
Dividend Policy
We have not declared or paid any cash dividends on our capital stock. We do not currently expect to pay cash dividends in the foreseeable future as we anticipate that all available funds will be invested to finance the growth of
our business. The Board of Directors will determine if and when dividends should be declared and paid in the future based upon our financial position at the relevant time.
Legal/Arbitration Proceedings
The Company is not subject to any legal or arbitration proceedings, which may have, or have had in the recent past, significant effects on the Company's financial position or profitability.
8.B.
Significant Changes
Since April 30, 2016, the date of our most recent financial statements, no significant changes have occurred.
ITEM 9. THE OFFER AND LISTING
9.A.
Offer and Listing Details
Common Shares
The following table lists the high and low prices for our common shares on the TSX Venture Exchange for the last six months, fiscal quarters for the last two completed fiscal years, and the last five fiscal year ends. Our common shares have traded on the TSX Venture Exchange since January 20, 2014 and were traded on the Toronto Stock Exchange before that date.
|
Period
|
|
High
|
|
|
Low
|
|
|
August 1-19, 2016
|
|
|
N/A
|
1
|
|
|
N/A
|
1
|
|
Month ended July 31, 2016
|
|
|
N/A
|
1
|
|
|
N/A
|
1
|
|
Month ended June 30, 2016
|
|
|
N/A
|
1
|
|
|
N/A
|
1
|
|
Month ended May 31, 2016
|
|
|
N/A
|
1
|
|
|
N/A
|
1
|
|
Month ended April 30, 2016
|
|
|
N/A
|
1
|
|
|
N/A
|
1
|
|
Month ended March 31, 2016
|
|
|
N/A
|
1
|
|
|
N/A
|
1
|
|
Month ended February 28, 2016
|
|
$
|
0.10
|
2
|
|
$
|
0.075
|
2
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal quarter ended April 30, 2016
|
|
|
N/A
|
1
|
|
|
N/A
|
1
|
|
Fiscal quarter ended January 31, 2016
|
|
$
|
0.145
|
|
|
$
|
0.07
|
|
|
Fiscal quarter ended October 31, 2015
|
|
$
|
0.135
|
|
|
$
|
0.065
|
|
|
Fiscal quarter ended July 31, 2015
|
|
$
|
0.155
|
|
|
$
|
0.085
|
|
|
Fiscal quarter ended April 30, 2015
|
|
$
|
0.16
|
|
|
$
|
0.10
|
|
|
Fiscal quarter ended January 31, 2015
|
|
$
|
0.25
|
|
|
$
|
0.12
|
|
|
Fiscal quarter ended October 31, 2014
|
|
$
|
0.31
|
|
|
$
|
0.15
|
|
|
Fiscal quarter ended July 31, 2014
|
|
$
|
0.37
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended April 30, 2016
|
|
$
|
0.16
|
3
|
|
$
|
0.04
|
3
|
|
Fiscal year ended April 30, 2015
|
|
$
|
0.37
|
|
|
$
|
0.10
|
|
|
Fiscal year ended April 30, 2014
|
|
$
|
0.60
|
|
|
$
|
0.02
|
|
|
Fiscal year ended April 30, 2013
|
|
$
|
0.45
|
|
|
$
|
0.05
|
|
|
Fiscal year ended April 30, 2012
|
|
$
|
0.99
|
|
|
$
|
0.35
|
|
|
1
|
Trading in the Company's shares was halted on the TSX Venture Exchange on February 17, 2016 and as at August 19, 2016, the shares remain halted. Therefore, no shares have traded on the TSX Venture Exchange since February 16, 2016.
|
|
2
|
These numbers representing the high/low prices for the period February 1, 2016 to February 16, 201s prior to the halt of trading of the Company's shares on the TSX Venture Exchange.
|
|
3
|
These numbers representing the high/low prices for the period May 1, 2016 to February 16, 2016 prior to the halt of trading of the Company's shares on the TSX Venture Exchange.
|
The following table lists the high and low prices for our common shares on OTCQB for the last six months, fiscal quarters for the last two completed fiscal years, and the last five fiscal years. Our common shares have traded on OTCQB since July 1, 2013 and were traded on NYSE MKT from May 7, 2007 to July 1, 2013.
|
Period
|
|
High
|
|
|
Low
|
|
|
August 1-19, 2016
|
|
|
N/A
|
1
|
|
|
N/A
|
1
|
|
Month ended July 31, 2016
|
|
|
N/A
|
1
|
|
|
N/A
|
1
|
|
Month ended June 30, 2016
|
|
|
N/A
|
1
|
|
|
N/A
|
1
|
|
Month ended May 31, 2016
|
|
|
N/A
|
1
|
|
|
N/A
|
1
|
|
Month ended April 30, 2016
|
|
|
N/A
|
1
|
|
$
|
0.07
|
|
|
Month ended March 31, 2016
|
|
|
N/A
|
1
|
|
|
N/A
|
1
|
|
Month ended February 28, 2016
|
|
$
|
0.08
|
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal quarter ended April 30, 2016
|
|
|
N/A
|
1
|
|
|
N/A
|
1
|
|
Fiscal quarter ended January 31, 2016
|
|
$
|
0.11
|
|
|
$
|
0.04
|
|
|
Fiscal quarter ended October 31, 2015
|
|
$
|
0.12
|
|
|
$
|
0.03
|
|
|
Fiscal quarter ended January 31, 2015
|
|
$
|
0.13
|
|
|
$
|
0.06
|
|
|
Fiscal quarter ended April 30, 2015
|
|
$
|
0.13
|
|
|
$
|
0.07
|
|
|
Fiscal quarter ended January 31, 2015
|
|
$
|
0.22
|
|
|
$
|
0.10
|
|
|
Fiscal quarter ended October 31, 2014
|
|
$
|
0.25
|
|
|
$
|
0.15
|
|
|
Fiscal quarter ended July 31, 2014
|
|
$
|
0.37
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended April 30, 2016
|
|
$
|
0.13
|
3
|
|
$
|
0.03
|
3
|
|
Fiscal year ended April 30, 2015
|
|
$
|
0.37
|
|
|
$
|
0.07
|
|
|
Fiscal year ended April 30, 2014
|
|
$
|
0.70
|
|
|
$
|
0.02
|
|
|
Fiscal Year ended April 30, 2013
|
|
$
|
0.46
|
|
|
$
|
0.05
|
|
|
Fiscal Year ended April 30, 2012
|
|
$
|
0.95
|
|
|
$
|
0.33
|
|
|
1
|
Trading in the Company's shares was halted on the OTCQB on February 17, 2016 and removed from trading on OTCQB on February 24, 2016. Therefore, no shares have traded on the OTCQB since February 16, 2016.
|
|
2
|
These numbers representing the high/low prices for the period February 1, 2016 to February 16, 2016 prior to the halt of trading of the Company's shares on the OTCQB.
|
|
3
|
These numbers representing the high/low prices for the period May 1, 2016 to February 16, 2016 prior to the halt of trading of the Company's shares on the OTCQB.
|
Warrants
Our Warrants commenced trading on the TSX Venture Exchange on January 19, 2015. The following table lists the high and low prices for our Warrants on the TSX Venture Exchange for the last six months, the last six fiscal quarters and the fiscal year ended April 30, 2016 and April 30, 2015. See "Item 4.A. History and Development of the Company – Introduction" and "Item 10.C. Material Contracts" for a description of the Warrants.
|
Period
|
|
High
|
|
Low
|
|
August 1-18, 2016
|
|
N/A
1
|
|
N/A
1
|
|
|
Month ended July 31, 2016
|
|
N/A
1
|
|
N/A
1
|
|
|
Month ended June 30, 2016
|
|
N/A
1
|
|
N/A
1
|
|
|
Month ended May 31, 2016
|
|
N/A
1
|
|
N/A
1
|
|
9.B.
Plan of Distribution
Not applicable
9.C.
Markets
Our common shares are listed on the TSX Venture Exchange under the trading symbol "JET". Until February 24, 2016, our common shares also traded on OTCQB under the trading symbol "JETMF". On February 24, 2016, pursuant to the rules of OTCQB, our common shares became ineligible to be traded on OTCQB due to the fact that trading of the shares had been halted for longer than four days. On January 19, 2015, our Warrants began trading on the TSX Venture Exchange under the trading symbol "JET.WT". There are currently no restrictions on the transferability of the common shares or Warrants under Canadian securities laws.
9.D.
Selling Shareholders
Not applicable
9.E.
Dilution
Not applicable
9.F.
Expenses of the Issue
Not applicable
ITEM 10. ADDITIONAL INFORMATION
10.A.
Share Capital
Not applicable
10.B.
Memorandum and Articles of Association
This information is incorporated by reference to our Form 20-F Registration Statement, "Item 10. Additional Information—Memorandum and Articles of Association" as filed on April 25, 2006.
10.C.
Material Contracts
We have entered into the following material contracts during the two years immediately preceding the date of this annual report and which are currently in effect:
|
1.
|
On September 16, 2014, we entered into a Warrant Indenture with Computershare Trust Company of Canada pursuant to which Computershare Trust Company of Canada agreed to act as Warrant Agent with respect to 20,000,000 Warrants issued to accredited investors pursuant to a non-brokered private placement of units ("
Units
") for gross proceeds of $3,000,000. Each Unit comprised one common share and one Warrant, with each Warrant exercisable to acquire one common share at an exercise price of $0.25 for a period of five years following closing of the private placement. The Warrant Indenture is referenced as Exhibit 4.10 hereto.
|
|
2.
|
On April 12, 2016, we entered into an Amalgamation Agreement with Canada Jetlines Ltd. providing for the amalgamation of Jetlines and a wholly-owned subsidiary of the Company. The Amalgamation Agreement is in connection with a change of business transaction pursuant to which the Company will move into the airline industry. For additional details regarding the Amalgamation Agreement please see "Item 4.B. – Business Overview – Corporate Development". The Amalgamation Agreement is referenced as Exhibit 4.11 hereto.
|
10.D.
Exchange Controls
Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors. There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-resident holders of our securities, except as discussed in "10.E. Taxation" below.
There are no limitations under the laws of Canada or in our organizing documents on the right of foreigners to hold or vote our securities, except that the Investment Canada Act may require review and approval by the Minister of Industry (Canada) of certain acquisitions of "
control
" of us by a "
non-Canadian
". The threshold for acquisitions of control is generally defined as being one-third or more of the voting shares of our company. "
Non-Canadian
" generally means an individual who is not a Canadian citizen, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians.
10.E.
Taxation
Certain Canadian Federal Income Tax Consequences
The discussion under this heading summarizes the principal Canadian federal income tax consequences of acquiring, holding and disposing of shares of the Company's common stock for a shareholder who at all relevant times, (i) is resident in the U.S., is not resident or deemed to be resident in Canada and has not been or been deemed to be resident in Canada for the purposes of the
Income Tax Act
(Canada) (the "
Canadian Tax Act
") and the
Canada-United States Tax Convention
(1980), as amended (the "Convention"), (ii) is a "qualifying person" and is the beneficial owner of all dividends paid on the common shares for the purposes of the Convention, (iii) deals at arm's length and is not affiliated with the Company for the purposes of the
Canadian Tax Act
, and (iv) will acquire and hold the Company's common shares as capital property for the purposes of the
Canadian Tax Act
. Generally, the Company's common shares will be considered to be capital property to the shareholder provided the shareholder does not hold the common shares in the course of carrying on a business of trading or dealing in securities and has not acquired them in one or more transactions considered to be an adventure or concern in the nature of trade.
This summary does not apply to a shareholder who uses or holds, or is deemed to use or hold, its shares in the Company in connection with carrying on a business in Canada, or to a shareholder that is either an insurer carrying on business in Canada and elsewhere or an "authorized foreign bank" as defined in the
Canadian Tax Act
. This summary is based on the current provisions of the
Canadian Tax Act
, the regulations thereunder in force as of the
date hereof (the "Regulations"), all proposals to amend the
Canadian Tax Act
or the Regulations publicly announced by the federal Minister of Finance (Canada) prior to the date hereof (the "Tax Proposals"), and an understanding of the current published administrative practices of the Canada Revenue Agency.
This summary is not exhaustive of all Canadian federal income tax considerations applicable to a shareholder of the Company and, except for the Tax Proposals, this summary does not take into account or anticipate any changes in the
Canadian Tax Act
, the Regulations or the administrative or assessing policies of the Canada Revenue Agency, whether by legislative, governmental or judicial decisions or action, nor does this summary take into account provincial, territorial or other foreign tax legislation or considerations, which may differ significantly from those discussed herein. There can be no assurance that the Tax Proposals will be enacted in the form proposed, or at all.
This summary is of a general nature only and is not intended to be, nor should it be considered to be, legal or tax advice to any particular shareholder. The tax consequences to any particular shareholder will depend on a variety of factors including the shareholder's own particular circumstances. Therefore, all shareholders should consult their own tax advisors with respect to their own particular circumstances.
The provisions of the
Canadian Tax Act
are subject to income tax treaties to which Canada is a party, including the Convention.
Dividends on Common Shares
Under the
Canadian Tax Act
, a non-resident of Canada is generally subject to Canadian withholding tax at the rate of 25% on dividends paid (including dividends deemed to have been paid) or credited to him or her by a corporation resident in Canada. The Company is responsible for withholding and remitting this tax. The Convention generally limits the rate of withholding tax on dividends to 15% of the gross amount of such dividends paid to shareholders or, if the shareholder is a company that beneficially owns at least 10% of the voting stock of the payor corporation, 5% of the gross amount of the dividends.
The Convention generally exempts from Canadian income tax dividends paid to a religious, scientific, literary, educational or charitable organization or to an organization constituted and operated exclusively to administer a pension, retirement or employee benefit fund or plan, if the organization is a resident of the U.S. and is exempt from income tax under the laws of the U.S.
Dispositions of Common Shares
Under the
Canadian Tax Act
, a taxpayer's capital gain or capital loss from a disposition of a common share of the Company is the amount, if any, by which his or her proceeds of disposition exceed (or are exceeded by, respectively) the aggregate of his or her adjusted cost base of the share and any reasonable expenses of disposition. The capital gain or loss must be computed in Canadian currency using a weighted average adjusted cost base for identical properties. One half of the amount, if any, by which capital gains exceed capital losses in a year (a "taxable capital gain") is included in income for that year. Where capital losses exceed capital gains in a year, one half of the excess may be deducted from a taxable capital gain realized by the shareholder in the three previous years or in any subsequent year, subject to certain restrictions in the case of a corporate shareholder.
Under the
Canadian Tax Act
, a non-resident of Canada is subject to Canadian tax on taxable capital gains, and may deduct allowable capital losses, realized on a disposition of "taxable Canadian property". Common shares of the Company will be taxable Canadian property of a shareholder at any particular time the common shares are listed on a "designated stock exchange" (which includes the TSX-V) if, at that time or at any time in the five years immediately preceding that time, (i) 25% or more of the issued shares of any class or series in the Company's capital stock were owned by one or any combination of the shareholder, persons with whom the shareholder did not deal at arm's length, and partnerships in which the shareholder or persons with whom the shareholder did not deal at arm's length hold a membership interest directly or indirectly through one or more partnerships, and (ii) more than 50% of the fair market value of the common shares was derived, directly or indirectly, from one or any combination of real or immovable property situated in Canada, Canadian resource properties, timber resource properties or
options in respect of, or interests in, or for civil law rights in, such properties. Common shares used in carrying on business in Canada and acquired in certain circumstances will also constitute taxable Canadian property.
The Convention generally relieves U.S. residents who qualify for benefit thereunder from liability for Canadian tax on capital gains derived on a disposition of shares unless the value of the shares is derived principally from real property situated in Canada, including the right to explore for or exploit natural resources and rights to amounts computed by reference to production.
Shareholders should consult their own advisors with respect to the application of the Convention.
U.S. Federal Income Tax Considerations
The following is a summary of the anticipated U.S. federal income tax consequences generally applicable to U.S. Holders (as defined below) of the ownership and disposition of Common Shares. This summary addresses only holders who acquire and hold Common Shares as "capital assets" (generally, assets held for investment purposes).
The following summary does not purport to address all U.S. federal income tax consequences that may be relevant to a U.S. Holder as a result of the acquisition, ownership and disposition of Common Shares, nor does it take into account the specific circumstances of any particular holder, some of which may be subject to special tax rules (including, but not limited to, brokers, dealers in securities or currencies, traders in securities that elect to use a mark-to-market method of accounting for securities holdings, tax-exempt organizations, insurance companies, banks, thrifts and other financial institutions, persons liable for alternative minimum tax, persons that hold an interest in an entity that holds the Common Shares, persons that will own, or will have owned, directly, indirectly or constructively 10% or more (by vote or value) of the Common Shares, persons that hold the Common Shares as part of a hedging, integration, conversion or constructive sale transaction or a straddle, or persons whose functional currency is not the U.S. dollar).
This summary is based on the U.S. Internal Revenue Code of 1986, as amended (the "
Code
"), U.S. Treasury regulations, administrative pronouncements and rulings of the United States Internal Revenue Service (the "IRS") and judicial decisions, all as in effect on the date hereof, and all of which are subject to change (possibly with retroactive effect) and to differing interpretations. Except as specifically set forth below, this summary does not discuss applicable income tax reporting requirements. This summary does not describe any state, local or foreign tax law considerations, or any aspect of U.S. federal tax law other than income taxation (e.g., estate or gift tax or the Medicare contribution tax). U.S. Holders should consult their own tax advisers regarding such matters.
No legal opinion from U.S. legal counsel or ruling from the IRS has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership or disposition of Common Shares. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this summary. In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and U.S. courts could disagree with one or more of the positions taken in this summary.
As used in this summary, a "U.S. Holder" is a beneficial owner of Common Shares who, for U.S. federal income tax purposes, is (i) a citizen or individual resident of the United States, (ii) a corporation (or other entity that is classified as a corporation for U.S. federal income tax purposes) that is created or organized in or under the laws of the United States, any State thereof or the District of Columbia, (iii) an estate whose income is subject to U.S. federal income tax regardless of its source, or (iv) a trust if (A) a U.S. court can exercise primary supervision over the trust's administration and one or more U.S. persons are authorized to control all substantial decisions of the trust, or (B) the trust has a valid election in effect to be treated as a U.S. person for U.S. federal income tax purposes.
The tax treatment of a partner in a partnership (or other entity or arrangement classified as a partnership for U.S. federal income tax purposes) may depend on both the partnership's and the partner's status and the activities of the
partnership. Partnerships (or other entities or arrangements classified as a partnership for U.S. federal income tax purposes) that are beneficial owners of Common Shares, and their partners and other owners, should consult their own tax advisers regarding the tax consequences of the acquisition, ownership and disposition of Common Shares.
Passive Foreign Investment Company Rules
A foreign corporation will be considered a passive foreign investment company ("
PFIC
") for any taxable year in which (1) 75% or more of its gross income is "passive income" under the PFIC rules or (2) 50% or more of the average quarterly value of its assets produce (or are held for the production of) "passive income." For this purpose, "passive income" generally includes interest, dividends, rents, royalties, certain gains from the sale of commodities and certain other gains. Interest, dividends, rents and royalties received from a related person (within the meaning of the PFIC rules) are excluded from passive income to the extent such payments are properly allocable to the active income of such related person. Moreover, for purposes of determining if the foreign corporation is a PFIC, if the foreign corporation owns, directly or indirectly, at least 25%, by value, of the shares of another corporation, it will be treated as if it holds directly its proportionate share of the assets and receives directly its proportionate share of the income of such other corporation. If a corporation is treated as a PFIC with respect to a U.S. Holder for any taxable year, the corporation will continue to be treated as a PFIC with respect to that U.S. Holder in all succeeding taxable years, regardless of whether the corporation continues to meet the PFIC requirements in such years, unless certain elections are made.
The determination as to whether a foreign corporation is a PFIC is based on the application of complex U.S. federal income tax rules, which are subject to differing interpretations, and the determination will depend on the composition of the income, expenses and assets of the foreign corporation from time to time and the nature of the activities performed by its officers and employees. The Company believes that it may have been classified as a PFIC for the taxable year ending April 30, 2016, and, based on current business plans and financial expectations, the Company expects that it may be classified as a PFIC for the current taxable year and in future taxable years. However, the Company's actual PFIC status for the current or any future taxable year is uncertain and cannot be determined until after the end of such taxable year.
If the Company is classified as a PFIC, a U.S. Holder that does not make one of the elections described below would be required to report any gain on the disposition of Common Shares as ordinary income, rather than as capital gain, and to compute the tax liability on such gain and any "Excess Distribution" (as defined below) received in respect of Common Shares as if such items had been earned ratably over the U.S. Holder's holding period for the Common Shares. The amounts allocated to the taxable year during which the gain is realized or distribution is made, and to any taxable years in such U.S. Holder's holding period that are before the first taxable year in which the Company is treated as a PFIC with respect to the U.S. Holder, would be included in the U.S. Holder's gross income as ordinary income for the taxable year of the gain or distribution. The amount allocated to each other taxable year in such U.S. Holder's holding period would be taxed as ordinary income in the taxable year during which the gain is realized or distribution is made at the highest tax rate in effect for the U.S. Holder in that other taxable year and would be subject to an interest charge as if the income tax liabilities had been due with respect to each such prior year. For purposes of these rules, gifts, exchanges pursuant to corporate reorganizations and use of Common Shares as security for a loan may be treated as a taxable disposition of the Common Shares. An "Excess Distribution" is the amount by which distributions during a taxable year in respect of a Common Share exceed 125% of the average amount of distributions in respect thereof during the three preceding taxable years (or, if shorter, the U.S. Holder's holding period for the Common Shares).
Certain additional adverse tax rules will apply to a U.S. Holder for any taxable year in which the Company is treated as a PFIC with respect to such U.S. Holder and any of our subsidiaries is also treated as a PFIC (a "
Subsidiary PFIC
"). In such a case, the U.S. Holder will generally be deemed to own its proportionate interest (by value) in any Subsidiary PFIC and be subject to the PFIC rules described above with respect to the Subsidiary PFIC regardless of such U.S. Holder's percentage ownership in the Company.
The adverse tax consequences described above may be mitigated if a U.S. Holder makes a timely "qualified electing fund" election (a "
QEF election
") with respect to its interest in the PFIC. Consequently, if the Company is
classified as a PFIC, it would likely be advantageous for a U.S. Holder to elect to treat the Company as a qualified electing fund (a "
QEF
") with respect to such U.S. Holder for the first year in which it holds Common Shares. If a U.S. Holder makes a timely QEF election with respect to the Company, the electing U.S. Holder would be required in each taxable year that the Company is considered a PFIC to include in gross income (i) as ordinary income, the U.S. Holder's pro rata share of the ordinary earnings of the Company and (ii) as capital gain, the U.S. Holder's pro rata share of the net capital gain (if any) of the Company, whether or not the ordinary earnings or net capital gain are distributed. An electing U.S. Holder's basis in Common Shares will be increased to reflect the amount of any taxed but undistributed income. Distributions of income that had previously been taxed will result in a corresponding reduction of basis in the Common Shares and will not be taxed again as distributions to the U.S. Holder.
A QEF election made with respect to the Company will not apply to any Subsidiary PFIC; a QEF election must be made separately for each Subsidiary PFIC (in which case the treatment described above would apply to such Subsidiary PFIC). If a U.S. Holder makes a timely QEF election with respect to a Subsidiary PFIC, it would be required in each taxable year to include in gross income its pro rata share of the ordinary earnings and net capital gain of such Subsidiary PFIC, but may not receive a distribution of such income. Such a U.S. Holder may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge (which would not be deductible for U.S. federal income tax purposes if the U.S. Holder were an individual).
If the Company determines that it, and any subsidiary in which the Company owns, directly or indirectly, more than 50% of such subsidiary's total aggregate voting power, is likely a PFIC in any taxable year, the Company intends to make available to U.S. Holders, upon request and in accordance with applicable procedures, a "PFIC Annual Information Statement" with respect to the Company and any such subsidiary for such taxable year. The PFIC Annual Information Statement may be used by U.S. Holders for purposes of complying with the reporting requirements applicable to a QEF election with respect to the Company and any Subsidiary PFIC.
The U.S. federal income tax on any gain from the disposition of Common Shares or from the receipt of Excess Distributions may be greater than the tax if a timely QEF election is made. It is recommended that, if the Company were to be classified as a PFIC, a U.S. Holder make a QEF election with respect to the Company and any Subsidiary PFIC.
Alternatively, if the Company were to be classified as a PFIC, a U.S. Holder could also avoid certain of the rules described above by making a mark-to-market election (instead of a QEF election), provided the Common Shares are treated as regularly traded on a qualified exchange or other market within the meaning of the applicable Treasury regulations. However, a U.S. Holder will not be permitted to make a mark-to-market election with respect to a Subsidiary PFIC. U.S. Holders should consult their own tax advisers regarding the potential availability and consequences of a mark-to-market election, as well as the advisability of making a protective QEF election in case the Company is classified as a PFIC in any taxable year.
During any taxable year in which the Company or any Subsidiary PFIC is treated as a PFIC with respect to a U.S. Holder, that U.S. Holder must file IRS Form 8621. U.S. Holders should consult their own tax advisers concerning annual filing requirements.
Taxation of Common Shares
Distributions on Common Shares
In general, subject to the PFIC rules discussed above, the gross amount of any distribution received by a U.S. Holder with respect to the Common Shares (including amounts withheld to pay Canadian withholding taxes) will be included in the gross income of the U.S. Holder as a dividend to the extent attributable to the Company's current and accumulated earnings and profits, as determined under U.S. federal income tax principles. The Company does not intend to calculate its earnings and profits under U.S. federal income tax rules. Accordingly, U.S. Holders should expect that a distribution generally will be treated as a dividend for U.S. federal income tax purposes.
Subject to the PFIC rules discussed above, distributions on Common Shares to certain non-corporate U.S. Holders that are treated as dividends may be taxed at preferential rates. Such dividends will not be eligible for the "dividends received" deduction ordinarily allowed to corporate shareholders with respect to dividends received from U.S. corporations.
The amount of any dividend paid in Canadian dollars (including amounts withheld to pay Canadian withholding taxes) will equal the U.S. dollar value of the Canadian dollars calculated by reference to the exchange rate in effect on the date the dividend is received by the U.S. Holder, regardless of whether the Canadian dollars are converted into U.S. dollars. A U.S. Holder will have a tax basis in the Canadian dollars equal to their U.S. dollar value on the date of receipt. If the Canadian dollars received are converted into U.S. dollars on the date of receipt, the U.S. Holder should generally not be required to recognize foreign currency gain or loss in respect of the distribution. If the Canadian dollars received are not converted into U.S. dollars on the date of receipt, a U.S. Holder may recognize foreign currency gain or loss on a subsequent conversion or other disposition of the Canadian dollars. Such gain or loss will be treated as U.S. source ordinary income or loss.
Distributions on Common Shares that are treated as dividends generally will constitute income from sources outside the United States and generally will be categorized for U.S. foreign tax credit purposes as "passive category income." A U.S. Holder may be eligible to elect to claim a U.S. foreign tax credit against its U.S. federal income tax liability, subject to applicable limitations and holding period requirements, for Canadian tax withheld, if any, from distributions received in respect of the Common Shares. A U.S. Holder that does not elect to claim a U.S. foreign tax credit may instead claim a deduction for Canadian tax withheld, but only for a taxable year in which the U.S. Holder elects to do so with respect to all foreign income taxes paid or accrued in such taxable year. The rules relating to U.S. foreign tax credits are complex, and each U.S. Holder should consult its own tax adviser regarding the application of such rules.
Sale, Exchange or Other Taxable Disposition of Common Shares
A U.S. Holder generally will recognize gain or loss on the sale, exchange or other taxable disposition of Common Shares in an amount equal to the difference, if any, between the amount realized on the sale, exchange or other taxable disposition and the U.S. Holder's adjusted tax basis in the Common Shares exchanged therefor. Subject to the PFIC rules discussed above, such gain or loss will be capital gain or loss and will be long-term capital gain (currently taxable at a reduced rate for non-corporate U.S. Holders) or loss if, on the date of the sale, exchange or other taxable disposition, the Common Shares have been held by such U.S. Holder for more than one year. The deductibility of capital losses is subject to limitations. Such gain or loss generally will be sourced within the United States for U.S. foreign tax credit purposes.
Required Disclosure with Respect to Foreign Financial Assets
Certain U.S. Holders are required to report information relating to an interest in Common Shares, subject to certain exceptions (including an exception for Common Shares held in accounts maintained by certain financial institutions) by attaching a completed IRS Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold an interest in Common Shares. U.S. Holders should consult their own tax advisers regarding information reporting requirements relating to their ownership of Common Shares.
10.F.
Dividends and Paying Agents
Not applicable
10.G.
Statement by Experts
Not applicable
10.H.
Documents on Display
The Company is subject to the informational requirements of the Exchange Act and file reports and other information with the SEC. You may read and copy any of the Company's reports and other information at, and obtain copies upon payment of prescribed fees from, the Public Reference Room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. In addition, the SEC maintains a Website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC at
http://www.sec.gov
. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, all documents referred to in this Annual Report on Form 20-F are available for inspection at the office of the Company, listed below, during normal office hours.
Jet Metal Corp.
1240
-
1140 West Pender Street
Vancouver, British Columbia
V6E 4G1 Canada
The Company is required to file reports and other information with the securities commissions in Canada. You are invited to read and copy any reports, statements or other information, other than confidential filings, that the Company files with the provincial securities commissions. These filings are also electronically available from the Canadian System for Electronic Document Analysis and Retrieval ("SEDAR") (
www.sedar.com
), the Canadian equivalent of the SEC's electronic document gathering and retrieval system.
The Company "incorporates by reference" information that it files with the SEC, which means that it can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this Form 20-F and more recent information automatically updates and supersedes more dated information contained or incorporated by reference in this Form 20-F.
As a foreign private issuer, the Company is exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to shareholders.
10.I.
Subsidiary Information
Not applicable
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Currency Exchange Rate Sensitivity
The Company's expenditures are predominantly in Canadian dollars, and any future equity raised is expected to be predominantly in Canadian dollars. As at April 30, 2016, the Company has accounts payable denominated in US dollars of US$57,256, cash of US$18,361 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 $3,800.
Interest Rate Sensitivity
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.
Commodity Price Sensitivity
Our future revenue and profitability will be dependent, to a significant extent, upon prevailing spot market prices for metals. In the past, metal prices have been volatile. Prices are subject to wide fluctuations in response to
changes in supply of and demand for metals, market uncertainty and a variety of additional factors that are beyond our control. Our mineral properties are in the exploration phase and accordingly we are not generating any operating revenues and are therefore not subject to any short term volatility in the prices of metals. As we are in the exploration phase, the above factors have had no material impact on operations or income. We have not entered into any futures or forward contracts.
|
ITEM 12.
|
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|
Not applicable