Exhibit 99.1
QUARTZ MOUNTAIN RESOURCES LTD. |
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2020 AND 2019 |
(Unaudited - Expressed in Canadian Dollars) |
NOTICE TO READERS |
In accordance with subsection 4.3(3) of National Instrument 51-102, management of the Company advises that the Company's auditors have not performed a review of these condensed consolidated interim financial statements. |
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QUARTZ MOUNTAIN RESOURCES LTD. | ||||
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION | ||||
(Unaudited - Expressed in Canadian Dollars) | ||||
April 30, | July 31, | ||
Note | 2020 | 2019 | |
Assets | |||
Current assets | |||
Cash | $350,610 | $72,373 | |
Amounts receivable and other assets | 3 | 19,274 | 8,188 |
369,884 | 80,561 | ||
Non-current assets | |||
Mineral property interests | 4 | 1 | 1 |
Total assets | $369,885 | $80,562 | |
Liabilities and Shareholders' Deficiency | |||
Current liabilities | |||
Amounts payable and other liabilities | 6 | $26,072 | $2,062 |
Loan payable | 7(c) | – | 101,209 |
Due to a related party | 7(b) | 113,764 | 2,972,945 |
Total liabilities | 139,836 | 3,076,216 | |
Shareholders' deficiency | |||
Share capital | 5(a) | 27,174,981 | 26,548,981 |
Reserves | 592,011 | 592,011 | |
Accumulated deficit | (27,536,943) | (30,136,646) | |
Total shareholders' deficiency | 230,049 | (2,995,654) | |
Total liabilities and shareholders' deficiency | $369,885 | $80,562 |
Nature and continuance of operations (note 1)
The accompanying notes are an integral part of these consolidated financial statements.
/s/ Trevor Thomas | /s/ Leonie Tomlinson | |
Trevor Thomas | Leonie Tomlinson | |
Director | Director |
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS | ||||||||
(Unaudited - Expressed in Canadian Dollars, except for weighted average number of common shares) | ||||||||
Three months ended April 30, | Nine months ended April 30, 2020 | ||||
Note | 2020 | 2019 | 2020 | 2019 | |
Expenses | |||||
General and administration | |||||
Administrative fees | 7(b) | 20,376 | 13,054 | 55,118 | 37,466 |
Legal, accounting and audit | 9,545 | 3,722 | 26,658 | 20,306 | |
Office and miscellaneous | 28,959 | 11,665 | 55,752 | 35,359 | |
Regulatory, trust and filing | 6,305 | 7,590 | 36,436 | 21,600 | |
Operating expenses | (65,185) | (36,031) | (173,964) | (114,731) | |
Other items | |||||
Interest income | 179 | 712 | 505 | 1,289 | |
Interest expense | 7(c) | (1,081) | (2,459) | (6,291) | (3,692) |
Foreign exchange loss | 8 | 2 | (429) | (153) | |
Gain on settlement of debt | 7(b) | – | – | 2,779,882 | – |
Income (loss) and comprehensive income (loss) for the period | $(66,079) | $(37,776) | $2,599,703 | $(117,287) | |
Basic and diluted income (loss) per common share | $(0.01) | $(0.01) | $0.31 | $(0.04) | |
Weighted average common shares outstanding | |||||
(basic and dilutive) | 8,492,592 | 3,347,137 | 8,492,592 | 3,347,137 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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QUARTZ MOUNTAIN RESOURCES LTD. | |||
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS | |||
(Unaudited - Expressed in Canadian Dollars) | |||
Nine months ended April 30, 2020 | |||
Note | 2020 | 2019 | |
Operating activities | |||
Gain (loss) for the period | $2,599,703 | $(117,287) | |
Adjustments for non-cash items: | |||
Gain on settlement of debt | (2,779,882) | – | |
Adjustments for investing and financing activities: | |||
Interest income | (505) | (1,289) | |
Interest expense | 6,291 | 3,692 | |
Changes in working capital items: | |||
Amounts receivable and other assets | (11,086) | (9,446) | |
Amounts payable and other liabilities | 6 | 24,010 | 7,002 |
Due to a related party | 7(b) | (2,859,181) | 60,382 |
Net cash used in operating activities | (3,020,650) | (56,946) | |
Investing activities | |||
Interest received | 505 | 1,289 | |
Net cash provided by investing activities | 505 | 1,289 | |
Financing activities | |||
Issuance of shares for settlement of debt | 7(b) | 2,905,882 | – |
Proceeds from private placement | 5(b) | 500,000 | – |
Proceeds from related party loan | – | 100,000 | |
Private placement deposit | 5(b) | 28,200 | – |
Repayment of private placement deposit | 5(b) | (28,200) | – |
Repayment of loan payable including interest | 5(b) | (107,500) | – |
Net cash provided by financing activities | 3,298,382 | 100,000 | |
(Decrease) increase in cash | 278,237 | 44,343 | |
Cash, beginning balance | 72,373 | 67,205 | |
Cash, ending balance | $350,610 | $111,548 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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QUARTZ MOUNTAIN RESOURCES LTD. | ||||||
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREOLDERS' DEFICIENCY | ||||||
(Unaudited - Expressed in Canadian Dollars, except for share information) | ||||||
Share Capital | Reserves | |||||
Note | Number of shares | Amount | Equity-settled share-based payments | Accumulated deficit | Total shareholders' deficiency | |
Balance at August 1, 2018 | 3,347,137 | $26,548,981 | $592,011 | $(29,982,931) | $(2,841,939) | |
Loss for the period | – | – | – | (117,287) | (117,287) | |
Balance at April 30, 2019 | 3,347,137 | $26,548,981 | $592,011 | $(30,100,218) | $(2,959,226) | |
Balance at August 1, 2019 | 3,347,137 | $26,548,981 | $592,011 | $(30,136,646) | $(2,995,654) | |
Shares issued for debt settlement | 7(b) | 600,000 | 126,000 | – | – | 126,000 |
Shares issued for private placement | 5(b) | 4,545,455 | 500,000 | – | – | 500,000 |
Income for the period | – | – | – | 2,599,703 | $2,599,703 | |
Balance at April 30, 2020 | 8,492,592 | $27,174,981 | $592,011 | $(27,536,943) | $230,049 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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QUARTZ MOUNTAIN RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2020 AND 2019
(Unaudited – Expressed in Canadian Dollars, unless otherwise stated)
1.
Nature and Continuance of Operations
Quartz Mountain Resources Ltd. is a Canadian public company incorporated in British Columbia on August 3, 1982. The Company's corporate office is located at 1040 West Georgia Street, 15th Floor, Vancouver, British Columbia, Canada. The Company most recently focused on evaluating mineral prospects for potential acquisition and exploration in British Columbia. The Company continues to investigate potential opportunities.
These condensed consolidated interim financial statements (the "Financial Statements") of the Company as at and for the three and nine months ended April 30, 2020, include Quartz Mountain Resources Ltd. and its subsidiaries (together referred to as the "Company"). Quartz Mountain Resources Ltd. is the ultimate parent entity of the group.
These Financial Statements have been prepared on a going concern basis, which contemplates the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future. As at April 30, 2020, the Company had cash of $350,610, and working capital of $230,049. The Company's continuing operations are dependent upon new projects, the ability of the Company to obtain the necessary financing to complete exploration of any new projects, the ability to obtain the necessary permits to explore, develop, and mine new projects, and the future profitable production of any mine. These material uncertainties raise substantial doubt on the ability of the Company to continue as a going concern.
Additional debt or equity financing will be required to fund acquisition of mineral property interests. There can be no assurance that the Company will be able to obtain additional financial resources or achieve positive cash flows. If the Company is unable to obtain adequate additional financing, it will need to curtail its expenditures further, until additional funds can be raised through financing activities.
These Financial Statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern.
2.
Significant Accounting Policies
The principal accounting policies applied in the preparation of these Financial Statements are described below. These policies have been consistently applied for all years presented, unless otherwise stated.
(a)
Statement of compliance
These Financial Statements have been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting ("IAS 34"), as issued by the International Accounting Standards Board ("IASB") and its interpretations. Accordingly, they do not include all of the information and note disclosures as required by International Financial Reporting Standards ("IFRS") for annual financial statements.
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QUARTZ MOUNTAIN RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2020 AND 2019
(Unaudited – Expressed in Canadian Dollars, unless otherwise stated)
The accounting policies and methods of computation applied by the Company in these Financial Statements are the same as those applied by the Company in its most recent annual consolidated financial statements filed on the Company's profile on SEDAR at www.sedar.com. These Financial Statements should be read in conjunction with the Company’s financial statements as at and for the year ended July 31, 2019. Results for the period ended April 30, 2020, are not necessarily indicative of future results.
The Audit Committee of the Company’s Board of Directors authorized issuance of these Financial Statements on June 15, 2020.
(b)
Basis of presentation and consolidation
These Financial Statements have been prepared on a historical cost basis, except for financial instruments measured at fair value. In addition, these Financial Statements have been prepared using the accrual basis of accounting, except for cash flow information.
These Financial Statements include the accounts of the Company and the subsidiaries that it controls. Control is achieved when the Company is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Intercompany balances and transactions including any unrealized income and expenses arising from intercompany transactions are eliminated upon consolidation.
At April 30, 2020 and July 31, 2019, the Company held a 100% interest in QZMG Resources Ltd., a company that holds a 100% interest in Wavecrest Resources Inc.
(c)
Significant accounting estimates and judgments
The preparation of these Financial Statements in conformity with IAS 34 involved the use of judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from such estimates.
In preparing these Financial Statements, significant judgements made by management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended July 31, 2019.
(d)
Changes in accounting policies and new accounting pronouncements
The Company has adopted the following revised or new IFRS accounting standards that were issued and effective January 1, 2019:
●
IFRS 16, Leases
●
IFRIC 23, Uncertainty over Income Tax Treatments
These new standards do not have material impact on the Company’s financial statements.
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QUARTZ MOUNTAIN RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2020 AND 2019
(Unaudited – Expressed in Canadian Dollars, unless otherwise stated)
3.
Amounts Receivable and Other Assets
April 30, 2020 | July 31, 2019 | |
Sales tax receivable | $3,169 | $1,098 |
Prepaid insurance | 16,105 | 7,090 |
Total | $19,274 | $8,188 |
4.
Mineral Property Interests
April 30, 2020 | July 31, 2019 | |
Angel's Camp royalty | $1 | $1 |
(a)
Angel's Camp Property
The Company retains a 1% net smelter return royalty payable to the Company on any production from the Angel's Camp property located in Lake County, Oregon. The royalty is recorded at a nominal amount of $1.
5.
Capital and Reserves
(a)
Authorized share capital
At April 30, 2020 and July 31, 2019, the authorized share capital of the Company comprised an unlimited number of common shares without par value and an unlimited number of preferred shares without par value.
No preferred shares have been issued to date. All issued common shares are fully paid.
(b)
Private Placement
The Company completed the private placement in one tranche of 4,545,455 on May 27, 2020, at a price of Cdn$0.15 per unit for gross proceeds of $500,000. Each unit consisted of one common share and one warrant (a "Warrant"). Each Warrant entitles the holder to purchase one additional share at a price of Cdn$0.15 for five years. After issuance costs of $1,302, the Group raised net proceeds of $498,698.
The private placement results in Robert Dickinson holding a control position of approximately 43% (60%, if warrants exercised) of the Company and has been approved by the TSX Venture Exchange.
During the nine months ended April 30, 2020, Robert Dickinson advanced $28,200 towards the financing, which has been refunded.
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QUARTZ MOUNTAIN RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2020 AND 2019
(Unaudited – Expressed in Canadian Dollars, unless otherwise stated)
6.
Amounts Payable and Other Liabilities
April 30, 2020 | July 31, 2019 | |
Amounts payable | $26,072 | $2,062 |
7.
Related Party Balances and Transactions
(a)
Transactions with Key Management Personnel
Key management personnel are those persons that have the authority and responsibility for planning, directing and controlling the activities of the Company, directly and indirectly, and by definition include the directors of the Company.
The Company compensated key management personnel as follows:
Three months endedApril 30, | Nine months endedApril 30, | |||
2020 | 2019 | 2020 | 2019 | |
Short-term employee benefits, including salaries | $11,038 | $6,288 | $28,863 | $16,438 |
Short-term employee benefits include salaries, director’s fees, and amounts paid to HDSI (note 7(b)) for services provided to the Company by certain HDSI personnel who serve as directors or officers of the Company.
(b)
Entities with Significant Influence over the Company
Hunter Dickinson Inc. (“HDI”) and its wholly‐owned subsidiary Hunter Dickinson Services Inc. (“HDSI”) are private companies established by a group of mining professionals. HDSI provides services under contracts for a number of mineral exploration and development companies, and also to companies that are outside of the mining and mineral development space. The Company acquires services from a number of related and arms‐length contractors, and it is at the Company’s discretion that HDSI provides certain contract services.
The Company’s Chief Executive Officer, President, Chairman, Chief Financial Officer, and Corporate Secretary are employees of HDSI and work for the Company under an employee secondment arrangement between the Company and HDSI.
Pursuant to an agreement dated July 2, 2010, HDSI provides certain cost effective technical, geological, corporate communications, regulatory compliance, and administrative and management services to the Company, on a non‐exclusive basis as needed and as requested by the Company. As a result of this relationship, the Company has ready access to a range of diverse and specialized expertise on a regular basis, without having to engage or hire full‐time employees or experts.
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QUARTZ MOUNTAIN RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2020 AND 2019
(Unaudited – Expressed in Canadian Dollars, unless otherwise stated)
The Company is not obligated to acquire any minimum amount of services from HDSI. The monetary amount of the services received from HDSI in a given period of time is a function of annually set and agreed charge‐out rates for and the time spent by each HDSI employee engaged by the Company.
HDSI also incurs third‐party costs on behalf of the Company. Such third party costs include, for example, directors and officers insurance, travel, conferences, and communication services. Third‐party costs are billed at cost, without markup.
There are no ongoing contractual or other commitments resulting from the Company's transactions with HDSI, other than the payment for services already rendered and billed. The agreement may be terminated upon 60 days' notice by either the Company or HDSI.
The following is a summary of transactions with HDSI that occurred during the reporting period:
Three months endedApril 30 | Nine months endedApril 30 | |||
2020 | 2019 | 2020 | 2019 | |
Services received based on management services agreement | $20,377 | $13,053 | $55,119 | $37,466 |
Reimbursement of third party expenses paid | 13,896 | 14,093 | 22,201 | 22,346 |
Total | $34,273 | $27,146 | $77,320 | $59,812 |
Outstanding balances were as follows:
April 30, 2020 | July 31, 2019 | |
Balance payable to HDSI | $113,764 | $2,972,945 |
In January 2016, the Company and HDSI reached a settlement agreement whereby HDSI agreed to forgive the balance due to HDSI in the net amount of $3,086,089 if the Company completes the following:
●
makes a cash payment of $180,207; and
●
issues 600,000 shares
The cash payment of $180,207 has been paid and the shares have been issued to HDSI, completing the settlement and resulting in a gain of $2,779,882.
(c)
Related Party Loan
In December 2018, the Company entered into a loan agreement with United Mineral Services Ltd. (the “Lender”), a company owned by a former director, pursuant to which the Lender advanced to the Company a principal sum of $100,000 with a six-month term, at an interest rate of 10% per annum calculated monthly and payable quarterly. As of April 30, 2020, the principal amount and related interest have been repaid.
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QUARTZ MOUNTAIN RESOURCES LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2020 AND 2019
(Unaudited – Expressed in Canadian Dollars, unless otherwise stated)
8.
Operating Segments
The Company operates in a single reportable operating segment – the acquisition, exploration, and evaluation of mineral property interests. The Company is currently focused on the acquisition and exploration of mineral property interests in Canada. The Company’s only long-term asset is located in the USA.
9.
Events after the reporting date
On May 25, 2020, the Company announced that it would undertake a forward share split (the "Share Split") on the basis of two additional common shares for every one common share currently outstanding.
The record date for the Share Split will be May 28, 2020. The Company's common shares will begin trading on a post-Share Split basis, under the existing ticker symbol, effective at the open of markets on May 27, 2020.
The Share Split is being conducted on a push-out basis. DRS statements for the additional shares resulting from the Share Split will be mailed to shareholders of record as of May 28, 2020 by the Company's transfer agent, Computershare Investor Services Inc. Shareholders of the Company do not need to take any action with respect to the Share Split, and there is no change to the Company's CUSIP and ISIN in connection with the Share Split. Following completion of the Share Split, the Company will have approximately 25,477,776 common shares outstanding.
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