NEVADA ZINC CORPORATION
(FORMERLY "GOLDSPIKE EXPLORATION INC.")
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2014 AND 2013
(EXPRESSED IN CANADIAN DOLLARS)
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Nevada Zinc Corporation.
We have audited the accompanying consolidated financial statements of Nevada Zinc Corporation and its subsidiary,
which comprise the consolidated statements of financial position as at December 31, 2014 and 2013, and the
consolidated statements of loss and comprehensive loss, consolidated statements of cash flows and consolidated
statements of changes in equity for the years then ended, and a summary of significant accounting policies and other
explanatory information.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that
we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair
presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An
audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Nevada Zinc Corporation and its subsidiary as at December 31, 2014 and 2013, and their financial performance and
cash flows for the years then ended in accordance with International Financial Reporting Standards.
McGOVERN, HURLEY, CUNNINGHAM, LLP
Chartered Accountants
Licensed Public Accountants
TORONTO, Canada
April 24, 2015
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
As at December 31,
2014
2013
ASSETS
Current assets
Cash and cash equivalents (note 8)
Marketable securities (note 9)
Amounts receivable and other assets (note 10)
Total assets
$
$
$
546,559
2,023
43,264
591,846
$
105,153
3,377
10,299
118,829
$
224,449
$
68,295
LIABILITIES AND EQUITY
Current liabilities
Amounts payable and other liabilities (notes 11 and 19)
Equity
Share capital (note 12)
Reserves (notes 14 and 15)
Deficit
Total equity
Total liabilities and equity
$
7,266,991
1,189,994
(8,089,588)
367,397
591,846
The accompanying notes are an integral part of these consolidated financial statements.
Nature of operations and going concern (note 1)
Contingencies (notes 3 and 21)
Subsequent events (note 22)
Approved on behalf of the Board:
(Signed) "R. Bruce Durham", Director
(Signed) "Donald Christie", Director
-2-
$
5,528,549
1,178,247
(6,656,262)
50,534
118,829
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Consolidated Statements of Loss and Comprehensive Loss
(Expressed in Canadian Dollars)
Years ended
December 31,
2014
2013
Operating expenses
Exploration and acquisition costs (recovery) (note 16)
General and administrative (note 17)
Operating loss before the following items
Loss on marketable securities
Other income
Income tax recovery (note 18)
Net loss and comprehensive loss for the year
$
998,248 $
536,479
(1,534,727)
(1,354)
5,856
6,815
$ (1,523,410) $
Basic and diluted loss per share (note 13)
$
Weighted average number of common shares outstanding - basic and diluted
The accompanying notes are an integral part of these consolidated financial statements.
-3-
(0.03) $
48,088,886
(28,334)
334,161
(305,827)
(31,566)
29,504
(307,889)
(0.01)
43,415,001
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
Years ended
December 31,
2014
2013
Operating activities
Net loss for the year
Adjustments for:
Loss on marketable securities
Share-based payments
Income tax recovery on expiry of warrants
Shares issued for exploration and acquisition costs (note 3)
Non-cash working capital items:
Amounts receivable and other assets
Amounts payable and other liabilities
Common shares received for optioned property (note 3)
Net cash and cash equivalents (used in) operating activities
$ (1,523,410) $
(307,889)
1,354
201,600
(6,815)
309,000
31,566
(29,504)
-
(32,965)
156,154
(895,082)
17,736
(20,531)
(40,000)
(348,622)
Investing activities
Proceeds from sale of marketable securities
Net cash and cash equivalents provided by investing activities
-
Financing activities
Issue of common shares
Proceeds from exercise of warrants (notes 12 and 14)
Issuance costs
Net cash and cash equivalents provided by financing activities
120,119
120,119
650,000
689,550
(3,062)
1,336,488
Net change in cash and cash equivalents
-
441,406
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
$
Cash and cash equivalents consist of:
Cash
Cash equivalents
$
$
The accompanying notes are an integral part of these consolidated financial statements.
-4-
105,153
546,559
479,821
66,738
546,559
(228,503)
$
$
$
333,656
105,153
9,316
95,837
105,153
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Consolidated Statements of Changes in Equity
(Expressed in Canadian Dollars)
Balance, December 31, 2012
Expiry of warrants
Tax impact on expiry of warrants
Net loss for the year
Balance, December 31, 2013
Issuance of common shares, net of issuance costs
Exercise of warrants (notes 12 and 14)
Expiry of stock options
Expiry of warrants
Tax impact on expiry of warrants
Shares issued for exploration and acquisition costs (note 3)
Share-based payments
Net loss for the year
Balance, December 31, 2014
$
$
Share
capital
5,528,549
5,528,549
646,938
782,504
309,000
7,266,991
The accompanying notes are an integral part of these consolidated financial statements.
-5-
Reserves
Share-based
Warrant
payment
reserve
reserve
Deficit
Total
$
945,685 $
455,235 $ (6,541,542) $
387,927
(222,673)
222,673
(29,504)
(29,504)
(307,889)
(307,889)
723,012
455,235
(6,656,262)
50,534
646,938
(92,954)
689,550
(45,462)
45,462
(51,437)
51,437
(6,815)
(6,815)
309,000
201,600
201,600
(1,523,410)
(1,523,410)
$
578,621 $
611,373 $ (8,089,588) $
367,397
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
1.
Nature of operations and going concern
On March 6, 2015, Goldspike Exploration Inc. changed its name to Nevada Zinc Corporation (the "Company") (see
note 22(iv)). The Company was incorporated by articles of incorporation dated September 29, 2010 under the
Business Corporations Act (Ontario). The Company's principal business activity is mineral exploration (described in
note 3) in Yukon, Canada and Nevada, United States. The Company's common shares are listed on the TSX Venture
Exchange ("TSXV") under the symbol NZN. The head office of the Company is located at 4 King Street West, Suite
1500, Toronto, Ontario, M5H 1B6.
The consolidated financial statements of the Company for the year ended December 31, 2014 were reviewed,
approved and authorized for issue by the Board of Directors on April 24, 2015.
These consolidated financial statements have been prepared using accounting policies applicable to a going concern,
which contemplates the realization of assets and settlement of liabilities in the normal course of business as they
become due.
The Company is at an exploration stage and as is common with many exploration companies, it raises financing for its
exploration and acquisition activities. The Company has incurred losses in previous periods, with current net losses of
$1,523,410 for the year ended December 31, 2014 and has an accumulated deficit of $8,089,588 as at December 31,
2014 (December 31, 2013 - $6,656,262). In addition, the Company had working capital of $367,397 at December 31,
2014 (December 31, 2013 - working capital of $50,534).
However, the existing funds may not be sufficient to explore potential exploration project acquisitions and in due
course, further funding will be required. In the event that the Company is unable to secure further financing it may not
be able to complete the development of its projects.
Although the Company has taken steps to verify title to the properties on which it is conducting exploration and in
which it has an interest, in accordance with industry standards for the current stage of operations of such properties,
these procedures do not guarantee the Company's title. Property title may be subject to government licensing
requirements or regulations, unregistered prior agreements, unregistered claims, aboriginal claims, and noncompliance with regulatory and environmental requirements. The Company’s assets may also be subject to increases
in taxes and royalties, renegotiation of contracts and political uncertainty.
Due to continuing operating losses and limited working capital, the Company's ability to continue as a going concern is
dependent on its ability to obtain additional sources of financing to successfully explore, evaluate and develop mineral
projects, if they are proven successful, and ultimately, to achieve profitable operations. The success of these
endeavours cannot be predicted at this time. The consolidated financial statements do not reflect adjustments to the
carrying values and classification of assets and liabilities that might be necessary should the Company be unable to
continue as a going concern, and such adjustments may be material.
2.
Significant accounting policies
(a)
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards ("IFRS") issued by the International Accounting Standards Board (“IASB”) and Interpretations of the
International Financial Reporting Interpretations Committee (“IFRIC”). The accounting policies set out below have been
applied consistently to the years presented in these consolidated financial statements unless otherwise noted below.
-6-
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
2.
Significant accounting policies (continued)
(b)
Subsidiaries
Subsidiaries consist of entities over which the Company is exposed to, or has rights to, variable returns as well as the
ability to affect those returns through the power to direct the relevant activities of the entity. Subsidiaries are fully
consolidated from the date control is transferred to the Company and are-deconsolidated from the date control ceases.
The consolidated financial statements include all the assets, liabilities, revenues, expenses and cash flows of the
Company and its subsidiaries after eliminating inter-entity balances and transactions. Lone Mountain Zinc Ltd. is 100%
owned by the Company.
(c)
Basis of presentation
These consolidated financial statements have been prepared on a historical cost basis except for financial instruments
classified as fair value through profit or loss ("FVTPL"). In addition, these consolidated financial statements have been
prepared using the accrual basis of accounting except for cash flow information.
In the preparation of these consolidated financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of expenses during the period. Actual
results could differ from these estimates. Of particular significance are the estimates and assumptions used in the
recognition and measurement of items included in note 2(q).
(d)
Foreign currencies
The functional currency, as determined by management, of the Company is the Canadian Dollar. For the purpose of
the consolidated financial statements, the consolidated results and consolidated financial position are expressed in
Canadian Dollars.
Transactions in currencies other than the functional currency are translated into the functional currency using the
exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign
currencies at the period end exchange rates are recognised in the consolidated statement of loss and comprehensive
loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
(e)
Financial instruments
Financial assets:
All financial assets are recognized and derecognized on the trade date where the purchase or sale of a financial asset
is under a contract whose terms require delivery of the financial asset within the time frame established by the market
concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified
as at FVTPL which are initially measured at fair value.
Financial assets are classified into the following categories: financial assets ‘at FVTPL’ which are measured at fair
value through profit or loss, ‘available-for-sale’ financial assets which are measured at fair value through
comprehensive income, ‘held-to-maturity investments’ and ‘loans and receivables’ which are measured at amortized
cost. The classification depends on the nature and purpose of the financial assets and is determined at the time of
initial recognition.
Financial liabilities:
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.
-7-
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
2.
Significant accounting policies (continued)
(e)
Financial instruments (continued)
Other financial liabilities:
Other financial liabilities including borrowings are initially measured at fair value, net of transaction costs. Other
financial liabilities are subsequently measured at amortized cost using the effective interest method, with interest
recognized on an effective yield basis.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating
interest costs over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash payments through the expected life of the financial liability or (where appropriate) to the net carrying amount on
initial recognition.
De-recognition of financial liabilities:
The Company derecognizes financial liabilities when the obligations are discharged, cancelled or expire.
The Company’s financial instruments consist of the following:
Financial assets:
Cash
Cash equivalents
Marketable securities
Amounts receivable
Classification:
Loans and receivables
FVTPL
FVTPL
Loans and receivables
Financial liabilities:
Amounts payable and other liabilities
Classification:
Other financial liabilities
Impairment of financial assets:
Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are
impaired when there is objective evidence that, as a result of one or more events that occurred after the initial
recognition of the financial assets, the estimated future cash flows of the investments have been negatively impacted.
Evidence of impairment could include: significant financial difficulty of the issuer or counterparty; or default or
delinquency in interest or principal payments; or the likelihood that the borrower will enter bankruptcy or financial
reorganization.
The carrying amount of financial assets is reduced by any impairment loss directly for all financial assets with the
exception of accounts or loan receivable, where the carrying amount is reduced through the use of an allowance
account. When an accounts or loan receivable is considered uncollectible, it is written off against the allowance
account. Subsequent recoveries of amounts previously written off are credited against the allowance account.
Changes in the carrying amount of the allowance account are recognized in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to
an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed
through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed
does not exceed what the amortized cost would have been had the impairment not been recognized.
-8-
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
2.
Significant accounting policies (continued)
(e)
Financial instruments (continued)
Financial instruments recorded at fair value:
Financial instruments recorded at fair value on the consolidated statement of financial position are classified using a
fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value
hierarchy has the following levels: Level 1 - valuation based on quoted prices (unadjusted) in active markets for
identical assets or liabilities; Level 2 - valuation techniques based on inputs other than quoted prices included in Level
1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 - valuation techniques using inputs for the asset or liability that are not based on observable market data
(unobservable inputs). As at December 31, 2014 and December 31, 2013, marketable securities and cash equivalents
were recorded at fair value on the consolidated statement of financial position.
(f)
Impairment of non-financial assets
At the end of each reporting period, the Company reviews the carrying amounts of its non-financial assets with finite
lives to determine whether there is any indication that those assets have suffered an impairment loss. Where such an
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment
loss. The recoverable amount is the higher of an asset’s fair value less cost to sell or its value in use. In addition, long
lived assets that are not amortized are subject to an annual impairment assessment.
(g)
Exploration and evaluation expenditures
The Company expenses exploration and evaluation expenditures as incurred. Exploration and evaluation expenditures
include acquisition costs of exploration properties, property option payments and evaluation activity.
Once a project has been established as commercially viable and technically feasible, related development
expenditures are capitalized. This includes costs incurred in preparing the site for mining operations. Capitalization
ceases when the mine is capable of commercial production, with the exception of development costs that give rise to a
future benefit.
(h)
Flow-through shares
Flow-through shares are a unique Canadian tax incentive. They are the subject of specific guidance under US GAAP,
but there is no equivalent IFRS guidance. Therefore, the Company has adopted a policy whereby flow-through
proceeds are allocated between the offering of the common shares and the sale of tax benefits when the common
shares are offered. The allocation is made based on the difference between the quoted price of the common shares
and the amount the investor pays for the flow-through shares. A liability is recognized for the premium paid by the
investors and is then derecognized in the period of renunciation. The recognition of deferred income tax liability upon
renunciation of the flow-through expenditure is recorded as income tax expense in the period of renunciation. Any
difference between the amount of the liability component derecognized and deferred income tax liability recognized is
recorded in the consolidated statement of loss and comprehensive loss.
(i)
Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of financial position consist of cash on hand and balances
with banks, including guaranteed investment certificates with maturity dates of 3 months or less or which are cashable
without penalty. The Company does not invest in any asset-backed deposits/investments.
-9-
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
2.
Significant accounting policies (continued)
(j)
Marketable securities
All marketable securities owned by the Company are categorized as financial assets at FVTPL. The fair value of all
equity securities is based on the consolidated statement of financial position date bid price in an active market.
(k)
Provisions
A provision is recognized when the Company has a present legal or constructive obligation as a result of a past event,
it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the
obligation can be reliably estimated. If the effect is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where
appropriate, the risks specific to the liability.
A provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a
contract are lower than the unavoidable cost of meeting its obligations under the contract.
The Company had no material provisions at December 31, 2014 and December 31, 2013.
(l)
Share-based payment transactions
The fair value of share options granted is recognized as an expense with a corresponding increase in equity. An
individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee)
or provides services similar to those performed by a direct employee, including directors of the Company.
The fair value of share-based payments to employees is measured at the grant date and recognized over the period
during which the options vest. Share-based payments to non-employees are measured at the fair value of the goods or
services received or the fair value of the equity instruments issued if it is determined the fair value of the goods or
services cannot be reliably measured, and are recorded at the date the goods or services are received. The fair value
of the options granted is measured using the Black-Scholes option pricing model, taking into account the terms and
conditions upon which the options were granted. At each financial position reporting date, the amount recognized as
an expense is adjusted to reflect the actual number of share options that are expected to vest. For those options that
expire after vesting, the recorded value is transferred to deficit.
Expired warrants are also transferred to deficit.
(m)
Income taxes
Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognized
in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in
equity.
Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years.
Deferred tax is provided using the liability method, providing for temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: goodwill not deductible for tax purposes and the initial recognition of assets
or liabilities that affect neither accounting nor taxable profit. The amount of deferred tax provided is based on the
expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or
substantively enacted at the financial position reporting date.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available
against which the asset can be utilized. The Company does not record deferred tax assets to the extent that the
Company does not consider it probable that a deferred tax asset will be recovered.
- 10 -
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
2.
Significant accounting policies (continued)
(n)
Restoration, rehabilitation and environmental obligations
A legal or constructive obligation to incur restoration, rehabilitation and environmental costs may arise when
environmental disturbance is caused by the exploration, development or ongoing production of an exploration property
interest. Such costs arising from the decommissioning of plant and other site preparation work, discounted to their net
present value, are provided for, as soon as the obligation to incur such costs arises. Discount rates using a pretax rate
that reflects the time value of money are used to calculate the net present value. These costs are charged against
profit or loss over the economic life of the related asset, through amortization using either a unit-of-production or the
straight-line method as appropriate. The related liability is adjusted for each period for the unwinding of the discount
rate and for changes to the current market-based discount rate, amount or timing of the underlying cash flows needed
to settle the obligation. Costs for restoration of subsequent site damage that is created on an ongoing basis during
production are provided for at their net present values and charged against profits as extraction progresses.
The Company had no material restoration, rehabilitation and environmental costs as at December 31, 2014 and
December 31, 2013 as the disturbance to date is minimal.
(o)
Loss per share
The Company presents basic and diluted loss per share data for its common shares, calculated by dividing the loss
attributable to common shareholders of the Company by the weighted average number of common shares outstanding
during the period. Diluted loss per share is determined by adjusting the weighted average number of common shares
outstanding to assume conversion of all dilutive potential common shares.
(p)
Modification of warrant terms
Under IFRS, following a report dated July 19, 2012, in which the IASB’s IFRS Discussion Group concluded that the
accounting under IFRS for the modification of warrants issued as part of a private placement unit should not trigger an
expense, rather the modification would trigger a reclassification within equity, or alternatively, no recognition at all. In
consideration of this guidance, the Company has elected to not value warrant modifications.
(q)
Significant accounting judgments and estimates
The preparation of these consolidated financial statements in conformity with IFRS requires management to make
certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of
the consolidated financial statements and reported amounts of expenses during the reporting period. Actual outcomes
could differ from these estimates. These consolidated financial statements include estimates that, by their nature, are
uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements, and may
require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the
period in which the estimate is revised and future periods if the revision affects both current and future periods. These
estimates are based on historical experience, current and future economic conditions and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
- 11 -
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
2.
Significant accounting policies (continued)
(q)
Significant accounting judgments and estimates (continued)
Critical accounting estimates
Significant assumptions about the future that management has made that could result in a material adjustment to the
carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but
are not limited to, the following:
(i) Income taxes and recoverability of potential deferred tax assets:
In assessing the probability of realizing income tax assets recognized, management makes estimates related to
expectations of future taxable income, applicable tax planning opportunities, expected timing of reversals of existing
temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable
tax authorities. In making its assessments, management gives additional weight to positive and negative evidence
that can be objectively verified. Estimates of future taxable income are based on forecasted cash flows from
operations and the application of existing tax laws in each jurisdiction. The Company considers whether relevant tax
planning opportunities are within the Company's control, are feasible, and are within management's ability to
implement. Examination by applicable tax authorities is supported based on individual facts and circumstances of
the relevant tax position examined in light of all available evidence. Where applicable tax laws and regulations are
either unclear or subject to ongoing varying interpretations, it is reasonably possible that changes in these
estimates can occur that materially affect the amounts of income tax assets recognized. Also, future changes in tax
laws could limit the Company from realizing the tax benefits from the deferred tax assets. The Company reassesses
unrecognized income tax assets at each reporting period.
(ii) Share-based payments:
Management determines costs for share-based payments using market-based valuation techniques. The fair value
of the market-based and performance-based share awards are determined at the date of grant using generally
accepted valuation techniques. Assumptions are made and judgment used in applying valuation techniques. These
assumptions and judgments include estimating the future volatility of the stock price, expected dividend yield, future
employee turnover rates and future employee stock option exercise behaviours and corporate performance. Such
judgments and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates.
(iii) Decommissioning, restoration and similar liabilities:
Decommissioning, restoration and similar liabilities are estimated based on the Company's interpretation of current
regulatory requirements, constructive obligations and are measured at fair value. Fair value is determined based on
the net present value of estimated future cash expenditures for the settlement of decommissioning, restoration or
similar liabilities that may occur upon decommissioning of the mine. Such estimates are subject to change based on
changes in laws and regulations and negotiations with regulatory authorities.
(iv) Contingencies:
Refer to note 21.
(r)
Change in accounting policies
IAS 32 - Financial Instruments: Presentation ("IAS 32") was amended by the IASB in December 2011 to clarify certain
aspects of the requirements on offsetting. The amendments focus on the criterion that an entity currently has a legally
enforceable right to set off the recognized amounts and the criterion that an entity intends either to settle on a net
basis, or to realize the asset and settle the liability simultaneously. As at January 1, 2014, the Company adopted this
pronouncement and there was no material impact on the Company's consolidated financial statements.
- 12 -
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
2.
Significant accounting policies (continued)
(s)
Recent accounting pronouncements
IFRS 9 - Financial Instruments ("IFRS 9") was issued by the IASB in November 2009 with additions in October 2010
and May 2013 and will replace lAS 39 - Financial Instruments: Recognition and Measurement ("lAS 39"). IFRS 9 uses
a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the
multiple rules in lAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the
context of its business model and the contractual cash flow characteristics of the financial assets. Most of the
requirements in lAS 39 for classification and measurement of financial liabilities were carried forward unchanged to
IFRS 9, except that an entity choosing to measure a financial liability at fair value will present the portion of any change
in its fair value due to changes in the entity's own credit risk in other comprehensive income, rather than within profit or
loss. The new standard also requires a single impairment method to be used, replacing the multiple impairment
methods in lAS 39. IFRS 9 is effective for annual periods beginning on January 1, 2018. Earlier adoption is permitted.
The Company is currently assessing the impact of this pronouncement.
IAS 1 – Presentation of Financial Statements was amended in December 2014 in order to clarify, among other things,
that information should not be obscured by aggregating or by providing immaterial information, that materiality
consideration apply to all parts of the financial statements and that even when a standard requires a specific
disclosure, materiality considerations do apply. The amendments are effective for annual periods beginning on or after
January 1, 2016. Earlier adoption permitted. The Company is currently assessing the impact of this pronouncement.
IAS 24 – Related Party Disclosures (“IAS 24”) was amended to clarify that an entity providing key management
services to the reporting entity or the parent of the reporting entity is a related party of the reporting entity. The
amendments also require an entity to disclose amounts incurred for key management personnel services provided by
a separate management entity. The amendments to IAS 24 are effective for annual periods beginning on or after July
1, 2014. The Company is currently assessing the impact of this pronouncement.
3.
Exploration and acquisition
Yukon, Canada
The Company owns certain groups of mineral claims through its principal property, the VIP Property located in the
Whitehorse Mining District, and throughout other parts of the Yukon Territory and the Lone Mountain Zinc Property in
Eureka County, Nevada.
On May 1, 2013, the Company entered into an amended option agreement with Goldstrike Resources Ltd.
(“Goldstrike”) for the Summit Property which is located in the Yukon Territory. Under the amended agreement,
Goldstrike has the option to earn a 100% interest in the Summit Property by meeting the following payments: (i) issue
200,000 shares by May 31, 2013 (issued and valued at $40,000); (ii) issue 300,000 shares and pay $125,000 or issue
shares in the equivalent amount, by October 31, 2015; (iii) issue 500,000 shares by October 31, 2016; and (iv) issue
600,000 shares and pay $250,000 or issue shares in the equivalent amount, and incur $1,000,000 in exploration
expenditures by October 31, 2017. The Company would retain a 30% net smelter return royalty ("NSR") and back-in
option in which the Company could reacquire 30% of the property by paying Goldstrike $5,000,000.
Nevada, United States
(i) On July 23, 2014, the Company received approval from the TSXV for the assignment of a lease agreement granting
the Company the right to acquire a 100% interest in the Lone Mountain zinc property comprised of 170 claims in
Eureka County, Nevada (the “Lease Agreement”) from Norvista Capital Corporation (“Norvista”). In connection with the
Lease Agreement and in consideration for the assignment, the Company issued 2,000,000 common shares to Norvista
at a fair value of $0.15 per share (valued at $300,000).
- 13 -
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
3.
Exploration and acquisition (continued)
Nevada, United States (continued)
Under the terms of the Lease Agreement, the Company has the right to continually lease the Lone Mountain zinc
property for a minimum 20 year period or longer if the Lease Agreement is extended beyond 20 years. The principal
terms of the Lease Agreement require the Company to make annual lease payments of US$25,000 to the lessor
during the first three years of the Lease Agreement, after which the lease payments increase to US$50,000 per year in
years four and five. Beginning in year six and thereafter the lease payments increase to US$100,000 per year,
however, these lease payments are treated as advances against royalty payments from production, if any, during the
year the lease payment is made.
The Company must also make all payments to keep the Lone Mountain zinc property in good standing and must carry
out work programs during the first five years of the Lease Agreement. The work programs are comprised of a minimum
of US$50,000 per year in the first three years of the Lease Agreement and a minimum of US$100,000 in years four
and five of the Lease Agreement.
The lessor will retain a 3% NSR on precious metals production, if any, and a 2% NSR on base metal production, if any,
from the Lone Mountain zinc property. The precious metals and base metals NSR on the Lone Mountain zinc property
can be reduced to 2% and 1%, respectively, under certain circumstances.
(ii) On October 30, 2014 the Company received approval from the TSXV approving the execution by the Company of a
lease with an option-to-purchase agreement with Bravada Gold Corp. (“Bravada”) to acquire a 100% interest in
Bravada's South Lone Mountain property, located along the Battle Mountain-Eureka gold trend in central Nevada. The
Bravada property is adjacent to the Company's Lone Mountain zinc property. The Bravada property consists of 28
unpatented mineral claims.
The Bravada agreement provides the Company with the option to earn a 100% interest in the property by making
staged, escalating lease payments totalling US$325,000 in cash over a period of up to 10 years, during which
exploration and development on the property may be conducted by the Company. In addition, Bravada received
50,000 of the Company's common shares on October 30, 2014 (valued at $9,000) and is eligible to receive another
100,000 of the Company's common shares in the event a National Instrument 43-101 combined resource estimate for
the Lone Mountain zinc property and the Bravada property indicates that at least 10 per cent of the reported tonnage is
attributable to the Bravada property. All lease payments can be applied to the final purchase price of US$325,000, after
which advance minimum royalty payments become due annually in the amount of the cash equivalent of 50 ounces of
gold.
Bravada and a previous owner of the Bravada property have royalties on production from the Bravada property.
Bravada holds a 1.5% NSR on base metals production and a 3.0% NSR on precious metals production. Bravada's
base metal NSR can be reduced to 1.0% and its precious metals NSR can be reduced to 1.5% concurrently, not
individually, by the Company for a total cash payment to Bravada of US$3 million. The previous owner of the Bravada
property holds a 1.0% NSR on both base and precious metal production from the Bravada property. The Company can
concurrently, not individually, buy down the royalty on both base and precious metals to 0.5% for total cash
consideration of US$3 million.
- 14 -
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
4.
Capital risk management
The Company manages its capital with the following objectives:


to ensure sufficient financial flexibility to achieve the ongoing business objectives including funding of future
growth opportunities, and pursuit of accretive acquisitions; and
to maximize shareholder return through enhancing the share value.
The Company monitors its capital structure and makes adjustments according to market conditions in an effort to meet
its objectives given the current outlook of the business and industry in general. The Company may manage its capital
structure by issuing new shares, repurchasing outstanding shares, adjusting capital spending, or disposing of assets.
The capital structure is reviewed by management and the Board of Directors on an ongoing basis.
The Company considers its capital to be equity, which comprises share capital, reserves and deficit, which at
December 31, 2014, totaled $367,397 (December 31, 2013 - $50,534).
The Company manages capital through its financial and operational forecasting processes. The Company reviews its
working capital and forecasts its future cash flows based on operating expenditures, and other investing and financing
activities. The forecast is updated based on activities related to its exploration properties. Selected information is
provided to the Board of Directors of the Company. The Company’s capital management objectives, policies and
processes have remained unchanged during the year ended December 31, 2014.
The Company is not subject to any capital requirements imposed by a lending institution or regulatory body, other than
Policy 2.5 of the TSXV which requires adequate working capital or financial resources of the greater of (i) $50,000 and
(ii) an amount required in order to maintain operations and cover general and administrative expenses for a period of 6
months. As of December 31, 2014, the Company is compliant with Policy 2.5 of the TSXV.
5.
Financial risk management
Financial risk
The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including
interest rate risk, foreign currency risk and commodity and equity price risk).
Risk management is carried out by the Company's management team with guidance from the Audit Committee under
policies approved by the Board of Directors. The Board of Directors also provides regular guidance for overall risk
management. There were no changes to credit risk, liquidity risk or market risk for the year ended December 31, 2014.
(i) Credit risk
Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The Company's
credit risk is primarily attributable to cash and cash equivalents and amounts receivable. Cash and cash equivalents is
held with select major Canadian chartered banks, from which management believes the risk of loss to be minimal.
(ii) Liquidity risk
Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as
they come due. The Company’s liquidity and operating results may be adversely affected if its access to the capital
market is hindered, whether as a result of a downturn in stock market conditions generally or matters specific to the
Company. The Company generates cash flow primarily from its financing activities. As at December 31, 2014, the
Company had cash and cash equivalents of $546,559 (December 31, 2013 - $105,153) to settle current liabilities of
$224,449 (December 31, 2013 - $68,295). All of the Company's financial liabilities as at December 31, 2014 are
subject to normal trade terms. The Company regularly evaluates its cash position to ensure preservation and security
of capital as well as liquidity.
- 15 -
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
5.
Financial risk management (continued)
(iii) Market risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange
rates and commodity and equity prices.
(a) Interest rate risk
The Company has cash and cash equivalents balances which are subject to a fixed interest rate. The
Company's current policy is to invest excess cash in investment-grade short-term deposit certificates issued by a
Canadian chartered bank with which it keeps its bank accounts. The Company periodically monitors the
investments it makes and is satisfied with the creditworthiness of its Canadian chartered bank.
(b) Foreign currency risk
The Company's functional and reporting currency is the Canadian dollar and major purchases are transacted in
Canadian dollars.
(c) Commodity and equity price risk
The Company is exposed to price risk with respect to commodity prices. Commodity price risk is defined as the
potential adverse impact on earnings and economic value due to commodity price movements and volatilities.
The Company closely monitors commodity prices, as they relate to precious and base metals and other
minerals, and the stock market to determine the appropriate course of action to be taken by the Company.
Commodity price risk could adversely affect the Company. In particular, the Company's future profitability and
viability of development depend upon the world market price of precious and base metals and other minerals.
Precious and base metals and other mineral prices have fluctuated widely in recent years. There is no
assurance that, even if commercial quantities of precious and base metals and other minerals are produced in
the future, a profitable market will exist for them. As at December 31, 2014, the Company was not a precious
minerals, base metals and other minerals producer. Even so, commodity price risk may affect the completion of
future equity transactions such as equity offerings and the exercise of stock options and warrants. This may also
affect the Company's liquidity and its ability to meet its ongoing obligations.
Other price risk is the risk that the value of financial instrument will fluctuate as a result of changes in market
prices.
The Company's other price risk includes equity price risk, whereby the Company's investments in marketable
securities are subject to market price fluctuation.
Sensitivity analysis
Based on management's knowledge and experience of the financial markets, the Company believes the following
movements are reasonably possible over a twelve-month period:
(i) The Company receives low interest rates on its cash and cash equivalent balances and, as such, the Company
does not have significant interest rate risk.
(ii) The Company does not hold balances in foreign currencies to give rise to exposure to foreign exchange risk.
(iii) The Company's marketable securities are subject to fair value fluctuations. As at December 31, 2014, if the bid
price of the common shares decreased/increased by 10% with all other variables held constant, net loss and
comprehensive loss for the year ended December 31, 2014 would have been approximately $200 higher/lower.
- 16 -
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
6.
Categories of financial instruments
As at December 31,
2014
Financial assets:
Loans and receivables
Cash
$
FVTPL
Marketable securities
Cash equivalents
Financial liabilities:
Other financial liabilities
Amounts payable and other liabilities
2013
479,821
$
9,316
2,023
66,738
$
224,449
3,377
95,837
$
68,295
As of December 31, 2014 and December 31, 2013, the fair value of all the Company’s financial instruments
approximates the carrying value, due to their short-term nature.
7.
Fair value measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the
inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices
for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or
liability, or inputs that are derived principally from or corroborated by observable market data or other means. Level 3
inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to
Level 1 inputs and the lowest priority to Level 3 inputs.
(a) Assets and liabilities measured at fair value on a recurring basis:
As at December 31, 2014
Cash equivalents
Marketable securities
As at December 31, 2013
Cash equivalents
Marketable securities
Quoted
prices in
active
Significant
markets for
other
Significant
identical
observable unobservable
assets
inputs
inputs
Aggregate
(Level 1)
(Level 2)
(Level 3)
fair value
$
$
66,738 $
$
66,738
2,023
2,023
$
2,023 $
66,738 $
$
68,761
$
$
- 17 -
3,377
3,377
$
$
95,837
95,837
$
$
-
$
$
95,837
3,377
99,214
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
7.
Fair value measurements (continued)
(b) Fair values of financial assets and liabilities:
As at
December 31, 2014
Carrying
Estimated
amount
fair value
Financial assets
Cash
Cash equivalents
Marketable securities
$
Financial liabilities
Amounts payable and other liabilities
$
479,821
66,738
2,023
548,582
$
224,449
$
$
479,821
66,738
2,023
548,582
$
224,449
December 31, 2013
Carrying
Estimated
amount
fair value
$
$
9,316 $
95,837
3,377
108,530 $
9,316
95,837
3,377
108,530
$
68,295 $
68,295
The Company does not offset financial assets with financial liabilities.
8.
Cash and cash equivalents
As at December 31,
2014
Cash
Money market investments
Total
9.
$
$
479,821
66,738
546,559
2013
$
$
9,316
95,837
105,153
Marketable securities
As of December 31, 2014, the Company's publicly traded investments consisted of the following:
Public issuer
Security description
Cava Resources Inc.
Mill City Gold Corp.
320,000 common shares
4,704 common shares (1)
$
$
(1)
Estimated
fair value
Cost
72,000
7,200
79,200
$
$
1,600
423
2,023
Share split: 2,352 common shares were increased to 4,704 common shares.
As of December 31, 2013, the Company's publicly traded investments consisted of the following:
Public issuer
Security description
Cava Resources Inc.
Mill City Gold Corp.
320,000 common shares
2,352 common shares
Estimated
fair value
Cost
$
$
72,000
7,200
79,200
$
$
3,200
177
3,377
During the year ended December 31, 2014, the Company received cash proceeds of $nil (year ended December 31,
2013 - $120,119) on the sale of marketable securities, resulting in a loss of $1,354 (year ended December 31, 2013 $31,566).
The Company received these marketable securities pursuant to option agreements relating to its exploration and
acquisition properties.
- 18 -
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
10.
Amounts receivable and other assets
As at December 31,
2014
Sales tax receivable - (Canada)
Prepaid expenses
Reclamation bond
$
$
11.
21,511
3,000
18,753
43,264
2013
$
$
10,299
10,299
Amounts payable and other liabilities
Amounts payable and other liabilities of the Company are principally comprised of amounts outstanding for purchases
relating to exploration and acquisition costs and general operating activities.
As at December 31,
2014
Trade payables
Accrued liabilities
$
$
26,751
197,698
224,449
2013
$
$
32,013
36,282
68,295
The following is an aged analysis of the amounts payable and other liabilities:
As at December 31,
2014
Less than 1 month
1 to 3 months
Greater than 3 months
$
$
12.
213,269
11,180
224,449
2013
$
$
43,604
7,432
17,259
68,295
Share capital
a) Authorized share capital
The authorized share capital consists of an unlimited number of common shares. The common shares do not have a
par value. All issued shares are fully paid.
b) Common shares issued
As at December 31, 2014, the issued share capital amounted to $7,266,991. The change in issued share capital for
the years presented were as follows:
Number of
common
shares
Amount
Balance, December 31, 2012 and December 31, 2013
Issuance of common shares (i)(ii)
Share issuance costs
Exercise of warrants (iii)(iv)(v)
Value of warrants exercised (iii)(iv)(v)(vi)
Issuance of common shares for exploration and acquisition costs (note 3)
Balance, December 31, 2014
- 19 -
43,415,001 $ 5,528,549
4,833,333
650,000
(3,062)
4,215,667
689,550
92,954
2,050,000
309,000
54,514,001 $ 7,266,991
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
12.
Share capital (continued)
b) Common shares issued (continued)
(i) On April 22, 2014, the Company completed a non-brokered private placement financing for aggregate gross
proceeds of $150,000. The offering consisted of the sale of 1,500,000 common shares of the Company at a price of
$0.10 per share.
(ii) On August 12, 2014, the Company completed a non-brokered private placement financing with Norvista for
aggregate gross proceeds of $500,000. The offering consisted of the sale of 3,333,333 common shares in the capital
stock of the Company at a price of $0.15 per share.
(iii) During the year ended December 31, 2014, the Company issued 3,341,667 shares of its common stock at $0.15
per share related to the exercise of warrants, for total proceeds of $501,250 and Black-Scholes value of $64,658.
(iv) During the year ended December 31, 2014, the Company issued 784,000 shares of its common stock at $0.20 per
share related to the exercise of warrants, for total proceeds of $156,800 and Black-Scholes value of $22,187.
(v) During the year ended December 31, 2014, the Company issued 90,000 shares of its common stock at $0.35 per
share related to the exercise of warrants, for total proceeds of $31,500 and Black-Scholes value of $5,236.
(vi) Refer to note 14(i).
13.
Net loss per common share
The calculation of basic loss per share for the year ended December 31, 2014 was based on the loss attributable to
common shareholders of $1,523,410 (year ended December 31, 2013 - $307,889) and the weighted average number
of common shares outstanding of 48,088,886 for the year ended December 31, 2014 (year ended December 31, 2013
- 43,415,001). Diluted loss per share for the years ended presented did not include the effect of 12,111,000 warrants
(December 31, 2013 - 19,000,000 warrants) and 4,350,000 stock options (December 31, 2013 - 3,250,000 options) as
they are anti-dilutive.
14.
Warrants
The following table reflects the continuity of warrants for the years ended December 31, 2014 and 2013:
Balance, December 31, 2012
Expired
Balance, December 31, 2013
Exercised (i)
Expired
Balance, December 31, 2014
Number of
warrants
20,785,000
(1,785,000)
19,000,000
(4,230,667)
(2,658,333)
12,111,000
Weighted average
exercise price ($)
0.25
0.26
0.25
0.16
0.15
0.30
(i) Refer to note 12(iii)(iv)(v). Also includes 15,000 warrants that were exercised during the year ended December 31,
2011. During the year ended December 31, 2011, the Company issued 15,000 shares of its common stock at $0.35
per share related to the the exercise of warrants with a Black-Scholes value of $873 which was accounted for during
the year ended December 31, 2014.
- 20 -
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
14.
Warrants (continued)
The following table reflects the actual warrants issued and outstanding as of December 31, 2014:
Number of
warrants
outstanding
4,216,000
7,895,000
12,111,000
Grant date
fair value ($)
119,314
459,307
578,621
Exercise
price ($)
0.20
0.35
0.30
Expiry date
February 3, 2015 (i)
February 3, 2015 (i)
(i) On July 10, 2014, the Company received approval from the TSXV for the extension of the expiry date of these
warrants. The expiry date of an aggregate of 13,000,000 previously issued warrants from December, 2010 and August,
2011 has been amended from August 3, 2014 to February 3, 2015. The exercise price of the warrants remains
unchanged.
(ii) The weighted average grant date fair value of warrants outstanding is $0.05 (year ended December 31, 2013 $0.04).
15.
Stock options
The Company has established a stock option plan for directors, senior officers, employees and consultants of the
Company.
The Board of Directors may designate which directors, senior officers, employees and consultants of the Company are
to be granted options to acquire common shares, subject to the restriction that the aggregate number of common
shares issuable upon the exercise of options granted thereunder shall not exceed 10% of the then current number of
issued and outstanding common shares as at the date of the options are granted.
The directors, in compliance with the requirements of the stock exchange or exchanges on which the common shares
are listed, determine the exercise price associated with any options granted under the option plan. The options will vest
on the date set by the directors and expire at a time set by the directors, being not more than ten years from the date of
grant, provided that any outstanding options will expire on a date to be determined by the directors following the date
that the holder ceases to be a senior officer, director, employee or consultant of the Company, such period not being
more that 12 months from the date of such cessation. In the event of the death of a holder, the option will remain
exercisable in accordance with its terms for a period not exceeding one year from the holder's death. Options granted
under the option plan will be non assignable. Outstanding options to be granted under the option plan may be adjusted
in certain events, as to exercise price and number of common shares, to prevent dilution or enlargement.
The following summarizes the stock option activity for the years ended December 31, 2014 and 2013:
Number of
stock options
3,250,000
1,400,000
(300,000)
4,350,000
Balance, December 31, 2012 and December 31, 2013
Granted (i)
Expired
Balance, December 31, 2014
- 21 -
Weighted average
exercise price ($)
0.25
0.15
0.25
0.22
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
15.
Stock options (continued)
(i) On August 12, 2014, the Company granted a total of 1,400,000 stock options to its directors and a consultant with
each option exercisable into one common share of the Company at an exercise price of $0.15 per share until August
12, 2019. A fair value of $201,600 was determined using the Black-Scholes option pricing model. The following
weighted average assumptions were used: risk-free interest rate - 1.52%; expected volatility - 239.6% which is based
on historical volatility of the Company's share price; expected dividend yield - nil; and expected life - 5 years. These
options vested immediately upon grant. During the year ended December 31, 2014, $201,600 was expensed to sharebased payments.
The following table reflects the Company's stock options outstanding and exercisable as at December 31, 2014:
Options
outstanding
2,450,000
500,000
1,400,000
4,350,000
16.
Grant
date fair
value ($)
371,273
38,500
201,600
611,373
Exercise
price ($)
0.25
0.25
0.15
0.22
Options
exercisable
2,450,000
500,000
1,400,000
4,350,000
Weighted
average
remaining
contractual life
Expiry
(years)
date
1.59
August 3, 2016
2.72
September 20, 2017
4.62
August 12, 2019
2.70
Exploration and acquisition costs (recovery)
Years ended
December 31,
2014
2013
Yukon, Canada
Mineral exploration property acquisition
Property option-out (note 3)
Exploration (recovery)
Claim renewal
Assessment cost
Laboratory and analysis
Geologist expenses
Equipment
Transportation
Consultant
Geophysical survey
Accommodation
Miscellaneous
$
$
Nevada, United States
Mineral exploration property acquisition (note 3)
Claim renewal
Drilling
Exploration
Reports
Laboratory and analysis
Consulting
$
$
$
Exploration and acquisition costs (recovery)
- 22 -
28,067
127
14,929
30,000
4,000
4,400
24,000
105,523
$
324,832
59,667
327,633
15,319
2,931
73,122
89,221
892,725
998,248
$
$
$
$
Cumulative to
December 31,
2014
$
(40,000)
(11,697)
20,203
3,160
(28,334) $
3,390,000
(909,800)
1,626,489
180,117
12,344
175,931
35,604
17,810
47,417
129,919
24,000
718
1,239
4,731,788
$
324,832
59,667
327,633
15,319
2,931
73,122
89,221
$
892,725
(28,334) $ 5,624,513
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
17.
General and administrative
Years ended
December 31,
2014
2013
Professional fees
Salaries
Share-based payments
Regulatory fees
Accounting fees
Administrative expenses
Consulting fees
$
$
18.
Income taxes
(a)
Provision for income taxes
60,702
111,821
201,600
27,919
21,855
58,961
53,621
536,479
$
$
13,626
191,204
25,625
24,695
63,683
15,328
334,161
Major items causing the Company's effective income tax rate to differ from the combined Canadian federal and
provincial statutory rate of 26.5% (2013 - 26.5%) were as follows:
Loss before income taxes
Expected income tax recovery based on statutory rate of 26.5% (2013 - 26.5%)
Adjustment to expected income tax benefit:
Share-based payments
Non-deductible expenses for tax purposes
Change in tax rates
Other
Change in benefit of tax assets not recognized
Deferred income tax provision (recovery)
(b)
Year ended
December 31,
2014
2013
$ (1,530,225) $
(337,393)
(406,000)
(89,000)
$
53,000
16,000
337,000
-
$
8,000
(16,000)
(64,000)
161,000
-
Deferred income tax
Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable
profit will be available against which the Company can use the benefits.
December 31,
2014
2013
Unrecognized deferred assets
Non-capital loss carry-forwards
Share issue costs
Mineral property costs
Capital losses
$
$
- 23 -
523,000
150,000
7,425,000
8,098,000
$
$
398,000
298,000
6,097,000
84,000
6,877,000
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
18.
Income taxes (continued)
(c)
Losses carried forward
As at December 31, 2014, the Company had capital losses available for carry forward of approximately $123,000
(2013 - $147,000) and non-capital losses available for carry forward of $523,000 (2013 - $398,000) for income tax
purposes as follows:
Expires
2030
2031
2032
2033
2034
$
$
19.
3,000
105,000
151,000
138,000
126,000
523,000
Major shareholders and related party transactions
Major shareholders
To the knowledge of the directors and senior officers of the Company, as at December 31, 2014, no person or
corporation beneficially owns or exercises control or direction over common shares of the Company carrying more than
10% of the voting rights attached to all common shares of the Company other than as set out below:
Percentage of
Number of
outstanding
Major shareholder
common shares common shares
Pasquale DiCapo
5,650,000
10.36 %
Sheldon Inwentash
5,900,000
10.82 %
None of the Company's major shareholders have different voting rights than other holders of the Company's common
shares.
The Company is not aware of any arrangements, the operation of which may at a subsequent date result in a change
in control of the Company. To the knowledge of the Company, it is not directly or indirectly owned or controlled by
another corporation, by any government or by any natural or legal person severally or jointly.
Related party transactions
Related parties include the Board of Directors, officers, close family members and enterprises that are controlled by
these individuals as well as certain persons performing similar functions.
The below noted transactions are in the normal course of business and are measured at the exchange amount, as
agreed to by the parties, and approved by the Board of Directors.
Remuneration of key management personnel of the Company was as follows:
During the year ended December 31, 2014, $60,000 (year ended December 31, 2013 - $120,000) was paid or accrued
as a salary of Bruce Durham, the Chief Executive Officer of the Company, and as of December 31, 2014, Bruce
Durham was owed $42,882 (December 31, 2013 - $10,000) and this amount was included in amounts payable and
other liabilities. The amounts are non-interest bearing, unsecured with no fixed terms of repayment.
- 24 -
Nevada Zinc Corporation (Formerly "Goldspike Exploration Inc.")
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(Expressed in Canadian Dollars)
19.
Major shareholders and related party transactions (continued)
Related party transactions (continued)
During the year ended December 31, 2014, $48,330 (year ended December 31, 2013 - $63,996) was paid as a salary
to Donald Christie, the Chief Financial Officer of the Company.
In addition, during the year ended December 31, 2014, directors and officers of the Company received $172,800 (year
ended December 31, 2013 - $nil) in share-based payments.
Refer to note 12(b)(ii).
20.
Segmented information
The Company primarily operates in two reportable operating segments, being mineral exploration in Canada and
United States. The Company has an administrative office in Toronto, Canada. Geographical information is as follows:
As at December 31,
Canada
Total assets
$
$
Canada
United States
Total net loss
Year ended
December 31,
2014
2013
$ (630,685)
$ (307,889)
(892,725)
$ (1,523,410)
$ (307,889)
21.
2014
591,846
591,846
$
$
2013
118,829
118,829
Contingencies
The Company's exploration activities are subject to government laws and regulations, including tax laws and laws and
regulations governing the protection of the environment. The Company believes that its operations comply in all
material respects with all applicable past and present laws and regulations. The Company records provisions for any
identified obligations, based on management's estimate at the time. Such estimates are, however, subject to changes
in laws and regulations.
22.
Subsequent events
(i) Subsequent to year-end, 4,216,000 warrants with an exercise price of $0.20 and expiry date of February 3, 2015
were exercised for gross proceeds of $843,200.
(ii) Subsequent to year-end, 241,499 warrants with an exercise price of $0.35 and expiry date of February 3, 2015
were exercised for gross proceeds of $84,525 and 7,653,501 warrants expired unexercised.
(iii) Subsequent to year-end, 300,000 options with an exercise price of $0.25 and expiry date of August 3, 2016 were
exercised for gross proceeds of $75,000.
(iv) On January 23, 2015, the Company granted a total of 350,000 stock options to consultants with each option
exercisable into one common share of the Company at an exercise price of $0.27 per share until January 23, 2020.
(v) On March 6, 2015, the Company completed a vertical amalgamation of its wholly-owned subsidiary Nevada Zinc
Corporation which was incorporated on January 16, 2015. Concurrent with the vertical amalgamation, the name of the
Company was changed from Goldspike Exploration Inc. to Nevada Zinc Corporation.
- 25 -