UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
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¨
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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or
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended January 31, 2018
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or
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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or
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¨
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of event requiring this shell company report______________
For the transition period from ___________________ to ___________________
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Commission File Number
0-15688
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CORAL GOLD RESOURCES LTD.
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(Exact name of Registrant as specified in its charter)
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Not Applicable
(Translation of Registrant’s name into English)
British Columbia, Canada
(Jurisdiction of incorporation or organization)
570 Granville Street, Suite 900, Vancouver, British Columbia V6C 3P1, Canada
(Address of principal executive offices)
David Wolfin, Tel: 604 682-3701, Email: dwolfin@coralgold.com
570 Granville Street, Suite 900, Vancouver, British Columbia V6C 3P1, Canada
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
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Not Applicable
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Not Applicable
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Title of Each Class
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Name of each exchange on which registered
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Securities registered or to be registered pursuant to Section 12(g) of the Act:
Common Shares, without Par Value
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Not Applicable
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
There were 47,831,337 common shares, without par value, issued and outstanding as of January 31, 2018.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
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Yes
x
No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
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Yes
x
No
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.
x
Yes
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No
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).
[Not applicable to the registrant]
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Yes
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No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, "accelerated filer,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large Accelerated File
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Accelerated Filer
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Non-Accelerated Filer
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x
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Emerging Growth Company
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¨
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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
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U.S. GAAP
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International Financial Reporting Standards as issued
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Other
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by the International Accounting Standards Board
x
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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.
Item 17
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Item 18
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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).
Yes
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No
x
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes
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No
¨
TABLE OF CONTENTS
INTRODUCTION
Nomenclature
In this Annual Report on Form 20-F, which we refer to as the “Annual Report”, except as otherwise indicated or as the context otherwise requires, the terms “Company”, “we”, “our” or “us” refers to Coral Gold Resources Ltd. and its subsidiaries.
You should rely only on the information contained in this Annual Report. We have not authorized anyone to provide you with information that is different. The information in this Annual Report may only be accurate on the date of this Annual Report or on or as at any other date provided with respect to specific information.
CURRENCY
Unless otherwise indicated in this Annual Report, all references to “Canadian Dollars”, “CDN$”, “dollars” or “$” are to the lawful currency of Canada and all references to “U.S. Dollars”, or “US$” are to the lawful currency of the United States.
FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report, including those appearing under Item 5, constitute “forward-looking statements”, including, without limitation, those concerning the economic outlook for the mining industry, expectations regarding mineral prices, potential production, cash costs and other operating results, growth prospects and outlook of the Company’s operations, individually or in the aggregate, including the completion and commencement of commercial operations of certain of the Company’s exploration and production projects, the Company’s liquidity and capital resources and capital expenditures, the outcome and consequences of any potential or pending litigation or regulatory proceedings, and the Company’s plan to conduct drilling operations. Additionally, forward-looking statements are generally identifiable by the terminology used such as “plans”, “expects”, “estimates”, “budgets”, “intends”, “anticipates”, “believes”, “projects”, “indicates”, “targets”, “objective”, “could”, “may”, or other similar words.
The forward-looking statements are subject to known and unknown risks and uncertainties and other factors that may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements. Such factors include, among others: market prices for metals; the results of exploration and development drilling and related activities; economic conditions in the countries and provinces in which we carry on business, especially economic slowdown; actions by governmental authorities including increases in taxes, changes in environmental and other regulations, and renegotiations of contracts; political uncertainty, including actions by insurgent groups or other conflict; the negotiation and closing of material contracts; and the other factors discussed in Item 3 Key Information – “Risk Factors”, and in other documents that we file with the SEC. The impact of any one factor on a particular forward-looking statement is not determinable with certainty as such factors are interdependent upon other factors; our course of action would depend upon our assessment of the future considering all information then available. In that regard, any statements as to capital expenditures; the allocation of capital expenditures to exploration and development activities; sources of funding of our capital program; drilling; expenditures and allowances relating to environmental matters; anticipated dates by which certain areas will be developed or will come on-stream; expected funding and development costs; cash flows; uses of cash flows; availability of trade credit; expected operating costs; expenditures and allowances relating to environmental matters; debt levels; and changes in any of the foregoing are forward-looking statements, and there can be no assurances that the expectations conveyed by such forward-looking statements will, in fact, be realized.
Although we believe that the expectations conveyed by the forward-looking statements are reasonable based on information available to us on the date such forward-looking statements were made, no assurances can be given as to future results, levels of activity, achievements or financial condition.
Readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results, which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described above, as well as others not now anticipated. The foregoing statements are not exclusive and further information concerning the Company, including factors that could materially affect its financial results, may emerge from time to time. The Company does not intend to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.
CAUTIONARY NOTE TO UNITED STATES INVESTORS CONCERNING ESTIMATE OF MEASURED AND INDICATED MINERAL RESOURCES
In Canada, an issuer is required to provide technical information with respect to mineralization, including reserves and resources, if any, on its mineral exploration properties in accordance with Canadian requirements, which differ significantly from the requirements of the Securities and Exchange Commission (the “SEC”) applicable to registration statements and reports filed by United States companies pursuant to the United States Securities Act of 1933, as amended (the “Securities Act”), or the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, information contained in this Annual Report concerning descriptions of mineralization under Canadian standards may not be comparable to similar information made public by United States companies subject to the reporting and disclosure requirements of the SEC. In particular, reports referred to in this Annual Report may include the terms “mineral resource,” “measured mineral resource,” “indicated mineral resource” and “inferred mineral resource”. Investors are advised that these terms are defined under Canadian rules under National Instrument 43-101 (“NI 43-101”).
Investors are cautioned not to assume that any part of the mineral deposits in these categories will ever be converted into reserves.
However, these terms are not defined terms under SEC Industry Guide 7 and are not permitted to be used in reports and registration statements filed with the SEC by U.S. domestic issuers. In addition, NI 43-101 permits disclosure of “contained ounces” of mineralization. In contrast, the SEC only permits issuers to report mineralization as in place tonnage and grade without reference to unit measures.
The definitions of proven and probable reserves used in NI 43-101 differ from the definitions in SEC Industry Guide 7. Under SEC Industry Guide 7, as interpreted by the staff of the SEC, mineralization may not be classified as a “reserve” for United States reporting purposes 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. Among other things, all necessary permits would be required to be in hand or issuance imminent in order to classify mineralized material as reserves under the SEC standards.
Investors are cautioned not to assume that any part or all of the mineral deposits identified as an “indicated mineral resource,” “measured mineral resource” or “inferred mineral resource” will ever be converted to reserves as defined in NI 43-101 or SEC Industry Guide 7. Further, “inferred mineral resources” have a great amount of uncertainty as to their existence and 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 securities legislation, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, or economic studies.
Investors are cautioned not to assume that part or all of an inferred mineral resource exists, or is economically or legally mineable.
EXPLANATORY NOTE REGARDING PRESENTATION OF FINANCIAL INFORMATION
The annual audited consolidated financial statements contained in this annual report on Form 20-F are reported in Canadian dollars. For the years ended January 31, 2018 through January 31, 2014, inclusive we have prepared our consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
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GLOSSARY OF TECHNICAL TERMS
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Au
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The elemental symbol for gold.
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carlin type
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Carlin–type gold deposits are sediment-hosted disseminated gold deposits. These deposits are characterized by invisible (typically microscopic and/or dissolved) gold in pyrite and arsenopyrite. The deposit is named after the Carlin mine, the first large deposit of this type discovered in the Carlin Trend, Nevada.
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Chert
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A rock resembling flint and consisting essentially of crypto-crystalline quartz or fibrous chalcedony.
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cryptocrystalline
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is a rock texture made up of such minute crystals that its crystalline nature is only vaguely revealed even microscopically in thin sections by transmitted polarized light.
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Crystalline
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consisting of or containing crystals.
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Devonian
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is a geologic period and system of the Paleozoic Era spanning from the end of the Silurian Period, about 416.0 ± 2.8 Million years ago.
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diamond drill
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A rotary type of rock drill that uses diamonds to cut a core of rock that is recovered in long cylindrical sections, two centimeters or more in diameter.
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Fault
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A fracture in a rock where there has been displacement of the two sides.
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Grade
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The concentration of each ore metal in a rock sample, usually given as weight percent. Where extremely low concentrations are involved, the concentration may be given in grams per tonne (g/t or gpt) or ounces per ton (oz/t). The grade of an ore deposit is calculated, often using sophisticated statistical procedures, as an average of the grades of a very large number of samples collected from throughout the deposit.
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heap leaching
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A process whereby valuable metals, usually gold and silver, are leached from a heap, or pad, of crushed ore by leaching solutions percolating down through the heap and collected from a sloping, impermeable liner below the pad.
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HQ diameter
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is a diamond drill bit size with an outside diameter of 88.9 mm and an internal diameter of 77.8 mm.
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hydrothermal
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Hot fluids, usually mainly water, in the earth’s crust which may carry metals and other compounds in solution to the site of ore deposition or wall rock alteration.
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Intrusive
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A rock mass formed below the earth’s surface from magma which has intruded into a pre-existing rock mass.
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lode claim
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A mining claim on an area containing a known vein or lode.
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microcrystalline
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material is a crystallized substance or rock that contains small crystals visible only through microscopic examination.
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mineral reserve
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The economically mineable part of a measured or indicated mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of the reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for losses that may occur when the material is mined. Mineral resources are sub-divided in order of increasing confidence into “probable” and “proven” mineral reserves. A probable mineral reserve has a lower level of confidence than a proven mineral reserve. The term “mineral reserve” does not necessarily signify that extraction facilities are in place or operative or that all governmental approvals have been received. It does signify that there are reasonable expectations of such approvals.
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mineral resource
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The estimated quantity and grade of mineralization that is of potential economic merit. A resource estimate does not require specific mining, metallurgical, environmental, price and cost data, but the nature and continuity or mineralization must be understood. Mineral resources are sub-divided in order of increasing geological confidence into “inferred”, “indicated”, and “measured” categories. An inferred mineral resource has a lower level of confidence than that applied to an indicated mineral resource. An indicated mineral resource has a higher level of confidence than an inferred mineral resource, but has a lower level of confidence than a measured mineral resource. A mineral resource is a concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the earth’s crust in such form and quantity and of such grade or quality that it has reasonable prospects for economic extraction.
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mineralization
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Usually implies minerals of value occurring in rocks.
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net smelter or NSR Royalty
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Payment of a percentage of net mining profits after deducting applicable smelter charges.
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NPV
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Net Present Value
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Ordovician
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is a geologic period and system, the second of six of the Paleozoic Era, and covers the time between 488.3±1.7 to 443.7±1.5 million years ago.
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Ore
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A natural aggregate of one or more minerals which may be mined and sold at a profit, or from which some part may be profitably separated.
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Oxide
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A compound of oxygen and some other element.
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Paleozoic
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is the earliest of three geologic eras of the Phanerozoic Eon, spanning from roughly 542 to 251 million years ago.
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phanerozoic eon
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is the current geologic eon in the geologic timescale. It covers roughly 542 million years.
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placer claim
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A mining claim located upon gravel or ground whose mineral contents are extracted by the use of water, by sluicing, hydraulicking, etc.
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Porphyry
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Rock type with mixed crystal sizes, i.e. containing larger crystals of one or more minerals.
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Quartz
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Silica or SiO
2
, a common constituent of veins, especially those containing gold and silver mineralization.
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RQD
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Rock Quality Designation - a technique that is used in geotechnical engineering principles which determines the quality of rock that was recovered when taking a core sample. It means rock quality designation and representative cross sections of the core sample must reach, or exceed 90- 100 mm in length for it to be considered excellent in quality.
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SG
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Specific gravity
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Silurian
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is a geologic period and system that extends from the end of the Ordovician Period, about 443.7 ± 1.5 million years ago (mya), to the beginning of the Devonian Period, about 416.0 ± 2.8 million years ago.
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slaven chert
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A thin-bedded brown to gray-green chert with interbeds of black argillite, siltstone, and bedded barite.
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Tertiary
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a widely used term for the geologic period from 65 million to 2.6 million years ago.
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Ton
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Imperial measurement of weight equivalent to 2,000 pounds.
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Tonne
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Metric measurement of weight equivalent to 1,000 kilograms (or 2,204.6 pounds).
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trench
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A long, narrow excavation dug through overburden, or blasted out of rock, to expose a vein or ore structure.
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Veins
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The mineral deposits that are found filling openings in rocks created by faults or replacing rocks on either side of faults.
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wenban limestone
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Devonian limestones best exposed on the western flank of Wenban Peak south of the town of Cortez, Nevada.
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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
A. Selected Financial Data
For the years ended January 31, 2018, 2017, 2016, 2015 and 2014, we have prepared our consolidated financial statements in accordance with IFRS, as issued by the IASB.
The selected historical consolidated financial information set forth below has been derived from our annual audited consolidated financial statements for each of the years in the five-year period ended January 31, 2018.
The selected historical consolidated financial information presented below is condensed and may not contain all of the information that you should consider. This selected financial data should be read in conjunction with our annual audited consolidated financial statements, the notes thereto and the section entitled ‘‘Item 5-Operating and Financial Review and Prospects.’’
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Years Ended January 31,
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2018
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2017
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2016
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2015
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2014
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Operations
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Revenue
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$
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-
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$
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-
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$
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-
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$
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-
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$
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-
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Expense
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Operating and Administrative
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1,375,982
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580,066
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642,193
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538,469
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860,517
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Net Income (Loss)
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2,015,340
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(981,139
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)
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50,521
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527
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(50,871
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)
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Earnings (Loss) Per Share – Basic
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0.04
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(0.02
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0.00
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0.00
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(0.00
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Earnings (Loss) Per Share – Diluted
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0.04
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(0.02
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0.00
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0.00
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(0.00
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Weighted Average Number of Shares Outstanding – Basic
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47,570,158
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48,396,734
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44,200,953
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42,016,049
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36,024,532
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Weighted Average Number of Shares Outstanding – Diluted
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50,519,282
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48,396,734
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44,200,953
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42,741,915
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36,024,532
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As at January 31,
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2018
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2017
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2016
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2015
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2014
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Balance Sheet
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Working Capital (deficit)
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$
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15,296,877
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$
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(117,528
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)
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$
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470,078
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$
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11,324
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$
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(486,109
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)
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Total Assets
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21,937,782
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19,641,035
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20,088,148
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20,275,844
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19,856,395
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Liabilities
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2,881,168
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1,793,502
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1,413,790
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2,011,063
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2,750,713
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Equity
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19,056,614
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17,837,213
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18,674,358
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18,264,781
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17,105,682
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Exchange Rates
The following table sets forth information as to the period end, average, the high and the low exchange rate for Canadian Dollars and U.S. Dollars for the periods indicated based on the noon buying rate in New York City for cable transfers in Canadian Dollars as certified for customs purposes by the Federal Reserve Bank of New York (Canadian dollar = US$1).
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Year Ended
January 31,
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Average
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Period End
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High
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Low
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2014
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1.0389
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1.1138
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1.1178
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0.9955
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2015
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1.1151
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1.2711
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1.2711
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1.0639
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2016
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1.2964
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1.4080
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1.4223
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1.2185
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2017
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1.3165
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1.3030
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1.4039
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1.2544
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2018
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1.2922
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1.2293
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1.3745
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|
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|
1.2131
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The following table sets forth the high and low exchange rate for the past six months based on the noon buying rate. As of May 31, 2018, the exchange rate was CDN$1.2970 for each US$1.
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Month
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High
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Low
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December 2017
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1.2900
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|
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1.2517
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January 2018
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1.2534
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1.2293
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February 2018
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1.2806
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|
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1.2280
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March 2018
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|
|
1.3096
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|
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1.2822
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April 2018
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|
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1.2918
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|
|
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1.2548
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May 2018
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1.3027
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|
|
|
1.2761
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B. Capitalization and Indebtedness
Not Applicable.
C. Reasons for the Offer and Use of Proceeds
Not Applicable.
D. Risk Factors
In addition to the other information presented in this Annual Report, the following should be considered carefully in evaluating the Company and its business. This Annual Report contains forward-looking statements that involve risks and uncertainties. The Company’s actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed below and elsewhere in this Annual Report.
Although the Company recognized net income for the year ended January 31, 2018, the Company does not anticipate any revenues in the near future and will incur losses.
During the year ended January 31, 2018, the Company recognized net income from the sale of the Robertson mining claims. The Company’s remaining properties are in the exploration stage. Therefore until such properties can develop or the Company can acquire properties that can be development and revenues can be derived therefrom, the Company will incur losses.
As of January 31, 2018, our internal controls over financial reporting were ineffective, and if we continue to fail to improve such controls and procedures, investors could lose confidence in our financial and other reports, the price of our shares of common stock may decline, and we may be subject to increased risks and liabilities.
As a public company, we are subject to the reporting requirements of the United States Securities Exchange Act of 1934, as amended, and the Sarbanes-Oxley Act of 2002. The Exchange Act requires, among other things, that we file annual reports with respect to our business and financial condition. Section 404 of the Sarbanes-Oxley Act requires, among other things, that we include certifications of our management regarding the effectiveness of our disclosure controls and procedures. For the year ended January 31, 2018, our management has concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that material information relating to the Company and its consolidated subsidiaries is made known to management and disclosed in accordance with applicable securities regulations. Further, management concluded the Company’s internal control over financial reporting was not effective as at January 31, 2018, due to the following material weaknesses: (i) due to the limited number of staff resources, the Company believes there are instances where a lack of segregation of duties exist to provide effective controls; and (ii) due to the limited number of staff resources, the Company may not have the necessary in-house knowledge to address complex accounting and tax issues that may arise. If we cannot effectively and efficiently improve our controls and procedures, we could suffer material misstatements in our financial statements and other information we report and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial and other information. This could lead to a decline in the trading price for our common shares.
We will be required to raise additional capital to mine our properties.
The Company is currently in the exploration stage of its properties. If the Company determines, based on its most recent information, that it is feasible to begin development and operations on its properties, the Company will be required to raise additional capital in order to develop and bring the properties into production. The Company’s ability to raise funds will depend on several factors, including, but not limited to, current economic conditions, its properties, its prospects, metal prices, businesses competing for financing and its financial condition. The Company may not be able to raise funds, or to raise funds on commercially reasonable terms. If the Company is unable to raise additional funds, it may not be able to develop its properties or any of its business plans as described in this Annual Report.
The commercial quantities of ore cannot be accurately predicted.
Whether an ore body will be commercially viable depends on a number of factors including the particular attributes of the deposit, such as size, grade and proximity to infrastructure, as well as mineral prices 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 the combination of these factors may result in a mineral deposit being unprofitable.
The mining industry is highly speculative and involves substantial risks
.
The mining industry, from exploration, development and production is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit from production. The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, and government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. The combination of such factors may result in the Company not receiving any or an adequate return on investment capital.
The Company’s properties are all at the exploration stage and have no reserves
. All of the Company’s properties are in the exploration stage only and are without a known body of ore. If the Company does not discover a body of ore in its properties, the Company will search for other properties where it can continue similar work.
The Company’s mineral exploration efforts may be unsuccessful
. Despite exploration work on its mineral claims, no known bodies of commercial ore or economic deposits have been established on any of the Company’s properties. In addition, the Company is at the exploration stage on all of its properties and substantial additional work will be required in order to determine if any economic deposits occur on the Company’s properties. Even in the event commercial quantities of minerals are discovered, the exploration properties might not be brought into a state of commercial production. Finding mineral deposits is dependent on a number of factors, including the technical skill of exploration personnel involved. The commercial viability of a mineral deposit once discovered is also dependent on a number of factors, some of which are particular attributes of the deposit, such as size, grade and proximity to infrastructure, as well as metal prices.
Competition for mineral land
. There is a limited supply of desirable mineral lands available for acquisition, claim staking or leasing in the areas where the Company contemplates expanding its operations and conducting exploration activities. Many participants are engaged in the mining business, including large, established mining companies. Accordingly, there can be no assurance that the Company will be able to compete successfully for new mining properties.
Uncertainty of exploration and development programs
.
The Company’s results of operations are significantly affected by the costs and results of its exploration programs. Exploration for minerals is highly speculative in nature, involves many risks and is frequently unsuccessful. Among the many uncertainties inherent in any gold and silver exploration and development program are the location of economic ore bodies, the development of appropriate metallurgical processes, the receipt of necessary governmental permits and the construction of mining and processing facilities. Assuming the discovery of an economic deposit, depending on the type of mining operation involved, several years may elapse from the initial phases of drilling until commercial operations are commenced and, during such time, the economic feasibility of production may change. Accordingly, the Company’s exploration and development programs may not result in any new economically viable mining operations or yield new mineral reserves to expand current mineral reserves.
Licenses and permits
. The operations of the Company require licenses and permits from various governmental authorities. The Company believes that it holds all necessary licenses and permits required under applicable laws and regulations and believes that it is presently complying in all material respects with the terms of such licenses and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that the Company will be able to obtain or maintain all necessary licenses and permits as are required to explore and develop its properties, commence construction or operation of mining facilities and properties under exploration or development or to maintain continued operations that economically justify the cost.
Conflict of interest.
Certain directors and officers of the Company are officers and/or directors of, or are associated with, other natural resource companies that acquire interests in mineral properties. Such associations may give rise to conflicts of interest from time to time. The directors are required by law, however, to act honestly and in good faith with a view to the best interests of the Company and its shareholders and to disclose any personal interest which they may have in any material transaction which is proposed to be entered into with the Company and to abstain from voting as a director for the approval of any such transaction.
Limited and volatile trading volume
.
Although the Company’s common shares are listed on the TSX Venture Exchange (the “TSX-V”), the Frankfurt Stock Exchange (the “FSE”), and the Berlin-Bremen Stock Exchange and quoted in the United States on the OTCQX, the volume of trading has been limited and volatile in the past and is likely to continue to be so in the future, reducing the liquidity of an investment in the Company’s common shares and making it difficult for investors to readily sell their shares in the open market. Without a liquid market for the Company’s common shares, investors may be unable to sell their shares at favorable times and prices and may be required to hold their shares in declining markets or to sell them at unfavorable prices.
Volatility of share price
.
In recent years, securities markets in Canada have experienced a high level of price volatility. The market price of many resource companies, particularly those, like the Company, that are considered speculative exploration companies, have experienced wide fluctuations in price, resulting in substantial losses to investors who have sold their shares at a low price point. These fluctuations are based only in part on the level of progress of exploration, and can reflect general economic and market trends, world events or investor sentiment, and may sometimes bear no apparent relation to any objective factors or criteria. During the 2018 fiscal year, the Company’s common share price fluctuated on the TSX-V between a low of $0.29 and a high of $0.42. Significant fluctuations in the Company’s common share price are likely to continue, and could potentially increase in the future.
Difficulty for United States investors to effect service of process against the Company
.
The Company is incorporated under the laws of the Province of British Columbia, Canada. Consequently, it will be difficult for United States investors to effect service of process in the United States upon the directors or officers of the Company, or to realize in Canada judgments of United States courts predicated upon civil liabilities under the Exchange Act. The majority of the Company’s directors and officers are residents of Canada. A judgment of a United States court predicated solely upon such civil liabilities would likely be enforceable in Canada by a Canadian court if the United States court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter. There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or the Company predicated solely upon such civil liabilities.
There are no assurances that we will discover minerals on a commercially viable basis.
The Company’s ability to generate revenues and profits is expected to occur through exploration, development and production of its existing properties as well as through acquisitions of interests in new properties. Substantial expenditures will be incurred in an attempt to establish the economic feasibility of mining operations by identifying mineral deposits and establishing ore reserves through drilling and other techniques, developing metallurgical processes to extract metals from ore, designing facilities and planning mining operations. The economic feasibility of a project depends on numerous factors, including the cost of mining and production facilities required to extract the desired minerals, the total mineral deposits that can be mined using a given facility, the proximity of the mineral deposits to a user of the minerals, and the market price of the minerals at the time of sale. There is no assurance that existing or future exploration programs or acquisitions will result in the identification of deposits that can be mined profitably.
The Company’s exploration activities are subject to various federal, state and local laws and regulations.
Laws and regulations govern various aspects of the Company’s business including the following: taxes; labor standards; occupational health; waste disposal; protection of the environment; mine safety; toxic substances; and the exploration, development, mining, production, importing and exporting of minerals. In many cases, licenses and permits are required to conduct mining operations. Amendments to current laws and regulations governing operations and activities of mining companies or more stringent implementation thereof could have a substantial adverse impact on the Company. Applicable laws and regulations will require the Company to make certain capital and operating expenditures to initiate new operations. Under certain circumstances, the Company may be required to stop its exploration activities once it is started until a particular problem is remedied or to undertake other remedial actions.
Market price is highly speculative
.
The market prices of metals are highly speculative and volatile. Instability in metal prices may affect the interest in mining properties and the exploration, development and production of such properties. If gold prices substantially decline, this may adversely affect the Company’s ability to raise capital to explore for existing and new mineral properties.
The Company operates in a highly competitive industry
. The Company competes with other developmental resource companies which have similar operations, and many competitors have operations and financial resources and industry experience greater than those of the Company. The Company may encounter increasing competition from other mining companies in its efforts to acquire mineral properties and hire experienced resource industry professionals. Increased competition in the Company’s business could adversely affect its ability to attract necessary capital funding or acquire suitable producing properties or prospects for mineral exploration in the future.
Penny stock rules may make it more difficult to trade the Company’s common shares.
The SEC has adopted regulations which generally define a “penny stock” to be any equity security that has a market price of less than US$5.00 per share or an exercise price of less than US$5.00 per share, subject to certain exceptions. The Company’s securities may be covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors such as institutions with assets in excess of US$5,000,000 or an individual with net worth in excess of US$1,000,000 or annual income exceeding US$200,000 or US$300,000 jointly with his or her spouse. For transactions covered by this rule, the broker-dealers must make a special suitability determination for the purchase and receive the purchaser’s written agreement of the transaction prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell the Company’s securities and also affect the ability of its investors to sell their shares in the secondary market.
FINRA rules will make it more difficult to trade the Company’s common shares
.
The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may limit a stockholder’s ability to buy and sell our stock. In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
Item 4. Information on the Company
A. History and Development of the Company
The Company was incorporated under the
Company Act
of the Province of British Columbia, Canada on January 22, 1981 under the name of Carol Energy Corporation, which name was changed to Coral Energy Corporation on March 3, 1982, and to Coral Gold Corp. on September 9, 1987. On September 14, 2004, the Company changed its name to Coral Gold Resources Ltd. in conjunction with a 10 to 1 share consolidation. On July 17, 2007, the shareholders of the Company amended the share structure by subdividing the Company’s issued share capital of 8,267,360 common shares into 24,802,080 common shares, every one common share being subdivided into three common shares. On July 15, 2004, the Company transitioned to the British Columbia
Business Corporations Act.
The principal executive office of the Company is located at 570 Granville Street, Suite 900, Vancouver, British Columbia V6C 3P1, and its telephone number is 604-682-3701.
The Company is a natural resource company primarily engaged in the exploration and development of natural resource properties. Its principal business activities have been the exploration of certain properties located in the states of Nevada and California in the United States.
Please refer to Note 6 of the financial statements for information regarding the Company’s exploration and evaluation assets.
B. Business Overview
Operations and Principal Activities
Presently, the Company’s principal business activity is the exploration of three mineral properties. The Company is in the process of exploring its mineral properties and has not yet determined whether its mineral properties contain ore reserves that are economically recoverable. There is no assurance that a commercially viable mineral deposit exists on any of the Company’s properties, and future exploration will be required before final evaluation as to the economic and legal feasibility is determined.
Competition
The mining industry is engaged and is highly competitive. Competitors include well-capitalized mining companies, independent mining companies and other companies having financial and other resources far greater than those of the Company. The Company competes with other mining companies in connection with the acquisition of gold and other precious metal properties. In general, properties with a higher grade of recoverable mineral and/or which are more readily minable afford the owners a competitive advantage in that the cost of production of the final mineral product is lower. Thus, a degree of competition exists between those engaged in the mining industries to acquire the most valuable properties. As a result, the Company may eventually be unable to acquire attractive gold mining properties.
Seasonality
Due to the climate in the States of Nevada and California, the Company is generally not affected by seasonality.
Dependence on Customers and Suppliers
The Company is not dependent upon a single or few customers or suppliers for revenues or its operations.
Government Regulation
We are subject to various federal and state laws and regulations including environmental laws and regulations. Environmental regulations impose, among other things, restrictions, liabilities and obligations in connection with the generation, handling, use, storage, transportation, treatment and disposal of hazardous substances and waste and in connection with spills, releases and emissions of various substances to the environment. Environmental regulation also requires that facility sites and other properties associated with our operations be operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities. In addition, certain types of operations, including exploration and development projects and changes to certain existing projects, may require the submission and approval of environmental impact assessments or permit applications. Compliance with environmental regulation can require significant expenditures, including expenditures for clean up costs and damages arising out of contaminated properties and failure to comply with environmental regulations may result in the imposition of fines and penalties. We believe that we are in substantial compliance with such laws and regulations; however, such laws and regulations may change in the future in a manner which will increase the burden and cost of compliance.
Certain laws and governmental regulations may impose liability on us for personal injuries, clean-up costs, environmental damages and property damages, as well as administrative, civil and criminal penalties. We maintain limited insurance coverage for sudden and accidental environmental damages, but do not maintain insurance coverage for the full potential liability that could be caused by sudden and accidental environmental damage. Accordingly, we may be subject to liability or may be required to cease production from properties in the event of such damages.
Environmental Regulations
The Company’s exploration programs in Nevada and California are subject to state and federal regulations regarding environmental considerations. All operations involving the exploration for the production of minerals are subject to existing laws and regulations relating to exploration procedures, safety precautions, employee health and safety, air quality standards, pollution of streams and fresh water sources, odor, noise, dust and other environmental protection controls adopted by federal, state and local governmental authorities as well as the rights of adjoining property owners. The Company may be required to prepare and present to federal, state or local authorities data pertaining to the effect or impact that any proposed exploration for or production of minerals may have upon the environment. All requirements imposed by any such authorities may be costly, time consuming and may delay commencement or continuation of exploration or production operations. Future legislation may significantly emphasize the protection of the environment, and, as a consequence, the activities of the Company may be more closely regulated to further the cause of environmental protection. Such legislation, as well as further interpretation of existing laws in the United States, may require substantial increases in equipment and operating costs to the Company and delays, interruptions, or a termination of operations, the extent of which cannot be predicted. Environmental problems known to exist at this time in the United States may not be in compliance with regulations that may come into existence in the future. This may have a substantial impact upon the capital expenditures required of the Company in order to deal with such problem and could substantially reduce earnings. At the present time, the Company’s exploration activities in Nevada and California are in compliance with all known environmental requirements.
The primary regulatory bodies that directly regulate the Company’s activities are the Bureau of Land Management (Federal), the Nevada Department of Environmental Protection and various state agencies in the State of California including the Office of Mine Reclamation.
C. Organizational Structure
The Company has two wholly-owned subsidiaries: Coral Energy Corporation of California, a California corporation which holds title to the Company’s California property, and Coral Resources, Inc., a Nevada corporation, which holds title to the Company’s mining claims located in Nevada.
D. Property, Plant and Equipment
Presently, the Company is an “exploration stage company”, as all of the Company’s properties are currently in the exploratory stage of development. In order to determine if a commercially viable mineral deposit exists in any of the Company’s properties, further geological work will need to be done and a final evaluation based upon the results obtained to conclude economic and legal feasibility.
Prior Property - Robertson Mining Claims, Nevada, U.S.A.
Completed Sale of Robertson Properties
On June 8, 2017, Coral completed the purchase and sale agreement (the “Agreement”) with Barrick Cortez Inc. (“Barrick”), a subsidiary of Barrick Gold Corp., for the sale of the Robertson Property in Lander County, Nevada, to Barrick in consideration of:
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1.
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The payment to Coral of US$15.75 million (Cdn $21.84 million based on the closing exchange rate) in cash (the “Cash Consideration”);
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2.
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The return of 4,150,000 common shares of Coral held by Barrick (which represent approximately 8.5% of the Company’s basic common shares outstanding as of June 8, 2017) for cancellation by the Company (the “Share Reduction”); and
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3.
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A sliding scale 1% to 2.25% net smelter returns royalty (the “NSR”) on the Robertson Property, payable quarterly, subject to potential advance royalty payments as outlined below, as well as a right of first refusal enabling Barrick to acquire the NSR in the event that the Company wishes to sell the NSR to any third party (the “Transaction”).
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The sliding scale NSR rate will be determined based on the observed gold price during each quarterly period based on the average LBMA Gold Price PM during the quarterly period, as follows:
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Average Gold Price/Oz During the Quarter (USD)
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Applicable NSR Royalty Rate
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Up to and including $1,200.00
$1,200.01 to $1,400.00
$1,400.01 to $1,600.00
$1,600.01 to $1,800.00
$1,800.01 to $2,000.00
Over $2,000.00
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1.00%
1.25%
1.50%
1.75%
2.00%
2.25%
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Pursuant to the Agreement, as amended, and due to the delay in closing, in the event that the Robertson Property is not placed into production by Barrick by December 31, 2024, then beginning on January 1, 2025, and continuing on an annual basis thereafter until the earlier of (i) the date commercial production commences and (ii) January 2, 2034, Barrick will make advance royalty payments to Coral Gold of US$0.5M, which will be non-refundable and fully credited against any future obligations under the NSR. These dates have all been extended by one year from the dates in Coral’s earlier announcement.
Barrick will also assume all liabilities relating to the Robertson Property, and will provide replacement security for the reclamation bond.
The Robertson Property includes the properties also known as the Core, Gold Ridge, Excluded and the Ruf mining claims, but does not include the properties known as the Norma Sass, Eagle, and JDN mining claims. The Robertson Property is located in eastern Lander County, Nevada, sixty miles southwest of Elko.
As a result of the sale, the Company recorded a gain of $5,871,719, net of transaction costs.
Existing Properties
(i)
Norma Sass Claims, Nevada
Property Description and Location
The Norma Sass claims are an exploration-stage project located immediately south of the Gold Acres open pit mine and west of the Pipeline open pit mine. Drilling at Norma Sass, which is comprised of 36 claims covering 740 acres, has encountered gold hosted by favorable, lower-plate carbonate strata.
History and Exploration
Effective December 31, 1999, the Company and Levon Resources Ltd. (“Levon”), entered into a fourth amending agreement whereby Levon could earn an undivided 50% interest in the Norma Sass and Ruf Claims upon completion of certain terms. This agreement was further amended effective December 31, 2001 (but signed on October 3, 2002), whereby Levon was transferred a 33.3% interest in the Company’s interest in the Norma Sass and Ruf claims, in consideration of 300,000 common shares of Levon previously issued to the Company and the prior payment of $350,294 for exploration work. Following the execution of a fifth amending agreement with Levon in December 2001 the Company secured a 66.6 % ownership in the Norma Sass and Ruf Claims
In January 2005, the Company announced the formation of an exploration agreement with Agnico-Eagle Mines Limited (“Agnico-Eagle”). The agreement covered the Norma Sass, Blue Nugget and Lander Ranch claims and also included the partnership with Levon. Under the agreement, Agnico-Eagle could earn a 51% interest in the Norma Sass, Blue Nugget and Lander Ranch claims by completing at least 45,000 feet of exploration drilling and paying certain advance royalties.
Agnico-Eagle mobilized a reverse circulation drill supplied by Lang Exploratory Drilling of Elko, Nevada to the Norma Sass property on May 15, 2006. Drilling commenced on the lander ranch target area and Agnico-Eagle drilled 15,000 feet in 12 to 15 holes on the Norma Sass and related properties. In February 2007, Agnico-Eagle notified the Company that it would not be continuing its option on the Company’s Norma Sass, Lander Ranch and Blue Nugget properties because of other corporate priorities.
In September 2008, the Company entered into an exploration, development and mine operating agreement with Barrick Cortez wherein Barrick Cortez granted the option to acquire up to a 75% interest in the Company’s and Levon interests in the Norma Sass Property, Nevada.
In May 2009, Barrick Cortez announced plans to do target delineation work in the second quarter followed by deep drilling in the third quarter on the Norma Sass property.
In October 2009, Barrick commenced drilling hole NS 09-01 targeting the lower plate carbonate sequence. This hole was drilled at 70 degree dip on a northwesterly azimuth across a SW-NE striking fault which trends into Barrick’s Gold Acres pit one mile to the northeast and is thought to be related to mineralization at Gold Acres. The hole was started using a reverse circulation drill which encountered recovery problems at a depth of 1,680 feet and was replaced by a core drill which completed the hole to a final depth of 2,586 feet. The lower plate and wenban limestone were intersected starting at a depth of 1,330 feet and Roberts Mountain Formation was encountered from 1,830 feet to the bottom of the hole. These formations are the major host rocks for the gold deposits at the Pipeline, Gold Acres and Cortez Hills mines.
On November 3, 2010, Barrick Cortez notified the Company that it had terminated its option on the Norma Sass property.
On January 22, 2016, the Company announced that it had acquired 100% ownership of the Norma Sass, Ruf, and Eagle claims from Levon. In consideration for the transfer of Levon's interest in the properties, the Company cancelled US$53,258 in exploration expenditures which remained owing to the Company from the former joint venture.
On August 7, 2017, Coral Resources Inc. the Company’s wholly owned subsidiary entered into a mining lease with Mauzy et al, owner of the Norma/Sass property.
The Company continues to keep the Norma Sass claims under care and maintenance and to keep such claims in good standing.
(ii)
JDN Claims, Nevada, U.S.A
. (formerly known as the JD Mining Claim)
Property Description and Location
The JDN claims are located approximately 10 miles northwest of the Robertson property near Barrick’s Hilltop deposit. The property is comprised of 27 claims covering roughly 550 acres. Access to the JDN Claims from Elko, Nevada, a regional mining supply center, is via Highways 80 and 306, a distance of approximately 64 miles to the community of Crescent Valley and then an additional 11 miles on a gravel access road from Crescent Valley. A four-wheel drive vehicle is usually necessary to access all roads on the property. As of fiscal year 2001, the Company has written down the JDN Claims to a nominal value. There is no underground or surface plant or equipment located on the JDN Claims, nor any known body of commercial ore.
History and Exploration
On December 16, 1986, the Company acquired six mining claims on 550 acres of land near Crescent Valley Lander County, Nevada for US$10,000. Several claims were added in 1987 (from the JD Group). The JDN claims consisting of 27 potential lode mining claims totaling 560 acres are a re-staking of the original JD claims. The JDN Claims are located approximately ten miles north of the Robertson Mining Claims. In 1987, geological mapping was conducted. In fiscal year 1994, the Company optioned a 50% interest in the JDN claims to Mill Bay Ventures Inc., formerly First International Metals Corp., referred to as “Mill Bay”, a company with two directors in common to the Company, for $10,000 and an initial installment of 50,000 common shares of Mill Bay. On February 5, 1997, Mill Bay exercised the option by issuing to the Company an additional 50,000 common shares and completion of specified exploration work.
The Company continues to keep the JDN Claims under care and maintenance and to keep such claims in good standing.
(iii) Eagle Claims, Nevada, U.S.A.
Property Description and Location
The Eagle Claims consist of 45 lode mineral claims, and are located at Corral Canyon, in Lander County, Nevada, approximately 7 miles north-northwest of Barrick’s Cortez gold mine and comprise a total of approximately 646 acres. The Eagle Claims are approximately three miles west of Crescent Valley, Nevada, and approximately 18 miles southeast of Battle Mountain, Nevada. Access to the Eagle Claims from Elko, Nevada, a regional mining supply center, is via Highways 80 and 306, a distance of approximately 56 miles and then an additional 8 miles on a gravel access road from the community of Crescent Valley. A four-wheel drive vehicle is usually necessary to access all roads on the property.
The Eagle Claims are subject to a 3% net smelter royalty to Geomex 8, which royalty shall cease at such time as the sum of US$1,250,000 has been paid to Geomex 8.
History and Exploration
In fiscal year 1994, the Company optioned a 50% interest in these claims to Levon for $10,000 and $100,000 Levon common shares. During 1996, Levon exercised its option to earn a 50% interest in the Eagle Claims. On January 22, 2016, the Company announced that it had acquired 100% ownership of the Norma, Sass, Ruf, and Eagle claims from Levon. In consideration for the transfer of Levon's interest in the properties, the Company cancelled US$53,258 in exploration expenditures which remained owing to the Company from the former joint venture. The Company has written down the Eagle Claims to a nominal value. There is no underground or surface plant or equipment on the Eagle Claims, or any known body of commercial ore.
The Company continues to keep the Eagle Claims under care and maintenance and to keep such claims in good standing.
(iv) Ludlow Property, California, U.S.A.
Property Description and Location
The Company owns certain mining properties consisting of approximately 128 acres in San Bernardino County, California, referred to as the “Ludlow Property”. The property is located approximately six miles south of Ludlow, California, and is readily accessible by dirt road from Ludlow. Ludlow lies at the western junction of U.S. Highway 40 and Route 66. Old wagon roads allow any part of the property to be reached by an easy walk. The Ludlow property has previously been explored as evidenced by trenches, pits and shallow shafts and adits. The only recorded data relating to previous exploration applies to the Baghdad-Chase Mine which lies approximately two kilometers to the south of the Ludlow Property.
History and Exploration
There has been no underground exploration or development work done on the claims by the Company other than geochemical soil sampling and, to the Company’s knowledge, there is no record of the previous work carried out on the claims as indicated by the evidence of trenches, pits and shallow shafts and adits that are located thereon. No exploration work has been performed on the property for the past five fiscal years. In order to keep the mining title to the Ludlow Property in good standing, the Company is required to pay property taxes. The Company has written down the Ludlow Property to a nominal value. There is no surface or underground plant or equipment on the Ludlow Property, nor any known body of commercial ore. Subsequent to fiscal year end, the Company decided to let all of the Ludlow mining claims lapse.
I
tem 4A. Unresolved Staff Comments
Not Applicable.
Item 5. Operating and Financial Review and Prospects
The following discussion and analysis of financial condition and results of operations should be read in conjunction with the information contained in the annual audited consolidated financial statements and the notes thereto included in this annual report on Form 20-F. Such discussion and analysis is based upon our annual audited consolidated financial statements prepared in accordance with IFRS.
A.
Operating Results
Year ended January 31, 2018 compared to the year ended January 31, 2017
Operating and administrative expenses
Operating and administrative expenses were $1,375,982 for the year ended January 31, 2018 compared to $580,066 for the year ended January 31, 2017, an increase of $795,916. Increases in administrative and operating costs compared to the year ended January 31, 2017 include a comparatively higher number of stock options granted during the year ended January 31, 2018, resulting in an increase to the related share-based payments of $557,385. Increases in other administrative and operating costs compared to the year ended January 31, 2017 include an increase of $79,585 in consulting fees, $124,500 in management fees, $46,343 in listing and filing fees, and $67,987 in salaries and benefits. The increases above are a result of increased corporate activity due to the sale of the Robertson Properties, and the related disclosure requirements associated with this corporate activity.
Income/Loss for the year
Net income for the year ended January 31, 2018 was $2,015,340 compared to net loss of $981,139 for the year ended January 31, 2017, a change of $2,996,479. The movement was primarily due to the gain on sale of exploration and evaluation assets, and the related current and deferred income tax expense, less the effects of lower operating and administrative expenses described above, as well as movements in foreign exchange throughout the year. During the year ended January 31, 2018, the Company recorded a gain on sale of exploration and evaluation assets of $5,871,719, finance income relating to the Company’s royalty receivable of $117,379, a gain on sale of investments of $93,693, and a loss on sale of fixed assets of $34,183, with no comparable transactions in the previous year. During the year ended January 31, 2018 the Company recorded a foreign exchange loss of $907,286, compared to a gain of $21,927 during the year ended January 31, 2017. The movements in foreign exchange are directly related to the changes in the Canadian dollar to US dollar rate from the closing of the sale of the Robertson property, to the Company’s reporting period end of January 31, 2018. Current income tax expense was $2,751,000 for the year ended January 31, 2018, compared to $Nil in the year ended January 31, 2017. The movement in current income tax relates directly to the sale of exploration and evaluation assets. Deferred income tax recovery was $1,001,000 for the year ended January 31, 2018, compared to an expense of $423,000 for the year ended January 31, 2017, a movement of $1,424,000 reflecting changes in temporary differences, and the sale of exploration and evaluation assets during the period. Deferred tax recovery arises due to differences in the carrying values of assets and liabilities and their tax values and the Company’s ability to utilize any of its deferred income tax assets to offset the deferred income liability.
Year ended January 31, 2017 compared to the year ended January 31, 2016
Operating and administrative expenses
Operating and administrative expenses were $580,066 for the year ended January 31, 2017 compared to $642,193 for the year ended January 31, 2016, a decrease of $62,127. Decreases in administrative and operating costs compared to the year ended January 31, 2016 include no impairment of mineral properties in the current year resulting in a decrease in impairment expense of $212,519, as well as a comparatively lower number of stock options granted resulting in a decrease to the related share-based payments of $149,277, and a decrease of $16,164 in regulatory and compliance fees. Increases in administrative and operating costs compared to the year ended January 31, 2016 include $148,445 in professional fees, $90,279 in investor relations, $29,396 in office and miscellaneous, $18,439 in salaries and benefits, $15,252 in consulting fees, and $13,253 in travel costs. The increases above are a result of increased corporate activity due to the ongoing negotiations of the sale of the Robertson Properties.
Income/Loss for the year
The net loss for the year ended January 31, 2017 was $981,139 compared to net income of $50,521 for the year ended January 31, 2016, a change of $1,031,660. The movement was primarily due to increases in deferred income tax expense, less the effects of lower operating and administrative expenses described above. During the year ended January 31, 2017, the Company recorded a gain on foreign exchange of $21,885, as compared to a loss of $9,714 in the previous year. Deferred income tax recovery was $670,000 for the year ended January 31, 2016 compared to an expense of $423,000 for the current year, a movement of $1,093,000 reflecting foreign exchange changes in value of tax losses. Deferred tax recovery arises due to differences in the carrying values of assets and liabilities and their tax values and the Company’s ability to utilize any of its deferred income tax assets to offset the deferred income liability. During the year ended January 31, 2017, the Company did not recognize any gains on the sale of investments or on the forgiveness of debts, compared to a gain on sale of investments of $27,059 on the sale of 79,071 shares of the related party company, as well as a gain on the forgiveness of debt of $5,250 during the year ended January 31, 2016.
Currency Fluctuations
The Company’s currency fluctuation exposure is primarily due to the U.S. Dollar. The Company does not use derivative financial instruments for speculative trading purposes, nor does the Company hedge its foreign currency exposure to manage the Company’s foreign currency fluctuation risk. Fluctuations in and among the currencies in which the Company operates could have a material effect on the Company’s operations and its financial results.
B. Liquidity and Capital Resources
At January 31, 2018, the Company had working capital of $15,296,877 and cash and cash equivalents of $14,321,433. The Company also holds term deposits of $3,694,415, with maturity dates within one year.
During the year ended January 31, 2018, the Company received $96,760 from the issuance of common shares from the exercise of options and warrants. These funds will be used to maintain the Company's existing operations and for general working capital requirements. The Company is in the exploration stage. The investment in and expenditures on the mineral property comprise substantially all of the Company’s assets. The recoverability of amounts shown for its mineral property interest and related deferred costs are dependent upon the continued support of its directors, the discovery of economically recoverable reserves, and the ability of the Company to obtain the financing necessary to complete development and achieve profitable operations in the future. The outcome of these matters cannot be predicted at this time.
Mineral exploration and development is capital intensive, and in order to maintain its interest the Company will be required to raise new equity capital in the future. There is no assurance that the Company will be successful in raising additional new equity capital.
C. Research and Development, Patents and Licenses, etc.
The Company is a mineral exploration company with no research and development policies. Refer to Part I Business overview for a summary of our exploration activities.
D. Trend Information
As at the time of filing this Annual Report and as otherwise disclosed in this Annual Report, the Company is not aware of any specific trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on the Company’s liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition. Many factors that are beyond the control of the Company can affect the Company’s operations, including, but not limited to, the price of minerals, the economy on a global scale, land and exploration permitting, and the appeal of investments in exploration companies. The appeal of exploration companies as investment alternatives could affect the liquidity of the Company and thus future exploration, development and financial conditions of the Company. Other factors such as retaining qualified mining personnel and contractor availability and costs could also impact the Company’s operations.
E. Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
F. Tabular Disclosure of Contractual Obligations
As at January 31, 2018, the Company had the following contractual obligations:
|
|
|
Payment due by period
|
|
|
|
|
Total
|
|
|
<1 year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
More than 5 years
|
|
|
Trade payables and other payables
|
|
$
|
88,168
|
|
|
$
|
88,168
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Current Tax Liability
|
|
|
2,751,000
|
|
|
|
2,751,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Deferred Tax Liability
|
|
|
42,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,000
|
|
|
Total
|
|
$
|
2,881,168
|
|
|
$
|
2,839,168
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
42,000
|
|
The Company has a cost-sharing agreement to reimburse a related company, Oniva International Services Corp. (“Oniva”), for a percentage of its overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred on behalf of the Company, and to pay a percentage fee based on the total overhead and corporate expenses. The agreement may be terminated with one-month notice by either party.
As of January 31, 2018, the Company had no other contractual obligations.
Legal Proceedings
The Company is not involved in any legal or arbitration proceedings, including those relating to bankruptcy, receivership or similar proceedings and those involving any third party, which may have, or had in the recent past, significant effects on the Company’s financial position or profitability, including governmental proceedings pending or known to be contemplated.
Dividend Policy
The Company has never paid any dividends and does not intend to in the near future.
G. Safe Harbor
All information that is not historical in nature disclosed under “Item 5 – Operating and Financial Review and Prospects” is deemed to be a forward looking statement. See “Forward-Looking Statements” for additional information.
Item 6. Directors, Senior Management and Employees
A. Directors and Senior Management
The following is a list of the Company’s directors and senior management as at May 31, 2018. The directors are elected for a term of one year at the annual meeting of shareholders. This year’s annual meeting will be held on July 19, 2018.
|
Name
|
|
Position Held
|
|
Principal Occupation
|
|
Director/Officer Since
|
|
Ronald Andrews
|
|
Director
|
|
Director of Berkley Renewables Inc. and Bonner Mall Partnership. Owner and operator of Andrews Orchards
|
|
January 2010
|
|
|
|
|
|
|
|
|
|
David Wolfin
|
|
Director, President &
Chief Executive Officer
|
|
Director, President and CEO of the Company, Gray Rock Resources Ltd. and Avino Silver & Gold Mines Ltd.; and Director of Berkley Renewables Inc., and Great Thunder Gold Corp.
|
|
September 1997
|
|
|
|
|
|
|
|
|
|
Gary Robertson
|
|
Chairman and Director
|
|
Certified Financial Planner, Director of the Company and Director of Avino Silver & Gold Mines Ltd., Levon Resources Ltd., and Sage Gold Inc.
|
|
July 2003
|
|
|
|
|
|
|
|
|
|
Andrew Kaplan
|
|
Director
|
|
Business Consultant
|
|
July 2012
|
|
|
|
|
|
|
|
|
|
Dorothy Chin
|
|
Corporate Secretary
|
|
Corporate Secretary of the Company, and of Avino Silver & Gold Mines, and Gray Rock Resources Ltd.
|
|
July 2015
|
|
|
|
|
|
|
|
|
|
Malcolm Davidson
|
|
Chief Financial Officer
|
|
Chartered Accountant, Chief Financial Officer of the Company and of Avino Silver & Gold Mines Ltd., and Gray Rock Resources Ltd.
|
|
January 2012
|
B. Compensation
During the last completed fiscal year, the Company had two executive officers, namely its Chief Executive Officer (“CEO”), David Wolfin and its Chief Financial Officer (“CFO”), Malcolm Davidson.
1)
Compensation Discussion and Analysis
The Company does not have a compensation program other than paying base salaries, incentive bonuses, and incentive stock options to its executive officers. The Company recognizes the need to provide compensation package that will attract and retain qualified and experienced executives, as well as align the compensation level of each executive to that executive’s level of responsibility. The three components of the compensation package are included to enable the Company to meet different objectives. The objectives of base salary are to recognize market pay, and acknowledge the competencies and skills of individuals. The objective of incentive bonuses (paid in the form of cash payments) is to add a variable component of compensation to recognize corporate and individual performances for executive officers and employees. The objectives of stock option awards are to reward achievement of long-term financial and operating performance and focus on key activities and achievements critical to the ongoing success of the Company. Implementation of new incentive stock option plans and amendments to the existing stock option plan are the responsibility of the Company’s Compensation Committee.
The Company has no other forms of compensation, although payments may be made from time to time to individuals or companies they control for the provision of consulting services. Such consulting services are paid for by the Company at competitive industry rates for work of a similar nature by reputable arm’s length services providers.
The Company relies on the discretion and judgment of the directors in establishing and amending contracts for all forms of compensation, including stock options to be granted to the CEO and the directors, and for reviewing the CEO’s recommendations respecting compensation of the other officers of the Company, to ensure such arrangements reflect the responsibilities and risks associated with each position. There is no formal process using objectives, criteria, or analysis, for determining compensation.
Actual compensation will vary based on the performance of the executives relative to the achievement of goals and the price of the Company’s securities.
|
Compensation Element
|
Description
|
Compensation Objectives
|
|
Annual Base Salary
|
Salary is market-competitive, fixed level of compensation
|
Retain qualified leaders, motivate strong business performance.
|
|
Incentive Bonuses
|
Discretionary cash payment
|
Reward individual performance in achieving corporate goals
|
|
Incentive Stock Option
|
Equity grants are made in the form of stock options. The amount of grant will be dependent on individual and corporate performance
|
Reward long-term financial and operating performance and align interests of key employees with those of shareholders
|
2)
Summary Compensation Table
The following table sets forth particulars concerning the compensation paid or accrued for services rendered to the Company in all capacities during the last three most recently completed financial years ended January 31, 2016, 2017 and 2018 of the Company to its executive officers:
|
Name and principal position
|
Year
|
Salary
($)
|
Share-based awards
($)
1
|
Option-based awards
($)
2
|
Non-equity incentive plan compensation
($)
3
|
Pension value
($)
4
|
All other compensation
($)
5
|
Total compensation
($)
|
|
David Wolfin
President,
CEO &
Director
6
|
2018
|
$54,500
|
NIL
|
$192,000
|
NIL
|
NIL
|
$100,000
|
$346,500
|
|
2017
|
$30,000
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
$30,000
|
|
2016
|
$30,000
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
$30,000
|
|
Malcolm
Davidson
CFO
|
2018
|
$21,420
|
NIL
|
$40,000
|
NIL
|
NIL
|
$10,000
|
$71,420
|
|
2017
|
$21,702
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
$21,702
|
|
2016
|
$15,140
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
$15,140
|
_______
|
(1)
|
The Company does not currently have any share-based award plans.
|
|
(2)
|
The methodology used to calculate the grant-date fair value is based on the Black-Scholes Option Pricing Model. During the year ended January 31, 2018, 725,000 options were granted to the Company’s executive officers. The fair value was estimated using the following assumptions: risk-free interest rate of 1.42%, expected dividend yield of 0%, expected option life of 5 years, and expected share price volatility of 130.12%
|
|
(3)
|
The Company does not have a non-equity incentive plan.
|
|
(4)
|
The Company does not have any pension plans.
|
|
(5)
|
Discretionary cash payment of incentive bonuses.
|
|
(6)
|
Mr. Wolfin’s compensation was paid to Intermark Capital Corp., a private BC corporation controlled by Mr. Wolfin.
|
Annual Base Salary
Base Salary for the executive officers is determined by the Board upon the recommendation of the Compensation Committee, and its recommendations are reached primarily by informal comparison of the remuneration paid by other reporting issuers with the same size and industry and with publicly available information on remuneration that the Compensation Committee feels is suitable.
The Annual Base Salary paid to the executive officers is, for the purpose of establishing appropriate increases, reviewed annually by the Board upon the recommendation of the Compensation Committee thereof as part of the annual review of executive officers. The decision on whether to grant an increase to the executive’s base salary and the amount of any such increase shall be in the sole discretion of the Board and Compensation Committee thereof.
Non-Equity Incentive Plan Compensation
One of the three components of the Company’s compensation package is a discretionary annual cash bonus, paid to recognize individual performance in attaining corporate goals and objectives. The Company does not have a long-term incentive plan.
Option Based Incentive Awards
An Option Based Incentive Award is in the form of an incentive stock option plan. The objective of the incentive stock option is to reward executive officers, employees’ and directors’ individual performance at the discretion of the Board upon the recommendation of the Compensation Committee.
The Company currently maintains a formal stock option plan (the “
Plan
”), under which stock options have been granted and may be granted to purchase a number equal to up to 10% of the Company’s issued capital from time to time. For details of the Plan please refer to “Particulars of Matters to be Act Upon” in the Information Circular.
The Plan is administered by the Compensation Committee. The process the Company uses to grant option-based awards to executive officers is upon the recommendations of the Compensation Committee.
The role of the Compensation Committee is to recommend to the Board the compensation of the Company’s directors and the executive officers which the Committee feels is suitable. All previous grants of equity-based incentive awards are taken into account when considering new grants.
3)
Incentive Plan Awards
Outstanding share-based awards and option-based awards
The following table sets forth the options granted to the executive officers to purchase or acquire securities of the Company outstanding at January 31, 2018:
|
|
Option-based Awards
|
Share-based Awards
|
|
Name
|
Number of securities underlying unexercised options
(#)
|
Option exercise price
($)
|
Option expiration date
|
Value of unexercised in-the-money options
($)
1
|
Number of shares or units of shares that have not vested
(#)
|
Market or payout value of share-based awards that have not vested
($)
|
Market or payout value of vested share-based awards not paid out or distributed
($)
|
|
David Wolfin
President, CEO and Director
|
600,000
|
$0.355
|
July 5, 2022
|
27,000
|
Nil
|
Nil
|
Nil
|
|
600,000
|
$0.24
|
Mar 14, 2019
|
96,000
|
Nil
|
Nil
|
Nil
|
|
Malcolm Davidson
CFO
|
125,000
|
$0.355
|
July 5, 2022
|
5,625
|
Nil
|
Nil
|
Nil
|
|
100,000
|
$0.24
|
Mar 14, 2019
|
16,000
|
Nil
|
Nil
|
Nil
|
________
|
(1)
|
In-the-Money Options are the difference between the market value of the underlying securities at January 31, 2018 and the exercise price of the option. The closing market price for the Company's common shares as at January 31, 2018 was $0.40 per common share.
|
Incentive plan awards – value vested or earned during the year
An “incentive plan” is any plan providing compensation that depends on achieving certain performance goals or similar conditions within a specific period. An “incentive plan award” means compensation awarded, earned, paid or payable under an incentive plan.
The following table sets forth the value vested or earned during the year of option-based awards, share-based awards and non-equity incentive plan compensation paid to executive officers during the most recently completed financial year ended January 31, 2018:
|
Name
|
Option-based awards –
Value vested
during the year
($)
|
Share-based awards –
Value vested during
the year
($)
|
Non-equity incentive plan compensation –
Value earned
during the year
($)
|
|
David Wolfin
President, CEO and Director
|
Nil
|
Nil
|
Nil
|
|
Malcolm Davidson
CFO
|
Nil
|
Nil
|
Nil
|
4)
Pension Plan Benefits
No pension plan or retirement benefit plans have been instituted by the Company and none are proposed at this time.
Use of Financial Instruments
The Company does not have in place policies which restrict the ability of directors or executive officers to purchase financial instruments, such as prepaid variable forward contracts, equity swaps, collars, or units of exchange funds, that are designed to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by a director or executive officers. Any such purchases would be subject to applicable insider reporting requirements.
5)
Termination and Change of Control Benefits
On February 1, 2015, the Company entered into a consulting agreement with Intermark Capital Corporation (the “Consultant”), a company owned by David Wolfin and on July 1, 2017, the Company further amended the consulting agreement which contains certain provisions in connection with termination of engagement or change of control.
The consulting agreement can be terminated at any time as follows:
|
|
(a)
|
by the Consultant electing to give the Company not less than 3 months prior notice of such termination;
|
|
|
|
|
|
|
(b)
|
by the Company electing to give the Consultant 3 months prior notice of such termination along with a termination payment equal to the annual Consulting fee; and
|
|
|
|
|
|
|
(c)
|
by the Consultant electing to give the Company notice, in the event that there occurs a Change of Control (as defined below) within six (6) months of the effective date of such Change of Control, and if the Consultant so elects to terminate the consulting agreement, then the Consultant will be immediately entitled to a termination payment equal to $500,000.
|
On February 1, 2015, the Company entered into a Change of Control Agreement with Malcolm Davidson, a named executive officer of the Company. This Agreement is for a period of 36 months from the date of this Agreement and can be extended by a decision of the Company’s Board of Directors. On February 1, 2018, the Company further amended and extended the Agreement for another thirty-six (36) months until February 1, 2021. The agreement contains Change of Control provisions as follows:
“In the event that there occurs a Change of Control (as defined below) within 6 months of the effective date of such Change of Control, and if the Executive so elects to terminate his employment, or by the Company upon notice to the Executive within 3 months prior to or within 6 months after a Change of Control is announced by the Company, then the Executive will be entitled receive on the date of termination a termination payment equal to
CAD $50,000
, and such payment will be in addition to any other severance payments to which the Executive may be entitled in law or equity.”
A Change of Control for purposes of Mr. Wolfin’s and Mr. Davidson’s agreements shall be deemed to have occurred when:
|
|
(i)
|
any person, entity or group becomes the beneficial owner of 20% or more of the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors, and such person, entity or group uses such effective voting control to change a majority of the Board of Directors of the Company, either all at once or through any series of elections and appointments when considered together; or
|
|
|
|
|
|
|
(ii)
|
completion of the sale or other disposition by the Company of all or substantially all of the Company's assets or a reorganization or merger or consolidation of the Company with any other entity or corporation, other than:
|
|
|
|
|
|
|
|
(A) a reorganization or merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent, either by remaining outstanding or by being converted into voting securities of another entity, more than 50.1% of the combined voting power of the voting securities of the Company or such other entity outstanding immediately after such reorganization or merger or consolidation; or
(B) a reorganization or merger or consolidation effected to implement a recapitalization or reincorporation of the Company (or similar transaction) that does not result in a material change in beneficial ownership of the voting securities of the Company or its successor.
|
6)
Director Compensation
The Company pays its independent directors $750 per quarter and an additional $750 per quarter for being a member of three or more committees. Effective July 1, 2017 the Independent Directors and Committee Members received combined Independent Directors and Committee Members fees of $15,000 per annum.
The following table sets forth the value of all compensation paid to the non-officer directors during the most recently completed financial year ended January 31, 2018:
|
Name
|
Fees earned
($)
|
Share-based awards
1
($)
|
Option-based awards
2
($)
|
Non-equity incentive plan compensation
3
($)
|
Pension value
4
($)
|
All other compensation
($)
|
Total
($)
|
|
Gary Robertson*
|
11,250
|
NIL
|
80,000
|
NIL
|
NIL
|
NIL
|
91,250
|
|
Chris Sampson**
|
3,325
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
3,325
|
|
Ronald Andrews*
|
11,250
|
NIL
|
64,000
|
NIL
|
NIL
|
NIL
|
75,250
|
|
Andrew Kaplan*
|
11,250
|
NIL
|
64,000
|
NIL
|
NIL
|
NIL
|
75,250
|
_________
|
*
|
Independent and Non-Employee Directors
|
|
**
|
Mr. Chris Sampson passed away on May 12, 2017
|
|
|
(1)
|
The Company does not currently have any share-based award plans.
|
|
|
(2)
|
The methodology used to calculate the grant-date fair value is based on the Black-Scholes Option Pricing Model. During the year ended January 31, 2018, 650,000 options were granted to the Company’s independent directors. The fair value was estimated using the following assumptions: risk-free interest rate of 1.42%, expected dividend yield of 0%, expected option life of 5 years, and expected share price volatility of 130.12%
|
|
|
(3)
|
The Company does not have a non-equity incentive plan
|
|
|
(4)
|
The Company does not have any pension plans.
|
No director of the Company who is not a named executive officer has received, during the most recently completed financial year, compensation pursuant to:
|
|
(a)
|
any standard arrangement for the compensation of directors for their services in their capacity as directors, including any additional amounts payable for committee participation or special assignments;
|
|
|
|
|
|
|
(b)
|
any other arrangement, in addition to, or in lieu of, any standard arrangement, for the compensation of directors in their capacity as directors except for the granting of stock options; or
|
|
|
|
|
|
|
(c)
|
any arrangement for the compensation of directors for services as consultants or experts.
|
The Company may grant incentive stock options to directors of the Company from time to time pursuant to the stock option plan of the Company and in accordance with the policies of the TSX-V.
Outstanding share-based awards and option-based awards
The following table sets forth the options granted to the directors to purchase or acquire securities of the Company outstanding at the end of the most recently completed financial year ended January 31, 2018:
|
|
Option-based Awards
|
Share-based Awards
|
|
Name
(1)
|
Number of securities underlying unexercised options
(#)
|
Option exercise price
($)
|
Option expiration date
|
Value of unexercised in-the-money options
($)
2
|
Number of shares or units of shares that have not vested
(#)
|
Market or payout value of share-based awards that have not vested
($)
|
Market or payout value of vested share-based awards not paid out or distributed
($)
|
|
Gary Robertson
|
250,000
|
$0.355
|
July 5, 2022
|
11,250
|
Nil
|
Nil
|
Nil
|
|
100,000
|
$0.24
|
Mar 14, 2019
|
16,000
|
Nil
|
Nil
|
Nil
|
|
Chris Sampson*
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|
Ronald Andrews
|
200,000
|
$0.355
|
July 5, 2022
|
9,000
|
Nil
|
Nil
|
Nil
|
|
100,000
|
$0.24
|
Mar 14, 2019
|
16,000
|
Nil
|
Nil
|
Nil
|
|
Andrew Kaplan
|
200,000
|
$0.355
|
July 5, 2022
|
9,000
|
Nil
|
Nil
|
Nil
|
|
100,000
|
$0.24
|
Mar 14, 2019
|
16,000
|
Nil
|
Nil
|
Nil
|
_________
|
*
|
Mr. Chris Sampson passed away on May 12, 2017, and all of his options expired on May 12, 2018.
|
|
|
(1)
|
For the compensation of Mr. Wolfin, the named executive officer of the Company, see “Incentive Plan Awards” above.
|
|
|
(2)
|
The in-the-money option value is the difference between the market value of the underlying securities as at January 31, 2018 and the exercise price of the option. The closing market price of the Company’s common shares as at January 31, 2018 was $0.40 per common share.
|
Incentive plan awards – value vested or earned during the year
An “incentive plan” is any plan providing compensation that depends on achieving certain performance goals or similar conditions within a specific period. An “incentive plan award” means compensation awarded, earned, paid or payable under an incentive plan.
The following table sets forth the value vested or earned during the year of option-based awards, share-based awards and non-equity incentive plan compensation paid to directors during the most recently completed financial year ended January 31, 2018:
|
Name
(1)
|
Option-based awards –
Value vested during the year
($)
(2)
|
Share-based awards –
Value vested during the year
($)
|
Non-equity incentive plan compensation – Value earned during the year
($)
|
|
Gary Robertson
|
Nil
|
Nil
|
Nil
|
|
Chris Sampson*
|
Nil
|
Nil
|
Nil
|
|
Ronald Andrews
|
Nil
|
Nil
|
Nil
|
|
Andrew Kaplan
|
Nil
|
Nil
|
Nil
|
_________
|
*
|
Mr. Chris Sampson passed away on May 12, 2017.
|
|
|
(1)
|
For the compensation of Mr. Wolfin, the named executive officer of the Company, see “Incentive Plan Awards” above.
|
|
|
(2)
|
The aggregate dollar value that would have been realized if the options granted during the year had been exercised on the vesting date
|
Termination of Employment, Changes in Responsibilities and Employment Contracts
On February 1, 2015, the Company entered into a consulting agreement with Intermark Capital Corporation (the “Consultant”), a company owned by David Wolfin and on July 1, 2017 the Company further amended the consulting agreement which contains certain provisions in connection with termination of engagement or change of control.
On February 1, 2015, the Company entered into an executive agreement with Malcolm Davidson, the named executive officer of the Company.
Please see “
Termination and Change of Control Benefits”
above for details
.
C. Board Practices
The Board is currently comprised of four directors. The size and experience of the Board is important for providing the Company with effective governance in the mining industry. The Board’s mandate and responsibilities can be effectively and efficiently administered at its current size. The Board has functioned, and is of the view that it can continue to function, independently of management as required. Directors are elected for a term of one year at the annual general meeting. At the Company’s previous annual general meeting, held on July 20, 2017, the shareholders elected Ronald Andrews, Gary Robertson, David Wolfin, and Andrew Kaplan as directors. Mr. Chris Sampson, longtime director and VP Exploration for the Company, who was instrumental in the exploration, development and the sale of the Robertson Property, passed away on May 12, 2017.
The Board has considered the relationship of each director to the Company and considers three of the four directors to be “unrelated” (Messrs. Andrews, Robertson and Kaplan). “Unrelated director” means a director who is independent of management and free from any interest and any business or other relationship which could reasonably be perceived to materially interfere with the director’s ability to act with a view to the best interest of the Company, other than interests and relationships arising solely from shareholdings.
David Wolfin is President and Chief Executive Officer of the Company and is not independent.
The Board has addressed the related directorship issues and intends, given a transitional period, to eventually be comprised of a majority of unrelated directors. Procedures are in place to allow the Board to function independently. At the present time, the Board has experienced directors that have made a significant contribution to the Company’s success, and are satisfied that it is not constrained in its access to information, in its deliberations or in its ability to satisfy the mandate established by law to supervise the business and affairs of the Company. The Company’s chairman and independent directors meet in the absence of managing directors. Committees meet independent of management and other directors. Committees appoint a chairman from their number who presides over the committee meetings.
Mandate of the Board of Directors, its Committees and Management
The role of the Board is to oversee the conduct of the Company’s business, including the supervision of management, and determining the Company’s strategy. Management is responsible for the Company’s day to day operations, including proposing its strategic direction and presenting budgets and business plans to the Board for consideration and approval. The strategic plan takes into account, among other things, the opportunities and risks of the Company’s business. Management provides the Board with periodic assessments as to those risks and the implementation of the Company’s systems to manage those risks. The Board reviews the personnel needs of the Company from time to time, having particular regard to succession issues relating to senior management. Management is responsible for the training and development of personnel. The Board assesses how effectively the Company communicates with shareholders, but has not adopted a formal communications policy. Through the audit committee, and in conjunction with its auditors, the Board assesses the adequacy of the Company’s internal control and management information systems. The Board looks to management to keep it informed of all significant developments relating to or effecting the Company’s operations. Major financings, acquisitions, dispositions and investments are subject to Board approval. A formal mandate for the Board and the Chief Executive Officer has not been considered necessary since the relative allocation of responsibility is well understood by both management and the Board.
The Board and committees may take action at regularly held meetings or at a meeting by conference call or by written consent.
Committees
Governance & Nominating Committee
The Governance and Nominating Committee assists the Board in establishing the Company’s corporate governance policies and practices generally identifying individuals qualified to become members of the Board, reviewing the composition and functioning of the Board and its committees and making recommendations to the Board as appropriate. When considering nominees to the Board the Governance and Nominating Committee’s mandate requires that it consider the current composition of the Board and give consideration to candidates having experience in the industry, life experience and background. The Governance and Nominating Committee is also responsible for the Company’s corporate governance guidelines. The Governance and Nominating Committee may retain legal or other advisors.
The Governance and Nominating Committee currently consists of three directors, Andrew Kaplan, Ronald Andrews and Gary Robertson, all of whom are considered independent.
Audit Committee
The Audit Committee assists the Board in its oversight of the Company’s financial statements and other related public disclosures, the Company’s compliance with legal and regulatory requirements relating to financial reporting, the external auditors, qualifications and independence and the performance of the internal audit function and the external auditors. The Audit Committee has direct communications channels with the Company’s auditors. The Audit Committee reviews the Company’s financial statements and related management’s discussion and analysis of financial and operating results. The Audit Committee can retain legal, accounting or other advisors.
The Audit Committee consists of Gary Robertson, Ronald Andrews and Andrew Kaplan, all of whom are financially literate. Currently, the Audit Committee has at least one member with accounting or related financial management expertise. “Financially literate” means the ability to read and understand a balance sheet, an income statement, and a cash flow statement. “Accounting or related financial expertise” means the ability to analyze and interpret a full set of financial statements, including the notes attached thereto, in accordance with IFRS. All of the Audit Committee Members are independent, having no direct or indirect material relationship with the Company which could, in the view of the Board, reasonably interfere with the exercise of a member’s independent judgment.
The Board has adopted a charter for the Audit Committee which is reviewed annually and sets out the role and oversight responsibilities of the Audit Committee with respect to:
|
|
·
|
its relationship with and expectation of the external auditors, including the establishment of the independence of the external auditor and the approval of any non-audit mandates of the external auditor;
|
|
|
·
|
determination of which non-audit services the external auditor is prohibited from providing;
|
|
|
·
|
the engagement, evaluation, remuneration, and termination of the external auditors;
|
|
|
·
|
appropriate funding for the payment of the auditor’s compensation and for any advisors retained by the Audit Committee;
|
|
|
·
|
its relationship with and expectation of the internal auditor;
|
|
|
·
|
its oversight of internal control;
|
|
|
·
|
disclosure of financial and related information; and
|
|
|
·
|
any other matter that the Audit Committee feels is important to its mandate or that which the Board chooses to delegate to it.
|
Compensation Committee
The Compensation Committee recommends to the Board the compensation of the Company’s directors and the Chief Executive Officer which the Compensation Committee feels is suitable. Its recommendations are reached primarily by comparison of the remuneration paid by the Company with publicly available information on remuneration paid by other reporting issuers that the Compensation Committee feels are similarly placed within the same business of the Company.
The Compensation Committee consists of three directors (Messrs. Robertson, Andrews and Kaplan), all of whom are considered independent.
D. Employees
As at January 31, 2018, the Company had no employees. The Company’s senior management as well as administrative and corporate services are located in Canada; however, these people are not considered employees of the Company. Senior management and administrative staff are contracted by the Company through their companies or through the Company’s cost sharing agreement for overhead and corporate services with Oniva.
E. Share Ownership
The following table sets out the share ownership of the individuals referred to in “Compensation” as of May 31, 2018:
|
Name of Beneficial Owner
|
|
Number of Shares
|
|
|
Percent
|
|
|
Chris Sampson**
|
|
|
266,300
|
|
|
*
|
|
|
Ronald Andrews
|
|
|
699,500
|
|
|
|
1.43
|
%
|
|
Gary Robertson
|
|
|
1,503,550
|
|
|
|
3.11
|
%
|
|
David Wolfin
|
|
|
6,762,800
|
|
|
|
14.01
|
%
|
|
Andrew Kaplan
|
|
|
475,000
|
|
|
*
|
|
|
Malcolm Davidson
|
|
|
40,000
|
|
|
*
|
|
_________
|
*
|
Less than one percent.
|
|
**
|
Mr. Chris Sampson passed away on May 12, 2017.
|
Outstanding Options
The following information, as of May 31, 2018, reflects outstanding options held by the individuals referred to in “Compensation”:
|
|
|
No. of Shares
|
|
Date of Grant
|
|
Exercise Price
|
|
Expiration Date
|
|
David Wolfin
President, CEO and Director
|
|
600,000
600,000
|
|
Mar. 14, 2014
July 5, 2017
|
|
$0.24
$0.355
|
|
Mar. 14, 2019
July 5, 2022
|
|
|
|
|
|
|
|
|
|
|
|
Malcolm Davidson
CFO
|
|
100,000
125,000
|
|
Mar. 14, 2014
July 5, 2017
|
|
$0.24
$0.355
|
|
Mar. 14, 2019
July 5, 2022
|
|
|
|
|
|
|
|
|
|
|
|
Chris Sampson*
Director
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
Ronald Andrews
Director
|
|
100,000
200,000
|
|
Mar. 14, 2014
July 5, 2017
|
|
$0.24
$0.355
|
|
Mar. 14, 2019
July 5, 2022
|
|
|
|
|
|
|
|
|
|
|
|
Gary Robertson
Director
|
|
100,000
250,000
|
|
Mar. 14, 2014
July 5, 2017
|
|
$0.24
$0.355
|
|
Mar. 14, 2019
July 5, 2022
|
|
|
|
|
|
|
|
|
|
|
|
Andrew Kaplan
Director
|
|
100,000
200,000
|
|
Mar. 14, 2014
July 5, 2017
|
|
$0.24
$0.355
|
|
Mar. 14, 2019
July 5, 2022
|
_________
|
*
|
Mr. Chris Sampson passed away on May 12, 2017
|
Item 7. Major Shareholders and Related Party Transactions
A. Major Shareholders
To the knowledge of the Company, it is not directly or indirectly owned or controlled by any other corporation or by the Canadian Government, or any foreign government, or by any other natural or legal person.
As of May 31, 2018, to the knowledge of the Company, no person owned more than five (5%) per cent of the outstanding shares of each class of the Company’s voting securities other than:
|
Name
|
|
Number of Voting Securities
|
|
Percentage
|
|
David Wolfin
|
|
6,762,800
|
|
14.01%
|
B. Related Party Transactions
Related party transactions are measured at the estimated fair values of the services provided or goods received. Related party transactions not disclosed elsewhere are as follows:
a) Management transactions
Key management personnel include the members of the Board of Directors and officers of the Company, who have the authority and responsibility for planning, directing and controlling the activities of the Company. The remuneration of directors and officers during the years ended January 31 was as follows:
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, bonuses, fees and benefits
|
|
|
|
|
|
|
|
|
|
|
Members of the Board of Directors
|
|
$
|
191,575
|
|
|
$
|
72,019
|
|
|
$
|
64,359
|
|
|
Other members of key management
|
|
|
55,071
|
|
|
|
34,581
|
|
|
|
27,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members of the Board of Directors
|
|
|
400,000
|
|
|
|
-
|
|
|
|
-
|
|
|
Other members of key management
|
|
|
72,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
$
|
718.646
|
|
|
$
|
106,600
|
|
|
$
|
91,890
|
|
b)
In the normal course of operations the Company transacts with companies related to its directors or officers. The following amounts are payable to related parties:
|
|
|
January 31,
2018
|
|
|
January 31,
2017
|
|
|
Directors
|
|
$
|
29,250
|
|
|
$
|
88,500
|
|
|
Oniva International Services Corp. (i)
|
|
|
10,615
|
|
|
|
19,654
|
|
|
Sampson Engineering Inc. (ii)
|
|
|
-
|
|
|
|
918
|
|
|
Intermark Capital Corp. (vi)
|
|
|
-
|
|
|
|
5,250
|
|
|
|
|
$
|
39,865
|
|
|
$
|
114,322
|
|
________
|
(i)
|
Oniva is a private company related by way of common management and directors.
|
|
(ii)
|
Sampson Engineering is a private company controlled by a director.
|
|
(iii)
|
Intermark Capital Corp is a private company controlled by an officer and director.
|
c) Other related party transactions
The Company has a cost-sharing agreement to reimburse Oniva International Services Corp. (“Oniva”), as described in Note 13 of the audited consolidated financial statements. The transactions with Oniva during the years ended January 31 are summarized below:
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
Salaries and benefits
|
|
$
|
105,344
|
|
|
$
|
91,346
|
|
|
$
|
72,747
|
|
|
Office and miscellaneous
|
|
|
66,663
|
|
|
|
38,260
|
|
|
|
24,176
|
|
|
|
|
$
|
172,007
|
|
|
$
|
129,606
|
|
|
$
|
96,923
|
|
The Company has entered into a cost-sharing agreement to reimburse Oniva for a variable percentage of its overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred on behalf of the Company, and to pay a percentage fee based on the total overhead and corporate expenses referred to above. The agreement may be terminated with one month’s notice by either party.
Amounts due are without stated terms of interest or repayment.
C. Interests of Experts and Counsel
Not Applicable.
Item 8. Financial Information
A. Consolidated Statements and Other Financial Information
The following financial statements of the Company are included under Item 18 to this Annual Report and include the following:
|
|
·
|
Independent Auditors’ Report;
|
|
|
·
|
Consolidated Statements of Financial Position as at January 31, 2018 and January 31, 2017;
|
|
|
·
|
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended January 31, 2018, 2017 and 2016;
|
|
|
·
|
Consolidated Statements of Equity for the years ended January 31, 2018, 2017 and 2016;
|
|
|
·
|
Consolidated Statements of Cash Flows for the years ended January 31, 2018, 2017 and 2016; and
|
|
|
·
|
Notes to the Consolidated Financial Statements.
|
B. Significant Changes
Except as otherwise disclosed in this annual report, there have been no material changes in our financial position, operations or cash flows since January 31, 2018.
Item 9. The Offer and Listing
A. Offer and Listing Details
The following table sets forth the high and low prices expressed in Canadian dollars on the TSX-V and in United States dollars on the OTCQX for the Company’s common shares for the past five years, for each quarter for the last two fiscal years, and for the last six months.
|
|
|
TSX-V
(Canadian Dollars)
|
|
|
OTCQX
(United States Dollars)
|
|
|
Last Six Months
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
May 2018
|
|
|
0.40
|
|
|
|
0.37
|
|
|
|
0.31
|
|
|
|
0.28
|
|
|
April 2018
|
|
|
0.40
|
|
|
|
0.38
|
|
|
|
0.33
|
|
|
|
0.28
|
|
|
March 2018
|
|
|
0.42
|
|
|
|
0.35
|
|
|
|
0.32
|
|
|
|
0.28
|
|
|
February 2018
|
|
|
0.42
|
|
|
|
0.38
|
|
|
|
0.33
|
|
|
|
0.30
|
|
|
January 2018
|
|
|
0.42
|
|
|
|
0.36
|
|
|
|
0.34
|
|
|
|
0.28
|
|
|
December 2017
|
|
|
0.36
|
|
|
|
0.33
|
|
|
|
0.27
|
|
|
|
0.25
|
|
|
2017-2018 Quarters
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
Fourth Quarter ended January 31, 2018
|
|
|
0.42
|
|
|
|
0.33
|
|
|
|
0.34
|
|
|
|
0.25
|
|
|
Third Quarter ended October 31, 2017
|
|
|
0.37
|
|
|
|
0.34
|
|
|
|
0.30
|
|
|
|
0.26
|
|
|
Second Quarter ended July 31, 2017
|
|
|
0.40
|
|
|
|
0.30
|
|
|
|
0.30
|
|
|
|
0.21
|
|
|
First Quarter ended April 30, 2017
|
|
|
0.38
|
|
|
|
0.29
|
|
|
|
0.29
|
|
|
|
0.22
|
|
|
2016-2017 Quarters
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
Fourth Quarter ended January 31, 2017
|
|
|
0.32
|
|
|
|
0.27
|
|
|
|
0.24
|
|
|
|
0.20
|
|
|
Third Quarter ended October 31, 2016
|
|
|
0.39
|
|
|
|
0.30
|
|
|
|
0.30
|
|
|
|
0.22
|
|
|
Second Quarter ended July 31, 2016
|
|
|
0.39
|
|
|
|
0.14
|
|
|
|
0.30
|
|
|
|
0.12
|
|
|
First Quarter ended April 30, 2016
|
|
|
0.15
|
|
|
|
0.05
|
|
|
|
0.12
|
|
|
|
0.04
|
|
|
Last Five Fiscal Years
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
2018
|
|
|
0.43
|
|
|
|
0.28
|
|
|
|
0.35
|
|
|
|
0.21
|
|
|
2017
|
|
|
0.39
|
|
|
|
0.05
|
|
|
|
0.30
|
|
|
|
0.04
|
|
|
2016
|
|
|
0.18
|
|
|
|
0.05
|
|
|
|
0.15
|
|
|
|
0.03
|
|
|
2015
|
|
|
0.31
|
|
|
|
0.11
|
|
|
|
0.27
|
|
|
|
0.10
|
|
|
2014
|
|
|
0.23
|
|
|
|
0.07
|
|
|
|
0.22
|
|
|
|
0.06
|
|
B. Plan of Distribution
Not Applicable.
C. Markets
The common shares of the Company is listed on the TSX-V under the symbol “CLH”, in the United States quoted on the OTCQX under the symbol “CLHRF” and on the FSE under the symbol “GV8”.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
Item 10. Additional Information
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
Carol Energy Corporation was incorporated on January 22, 1981 under the
Company Act
of the Province of British Columbia, which changed its name to Coral Energy Corporation on March 3, 1981. On September 9, 1987, Coral Energy Corporation changed its name to the Coral Gold Corp. On September 13, 2004, the Company changed its name to Coral Gold Resources Ltd. in conjunction with a 10:1 share consolidation.
Common Shares
All issued and outstanding common shares are fully paid and non-assessable. Each holder of record of common shares is entitled to one vote for each common share so held on all matters requiring a vote of shareholders, including the election of directors. The holders of common shares will be entitled to dividends on a pro-rata basis, if and when as declared by the board of directors. There are no preferences, conversion rights, preemptive rights, subscription rights, or restrictions or transfers attached to the common shares. In the event of liquidation, dissolution, or winding up of the Company, the holders of common shares are entitled to participate in the assets of the Company available for distribution after satisfaction of the claims of creditors.
Powers and Duties of Directors
The directors shall manage or supervise the management of the affairs and business of the Company and shall have authority to exercise all such powers of the Company as are not, by the British Columbia
Business Corporations Act
or by the Memorandum or Articles, required to be exercised by the Company in a general meeting.
Directors will serve as such until the next annual meeting. In general, a director who is, in any way, directly or indirectly interested in an existing or proposed contract or transaction with the Company whereby a duty or interest might be created to conflict with his duty or interest as a director, that director shall declare the nature and extent of his interest in such contract or transaction or the conflict or potential conflict with his duty and interest as a director. Such director shall not vote in respect of any such contract or transaction with the Company in which he is interested and if he shall do so, his vote shall not be counted, but he shall be counted in the quorum present at the meeting at which such vote is taken. However, notwithstanding the foregoing, directors shall have the right to vote on determining the remuneration of the directors.
The directors may from time to time on behalf of the Company: (a) borrow money in such manner and amount from such sources and upon such terms and conditions as they think fit; (b) issue bonds, debentures and other debt obligations; and/or (c) mortgage, charge or give other security on the whole or any part of the property and assets of the Company.
The majority of the directors of the Company must be persons ordinarily resident in Canada and one director of the Company must be ordinarily resident in British Columbia and be of the full age of 18 years. There is no minimum share ownership to be a director. No person shall be a director of the Company who is not capable of managing their own affairs, is an un-discharged bankrupt, convicted of an offense in connection with the promotion, formation or management of a corporation or involved in fraud within the last five years, or a person that has had a registration in any capacity under the “British Columbia
Securities Act
” or the “British Columbia
Mortgage Brokers Act
” canceled within the last five years.
Shareholders
An annual general meeting shall be held once in every calendar year at such time and place as may be determined by the directors. A quorum at an annual general meeting and special meeting shall be two shareholders or one or more proxy holder representing two shareholders, or one shareholder and a proxy holder representing another shareholder. There is no limitation imposed by the laws of Canada or by the charter or other constituent documents of the Company on the right of a non-resident to hold or vote the common shares, other than as provided in the
Investment Canada Act
, (the “Investment Act”) discussed below under “Item 10. Additional Information, D. Exchange Controls.”
In accordance with British Columbia law, directors shall be elected by an “ordinary resolution” which means: (a) a resolution passed by the shareholders of the Company at a general meeting by a simple majority of the votes cast in person or by proxy: or (b) a resolution that has been submitted to the shareholders of the Company who would have been entitled to vote on it in person or by proxy at a general meeting of the Company and that has been consented to in writing by such shareholders of the Company holding shares carrying not less than the requisite majority of the votes entitled to be cast on it.
Under British Columbia law certain items such as an amendment to the Company’s Articles or entering into a merger requires approval by a special resolution which means: (a) a resolution passed by a majority of not less than the requisite majority of the votes cast by the shareholders of the Company who, being entitled to do so, vote in person or by proxy at a general meeting of the company; or (b) a resolution consented to in writing by every shareholder of the Company who would have been entitled to vote in person or by proxy at a general meeting of the Company, and a resolution so consented to is deemed to be a special resolution passed at a general meeting of the Company.
C. Material Contracts
The Company entered into an Asset Purchase Agreement dated June 20, 2016 with Barrick Cortez Inc., a subsidiary of Barrick Gold Corp., for the sale of the Robertson Property in Lander County, Nevada, to Barrick. A copy of the Agreement was filed on “SEDAR” on June 21, 2016 and is discussed in more details under the Property, Plant, and Equipment section above.
The Company entered into a cost sharing agreement dated October 1, 1997, and amended November 1, 2003 to reimburse Oniva International for a variable percentage of Oniva’s overhead expenses, to reimburse 100% of Oniva’s out-of-pocket expenses incurred on behalf of the company, and to pay to Oniva a percentage fee based on the total overhead and corporate expenses. The agreement may be terminated with one month notice by either party.
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 the Issuer’s securities, except as discussed below under “Item 10. Additional Information, E. Taxation.”
There are no limitations under the laws of Canada or in the organizing documents of the Company on the right of foreigners to hold or vote securities of the Company, except that the
Investment Canada Act
may require review and approval by the Minister of Industry (Canada) of certain acquisitions of “control” of the Company by a “non-Canadian”. The threshold for acquisitions of control is generally defined as being one-third or more of the voting shares of the 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.
E. Taxation
Canadian Federal Income Tax Consequences
The following summarizes the principal Canadian federal income tax consequences applicable to the holding and disposition of common shares in the capital of the Company by a United States resident, and who holds common shares solely as capital property, referred to as a “U.S. Holder”. This summary is based on the current provisions of the
Income Tax Act
(Canada) (the “Tax Act”), the regulations thereunder, all amendments thereto publicly proposed by the government of Canada, the published administrative practices of Revenue Canada, Customs, Excise and Taxation, and on the current provisions of the
Canada
-
United States Income Tax Convention, 1980
, as amended, referred to as the “Treaty”. Except as otherwise expressly provided, this summary does not take into account any provincial, territorial or foreign (including without limitation, any U.S.) tax law or treaty. It has been assumed that all currently proposed amendments will be enacted substantially as proposed and that there is no other relevant change in any governing law or practice, although no assurance can be given in these respects.
Each U.S. Holder is advised to obtain tax and legal advice applicable to such U.S. Holder’s particular circumstances.
Every U.S. Holder is liable to pay a Canadian withholding tax on every dividend that is or is deemed to be paid or credited to the U.S. Holder on the U.S. Holder’s common shares. The statutory rate of withholding tax is 25% of the gross amount of the dividend paid. The Treaty reduces the statutory rate with respect to dividends paid to a U.S. Holder for the purposes of the Treaty. Where applicable, the general rate of withholding tax under the Treaty is 15% of the gross amount of the dividend, but if the U.S. Holder is a company that owns at least 10% of the voting stock of the Company and beneficially owns the dividend, the rate of withholding tax is 5% for dividends paid or credited after 1996 to such corporate U.S. Holder. The Company is required to withhold the applicable tax from the dividend payable to the U.S. Holder, and to remit the tax to the Receiver General of Canada for the account of the U.S. Holder.
Pursuant to the Tax Act, a U.S. Holder will not be subject to Canadian capital gains tax on any capital gain realized on an actual or deemed disposition of a common share, including a deemed disposition on death, provided that the U.S. Holder did not hold the common share as capital property used in carrying on a business in Canada, and that neither the U. S. Holder nor persons with whom the U.S. Holder did not deal at arm’s length (alone or together) owned or had the right or an option to acquire 25% or more of the issued shares of any class of the Company at any time in the five years immediately preceding the disposition.
Certain United States Federal Income Tax Considerations
The following is a general summary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership, and disposition of the Company’s common shares.
This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder arising from and relating to the acquisition, ownership, and disposition of common shares. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including specific tax consequences to a U.S. Holder under an applicable tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any particular U.S. Holder. This summary does not address the U.S. federal alternative minimum, U.S. federal estate and gift, U.S. Medicare contribution, U.S. state and local, or non-U.S. tax consequences to U.S. Holders of the acquisition, ownership, and disposition of common shares. Except as specifically set forth below, this summary does not discuss applicable tax reporting requirements. Each U.S. Holder should consult its own tax advisor regarding all U.S. federal, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of common shares.
No opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the "IRS") has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership, and 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, any position taken in this summary. In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the positions taken in this summary.
Scope of this Summary
Authorities
This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations (whether final, temporary, or proposed), published rulings of the IRS, published administrative positions of the IRS, the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the "Canada-U.S. Tax Convention"), and U.S. court decisions that are applicable and, in each case, as in effect and available, as of the date of this document. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive or prospective basis which could affect the U.S. federal income tax considerations described in this summary. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive or prospective basis.
U.S. Holders
For purposes of this summary, the term "U.S. Holder" means a beneficial owner of common shares that is for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the U.S.;
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a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the U.S., any state thereof or the District of Columbia;
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust that (1) is subject to the primary supervision of a court within the U.S. and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
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Non-U.S. Holders
For purposes of this summary, a "non-U.S. Holder" is a beneficial owner of common shares that is not a partnership (or other “pass-through” entity) for U.S. federal income tax purposes and is not a U.S. Holder. This summary does not address the U.S. federal income tax consequences to non-U.S. Holders arising from and relating to the acquisition, ownership, and disposition of common shares. Accordingly, a non-U.S. Holder should consult its own tax advisor regarding all U.S. federal, U.S. state and local, and non-U.S. tax consequences (including the potential application of and operation of any income tax treaties) relating to the acquisition, ownership, and disposition of common shares.
U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed
This summary does not address the U.S. federal income tax considerations applicable to U.S. Holders that are subject to special provisions under the Code, including, but not limited to, the following: (a) U.S. Holders that are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) U.S. Holders that are financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment companies; (c) U.S. Holders that are broker-dealers, dealers, or traders in securities or currencies that elect to apply a mark-to-market accounting method; (d) U.S. Holders that have a "functional currency" other than the U.S. Dollar; (e) U.S. Holders that own common shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (f) U.S. Holders that acquired common shares in connection with the exercise of employee stock options or otherwise as compensation for services; (g) U.S. Holders that hold common shares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment purposes); or (h) U.S. Holders that own or have owned (directly, indirectly, or by attribution) 10% or more of the total combined voting power of the outstanding shares of the Company. This summary also does not address the U.S. federal income tax considerations applicable to U.S. Holders who are: (a) U.S. expatriates or former long-term residents of the U.S.; (b) persons that have been, are, or will be a resident or deemed to be a resident in Canada for purposes of the Income Tax Act (Canada) (the "Tax Act"); (c) persons that use or hold, will use or hold, or that are or will be deemed to use or hold common shares in connection with carrying on a business in Canada; (d) persons whose common shares constitute "taxable Canadian property" under the Tax Act; or (e) persons that have a permanent establishment in Canada for the purposes of the Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders described immediately above, should consult their own tax advisors regarding all U.S. federal, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of common shares.
If an entity or arrangement that is classified as a partnership (or other "pass-through" entity) for U.S. federal income tax purposes holds common shares, the U.S. federal income tax consequences to such entity and the partners (or other owners) of such entity of the ownership and disposition of common shares generally will depend on the activities of the entity and the status of such partners (or other owners). This summary does not address the U.S. federal income tax consequences to any such entity or its owners. Partners (or other owners) of entities or arrangements that are classified as partnerships (or other "pass-through" entities) for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership, and disposition of common shares.
Passive Foreign Investment Company Rules
If the Company were to constitute a "passive foreign investment company" within the meaning of Section 1297 of the Code (a "PFIC", as defined below) for any tax year during a U.S. Holder's holding period, then certain potentially adverse rules will affect the U.S. federal income tax consequences to such U.S. Holder resulting from the acquisition, ownership and disposition of common shares. The Company believes it was a PFIC during one or more prior years, and, based on current business plans and financial projections, expects to be a PFIC in possibly subsequent tax years. The determination of whether any corporation was, or will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether any corporation will be a PFIC for any tax year depends on the assets and income of such corporation over the course of each such tax year and, as a result, cannot be predicted with certainty before the close of the tax year in question. Accordingly, there can be no assurance that the Company will or will not be determined to be a PFIC for the current or any prior or future tax year, or that the IRS will not challenge any determination made by the Company (or any subsidiary of the Company) concerning its PFIC status. Each U.S. Holder should consult its own tax advisor regarding the PFIC status of the Company and any subsidiary of the Company.
In addition, in any year in which the Company is a PFIC, a U.S. Holder would be required to file an annual report with the IRS containing such information as Treasury Regulations and/or other IRS guidance may require. In addition to penalties, the failure to satisfy such reporting requirements may result in an extension of the time period during which the IRS can assess a tax. U.S. Holders should consult their own tax advisors regarding the requirements of filing such information returns under these rules, including the requirement to file an IRS Form 8621.
PFIC Status of the Company
The Company generally will be a PFIC for a tax year, if (a) 75% or more of its gross income is passive income (as defined for U.S. federal income tax purposes) (the "income test") or (b) 50% or more (by value) of its assets either produce passive income or are held for the production of passive income, based on the quarterly average of the fair market value of such assets (the "asset test"). For purposes of the PFIC provisions, "gross income" generally includes all sales revenues less the cost of goods sold, plus income from investments and from incidental or outside operations or sources, and "passive income" generally includes dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.
Active business gains arising from the sale of commodities generally will be excluded from passive income if substantially all (85% or more) of the Company’s commodities are stock in trade or inventory, depreciable property used in a trade or business, or supplies regularly used or consumed in a trade or business and certain other requirements are satisfied.
For purposes of the PFIC income test and asset test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, for purposes of the PFIC income test and asset test described above, and assuming certain other requirements are met, "passive income" does not include certain interest, dividends, rents, or royalties that are received or accrued by the Company from certain "related persons" (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the income of such related person that is not passive income.
Under certain attribution rules, if the Company is a PFIC, U.S. Holders will generally be deemed to own their proportionate share of the Company's direct or indirect equity interest in any company that is also a PFIC (a ''Subsidiary PFIC''), and will be subject to U.S. federal income tax on their proportionate share of (a) any "excess distributions," as described below, on the stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of the stock of a Subsidiary PFIC by the Company or another Subsidiary PFIC, both as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In addition, U.S. Holders may be subject to U.S. federal income tax on any indirect gain realized on the stock of a Subsidiary PFIC on the sale or disposition of common shares. Accordingly, U.S. Holders should be aware that they could be subject to tax even if no distributions are received and no redemptions or other dispositions of the Company’s common shares are made.
Default PFIC Rules under Section 1291 of the Code
If the Company meets the income test or the asset test for any tax year during which a U.S. Holder owns common shares, the U.S. federal income tax consequences to such U.S. Holder of the acquisition, ownership, and disposition of common shares will depend on whether and when such U.S. Holder makes an election to treat the Company and each Subsidiary PFIC, if any, as a "qualified electing fund" or "QEF" under Section 1295 of the Code (a "QEF Election") or makes a mark-to-market election under Section 1296 of the Code (a "Mark-to-Market Election"). A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a "Non-Electing U.S. Holder."
A Non-Electing U.S. Holder will be subject to the default rules of Section 1291 of the Code (described below) with respect to (a) any gain realized on the sale or other disposition (including dispositions and certain other events that would not otherwise be treated as taxable events) of common shares and (b) any "excess distribution" received on the common shares. A distribution generally will be an "excess distribution" to the extent that such distribution (together with all other distributions received in the relevant tax year) exceeds 125% of the average annual distribution received during the three preceding tax years (or during a U.S. Holder's holding period for the common shares, if shorter).
Under the default rules of Section 1291 of the Code, any gain realized on the sale or other disposition of common shares (including an indirect disposition of the stock of any Subsidiary PFIC), and any "excess distribution" received on common shares or with respect to the stock of a Subsidiary PFIC, must be ratably allocated to each day in a Non-Electing U.S. Holder's holding period for the respective common shares. The amount of any such gain or excess distribution allocated to the tax year of disposition or distribution of the excess distribution and to tax years before the entity became a PFIC, if any, would be taxed as ordinary income. The amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax rate applicable to ordinary income in each such year, and an interest charge would be imposed on the resulting tax liability for each such year, calculated as if such tax liability had been due in each such tax year. A Non-Electing U.S. Holder that is not a corporation must treat any such interest paid as "personal interest," which is not deductible. Any loss realized on the disposition of common shares would not be recognized.
If the Company meets the income test or the asset test for any tax year during which a Non-Electing U.S. Holder holds common shares, the Company will continue to be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether the Company meets the income test or the asset test in one or more subsequent tax years. A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the default rules of Section 1291 of the Code discussed above), but not loss, as if such common shares were sold on the last day of the last tax year for which the Company was a PFIC.
QEF Election
A U.S. Holder that makes a timely and effective QEF Election for the first tax year in which its holding period of its common shares begins generally will not be subject to the default rules of Section 1291 of the Code, discussed above, with respect to its common shares. Instead, such a U.S. Holder will be required to include currently in gross income for each tax year in which the Company is a PFIC, such U.S. Holder’s pro rata share of the Company’s net capital gain and ordinary earnings, if any, regardless of whether such gain or earnings are actually distributed. If a U.S. Holder that made a timely and effective QEF Election has an income inclusion, such 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. If such U.S. Holder is not a corporation, any such interest paid will be treated as "personal interest," which is not deductible.
A U.S. Holder that makes a timely and effective QEF Election with respect to the Company generally (a) may receive tax-free distributions from the Company to the extent that such distribution represents "earnings and profits" of the Company that were previously included in income by the U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder's tax basis in the common shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of common shares.
The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is “timely”. A QEF Election will be treated as "timely" if such QEF Election is made for the first tax year in the U.S. Holder's holding period for the common shares in which the Company was meets the income test or asset test. A U.S. Holder may make a QEF Election for a tax year by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such tax year. If a U.S. Holder does not make a timely and effective QEF Election for the first year in the U.S. Holder's holding period for the common shares, the U.S. Holder may still be able to make a timely and effective QEF Election in a subsequent year if such U.S. Holder meets certain requirements and makes a "purging" election to recognize gain (which will be taxed under the default rules of Section 1291 of the Code discussed above) as if such common shares were sold for their fair market value on the day the QEF Election is effective. If a U.S. Holder owns PFIC stock indirectly through another PFIC, separate QEF Elections must be made for the PFIC in which the U.S. Holder is a direct shareholder and the Subsidiary PFIC for the QEF rules to apply to both PFICs.
A QEF Election will apply to the tax year for which it is timely made and to all subsequent tax years, unless such QEF Election is invalidated or terminated or the IRS consents to its revocation. If a U.S. Holder makes a QEF Election and, in a subsequent tax year, the Company ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable). Accordingly, if the Company becomes a PFIC in another subsequent tax year, the QEF Election will be effective and the U.S. Holder will be subject to the QEF rules described above during any subsequent tax year in which the Company qualifies as a PFIC.
In light of the adverse tax consequences of the Company being a PFIC and the uncertainty as to the Company’s PFIC status, the Company will provide to any U.S. Holder, upon written request, the information necessary for U.S. income tax reporting purposes for such U.S. Holder to make a QEF Election with respect to the Company. The Company may elect to provide such information on its website. Each U.S. Holder should consult its own tax advisor regarding the availability and desirability of, and procedure for making, a QEF Election.
Mark-to-Market Election
A U.S. Holder may make a Mark-to-Market Election only if the common shares are "regularly traded" on a qualified exchange or other market (within the meaning of the Code and applicable Treasury Regulations), which include a national securities exchange that is registered with the Securities and Exchange Commission, the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934, and certain foreign securities exchanges that are regulated or supervised by a governmental authority of the country in which the market is located. If such stock is traded on such a qualified exchange or other market, such stock generally will be "regularly traded" for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. There is no assurance that the common shares will be or remain "regularly traded" for this purpose.
A U.S. Holder that makes a Mark-to-Market Election with respect to its common shares generally will not be subject to the default rules of Section 1291 of the Code, discussed above, with respect to such common shares. However, if a U.S. Holder does not make a Mark-to-Market Election beginning in the first tax year of such U.S. Holder's holding period for the common shares or such U.S. Holder has not made a timely QEF Election, the default rules of Section 1291 of the Code, discussed above, will apply to certain dispositions of, and distributions on, the common shares.
A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each tax year in which the Company is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the common shares, as of the close of such tax year over (b) such U.S. Holder's tax basis in such common shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the excess, if any, of (a) such U.S. Holder's adjusted tax basis in the common shares, as of the close of such tax year, over (b) the fair market value of such common shares (but only to the extent of the net amount of previously included income as a result of the Mark-to-Market Election for prior tax years).
A U.S. Holder that makes a Mark-to-Market Election generally also will adjust such U.S. Holder's tax basis in the common shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition of common shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or ordinary loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior tax years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior tax years). Losses that exceed this limitation are treated as capital losses. Deductions for capital losses are subject to significant limitations under the Code.
A Mark-to-Market Election applies to the tax year in which such Mark-to-Market Election is made and to each subsequent tax year, unless the common shares cease to be eligible for such election or the IRS consents to revocation of such election. Each U.S. Holder should consult its own tax advisor regarding the availability of, and procedure for making, a Mark-to-Market Election.
Although a U.S. Holder may be eligible to make a Mark-to-Market Election with respect to the common shares, no such election may be made with respect to the stock of any Subsidiary PFIC that a U.S. Holder is treated as owning, because such stock is not marketable. Hence, the Mark-to-Market Election will not be effective to eliminate the application of the default rules of Section 1291 of the Code described above with respect to deemed dispositions of Subsidiary PFIC stock or excess distributions with respect to a Subsidiary PFIC.
The PFIC rules are complex, and each U.S. Holder should consult its own tax advisor regarding the PFIC rules and how the PFIC rules may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of common shares.
Ownership and Disposition of Common Shares
The following discussion is subject to the rules described above under the heading "Passive Foreign Investment Company Rules."
Distributions on Common Shares
A U.S. Holder that receives a distribution, including a constructive distribution, with respect to a common share will be required to include the amount of such distribution in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of the current or accumulated "earnings and profits" of the Company, as computed for U.S. federal income tax purposes. To the extent that a distribution exceeds the current and accumulated "earnings and profits" of the Company, such distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holder's tax basis in the common shares and thereafter as gain from the sale or exchange of such common shares. (See "Sale or Other Taxable Disposition of Common Shares" below). However, the Company may not maintain the calculations of earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder should therefore assume that any distribution by the Company with respect to the common shares will constitute a dividend. Dividends received on common shares generally will not be eligible for the "dividends received deduction" available to U.S. corporate shareholders receiving dividends for U.S. corporations. If the Company is eligible for the benefits of the Canada-U.S. Tax Convention, dividends paid by the Company to non-corporate U.S. Holders generally will be eligible for preferential tax rates applicable to long-term capital gains, provided certain holding period and other conditions are satisfied, including that the Company not be classified as a PFIC in the tax year of distribution or in the preceding tax year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisor regarding the application of such rules.
Sale or Other Taxable Disposition of Common Shares
Upon the sale or other taxable disposition of common shares, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the amount of cash received plus the fair market value of any property received and such U.S. Holder's tax basis in such common shares sold or otherwise disposed of. A U.S. Holder's tax basis in common shares generally will be such U.S. Holder's U.S. Dollar cost for such common shares. Gain or loss recognized on such sale or other disposition generally will be long-term capital gain or loss if, at the time of the sale or other taxable disposition, the common shares have been held for more than one year.
Preferential tax rates currently apply to long-term capital gain of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term capital gain of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code.
Receipt of Foreign Currency
The amount of any distribution paid to a U.S. Holder in connection with the ownership of common shares, or on the sale or other taxable disposition of common shares, generally will be equal to the U.S. Dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of whether such foreign currency is converted into U.S. Dollars at that time). A U.S. Holder will have a basis in the foreign currency equal to its U.S. Dollar value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method with respect to foreign currency received upon the sale, exchange or other taxable disposition of the common shares. Each U.S. Holder should consult its own tax advisor regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.
Foreign Tax Credit
Subject to the PFIC rules discussed above, a U.S. Holder that pays (whether directly or through withholding) Canadian income tax in connection with the ownership or disposition of common shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax. Generally, a credit will reduce a U.S. Holder's U.S. federal income tax liability on a Dollar-for-Dollar basis, whereas a deduction will reduce a U.S. Holder's income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all creditable foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.
Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder's U.S. federal income tax liability that such U.S. Holder's "foreign source" taxable income bears to such U.S. Holder's worldwide taxable income. In applying this limitation, a U.S. Holder's various items of income and deduction must be classified, under complex rules, as either "foreign source" or "U.S. source." Generally, dividends paid by a non-U.S. corporation should be treated as foreign source for this purpose, and gains recognized on the sale of stock of a non-U.S. corporation by a U.S. Holder should be treated as U.S. source for this purpose, except as otherwise provided in an applicable income tax treaty, and if an election is properly made under the Code. However, the amount of a distribution with respect to the common shares that is treated as a "dividend" may be lower for U.S. federal income tax purposes than it is for Canadian federal income tax purposes, resulting in a reduced foreign tax credit allowance to a U.S. Holder. In addition, this limitation is calculated separately with respect to specific categories of income. The foreign tax credit rules are complex, and each U.S. Holder should consult its own U.S. tax advisor regarding the foreign tax credit rules.
Special rules apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC. Subject to such special rules, foreign taxes paid with respect to any distribution in respect of stock in a PFIC are generally eligible for the foreign tax credit. The rules relating to distributions by a PFIC and their eligibility for the foreign tax credit are complicated, and a U.S. Holder should consult with its own tax advisor regarding the availability of the foreign tax credit with respect to distributions by a PFIC.
Information Reporting and Backup Withholding
Under U.S. federal income tax law, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a non-U.S. corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. Holders that hold certain specified foreign financial assets in excess of certain threshold amounts. The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, if held for investment and not in an account maintained by certain financial institutions, any stock or security issued by a non-U.S. person, any financial instrument or contract that has an issuer or counterparty other than a U.S. person and any interest in a non-U.S. entity. U.S. Holders may be subject to these reporting requirements unless their common shares are held in an account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. Holders should consult with their own tax advisors regarding the requirements of filing information returns, including the requirement to file an IRS Form 8938.
Payments made within the U.S. or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of, common shares will generally be subject to information reporting. In addition, backup withholding, currently, at a rate of 28%, may apply to such payments if a U.S. Holder (a) fails to furnish such U.S. Holder's correct U.S. taxpayer identification number (generally on IRS Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding. Certain exempt persons generally are excluded from these information reporting and backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup withholding rules will be allowed as a credit against a U.S. Holder's U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner. Each U.S. Holder should consult its own tax advisor regarding the information reporting and backup withholding rules.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
The Company is required to file financial statements and other information with the Securities Commission in the Provinces of British Columbia, Ontario and Alberta, electronically through the Canadian System for Electronic Document Analysis and Retrieval (“SEDAR”) which can be viewed at www.sedar.com.
The Company files annual reports and furnishes other information with the SEC. You may read and copy any document that we file at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 or by accessing the Commission’s website (http://www.sec.gov).
Copies of the Company’s material contracts are kept in the Company’s administrative headquarters.
I. Subsidiary Information
Not applicable.
Item 11. Quantitative and Qualitative Disclosures About Market Risks
The Audit Committee of our board of directors regularly reviews foreign exchange and interest rates. Our policy prohibits the use of financial instruments for speculative purposes. See Note 14 in our annual audited consolidated Financial Statements contained in this Annual Report for quantitative and qualitative disclosure of market risk.
Item 12. Description of Securities Other than Equity Securities
Not applicable.
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Not Applicable.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Not Applicable.
Item 15. Controls and Procedures
Disclosure Controls and Procedures
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, the Company’s principal executive officer and principal financial officer evaluated the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report on Form 20-F. Based on the evaluation, these officers concluded that as of the end of the period covered by this Annual Report on Form 20-F, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the rules and forms of the SEC. These disclosure controls and procedures include controls and procedures designed to ensure that such information is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of material weaknesses in internal control over financial reporting as identified below under the heading “Management’s Report on Internal Control Over Financial Reporting.”
Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated. The Company intends to remediate the material weaknesses as set out below.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company have been detected.
Management’s Annual Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) for the Company. The Company’s internal control over financial reporting is designed to provide reasonable assurance, not absolute assurance, regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the Company’s consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management, including the Company’s principal executive officer and principal financial officer, along with an independent consultant, conducted an evaluation of the design and operation of the Company’s internal control over financial reporting as of January 31, 2018 based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, the Company’s management concluded the Company’s internal control over financial reporting was not effective as at January 31, 2018 due to the following material weaknesses: (i) due to the limited number of staff resources, the Company believes there are instances where a lack of segregation of duties exist to provide effective controls; and (ii) due to the limited number of staff resources, the Company may not have the necessary in-house knowledge to address complex accounting and tax issues that may arise. During the period covered by this annual report on Form 20-F, we have not been able to remediate the material weaknesses identified above.
The Company’s internal control over financial reporting was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this annual report.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Attestation Report of the Registered Public Accounting Firm
Not Applicable.
Changes in Internal Control over Financial Reporting
There were no changes in internal control over financial reporting in the year ended January 31, 2018.
Item 16. [Reserved]
Not Applicable.
Item 16A. Audit Committee Financial Expert
The Board determined that Mr. Gary Robertson is an “audit committee financial expert” as defined in Item 16A of Form 20-F under the Exchange Act, and that Mr. Robertson is independent as defined in the NASDAQ listing rules.
Item 16B. Code of Ethics
The Company has not adopted a code of ethics but is evaluating its internal procedures to determine the necessity of same. In the event that it is determined that a code of ethics is necessary, an appropriate code will be implemented.
Item 16C. Principal Accountant Fees and Services
The independent auditor for the years ended January 31, 2018 and 2017 was Manning Elliott LLP.
Audit Fees
The aggregate fees billed by Manning Elliott LLP for the audit of the Company’s annual financial statements for the fiscal year ended January 31, 2018 were $38,250. The aggregate fees billed by Manning Elliott LLP for the fiscal year ended January 31, 2017 were $32,000.
Audit-Related Fees
The audit related fees billed by Manning Elliott LLP for the year ended January 31, 2018 are estimated to be $3,750. The audit related fees billed by Manning Elliott for the year ended January 31, 2017 were $3,250. These fees relate to the advisory services provided with respect to the Company’s Form 20-F.
Tax Fees
The tax fees billed by Manning Elliott LLP for the year ended January 31, 2018 are estimated to be $3,250. The tax fees billed by Manning Elliott LLP for the year ended January 31, 2017 were $3,000. The services comprising these fees include compliance service with respect to Canadian tax filings.
All Other Fees
The aggregate fees billed for all other professional services rendered by the Company’s independent registered public accounting firm were $Nil for the fiscal years ended January 31, 2018 and 2017, respectively.
The Audit Committee approved the fees paid to the principal accountant for audit-related, tax and other fees in the year ended January 31, 2018 and 2017. The Audit Committee pre-approves all non-audit services to be performed by the auditor in accordance with the Audit Committee Charter. The percentage of hours expended on the principal accountant’s engagement to audit the Company’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was 0%.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 16F. Change in Registrant’s Certifying Accountant
Not applicable
Item 16G. Corporate Governance
Not applicable.
Item 16H. Mine Safety Disclosure
Each of the Company’s properties is in the exploration stage. We have no reportable events required under Item 16H.
PART III
Item 17. Financial Statements
See Item 18.
Item 18. Financial Statements
The following Consolidated Financial Statements pertaining to the Company are filed as part of this annual report:
|
Report of Independent Registered Accounting Firm
|
|
|
|
49
|
|
|
Consolidated Statements of Financial Position
|
|
|
|
50
|
|
|
Consolidated Statements of Operations and Comprehensive Income (Loss)
|
|
|
|
51
|
|
|
Consolidated Statements of Changes in Equity
|
|
|
|
52
|
|
|
Consolidated Statements of Cash Flows
|
|
|
|
53
|
|
|
Notes to Consolidated Financial Statements
|
|
|
|
54
|
|
Item 19. Exhibits
________
|
*
|
Incorporated by reference from a previous filing.
|
CORAL GOLD RESOURCES LTD.
(an Exploration Stage Company)
Consolidated Financial Statements
For the Years Ended January 31, 2018, 2017, and 2016
(Expressed in Canadian Dollars)
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The consolidated financial statements of Coral Gold Resources Ltd. (the “Company”) are the responsibility of the Company’s management. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and reflect management’s best estimates and judgment based on information currently available.
Management has developed and is maintaining a system of internal controls to ensure that the Company’s assets are safeguarded, transactions are authorized and properly recorded and financial information is reliable.
The Board of Directors is responsible for ensuring management fulfills its responsibilities. The Audit Committee reviews the results of the audit and the annual consolidated financial statements prior to their submission to the Board of Directors for approval.
The consolidated financial statements as at January 31, 2018 and 2017 and for the years ended January 31, 2018, 2017, and 2016 have been audited by Manning Elliott LLP, an independent registered public accounting firm, and their report outlines the scope of their examination and gives their opinion on the consolidated financial statements.
|
“David Wolfin”
|
|
“Malcolm Davidson”
|
|
|
|
|
|
David Wolfin
|
|
Malcolm Davidson, CPA, CA
|
|
President & CEO
|
|
Chief Financial Officer
|
|
May 31, 2018
|
|
May 31, 2018
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Coral Gold Resources Ltd.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Coral Gold Resources Ltd. (the “Company”), which comprise the consolidated statements of financial position as at January 31, 2018 and January 31, 2017, and the consolidated statements of operations and comprehensive income (loss), consolidated statements of changes in equity and consolidated statements of cash flows for the years ended January 31, 2018, 2017 and 2016, and the related notes, including a summary of significant accounting policies and other explanatory information (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at January 31, 2018 and January 31, 2017, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
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 as issued by the International Accounting Standards Board, 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 and the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement, whether due to fraud or error. Those standards also require that we comply with ethical requirements. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. Further, we are required to be independent of the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated financial statements in Canada and to fulfill our other ethical responsibilities in accordance with these requirements.
An audit includes performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our 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, we consider internal control relevant to the Company’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 Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies and principles 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 in our audits is sufficient and appropriate to provide a reasonable basis for our audit opinion.
/S/ Manning Elliott LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, Canada
May 31, 2018
We have served as the Company’s auditor since 2013.
|
|
|
Note
|
|
|
January 31,
2018
|
|
|
January 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
$
|
14,321,433
|
|
|
$
|
54,847
|
|
|
Term deposits
|
|
|
|
|
|
3,694,415
|
|
|
|
-
|
|
|
Other amounts receivable
|
|
|
|
|
|
87,960
|
|
|
|
5,693
|
|
|
Prepaid expenses
|
|
|
|
|
|
32,237
|
|
|
|
13,177
|
|
|
Total current assets
|
|
|
|
|
|
18,136,045
|
|
|
|
73,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and Evaluation Assets
|
|
|
6
|
|
|
|
199,848
|
|
|
|
19,258,358
|
|
|
Property and Equipment
|
|
|
8
|
|
|
|
1,079
|
|
|
|
92,488
|
|
|
Royalty Receivable
|
|
|
9
|
|
|
|
3,540,753
|
|
|
|
-
|
|
|
Investments
|
|
|
10
|
|
|
|
60,057
|
|
|
|
133,195
|
|
|
Reclamation Bonds
|
|
|
11
|
|
|
|
-
|
|
|
|
83,277
|
|
|
Total assets
|
|
|
|
|
|
$
|
21,937,782
|
|
|
$
|
19,641,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
$
|
48,303
|
|
|
$
|
76,923
|
|
|
Amounts payable to related parties
|
|
|
13
b
|
|
|
|
39,865
|
|
|
|
114,322
|
|
|
Current income tax liability
|
|
|
|
|
|
|
2,751,000
|
|
|
|
-
|
|
|
Total current liabilities
|
|
|
|
|
|
|
2,839,168
|
|
|
|
191,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclamation Provision
|
|
|
14
|
|
|
|
-
|
|
|
|
559,257
|
|
|
Deferred Tax Liability
|
|
|
19
|
|
|
|
42,000
|
|
|
|
1,043,000
|
|
|
Total liabilities
|
|
|
|
|
|
|
2,881,168
|
|
|
|
1,793,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Capital
|
|
|
12
|
|
|
|
44,356,316
|
|
|
|
45,495,382
|
|
|
Equity Reserves
|
|
|
|
|
|
|
1,182,299
|
|
|
|
1,071,804
|
|
|
Accumulated Other Comprehensive Income
|
|
|
|
|
|
|
23,808
|
|
|
|
81,077
|
|
|
Accumulated Deficit
|
|
|
|
|
|
|
(26,516,129
|
)
|
|
|
(28,811,050
|
)
|
|
Equity Attributable to Equity Holders of the Company
|
|
|
|
|
|
|
19,046,294
|
|
|
|
17,837,213
|
|
|
Equity Attributable to Non-Controlling Interests
|
|
|
|
|
|
|
10,320
|
|
|
|
10,320
|
|
|
Total Equity
|
|
|
|
|
|
|
19,056,614
|
|
|
|
17,847,533
|
|
|
Total Liabilities and Equity
|
|
|
|
|
|
$
|
21,937,782
|
|
|
$
|
19,641,035
|
|
Commitments – Note 15
Approved by the Board of Directors on May 31, 2018:
|
/s/ David Wolfin
Director
|
/s/ Gary Robertson
Director
|
The accompanying notes are an integral part of the consolidated financial statements
|
CORAL GOLD RESOURCES LTD.
Consolidated Statements of Operations and Comprehensive Income (Loss)
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
|
|
|
Note
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting fees
|
|
|
|
|
$
|
97,500
|
|
|
$
|
17,915
|
|
|
$
|
2,663
|
|
|
Depreciation
|
|
|
|
|
|
1,670
|
|
|
|
2,207
|
|
|
|
2,290
|
|
|
Directors’ fees
|
|
|
|
|
|
33,750
|
|
|
|
18,000
|
|
|
|
18,000
|
|
|
Finance costs
|
|
|
14
|
|
|
|
6,786
|
|
|
|
18,240
|
|
|
|
17,389
|
|
|
Impairment of exploration and evaluation assets
|
|
|
7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
212,519
|
|
|
Investor relations
|
|
|
|
|
|
|
60,603
|
|
|
|
97,977
|
|
|
|
7,698
|
|
|
Management fees
|
|
|
|
|
|
|
154,500
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
Office and miscellaneous
|
|
|
|
|
|
|
28,123
|
|
|
|
40,029
|
|
|
|
10,632
|
|
|
Professional fees
|
|
|
|
|
|
|
169,845
|
|
|
|
215,740
|
|
|
|
67,295
|
|
|
Listing and filing fees
|
|
|
|
|
|
|
69,670
|
|
|
|
23,327
|
|
|
|
39,491
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
159,457
|
|
|
|
91,470
|
|
|
|
73,031
|
|
|
Share-based payments
|
|
|
12
|
|
|
|
565,250
|
|
|
|
7,865
|
|
|
|
157,142
|
|
|
Travel
|
|
|
|
|
|
|
28,828
|
|
|
|
17,296
|
|
|
|
4,043
|
|
|
|
|
|
|
|
|
|
1,375,982
|
|
|
|
580,066
|
|
|
|
642,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss Before Other Items and Income Taxes
|
|
|
|
|
|
|
(1,375,982
|
)
|
|
|
(580,066
|
)
|
|
|
(642,193
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of exploration and evaluation assets
|
|
|
5
|
|
|
|
5,871,719
|
|
|
|
-
|
|
|
|
-
|
|
|
Finance income
|
|
|
|
|
|
|
117,379
|
|
|
|
-
|
|
|
|
-
|
|
|
Gain on sale of investments
|
|
|
10
|
|
|
|
93,693
|
|
|
|
-
|
|
|
|
27,059
|
|
|
Foreign exchange gain (loss)
|
|
|
|
|
|
|
(907,286
|
)
|
|
|
21,927
|
|
|
|
(9,595
|
)
|
|
Loss on sale of fixed asset
|
|
|
|
|
|
|
(34,183
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Gain on forgiveness of debt
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,250
|
|
|
Income (Loss) Before Income Taxes
|
|
|
|
|
|
|
3,765,340
|
|
|
|
(558,139
|
)
|
|
|
(619,479
|
)
|
|
Income Tax Recovery (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax expense
|
|
|
|
|
|
|
(2,751,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Deferred income tax recovery (expense)
|
|
|
19
|
|
|
|
1,001,000
|
|
|
|
(423,000
|
)
|
|
|
670,000
|
|
|
|
|
|
|
|
|
|
(1,750,000
|
)
|
|
|
(423,000
|
)
|
|
|
670,000
|
|
|
Net Income (Loss)
|
|
|
|
|
|
|
2,015,340
|
|
|
|
(981,139
|
)
|
|
|
50,521
|
|
|
Other Comprehensive Income (Loss) –
Items that may be reclassified subsequently to income or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available for sale securities
|
|
|
10
|
|
|
|
(57,269
|
)
|
|
|
40,449
|
|
|
|
(46,960
|
)
|
|
Comprehensive Income (Loss)
|
|
|
|
|
|
$
|
1,958,071
|
|
|
$
|
(940,690
|
)
|
|
$
|
3,561
|
|
|
Earnings (Loss) per Share - Basic and Diluted
|
|
|
|
|
|
$
|
0.04
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Shares Outstanding
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
47,570,158
|
|
|
|
48,396,734
|
|
|
|
44,200,953
|
|
|
Diluted
|
|
|
|
|
|
|
50,509,282
|
|
|
|
48,396,734
|
|
|
|
44,200,953
|
|
The accompanying notes are an integral part of the consolidated financial statements
|
CORAL GOLD RESOURCES LTD.
Consolidated Statements of Changes in Equity
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
|
|
|
Note
|
|
|
Number of Common Shares
|
|
|
Share Capital Amount
|
|
|
Reserve for Stock Options
|
|
|
Reserve for Warrants
|
|
|
Total Reserves
|
|
|
Accumulated Other Comprehensive Income
|
|
|
Accumulated Deficit
|
|
|
Non-Controlling Interest
|
|
|
Total
|
|
|
Balance, January 31, 2015
|
|
|
|
|
|
42,825,337
|
|
|
$
|
45,205,901
|
|
|
$
|
768,274
|
|
|
$
|
1,916,575
|
|
|
$
|
2,684,849
|
|
|
$
|
87,588
|
|
|
$
|
(29,723,877
|
)
|
|
$
|
10,320
|
|
|
$
|
18,264,781
|
|
|
Common shares issued for cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Placements
|
|
|
12
|
|
|
|
5,000,000
|
|
|
|
162,500
|
|
|
|
-
|
|
|
|
87,500
|
|
|
|
87,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
250,000
|
|
|
Less: Share issuance costs
|
|
|
|
|
|
|
-
|
|
|
|
(1,126
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,126
|
)
|
|
Share-based payments
|
|
|
12
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,446
|
|
|
|
143,696
|
|
|
|
157,142
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
157,142
|
|
|
Transfer of expired/cancelled
options and warrants
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(118,000
|
)
|
|
|
(1,725,445
|
)
|
|
|
(1,843,445
|
)
|
|
|
-
|
|
|
|
1,843,445
|
|
|
|
-
|
|
|
|
-
|
|
|
Unrealized gain on investment in securities, net of tax
|
|
|
10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(46,960
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(46,960
|
)
|
|
Net income for 2016
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,521
|
|
|
|
-
|
|
|
|
50,521
|
|
|
Balance, January 31, 2016
|
|
|
|
|
|
|
47,825,337
|
|
|
$
|
45,367,275
|
|
|
$
|
663,720
|
|
|
$
|
422,326
|
|
|
$
|
1,086,046
|
|
|
$
|
40,628
|
|
|
$
|
(27,829,911
|
)
|
|
$
|
10,320
|
|
|
$
|
18,674,358
|
|
|
Common shares issued for cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
12
|
|
|
|
25,000
|
|
|
|
10,250
|
|
|
|
(4,250
|
)
|
|
|
-
|
|
|
|
(4,250
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,000
|
|
|
Exercise of warrants and compensation options
|
|
|
|
|
|
|
1,000,000
|
|
|
|
117,857
|
|
|
|
-
|
|
|
|
(17,857
|
)
|
|
|
(17,857
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,000
|
|
|
Share-based payments
|
|
|
12
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,865
|
|
|
|
-
|
|
|
|
7,865
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,865
|
|
|
Unrealized loss on investment in securities, net of tax
|
|
|
10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,449
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,449
|
|
|
Net loss for 2017
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(981,139
|
)
|
|
|
-
|
|
|
|
(981,139
|
)
|
|
Balance, January 31, 2017
|
|
|
|
|
|
|
48,850,337
|
|
|
$
|
45,495,382
|
|
|
$
|
667,335
|
|
|
$
|
404,469
|
|
|
$
|
1,071,804
|
|
|
$
|
81,077
|
|
|
$
|
(28,811,050
|
)
|
|
$
|
10,320
|
|
|
$
|
17,847,533
|
|
|
Common shares issued for cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
12
|
|
|
|
510,000
|
|
|
|
249,209
|
|
|
|
(98,609
|
)
|
|
|
-
|
|
|
|
(98,609
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
150,600
|
|
|
Exercise of warrants and compensation options
|
|
|
|
|
|
|
3,965,000
|
|
|
|
481,315
|
|
|
|
-
|
|
|
|
(76,565
|
)
|
|
|
(76,565
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
404,750
|
|
|
Less: Share issuance costs
|
|
|
|
|
|
|
-
|
|
|
|
(5,850
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,850
|
)
|
|
Common shares returned to treasury and cancelled
|
|
|
12
|
|
|
|
(4,150,000
|
)
|
|
|
(1,411,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,411,000
|
)
|
|
Common shares repurchased and cancelled
|
|
|
|
|
|
|
(911,500
|
)
|
|
|
(320,431
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(320,431
|
)
|
|
Common shares repurchased in treasury
|
|
|
|
|
|
|
(432,500
|
)
|
|
|
(132,309
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(132,309
|
)
|
|
Share-based payments
|
|
|
12
|
|
|
|
-
|
|
|
|
-
|
|
|
|
565,250
|
|
|
|
-
|
|
|
|
565,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
565,250
|
|
|
Transfer of expired/cancelled
options and warrants
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(269,581
|
)
|
|
|
(10,000
|
)
|
|
|
(279,581
|
)
|
|
|
-
|
|
|
|
279,581
|
|
|
|
-
|
|
|
|
-
|
|
|
Unrealized gain on investment in securities, net of tax
|
|
|
10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(57,269
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(57,269
|
)
|
|
Net income for 2018
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,015,340
|
|
|
|
-
|
|
|
|
2,015,340
|
|
|
Balance, January 31, 2018
|
|
|
|
|
|
|
47,831,337
|
|
|
$
|
44,356,316
|
|
|
$
|
864,395
|
|
|
$
|
228,515
|
|
|
$
|
1,182,299
|
|
|
$
|
23,808
|
|
|
$
|
(26,516,129
|
)
|
|
$
|
10,320
|
|
|
$
|
19,056,614
|
|
The accompanying notes are an integral part of the consolidated financial statements
|
CORAL GOLD RESOURCES LTD.
Consolidated Statements of Cash Flows
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
|
|
|
Note
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH PROVIDED BY (USED IN):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
$
|
2,015,340
|
|
|
$
|
(981,139
|
)
|
|
$
|
50,521
|
|
|
Adjustments for non-cash items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax expense
|
|
|
|
|
|
2,751,000
|
|
|
|
-
|
|
|
|
-
|
|
|
Deferred income tax expense (recovery)
|
|
|
|
|
|
(1,001,000
|
)
|
|
|
423,000
|
|
|
|
(670,000
|
)
|
|
Depreciation
|
|
|
|
|
|
1,670
|
|
|
|
2,207
|
|
|
|
2,290
|
|
|
Finance costs
|
|
|
|
|
|
6,786
|
|
|
|
18,240
|
|
|
|
17,389
|
|
|
Foreign exchange gain (loss)
|
|
|
|
|
|
(507,302
|
)
|
|
|
(37,713
|
)
|
|
|
55,070
|
|
|
Gain on sale of investments
|
|
|
|
|
|
(93,693
|
)
|
|
|
-
|
|
|
|
(27,059
|
)
|
|
Gain on forgiveness of debt
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,250
|
)
|
|
Gain on sale of exploration and evaluation assets
|
|
|
|
|
|
(5,871,719
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Impairment of exploration and evaluation assets
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
212,519
|
|
|
Share-based payments
|
|
|
|
|
|
565,250
|
|
|
|
72,398
|
|
|
|
157,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,133,668
|
)
|
|
|
(503,007
|
)
|
|
|
(207,378
|
)
|
|
Net change in non-cash working capital
|
|
|
18
|
|
|
|
(113,747
|
)
|
|
|
44,324
|
|
|
|
(2,668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,247,415
|
)
|
|
|
(458,683
|
)
|
|
|
(210,046
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures on exploration and evaluation assets
|
|
|
|
|
|
|
(265,059
|
)
|
|
|
(126,658
|
)
|
|
|
(191,679
|
)
|
|
Proceeds on sale of mineral property
|
|
|
|
|
|
|
20,184,056
|
|
|
|
-
|
|
|
|
-
|
|
|
Proceeds on sale of investments
|
|
|
|
|
|
|
109,562
|
|
|
|
-
|
|
|
|
33,385
|
|
|
Increase in term deposits
|
|
|
|
|
|
|
(3,694,415
|
)
|
|
|
|
|
|
|
|
|
|
Decrease in reclamation bond
|
|
|
|
|
|
|
83,277
|
|
|
|
-
|
|
|
|
571,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,417,421
|
|
|
|
(126,658
|
)
|
|
|
413,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for cash, net
|
|
|
|
|
|
|
96,760
|
|
|
|
41,467
|
|
|
|
248,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate fluctuations on cash and equivalents
|
|
|
|
|
|
|
(180
|
)
|
|
|
(1,243
|
)
|
|
|
358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and equivalents
|
|
|
|
|
|
|
14,266,586
|
|
|
|
(545,117
|
)
|
|
|
452,389
|
|
|
Cash and cash equivalents, beginning of year
|
|
|
|
|
|
|
54,847
|
|
|
|
599,964
|
|
|
|
147,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
|
|
|
|
$
|
14,321,433
|
|
|
$
|
54,847
|
|
|
$
|
599,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
$
|
5,722,848
|
|
|
$
|
54,847
|
|
|
$
|
599,964
|
|
|
Term deposits
|
|
|
|
|
|
|
8,598,585
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,321,433
|
|
|
$
|
54,847
|
|
|
$
|
599,964
|
|
Supplementary cash flow disclosures – Note 18
The accompanying notes are an integral part of the consolidated financial statements
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
1. NATURE AND CONTINUANCE OF OPERATIONS
Coral Gold Resources Ltd. (the “Company”) was incorporated in 1988 under the
Company Act
of British Columbia and is primarily involved in the exploration and development of its mineral properties. The Company’s head office and principal place of business is Suite 900, 570 Granville Street, Vancouver, BC, Canada. The Company’s common shares are traded on the TSX-V, OTCQX, and the Frankfurt Stock Exchange.
The business of mining and exploring for minerals involves a high degree of risk and there can be no assurance that current exploration programs will result in profitable mining operations. The recoverability of the carrying value of exploration and evaluation assets and the Company's ability to continue as a going concern is dependent upon the preservation of its interest in the underlying properties, the discovery of economically recoverable reserves, the achievement of profitable operations, or alternatively the ability of the Company to raise financing.
2. BASIS OF PRESENTATION
Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
Basis of presentation
These consolidated financial statements are expressed in Canadian dollars, the Company’s presentation currency, and have been prepared on a historical cost basis, except for financial instruments that have been measured at fair value. The accounting policies in Note 3 have been applied consistently to all periods presented.
Approval of the consolidated financial statements
These consolidated financial statements were reviewed by the Audit Committee and approved and authorized for issue by the Board of Directors on May 31, 2018.
Foreign Currency Translation
The functional currency of the Company and its subsidiaries is the Canadian dollar. Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each financial position reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at the date of the consolidated statement of financial position. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Foreign currency translation differences are recognized in net income or loss for the year.
The preparation of these consolidated financial statements requires management to make estimates and judgments 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 under different assumptions and conditions.
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
2. BASIS OF PRESENTATION (continued)
Significant Accounting Judgements and Estimates
Significant assumptions about the future and other sources of estimation uncertainty that management has made at the consolidated statement of financial position date, 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:
a)
Impairment of equipment and exploration and evaluation assets
Management considers both external and internal sources of information in assessing whether there are any indications that the Company’s equipment and exploration and evaluation assets are impaired. External sources of information management considers include changes in the market, economic and legal environment in which the Company operates that are not within its control and affect the recoverable amount of its equipment and mining interests.
b)
Valuation of share-based payments
The Company uses the Black Scholes Option Pricing Model for valuation of share-based payments. Option pricing models require the input of subjective assumptions including expected price volatility, interest rate and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s earnings and equity reserves.
c)
Recognition and measurement of deferred tax assets and liabilities
Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. Weight is attached to tax planning opportunities that are within the Company’s control, and are feasible and implementable without significant obstacles. The likelihood that tax positions taken will be sustained upon examination by applicable tax authorities is assessed based on individual facts and circumstances of the relevant tax position evaluated 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/liabilities.
d)
Measurement of royalty receivable
The Company considered the fair value of the Company’s royalty receivable relating to the Robertson Property as the present value of the minimum payments that will be made, regardless if the Robertson Property enters the production stage and earns revenues. The valuation method requires the input of a discount rate, and takes into account the timing of the payments, which have been outlined in the transaction. Changes in the input assumptions such as the discount rate can materially affect the fair value estimate.
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
3. SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its US subsidiaries as follows:
|
|
|
Ownership Interest
|
|
Jurisdiction
|
|
Nature of Operations
|
|
|
|
|
|
|
|
|
|
Coral Resources, Inc.
|
|
100%
|
|
Nevada, USA
|
|
Exploration Company
|
|
|
|
|
|
|
|
|
|
Coral Energy Corporation
|
|
100%
|
|
California, USA
|
|
Holding Company
|
|
|
|
|
|
|
|
|
|
Marcus Corporation
|
|
98.49%
|
|
Nevada, USA
|
|
Holding Company
|
Intercompany balances and transactions, including unrealized income and expenses arising from intercompany transactions are eliminated in preparing the consolidated financial statements.
Financial Instruments
All financial assets are initially recorded at fair value and classified into one of four categories: held to maturity, available for sale, loans and receivable or fair value through profit or loss (“FVTPL”). All financial liabilities are initially recorded at fair value and classified as either FVTPL or other financial liabilities. Financial instruments comprise cash and cash equivalents, royalty receivable, investments, accounts payable and amounts payable to related parties. At initial recognition management has classified financial assets and liabilities as follows:
The Company has classified its cash and cash equivalent and term deposits as FVTPL and royalty receivable as loans and receivables. Investments in related companies are classified as available for sale, and accounts payable and amounts payable to related parties are classified as other liabilities.
Fair value hierarchy
Fair value measurements of financial instruments are required to be classified using a fair value hierarchy that reflects the significance of inputs in making the measurements. The levels of the fair value hierarchy are defined as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – Inputs for the asset or liability that are not based on observable market data.
Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of financial position comprise cash at banks and on hand, and short-term deposits with an original maturity of three months or less, which are readily convertible into known amounts of cash.
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Exploration and evaluation assets
The Company is in the exploration stage with respect to its mineral properties and capitalizes all costs relating to the acquisition, exploration and evaluation of mineral claims and recognizes any proceeds received as a reduction of the cost of the related claims. At such time as commercial production commences, these costs will be charged to operations on a unit-of-production method based on proven and probable reserves. The aggregate costs related to abandoned mineral claims are charged to operations at the time of any abandonment. All capitalized exploration and evaluation expenditures are monitored for indications of impairment. Where a potential impairment is indicated, assessments are performed for each area of interest. To the extent that exploration expenditure is not expected to be recovered, it is charged to the results of operations. An impairment charge relating to a mineral property is subsequently reversed when new exploration results or actual or potential proceeds on sale or farm out of the property result in a revised estimate of the recoverable amount, but only to the extent that this does not exceed the original carrying value of the property that would have resulted if no impairment had been recognized.
The recoverability of amounts shown for exploration and evaluation assets is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain financing to complete development of the properties, and on future production or proceeds of disposition.
Incidental revenues and operating costs are included in exploration and evaluation assets prior to commercial production.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mine development properties, and subsequently amortized over the life of the resources associated with the area of interest once mining operations have commenced.
Property and equipment
Property and equipment are recorded at historical cost less accumulated depreciation and impairment. Historical costs include expenditures that are directly attributable to bringing the asset to a location and condition necessary to operate in a manner intended by management. Such costs are accumulated as construction in progress until the asset is available for use, at which point the asset is classified as plant and equipment. Once commercial production has commenced, certain equipment are depreciated using the units of production method, if sufficient reserve information is available or the straight-line method over their estimated useful lives, not to exceed the life of the mine to which the assets related.
Property and equipment are depreciated annually using the following methods and rates:
|
Buildings
|
10% declining balance
|
|
Computer hardware
|
20% declining balance
|
|
Equipment
|
20% declining balance
|
|
Vehicles
|
5 years straight line
|
An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in profit or loss in the consolidated statements of comprehensive income or loss.
Where an item of property and equipment comprises major components with different useful lives, the components are accounted for as separate items of property and equipment. Expenditures incurred to replace a component of an item of plant and equipment that is accounted for separately, including major inspection and overhaul expenditures, are capitalized.
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment
At each financial reporting date, the carrying amounts of the Company’s assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. Where the asset does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
An asset’s recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset or cash generating unit is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in the profit or loss for the year.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
Share capital
Share capital is classified as equity. Incremental costs directly attributable to the issue of shares and share options are recognized as a deduction from equity. When share capital is repurchased, the amount of the consideration paid, included directly attributable costs is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from equity. When treasury shares are subsequently reissued, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to or from accumulated deficit.
Accounting for equity units
Proceeds received on the issuance of units, comprised of common shares and warrants are allocated based on the relative fair value approach which considers the value determined by the Black-Scholes option pricing model for the warrants.
Share-based payment transactions
The share option plan allows Company employees, directors and consultants to acquire shares of the Company. All options granted are measured at fair value and are recognized in expenses as share-based payments with a corresponding increase in equity reserves. 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.
The fair value of employee options is measured at grant date, and each tranche is recognized using the graded vesting method over the period during which the options vest. 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. For non-employees, share-based payments are measured at the fair value goods and services received or the fair value or the fair value of the equity instruments issued, if it is determined the fair value cannot be reliably measured, and are recorded at the date the goods or services are received. The fair value of the options is accrued and charged either to operations or exploration and evaluation assets, with the offset credit to equity reserves. This includes a forfeiture estimate, which is revised for actual forfeitures in subsequent periods. Upon the expiration or cancellation of unexercised stock options, the Company will transfer the value attributed to those stock options from equity reserves to accumulated deficit.
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Provisions
Provisions are recognized where a legal or constructive obligation has been incurred as a result of past events, it is probable that an outflow of resources embodying economic benefit will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. If material, provisions are measured at the present value of the expenditures expected to be required to settle the obligation. The increase in any provision due to passage of time is recognized as accretion expense.
Reclamation provision
The Company records the present value of estimated costs of legal and constructive obligations required to restore mineral properties in the period in which the obligation is incurred. The nature of these restoration activities includes dismantling and removing structures, rehabilitating mines and restoration, reclamation and re-vegetation of affected areas. The reclamation provisions are initially recorded with corresponding increase to the carrying amount of related mineral properties.
When the liability is initially recognized, the present value of the estimated cost is capitalized by increasing the carrying amount of the related mineral property. Over time, the discounted liability is increased for the change in present value based on the risk-free interest rate applicable to the future cash outflows, which is accreted over time through periodic charges to income or loss.
Income (loss) per share
The Company presents basic and diluted income (loss) per share data for its common shares, calculated by dividing the income (loss) attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is determined by adjusting the income (loss) attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all dilutive potential common shares. For the year ended January 31, 2018, the diluted weighted average number of common shares outstanding includes 606,119 dilutive stock options and 2,333,005 dilutive warrants. For the years ended January 31, 2017 and 2016, diluted income (loss) per share is the same as basic income (loss) per share as the effects of including all outstanding options and warrants would be anti-dilutive.
Income taxes
Income tax on the profit or loss for the years 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 as equity.
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 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 consolidated statement of financial position 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.
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
4. RECENT ACCOUNTING PRONOUNCEMENTS
Changes in accounting standards not yet effective:
The following accounting standards were issued but not yet effective as of January 31, 2018:
IFRS 15 – Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 – Revenue from Contracts with Customers ("IFRS 15") which supersedes IAS 11 – Construction Contracts, IAS 18 – Revenue, IFRIC 13 – Customer Loyalty Programmes, IFRIC 15 – Agreements for the Construction of Real Estate, IFRIC 18 – Transfers of Assets from Customers, and SIC 31 – Revenue – Barter Transactions Involving Advertising Services. IFRS 15 establishes a comprehensive five-step framework for the nature, amount, timing and uncertainty of revenue arising from a contract with a customer. The standard is effective for annual periods beginning on or after January 1, 2018. The Company currently has no revenues, and is not expecting any impact on its consolidated financial statements.
IFRS 9 – Financial Instruments
In July 2014, the IASB issued the final version of IFRS 9 – Financial Instruments (“IFRS 9”) to replace IAS 39 – Financial Instruments: Recognition and Measurement in its entirety. IFRS 9 provides a revised model for recognition and measurement of financial instruments and a single, forward-looking ‘expected-loss’ impairment model, as well as a substantially reformed approach to hedge accounting. The standard is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted.
The classification of financial assets and liabilities is expected to remain consistent under IFRS 9, with the possible exception of equity securities. Under IFRS 9, the Company will have the option to designate equity securities as financial assets at fair value through other comprehensive income. If the Company does not make this election, changes in the fair value of equity securities will continue to be recognized in profit or loss in accordance with the Company’s current policy.
The Company expects the above potential changes to be the only impacts, as the Company currently has no hedging arrangements. The above assessments were made based on an analysis of the Company’s financial assets and financial liabilities at January 31, 2018, on the basis of the facts and circumstances that existed at that date. As facts and circumstances may change during the period leading up to the initial date of application, the assessment of the potential impact is subject to change.
IFRS 16 Leases
In January 2016, the IASB issued IFRS 16 – Leases (“IFRS 16”) which replaces IAS 17 – Leases and its associated interpretative guidance, and will be effective for accounting periods beginning on or after January 1, 2019. Early adoption is permitted, provided the Company has adopted IFRS 15. This standard sets out a new model for lease accounting. The Company is currently evaluating the impact the final standard is expected to have on its consolidated financial statements.
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
5. DISPOSITION OF EXPLORATION AND EVALUATION ASSETS
On June 8, 2017, the Company announced that it has closed the previously announced purchase and sale agreement (the “Agreement”) with Barrick Cortez Inc. (“Barrick”), a subsidiary of Barrick Gold Corp., for the sale of the Robertson Property in Lander County, Nevada, to Barrick. The Robertson Property sold to Barrick includes four contiguous claim groups known as the Core, Gold Ridge, Excluded, and the RUF mining claims, but does not include the portions of mining claims known as the Norma, Sass, Eagle, and JDN, which will remain owned by the Company.
The sale consideration is as follows:
|
|
·
|
Payment to the Company of US$15.75 million (approximately Cdn $21.84 million based on foreign exchange rates) in cash;
|
|
|
|
|
|
|
·
|
The return of 4,150,000 common shares of the Company held by Barrick (which represented approximately 8.5% of the Company’s basic common shares outstanding as of June 8, 2017) for cancellation by the Company; and
|
|
|
|
|
|
|
·
|
A sliding scale 1% to 2.25% net smelter returns royalty (the “NSR”) on the Robertson Property, payable quarterly, subject to potential advance royalty payments as outlined below, as well as a right of first refusal enabling Barrick to acquire the NSR in the event that the Company wishes to sell the NSR to any third party.
|
The sliding scale NSR rate will be determined based on the observed gold price during each quarterly period based on the average LBMA Gold Price PM during the quarterly period, as follows:
|
Average Gold Price/Oz During the Quarter (USD)
|
|
Applicable NSR Royalty Rate
|
|
|
Up to and including $1,200.00
|
|
|
1.00
|
%
|
|
$1,200.01 to $1,400.00
|
|
|
1.25
|
%
|
|
$1,400.01 to $1,600.00
|
|
|
1.50
|
%
|
|
$1,600.01 to $1,800.00
|
|
|
1.75
|
%
|
|
$1,800.01 to $2,000.00
|
|
|
2.00
|
%
|
|
Over $2,000.00
|
|
|
2.25
|
%
|
Pursuant to the Agreement, as amended, and due to the delay in closing, in the event that the Robertson Property is not placed into production by December 31, 2024, then beginning on January 1, 2025, and continuing on an annual basis thereafter until the earlier of (i) the date commercial production commences and (ii) January 2, 2034, Barrick will make advance royalty payments to the Company of US$0.5 million, which will be non-refundable and fully credited against any future obligations under the NSR.
The fair value of the royalty receivable (Note 9) was estimated based on the present value of the advance royalty payments, using a discount rate of 5.04%.
Barrick will also assume liabilities relating to the Robertson Property, and will provide replacement security for the reclamation bond.
As a result of the transaction, the Company recorded a gain of $5,871,719, net of transaction costs, which has been included in Other Items on the consolidated statements of operations and comprehensive income (loss).
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
6. EXPLORATION AND EVALUATION ASSETS
The Company has accumulated the following acquisition and exploration expenditures:
|
|
|
Robertson Property
|
|
|
Ruf & Norma Sass Claims
|
|
|
Eagle & JDN Claims
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2016
|
|
$
|
19,092,549
|
|
|
$
|
99,801
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
19,192,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration costs during the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
|
|
|
37,440
|
|
|
|
25,237
|
|
|
|
-
|
|
|
|
-
|
|
|
|
62,677
|
|
|
Lease payments
|
|
|
31,775
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31,775
|
|
|
Taxes, licenses and permits
|
|
|
7,832
|
|
|
|
7,516
|
|
|
|
14,690
|
|
|
|
-
|
|
|
|
30,038
|
|
|
Mapping
|
|
|
332
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
332
|
|
|
Change in reclamation estimate
|
|
|
(58,817
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(58,817
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2017
|
|
$
|
19,111,111
|
|
|
$
|
132,554
|
|
|
$
|
14,692
|
|
|
$
|
1
|
|
|
$
|
19,258,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration costs during the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
|
|
|
25,717
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,717
|
|
|
Drilling
|
|
|
-
|
|
|
|
-
|
|
|
|
8,143
|
|
|
|
-
|
|
|
|
8,143
|
|
|
Lease payments
|
|
|
5,168
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,168
|
|
|
Royalties
|
|
|
-
|
|
|
|
22,664
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,664
|
|
|
Taxes, licenses and permits
|
|
|
7,129
|
|
|
|
7,377
|
|
|
|
14,417
|
|
|
|
-
|
|
|
|
28,923
|
|
|
Proceeds from sale of mineral property (Note 5)
|
|
|
(19,149,125
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(19,149,125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2018
|
|
$
|
-
|
|
|
$
|
162,595
|
|
|
$
|
37,252
|
|
|
$
|
1
|
|
|
|
199,848
|
|
The Company has certain interests in 108 patented and unpatented lode mining claims located in Lander County, Nevada, subject to net smelter returns (“NSR”) on production ranging from 4% to 10%, and which certain leases provide for advanced royalty payments.
a)
Norma Sass Property – 100% interest
The Company holds a 100% interest in the 36 Norma Sass mining claims located in Lander County, Nevada. Expenditures incurred on the Ruf claims have been classified to Ruf and Norma Sass claims in the exploration expenditure table.
b)
JDN Hilltop Crest – 100% interest
The Company holds a 100% interest in 27 claims in the Hilltop District, Lander County, Nevada. Expenditures incurred on the Ruf claims have been classified to JDN and Eagle claims in the exploration expenditure table.
c)
Eagle Claims – 100% interest
The Company holds a 100% interest in 45 claims in the Eagle Claims situated in the Shoshone Range, Lander County, Nevada. Expenditures incurred on the Ruf claims have been classified to JDN and Eagle claims in the exploration expenditure table.
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
6. EXPLORATION AND EVALUATION ASSETS (continued)
Realization of Exploration and Evaluation Assets
The investment in and expenditures on exploration and evaluation assets comprise a significant portion of the Company’s assets. Realization of the Company’s investment in these assets is dependent upon the establishment of legal ownership, the attainment of successful production from the properties or from the proceeds of their disposal. Resource exploration and development is highly speculative and involves inherent risks. While the rewards can be substantial if an ore body is discovered, few properties that are explored are ultimately developed into producing mines. There can be no assurance that current exploration programs will result in the discovery of economically viable quantities of ore.
The amounts shown for acquisition costs and deferred exploration expenditures represent costs incurred to date and do not necessarily reflect present or future values.
Title to Exploration and Evaluation Assets Interests
Although the Company has taken steps to verify the title to exploration and evaluation assets in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property title may be subject to unregistered prior agreements or transfers and title may be affected by undetected defects.
Environmental
The Company is subject to the laws and regulations relating to environmental matters in all jurisdictions in which it operates, including provisions relating to property reclamation, discharge of hazardous material, and other matters. The Company may also be held liable should environmental problems be discovered that were caused by former owners and operators of its properties and properties in which it has previously had an interest. The Company conducts its mineral exploration activities in compliance with applicable environmental protection legislation. The Company is not aware of any existing environmental problems related to any of its current or former properties that may result in material liability to the Company other than the amount presented and disclosed as a reclamation provision in these consolidated financial statements.
Environmental legislation is becoming increasingly stringent and costs and expenses of regulatory compliance are increasing. The impact of new and future environmental legislation on the Company’s operations may cause additional expenses and restrictions. If the restrictions adversely affect the scope of exploration and development on the mineral properties, the potential for production on the property may be diminished or negated.
7. IMPAIRMENT OF EXPLORATION AND EVALUATION ASSETS
The Company reviews the carrying amounts of its long-term assets at each consolidated statement of financial position date to determine whether there is any indication that those assets are impaired.
Based on the assessment performed at, and throughout the years ended, January 31, 2018 and 2017, there were no impairments or write-offs during the year.
During the year ended January 31, 2016, the Company determined that the six lode mining claims that were leased under the Breckon Lease June Claims were insignificant to the property and did not warrant additional expenditure for lease payments and claims maintenance. The value attributed to the claims of $212,519 was written-off as a charge to operations and is included in net loss in 2016.
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
8. PROPERTY AND EQUIPMENT
|
|
|
Land
|
|
|
Buildings
|
|
|
Vehicles
|
|
|
Computer
Hardware
|
|
|
Equipment
|
|
|
TOTAL
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
COST
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31, 2016
|
|
|
84,127
|
|
|
|
18,708
|
|
|
|
6,920
|
|
|
|
5,926
|
|
|
|
3,459
|
|
|
|
119,140
|
|
|
Additions (Disposals)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance at January 31, 2017
|
|
|
84,127
|
|
|
|
18,708
|
|
|
|
6,920
|
|
|
|
5,926
|
|
|
|
3,459
|
|
|
|
119,140
|
|
|
Additions (Disposals)
|
|
|
(84,127
|
)
|
|
|
(18,708
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(102,835
|
)
|
|
Balance at January 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
6,920
|
|
|
|
5,926
|
|
|
|
3,459
|
|
|
|
16,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACCUMULATED DEPRECIATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31, 2016
|
|
|
-
|
|
|
|
9,822
|
|
|
|
6,920
|
|
|
|
5,559
|
|
|
|
2,143
|
|
|
|
24,444
|
|
|
Depreciation
|
|
|
-
|
|
|
|
1,872
|
|
|
|
-
|
|
|
|
73
|
|
|
|
263
|
|
|
|
2,208
|
|
|
Balance at January 31, 2017
|
|
|
-
|
|
|
|
11,694
|
|
|
|
6,920
|
|
|
|
5,632
|
|
|
|
2,406
|
|
|
|
26,652
|
|
|
Depreciation
|
|
|
-
|
|
|
|
(11,694
|
)
|
|
|
-
|
|
|
|
57
|
|
|
|
211
|
|
|
|
(11,426
|
)
|
|
Balance at January 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
6,920
|
|
|
|
5,689
|
|
|
|
2,617
|
|
|
|
15,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CARRYING VALUE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 31, 2017
|
|
|
84,127
|
|
|
|
7,014
|
|
|
|
-
|
|
|
|
294
|
|
|
|
1,053
|
|
|
|
92,488
|
|
|
At January 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
237
|
|
|
|
842
|
|
|
|
1,079
|
|
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
9. ROYALTY RECEIVABLE
A reconciliation of the royalty receivable balance at January 31, 2018, is as follows:
|
|
|
January 31,
2018
|
|
|
January 31,
2017
|
|
|
Beginning balance
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Royalty received for exploration and evaluation asset (Note 5)
|
|
|
3,603,680
|
|
|
|
-
|
|
|
Finance income
|
|
|
117,379
|
|
|
|
-
|
|
|
Change in foreign exchange rate
|
|
|
(180,306
|
)
|
|
|
-
|
|
|
|
|
$
|
3,540,753
|
|
|
$
|
-
|
|
10. INVESTMENTS
At January 31, 2018, the Company held shares as follows:
|
|
|
Number of Shares
|
|
|
Cost
|
|
|
Accumulated Unrealized
Gain (Loss)
|
|
|
Fair Value
|
|
|
Available-for-sale shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Levon Resources Ltd.
|
|
|
40,000
|
|
|
$
|
2,116
|
|
|
$
|
17,684
|
|
|
$
|
19,800
|
|
|
VBI Vaccines Inc.
|
|
|
8,000
|
|
|
|
16,927
|
|
|
|
22,033
|
|
|
|
38,960
|
|
|
Great Thunder Gold Corp.
|
|
|
10,819
|
|
|
|
866
|
|
|
|
431
|
|
|
|
1,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,909
|
|
|
$
|
40,148
|
|
|
$
|
60,057
|
|
At January 31, 2017, the Company held shares as follows:
|
|
|
Number of Shares
|
|
|
Cost
|
|
|
Accumulated Unrealized
Gain (Loss)
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Levon Resources Ltd.
|
|
|
220,000
|
|
|
$
|
11,637
|
|
|
$
|
65,363
|
|
|
$
|
77,000
|
|
|
VBI Vaccines Inc.
|
|
|
11,000
|
|
|
|
23,274
|
|
|
|
32,056
|
|
|
|
55,330
|
|
|
Great Thunder Gold Corp.
|
|
|
17,829
|
|
|
|
1,297
|
|
|
|
(432
|
)
|
|
|
865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
36,208
|
|
|
$
|
96,987
|
|
|
$
|
133,195
|
|
During the year ended January 31, 2018, the Company recorded an unrealized loss of $57,269 (2017 – gain of $40,449; 2016 – loss of $46,960) on investments in marketable securities, representing the change in fair value during the year.
During the year ended January 31, 2018, the Company sold 180,000 (2017 – Nil, 2016 - Nil) shares of Levon Resources Ltd. for gross proceeds of $79,070 (2017 - $Nil, 2016 - $Nil) and 3,000 (2017 – Nil, 2016 - Nil) shares of VBI Vaccines Inc. for gross proceeds of $23,061 (2017 - $Nil, 2016 - $Nil). As a result, the Company recorded a gain on sale of investments of $87,320 for the year ended January 31, 2018 (2017 – $Nil, 2016 – $Nil).
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
11. RECLAMATION BONDS
Under the Bureau of Land Management of the United States (the “Bureau”), the Company is required to hold reclamation bonds that cover the estimated cost to reclaim the ground disturbed.
In the past, the Company held reclamation deposits to cover the reclamation bonds. However, the cash was deemed to be more useful in working on the Company’s mineral properties that alternative bonds were arranged. As at January 31, 2018, the total reclamation deposits were $Nil (US$Nil) (January 31, 2017 - $83,277 (US$64,000)).
12. SHARE CAPITAL AND SHARE-BASED PAYMENTS
a) Authorized
Unlimited common shares without par value. All shares outstanding are fully paid.
b) Issued during 2018 and 2017
During the year ended January 31, 2018, the Company issued 510,000 common shares upon the exercise of stock options for gross proceeds of $150,600.
During the year ended January 31, 2018, the Company issued 3,965,000 common shares upon the exercise of warrants for gross proceeds of $404,750.
During the year ended January 31, 2017, the Company issued 25,000 common shares upon the exercise of stock options for gross proceeds of $6,000.
During the year ended January 31, 2017, the Company issued 1,000,000 common shares upon the exercise of warrants for gross proceeds of $100,000.
c)
Share repurchases and cancellations
During the year ended January 31, 2018, and pursuant to the closing of the transaction with Barrick (Note 5), 4,150,000 common shares of the Company were returned and cancelled.
On June 26, 2017, the Company announced that the TSX Venture Exchange (”TSX-V”) has accepted the Company’s Notice for its normal course issuer bid (the “Bid”).
Pursuant to the Bid, the Company may purchase up to 3,844,000 common shares up until June 26, 2018, which represents approximately 10% of the total current public float (being total issued shares, less shares held by insiders, and their associates and affiliates).
During the year ended January 31, 2018, the Company purchased 1,254,000 common shares and cancelled 911,500 common shares pursuant to the Bid. As at January 31, 2018, the Company held 342,500 treasury shares.
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
12. SHARE CAPITAL AND SHARE-BASED PAYMENTS (continued)
d)
Share purchase warrants
A summary of the share purchase warrants issued, exercised and expired during the years ended January 31, 2018, and 2017, is as follows:
|
|
|
Number of Warrants
|
|
|
Weighted Average Exercise Price
|
|
|
Balance, January 31, 2016
|
|
|
8,649,500
|
|
|
$
|
0.12
|
|
|
Exercised
|
|
|
(1,000,000
|
)
|
|
$
|
0.10
|
|
|
Balance, January 31, 2017
|
|
|
7,649,500
|
|
|
$
|
0.12
|
|
|
Exercised
|
|
|
(3,965,000
|
)
|
|
$
|
0.10
|
|
|
Expired
|
|
|
(200,000
|
)
|
|
$
|
0.10
|
|
|
Balance, January 31, 2018
|
|
|
3,484,500
|
|
|
$
|
0.15
|
|
Details of share purchase warrants outstanding as of January 31, 2018 and 2017 are as follows:
|
|
|
Exercise Price
|
|
|
Warrants Outstanding and Exercisable
|
|
|
Expiry Date
|
|
per Share
|
|
|
January 31, 2018
|
|
|
January 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 10, 2017
|
|
$
|
0.10
|
|
|
|
-
|
|
|
|
2,500,000
|
|
|
July 17, 2018
|
|
$
|
0.15
|
|
|
|
3,484,500
|
|
|
|
3,649,500
|
|
|
January 14, 2018
|
|
$
|
0.10
|
|
|
|
-
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
3,484,500
|
|
|
|
7,649,500
|
|
e) Stock options
The Company’s stock option plan provides for the granting of options to directors, officers, employees and consultants. Under the terms of the option plan, options issued will not exceed 10% (2017 - 10%) of the issued and outstanding shares from time to time. The option price under each option is not less than the discounted market price on the grant date. The expiry date for each option is set by the Board of Directors at the time of issue and cannot be more than 10 years after the grant date. All options vest 100% on the grant date unless a vesting schedule is set by the Board of Directors at the time of issue.
For the years ended January 31, 2018 and 2017, stock option activity is summarized as follows:
|
|
|
Number of Options
|
|
|
Weighted Average Exercise Price
|
|
|
Stock options outstanding and exercisable, January 31, 2016
|
|
|
3,170,000
|
|
|
$
|
0.28
|
|
|
Exercised
|
|
|
(25,000
|
)
|
|
$
|
0.24
|
|
|
Stock options outstanding and exercisable, January 31, 2017
|
|
|
3,145,000
|
|
|
$
|
0.28
|
|
|
Granted
|
|
|
1,775,000
|
|
|
$
|
0.36
|
|
|
Exercised
|
|
|
(510,000
|
)
|
|
$
|
0.30
|
|
|
Cancelled
|
|
|
(115,000
|
)
|
|
$
|
0.29
|
|
|
Expired
|
|
|
(900,000
|
)
|
|
$
|
0.39
|
|
|
Stock options outstanding and exercisable, January 31, 2018
|
|
|
3,395,000
|
|
|
$
|
0.29
|
|
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
12. SHARE CAPITAL AND SHARE-BASED PAYMENTS (continued)
e) Stock options (continued)
A summary of stock options outstanding as at January 31, 2018 is as follows:
|
Number Outstanding
|
|
|
Exercise
Price
|
|
|
Weighted Average
Remaining
Contractual
Life (years)
|
|
|
Expiry Date
|
|
|
1,150,000
|
|
|
$
|
0.240
|
|
|
|
1.12
|
|
|
March 14, 2019
|
|
|
100,000
|
|
|
$
|
0.125
|
|
|
|
2.68
|
|
|
October 6, 2020
|
|
|
100,000
|
|
|
$
|
0.150
|
|
|
|
2.68
|
|
|
October 6, 2020
|
|
|
100,000
|
|
|
$
|
0.175
|
|
|
|
2.68
|
|
|
October 6, 2020
|
|
|
100,000
|
|
|
$
|
0.200
|
|
|
|
2.68
|
|
|
October 6, 2020
|
|
|
100,000
|
|
|
$
|
0.225
|
|
|
|
2.68
|
|
|
October 6, 2020
|
|
|
1,720,000
|
|
|
$
|
0.355
|
|
|
|
4.43
|
|
|
July 5, 2022
|
|
|
25,000
|
|
|
$
|
0.355
|
|
|
|
1.44
|
|
|
July 10, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,395,000
|
|
|
|
|
|
|
|
3.03
|
|
|
|
|
During the year ended January 31, 2018, the Company granted incentive stock options for the purchase of up to 1,775,000 common shares at a price of $0.355 per share to directors, officers, consultants, and employees of the Company.
No stock options were granted during the year ended January 31, 2017.
On October 6, 2015, the Company granted incentive stock options for the purchase of up to 500,000 common shares to a consultant. These 500,000 stock options have the following prices and vesting terms, and are exercisable on or before October 6, 2020:
- 100,000 at a price of $0.125 vesting after three months
- 100,000 at a price of $0.15 vesting after six months
- 100,000 at a price of $0.175 vesting after nine months
- 100,000 at a price of $0.20 vesting after twelve months
- 100,000 at a price of $0.225 vesting after fifteen months
The table below outlines the share-based payment expense relating to the grant and vesting of stock options and for the extension of the expiry date of warrants during the years ended:
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors, officers and employees
|
|
$
|
560,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Investor relations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Consultants
|
|
|
5,250
|
|
|
|
7,865
|
|
|
|
13,445
|
|
|
Extension of warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
143,697
|
|
|
|
|
$
|
565,250
|
|
|
$
|
7,865
|
|
|
$
|
157,142
|
|
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
12. SHARE CAPITAL AND SHARE-BASED PAYMENTS (continued)
e) Stock options (continued)
Option pricing requires the use of highly subjective estimates and assumptions including the expected stock price volatility. Changes in the underlying assumptions can materially affect the fair value estimates. The fair value of the options re-valued and granted to officers, directors, consultants and employees was calculated using the Black-Scholes model with following weighted average assumptions:
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
Weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
1.42
|
%
|
|
|
0.71
|
%
|
|
|
0.42
|
%
|
|
Expected dividend yield
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Expected option life (years)
|
|
|
4.96
|
|
|
|
4.13
|
|
|
|
3.20
|
|
|
Expected stock price volatility
|
|
|
129.96
|
%
|
|
|
104.02
|
%
|
|
|
100.07
|
%
|
|
Forfeiture rate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Weighted average fair value at grant date
|
|
$
|
0.32
|
|
|
$
|
0.05
|
|
|
$
|
0.04
|
|
13. RELATED PARTY TRANSACTIONS AND BALANCES
Related party transactions are measured at the estimated fair values of the services provided or goods received. Related party transactions not disclosed elsewhere in these financial consolidated statements are as follows:
a) Key management personnel
The Company has identified its directors and certain senior officers of the Company, who have the authority and responsibility for planning, directing and controlling the activities of the Company, as key management personnel. The remuneration of directors and officers for the years ended was as follows:
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, bonuses, fees and benefits
|
|
|
|
|
|
|
|
|
|
|
Members of the Board of Directors
|
|
$
|
191,575
|
|
|
$
|
72,019
|
|
|
$
|
64,359
|
|
|
Other members of key management
|
|
|
55,071
|
|
|
|
34,581
|
|
|
|
27,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members of the Board of Directors
|
|
|
400,000
|
|
|
|
-
|
|
|
|
-
|
|
|
Other members of key management
|
|
|
72,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
$
|
718,646
|
|
|
$
|
106,600
|
|
|
$
|
91,890
|
|
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
13. RELATED PARTY TRANSACTIONS AND BALANCES (continued)
b) Amounts due to/from relates parties
In the normal course of operations the Company transacts with companies with directors or officers in common.
At January 31, 2018, and January 31, 2017, the following amounts are payable to related parties:
|
|
|
January 31,
2018
|
|
|
January 31,
2017
|
|
|
Directors
|
|
|
29,250
|
|
|
$
|
88,500
|
|
|
Oniva International Services Corp.
|
|
|
10,615
|
|
|
|
19,654
|
|
|
Sampson Engineering Inc.
|
|
|
-
|
|
|
|
918
|
|
|
Intermark Capital Corp.
|
|
|
-
|
|
|
|
5,250
|
|
|
|
|
$
|
39,865
|
|
|
$
|
114,322
|
|
The amounts included above are unsecured, non-interest bearing with no fixed terms of repayment.
c) Other related party transactions
The Company has a cost-sharing agreement to reimburse Oniva International Services Corp. (“Oniva”), as described in Note 15. The transactions with Oniva during the year are summarized below:
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
Salaries and benefits
|
|
$
|
105,344
|
|
|
$
|
91,346
|
|
|
$
|
72,747
|
|
|
Office and miscellaneous
|
|
|
66,663
|
|
|
|
38,260
|
|
|
|
24,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
172,007
|
|
|
$
|
129,606
|
|
|
$
|
96,923
|
|
Salaries and benefits above includes $35,071 (2017 - $34,581) for key management personnel compensation that has been included in Note 13(a).
14. RECLAMATION PROVISION
The Company’s reclamation provision relates to the reclamation work required by the Bureau of Land Management to be performed on the Robertson Property.
Due to the sale of the Robertson Property, management estimates the total undiscounted inflation-adjusted amount of cash flows required to settle its reclamation provision to be $Nil (US$Nil) (January 31, 2017 - $588,366 (US$452,172)). The risk-free rate of 3% was used to calculate the present value of the reclamation provision at January 31, 2017.
A reconciliation of the reclamation provision is as follows:
|
|
|
January 31,
2018
|
|
|
January 31,
2017
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
559,257
|
|
|
$
|
645,153
|
|
|
Unwinding of discount
|
|
|
6,786
|
|
|
|
18,240
|
|
|
Change in estimate
|
|
|
-
|
|
|
|
(58,141
|
)
|
|
Transferred to Barrick (Note 5)
|
|
|
(543,164
|
)
|
|
|
-
|
|
|
Change in foreign exchange rate
|
|
|
(22,879
|
)
|
|
|
(45,995
|
)
|
|
|
|
$
|
-
|
|
|
$
|
559,257
|
|
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
15. COMMITMENTS
The Company has a cost-sharing agreement to reimburse Oniva for a percentage of its overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred on behalf of the Company, and to pay a percentage fee based on the total overhead and corporate expenses. The agreement may be terminated with one-months’ notice by either party. Transactions and balances with Oniva are disclosed in Note 13.
16. FINANCIAL INSTRUMENTS
The fair values of the Company’s cash and cash equivalents, term deposits, amounts receivable from a related party, accounts payable, and amounts payable to related parties approximate their carrying values due to the short-term nature of these instruments. Investment securities are accounted for at fair value based on quoted market prices.
The Company’s financial instruments are exposed to certain financial risk, credit risk, liquidity risk, and market risk.
a) Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company’s cash and cash equivalents is exposed to credit risk. The Company is not exposed to significant credit risk on amounts receivable (excluding GST).
The Company manages credit risk, in respect of cash, by maintaining the majority of cash at high credit rated Canadian financial institutions.
Concentration of credit risk exists with respect to the Company’s cash and cash equivalents, term deposits and reclamation deposits as the majority of the amounts are held with a single Canadian and US financial institution. The Company’s concentration of credit risk, and maximum exposure thereto, is as follows:
|
|
|
January 31,
2018
|
|
|
January 31,
2017
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents held at major financial institutions
|
|
|
|
|
|
|
|
Canada – cash and cash equivalents
|
|
$
|
1,874,545
|
|
|
$
|
15,260
|
|
|
US – cash and cash equivalents
|
|
|
12,446,888
|
|
|
|
39,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,321,433
|
|
|
|
54,847
|
|
|
Term deposits – US
|
|
|
3,694,415
|
|
|
|
-
|
|
|
Royalty receivable
|
|
|
3,540,753
|
|
|
|
-
|
|
|
Reclamation deposits held at major financial institutions
|
|
|
-
|
|
|
|
83,277
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents, term deposits, royalty receivable and reclamation deposits
|
|
|
21,556,601
|
|
|
$
|
138,124
|
|
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
16. FINANCIAL INSTRUMENTS (continued)
b) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in satisfying financial obligations as they become due.
The Company manages its liquidity risk by forecasting cash flows required by operations and anticipated investing and financing activities. At January 31, 2018, the Company had working capital of $15,296,877 (January 31, 2017 – working capital deficiency of $117,528). The Company has cash at January 31, 2018 in the amount of $14,321,433 (January 31, 2017 - $54,847) for short-term business requirements. Of this amount, $1,676,003 has been set aside for the purchases of shares related to the Company’s normal course issuer bid, and is currently being held in the Company’s brokerage account. The Company has access to the cash at any time, and meets the definition of Cash and Cash Equivalents under
IAS 7 – Statements of Cash Flows
.
At January 31, 2018, the Company had current liabilities of $2,839,168 (January 31, 2017 - $191,245). Accounts payable have contractual maturities of approximately 30 days and are subject to normal trade terms. Amounts due to related parties are without stated terms of interest or repayment.
c) Market risk
Market risk consists of interest rate risk, foreign currency risk, and other price risk. These are discussed further below.
Interest rate risk
Interest rate risk consists of two components:
(i) To the extent that payments made or received on the Company’s monetary assets and liabilities are affected by changes in the prevailing market interest rates, the Company is exposed to interest rate cash flow risk.
(ii) To the extent that changes in prevailing market rates differ from the interest rate in the Company’s monetary assets and liabilities, the Company is exposed to interest rate price risk.
The Company is exposed to interest rate price risk with respect to reclamation deposits as they bear interest at market rates. However, given the stated rates of interest are fixed, the Company is not exposed to significant interest rate price risk as at January 31, 2018 and 2017.
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
16. FINANCIAL INSTRUMENTS (continued)
c) Market risk (continued)
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company is exposed to foreign currency risk to the extent that monetary assets and liabilities are denominated in foreign currency.
The Company is exposed to foreign currency risk with respect to cash, royalty receivable, other amounts receivable, amounts receivable from a related party, reclamation bonds, and accounts payable, as a portion of these amounts are denominated in US dollars as follows:
|
|
|
January 31, 2018
|
|
|
January 31, 2017
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
US$
|
10,125,183
|
|
|
US$
|
30,424
|
|
|
|
|
|
|
|
|
|
|
|
Term deposits
|
|
|
3,005,300
|
|
|
|
|
|
Other amounts receivable
|
|
|
-
|
|
|
|
181
|
|
|
Royalty receivable
|
|
|
2,880,300
|
|
|
|
-
|
|
|
Reclamation bonds
|
|
|
-
|
|
|
|
64,000
|
|
|
Accounts payable
|
|
|
-
|
|
|
|
(15,369
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net exposure
|
|
US$
|
16,010,783
|
|
|
US$
|
79,326
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian dollar equivalent
|
|
$
|
19,682,055
|
|
|
$
|
103,101
|
|
Based on the net Canadian dollar denominated asset and liability exposures as at January 31, 2018, a 10% (2017 – 10%) fluctuation in the Canadian/US exchange rates will impact the Company’s net income and comprehensive income by approximately $1,968,206 (2017 - $10,310).
The Company manages foreign currency risk by minimizing the value of financial instruments denominated in foreign currency. The Company has not entered into any foreign currency contracts to mitigate this risk.
Other price risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk or foreign currency risk. The Company is exposed to other price risk with respect to its investment securities, as they are carried at fair value based on quoted market prices.
The Company’s ability to raise capital to fund mineral resource exploration is subject to risks associated with fluctuations in mineral resource prices. Management closely monitors commodity prices, individual equity movements and the stock market to determine the appropriate course of action to be taken by the Company.
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
16. FINANCIAL INSTRUMENTS (continued)
d)
Classification of Financial instruments
The following table sets forth the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy as at January 31, 2018:
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Cash and cash equivalents
|
|
$
|
14,321,433
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Term deposits
|
|
|
3,694,415
|
|
|
|
-
|
|
|
|
-
|
|
|
Investments
|
|
$
|
60,057
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
18,075,905
|
|
|
|
|
|
|
|
|
|
17. CAPITAL MANAGEMENT
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the exploration and development of its properties and to maintain flexible capital structure for its projects for the benefit of its stakeholders. The Board of Directors does not establish quantitative returns on capital criteria for management. The Company considers its capital structure to consist of the components of shareholders’ equity.
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares or adjust the amount of cash and cash equivalents. Management reviews the capital structure on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. The Company is not subject to externally imposed capital requirements. There were no changes to the Company’s capital management during the year ended January 31, 2018.
18. SUPPLEMENTARY CASH FLOW DISCLOSURES
The net change in non-cash working capital is comprised of the following:
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts receivable
|
|
$
|
7,473
|
|
|
$
|
(806
|
)
|
|
$
|
13,067
|
|
|
Prepaid expenses
|
|
|
(19,060
|
)
|
|
|
687
|
|
|
|
(13,416
|
)
|
|
Accounts payable and accrued liabilities
|
|
|
(28,621
|
)
|
|
|
31,541
|
|
|
|
(3,728
|
)
|
|
Amounts payable to related parties
|
|
|
(73,539
|
)
|
|
|
12,901
|
|
|
|
1,409
|
|
|
|
|
$
|
(113,747
|
)
|
|
$
|
44,323
|
|
|
$
|
(2,668
|
)
|
|
Supplementary Cash Flow Disclosures:
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Expenditures on exploration and evaluation assets included in amounts payable to related parties
|
|
$
|
-
|
|
|
$
|
(918
|
)
|
|
$
|
(1,212
|
)
|
|
Expenditures on exploration and evaluation assets in the amount of forgiven debt
|
|
$
|
-
|
|
|
$
|
(8,840
|
)
|
|
$
|
(69,030
|
)
|
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
19. INCOME TAXES
Income tax recovery (expense) differs from the amount that would result from applying the Canadian federal and provincial statutory income tax rates to income (loss) before future income taxes. For the year ended January 31, 2018, the Canadian statutory rate is 26% (2017 - 26%, 2016 – 26%).
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax recovery
|
|
$
|
(982,000
|
)
|
|
$
|
145,000
|
|
|
$
|
161,065
|
|
|
Permanent differences
|
|
|
100,000
|
|
|
|
(46,000
|
)
|
|
|
(35,857
|
)
|
|
Changes in timing differences and other
|
|
|
459,000
|
|
|
|
(11,000
|
)
|
|
|
(3,792
|
)
|
|
Effect of foreign exchange changes on U.S. loss carry-forwards
|
|
|
(52,000
|
)
|
|
|
(412,000
|
)
|
|
|
559,063
|
|
|
Expired losses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Changes in unrecognized deferred income tax assets
|
|
|
(758,000
|
)
|
|
|
(108,000
|
)
|
|
|
(50,115
|
)
|
|
Adjustments due to effective tax rate attributable to U.S. tax on subsidiaries
|
|
|
(517,000
|
)
|
|
|
9,000
|
|
|
|
39,636
|
|
|
Total deferred and current income tax recovery (expense)
|
|
$
|
(1,750,000
|
)
|
|
$
|
(423,000
|
)
|
|
$
|
670,000
|
|
The approximate tax effects of each type of temporary difference that gives rise to potential deferred income tax assets and liabilities are as follows:
|
|
|
January 31,
2018
|
|
|
January 31,
2017
|
|
|
Non-capital losses carried forward
|
|
$
|
-
|
|
|
$
|
5,486,000
|
|
|
Reclamation provision
|
|
|
-
|
|
|
|
194,000
|
|
|
Exploration and evaluation assets
|
|
|
(42,000
|
)
|
|
|
(6,734,000
|
)
|
|
Equipment and other
|
|
|
-
|
|
|
|
16,000
|
|
|
Investments
|
|
|
-
|
|
|
|
(5,000
|
)
|
|
Net deferred income tax liabilities
|
|
$
|
(42,000
|
)
|
|
$
|
(1,043,000
|
)
|
Temporary differences and tax losses arising in Canada have not been recognized as deferred income tax assets due to the fact that management has determined it is not probable that sufficient future taxable profits will be earned in Canada to recover such assets. Unrecognized deductible temporary differences are summarized as follows:
|
|
|
January 31,
2018
|
|
|
January 31,
2017
|
|
|
Non-capital losses carried forward
|
|
$
|
2,741,000
|
|
|
$
|
2,017,000
|
|
|
Equipment and other
|
|
|
2,000
|
|
|
|
1,000
|
|
|
Investments
|
|
|
-
|
|
|
|
(5,000
|
)
|
|
Exploration and evaluation assets
|
|
|
734,000
|
|
|
|
706,000
|
|
|
Unrecognized deductible temporary differences
|
|
$
|
3,477,000
|
|
|
$
|
2,719,000
|
|
At January 31, 2018, the Company had, for Canadian tax purposes, non-capital losses aggregating approximately $10,153,000. These losses are available to reduce taxable income earned by the Canadian operations of future years and expire as follows between 2025 and 2038.
|
CORAL GOLD RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the years ended January 31, 2018, 2017, and 2016
(Expressed in Canadian dollars)
|
20. SEGMENTED INFORMATION
The Company operates one operating segment, mineral exploration activities. The Company is in the exploration stage and, accordingly, has no reportable revenues for the years ended January 31, 2018, 2017, and 2016.
The Company has non-current assets in the following geographic locations:
|
|
|
January 31, 2018
|
|
|
January 31, 2017
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
$
|
61,139
|
|
|
$
|
134,544
|
|
|
USA
|
|
|
3,740,601
|
|
|
|
19,432,774
|
|
|
|
|
$
|
3,801,740
|
|
|
$
|
19,567,318
|
|
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
|
|
CORAL GOLD RESOURCES LTD.
|
|
|
|
|
|
|
|
Dated: June 15, 2018
|
By:
|
/s/ David Wolfin
|
|
|
|
|
David Wolfin
|
|
|
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|