PeakBirch Commerce Inc. - Management Reports 2020

Kootenay Zinc Corp. Management Discussion and Analysis For the year ended February 29, 2020

The Management Discussion and Analysis (“MD&A”), prepared June 16, 2020 should be read in conjunction with the audited financial statements and notes thereto for the year ended February 29, 2020 of Kootenay Zinc Corp. (the “Company”) which were prepared in accordance with International Financial Reporting Standards (“IFRS”). Unless otherwise noted, all currency amounts are in Canadian dollars.

FORWARD-LOOKING STATEMENTS

This management discussion and analysis may contain forward-looking statements in respect of various matters including upcoming events and include without limitation, statements regarding discussions of the Company’s business strategy, future plans, projections, objectives, estimates and forecasts and statements as to management's expectations with respect to, among other things, the development of the Company’s project. These forward-looking statements involve numerous risks and uncertainties and actual results may vary. Important factors that may cause actual results to vary include without limitation, certain transactions, certain approvals, changes in commodity prices, risks inherent in exploration results, timing and success, inaccurate geological and metallurgical assumptions (including with respect to the size, grade and recoverability of mineral reserves and mineral resources), delays in the receipt of government approvals, and changes in general economic conditions or conditions in the financial markets. In making the forwardlooking statements in this MD&A, the Company has applied several material assumptions, including without limitation, the assumptions that: (1) any additional financing needed will be available on reasonable terms; and (2) any permits or government approvals needed will be obtained.

Additional factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, among other factors: (1) weak commodity prices and general metal price volatility; (2) the state of the global economy and economic and political events, including the deterioration of the global capital markets, affecting supply and demand and economic and political events affecting supply and demand; and (3) securing and the nature of regulatory permits and approvals and the costs of complying with environmental, health and safety laws and regulations.

The Company cannot assure you that any of these assumptions will prove to be correct.

The words “expect,” “anticipate,” “estimate,” “may,” “will,” “should,” “intend,” “believe,” “target,” “budget,” “plan,” “projection” and similar expressions are intended to identify forward-looking statements. Information concerning mineral reserve and mineral resource estimates also may be considered forwardlooking statements, as such information constitutes a prediction of what mineralization might be found to be present during operations or if and when an undeveloped project is actually developed.

These factors should be considered carefully, and readers should not place undue reliance on the Company’s forward-looking statements. The Company believes that the expectations reflected in the forward-looking statements, including future-oriented financial information, contained in this MD&A and any documents incorporated by reference are reasonable, but no assurance can be given that these expectations will prove to be correct. In addition, although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, including future-oriented financial information, there may be other factors that cause actions, events, or results not to be as anticipated, estimated, or intended. The Company undertakes no obligation to disclose publicly any future revisions to forward-looking statements, including future-oriented financial information, to reflect events or circumstances after the date of this MD&A or to reflect the occurrence of unanticipated events, except as expressly required by law.

Additionally, the forward-looking statements, including future-oriented financial information, contained herein are presented solely for the purpose of conveying our reasonable belief of the direction of the Company and may not be appropriate for other purposes.

The results or events predicted in these forward-looking statements may differ materially from the actual results or events. The Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

DESCRIPTION OF BUSINESS

The Company was incorporated on March 23, 2015 pursuant to the Business Corporations Act (British Columbia). The shares of the Company are traded on the Canadian Securities Exchange (the “Exchange”) under the symbol “ZNK”. The address of its head office and registered office is located at Suite 400-837 West Hastings Street, Vancouver, British Columbia, V6C 3N6.

The Company was engaged in the business of mineral exploration.

On September 13, 2019, the Company entered into an option agreement with Longford Capital Corp. to acquire 100% interest in the Angus Property. Subsequent to the year end, the Company decided not to continue its business of mineral exploration and evaluation. The carrying value of the mineral property was fully impaired.

The Company is currently focused on seeking business or assets to purchase.

The Company was one of the respondents to the British Columbia Securities Commission (“BCSC”) Temporary Order dated November 26, 2018 issued against a group of people and entities. The hearing was held on December 7, 2018. The case centered around share issuances by 11 CSE issuers (the Company being one of the named issuers in the order) between February 2018 and August 2018. The BCSC is investigating whether the respondents violated securities legislation by participating in a scheme that involves conduct abusive to the capital markets and the illegal distribution of securities. The scheme, as set out by the BCSC, involved listed companies issuing private placement shares without a prospectus. The issuances were done under an exemption normally reserved for consultants. Pursuant to the BCSC decision dated January 15, 2019, the temporary order has not been extended against the Company.

On July 26, 2019, the Company received notice that a class action lawsuit has been filed against the Company, former directors of the Company and certain others in the Supreme Court of British Columbia. The plaintiffs are seeking damages for various possible causes of action, including unlawful conspiracy, misrepresentation and secondary market misrepresentations. The claim has not been certified as a class action as at the date hereof. The Company is of the view that the allegations contained in the claim are without merit and intends to vigorously defend its position.

The Company’s continuing operations, as intended, are dependent upon its ability to complete the exploration of its exploration and evaluation assets, including obtaining the necessary financing. There can be no assurance that the Company will be able to complete such activities or obtain financing to continue; therefore, a material uncertainty exists that casts significant doubt over the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.

MANAGEMENT CHANGES

On June 17, 2019, the Company appointed Tara Haddad and Usama Chaudhry following the resignations of both Anthony Jackson and Von Torres as directors of the Company. Ms. Haddad was also appointed as the chief financial officer of the Company, replacing Mr. Jackson.

On September 13, 2019, the Company appointed Tara Haddad as interim chief executive officer of the Company and Von Torres as a board director, following the resignation of Rob Tindall as chief executive officer and director of the Company.

On June 12, 2020, Tara Haddad resigned as interim chief executive officer, chief financial officer and director of the Company. Von Torres was appointed as interim chief executive officer and chief financial officer following the resignation of Tara Haddad.

SELECTED ANNUAL INFORMATION

The following table sets forth selected audited financial information of the Company for the years ended February 29, 2020 and February 28, 2019 and 2018.

		February 29,	February	February
		2020	28, 2019	28, 2018
				(Re-stated)
Revenue	$	- $	- $	-
Net loss		(417,105)	(1,788,659)	(2,684,776)
Total assets		94,532	544,513	1,890,981
Total liabilities		332,799	578,175	384,384
Basic and diluted lossper share	$	(0.02) $	(0.19) $	(0.59)

OPERATIONS

Year Ended February 29, 2020

During the year ended February 29, 2020, the Company reported a net loss of $417,105 (February 28, 2019 - $1,788,659), a decrease of $1,371,554 as compared to the prior year. The decrease in net loss was significantly attributable to the decrease of the following expenses: $nil (February 28, 2019 - $78,042) in advertising and promotion, $115,113 (February 28, 2019 - $1,027,712) in consulting fees, $nil (February 28, 2019 - $17,526) in exploration expenditures, $nil (February 28, 2019 - $128,343) in flow-through shares penalties, $nil (February 28, 2019 - $31,792) in indemnification provision for flow-through shares, $131,000 (February 28, 2019 - $145,000) in management fees, $1,743 (February 28, 2019 - $12,390) in meals and entertainment, $2,258 (February 28, 2019 - $51,085) in office expense, $1,780 (February 28, 2019 - $101,574) in rent, $19,664 (February 28, 2019 - $29,835) in transfer agent and filing fees, and $282 (February 28, 2019 - $60,453) in travel expense. The following are increases in expenses that offset the decrease in net loss: $781 (February 28, 2019 - $691) in bank charges, $7,726 (February 28, 2019 - $2,818) in insurance, $152,407 (February 28, 2019 - $101,101) in professional fees, and $3,412 (February 28, 2019 - $297 loss) in foreign exchange gain. The Company also recognized a mineral property impairment of $212,500 (February 28, 2019 - $nil), gain on write-off of accounts payable of $26,737 (February 28, 2019 - $nil) and a gain on debt settlement of $198,000 (February 28, 2019 - $nil). The decrease in the Company’s loss was mainly due to decrease in consulting fees and gain on debt settlement during the year as compared to the prior year.

Three Months Ended February 29, 2020

During the three months ended February 29, 2020, the Company reported a net loss of $312,075 (February 28, 2019 - $540,884), a decrease in loss of $228,809 as compared to the prior period. The decrease in net loss was significantly attributable to the decreases of the following expenses: $nil (February 28, 2019 -

$149,775) in consulting fees, $nil (February 28, 2019 - $128,343) in flow-through share penalties, $nil (February 28, 2019 - $31,792) in indemnification provision for flow-through shares, $2,224 (February 28, 2019 - $2,818) in insurance, $40,000 (February 28, 2019 - $45,000) in management fees, $nil (February 28, 2019 - $8,802) in meals and entertainment, $nil (February 28, 2019 - $47,390) in office expense, $nil (February 28, 2019 - $33,554) in rent, $3,047 (February 28, 2019 - $9,306) in transfer agent and filing fees, and $nil (February 28, 2019 - $33,531) in travel expense. The following are increases in expenses that offset the decrease in net loss: $512 (February 28, 2019 - $409) in bank charges and interest and $80,525 (February 28, 2019 - $50,161) in professional fees. The Company also recognized a mineral property impairment of $212,500 (February 28, 2019 - $nil) and gain on write-off of accounts payable of $26,737 (February 28, 2019 - $nil). The decrease in the Company’s net loss was due mainly to decrease in consulting fees and flow-through share penalties during the period as compared to the prior period.

SUMMARY OF QUARTERLY RESULTS

	Three	Three	Three	Three	Three	Three	Three	Three
	months	months	months	months	months	months	months	months
	ended	ended	ended	ended	ended	ended	ended	ended
	February	November	August	May	February	November	August	May
	29, 2020	30, 2019	31, 2019	31, 2019	28, 2019	30, 2018	31, 2018	31, 2018
Net income
(loss)	$ (312,075)	$ (59,081) $ 105,991 $ (151,940)			$ (540,884)	$ (335,451) $ (197,785) $ (714,539)
Total assets	94,532	310,059	151,011	334,916	544,513	816,643	1,128,010	1,066,047
Total
liabilities	332,799	236,251	230,622	520,518	578,175	331,781	307,697	295,989
Basic and
diluted
income
(loss) per
share	$ (0.03)	$ (0.01) $0.01$ (0.02)			$ (0.06)	$ (0.04) $ (0.02) $ (0.08)

There are no general trends regarding the Company’s quarterly results. Quarterly results may vary significantly depending mainly on the Company’s current business activities or whether the Company granted any stock options. These factors may account for material variations in the Company’s quarterly net losses and are not predictable. The factor which has had the most material effect on quarterly results are the granting of stock option due to the resulting share-based compensation charges which may be significant when they arise. Other factor which has a direct effect on quarterly results is the write down of exploration and evaluation assets.

LIQUIDITY AND CAPITAL RESOURCES

As at February 29, 2020, the Company had cash of $15,719 (February 28, 2019 - $452,421).

During the year ended February 29, 2020, net cash used in operating activities was $436,702 (February 28, 2019 - $1,354,212) which includes: net loss of $417,105 (February 28, 2019 - $1,788,659), $198,000 (February 28, 2019 - $nil) gain on debt settlement, $26,737 (February 28, 2019 - $nil) gain on write-off of accounts payable, $212,500 (February 28, 2019 - $nil) loss on mineral property impairment, increase in GST receivable of $17,485 (February 28, 2019 - $17,906 decrease), decrease in prepaid expenses of $30,764 (February 28, 2019 - $222,750), and decrease in accounts payable and accrued liabilities of $20,639 (February 28, 2019 - $33,656 increase).

During the year ended February 29, 2020, net cash provided by financing activity was $nil (February 28, 2019 - $248,400) from share subscription received.

There was no investing activity during the years ended February 29, 2020 and February 28, 2019.

On October 12, 2017, the Company closed a non-brokered flow-through private placement of 1,000,000 flow-through units (the “FT Unit”) at a price of $0.50 per FT Unit for gross proceeds of $500,000. Each FT Unit consists of one flow-through share of the Company and one common share purchase warrant (the “Warrant”). Each Warrant is convertible into one common share at a price of $1.00 per share and is exercisable for a period of one year. The Warrants were valued at $nil using the residual value method and no value was allocated to the flow-through premium. During year ended February 29, 2020, the Company amended its flow-through filings so that only 500,000 units (for $250,000) were to be considered flowthrough units.

During the year ended February 28, 2018, the Company collected $175,500 of proceeds for an oversubscribed private placement. This amount was included in accounts payable and accrued liabilities as at February 28, 2018 and was returned to the subscribers during the year ended February 28, 2019.

On September 13, 2019, the Company issued 2,500,000 common shares of the Company with fair value of $212,500 in pursuant to the agreement between the Company and Longford Capital Corp.

There were no shares issued during the year ended February 28, 2019.

EXPLORATION AND EVALUATION ASSETS

Angus Property

On September 12, 2019, the Company entered into an option agreement with Longford Capital Corp. to acquire a 100% interest in and to certain minerals properties, together with the surface rights, mineral rights, personal property and permits associated therewith, located in the Angus Property.

The Angus Property is a gold and copper prospect with an area of 1,019 hectares in the Victoria mining division of Vancouver Island. The property has access by logging roads to the north of the Lake Cowichan community, which is owned by Island Timberland and Timberland West.

Highlights of the project:

The property hosts four historic Minfiles and has returned multiple multigram assay results (grams per tonne gold). Historic results include:

From a gossanous diorite grab sample: o 13.0 grams per tonne gold; o 14.7 grams per tonne silver; and o 0.3376% copper.
From vein material:
13.03 grams per tonne gold;
o 29.4 grams per tonne silver; o 0.55% lead; and o 0.238% sinc.

The area has the potential for hosting a copper-gold porphyry with a historic grab sample of chlorite schist feldspar porphyry near a shear zone running 0.325 gram per tonne gold and 0.472% copper, and a second sample running 1.4 grams per tonne gold, 17.6 grams per tonne silver and 1.58% copper.

Grab samples are selected samples and are not necessarily representative of the mineralization hosted on the property.

Agreement terms:

The Company is granted the sole and exclusive right and option to acquire a 100% interest in the Angus Property by issuing 3,000,000 shares to the optioners:
2,500,000 shares to be issued upon signing of the agreement (issued); and
500,000 shares to be issued on the first anniversary from the effective date of the agreement.
The Company is to complete $125,000 in exploration expenditures within 24 months of the effective date of the agreement:
The Company grants and agrees to pay to the royalty holder a royalty equal to 2% of the net smelter return royalty in respect of the Angus claims. The Company has the option to buy back 1% of the NSR for consideration of $1,500,000.

During the year ended February 29, 2020, the Company issued 2,500,000 common shares as payment in relation to the option agreement, which were valued at $212,500 and were capitalized to exploration and evaluation assets. Subsequent to the year end, the Company decided not to continue its business of mineral exploration and evaluation. $212,500 of the carrying value of the mineral property was fully impaired.

RELATED PARTY TRANSACTIONS

Key management compensation

Key management personnel of the Company are the directors and officers of the Company. During the year ended February 29, 2020, the Company entered into the following transactions with key management personnel and other related parties:

a) Paid or accrued management fees of $35,000 (February 28, 2019 - $95,000) to Robert Tindall, a former director and officer of the Company.
b) Paid or accrued management fees of $90,000 (February 28, 2019 - $nil) to Tara Haddad, a director and officer of the Company.
c) Paid or accrued management fees of $6,000 (February 28, 2019 - $nil) to Chaudhry U Consulting Inc., a company controlled by a director of the Company.
d) Paid or accrued consulting fees and management fees of $15,000 and $nil, respectively (February 28, 2019 - $51,250 and $50,000, respectively) to Essos Corporate Services Inc., a company controlled by a director of the Company.
e) Paid or accrued accounting fees of $nil (February 28, 2019 - $55,000) to BridgeMark Financial Corp., and $20,000 (February 28, 2019 - $5,000) to Regiis Oak Capital Corp., companies controlled by a former director and officer of the Company.
f) Paid or accrued geological consulting fees of $nil (February 28, 2019 - $9,093) to Paul Ransom, former technical officer of the Company.

On February 11, 2020, the Company entered into a debt settlement agreement with the Company’s former CEO (the “Creditor”) for the settlement of the Company’s outstanding debt. Pursuant to the debt settlement agreement, 400,000 common shares of the Company will be issued to the Creditor at a price of $0.05 per share, in full and final settlement of the outstanding debt of $20,000. The common shares were issued subsequent to the year ended February 29, 2020.

At February 29, 2020, $91,429 (February 28, 2019 - $91,532) was included in accounts payable and accrued liabilities as owing to related parties. Amounts due to related parties are unsecured, non-interest-bearing and have no fixed terms of repayment.

Subsequent to the year ended February 29, 2020, the Company issued a total of 1,200,000 common shares at a deemed price of $0.05 per share for a settlement of outstanding debt of $60,000. The debt settlement is regarding to the director fees charged to the Company by a current officer and director, and a former officer and director of the Company.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has not entered into any off-balance sheet arrangements.

PROPOSED TRANSACTIONS

The Company has no proposed transactions as at the date of this MD&A.

SUBSEQUENT EVENTS

On March 20, 2020, the Company closed a non-brokered private placement consisted of an issuance of nonflow-through (“NFT”) common shares and flow-through (“FT”) shares. 1,400,000 non-flow-through common shares were issued at a price of $0.05 per NFT share for gross proceeds of $70,000 and 500,000 flow-through shares were issued at a price of $0.05 per FT share for gross proceeds of $25,000.

The Company also issued a total of 1,200,000 shares at a deemed price of $0.05 per share for a settlement of outstanding debt of $60,000. The debt settlement is regarding director fees charged to the Company by a current officer and director, and a former officer and director of the Company.

All shares issued from the financing and the share-for-debt transaction will be subject to a four-month hold period.

On April 28, 2020, the Company has completed the spring 2020 exploration program at its Angus Property.

The Company completed an exploration program on the Angus Property over the course of three days. The work included prospecting and rock sampling as well as a geochemical soil sampling over a small grid at an area of interest at the south of the property which results are currently pending.

Historical anomalies that merited further investigation were sought-out and prospected to assess their mineral potential. Multiple anomalous gold in soil and rock sample locations were prospected for outcrop, visual mineralization, local geological indicators, as well as access for drilling.

A total of 39 rock grab samples were collected across the property, and 53 soil samples (including 2 field duplicates) were collected over a 50 m by 50 m grid at the south of the property. The grab samples are selected samples and are not necessarily representative of the mineralization hosted on the property.

On May 18, 2020, company entered into a binding letter agreement dated with Canndora Delivery Ltd. (“Canndora”), Greeny Collaboration Group (Canada) Inc. (“Greeny”) and Lifted Innovations Inc. (“Lifted”) to effect a proposed business combination. This will result in a reverse takeover and change of business of the Company, and the resulting issuer will continue as a media company that specializes in e- commerce.

The Company will complete a 23-1 share consolidation.

The Company will structure all of Canndora and Greeny’s issued and outstanding shares as a triangular amalgamation.

The Company will structure the acquisition of Lifted as a takeover bid for 100% of issued and outstanding shares of Lifted.

Shareholders of Canndora, Greeny and Lifted will receive Resulting Issuer Shares in exchange, assuming a share price of CAD $1.15.

Concurrently with the closing of above transaction, Resulting Issuer intends on completing a unit financing between CAD $500,000 to $1,000,000. Each unit will be priced at $1.15, consisting of 1 Resulting Issuer

Share and 1 share purchase warrant, which entitles to acquire 1 Resulting Issuer share at CAD $1.40 for a period of 3 years.

COVID-19

Subsequent to year-end, there was a global outbreak of COVID-19 (coronavirus), which has had a significant impact on businesses through the restrictions put in place by the Canadian, provincial and municipal governments regarding travel, business operations and isolation/quarantine orders. At this time, it is unknown the extent of the impact the COVID-19 outbreak may have on the Company as this will depend on future developments that are highly uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic spread of the disease, and the duration of the outbreak, including the duration of travel restrictions, business closures or disruptions, and quarantine/isolation measures that are currently, or may be put, in place by Canada and other countries to fight the virus. While the extent of the impact is unknown, we anticipate this outbreak might increase the difficulty in capital raising which may negatively impact the Company’s business and financial condition.

FINANCIAL INSTRUMENTS

Classification

The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive loss (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company has opted to measure them at FVTPL.

The following table shows the classification under IFRS 9:

Financial assets/liabilities	IFRS 9 classification
Cash	FVTPL
Accountspayable and accrued liabilities	Amortized cost

Measurement

Financial assets at FVTOCI

Elected investments in equity investments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses recognized in other comprehensive loss.

Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.

Financial assets and liabilities at FVTPL

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transactions costs expensed in the statements of profit or loss. Realized and unrealized gains or losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the statements of profit or loss.

Impairment of financial assets at amortized cost

The Company recognized a loss allowance for expected credit losses on financial assets that are measured at amortized cost.

At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset’s credit risk has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the statements of profit or loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

Derecognition

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the statements of profit or loss. However, gains and losses on derecognition of financial assets classified as FVTOCI remain within accumulated other comprehensive loss.

Financial liabilities

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in the statements of profit or loss.

CHANGE IN ACCOUNTING POLICIES

New Accounting Standard Effective and Adopted

IFRS 16 Leases

This new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both the lessee and the lessor. The new standard introduces a single lessee accounting model that requires the recognition of all assets and liabilities arising from a lease.

The main features of the new standard are as follows:

An entity identifies as a lease a contract that conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
A lessee recognizes an asset representing the right to use the leased asset, and a liability for its obligation to make lease payments. Exceptions are permitted for short-term leases and leases of lowvalue assets.
A lease asset is initially measured at cost, and is then depreciated similarly to property, plant and equipment. A lease liability is initially measured at the present value of the unpaid lease payments.
A lessee presents interest expense on a lease liability separately from depreciation of a lease asset in the statement of profit or loss and other comprehensive income.
A lessor continues to classify its leases as operating leases or finance leases, and to account for them accordingly.
A lessor provides enhanced disclosures about its risk exposure, particularly exposure to residual-value risk.

The new standard supersedes the requirements in IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease .

The new standard is effective for annual periods beginning March 1, 2019, with earlier application permitted for entities that also apply IFRS 15 Revenue from Contracts with Customers .

The Company adopted IFRS 16 using the modified retrospective approach and did not restate comparative amounts for the year prior to first adoption. As at the date of transition, management has assessed that it does not have any leases to which IFRS 16 applies. The adoption of the new IFRS pronouncement has therefore not resulted to adjustments in previously reported figures and there have been no changes to the opening deficit balance as at March 1, 2019.

There are no other IFRS or International Financial Reporting Interpretations Committee interpretations that are not yet effective that would be expected to have a material impact on the Company’s financial statements.

Risks and Uncertainties

The Company was engaged in the acquisition and exploration of natural resource properties, an inherently risky business, and there is no assurance that economically recoverable resources will ever be discovered and subsequently put into production. Most exploration projects do not result in the discovery of economically recoverable resources. Exploration activities require large amounts of capital. There is a risk that during the current difficult economic situation the Company will not be able to raise sufficient funds to finance its projects to a successful development and production stage.

While the Company’s management and technical team carefully evaluate all potential projects prior to committing the Company’s participation and funds, there is a high degree of risk that the Company’s exploration efforts will not result in discovering economically recoverable resources. The Company depends on the business and technical expertise of its management team and there is little possibility that this dependence will decrease in the near term.

RISK MANAGEMENT

The Company classifies its financial instruments as follows:

Cash is classified as a financial asset at FVTPL
Accounts payable and accrued liabilities, at amortized cost

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 used 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 assets or liability, either directly or indirectly.

Level 3 - Inputs for assets or liabilities that are not based on observable market data.

The Company’s risk exposure and the impact on the Company’s financial instrument is summarized below:

Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s cash.

The Company limits exposure to credit risk through maintaining its cash with high-credit quality Canadian financial institutions. The Company is not exposed to significant credit risk on receivables, as these amounts are due from government agencies. The carrying amount of financial assets represents the maximum credit exposure.

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 from operations and anticipated investing and financing activities. The Company’s objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements. The Company is not exposed to significant liquidity risk. All of the Company’s financial liabilities have contractual maturities of less than 90 days.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will significantly fluctuate due to changes in market prices. The value of financial instruments can be affected by changes in interest rates, foreign currency rates and other price risk. The Company is not exposed to significant market risk.

SHARE CAPITAL

Issued

The Company has 11,864,329 issued and outstanding as at February 29, 2020 and 14,964,329 issued and outstanding as at June 16, 2020.

Share Purchase Options

The Company has nil stock options outstanding as at February 29, 2020 and as at June 16, 2020.

Share Purchase Warrants

The Company has nil purchase warrants outstanding as at February 29, 2020 and as at June 16, 2020.

Escrow Shares

The Company has nil shares held in escrow as at February 29, 2020 and as at June 16, 2020.