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Serrano Resources Ltd. — Management Reports 2024
Nov 29, 2024
45356_rns_2024-11-29_4bc76366-25cf-4415-b755-a7f6e4e619a7.pdf
Management Reports
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SERRANO RESOURCES LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2024
This management discussion and analysis of financial position and results of operations (“MD&A”) is prepared as at November 29, 2024 and should be read in conjunction with the unaudited condensed interim consolidated financial statements for the nine months ended September 30, 2024 of Serrano Resources Ltd. (“Serrano” or the “Company”) with the related notes thereto. These unaudited condensed interim consolidated financial statements have been prepared in accordance with IFRS Accounting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
Readers may also want to refer to the December 31, 2023 audited consolidated financial statements and the accompanying notes. All dollar amounts included therein and in the following MD&A are expressed in Canadian dollars except where noted.
This discussion contains forward-looking statements that involve risks and uncertainties. Such information, although considered to be reasonable by the Company’s management at the time of preparation, may prove to be inaccurate and actual results may differ materially from those anticipated in the statements made. Additional information on the Company is available for viewing on SEDAR+ at www.sedarplus.ca.
Description of Business
Serrano was incorporated pursuant to the provisions of the Business Corporations Act (Alberta) on October 30, 2003. On April 8, 2008, the Company continued its corporate jurisdiction from Alberta to British Columbia. The Company trades under the symbol SC.H and is currently seeking projects for investment.
Outlook
The Company will continue its efforts to refinance and restructure as part of its strategy.
Going Concern
The Company’s condensed interim consolidated financial statements have been prepared on the going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. At September 30, 2024, the Company has a deficit of $45,658,661 (December 31, 2023 - $45,629,587) and has incurred losses since inception. The continuing operations of the Company are dependent upon obtaining necessary financing to meet the Company’s commitments as they come due and to finance future exploration and development of potential business acquisitions, economically recoverable reserves, securing and maintaining title and beneficial interest in the properties and upon future profitable production. Failure to continue as a going concern would require that assets and liabilities be recorded at their liquidation values, which might differ significantly from their carrying values. There is substantial doubt that the Company can meet general operating expenditures requirement due to its limited working capital. There can be no assurances that the Company will be able to raise additional financial resources necessary and/or achieve profitability or positive cash flows. If the Company is unable to obtain adequate additional financing, the Company will be required to curtail operations, exploration and evaluation activities.
The Company’s business may be affected by changes in political and market conditions, such as interest rates, availability of credit, inflation rates, changes in laws, and national and international circumstances. Recent geopolitical events, including and potential economic global challenges such as the risk of higher inflation and energy crises, may create further uncertainty and risk with respect to the prospects of the Company’s business. These conditions indicate the existence of a material uncertainty which may cast significant doubt on the Company’s ability to continue as a going-concern.
SERRANO RESOURCES LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2024
There is no assurance that debt or equity financing will be available when needed on terms acceptable to the Company in the future.
Results of Operation
Nine months ended September 30, 2024 and 2023
During the nine months period ended September 30, 2024, the Company recorded a net and comprehensive loss of $29,074 (2023 – $39,009) and loss per share of $0.00 (2023 – $0.00).
- Office and general of $113 (2023 – $1,154) decreased due to the decreased activities in the current period.
- Transfer agent and filing fees of $5,570 (2023 – $12,213) decreased due to the timing of filing fees in the current period.
Three months ended September 30, 2024 and 2023
During the three months period ended September 30, 2024, the Company recorded a net and comprehensive loss of $9,216 (2023 – $12,946) and loss per share of $0.00 (2023 – $0.00).
- Transfer agent and filing fees of $1,948 (2023 – $4,105) decreased due to the timing of filing fees in the current period.
Quarterly Information
The following table sets forth selected quarterly financial information prepared by management of the Company:
| Three Months Ended September 30, 2024 | Three Months Ended June 30, 2024 | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | |
|---|---|---|---|---|
| $ | $ | $ | $ | |
| Total assets | 3,664 | 3,559 | 3,537 | 3,019 |
| Working capital deficiency | (444,159) | (431,279) | (421,666) | (411,421) |
| Operating expenses | (9,216) | (9,613) | (10,245) | (8,910) |
| Loss for the period | (9,216) | (9,613) | (10,245) | (8,910) |
| Basic and diluted loss per share | (0.00) | (0.00) | (0.00) | (0.00) |
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SERRANO RESOURCES LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2024
| Three Months Ended September 30, 2023 | Three Months Ended June 30, 2023 | Three Months Ended March 31, 2023 | Three Months Ended December 31, 2022 | |
|---|---|---|---|---|
| $ | $ | $ | $ | |
| Total assets | 2,968 | 2,719 | 4,047 | 3,984 |
| Working capital deficiency | (402,507) | (389,563) | (375,734) | (363,500) |
| Operating expenses | (12,948) | (13,829) | (12,234) | (11,267) |
| Loss for the period | (12,948) | (13,829) | (12,234) | (11,267) |
| Basic and diluted loss per share | (0.00) | (0.00) | (0.00) | (0.00) |
During the quarter ended September 30, 2024, loss decreased to $9,216 compared to $9,613 for the quarter ended June 30, 2024. The decrease was primarily attributable to office and general expenses of $18 (June 30, 2024 - $53) due to the decreased activities in the current period.
During the quarter ended June 30, 2024, loss decreased to $9,613 compared to $10,245 for the quarter ended March 31, 2024. The decrease was primarily attributable to transfer agent and filing fees of $1,531 (March 31, 2024 - $2,091) due to lower filing fees incurred.
During the quarter ended March 31, 2024, loss increased to $10,245 compared to $8,910 for the quarter ended December 31, 2023. The increase was primarily attributable to professional fees of $8,113 (December 31, 2023 - $7,000) due to lower accounting fees incurred.
During the quarter ended December 31, 2023, loss decreased to $8,910 compared to $12,948 for the quarter ended September 30, 2023. The decrease was primarily attributable to transfer agent and filing fees of $1,869 (September 30, 2023 - $4,105) due to lower filing fees incurred.
During the quarter ended September 30, 2023, loss decreased to $12,948 compared to $13,829 for the quarter ended June 30, 2023. The decrease was primarily attributable to professional fees of $8,800 (June 30, 2023 - $9,842) due to lower accounting fees incurred.
During the quarter ended June 30, 2023, loss increased to $13,829 compared to $12,234 for the quarter ended March 31, 2023. The increase was primarily attributable to professional fees of $9,842 (March 31, 2023 - $7,000) due to higher accounting fees incurred.
During the quarter ended March 31, 2023, loss increased to $12,234 compared to $11,267 for the quarter ended December 31, 2022. The increase was primarily attributable to transfer agent and filing fees of $5,167 (December 31, 2022 - $1,999) due to higher filing fees incurred.
During the quarter ended December 31, 2022, loss decreased to $11,267 compared to $11,755 for the quarter ended September 30, 2022. The decrease was primarily attributable to professional fees of $9,200 (September 30, 2022 - $7,000) due to the timing of accounting fees recorded.
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SERRANO RESOURCES LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2024
Liquidity and Capital Resources
At September 30, 2024, the Company had a working capital deficiency of $440,495 and cash on hand of $3,467 compared to a working capital deficiency of $411,421 and cash on hand of $2,635 at December 31, 2023.
Net cash provided by operating activities for the period ended September 30, 2024 was $832 compared to net cash used in operating activities of $728 during the period ended September 30, 2023 primarily due to the changes in the Company’s non-cash working capital items.
To finance future acquisition, exploration, development and operating costs, the Company will require financing from external sources, including from the issuance of new shares, issuance of debt or execution of working interest farm-out agreements. There can be no assurance that such financing will be available to the Company or, if available, that it will be offered on acceptable terms. If additional financing is raised through the issuance of equity or convertible debt securities, control of the Company may change and the interest of shareholders in the net assets of the Company may be diluted. Availability of capital will also directly impact the Company’s ability to take advantage of acquisition opportunities.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Related Party Transactions
The Company incurred the following fees and expenses in the normal course of operations in connection with the following related parties:
| Nature of transactions | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | |
|---|---|---|---|
| Related parties: | |||
| A Company controlled by a Director | Professional fees | $ 15,000 | $ 15,000 |
The amounts due to related parties included in accounts payable and accrued liabilities are as follows:
| September 30, 2024 | December 31, 2023 | |
|---|---|---|
| A Company controlled by a Director | $ 311,237 | $ 295,625 |
| Due to a Director of the Company | 10,000 | 10,000 |
| $ 321,237 | $ 305,625 |
The amounts due to related parties are unsecured, non-interest bearing and due on demand.
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SERRANO RESOURCES LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2024
Basis of Consolidation and Presentation
The consolidated financial statements have been prepared on a historical cost basis except for certain financial assets measured at fair value. All dollar amounts presented are in Canadian dollars unless otherwise specified.
The condensed interim consolidated financial statements include the financial statements of Serrano Resources Ltd. and its subsidiary listed in the following table:
| Name of Subsidiary | Country of Incorporation | Proportion of Ownership Interest September 30, 2024 | Proportion of Ownership Interest December 31, 2023 | Principal Activity |
|---|---|---|---|---|
| 1463411 Alberta Ltd. | Alberta, Canada | 100% | 100% | Not active |
Functional and Presentation Currency
These condensed interim consolidated financial statements are presented in Canadian dollars, which is the functional currency for the parent company and 1463411 Alberta Ltd.
Forward-Looking Statements
This MD&A contains certain forward-looking statements relating, but not limited to, the Company's operations, anticipated financial performance, business prospects and strategies. Forward-looking information typically contains statements with words such as "may", "will", "should", "expects", "projects", "plans", "anticipates" or similar expressions suggesting future outcomes.
The Company does not have a history of earnings. These statements represent management's expectations or beliefs concerning, among other things, future performance and financial results and various components thereof. Readers are cautioned not to place undue reliance on forward-looking information because it is possible that predictions, forecasts, projections and other forms of forward-looking assumptions will not be achieved by the Company. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, including but not limited to: changes in business strategies; general economic and business conditions; the effects of competition; changes in laws and regulations, including environmental and regulatory laws; and various events that could disrupt operations. Actual performance and financial results in future periods may differ materially from any projections of future performance or results expressed or implied by forward-looking statements.
The Company undertakes no obligation to update publicly or otherwise revise any forward-looking information, whether as a result of new information, future events or otherwise, or the foregoing list of factors affecting such information.
Financial Instruments
Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:
Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities;
Level 2 – Inputs other than quoted prices that are observable for the assets or liabilities either directly or indirectly; and
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SERRANO RESOURCES LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2024
Level 3 – Inputs that are not based on observable market data.
The Company’s primary financial instruments are classified as follows:
| Financial instruments | Classifications |
|---|---|
| Cash | FVTPL |
| Accounts payable and accrued liabilities | Amortized cost |
The fair value of accounts payable and accrued liabilities approximates its carrying amount due to the short term nature except as otherwise noted. The fair value of the Company’s cash constitutes a Level 1 fair value measurement.
The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:
Liquidity risk
Liquidity risk is the risk that the Company cannot meet its financial obligations associated with financial liabilities in full. The Company manages liquidity risk through the management of its capital structure. As at September 30, 2024, the Company had a cash balance of $3,467 to settle current liabilities of $444,159. All of the Company’s financial liabilities have contractual maturities of 30 days or due on demand and are subject to normal trade terms. The Company will require financing from lenders, shareholders and other investors to generate sufficient capital to meet its short term business requirements. The Company is planning additional financings in the near term to raise working capital to finance its ongoing operations.
Credit risk
Credit risk is the risk of loss associated with counterparty’s inability to fulfill its payment obligations. As at September 30, 2024, the Company’s receivables consisted of $197 in GST receivable from the government authorities in Canada. Substantially all cash balances are held at chartered banks in Canada. The Company believes it has no significant credit risk.
Market risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices.
a) Interest rate risk
The Company has cash balances and no interest-bearing debt. The Company is satisfied with the credit ratings of its banks. As of September 30, 2024, the Company did not hold any investments. The Company believes it has no significant interest rate risk.
b) Foreign currency risk
The Company is not exposed to changes in foreign exchange rates risk as the Company does not hold financial instruments or are not exposed in foreign currency.
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SERRANO RESOURCES LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2024
Proposed Transactions
There are no proposed transactions as of the date of this MD&A.
Outstanding Share Data
As at November 29, 2024, the Company has:
a) 73,935,683 common shares outstanding;
b) Nil stock options outstanding;
c) Nil warrants outstanding; and