Condensed Consolidated Interim Financial Statements
PROVIDENCE GOLD MINES INC.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three months ended March 31, 2022
(Stated in Canadian Dollars)
Unaudited – Prepared by Management
NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS
Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor. The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management. The Company’s independent auditor has not performed a review of these financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity’s auditor.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
March 31, December 31, 2022 2021
ASSETS
Current assets
| Cash | $ 35,122 $ | 53,197 |
| Accounts receivable | 4,567 | 5,748 |
| Prepaid expenses and advances | 19,285 | 27,537 |
| Total current assets | 58,974 | 86,482 |
Non-current assets
| Equipment, net | - | 3,879 | |||
| Right-of-use asset | - | 2,824 | |||
| Exploration and evaluation assets – Note 5 | 2,618,727 | 2,589,027 | |||
| Total non-current assets | 2,618,727 | 2,595,730 | |||
| Total Assets | $ 2,677,701 | $ | 2,682,212 |
LIABILITIES
Current liabilities
| Trade and other payables – Note 7 | $ 164,126 $ | 74,084 |
| Lease liability | - | 2,934 |
| Total liabilities | 164,126 | 77,018 |
EQUITY
| Share capital – Note 6 | 6,169,710 | 6,169,710 |
| Equity reserves – Note 6 | 797,983 | 797,983 |
| Shares subscribed – Note 6 | 7,000 | - |
| Accumulated deficit | (4,461,118) | (4,362,499) |
| Total Equity | 2,513,575 | 2,605,194 |
| Total Liabilities and Equity | $ 2,677,701 | $ 2,682,212 |
Nature of Operations and Going Concern – Note 1
APPROVED ON BEHALF OF THE DIRECTORS:
“Ronald Coombes” Director “Thomas Kennedy” Director
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS
Three Months Ended March 31,
2022 2021
Expenses:
| Accounting and audit fees – Note 7 | $ 15,000 | $ 15,000 |
| Amortization | 6,703 | 8,934 |
| Consulting fees – Note 7 | 33,540 | 25,000 |
| Foreign exchange | 170 | (346) |
| Legal and corporate services – Note 7 | 6,352 | 9,900 |
| Management fees – Note 7 | 12,000 | 12,000 |
| Marketing | 5,000 | 11,000 |
| Office, rent and administration | 10,064 | 21,359 |
| Shareholder communications | 1,436 | 26,019 |
| Stock-based payments – Notes 6 and 7 | - | 32,300 |
| Transfer agent and filing fees | 8,156 | 5,219 |
| Total expenses | (98,421) | (166,385) |
Other Items:
| Interest on lease liabilities | (198) | (464) | ||
| Net loss and comprehensive loss for the period | $ | (98,619) | $ (166,849) | |
| Basic and diluted loss per share | $ | (0.00) | $ | (0.00) |
Weighted average shares outstanding – basic and diluted 60,109,075 55,057,004 CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
2022 2021
Operating Activities:
Net loss for the period $ (98,619) $ (166,849) Items not involving cash:
| Amortization | 6,703 | 8,934 |
| Interest on lease liabilities | 198 | 464 |
| Stock-based payments | - | 32,300 |
Changes in non-cash working capital items:
| Accounts receivable | 1,181 | 714 |
| Prepaid expenses and advances | 8,252 | 32,256 |
| Trade and other payables | 62,910 | 8,861 |
(19,375) (83,320)
Investing Activity:
Investment in exploration and evaluation assets (5,700) (66,343)
(5,700) (66,343)
Financing Activities:
Shares subscribed 7,000 - Payments on lease liability - (8,947)
7,000 (8,947)
| Change in cash | (18,075) | (158,610) |
| Cash, beginning | 53,197 | 514,455 |
| Cash, end | $ 35,122 | $ 355,845 |
Supplemental cash flow information:
Interest paid $ - $ -
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
Number of Advance share
| Shares | Share | Equity | subscriptions | Accumulated | Total | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Outstanding | capital | reserves | received | deficit | equity | |||||
| Balance – December 31, 2020 | 55,057,004 $ | 5,834,604 $ | 748,224 | $ | - $ | (3,717,023) $ | 2,865,805 | |||
| Stock-based payments | - | - | 32,300 | - | - | 32,300 | ||||
| Net loss for the period | - | - | - | - | (166,849) | (166,849) | ||||
| Balance – March 31, 2021 | 55,057,004 $ | 5,834,604 | $ | 780,524 | $ | - $ | (3,883,872) $ | 2,731,256 | ||
| Balance – December 31, 2021 | 60,109,075 $ | 6,169,710 $ | 797,983 $ | - $ | (4,362,499) $ | 2,605,194 | ||||
| Shares subscribed | - | - | - | 7,000 | - | 7,000 | ||||
| Net loss for the period | - | - | - | - | (98,619) | (98,619) | ||||
| Balance – March 31, 2022 | 60,109,075 $ | 6,169,710 $ | 797,983 $ | 7,000 $ | (4,461,118) | $ 2,513,575 |
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
(Stated in Canadian Dollars)
Note 1 Nature of Operations and Going Concern
Providence Gold Mines Inc. (the “Company”) was incorporated on February 16, 2010 under the Business Corporations Act of British Columbia. It commenced operations on April 18, 2011. The Company is in the process of exploring and evaluating its mineral property located in California, United States.
The Company’s principal business activity is mineral exploration. It is a public company which trades on the TSX Venture Exchange (“TSX-V”) under the trading symbol “PHD” as a Tier 2 issuer and trades on the OTCQB market under the trading symbol “PRRVF”. The address of the Company’s corporate office and principal place of business is PO Box 42096, Surrey RPO Guildford, Surrey, British Columbia, Canada.
These condensed consolidated interim financial statements have been prepared on the assumption that the Company will realize its assets and discharge its liabilities in the normal course of business. As at March 31, 2022, the Company has an accumulated deficit of $4,461,118 and has experienced negative cash flows from operations. Management cannot provide assurance that the Company will achieve profitable operations or become cash flow positive or raise additional funds via equity issuances or debt instruments. Its ability to continue as a going concern depends upon whether it develops profitable operations and continues to raise adequate financing.
On March 11, 2020, the World Health Organization categorized COVID-19 as a pandemic. To date, the potential economic effects within the Company’s environment and in the global markets, possible disruption in supply chains, and measures introduced and being introduced at various levels of government to curtail the spread of the virus (such as travel restrictions, closures of non-essential municipal and private operations, imposition of quarantines and physical distancing) have not had a material impact on the Company’s operations. Nevertheless, going forward these measures could have a material impact on the Company or the Company’s suppliers. The extent of the impact of this outbreak and related containment measures on the Company’s future operations cannot be reliably estimated at the date of these condensed consolidated interim financial statements.
These events and conditions create a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern.
As the Company is in the exploration stage, the recoverability of the costs incurred to date on exploration properties is dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of its properties and upon future profitable production or proceeds from the disposition of the properties and deferred exploration expenditures.
There can be no assurance that the Company will be able to raise the funds necessary to continue future operations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded on the consolidated statements of financial position. The condensed consolidated interim financial statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations.
Note 2 Basis of Preparation
a) Statement of Compliance
These condensed consolidated interim financial statements, including comparatives, have been prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting . These condensed consolidated interim financial statements were approved for issue by the Board of Directors on May 5, 2022.
These condensed consolidated interim financial statements include the accounts of the Company and its wholly owned subsidiary. The Company’s subsidiary is Providence Gold Mines (US) Inc., which was incorporated in the United States of America. A subsidiary is any entity controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity; is exposed to variable returns in connection with its interest in the entity; and a linkage exists between this power and exposure to variable returns. Subsidiaries are included in the condensed consolidated interim financial results of the Company from the effective date of acquisition up to the effective date of disposal or loss of control.
All intra-group transactions, balances, income and expenses are eliminated, in full, on consolidation.
b) Basis of presentation
The Company and its subsidiary each have a functional currency of Canadian dollars, which is also the presentation currency for the condensed consolidated interim financial statements.
These condensed consolidated interim financial statements have been prepared using the historic cost convention, except for financial instruments measured at fair value. These condensed consolidated interim financial statements are also prepared using the accrual basis of accounting, except for cash flow information.
Note 3 Summary of Significant Accounting Policies
In preparation of these condensed consolidated interim financial statements, the Company has consistently applied the same accounting policies as disclosed in the audited consolidated annual financial statements for the year ended December 31, 2021.
Note 4 Critical Accounting Estimates and Judgments
The Company makes estimates and judgments about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and judgments.
The effect of a change in accounting estimate is recognized prospectively by including it in the Company’s profit or loss in the period of the change, if it affects that period only, or in the period of the change and future periods, if the change affects both.
Note 4 Critical Accounting Estimates and Judgments (cont’d)
Information about critical estimates and judgments made in applying accounting policies that have the most significant risk of causing material adjustment to the carrying amounts of assets and liabilities recognized in the condensed consolidated interim financial statements within the next financial year are discussed below:
a) Exploration and Evaluation Expenditures
The application of the Company’s accounting policy for E&E expenditures requires judgment in determining whether indicators of impairment exist. Judgements and assumptions made may change if new information becomes available.
b) Title to Mineral Property Interests
Although the Company takes steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects
c) Functional Currency The Company applied judgment in determining its functional currency and the functional currency of its subsidiary. The functional currency was determined based on the currency in which funds are sourced and the degree of dependence on the Company, by the subsidiary, for financial support.
d) Going Concern
Management makes a judgment about the Company’s ability to continue as a going concern by taking into account the consideration of the various factors discussed in Note 1.
Note 5 Exploration and Evaluation Assets
Tuolumne Property Acquisition Costs:
Balance, December 31, 2020, 2021 and March 31, 2022 $ 970,955
Exploration Costs:
Balance, December 31, 2020 1,352,428 Claims maintenance 4,570 Equipment rental 15,580 Geological costs – Note 7 150,253 Field costs 62,429 Sample analysis 32,812 Balance, December 31, 2021 1,618,072 Geological costs – Note 7 24,000 Field costs 5,700
Balance, March 31, 2022 1,647,772
Exploration and evaluation assets, December 31, 2021 $ 2,589,027 Exploration and evaluation assets, March 31, 2022 $ 2,618,727 Tuolumne Property
On March 28, 2017, the Company entered into an agreement (the "Agreement") with Ellers Family Trust ("Ellers" or the "Optionor"), as amended April 24, 2019 (the "First Amendment") and May 24, 2020 (the "Second Amendment"), whereby the Company was granted a lease of claims comprising the Tuolumne Property (the "Property") and options to acquire a 50% working interest in the Property (the "50% Working Interest Option") or purchase 100% right, title and interest in the Property (the "100% Property Acquisition Option"). The Property includes six parcels and thirteen 20-acre mining claims. The Assignors have also staked a further 9 claims contiguous to the existing claims for a total of 6 patented and 22 located mining claims.
To exercise the 50% Working Interest Option, the Company must:
a) Pay US$25,000 to Ellers following regulatory approval of the Agreement (paid);
b) Pay a further US$25,000 to Ellers (paid) and incur $250,000 in Property expenditures by March 28, 2018 (incurred);
c) Pay a further US$50,000 to Ellers upon execution of the First Amendment (paid);
d) Pay a further US$50,000 to Ellers (US$3,500 paid, with the remainder of the payment amount settled via the issuance of 1,000,000 Company common shares (issued) pursuant to the Second Amendment and incur $750,000 in Property expenditures by October 15, 2019 (incurred); and
e) Incur $500,000 in Property expenditures during each of five one-year lease extension lease periods ending May 24, 2021, 2022, 2023, 2024 and 2025, pursuant to the Second Amendment. For any given one-year lease period, the Company may pay Ellers US$25,000 in lieu of incurring the required expenditures.
Upon earning a 50% Property working interest, the Company will form a 50/50 joint venture with Ellers.
As consideration for the Second Amendment, the Company shall issue to Ellers:
a) 1,000,000 Company common shares within 30 days of execution (issued); and
b) 200,000 Company common shares within 30 days after the commencement of a planned 3,900-metre drilling program on the Property.
Notwithstanding the terms of earning a 50% Property working interest, the Company may, at any time before the expiry of the Property lease period, exercise the 100% Property Acquisition Option and acquire a 100% Property interest by paying Ellers US$5,000,000, with up to one-half of this consideration payable in Company common shares at the option of the Company.
Ellers shall retain a 2.5% net smelter returns royalty ("NSR") with respect to the Property, with the Company having the exclusive right and option to purchase 60% (1.5%) of the NSR for US$1,000,000 at any time up to and including 90 days after the Company commences commercial production on the Property.
The Company's negotiation of the Agreement with Ellers resulted from the assignment to the Company of rights and interests agreed to in a February 1, 2017 Summary of Terms between Ellers and third parties, including the Company's CEO and two arm's-length parties (the "Assignors"). As consideration for the assignment, the Company shall pay and issue to the Assignors the following consideration:
a) Pay US$25,000 (paid) and issue 1,500,000 Company common shares within 14 days of TSX Venture Exchange approval of the Assignment (issued);
b) Issue a further 1,500,000 Company common shares within 14 days following the completion of the first year Property work program of $250,000 (issued);
c) Issue a further 1,500,000 Company common shares within 14 days following the completion of the second year Property work program of $750,000 (issued); and
d) Issue a further 1,500,000 Company common shares within 14 days of the Company acquiring a 100% Property interest for US$5,000,000.
On October 19, 2019, the Company and Ellers entered into an agreement regarding the evaluation, milling, processing and reprocessing of stockpiles on the Property (the "Stockpile Processing Agreement"). Pursuant to the Stockpile Processing Agreement, the Company shall pay Ellers a 10% net profit interest of profit generated from these activities.
Environmental Protection Practices
The Company is subject to 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 disturbances 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 has not recorded any material liability for any existing environmental matters related to any of its current or former properties that may result in a material liability to the Company.
Note 6 Share Capital and Equity Reserves
a) Common Shares
The Company is authorized to issue an unlimited number of no par value common shares, issuable in series. The holders of common shares are entitled to one vote per share at meetings of the Company and to receive dividends, which may be declared from time-to-time.
No dividends have been declared by the Company since its inception. All shares are ranked equally with regard to the Company’s residual net assets.
During the period ended March 31, 2022, the Company received $7,000 towards a future private placement.
During the year ended December 31, 2021, the Company:
i) closed a non-brokered private placement in two tranches of 3,864,571 common shares at $0.07 per share for gross proceeds of $270,520. Finder’s fees paid in connection with the financing were comprised of cash of $4,200 and 60,000 finder’s warrants valued at $984 entitling the holder to purchase one common share of the Company for a period of one year at a price of $0.15 per common share.
Note 6 Share Capital and Equity Reserves (cont’d)
The fair value of finder’s warrants above was determined to be $0.0164 per warrant using the Black-Scholes option pricing model with the following assumptions:
Stock price $0.07 Exercise price $0.15 Dividend rate 0% Expected life 1 Year Expected annual volatility 114.89% Risk-free rate 0.39%
ii) closed the first tranche of a non-brokered private placement for 1,187,500 units at $0.07 per unit for gross proceeds of $83,125. Each unit consists of one common share and one warrant entitling the holder to purchase one common share of the Company for a period of one year at a price of $0.15 per common share. Share issue costs of $1,480 were paid in connection with the financing. A fair value of $11,875 was allocated from share capital to equity reserves relating to the unit warrants of the private placement.
a) Share Purchase Warrants
A summary of the Company’s outstanding share purchase warrants is presented below:
For the Period Ended For the Year Ended March 31, 2022 December 31, 2021
Weighted Weighted Average Average Number of Exercise Price Number of Exercise Price Warrants Warrants
| Opening balance | 6,490,366 | $ 0.23 | 28,453,163 | $ 0.17 |
| Issued | - | - | 1,247,500 | 0.15 |
| Expired | (1,858,666) | 0.25 | (23,210,297) | 0.18 |
| Ending balance | 4,631,700 | $ 0.22 | 6,490,366 | $ 0.23 |
At March 31, 2022, the following share purchase warrants were outstanding:
| Expiry | Number of | Exercise | |||
|---|---|---|---|---|---|
| Date | Warrants | Price ($) | |||
| Warrants* | May 29, 2022 | 3,384,200 | 0.25 | ||
| Finder’s warrants | September 3, 2022 | 60,000 | 0.15 | ||
| Warrants | December 21, 2022 | 1,187,500 | 0.15 |
Total 4,631,700 *Warrants are exercisable at $0.15 per share during the first year outstanding, at $0.20 per share during the second year outstanding and at $0.25 during the third year outstanding.