Broadway Gold Mining Ltd. (fka BDWYF)

[edzon]

BROADWAY GOLD MINING LTD. CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDEDNOVEMBER 30, 2019 (EXPRESSED IN CANADIAN DOLLARS) (UNAUDITED)
Notice To Reader The accompanying unaudited condensed interim consolidated financial statements of Broadway Gold Mining Ltd. (the "Company") have been prepared by and are the responsibility of management. The unaudited condensed interim consolidated financial statements have not been reviewed by the Company's auditors.
Broadway Gold Mining Ltd. Condensed Interim Consolidated Statements of Financial Position (Expressed in Canadian Dollars) Unaudited
As at As at November 30, August 31, 2019 2019
ASSETS Current assets Cash $ 22,668 $ 23,827 GST receivables 8,685 6,745 Prepaid expenses 50,142 28,594 Assets held for sale (note 3) 3,833,494 3,843,419 Total assets $ 3,914,989 $ 3,902,585
EQUITY AND LIABILITIES Current liabilities Accounts payable and accrued liabilities (note 6) $ 149,011 $ 192,256 Loan payable (note 10) 15,000 Liabilities related to assets held for sale (note 3) 59,107 72,119 Total liabilities 223,118 264,375
Equity Share capital (note 5) 7,501,694 7,381,694 Contributed surplus (note 5) 1,060,901 1,060,901 Accumulated other comprehensive income 43,788 46,099 Deficit (4,914,512) (4,850,484) Totalequity 3,691,871 3,638,210 Total equity and liabilities $ 3,914,989 $ 3,902,585
The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.
Nature of operations and going concern (note 1) Contingencies (note 9) Subsequent events (note 11)
- 1
Broadway Gold Mining Ltd. Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Expressed in Canadian Dollars except for shares and per share amounts) Unaudited
Three Months Three Months Ended Ended November 30, November 30, 2019 2018
Expenses Accounting and audit fees (note 6) $ 19,043 $ 13,437 Advertising and marketing expenses (2,000) Consulting fees (note 6) 45,000 107,540 Depreciation - 2,186 General office expenses 5,364 12,061 Legal fees 3,615 8,823 Office rent 4,901 4,547 Shareholder information and communication 1,000 3,738 Transfer agent and filing fees (note 6) 8,246 12,809 Net loss before other income (85,169) $ (165,141)
Other (expense) income Gain on sale of equipment 21,141 Net loss for the period $ (64,028) $ (165,141)
Other comprehensive income Item that may be subsequently reclassified to profit or loss: Foreign currency translation (loss) gain (2,311) 82,768 Comprehensive loss for the period $ (66,339) $ (82,373)
Basic and diluted net loss per share $ (0.00) $ (0.00) Weighted average number of common shares outstanding - basic and diluted 49,273,247 42,200,962
The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.
- 2
Broadway Gold Mining Ltd. Condensed Interim Consolidated Statements of Cash Flows (Expressed in Canadian Dollars) Unaudited
Three Months Three Months Ended Ended November 30, November 30, 2019 2018
Operating activities Net loss for the period $ (64,028) $ (165,141) Adjustments for: Depreciation - 2,186 Gain on sale of equipment (21,141) Changes in non-cash working capital items: GST receivables (1,940) (6,100) Prepaid expenses (21,548) 11,579 Accounts payable and accrued liabilities 63,743 112,091 Net cash used in operating activities (44,914) (45,385) Investing activities Exploration activities and maintenance of properties (30,624) (133,925) Recovery from earn-in agreement 25,809 Proceeds from sale of equipment 33,716 Net cash provided by (used in) investing activities 28,901 (133,925) Financing activities Loan advanced 15,000 Bank indebtedness - (19,738) Net proceeds from private placements - 418,445 Net cash provided by financing activities 15,000 398,707 Net change in cash (1,013) 219,397 Effect of exchange rate changes on cash (146) 29,557 Cash, beginning of period 23,827 201,840 Cash, end of period $ 22,668 $ 450,794
Supplemental cash flow information Warrants exercised to settle accounts payable and accrued liabilities $ 120,000 $ Shares issued for exploration and evaluation assets $ - $ 57,305
The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.
- 3
Broadway Gold Mining Ltd. Condensed Interim Consolidated Statements of Changes in Equity (Expressed in Canadian Dollars) Unaudited Share capital
Accumulated other Number of Share Contributed Shares to comprehensive shares capital surplus be issued income (loss) Deficit Total Balance, August 31, 2018 41,959,204 $ 6,942,173 $ 1,000,521 $ 57,305 $ (32,347) $ (3,371,521) $ 4,596,131 Shares issued previously allocated 500,000 57,305 - (57,305) - - Foreign currency translation gain - - - - 82,768 - 82,768 Net loss for the period - - - - - (165,141) (165,141) Balance, November 30, 2018 42,459,204 $ 6,999,478 $ 1,000,521 $ - $ 50,421 $ (3,536,662) $ 4,513,758
Balance, August 31, 2019 48,660,204 $ 7,381,694 $ 1,060,901 $ - $ 46,099 $ (4,850,484) $ 3,638,210 Foreign currency translation gain - - - - (2,311) - (2,311) Warrants exercised 1,200,000 120,000 - - - - Net loss for the period - - - - - (64,028) (64,028) Balance, November 30, 2019 49,860,204 $ 7,501,694 $ 1,060,901 $ - $ 43,788 $ (4,914,512) $ 3,691,871
The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.
- 4
Broadway Gold Mining Ltd. Notes to Condensed Interim Consolidated Financial Statements Three Months EndedNovember 30, 2019 (Expressed in Canadian Dollars) Unaudited 1. Nature of operations and going concern Broadway Gold Mining Ltd. ("Broadway" or the "Company”) was incorporated under the Business Corporations Act of British Columbia on July 26, 2010. The head office and principal address of the Company is 277 Lakeshore Road East, Suite 403, Oakville, Ontario, L6J 6J3.
The Company was a capital pool company as defined by the rules of the TSX Venture Exchange (“Exchange”) in Policy 2.4 of the Exchange and on March 26, 2013, received Exchange approval for its Qualifying Transaction and commenced trading on the Exchange as a Tier 2 Mining Issuer. In March 2013, the Company acquired the GP Property located in British Columbia, Canada. In September 2016, the Company through its wholly owned subsidiary, Broadway Gold Corp., acquired a 100% interest in 6 patented and 35 unpatented claims in the Madison Property located in Montana, USA. The Company’s principal business activity is the exploration of mineral resources on the Madison Property. Subsequent to the acquisition of the Madison Project, the Company changed its name to Broadway Gold Mining Ltd. and trades on the TSX Venture Exchange under the symbol “BRD”.
These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis, which contemplates that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business.
As at November 30, 2019, the Company had not yet achieved profitable operations, had accumulated deficit of $4,914,512 and expects to incur further losses in the development of its business, all of which constitutes a material uncertainty which casts significant doubt about the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent upon its ability to raise future equity financing to fund its operations and advance the development of its exploration mining business.
Mineral exploration involves a high degree of risk and there is no assurance that exploration projects will result in future profitable operations. The business is subject to risk, market conditions, supply and demand and competition. The Company has cash requirements to meet its administrative overhead and maintain its exploration and evaluation assets. The recoverability of amounts shown for exploration and evaluation assets is dependent on several factors. These factors include the discovery of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the development of these properties, and the future profitable production or proceeds from disposition of exploration and evaluation assets. The carrying value of the Company’s exploration and evaluation assets reflect historical costs incurred and is not intended to reflect current or future values.
During the three months ended November 30, 2019, the Company entered into a definitive arrangement agreement with Mind Medicine, Inc. ("MindMed") which will result in a reverse take-over of Broadway by the current shareholders of MindMed. See note 10. 2. Significant accounting policies Statement of compliance These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (“IAS 34”), as issued by the International Accounting Standards Board (“IASB”). These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended August 31, 2019, which have been prepared in accordance with IFRS issued by the IASB. The accounting policies applied by the Company in the unaudited condensed interim consolidated financial statements are the same as those applied by the Company in its most recent annual audited consolidated financial statements for the year ended August 31, 2019.
- 5
Broadway Gold Mining Ltd. Notes to Condensed Interim Consolidated Financial Statements Three Months EndedNovember 30, 2019 (Expressed in Canadian Dollars) Unaudited 2. Significant accounting policies (continued) New accounting standards adopted (i) IFRS 16 - Lease ("IFRS 16)
Effective September 1, 2019, the Company adopted IFRS 16. IFRS 16 was issued in January 2016 and replaces IAS 17 - Leases as well as some lease related interpretations. With certain exceptions for leases under twelve months in length or for assets of low value, IFRS 16 states that upon lease commencement a lessee recognises a right-of-use asset and a lease liability. The right-of-use asset is initially measured at the amount of the liability plus any initial direct costs. After lease commencement, the lessee shall measure the right-of-use asset at cost less accumulated depreciation and accumulated impairment. A lessee shall either apply IFRS 16 with full retrospective effect or alternatively not restate comparative information but recognise the cumulative effect of initially applying IFRS 16 as an adjustment to opening equity at the date of initial application. IFRS 16 requires that lessors classify each lease as an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Otherwise it is an operating lease. The adoption of IFRS 16 had no impact to the Company's consolidated financial statements. 3. Assets held for sale During the three months ended November 30, 2019, the Company entered into a definitive arrangement agreement, under which all of Broadway's right, title and interest in the Madison Property and any related liabilities will be transferred (the “Spin-Out Transaction”) to a newly incorporated wholly-owned subsidiary of Broadway, Madison Metals Inc. ("Madison Metals"). As consideration for the purchase of the assets from Broadway, Madison Metals will issue its shares to Broadway. These shares will then be distributed to the shareholders of Broadway immediately before the completion of the reverse take-over. Accordingly, the Company has transferred the carrying costs relating to the Madison Property to assets held for sale as of August 31, 2019.
The major assets and liabilities of Madison Property classified as held for sale are as follows: As at As at November 30, August 31, 2019 2019 ASSETS Property and equipment $ 63,078 $ 75,749 Exploration and evaluation assets (note 4) 3,589,906 4,398,077 Reclamation deposits 180,511 180,593 $ 3,833,495 $ 4,654,419 Impairment of assets held for sale - (811,000) Total assets held for sale $ 3,833,495 $ 3,843,419
LIABILITIES Accounts payable and accrued liabilities $ 59,107 $ 72,119 Total liabilities related to assets held for sale $ 59,107 $ 72,119
- 6
Broadway Gold Mining Ltd. Notes to Condensed Interim Consolidated Financial Statements Three Months EndedNovember 30, 2019 (Expressed in Canadian Dollars) Unaudited 3. Assets held for sale (continued) The Company recorded an impairment loss of $811,000 for the year ended August 31, 2019 to reduce the carrying amount of the assets held for sale to their fair value less costs to sell. The fair value is determined by reference to the fair value of the consideration estimated based on the quoted market price of the Company’s share at the year end. The impairment loss was located to the exploration and evaluation assets. 4. Exploration and evaluation assets The Company’s exploration and evaluation assets are comprised of properties located in British Columbia Canada (the GP Property) and in Montana, USA (the Madison Property). Capitalized expenditures are as follows: GP Madison Property Property Total Balance, August 31, 2018 $ 47,400 $ 4,039,824 $ 4,087,224 Assessment and taxes - 1,608 1,608 Camp costs - 9,329 9,329 Consulting engineers - 45,814 45,814 Fieldwork and wages - 76,001 76,001 Power utilities - 1,173 1,173 Net expenditures during the period - 133,925 133,925 Foreign exchange differences - 79,826 79,826 Balance, November 30, 2018 $ 47,400 $ 4,253,575 $ 4,300,975 Balance, August 31, 2019 $ - $ - $ Assessment and taxes - 1,960 1,960 Camp costs - 86 86 Consulting engineers - 2,839 2,839 Fieldwork and wages - 24,705 24,705 Power utilities - 1,034 1,034 Recovery - (25,809) (25,809) Net expenditures during the period - 4,815 4,815 Foreign exchange differences - (1,986) (1,986) Reclassified as asset held for sale (note 3) - (2,829) (2,829) Balance, November 30, 2019 $ - $ - $
(a) GP Property, British Columbia On November 20, 2012, the Company entered into an Option Agreement to earn a 100% interest in the GP Property. In order to maintain the Option in good standing the Company is required to: incur exploration expenditures to a total of $100,000 on or before the first anniversary of the date of Exchange approval, make cash payments to the vendors of the Option of $10,000 upon receipt of the Technical Report and $15,000 at the time of Exchange approval and issue 700,000 shares (200,000 upon Exchange approval, 200,000 on the first anniversary of Exchange approval and 300,000 on or before the second anniversary). All payments have been made and share commitments have been issued.
During the year ended August 31, 2016, the Company recorded an impairment on the property and wrote down the asset by $92,639 to a residual amount of $47,400.
During the year ended August 31, 2019, the Company decided not to renew the claims expiring on March 31, 2019 and wrote off the property to $nil.
- 7
Broadway Gold Mining Ltd. Notes to Condensed Interim Consolidated Financial Statements Three Months EndedNovember 30, 2019 (Expressed in Canadian Dollars) Unaudited 4. Exploration and evaluation assets (continued) (b) Madison Property, Montana On July 21, 2016, the Company through its subsidiary entered into an agreement to purchase 100% right, title and interest in 450 acres of land with a 192 acre ranch, buildings, mine equipment and fixtures and 6 patented and 35 unpatented mineral claims situated in Madison County, Montana. The agreement called for a cash payment of CDN$250,000 (inclusive of the US$25,000 paid on May 18, 2016 towards the annual property payment) and the issuance of 500,000 common shares each on the First (issued) and Second (issued) Anniversary and CDN$100,000 upon attainment of commercial production. The 1,000,000 shares to be issued were valued at the prevailing stock price at the time of closing of the transaction of $0.115 per share for total additional consideration of $115,000. The acquisition is also subject to an annual payment equal to the greater of a 2% NSR or US$50,000. Final TSX approval for the closing of the transaction was received on September 30, 2016.
As at November 30, 2019, the Company has provided aggregate funding of $180,511 (August 31, 2019 - $180,593) for deposits as security against potential future reclamation work related to the Madison property.
In April 2019, the Company signed an Earn-In with Option to Joint Venture Agreement (the "Earn-In Agreement") with Kennecott Exploration Company ("Kennecott"), part of the Rio Tinto Group.
Under the terms of the Earn-In Agreement,
? Kennecott has an option to:
(i) acquire a 55% undivided interest in the property by incurring exploration and related expenditures of US$5 million within the first five years. Kennecott may elect to earn an additional 10% undivided interest by incurring additional expenditures of US$10 million within the following three years.
(ii) acquire a 65% undivided interest in the property by incurring exploration and related expenditures of US$15 million within the first eight years. Kennecott may elect to earn an additional 5% undivided interest by incurring additional expenditures of US$15 million within the following three years.
(iii) acquire a 70% undivided interest in the property by incurring exploration and related expenditures of US$30 million over eleven years.
? Kennecott is to incur a minimum of US$1 million of exploration expenditures in the first year.
? Broadway is to receive cash payments of US$225,000 (US$100,000 received) over the first five years.
? Kennecott may request Broadway to conduct exploration on its behalf during the first year in return for 10% administration charge.
As of November 30, 2019, the Company has classified Madison Property to asset held for sale. Please refer to note 3. (c) Title to exploration and evaluation asset Although the Company has taken steps to verify 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.
- 8
Broadway Gold Mining Ltd. Notes to Condensed Interim Consolidated Financial Statements Three Months EndedNovember 30, 2019 (Expressed in Canadian Dollars) Unaudited 4. Exploration and evaluation assets (continued) (d) Environmental 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 exploration and evaluation assets, the potential for production on the property may be diminished or negated.
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 exploration and evaluation asset 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. 5. Share capital (a) Authorized Unlimited number of common shares without par value. (b) Issued and outstanding Number of Share shares capital Balance, August 31, 2018 41,959,204 $ 6,942,173 Issued for acquisition of exploration and evaluation asset (note 4(b)) 500,000 57,305 Balance, November 30, 2018 42,459,204 $ 6,999,478
Balance, August 31, 2019 48,660,204 $ 7,381,694 Warrants exercised 1,200,000 120,000 Balance, November 30, 2019 49,860,204 $ 7,501,694
- 9
Broadway Gold Mining Ltd. Notes to Condensed Interim Consolidated Financial Statements Three Months EndedNovember 30, 2019 (Expressed in Canadian Dollars) Unaudited 5. Share capital (continued) (c) Stock options The Company has an incentive stock option plan (the “Option Plan”) allowing for the reservation of common shares issuable under the Plan to a maximum 10% of the number of issued and outstanding common shares of the Company at any given time. The term of any stock option granted under the Plan may not exceed five years and the exercise price may not be less than the discounted market price on the grant date. All options granted under the plan shall vest and become exercisable in full upon grant, except options granted to consultants performing investor relations activities, whose options must vest in stages over twelve months with no more than one quarter of the options vesting in any three-month period. The purpose of the Plan is to provide directors, officers and key employees and certain other persons who provided services to the Company and its subsidiary with an increased incentive to contribute to the future success and prosperity of the Company.
A summary of option activity for the period ended November 30, 2019 is as follows:
Weighted Number of average stock options exercise price Balance, August 31, 2018 3,665,000 $ 0.22 Cancelled (500,000) 0.25 Balance, November 30, 2018 3,165,000 $ 0.18
Balance, August 31, 2019 and November 30, 2019 3,400,000 $ 0.19
The following table reflects the actual stock options issued and outstanding as of November 30, 2019: Weighted average Number of remaining Number of options Exercise contractual options vested Expiry date price ($) life (years) outstanding (exercisable) February 21, 2021 0.05 1.21 200,000 200,000 October 18, 2021 0.25 1.88 350,000 350,000 October 18, 2021 0.19 1.88 250,000 250,000 October 19, 2021 0.25 1.88 500,000 500,000 April 3, 2022 0.20 2.34 400,000 400,000 July 13, 2022 0.20 2.62 400,000 400,000 January 10, 2023 0.43 3.12 100,000 100,000 August 31, 2023 0.20 3.75 525,000 525,000 March 19, 2024 0.10 4.30 675,000 675,000
0.19 2.86 3,400,000 3,400,000
- 10
Broadway Gold Mining Ltd. Notes to Condensed Interim Consolidated Financial Statements Three Months EndedNovember 30, 2019 (Expressed in Canadian Dollars) Unaudited 5. Share capital (continued) (d) Warrants Warrant transactions and the number of warrants outstanding are summarized as follows:
Weighted Number of average warrants exercise price Balance, August 31, 2018 and November 30, 2018 20,559,053 $ 0.31 Expired (1,560,008) 0.10 Balance, November 30, 2018 18,999,045 $ 0.21
Balance, August 31, 2019 18,792,167 $ 0.11 Expired (14,491,667) 0.10 Exercised (1,200,000) 0.10 Balance, November 30, 2019 3,100,500 $ 0.15
The following table reflects the actual warrants issued and outstanding as of November 30, 2019: Weighted average remaining Number of Exercise contractual warrants Expiry date price ($) life (years) outstanding February 28, 2020 0.15 0.25 3,100,500
- 11
Broadway Gold Mining Ltd. Notes to Condensed Interim Consolidated Financial Statements Three Months EndedNovember 30, 2019 (Expressed in Canadian Dollars) Unaudited 6. Related party transactions Balances and transactions with related parties not disclosed elsewhere in these unaudited condensed interim consolidated financial statements are as follows:
(a) During the three months ended November 30, 2019, the Company incurred management services of $45,000 (three months ended November 30, 2018 - $15,000) to a director and officer of the Company. As at November 30, 2019, included in accounts payable and accrued liabilities is an aggregate of $nil (August 31, 2019 - $45,000) payable to this director and officer for the services.
(b) During the three months ended November 30, 2019, the Company paid accounting and transfer agent and filing fees of $12,067 (three months ended November 30, 2018 - $12,850) to Marrelli Support Services Inc. (“MSSI”), DSA Corporate Services Inc. (“DSA Corp”) and DSA Filing Services Limited (“DSA Filing”), together known as the “Marrelli Group”, for:
? Eric Myung, an employee of Marrelli Group, to act as the CFO of the Company; ? Bookkeeping services; ? Regulatory filing services; ? Corporate secretarial services.
As at November 30, 2019, included in accounts payable is an aggregate of $22,632 (August 31, 2019 - $18,893) payable to the Marrelli Group.
All transactions and balances are in the normal course of operations and are measured at the exchange amount which is the amount of consideration established and agreed to by the related parties.
- 12
Broadway Gold Mining Ltd. Notes to Condensed Interim Consolidated Financial Statements Three Months EndedNovember 30, 2019 (Expressed in Canadian Dollars) Unaudited 7. Financial risk management The Company’s financial assets consist of cash and reclamation deposit. The estimated fair values of cash and reclamation deposit approximate their respective carrying values due to the short period to maturity.
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 or liabilities Level 2 – inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and Level 3 – inputs that are not based on observable market data.
For the period ended November 30, 2019, the fair value of cash was measured using Level 1 inputs.
The Company is exposed to varying degrees to a variety of financial instrument related risks. The Board approves and monitors the risk management processes, inclusive of counterparty limits, controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows: Liquidity Risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations when they become due. The Company ensures, as far as reasonably possible, it will have sufficient capital in order to meet short-term business requirements, after taking into account cash flows from operations and the Company’s holdings of cash and cash equivalents. The Company believes that these sources will be sufficient to cover the likely short-term cash requirements. The Company’s cash is currently invested in business accounts which are available on demand by the Company for its operations. Credit Risk Credit risk is the risk of a loss in a counterparty to a financial instrument that fails to meet its contractual obligations. The Company’s exposure to credit risk is limited to its cash. The Company limits its exposure to credit risk by holding its cash in deposits with high credit quality Canadian financial institutions. Foreign Currency Risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. A portion of the Company’s financial assets and liabilities is denominated in Unites States dollars. Consequently, certain financial assets and liabilities are exposed to currency fluctuations. Most of the Company's operations are conducted in Canadian dollars. The Company does not use derivative instruments to reduce its exposure to foreign currency risk. The financial assets and liabilities denominated in United States dollars, translated into Canadian dollars at the closing rate, which expose the Company to currency risk are: As at As at November 30, August 31, 2019 2019 Cash $ 6,854 $ 5,263
A 10% change in the exchange rate would not have a significant impact.
- 13
Broadway Gold Mining Ltd. Notes to Condensed Interim Consolidated Financial Statements Three Months EndedNovember 30, 2019 (Expressed in Canadian Dollars) Unaudited 8. Capital management The Company manages its capital structure and makes adjustment to it based on the funds available to the Company in order to support the acquisition and exploration of mineral properties. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. The Company defines capital that it manages as share capital and cash.
The properties in which the Company currently has an interest are in the exploration stage; as such, the Company has historically relied on equity financing to fund its activities. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes in the Company's approach to capital management during the period ended November 30, 2019. 9. Contingencies The Company has been named in a province of Ontario small claims court notice of claim by the former CEO for severance. The claim totals $25,000. The Company has recognized a provision for this amount which is expected to be paid by January 2020. 10. Proposed transaction On October 15, 2019, the Company entered into a definitive arrangement agreement ("Arrange Agreement") with Mind Medicine, Inc., a privately held issuer incorporated under the laws of Delaware ("MindMed"), which will result in a reverse take-over ("RTO") of Broadway by the current shareholders of MindMed by way of plan of arrangement ("Plan of Arrangement") under the Business Corporations Act (British Columbia) ("Arrangement").
Pursuant to the terms of the Arrangement Agreement, Broadway Delaware Subco Inc., a wholly-owned subsidiary of Broadway incorporated for the purpose under the laws of Delaware (“Delaware Subco”) will merge with MindMed. In accordance with the Arrangement and the articles of MindMed, all outstanding Class B common shares (“Class B Shares”), Class C common shares (“Class C Shares”) and Class D common shares (“Class D Shares”) of MindMed will be exchanged for Class A common shares (“Class A Shares”), immediately following which all Class A Shares of MindMed will be exchanged, on a one-for-one basis (the “Exchange Ratio”), for securities of Broadway on a Consolidated (as defined below) basis (Broadway following the completion of the Arrangement herein referred to as the “Resulting Issuer”). Any outstanding convertible securities of MindMed, including any convertible securities issued in connection with the MindMed Financing (as defined below), will be exchanged for convertible securities of the Resulting Issuer on the basis of the Exchange Ratio.
As part of the Arrangement and subject to the receipt of all required approvals, Broadway will consolidate its outstanding shares, warrants and options on an eight (8) old common shares for one (1) new common share basis (the “Consolidation”) and change its name to “Mind Medicine (MindMed), Inc.” (or such other name as MindMed may determine) (the “Name Change”). It will also amend its capital structure (the “Capital Structure Amendment”) by creating a new class of multiple voting shares that will each carry 100 votes per share (the “Multiple Voting Shares”), and change the name of its common shares to “subordinate voting shares” (with all other terms of the common shares remaining unchanged). The Multiple Voting Shares will be issued to certain U.S. resident holders of MindMed shares in connection with the Arrangement.
- 14
Broadway Gold Mining Ltd. Notes to Condensed Interim Consolidated Financial Statements Three Months EndedNovember 30, 2019 (Expressed in Canadian Dollars) Unaudited 10. Proposed transaction (continued) The Plan of Arrangement also includes the transfer of all of Broadway’s right, title and interest, and all associated liabilities, in the Madison Property. The Madison Property is currently held by Broadway Gold Corp. The Spin-Out Transaction will consist of the transfer of all of the shares of Broadway Gold Corp. and any related assets and liabilities in connection with the Madison Property to Madison Metals (as defined in note 3). Madison Metals will also assume all liabilities associated with Broadway's mineral exploration and development business as conducted prior to the completion of the Arrangement. Pursuant to the Plan of Arrangement, Madison Metals will issue common shares to Broadway as consideration for the Transferred Assets, which will be distributed to the holders of record of the Company's shares immediately before completion of the RTO on a pro-rata basis. Broadway shareholders will be entitled to receive one Madison Metals share for every common share of Broadway on a pre-Consolidation basis held by such shareholder. Refer to note 3 on asset held for sale.
In connection with the Arrangement, MindMed has agreed to make a bridge loan available to Broadway (“Bridge Loan”) as provided in the Arrangement Agreement. The terms of the Bridge Loan provide that MindMed will lend to Broadway (i) $15,000 on execution of the Agreement (received); (ii) a maximum of $30,000 per month, starting on the later of the date of execution of the Arrangement Agreement and October 1, 2019 and ending on the earlier of the Closing Date (as defined in the Arrangement Agreement) or January 1, 2020, to cover the costs and expenses necessary to maintain Broadway’s and the Broadway Montana’s business, and (iii) no more than $170,000 to pay down the aggregate accounts payable currently owed by Broadway and the Broadway Montana, which amounts will be forgiven or assumed by MindMed upon completion of the Arrangement. 11. Subsequent events On January 8, 2020, Broadway entered into an exclusivity agreement ("Agreement") with American Pacific Mining Corp. ("APM") wherein APM is granted an exclusive right to negotiate the acquisition of the Madison Property during the period from the date of Agreement until the earlier of (i) the date of execution of a mutually acceptable definitive purchase agreement; (ii) five business days after the closing of the Arrangement; (iii) the termination of the Arrangement Agreement; and (iv) the date, if any, upon which Broadway and APM mutually agree in writing to terminate discussions.
On January 23, 2020, Broadway and MindMed have executed an amendment (the "Amendment") to the Arrangement Agreement to extend the closing date of the Arrangement from no later than January 31, 2020 to no later than March 31, 2020. All other terms of the Arrangement Agreement remain in full force and effect and unamended.