TORQ RESOURCES INC.
Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
Independent Auditor's Report
To the Shareholders and the Board of Directors of
Torq Resources Inc.
Opinion
We have audited the consolidated financial statements of Torq Resources Inc. (the "Company"), which comprise the consolidated statements of financial position as at and December 31, 2023 and 2022, and the consolidated statements of loss and comprehensive loss, consolidated statement of changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information (collectively referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2023 and 2022, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards ("IFRS").
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards ("Canadian GAAS"). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty related to Going Concern
We draw attention to Note 1 in the financial statements, which indicates that the Company incurred a net loss of $19,211,640 during the year ended December 31, 2023 and, as of that date the Company has a working capital deficit of $114,845. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Key Audit Matters
A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the consolidated financial statements for the year ended December 31, 2023. This matter was addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.
In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matter described below to be the key audit matter to be communicated in our auditor's report.
Loan Facility - Refer to Note 9 to the financial statements
Key Audit Matter Description
On November 27, 2023, the Company and the Lender agreed to amend the loan facility agreement by extending the maturity date to July 11, 2025. In consideration of the extension, the Company agreed to replace share purchase warrants that were previously issued to the Lender with share purchase warrants exercisable at a different price per common share. This amendment was treated as an extinguishment of the former loan facility and reissuance of a new loan facility (the "Loan Facility"). The carrying amount of the equity instruments were established using the residual fair value approach, which represents the difference between the principal amount received from the Loan Facility less the fair value of the loan.
While management is required to make several judgments and assumptions relating to the Loan Facility, those with the highest degree of subjectivity relate to the appropriate accounting treatment and the determination of the discount rate. Auditing these judgements and assumptions resulted in an increased extent of audit effort.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the accounting treatment of the Loan Facility and determination of the discount rate, included the following, among others:
- Evaluated the appropriateness of management's accounting treatment of the Loan Facility by:
- Reviewing the executed contracts to determine whether all key facts and circumstances were incorporated into management's assessment; and
- Analyzing relevant accounting standards, including various aspects of IFRS, conceptual framework and guidance.
- Evaluated the reasonableness of the discount rate by comparing it to similar instruments .
Other Information
Management is responsible for the other information. The other information comprises of Management's Discussion and Analysis.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Jayana Darras.
/s/ Deloitte LLP
Chartered Professional Accountants
Vancouver, British Columbia
April 17, 2024
Torq Resources Inc.
Consolidated Statements of Financial Position (Expressed in Canadian dollars)
December 31, | December 31, | ||
Note | 2023 | 2022 | |
$ | $ | ||
ASSETS | |||
Current | |||
Cash | 487,970 | 12,470,543 | |
Amounts receivable | 37,134 | 65,899 | |
Prepaid expenses and deposits | 559,033 | 466,094 | |
1,084,137 | 13,002,536 | ||
Equity investment | 5 | 121,991 | 127,024 |
Equipment | 6 | 217,646 | 463,816 |
Mineral property interests | 7 | 2,782,273 | 2,012,368 |
Total assets | 4,206,047 | 15,605,744 | |
LIABILITIES | |||
Current | |||
Accounts payable and accrued liabilities | 11 | 1,198,982 | 1,637,551 |
1,198,982 | 1,637,551 | ||
Loan facility | 9 | 1,969,137 | 1,966,710 |
Total liabilities | 3,168,119 | 3,604,261 | |
SHAREHOLDERS' EQUITY | |||
Share capital | 10 | 73,153,551 | 68,160,093 |
Shares to be issued | 10 | 40,250 | 70,862 |
Stock options and warrants reserve | 13,890,761 | 10,547,271 | |
Accumulated other comprehensive income | 29,739 | 89,777 | |
Deficit | (86,076,373) | (66,866,520) | |
Total shareholders' equity | 1,037,928 | 12,001,483 | |
Total liabilities and shareholders' equity | 4,206,047 | 15,605,744 |
Nature of operations and going concern (Note 1)
Commitments (Note 5)
Subsequent events (Note 16)
Approved and authorized for issue on behalf of the Board of Directors:
/s/ "Steve Cook" | /s/ "Carolina Vargas" | |
Director | Director |
The accompanying notes are an integral part of these consolidated financial statements.
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Torq Resources Inc.
Consolidated Statements of Loss and Comprehensive Loss
(Expressed in Canadian dollars, except for per share amounts and number of shares)
Years ended December 31, | |||
Note | 2023 | 2022 | |
$ | $ | ||
Operating expenses | |||
Exploration and evaluation expenses | 8, 11(a) | 13,293,245 | 7,242,112 |
Fees, salaries and other employee benefits | 11(b) | 2,821,459 | 2,090,738 |
Legal and professional | 11 | 423,316 | 257,429 |
Marketing and investor relations | 11 | 1,243,429 | 1,251,320 |
Office and administration | 11 | 673,548 | 735,307 |
Project investigation | 11 | 136,417 | 256,533 |
Regulatory and transfer agent | 11 | 109,801 | 66,110 |
Operating loss | 18,701,215 | 11,899,549 | |
Other expenses (income) | |||
Accretion expense | 9 | 317,848 | 93,981 |
Foreign exchange loss (gain) | 135,100 | (26,487) | |
Interest expense | 9 | 225,000 | 83,466 |
Interest income | (374,638) | (195,681) | |
Loss on extinguishment of loan facility | 9 | 202,082 | - |
Net loss from equity investment | 5 | 5,033 | 23,976 |
Net loss before income tax | 19,211,640 | 11,878,804 | |
Deferred income tax recovery | 15 | - | (159,458) |
Net loss for the year | 19,211,640 | 11,719,346 | |
Other comprehensive loss (gain) | |||
Currency translation differences | 58,251 | (142,040) | |
Comprehensive loss for the year | 19,269,891 | 11,577,306 | |
Net loss per share: | |||
Basic and diluted | 0.18 | 0.13 | |
Weighted average number of common shares: | |||
Basic and diluted | 108,335,592 | 87,848,503 |
The accompanying notes are an integral part of these consolidated financial statements.
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Torq Resources Inc.
Consolidated Statements of Cash Flows (Expressed in Canadian dollars)
Years ended December 31, | ||
2023 | 2022 | |
$ | $ | |
Operating activities: | ||
Net loss for the year | (19,211,640) | (11,719,346) |
Items not affecting cash: | ||
Accretion expense | 317,848 | 93,981 |
Deferred income tax recovery | - | (159,458) |
Depreciation | 282,874 | 181,650 |
Interest expense | 225,000 | 83,466 |
Interest income | (374,638) | (195,681) |
Loss on extinguishment of loan facility | 202,082 | - |
Net loss from equity investment | 5,033 | 23,976 |
Share-based compensation expense | 2,184,578 | 490,899 |
Unrealized foreign exchange loss (gain) | 1,730 | (37,940) |
Changes in non-cash working capital: | ||
Amounts receivable | 28,821 | 85,854 |
Prepaid expenses and deposits | (92,260) | 50,379 |
Accounts payable and accrued liabilities | (270,467) | 1,006,432 |
Cash used in operating activities | (16,701,039) | (10,095,788) |
Investing activities: | ||
Acquisition of equity investment | - | (1,000) |
Interest income received | 374,638 | 195,681 |
Mineral properties additions | (829,664) | (1,061,683) |
Purchase of equipment | (36,903) | (196,330) |
Cash used in investing activities | (491,929) | (1,063,332) |
Financing activities: | ||
Interest paid on the Loan Facility | (225,000) | (83,466) |
Proceeds from private placement, net of share issuance costs | 5,401,069 | 5,044,875 |
Proceeds from loan and credit facility, net of arrangement fee and costs | - | 2,451,968 |
Proceeds from issue of shares to Gold Fields Limited, net of costs | - | 14,314,287 |
Proceeds from shares to be issued | 40,250 | - |
Cash provided by financing activities | 5,216,319 | 21,727,664 |
Effect of exchange rate on changes in cash | (5,924) | 2,675 |
Change in cash | (11,982,573) | 10,571,219 |
Cash, beginning of year | 12,470,543 | 1,899,324 |
Cash, end of year | 487,970 | 12,470,543 |
Supplemental cash flows information: | ||
Share issue cost included in accounts payable and accrued liabilities | 162,936 | - |
Income taxes | - | - |
The accompanying notes are an integral part of these consolidated financial statements.
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Torq Resources Inc.
Consolidated Statements of Changes in Shareholders' Equity (Expressed in Canadian dollars, except number of shares)
Accumulated | |||||||
Stock options | other | Total | |||||
Common | Shares to be | and warrants comprehensive | shareholders' | ||||
shares | Share capital | issued | reserve | income (loss) | Deficit | equity | |
# | $ | $ | $ | $ | $ | $ | |
Balance, December 31, 2021 | 77,515,414 | 49,124,432 | 99,031 | 9,284,921 | (52,263) | (55,147,174) | 3,308,947 |
Shares issued, net of share issue costs - Gold | |||||||
Fields | 15,000,000 | 14,314,287 | - | - | - | - | 14,314,287 |
Shares issued as finders' fee | 141,667 | 28,169 | (28,169) | - | - | - | - |
Share-based compensation | - | - | - | 490,899 | - | - | 490,899 |
Share purchase warrants issued related to | |||||||
the loan facility, net of deferred income tax | - | - | - | 419,781 | - | - | 419,781 |
Shares issued in private placement, net of | |||||||
share issuance costs | 7,033,400 | 4,693,205 | - | 351,670 | - | - | 5,044,875 |
Currency translation differences | - | - | - | - | 142,040 | - | 142,040 |
Net loss for the year | - | - | - | - | - | (11,719,346) | (11,719,346) |
Balance, December 31, 2022 | 99,690,481 | 68,160,093 | 70,862 | 10,547,271 | 89,777 | (66,866,520) | 12,001,483 |
Shares issued as finders' fee | 243,750 | 70,862 | (70,862) | - | - | - | - |
Shares to be issued | - | - | 40,250 | - | - | - | 40,250 |
Share-based compensation | - | - | - | 2,184,578 | - | - | 2,184,578 |
Shares issued in private placement, net of | |||||||
share issuance costs | 10,433,899 | 5,042,310 | - | 521,695 | - | - | 5,564,005 |
Share purchase warrants issued related to | |||||||
the loan facility | - | - | - | 517,503 | - | - | 517,503 |
Warrants issued for finders' fees | - | (119,714) | - | 119,714 | - | - | - |
Reclassification of subsidiary other | |||||||
comprehensive income upon dissolution | - | - | - | - | (1,787) | 1,787 | - |
Currency translation differences | - | - | - | - | (58,251) | - | (58,251) |
Net loss for the year | - | - | - | - | - | (19,211,640) | (19,211,640) |
Balance, December 31, 2023 | 110,368,130 | 73,153,551 | 40,250 | 13,890,761 | 29,739 | (86,076,373) | 1,037,928 |
The accompanying notes are an integral part of these consolidated financial statements.
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Torq Resources Inc.
Notes to the Consolidated Financial Statements For the years ended December 31, 2023 and 2022 (Expressed in Canadian dollars, except where noted)
1. NATURE OF OPERATIONS AND GOING CONCERN
Torq Resources Inc. (the "Company" or "Torq") was incorporated under the Business Corporations Act (British Columbia) and is listed on the TSX Venture Exchange (the "Exchange") as a Tier 2 mining issuer. The Company's shares trade under the symbol TORQ.V in Canada and on the OTCQX under the US symbol TRBMF. The head office and principal address of Torq is located at 1177 West Hastings Street, Suite 1630, Vancouver, British Columbia, Canada, V6E 2K3.
The Company is principally engaged in the acquisition and exploration of mineral property interests with a focus in the Americas, particularly Chile.
Going concern
These consolidated financial statements for the years ended December 31, 2023 and 2022 ("financial statements") have been prepared on a going concern basis, which assumes that the Company will be able to meet its obligations and continue its operations for at least the next twelve months. As at December 31, 2023, the Company has a working capital deficit of $114,845 (December 31, 2022 working capital surplus - $11,364,985) and an accumulated deficit of $86,076,373 (December 31, 2022 - $66,866,520). During the year ended December 31, 2023 the Company incurred a net loss of $19,211,640 (2022 - $11,719,346). The Company has incurred operating losses to date and does not generate revenue to support its operating activities. With no source of operating cash flows, there is no assurance that sufficient funding will be available to conduct further exploration of its mineral properties. The Company has had success raising capital in the past, on March 10, 2023, the Company closed a non- brokered private placement for gross proceeds of $6,260,339 (Note 10(b)). On January 4, 2024, the Company completed a public and private offering of equity securities for gross proceeds of $5,337,578, which consisted of 23,206,860 units at a price of $0.23 per unit (Note 16). However, the ability to continue as a going concern remains dependent upon Torq's capacity to obtain the financing necessary to continue to fund its mineral properties, including two active exploration projects, the realization of future profitable production, proceeds from the disposition of its mineral interests, and/or other sources. These conditions create a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern.
These financial statements do not give effect to adjustments to the carrying values and classification of assets and liabilities that would be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.
2. BASIS OF PREPARATION
- Statement of compliance
These financial statements were approved by the Board of Directors and authorized for issue on April 17, 2024.
These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations of the International Financial Reporting Interpretations Committee ("IFRIC").
- Basis of presentation
These financial statements have been prepared on a historical cost basis. In addition, except for cash flow information, these financial statements have been prepared using the accrual method of accounting.
- Functional and presentation currency
These financial statements are presented in Canadian dollars ("$" or "CAD") which is the Company's functional currency. The functional currency is the currency of the primary economic environment in which an entity operates. References to "US$"" are to United States dollars, and references to "CLP" are to Chilean pesos.
- Basis of consolidation
These financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances are eliminated on consolidation. Control exists where the parent entity has power over the investee and is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are included in the financial statements from the date control commences until the date control ceases.
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Torq Resources Inc. published this content on 17 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 April 2024 15:42:02 UTC.