ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements contained in this report (including information incorporated by reference) are "forward-looking statements." The Company's forward-looking statements include current expectations and projections about future production, results, performance, prospects and opportunities, including reserves and other mineralization. The Company has tried to identify these forward-looking statements by using words such as "may," "might," "will," "expect," "anticipate," "believe," "could," "intend," "plan," "estimate" and similar expressions. These forward-looking statements are based on information currently available and are expressed in good faith and believed to have a reasonable basis. However, the forward-looking statements are subject to risks, uncertainties and other factors that could cause actual production, results, performance, prospects or opportunities, including reserves and mineralization, to differ materially from those expressed in, or implied by, these forward-looking statements.
Given these risks and uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements. Projections and other forward-looking statements included in this report have been prepared based on assumptions, which the Company believes to be reasonable, and in accordance with United States generally accepted accounting principles ("GAAP") or any guidelines of the Securities and Exchange Commission ("SEC"). Actual results may vary, perhaps materially. Readers are strongly cautioned not to place undue reliance on such projections and other forward-looking statements. All subsequent written and oral forward-looking statements attributable to Hunt Mining Corporation or to persons acting on the Company's behalf are expressly qualified in their entirety by these cautionary statements. Except as required by federal securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Users of these documents should read the following discussion and analysis of the Company's financial condition and results of operations together with its financial statements and related notes in this annual report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under "Risk Factors" in this annual report on Form 10-K.
Hunt Mining Corp. is a mineral exploration company incorporated on January 10, 2006 under the laws of Alberta, Canada and, together with its subsidiaries, is engaged in the exploration of mineral properties in Santa Cruz Province, Argentina.
Effective November 6, 2013, the Company continued from the Province of Alberta to the Province of British Columbia. The Company's registered office is located at 25th Floor, 700 W Georgia Street, Vancouver, B.C. V7Y 1B3. The Company's head office is located at 23800 E Appleway Avenue, Liberty Lake, Washington, 99019 USA.
During the year ended December 31, 2018, the major sources of funding were from collection of 2017 silver-gold concentrate receivables, new sales of silver-gold concentrate and proceeds from loans. The Company incurred net operating losses of $3,530,301 for the year ended December 31, 2018 but was profitable in 2017 by approximately $1.66 million. The Company remains focused on evaluating its mining properties in Argentina, with near term prospects of mining the La Josefina gold property and the continuation of production of silver-gold concentrate from the Mina Martha property. The Company is also reviewing strategic opportunities, focusing primarily on development of mineral properties.
During the year ended December 31, 2018, the Company sold concentrate containing 1,360 ounces of gold at an average price of $1,221 and 186,078 ounces of silver at an average price of $15.24 for net proceeds of $3,961,399. 148 tonnes of gold/silver concentrate were shipped during the year ended December 31, 2018 with average grades of Au 285.92 g/mt and Ag 39,113 g/mt. This concentrate was produced from the La Josefina project for testing and the Mina Martha project. Concentrate produced as a result of metallurgical testing on La Josefina was from approximately 1,700 tonnes of material with average grade of 26.52 Au g/mt. Concentrate produced from Mina Martha was from approximately 12,900 tonnes of material with average grade of 416.71 Ag/mt.
For the year ended December 31, 2018 the Company had a net loss of $3,564,180, or $0.06 per basic share, compared to a net income of $1,655,914 or $0.03 per basic share, for the year ended December 31, 2017. The decrease was due to the Company following its strategic plan by focusing more of its resources on the advancement of the La Josefina project. Consequently, sales of silver and gold concentrate decreased.
Working capital decreased from 2017 to 2018 by $2,308,144 due to the reduction in concentrate sales resulting in increases of short-term payables, accrued liabilities of approximately $110,000 and an increase in loan payable and current portion of long-term debt of $2.1M.
Total assets decreased from 2017 to 2018 by $631,106. The significant factors attributing to this decrease were reduced trade receivables of $670,000, a net reduction in value of property plant and equipment of $447,000 and an increase in concentrate inventory of $580,000. The trade receivable reduction stemmed from the lower sales levels in 2018. Property Plant and Equipment had additions of approximately $500,000 in 2018 but depreciation for the year was approximately $948,000.
Additions of $486,589 to asset retirement obligations coupled with accretion of $74,370 were the major contributors to non-current liabilities increasing from 2017. Long-term debt decreased by $115,577. The net increase to non-current liabilities was $419,386.
Total shareholder's equity decreased from 2017 to 2018 by the net loss and comprehensive income (loss) for the year of $3.29M.
Summary of Results of Operations:
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
Change
Favorable (Unfavorable)
|
|
Net income (loss) for the year
|
|
$
|
(3,564,180
|
)
|
|
$
|
1,655,914
|
|
|
$
|
(5,220,094
|
)
|
Net income (loss) per share – basic
|
|
|
(0.06
|
)
|
|
|
0.03
|
|
|
|
(0.09
|
)
|
Net income (loss) per share – dilluted
|
|
|
(0.06
|
)
|
|
|
0.01
|
|
|
|
(0.07
|
)
|
Working capital
|
|
$
|
(7,616,966
|
)
|
|
$
|
(5,308,822
|
)
|
|
$
|
(2,308,144
|
)
|
Total assets
|
|
$
|
7,900,222
|
|
|
$
|
8,531,328
|
|
|
$
|
(631,106
|
)
|
Total non-current liabilities
|
|
|
2,561,416
|
|
|
|
2,142,030
|
|
|
|
(419.386
|
)
|
Total shareholders' equity
|
|
|
(4,839,422
|
)
|
|
|
(1,544,661
|
)
|
|
|
(3,294,761
|
)
|
The Company is in exploration phase and has incurred losses since its inception up to 2018. In 2017 and it began selling silver and gold concentrate from Mina Martha and in 2018 began selling gold and silver concentrate as part of metallurgical testing at La Josefina. As shown in the accompanying consolidated financial statements, the Company has an accumulated loss of $39,557,836 through December 31, 2018. The Company intends to fund operations for the next twelve months from the sale of material from the Mina Martha property and the Josefina property.
Financial Position
Cash
Cash increased marginally in 2018. Operating cash outflows were $2,193,591, a decrease from 2017 of approximately $5.6 from lower production and sales levels. There were cash outflows from the purchase of property and equipment of $178,059. The company compensated for these cash outflows by increasing funds from financing activities. Net cash inflow from financing was approximately $2.4M, an increase over 2017 of approximately $3.4M.
Accounts Receivable
The reduced sale of concentrate played a significant role in the Company's decreased accounts receivable balance in 2018. Receivables from the sale of concentrate decreased from 2017 by approximately $700,000.
Inventory
There remained approximately $913,000 of combined mineral inventory and supplies at December 31, 2018.
Property, plant and equipment
Property plant and equipment consists of office furniture, computer equipment, geological equipment, and the Mina Martha plant and equipment assets. The primary reason for the increase in asset costs was additions to the asset retirement obligation of approximately $486,000 for work performed on La Josefina project. During the year, the plant and equipment, that had been repaired as part of the initial capitalization of the Martha facilities, functioned with fewer than anticipated repairs. Furthermore, in 2018 it was determined that the facilities at Martha would be adequate and successful in processing material from la Josefina and potentially other projects. For this reason, management revised its estimate of the useful life on the plant and buildings at the Martha site, extending the projected useful life for 87 months from December 31, 2018. Depreciation for the year was approximately $948,000 (Note 10 of Consolidated Financial Statements).
Accounts payable, accrued liabilities, bank indebtedness and taxes payable.
There were overall increases to these current liabilities of only approximately $110,000 primarily because the majority of continued mining and exploration activities with lower volumes of concentrate sold were funded with short term debt. Focus on exploration of La Josefina was furthered in 2018 with the aim to develop further mining plans with corresponding cost/benefit analysis.
Loan Payable and Long-term Debt
The Company increased net loans to related parties during the year by approximately $1,429,000. Also, during 2018, the company acquired a loan of $700,000 secured by concentrate sales which, during the course of the year, was repaid in full and then redrawn. This loan had an outstanding balance of $591,280 at December 31, 2018. Subsequent to December 31, 2018 this loan was repaid in full and then redrawn again in the amount of $600,000 (Note 23 of Consolidated Financial Statements)
Off-balance sheet arrangements
At December 31, 2018, the Company had no material off-balance sheet arrangements such as guarantee contracts, contingent interest in
assets
transferred to an entity, derivative instruments obligations or any obligations that trigger financing, liquidity, market or credit risk to us.
Contractual Obligations
|
|
Payments due by period
|
|
Total
|
< 1 year
|
1-3 years
|
3-5 y
ears
|
> 5 years
|
|
|
|
|
|
|
|
|
|
|
|
Loan Payable
|
$
|
2,836,141
|
$
|
2,836,141
|
$
|
-
|
$
|
-
|
$
|
-
|
Long-Term Debt
|
|
1,615,445
|
|
362,428
|
|
770,100
|
|
482,917
|
|
-
|
TOTAL
|
$
|
4,451,586
|
$
|
3,198,569
|
$
|
770,100
|
$
|
482,917
|
$
|
-
|
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. During the year ended December 31, 2018, the Company had net loss of $3,564,180. As at December 31, 2018, the Company had an accumulated deficit of $39,557,836. The Company intends to continue funding operations through operation of the Martha mine, La Josefina project and equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending December 31, 2019.
These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Additional Information and Accounting Pronouncements
Discussed below are the accounting policies that the Company believes are critical to its financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense reported.
The significant accounting policies used in the preparation of these consolidated financial statements are described below.
(a) Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial assets and financial liabilities to fair value.
(b) Consolidation
The Company's consolidated financial statements consolidate the accounts of the Company and its subsidiaries. All intercompany transactions, balances and unrealized gains or losses from intercompany transactions are eliminated on consolidation.
(c) Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rates of exchange prevailing at the reporting date. Non-monetary assets and liabilities are translated at the exchange rate prevailing at the transaction date. Revenues and expenses are translated at average exchange rates throughout the reporting period. Gains and losses on translation of foreign currencies are included in the consolidated statement of operations.
The Company's functional currency
is the Canadian dollar
. All of the Company's subsidiaries have a US dollar functional currency. Financial statements are translated to their US dollar equivalents using the current rate method. Under this method, the statements of operations and comprehensive loss and cash flows for each period have been translated using the average exchange rates prevailing during each period. All assets and liabilities have been translated using the exchange rate prevailing at the balance sheet date. Translation adjustments are recorded as income or losses in other comprehensive income or loss. Transaction gains and losses resulting from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized as incurred in the accompanying consolidated statement of loss and comprehensive loss.
(d) Financial instruments
The Company measures the fair value of financial assets and liabilities based on US GAAP guidance, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
The Company classifies financial assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other financial liabilities depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition, except for those arising from certain related party transactions, which are accounted for at the transferor's carrying amount or exchange amount.
Financial assets and liabilities classified as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified as held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale are measured at fair value, with unrealized gains and losses being recognized as other comprehensive income until realized, or if an unrealized loss is considered other than temporary, the unrealized loss is recorded in income.
See Note 17 to the Consolidated Financial Statements for fair value disclosures.
(e) Cash and equivalents
Cash and equivalents include cash on hand, deposits held with banks and other liquid short-term investments with original maturities of three months or less. The Company has no cash equivalents for all periods presented.
(f) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of an asset.
Repairs and maintenance costs are charged to the consolidated statement of operations and comprehensive loss during the period in which they are incurred.
Depreciation is calculated to amortize the cost of the property, plant and equipment over their estimated useful lives using the straight-line method. Plant, buildings, equipment and vehicles are stated at cost and depreciated straight line over an estimated useful life of three to eight years. Depreciation begins once the asset is in the state intended for use by management.
The Company allocates the amount initially recognized in respect of an item of property and equipment to its significant parts and depreciates separately each such part. Residual values, method of depreciation and useful lives of the assets are reviewed annually and adjusted if appropriate.
Gains and losses on disposals of property, plant and equipment are determined by comparing the proceeds with the carrying amount of the asset and are included as part of other gains or losses
in the consolidated statement of operations and comprehensive loss.
(g) Mineral properties and exploration and evaluation expenditures
All exploration expenditures are expensed as incurred. Expenditures to acquire mineral rights, to develop new mines, to define further mineralization in mineral properties which are in the development or operating stage, and to expand the capacity of operating mines, are capitalized and amortized on a units-of-production basis over proven and probable reserves.
Should a property be abandoned, its capitalized costs are charged to the consolidated statement of loss and comprehensive loss. The Company charges to the consolidated statement of loss and comprehensive loss the allocable portion of capitalized costs attributable to properties sold. Capitalized costs are allocated to properties sold based on the proportion of claims sold to the claims remaining within the project area.
(h) Long-lived assets
Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of their carrying amount or fair value less costs to sell.
(i) Asset retirement obligations
The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal constructive obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the long-lived assets. The Company also records a corresponding asset, which is amortized over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying the obligation (asset retirement cost).
(j) Income taxes
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under the asset and liability method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion or all of the deferred tax asset will not be recognized.
(k) Share-based compensation
The Company offers a share option plan for its directors, officers, employees and consultants. ASC 718 "Compensation – Stock Compensation" prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, "Equity Based Payments to Non-Employees." Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
(l) Earnings (loss) per share
The calculation of earnings (loss) per share ("EPS") is based on the weighted average number of shares outstanding for each period. The basic EPS is calculated by dividing the earnings or loss attributable to the equity owners of the Company by the weighted average number of common shares outstanding during the period.
The computation of diluted EPS assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on the earnings per share. The treasury stock method is used to determine the dilutive effect of the warrants and share options. When the Company reports a loss, the diluted net loss per common share is equal to the basic net loss per common share due to the anti-dilutive effect of the outstanding warrants and share options.
(m) Silver and gold recovery (loss), net of expenses
Recovery of concentrate and other income is recognized when title and the risks and rewards of ownership to deliver concentrate and commodities pass to the buyer and collection is reasonably assured.
Sale of concentrate is classified as silver and gold recovery, net of expenses in profit and loss because the Company has not established proven or probable ore reserves and remains in the exploration stage as defined by Industry guide 7.
Not all overhead costs are applied against Silver and gold recovery. Since the Company has no resources or reserves, the Company is treated as an exploration company and as such, direct cost, portions of fixed costs and portions of variable costs are applied against Silver and gold recovery. Other administrative, office, professional fees, and travel are disclosed separately.
From time to time, some of the Company's sales of concentrate are made under provisional pricing arrangements where the final sale prices are determined by quoted market prices in a period subsequent to the date of sale. In these circumstances, sales are recorded at period end based on latest information about prices and quantities available to management for the expected date of final settlement. Under such arrangements, the Company's receivable changes as the underlying commodity market price varies, this component of the contract is an embedded derivative which is recognized at fair value with changes in fair value recognized in profit and loss and receivables. Subsequent variations in prices and metal quantities are recognized as they occur.
(n) Inventories
Mineral concentrate and mineralized material stockpiles are physically measured or estimated and valued at the lower of cost or net realizable value. Net realizable value is the estimated future sales price of the product the entity expects to realize when the product is processed and sold, less estimated costs to complete production and bring the product to sale. Where the time value of money is material, these future prices and costs to complete are discounted.
If the stockpile is not expected to be processed in 12 months after the reporting date, it is included in noncurrent assets and the net realizable value is calculated on a discounted cash flow basis.
Cost of silver concentrate and mineralized material stockpiles is determined by using the weighted average method and comprises direct costs and a portion of fixed and variable overhead costs incurred in converting materials into concentrate, based on the normal production capacity.
Materials and supplies are valued at the lower of cost or net realizable value. Any provision for obsolescence is determined by reference to specific items of stock. A regular review is undertaken to determine the extent of any provision for obsolescence.
Recent Accounting Pronouncements
Restricted Cash
In November 2016, ASU No. 2016-18 was issued related to the inclusion of restricted cash in the statement of cash flows. This new guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is permitted. The adoption of this guidance will result in the inclusion of the restricted cash balances within the overall cash balance and removal of the changes in restricted cash activities, which are currently recognized in other financing activities, on the Statements of Consolidated Cash Flows. Furthermore, an additional reconciliation will be required to reconcile cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets to sum to the total shown in the Statements of Consolidated Cash Flows. The adoption of this ASU had no material impact on the Company's consolidated financial statements.
Intra-Entity Transfers
In October 2016, ASU No. 2016-16 was issued related to the intra-entity transfers of assets other than inventory. This new guidance requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is permitted. The adoption of this ASU had no material impact on the Company's consolidated financial statements.
Statement of Cash Flows
In August 2016, ASU No. 2016-15 was issued related to the statement of cash flows. This new guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is permitted. The adoption of this ASU had no material impact on the Company's consolidated financial statements.
Leases
In February 2016, ASU No. 2016-02 was issued related to leases. The new guidance modifies the classification criteria and requires lessees to recognize the assets and liabilities arising from most leases on the balance sheet. This update is effective in fiscal years, including interim periods, beginning after December 15, 2018 and early adoption is permitted. The Company has evaluated all contracts which could be classified as leases under the new standards and determined that any impact as a result of adoption would not be material.
Investments
In January 2016, ASU No. 2016-01 was issued related to financial instruments. The new guidance requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income. This new guidance also updates certain disclosure requirements for these investments. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is not permitted. The adoption of this ASU had no material impact on the Company's consolidated financial statements.
Revenue recognition
In May 2014, ASU No. 2014-09 was issued related to revenue from contracts with customers. This ASU was further amended in August 2015, March 2016, April 2016, May 2016 and December 2016 by ASU No. 2015-14, No. 2016-08, No. 2016-10, No. 2016-12 and No. 2016-20, respectively. The new standard provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. In August 2015, the effective date was deferred to reporting periods, including interim periods, beginning after December 15, 2017 and will be applied retrospectively. Early adoption is not permitted. The adoption of this ASU had no material impact on the Company's consolidated financial statements.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item
.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See audited financial statements previously filed with the SEC
The consolidated financial statements and supplementary information filed as part of this Item 8 are listed under Part IV, Item 15, "Exhibits, Financial Statement Schedules" and contained in this annual report on Form 10-K.
Hunt Mining Corp.
|
|
|
Consolidated Financial Statements
|
|
|
|
Year ended December 31, 2018 and 2017
|
Page
|
|
|
Report of Independent Registered Public Accounting Firm
|
29
|
|
|
Consolidated Balance Sheets
|
31
|
|
|
Consolidated Statements of Operations and Comprehensive Income (Loss)
|
32
|
|
|
Consolidated Statement of Changes in Stockholders' Deficiency
|
33
|
|
|
Consolidated Statements of Cash Flows
|
34
|
|
|
Notes to the Consolidate Financial Statements
|
35 - 50
|
D
AVIDSON & COMPANY
LLP
|
Chartered Professional Accountants
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Directors of
Hunt Mining Corp.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Hunt Mining Corp. (the "Company"), as of December 31, 2018 and 2017, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders' deficiency, and cash flows for the years ended December 31, 2018 and 2017, and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Hunt Mining Corp. as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years ended December 31, 2018 and 2017, in conformity with accounting principles generally accepted in the United States of America.
The Company's Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
|
1200 - 609 Granville Street, P.O. Box 10372, Pacific Center, Vancouver, B.C., Canada V7Y 1G6
Telephone (604) 687-0947 Davidson-co.com
|
Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company's auditor since 2017.
|
"DAVIDSON & COMPANY LLP"
|
|
Chartered Professional Accountants
|
Vancouver, Canada
March 29, 2019
Hunt Mining Corp.
|
|
|
|
|
|
|
|
|
|
Expressed in U.S. Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
NOTE
|
|
|
2018
|
|
|
2017
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
17
|
|
|
$
|
115,372
|
|
|
$
|
78,145
|
|
Accounts receivable
|
|
|
12,17,20
|
|
|
|
1,474,303
|
|
|
|
2,144,830
|
|
Prepaid expenses
|
|
|
|
|
|
|
57,672
|
|
|
|
13,750
|
|
Other deposit
|
|
|
|
|
|
|
-
|
|
|
|
55,092
|
|
Inventory
|
|
|
7
|
|
|
|
913,915
|
|
|
|
333,320
|
|
Total Current Assets
|
|
|
|
|
|
|
2,561,262
|
|
|
|
2,625,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral Properties
|
|
|
8
|
|
|
|
438,062
|
|
|
|
438,062
|
|
Property, plant and equipment
|
|
|
10
|
|
|
|
4,585,520
|
|
|
|
5,033,490
|
|
Performance bond
|
|
|
11,17
|
|
|
|
315,378
|
|
|
|
434,639
|
|
Total Non-Current Assets:
|
|
|
|
|
|
|
5,338,960
|
|
|
|
5,906,191
|
|
TOTAL ASSETS:
|
|
|
|
|
|
$
|
7,900,222
|
|
|
$
|
8,531,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
13,16,17
|
|
|
$
|
6,328,861
|
|
|
$
|
6,673,319
|
|
Bank indebtedness
|
|
|
21
|
|
|
|
330,000
|
|
|
|
-
|
|
Interest payable
|
|
|
16,17
|
|
|
|
320,669
|
|
|
|
151,024
|
|
Transaction taxes payable
|
|
|
17
|
|
|
|
129
|
|
|
|
47,188
|
|
Loan payable and current portion of long-term debt
|
|
|
14,16,17
|
|
|
|
3,198,569
|
|
|
|
1,062,428
|
|
Total Current Liabilities:
|
|
|
|
|
|
|
10,178,228
|
|
|
|
7,933,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
14,16,17
|
|
|
|
1,253,017
|
|
|
|
1,368,594
|
|
Asset retirement obligation
|
|
|
9
|
|
|
|
1,308,399
|
|
|
|
773,436
|
|
Total Non-Current Liabilities:
|
|
|
|
|
|
|
2,561,416
|
|
|
|
2,142,030
|
|
TOTAL LIABILITIES:
|
|
|
|
|
|
$
|
12,739,644
|
|
|
$
|
10,075,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' DEFICIENCY:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock: Authorized- Unlimited No Par Value Issued and outstanding - 63,588,798 common shares (December 31, 2017 - 63,588,798 common shares)
|
|
|
15
|
|
|
$
|
24,695,186
|
|
|
$
|
24,695,186
|
|
Additional paid in capital
|
|
|
|
|
|
|
9,696,520
|
|
|
|
9,696,520
|
|
Deficit
|
|
|
|
|
|
|
(39,557,836
|
)
|
|
|
(35,993,656
|
)
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
326,708
|
|
|
|
57,289
|
|
Total Stockholders' Deficiency:
|
|
|
|
|
|
|
(4,839,422
|
)
|
|
|
(1,544,661
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
|
|
|
|
|
|
$
|
7,900,222
|
|
|
$
|
8,531,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Going Concern (Note 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent Events (Note 23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approved on behalf of the Board of Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signed CEO "Tim Hunt"
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signed CFO "Ken Atwood"
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
|
|
|
Hunt Mining Corp.
|
|
|
|
|
|
|
|
|
|
Expressed in U.S. Dollars
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Operations and Comprehensive Income (Loss)
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
NOTE
|
|
|
2018
|
|
|
2017
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
16
|
|
|
|
736,380
|
|
|
|
887,198
|
|
Directors fees
|
|
|
|
|
|
|
3,119
|
|
|
|
3,934
|
|
Exploration expenses
|
|
|
|
|
|
|
484,695
|
|
|
|
752,341
|
|
Travel expenses
|
|
|
|
|
|
|
157,786
|
|
|
|
310,718
|
|
Administrative and office expenses
|
|
|
16
|
|
|
|
119,785
|
|
|
|
295,921
|
|
Payroll expenses
|
|
|
16
|
|
|
|
331,967
|
|
|
|
402,785
|
|
Share based compensation
|
|
|
15,16
|
|
|
|
-
|
|
|
|
34,528
|
|
Interest expense
|
|
|
16
|
|
|
|
522,968
|
|
|
|
462,127
|
|
Banking charges
|
|
|
|
|
|
|
64,002
|
|
|
|
104,227
|
|
Depreciation
|
|
|
10
|
|
|
|
948,118
|
|
|
|
1,165,592
|
|
Total operating expenses:
|
|
|
|
|
|
$
|
3,368,820
|
|
|
$
|
4,419,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME/(EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
Silver and gold recovery (loss), net of expenses
|
|
|
20
|
|
|
$
|
397,135
|
|
|
$
|
5,757,321
|
|
Interest income
|
|
|
|
|
|
|
18,869
|
|
|
|
16,292
|
|
Transaction taxes
|
|
|
|
|
|
|
(16,903
|
)
|
|
|
(33,169
|
)
|
Gain (loss) on foreign exchange
|
|
|
|
|
|
|
(520,091
|
)
|
|
|
(11,910
|
)
|
Contingent liability recovery
|
|
|
|
|
|
|
-
|
|
|
|
73,970
|
|
Accretion expense
|
|
|
9
|
|
|
|
(74,370
|
)
|
|
|
(68,068
|
)
|
Recovery of written-off value added tax
|
|
|
|
|
|
|
-
|
|
|
|
340,849
|
|
Total other income (expense):
|
|
|
|
|
|
$
|
(195,360
|
)
|
|
$
|
6,075,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) FOR THE YEAR
|
|
|
|
|
|
$
|
(3,564,180
|
)
|
|
$
|
1,655,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
|
|
|
|
|
|
|
|
|
|
Change in value of performance bond
|
|
|
11
|
|
|
|
(119,261
|
)
|
|
|
53,284
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
388,680
|
|
|
|
33,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL NET INCOME (LOSS) AND COMPREHENSIVE
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FOR THE YEAR:
|
|
|
|
|
|
$
|
(3,294,761
|
)
|
|
$
|
1,742,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted
|
|
|
|
|
|
|
63,588,798
|
|
|
|
63,588,798
|
|
Weighted average shares outstanding - diluted
|
|
|
|
|
|
|
-
|
|
|
|
115,163,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER SHARE - BASIC
|
|
|
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.03
|
|
NET INCOME (LOSS) PER SHARE - DILUTED:
|
|
|
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
Hunt Mining Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expressed in U.S. Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Changes in Stockholders' Deficiency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Additional
|
|
|
|
|
|
|
Capital
|
|
|
|
|
|
Comprehensive
|
|
|
Paid in
|
|
|
|
|
|
|
Stock
|
|
|
Deficit
|
|
|
Income (Loss)
|
|
|
Capital
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance -January 1, 2017
|
|
$
|
24,695,186
|
|
|
$
|
(37,649,570
|
)
|
|
$
|
(29,326
|
)
|
|
$
|
9,661,992
|
|
|
$
|
(3,321,718
|
)
|
Net Income
|
|
|
-
|
|
|
|
1,655,914
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,655,914
|
|
Other comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
86,615
|
|
|
|
-
|
|
|
|
86,615
|
|
Share based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
34,528
|
|
|
|
34,528
|
|
Balance - December 31, 2017
|
|
$
|
24,695,186
|
|
|
$
|
(35,993,656
|
)
|
|
$
|
57,289
|
|
|
$
|
9,696,520
|
|
|
$
|
(1,544,661
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - January 1, 2018
|
|
$
|
24,695,186
|
|
|
$
|
(35,993,656
|
)
|
|
$
|
57,289
|
|
|
$
|
9,696,520
|
|
|
$
|
(1,544,661
|
)
|
Net Income (loss)
|
|
|
-
|
|
|
|
(3,564,180
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,564,180
|
)
|
Other comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
269,419
|
|
|
|
-
|
|
|
|
269,419
|
|
Balance - December 31, 2018
|
|
$
|
24,695,186
|
|
|
$
|
(39,557,836
|
)
|
|
$
|
326,708
|
|
|
$
|
9,696,520
|
|
|
$
|
(4,839,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
Hunt Mining Corp.
|
|
|
|
|
|
|
|
|
|
Expressed in U.S. Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
NOTE
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
$
|
(3,564,180
|
)
|
|
$
|
1,655,914
|
|
Items not affecting cash
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
10
|
|
|
|
948,118
|
|
|
|
1,165,592
|
|
Contingent liability recovery
|
|
|
|
|
|
|
-
|
|
|
|
(73,970
|
)
|
Loss on foreign exchange
|
|
|
|
|
|
|
(25,996
|
)
|
|
|
(6,809
|
)
|
Share based compensation
|
|
|
|
|
|
|
-
|
|
|
|
34,528
|
|
Accretion
|
|
|
9
|
|
|
|
74,370
|
|
|
|
68,068
|
|
Net change in non-cash working capital items
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in accounts receivable
|
|
|
|
|
|
|
670,527
|
|
|
|
(2,018,377
|
)
|
Decrease (increase) in prepaid expenses
|
|
|
|
|
|
|
(44,570
|
)
|
|
|
4,362
|
|
Increase in inventory
|
|
|
|
|
|
|
(580,595
|
)
|
|
|
(333,320
|
)
|
Increase in accounts payable and accrued liabilities
|
|
|
|
|
|
|
206,149
|
|
|
|
2,910,022
|
|
Increase in interest payable
|
|
|
|
|
|
|
169,645
|
|
|
|
97,731
|
|
Decrease in transaction taxes payable
|
|
|
|
|
|
|
(47,059
|
)
|
|
|
(71,479
|
)
|
|
|
|
|
|
|
|
|
(2,193,591
|
)
|
|
|
3,432,262
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
10
|
|
|
|
(178,059
|
)
|
|
|
(2,599,799
|
)
|
|
|
|
|
|
|
|
|
(178,059
|
)
|
|
|
(2,599,799
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in bank line of credit (net)
|
|
|
21
|
|
|
|
330,000
|
|
|
|
-
|
|
Proceeds from loans
|
|
|
14,16
|
|
|
|
3,790,862
|
|
|
|
4,400,000
|
|
Repayment of loans
|
|
|
14,16
|
|
|
|
(1,770,298
|
)
|
|
|
(5,440,289
|
)
|
|
|
|
|
|
|
|
|
2,350,564
|
|
|
|
(1,040,289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH:
|
|
|
|
|
|
|
(21,086
|
)
|
|
|
(207,826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF FOREIGN EXCHANGE ON CASH
|
|
|
|
|
|
|
58,313
|
|
|
|
177,699
|
|
CASH, BEGINNING OF YEAR:
|
|
|
|
|
|
|
78,145
|
|
|
|
108,272
|
|
CASH, END OF YEAR:
|
|
|
|
|
|
$
|
115,372
|
|
|
$
|
78,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes paid
|
|
|
|
|
|
$
|
180,840
|
|
|
$
|
146,090
|
|
Interest paid
|
|
|
|
|
|
$
|
98,492
|
|
|
$
|
143,695
|
|
SUPPLEMENTAL NON-CASH INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in asset retirement obligation capitalized to Property Plant, and equipment
|
|
|
$
|
486,589
|
|
|
$
|
-
|
|
Reclassification of long-term debt from current
|
|
|
|
|
|
$
|
-
|
|
|
$
|
1,368,594
|
|
Change in value of performance bond
|
|
|
|
|
|
$
|
(119,261
|
)
|
|
$
|
53,284
|
|
PP&E included in AP
|
|
|
|
|
|
$
|
-
|
|
|
$
|
164,500
|
|
Reclassification of contingent liability to accrued liability
|
|
|
|
|
|
$
|
-
|
|
|
$
|
176,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
|
|
|
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
1.
Nature of Business
Hunt Mining Corp. (the "Company" or "Hunt Mining"), is a mineral exploration and processing company incorporated on January 10, 2006 under the laws of Alberta, Canada and, together with its subsidiaries, is engaged in the exploration of mineral properties in Santa Cruz Province, Argentina.
Effective November 6, 2013, the Company relocated from the Province of Alberta to the Province of British Columbia. The Company's registered office is located at 25th Floor, 700 West Georgia Street, Vancouver, B.C. V7Y 1B3. The Company's head office is located at 23800 E Appleway Avenue, Liberty Lake, Washington, 99019 USA.
The consolidated financial statements include the accounts of the following subsidiaries after elimination of intercompany transactions and balances:
Corporation
|
Incorporation
|
Percentage
ownership
|
Business Purpose
|
Cerro Cazador S.A. ("CCSA")
|
Argentina
|
100%
|
Holder of Assets and Exploration Company
|
Ganadera Patagonia
(1)
|
Argentina
|
40%
|
Land Holding Company
|
1494716 Alberta Ltd.
|
Alberta
|
100%
|
Nominee Shareholder
|
Hunt Gold USA LLC
|
Washington, USA
|
100%
|
Management Company
|
(1)
The Company has determined that the subsidiary is a variable interest entity because the Company is the primary beneficiary of the land the subsidiary holds, and therefore consolidates the
subsidiary in its financial statements.
The Company's activities include the exploration and processing of minerals from properties in Argentina including the Mina Martha project (Note 8) and the La Josefina project on a metallurgical test basis. On the basis of information to date, the Company has not yet determined whether the Exploration properties contain economically recoverable ore reserves. The underlying value of the mineral properties is entirely dependent upon the existence of reserves, the ability of the Company to obtain the necessary financing to complete development and upon future profitable production or a sale of these properties. The Mina Martha project was purchased in the second quarter of 2016 and refurbishing activities began in late 2016. The Company finished all refurbishments to the Mina Martha project in the first quarter of 2017 and began selling concentrate in the second quarter of 2017. In 2018, the Company continued the sale of concentrate from Martha as well as began metallurgical tests on the La Josefina project. Concentrate produced as a byproduct of this testing was sold in 2018.
Ongoing production at the Martha Project is being undertaken without established mineral resources or reserves and the Company has not established the economic viability of the operations on the Martha Project. As a result, there is increased uncertainty and economic risks of failure associated with these production activities.
Despite the sale of concentrate, the all projects remain in the exploration stage because management has not established proven or probable ore reserves required to be classified in either the development or production stage. As such, the sales of concentrate are classified as silver and gold recovery, net of expenses in profit and loss.
2. Basis of presentation
These consolidated financial statements have been prepared in conformity with generally accepted accounting principles of the United States of America ("US GAAP").
These consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments measured at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
The Company's presentation currency is the US Dollar.
The preparation of the consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.
Judgments made by management in the application of US GAAP that have a significant effect on the consolidated financial statements and estimates with significant risk of material adjustment in the current and following periods are discussed in Note 6.
2.
Going Concern
3.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. During the
year ended December 31, 2018, the Company had net loss of $3,564,180. As at
December 31, 2018, the Company had an accumulated deficit of $39,557,836. The Company intends to continue funding operations through operation of the Martha mine, La Josefina project and equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending December 31, 2019.
These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
4. Significant Accounting Policies
The significant accounting policies used in the preparation of these consolidated financial statements are described below.
(a) Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial assets and financial liabilities to fair value.
(b) Consolidation
The Company's consolidated financial statements consolidate the accounts of the Company and its subsidiaries. All intercompany transactions, balances and unrealized gains or losses from intercompany transactions are eliminated on consolidation.
(c) Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rates of exchange prevailing at the reporting date. Non-monetary assets and liabilities are translated at the exchange rate prevailing at the transaction date. Revenues and expenses are translated at average exchange rates throughout the reporting period. Gains and losses on translation of foreign currencies are included in the consolidated statement of operations.
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
The Company's functional currency
is the Canadian dollar
. All of the Company's subsidiaries have a US dollar functional currency. Financial statements are translated to their US dollar equivalents using the current rate method. Under this method, the statements of operations and comprehensive loss and cash flows for each period have been translated using the average exchange rates prevailing during each period. All assets and liabilities have been translated using the exchange rate prevailing at the balance sheet date. Translation adjustments are recorded as income or losses in other comprehensive income or loss. Transaction gains and losses resulting from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized as incurred in the accompanying consolidated statement of loss and comprehensive loss.
(d) Financial instruments
The Company measures the fair value of financial assets and liabilities based on US GAAP guidance, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
The Company classifies financial assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other financial liabilities depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition, except for those arising from certain related party transactions, which are accounted for at the transferor's carrying amount or exchange amount.
Financial assets and liabilities classified as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified as held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale are measured at fair value, with unrealized gains and losses being recognized as other comprehensive income until realized, or if an unrealized loss is considered other than temporary, the unrealized loss is recorded in income.
See Note 17 to the Consolidated Financial Statements for fair value disclosures.
(e) Cash and equivalents
Cash and equivalents include cash on hand, deposits held with banks and other liquid short-term investments with original maturities of three months or less. The Company has no cash equivalents for all periods presented.
(f) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of an asset.
Repairs and maintenance costs are charged to the consolidated statement of operations and comprehensive loss during the period in which they are incurred.
Depreciation is calculated to amortize the cost of the property, plant and equipment over their estimated useful lives using the straight-line method. Plant, buildings, equipment and vehicles are stated at cost and depreciated straight line over an estimated useful life of three to eight years. Depreciation begins once the asset is in the state intended for use by management.
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
The Company allocates the amount initially recognized in respect of an item of property and equipment to its significant parts and depreciates separately each such part. Residual values, method of depreciation and useful lives of the assets are reviewed annually and adjusted if appropriate.
Gains and losses on disposals of property, plant and equipment are determined by comparing the proceeds with the carrying amount of the asset and are included as part of other gains or losses
in the consolidated statement of operations and comprehensive loss.
(g) Mineral properties and exploration and evaluation expenditures
All exploration expenditures are expensed as incurred. Expenditures to acquire mineral rights, to develop new mines, to define further mineralization in mineral properties which are in the development or operating stage, and to expand the capacity of operating mines, are capitalized and amortized on a units-of-production basis over proven and probable reserves.
Should a property be abandoned, its capitalized costs are charged to the consolidated statement of loss and comprehensive loss. The Company charges to the consolidated statement of loss and comprehensive loss the allocable portion of capitalized costs attributable to properties sold. Capitalized costs are allocated to properties sold based on the proportion of claims sold to the claims remaining within the project area.
(h) Long-lived assets
Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of their carrying amount or fair value less costs to sell.
(i) Asset retirement obligations
The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal constructive obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the long-lived assets. The Company also records a corresponding asset, which is amortized over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying the obligation (asset retirement cost).
(j) Income taxes
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under the asset and liability method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion or all of the deferred tax asset will not be recognized.
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
(k) Share-based compensation
The Company offers a share option plan for its directors, officers, employees and consultants. ASC 718 "Compensation – Stock Compensation" prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, "Equity Based Payments to Non-Employees." Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
(l) Earnings (loss) per share
The calculation of earnings (loss) per share ("EPS") is based on the weighted average number of shares outstanding for each period. The basic EPS is calculated by dividing the earnings or loss attributable to the equity owners of the Company by the weighted average number of common shares outstanding during the period.
The computation of diluted EPS assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on the earnings per share. The treasury stock method is used to determine the dilutive effect of the warrants and share options. When the Company reports a loss, the diluted net loss per common share is equal to the basic net loss per common share due to the anti-dilutive effect of the outstanding warrants and share options.
(m) Silver and gold recovery (loss), net of expenses
Recovery of concentrate and other income is recognized when title and the risks and rewards of ownership to deliver concentrate and commodities pass to the buyer and collection is reasonably assured.
Sale of concentrate is classified as silver and gold recovery, net of expenses in profit and loss because the Company has not established proven or probable ore reserves and remains in the exploration stage as defined by Industry guide 7.
Not all overhead costs are applied against Silver and gold recovery. Since the Company has no reserves, the Company is treated as an exploration company and as such, direct cost, portions of fixed costs and portions of variable costs are applied against Silver and gold recovery. Other administrative, office, professional fees, and travel are disclosed separately.
From time to time, some of the Company's sales of concentrate are made under provisional pricing arrangements where the final sale prices are determined by quoted market prices in a period subsequent to the date of sale. In these circumstances, sales are recorded at period end based on latest information about prices and quantities available to management for the expected date of final settlement. Under such arrangements, the Company's receivable changes as the underlying commodity market price varies, this component of the contract is an embedded derivative which is recognized at fair value with changes in fair value recognized in profit and loss and receivables. Subsequent variations in prices and metal quantities are recognized as they occur.
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
(n) Inventories
Mineral concentrate and mineralized material stockpiles are physically measured or estimated and valued at the lower of cost or net realizable value. Net realizable value is the estimated future sales price of the product the entity expects to realize when the product is processed and sold, less estimated costs to complete production and bring the product to sale. Where the time value of money is material, these future prices and costs to complete are discounted.
If the stockpile is not expected to be processed in 12 months after the reporting date, it is included in noncurrent assets and the net realizable value is calculated on a discounted cash flow basis.
Cost of silver concentrate and mineralized material stockpiles is determined by using the weighted average method and comprises direct costs and a portion of fixed and variable overhead costs incurred in converting materials into concentrate, based on the normal production capacity.
Materials and supplies are valued at the lower of cost or net realizable value. Any provision for obsolescence is determined by reference to specific items of stock. A regular review is undertaken to determine the extent of any provision for obsolescence.
5. Recently Issued Accounting Pronouncements
Restricted Cash
In November 2016, ASU No. 2016-18 was issued related to the inclusion of restricted cash in the statement of cash flows. This new guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is permitted. The adoption of this guidance will result in the inclusion of the restricted cash balances within the overall cash balance and removal of the changes in restricted cash activities, which are currently recognized in other financing activities, on the Statements of Consolidated Cash Flows. Furthermore, an additional reconciliation will be required to reconcile cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets to sum to the total shown in the Statements of Consolidated Cash Flows. The adoption of this ASU had no material impact on the Company's consolidated financial statements.
Intra-Entity Transfers
In October 2016, ASU No. 2016-16 was issued related to the intra-entity transfers of assets other than inventory. This new guidance requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is permitted. The adoption of this ASU had no material impact on the Company's consolidated financial statements.
Statement of Cash Flows
In August 2016, ASU No. 2016-15 was issued related to the statement of cash flows. This new guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is permitted. The adoption of this ASU had no material impact on the Company's consolidated financial statements.
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
Leases
In February 2016, ASU No. 2016-02 was issued related to leases. The new guidance modifies the classification criteria and requires lessees to recognize the assets and liabilities arising from most leases on the balance sheet. This update is effective in fiscal years, including interim periods, beginning after December 15, 2018 and early adoption is permitted. The Company has evaluated all contracts which could be classified as leases under the new standards and determined that any impact as a result of adoption would not be material.
Investments
In January 2016, ASU No. 2016-01 was issued related to financial instruments. The new guidance requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income. This new guidance also updates certain disclosure requirements for these investments. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is not permitted. The adoption of this ASU had no material impact on the Company's consolidated financial statements.
Revenue recognition
In May 2014, ASU No. 2014-09 was issued related to revenue from contracts with customers. This ASU was further amended in August 2015, March 2016, April 2016, May 2016 and December 2016 by ASU No. 2015-14, No. 2016-08, No. 2016-10, No. 2016-12 and No. 2016-20, respectively. The new standard provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. In August 2015, the effective date was deferred to reporting periods, including interim periods, beginning after December 15, 2017 and will be applied retrospectively. Early adoption is not permitted. The adoption of this ASU had no material impact on the Company's consolidated financial statements.
6. Critical accounting judgments and estimates
(a) Significant judgments
Preparation of the consolidated financial statements requires management to make judgments in applying the Company's accounting policies. Judgments that have the most significant effect on the amounts recognized in these consolidated financial statements relate to functional currency; income taxes; provisions and reclamation and closure cost obligations. These judgments have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
Functional Currency
Management determines the functional currency for each entity. This requires that management assess the primary economic environment in which each of these entities operates. Management's determination of functional currencies affects how the Company translates foreign currency balances and transactions. Determination includes an assessment of various indicators. In determining the functional currency of the Company's operations in Canada (Canadian dollar) and Argentina (U.S. dollar), management considered the indicators of ASC 830.
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
Income Taxes and value-added taxes receivable
Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain and subject to judgment. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the Company's current understanding of the tax law in the various jurisdictions in which it operates. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.
The Company has receivables due from the Argentinean government for value-added taxes. Significant estimates and judgments are involved in the assessment of recoverability of these receivables. Changes in management's impairment assumptions may result in an additional impairment provision, or a reduction to any previously recorded impairment provision, with the impact recorded in profit and loss.
Provisions
Management makes judgments as to whether an obligation exists and whether an outflow of resources embodying economic benefits of a liability of uncertain timing or amount is probable, not probable or remote. Management considers all available information relevant to each specific matter.
Reclamation and closure costs obligations
The Argentine mining regulations require that mine property be restored in accordance with specified standards and an approved reclamation plan. Significant reclamation activities include reclaiming refuse and slurry ponds, reclaiming the pit and support acreage at surface mines, and sealing portals at deep mines. The Company accrues for the cost of final mine closure reclamation over the estimated useful mining life of the property. At each period, the Company reviews the entire reclamation liability and makes necessary adjustments for revisions to cost estimates to reflect current experience.
The Company has adopted ASC 410, Asset Retirement and Environmental Obligations, which requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, that cost is capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset.
Title to Mineral Property Interests
Although the Company has taken 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.
(b) Estimation uncertainty
The preparation of the consolidated financial statements in conformity with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company also makes estimates and assumptions concerning the future. The determination of estimates requires the exercise of judgment based on various assumptions and other factors such as historical experience and current and expected economic conditions. Actual results could differ from those estimates.
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
The more significant areas requiring the use of management estimates and assumptions relate to title to mineral property interests; asset retirement obligations and inventories. These estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
The Company is also exposed to legal risk. The outcome of currently pending and future proceedings cannot be predicted with certainty. Thus, an adverse decision in a lawsuit could result in additional costs that are not covered, either wholly or partly, under insurance policies and that could significantly influence the business and results of operations.
Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Asset retirement obligation
Upon retirement of the Company's mineral properties, retirement costs will be incurred by the Company. Estimates of these costs are subject to uncertainty associated with the method, timing and extent of future decommissioning activities. The liability, the related asset and the expense are affected by estimates with respect to the costs and timing of retiring the assets.
Inventories
Net realizable value tests are performed at each reporting date and represent the estimated future sales price of the product the Company expects to realize when the product is processed and sold, less estimated costs to complete production and bring the product to sale. Where the time value of money is material, these future prices and costs to complete are discounted.
Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of contained mineral ounces is based on assay data, and the estimated recovery percentage is based on the expected processing method. Stockpile tonnages are verified by periodic surveys.
Silver and gold recovery (loss), net of expenses
From time to time, some of the Company's sales of concentrate are made under provisional pricing arrangements where the final sale prices are determined by quoted market prices in a period subsequent to the date of sale. In these circumstances, sales are recorded at period end based on latest information about prices and quantities available to management for the expected date of final settlement.
Change in estimates
During the year, the Company conducted a review of its plant and buildings which resulted in changes in its expected use. It was determined that the renovation work performed in 2016 and 2017 on these assets was having greater success than originally anticipated in extending their useful life. Additionally, metallurgical studies performed throughout 2018 confirmed that the plant could be successfully used to process mineralized materials from other mineral properties of the Company. It is now expected that the useful life of these assets will be extended from an original estimate of 36 months in 2017 to 87 months from December 31, 2018.
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
7. Inventory
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
Silver and gold concentrate
|
|
$
|
794,086
|
|
|
$
|
128,894
|
|
Ore stockpiles
|
|
|
-
|
|
|
|
98,210
|
|
Materials and supplies
|
|
|
119,829
|
|
|
|
106,216
|
|
|
|
$
|
913,915
|
|
|
$
|
333,320
|
|
Inventory at December 31, 2018 includes $616,253 of gold concentrate which resulted from the metallurgical testing on the La Josefina project. The Company is currently working with, the local state agency, Fomicruz to establish a formal agreement for full production rights on the project, and in good faith does not plan to sell the gold concentrate until those terms can be finalized. As this process is expected to be resolved within the year, the gold concentrate has been classified as a current asset within inventory. Fomicruz will have rights to a 5% net smelter royalty on the sale of this inventory under the current agreements in place.
8. Mineral properties
(a) Acquisition of Mina Martha project
On May 6, 2016, the Company acquired the assets of the Mina Martha project from Coeur Mining Inc. ("Coeur"). The Mina Martha project consists of land, mineral rights, a mine camp, offices, a warehouse, maintenance shop, mining facilities including a flotation mill and a tailings retention facility.
(b) Acquisition of La Josefina project
In March 2007, the Company acquired the exploration and development rights to the La Josefina project from Fomento Minero de Santa Cruz Sociedad del Estado ("Fomicruz").
In July 2007, the Company entered into an agreement (subsequently amended) with Fomicruz which provides that, in the event that a positive feasibility study is completed on the La Josefina property, a Joint Venture Corporation ("JV Corporation") would be formed by the Company and Fomicruz. The Company would own 81% of the joint venture company and Fomicruz would own the remaining 19%. Fomicruz has the option to earn up to a 49% participating interest in the JV Corporation by reimbursing the Company an equivalent amount, up to 49%, of the exploration investment made by the Company. The Company has the right to buy back any increase in Fomicruz's ownership interest in the JV Corporation at a purchase price of USD$200,000 per each percentage interest owned by Fomicruz down to its initial ownership interest of 19%; the Company can also purchase 10% of the Fomicruz's initial 19% JV Corporation ownership interest by negotiating a purchase price with Fomicruz. Under the agreement, the Company has until the end of 2019 to complete cumulative exploration expenditures of $18 million and determine if it will enter into production on the property. At December 31, 2018, the Company had incurred approximately $20 million and is in current discussions with Fomicruz to develop a plan for production in early to mid-2019.
As at December 31, 2018 this project has a carrying amount of $Nil (2017 - $Nil) on the consolidated balance sheet.
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
(c) Acquisition of La Valenciana project
On November 1, 2012, the Company entered into an agreement for the exploration of the La Valenciana project in Santa Cruz province, Argentina. The agreement is for a total of 7 years, expiring on October 31, 2019. The agreement requires the Company to spend $5,000,000 in exploration on the project over 7 years. If the Company elects to exercise its option to bring the La Valenciana project into production, it must grant Fomicruz a 9% ownership in a new JV Corporation to be created by the Company to manage the project and the Company will have a 91% ownership interest in the JV Corporation.
As at December 31, 2018 this project has a carrying amount of $Nil (2017 - $Nil) on the consolidated balance sheet
9. Asset retirement obligation
On May 6, 2016, the Company purchased the Mina Martha project (Note 8). The Company is legally required to perform reclamation on the site to restore it to its original condition at the end of its useful life. In accordance with FASB ASC 410-20, Asset Retirement Obligations, the Company recognized the fair value of that liability as an asset retirement obligation. During the year ended December 31, 2018, the company recognized additions to its asset retirement obligation related to work performed on the La Josefina property in the amount of $486,589. The total amount of undiscounted cash flows required to settle the estimated obligation is $1,940,270 which has been discounted using a credit-adjusted rate of 10% (2017 – 10%) and an inflation rate of 2% (2017 – 2%).
The following table describes all of the changes to the Company's asset retirement obligation liability:
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
Asset retirement obligation at beginning of year
|
|
$
|
773,436
|
|
|
$
|
721,695
|
|
Additions
|
|
|
486,589
|
|
|
|
-
|
|
Foreign exchange
|
|
|
(25,996
|
)
|
|
|
(16,327
|
)
|
Accretion expense
|
|
|
74,370
|
|
|
|
68,068
|
|
Asset retirement obligation at end of period
|
|
|
1,308,399
|
|
|
|
773,436
|
|
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
10. Property, Plant and Equipment
|
|
Land
|
|
|
Plant
|
|
|
Buildings
|
|
|
Vehicles and Equipment
|
|
|
Total
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
$
|
1,035,397
|
|
|
$
|
2,631,646
|
|
|
$
|
117,500
|
|
|
$
|
2,352,222
|
|
|
$
|
6,136,765
|
|
Additions
|
|
|
-
|
|
|
|
792,055
|
|
|
|
-
|
|
|
|
472,244
|
|
|
|
1,264,299
|
|
Balance at December 31, 2017
|
|
|
1,035,397
|
|
|
|
3,423,701
|
|
|
|
117,500
|
|
|
|
2,824,466
|
|
|
|
7,401,064
|
|
Additions
|
|
|
-
|
|
|
|
486,589
|
|
|
|
-
|
|
|
|
13,559
|
|
|
|
500,148
|
|
Balance at December 31, 2018
|
|
$
|
1,035,397
|
|
|
$
|
3,910,290
|
|
|
$
|
117,500
|
|
|
$
|
2,838,025
|
|
|
$
|
7,901,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,201,982
|
|
|
$
|
1,201,982
|
|
Depreciation for the year
|
|
|
-
|
|
|
|
753,391
|
|
|
|
29,375
|
|
|
|
382,826
|
|
|
|
1,165,592
|
|
Balance at December 31, 2017
|
|
|
-
|
|
|
|
753,391
|
|
|
|
29,375
|
|
|
|
1,584,808
|
|
|
|
2,367,574
|
|
Depreciation for the year
|
|
|
-
|
|
|
|
368,319
|
|
|
|
12,155
|
|
|
|
567,644
|
|
|
|
948,118
|
|
Balance at December 31, 2018
|
|
$
|
-
|
|
|
$
|
1,121,710
|
|
|
$
|
41,530
|
|
|
$
|
2,152,452
|
|
|
$
|
3,315,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
$
|
1,035,397
|
|
|
$
|
2,670,310
|
|
|
$
|
88,125
|
|
|
$
|
1,239,658
|
|
|
$
|
5,033,490
|
|
At December 31, 2018
|
|
$
|
1,035,397
|
|
|
$
|
2,788,580
|
|
|
$
|
75,970
|
|
|
$
|
685,573
|
|
|
$
|
4,585,520
|
|
11.
Performance bond
The performance bond, originally required to secure the Company's rights to explore the La Josefina property, is a step-up US dollar denominated 2.5% coupon bond, paying quarterly, issued by the Government of Argentina with a face value of $600,000 and a maturity date of 2035. The bond trades in the secondary market in Argentina. The bond was originally purchased for $247,487. As of the year
ended
December 31, 2018, the value of the bond decreased to $315,378 (December 31, 2017 - $434,639). The change in the face value of the performance bond of $119,261 for the year ended December 31, 2018 (December 31, 2017- $53,284) is recorded as other comprehensive loss in the Company's consolidated statement of operations and comprehensive loss.
Since Cerro Cazador S.A. ("CCSA") fulfilled its exploration expenditure requirement mandated by the agreement with Fomento Minero de Santa Cruz Sociedad del Estado ("Fomicruz"), the performance bond was no longer required to secure the La Josefina project. Therefore, in September 2010 the Company used the bond to secure the La Valenciana project, an additional Fomicruz exploration project.
12.
Accounts receivable
|
|
December 31,
|
December 31,
|
|
|
|
2018
|
2017
|
|
Receivable from sale of concentrate
|
|
$ 438,042
|
$ 1,144,710
|
|
Value added tax ("VAT") recoverable
|
|
986,014
|
1,000,120
|
|
Other receivables
|
|
50,247
|
-
|
|
Total accounts receivable
|
|
$ 1,474,303
|
$ 2,144,830
|
|
|
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
13. Accounts payable
|
|
Note
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
Accounts payables due to related parties
|
|
|
16
|
|
|
$
|
4,416,555
|
|
|
$
|
4,410,894
|
|
Trade accounts payable and accrued liabilities
|
|
|
|
|
|
|
1,912,306
|
|
|
|
2,262,425
|
|
Total accounts payable and accrued liabilities
|
|
|
|
|
|
$
|
6,328,861
|
|
|
$
|
6,673,319
|
|
14.
Loan Payable and long-term debt
The Following is a summary of all loans.
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Unsecured loan payable to related party at 8% interest per annum, due 2022
1
(Note 16)
|
|
$
|
1,615,445
|
|
|
$
|
1,731,022
|
|
|
|
|
|
|
|
|
|
|
Unsecured loan payable to related party at 8% interest per annum, due on demand (Note 16)
|
|
|
994,861
|
|
|
|
700,000
|
|
|
|
|
|
|
|
|
|
|
Unsecured loan payable to related party at 7% interest per annum, due on demand (Note 16)
|
|
|
1,250,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Loan payable, repayable in monthly installments ranging between $3,000 and $15,000 per dry metric ton of concentrate, with interest at 6% per annum, secured by concentrate, due 2018
2
|
|
|
591,280
|
|
|
|
-
|
|
|
|
$
|
4,451,586
|
|
|
$
|
2,431,022
|
|
Less current portion
|
|
|
(3,198,569
|
)
|
|
|
(1,062,428
|
)
|
Long-term debt
|
|
$
|
1,253,017
|
|
|
$
|
1,368,594
|
|
Principal payments on long-term debt are due as follows.
|
Year ending December 31,
|
|
2019
|
$ 362,428
|
|
2020
|
$ 375,510
|
|
2021
|
$ 394,590
|
|
2022
|
$ 414,910
|
|
2023
|
$ 68,007
|
1
|
During the year ended December 31, 2017, the maturity date of the loan payable was extended to May 9, 2022. The modification of the loan payable did not result in an extinguishment in accordance with ASC 470-50. During the year ended December 31, 2017 loan payable was re-classified as long-term debt.
|
|
|
|
|
2
|
Subsequent to December 31, 2018, loan was repaid in full (Note 23).
|
|
15.
Capital Stock
Authorized:
Unlimited number of common shares without par value
Unlimited number of preferred shares without par value
Issued:
Common Shares
|
|
Year ended
|
|
|
Year ended
|
|
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Amount
|
|
Balance, beginning of year
|
|
|
63,588,798
|
|
|
$
|
24,695,186
|
|
|
|
63,588,798
|
|
|
$
|
24,695,186
|
|
Balance, end of year
|
|
|
63,588,798
|
|
|
$
|
24,695,186
|
|
|
|
63,588,798
|
|
|
$
|
24,695,186
|
|
Common share issuances:
No common shares were issued during the year ended December 31, 2018 (December 31, 2017 – None).
Stock options
Under the Company's share option plan, and in accordance with TSX Venture Exchange requirements, the number of common shares reserved for issuance under the option plan shall not exceed 10% of the issued and outstanding common shares of the Company, have a maximum term of 5 years and vest at the discretion of the Board of Directors. In connection with the foregoing, the number of common shares reserved for issuance to: (a) any individual director or officer will not exceed 5% of the issued and outstanding common shares; and (b) all consultants will not exceed 2% of the issued and outstanding common shares.
|
|
Range of Exercise prices (CAD)
|
|
|
Number outstanding
|
|
|
Weighted average life (years)
|
|
|
Weighted average exercise price (CAD)
|
|
|
Number exercisable on December 31, 2018
|
|
Stock options
|
|
$
|
0.15 - $1.00
|
|
|
|
4,160,000
|
|
|
|
2.29
|
|
|
$
|
0.21
|
|
|
|
4,160,000
|
|
_____________
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
Number of options
|
|
|
Weighted Average Price (CAD)
|
|
|
Number of options
|
|
|
Weighted Average Price (CAD)
|
|
Balance, beginning of year
|
|
|
4,380,000
|
|
|
$
|
0.21
|
|
|
|
4,225,000
|
|
|
$
|
0.24
|
|
Granted
|
|
|
-
|
|
|
$
|
0.00
|
|
|
|
200,000
|
|
|
$
|
0.20
|
|
Expiration of stock options
|
|
|
(220,000
|
)
|
|
$
|
0.23
|
|
|
|
(45,000
|
)
|
|
$
|
3.00
|
|
Balance, end of year
|
|
|
4,160,000
|
|
|
$
|
0.21
|
|
|
|
4,380,000
|
|
|
$
|
0.21
|
|
No options were granted during the year ended December 31, 2018.
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
On June 14, 2017, 200,000 stock options were granted to the Company's controller with an exercise price of $CAD 0.20 and expiry date of June 14, 2022. The $34,528 fair value of the options granted were calculated using the Black-Scholes option pricing model and using the following assumptions:
|
|
Year ended
|
|
|
December 31,
|
|
|
2017
|
Expected volatility
|
235.10%
|
Expected life (years)
|
5
|
Expected dividend yield
|
0%
|
Forfeiture rate
|
0%
|
Stock price
|
|
$CAD 0.23
|
On February 27, 2017, 45,000 options with an exercise price of CAD $3.00 expired.
On April 23, 2018, 20,000 options with an exercise price of CAD $1.00 expired.
On April 26, 2018 200,000 stock options expired/cancelled as a result of an employee resigning from the Company.
As at December 31, 2018, the Company's outstanding and exercisable stock options had an aggregate intrinsic value of $Nil (December 31, 2017 - $316,717).
Warrants:
|
|
Range of Exercise prices (CAD)
|
|
|
Number outstanding
|
|
|
Weighted average life (years)
|
|
|
Weighted average exercise price (CAD)
|
|
Warrants
|
|
|
0.05 - 0.075
|
|
|
|
47,500,000
|
|
|
|
1.68
|
|
|
$
|
0.06
|
|
_______________
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
Number of warrants
|
|
|
Weighted Average Price (CAD)
|
|
|
Number of warrants
|
|
|
Weighted Average Price (CAD)
|
|
Balance, beginning of year
|
|
|
48,862,500
|
|
|
$
|
0.07
|
|
|
|
48,862,500
|
|
|
$
|
0.07
|
|
Expiration of Warrants
|
|
|
(1,362,500
|
)
|
|
$
|
0.40
|
|
|
|
-
|
|
|
|
-
|
|
Balance, end of year
|
|
|
47,500,000
|
|
|
$
|
0.06
|
|
|
|
48,862,500
|
|
|
$
|
0.07
|
|
On November 25, 2018, 1,362,500 warrants with an exercise price of CAD $0.40 expired.
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
16. Related Party Transactions
Key management personnel include the members of the Board of Directors and executive officers of the Company. Related party transactions and balances not disclosed elsewhere in the Financial Statements are as follows:
Name and Principal Position
|
|
Remuneration, fees or interest expense
|
Loans or Advances
|
Remuneration, fees, or interest payments
|
Loan payments
|
Included in Accounts Payable
|
Included in Loan Payable and Long-term debt
|
|
|
Year ended December 31
|
|
|
As at December 31, 2018 and
December 31, 2017
|
A company controlled by a director
|
2018
|
165,270
|
-
|
-
|
-
|
3,972,693
|
-
|
- admin, office, and interest expenses
|
2017
|
463,938
|
1659963
|
-
|
-
|
3,807,423
|
-
|
Key executive person
|
2018
|
135,000
|
-
|
135,000
|
-
|
-
|
-
|
- salaries and wages
|
2017
|
-
|
-
|
-
|
-
|
-
|
-
|
Former Key Executive person - professional fees
|
2017
|
114,222
|
-
|
66,630
|
-
|
98,549
|
-
|
Key executive person
|
2018
|
135,000
|
-
|
135,000
|
-
|
-
|
-
|
- salaries and wages
|
2017
|
124,977
|
-
|
124,977
|
-
|
-
|
-
|
Director
|
2018
|
254,868
|
2,390,862
|
46,030
|
961,577
|
443,862
|
3,860,306
1,2
|
-loans
|
2017
|
186,676
|
2,900,000
|
35,652
|
2,441,070
|
235,024
|
2,431,022
|
1
|
The Company has two unsecured loans payable to related party at 8% interest per annum, with one loan of $994,861 due on demand and the other loan of $1,615,445 due 2022. The Company has another unsecured loan payable of $1,250,000 to a related party at 7% interest per annum (Note 14).
|
|
|
2
|
Subsequent to December 31, 2018 the Company was loaned funds from a related party of in the amount of $1,275,080. (Note 23).
|
17. Financial Instruments
The Company's financial instruments consist of cash, accounts receivable, performance bond, accounts payable and accrued liabilities, bank indebtedness, loan payable, interest payable, and long-term debt.
The Company characterizes inputs used in determining fair value using a hierarchy that prioritizes inputs depending on the degree to which they are observable. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
·
|
Level 1: inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
|
·
|
Level 2: inputs, other than quoted prices, that are observable, either directly or indirectly. Level 2 valuations are based on inputs, including quoted forward prices for commodities, market interest rates, and volatility factors, which can be observed or corroborated in the market place.
|
|
|
·
|
Level 3: inputs are less observable, unavoidable or where the observable data does not support the majority of the instruments' fair value.
|
Fair value
As at
December 31, 2018, there were no changes in the levels in comparison to December 31, 2017. The fair values of financial instruments are summarized as follows:
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
Carrying amount
|
|
|
Fair value
|
|
|
Carrying amount
|
|
|
Fair value
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FVTPL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (Level 1)
|
|
|
115,372
|
|
|
|
115,372
|
|
|
|
78,145
|
|
|
|
78,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance bond (Level 1)
|
|
|
315,378
|
|
|
|
315,378
|
|
|
|
434,639
|
|
|
|
434,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
1,474,303
|
|
|
|
1,474,303
|
|
|
|
2,144,830
|
|
|
|
2,144,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank indebtedness
|
|
|
330,000
|
|
|
|
330,000
|
|
|
|
-
|
|
|
|
-
|
|
Accounts payable and accrued liabilities
|
|
|
6,328,861
|
|
|
|
6,328,861
|
|
|
|
6,673,319
|
|
|
|
6,673,319
|
|
Transaction taxes payable
|
|
|
129
|
|
|
|
129
|
|
|
|
47,188
|
|
|
|
47,188
|
|
Interest payable
|
|
|
320,669
|
|
|
|
320,669
|
|
|
|
151,024
|
|
|
|
151,024
|
|
Loan payable
|
|
|
3,198,569
|
|
|
|
3,198,569
|
|
|
|
1,062,428
|
|
|
|
1,062,428
|
|
Long-term debt
|
|
|
1,253,017
|
|
|
|
1,253,017
|
|
|
|
1,731,022
|
|
|
|
1,731,022
|
|
C
ash and performance bond are measured based on Level 1 inputs of the fair value hierarchy on a recurring basis.
The carrying value of accounts receivable, accounts payable and accrued liabilities, bank indebtedness, loan payable, interest payable, and long-term debt approximate their fair value because of the short-term nature of these instruments and because long-term debt approximates a market rate of interest. The Company assessed that there were no indicators of impairment for these financial instruments.
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company places its cash with high quality financial institutions and limits the amount of credit exposure with any one institution. Accounts receivable consist of trade receivables and VAT recoverable and are not considered subject to significant risk, because the amounts are due from a government and a customer who is considered credit worthy.
The Company has concentrations of credit risk with respect to its trade receivables, the majority of which are concentrated geographically in Argentina amongst a small number of customers. As at December 31, 2018, the Company had one customer whose trade receivable of $438,042 (December 31, 2017 – $1,144,710) accounted for greater than 10% of the total trade receivables. The Company controls credit risk through monitoring procedures, and by performing credit evaluations of its customers, but generally does not require collateral to secure accounts receivable.
The Company has concentrations in the volume of sales it made to customers. For the year ended December 31, 2018, the Company made sales of $3,961,399 to one customer which accounted for greater than 10% of the total silver and gold recovery, net of expenses (2017 - $8,740,854).
The Company currently maintains a substantial portion of its day-to-day operating cash balances at financial institutions. At
December 31, 2018, the Company had total cash balances of $115,372 (December 31, 2017- $78,145) at financial institutions, where $Nil (December 31, 2017- $Nil) is in excess of federally insured limits.
18. Segmented Information
All of the Company's operations are in the mineral properties exploration industry with its principal business activity in mineral exploration. The Company conducts its activities primarily in Argentina. All of the Company's long-lived assets are located in Argentina. All of the Company's silver and gold recovery arose from sales made in Argentina.
19. Commitments and Provision
On October 31, 2011, the Company signed an agreement with the owners of the Piedra Labrada Ranch for the use and lease of facilities on the same premises as the Company's La Josefina facilities. The initial term was for three years beginning November 1, 2011 and ended on October 31, 2014, including annual commitments of $60,000. The Company extended this agreement on April 30, 2015 for three years with an option to renew for a second three-year term.
20. Silver and Gold Recovery
Silver and gold recovery include the sales from concentrate sold during the year ended December 31, 2018 from mining projects of $3,961,399 (2017 - $8,740,854) Silver and gold recovery revenues have been reported net of direct operating expenses of $3,564,264 for the year ended December 31, 2018 (2017 -$3,498,512). Accounts receivable include $438,042 (December 31, 2017 -$1,144,710) for the sales of concentrate.
21.
Bank Indebtedness
The Company has a variable rate line of credit available for $330,000 with interest charged at the lender's Index Rate plus 1.0%, with a floor of 4.25%. As at December 31, 2018, the balance of bank indebtedness was $330,000 (December 31, 2017- $Nil). Subsequent to December 31, 2018, the Company paid off the balance of $330,000 (Note 23).
22. Income Taxes
A reconciliation of income taxes at statutory rates with the reported taxes is as follows:
Hunt Mining Corp.
|
Expressed in U.S. Dollars
|
|
Notes to Financial Statements
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
$
|
(3,564,180
|
)
|
|
$
|
1,655,914
|
|
|
|
|
|
|
|
|
|
|
Expected income tax (recovery)
|
|
$
|
(962,000
|
)
|
|
$
|
431,000
|
|
Change in statutory, foreign tax, foreign exchange rates and other
|
|
|
69,000
|
|
|
|
1,240,000
|
|
Permanent differences
|
|
|
307,000
|
|
|
|
404,000
|
|
Adjustment to prior years provision versus statutory tax returns and expiry of non-capital losses
|
|
|
304,000
|
|
|
|
73,000
|
|
Change in unrecognized deductible temporary differences
|
|
|
282,000
|
|
|
|
(2,148,000
|
)
|
Total income tax expense (recovery)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Current income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred tax recovery
|
|
$
|
-
|
|
|
$
|
-
|
|
The valuation allowance for deferred tax assets as of December 31, 2018 was $(2,982,000) and (December 31, 2017- $(2,700,000) respectively.
The tax effects of temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below:
|
|
2018
|
|
|
2017
|
|
Deferred tax assets (liabilities)
|
|
|
|
|
|
|
Property and equipment
|
|
|
14,000
|
|
|
|
-
|
|
Non-capital losses available for future period
|
|
|
2,968,000
|
|
|
|
2,700,000
|
|
|
|
|
2,982,000
|
|
|
|
2,700,000
|
|
Valuation allowance
|
|
|
(2,982,000
|
)
|
|
|
(2,700,000
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
23. Subsequent Events
Subsequent to December 31, 2018, the Company had sales of silver concentrate of approximately $332,000. Funds from this shipment were used to repay $75,000 of loan payable (Note 14)
Subsequent to December 31, 2018, the Company repaid $591,280 of debt to a third party.
Subsequent to December 31, 2018, the Company acquired a new short-term loan from a third party in the amount of $600,000.
Subsequent to December 31, 2018 the Company was loaned funds from a related party of in the amount of $1,275,080.
Subsequent to December 31, 2018, the Company repaid $330,000 on its line of credit.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
.
ITEM 9A: CONTROLS AND PROCEDURE S Disclosure Controls and Procedures
The management of Hunt Mining Company has evaluated, with the participation of the Principal Executive Officer and Principal Financial Officer, the effectiveness of disclosure controls and as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this Annual Report on Form 10-K. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In additions, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management's evaluation, the Principal Executive Officer and Principal Financial Officer determined that internal controls over financial reporting disclosure and procedures were effective as of December 31, 2018.
Management's Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with the authorization of management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management, including the Principal Executive Officer and Principal Financial Officer, assessed the effectiveness of internal control over financial reporting as of December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control over Financial Reporting – Guidance for Smaller Public Companies. Based on management's assessment, and in consideration of the COSO criteria, management concluded that, internal controls over financial reporting were effective as of December 31, 2018.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control system, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Management regularly reviews system of internal control over financial reporting to ensure the Company maintains an effective internal control environment. There were no changes in internal controls over financial reporting during the year ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company's internal control over financial reporting that occurred during the year ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
ITEM 9B: OTHER INFORMATION
None.