Celtic Minerals Ltd. (an exploration stage company) Financial Statements

Transcription

1 Financial Statements For the years ended December 31, 2014 and 2013 (unaudited prepared by Management)

2 Notice of No Auditor Review of Financial Statements In accordance with National Instrument released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed these unaudited financial statements as at and for the year ended December 31, 2014.

3 Statements of Financial Position December 31 December Assets Current assets Cash (Note 6) $ 334 $ 32,382 Trade and other receivables (Note 7) 8,774 2,137 Prepaid expenses and deposits 19, Mineral properties held for sale (Note 9) 50,000 Total current assets 28,294 84,844 Non-current assets Mineral property deposits (Note 8) 19,653 Total assets $ 28,294 $ 104,497 Liabilities and deficit Current liabilities Trade and other payables (Note 11) $ 160,982 $ 149,392 Other current liabilities (Note 12) 860,424 Total liabilities 160,982 1,009,816 Deficit Share capital (Note 13) 34,585,021 34,585,021 Deficit (34,717,709) (35,490,340) Total deficit (132,688) (905,319) Total liabilities and deficit $ 28,294 $ 104,497 Going concern (Note 1) Approved by the Board: ( Signed ) David Grand ( Signed ) Ken Johnston See accompanying notes to these financial statements. 2

4 Statements of Income (Loss) and Comprehensive Income (Loss) For the years ended December 31 N Operating expenses General and administrative $ 75,594 $ 104,037 Impairment of property and equipment (Note 10) 16,735 Gain on settlement of mineral property interest (Note 9) (25,434) Total operating expenses (75,594) (95,338) Net finance expense (Note 17) (12,199) (635) Loss from continuing operations (87,793) (95,973) Other Extinguishment of other current liabilities (Note 12) 860,424 Income (Loss) before income tax 772,631 (95,973) Income tax recovered 17,281 Comprehensive income (loss) for the year $ 772,631 $ (78,692) Net income (loss) per share Basic and diluted (Note 16) $ 0.01 $ See accompanying notes to these financial statements. 3

5 Statements of Changes in Deficit Total Share Shareholders Capital Deficit Equity Balance at December 31, 2012 $ 34,585,021 $ (35,411,648) $ (826,627) Comprehensive loss for the year (78,692) (78,692) Balance at December 31, 2013 $ 34,585,021 $ (35,490,340) $ (905,319) Comprehensive loss for the year 772, ,631 Balance at December 31, 2014 $ 34,585,021 $ (34,717,709) $ (132,688) See accompanying notes to these financial statements. 4

6 Statements of Cash Flows For the years ended December Cash flows used in operating activities Net income (loss) $ 772,631 $ (78,692) Add back (deduct) non-cash items: Impairment of property and equipment (Note 10) 16,735 Gain on settlement of mineral property interest (Note 9) (25,434) Extinguishment of other current liabilities (Note 12) (860,424) Change in non-cash working capital (Note 18) (13,908) (11,863) Total cash used in operating activities (101,701) (99,254) Cash flows from investing activities Mineral property security deposits 19,653 (19,653) Proceeds on disposal of mineral properties (Note 9) 50,000 60,000 Proceeds on disposal of subsidiary (Note 9) 25,434 Change in non-cash working capital (Note 18) (32) Total cash from investing activities 69,653 65,749 Change in cash (32,048) (33,505) Cash, beginning of year 32,382 65,887 Cash, end of year $ 334 $ 32,382 See accompanying notes to these financial statements. 5

7 1. REPORTING ENTITY AND GOING CONCERN: Celtic Minerals Ltd. (the Company ) is incorporated under the laws of the Province of Alberta. The Company holds several mineral rights licences in Canada, and is looking toward exploration should financing be obtained. The Company is satisfied that title to all of its properties in all material respects is satisfactory. The Company s registered office is at c/o David Grand, 172 St Germaine Ave., Toronto, Ontario, M5M 1W1. At December 31, 2014, the Company incurred a comprehensive income of $772,631 (December 31, 2013 comprehensive loss of $78,692), had a working capital deficiency of $132,688 (December 31, 2013 $924,972) and an accumulated deficit of $34,694,092 (December 31, 2013 $35,490,340). The Company s ability to continue its operations is dependent on the Company s success in developing its mineral interests, obtaining required funds for exploration activities and attaining profitable operations. The Company plans to meet its future expenditures and obligations by raising funds through private placements, the sale of mineral properties and controlling expenditures over the next twelve months. However, there can be no certainty that the Company will be successful with these plans. These conditions indicate the existence of a material uncertainty that casts significant doubt about the Company's ability to continue as a going concern. These financial statements have been prepared on the basis that the Company will be able to discharge its obligations and realize its assets in the normal course of business at the values at which they are carried in these financial statements, and that the Company will be able to continue its business activities. However, there is no certainty that the Company will be able to continue as a going concern, in which case the Company may not be able to meet its obligations as they come due or realize its assets at the amounts at which they are carried in these financial statements. Should the going concern assumption not be appropriate, certain assets and liability amounts would require adjustment and reclassification and such adjustments may be significant. 2. BASIS OF PREPARATION: (a) Statement of compliance: These financial statements, including comparatives, have been prepared using accounting policies consistent with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ) and the interpretations of the International Financial Reporting Interpretations Committee ( IFRIC ). These financial statements were authorized for issue by the Board of Directors on April 30, (b) Basis of measurement: These financial statements have been prepared on a historical cost basis, except for financial instruments classified as financial instruments at fair value through profit and loss, which are stated at their fair value. In addition, these financial statements have been prepared using the accrual basis of accounting except for cash flow information. (c) Functional and presentation currency: These financial statements are presented in Canadian dollars, which is the Company s functional 6

8 and presentation currency. (d) Use of estimates and judgments: The preparation of these financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results could differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future years affected. Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are included in the following notes: Note 15 Measurement of share-based payments The measurement of share-based payments is based on the fair value of equity instruments granted to employees and others providing similar services, which is estimated using the Black-Scholes option pricing model. The assumptions used in this model include the estimation of the future volatility of the share price, estimated expected life of the options, and the estimated forfeiture rate. Note 9 Exploration and evaluation assets The application of the Company s accounting policy for exploration and evaluation expenditure requires judgment in determining whether it is likely that future economic benefits will flow to the Company, which may be based on assumptions about future events or circumstances. Estimates and assumptions made may change if new information becomes available. If, after expenditure is capitalized, information becomes available suggesting that the recovery of expenditure is unlikely, the amount capitalized is written off in the statement of loss and comprehensive loss in the period the new information becomes available. Note 12 Measurement of other current liabilities Because the Company has indemnified subscribers of the 2008 flow through shares offering of all tax liability, judgment is required in determining the fair value of the liability. There are many factors to take into account when estimating the fair value of the liability; for example, the amount unspent or the estimated tax liability of each individual or individual entity. Note 20 Income taxes 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. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the Company s current understanding of the tax law. 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 7

9 included in the tax liabilities. In addition, the Company recognizes deferred tax assets relating to tax losses carried forward to the extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same taxable entity against which the unused tax losses can be utilized. However, utilization of the tax losses also depends on the ability of the taxable entity to satisfy certain tests at the time the losses are recouped. 3. SIGNIFICANT ACCOUNTING POLICIES: The accounting policies set out below have been applied consistently by the Company to all years presented in these financial statements. (a) Foreign currency: The Canadian dollar is the Company's functional and presentation currency. Expenses in currencies other than the Canadian dollar are recorded at exchange rates prevailing on the dates of the transactions. (b) Financial instruments: (i) Financial assets: The Company classifies its financial assets into one of the following categories, depending on the purpose for which the asset was acquired. The Company s accounting policy for each category is as follows: Fair value through profit or loss The category comprises derivatives, or assets acquired principally for the purpose of selling or repurchasing it in the near term. They are carried in the statement of financial position at fair value with changes in fair value recognized in the statement of loss and comprehensive loss. Loans and receivables These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are carried at cost less any provision for impairment. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. Held-to-maturity investments These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company s management has the positive intention and ability to hold to maturity. These assets are measured at amortized cost using the effective interest method. If there is objective evidence that the investment is impaired, determined by reference to external credit ratings and other relevant indicators, the financial assets is measured at the present value of estimated future cash flows. Any changes to the carrying amount of the investment, including impairment losses, are recognized in the statements of loss and comprehensive loss. Available-for-sale Non-derivative financial assets not included in the above categories are classified as available-for-sale. They are carried at fair value with changes in fair value recognized directly in equity. Where a decline in the fair value of an available-for-sale financial 8

10 asset constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognized in the statements of loss and comprehensive loss. All financial assets except for those at fair value through profit and loss are subject to review for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described above. (ii) Financial liabilities: The Company classifies its financial liabilities into one or two categories, depending on the purpose for which the liability was incurred. The Company s accounting policy for each category is as follows: Fair value through profit or loss This category comprises derivatives, or liabilities acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried in the statement of financial position at fair value with changes in fair value recognized in the statements of loss and comprehensive loss. Other financial liabilities This category includes accounts payable and accrued liabilities, all of which are recognized at amortized cost. The Company has classified its cash and investments as fair value through profit and loss. The Company s receivables are classified as loans and receivables. The Company s accounts payable and accrued liabilities are classified as other financial liabilities. Financial instruments measured at fair value are classified into one of the three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and Level 3 Inputs that are not based on observable market data. See Note 4 for relevant disclosures. (c) Share capital: Common shares are classified as share capital. Incremental costs directly attributable to the issue of common shares and share options are recognized as a deduction from share capital, net of any tax effects. (d) Property and equipment: Property and equipment is comprised of office equipment, computer equipment, computer software and field equipment which are carried at cost and depreciated on a declining balance basis over the estimated service lives of the assets ranging from 20% to 100%. Depreciation methods, service lives and residual values are reviewed at each reporting date. 9

11 (e) Exploration and evaluation assets: Exploration and evaluation expenditures include the costs of acquiring licenses, payments made and/or received under option or joint venture agreements and costs associated with exploration and evaluation activity. Exploration and evaluation expenditures are capitalized as exploration and evaluation ( E&E ) assets. Costs incurred before the Company has obtained the legal rights to explore an area are recognized in the statements of loss and comprehensive loss. Acquisition costs, including general and administrative costs, are only capitalized to the extent that these costs can be related directly to operational activities in the relevant area of interest where it is considered likely to be recoverable by future exploitation or sale or where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. Where the Company s exploration commitments for a mineral property are performed under option agreements with a third party, the proceeds of option payments under such agreements are applied to the mineral property to the extent costs are incurred. The excess, if any, is recorded in the statements of loss and comprehensive loss. Provincial government mining credits are applied against the related mineral properties. E&E assets are assessed for impairment only when facts and circumstances suggest that the carrying amount of an E&E asset may exceed its recoverable amount. Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, E&E assets attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets within property and equipment. To date, none of the Company s mineral properties have demonstrated technical feasibility and commercial viability. Recoverability of the carrying amount of any E&E assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest. (f) Impairment: The carrying amount of the Company s assets is reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in the statements of loss and comprehensive loss. The recoverable amount of assets is the greater of an asset s fair value less cost to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm s length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. 10

12 An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount, however, not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years. A reversal of an impairment is recognized immediately in the statements of loss and comprehensive loss. Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. (g) Share-based payments: The Company grants options to purchase common shares to directors, officers, employees and consultants under its share option plan. Share-based payments to directors, officers and employees are measured at the fair value of options issued and amortized over the vesting periods. The amount recognized as a share-based payment expense during a reporting period is adjusted to reflect the number of options expected to vest. The offset to this recorded cost is to share capital. A forfeiture rate is estimated on the grant date and is subsequently adjusted to reflect the actual number of options that vest. Share-based payments to consultants are measured at the fair value of goods and services received when possible. When such fair values cannot be measured reliably, the options are measured at the fair value of options issued. Share-based payments to third parties in exchange for assets are measured at the fair value of the asset received. Share-based payments issued as settlement of other current liabilities are measured at the fair value of the share at the date the share is issued. (h) Decommissioning obligation: The Company s activities may give rise to dismantling, decommissioning and site disturbance remediation activities. Provision is made for the estimated cost of site restoration and capitalized in the relevant asset category. The Company s decommissioning obligation is measured at the present value of management s best estimate of expenditure required to settle the present obligation at the statement of financial position date. Subsequent to the initial measurement, the obligation is adjusted at the end of each period to reflect the passage of time, changes in the estimated future cash flows underlying the obligation and changes to the discount rate. The increase in the provision due to the passage of time is recognized as finance costs whereas increases/decreases due to changes in the estimated future cash flows are capitalized. Actual costs incurred upon settlement of the decommissioning obligation are charged against the provision to the extent the provision was established. Mineral property security deposits have been paid to the Government of Newfoundland and Labrador and are refundable upon completion of required expenditures. (i) Finance income and expense: Interest income and interest expense are recognized as they accrue in the statements of loss and comprehensive loss, using the effective interest method. (j) Income tax: Income tax expense comprises current and deferred tax. Income tax expense is recognized in the 11

13 statements of loss and comprehensiveloss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized using the statement of financial position method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is not a business combination and affects neither accounting nor taxable profit. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. (k) Per share amounts Basic loss per share is calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year. Diluted loss per share is determined by adjusting the loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of dilutive instruments such as warrants and options granted to employees. (l) Segmental reporting The Company is organized into business units based on mineral properties and has one reportable operating segment, being that of acquisition and exploration and evaluation activities. (m) New and future accounting pronouncements As of January 1, 2014, the Company adopted the following accounting policy: IAS 32 (Amendment): Standard amended to clarify requirements for offsetting financial assets and financial liabilities, effective for annual periods beginning on or after January 1, There was no effect on the Company s financial statements as a result of adopting this standard. Other accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company s financial statements. 12

14 The Company has not early adopted these standards and is currently assessing the impact these standards will have on its financial statements: IFRS 7 (Amendment): Standard amended to clarify requirements for mandatory effective dates and transition disclosures, effective for annual periods beginning on or after January 1, IFRS 9: New Standard that replaced IAS 39 for classification and measurement of financial assets, effective for annual periods beginning on or after January 1, FINANCIAL INSTRUMENTS AND RISK FACTORS: (a) Fair value Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and Level 3 Inputs that are not based on observable market data. The Company s financial instruments include cash, receivables, and accounts payable and accrued liabilities. The carrying value of these financial instruments approximates their fair value. Cash is measured based on Level 1 inputs of the fair value hierarchy. (b) Risk factors The Company is exposed in varying degrees to a variety of financial instrument related risks. (i) Credit risk: Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. All cash is held with financial institutions of reputable credit and may be redeemed upon demand. The Company s secondary exposure to risk is on its receivables. This risk is minimal as receivables consist primarily of refundable government sales taxes. (ii) Currency risk: Currency risk is the risk that arises from the change in price of one currency against another. The Company operates in Canada and is therefore not exposed to foreign exchange risk arising from transactions denominated in a foreign currency. (iii) Interest rate risk: Interest rate risk is the risk due to variability of interest rates. Interest earned on cash is at nominal rates and therefore, the Company considers this risk to be nominal. The Company has no interest-bearing financial liabilities. 13

15 (iv) Liquidity risk: Liquidity risk relates to the risk the Company will not be able to meet its financial obligations as they fall due. The Company s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient cash to allow it to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company s reputation. The Company has sold properties to meet financial obligations and intends to continue to sell properties to meet financial obligations should they be unable to raise funds via financing (note 1). As at December 31, 2014, the Company s financial liabilities were comprised of trade and other payables. All of the Company s financial liabilities are due on demand. Funding risk is the risk that market conditions will impact the Company s ability to raise capital through equity markets under acceptable terms and conditions. Under current market conditions, both liquidity and funding risk have been assessed as high. 5. CAPITAL MANAGEMENT: The Company monitors its cash, common shares, warrants and share options as capital. The Company s objectives when maintaining capital are to maintain a sufficient capital base in order to meet its short-term obligations and at the same time preserve investor s confidence required to sustain future development and production of the business. The Company is not exposed to any externally imposed capital requirements. 6. CASH: As at December 31, 2014, cash consists of $334 ( $32,382) in the Company s bank accounts. 7. TRADE AND OTHER RECEIVABLES: As at December 31, 2014, trade and other receivables consists of $8,774 (2013 $2,137) in Goods and Services Tax paid. 8. MINERAL PROPERTY DEPOSITS: Mineral Property Deposits consists of a $19,653 refundable deposit with the Government of Newfoundland and Labrador on the Great Burnt Lake property as at December 31,

16 9. EXPLORATION AND EVALUATION ASSETS: Newfoundland and Labrador, Cost Canada Papua New Guinea Total E&E Assets As at December 31, 2012 $ 1,075,426 $ 50,000 $ 1,125,426 Disposal (60,000) (60,000) As at December 31, ,015,426 50,000 1,065,426 Disposal (50,000) (50,000) As at December 31, 2014 $ 1,015,426 $ $ 1,015,426 Accumulated impairment As at December 31, ,015,426 1,015,426 As at December 31, 2014 $ 1,015,426 $ $ 1,015,426 Net book value As at December 31, 2013 $ $ 50,000 $ 50,000 As at December 31, 2014 $ $ $ The Company did not capitalize any general and administrative expenses or share-based compensation expense to exploration and evaluation assets in 2014 and (a) Newfoundland and Labrador Canada On April 8, 2013, the Company entered into a sale agreement with Pavey Ark Minerals Ltd. for cash consideration of $60,000 for a 100% interest in the Great Burnt Lake property. A mineral property deposit refund on this property of $19,653 was received during the year ended December 31, (b) Crater Mountain Papua New Guinea On April 15, 2013, the Company entered into a sale agreement with Gold Anomaly Limited ACN for cash consideration of AUD$50,000 for the Company s interest in the Crater Mountain Project. The sale agreement was completed on May 20, (c) Dawson Colorado, USA The Company sold its interest in During the year ended December 31, 2013, the Company received $25,434 from Zephyr Minerals Ltd. for property deposits retrieved that the Company had previously written down. 15

17 10. PROPERTY AND EQUIPMENT: Equipment Cost or deemed cost As at December 31, 2013 and 2014 $ 59,225 Accumulated depreciation As at December 31, 2012 $ 42,490 Impairment 16,735 As at December 31, 2013 and 2014 $ 59,225 Net book value As at December 31, 2013 $ 16,735 As at December 31, 2014 $ The Company may not be using the property and equipment in future operations and has determined the fair values less costs to sell to be $nil. 11. TRADE AND OTHER PAYABLES: As at December 31, 2014, trade and other payables includes $102,202 ( $102,202) of Part XII.6 tax owing to Canada Revenue Agency for flow-through funds raised in 2006 and OTHER CURRENT LIABILITIES: The Company raised capital through the issuance of flow-through shares in 2008, which provided indemnity to the subscriber for additional taxes payable if the Company was unable to, or failed to, renounce the qualifying expenditures as agreed, without limiting the recourse of the subscriber. The Company was not able to spend $3,728,995 of the flow-through funds raised. The Company is exposed to costs for the indemnification of the subscribers. The Company had estimated a potential liability in the amount of $1,410,353 at December 31, 2010, which was revised from the $1,388,910 previously recorded in the year ended December 31, The accrued amount is subject to measurement uncertainty due to the tax filing positions of the subscribers, their tax rates and the amount of personal taxes that may be payable and interpretation of the indemnity agreement, which will not be known until potentially affected subscribers are reassessed for their tax positions by the Canada Revenue Agency and these amounts become known to the Company. During the year ended December 31, 2011, the Company proposed to all subscribers of the 2008 offering of flow-through shares, an additional issuance of 50% of the original number of shares subscribed to in 2008 as settlement of the indemnification provided. Certain of the subscribers have agreed to the proposition and as a result, during the year ended December 31, 2011, the Company issued 1,326,955 common shares at a value of $0.02 per common share and 323,000 common shares at a value of $0.10 per common share for settlement of the estimated indemnity amount of $549,929, reducing the potential liability to $860,

18 During the year ended December 31, 2014, the Company has extinguished the potential liability of $860,424, as more than two years have passed since the settlement proposal. 13. SHARE CAPITAL: (a) Authorized Unlimited number of common voting shares without nominal or par value Unlimited number of first preferred shares Unlimited number of second preferred shares (b) Issued and Outstanding Share capital Number of Shares Amount Balance December 31, 2013 and ,444,631 $ 34,585,021 (c) Nature and Purpose of Equity, Share Capital, Deficit and Accumulated Other Comprehensive Loss Share capital recorded in equity on the Company s statement of financial position include shares issued and outstanding, warrants issued and outstanding and share option grants. Deficit is used to record the Company s change in deficit from loss from year to year. Accumulated other comprehensive loss is used to record the Company s change in other comprehensive loss from year to year. 14. WARRANTS: Number of warrants Balance December 31, ,000,000 Expired (4,000,000) Balance December 31, 2013 and 2014 All warrants outstanding at December 31, 2012 expired on November 9, SHARE-BASED PAYMENTS: The Company has a share option plan, administered by the Board of Directors, for directors, officers, key employees and consultants of the Company. The options expire not more than five years from the date of grant, or earlier if the individual ceases to be associated with the Company, and vest over terms determined at the time of grant. The maximum number of options issuable under the share option plan will not exceed 10 percent of the issued and outstanding common shares. The Company s policy 17

19 allows the discounting, within the guideline of the TSX-V Exchange, of the exercise price of the options when granted. The following is a continuity of share options for which shares have been reserved: Number of options Weightedaverage exercise price Balance December 31, 2013 and ,094,463 $ 0.09 The following table summarizes information about share options outstanding as at December 31, 2014: Exercise price Number outstanding Expiry date Number exercisable $ ,250,000 July 19, ,250, ,000 July 22, , ,594,463 April 11, ,594,463 7,094,463 7,094, PER SHARE AMOUNTS: Basic net income (loss) per share is calculated as follows: Net income (loss) $ 772,631 $ (78,692) Weighted average number of shares basic: Issued common shares at January 1 88,444,631 88,444,631 Effects of shares issued 88,444,631 88,444,631 Net income (loss) per share basic: $ 0.01 $ The effect of share options is anti-dilutive in loss periods. 17. FINANCE INCOME AND EXPENSES: Finance expense: Interest income $ $ 55 Interest expense (12,199) (690) Net finance expense $ (12,199) $ (635) 18

20 18. CHANGE IN NON-CASH WORKING CAPITAL: Trade and other receivables $ (6,637) $ (2,137) Prepaid expenses and deposits (18,861) (235) Trade and other payables 11,590 (9,523) Allocation of change in non-cash working capital: $ (13,908) $ (11,895) Operating activities $ (13,908) $ (11,863) Investing activities (32) $ (13,908) $ (11,895) 19. RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION: The Company considers its directors and executives to be key management personnel. December 31, 2014, key management personnel included 3 individuals ( individuals). As at During the year ended December 31, 2014 there were no related party transactions and no key management compensation. 20. INCOME TAXES The provision for deferred income taxes differs from the amount computed by applying the combined federal and provincial tax rates to the loss before taxes. The difference results from the following: Expected income tax recovery at XX% ( %) $ $ (24,382) Non-deductible charges (2,547) Share-based payments Change in unrecognized deductible temporary differences 34,502 Quebec refund adjustment (17,281) Change in tax rates 2,187 Other (9,760) Deferred income tax expense (recovery) $ $ (17,281) 19

21 Unrecognized deferred tax assets Deferred tax assets have not been recognized in respect of the following deductible temporary differences because at this time, it is not probable that taxable profit will be available against which the deductible temporary difference can be utilized: Property and equipment $ $ 1,778,728 Flow-through share indemnity 218,592 Unused non-capital loss 2,385,039 Unused net capital loss 119,944 Share issue costs 203 The following represents unused tax pools available to the Company: $ $ 4,502, Canadian exploration expenses $ $ 3,980,205 Foreign exploration and development expenses 2,928,509 Cumulative foreign resource expenses 144,528 Undepreciated capital costs 17,817 Unused non-capital loss 9,388,068 Unused capital loss 472,127 Share issue costs 800 Estimated tax pools for carry forward $ $ 16,932,054 As at December 31, 2014, the Company has estimated non-capital losses for Canadian income tax purposes that may be carried forward to reduce taxable income derived in future years. A summary of these losses is provided below. The losses expire as follows: 2014 $ 549, , , ,053, ,162, ,094, ,278, ,221, ,711 Total $ 9,388,068 20

22 Management Discussion and Analysis For the three months and year ended December 31, 2014 April 30, 2015 The following Management s Discussion and Analysis ( MD&A ) of Celtic Minerals Ltd. (the Company ) should be read in conjunction with the December 31, 2014 unaudited financial statements and related notes therein as prepared in accordance with International Financial Reporting Standards ( IFRS ). Additional information relating to the Company and its operations is available on SEDAR at or on the Company s website at Forward-looking Statements Certain statements included in this MD&A constitute forward-looking statements that are subject to substantial risks and uncertainties that may cause the actual results, performance or achievements expressed or implied by such forward-looking statements to differ. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause the Company s actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. This Company is a mineral exploration company and is exposed to a number of risks and uncertainties that are common to companies in the same business. These risks and uncertainties include, among other things, the speculative nature of mineral exploration and development activities, the Company s need for additional funding to continue its exploration efforts, operating hazards and risks incidental to mineral exploration, the Company s properties are in the exploration stage only and do not contain a known body of commercial ore, changes in general economic, market and business conditions, competition for, among other things, capital, acquisitions of mineral properties and skilled personnel, ability to obtain required mine licences, mine permits and regulatory approvals required to proceed with mining operations, ability to comply with current and future environmental and other laws, actions by governmental or regulatory authorities including increasing taxes and changes in other regulations, and the occurrence of unexpected events involved in mineral exploration, development and production. The Company cautions that actual performance will be affected by a number of factors, many of which are beyond its control. All references are to Canadian dollars unless otherwise indicated. COMPANY DESCRIPTION Celtic Minerals Ltd. (the Company or Celtic ) holds several mineral rights licences in Canada, and is looking toward exploration should financing be obtained. 1

23 Management Discussion and Analysis For the three months and year ended December 31, 2014 RESULTS OF OPERATIONS The following table is a comparison of the Company s results of operations: Three months ended December 31 Year ended December Operating expenses General and administrative $ 37,951 $ 23,247 $ 75,594 $ 104,037 Depreciation (2,660) Impairment of property & equipment 16,735 16,735 Gain on settlement of mineral property interest (25,434) (25,434) Loss from operations (37,951) (11,888) (75,594) (95,338) Net finance expense (11,595) (12,199) (635) Loss from continuing operations (49,546) (11,888) (87,793) (95,973) Other Extinguishment of other current liabilities 860,424 Income (Loss) before income tax (49,546) (11,888) 772,631 (95,973) Income tax recovered 17,281 Net income (loss) for the period $ (49,546) $ (11,888) $ 772,631 $ (78,692) Three months ended December 31, 2014 Loss from operations was $37,951 for the three months ended December 31, 2014, as compared to $11,888 for the three months ended December 31, This variance between the 2014 and 2013 three month period is explained by changes in the following expenses: General and administrative expense was $37,951 for the three months ended December 31, 2014 as compared to $23,247 for the three months ended December 31, The increase relates primarily to professional fees for audit and accounting services. Depreciation was $(2,660) for three months ended December 31, Depreciation for the first three quarters of 2013 was reversed in the fourth quarter of 2013, as $16,735 of property and equipment was impaired. The gain on settlement of mineral property interest in the fourth quarter of 2013 is a deposit refund received from Zephyr Minerals Ltd. on the Dawson property that was sold in Net finance expense for the fourth quarter of 2014 of $11,595 relates to a late filing fee for US income taxes paid on behalf of Zephyr Minerals Ltd. Year ended December 31, 2014 Loss from operations was $75,594 for the year ended December 31, 2014, as compared to a loss from operations of $95,338 for the year ended December 31, This variance between fiscal 2014 and fiscal 2013 is explained by changes in the following expenses: General and administrative expense was $75,594 for fiscal 2014, as compared to $104,037 for fiscal The decrease is primarily attributable to a decrease in salaries with no full-time salary in the 2

24 Management Discussion and Analysis For the three months and year ended December 31, 2014 current year and a decrease in professional fees for the current year when there was a consulting firm retained to provide strategic and financial advisory services to the Company. There is no depreciation for the year ended December 31, 2014 as the property and equipment was impaired at December 31, The gain on settlement of mineral property interest for the year ended December 31, 2013, is a deposit refund received from Zephyr Minerals Ltd. on the Dawson property that was sold in Net finance income for fiscal 2014 is comprised of $12,199 interest expense. Net finance income for fiscal 2013 is comprised of $55 interest income less $690 interest expense. During the year ended December 31, 2014, the Company has extinguished the potential liability of $860,424, as more than two years have passed since the settlement proposal. EXPLORATION AND EVALUATION EXPENDITURES During the year ended December 31, 2014, the Company did not incur any exploration and evaluation expenditures. Crater Mountain Papua New Guinea On April 15, 2013, the Company entered into a sale agreement with Gold Anomaly Limited ACN for cash consideration of AUD$50,000 for the Company s interest in the Crater Mountain project. The sale agreement was completed on May 20, 2014 The Company holds several mineral rights licenses in Newfoundland and Labrador, including the following areas: Hungry Hill Kingurutik River West Voisey s Bay LIQUIDITY, CAPITAL RESOURCES AND FINANCING ACTIVITIES As at December 31, 2014, the Company had a working capital deficit of $132,688 compared to a working capital deficit of $924,972 at December 31, As the Company does not have revenue generating projects at this time, the ability of the Company to carry on business rests with the ability to raise equity, obtain other forms of financing, and option or sell properties. The Company may require additional financing to fund exploration programs and acquire any new properties. Future funds for exploration will be raised by equity financing or the offering of an interest in or sale of its properties. EQUITY INSTRUMENTS Common shares As at December 31, 2013, December 31, 2014 and the date of this MD&A, the Company has 88,444,631 common shares outstanding. Warrants As at December 31, 2013, December 31, 2014 and the date of this MD&A, the Company has no warrants outstanding. 3

25 Options Celtic Minerals Ltd. Management Discussion and Analysis For the three months and year ended December 31, 2014 As at December 31, 2013, December 31, 2014 and the date of this MD&A, the Company has 7,094,463 stock options outstanding. RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION The Company considers its directors and executives to be key management personnel. As at December 31, 2014, key management personnel included 3 individuals (December 31, individuals). Key management personnel compensation was $nil for the years ended December, 2014 and SELECTED FINANCIAL INFORMATION The highlights of financial data for the Company for the three most recently completed financial years are as follows: As at and for the years ended December 31, 2014 December 31, 2013 December 31, 2012 Operating expenses (75,594) (95,338) (91,249) Net finance income (expense) (12,199) (635) (22,408) Reversal of indemnification expense 860,424 Loss from discontinued operations (298,278) Income taxes 17,281 Net income (loss) 772,631 (78,692) (411,935) Net income (loss) per share basic and diluted 0.01 (0.01) Total assets 28, , ,712 Total liabilities 160,982 1,009,816 1,019,339 SELECTED QUARTERLY FINANCIAL INFORMATION Quarterly Q Q Q Q Operating expenses (37,951) (9,410) (18,548) (9,685) Net finance income (expense) (11,595) (12) (92) (500) Extinguishment of other current liabilities 860,424 Net loss for the period (49,546) (9,422) (18,640) 850,239 Net loss per share basic and diluted 0.01 Quarterly Q Q Q Q Operating expenses (11,888) (34,693) (26,509) (22,248) Net finance income (expense) (310) (325) Loss from discontinued operations Income taxes 17,281 Net loss for the period (11,888) (17,722) (26,834) (22,248) Net loss per share basic and diluted 4

26 Management Discussion and Analysis For the three months and year ended December 31, 2014 THE YEAR AHEAD The last few years have been extremely challenging for the junior mining industry. Although Celtic has shed many of its assets to meet its financial obligations, the Company has retained mineral rights licences in Canada. Celtic is or has been in discussions with multiple groups to hopefully steer the Company in a new direction that will result in shareholder share appreciation. RISKS AND UNCERTAINTIES The Company is in the mineral exploration and development business and is exposed to a number of risks and uncertainties that are not uncommon to other companies in the same business. Exploration for mineral resources involves a high degree of risk, the cost of conducting programs may be substantial and the likelihood of success is difficult to assess. Beyond exploration risk, companies in this industry are subject to many and varied risks and uncertainties, including but not limited to, environmental, metal prices, political, economic and title. The industry is capital intensive and subject to fluctuations in metal prices, market sentiment, foreign exchange and interest rates. The Company is subject to the laws and regulations relating to environmental matters and various licences and permits in all jurisdictions in which it operates, including provisions relating to site restoration and other matters. The Company has no significant source of operating cash flow and no revenues from operations. The Company relies on the placement of equity and the exercise of stock options for its financing. While it has been successful at raising equity in the past, there can be no assurance that it will be able to do so in the future. ACCOUNTING JUDGMENTS AND ESTIMATES The Company s unaudited financial statements as at and for the year ended December 31, 2014 were prepared in accordance with IFRS. Information about management s use of estimates and judgments is contained in Note 2(d) and a comprehensive discussion of the Company s significant accounting policies is contained in Note 3. The Company s significant accounting policies are subject to estimates and key judgments about future events, many of which are beyond management s control. Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in the following notes: Note 15 measurement of share-based payments; Note 9 exploration and evaluation assets; Note 12 measurement of other current liabilities; and Note 20 income taxes. 5