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Kiska Metals Corporation Notes to the consolidated interim financial statements March 31, 2012 and 2011 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management) 20. Related party disclosures (continued) Balances payable are not interest bearing and have no specific terms of repayment. All transactions were incurred in the normal course of operations. Mineral property interests One of the officers indirectly owns 11% of a 7.5% to 15% Net Profits Interest (“NPI”) in the Wernecke Breccia property. The claims were originally staked and explored by a company in which he holds an interest. When the property was sold to the Newmont and NVI Mining Ltd, that company retained an NPI of varying amounts depending on the claim group. Compensation of key management personnel of the Group 2012 2011 Wages and benefits $ 183,119 $ 115,286 Post-employment pension and medical benefits 11,417 7,608 Share-based payments 93,875 306,656 $ 288,411 $ 429,550 21. Income taxes The Company’s deferred tax assets and liabilities at the most recent fiscal year end are: December 31 2011 Deferred tax assets (liabilities) Mineral property interests $ 4,228,871 Other assets 111,461 Marketable securities 42,247 Tax loss carry-forwards 21,290,881 25,673,460 Valuation allowance (25,673,460) Net deferred tax assets $ - 36
Kiska Metals Corporation Notes to the consolidated interim financial statements March 31, 2012 and 2011 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management) 21. Income taxes (continued) At December 31, 2011, the Company has unrecognized losses for income tax purposes of approximately $68,829,000 which may be used to offset taxable incomes of future years. If unused, these losses will expire as follows: 2014 $ 955,000 2015 2,632,000 2026 5,330,000 2027 8,247,000 2028 14,786,000 2029 8,163,000 2030 11,026,000 2031 17,690,000 $ 68,829,000 The Company also has unrecognized resource related tax deductions of approximately $8,100,000 available for deduction against future Canadian taxable income, which can be carried forward indefinitely. In assessing the Company’s ability to utilize deferred tax assets, management considers whether it is probable that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are or become deductible or during the periods before expiry of the loss carry forwards. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which tax assets are deductible, management currently believes it is probable that the Company will not realize the benefits of the deferred tax assets. 22. Financial risk management objectives and policies The Group’s principal financial instruments comprise financial liabilities and financial assets. The Group’s principal financial liabilities, other than derivatives, comprise accounts payable and accrued liabilities, and due to related parties. The main purpose of these financial instruments is to manage short term cash flow and raise finance for the Group’s capital expenditure program. The Group has various financial assets such as accounts receivable and cash and short-term deposits, which arise directly from its operations. Risk exposures and responses The Group manages its exposure to key financial risks in accordance with the Group’s financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets while protecting future financial security. The main risks that could adversely affect the Group’s financial assets, liabilities or future cash flows are market risks, comprising commodity price risk, cash flow interest rate risk and foreign currency risk and liquidity risk and credit risk. Management reviews and agrees policies for managing each of these risks which are summarized below. The Group’s senior management oversees the management of financial risks. The Group’s senior management is supported by the board of directors (the “board”) that advises on financial risks and the appropriate financial risk governance framework for the Group. The board provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate 37
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