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Condensed Interim Consolidated Financial Statements for the Three and Nine Month Period Ended September 30, 2012
(Expressed in Canadian Dollars) (Unaudited Prepared by Management)
Notice of No Auditor Review of Condensed Interim Consolidated Financial Statements Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of interim consolidated financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor. The accompanying unaudited condensed interim consolidated financial statements of the company have been prepared by and are the responsibility of the Company's management. These condensed interim consolidated financial statements reflect management's best estimates and judgment based on information currently available as of November 26, 2012. The Company's independent auditor has not performed a review of these condensed interim consolidated financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review of interim consolidated financial statements by an entity's auditor.
$ $
(Unaudited) (Audited)
ASSETS
Current Assets
Investment in Global Mineral Investments, LLC (Notes 3 (a) and 12) 485,400 485,400
Current Liabilities
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59,772 Shareholders' Equity
Capital Stock 17,268,966 17,268,966 Contributed Surplus 890,684 890,684 Deficit (17,696,112) (17,677,849) Total Equity 463,538 481,801 Total Liabilities and Shareholders' Equity 537,268 541,573 Going Concern (Note 2) The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements
Approved on behalf of the Board "Hirsh Kwinter" (signed) Director "Dr. Ezra Franken ("signed") Hirsh Kwinter Dr. Ezra Franken
670 0 670
2,012 0 2,012
(670)
(2,012)
(18,263)
(14,606)
$(0.000003)
(0.00001)
(0.00008)
(0.00006)
239,171,893
239,171,893
239,171,893
239,171,893
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements
Share Capital # of Shares Balance January 1, 2011 Net loss and comprehensive loss for the nine month period ended September 30, 2011 Balance September 30, 2011 Net loss and comprehensive loss for the three month period ended December 31, 2011 Balance December 31, 2011 Net loss and comprehensive loss for the nine month period ended September 30, 2012 Balance September 30, 2012 239,171,893 $ 17,268,966 $ 890,684 239,171,893 $ 17,268,966 $ 890,684 239,171,893 $ 17,268,966 $ 890,684 $ 239,171,893 Amount $ 17,268,966 Contributed Surplus $ 890,684 $ Deficit (17,501,620) $ Total 658,030
(14,606) (17,516,226) $
(14,606) 643,424
(161,623)
(161,623)
$ (17,677,849)
481,801
(18,263) $ (17,696,112) $
(18,263) 463,538
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements
OPERATING ACTIVITIES Net Loss Changes in non-cash working capital items Prepaids and sundry receivables Accounts payable and accrued charges Cash Flow Used in Operating Activities FINANCING ACTIVITIES Loan (repayment to) from Directors Cash Flow From Financing Activities Net Increase (Decrease) in Cash Cash beginning of period (250) (250) 202 631 20,000 20,000 17,575 1,919 8,750 8,750 (4,275) 5,108 39,000 39,000 9,685 9,809 1,156 (34) 452 618 (1,031) (2,425) 30 5,208 (13,025) 630 (15,339) (29,315) $ (670) $ (2,012) $ (18,263) $ (14,606)
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Cash end of period $ 833 $ 19,494 $ 833 $ 19,494
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements
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3. OPERATIONS (a) Mining and Resource Unit The Company initially acquired a 3% interest, together with an option to acquire up to an additional 15% interest, in Global Mineral Investments, LLC (GMI), a private U.S. corporation that proposed to lease and develop gold mining concessions in West Africa. On August 31, 2007, GMI was awarded four Class B Gold Mining Licences (the GMI Mining Licences) by the Ministry of Lands, Mines and Energy of the Republic of Liberia (the Ministry) for four, separate concessions (the GMI Concessions) located in the Sanquin Mining Zone in the Republic of Liberia. In consideration for business and management services that the Company rendered GMI, on September 6, 2007, the Companys ownership interest in GMI was increased from 3% to 4%. On October 10, 2008, the Company announced that it entered into a funding and operating agreement (the Funding Agreement) with GMI and a number of investors to raise, by way of a non-brokered private placement (the Offering or the Placement), the sum of $535,000.00 through the issue of 10,700,000 common shares at a price of $0.05 per share. The announced use of the proceeds from the Offering was to fund GMIs Proposed Dredging Operations (the "Proposed Dredging Operations") that GMI planned to carry out in those portions of the Upper Tartweh River system flowing through the GMI Concessions; to acquire an additional 16% equity interest in GMI
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that is equal to Vengas then equity ownership position in GMI; and Any additional mining concessions secured or negotiated by GMI or Venga in Liberia or West Africa to be acquired in the joint names of GMI and Venga reflecting the parties equal ownership of such additional concessions.
In April of 2011, GMI signed a an operational agreement with Kiwi, Inc., ("Kiwi") a private Liberian based mining company, to fund and manage GMI's dredge mining and planned land based mining operations at several of the GMI Concessions. On July 18, 2011, the Company announced that GMI, in association with Kiwi, Inc. had signed an Exploration and Development Agreement (the "Exploration Agreement") with Tawana Resources NL ("Tawana") wherein GMI granted Tawana exclusive exploration rights to the GMI Concessions (which exclusive exploration rights are hereinafter referred to as the "Sinoe Project") in Sinoe County, Liberia. Tawana paid GMI an initial exclusivity option fee to secure binding exclusivity and exclusive rights to due diligence over what Tawana has described as GMI's 'highly prospective ground in Liberia'. In an earlier July 13, 2011 press release, Tawana announced that pursuant to the terms of Exploration Agreement and pending successful due diligence, Tawana had acquired from GMI, what Tawana described as a highly prospective land package within arguably one of the most prospective Birimian gold structures currently being explored in Liberia. Tawana also confirmed that an aggressive field sampling and mapping program was to be completed in the Sinoe Project and that it had retained the services of the GMIs site manager to build access tracks, additional camp facilities and maintain logistical supplies to facilitate exploration activities. Pursuant to the terms of the Exploration Agreement, GMI, in association with Kiwi, Inc. will actively participate and assist Tawana in the development and operation of the Sinoe Project, retain and independently develop certain identified gold mining sites within the Sinoe Project and continue to pursue GMI's current and planned gold dredging operations in the GMI Concessions.
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On February 6, 2012, Tawana announced that pursuant to the terms of the Exploration Agreement Tawana had paid GMI the $50,000 USD Execution Payment. On February 7, 2012, the Company announced that Tawana had identified several high priority soil anomalies from its ongoing geological exploration program at the Sinoe Project and that Tawana had confirmed that it had received results from approximately 2,000 samples taken from its initial soil sampling program which confirmed two large, coherent and continuous + 30ppb soil anomalies with results of up to 1 g/t providing confidence of significant mineralization occurring below within the explored area of the Sinoe Project. Tawana further announced that it was in the process of completing a further soil sampling and trenching program, and subject to the results of these programs, was scheduled to commence drilling at the Sinoe Project during the second quarter of 2012. On March 12, 2012, Tawana announced the results from an additional approximately 1,300 soil sampling taken from its maiden sampling grid. These additional results extended the known gold anomalism from a strike length of 5.8 kilometers to a total strike length of 9 kilometers and having widths of between 400 meters to 1,600 meters. The anomalism is broadly defined by +30 ppb with the highest results returned at approximately 1 g/t. On July 27, 2012 the Company announced that GMI had released a National Instrument ("NI") 43-101 compliant report (the "Technical Report") which determined that the GMI Concessions were 'an exploration project of merit' and recommended that a more comprehensive, two phase exploration programme be carried out. The Technical Report which is compliant with NI 43-101 and companion policy NI 43-101CP and Form 43101FI, was prepared by independent Qualified Person Pierre C. LaBrque P.ENG. of La Prairie, Quebec. For the purposes of preparing the Technical Report, Mr. LaBrque visited the GMI Concessions for a ten day period in May of 2012 and relied on information gained from published geological reports including the US Geological Survey of Liberia and Tawana's 2011 and 2012 geochemical surveys and from the direct, on-site discussions that Mr. LaBrque had with GMI's representatives who were familiar with the GMI Concessions and the area in general. The Technical Report affirmed Mr. LaBrque's opinion that all information set out in the report, and the conclusions on which such information is based, should be considered reliable. The Technical Report confirmed that the GMI Concessions are underlain by Precambrian rock formations which belong to the West African Precambrian (Guinean) shield and that the Dugbe Shear, a major east/west structural feature in the area, is believed to cross the central part of the GMI Concessions. The Technical Report further notes that Tawana's
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favourable to host gold deposits in the underlying geological formations and in the overlying overburden (placer deposits). The area under consideration, encompassing the property of GMI, is host to a number of gold artisanal mining operations. Several places are still actively mined by those informal miners and several other places have been in the past targets of such operations. There are several interpreted possible shear zones which have been outlined within the limits of the exploration licence. The most prominent is the eastern extension of the Dugbe shear zone which crosses the middle part of the concession. As all experienced explorationists are aware, features like the presence of shear zones are positive for gold exploration. The fractures and stockwork generated by shearing/faulting favour the formation of auriferous quartz veins and lenses, so their presence cannot be overlooked. Some 20-40 km east of the limits of the licence of GMI, major discoveries have unveiled two deposits (Hummingbird) totaling some 2.8 Moz Au while Equator Resources will drill test the Bukon Jedeh Gold anomaly in order to determine its economic potential. All these gold occurrences are located in the neighbourhood of the Dugbe shear. In a general way, the geology in the surroundings of the Hummingbird and Equator discoveries is the same as that underlying the exploration licence of GMI. So, gold deposits may be found in both places, in the bedrock and in the overburden as alluvial and eluvial placers." The author of the Technical Report, Mr. Pierre LeBrque, graduated from the cole Polytechnique (Faculty of Engineering), University of Montreal in 1971 with a B.A. Sc. degree in Geological Engineering. Mr. LeBrque has practiced his profession continuously since his graduation and has extensive experience in all phases of mining exploration and development in both Canada and internationally, including participating in mining projects situated in such countries as Madagascar, Sierra Leone, Angola, Nigeria, Algeria, Mali, Peru, Bolivia, Mongolia and Kazakhstan. The mining operations that Mr. LeBrque has participated in have included the exploration and development of gold, silver, uranium, zinc, lead, bentonite and kieselghur projects. Mr. LeBrque is a member in good standing of the Order des Ingnieurs du Quebec which is an official association legally created by the Government of Quebec to supervise the practice of professional engineering and applied sciences. Mr. LeBrque was a member of an advisory committee that provided recommendations to the Securities Commission of Quebec concerning the guidelines used to accept technical reports produced to support public financing of mining exploration companies.
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(b) 3D Graphics Unit In November of 2006, the Company entered into a joint venture agreement (the JV Agreement) with 3DP North America, Inc., of Kenner, Louisiana; United Business & Capital Services, LLC of Kenner, Louisiana; EKG, LLC of Lafayette, Louisiana and Armadillo Photo Supply, Inc. of Houston, Texas creating a new commercial entity, the 3DP North America Joint Venture (the New JV), to provide a range of advanced 3D products and print services for both commercial and consumer customers. The Company retains a 30% ownership interest in the New JV with 3DP North America, Inc., who acts as the managing venturer of the New JV, owning the remaining 70% of the venture. The New JV purchased two, Chinese manufactured, specialized 3D printer / processors, with the first of these 3D printer/processors having been delivered to the New JV's Houston, Texas production facility in January of 2008 and the second being delivered in March of 2009. As a consequence of the delays in the New JV becoming operational, the New JV has decided to place the two specialized 3D printer/processors into storage. (c) Aerospace Unit The Company, in association with ARINC Incorporated (www.arinc.com), made an unsolicited proposal (the Venga Proposal) to the Canadian government to provide replacement jet aircraft for the Canadian Forces' Snowbirds aerial demonstration squadron. As a direct result of the continuing delays in the Canadian government's decision with respect to selecting a program to replace or upgrade the Snowbirds' aircraft, the Company is holding the Venga Proposal in abeyance pending receipt of a positive response from the Canadian government. As a direct consequence of the passage in time, Management is proceeding on the assumption that the Canadian Government will not be selecting the Venga Proposal as the option for upgrading or replacing the Snowbirds aircraft. 4. BASIS OF PREPARATION (a) Statement of Compliance These condensed interim unaudited consolidated financial statements have been prepared using accounting policies consistent with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and Interpretations of the International Financial Reporting Interpretations Committee (IFRIC). These condensed interim unaudited consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements required by IFRS as issued by IASB and interpretations issued by IFRIC.
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(b) Basis of Presentation These condensed interim unaudited consolidated financial statements have been prepared on the historical
cost basis except for financial instruments, which are measured at fair value. These financial statements have been prepared using IFRS principles applicable to a going concern, which contemplate the realization of assets and settlement of liabilities in the normal course of business as they come due. All amounts are presented in Canadian dollars, unless otherwise indicated.
(c) Adoption of New and Revised Standards and Interpretations The IASB issued a number of new and revised International Accounting Standards, International Financial Reporting Standards, amendments and related interpretations which are effective for the Companys financial year beginning on or after January 1, 2011. For the purpose of preparing and presenting the financial statements for the relevant periods, the Company has consistently adopted all these new standards. At the date of authorization of these condensed interim unaudited consolidated financial statements, the IASB and IFRIC have issued the following new and revised Standards and Interpretations which are not yet effective for the relevant reporting periods. IFRS 9 Financial Instruments IFRS 9 Financial Instruments is part of IASBs wider project to replace IFRS 39 Financial Instruments: Recognition and Measurement. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value. The basis of classification depends on the entitys business model and the contractual cash flow characteristics of the financial asset. The standard is effective for annual periods beginning on our after January 1, 2015. The Company is in the process of evaluating the impact of the new standard on the accounting for available-for-sale investment. IFRS 10 Consolidated Financial Statements IFRS 10 establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more entities. IFRS 10 replaces the consolidation requirements of SIC-12 Consolidation Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements and is effective for annual periods beginning on or after January 1, 2013. Earlier adoption is permitted. IFRS 10 builds upon existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The Company is currently assessing the financial impact of the new standard. IFRS 12 Disclosure of Interests in Other Entities IFRS 12 is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. IFRS is effective for annual periods beginning on or after January 1, 2013. The Company is currently assessing the financial impact of the new standard.
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standard is for annual periods beginning on or after January 1, 2013. The Company is currently assessing the financial impact of the new standard. 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These condensed interim unaudited consolidated financial statements follow the same accounting policies and methods of application as the Company's most recent annual financial statements. a) Basis of Presentation The Company has prepared these comparative condensed interim unaudited consolidated financial statements on a consolidated basis which includes its wholly-owned subsidiary, Venga Joint Venture Ltd. (b) Principles of Consolidation These condensed interim unaudited consolidated financial statements include the accounts of Venga Aerospace Systems Inc. ("the Company") and its subsidiary. (c) Use of Estimates The preparation of these condensed interim unaudited consolidated financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities at the date of the financial statements. Judgments, estimates and underlying assumptions are reviewed on a continuous basis and are based on managements experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes could differ from those estimates. Significant areas of financial reporting the require managements estimates and judgements are as follows: Accrued liabilities The Company uses estimates to record the expenses that have been incurred but payments have not been made. Impairment of long- term investments The Company records impairment of long-term investments based on managements determination. Judgment is required to determine the extent of impairment. (d) Financial Instruments Financial assets Financial assets are classified into three categories: Fair value through profit or loss (FVTPL) Held to maturity (HTM); and Loans and receivables.
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Financial assets at fair value through profit or loss (FVTPL) A financial asset is classified at fair value through profit or loss if it is classified as held-for-trading or is designated as such upon initial recognition. Financial assets are designated as at FVTPL if the Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Companys risk management strategy. Attributable transaction costs are recognized in profit or loss when incurred. FVTPL are measured at fair value, and changes are recognized in the statements of operations and comprehensive loss. Cash is categorized as FVTPL and is carried at fair value. Held to maturity (HTM) These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Companys management has the positive intention and ability to hold to maturity. These assets are measured at amortized costs using the effective interest method. If there is objective evidence that the asset is impaired, determined by reference to external credit ratings and other relevant indicators, the financial asset 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 operations and comprehensive loss. Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted on an active market. Such assets are initially recognized at fair value plus any direct attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment loss. The Company classified its financial assets which consisted of prepaids and sundry receivables as loans and receivables. Financial liabilities Financial liabilities are classified as other financial liabilities. This category includes accounts payable and accrued charges and due to directors, all of which are recognized at amortized cost. Impairment of financial assets Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the investments have been affected. For all financial assets, objective evidence of impairment could include: significant financial difficulty of the issuer or counterparty; or it becomes probable that the borrower will enter bankruptcy or financial re-organization. For certain categories of financial assets, such as receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. The carrying amount of financial assets is reduced by the impairment loss directly for all financial assets except receivables, where the carrying amount is reduced through the use of an allowance account. Subsequent recoveries of receivables previously written off are
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5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (d) Financial Instruments (continued) Impairment of financial assets (continued) credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in the statement of comprehensive loss. If, in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the statement of loss and comprehensive loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. (e) Income Taxes The Company uses the asset and liability method of accounting for income taxes under which future tax assets and liabilities are recognized for differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using substantively enacted tax rates in effect in the year in which those temporary differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized as part of the provision for income taxes in the year that includes the enactment date. A valuation allowance is recorded to the extent there is uncertainty regarding realization of future tax assets. (f) Translation of Foreign Currencies Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange prevailing at the year end, non-monetary assets and liabilities are translated at historical rates and revenue and expenses are translated at the rate of exchange in effect on the transaction dates. Exchange gains and losses arising on translation of monetary items are included in income in the year in which they occur. (g) Long-term Investments Long-term investments are recorded at cost. Long-term investments classified as held-to maturity financial instruments, are valued at amortized cost, with changes in valuation charged to operations. Long-term investments classified as available-for-sale financial instruments, are valued at fair market value, with changes in valuation charged to comprehensive income. Long-term investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost gains and losses are recognized when investments are sold. Income is recognized only to the extent dividends are received (h) Impairment of Long-lived Assets Long-lived assets, including capital assets, are amortized over their useful lives. The Company reviews long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the undiscounted cash flows expected to result from the use and eventual disposition of a group of assets is less than its carrying amount, it is considered impaired. An impairment loss is measured as the amount by which the carrying amount of the group of assets exceeds its fair value. (i) Basic and Diluted Loss per Share The Canadian Institute of Chartered Accountants ("CICA") recommends the use of the treasury stock method in computing earnings/loss per share. Under this method, basic loss per share is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding during the year. In computing the loss per share on a fully diluted basis, the treasury stock method assumes that proceeds received
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for the Period Ended September 30, 2012 (Expressed in Canadian Dollars) (Unaudited - Prepared by Management) _________________________________________________________________________________________ 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (i) Basic and Diluted Loss per Share (continued) from in-the-money stock options are used to repurchase common shares at the prevailing market rate. The weighted average number of common shares outstanding during the period was 239,171,893 (2011 239,171,893). (j) Revenue Recognition Revenue is recognized to the extent that it is probable that future economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or to be received. Revenue is earned from the provision of consulting services, licence fees and if and when the Company receives its share of profits from the Company's 3D graphics and mining and resources business units. The Company recognizes revenue from consulting services when performance of the consulting services are complete and recognizes revenue from the Company's 3D graphics and mining and resources business units when such profit distributions are received. Licence fees represent fees that the New JV is contractually required to pay the Company for use of the Company's CLIK 3D trade name. 6. CAPITAL STOCK Authorized: Unlimited common stock and special shares without par value September 30, 2012 239,171,893 $17,268,966 September 30, 2011 239,171,893 $17,268,966
Issued:
As of September 30, 2012, the Company had not issued any warrants or options nor were there any outstanding warrants or options. 7. RELATED PARTY TRANSACTIONS Directors of the Company advanced the Company the sum of $47,750 as loans due and payable on demand which loans are non - interest bearing. These funds were to be used by the Company for its ongoing corporate and business operations. 8. CAPITAL MANAGEMENT The Companys objectives when managing capital are to safeguard its ability to continue as a going concern to pursue the development of its three business segments and to maintain a flexible capital structure which optimizes the cost of capital within a framework of acceptable risk. In the management of capital, the Company includes share capital, contributed surplus and deficit.
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for the Period Ended September 30, 2012 (Expressed in Canadian Dollars) (Unaudited - Prepared by Management) _________________________________________________________________________________________ 8. CAPITAL MANAGMENT (continued) The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its capital structure, the Company may issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of cash and cash equivalents. The Company is dependent on the capital markets and potential private investors as its sole source of operating capital and the Companys capital resources are largely determined by the strength of the junior public markets and by the status of the Companys projects in relation to these markets and its ability to compete for investor support of its projects. The Company is not subject to externally imposed capital requirements 10. INVESTMENT IN NEW JV September 30, 2012 $ Investment, end of period 51,000 September 30, 2011 $ 200,000
Pursuant to the terms of the JV Agreement, and in order to provide the New JV with working or operational capital, the Company advanced $600,000 USD to the New JV. The Company has no management rights or further funding requirements or obligations with respect to the New JV. The Companys participation in the New JV is limited to the Companys right to receive 30% of the New JVs net profits as and when such profits are distributed to the joint venturers in accordance with the terms and provisions of the New JV Agreement. As a consequence of both the continuing delays in the New JV becoming operational and the New JVs outstanding and unfulfilled obligation to pay the Company a licensing fee as required pursuant to the terms of the New JV Agreement, Management elected in 2008 to take write down its investment interest in the New JV for impairment to $300,000 and to take a further write down for impairment loss of $100,000 in 2010. With the New JV continuing to experience delays in becoming operational and following an appraisal by 3DP North America Inc. of the fair market value of JVs assets, Management decided to record a further impairment loss of $149,000 of the Company's interest in the New JV in 2011. The Company is only liable to the extent of its investment and is indemnified from the other joint venturers for any excess losses and liabilities. Upon termination of the New JV, the Company is entitled to its capital account share in net assets of the New JV. 11. VENGA'S LICENCE FEE Pursuant to the terms of the New JV Agreement, the Company granted the New JV a licence (the "Venga Licence") during the currency of the New JV Agreement to use, market, operate and commercially exploit the business trade name 'CLIK 3D'. In consideration of the Company's granting of the Venga Licence, the New JV agreed to pay Venga, the sum of fifty thousand ($50,000.00) dollars (the "Venga Licence Fee") each year or part year during the currency of the New JV Agreement. Notwithstanding the terms of the New JV Agreement, the New
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Notes to the Condensed Interim Consolidated Financial Statements for the Period Ended June 30, 2012 (Expressed in Canadian Dollars) (Unaudited - Prepared by Management) _________________________________________________________________________________________ 11. VENGA'S LICENCE FEE (continued) JV has failed to pay the Company the required Venga Licence Fee for the years 2006 through 2011. The Company has advised the New JV that the Company is not waiving any right to recover any portion of the accumulated, unpaid and outstanding amount for the Venga Licence Fee and that the Company is and continues to regard the accumulated, unpaid and outstanding amount for the Venga Licence Fee a valid, legal debt owed by the New JV to the Company. However, in accordance with the Companys significant accounting policies with respect to revenue recognition, revenue with respect to Vengas licence fee has not been recorded for the periods ended September 30, 2012 or September 30, 2011. 12. INVESTMENT IN GLOBAL MINERAL INVESTMENTS LLC Pursuant to the terms and provisions of the Funding Agreement the Company currently has a 20% (September 30, 2011 - 20%) interest. The Funding Agreement provides that the Company will participate in the profits generated by GMIs mining operations and from the Companys management of the financial aspects of the Proposed Dredging Operation for which the Company is entitled to receive a management fee in accordance with the terms of the Funding Agreement. To date the Company has yet to receive any portion or part of such management fee. The Company has no operational management rights or ongoing funding requirements with respect to GMI or the Proposed Dredging Operation. The Company and GMI have specifically agreed that no term, condition or provision in the Funding Agreement will act to, or be deemed to, create or establish in law, or otherwise, a form of partnership between GMI and the Company nor will the terms, conditions and provisions of the Funding Agreement create, or be deemed to create or establish, in law or otherwise, a joint venture between the Company and GMI with respect to the Proposed Dredging Operation or otherwise. Though GMI carried on limited dredging and land base mining operations in the GMI Concessions during both the 2009 and 2010 operational seasons which only produced approximately 80 ounces of gold, as of the date of these condensed interim unaudited consolidated financial statements Vengas investment in GMI constitutes the Companys main asset. In April of 2011, GMI signed a an operational agreement with Kiwi, Inc., ("Kiwi") a private Liberian based mining company, to fund and manage GMI's dredge mining and planned land based mining operations at several of the GMI Concessions. Pursuant to the terms of the Operational Agreement, Kiwi, Inc. has agreed to provide $10 Million of financing to fund GMI's Planned Land Based Operations (the "Operational Funding") and to make the Operational Funding available for GMI's Planned Land based Operations by September 5, 2011, failing which, the Operational Agreement will be deemed to be null and void. While the Corporation has received confirmation from GMI that the original September, 5, 2011 deadline for making the Operational Funding available for GMI's Planned Land based Operations has been extended, as of the date of these unaudited condensed interim consolidated financial statements the Company has yet to receive confirmation as to when, or even if, the Operational Funding will be made available. Pursuant to its managerial mandate, in July of 2011, Kiwi negotiated the Exploration Agreement between GMI and Tawana an Australian based public company listed on the Australian Stock Exchange (ASX: TAW) wherein GMI granted Tawana exclusive exploration rights to the Sinoe Project. Pursuant to the terms of the Exploration Agreement Tawana paid GMI an initial exclusivity option fee to secure binding exclusivity and exclusive rights to due diligence over what Tawana described as GMI's 'highly prospective ground in Liberia'. Tawana also confirmed that an aggressive field sampling and mapping program would be completed in the Sinoe Project and that it had retained the services of GMIs site manager to build access tracks, additional camp facilities and maintain logistical supplies to facilitate exploration activities. On August 16, 2011, the Company and Tawana announced that Tawana had successfully completed its due diligence and that Tawana was proceeding with its planned acquisition of the exclusive exploration and development rights to the Sinoe Project and that Tawana had further secured an option to purchase outright the GMI Concessions. Pursuant to the terms of the Exploration Agreement Tawana has paid GMI $100,000 to secure
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$
Financial assets: Cash and cash equivalent Prepaids and sundry receivables Held for trading Loans and receivables Fair value Amortized cost 833 35
19,494 87
Financial liabilities: Accounts payable and accrued charges Other financial liabilities Amortized cost 25,980 22,557
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Due to Directors Other financial liabilities Amortized cost 47,750 39,000
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are not observable for the asset or liability, either directly(i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data.
The fair value of cash is measured based on Level 1 inputs referred to in the three levels of the hierarchy noted above. The Company does not have any Level 2 or 3 fair value measurements. There have been no significant transfers between levels. (b) Risk The Company has exposure to a credit risk; liquidity risk; foreign currency risk and interest risk from its use of financial instruments. The Company's cash is held in major Canadian banks and their subsidiaries. Management approves and monitors the risk management process. There has been no change in the Company's risk management process for the period ended September 30, 2012. Credit Risk Credit risk represents the financial loss that the Company would experience if a counterparty to a financial instrument failed to meet its obligations to the Company. Cash consists of cash bank balances held in a major Canadian financial institution. As a result, there is no significant credit risk related to the Company's assets. The carrying amounts of this financial asset represent the maximum credit exposure. Liquidity Risk The Company ensures, including arranging a loan from a director, that there is sufficient capital in order to meet short-term business requirements after taking into account the Company's holdings of cash. The Company's cash is held in major Canadian banks and their subsidiaries. As of the period ended September 30, 2012, the Company had cash of $833 and thus the Company faces a liquidity risk.
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Foreign Currency Risk While the Company's functional currency is the Canadian dollar, the Company is subject to normal market risks including fluctuations in foreign exchange rates. The Company has not entered into any derivatives or contracts to hedge or otherwise mitigate this exposure. As at September 30, 2012, the Company held no financial instruments subject to foreign exchange rates.