NEW NADINA EXPLORATIONS LIMITED

Transcription

1 CONDENSED INTERIM FINANCIAL STATEMENTS 3 rd quarter May 31, 2013 (Unaudited Prepared by Management) CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION CONDENSED INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS CONDENSED INTERIM STATEMENTS OF CHANGES IN EQUITY CONDENSED INTERIM STATEMENTS OF CASH FLOWS

2 New Nadina Explorations Limited TSX-V-NNA Box 130, 298 Greenwood Street Greenwood BC V0H 1J0 Phone (250) , Toll Free Fax (250) nadina2005@shaw.ca NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS Under National Instrument , Part 4, subsection 4.3(3), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor. The accompanying unedited interim financial statements of the Company have been prepared by and are the responsibility of the Company s management. The Company s independent auditor has not performed a review of these financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statement by an entity s auditor. Page 2

3 Statement 1 Condensed Interim Statements of Financial Position Canadian Funds Unaudited Prepared by Management May 31, 2013 August 31, 2012 September 1, 2011 ASSETS CURRENT ASSETS Cash and cash equivalents $ 247,898 $ 150,655 $ 629,453 Accrued interest and other amounts receivable 26,670 74,738 42,236 Drilling program advance , , , ,689 Reclamation Bonds (Note 4) 82,500 37,500 32,500 Equipment (Note 5) 171, , ,824 Mineral Properties (Note 6) 38,414 38,414 38,414 $ 566,988 $ 461,222 $ 1,065,427 LIABILITIES CURRENT LIABILITIES ** Accounts payable and accrued liabilities ** 35, , ,665 Due to Kettle River Resources Ltd. 4,510 3,254 4,760 Due to directors (Note 8) 6,536 37,846 5,304 46, , ,729 Flow Through Premium Liability ,000 46, ,729 SHAREHOLDERS' EQUITY Capital stock (Note 7) 13,217,244 11,616,594 10,987,441 Shares allotted and unissued - 45,000 1,600 Reserves (Note 7) 2,648,399 2,426,245 2,649,798 Deficit (15,345,346) (13,880,780) (12,849,141) 520, , ,698 $ 566,988 $ 461,222 $ 1,065,427 ** see Note 11 for corrected amounts for three month period ending November 30, 2011 ON BEHALF OF THE BOARD: Ellen Clements Ellen Clements, Director John Jewitt John Jewitt, Director See accompanying notes to financial statements Page 3

4 Statement 2 Condensed Interim Statement of Loss and Comprehensive Loss Canadian Funds Unaudited Prepared by Management For three months ended May 31, For Nine months ended May 31, Exploration expenses Acquisition $ - - $ 12,340 2,820 Amortization 3,406 3,790 10,218 11,369 Assay analyses 39,929 4,811 53,607 43,862 Camp preparation ,191 - Drilling ** 75,233 69,271 1,005, ,867 General exploration 102,142 62, , ,909 Geochemical / Geophysics - 141,343 4, ,390 Geology 10,768 1,764 58,219 31,278 Property, assessment and taxes Technical reports , ,303 1,350,789 1,307,844 Less: Government assistance - - Less: Joint Venture operator fees - (4,188) - (4,188) Less: Camp rental - - (46,280) (22,421) Contribution from participants - (35,604) (17,429) (35,604) Net exploration expense (Note 6 (c)) ** 231, ,511 1,287,080 1,245,631 Administration expenses Financial consulting Insurance ,478 1,228 Legal, audit and accounting * (27,888) 8,548 32,045 21,219 Licences, fees and other 7, ,150 8,695 Management - 1,350-8,000 Office rent 1,800 1,800 5,400 5,400 Printing, stationery and office 3,912 4,192 29,530 16,999 Stock compensation cost ,131 - Telephone ,198 1,408 Transfer agent fees 7,020 3,567 12,125 6,841 Travel and promotion 1, ,147 7,079 Less: Interest income (2,148) (19) (3,718) (89) (7,679) 20, ,486 76,780 Loss before income taxes 224, ,939 1,464,566 1,322,411 Future income tax recovery flow through shares Net loss and comprehensive loss for the period ** 224, ,939 $ 1,464,566 1,322,411 Loss per share, basic and diluted $ $ (0.01) 0.02 Weighted average common shares outstanding 84,486,568 67,159,828 80,407,588 66,099,890 Deficit, beginning of period $ (15,121,134) (13,278,110) $ (13,880,780) (12,219,638) Net loss (224,212) (263,939) (1,464,566) (1,322,411) Deficit, end of period ** $ (15,345,346) (13,542,049) $ (15,345,346) (13,542,049) * Legal fees related to property expense reallocated from Administration to Exploration. ** see Note 11 for corrected amounts for three month period ending November 30, See accompanying notes to financial statements. Page 4

5 CONDENSED INTERIM STATEMENTS OF CHANGES IN EQUITY Canadian Funds Unaudited Prepared by Management Number of shares Share capital Reserves Shares allotted and unissued Deficit Total Equity September 1, 2011 (Note 11) 63,778,828 $ 10,987,441 $ 2,649,798 $ 1,600 $ (12,849,141) $ 789,698 Shares issued warrants 1,786, , ,000 Fair value of warrants exercised 77,647 (77,374) Net loss for the period (761,955) (761,955) November 30, 2011 (Note 11) 65,564,828 11,242,088 2,572,424 - (13,611,096) 205,016 September 1, ,778,828 $ 10,987,441 $ 2,649,798 $ 1,600 $ (12,849,141) $ 789,698 Shares issued warrants 3,136, ,100 - (1,600) - 379,500 Fair value of warrants exercised - 186,787 (186,787) Shares issued - options 245,000 24, ,500 Fair value of options exercised - 36,766 (36,766) Shares allotted and unissued ,000-45,000 Net loss for the year (1,031,639) (1,031,639) August 31, ,159,828 $ 11,616,594 $ 2,426,245 $ 45,000 $ (13,880,780) $ 207,059 September 1, ,159,828 $ 11,616,594 $ 2,426,245 $ 45,000 $ (13,880,780) $ 207,059 Shares issued-private placement 10,000, , ,050 Fair value-warrants , ,950 Shares issued-flow through 5,500, , ,000 Shares issued 300,000 45,000 - (45,000) - - Shares issued for debt 1,526, , ,600 Fair value-warrants , ,073 Fair value-options , ,131 Net loss for the period (1,464,566) (1,464,566) May 31, ,486,568 13,217,244 2,648,399 - (15,345,346) 520,297 Page 5

6 Statement 3 Condensed Interim Statement of Cash Flows Canadian Funds Unaudited Prepared by Management For Three months ended May 31 For Nine months ended May 31, Cash Flows from Operating Activities Gain (Loss) for the period $ (224,212) (263,939) $ (1,464,566) (1,322,411) Add (Deduct): Items not involving cash Amortization 3,406 3,790 10,218 11,369 Stock compensation 75,131 (220,806) (260,149) (1,379,217) (1,311,042) Changes in non-cash working capital items: Decrease (increase) in accounts receivable and prepaids 74,860 (29,883) 48,068 (13,259) Increase (decrease) in amounts due to director(s) (7,143) 15,371 (31,310) 13,279 Advance for drill program ,000 Increase (decrease) in accounts payable (59,532) 203,515 (177,418) 163,819 Due to Kettle River Resources Ltd. (653) (247) 1,256 (146) (213,274) (71,393) (1,538,621) (997,349) Cash Flows from Financing Activities Proceeds from Issue of shares - - 1,702, ,873 Less: reduction in obligation to issue shares (1,600) - - 1,702, ,273 Investing Activities Purchase of Equipment - - (21,809) - Reclamation Deposits - - (45,000) (66,809) - Increase (decrease) in Cash (213,274) (71,393) 97,243 (593,076) Cash, and cash equivalents, beginning of period Cash and cash equivalents, end of period 461, , , ,453 $ 247,898 36,377 $ 247,898 36,377 Cash and Term deposits represent by 247,898 36,377 36,777 Cash on hand 247,898 Supplementary Schedule Amortization of capital assets to mineral properties 3,406 3,789 10,218 11,368 Non-monetary transactions See accompanying notes to financial statements. Page 6

7 1. NATURE AND CONTINUANCE OF OPERATIONS These financial statements have been prepared on the going concern basis, which assumes the realization of assets and liquidation of liabilities and commitments in the normal course of business. The application of the going concern concept is dependent upon the Company s ability to generate future profitable operations and receive continued financial support from its creditors and shareholders. These financial statements do not give effect to any adjustments that might be required should the Company be unable to continue as a going concern and therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts differing from those reflected in the financial statements. The Company has a working capital ** (see Note 11 for corrected amounts for three month period ending November 30, 2011) of $227,877 as at May 31, 2013 and has accumulated losses of $1,464,566. Since inception, the Company has been successful in funding its operations and to date has net issued shares of 84,486,568 for net proceeds of $13,217,244 averaging $0.156 per share. The share price at May 31, 2013 was $0.025 Cdn. Management plans to continue to pursue equity financing to support operations. Management believes this plan will be sufficient to meet the Company s liabilities and commitments as they become payable over the next twelve months. There can be no assurance that management s plan will be successful. Failure to maintain the support of creditors and obtain additional external equity financing will cause the Company to curtail operations and the Company s ability to continue as a going concern will be impaired. The outcome of these matters cannot be predicted at this time. 2. BASIS OF PRESENTATION These condensed interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting ( IAS 34 ), as issued by the International Accounting Standards Board, and its interpretations. Accordingly, these condensed interim financial statements do not include all of the information and footnotes required by International Financial Reporting Standards ( IFRS ) for complete financial statements for year-end reporting purposes. Results for the period ended May 31, 2013, are not necessarily indicative of future results. These are the Company s first IFRS condensed interim financial statements for part of the period covered by the first IFRS consolidated annual financial statements to be presented in accordance with IFRS for the year ending August 31, Previously, the Company prepared its annual and interim financial statements in accordance with Canadian generally accepted accounting principles ( Canadian GAAP ). These condensed interim financial statements have been prepared on a historical cost basis except for financial instruments classified as available-for-sale, which are stated at their fair value. In addition these condensed interim financial statements have been prepared using the accrual basis of accounting, except for cash flow information. The accounting policies set out below have been applied consistently to all periods presented in preparing the opening balance sheet at September 1, 2010 (note 12) for purposes of transition to IFRS. The accounting policies have been applied consistently by the Company. 3. SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenues and expenses during the period. Although management uses historical experience and its best knowledge of the amount, events or actions to form the basis for judgments and estimates, actual results may differ from these estimates. The most significant accounts that require estimates as the basis for determining the stated amounts include the recoverability of receivables, valuation of inventories, valuation and depreciation of property, plant and equipment and mining interests, valuation of share-based payments, recognition of deferred income tax amounts and provision for restoration, rehabilitation and environmental costs. Cash and cash equivalents Cash and cash equivalents are comprised of cash on hand, deposits in banks and highly liquid investments having terms to maturity of 90 days or less when acquired. Page 7

8 3. SIGNIFICANT ACCOUNTING POLICIES - continued Mineral properties Once a license to explore an area has been secured, expenditures on mineral properties are capitalized to exploration and classified as a non-current asset. Exploration expenditures relate to the initial search for deposits with economic potential and to detailed assessments of deposits or other projects that have been identified as having economic potential. All capitalized exploration and evaluation expenditures are monitored for indications of impairment. Where a potential impairment is indicated, assessments are performed for each area of interest, as described in note 2(i). To the extent that exploration expenditure is not expected to be recovered, it is charged to the results of operations. Once an economically viable reserve has been determined for an area and the decision to proceed with development has been approved, exploration and evaluation assets attributable to that area are first tested for impairment and then reclassified to construction in progress within property, plant and equipment. Subsequent recovery of the resulting carrying value depends on successful development or sale of the undeveloped project. If a project does not prove viable, all irrecoverable costs associated with the project net of any impairment provisions are written off. Equipment Equipment is recorded and amortized on a declining-balance basis at an annual rate of 20% for office equipment and on-site exploration equipment, 30% for computer equipment and vehicles, and 100% for computer software. Amortization for exploration-related equipment is recorded as a deferred property cost. Amortization in the year of acquisition is recorded at one half of its normal rate. Impairment At each reporting period, management reviews all assets for indicators of impairment. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs 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. In assessing value in use, the estimated future cash flows are discounted to their present value. If the recoverable amount of the asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in the profit or loss for that period. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which that asset belongs. Past impairments are also considered at each reporting period and where there is an indication that an impairment loss may have decreased, the recoverable amount is calculated as outlined above to determine the extent of the recovery. If the recoverable amount of the asset is more than its carrying amount, the carrying amount of the asset is increased to its recoverable amount and the impairment loss is reversed in the profit or loss for that period. The increased carrying amount due to reversal will not be more than what the depreciated historical cost would have been if the impairment had not been recognized. Income taxes The Company uses the balance sheet method of accounting for income taxes. Under the balance sheet method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred income tax assets also result from unused loss carry forwards, resource related pools and other deductions. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they 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. Share capital The Company records proceeds from share issuances net of issue costs and any tax effects. Common shares issued for consideration other than cash, are valued based on their market value at the date the agreement to issue shares was concluded. Page 8

9 3. SIGNIFICANT ACCOUNTING POLICIES - continued Financial instruments Financial assets The Company classifies its financial assets in the following categories: fair value through profit or loss, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of financial assets at recognition. i. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are initially recognized at fair value with changes in fair value recorded through income. Cash and cash equivalents, are included in this category of financial assets. ii. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are classified as current assets or non-current assets based on their maturity date. Loans and receivables are carried at amortized cost less any impairment. Loans and receivables comprise trade and other receivables. iii. Available-for-sale financial assets Available-for-sale (AFS) financial assets are non-derivatives that are either designated as available-for-sale or not classified in any of the other financial asset categories. Changes in the fair value of AFS financial assets are recognized as other comprehensive income and classified as a component of equity. Management assesses the carrying value of AFS financial assets at each reporting period and any impairment charges are also recognized in profit or loss. When financial assets classified as available-for-sale are sold, the accumulated fair value adjustments recognized in other comprehensive income are included in profit and loss. Financial liabilities The Company s financial liabilities are classified as borrowings and other financial liabilities. Borrowings and other financial liabilities are non-derivatives and are recognized initially at fair value, net of transaction costs incurred and are subsequently stated at amortized cost. Any difference between the amounts originally received, net of transaction costs, and the redemption value is recognized in the income statement over the period to maturity using the effective interest method. Borrowings and other financial liabilities are classified as current or non-current based on their maturity date. Financial liabilities include trade accounts payable, due to directors and loan payable. Share-based payments The Company s Stock Option Plan allows employees and consultants to acquire shares of the Company. Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The fair value of the share-based payment is measured using the Black-Scholes option pricing model. The fair value of the share based payment is recognized as an expense or capitalized to mineral property with a corresponding increase in contributed surplus. Consideration received on the exercise of stock options is recorded as share capital and the related reserves amount is transferred to share capital. Loss per share Basic loss per share is calculated by dividing the loss available to common shareholders by the weighted average number of common shares outstanding in the period. Diluted loss per share is calculated by the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding for the calculation of diluted loss per share assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the period. Where the effects of including all outstanding options and warrants would be antidilutive, no dilution is calculated and the diluted loss per share is presented as the same as basic loss per share. Page 9

10 4. RECLAMATION DEPOSITS Included in reclamation deposits of $82,500 ( $32,500) are: three guaranteed investment certificates pledged of $5,000 each and one guaranteed investment certificate pledged of $4,000 plus a non-interest bearing cash deposit of $4,500 with the Province of British Columbia Department of Energy and Mines (total $23,500) to cover proposed mining disturbance for the Silver Queen property. a security deposit of $59,000 was paid to Mackenzie Valley Land & Water Board as a condition of a Land Use Permit, for work in the Northwest Territories on the Monument Diamond property. 5. PROPERTY, PLANT AND EQUIPMENT Amortization Rate Cost Accumulated Amortization May 31, 2013 Net Book Value August 31, 2012 Net Book Value Buildings 4%-5% 173,345 42, , ,273 Camp equipment 20% 74,959 34,075 40,884 37,642 $ 248,304 $ 76,798 $ 171,506 $ 159, MINERAL PROPERTIES Acquisition costs and exploration expenditures relating to mineral properties are written off as incurred. Payments received for exploration rights on the Company s mineral properties are treated as cost recoveries and are credited to reduce the cost of exploration expenditures related to the mineral claims with any excess, on an aggregate basis, recorded as income. Option payments are recorded as incurred. Ongoing reclamation and site restoration costs including site maintenance and caretaking are expensed when incurred Saskatchewan property (50% interest) (Note 6a) $ - $ - Silver Queen property (100% interest) (Note 6b) 38,413 38,413 Monument Diamond property (57.49% interest) (Note 6c) 1 1 $ 38,414 $ 38,414 (a) Saskatchewan property (50%) An area of 54 acres has been staked providing adequate coverage. The lease is valid until December 11, 2014 and is subject to an annual rental fee of $2 per acre. To date, no income has been received from the lease. (b) Silver Queen property, British Columbia - Omineca Mining Division (100%) In December 2011 the Company acquired 19 tenure claims contiguous to the claim block. The property of 17,089ha near Owen Lake contains 17 crown-granted and 42 tenure claims. The property is south of Houston, British Columbia and accessible via an all season forestry road. The property has been explored since early 1900 s with limited production from the north end of the NO3 Vein during the early 1970 s. Since that time significant exploration has proven extended length and depth of different vein mineralization. In 2011 a hidden copper-molybdenum-gold porphyry deposit was discovered by diamond drilling subsequent to geophysical results. Geophysics to the north and south conducted in February/March 2012 closed the extent of the large anomaly indicating four defined areas, two of which are near surface. 3D modelling of the target has determined the 2011drilling did not test the core of the target. (c) Monument Diamond property, Lac de Gras NWT (57.49%) In May 2002, the Company applied, through Kennecott Canada Exploration Inc. ( Kennecott ) to take the DHK 16, 17, and 18 claims abandoned by the DHK Diamonds Inc. ( DHK ) participants to lease. The Company entered a property release agreement signed by independent directors of DHK allowing a 1% gross overriding royalty payable to each of DHK and RoyalGold, Inc. (assigned/purchased Kennecott-Rio Tinto / International Royalty Corp). Dr. Christopher and Mrs. J. Jennings ( Jennings ) hold a 22.11% participating interest with the Company holding 57.49%. Archon Minerals Limited contributed $15,000 to acquire a 10% working interest and acquired an additional 10.4% interest by contributing 20.4% of project costs. In September 2002, the on Page 10

11 6. MINERAL PROPERTIES - continued (c) Monument Diamond property, Lac de Gras NWT (57.49%) continued ground survey requirements for the Canada Mining Lease over the three claim blocks covering 3, hectares (7,747 acres) were completed as was transfer of title. A new five-year Type A Land Use permit was issued by the Wek eezhii Land and Water Board, dated September 5, 2012, with an expiry date of September 4, Exploration Expenditures by Property Saskatchewan Silver Queen Monument For the period ended property property Diamond property May 31, 2013 Note 5(a) Note 5(b) Note 5(c) Total Acquisition $ - $ 12,340 $ - $ 12,340 Amortization - 10,218-10,218 Assay analyses - 53,607-53,607 Camp preparation - 57,191-57,191 Drilling ** - 1,005,836-1,005,836 General exploration - 147, ,166 Geochemical / Geophysics - 4,713-4,713 Geology - 58,219-58,219 Property, assessment and taxes Sampling Technical reports ,349, ,350,789 Less: Government assistance Camp rental - (46,280) - (46,280) Less: Reimbursement (Contributions) from participants - - (17,429) (17,429) Net Exploration $ 118 $ 1,303,496 $ (16,534) $ 1,287,080 Exploration Expenditures by Property For the period ended May 31, 2012 Saskatchewan property Note 5(a) Silver Queen property Note 5(b) 2012 Monument Diamond property Note 5(c) Total Acquisition $ - $ 2,821 $ - $ 2,821 Amortization - 11,368-11,368 Assay analyses - 43,862-43,862 Camp preparation Drilling - 722,867 50, ,867 General exploration ,290 42, ,910 Geochemical / Geophysics - 298, ,389 Geology - 31,278-31,278 Property, assessment and taxes Technical reports ,215,116 92,605 1,307,844 Less: Government assistance Less: Reimbursement Camp rental (Contributions) from participants - - (35,604) (35,604) Net Exploration $ 123 $ 1,215,116 $ 57,001 $ 1,272,240 ** see Note 11 for corrected amounts for three month period ending November 30, 2011 Page 11

12 7. SHARE CAPITAL a) Authorized: unlimited common shares without par value b) Issued and fully paid: Number of Shares Value Number of Shares Value Balance at beginning of period 67,159,828 $ 11,616,594 63,778,828 $ 10,450,938 Options exercised at $ ,000 24,500 Private placements (2) 10,000, , Shares issued for debt (1) 1,526, , Shares issued-flow through (2) 5,500, , Shares issued 300,000 45,000 3,136, ,100 (1) Fair value of warrants exercised ,483 Fair value of options exercised ,777 Balance at end of period 84,486,568 $ 13,217,244 67,159,828 $ 11,042,798 (1) On September 21, 2012, 1,526,670 shares issued for debt settlement to one creditor at $0.10 per share, with a hold period to January 22, Also issued 1,526,670 warrants, good for two years, with an exercise price of $0.10 for year one and price of $0.15 for year two. Ref NR September 7, (2) On November 6, ,500,000 shares issued for private placement (10,000,000 non-flow through and 500,000 flow through). The non-flow through placement included the issue of 5,000,000 warrants, good for 2 years, with an exercise price of $0.15. The hold period for free trading is to March 7, On November 14, ,000,000 flow-through shares issued, these have hold period to March 15, Ref NR November 14 and November 15, c) Warrants: The continuity of share purchase warrants is as follows: Number Warrants of Weighted Price $ Number warrants of Weighted Price $ Opening balance 1,100,000 11,919, Granted 6,526, Expired / exercised (1,100,000) (7,212,000) Closing balance 6,526, ,707, Weighted average years to expiry d) Share purchase options: The Company has established a share purchase option plan whereby the board of directors may from time to time grant options to directors, officers, employees or consultants. Options granted must be exercised no later than ten years from date of grant or such lesser period as determined by the Company s board of directors. The exercise price of options is determined by the Board of Directors and shall not be lower than the allowable discounted closing market price of the shares on the business day immediately prior to the grant date. As at May 31, 2013, there were 6,250,000 (2012 4,450,000) options outstanding and fully vested. Page 12

13 7. SHARE CAPITAL - continued d) Share purchase options: - continued Summary of the Company s options at May 31, 2013: Number of Options Weighted Price $ Number Options of Weighted Price $ Opening balance 4,450, ,140, Granted 2,500, Exercised/cancelled (50,000) ,000 Expired (650,000) Closing balance 6,250, ,450, Weighted average years to expiry 3.49 yrs yrs (a) The vesting schedules vary depending on the recipient guidelines in Rolling Share Option Plan. (b) Options granted on July 21, 2011 have no vesting periods and are fully vested. e) Stock based compensation The fair value of options granted is estimated on the date of grant using the Black Scholes Option Pricing Model with the following assumptions: Date of Grant Granted on July 21, 2011 Granted on February 14, 2013 Average risk free interest rate 2.03 % 1.32 % Average expected option life 5 years 5 years Stock volatility based on trading history 71.63% 74.28% Dividend payments during life of option Nil Nil The Black-Scholes Option Pricing Model was created for use in estimating the fair value of freely tradable, fully transferable options. The Company s employee stock options have characteristics significantly different from those of traded options, and because changes in the highly subjective input assumptions can materially affect the calculated values, management believes that the accepted Black-Scholes model does not necessarily provide a reliable measure of the fair value of the Company s stock option awards. On March 18, 2008, 750,000 options were granted to purchase shares at $0.25 per share. On January 27, 2010 the TSX approved the re-pricing of these options to $0.10. The total value was calculated to be $124,125 and this amount recorded in the Company accounts as stock compensation expenses in prior periods. On March 20, 2009, 700,000 options were granted to purchase shares at $0.12 per share. The total value was calculated to be $50,299 and this amount recorded in the Company accounts as stock compensation expenses in prior periods. On November 16, 2009, 200,000 options were granted to purchase shares at $0.10 per share. The total value was calculated to be $10,429 and this amount recorded in the Company accounts as stock compensation expenses in prior periods. On July 21, 2011, 3,000,000 options were granted to purchase shares at $0.15 per share. The total value was calculated to be $395,400 on the grant date. On February 14, 2013, 2,500,000 options were granted to purchase shares at $0.10 per share. The total value was calculated to be $75,131 on the grant date. Page 13

14 7. SHARE CAPITAL - continued f) Reserves The continuity of reserves is as follows: Opening balance, September 1,2011 and 2010 $ 2,649,798 $ 2,025,975 Fair value of options granted - 395,400 Fair value of options exercised (36,766) - Fair value of warrants issued - 243,573 Fair value of warrants exercised (186,787) (15,150) Closing balance August 31, 2012 and 2011 $ 2,426,245 $ 2,649,798 Fair value of options - granted (exercised) 75,131 (36,777) Fair value of warrants issued (exercised) 147,023 (149,210) Closing balance May 31, 2013 and ,648,399 2,463, RELATED PARTY TRANSACTIONS As at May 31, 2013 unsecured advances owing to directors and shareholders and bearing no interest were $6,536. For the period ended May 31 th the Company incurred the following expenses with related parties: Charged by Kettle River for various office and secretarial services, exploration reimbursements, rent and supplies $ 43,065 $ 39,520 Charged by the President s private company for office, administrative and exploration management services. 119,859 64,946 Charged by a director for geological consulting services 1,800 1,800 Charged by a director s private company for office, management and miscellaneous services. - 8,000 Total $ 164,724 $ 114,266 The above transactions have been recorded at their exchange amount, which is the amount of consideration agreed upon by the related parties. 9. SEGMENTED INFORMATION9 No segmented information is presented because the Company is solely involved in mineral exploration. 10. SUBSEQUENT EVENTS No subsequent events Page 14

15 11. NOTATION FOR CORRECTION TO FIGURES FOR THREE MONTH PERIOD TO NOVEMBER 30, 2011 The financial statements, as previously reported for the three months ending November 30, 2011, contained a posting error which affected current liabilities, exploration expenses and consequently, net loss the period. Through an oversight, payment amounts totaling $375,000 were added to drilling expenses rather than deducted from accounts payable. In reviewing the financial statements for the three months ending November 30, 2011, readers should take note of the corrected figures in the following accounts and account totals: As Previously Corrected Stated Amount Accounts payable and accrued liabilities 645, ,143 Total current liabilities 671, ,053 Explorations expenses - Drilling 1,036, ,831 Net exploration expense 1,118, ,157 Net loss and comprehensive loss for the period 1,136, ,955 Working capital(working capital deficit) (316,932) 58,068 Deficit, end of period (13,356,593) (12,981,593) 12. FIRST TIME ADOPTION OF IFRS As stated in Note 2, these condensed interim financial statements are for the period covered by the Company s first annual financial statements prepared in accordance with IFRS. The accounting policies in Note 3 have been applied in preparing the condensed interim financial statements for the nine months ended May 31, 2013 and 2012, the financial statements for the year ended August 31, 2012 and the opening IFRS statement of financial position on September 1, 2010, the Transition Date. In preparing the opening IFRS statement of financial position and the financial statements for the interim period ended May 31, 2013, the Company found it unnecessary to adjust amounts reported previously in financial statement that were prepared in accordance with GAAP. An explanation of how the transition from GAAP to IFRS has affected the Company s financial position, financial performance and cash flows is set out in the following tables. The guidance for the first time adoption of IFRS is set out in IFRS 1. IFRS 1 provided for certain mandatory exceptions and optional exemptions for the first time adopters of IFRS. The Company elected to take the following IFRS 1 optional exemptions: (a) To apply the requirements of IFRS 3, Business Combinations, prospectively from the Transition Date; (b) To apply the requirements of IFRS 2, Share-based payment, only to equity instruments granted which had not vested as of the Transition Date; and (c) To transfer all foreign currency translation differences, recognized as a separate component to equity, to deficit as at the Transition Date including those foreign currency differences which arose on adoption of IFRS. Additionally, in accordance with IFRS 1, an entity s estimates under IFRS at the date of transition to IFRS must be consistent with estimates made for the same date under previous GAAP, unless there is objective evidence that those estimates were in error. The Company s IFRS estimates as of September 1, 2010 are consistent with the GAAP estimates for the same date. Financial Statement Impact on Transition to IFRS IFRS employs a conceptual framework that is similar to Canadian GAAP. The adoption of IFRS has not changed the Company s cash flows, Balance Sheets, and Statements of Comprehensive Loss. Therefore, no reconciliation of shareholder s equity and net income is provided as amounts reported under Canadian GAAP are the same as under IFRS. Page 15