CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, Unaudited

Transcription

1 CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2016

2 NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS Under National Instrument , Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the Company s interim 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. 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 financial statements by an entity s auditor. President Ken Booth Kerry Spong Chief Financial Officer November 24, West Pender Street, Vancouver, B.C. V6C 1H2 Tel: (604) Fax: (778)

3 Condensed Interim Consolidated Balance Sheets ASSETS September 30, 2016 December 31, 2015 Current Cash $ 94,340 $ 35,310 Marketable securities (Note 3) Accounts receivable - 1,865 Prepaid expenses 9,563 9,449 Property held for sale (Note 4) - 1, ,913 47,946 Due from AndeanGold Ltd. (Note 7) 1,000 1,000 Equipment (Note 5) - 11,133 $ 104,913 $ 60,079 LIABILITIES Current Trade payables and accrued liabilities (Note 8) $ 43,115 $ 43,765 Long-Term Debt Related Parties (Note 8) 42,500 - Loan Payable Related Party (Note 8) 51,205 - SHAREHOLDERS EQUITY (DEFICIENCY) 136,820 43,765 Share Capital (Note 6a) 32,207,139 32,171,989 Contributed Surplus 1,440,814 1,440,814 Deficit (33,679,860) (33,596,489) Nature of Operations and Going Concern (Note 1) Subsequent Events (Note 10) (31,907) 16,314 $ 104,913 $ 60,079 ON BEHALF OF THE BOARD: Ken Booth Ken Booth Robert Matthews Robert Matthews, Director, Director - See Accompanying Notes -

4 Condensed Interim Consolidated Statements of Changes In Shareholders Equity (Deficiency) For the Nine Months Ended September 30 Share Capital (Note 6a) Contributed Surplus Accumulated Other Comprehensive Income (loss) Deficit Total Balance December 31, 2014 $ 32,171,989 $ 1,440,814 $ - $ (33,080,944) $ 531,859 Other comprehensive loss (Note 3) - - (10,608) - (10,608) Comprehensive loss for the period (79,869) (79,869) Balance September 30, 2015 $ 32,171,989 $ 1,440,814 $ (10,608) $ (33,160,813) $ 441,382 Balance December 31, 2015 $ 32,171,989 $ 1,440,814 $ - $ (33,596,489) $ 16,314 Private placement - units 47, ,500 Flow-through premium (12,350) (12,350) Comprehensive loss for the period (83,371) (83,371) Balance September 30, 2016 $ 32,207,139 $ 1,440,814 $ - $ (33,679,860) $ (31,907) - See Accompanying Notes -

5 Condensed Interim Consolidated Statements Of Comprehensive Loss For the Three and Nine Months Ended September 30 For the Three Months Ended September 30 For the Nine Months Ended September Expenses Accounting and audit $ 5,150 $ 14,750 $ 19,730 $ 39,200 Depreciation ,088 Exploration and evaluation (Note 7) 53,656-54,837 - General exploration ,727 Interest on long-term debt (Note 8) 1,205-1,205 - Legal 9, ,737 1,417 Management fees - 15,000 15,000 45,000 Office rent, and miscellaneous 806 7,180 9,876 22,375 Shareholder information 1,973 (2,557) 2,756 3,241 Stock exchange and filing fees 1,488-11,691 10,556 Transfer agent fees 8,077 5,934 9,417 11,188 Travel ,317 5,011 Loss before Other Items (81,765) (42,262) (136,751) (141,803) Accretion - Due from AndeanGold Ltd. (Note 7) - 13,384-38,245 Flow-through premium realized (Note 6) 12,350-12,350 - Loss on disposal of equipment (Note 5) - - (10,948) - Gain on sale of property (Note 4) - 23,689 51,978 23,689 Loss for the Period (69,415) (5,189) (83,371) (79,869) Other Comprehensive Loss Items that may be reclassified subsequently to profit or loss Unrealized loss on available-for-sale Marketable securities (Note 3) - (7,293) - (10,608) Comprehensive Loss for the Period $ (69,415) $ (12,482) $ (83,371) $ (90,477) Loss Per Share Basic and Diluted $ (0.00) $ (0.00) $ (0.00) $ (0.00) Weighted-Average Number of Shares Outstanding Basic and Diluted 63,254,923 62,779,923 62,939,412 62,779,923 - See Accompanying Notes -

6 Condensed Interim Consolidated Statements of Cash Flows For the Nine Months Ended September 30 Cash Flows from Operating Activities Loss for the period $ (83,371) $ (79,869) Items not involving cash Loss on disposal of equipment 10,948 - Gain on sale of property (51,978) (23,689) Accretion of Due from AndeanGold Ltd. - (38,245) Accrued interest loan payable related party 1,205 - Flow-through premium realized (12,350) - Depreciation 185 2,088 Changes in non-cash working capital items Accounts receivable 1,865 1,436 Prepaid expenses (114) (2,195) Accounts payable and accrued liabilities 41,850 (12,743) (91,760) (153,217) Cash Flows from Investing Activities Properties held for sale - (2,623) Proceeds from sale of property held for sale 53,290 25,000 53,290 22,377 Cash Flows from Financing Activities Share capital issued for cash 47,500 - Loan payable related party 50,000-97,500 - Increase (Decrease) in Cash Position 59,030 (130,840) Cash Position - Beginning of Period 35, ,305 Cash Position - End of Period $ 94,340 $ 52,465 Supplemental Schedule of Non-Cash Financing Transactions Accounts payable reclassified to long-term debt related parties (Note 8) $ 42,500 $ - Flow-through premium realized (Note 5) $ 12,350 $ - - See Accompanying Notes -

7 Notes to Condensed Interim Consolidated Financial Statements September 30, Nature of Operations and Going Concern Gitennes Exploration Inc. ( the Company ) is incorporated in the province of Ontario and has its principal office located at West Pender Street, Vancouver, British Columbia. The Company has staked an exploration property in British Columbia, and has a royalty interest in a mineral property located in Peru, which is also in the exploration stage and is being explored by another party. It has not yet been determined whether these properties contain economic reserves. These financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. Several adverse conditions and material uncertainties cast significant doubt upon the going concern assumption. The business of mining and exploration involves a high degree of risk and there can be no assurance that future exploration and development of these properties will result in profitable mining operations and royalty payments to the Company. The Company currently has no ongoing source of revenue, and requires cash to meet its administrative overhead. As at September 30, 2016, the Company had working capital of $60,798 and an accumulated deficit of $33,679,860. The ability of the Company to continue as a going concern is dependent upon its ability to realize on its assets or raise additional financing. Specifically the Company needs to collect on its convertible debenture from AndeanGold Ltd., and realize proceeds from, or from the sale of, its royalty interest on the Urumalqui project (Notes 7 and 10), and/or obtain the necessary financing to acquire and complete the development of additional mineral properties and to fund future corporate and administrative expenses. While the Company has been successful in the past at raising funds, there can be no assurance that it will be able to do so in the future. These financial statements do not include adjustments that would be necessary should the Company be unable to continue as a going concern, and such adjustments could be material. 2. Significant Accounting Policies Statement of compliance and basis of presentation These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board as applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. These statements do not include all of the information and disclosures required by IFRS for annual financial statements. In the opinion of management, all adjustments and information considered necessary for fair presentation have been included in these financial statements. These condensed interim consolidated financial statements follow the same accounting policies and methods of their application as the most recent annual financial statements and should be read in conjunction with the Company s audited consolidated financial statements including the notes thereto for the year ended December 31, All financial information presented herein is unaudited. The Company s board of directors approved these condensed interim consolidated financial statements for issue on November 24, 2016.

8 Notes to Condensed Interim Consolidated Financial Statements September 30, Significant Accounting Policies - continued Flow-through shares Canadian Income Tax legislation permits an enterprise to issue securities known as flow-through shares, through which the investor can claim the tax deductions arising from the renunciation of the related resource expenditures incurred by the Company. Proceeds from the issuance of flow-through shares are allocated between the offering of the flow-through share and the premium paid for the implied tax benefit received by the investors as a result of acquiring the flow-through shares. The calculated tax benefit is recognized as a liability until the Company incurs the qualifying expenditures, at which point the liability is reversed and recorded as other income in the statement of loss and comprehensive loss. 3. Marketable Securities At September 30, the Company held common shares of AndeanGold Ltd., which were acquired under option agreements relating to the Urumalqui property (Note 7). Details are as follows: Number of shares held 663, ,000 Cost $ 31,732 $ 31,732 Market value beginning of period $ 10 $ 13,260 Change in fair value - (10,680) Market value end of period $ 10 $ 2,580 On October 1, 2015, the common shares of Andean became subject to a Cease-Trade Order issued by the British Columbia Securities Commission due to a default in complying with its continuous disclosure filing requirements. To date, the Cease-Trade Order remains in effect and the shares of Andean remain halted. Until the Cease-Trade Order is lifted, the Company s shares in Andean cannot be traded. Due to the uncertainty surrounding the likelihood and timing of Andean s shares returning for trading, in December 2015 the Company recorded an impairment of these shares to write them down to a nominal value. 4. Property Held for Sale During 2015, the Company acquired title to two properties located in Ontario, Canada, which formed part of an exploration project that was abandoned and written off in The carrying value of the properties consisted of the costs incurred to have the lots transferred from a former joint venture partner to the Company. In September 2015, the Company sold one of the lots for a gross sale price of $25,000. In April 2016, the Company sold the remaining property for a gross sale price of $57,500 and paid a commission of $2,875 and legal costs of $1,335 in respect of the sale.

9 Notes to Condensed Interim Consolidated Financial Statements September 30, Equipment Computer Equipment Furniture and Fixtures Total Cost Balance December 31, 2015 $ 37,375 $ 20,423 $ 57,798 Disposals (i) (37,375) (20,423) (57,798) Balance September 30, 2016 $ - $ - $ - Accumulated depreciation Balance December 31, 2015 $ 28,383 $ 18,282 $ 46,665 Additions Disposals (i) (28,533) (18,317) (46,850) Balance September 30, 2016 $ - $ - $ - Net book value Balance December 31, 2015 $ 8,992 $ 2,141 $ 11,133 Balance September 30, 2016 $ - $ - $ - (i) In January 2016, the Company disposed of office and computer equipment for no proceeds and a loss of $10, Share Capital The authorized share capital of the company consists of an unlimited number of common shares without par value. a) Issued and outstanding: Shares Amount Balance December 31, 2014 and ,779,923 $ 32,171,989 Private placement units 1,900,000 47,500 Flow-through premium - (12,350) Balance September 30, ,679,923 $ 32,207,139 In August 2016, the Company completed a private placement of 1,900,000 units at a price of $0.025 per share for gross proceeds of $47,500. Each unit consisted of one common flow-through share and one non-flow-through share purchase warrant entitling the holder to purchase one additional common share at a price of $0.05 per share for a period of 18 months. The flow-through feature of the shares was valued at $ per share, resulting in a flow-through premium liability of $12,350. The full amount of this premium was realized as income in September 2016 upon the Company completing its qualifying flow-through expenditure requirements.

10 Notes to Condensed Interim Consolidated Financial Statements September 30, Share Capital - continued b) Stock options The Company has a rolling stock option plan under which the Company may grant options to its directors, employees, and other service providers for up to 10% of the outstanding common shares. The board of directors determines the exercise price per share and the vesting period under the plan, subject to TSX Venture Exchange policy. Details of stock option activities are as follows: Weighted Average Exercise Number Price Balance December 31, ,250,000 $ 0.12 Expired (850,000) $ 0.12 Balance December 31, ,400,000 $ 0.12 Expired (550,000) $ 0.20 Balance September 30, ,850,000 $ 0.10 As at September 30, 2016, the Company had stock options outstanding entitling the holders to purchase common shares of the Company as follows: Number Exercise Price Expiry Date 225,000 $ 0.26 June 5, ,000 $ 0.17 August 7, ,750,000 $ 0.05 August 22, ,850,000 The outstanding options have a weighted-average remaining life of 1.78 years. September 30, 2016, all outstanding options had vested and were exercisable. As at During the period, the Company issued 1,900,000 share purchase warrants entitling the holders to purchase 1,900,000 common shares of the Company at a price of $0.05 per share until March 9, The remaining life of these warrants is 1.44 years.

11 Notes to Condensed Interim Consolidated Financial Statements September 30, Exploration and Evaluation The Company expenses exploration and evaluation costs relating to its mineral property interests in the period incurred. Expenditures for the period and cumulative expenditures as at September 30, 2016 are as follows: Total Additions Cumulative Expenditures Acquisition Exploration Hixon, Canada Acquisition and staking $ 2,531 $ - $ 2,531 $ 2,531 Administration and legal Assays - 5,061 5,061 5,061 Camp - 5,646 5,646 5,646 Geological - 14,800 14,800 14,800 Geophysical - 10,859 10,859 10,859 Transportation - 15,440 15,440 15,440 $ 2,531 $ 52,306 $ 54,837 $ 54,837 The Company incurred no exploration and evaluation expenditures during the period ended September 30, Hixon, Canada In June 2016, the Company acquired, through staking, mining claims in the northern part of the Barkerville Gold Belt. The property is subject to a 2% NSR on all hard rock mineral products. Urumalqui, Peru The Company owned a 100% interest in the Urumalqui project situated in north-central Peru. In April 2010 and May 2012, the Company signed option agreements with Andean granting it the right to earn an aggregate 100% interest in Urumalqui. On December 22, 2014, the Company and Andean signed an amendment to the agreements such that Andean obtained a 100% interest in the Urumalqui project by paying the Company $125,000, committing to make staged cash payments totaling $475,000, and granting the Company an uncapped NSR of 1.5% on all metals produced at Urumalqui, with no buy-out or other provisions attached. Andean did not make any of the scheduled cash payments due under the $475,000 receivable. In accordance with the agreement, the balance remaining unpaid at June 21, 2015 was rolled into a convertible debenture carrying an annual interest rate of 6% with interest only due semi-annually, a maturity of three years, and with the balance convertible into shares of Andean, at the Company s option, at a conversion rate of $0.06 per Andean share. During the period of the debenture, Andean must pay 12% of any funds raised by it and certain of its subsidiaries to pay down the debenture. In December 2014, the Company classified this financial instrument as a long-term receivable and estimated its fair value at initial recognition at $346,704. On June 21, 2015, the receivable converted into a convertible debenture. The Company estimated the fair value of the convertible debenture upon initial recognition to be equal to the June 21, 2015 carrying value of the receivable of $371,480. The Company used the effective interest method to accrete the balance over the expected life of the instrument.

12 Notes to Condensed Interim Consolidated Financial Statements September 30, Exploration and Evaluation - continued Urumalqui, Peru - continued In light of the financial condition of Andean as at December 31, 2015, the Company performed an impairment test on the convertible debenture receivable. Management considered all objective evidence supporting Andean s ability to satisfy the debt and consequently recorded an impairment loss of $399,018 to write down the carrying value of the convertible debenture to a nominal value. Accordingly, no accretion has been recorded in the current period ( $38,245). Given the current market price and halted status of Andean s shares (Note 3), the conversion feature of the convertible debenture is considered to be of negligible value. Management remains committed to collecting the $475,000 face value of the debenture, plus accrued interest, as future circumstances permit (Note 10). 8. Related Party Transactions and Key Management Compensation The Company had transactions with related persons or corporations, which were undertaken in the normal course of operations and were measured at the amounts agreed to by the parties. Key management personnel include executive and non-executive directors and executive officers. The compensation paid or payable to key management is as follows: Administrative consulting fees $ 15,000 $ 45,000 Accounting fees 10,500 28,000 $ 25,500 $ 73,000 Accounts payable includes $nil (December 31, $17,850) in accrued administrative consulting and accounting fees due to the chief executive officer and the chief financial officer. During the period, these officers agreed to waive payment of accrued administrative consulting and accounting fees totalling $42,500 for the ensuing twelve months. Accordingly, this amount has been classified as long-term debt in these financial statements. In July 2016, the Company received a loan of $50,000 from the chief executive officer of the Company. The loan is unsecured, bears interest at 10% per annum, and matures on December 31, Accrued interest to September 30, 2016 totals $1, Segmented Information The company currently operates in only one operating segment, that being the mineral exploration industry. The Company is currently exploring a property in British Columbia, Canada and has a royalty interest in an exploration property located in Peru that is under option with Andean. 10. Subsequent Events Subsequent to September 30, 2016, the Company received an interest payment of $10,000 from Andean in respect of its convertible debenture (Note 7). In addition, the Company granted 2,450,000 fiveyear incentive stock options at a price of $0.05 per share to directors and officers.