Spur Ventures Inc.
Consolidated Financial Statements (Unaudited)
For the three months ended June 30, 2006 and 2005
(Expressed in U.S. dollars)
| Spur Ventures Inc. |
| Consolidated Balance Sheets |
| Expressed in U.S. dollars | | June 30, | | | December 31, | |
| | | 2006 | | | 2005 | |
| | | (Unaudited) | | | (Restated) | |
| ASSETS | | | | | | |
| Current | | | | | | |
| Cash and cash equivalents | $ | 19,215,593 | | $ | 24,988,099 | |
| Short-term investments | | 10,729,547 | | | 5,767,612 | |
| Accounts receivable | | 570,923 | | | 401,787 | |
| Inventory | | 2,919,994 | | | 2,604,680 | |
| Prepaid expenses | | 174,003 | | | 280,268 | |
| Due from YPCC (Note 5) | | 303,764 | | | 316,327 | |
| | | 33,913,824 | | | 34,358,773 | |
| Fixed assets - net(Note 3) | | 8,713,945 | | | 8,574,372 | |
| Land use right - net(Note 4) | | 710,405 | | | 691,583 | |
| Mineral properties(Note 2) | | 2,924,132 | | | 2,557,660 | |
| Other assets | | 471,715 | | | 420,871 | |
| | $ | 46,734,021 | | $ | 46,603,259 | |
| LIABILITIES | | | | | | |
| Current | | | | | | |
| Accounts payable and accrued liabilities | $ | 1,911,343 | | $ | 2,106,716 | |
| Customer deposits | | 98,022 | | | 139,963 | |
| Other payables | | 225,414 | | | 273,611 | |
| Bank loans (Note 6) | | 2,690,012 | | | 2,664,684 | |
| | | 4,924,791 | | | 5,184,974 | |
| Minority interest | | 337,826 | | | 506,671 | |
| SHAREHOLDERS' EQUITY | | | | | | |
| Capital stock(Note 7) | | | | | | |
| Authorized - | | | | | | |
| Unlimited number of Common shares without par value | | | | | | |
| Unlimited number of Preferred shares without par value | | | | | | |
| Issued - | | | | | | |
| 58,740,520 Common shares (2005: 58,090,520) | | 44,211,521 | | | 43,646,054 | |
| Stock options and warrants | | 2,708,917 | | | 2,649,685 | |
| Cumulative translation adjustment | | 4,593,806 | | | 3,601,095 | |
| Deficit | | (10,042,840 | ) | | (8,985,220 | ) |
| | | 41,471,404 | | | 40,911,614 | |
| | $ | 46,734,021 | | $ | 46,603,259 | |
| APPROVED BY THE DIRECTORS | | |
| | | |
| Robert G. Atkinson | | Robert J. Rennie |
| Director | | Director |
(The accompanying notes are an integral part of these consolidated financial statements)
2
| Spur Ventures Inc. |
| Consolidated Statements of Operations and Deficit (Unaudited) |
| | | Three months ended | | | Six months ended | |
| Expressed in U.S. dollars | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
| | | | | | | | | | | | | |
| Sales | $ | 1,020,136 | | $ | 2,099,865 | | $ | 3,840,986 | | $ | 3,825,539 | |
| Cost of sales | | 1,171,584 | | | 2,049,960 | | | 3,795,674 | | | 3,493,543 | |
| Gross Profit / (Loss) | | (151,448 | ) | | 49,905 | | | 45,312 | | | 331,996 | |
| | | | | | | | | | | | | |
| Expenses | | | | | | | | | | | | |
| Consulting fees | | 42,518 | | | 15,756 | | | 82,264 | | | 78,511 | |
| Depreciation and amortization | | 107,310 | | | 54,147 | | | 124,183 | | | 67,985 | |
| Interest | | 50,438 | | | 39,802 | | | 98,668 | | | 89,506 | |
| Office and miscellaneous | | 106,842 | | | 80,402 | | | 250,323 | | | 124,928 | |
| Printing and mailing | | 25,728 | | | 30,514 | | | 33,173 | | | 32,122 | |
| Professional fees | | 140,040 | | | 94,131 | | | 210,502 | | | 112,681 | |
| Rent | | 64,868 | | | 28,334 | | | 94,314 | | | 39,303 | |
| Repairs and maintenance | | 1,385 | | | 35,865 | | | 1,937 | | | 39,719 | |
| Selling expenses | | 53,308 | | | 73,223 | | | 167,729 | | | 126,471 | |
| Stock-based compensation expenses | | 63,068 | | | 161,141 | | | 157,414 | | | 346,800 | |
| Transfer agent and filing fees | | 17,285 | | | 10,642 | | | 29,200 | | | 13,318 | |
| Travel, advertising and promotion | | 70,223 | | | 101,943 | | | 94,553 | | | 153,653 | |
| Wages and benefits | | 209,833 | | | 137,219 | | | 361,940 | | | 234,877 | |
| | | 952,846 | | | 863,119 | | | 1,706,200 | | | 1,459,874 | |
| | | | | | | | | | | | | |
| Operating loss | | (1,104,294 | ) | | (813,214 | ) | | (1,660,888 | ) | | (1,127,878 | ) |
| | | | | | | | | | | | | |
| Other income and expenses | | | | | | | | | | | | |
| Interest income | | 243,557 | | | 2,659 | | | 458,267 | | | 50,316 | |
| Foreign exchange gain (loss) | | (42,495 | ) | | (100 | ) | | 5,994 | | | (574 | ) |
| | | 201,062 | | | 2,559 | | | 464,261 | | | 49,742 | |
| | | | | | | | | | | | | |
| Loss before minority interest | | (903,232 | ) | | (810,655 | ) | | (1,196,627 | ) | | (1,078,136 | ) |
| Minority interest | | 85,076 | | | 97,643 | | | 139,008 | | | 69,489 | |
| Loss for the period | | (818,156 | ) | | (713,012 | ) | | (1,057,619 | ) | | (1,008,647 | ) |
| | | | | | | | | | | | | |
| Deficit, Beginning of period, restated (Note 1) | | (9,224,684 | ) | | (6,462,049 | ) | | (8,985,221 | ) | | (6,166,414 | ) |
| | | | | | | | | | | | | |
| Deficit, End of period | $ | (10,042,840 | ) | $ | (7,175,061 | ) | $ | (10,042,840 | ) | $ | (7,175,061 | ) |
| | | | | | | | | | | | | |
| Basic and diluted loss per common share | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.03 | ) |
| | | | | | | | | | | | | |
| Weighted average number of common shares outstanding | | 58,340,520 | | | 40,390,043 | | | 58,216,211 | | | 40,141,897 | |
| | | | | | | | | | | | | |
| (The accompanying notes are an integral part of these consolidated financial statements) | | | | | | | |
| Spur Ventures Inc. |
| Consolidated Statements of Cash Flows (Unaudited) |
| | | Three months ended | | | Six months ended | |
| Expressed in U.S. dollars | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
| | | | | | | | | | | | | |
| Cash flows from operating activities | | | | | | | | | | | | |
| Net loss | $ | (818,156 | ) | $ | (713,012 | ) | $ | (1,057,619 | ) | $ | (1,008,648 | ) |
| Items not affecting cash | | | | | | | | | | | | |
| Depreciation and amortization | | 168,449 | | | 123,578 | | | 395,845 | | | 199,914 | |
| Stock-based compensation | | 63,068 | | | 161,141 | | | 157,414 | | | 346,800 | |
| Unrealized foreign exchange (gain)/loss | | 42,495 | | | - | | | (4,761 | ) | | - | |
| Loss on disposal of fixed assets | | - | | | 3,297 | | | 41,633 | | | 4,239 | |
| Net changes in non-cash working capital | | | | | | | | | | | | |
| Accounts receivable | | 258,990 | | | 105,607 | | | (195,895 | ) | | 26,613 | |
| Inventory | | (429,092 | ) | | (41,426 | ) | | (308,021 | ) | | (75,799 | ) |
| Prepaid expenses | | 173,321 | | | (410,388 | ) | | 135,693 | | | (402,245 | ) |
| Accounts payable and accrued liabilities | | 181,488 | | | 421,248 | | | (216,890 | ) | | 21,689 | |
| Customers deposits | | (16,883 | ) | | (27,672 | ) | | (46,668 | ) | | (268,992 | ) |
| Minority interest | | (85,076 | ) | | (97,643 | ) | | (136,787 | ) | | (69,489 | ) |
| Other Operating | | (123,298 | ) | | 2,533 | | | (49,237 | ) | | 2,533 | |
| | | (584,694 | ) | | (472,737 | ) | | (1,285,293 | ) | | (1,223,385 | ) |
| Cash flows from investing activities | | | | | | | | | | | | |
| Capital expenditures | | (283,756 | ) | | (457,575 | ) | | (335,093 | ) | | (1,431,498 | ) |
| Acquisition of other assets | | (28,533 | ) | | - | | | (71,422 | ) | | - | |
| Proceeds from disposal of assets and investments | | - | | | (31,599 | ) | | - | | | 4,459,799 | |
| Purchase of short-term investments | | 185,653 | | | - | | | (4,992,121 | ) | | - | |
| | | (126,636 | ) | | (489,174 | ) | | (5,398,636 | ) | | 3,028,301 | |
| Cash flows from financing activities | | | | | | | | | | | | |
| Issue of shares for cash - net of issue costs | | 440,478 | | | 629,048 | | | 461,275 | | | 665,723 | |
| Bank indebtedness repayment | | - | | | (7 | ) | | - | | | (604,113 | ) |
| | | 440,478 | | | 629,041 | | | 461,275 | | | 61,610 | |
| | | | | | | | | | | | | |
| Effect of exchange rate changes | | 379,327 | | | (92,494 | ) | | 450,149 | | | (105,982 | ) |
| | | | | | | | | | | | | |
| Increase (decrease) in cash and cash equivalents | | 108,475 | | | (425,364 | ) | | (5,772,505 | ) | | 1,760,544 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents, beginning of period | | 19,107,118 | | | 10,066,420 | | | 24,988,098 | | | 7,880,512 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents, end of period | | 19,215,593 | | $ | 9,641,056 | | $ | 19,215,593 | | $ | 9,641,056 | |
| | | | | | | | | | | | | |
| Supplemental cash flow disclosure | | | | | | | | | | | | |
| Interest received | | 257,770 | | | 221 | | | 433,589 | | | 99,854 | |
| Interest paid | | (33,491 | ) | | (27,242 | ) | | (77,364 | ) | | (82,766 | ) |
(The accompanying notes are an integral part of these consolidated financial statements)
4
| Spur Ventures Inc. |
| Notes to Consolidated Financial Statements (Unaudited, except annual financial |
| statements ended December 31, 2005) |
| June 30, 2006 and 2005 |
1. Basis of Presentation
Change in Reporting Currency to the U.S. dollar
Effective January 1, 2006, Spur Ventures Inc. (the “Company”) changed its reporting currency to the U.S. dollar (USD). The change in reporting currency is to better reflect the company’s business activities and to improve investors’ ability to compare the Company’s financial results with other publicly traded businesses in the industry. The Company holds most of its cash balances in USD deposits and conducts its Chinese operations in Chinese Renminbi (RMB). RMB revalued against the USD by 2.1% in July 2005 and introduced a managed float. Furthermore, the international currency of the agribusiness and mining industries is the USD. Prior to January 1, 2006, the Company reported its annual and quarterly consolidated balance sheets and the related consolidated statements of operations and shareholders’ equity and cash flows in the Canadian dollar (CAD). The related financial statements and corresponding notes prior to January 1, 2006 have been restated to USD for comparison to the 2006 financial results.
These previous consolidated financial statements have been translated to the USD in accordance with EIC 130 “Translation Method when the Reporting Currency Differs from the Measurement Currency or There is a Change in the Reporting Currency”. These guidelines require that the financial statements be translated into the reporting currency using the current rate method. Under this method, the income statement and the cash flow items for each year are translated into the reporting currency using the average rate in effect for the period, and assets and liabilities are translated using the exchange rate at the period end. All resulting exchange differences are reported as a separate component of shareholders’ equity titled Cumulative Translation Adjustment.
Principles of consolidation and preparation of financial statements
The accompanying interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”). These interim consolidated financial statements do not include all disclosures required under Canadian GAAP for annual audited financial statements. Accordingly, they should be read in conjunction with the notes to the Company’s audited consolidated financial statements for the year ended December 31, 2005.
The Company has used the same accounting policies as disclosed in the audited financial statements included in the Company’s latest annual report, except as disclosed in Note 1.
The preparation of the consolidated financial statements in compliance with GAAP requires management to make estimates and assumptions. These estimates affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods. Actual results could differ from these estimates.
In the opinion of management, all adjustments considered necessary for fair presentation of the results for the periods presented have been reflected in the consolidated financial statements.
The unaudited consolidated financial statements include Spur Ventures Inc., its 72.18% owned Joint Venture Company, Yichang Spur Chemicals Ltd. (“YSC”), since the date of acquisition, its
| Spur Ventures Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2006 and 2005 |
78.72% owned Joint Venture company, Yichang Maple Leaf Chemicals Ltd. (“YMC”) (Note 2) and its wholly owned subsidiary, Spur Chemicals (BVI) Inc. All significant inter-company transactions and accounts have been eliminated. YSC is dependent on Spur’s cash injections for working capital and repayments of loans, to which some of YSC’s assets are pledged as collateral at June 30, 2006. (Note 6)
Certain items have been reclassified to conform to the current period presentation. There is no effect on total results of operations or shareholders’ equity.
Foreign currency translations
While the Company’s fertilizer subsidiary YSC was considered a self-sustaining operation prior to March 31, 2006, it is now considered an integrated operation due to a significant change in the financial condition of YSC. Foreign currency translation of YSC was prospectively changed from the current rate method to temporal method. Under the temporal method, monetary assets and liabilities are translated at period-end exchange rates and items included on the statements of operations and cash flows are translated at rates in effect at the time of the transaction. Non-monetary assets and liabilities are translated at historical rates. The gain or loss on translation is charged to the statement of operations.
YMC, the Company’s mining subsidiary, is considered an integrated operation and is translated from RMB into the CAD using the temporal method. Under this method, monetary assets and liabilities are translated at period-end exchange rates and items included on the statements of operations and cash flows are translated at rates in effect at the time of the transaction. Non-monetary assets and liabilities are translated at historical rates. The gain or loss on translation is charged to the statement of operations.
2. Mineral Properties
| Yichang Phosphate Project | | | | | | | |
| | China | | Canada | | Total |
| | RMB | USD | | CAD | USD | | USD |
| Exploration and development costs | | | | | | | |
| Balance, December 31, 2005 (Restated) | 4,727,631 | 592,405 | | 2,291,290 | 1,965,254 | | 2,557,660 |
| Project Costs | 1,451,112 | 211,960 | | 72,146 | 154,512 | | 366,472 |
| Balance, June 30, 2006 | 6,178,743 | 804,365 | | 2,363,436 | 2,119,766 | | 2,924,132 |
3. Fixed Assets
| | June 30, 2006 | | December 31, 2005 (Restated) |
| | | Accumulated | Net Book | | | Accumulated | Net Book |
| | Cost | Amortization | Value | | Cost | Amortization | Value |
| | | | | | | | |
| Building | $ 3,818,255 | $ 281,678 | $ 3,536,577 | | $ 3,373,561 | $ 188,963 | $ 3,184,598 |
| Construction in progress | 273,571 | - | 273,571 | | 500,604 | - | 500,604 |
| Machinery and equipment | 5,502,358 | 806,706 | 4,695,652 | | 5,262,997 | 548,523 | 4,714,474 |
| Motor vehicle | 142,566 | 33,591 | 108,975 | | 103,180 | 23,655 | 79,525 |
6
| Spur Ventures Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2006 and 2005 |
| Office equipment and furniture | | 107,785 | | | 37,375 | | | 70,410 | | | | 90,851 | | | 26,419 | | | 64,432 | |
| Leasehold improvement | | 33,835 | | | 5,075 | | | 28,760 | | | | 32,357 | | | 1,618 | | | 30,739 | |
| | | | | | | | | | | | | | | | | | | | |
| Total Fixed Assets | $ | 9,878,370 | | $ | 1,164,425 | | $ | 8,713,945 | | | $ | 9,363,550 | | $ | 789,178 | | $ | 8,574,372 | |
4. Land Use Rights
| | | | | | June 30, 2006 | | | | | | | December 31, 2005(Restated) | |
| | | | | | Accumulated | | | Net Book | | | | | | | Accumulated | | | Net Book | |
| | | Cost | | | Amortization | | | Value | | | | Cost | | | Amortization | | | Value | |
| | | | | | | | | | | | | | | | | | | | |
| Land Use Rights | $ | 756,165 | | $ | 45,760 | | $ | 710,405 | | | $ | 723,120 | | $ | 31,537 | | $ | 691,583 | |
5. Due from YPCC
As of June 30, 2006, the Company had the following amounts outstanding with minority shareholders of YSC, Yichang Phosphorous Chemical Industries Group Co. (“YPCC”):
| | | June 30, 2006 | | | December 31, 2005(Restated) | |
| | | RMB | | | USD | | | RMB | | | USD | |
| Ag Bank loan (Note 6) | | 6,900,000 | | | 863,306 | | | 6,900,000 | | | 855,178 | |
| | | | | | | | | | | | | |
| Loan from YPCC | | (4,475,375 | ) | | (559,944 | ) | | (4,475,375 | ) | | (554,672 | ) |
| Net exposure of YSC on loans | | 2,424,625 | | | 303,362 | | | 2,424,625 | | | 300,506 | |
| Other amounts due from YPCC and its subsidiaries | | 3,216 | | | 402 | | | 127,662 | | | 15,821 | |
| Total due from YPCC | | 2,427,841 | | | 303,764 | | | 2,552,287 | | | 316,327 | |
The three party YPCC-YSC-Agricultural Bank loan situation has now been resolved. YPCC cancelled the loan of RMB 4,475,375 ($559,944) owed by YSC, YSC applied this loan as a credit against the RMB 6,900,000 ($863,306) owed by YPCC. YSC made a repayment of RMB 4,280,073 ($535,509) to the Agricultural Bank on August 14, 2006 to the Agricultural bank for a principal of RMB 4,000,000 ($500,467) and related interest. The remaining loan balance of RMB 2,900,000 ($362,839) will be repaid by December 2006.
6. Bank Loans
| Lender | | Principal Amount | | | Annual interest | | | | |
| | | RMB | | | USD | | | rate | | | Maturity date | |
| | | | | | | | | | | | | |
| ICBC Bank | | 11,900,000 | | | 1,488,891 | | | 5.84% | | | October 27, 2005 | |
| ICBC Bank | | 2,700,000 | | | 337,815 | | | 5.58% | | | November 3, 2005 | |
| Agricultural Bank | | 6,900,000 | | | 863,306 | | | 6.588% (Note 5) | | | December 27, 2004 | |
| | | 21,500,000 | | | 2,690,012 | | | Total | | | | |
The two ICBC bank (Industrial & Commerce bank of China) loans were due in late October and early November 2005. YSC signed an agreement with ICBC bank on August 14, 2006, whereby it will make monthly repayments and repay RMB 4,700,000 ($588,049) by the end of 2006, and the remaining balance of RMB 9,900,000 ($1,238,656) by September 20, 2007. Collateral for the two ICBC loans include 9 YSC buildings, land use right for 13,563 square meters of land and 353 machineries at Xinyuan plant acquired in 2004, the principal place of business of YSC.
7
| Spur Ventures Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2006 and 2005 |
7. Capital Stock, Warrants and Options
(a) Capital Stock
The following is a summary of capital stock transactions during the six-month period ended June 30, 2006:
| (I) | Authorized |
| | | |
| | Unlimited number of Common shares without par value |
| | Unlimited number of Preferred shares without par value, issuable in series and with special rights and restrictions to be determined on issuance |
| | | |
| (ii) | Issued and outstanding |
| | | Number of | | | |
| | | common shares | | Amount | |
| | Balance, December 31, 2005 | 58,090,520 | | $ 43,646,054 | |
| | Refund of issuance costs for private placement | | | 20,812 | |
| | Issuance costs for private placement | | | (563 | ) |
| | Exercise of options | | | | |
| | - cash received | 650,000 | | 447,035 | |
| | - transfer from stock option account | | | 98,183 | |
| | | | | | |
| | Balance as at June 30, 2006 | 58,740,520 | | $ 44,211,521 | |
During the six months ended June 30, 2006, the Company received a refund of $20,812 from Raymond James being overpayment of issuance costs on the private placement in July of 2005. 350,000 stock options at an exercise price of CAD$0.90 each and 300,000 stock options at an exercise price of CAD$0.60 were exercised in May, 2006.
(b) Warrants
There were no warrants issued or exercised during the six-month period ended June 30, 2006. 5,421,666 warrants at an exercise price of CAD$1.50 expired on June 22, 2006.
The following table summarizes information for warrants outstanding as at June 30, 2006:
| Number of warrants | | Exercise price (CAD) | | | Expiry date | |
| 8,571,429 | | 2.00 | | | July 28, 2007 | |
(c) Stock Options
The following is a summary of stock option transactions during the six-month period ended June 30, 2006:
8
| Spur Ventures Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2006 and 2005 |
| | | | | | Weighted | |
| | | | | | average | |
| | | | | | exercise | |
| | | Options | | | price | |
| | | outstanding | | | (CAD) | |
| Balance, December 31, 2005 | | 5,885,000 | | | 1.12 | |
| Granted | | 200,000 | | | 1.50 | |
| Expired | | (350,000 | ) | | 0.90 | |
| Exercised (Note 7(a)) | | (650,000 | ) | | 0.76 | |
| Balance, June 30, 2006 | | 5,085,000 | | | 1.19 | |
In March, 2006, the Company issued options to an officer to purchase 200,000 common shares of the Company at the exercise price of $1.50 per share. 50% of the options will vest on March 14th, 2007 and the remaining 50% will vest on March 14th, 2008.
The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model with assumptions for the grant as follows:
| Risk free interest rate | 3.41% - 3.64% |
| Expected life of options in years | 2 to 5 years |
| Expected volatility | 36 - 57% |
| Dividend per share | $0.00 |
The following table summarizes information about stock options outstanding at June 30, 2006:
| Option | |
| Exercise | |
| Number of options | Price | Expiry Date |
| CAD | |
| | | |
| 1,700,000 | 0.60 | May 6, 2008 |
| 635,000 | 1.20 | June 19, 2008 |
| 1,650,000 | 1.50 | July 23, 2009 |
| 200,000 | 1.50 | October 12, 2009 |
| 500,000 | 1.80 | March 1, 2010 |
| 200,000 | 1.50 | September 16, 2010 |
| 200,000 | 1.50 | March 14, 2011 |
| 5,085,000 | Total | |
During the three-months ended June 30, 2006, compensation expense of $63,068 was recognized for options previously granted and vesting over time using the Black-Scholes option pricing model.
9
| Spur Ventures Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2006 and 2005 |
During the six months ended June 30, 2006, the year to date accumulated stock based compensation expense is $157,414.
8. Related Party Transactions
During the three-month period ended June 30, 2006, the Company paid consulting fees of $36,300 (2005: $38,038) to two companies controlled by one officer and an associate of a director (2005: 3 companies).
During the six-month period ended June 30, 2006, the Company paid consulting fees of $70,903 (2005: $92,465) to two companies controlled by one officer and an associate of a director (2005:4 companies).
9. Segmented Information
Management considers developing an integrated fertilizer business including the development of the phosphate project in China to be the Company’s principal activity. All revenues are earned from sales to customers located in China.
| | | | | June 30, 2006 |
| | | Canada | China | Consolidated |
| | Current assets | $ 21,655,656 | $ 12,258,168 | $ 33,913,824 |
| | Other assets | 428,631 | 43,084 | 471,715 |
| | Fixed assets - net | 40,174 | 8,673,771 | 8,713,945 |
| | Land used right - net | - | 710,405 | 710,405 |
| | Mineral properties | - | 2,924,132 | 2,924,132 |
| | Total assets | $ 22,124,461 | $ 24,609,560 | $ 46,734,021 |
| | | | | |
| | | | | December 31, 2005 (Restated) |
| | | Canada | China | Consolidated |
| | Current assets | $ 21,397,256 | $ 12,961,517 | $ 34,358,773 |
| | Other assets | 339,964 | 80,907 | 420,871 |
| | Fixed assets - net | 42,649 | 8,531,723 | 8,574,372 |
| | Land used right - net | - | 691,583 | 691,583 |
| | Mineral properties | - | 2,557,660 | 2,557,660 |
| | Total assets | $ 21,779,869 | $ 24,823,390 | $ 46,603,259 |
10. Commitments and Obligations
(a) Tianren Acquisition final agreement
10
| Spur Ventures Inc. |
| Notes to Consolidated Financial Statements |
| June 30, 2006 and 2005 |
The Company signed the final agreement to acquire the fertilizer related business of Hebei Tianren Chemical Corporation (“Tianren”) in Beijing on June 18, 2006.
The interests being acquired include a:
1. 95% interest (80% direct and 15% indirect) in Tianren Agriculture Franchise Company (“Ag Franchise”), China’s largest marketer of compound NPK fertilizers. Ag Franchise sells over 1.5 Million tonnes per annum (“tpa”) of NPK (Nitrogen, Phosphate, Potassium) fertilizer as a commissioned sales agent for Sino Arab Chemical Fertilizer Company (SACF) and Dayukou Chemical Fertilizer Company (“Dayukou”).
2. 75% interest in Tianding Chemical Company (“Tianding”), which has a 100,000 tpa NPK plant in Qinhuangdao, Hebei Province. Tianding also has one of the largest fertilizer bag manufacturing facilities in China with current production under contract of in excess of 28 million bags per annum for Tianren, SACF, Dayukou and others. The bagging facility is a key part of the logistics for distribution of 50 kg bags of fertilizer within China.
3. 60% interest in Hubei Yichang Tianlong Industry Company (“Tianlong”), a raw materials sourcing and fertilizer trading company based in Yichang, Hubei Province, where Spur’s current facilities are located. Tianlong has an import license for sulphuric and phosphoric acid and will be eligible to apply for more import permits in the near future
4. 51% interest in Xinjiang Tianren Ltd. (“Xinjiang”), which has a 100,000 tpa plant in Xinjiang Uigur Autonomous Region in northwest China, an emerging market in China. The Xinjiang plant has scale up potential for over 1 million tonnes of production.
In exchange for the Acquired Interests, Spur will issue approximately 15.5 million shares. The Spur shares will be issued to Tianren on a pro-rata basis as the transfer of each of the acquired interests receives official approval from the Chinese authorities. The transaction is also subject to acceptance by the TSX Venture Exchange.
11. Subsequent Events
On July 4, 2006, the Company granted options to each of the independent directors of the Company to purchase 75,000 common shares in the capital of the Company, and to the CEO Dr. Rennie to purchase 250,000 common shares. These options are exercisable at a price of $1.03 per share up until the date that is 5 years following the date of grant and vest over a three-year period with one-third of the options vesting one year after the date of grant, one-third of the options vesting two years after the date of grant, and the remaining one-third of the options vesting three years after the date of grant.
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