(An exploration stage company)
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
SIX MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(Expressed in Canadian dollars)
(Unaudited)
Notice of Non-review of Interim Financial Statements
The attached condensed consolidated interim financial statements for the period ended September 30, 2012 have been prepared by and are the responsibility of the Company’s management and have been approved by the Board of Directors of the Company. The Company’s independent auditor has not performed a review of these interim financial statements.
CREAM MINERALS LTD.
(An exploration stage company)
Condensed Consolidated Interim Statements of Financial Position
(Expressed in Canadian dollars)
(Unaudited)
| | | | | | | |
| | | September 30, | | | March 31, | |
| | | 2012 | | | 2012 | |
| Assets | | | | | | |
| | | | | | | |
| Current Assets | | | | | | |
| Cash | | $ | 411,819 | | | $ | 292,501 | |
| Short-term investments | | | 276,357 | | | | 175,429 | |
| Amounts receivable and prepaid expenses (Note 3) | | | 73,257 | | | | 87,679 | |
| | | | 761,433 | | | | 555,609 | |
| Non-current Assets | | | | | | | | |
| Deposits, related party (Note 6(a)) | | | -- | | | | 189,963 | |
| Exploration and evaluation assets (Note 4) | | | 97,080 | | | | 97,080 | |
| Foreign value-added taxes recoverable | | | 13,461 | | | | 497,865 | |
| Equipment | | | 46,537 | | | | 59,566 | |
| Investment in associate | | | 1 | | | | 1 | |
| Reclamation deposits | | | 15,000 | | | | 15,000 | |
| | | | | | | | | |
| Total Assets | | $ | 933,512 | | | $ | 1,415,084 | |
| | | | | | | | | |
| Liabilities | | | | | | | | |
| | | | | | | | | |
| Current Liabilities | | | | | | | | |
| Accounts payable and accrued liabilities (Note 5) | | $ | 116,356 | | | $ | 157,941 | |
| Accounts payable, related parties (Note 6) | | | 105,750 | | | | 88,890 | |
| Total Liabilities | | | 222,106 | | | | 246,831 | |
| | | | | | | | | |
| Shareholders’ Equity | | | | | | | | |
| Share capital (Note 8) | | | 33,066,916 | | | | 32,589,847 | |
| Warrant reserve (Note 8) | | | 2,764,218 | | | | 2,836,637 | |
| Share-based payments reserve (Note 8) | | | 4,510,593 | | | | 4,506,782 | |
| Deficit | | | (39,630,321 | ) | | | (38,765,013 | ) |
| Total Shareholders’ Equity | | | 711,406 | | | | 1,168,253 | |
| Total Liabilities and Shareholders’ Equity | | $ | 933,512 | | | $ | 1,415,084 | |
Nature of operations and going concern (Note 1)
Approved and authorized for issue on behalf of the board of directors on November 27, 2012 by:
| /s/Michael O’Connor | /s/Robin Merrifield |
| Director | Director |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
CREAM MINERALS LTD.
(An exploration stage company)
Condensed Interim Consolidated Statement of Operations and Comprehensive Loss
(Expressed in Canadian dollars)
(Unaudited – prepared by management)
| | | Three Months Ended September 30, | | | Six Months Ended September 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| Revenue | | | | | | | | | | | | |
| Interest | | $ | 1,082 | | | $ | 5,947 | | | $ | 2,276 | | | $ | 17,662 | |
| Total Revenue | | | 1,082 | | | | 5,947 | | | | 2,276 | | | | 17,662 | |
| Expenses | | | | | | | | | | | | | | | | |
| Consulting and directors fees | | | 23,500 | | | | 28,211 | | | | 45,013 | | | | 35,711 | |
| Exploration costs (Note 12) | | | 208,554 | | | | 1,145,302 | | | | 353,860 | | | | 2,423,331 | |
| Foreign exchange | | | 1,575 | | | | (10,114 | ) | | | (1,097 | ) | | | 1,222 | |
| General and administrative (Note 7) | | | 31,380 | | | | 41,255 | | | | 90,323 | | | | (134,022 | ) |
| Loss (gain) on marketable securities | | | -- | | | | (51 | ) | | | -- | | | | 2,596 | |
| Professional fees | | | 47,316 | | | | 63,981 | | | | 81,746 | | | | 120,746 | |
| Salaries and benefits | | | 101,443 | | | | 147,325 | | | | 197,480 | | | | 234,242 | |
| Shareholder communications | | | 41,088 | | | | 103,392 | | | | 96,448 | | | | 242,343 | |
| Share-based payments | | | -- | | | | 64,778 | | | | 3,811 | | | | 400,253 | |
| Write-down of exploration and evaluation assets | | | -- | | | | 178,838 | | | | -- | | | | 440,812 | |
| Total Expenses | | | 454,856 | | | | 1,762,917 | | | | 867,584 | | | | 3,767,234 | |
| Net Loss and Comprehensive Loss for the Period | | | 453,774 | | | | 1,756,970 | | | | 865,308 | | | | 3,749,572 | |
| | | | | | | | | | | | | | | | | |
| Loss per Share, Basic and Diluted | | $ | 0.01 | | | $ | 0.01 | | | $ | 0.01 | | | $ | 0.02 | |
| | | | | | | | | | | | | | | | | |
| Weighted Average Number of Common Shares Outstanding – Basic and Diluted | | | 154,984,604 | | | | 151,813,340 | | | | 153,807,362 | | | | 150,632,424 | |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
CREAM MINERALS LTD.
(An exploration stage company)
Condensed Consolidated Interim Statement of Changes in Equity
(Expressed in Canadian dollars)
(Unaudited)
| | | Common Shares Without Par Value | | | Warrant | | | Share-based | | | | | | | |
| | | Shares | | | Amount | | | Reserve | | | Payments Reserve | | | Deficit | | | Total Equity | |
| Balance, March 31, 2011 | | | 149,464,345 | | | $ | 32,110,200 | | | $ | 2,922,556 | | | $ | 4,035,325 | | | $ | (33,881,723 | ) | | $ | 5,186,358 | |
| Warrants exercised | | | 2,598,571 | | | | 329,615 | | | | (69,759 | ) | | | -- | | | | -- | | | | 259,856 | |
| Options exercised | | | 100,000 | | | | 20,772 | | | | -- | | | | (8,772 | ) | | | -- | | | | 12,000 | |
| Share-based payments | | | -- | | | | -- | | | | -- | | | | 400,253 | | | | -- | | | | 400,253 | |
| Net loss for the period | | | -- | | | | -- | | | | -- | | | | -- | | | | (3,749,572 | ) | | | (3,749,572 | ) |
| Balance, September 30, 2011 | | | 152,162,916 | | | | 32,460,587 | | | | 2,852,797 | | | | 4,426,806 | | | | (37,631,295 | ) | | | 2,108,895 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, March 31, 2012 | | | 152,642,916 | | | | 32,589,847 | | | | 2,836,637 | | | | 4,506,782 | | | | (38,765,013 | ) | | | 1,168,253 | |
| Warrants exercised | | | 2,697,666 | | | | 477,069 | | | | (72,419 | ) | | | -- | | | | -- | | | | 404,650 | |
| Share-based payments | | | -- | | | | -- | | | | -- | | | | 3,811 | | | | -- | | | | 3,811 | |
| Net loss for the period | | | -- | | | | -- | | | | -- | | | | -- | | | | (865,308 | ) | | | (865,308 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, September 30, 2012 | | | 155,340,582 | | | $ | 33,066,916 | | | $ | 2,764,218 | | | $ | 4,510,593 | | | $ | (39,630,321 | ) | | $ | 711,406 | |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
CREAM MINERALS LTD.
(An exploration stage company)
Condensed Consolidated Interim Statements of Cash Flows
(Expressed in Canadian dollars)
(Unaudited)
| | | Six months ended September 30, | |
| | | 2012 | | | 2011 | |
| Cash provided by (used in): | | | | | | |
| | | | | | | |
| Operations | | | | | | |
| Net loss for the period | | $ | (865,308 | ) | | $ | (3,749,572 | ) |
| Items not involving cash | | | | | | | | |
| Depreciation | | | 13,029 | | | | 12,582 | |
| Share-based payments | | | 3,811 | | | | 400,253 | |
| Unrealized foreign exchange | | | 25,084 | | | | 37,319 | |
| Write-off of exploration and evaluation assets | | | -- | | | | 440,812 | |
| Unrealized loss on marketable securities | | | -- | | | | 2,596 | |
| Changes in non-cash operating assets and liabilities | | | | | | | | |
| Amounts receivable and prepaid expenses | | | 14,422 | | | | 10,781 | |
| Foreign value-added taxes recoverable | | | 459,320 | | | | (373,049 | ) |
| Accounts payable and accrued liabilities | | | (41,585 | ) | | | (68,452 | ) |
| Accounts payable, related parties | | | 206,823 | | | | -- | |
| Cash provided by (used in) operating activities | | | (184,404 | ) | | | (3,286,730 | ) |
| Investing activities | | | | | | | | |
| Exploration and evaluation assets | | | -- | | | | (353 | ) |
| Purchase (proceeds) of short-term investments | | | (99,571 | ) | | | 3,186,906 | |
| Proceeds on sale of marketable securities | | | -- | | | | 5,587 | |
| Unrealized interest on short-term investments | | | (1,357 | ) | | | (10,208 | ) |
| Purchase of equipment | | | -- | | | | (30,313 | ) |
| Cash provided by (used in) investing activities | | | (100,928 | ) | | | 3,151,619 | |
| Financing activities | | | | | | | | |
| Common shares | | | 404,650 | | | | 271,855 | |
| Net settlements with related party | | | -- | | | | (257,004 | ) |
| Cash provided by (used in) financing activities | | | 404,650 | | | | 14,851 | |
| | | | | | | | | |
| Increase (decrease) in cash during the period | | | 119,318 | | | | (120,260 | ) |
| | | | | | | | | |
| Cash, beginning of period | | | 292,501 | | | | 448,109 | |
| | | | | | | | | |
| Cash, end of period | | $ | 411,819 | | | $ | 327,849 | |
| | | | | | | | | |
| Supplemental information | | | | | | | | |
| Non-cash portion of warrants exercised | | $ | 72,419 | | | $ | 69,759 | |
| Non-cash portion of stock options exercised | | | -- | | | | 8,772 | |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
CREAM MINERALS LTD.
(An exploration stage company)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended September 30, 2012 and 2011
(Expressed in Canadian dollars)
1. Nature of Operations and Going Concern
Cream Minerals Ltd. (the “Company”) was incorporated on October 12, 1966 in the Province of British Columbia under the Business Corporations Act of British Columbia, and its principal business activity is the exploration of mineral properties in Mexico and Canada.
The Company’s head office, principal address and registered and records office is #890-789 West Pender Street, Vancouver, B.C., Canada, V6C 1H2.
The Company’s continuing operations and underlying value and recoverability of the amounts shown for exploration and evaluation assets are entirely dependent upon the existence of economically recoverable mineral reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of its mineral property interests and on future profitable production or proceeds from the disposition of the mineral property interest or other interests.
| | These unaudited condensed consolidated interim financial statements have been prepared on the basis of accounting principles applicable to a going concern. This assumes the Company will operate for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. The Company has incurred operating losses since inception, has no source of operating cash flow, minimal income from short-term investments, and there can be no assurances that sufficient funding, including adequate financing, will be available to explore its mineral properties and to cover general and administrative expenses necessary for the maintenance of a public company. The ability of the Company to arrange additional financing in the future depends in part, on the prevailing capital market conditions and mineral property exploration success. These factors cast substantial doubt on the Company’s ability to continue as a going concern. Accordingly, the financial statements do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and liquidate its liabilities, contingent obligations and commitments other than in the normal course of business and at amounts different from those in the condensed consolidated interim financial statements. |
2. Significant Accounting Policies
| (a) | Statement of Compliance |
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standards (“IAS”) 34 ‘Interim Financial Reporting’ (“IAS 34”) using accounting policies consistent with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).
| (b) | Basis of Measurement and Presentation |
These condensed consolidated interim financial statements have been prepared on the basis of accounting policies and critical account judgments and estimates consistent with those applied in the Company’s March 31, 2012 consolidated annual audited financial statements.
CREAM MINERALS LTD.
(An exploration stage company)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended September 30, 2012 and 2011
(Expressed in Canadian dollars)
2. Significant Accounting Policies (Continued)
(c) New Standards Not Yet Adopted
| | The following new standards, amendments to standards and interpretations have been issued but are not effective during the period ended September 30, 2012: |
· IFRS 9 | New financial instruments standard that replaces IAS 39 for classification and measurement of financial assets(iii) |
· IFRS 10 | New standard to establish principles for the presentation and preparation of consolidated financial statements when an entity controls multiple entities(i) |
· IFRS 11 | New standard to account for the rights and obligations in accordance with a joint agreement(i) |
· IFRS 12 | New standard for the disclosure of interests in other entities not within the scope of IFRS 9/IAS 39(i) |
· IFRS 13 | New standard on the measurement and disclosure of fair value(i) |
· IAS 1 (Amendment) | Presentation of other comprehensive income(ii) |
· IAS 28 (Amendment) | New standard issued that supersedes IAS 28 (2003) to prescribe the accounting for investments in associates and joint ventures(i) |
| (i) | Effective for annual periods beginning on or after January 1, 2013 |
| (ii) | Effective for annual periods beginning on or after July 1, 2012 |
| (iii) | Effective for annual periods beginning on or after January 1, 2015 |
The Company anticipates that the application of these standards, amendments and interpretations will not have a material impact on the results and financial position of the Company.
3. Amounts Receivable and Prepaid Expenses
| | | September 30, | | | March 31, | |
| | | 2012 | | | 2012 | |
| Harmonized Sales Tax receivable | | $ | 32,762 | | | $ | 35,597 | |
| Prepayments and amounts receivable | | | 40,495 | | | | 52,082 | |
| Total | | $ | 73,257 | | | $ | 87,679 | |
CREAM MINERALS LTD.
(An exploration stage company)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended September 30, 2012 and 2011
(Expressed in Canadian dollars)
4. Exploration and Evaluation Assets
Detailed exploration and evaluation expenditures incurred in respect to the Company’s mineral property interests owned, leased or held under option are disclosed in Note 12.
| | | | Kaslo | | | |
| | Manitoba | | Silver | | Total | |
| | Properties, | | Property, | | Acquisition | |
| | Manitoba (b) | | BC (c) | | Costs | |
| Balance, March 31, 2011 | | $ | 270,367 | | | $ | 1 | | | $ | 270,368 | |
| Additions | | | 54,000 | | | | -- | | | | 54,000 | |
| Write-downs | | | (227,287 | ) | | | (1 | ) | | | (227,288 | ) |
| Balance, March 31, 2012 and September 30, 2012 | | $ | 97,080 | | | $ | -- | | | | 97,080 | |
(i) Stephens Lake and Stephens Trout Property
The Company holds, jointly with Sultan Minerals Inc. and ValGold Resources Ltd. (“ValGold”), a 75% interest in two staked claims. The property has been written down to $Nil as there are no future plans to continue with exploration.
(ii) Wine Claims
In March 2006, the Company entered into an option agreement, subsequently amended, to acquire 100% interest in the Wine Claim, MB 3964 and Wine 1 Claim, all located approximately 60 kilometres southeast of Flin Flon, Manitoba. The property has been written down to $Nil as there are no future plans to continue with exploration.
In November 2009, the Company entered into an option agreement to acquire the Blueberry property and the Company staked additional claims which have been appended to the option agreement. The property is located approximately 30 km north-east of Flin Flon, Manitoba.
| (b) | Kaslo Silver Property, Kaslo, British Columbia, Canada |
The 100% owned Kaslo Silver Property, a silver target, hosts eleven historic high-grade silver deposits within 14 kilometres of sub-parallel shear zones. Although the Company plans a review of geological data compiled to date, and a property site visit was done during the year ended March 31, 2012, the property was written down to $Nil as no significant exploration work is planned for fiscal 2013.
CREAM MINERALS LTD.
(An exploration stage company)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended September 30, 2012 and 2011
(Expressed in Canadian dollars)
(Unaudited)
4. Exploration and Evaluation Assets (Continued)
| (c) | Nuevo Milenio Property, Nayarit, Mexico |
The Company holds a 100% interest in the Nuevo Milenio Project (“Nuevo Milenio”), located in Nayarit, Mexico. Neuva Milenio had previously been fully written down and all current exploration costs have been charged to the Statement of Operations (Note 12).
5. Accounts Payable and Accrued Liabilities
| | | September 30, 2012 | | | March 31, 2012 | |
| | | | | | | |
| Trade payables | | $ | 76,655 | | | $ | 42,760 | |
| Accrued liabilities | | | 39,701 | | | | 115,181 | |
| Totals | | $ | 116,356 | | | $ | 157,941 | |
6. Related Party Transactions and Balances
Remuneration of directors and key management personnel of the Company was as follows for the six months ended September 30, 2012 and 2011:
| | | Six months ended September 30, | |
| | | 2012 | | | 2011 | |
| Cream Minerals Limited | | | | | | |
| Salaries and benefits | | $ | 136,327 | | | $ | 221,207 | |
| Directors fees (1) | | | 43,250 | | | | -- | |
| Share-based payments (1) | | | -- | | | | 254,949 | |
| Cream Minerals de Mexico, S.A. de C.V. | | | | | | | | |
| Salaries and benefits (2) | | | 60,000 | | | | 60,000 | |
| (1) | Directors are entitled to director fees and stock options for their services. |
| (2) | Salaries and benefits have been recorded as exploration costs related to the Nuevo Milenio project. |
CREAM MINERALS LTD.
(An exploration stage company)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended September 30, 2012 and 2011
(Expressed in Canadian dollars)
(Unaudited)
6. Related Party Transactions and Balances (Continued)
Other related party transactions for the six months ended September 30, 2012 and 2011 and related party balances as at September 30, 2012 and March 31, 2012 were as follows:
| | | Six months ended September 30, | |
| | | 2012 | | | 2011 | |
| Quorum Management and Administrative Services Inc. (“Quorum”) (a) | | $ | 209,318 | | | $ | 248,944 | |
| Consulting (b) | | | -- | | | | 15,000 | |
| Balances at: | | September 30, 2012 | | | March 31, 2012 | |
| Quorum (a) | | | | | | |
| Deposits | | $ | -- | | | $ | 189,963 | |
| Payables: | | | | | | | | |
| Quorum (a) | | | 31,936 | | | | 59,008 | |
| Directors (c) | | | 73,814 | | | | 29,882 | |
| (a) | Management, administrative, and other services are provided by Quorum, a private company held jointly, with a one-third interest each, by the Company and two other public companies, ValGold and Emgold Mining Corporation (“Emgold”). Quorum provided services on a full cost recovery basis to the various entities sharing office space with the Company until August 31, 2012. |
The three public companies have deferred dissolving Quorum and will maintain the company as inactive.
| (b) | Included in consulting fees are legal fees to Kent Avenue Consulting Ltd., a private company controlled by a director, Sargent H. Berner. These fees were paid through Quorum, and are also included in the balance for services provided by Quorum. |
| (c) | The directors balance includes fees and expenses owing to directors, as well as any salaries accrued to Fred Holcapek, a director of the Company and an officer of the subsidiary in Mexico, Cream Minerals de Mexico, S.A. de C.V., for administrative and geological services rendered. |
7. Expenses by Nature
Included in general and administrative expenses are the following:
| | | Six months ended September 30, | |
| | | 2012 | | | 2011 | |
| Depreciation | | $ | 1,489 | | | $ | 1,296 | |
| Office and administration | | | 88,834 | | | | (145,491 | ) |
| Travel and conferences | | | -- | | | | 22,655 | |
| Property investigation | | | -- | | | | (12,482 | ) |
| Totals | | $ | 90,323 | | | $ | (134,022 | ) |
CREAM MINERALS LTD.
(An exploration stage company)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended September 30, 2012 and 2011
(Expressed in Canadian dollars)
8. Share Capital and Reserves
Authorized
Unlimited number of common shares without par value.
Issued and Fully Paid
155,340,582 common shares (2011 – 152,162,916).
Stock options
The Company has a 10% rolling stock option plan for its directors, employees and consultants to acquire common shares of the Company at a price determined by the fair market value of the shares at the date of grant. The Company’s stock option plan provides for immediate vesting, or vesting at the discretion of the Board at the time of the option grant and are exercisable for a period of up to 10 years.
Stock options granted to investor relations’ consultants vest over a twelve month period, with one quarter of such options vesting in each three month period.
During the period ended September 30, 2012 Nil (2011 – 2,300,000) stock options were granted. The following table summarizes information on stock options outstanding at September 30, 2012:
Exercise Price | | Number Outstanding and Exercisable | Average Remaining Contractual Life |
| $0.50 | | 150,000 | | 0.18 years | |
| $0.12 | | 1,560,000 | | 1.37 years | |
| $0.38 | | 5,575,000 | | 3.43 years | |
| $0.22 | | 600,000 | | 3.67 years | |
| $0.23 | | 500,000 | | 3.68 years | |
| $0.16 | | 1,200,000 | | 3.73 years | |
| | | 9,585,000 | | 3.11 years | |
A summary of the changes in stock options for the six months ended September 30, 2012 and the year ended March 31, 2012 is presented below:
| | | Number of Shares | | | Weighted Average Exercise Price | |
| Balance, March 31, 2011 | | | 9,906,500 | | | $ | 0.36 | |
| Granted | | | 2,300,000 | | | | 0.19 | |
| Exercised | | | (100,000 | ) | | | 0.12 | |
| Cancelled/forfeited | | | (720,000 | ) | | | 0.48 | |
| Balance, March 31, 2012 | | | 11,386,500 | | | | 0.32 | |
| Expired | | | (1,001,500 | ) | | | 0.50 | |
| Cancelled/forfeited | | | (800,000 | ) | | | 0.38 | |
| Vested and exercisable at September 30, 2012 | | | 9,585,000 | | | $ | 0.29 | |
CREAM MINERALS LTD.
(An exploration stage company)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended September 30, 2012 and 2011
(Expressed in Canadian dollars)
8. Share Capital (Continued)
Warrants
As at September 30, 2012, the following share purchase warrants issued in connection with private placements were outstanding:
| Number of Warrants | Exercise Price | Expiry Dates |
| 40,900,000 | $0.24 | December 21, 2012 |
| 3,750,000 | $0.16 | December 21, 2012 |
| 44,650,000 | | |
A summary of the changes in warrants for the six months ended September 30, 2012 and the year ended March 31, 2012, is presented below:
| | | Number of Warrants | | | Weighted Average Exercise Price | |
| Balance, March 31, 2011 | | | 53,407,071 | | | $ | 0.22 | |
| Exercised | | | (2,998,571 | ) | | | 0.16 | |
| Balance, March 31, 2012 | | | 50,408,500 | | | | 0.22 | |
| Exercised | | | (2,697,666 | ) | | | 0.15 | |
| Expired | | | (3,060,834 | ) | | | 0.15 | |
| Balance, September 30, 2012 | | | 44,650,000 | | | $ | 0.23 | |
9. Segmented Information
Operating Segments
The Company has one operating segment, which is the exploration and evaluation of mineral properties.
Geographic Segments
The Company’s principal operations are carried out in Canada and Mexico. The majority of investment income is earned in Canada. Segmented assets by geographical location are as follows:
| Statement of Financial Position September 30, 2012 | | Canada | | | Mexico | | | Total | |
| Total Assets | | $ | 425,753 | | | $ | 507,759 | | | $ | 933,512 | |
| Current Assets | | $ | 364,154 | | | $ | 397,279 | | | $ | 761,433 | |
| Long-term Assets | | $ | 61,599 | | | $ | 110,480 | | | $ | 172,079 | |
CREAM MINERALS LTD.
(An exploration stage company)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended September 30, 2012 and 2011
(Expressed in Canadian dollars)
9. Segmented Information (Continued)
| Statement of Financial Position March 31, 2012 | | Canada | | | Mexico | | | Total | |
| Total Assets | | $ | 729,798 | | | $ | 685,286 | | | $ | 1,415,084 | |
| Current Assets | | $ | 476,747 | | | $ | 78,862 | | | $ | 555,609 | |
| Long-term Assets | | $ | 253,051 | | | $ | 606,424 | | | $ | 859,475 | |
Segmented expenses by geographical location are as follows:
| September 30, 2012 | | Canada | | | Mexico | | | Total | |
| Exploration and evaluation costs | | $ | 178,800 | | | $ | 175,060 | | | $ | 353,860 | |
| Other expenses | | | 513,724 | | | | -- | | | | 513,724 | |
| Total expenses | | $ | 692,524 | | | $ | 175,060 | | | $ | 867,584 | |
| September 30, 2011 | | Canada | | | Mexico | | | Total | |
| Exploration and evaluation costs | | $ | 82,890 | | | $ | 2,340,441 | | | $ | 2,423,331 | |
| Other expenses | | | 1,308,579 | | | | -- | | | | 1,308,579 | |
| Total expenses | | $ | 1,391,469 | | | $ | 2,340,441 | | | $ | 3,731,910 | |
10. Financial Instruments and Risk Management
Financial assets and financial liabilities are measured on an ongoing basis at fair value or amortized cost. Cash and short-term investments are designated as fair value through profit or loss and are measured at fair value. Amounts receivable are designated as loans and receivables and measured at amortized cost using the effective interest rate method. Accounts payable and accrued liabilities and accounts payable, related parties are designated as other financial liabilities and measured at amortized cost using the effective interest rate method. The fair values of the Company’s amounts receivable and prepaid expenses approximate their carrying values at September 30, 2012, due to their short-term nature.
The following table presents the Company’s financial instruments, measured at fair value on the consolidated statements of financial position as at September 30, 2012 and March 31, 2012 and categorized into levels of the fair value hierarchy:
| | | | | | September 30, 2012 | | | March 31, 2012 | |
| | | | | | Carrying | | | Fair | | | Carrying | | | Fair | |
| | | Level | | | Value | | | Value | | | Value | | | Value | |
| Cash (a) | | | 1 | | | $ | 411,819 | | | $ | 411,819 | | | $ | 292,501 | | | $ | 292,501 | |
| Short-term investments (a) | | | 1 | | | | 276,357 | | | | 276,357 | | | | 175,429 | | | | 175,429 | |
| Amounts receivable and prepaid expenses (a) | | | 1 | | | | 73,257 | | | | 73,257 | | | | 87,679 | | | | 87,679 | |
| Investment in associate (b) | | | 3 | | | | 1 | | | | 1 | | | | 1 | | | | 1 | |
| Accounts payable and accrued liabilities (a) | | | 2 | | | | 116,356 | | | | 116,356 | | | | 157,941 | | | | 157,941 | |
| Accounts payable, related parties (a) | | | 2 | | | | 105,750 | | | | 105,750 | | | | 88,890 | | | | 88,890 | |
| a) | Fair value approximates the carrying amounts due to the short-term nature. |
| b) | Investment relates to Quorum. |
CREAM MINERALS LTD.
(An exploration stage company)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended September 30, 2012 and 2011
(Expressed in Canadian dollars)
10. Financial Instruments and Risk Management (Continued)
There were no other transfers from level 1 and 2 during the periods ended September 30, 2012 and March 31, 2012. There have been no transfers in or out of level 3, or changes in fair value measurements of financial instruments classified as level 3 for the periods ended September 30, 2012 and March 31, 2012.
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its obligations. The Company’s maximum exposure to credit risk at the financial position date under its financial instruments is summarized as follows:
| | | September 30, 2012 | | | March 31, 2012 | |
| Amounts receivable | | | | | | |
| Due within 90 days | | $ | 32,762 | | | $ | 35,597 | |
| Deposits, related party | | | -- | | | | 189,963 | |
| | | $ | 32,762 | | | $ | 225,560 | |
| Cash | | | 411,819 | | | | 292,501 | |
| Short-term investments | | | 276,357 | | | | 175,429 | |
| | | $ | 720,938 | | | $ | 693,490 | |
Substantially all of the Company’s cash is held with major financial institutions in Canada and management believes the exposure to credit risk with such institutions is not significant. The financial assets that potentially subject the Company to credit risk are any receivables. The Company considers the risk of material loss to be significantly mitigated due to the financial strength of the major financial institutions where cash and term deposits are held. In the six months ended September 30, 2012, no material provision has been recorded in respect of impaired receivables. The Company’s maximum exposure to credit risk as at September 30, 2012 is the carrying value of its financial assets.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its obligations associated with financial liabilities. The Company has a planning and budgeting process in place by which it anticipates and determines the funds required to support normal operation requirements as well as the growth and development of its mineral property interests. During the six months ended September 30, 2012, the Company issued 2,697,666 common shares for gross proceeds of $404,650, from the exercise of warrants. Further information regarding liquidity risk is set out in Note 1. The Company’s financial assets are comprised of its cash, short-term investments, and amounts receivable and the Company’s financial liabilities are comprised of its accounts payable, accrued liabilities and accounts payable, related parties, the contractual maturities of which at September 30, 2012 and March 31, 2012 and are summarized as follows:
CREAM MINERALS LTD.
(An exploration stage company)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended September 30, 2012 and 2011
(Expressed in Canadian dollars)
10. Financial Instruments and Risk Management (Continued)
| | | September 30, 2012 | | | March 31, 2012 | |
| Cash | | $ | 411,819 | | | $ | 292,501 | |
| Short-term investments | | | 276,357 | | | | 175,429 | |
| Amounts receivable - Within 90 days or less | | | 32,762 | | | | 35,597 | |
| Deposits from related party - In later than 90 days, not less than on year | | | -- | | | | 189,963 | |
| Accounts payable and accrued liabilities with contractual maturities – Within 90 days or less | | | 116,356 | | | | 157,941 | |
| Due to related parties with contractual maturities - Within 90 days or less | | | 105,750 | | | | 88,890 | |
Interest rate risk
The Company has no significant exposure at September 30, 2012 to interest rate risk through its financial instruments.
Currency risk
The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company operates in Canada and Mexico and a portion of its expenses are incurred in U.S. dollars and in Mexican pesos. A significant change in the currency exchange rates between the Canadian dollar and these currencies could have an effect on the Company’s results of operations, financial position or cash flows.
The Company has not hedged its exposure to currency fluctuations. At September 30, 2012, the Company is exposed to currency risk through the following assets and liabilities denominated in Mexican pesos and U.S. dollars, but presented in Canadian dollar equivalents.
| | | September 30, 2012 | | | March 31, 2012 | |
| U.S. Dollars | | | | | | |
| Cash | | $ | 11,386 | | | $ | 146,487 | |
| Accounts payable and accrued liabilities | | | (48,359 | ) | | | (14,137 | ) |
| Mexican Pesos | | | | | | | | |
| Cash | | | 394,129 | | | | 8,316 | |
| Value-added taxes recoverable | | | 13,461 | | | | 497,865 | |
| Accounts payable and accrued liabilities | | | (2,088 | ) | | | (10,881 | ) |
CREAM MINERALS LTD.
(An exploration stage company)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended September 30, 2012 and 2011
(Expressed in Canadian dollars)
10. Financial Instruments and Risk Management (Continued)
Currency risk (Continued)
Based on the above net exposures at September 30, 2012, and assuming that all other variables remain constant, a 10% appreciation or depreciation of the Canadian dollar against the U.S. dollar would result in an increase/decrease of $3,697 (2011 - $21,442) in the Company’s loss from operations, and a 10% appreciation or depreciation of the Canadian dollar against the Mexican Pesos would result in an increase/decrease of $40,550 (2011 – $50,130) in the Company’s loss from operations.
Financial assets and financial liabilities that bear interest at fixed rates are subject to fair value interest rate risk. The Company had no cash equivalents at September 30, 2012. In respect of financial assets, the Company’s policy is to invest cash at floating rates of interest in order to maintain liquidity while achieving a satisfactory return. Fluctuations in interest rates impact the amount of return the Company may realize but interest rate risk is not significant to the Company. As at September 30, 2012 with other variables unchanged, a 1% change in the variable interest rates would have had an insignificant impact on the loss of the Company.
11. Management of Capital
The Company defines capital that it manages as equity. ��When managing capital, the Company’s objective is to ensure the Company continues as a going concern as well as to achieve optimal returns to shareholders and benefits for other stakeholders. The Board of Directors does not establish a quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management team to sustain the future development of the business.
The Company’s capital management approach is revised on an ongoing basis and reflects adjustments in light of economic conditions affecting metal markets and the mining industry in particular. Given the nature of its activities, the Company is dependent on external financing to fund its operations. To maintain or adjust the capital structure, the Company may issue new shares, options and warrants, and issue debt. There were no changes in the Company’s approach to capital management during the six month period ended September 30, 2012. Neither the Company nor its subsidiary is subject to externally imposed capital requirements.
CREAM MINERALS LTD.
(An exploration stage company)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended September 30, 2012 and 2011
(Expressed in Canadian dollars)
12. Exploration Costs
| Six months ended September 30, 2012 | | Kaslo Silver Property, British Columbia | | | Manitoba Properties, Manitoba | | | Nuevo Milenio Property, Mexico | | | Total September 30, 2012 | |
| Incurred during the period | | | | | | | | | | | | |
| Assays and analysis | | $ | -- | | | $ | -- | | | $ | 909 | | | $ | 909 | |
| Geological and geophysical | | | 5,600 | | | | 3,900 | | | | 184,929 | | | | 194,429 | |
| Site activities | | | 2,521 | | | | 35 | | | | 142,042 | | | | 144,598 | |
| Travel and accommodation | | | -- | | | | -- | | | | 13,924 | | | | 13,924 | |
| Total Expenses September 30, 2012 | | $ | 8,121 | | | $ | 3,935 | | | $ | 341,804 | | | $ | 353,860 | |
| Six months ended September 30, 2011 | | Nuevo Milenio Property, Mexico | | | Total September 30, 2011 | |
| Incurred during the period | | | | | | |
| Assays and analysis | | $ | 105,671 | | | $ | 105,671 | |
| Drilling | | | 1,990,717 | | | | 1,990,717 | |
| Geological and geophysical | | | 145,915 | | | | 145,915 | |
| Site activities | | | 169,561 | | | | 169,561 | |
| Travel and accommodation | | | 11,467 | | | | 11,467 | |
| Total Expenses September 30, 2011 | | $ | 2,423,331 | | | $ | 2,423,331 | |
