BUFFALO GOLD LTD.
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
(Unaudited, Prepared by Management)
March 31, 2008
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NOTICE TO READER
These unaudited consolidated financial statements for the first financial quarter ended March 31, 2008 have not been reviewed by our auditors, Davidson & Company LLP, Chartered Accountants. They have been prepared by Buffalo Gold Ltd.’s management in accordance with accounting principles generally accepted in Canada, consistent with previous quarters and years except for the adoption of new accounting policies as described in note 3. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2007.
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BUFFALO GOLD LTD.
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in Canadian dollars)
(Unaudited, Prepared by Management)
Continuance of operations(note 2)
Subsequent events (note 14)
On behalf of the board of directors |
|
|
|
“Brian McEwen” |
| “James Stewart” |
|
Brian McEwen | Director | James Stewart | Director |
The accompanying notes are an integral part of these consolidated financial statements.
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Buffalo Gold Ltd. Q1 March 31, 2008 Financials
Page 1
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BUFFALO GOLD LTD.
(An Exploration Stage Company)
Consolidated Statements of Operations
(Expressed in Canadian dollars)
(Unaudited, Prepared by Management)
The accompanying notes are an integral part of these financial statements
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Buffalo Gold Ltd. Q1 March 31, 2008 Financials
Page 2
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BUFFALO GOLD LTD.
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
(Unaudited, Prepared by Management)
The accompanying notes are an integral part of these financial statements
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Buffalo Gold Ltd. Q1 March 31, 2008 Financials
Page 3
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BUFFALO GOLD LTD.
(An Exploration Stage Company)
Consolidated Statements of Shareholders’ Equity
(Expressed in Canadian dollars)
(Unaudited, Prepared by Management)
The accompanying notes are an integral part of these financial statements.
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Buffalo Gold Ltd. Q1 March 31, 2008 Financials
Page 4
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BUFFALO GOLD LTD.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the Three Months Ended March 31, 2008
(Unaudited, Prepared by Management)
1.
BASIS OF PRESENTATION
These consolidated financial statements include the accounts of Buffalo Gold Ltd. and all of its subsidiaries and investments. Buffalo Gold Ltd. and its subsidiaries are collectively referred to as the “Company”. The principal subsidiaries and investments of the Company and their geographic locations at March 31, 2008 are listed below:
Entity |
| Location |
| Ownership Interest |
| Status |
Sardinia Gold Mines SPA (“SGM”) |
| Italy |
| 100% |
| Consolidated |
SGM Ricerche SPA (“SGM Ricerche”) |
| Italy |
| 100% |
| Consolidated |
Madison Enterprises (PNG) Ltd. (“Madison PNG”) |
| Papua New |
| 60% |
| Consolidated |
Gold FX Limited (“Gold FX”) |
| Australia |
| 100% |
| Consolidated |
Canon Investments Pty Ltd. (“Canon”) |
| Australia |
| 100% |
| Consolidated |
Bondi Mining Limited (“Bondi”) |
| Australia |
| 42% |
| Equity investment |
AMI Resources Inc. (“AMI”) |
| Ghana |
| 22% |
| Equity investment |
Buffalo Gold Ltd. is an Alberta Corporation engaged in the business of the acquisition, exploration, development of mineral properties, with the primary aim of developing properties to a stage where they can be exploited for a profit. The Company adds value by investing in strategic companies and developing assets through exploration moving towards the overall strategy of becoming a mid-tier gold producer. The Company’s shares are listed on the TSX Venture Exchange (the “Exchange”) and, accordingly, the Company is subject to restrictions on share issuances and certain types of payments as set out in Exchange policies. The Company’s shares are also listed on the Over the Counter market (“OTC”) in the United States and the Frankfurt Stock Exchange in Germany.
2.
CONTINUANCE OF OPERATIONS
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Canada (“Canadian GAAP”) and the ongoing assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. The Company has a history of operating losses and it had a working capital deficiency of $5,222,862 at March 31, 2008 (December 31, 2007 - $2,121,615). The Company intends to undertake exploration and development programs that will require the Company to raise further funds or sell assets. These consolidated financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
The operations of the Company have been primarily funded by the issuance of share capital and debt. Continued operation of the Company is dependent on the Company's ability to complete additional equity financings or generate profitable operations in the future. Such financings may not be available or may not be available on reasonable terms.
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Buffalo Gold Ltd. Q1 March 31, 2008 Financials
Page 5
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BUFFALO GOLD LTD.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the Three Months Ended March 31, 2008
(Unaudited, Prepared by Management)
3.
ADOPTION OF ACCOUNTING POLICIES
Accounting policies to be implemented effective January 1, 2008
Two new CICA Handbook sections, 3862,Financial Instruments – Disclosure and 3863,Financial Instruments – Presentation, will replace Section 3861,Financial Instruments – Disclosure and Presentation. These new sections incorporate many of the disclosure requirements in the existing section, but place an increased emphasis on disclosure about risk, including both qualitative and quantitative information about the risk exposures arising from financial instruments.
Section 1535, Capital Disclosures establishes disclosure requirements about the Company’s objectives, policies and processes for managing capital, as well as quantitative information about the capital.
Section 3031, Inventories, which replaces the existing Section 3030, establishes standards for the measurement and disclosure of inventories. The new standard provides more extensive guidance on the determination of cost, including allocation of overhead, requires impairment testing and expands the disclosure requirements. The adoption of Section 3031 will not have a material impact on the Company’s consolidated financial position and results of operations.
Accounting policies to be implemented effective January 1, 2009
In February 2008, the CICA issued Section 3064,Goodwill and Intangible Assets, which replaces Section 3062,Goodwill and Other Intangible Assets and Section 3450,Research and Development Costs. Various changes have been made to other sections of the CICA Handbook for consistency purposes. Section 3064 establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets. Standards concerning goodwill are unchanged from the standards included in the previous Section 3062. The new Section will be applicable to the Company’s financial statements for its fiscal year beginning January 1, 2009. The Company is currently evaluating the impact of the adoption of this new Section on its consolidated financial statements.
International Financial Reporting Standards (“IFRS”)
In 2006, the Canadian Accounting Standards Board (“AcSB”) published a new strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected five year transitional period. In February 2008, the AcSB announced that 2011 is the changeover date for publicly-listed companies to use IFRS, replacing Canada’s own GAAP and the date for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The transition date of January 1, 2011 will require the restatement for comparative purposes of amounts reported by the Company for the year ended December 31, 2010. While the Company has begun assessing the adoption of IFRS for 2011, the financial reporting impact of the transition to IFRS cannot be reasonable estimated at this time.
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Buffalo Gold Ltd. Q1 March 31, 2008 Financials
Page 6
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BUFFALO GOLD LTD.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the Three Months Ended March 31, 2008
(Unaudited, Prepared by Management)
4.
MARKETABLE SECURITIES
At March 31, 2008, the Company held the following available-for-sale securities:
|
| Cost | Market Value |
Solomon Gold plc | Common shares | $ 318,999 | $ 159,175 |
Gold Aura | Common shares | 390,628 | 170,984 |
Kinbauri Gold Corp. | Common shares | 6,501,640 | 8,786,000 |
|
| $ 7,211,267 | $ 9,116,159 |
At December 31, 2007, the Company held the following available-for-sale securities:
|
| Cost | Market Value |
Solomon Gold plc | Common shares | $ 318,999 | $ 160,524 |
AMI Resources Inc. | Common shares | 670,782 | 361,375 |
Gold Aura Limited | Common shares | 390,628 | 286,396 |
|
| $1,380,409 | $ 808,295 |
5.
INVENTORIES
| March 31, 2008 | December 31, 2007 | |||
|
|
|
|
|
|
Gold doré bars | $ | - |
| $ | 77,945 |
Work in progress |
| 659,950 |
|
| 505,553 |
Materials and supplies |
| 575,654 |
|
| 415,609 |
| $ | 1,235,604 |
| $ | 999,107 |
6.
PROPERTY, PLANT AND EQUIPMENT
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Buffalo Gold Ltd. Q1 March 31, 2008 Financials
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BUFFALO GOLD LTD.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the Three Months Ended March 31, 2008
(Unaudited, Prepared by Management)
7.
EQUITY INVESTMENTS
Kinbauri Gold Corp.
|
|
|
Balance, December 31, 2007 | $ | 4,465,152 |
Equity in loss for the period |
| (665,794) |
Sale of shares |
| (815,167) |
Transfer to marketable securities |
| (2,984,191) |
Balance, March 31, 2008 | $ | - |
At December 31, 2007, the Company held 26% of the issued common shares of Kinbauri. In the quarter ended March 31, 2008, the Company sold 2,400,000 shares of Kinbauri for net proceeds of $1,382,640. At February 28, 2008 the Company shareholding in Kinbauri fell below 20% and Kinbauri ceased to be an equity investee.
Bondi Mining Ltd.
|
|
|
Balance, December 31, 2007 | $ | 8,615,362 |
Equity in loss for the period |
| (287,258) |
Balance, March 31, 2008 | $ | 8,328,104 |
At March 31, 2008 Company held 42% of the issued common shares of Bondi.
AMI Resources Inc.
In May 2007, the Company acquired 1,445,500 shares of AMI, a publicly traded company, at a cost of $670,782. Longview Capital Partners Incorporated (“Longview Incorporated”), a company with an officer and a director in common with the Company, is a significant shareholder of AMI.
In January 2008, the Company acquired 5,724,500 common shares of AMI at a price of $0.40 per share in a private transaction with Longview Incorporated. As a result of this transaction, the Company now owns 7,170,000 common shares, representing approximately 22% of AMI’s issued and outstanding share capital.
|
|
|
Balance, December 31, 2007 | $ | - |
Purchase of shares and warrants |
| 2,868,000 |
Equity in loss for the period |
| (132,000) |
Balance, March 31, 2008 | $ | 2,736,000 |
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Buffalo Gold Ltd. Q1 March 31, 2008 Financials
Page 8
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BUFFALO GOLD LTD.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the Three Months Ended March 31, 2008
(Unaudited, Prepared by Management)
8.
EXPLORATION PROPERTIES
The carrying values of the Company’s mineral properties were:
The Company incurred exploration expenses as follows:
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Buffalo Gold Ltd. Q1 March 31, 2008 Financials
Page 9
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BUFFALO GOLD LTD.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the Three Months Ended March 31, 2008
(Unaudited, Prepared by Management)
8.
EXPLORATION PROPERTIES (CONTINUED)
The Company’s exploration expenditures (recoveries) by property were:
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Buffalo Gold Ltd. Q1 March 31, 2008 Financials
Page 10
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BUFFALO GOLD LTD.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the Three Months Ended March 31, 2008
(Unaudited, Prepared by Management)
9.
SHARE CAPITAL
In January 2008, the Company completed the second tranche of a brokered private placement of 9,104,001 units at a price of $0.45 per unit to generate gross proceeds of $4,096,800 of which $211,500 was received in 2007. Each unit comprises one common share and a half-warrant with each full warrant exercisable to purchase a common share at $0.75 for a period of two years. The Company incurred cash offering costs of $474,078. In addition, the Company issued 1,114,711 broker warrants.
10.
STOCK OPTIONS
The Company has an incentive stock option plan (the “Plan”) to grant options to directors, officers, employees and consultants of the Company. The maximum number of shares reserved for issuance under the Plan may not exceed 10% of the issued share capital of the Company. Under the Plan, the exercise price of each option may not be less than the market price of the Company’s shares at the date of grant. Options granted under the Plan have a term not to exceed five years and vesting provisions are determined by the board of directors.
The change in stock options outstanding is as follows:
| March 31, 2008 |
| March 31, 2007 | ||
| Stock Options Outstanding | Weighted Average Exercise Price US$ |
| Stock Options Outstanding | Weighted Average Exercise Price US$ |
|
|
|
|
|
|
Balance, January 1 | 8,387,262 | 0.74 |
| 3,698,500 | 1.14 |
|
|
|
|
|
|
Granted | - | - |
| - | - |
Exercised | - | - |
| (250,000) | 0.35 |
Expired or forfeited | (1,760,190) | 0.71 |
| - | - |
Balance, March 31 | 6,627,072 | 0.75 |
| 3,448,500 | 1.20 |
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Buffalo Gold Ltd. Q1 March 31, 2008 Financials
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BUFFALO GOLD LTD.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the Three Months Ended March 31, 2008
(Unaudited, Prepared by Management)
11.
WARRANTS
At March 31, 2008, the following share purchase warrants were outstanding:
The change in share purchase warrants outstanding is as follows (where applicable, Canadian dollar denominated amounts have been converted to US dollars at prevailing exchange rates):
| Financing Warrants |
| Broker Warrants | ||||
| Warrants Outstanding | Weighted Average Exercise Price |
| Warrants Outstanding | Weighted Average Exercise Price | ||
At January 1, 2008 | 14,608,993 | US$ 1.43 |
| 4,754,597 | - | US$ 1.23 |
|
Issued | 4,552,001 | US$ 0.74 |
| 1,114,711 | - | US$ 0.74 |
|
Expired | - | - |
| - | - | - |
|
Exercised | - | - |
| - | - | - |
|
At March 31, 2008 | 19,160,994 | US$ 1.27 |
| 5,869,308 | - | US$ 1.14 |
|
12.
RELATED PARTY TRANSACTIONS
The Company incurred the following expenses with officers, a former officer, directors, a former director, companies and a law firm in which officers or directors of the Company, or their spouses, hold an interest:
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Buffalo Gold Ltd. Q1 March 31, 2008 Financials
Page 12
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BUFFALO GOLD LTD.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the Three Months Ended March 31, 2008
(Unaudited, Prepared by Management)
12.
RELATED PARTY TRANSACTIONS (CONTINUED)
Included in accounts payable at March 31, 2008 is $231,880 (December 31, 2007 - $249,675) due to officers, directors and consulting companies in which officers or directors hold an interest.
These transactions were in the normal course of operations and were measured at the exchange value which represented the amount of consideration established and agreed to by the related parties.
13.
CAPITAL MANAGEMENT
The Company considers that its capital comprises shareholders' equity and long-term liabilities. The Company's objectives in managing capital are to ensure that it has sufficient funds to support the development of a gold exploration and mining company and maintain creditor confidence; and to safeguard the Company’s ability to obtain financing when the need arises.
The Company does not have any externally or internally imposed capital requirements. In maintaining its capital, the Company has a strict investment policy which includes investing surplus cash only in highly liquid, highly rated financial instruments. The Company regularly reviews its capital management approach. There were no changes in the Company’s approach to capital management during the period.
14.
SUBSEQUENT EVENT
In April 2008, the Company gave notice to Madison Minerals Inc. (“Madison”) that the Company wishes to implement a joint venture at the Mt. Kare project in Papua New Guinea following a 90-day notice period. The Company currently has a 60% interest in the Mt. Kare project and Madison has 40%. Madison and the Company collectively hold a 10% interest in trust for the local landowners, which is included in their interests. The Company and Madison will have to contribute on a pro rata basis to the project costs or their ownership interests will be diluted. Madison has indicated that it will not be contributing to the joint venture and will be subject to dilution.
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Buffalo Gold Ltd. Q1 March 31, 2008 Financials
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