Exhibit 99.1
Condensed Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
KOBEX MINERALS INC.
(An Exploration Stage Company)
For the 6 months ended June 30, 2011 and 2010 (Unaudited)
NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS
These financial statements have been prepared by management of the Company and have not been reviewed by the Company’s independent auditor.
Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statement of Financial Position (Unaudited)
(Expressed in Canadian dollars)
| | | | June 30 | | December 31 | | January 1 |
| | | | 2011 | | 2010 | | 2010 |
| | | | | | (Note 12) | | (Note 12) |
ASSETS | | | | | | |
| | | | | | | | |
| CURRENT ASSETS: | | | | | | |
| | Cash and cash equivalents | $ 38,007,233 | | $ 38,852,899 | | $ 40,911,288 |
| | Marketable securities (see Note 3) | 1,333,933 | | 2,084,233 | | 5,000,900 |
| | Other receivables and prepaids | 125,767 | | 148,730 | | 319,485 |
| | Due from related party (see Note 7) | 3,011 | | 1,359 | | - |
| | | | 39,469,944 | | 41,087,221 | | 46,231,673 |
| | | | | | | | |
| EQUIPMENT | | 8,034 | | 7,355 | | - |
| MINERAL PROPERTY INTEREST | - | | - | | 28,048 |
| | | | | | | | |
| Total assets | | $ 39,477,978 | | $ 41,094,576 | | $ 46,259,721 |
| | | | | | | | |
LIABILITIES | | | | | | |
| | | | | | | | |
| CURRENT LIABILITIES: | | | | | | |
| | Accounts payable & accrued liabilities | $ 207,603 | | $ 222,133 | | $ 213,818 |
| | | | | | | | |
SHAREHOLDERS' EQUITY | | | | | | |
| | | | | | | | |
| | Share Capital (see Note 6) | 81,434,814 | | 81,325,651 | | 81,325,651 |
| | Contributed Surplus | | 9,742,322 | | 9,660,797 | | 8,333,185 |
| | Accumulated Other Comprehensive Income | 724,599 | | 1,474,899 | | 4,026,983 |
| | Deficit | | (52,631,360) | | (51,588,904) | | (47,639,916) |
| | | | | | | | |
| Total shareholders' equity | | 39,270,375 | | 40,872,443 | | 46,045,903 |
| | | | | | | | |
| Nature of operations (Note 1) | | | | | | |
| Commitments (Note 11) | | | | | | |
| Subsequent event (Note 13) | | | | | | |
| Total shareholders' equity and liabilities | $ 39,477,978 | | $ 41,094,576 | | $ 46,259,721 |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Approved on behalf of the Board: | | | | | |
| | | | | | | | |
| "Roman Shklanka" | | | | | | |
| August 4, 2011 | | | | | | |
| | | | | | | | |
| "Alfred Hills" | | | | | | |
| August 4, 2011 | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statements of Operations and Comprehensive Income/(Loss) (Unaudited)
(Expressed in Canadian dollars)
For the three and six months ended June 30, 2011 and 2010
| | | | Three months ended June 30, | | Six months ended June 30, |
| | | | 2011 | 2010 | | 2011 | 2010 |
| | | | | (Note 12) | | | (Note 12) |
| EXPENSES | | | | | | |
| | Corporate development and investor relations | $ 4,719 | $ 15,937 | | $ 5,583 | $ 24,231 |
| | Consulting | | 35,881 | 59,155 | | 61,074 | 120,296 |
| | Depreciation | | 1,052 | - | | 1,971 | - |
| | Exploration (Note 4) | | 72,334 | 121,117 | | 174,177 | 223,633 |
| | Office and sundry | | 56,984 | 40,358 | | 105,254 | 211,886 |
| | Professional fees | | 38,647 | 63,677 | | 51,237 | 144,028 |
| | Rent, parking and storage | | 61,629 | 50,220 | | 122,000 | 109,965 |
| | Salaries and employee benefits | 247,452 | 240,978 | | 502,885 | 487,718 |
| | Stock-based compensation (Note 6 and 12) | 65,410 | 196,230 | | 130,102 | 390,305 |
| | Transfer agent and regulatory fees | 13,269 | 19,655 | | 32,511 | 36,358 |
| | Travel and accomodation | | 3,876 | 9,951 | | 10,124 | 11,901 |
| | | | 601,253 | 817,278 | | 1,196,918 | 1,760,321 |
| LOSS BEFORE UNDERNOTED ITEMS | (601,253) | (817,278) | | (1,196,918) | (1,760,321) |
| | | | | | | | |
| OTHER INCOME (EXPENSE) | | | | | |
| | Foreign exchange loss | | (15,295) | 95,964 | | (84,803) | 29,881 |
| | Interest income | | 120,162 | 68,920 | | 239,265 | 153,902 |
| | Write off of mineral property interest (Note 4) | - | (28,048) | | - | (28,048) |
| | | | 104,867 | 136,836 | | 154,462 | 155,735 |
| | | | | | | | |
| NET LOSS FOR THE PERIOD | (496,386) | (680,442) | | (1,042,456) | (1,604,586) |
| | | | | | | | |
| OTHER COMPREHENSIVE INCOME/(LOSS) | | | | | |
| | Unrealized (loss)/gain on available-for-sale marketable securities | (600) | (3,750,000) | | (750,300) | (2,500,300) |
| | | | | | | | |
| COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD | $ (496,986) | $ (4,430,442) | | $ (1,792,756) | $ (4,104,886) |
| | | | | | | | |
| BASIC AND DILUTED LOSS PER SHARE | $ (0.01) | $ (0.01) | | $ (0.02) | $ (0.03) |
| | | | | | | | |
| WEIGHTED AVERAGE NUMBER OF SHARES | 46,057,832 | 45,967,077 | | 46,027,046 | 45,967,077 |
The accompanying notes are an integral part of these consolidated financial statements
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statement of Changes in Equity (Unaudited)
(Expressed in Canadian dollars)
For the six months ended June 30, 2011 and 2010
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Accumulated Other | |
| | | Common Shares | | | Contributed | | | Comprehensive | |
| | | Number of shares | | | Amount | | | Surplus | | | Deficit | | | Income | | | Total | |
| Balance as at January 1, 2010 | | | 45,967,077 | | | $ | 81,325,651 | | | $ | 8,402,224 | | | $ | (47,708,955 | ) | | $ | 4,026,983 | | | $ | 46,045,903 | |
| Net loss | | | - | | | | - | | | | - | | | | (1,604,586 | ) | | | - | | | | (1,604,586 | ) |
| Unrealized gains/(losses) on available-for-sale securities (Note 3) | - | | | | - | | | | - | | | | - | | | | (2,500,300 | ) | | | (2,500,300 | ) |
| Income tax effect of unrealized gain on available-for-sale securities | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Share based compensation | | | - | | | | - | | | | 390,305 | | | | - | | | | - | | | | 390,305 | |
| Balance as at June 30, 2010 | | | 45,967,077 | | | $ | 81,325,651 | | | $ | 8,792,529 | | | $ | (49,313,541 | ) | | $ | 1,526,683 | | | $ | 42,331,322 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as at January 1, 2011 | | | 45,967,077 | | | $ | 81,325,651 | | | $ | 9,660,797 | | | $ | (51,588,904 | ) | | $ | 1,474,899 | | | $ | 40,872,443 | |
| Net Income | | | - | | | | - | | | | - | | | | (1,042,456 | ) | | | - | | | | (1,042,456 | ) |
| Unrealized gains/(losses) on available-for-sale securities (Note 3) | - | | | | - | | | | - | | | | - | | | | (750,300 | ) | | | (750,300 | ) |
| Share based compensation | | | - | | | | - | | | | 130,102 | | | | - | | | | - | | | | 130,102 | |
| Exercise of stock options (Note 6) | | | 90,755 | | | | 109,163 | | | | (48,577 | ) | | | - | | | | - | | | | 60,586 | |
| Balance as at June 30, 2011 | | | 46,057,832 | | | $ | 81,434,814 | | | $ | 9,742,322 | | | $ | (52,631,360 | ) | | $ | 724,599 | | | $ | 39,270,375 | |
The accompanying notes are an integral part of these consolidated financial statements.
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Expressed in Canadian dollars)
For the three and six months ended June 30, 2011 and 2010
| | | | | | | | |
| | | | Three months ended June 30, | | Six months ended June 30, |
| | | | 2011 | 2010 | | 2011 | 2010 |
| | | | | (Note 12) | | | (Note 12) |
| CASH PROVIDED FROM (USED FOR) | | | | | | |
| | | | | | | | |
| OPERATING ACTIVITIES | | | | | | | |
| Net loss for the period | | | $ (496,386) | $ (680,442) | | $ (1,042,456) | $ (1,604,586) |
| Items not affecting cash | | | | | | | |
| Interest income | | | 120,162 | 68,920 | | 239,265 | 153,902 |
| Stock-based compensation | | 65,410 | 196,230 | | 130,102 | 390,305 |
| Write off of mineral property interest | | - | 28,048 | | - | 28,048 |
| Depreciation | | | 1,052 | - | | 1,971 | - |
| | | | (309,762) | (387,244) | | (671,118) | (1,032,331) |
| Interest received | | | (120,162) | (68,920) | | (239,265) | (153,902) |
| Change in non-cash working capital balances | | 50,388 | 59,107 | | 6,782 | 152,273 |
| | | | (379,536) | (397,057) | | (903,601) | (1,033,960) |
| | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | |
| Acquisition of fixed assets | | | (2,651) | - | | (2,651) | - |
| | | | (2,651) | - | | (2,651) | - |
| | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | |
| Exercise of stock options | | | - | - | | 60,586 | - |
| | | | - | - | | 60,586 | - |
| | | | | | | | |
| (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS | (382,187) | (397,057) | | (845,666) | (1,033,960) |
| | | | | | | | |
| CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 38,389,420 | 40,274,385 | | 38,852,899 | 40,911,288 |
| | | | | | | | |
| CASH AND CASH EQUIVALENTS - END OF PERIOD | $ 38,007,233 | $ 39,877,328 | | $ 38,007,233 | $ 39,877,328 |
| | | | | | | | |
| | | | | | | | |
| | | | Three months ended June 30, | | Six months ended June 30, |
| | | | 2011 | 2010 | | 2011 | 2010 |
| Change in non-cash working capital | | | | | | |
| | Other receivables and prepaids | $ 24,969 | $ 24,115 | | $ 22,963 | $ 173,547 |
| | Due from related party | | (1,661) | 75 | | (1,651) | (1,263) |
| | Accounts payable and accrued liabilities | 27,080 | 34,917 | | (14,530) | (20,011) |
| | | | $ 50,388 | $ 59,107 | | $ 6,782 | $ 152,273 |
The accompanying notes are an integral part of these consolidated financial statements.
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Expressed in Canadian dollars)
For the three and six months ended June 30, 2011 and 2010
1. NATURE OF OPERATIONS
Kobex Minerals Inc. (the “Company”) is a public company listed on the TSX Venture Exchange in Canada and the NYSE-Amex Exchange in the United States. The Company is engaged in the business of acquisition, exploration and development of mineral properties. The underlying value of mineral properties is dependent upon the ability of the Company to complete exploration and development and the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to explore and develop the properties and upon future profitable production or proceeds from disposition of the Company’s mineral properties. The Company presently considers itself to be an exploration stage company.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
These condensed consolidated interim financial statements have been prepared by management in conformity with IAS 34, Interim Financial Reporting and do not include all the disclosures required for full annual financial statements in accordance with International Financial Reporting Standards (IFRS).
These IFRS interim financial statements are for part of the period covered by the Company’s first IFRS consolidated annual financial statements to be presented in accordance with IFRS for the year ending December 31, 2011. An explanation of how the transition to IFRSs has affected the reported financial position, financial performance and cash flows of the Company is provided in note 12. This note includes reconciliation of equity and total comprehensive income for the comparative periods and of equity at the date of transition reported under Canadian GAAP to those reported for those periods and at the date of transition under IFRS.
Certain comparative figures have been reclassified to conform to the current period's presentation.
Basis of presentation
These condensed consolidated interim financial statements have been prepared on a historical basis except for certain financial instruments which are recorded at fair value. In addition, these condensed consolidated interim financial statements have been prepared using the accrual method of accounting, except for cash flow information.
Use of Estimates
The preparation of financial statements in conformity with IAS 34 requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the period. Significant areas requiring the use of management estimates relate to the determination of the fair value of stock based compensation, other than temporary impairments for investments, environmental obligations and impairment of mineral properties and deferred costs. Actual results may differ from these estimates.
Foreign Currency
These condensed consolidated interim financial statements are presented in Canadian dollars, which is the Company’s and all its subsidiaries functional currency. All financial information presented in Canadian dollars has been rounded to the nearest dollar.
Transactions in currencies other than the functional currency of an entity are recorded at the rates of exchange prevailing on the dates of the transactions. At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in the foreign currency are not re-translated.
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Expressed in Canadian dollars)
For the three and six months ended June 30, 2011 and 2010
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Principles of Consolidation
These consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All inter-company transactions and balances have been eliminated.
Mineral Properties
Except for direct costs related to the acquisition of exploration stage resource property interests, all exploration and evaluation expenditures including those incurred prior to an exploration license being obtained are charged to earnings as they are incurred until a property reaches the development stage.
The Company does not consider a resource property to be at the development stage until such time as either mineral reserves are proven or permits to operate the mineral resource property are received and financing to complete development has been obtained. Development expenditures incurred subsequent to a development decision, and to increase or to extend the life of existing production, are capitalized and will be amortized on the unit-of-production method based upon estimated proven and probable reserves.
Management of the Company periodically reviews the recoverability of the capitalized mineral properties. Management takes into consideration various information including, but not limited to, results of exploration activities conducted to date, estimated future metal prices, and reports and opinions of outside geologists, mine engineers and consultants. When it is determined that a project or property will be abandoned, then the costs are written-off, or if its carrying value has been impaired, then it is written down to fair value.
Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.
Site rehabilitation obligations
Site rehabilitation obligations are recognized when a legal or constructive obligation arises. The liability is recognized at the present value of management’s best estimate of the site rehabilitation obligation. The estimate is discounted to the present value using a discount rate specific to the obligation. When the liability is initially recorded the Company capitalizes the cost by increasing the carrying amount of the related long-lived assets. Over time the liability is accreted to its present value each period, and the capitalized cost is amortized on the same basis as the related asset. Upon settlement of the liability, the Company may incur a gain or loss. As at June 30, 2011 and December 31, 2010 the Company does not have any asset retirement obligations.
Value Added Taxes (“VAT”)
The Company accounts for foreign VAT paid as expenses when incurred. The recovery of these taxes may commence on the beginning of foreign commercial operations. Should these amounts be recovered they would be treated as a recovery of exploration expenses at that time.
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Expressed in Canadian dollars)
For the three and six months ended June 30, 2011 and 2010
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
The Company uses the asset and liability method of accounting for future income taxes. Under this method of tax allocation, deferred income tax liabilities and assets are recognized for the estimated tax consequences attributable to differences between the amounts reported in the consolidated financial statement and their respective tax bases. Deferred tax is not recognized for temporary differences which arise on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting, nor taxable profit or loss. Deferred taxes are recorded using substantively enacted tax rates and laws that are expected to be in effect in the periods in which the deferred income tax asset or liability is expected to be settled or realized. The effect of a change in income tax rates on deferred income tax liabilities and assets is recognized in income in the period that the change occurs. Potential future income tax assets are not recognized to the extent that realization is not considered probable.
Investment Tax Credits
Eligible investment tax credits (“ITCs”) related to the Company’s mineral property expenditures are accounted for in accordance with the Company’s income taxes accounting policy.
Equipment
Equipment is recorded at cost and is amortized over their estimated useful lives. Equipment costs are amortized at one-half of the annual rate in the year of acquisition.
Asset Basis Rate
| | Leasehold improvements | Straight-line | Lesser of estimated useful |
| | Computer hardware | Declining-balance | 30% per annum |
Share Based Payment
Share based compensation arrangements in which the Company receives goods or services as consideration for its own equity instruments are accounted for as equity settled share based payment transactions. If the fair value of the goods or services received cannot be estimated reliably, the share based payment transaction is measured at the fair value of the equity instruments granted at the date the Company receives the goods or the services.
The fair value of options on the date of the grant is recognized as an expense, with a corresponding increase in contributed surplus, over the period that the optionee becomes unconditionally entitled to the options. The amount recognized as an expense is adjusted to reflect the actual number of share options for which the related service and vesting conditions are met.
Consideration received on the exercise of stock options is recorded as share capital and the related contributed surplus is transferred to share capital.
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Expressed in Canadian dollars)
For the three and six months ended June 30, 2011 and 2010
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial Instruments - Recognition and Measurement
The Company classifies all financial instruments as held to maturity, available-for-sale, held for trading, loans and receivables or other liabilities. Financial assets classified as held to maturity, loans and other receivables, and other liabilities are measured at amortized cost. Available for sale financial instruments are measured at fair value with temporary unrealized gains and losses recorded in other comprehensive income. Realized losses and other than temporary unrealized losses on available-for-sale financial assets are recognized in the statement of operations. Instruments classified as held for trading are measured at fair value with unrealized gains and losses recognized in the statement of operations for the period.
The Company has designated its financial instruments as follows:
| | i) | Cash and cash equivalents are classified as “Loans and receivables” and recorded at amortized cost. |
| | ii) | Marketable securities are classified as either “Available-for-sale” or “Held-for-trading”. “Available-for-sale” securities are recorded at fair value with temporary changes in fair value recorded in other comprehensive income. The fair value of marketable securities is obtained by reference to the closing quoted market price on the balance sheet date. |
| | iii) | Amounts receivable and deposits are classified as “Loans and Receivables” and are recorded at their amortized cost. |
| | iv) | Accounts payable, accrued liabilities and termination benefits are classified as “Other Financial Liabilities” and are carried at their amortized cost. |
Cash and cash equivalents include cash, money market investments and guaranteed investment certificates (GICs) with a term of 1 year or less. These investments are redeemable at any time for their fair market value at the option of the Company.
Loss per Share
Loss per share is calculated based on the weighted average number of common shares issued and outstanding during the period. In period in which a loss is incurred, the effect of potential issuances of shares under options and warrants would be anti-dilutive and therefore basic and diluted losses per share are the same.
New Pronouncements
A number of new IFRS standards, and amendments to standards and interpretations, are not yet effective for the period ended June 30, 2011, and have not been applied in preparing these condensed consolidated financial statements. None of these standards are expected to have a significant effect on the consolidated financial statements of the Company.
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Expressed in Canadian dollars)
For the three and six months ended June 30, 2011 and 2010
3. MARKETABLE SECURITIES AND INVESTMENT
| For the 6 months period ended June 30, 2011 | | | | | | | | | |
| | | | | | | | | | |
| | | January 1, 2011 | | | Adjustment | | | June 30, 2011 | |
| | | carrying value | | | to fair value | | | carrying value | |
| Available-for-sale investment | | | | | | | | | |
| Urodynamix Technologies Ltd. | | $ | 900 | | | $ | (300 | ) | | $ | 600 | |
| Blue Sky Uranium Corp. | | | 2,083,333 | | | | (750,000 | ) | | | 1,333,333 | |
| Total marketable securities | | $ | 2,084,233 | | | $ | (750,300 | ) | | $ | 1,333,933 | |
| | | | | | | | | | | | | |
| For the year ended December 31, 2010 | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | January 1, 2010 | | | Adjustment | | | December 31, 2010 | |
| | | carrying value | | | to fair value | | | carrying value | |
| Available-for-sale investment | | | | | | | | | | | | |
| Urodynamix Technologies Ltd. | | $ | 900 | | | $ | - | | | $ | 900 | |
| Blue Sky Uranium Corp. | | | 5,000,000 | | | | (2,916,667 | ) | | | 2,083,333 | |
| Total marketable securities | | $ | 5,000,900 | | | $ | (2,916,667 | ) | | $ | 2,084,233 | |
The fair value of investments in equity securities classified as available for sale is determined using bid prices at the balance sheet date. As at June 30, 2011, the quoted market value of the shares was $1,333,933.
4. MINERAL PROPERTIES
The table below summarizes the acquisition costs and exploration expenditures for the six months period ended June 30, 2011 and 2010.
| | | | | | | | | | | | | |
| | | Acquisition | | | Exploration | | | Six months ended | | Six months ended | |
| | | costs | | | expenses | | | June 30, 2011 | | June 30, 2010 | |
| | | | | | | | | | | | | |
| Hushamu property (Note 4(c)) | | $ | - | | | $ | - | | | $ | - | | | $ | 13,900 | |
| General exploration | | | - | | | | 174,177 | | | | 174,177 | | | | 209,733 | |
| | | $ | - | | | $ | 174,177 | | | $ | 174,177 | | | $ | 223,633 | |
The Company has an undivided 100% interest in the Mel Property situated in the Watson Lake Mining District, Yukon Territory. The Company has agreed to pay a royalty of 1% of any Net Smelter Returns from the property to Breakwater Resources Ltd. The Mel Property currently consists of 257 mineral claims, with the main targets being zinc, lead and barite.
The wholly-owned property consists of 21 mineral claims situated in the Watson Lake Mining District, Yukon Territory, approximately 100 kilometers north of the town of Watson Lake, with the main targets being zinc, lead and silver.
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Expressed in Canadian dollars)
For the three and six months ended June 30, 2011 and 2010
4. MINERAL PROPERTIES (continued)
The Company entered into an Option Agreement on May 12, 2008 with Western Copper Corporation (“Western Copper”) to further explore and develop the Hushamu Property and the Company had the right to acquire up to a 70% interest. The Hushamu porphyry style copper-molybdenum-gold deposit is located on northern Vancouver Island, B.C.
The Company agreed to expend a minimum of $1.9 million (incurred) by August 15, 2009 of a three year option period. Over the next two years ending August 15, 2011, the Company had an option to spend an additional $13.1 million on drilling, metallurgical, and engineering studies in the completion of a pre-feasibility report on the Hushamu deposit to meet the required terms of the agreement. The total expenditure of $15 million and the completion of a pre-feasibility report would have earned the Company a 49% interest in the project (Option 1) by August 15, 2011. The Company could have earned an additional 16% by funding a subsequent feasibility study by August 15, 2012 (Option 2) and an additional 5% could be earned upon completion of mine permitting (Option 3) for a total interest of 70% with Western Copper retaining a 30% participating interest in the joint venture. On July 2, 2010, the Company announced it terminated this Option Agreement with Western Copper and as such wrote off a mineral property interest of $28,048.
| | | | June 30, 2011 | | | December 31, 2010 | |
| Acquisition costs: | | | | | | |
| Balance, beginning of period | | $ | - | | | $ | 28,048 | |
| | Write off of property interest | | | - | | | | (28,048 | ) |
| Balance, end of period | | $ | - | | | $ | - | |
| | | | | | | | | | |
| Exploration expenditures: | | | | | | | | |
| Balance, beginning of period | | $ | 2,041,018 | | | $ | 2,020,661 | |
| | | | | | | | | | |
| | Salaries and contractors | | | - | | | | 10,638 | |
| | Imagery and base maps | | | - | | | | 123 | |
| | Office | | | - | | | | 13,818 | |
| | Assays | | | - | | | | 5,171 | |
| | Transportation | | | - | | | | (9,393 | ) |
| Balance, end of period | | | 2,041,018 | | | | 2,041,018 | |
| | | | | | | | | | |
| Mineral income tax credit | | | (355,129 | ) | | | (355,129 | ) |
| Total | | | $ | 1,685,889 | | | $ | 1,685,889 | |
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Expressed in Canadian dollars)
For the three and six months ended June 30, 2011 and 2010
5. EQUIPMENT
| | | | | | Accumulated | | | Net Book | |
| June 30, 2011 | | Cost | | | Amortization | | | Value | |
| | | | | | | | | | |
| Leasehold Improvement | | $ | 11,033 | | | $ | (5,517 | ) | | $ | 5,517 | |
| Computer Hardware | | | 2,650 | | | | (133 | ) | | | 2,518 | |
| | | $ | 13,683 | | | $ | (5,649 | ) | | $ | 8,034 | |
| | | | | | | | | | | | | |
| | | | | | | Accumulated | | | Net Book | |
| December 31, 2010 | | Cost | | | Amortization | | | Value | |
| | | | | | | | | | | | | |
| Leasehold Improvement | | $ | 11,033 | | | $ | (3,678 | ) | | $ | 7,355 | |
| | | $ | 11,033 | | | $ | (3,678 | ) | | $ | 7,355 | |
6. SHARE CAPITAL
| | Authorized | - | unlimited common shares without par value |
| | - | 100,000,000 preferred shares without par value |
Issued and outstanding as at June 30, 2011 – 46,057,832 (see Condensed Consolidated Statement of Changes in Equity)
| | (a) | In March 2011, 90,755 stock options were exercised at a price ranging from $0.53 to $0.96 for total proceeds of $60,586 to the Company. |
(b) Stock options and stock-based compensation
The Company has established a rolling stock option plan (the “Plan”), in which the maximum number of common shares which can be reserved for issuance under the Plan is 10% of the issued and outstanding shares of the Company. The stock options granted are subject to a four month hold period and exercisable for a period of five years.
There were no stock options granted for the 6 months ended June 30. 2011.
For the 6 months ended June 30, 2011, the Company incurred a stock-based compensation expense of $130,102 with a corresponding increase in contributed surplus (2010: $390,305).
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Expressed in Canadian dollars)
For the three and six months ended June 30, 2011 and 2010
6. SHARE CAPITAL (continued)
A summary of the changes in the number of stock options outstanding and exercisable for the six months period ended June 30, 2011 and the year ended December 31, 2010 are as follow:
| | | Six months ended | | | Year Ended | | | | |
| | | June 30, 2011 | | | | | | December 31, 2010 | |
| | | Number of options | | | Weighted average | | | Number of options | | | Weighted average | |
| | | outstanding | | | exercise price $ | | | outstanding | | | exercise price $ | |
| | | | | | | | | | | | | |
| Balance, beginning of year | | | 4,016,829 | | | $ | 1.54 | | | | 4,187,925 | | | $ | 2.70 | |
| Granted | | | - | | | $ | - | | | | 745,000 | | | $ | 0.96 | |
| Exercised | | | (90,755 | ) | | $ | 0.67 | | | | - | | | $ | - | |
| Cancelled/Forfeited | | | - | | | $ | - | | | | (169,617 | ) | | $ | 3.46 | |
| Expired | | | (131,375 | ) | | $ | 2.56 | | | | (746,479 | ) | | $ | 7.00 | |
| Outstanding, end of year | | | 3,794,699 | | | $ | 1.53 | | | | 4,016,829 | | | $ | 1.54 | |
| | | | | | | | | | | | | | | | | |
| Exercisable, end of year | | | 3,045,599 | | | $ | 1.71 | | | | 3,267,729 | | | $ | 1.71 | |
The weighted average life of the options outstanding as at June 30, 2011 is 3.17 years.
As at June 30, 2011, the following stock options were outstanding:
| Number of | Number of | Exercise Price |
| Options Granted | Options Vested | per share | Expiry Date |
| 46,041 | 46,041 | | $ 25.09 | | July 6, 2011 |
| 111,978 | 111,978 | | $ 3.42 | | March 16, 2012 |
| 33,608 | 33,608 | | $ 20.31 | | March 16, 2012 |
| 11,510 | 11,510 | | $ 13.36 | | November 7, 2012 |
| 1,381 | 1,381 | | $ 12.81 | | November 8, 2012 |
| 68,281 | 68,281 | | $ 2.03 | | November 15, 2012 |
| 182,989 | 182,989 | | $ 1.67 | | December 12, 2012 |
| 31,489 | 31,489 | | $ 6.73 | | February 5, 2013 |
| 71,819 | 71,819 | | $ 1.09 | | February 25, 2014 |
| 254,003 | 254,003 | | $ 0.53 | | February 26, 2014 |
| 2,256,600 | 1,507,500 | | $ 0.82 | | October 26, 2014 |
| 725,000 | 725,000 | | $ 0.96 | | November 1, 2015 |
| 3,794,699 | 3,045,599 | | | | |
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Expressed in Canadian dollars)
For the three and six months ended June 30, 2011 and 2010
6. SHARE CAPITAL (continued)
(b) Warrants
A summary of the number of common shares reserved pursuant to the Company’s outstanding warrants and agents warrants outstanding at June 30, 2011 and December 31, 2010, and the changes for the periods ending on those dates are as follow:
| | | | | | |
| | | | Six months ended | Year Ended |
| | | | June 30, 2011 | December 31, 2010 |
| | | | | | |
| Balance, beginning of year | - | | 1,242,264 |
| Expired | | | - | | (1,242,264) |
| Balance, end of year | | - | | - |
| | | | | | |
During the six months ended June 30, 2011, management services fees of $8,400 (2010 - $7,200) were charged to a company related by common directors. As of June 30, 2011, $3,011 (2010 - $1,263) is owed to the Company as a result of management service provided to related corporation.
| | All of the related party transactions and balances in these consolidated financial statements arose in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. |
8. CAPITAL RISK MANAGEMENT
The Company defines capital as the items included in shareholders’ equity. The Company’s objectives in managing capital are to safeguard its ability to continue as a going concern and to provide returns for shareholders and benefits for other stakeholders. To meet this objective, the Company will ensure it has sufficient cash resources to pursue the acquisition, exploration and development of mineral properties and fund potential acquisitions.
To support these objectives, the Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and risk characteristics of underlying assets. To maintain or adjust its capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of cash and cash equivalents. In order to maximize the exploration and development efforts, the Company currently does not pay out dividends.
The Company is not subject to any externally imposed capital requirements and there has been no change with respect to the overall capital risk management strategy during the six months ended June 30, 2011.
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Expressed in Canadian dollars)
For the three and six months ended June 30, 2011 and 2010
9. MANAGEMENT OF FINANCIAL RISK
The Company’s financial instruments are exposed to certain risks, including currency, credit and metal price risk.
Currency Risk: Business is transacted by the Company in a number of currencies. Fluctuations in exchange rates may have a significant effect on the cash flows of the Company. Future changes in exchange rates could materially affect the Company’s results in either a positive or negative direction.
The Company has not hedged its exposure to currency fluctuations. As at June 30, 2011, the Company is exposed to currency risk through the following assets and liabilities denominated in US dollars (“USD”):
| | | June 30, 2011 | | | December 31, 2010 | | | January 1, 2010 | |
| | | USD | | | USD | | | USD | |
| | | | | | | | | | |
| Cash | | $ | 2,043,903 | | | $ | 2,100,545 | | | $ | 2,168,732 | |
| Accounts payable and accrued liabilities | | | - | | | | (5,073 | ) | | | (5,510 | ) |
| | | $ | 2,043,903 | | | $ | 2,095,472 | | | $ | 2,163,222 | |
Based on the net exposures as at June 30, 2011, and assuming that all other variables remain constant, a 10% depreciation or appreciation of the Canadian dollar against the US dollar would result in a $197,094 loss or gain in the Company’s net earnings.
Credit Risk: Credit risk is the risk of an unexpected loss of a third party to a financial instrument fails to meet its contractual obligations. The Company is subject to credit risk on the cash and cash equivalents and other receivables. The Company limits its exposure to credit loss by placing its cash and cash equivalents with major financial institutions.
Price Risk: The Company is exposed to price risk with respect to commodity and equity prices. Equity price risk is defined as the potential adverse impact on the Company’s earnings due to movements in individual equity prices or general movements in the level of the stock market. Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. The prices of these commodities affect the value of the Company and the potential value of its property and investments.
Liquidity Risk: Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they are due. The Company ensures that there is sufficient capital in order to meet short-term business requirements, after taking into account the Company’s holdings of cash. The Company raises capital through equity issues and its ability to do so is dependent on a number of factors including market acceptance, stock price and exploration results. The Company’s cash is primarily invested in bank accounts and guaranteed investment certificates (GIC’s) which are cashable on demand. The Company expects that its cash on hand at June 30, 2011 provides the sufficient financial resources to carry out its operations through the 2011 financial year and also allow the Company to pursue acquisition opportunities.
Interest Risk: The Company’s bank accounts earn interest income at variable rates. The fair value of its cash equivalents is relatively unaffected by changes in short-term interest rates. The Company’s future interest income is exposed to short-term rates.
10. SEGMENTED INFORMATION
The Company is involved in mineral exploration and development activities. The Company is in the exploration stage and, accordingly, has no reportable segment revenues or operating results. The Company’s cash is held in Canada, and the majority of the Company’s cash is held with large financial institutions in Canada by the Parent Company.
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Expressed in Canadian dollars)
For the three and six months ended June 30, 2011 and 2010
11. COMMITMENTS
The Company has entered into a lease agreement for office premises, which expires on January 30, 2013, whereby the Company’s minimum rental obligations are as follows:
| 2011 | | $ | 111,649 | |
| 2012 | | | 223,297 | |
| 2013 | | | 18,608 | |
| | | $ | 353,554 | |
On November 26, 2009 the Company entered into an agreement to sublease a portion of its office premises for a term commencing on December 1, 2009 and expiring January 30, 2013 for $5,500 per month. In addition, the subtenant is responsible for its proportionate share of real estate taxes, operating costs and utilities.
12. TRANSITION TO IFRS
These are the Company’s second condensed consolidated interim financial statements for the period covered by the first annual consolidated financial statements prepared in accordance with IFRS. The accounting policies in Note 2 have been applied in preparing the condensed consolidated interim financial statements for the six months ended June 30, 2011, the comparative information for the six months ended June 30, 2010, the financial statements for the year ended December 31, 2010 and the preparation of an opening IFRS statement of financial position on the Transition Date, January 1, 2010.
In preparing its opening IFRS statement of financial position, comparative information for the six months ended June 30, 2010 and financial statements for the year ended December 31, 2010, the Company has adjusted amounts reported previously in financial statements prepared in accordance with Canadian GAAP. An explanation of how the transition from previous GAAP to IFRS has affected the Company’s financial position, financial performance and cash flows is set out in the following tables.
The guidance for the first time adoption of IFRS are set out in IFRS 1. IFRS 1 provides for certain mandatory exceptions and optional exemptions for first time adopters of IFRS. The Company elected to take the following IFRS 1 optional exemptions:
| | · | Business Combinations – Under IFRS 1, an entity has the option to retroactively apply IFRS 3 to all business combinations or may elect to apply the standard prospectively only to those business combinations that occur after the date of transition. The Company has elected this exemption under IFRS 1, which removes the requirement to retrospectively restate all business combinations prior to the date of transition to IFRS. |
| | · | Share-based payments – IFRS 1 permits the Company to apply IFRS 2 Share-based payments only to awards granted on or after the transition date. The Company is also required to apply IFRS 2 to equity instruments that were granted after November 7, 2002 that vest after the date of transition to IFRS. Each tranche of an award with different vesting dates is considered a separate grant for the calculation of fair value, and the resulting fair value is amortized over the estimated lives of the respective tranches. Forfeiture estimates are recognized in the period they are estimated, and are revised for actual forfeitures in subsequent periods. The Company has elected this exemption under IFRS 1 |
KOBEX MINERALS INC.
(An Exploration Stage Company)
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Expressed in Canadian dollars)
For the three and six months ended June 30, 2011 and 2010
12. TRANSITION TO IFRS (Continued)
IFRS reconciliation to Canadian GAAP
[Missing Graphic Reference]
Notes to Reconciliation
| | Under Canadian GAAP, the Company measured share-based compensation related to share purchase options at their fair value of the options granted using the Black-Scholes option pricing formula and recognized this expense over the vesting period of the options. The fair value of the options granted is measured on the date of grant. Forfeitures are recognized as they occur. |
| | IFRS 2, similar to Canadian GAAP, requires the Company to measure share-based compensation related to share purchase options granted at the fair value of the options on the date of grant to recognize such expense over the vesting period of the options. However, all option grants are amortized using a graded amortization schedule. In addition, each vesting tranche is valued with unique assumptions, as if it were a separate grant. |
13. SUBSEQUENT EVENT
Subsequent to June 30, 2011, 46,041 stock options with an exercise price of $25.09 expired without exercise.
