FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of JULY, 2004
OROMIN EXPLORATIONS LTD. (File #0-30614)
(Translation of registrant's name into English)
Suite 2000, 1055 West Hastings St., Vancouver, B.C. Canada, V6E 2E9
(Address of principal executive offices)
Attachments:
1.
Oromin Explorations Ltd. Interim Financial Statements for the Period Ended May 31, 2004.
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F __________
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):
82-________________
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized.
OROMIN EXPLORATIONS LTD.
(Registrant)
Date: August 5, 2004
By:
“Chet Idziszek”
Chet Idziszek
Its: President
(Title)
August 5, 2004
VIA EDGAR
SECURITIES AND EXCHANGE COMMISSION
Judiciary Plaza Office Building
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sir or Madam:
RE:
Oromin Explorations Ltd. - (File #0-30614)
Form 6-K
On behalf of Oromin Explorations Ltd., a corporation under the laws of British Columbia, Canada, we enclose for filing, one (1) copy of Form 6-K, including exhibits.
If you have any questions, please contact the undersigned at your convenience.
Very truly yours,
OROMIN EXPLORATIONS LTD.
“Chet Idziszek”
per:
Chet Idziszek
President
Enclosures
cc:
Standard & Poor's Corporation (w. 3 copies)
Thomas Rondeau, Attn: James L. Harris
OROMIN EXPLORATIONS LTD.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Three months ended May 31, 2004
(Unaudited – Prepared by Management)
Unaudited Interim Financial Statements
In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed the interim unaudited consolidated financial statements for the period ended May 31, 2004.
Oromin Explorations Ltd.
(An exploration stage company)
Consolidated Balance Sheets as at
(Unaudited – Prepared by Management)
May 31, 2004 | February 28, 2004 | |
ASSETS | ||
Current | ||
Cash and cash equivalents | $ 1,572,583 | $ 515,795 |
Receivables | 9,298 | 7,670 |
Prepaid expenses and deposits | 4,872 | 4,872 |
1,586,753 | 528,337 | |
Equipment | 4,921 | 5,294 |
Resource properties and deferred costs(Note 4) | 1,602,392 | 2,310,978 |
Performance bond – restricted cash | 148,611 | 146,071 |
$ 3,342,677 | $ 2,990,680 | |
LIABILITIES & SHAREHOLDERS’ EQUITY | ||
Current | ||
Accounts payable and accrued liabilities | $ 389,900 | $ 291,002 |
Shareholders’ equity | ||
Capital stock (Note 5) | ||
Authorized | ||
100,000,000 common shares without par value | ||
25,695,308 common shares (February 29, 2004 – 21,195,308) | 11,640,280 | 11,010,280 |
Share subscriptions | - | 330,000 |
Contributed surplus | 182,746 | 122,568 |
Deficit | (8,870,249) | (8,763,170) |
2,952,777 | 2,699,678 | |
$ 3,342,677 | $ 2,990,680 |
Nature of operations and going concern (Note 1)
Approved by the Board
“Chet Idziszek”
Director
“James G. Stewart” Director
Oromin Explorations Ltd.
(An exploration stage company)
Consolidated Statements of Loss and Deficit
(Unaudited – Prepared by Management)
Three Months Ended May 31, 2004 | Three Months Ended May 31, 2003 | |
Expenses | ||
Amortization | $ 373 | $ 524 |
Filing and transfer fees | 2,775 | 3,633 |
Office and rent | 12,020 | 15,007 |
Professional fees | 8,294 | 9,678 |
Shareholder information | 1,760 | 678 |
Stock-based compensation | 60,178 | - |
Travel and public relations | 6,792 | 5,190 |
Wages and benefits | 5,494 | 4,890 |
(97,686) | (39,600) | |
Other INCOME (EXPENSE) | ||
Interest income | 1,973 | 1,144 |
Foreign exchange loss | (11,366) | (12,909) |
(9,393) | (11,765) | |
Loss for the period | (107,079) | (51,365) |
Deficit - beginning of period | (8,763,170) | (8,465,554) |
Deficit - end of period | $ (8,870,249) | $ (8,516,919) |
Net loss per share | $ (0.00) | $ (0.00) |
Oromin Explorations Ltd.
(An exploration stage company)
Consolidated Statements of Cash Flows
(Unaudited – Prepared by Management)
Three Months Ended May 31, 2004 | Three Months Ended May 31, 2003 | |
Cash flows from operating activities | ||
Net loss for the period | $ (107,079) | $ (51,365) |
Items not affecting cash: | ||
Amortization | 373 | 524 |
Foreign exchange (gain) loss | (2,540) | 12,677 |
Stock-based compensation | 60,178 | - |
Changes in non-cash working capital items: | ||
Receivables | (1,628) | (786) |
Prepaid expenses and deposits | - | 15,428 |
Accounts payable and accrued liabilities | 98,898 | 2,148 |
48,202 | (21,374) | |
Cash flows from financing activitY | ||
Capital stock issued for cash | 300,000 | 224,409 |
Cash flows from investing activitY | ||
Expenditures on resource properties | (124,094) | (29,319) |
Proceeds from sale of interest in Argentina project | 832,680 | - |
708,586 | (29,319) | |
Change in cash and cash equivalents | 1,056,788 | 173,716 |
Cash and cash equivalents, beginning of period | 515,795 | 100,851 |
Cash and cash equivalents, end of period | $ 1,572,583 | $ 274,567 |
Supplemental disclosure with respect to cash flows (Note 10) | ||
Oromin Explorations Ltd.
(An Exploration Stage Company)
Notes to The Interim Consolidated Financial Statements
(Expressed in Canadian Dollars – Unaudited, Prepared by Management)
For the three months ended May 31, 2004
1.
NATURE OF OPERATIONS AND GOING CONCERN
The Company is in the business of exploring its resource properties. The Company’s current oil and gas exploration activities are in the pre-production stage. Consequently, the Company considers itself to be an exploration stage Company. The recoverability of the Company’s investments in oil and gas properties is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the exploration and future profitable commercial production or proceeds from the disposition thereof.
As at May 31, 2004, the Company has working capital of $1,196,853 (February 29, 2004 - $237,335). The Company’s ability to fulfill its obligations is dependent on its ability to secure additional financing, and while it has been successful in doing so in the past, there can be no assurance it will be able to do so in the future. Accordingly, there is substantial doubt about the ability of the Company to continue as a going concern. Management is actively pursuing additional funds by way of private placement to meet its level of general and administrative expenditures and expenditures on the exploration of its oil and gas properties. In addition, management is pursuing joint venture partners to jointly explore the Company’s oil and gas properties in Argentina.
These interim unaudited consolidated financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. These interim unaudited consolidated financial statements do not include any adjustments that would be necessary should the Company be unable to continue as a going concern.
2.
Interim Unaudited Consolidated Financial Statements
These interim unaudited consolidated financial statements do not contain all the information required for annual financial statements and should be read in conjunction with the financial statements for the year ended February 29, 2004.
3.
SIGNIFICANT ACCOUNTING POLICIES
These interim unaudited consolidated financial statements follow the same accounting policies and methods of their application as the most recent annual financial statements of the Company.
Oromin Explorations Ltd.
(An Exploration Stage Company)
Notes to The Interim Consolidated Financial Statements
(Expressed in Canadian Dollars – Unaudited, Prepared by Management)
For the three months ended May 31, 2004
4.
RESOURCE PROPERTIES AND DEFERRED COSTS
Argentina | Africa | Total | |
Balance, February 29, 2004 | $2,310,978 | $ - | $2,310,978 |
Camp/admin costs | - | 585 | 585 |
Contractors and geologic staff | 45,323 | 25,340 | 70,663 |
Land and legal | 13,004 | 10,400 | 23,404 |
Travel and accommodation | - | 29,442 | 29,442 |
Proceeds from sale of interest (initial payment) | (832,680) | - | (832,680) |
Balance, May 31, 2004 | $1,536,625 | $ 65,767 | $ 1,602,392 |
a)
Argentina
On September 29, 2000, the Company submitted a bid to the Secretariat of Energy of the Republic of Argentina to acquire certain oil and gas rights in the Cuyana Basin of central Argentina. In March 2001, the Secretariat of Energy of the Republic of Argentina approved the Company’s bid to acquire a 100% interest in the oil and gas exploration rights in the Province of Mendoza in central Argentina (the “Santa Rosa property”). These exploration rights are for a period of six years and will be converted into exploitation rights for a period of 25 years if commercial quantities of hydrocarbons are discovered. Upon the successful bid, the Company agreed to incur US$600,000 of exploration expenditures by March 20, 2003, (incurred) as a performance guarantee on the property. The Company has yet to receive formal title to the Santa Rosa property a nd exploration rights.
In April 2003, Cynthia Holdings Limited (“Cynthia”), a wholly-owned subsidiary of the Company, entered into an agreement with The Havana Group, Inc. (“Havana”) whereby Cynthia agreed to sell to Havana an effective 50% interest in the Santa Rosa property owned by Exploraciones Oromin, S.A. (“Oromin, S.A.”) in exchange for US$1,500,000. This agreement amends previous letter agreements.
The agreement is structured such that Oromin, S.A. will be a wholly-owned subsidiary of Cynthia. Currently, Oromin, S.A. is owned directly by Oromin Explorations Ltd. and not by Cynthia although management intends to make Oromin, S.A. a wholly-owned subsidiary of Cynthia.
In exchange for selling the effective 50% interest, Cynthia will issue to Havana 1,000 common shares, representing 50% of the outstanding voting common shares, for US$1,500,000. Havana will be issued one common share for every US$1,500 paid. The agreement provides that the purchase price will be fixed to equivalent Canadian dollars as at July 31, 2002 of approximately $2,376,450. In addition, Havana will also issue to Irie Isle Limited (“Irie”) 1,000,000 unregistered common shares. Irie is the parent company of Cynthia.
Oromin Explorations Ltd.
(An Exploration Stage Company)
Notes to The Interim Consolidated Financial Statements
(Expressed in Canadian Dollars – Unaudited, Prepared by Management)
For the three months ended May 31, 2004
4.
RESOURCE PROPERTIES AND DEFERRED COSTS (cont’d…)
Havana and Irie have agreed that the operations of Oromin, S.A. will be borne equally by each party pursuant to monthly cash calls which will be structured as subscriptions for additional common shares of Cynthia. Havana and Irie have also agreed that Irie will be the operator of Oromin, S.A. and have the casting vote on all operating decisions.
A director of the Company became a director of Havana in August 2002.
Cynthia received (US$832,680) towards this agreement during the three months ended May 31, 2004.
a)
Africa
The Company has deferred other costs relating to the technical due diligence of a potential mineral property acquisition in Africa.
5.
CAPITAL STOCK AND CONTRIBUTED SURPLUS
Number of Shares | Amount | Contributed Surplus | ||
Authorized 100,000,000 common shares without par value | ||||
Balance as at February 29, 2004 | 21,195,308 | $ 11,010,280 | $ 122,568 | |
For cash pursuant to private placement | 3,000,000 | 450,000 | - | |
For cash on exercise of warrants | 1,500,000 | 180,000 | - | |
Stock-based compensation (Note 6) | - | - | 60,178 | |
Balance as at May 31, 2004 | 25,695,308 | $ 11,640,280 | $ 182,746 | |
In March 2004, the Company closed a non-brokered private placement consisting of 3,000,000 units at a price of $0.15 per unit for proceeds of $450,000. Each unit consists of one common share and one-half of one non-transferable share purchase warrant. Each whole warrant entitles the holder to purchase one additional common share at a price of $0.25 per share until March 1, 2006. The Company had received subscription proceeds of $330,000 towards this private placement prior to the three months ended May 31, 2004.
Oromin Explorations Ltd.
(An Exploration Stage Company)
Notes to The Interim Consolidated Financial Statements
(Expressed in Canadian Dollars – Unaudited, Prepared by Management)
For the three months ended May 31, 2004
6.
STOCK OPTIONS
The total fair value of stock options granted during the current period entitling the purchase of up to 300,000 common shares at an exercise price of $0.25 per share until March 3, 2009, was $60,178 which has been recorded in the results of operations.
The following weighted average assumptions were used for the Black-Scholes valuation of options granted during the period.
Risk-free interest rate
3.5%
Expected life
5 years
Annualized volatility
111%
Dividend rate
0%
As at May 31, 2004, the following stock options were outstanding and exercisable:
Exercise Price | Number of Shares | Expiry Date | ||||
$ 0.20 | 145,000 | June 1, 2004 (expired unexercised) | ||||
0.24 | 145,000 | May 12, 2005 | ||||
0.20 | 433,000 | September 28, 2005 | ||||
0.34 | 191,749 | February 8, 2006 | ||||
0.20 | 245,000 | July 4, 2006 | ||||
0.16 | 50,000 | December 1, 2008 | ||||
0.25 | 909,000 | January 22, 2009 | ||||
0.25 | 300,000 | March 3, 2009 | ||||
2,418,749 | ||||||
7.
WARRANTS
As at May 31, 2004, the following share purchase warrants were outstanding and exercisable:
Number of Shares | Exercise Price | Expiry Date |
2,045,454 | $ 0.18 | April 1, 2005 |
1,499,999 | 0.25 | March 1, 2006 |
3,545,453 |
Oromin Explorations Ltd.
(An Exploration Stage Company)
Notes to The Interim Consolidated Financial Statements
(Expressed in Canadian Dollars – Unaudited, Prepared by Management)
For the three months ended May 31, 2004
8.
RELATED PARTY TRANSACTIONS
a)
During the three months ended May 31, 2004, the Company incurred professional fees of $23,523 (2003 - $12,978) with companies related by directors in common.
b)
As at May 31, 2004, accounts payable includes $217,601 (February 29, 2004 - $151,823) due to related parties.
c)
The Company received $832,680 from a related party pursuant to an agreement to sell a 50% interest in the Santa Rosa Property (Note 4a)).
9.
SEGMENTED INFORMATION
The Company has one operating segment, being the exploration of resource properties. The Company’s equipment and resource properties are located in the following geographic areas as at May 31, 2004:
Argentina | $ 1,536,625 |
Canada | 4,921 |
$ 1,541,546 |
10.
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
During the three months ended May 31, 2004, the Company conducted the following non-cash transaction:
Transferred $330,000 to capital stock from share subscriptions on closing the private placement completed March 1, 2004 (Note 5).
FORM 51-102F1
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE MONTH PERIOD
ENDED MAY 31, 2004
OROMIN EXPLORATIONS LTD.
FORM 51-102F1
MANAGEMENT DISCUSSION AND ANALYSIS
THREE MONTH PERIOD ENDED MAY 31, 2004
The following discussion and analysis, prepared as of July 19, 2004, should be read together with the interim unaudited consolidated financial statements for the three month period ended May 31, 2004 and related notes attached thereto, which are prepared in accordance with Canadian generally accepted accounting principles. All amounts are stated in Canadian dollars unless otherwise indicated.
The reader should also refer to the annual audited financial statements for the years ended February 29, 2004 and February 28 2003, and the Management Discussion and Analysis for those years.
Statements in this report that are not historical facts are forward-looking statements involving known and unknown risks and uncertainties, which could cause actual results to vary considerably from these statements. Readers are cautioned not to put undue reliance on forward-looking statements.
Additional information related to the Company is available for view on SEDAR atwww.sedar.com.
Description of Business
The Company is in the business of exploring its resource properties. The Company’s sole property is an oil and gas exploration block known as the Santa Rosa Property which is located in the Republic of Argentina.
The Company’s interest in the Santa Rosa Property is subject to an agreement between Cynthia Holdings Ltd. (“Cynthia”), a wholly-owned subsidiary of the Company, and The Havana Group Inc. (“Havana”) to sell an effective 50% interest in the Santa Rosa Property to Havana. Cynthia received US$600,000 during the period and the balance remains owing. Following the completion of Havana’s purchase of the 50% interest in the Santa Rosa Property, Cynthia and Havana will jointly undertake the next phase of the exploration program, at an estimated cost of US$1,350,000, which will consist of interpretation of seismic data, completion of environmental studies, drilling three exploration wells and, contingent upon success, completing one production well. All required funding for the upcoming phase of exploration and all future exploration and development of the Santa Rosa Prope rty, will be borne equally by each party.
The Company’s common shares trade on the TSX Venture Exchange under the symbol “OLE”.
Performance Summary
The following is a summary of significant events and transactions that occurred during the period:
1.
In March 2004, Cynthia Holdings Ltd. (“Cynthia”), a wholly-owned subsidiary of the Company, received US$600,000 from The Havana Group Inc. (“Havana”) pursuant to an agreement to sell an effective 50% interest in the Santa Rosa Property to Havana.
2.
In March 2004, the Company issued 3,000,000 units at a price of $0.15 per unit to generate net proceeds of $450,000 pursuant to a non-brokered private placement. Each unit is comprised of one common share of the Company and one half non-transferable share purchase warrant, each whole warrant entitling the purchase of one additional share of the Company at a price of $0.25 per share until March 1, 2006. The Company had received $330,000 toward this private placement in the year ended February 29, 2004.
3.
In May 2004, the Company issued 1,500,000 common shares pursuant to the exercise of warrants for proceeds of $180,000.
Selected Annual Information
The following table provides a brief summary of the Company’s financial operations. For more detailed information, refer to the Financial Statements.
Year Ended February 29, 2004 | Year Ended February 28, 2003 | Year Ended February 28, 2002 | |
Total revenues | nil | nil | Nil |
Net loss | $297,616 | $193,126 | $79,385 |
Basic and diluted loss per share | (0.01) | (0.01) | (0.01) |
Total assets | 2,990,680 | 2,444,494 | 4,581,547 |
Total long-term liabilities | nil | nil | Nil |
Cash dividends | nil | nil | Nil |
During the fiscal year ended February 29, 2004, the total assets of the Company increased to $2,990,680 from $2,444,494 as at February 28, 2003, primarily due to funds raised by way of private placement and on the exercise of warrants which generated proceeds of $344,409. The Company also received $330,000 in share subscriptions pursuant to a private placement which closed March 1, 2004. The significant increase in loss during the year ended February 29, 2004 compared to the loss for the year ended February 28, 2003 is due to stock-based compensation of $110,518.
During the fiscal year ended February 28, 2003, the total assets of the Company decreased to $2,444,494 from $4,581,547 as at February 28, 2002, due principally to the repayment of the loan made in a previous period which was used by the Company to make a capital contribution to its Argentine subsidiary, Exploraciones Oromin S.A., in order to permit Exploraciones Oromin S.A. to qualify as a bidder for the Santa Rosa Property.
The Company follows the full cost method of accounting for oil and gas properties in accordance with the accounting guidelines published by the Canadian Institute of Chartered Accountants. All costs of exploration and development of oil and gas properties are capitalized and accumulated in cost centres. General and administrative costs are expensed in the period in which they are incurred. The Company follows the fair value method for measuring compensation costs.
The Company has not paid any dividends on its common shares. The Company has no present intention of paying dividends on its common shares, as it anticipates that all available funds will be invested to finance the growth of its business.
Results of Operations
The Company’s largest cash inflow was $832,680 (US$600,000) received from the Havana Group representing the first payment toward the sale of a 50% interest in the Santa Rosa property in Argentina. The Company's largest cash outflow in the three month period ended May 31, 2004 was as a result of exploration expenditures of $124,094. These expenditures consisted of $65,767 spent on technical due diligence of a potential mineral property acquisition in Africa, and $58,327 in expenditures on the Santa Rosa property in Argentina. Expenditures on the due diligence of the African prospect include $585 for related administrative costs, $25,340 paid to consulting geologists for assessment of the prospect and guided assistance while in Africa, $10,400 in legal costs related to bid submission and $29,442 for travel and accommodation. Expenditures in Argentina include $45,323 paid to contractor s and geological staff and $13,004 for land and legal costs.
Expenses for the three month period ended May 31, 2004 were $97,686, up from $39,600 for the three month period ended May 31, 2003. This increase is primarily due to stock-based compensation of $60,178 recorded on the granting of stock options during the three month period ended May 31, 2004. No stock options were granted during the three month period ended May 31, 2003. Office and rent costs decreased by $2,987 during the same period due to the decrease in office space occupied and wages and benefits increased by $604 due to staff salary and benefit cost increases.
Summary of Quarterly Results
Three Months Ended May 31, 2004 | Three Months Ended February 29, 2004 | Three Months Ended November 30, 2003 | Three Months Ended August 31, 2003 | Three Months Ended May 31, 2003 | Three Months Ended February 28, 2003 | Three Months Ended November 30, 2002 | Three Months Ended August 31, 2002 | |
Total assets | $3,342,677 | 2,990,680 | 2,616,211 | 2,641,157 | 2,629,699 | 2,444,494 | 2,402,357 | 2,523,469 |
Resource properties and deferred costs | 1,602,392 | 2,310,978 | 2,248,519 | 2,219,044 |
2,185,635 |
2,146,303 | 2,069,096 | 2,008,089 |
Working capital (deficiency) | 1,196,853 | 237,335 | (94,407) | (47,687) | 43,493 | (103,420) | 197,688 | 295,952 |
Shareholders’ equity | 2,952,777 | 2,699,678 | 2,301,336 | 2,328,675 | 2,385,411 | 2,212,367 | 2,274,912 | 2,312,907 |
Revenues | nil | nil | nil | nil | nil | nil | nil | nil |
Net loss | (107,079) | (162,176) | (27,339) | (56,736) | (51,365) | (62,545) | (37,995) | (55,115) |
Earnings (loss) per share | (0.00) | (0.01) | (0.00) | (0.00) | (0.00) | (0.00) | (0.00) | (0.00) |
Significant changes in key financial data from 2002 to 2004 can be attributed to expenditures on the Santa Rosa property in Argentina and the sale of share capital. During the three months ended May 31, 2004, the Company received $832,680 (US$600,000) representing the initial payment towards the sale of a 50% interest in the Santa Rosa property in Argentina significantly increasing working capital and reducing cumulative resource property costs.
Liquidity
The Company does not currently own or have an interest in any producing resource properties and has not derived any revenues from the sale of resource products in the last three financial years. The Company's exploration activities have been funded through sales of common shares, and the Company expects that it will continue to be able to utilize this source of financing until it develops cash flow from its operations. There can be no assurance, however, that the Company will be able to obtain required financing in the future on acceptable terms, or at all. In the near term, the Company plans to continue its exploration activities on its currently held property.
Based on its existing working capital, the Company requires additional financing for the Santa Rosa Property if it is to proceed with drilling during the current fiscal year. If such funds are not available or cannot be obtained or are insufficient to cover such costs, the Company will be forced to curtail its exploration activities to a level for which funding is available or can be obtained. Accordingly, there is substantial doubt about its ability to continue as a going concern.
May 31, 2004 | February 29, 2004 | |
Working capital | 1,196,853 | 237,335 |
Deficit | (8,870,249) | (8,763,170) |
Capital Resources
During the three month period ended May 31, 2004, the Company issued 3,000,000 units at a price of $0.15 per unit to generate net proceeds of $450,000 pursuant to a non-brokered private placement. Each unit is comprised of one common share of the Company and one half non-transferable share purchase warrant, each whole warrant entitling the purchase of one additional share of the Company at a price of $0.25 per share until March 1, 2006. The Company had received $330,000 of the proceeds of this private placement in the year ended February 29, 2004.
The Company also issued 1,500,000 common shares and received proceeds of $180,000 during the three months ended May 31, 2004, pursuant to the exercise of warrants.
While the Company has sufficient funds to meet its anticipated general and administrative expenses for the balance of the fiscal year, the Company will require additional financing if it is to proceed with its proposed exploration program for its Santa Rosa Property during the current fiscal year.
Related Party Transactions
During the three months ended May 31, 2004, the Company incurred professional fees of $23,523 with companies related by directors in common. These payments were comprised of $10,823 paid to a director of the Company for geological consulting services and $12,700 paid to a company controlled by a director and officer of the Company for legal services.
As at May 31, 2004, accounts payable includes $217,601 due to related parties as a result of office, rent and wages costs incurred with a company with directors in common pursuant to cost sharing arrangements, geological consulting services incurred with a director and legal fees incurred with a company controlled by a director.
The Company’s wholly-owned subsidiary, Cynthia Holdings Limited, received $832,680 from The Havana Group Inc. (“Havana”) pursuant to an agreement to sell an effective 50% interest in the Santa Rosa Property to Havana. At the time that the agreement was entered into, the Company was not related to Havana, however, since the date of the agreement, Chet Idziszek, the President and a director of the Company was appointed as a director of Havana and the agreement has been amended a number of times subsequent to Mr. Idziszek becoming a director of Havana.
These transactions are 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 Company and the related parties.
Financial Instruments
The Company’s financial instruments consist of cash, receivables, prepaid expenses, deposits and accounts payable. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments is approximately equal to their carrying values, unless otherwise noted. As at May 31, 2004 approximately 52% of cash and cash equivalents is held in US dollars. The performance bond is 100% US dollars and as at May 31, 2004, approximately 34% of the Company’s accounts payable and accrued liabilities are denominated in US dollars. The Company does not use derivative instruments or foreign exchange contracts to hedge against gains or losses arising from foreign exchange fluctuations.
Subsequent Events
Subsequent to May 31, 2004, Robert Sibthorpe became a director of the Company. Mr. Sibthorpe is an independent mining consultant who holds a B.Sc. in geology and an M.B.A. from the University of Toronto.
