GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
FOR NINE MONTHS ENDED MAY 31, 2008
UNAUDITED – PREPARED BY MANAGEMENT
The financial statements for the nine-month period ended May 31, 2008
have not been reviewed by the Company’s auditors.
CONSOLIDATED BALANCE SHEETS
| | Unaudited | |
| | MAY 31 | AUGUST 31 |
| | 2008 | 2007 |
| | |
| Restated (Note 3) |
ASSETS | |
| |
|
| | |
| |
|
Current | |
| |
|
Cash | $ | 128,191 | $ | 184,578 |
Short-term investments (Note 4) | | 3,588,945 | | 6,980,945 |
Accounts receivable (Note 5) | | 118,789 | | 134,371 |
Prepaid expenses | | 20,270 | | 22,546 |
| | | 3,856,195 | | 7,322,440 |
| | | | | |
Exploration Advances | | 15,743 | | 90,146 |
Mineral Property Acquisition Costs (Note 6) | | 334,773 | | 334,773 |
Mineral Property Exploration Costs (Note 6) | | 6,513,763 | | 3,428,250 |
Equipment (Note 7) | | 101,412 | | 74,109 |
| | |
| |
|
| | $ | 10,821,886 | $ | 11,249,718 |
| | |
| | |
LIABILITIES | |
| | |
| | |
| | |
Current | |
| | |
Accounts payable and accrued liabilities | $ | 426,273 | $ | 264,403 |
| | |
| |
|
Employment Benefit Obligations | | 37,000 | | 37,000 |
| | | 463,273 | | 301,403 |
| | |
| |
|
SHAREHOLDERS’ EQUITY | |
| |
|
| | |
| |
|
Share Capital (Note 8) | | 18,950,829 | | 18,905,829 |
| | |
| |
|
Contributed Surplus(Note 8) | | 1,662,739 | | 1,571,851 |
| | |
| |
|
Deficit | | (10,254,955) | | (9,529,365) |
| | | 10,358,613 | | 10,948,315 |
| | |
| |
|
| | $ | 10,821,886 | $ | 11,249,718 |
Approved on behalf of the Board of Directors: |
| | | |
“J. Paul Sorbara” | | “Stephen W. Pearce” |
Director | | Director |
The accompanying notes are integral part of these consolidated financial statements.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(Unaudited)
| | 3 MONTHS ENDED | 9 MONTHS ENDED |
| | 31 MAY | 31 MAY |
| | 2008 | 2007 | 2008 | 2007 |
| | | | | |
Expenses | |
|
|
|
| | |
|
|
|
Amortization | $ 5,096 | $ 2,995 | $ 13,838 | $ 8,409 |
Automobile | 801 | 1,228 | 2,227 | 3,112 |
Foreign exchange loss | 14,818 | 17,523 | 61,554 | 34,099 |
Management fees | 30,000 | 30,000 | 90,000 | 90,000 |
Consulting fees | 15,002 | - | 45,141 | - |
Office and general | 45,441 | 61,737 | 116,586 | 133,201 |
Professional fees | 297 | 14,196 | 44,057 | 52,885 |
Investor relations | 42,092 | - | 115,189 | - |
Rent and utilities | 16,498 | 17,811 | 49,264 | 51,086 |
Transfer agent and filing fees | 20,402 | 48,778 | 41,107 | 57,514 |
Travel | 18,345 | 7,831 | 37,775 | 21,050 |
Stock based compensation | - | 12,550 | 90,888 | 19,147 |
Wages and benefits | 58,777 | 55,683 | 185,859 | 152,527 |
Loss Before The Following | 267,569 | 270,332 | 893,485 | 623,030 |
| | |
| | |
Interest Income | (45,831) | (20,317) | (167,895) | (41,878) |
| | | | | |
Net Loss For The Period | 221,738 | 250,015 | 725,590 | 581,152 |
| | | |
| |
Deficit, Beginning Of Period | 10,033,217 | 8,781,946 | 9,529,365 | 8,450,809 |
| | |
|
| |
Deficit, End Of Year Period | $10,254,955 | $9,031,961 | $10,254,955 | $9,031,961 |
| | |
|
| |
| | |
|
| |
Loss Per Share – Basic And Diluted | $ (0.00) | $ (0.00) | $ (0.01) | $ (0.01) |
| | |
|
| |
Weighted Average Number of Common Shares Outstanding – Basic And Diluted |
60,934,037 |
49,935,061 |
60,855,862 |
44,862,088 |
The accompanying notes are integral part of these consolidated financial statements.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | 3 MONTHS ENDED | 9 MONTHS ENDED |
| | 31 MAY | 31 MAY |
| | 2008 | 2007 | 2008 | 2007 |
| | | | | |
| | | | | |
Cash Provided By (Used For) | | | | |
| | | | | |
Operating Activities | | | | |
Net loss for the period | $ (221,738) | $ (250,015) | $(725,590) | $ ( 581,152) |
Items not affecting cash: | |
| |
|
Stock based compensation | - | 12,550 | 90,888 | 19,147 |
Amortization | 4,934 | 2,995 | 17,677 | 8,409 |
Change in non-cash working capital items: | |
|
|
|
Accounts receivable | 126,784 | (32,681) | 15,582 | (7,787) |
Accounts payable and accrued liabilities | 84,482 | (14,156) | 161,870 | 8,192 |
Prepaid expenses | (3,406) | (27,174) | 2,276 | (21,332) |
Cash Used In Operating Activities | (8,944) | (296,726) | (441,297) | (574,523) |
| |
|
|
| |
Investing Activities | |
|
| |
Exploration Advances | - | (232,641) | 74,403 | (431,059) |
Expenditures on mineral properties | (1,094,126) | (6,500,945) | (3,085,513) | (5,918,186) |
Proceeds from redemption of short term investments | 1,072,000 | - | 3,392,000 | - |
Purchase of capital assets | - | (5,934) | (40,980) | (13,438) |
| | (22,126) | (6,739,520) | 339,910 | (6,362,683) |
| |
| |
| |
Financing Activities | | |
| |
Share issuances for cash | - | (7,367,200) | 45,000 | 7,367,200 |
Share issue (costs) recovery | - | (375,646) | - | (375,646) |
| | - | 6,991,555 | 45,000 | 6,991,555 |
| |
| |
| |
Increase(Deacrese) In Cash | (31,070) | (44,691) | (56,387) | 54,349 |
| | |
|
|
|
Cash And Cash Equivalents, Beginning Of Period | 159,261 | 233,672 | 184,578 | 134,632 |
| | | |
| |
Cash And Cash Equivalents, End Of period | 128,191 | $ 188,981 | 128,191 | $ 188,981 |
| |
|
|
|
|
| |
|
|
|
|
The accompanying notes are integral part of these consolidated financial statements.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
1.
NATURE OF OPERATIONS
Golden Goliath Resources Ltd. (the “Company”) is incorporated in British Columbia. The Company is a public company listed on the TSX Venture Exchange (the “TSX.V”), trading under the “GNG” symbol.
The Company’s principal business activity is the exploration of mineral properties in Mexico. The Company has not yet determined whether these properties contain reserves that are economically recoverable.
The recoverability of amounts shown for mineral properties is dependent upon the discovery of economically recoverable reserves, confirmation of the Company’s interest in the underlying mineral concessions, the ability of the Company to obtain financing to complete the development, and to attain future profitable production from the properties or proceeds from disposition.
2.
SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) as prescribed by The Canadian Institute of Chartered Accountants (“CICA”).
a)
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Minera Delta S.A. de C.V. of Mexico, and 4247 Investments Ltd. of British Columbia. Significant inter-company balances and transactions have been eliminated on consolidation.
b)
Variable Interest Entities
The CICA issued Accounting Guideline 15, “Consolidation of Variable Interest Entities”, to provide accounting guidance related to variable interest entities (“VIE”). A VIE is an entity in which equity investors do not have the characteristics of a “controlling financial interest” or there is not sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The Company has determined that it does not have a primary beneficiary interest in a VIE.
c)
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Although these estimates are based on management’s knowledge of current events and actions the Company may undertake in the future, actual results ultimately may differ from the estimates.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
c) Use of Estimates (Continued)
Significant areas requiring the use of management estimates relate to the identification and capitalization of exploration costs, determination of impairment in the carrying values for long-lived assets, the existence of contingent assets and liabilities, amounts recorded for related party transactions and balances, asset retirement obligations and stock-based compensation valuations. Management reviews significant estimates on a periodic basis and, when changes in estimates are necessary, makes adjustments prospectively.
d)
Financial Instruments
The Company’s financial instruments comprise cash, short-term investments, accounts receivable, exploration advances, accounts payable and accrued liabilities, and employment benefits obligations. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from the financial instruments. The fair value of the financial instruments approximates their carrying value due to their short-term maturity or capacity of prompt liquidation.
The Company is affected by changes between its reporting and foreign functional currencies. The Company monitors its foreign currency balances to mitigate these risks.
e)
Foreign Currency Translation
The Company’s reporting currency is the Canadian dollar. Transactions in United States (“US”) and Mexican (“MXN”) foreign currencies have been translated into Canadian dollars using the temporal method as follows:
i)
Monetary items at the rate prevailing at the balance sheet date;
ii)
Non-monetary items at the historical exchange rate;
iii)
Revenues and expenses at the average rate in effect during the applicable accounting period; and
iv)
Gains or losses arising on foreign currency translation are included in the statements of loss and deficit.
f)
Cash and Cash Equivalents
Cash includes cash on hand, cash held in trust and demand deposits. Cash equivalents include short-term, highly liquid investments that are readily convertible to known amounts of cash which are subject to insignificant risk of change and have maturities of 90 days or less from the date of acquisition, held for the purpose of meeting short-term cash commitments rather than for investing or other purposes. The Company did not have cash equivalents as of November 30, 2007 and 2006.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
g)
Short-Term Investments
Short-term investments are carried at cost which approximates fair value.
h)
Mineral Property Costs
The Company records its interest in mineral properties at cost, less option income realized. The cost of mineral properties and related exploration costs are deferred and capitalized until the properties are brought into production, sold or abandoned. These deferred costs will be amortized on the unit-of-production basis over the estimated useful life of the properties following the commencement of production or are written-off if the properties are sold, allowed to lapse or abandoned. Amounts shown for the mineral property acquisition exploration costs represent costs incurred and are not intended to reflect present or future values.
Title to mineral properties involves certain inherent risks due to the difficulties of determining the validity of permits and the potential for problems arising from government conveyance accuracy, prior unregistered agreements or transfers, indigenous land claims, confirmation of physical boundaries, and title may be affected by undetected defects. The Company does not carry title insurance. The Company has evaluated title to all of its mineral properties and believes, to the best of its knowledge, that evidence of title is adequate and acceptable given the current stage of exploration.
i)
Capital assets
Capital assets are recorded at cost and amortized on a straight-line basis over their estimated useful lives at the following rates:
| | Equipment | 10% - 25% |
| | Vehicles | 25% |
j)
Employee Future Benefits
The cost of retirement benefits and other benefit obligations are recognized over the period in which the employee renders services in return for the benefit.
k)
Impairment of Long-Lived Assets
Long-lived assets include the carrying values of mineral properties and equipment. Long-lived assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Impairment or write downs are recorded in the event the net book value of such assets exceeds the estimated indicated future cash flows attributable to such assets.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
l)
Asset Retirement Obligations
The Company applies CICA accounting standard 3110 – “Asset Retirement Obligations” to account for the obligations to reclaim and remediate the mineral properties. Under the standard, the estimated fair value of the legal obligations are recognized in the period incurred, at the net present value of the cash flows required to settle the future obligations. A corresponding amount is capitalized to the related asset. Asset retirement obligations are subject to accretion over time for increases in the fair value of the liabilities.
As of May 31, 2008, the Company had determined that there were no significant legal obligations for reclamation and remediation costs. The Company’s estimates of its ultimate asset retirement obligations could change as a result of changes in regulations, the extent of environmental remediation required, and the means of reclamation or cost estimates. Changes in estimates are accounted for prospectively from the period estimates are revised.
m)
Share Capital
i)
Non-monetary consideration – The fair value of the shares issued is based on the trading price of those shares on the TSX.V on the grant date determined by the Board of Directors. Agent’s warrants, stock options and other equity instruments issued in non-monetary transactions are recorded at fair value determined by management using the Black-Scholes option pricing model.
ii)
Stock based compensation – Compensatory stock option transactions with directors, officers, employees and outside consultants are charged to operations or capitalized to mineral properties with an offsetting credit to contributed surplus. Stock options which vest immediately are recorded at the date of grant. Stock options issued to directors, officers and employees that vest over time are valued at the grant date and recorded using the straight line method over the vesting period. Stock options issued to outside consultants that vest over time are valued at the grant date and recorded using the straight line method over the vesting period and subsequently re-valued and adjusted on each vesting date. Consideration received on the exercise of stock options together with the related portion previously recorded in contributed surplus is credited to share capital.
iii)
Share issuance costs – Costs directly identifiable with the raising of share capital financing are charged against share capital. Share issuance costs incurred in advance of share subscriptions are recorded as non-current deferred assets. Share issuance costs related to uncompleted share subscriptions are charged to operations.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
n)
Earnings (Loss) Per Share
Earnings (loss) per share are calculated based on the weighted average number of shares outstanding. The Company uses the treasury stock method to compute the dilutive effect of options, warrants and other similar instruments. Under this method, the dilutive effect on earnings per share is calculated to reflect the use of the proceeds that could be obtained upon the exercise of options and warrants. It assumes that the proceeds would be used to purchase common shares at the average market price during the period. Basic and diluted losses per share are equal as the assumed conversion of outstanding options and warrants would be anti-dilutive.
o)
Income Taxes
Income taxes are calculated using the liability method of accounting. Temporary differences arising from the difference between the tax basis of an asset or liability and its carrying amount on the balance sheet are used to calculate future income tax liabilities or assets. Future tax assets are recognized to the extent that they are considered more likely than not to be realized. Future income tax liabilities or assets are calculated using the tax rates anticipated to apply in the periods that the temporary differences are expected to reverse. Valuation allowances are provided when unrecognized net future income tax assets are not more likely than not to be realized.
3.
RESTATEMENT OF FINANCIAL STATEMENTS
The Company has recorded a liability for estimated retirement and employee benefits payable to its Mexican employees in the amount of $51,000, comprised of a current portion of $14,000 and a long term portion of $37,000, as of August 31, 2007 (2006 - $43,000 and 2005-$38,000).
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
4.
SHORT-TERM INVESTMENTS
As at May 31, 2008, short–term investments in the amount of $3,588,945 (2008 - $7,430,945) were comprised of Canadian investments in a guaranteed investment certificate with maturity date May 15, 2009 and variable interest rates.
5.
ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
| | 2008 | 2007 |
| | |
|
Sales taxes recoverable | $ 111,723 | $ 5,753 |
Interest receivable | 4,045 | 18,992 |
Other receivable | 3,021 | 38,269 |
| | $ 118,789 | $ 63,014 |
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
6.
DEFERRED MINERAL PROPERTY ACQUISITION AND EXPLORATION COSTS
State of Chihuahua, Mexico
| | | | | | | | LAS BOLAS | | | |
| | | | | | |
BUFALO | TODOS SANTOS | | | |
| | | | | | | LA | LOS HILOS | NOPALERA | | |
| | | | | | | HERMOSA | EL MANTO | FLOR DEL | | |
| | SAN | | | | OTEROS | LA BARRANCA | DON LAZARO | TRIGO | | |
| | TIMOTEO | NUEVA | LA | | LA | BECK | AMPLIACION | EL CARNARIO | TOTAL | TOTAL |
| | ORO LEON | UNION | REFORMA | CORONA | ESPERANZA | EL CHAMIZAL | LA VERDE | LA CRUZ | 2008 | 2007 |
| | | | | | | | |
| | | |
| | |
Acquisition costs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - |
| | | | | | | | | | | | | | | | | | | | | |
Exploration costs | | | | | | | | | | | | | | | | | | | | |
Assaying | | 214,810 | | - | | 68,188 | | - | | - | | - | | 3,588 | | - | | 286,586 | | 35,914 |
Drilling | | 1,112,778 | | - | | 938,915 | | - | | - | | - | | 153,340 | | - | | 2,205,032 | | 133,630 |
Geology and mapping | | 99,752 | | 130 | | 43,849 | | - | | - | | - | | 96,174 | | - | | 239,905 | | 64,039 |
Property taxes and passage rights | |
4,272 | |
274 | |
8,106 | |
2,851 | |
1,254 | |
4,172 | |
3,763 | |
12,002 | |
36,694 | |
27,242 |
Salaries | | 22,614 | | 12,261 | | 32,113 | | - | | - | | 139 | | 11,409 | | - | | 78,536 | | 42,561 |
Travel | | 937 | | 78 | | 4,058 | | - | | - | | - | | 1,551 | | - | | 6,624 | | 4,741 |
Road construction and site preparation | |
46,360 | |
11,673 | |
38,500 | |
- | |
- | |
- | |
31,197 | |
- | |
127,730 | |
69,307 |
Miscellaneous | | 17,489 | | 21,632 | | 44,083 | | - | | - | | - | | 21,201 | | - | | 104,406 | | 53,625 |
Current costs | | 1,519,012 | | 46,048 | | 1,177,812 | | 2,851 | | 1,254 | | 4,311 | | 322,223 | | 12,002 | | 3,085,513 | | 431,059 |
Balance, beginning of year | | 1,352,634 | | 55,391 | | 485,806 | | 28,780 | | 9,489 | | 23,199 | | 1,469,334 | | 338,390 | | 3,763,023 | | 2,973,452 |
Balance, end of period | $ | 2,871,646 | $ | 101,439 | $ | 1,663,618 | $ | 31,631 | $ | 10,743 | $ | 27,510 | $ | 1,791,557 | $ | 350,392 | $ | 6,848,536 | $ | 3,404,511 |
| | | | | | | | | | | | | | | | | | | | | |
Costs summary | | | | | | | | | | | | | | | | | | | | |
Acquisition | $ | 69,257 | $ | - | $ | 75,000 | $ | - | $ | - | $ | - | $ | 187,123 | $ | 3,393 | $ | 334,773 | | 334,773 |
Exploration | $ | 2,802,389 | $ | 101,439 | $ | 1,588,618 | | 31,631 | $ | 10,743 | $ | 27,511 | $ | 1,604,434 | $ | 346,999 | $ | 6,513,763 | | 3,069,738 |
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
6. MINERAL PROPERTY ACQUISITION AND EXPLORATION COSTS(Continued)
| | |
SAN TIMOTEO ORO | |
NUEVA UNION | |
LA REFORMA | |
CORONA | |
OTEROS LA ESPERANZA | | BUFALO LA HERMOSA LA BARRANCA BECK EL CHAMIZAL | | LOS HILOS LAS BOLAS EL MANTO DON LAZARO AMPLIACION LA VERDE | |
NOPALERA FLOR DEL TRIGO | |
TOTAL 2007 | |
TOTAL 2006 |
| | | | | | | | | | | | | | | | | | | | | |
Acquisition costs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - |
| | | | | | | | | | | | | | | | | | | | | |
Exploration costs | | | | | | | | | | | | | | | | | | | | |
Assaying | | 24,468 | | - | | - | | - | | - | | - | | 11,446 | | - | | 35,914 | | 105,115 |
Drilling | | 132,612 | | - | | - | | - | | - | | - | | 1,018 | | - | | 133,630 | | 286,862 |
Geology and mapping | | 17,893 | | 1,445 | | 1,564 | | - | | - | | 2,310 | | 40,827 | | - | | 64,039 | | 66,232 |
Property taxes and passage rights | |
649 | |
152 | |
3,705 | |
3,205 | |
946 | |
4,733 | |
1,199 | |
12,653 | |
27,242 | |
19,463 |
Salaries | | 18,909 | | 12,918 | | - | | - | | - | | - | | 10,734 | | - | | 42,561 | | 23,304 |
Travel | | 4,174 | | - | | - | | - | | - | | 64 | | 503 | | - | | 4,741 | | 11,449 |
Road construction and site preparation | |
57,860 | |
376 | |
125 | |
- | | - | |
302 | |
10,644 | |
- | |
69,307 | |
47,074 |
Miscellaneous | | 32,920 | | 6,333 | | 135 | | - | | - | | 64 | | 7,242 | | 6,931 | | 53,625 | | 27,817 |
Current costs | | 289,485 | | 21,224 | | 5,529 | | 3,205 | | 946 | | 7,473 | | 83,613 | | 19,584 | | 431,059 | | 587,316 |
Balance, beginning of year | | 784,405 | | 26,695 | | 474,358 | | 22,489 | | 7,178 | | 12,409 | | 1,325,554 | | 320,364
| | 2,973,452 | | 2,306,954 |
Balance, end of period | $ | 1,073,890 | $ | 47,919 | $ | 479,887 | $ | 25,694 | $ | 8,124 | $ | 19,882 | $ | 1,409,167 | $ | 339,948 | $ | 3,404,511 | $ | 2,894,270 |
| | | | | | | | | | | | | | | | | | | | | |
Costs summary | | | | | | | | | | | | | | | | | | | | |
Acquisition | $ | 69,257 | $ | - | $ | 75,000 | $ | - | $ | - | $ | - | $ | 187,123 | $ | 3,393 | $ | 334,773 | | 334,773 |
Exploration | $ | 1,004,633 | $ | 47,919 | $ | 404,887 | | 25,694 | $ | 8,124 | $ | 19,882 | $ | 1,222,044 | $ | 336,555 | $ | 3,069,738 | | 2,559,497 |
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
6.
MINERAL PROPERTY ACQUISITION AND EXPLORATION COSTS (Continued)
The Company has an extensive property portfolio of mining concessions, acquired mainly through staking, in the Uruachic District of Mexico covering approximately 10,000 hectares. The Company has various net smelter returns on specific claims forming a part of the Company’s properties. The net smelter returns range from 1% to 3%, which have buyouts ranging from US$250,000 to US$2,000,000.
In April 2007, the Company signed an agreement to acquire the Todos Santos 50 hectare mining concession for approximately $25,000. In April 2007 and July 2007, the Company paid $9,754 to bring the property into good standing with the Mexican authorities and committed to pay $5,000 in October 2007 (paid) and $10,000 in October 2008 to complete the acquisition.
In May 2007, the Company optioned the Corona and El Chamizal properties to a company which undertook to spend $500,000 and $200,000 on the respective properties over a period of three years and issue 300,000 and 150,000 shares respectively to the Company over a period of three years from when the company lists its shares on a stock exchange.
In September 2007, the Company optioned a 60% interest in La Cruz Property to a company which undertook to make cash payments to the Company totaling US $300,000 and spend US $450,000 on the property over a period of three years.
7.
Capital assets
| | 2008 |
| |
| ACCUMULATED |
|
| | COST | AMORTIZATION | NET |
| | |
| |
|
Equipment | $ | 84,518 | $ 29,849 | $ 54,669 |
Vehicles | | 73,250 | 26,507 | 46,743 |
| | | |
| |
| | $ | 157,768 | $ 56,356 | $ 101,412 |
| | 2007 |
| |
| ACCUMULATED |
|
| | COST | AMORTIZATION | NET |
| | |
| |
|
Equipment | $ | 57,283 | $ 24,010 | $ 33,273 |
Vehicles | | 38,802 | 14,181 | 24,621 |
| |
$ |
96,085 | $ 38,191 |
$57,894 |
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
8.
SHARE CAPITAL
Authorized
The authorized share capital of the Company consists of an unlimited number of common shares without par value.
Issued and Fully Paid
| | NUMBER OF SHARES |
AMOUNT |
| |
| |
|
Balance, May 31, 2005 | 37,246,311 | $ | 10,086,377 |
| | | |
|
Issued for options exercised at $0.25 per share | 15,000 | | 3,750 |
Issued for options exercised at $0.36 per share | 25,000 | | 9,000 |
Issued for warrants exercised at $0.55 per share | 40,000 | | 22,000 |
Issued for cash at $0.35 per share | 4,000,000 | | 1,400,000 |
Issued for agent’s commission | 15,750 | | 5,512 |
Share issue costs | - | | (195,681) |
Balance, May 31, 2006 | 41,342,061 | | 11,330,958 |
Issued for options exercised at $0.25 per share | 50,000 | | 12,500 |
Issued for options exercised at $0.30 per share | 50,000 | | 15,000 |
Issued for warrants exercised at $0.55 per share | 841,500 | | 462,825 |
Fair value of options allocated to shares on exercise | - | | 26,980 |
Fair value of agent’s warrants | - | | 80,013 |
Share issue costs | - | | (207,183) |
Balance, May 31, 2007 | 42,283,561 | | 11,916,774 |
Issued for cash at $0.40 per share | 16,618,000 | | 6,647,200 |
Issued for warrants exercised at $0.45 per share | 1,600,000 | | 720,000 |
Issued for agent’s commission | 252,476 | | 100,990 |
Fair value of agent’s warrants | - | | 335,909 |
Issued for options exercised at $0.25 per share | 180,000 | | 45,000 |
Share issue costs | | | (815,044) |
Balance, May 31, 2008 | 60,934,037 | $ | 18,950,829 |
In April 2007, the Company closed a brokered private placement of 16,618,000 units at a price of $0.40 per unit. Each unit consisted of one share and one non-transferable share purchase warrant exercisable for a period of two years at a price of $0.45 for each warrant. Once resale restrictions on the shares expire and upon the Company’s shares trading at or above a weighted average trading price of $0.75 for 20 consecutive trading days, the Company may give notice that the warrants will expire 30 days from the date of providing such notice. The Company’s agents received a commission of $378,145 in cash and 252,476 units, having the same terms as those issued pursuant to the private placement, and 1,482,250 agent’s warrants exercisable at $0.45 per share for two years valued at $335,909 (risk-free interest rate of 4.2%, dividend yield of Nil, volatility factor of 87%, an expected life of 2 years).
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
8.
SHARE CAPITAL (Continued)
In February 2006, the Company completed a brokered private placement of 4,000,000 units at a price of $0.35 per unit. Each unit consisted of one share and one non-transferable share purchase warrant exercisable for a period of one year at a price of $0.45 for each whole warrant. Subsequently the warrants were extended until May 15, 2007. The Company’s agent received a cash commission of $106,487, 400,000 warrants valued at $80,013 (risk-free interest rate of 4.0%, dividend yield of Nil, volatility factor of 100%, expected life of 1 year) and 15,750 units.
a)
Outstanding Warrants
As at May 31, 2008, the Company had 18,352,726 share purchase warrants outstanding, exercisable at $0.45 until April 20, 2009.
A summary of changes in share purchase warrants since May 31, 2006 is presented below:
| |
NUMBER OF SHARES | WEIGHTED AVERAGE EXERCISE PRICE |
| |
| |
|
Balance, May 31, 2006 | 1,200,000 | | 0.50 |
Granted | 4,415,750 | | 0.45 |
Exercised | (681,500) | | 0.55 |
Expired | (518,500) | | 0.43 |
Balance, May 31, 2007 | 4,415,750 | | 0.45 |
Granted | 18,352,726 | | 0.45 |
Exercised | (1,600,000) | | 0.45 |
Expired | (2,815,750) | | 0.45 |
| |
| |
|
Balance, May 31,2008 | 18,352,726 | $ | 0.45 |
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
8.
SHARE CAPITAL (Continued)
b)
Stock Options
A summary of changes in stock options is presented below:
| | | WEIGHTED |
| | NUMBER | AVERAGE |
| | OF | EXERCISE |
| | SHARES | PRICE |
Balance, May 31, 2006 | 1,300,000 | | 0.31 |
Granted | 425,000 | | |
Granted | 2,275,000 | | 0.36 |
Cancelled | (325,000) | | 0.25 |
Exercised | (100,000) | | 0.32 |
Granted | 50,000 | | 0.36 |
Balance, May 31, 2007 | 3,625,000 | | 0.34 |
Granted | 35,000 | | 0.42 |
Granted | 1,325,000 | | 0.40 |
Balance, August 31, 2007 | 4,985,000 | |
|
Granted | 120,000 | | 0.31 |
Granted | 325,000 | | 0.35 |
Cancelled | (50,000) | | 0.45 |
Cancelled | (100,000) | | 0.30 |
Cancelled | (50,000) | | 0.25 |
Cancelled | (25,000) | | 0.36 |
Exercised | (180,000) | | 0.25 |
Balance, May 31, 2008 | 5,025,000 | $ | 0.36 |
The following summarizes information about stock options outstanding at MAY 31, 2008:
OPTIONS OUTSTANDING | | OPTIONS EXERCISABLE |
| | WEIGHTED | | | | |
| | AVERAGE | WEIGHTED | | | WEIGHTED |
NUMBER | REMAINING | AVERAGE | | NUMBER | AVERAGE |
OF | CONTRACTUAL | EXERCISE | | OF | EXERCISE |
OPTIONS | LIFE | PRICE | | OPTIONS | PRICE |
| | | | | | | |
5,025,000 | 3.07 years | $0.36 | | 4,920,000 | $ | 0.36 |
Stock based compensation on options granted in the 2007 fiscal year amounted to $333,813 (2006 - $610,764; 2005 - $127,087). The fair value for options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rate of 4.2% (2006 - 4.5%, 2005 – 3.5%), dividend
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
8.
SHARE CAPITAL (Continued)
yield of nil, volatility factor of 92% (2006 -96%, 2005 – 94%), and a weighted average expected life of the options of 5 years (2006 – 5 years, 2005 – 3 years).
In July 2007, the Company granted 1,075,000 incentive stock options to directors and officers of the Company, and 225,000 incentive stock options to employees of the company at a price of $0.40 per share, exercisable for a period of five years.
In July 2007, the Exchange approved an investor relations agreement entered into by the Company with a consultant, for a three month period, at a monthly fee of US$7,500 and 60,000 stock options (15,000 vested as of August 31, 2007) at a price of $0.42 per share. In October 2007, the contract was renewed for a six month term at US$7,500 per month and 120,000 stock options at a price of $0.31 per share.
In November 2007, the Company granted 325,000 incentive stock options to employees of the company at a price of $0.35 per share, exercisable for a period of five years.
c)
Contributed Surplus
The following table summarizes the Company’s Contributed Surplus:
Balance, May 31, 2006 | $ 654,254 |
Stock options granted | 610,764 |
Stock options granted | 19,147 |
Stock options exercised | (26,980) |
Balance, May 31, 2007 | 1,257,185 |
Stock options granted Stock options granted | 333,813 90,888 |
Balance, May 31, 2008 | $ 1,662,739 |
iv)
INCOME TAXES
The Company is subject to income taxes on its unconsolidated financial statements in Canada and Mexico. The consolidated provision for income taxes varies from the amount that would be computed from applying the combined statutory income tax rates to the net loss before taxes were approximately as follows:
| | Year ended August 31 |
| | 2007 | 2006 | 2005 |
| | | | |
Combined statutory tax rate | 33% | 33% | 36% |
Expected income tax recovery | $ (339,000) | $ (377,000) | $ (386,000) |
Non-deductible differences | 80,000 | 195,000 | 137,000 |
Effect of changes in tax rate | - | (182,000) | - |
Unrecognized tax losses | 259,000 | 364,000 | 249,000 |
Income tax provision | $ - | $ - | $ - |
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
10. INCOME TAXES (Continued)
The significant components of the Company’s future income tax assets were approximately as follows:
| | Year ended August 31 |
| | 2007 | 2006 |
| | | |
|
Mineral properties | $ 1,142,000 | $ | 867,000 |
Loss available for future periods | 2,300,000 | | 2,151,000 |
Share issue costs | 156,000 | | 42,000 |
Valuation allowance | (3,598,000) | | (3,060,000) |
Net future income tax asset | $ - | $ | - |
The Company has Canadian and Mexican non-capital losses of approximately $7,308,000 as at August 31,2007 which may be carried forward and applied against taxable income in future years. These losses expire as follows:
CANADA |
| MEXICO |
2008 | $ | 502,000 |
| 2008 | $ | 236,000 |
2009 | $ | 608,000 |
| 2009 | $ | 74,000 |
2010 | $ | 578,000 |
| 2010 | $ | 425,000 |
2011 | $ | 322,000 |
| 2011 | $ | 343,000 |
2012 | $ | - |
| 2012 | $ | 1,185,000 |
2013 | $ | - |
| 2013 | $ | 257,000 |
2014 | $ | 517,000 |
| 2014 | $ | 143,000 |
2015 | $ | 566,000 |
| 2015 | $ | 130,000 |
2026 | $ | 408,000 |
| 2016 | $ | 177,000 |
2027 | $ | 616,000 |
| 2017 | $ | 221,000 |
| | $ | 4,117,000 |
| | $ | 3,191,000 |
9.
RELATED PARTY TRANSACTIONS
a)
Accounts payable and accrued liabilities include $nil (2007 - $ 3,382) due to a company controlled by a director.
b)
During the 9 months ended May 31, 2008, the Company paid $90,000 recorded as management fees for geological and management services to a company controlled by a director (2007– $ 90,000; 2006 - $90,000).
c)
During the 9 months ended May 31, 2008, the Company paid $85,887 in wages and benefits and consulting fees to two directors (2007– $38,961 , 2006 - $ 26,707).
d)
During the 9 months ended May 31, 2008, the Company paid $40,500 in respect of office and administration costs to a management company controlled by a director of the Company (2007- $39,500; 2006 - $31,500).
10.
SEGMENTED INFORMATION
The Company has one operating segment, which is mineral exploration. All mineral properties are located in Mexico. All option proceeds are attributable to the Mexican mineral properties. Assets by geographic segment, at cost, are as follows:
| | CANADA | MEXICO | TOTAL |
| | |
| |
| |
|
May 31, 2008 | |
| |
| |
|
| | |
| |
| |
|
Current assets | $ | 3,743,196 | $ | 112,999 | $ | 3,856,195 |
Equipment | $ | 12,186 | $ | 89,226 | $ | 101,412 |
Mineral property costs | $ | 15,743 | $ | 6,848,536 | $ | 6,864,279 |
Total assets | $ | 3,771,125 | $ | 7,050,761 | $ | 10,821,886 |
Interest income | $ | 167,493 | $ | 401 | $ | 167,894 |
Net loss | $ | 491,468 | $ | 234,122 | $ | 725,590 |
| | | | | | | |
May 31, 2007 | | | | | | |
Current assets | $ | 7,611,747 | $ | 102,688 | $ | 7,714,435 |
Equipment | | 12,968 | | 44,682 | | 57,650 |
Mineral property costs | | - | | 3,404,511 | | 3,404,511 |
Total assets | | 7,624,715 | | 3,551,881 | | 11,176,596 |
Interest income | | 41,334 | | 544 | | 41,878 |
Net loss | | 426,466 | | 154,686 | | 581,152 |
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
11.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GAAP
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in Canada (“Canadian GAAP”) that differ in certain material respects from accounting principles generally accepted in the United States (“US GAAP”). The major differences between Canadian and US GAAP, which affects the Company’s financial statements, are described below and the effect on the financial statements is summarized as follows:
Consolidated Balance Sheets
| | May 31, 2008 | May 31, 2007 | May 31, 2006 |
| | | | |
ASSETS | | | |
Total Assets, Canadian GAAP | $10,821,886 | $11,176,596 | $ 4,999,943 |
| | | | |
Deferred Mineral Property Acquisition Cost (Note 12a) | (334,773) | (334,773) | (334,773) |
Deferred Mineral Property Exploration Costs (Note 12a) | (6,513,763) | (3,069,738) | (2,559,497) |
| | | | |
Total Assets, US GAAP | $3,973,350 | $ 7,772,085 | $ 2,105,673 |
| | | | |
LIABILITIES | | | |
Total Liabilities, Canadian and US GAAP | $ 463,273 | $ 43,043 | $ 192,453 |
| | | | |
SHAREHOLDERS’ EQUITY | | | |
Share Capital and Contributed Surplus, Canadian and US GAAP | 20,613,568 | 20,165,514 | 12,544,048 |
Deficit and Accumulated Other Comprehensive Income, US GAAP | (17,103,491) | (12,436,472) | (10,630,828) |
| | | | |
Shareholders’ Equity, US GAAP | $3,510,077 | $7,729,042 | $ 1,913,220 |
| | $3,973,350 | $7,772,085 | $ 2,105,673 |
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
12. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GAAP (Continued)
Consolidated Statements of Loss and Deficit
| | 2008 | 2007 | 2006 |
| | | | |
Loss for the year under Canadian GAAP | $ (725,590) | $ (581,152) | $ (417,123) |
Foreign exchange loss | 61,554 | 34,099 | 12,151 |
Deferred mineral property costs written off during the year for Canadian GAAP purposes | | | |
Mineral exploration expenditures | (3,085,513) | (431,059) | (587,316) |
| | | | |
Loss under US GAAP | (3,749,549) | (978,112) | (992,288) |
| | | | |
Comprehensive income | | | |
Foreign exchange translation adjustment | (61,554) | (34,099) | (12,151) |
Comprehensive income (loss) under US GAAP | (3,811,103) | (1,012,211) | (1,004,439) |
| | | | |
Weighted average number of common shares outstanding under US GAAP |
60,855,862 |
44,862,088 |
39,107,490 |
| | | | |
Loss per share under US GAAP | (0.06) | (0.02) | (0.02) |
Consolidated Statements of Cash Flows
| | 2008 | 2007 | 2006 |
| | | | |
Cash flows from operating activities | | | |
Under Canadian GAAP | (441,297) | (574,523) | (262,577) |
Mineral exploration expenditures (Note 12a) |
(3,085,513) |
(431,059) |
(587,316) |
Cash used for operating activities under US GAAP |
(3,526,810) |
(1,005,582) |
(849,893) |
| | | | |
Cash flows from financing activities | | | |
Under Canadian and US GAAP | 45,000 | 6,991,555 | 1,803,417 |
| | | | |
Cash flows from investing activities | | | |
Under Canadian GAAP | 339,910 | (6,362,683) | (1,515,500) |
Mineral exploration expenditures (Note 12a) | 3,085,513 | 431,059 | 587,316 |
Cash from (used in) investing activities under US GAAP | 3,425,423 | (5,931,624) | (928,184) |
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
12.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GAAP (Continued)
a) Acquisition of Mineral Properties and Capitalized Exploration Costs
Under Canadian GAAP both acquisition and exploration expenditures are capitalized. Under US GAAP in accordance with Emerging Issues Task Force (“EITF”) No. 04-02 – “Whether Mineral Rights are Tangible or Intangible Assets”, mineral property acquisition costs are capitalized and mineral property exploration expenditures are expensed for periods ending after April 1, 2004. For US GAAP, the Company has expensed mineral property acquisition and exploration expenditures for periods ending before April 1, 2004.
b) Exploration Stage Company
For US GAAP purposes, the Company is considered an exploration stage company. Under US GAAP exploration stage companies are required to disclose cumulative since inception to date summaries for each line item on the statements of loss and cash flow plus annual summaries of each component of shareholders’ equity since inception. Under Canadian GAAP the Company is not required to disclose this information. Cumulative since inception, information was not readily available and accordingly has not been presented.
c) Other Comprehensive Income
US GAAP requires that a statement of comprehensive income be displayed with the same prominence as other financial statements and that the aggregate amount of comprehensive income excluding the deficit be disclosed separately in shareholders’ equity. Comprehensive income, which incorporates the net loss, includes all changes in shareholders’ equity during a period except those resulting from investments by and distributions to owners. There is currently no requirement to disclose comprehensive income under Canadian GAAP.
d) Recent Accounting Pronouncements
In February 2007, the FASB issued SFAS No. 159, “Establishing the Fair Value Option for Financial Assets and Liabilities” (“SFAS No. 159”). SFAS No. 159 was to permit all entities to choose to elect, at specified election dates, to measure eligible financial instruments at fair value. An entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date, and recognize upfront costs and fees related to those items in earnings as incurred and not deferred. SFAS No. 159 applies to fiscal years beginning after November 15, 2007, with early adoption permitted for an entity that has also elected to apply the provisions of SFAS No. 157, “Fair Value Measurements”. An entity is prohibited from retrospectively applying SFAS No. 159, unless it chooses early adoption. SFA S No. 159 also applies to eligible items existing at November 15, 2007 (or early adoption date). The Company is evaluating the impact of the adoption of SFAS No. 159 could have on the Company’s financial statements.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2008 AND 2007
(unaudited)
12.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GAAP (Continued)
d) Recent Accounting Pronouncements (Continued)
September 2006 – Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB No. 108 is effective for periods ending after November 15, 2006. The impact of adopting SAB No. 108 did not have a material effect on the consolidated financial statements.
