GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
NINE MONTHS ENDED MAY 31, 2014 AND 2013
(Expressed in Canadian Dollars)
(Unaudited)
NOTICE TO READERS
The attached condensed consolidated interim financial statements for the three and nine months periods ended May 31, 2014 and 2013 have been prepared by and are the responsibility of the Company’s management and have been approved by the Board of Directors of the Company. The Company’s independent auditor has not performed a review of these interim financial statements.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
Condensed Consolidated Interim Statements of Financial Position
(Expressed in Canadian Dollars)
(Unaudited
| | | | | | | | |
| May 31, | August 31, |
| 2014 | 2013 (Audited) |
| | | |
|
ASSETS | | | |
|
| | | |
|
Current Assets | | | |
|
Cash | $ | 358,841 | $ | 297,429 |
Short term investments (Note 3) | | - | | 783,952 |
Marketable securities (Note 4) | | 17,000 | | 48,875 |
Accounts receivable (Note 5) | | 31,964 | | 12,281 |
Due from related parties (Note 13) | | 36,225 | | 36,121 |
Prepaid expenses | | 12,404 | | 27,067 |
Total Current Assets | | 456,434 | | 1,205,725 |
| | | | |
Non-current Assets | | | | |
Value-added taxes recoverable | | 100,856 | | 92,734 |
Exploration and evaluation assets (Notes 6 and 15) | | 6,075,872 | | 5,884,438 |
Property and equipment (Note 7) | | 82,623 | | 97,033 |
| | | | |
Total Assets | $ | 6,715,785 | $ | 7,279,930 |
| | | | |
LIABILITIES | | | | |
| | | | |
Current Liabilities | | | | |
Accounts payable and accrued liabilities | $ | 37,062 | $ | 45,381 |
| | | | |
Non-current Liabilities | | | | |
Employment benefit obligations | | 62,219 | | 62,219 |
| | | | |
Total Liabilities | | 99,281 | | 107,600 |
| | | | |
EQUITY | | | | |
| | | | |
Share capital (Note 8) | | 26,044,652 | | 26,044,652 |
Reserves | | 2,758,145 | | 2,758,145 |
Accumulated other comprehensive (loss) income | | (66,263) | | (34,388) |
Deficit | | (22,120,030) | | (21,596,079) |
Total Equity | | 6,616,504 | | 7,172,330 |
| | | | |
Total Liabilities And Equity | $ | 6,715,785 | $ | 7,279,930 |
| |
Going Concern(Note 1) |
These consolidated financial statements were authorized for issue by the Board of Directors on July 30, 2014. They are signed on behalf of the Company by: |
| | |
“J. Paul Sorbara” | | “Stephen W. Pearce” |
Director | | Director |
See accompanying notes to consolidated financial statements.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
Condensed Consolidated Interim Statement of Operations and Comprehensive Loss
(Expressed in Canadian Dollars)
(Unaudited)
| | | | | | | | |
| Three Months Ended May 31 | Nine Months Ended May 31 |
| 2014 | 2013 | 2014 | 2013 |
| | | | | | | | |
Expenses | | | | | | | | |
Amortization | $ | 5,699 | $ | 6,786 | $ | 16,966 | $ | 20,081 |
Automobile | | 799 | | 751 | | 1,933 | | 2,204 |
Consulting (Note 13) | | 14,209 | | 29,284 | | 47,542 | | 95,208 |
Foreign exchange loss (gain) | | 2,350 | | (533) | | (8,709) | | (12,716) |
Investor relations | | 7,819 | | 15,511 | | 22,347 | | 83,996 |
Management fees (Note 13) | | 30,000 | | 30,000 | | 90,000 | | 90,000 |
Office and general | | 25,100 | | 23,791 | | 91,162 | | 67,622 |
Professional fees | | 3,000 | | 3,426 | | 52,810 | | 54,108 |
Rent and utilities | | 3,796 | | 9,931 | | 23,217 | | 28,756 |
Transfer agent and filing fees | | 3,076 | | 1,798 | | 4,896 | | 18,485 |
Travel | | 3,693 | | 9,201 | | 14,312 | | 23,120 |
Wages and benefits (Note 13) | | 54,886 | | 64,308 | | 179,390 | | 191,163 |
Loss Before Other Income | | 154,427 | | 194,254 | | 535,866 | | 662,027 |
| | | | | | | | |
Other Income | | | | | | | | |
Interest income | | 423 | | 2,757 | | 4,152 | | 5,754 |
Gain on sale of marketable securities | | - | | - | | - | | 44,105 |
Gain on sale of mineral property | | - | | - | | - | | 29,756 |
Property option payment received | | - | | 13,500 | | - | | 13,500 |
Other income | | 1,573 | | 1,059 | | 7,763 | | 3,059 |
Net Loss for the Period Before Taxes | | 152,431 | | 176,938 | | 523,951 | | 565,853 |
| | | | | | | | |
Income tax expense | | - | | - | | - | | 5,734 |
Net Loss for the Period | | 152,431 | | 176,938 | | 523,951 | | 571,587 |
| | | | | | | | |
Comprehensive Loss for the Period | | | | | | | | |
Unrealized Gain (loss) on marketable securities | | - | | 4,132 | | (31,875) | | (65,674) |
Comprehensive Loss for the Period | $ | 152,431 | $ | 172,806 | $ | 555,826 | $ | 637,261 |
Loss Per Share –Basic and Diluted | $ | (0.01) | $ | (0.01) | $ | (0.01) | $ | (0.01) |
| | | | | | | | |
Weighted Average Number Of Shares Outstanding –Basic and diluted |
| 106,660,889 | | 102,264,754 |
| 106,660,889 | | 95,602,688 |
See accompanying notes to consolidated financial statements.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
Condensed Consolidated Interim Statement of Changes in Equity
For the nine months ended May 31, 2014 and 2013
(Expressed in Canadian Dollars)
(Unaudited)
| | | | | | | | | | | | | | | |
| COMMON SHARES | SHARE-BASED PAYMENTS RESERVE | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | | |
| WITHOUT PAR VALUE | |
| SHARES | AMOUNT | DEFICIT | TOTAL EQUITY |
Balance, August 31, 2012 | 92,216,445 | $ | 24,848,652 | $ | 2,758,145 | $ | 45,000 | $ | (18,665,924) | $ | 8,985,873 |
| | | | | | | | | | | |
Private placements, net of share issue costs | 14,444,444 | | 948,981 | | - | | - | | - | | 948,981 |
Share issue costs | - | | (148,121) | | - | | - | | - | | (148,121) |
Other comprehensive loss | - | | - | | - | | (65,674) | | - | | (65,674) |
Net loss for the period | - | | - | | - | | - | | (571,587) | | (571,587) |
Balance, May 31, 2013 | 106,660,889 | $ | 25,649,512 | $ | 2,758,145 | | (20,674) | $ | (19,237,511) | $ | 9,149,472 |
| | | | |
| | | | | | |
Balance, August 31, 2013 | 106,660,889 | $ | 26,044,652 | $ | 2,758,145 | $ | (34,388) | $ | (21,596,079) | $ | 7,172,330 |
| | | | | | | | | | | |
Other comprehensive loss | - | | - | | - | | (31,875) | | - | | (31,875) |
Net loss for the period | - | | - | | - | | - | | (523,951) | | (523,951) |
Balance, May 31, 2014 | 106,660,889 | $ | 26,044,652 | $ | 2,758,145 | $ | (66,263) | $ | (22,120,030) | $ | 6,616,504 |
See accompanying notes to consolidated financial statements.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
Condensed Consolidated Interim Statement of Cash Flows
(Expressed in Canadian Dollars)
(Unaudited)
| | | | |
| Nine months ended May 31, |
| 2014 | 2013 |
| |
| | |
Operating Activities | | | | |
Net loss for the period | $ | (523,951) | $ | (571,587) |
Adjustments to reconcile loss to net cash used in operating activities: | | | | |
Amortization | | 16,966 | | 20,081 |
Gain on sale of mineral property interest | | - | | (29,756) |
Interest income | | (4,152) | | (5,754) |
Income tax expense | | - | | 6,351 |
Unrealized gain (loss) on marketable securities | | - | | (14,118) |
Change in non-cash operating assets and liabilities: | | | | |
Accounts receivable and VAT recoverable | | (23,853) | | (13,747) |
Accounts due from related parties | | (104) | | 309 |
Prepaid expenses | | 14,663 | | 25,333 |
Accounts payable and accrued liabilities | | (8,319) | | (56,837) |
Cash Used In Operating Activities | | (528,750) | | (639,725) |
| | | | |
Investing Activities | | | | |
Expenditures on mineral properties | | (191,434) | | (312,191) |
Proceeds on sale of marketable securities | | - | | 94,842 |
Purchase of short term investments | | - | | (1,200,000) |
Proceeds from redemption of short term investments | | 780,000 | | 958,525 |
Purchase of property and equipment | | (2,556) | | (2,214) |
Interest income | | 4,152 | | 5,754 |
Realized gain on marketable securities | | - | | (44,105) |
Cash (Used In) Provided By Investing Activities | | 590,162 | | (499,389) |
| | | | |
Financing activities | | | | |
Share issuances for cash | | - | | 1,300,000 |
Share issue cost | | - | | (104,000) |
Cash Provided By Financing Activities | $ | - | $ | 1,196,000 |
| | | | |
Increase Decrease In Cash During the Period | | 61,412 | | 56,886 |
| | | | |
Cash, Beginning Of Period | | 297,429 | | 249,032 |
| | | | |
Cash, End Of Period | $ | 358,841 | $ | 305,918 |
See accompanying notes to consolidated financial statements
.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED INTERIN FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2014, AND 2013
(Expressed in Canadian Dollars)
(Unaudited)
1.
NATURE OF OPERATIONS AND GOING CONCERN
Golden Goliath Resources Ltd. (the “Company”) was incorporated on June 12, 1996 under the Business Corporations Act of British Columbia, Canada. The Company is a public company listed on the TSX Venture Exchange (the “TSX.V”), trading under the symbol “GNG”. The address of the Company’s corporate office and principal place of business is Suite 711, 675 West Hastings Street, Vancouver, British Columbia, Canada. The Company’s principal business activity is the acquisition and exploration of resource properties.
The Company is in the exploration stage and is in the process of evaluating its Mexican resource properties and has not yet determined whether these properties contain reserves that are economically recoverable. The recoverability of amounts shown for exploration and evaluation assets are dependent upon the discovery of economically recoverable reserves, confirmation of the Company’s interest in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete the development of the properties and upon future profitable production or proceeds from the disposition thereof. Managements’ plan in this regard is to secure additional funds through future equity financings, which either may not be available or may not be available on reasonable terms.
The condensed interim consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern. This assumes the Company will operate for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. Accordingly, they do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and liquidate its liabilities, contingent obligations and commitments other than in the normal course of business and at amounts different from those in the financial statements. The Company has incurred operating losses since inception, has no source of operating cash flow, minimal income from short-term investments, and there can be no assurances that sufficient funding, including adequate financing, will be available to complete the exploration of its mineral properties and to cover general and administrative expenses necessary for the maintenance of a public company. The ability of the Company to arrange additional financing in the future depends in part, on the prevailing capital market conditions and mineral property exploration success. These factors cast substantial doubt on the Company’s ability to continue as a going concern. Accordingly, the financial statements do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and liquidate its liabilities, contingent obligations and commitments other than in the normal course of business and at amounts different from those in the financial statements.
2.
BASIS OF PRESENTATION
a)
Statement of Compliance
These condensed consolidated interim financial statements are unaudited and have been prepared in accordance with International Accounting Standards (“IAS”) 34 ‘Interim Financial Reporting’ (“IAS 34”) using accounting policies consistent with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).
Certain disclosures that are required to be included in the annual financial statements prepared in accordance with IFRS are not included in these interim financial statements These statements should be read in conjunction with the consolidated financial statements for the year ended August 31, 2013.
b)
Basis of Measurement
These condensed consolidated interim financial statements have been prepared on the basis of accounting policies and critical account judgments and estimates consistent with those applied in the Company’s August 31, 2013 consolidated annual audited financial statements.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED INTERIN FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2014, AND 2013
(Expressed in Canadian Dollars)
(Unaudited)
2.
BASIS OF PRESENTATION (continued)
c)
Future accounting pronouncements not yet adopted
IFRS 9 - Financial Instruments. IFRS 9 establishes the requirements for recognizing and measuring financial assets and financial liabilities. This new standard is effective for annual periods beginning on or after January
1, 2015 with earlier application permitted. The Company has yet to assess the full impact of IFRS 9.
The following standards are effective for annual periods beginning on or after January 1, 2013, with early adoption permitted. The Company has not yet begun the process of assessing the impact that the new and amended standards will have on its financial statements or whether to early adopt any of the new requirements.
IFRS 10 - Consolidated Financial Statements. IFRS 10 supersedes IAS 27: Consolidated and Separate Financial Statements and establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.
IFRS 11 - Joint Arrangements. IFRS 11 establishes principles for financial reporting by parties to a joint arrangement and supersedes IAS 31: Interests in Joint Ventures and SIC 13: Jointly Controlled Entities - Non-Monetary Contributions by Venturers.
IFRS 12 - Disclosure of Interests in Other Entities. IFRS 12 applies to entities that have an interest in a subsidiary, a joint arrangement, an associate or an unconsolidated structured entity.
IFRS 27 - Separate Financial Statements. IAS 27 contains accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. IAS 27 requires an entity preparing separate financial statements to account for those investments at cost or in accordance with IFRS 9.
IFRS 28 - Investments in Associates and Joint Ventures. IAS 28 prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.
3.
SHORT-TERM INVESTMENTS
As at May 31, 2014, the Company’s short–term investment of $ Nil (August 31, 2013 - $780,000) was comprised of Canadian investments in guaranteed investment certificates at effective interest rates of Nil (August 31, 2013 – 1.35%).
4.
MARKETABLE SECURITIES
Marketable securities consist of 425,000 (August 31, 2013 – 425,000) common shares of Comstock Metals Ltd. with a fair value of $17,000 (August 31, 2013 - $48,875).
Marketable securities are measured at fair value with changes in fair value recorded in other comprehensive income (loss) until the investment is derecognized or impaired, at which time, the gain (loss) would be recorded in net income.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED INTERIN FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2014, AND 2013
(Expressed in Canadian Dollars)
(Unaudited)
5.
ACCOUNTS RECEIVABLE
Accounts receivable consists of the following:
| | | |
| | May 31, | August 31, |
| | 2014 | 2013 |
| | |
|
| Sales taxes recoverable | $ 6,946 | $ 2,966 |
| Other receivable | 25,018 | 9,315 |
| | $ 31,964 | $ 12,281 |
6.
EXPLORATION AND EVALUATION ASSETS
Detailed exploration and evaluation expenditures incurred in respect to the Company’s mineral property interests owned, leased or held under option are disclosed in Note 14. Property payments made on the Company’s mineral property interests are included in the property descriptions below. Acquisition costs paid through May 31, 2014 are as follows:
| | | |
| San Timoteo, Oro Leon, Nueva Union, La Reforma | $ | 69,257 |
| Oteros, La Esperanza, La Hermosa | | - |
| Bufalo, La Barranca | | - |
| Los Hilos, Las Bolas, El Manto, Don Lazaro, La Verde | | 187,123 |
| Nopalera, Flor de Trigo | | 78,393 |
| Corona, Beck, El Chamizal, El Canario, La Cruz | | - |
| Las Trojas, La Gloria, Todos los Santos, Los Cantiles | | - |
| | $ | 334,773 |
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.
The Company and Comstock Metals Ltd. (“Comstock”) entered into an option agreement whereby Comstock has earned a 60% interest in the Corona property. The Company and Comstock subsequently entered into a joint venture agreement to further explore the property whereby Comstock shall act as the operator. The Company is responsible for 40% of all exploration costs going forward.
In December 2011, the Company signed an Earn-in and Shareholders Agreement with Agnico-Eagle Mines Limited (“Agnico”) for the exploration and development of the Company’s Las Bolas/Los Hilos property. Under the terms of the agreement, Agnico has the right to earn a 51% interest in the property by spending $5,000,000 on the property over a period of 5 years. The first year’s work commitment is a firm commitment of $500,000 with expenditure requirements increasing each year thereafter. Upon exercising its option, Agnico will have the right to earn an additional 20% interest by spending $6,000,000 over another period of four years and completing a feasibility study or by spending $10,000,000 over a longer period of eight years.
In August 2013 Agnico has elected to terminate the agreement.
During the year ended August 31, 2013, $2,178,691 in deferred expenditures related to certain mineral claims were written off. While the Company will continue to hold these claims, management currently does not view them as priorities and does not currently intend to conduct any exploration activities on these claims in the next year.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED INTERIN FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2014, AND 2013
(Expressed in Canadian Dollars)
(Unaudited)
7.
PROPERTY AND EQUIPMENT
| | | | | | | | | |
| COST | EQUIPMENT | VEHICLES | LAND | TOTAL |
| Balance August 31, 2012 | $ | 150,314 | $ | 101,610 | $ | 18,917 | $ | 270,841 |
| Additions | | 4,454 | | - | | - | | 4,454 |
| Balance August 31, 2013 | $ | 154,768 | $ | 101,610 | $ | 18,917 | $ | 275,295 |
| Additions | | 2,556 | | - | | - | | 2,556 |
| Balance May 31, 2014 | $ | 157,324 | $ | 101,610 | $ | 18,917 | $ | 277,851 |
| | | | | | | | | |
| ACCUMULATED AMORTIZATION | | EQUIPMENT | | VEHICLES | | LAND | | TOTAL |
| Balance August 31, 2012 | $ | 71,973 | $ | 79,435 | $ | - | $ | 151,408 |
| Amortization | | 24,373 | | 2,481 | | - | | 26,854 |
| Balance August 31, 2013 | $ | 96,346 | $ | 81,916 | $ | - | $ | 178,262 |
| Amortization | | 15,041 | | 1,925 | | - | | 16,966 |
| Balance May 31, 2014 | $ | 111,387 | $ | 83,841 | $ | - | $ | 195,228 |
| | | | | | | | | |
| CARRYING AMOUNTS | | | | | | | | |
| As at August 31, 2013 | $ | 58,422 | $ | 19,694 | $ | 18,917 | $ | 97,033 |
| As at May 31, 2014 | $ | 45,937 | $ | 17,769 | $ | 18,917 | $ | 82,623 |
8.
SHARE CAPITAL AND RESERVES
Authorized
The authorized share capital of the Company consists of an unlimited number of common shares without par value.
Issued and Fully Paid
As at May 31, 2014, the Company had 106,660,889 (August 31, 2013 – 106,660,889) common shares issued and fully paid.
On March 28, 2013 the Company completed a private placement of 14,444,444 units at a price of $0.09 per unit for gross proceeds of $1,300,000. Each unit consist of one common share and three-quarters of one nontransferable share purchase warrant exercisable for a period of three years at a price of $0.12 for each whole warrant.
The Company paid its agents a cash commission of $104,000 and 1,155,555 agent’s warrants exercisable at $0.09 per share for three years valued at $44,121 (risk-free interest rate of 1.21%, dividend yield of Nil, volatility factor of 77.48%, and expected life of 3 years).
Warrants
As at May 31, 2014, the following share purchase warrants issued on March 28, 2013 in connection with private placements were outstanding:
| | | |
| NUMBER OF WARRANTS | EXERCISE PRICE | EXPIRY DATES |
| 10,833,333 | 0.12 | March 26, 2016 |
| 1,155,555 | 0.09 | March 26, 2016 |
| 11,988,888 | | |
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED INTERIN FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2014, AND 2013
(Expressed in Canadian Dollars)
(Unaudited)
8.
SHARE CAPITAL AND RESERVES(Continued)
Stock Options
The Company has a 10% rolling stock option plan for its directors, officers, employees and consultants to acquire common shares of the Company at a price determined by the fair market value of the shares at the date of grant. The Company’s stock option plan provides for immediate vesting, or vesting at the discretion of the Board at the time of the option grant and are exercisable for a period of up to 5 years. Stock options granted to investor relations’ consultants vest over a twelve month period, with one quarter of such options vesting in each three month period.
On July 16, 2012, the Company granted 1,375,000 incentive stock options to directors and officers of the Company and 300,000 incentive stock options to employees and consultants of the Company, at a price of $0.20 per share, exercisable for a period of five years.
The fair value of the stock options granted during the year ended August 31, 2012 was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions:
| | | |
| | December 21, 2011 | July 16, 2012 |
| Stock based compensation | $553,675 | $ 223,672 |
| Risk-free interest rate | 1.18% | 1.12% |
| Dividend yield of nil, volatility factor | 102.71% | 102.49% |
| Weighted average expected life of the options | 5 years | 5 years |
A summary of changes in stock options is presented below:
| | | |
| | | WEIGHTED |
| | NUMBER | AVERAGE |
| | OF | EXERCISE |
| | SHARES | PRICE |
| | | |
| Balance, August 31, 2012 | 9,065,000 | 0.23 |
| Cancelled | (800,000) | 0.24 |
| Expired | (75,000) | 0.35 |
| | | |
| Balance, August 31, 2013 | 8,190,000 | $ 0.23 |
| Cancelled | (815,000) | 0.25 |
| Expired | (625,000) | 0.10 |
| | | |
| Balance, May 31, 2014 | 6,750,000 | $ 0.24 |
The weighted average remaining contractual life of options outstanding at May 31, 2014 was 2.24 years (August 31, 2013 – 2.75 years).
Nature and Purpose of Reserves
The reserves recorded in equity on the Company’s Statements of Financial Position is comprised of ‘Share-based Payment Reserves’ and is used to recognize the fair value of stock option grants prior to exercise, expiry or cancellation and the fair value of other share-based consideration paid at the date of payment.
9.
LOSS PER SHARE
The Company calculates the basic and diluted loss per common share using the weighted average number of common shares outstanding during each period and the diluted loss per share assumes that the outstanding vested stock options and share purchase warrants had been exercised at the beginning of the year.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED INTERIN FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2014, AND 2013
(Expressed in Canadian Dollars)
(Unaudited)
9.
LOSS PER SHARE (continued)
To compute diluted earnings per share, the average number of shares outstanding is adjusted for the number of all potentially dilutive shares. As of May 31, 2014 the Company had a total of 6,750,000 stock options outstanding (August 31, 2013 – 7,375,000) out of which Nil (August 31, 2013 – 650,000) were potentially dilutive. As of May 31, 2014 the Company also had a total of 11,988,888 warrants outstanding out of which 1,155,555 were potentially dilutive. Dilutive options and warrants were not included in the Company’s loss per common share calculation because the result was anti-dilutive.
| | | | | |
| | NINE MONTH ENDED MAY 31 |
| | 2014 | 2013 |
| Basic weighted average common shares | | 106,660,889 | | 92,216,445 |
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, 2014 | |
| |
| |
|
| | |
| |
| |
|
| Current assets | $ | 430,803 | $ | 25,631 | $ | 456,434 |
| Equipment | $ | 25,654 | $ | 56,969 | $ | 82,623 |
| Mineral property costs | $ | - | $ | 6,075,872 | $ | 6,075,872 |
| VAT Recoverable | $ | - | $ | 100,856 | $ | 100,856 |
| Total assets | $ | 456,457 | $ | 6,259,328 | $ | 6,715,785 |
| Accounts payable and accrued liabilities | $ | 16,239 | $ | 11,422 | $ | 27,661 |
| Interest income | $ | 4,145 | $ | 7 | $ | 4,152 |
| Net loss and comprehensive loss | $ | 341,688 | $ | 182,263 | $ | 523,951 |
| | |
| |
| |
|
| August 31, 2013 | |
| |
| |
|
| | | | | | | |
| Current assets | $ | 1,153,797 | $ | 51,928 | $ | 1,205,725 |
| Equipment | $ | 34,747 | $ | 62,286 | $ | 97,033 |
| Mineral property costs | $ | - | $ | 5,897,938 | $ | 5,897,938 |
| VAT Recoverable | $ | - | $ | 92,734 | $ | 92,734 |
| Total assets | $ | 1,188,544 | $ | 6,104,886 | $ | 7,293,430 |
| Accounts payable and accrued liabilities | $ | 22,889 | $ | 22,492 | $ | 45,381 |
| Interest income | $ | 9,035 | $ | 8 | $ | 9,043 |
| Net loss and comprehensive loss | $ | 2,733,599 | $ | 275,944 | $ | 3,009,543 |
11.
FINANCIAL INSTRUMENTS
As at May 31, 2014 and August 31, 2013, the carrying value of the Company’s financial instruments approximates their fair value. Cash and cash equivalents and short term investments are recorded at fair value and the Company’s other financial instruments are recorded at amortized cost, which approximates fair value due to their short term nature. The Company’s financial instruments are classified into the following categories:
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED INTERIN FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2014, AND 2013
(Expressed in Canadian Dollars)
(Unaudited)
11.
FINANCIAL INSTRUMENTS (continued)
| | | | | | | | | | |
| | | MAY 31, 2014 | AUGUST 31, 2013 |
| | LEVEL | CARRYING VALUE | FAIR VALUE | CARRYING VALUE | FAIR VALUE |
| Held for Trading | | | | | | | | | |
| Cash | 1 | $ | 358,841 | $ | 358,841 | $ | 297,429 | $ | 297,429 |
| Short term investments | 1 | $ | - | $ | - | $ | 783,952 | $ | 783,952 |
| Available for sale | | | | | | | | | |
| Marketable Securities | 1 | $ | 17,000 | $ | 17,000 | $ | 48,875 | $ | 48,875 |
| Loans and receivables | | | | | | | | | |
| Accounts receivable | 2 | $ | 31,964 | $ | 31,964 | $ | 12,281 | $ | 12,281 |
| Due from related parties | 2 | $ | 36,225 | $ | 36,225 | $ | 36,121 | $ | 36,121 |
| Other Financial Liabilities | | | | | | | | | |
| Accounts payable and accrued liabilities | 2 | $ | 37,062 | $ | 37,062 | $ | 45,381 | $ | 45,381 |
There have been no transfers between levels 1 and 2, or transfers in or out of level 3 for the period ended May 31, 2014 and the year ended August 31, 2013.
Financial Instrument Risk Exposure and Risk Management
The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management process. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company’s competitiveness and flexibility. The types of risk exposure and the way in which such exposure is managed is provided as follows:
Credit Risk
Credit risk is the risk that one party to a financial instrument will fail to fulfil an obligation and cause the other party to incur a financial loss. The Company’s credit risk to its financial asset is summarized below:
| | | | | |
| | May 31, 2014 | August 31, 2013 |
| Cash | $ | 358,841 | $ | 297,429 |
| Short term investments | $ | - | $ | 783,952 |
| Marketable securities | $ | 17,000 | $ | 48,875 |
| Accounts receivable | $ | 31,964 | $ | 12,281 |
| Due from related parties | $ | 36,225 | $ | 36,121 |
The credit risk of cash, and short-term investments, is assessed as nominal as the counter party is major Canadian financial institutions. The credit risk of accounts receivable and marketable securities is assessed as low. The carrying amount of these financial assets is their maximum exposure to credit risk. The Company does not invest in asset–backed commercial papers.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulties in meeting its financial obligations associated with its financial liabilities as they fall 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 believes that these sources will be sufficient to cover the expected short term cash requirements.
As of May 31, 2014 the Company has sufficient cash and highly liquid investment on hand to meet current liabilities and its expected administrative requirements for the coming year. The Company has cash of $358,841 (August 31, 2013 - $297,429), highly liquid investments of $ Nil (August 31, 2013 - $783,952) and total liabilities of $99,281 (August 31, 2013 - $107,600). Accounts payable and accrued liabilities of $37,062 are due within three months. Management has assessed liquidity risk as low.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED INTERIN FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2014, AND 2013
(Expressed in Canadian Dollars)
(Unaudited)
11.
FINANCIAL INSTRUMENTS(Continued)
Market Risk
The significant market risk exposures to which the Company is exposed are foreign exchange risk, interest rate risk, and commodity price risk.
Foreign Currency Risk
The Company has operations in Canada and Mexico subject to foreign currency fluctuations. The Company’s operating expenses are incurred in Canadian dollars and Mexican pesos, and the fluctuation of the Canadian dollar in relation to this other currency will have an impact upon the profitability of the Company and may also affect the value of the Company’s assets and the amount of shareholders’ equity. The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks.
Financial assets and liabilities denominated in Mexican Pesos and U.S. dollars were as follows:
| | | | | |
| | MAY 31, 2014 | AUGUST 31, 2013 |
| U.S. Dollars | | | | |
| Financial assets | $ | 143,468 | $ | 151,479 |
| Financial Liabilities | $ | - | $ | 2,971 |
| Mexican Pesos | | | | |
| Financial assets | $ | 205,274 | $ | 137,888 |
| Financial Liabilities | $ | 114,071 | $ | 106,190 |
Based on the above net exposures as at May 31, 2014, and assuming that all other variables remain constant, a 10% change in the value of the Mexican peso against the Canadian dollar would result in an increase/decrease of approximately $7,706 in the loss from operations. Based on the above net exposures as at May 31, 2014, and assuming that all other variables remain constant, a 10% change in the value of the US dollar against the Canadian dollar would result in an increase/decrease of approximately $15,590 in the loss from operations.
Interest Rate Risk
As at May 31, 2014, the Company has no significant exposure to interest rate risk through its financial instruments.
The Company's operations are in northern Mexico and are subject to various levels of political, economic and other risks and uncertainties unique to Mexico. These risks and uncertainties may include: extreme fluctuations in currency exchange rates; high rates of inflation; labor unrest; risks of war or civil unrest; expropriation and nationalization; renegotiation or nullification of existing concessions, licenses, permits and contracts; illegal mining; corruption; restrictions on foreign exchange and repatriation; hostage taking; and changing political conditions and currency controls. In addition, the Company may have to comply with multiple and potentially conflicting regulations in Canada and Mexico, including export requirements, taxes, tariffs, import duties and other trade barriers, as well as health, safety and environmental requirements. Changes, if any, in mining or investment policies or shifts in political attitude in Mexico may adversely affect the Company's operations. Operations may be affected in varying degrees by government regulations with respect to matters including restrictions on production, price controls, export controls, currency controls or restrictions, currency remittance, income and other taxes, expropriation of property, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. Failure to comply strictly with applicable laws, regulations and local practices relating to mineral rights applications and tenure could result in loss, reduction or expropriation of entitlements or the imposition of additional local or foreign parties as joint venture partners with carried or other interests.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED INTERIN FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2014, AND 2013
(Expressed in Canadian Dollars)
(Unaudited)
12.
CAPITAL DISCLOSURES
The Company was formed for the purpose of acquiring exploration and development stage natural resource properties. The directors determine the Company’s capital structure and make adjustments to it based on funds available to the Company, in order to support the acquisition, exploration and development of mineral properties. The directors have not established quantitative return on capital criteria for capital management.
The Company is dependent upon external financing to fund future exploration programs and its administrative costs. The Company will spend existing working capital and raise additional amounts as needed. The Company will continue to assess new properties and to seek to acquire an interest in additional properties if management feels there is sufficient geologic or economic potential provided it has adequate financial resources to do so.
The directors review the Company’s capital management approach on an ongoing basis and believe that this approach, given the relative size of the Company, is reasonable. The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a going concern.
The Company considers the items included on the balance sheet in shareholders’ equity as capital. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may issue new shares through private placements, sell assets to reduce debt or return capital to shareholders. There were no changes to the Company’s approach to capital management during the year. Neither the Company nor its subsidiaries are subject to externally imposed capital requirements.
13.
RELATED PARTY BALANCES AND TRANSACTIONS
Key Management Compensation
| | | | | |
| | NINE MONTH ENDED |
| | MAY 31 |
| | 2014 | 2013 |
| | | | | |
| Golden Goliath Resources Ltd. | | | | |
| Management fees | $ | 90,000 | $ | 90,000 |
| Consulting fees | | 42,500 | | 45,000 |
| Minera Delta S.A. de C.V. | | | | |
| Wages and benefits | | 31,058 | | 29,875 |
| | | | | |
| Total | $ | 163,558 | $ | 164,875 |
Payments to key management personnel including the President, Chief Financial Officer, directors and companies directly controlled by key management personnel, and a former director, are directly related to their position in the organization.
Other Related Party Transactions
The Company entered into the following transactions and had the following balances payable with related parties. The transactions were recorded at the exchange amount agreed to by the related parties. Balances outstanding are non-interest bearing, unsecured and had no specific terms for collection or repayment.
Due from related parties consists of $36,225 (August 31, 2013 - $36,121) due from companies controlled by common directors.
GOLDEN GOLIATH RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED INTERIN FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 2014, AND 2013
(Expressed in Canadian Dollars)
(Unaudited)
15.
EXPLORATION AND EVALUATION ASSETS
| | | | | | | | | |
| San Timoteo Oro Leon Nueva Union La Reforma | Oteros La Esperanza La Hermosa | Bufalo La Barranca | Los Hilos Las Bolas El Manto Don Lazaro La Verde |
Nopalera Flor de Trigo |
Corona Beck El Chamizal El Canario La Cruz |
Las Trojas La Gloria Todos los Santos Los Cantiles | Yudit | Total |
| | | | | | | | | |
Balance, August 31, 2012 | $ 1,959,203 | $ - | $ 132,014 | $ 4,094,935 | $ 881,200 | $ 92,857 | $ 101,943 | $ 513 | $ 7,262,665 |
| | | | | | | | | |
Incurred during the year | | | | | | | | | |
Assaying | 25,817 | -- | -- | -- | 676 | -- | -- | -- | 26,493 |
Geology and mapping | 2,021 | -- | 215 | -- | 1,600 | -- | -- | -- | 3,836 |
Property taxes and passage rights | 28,857 | 10,086 | 51,323 | 45 | 15,554 | 27,155 | 7,551 | 541 | 141,112 |
Salaries | 26,330 | -- | -- | -- | -- | 1,078 | - | -- | 27,408 |
Travel | 10,598 | -- | 4,418 | -- | 292 | 574 | 886 | -- | 16,768 |
Road construction and site preparation | -- | -- | 908 | -- | -- | -- | 2,453 | -- | 3,361 |
Facilities and other | 67,672 | -- | 102,163 | -- | -- | 20,803 | 82,842 | 2,477 | 275,957 |
Option payment | | | | | | (29,244) | | | (29,244) |
Write down | -- | (10,086) | -- | (2,047,491 ) | -- | (109,220) | (8,363) | (3,531) | (2,178,691) |
Balance, August 31, 2013 | $ 2,120,498 | $ -- | $ 291,041 | $ 2,047,489 | $ 899,322 | $ 4,003 | $ 187,312 | $ -- | $ 5,549,665 |
| | | | | | | | | |
Incurred during the year | | | | | | | | | |
Assaying | 1,760 | -- | -- | -- | -- | -- | -- | -- | 1,760 |
Geology and mapping | 145 | -- | -- | -- | -- | -- | 205 | -- | 350 |
Property taxes and passage rights | 8,630 | 5,228 | 17,169 | 4,495 | 13,967 | 5,193 | 2,987 | -- | 57,669 |
Salaries | 19,002 | -- | -- | -- | -- | 2,662 | -- | -- | 21,664 |
Travel | 3,877 | -- | -- | -- | -- | 960 | 646 | -- | 5,483 |
Facilities and other | 31,199 | -- | -- | -- | -- | 22,630 | 48,612 | 2,067 | 104,508 |
Balance, May 31, 2014 | $ 2,185,111 | $ 5,228 | $ 308,210 | $ 2,051,984 | $ 913,289 | $ 35,448 | $ 239,762 | $ 2,067 | $ 5,741,099 |
