EL NINO VENTURES INC.
(An Exploration Stage Company)
FINANCIAL STATEMENTS
July 31, 2007 and 2006
(Canadian Dollars)
Prepared by Management
These financial statements have NOT been reviewed by the Company’s auditor
El Nino Ventures Inc. (An Exploration Stage Company) | Statement 1 |
Balance Sheets |
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|
|
Canadian Funds |
|
ASSETS |
|
July 31,
2007
January 31,
2007
Current
Cash
$
3,049,340
$
33,780
GST receivable
24,840
16,816
Prepaid expenses and deposits
64,870
48,807
Accounts receivable
192,465
-
Marketable securities(Note 4)
261,250
261,250
Project advances(Note 6c)
2,237,361
3,034,579
5,830,126
3,395,232
Equipment,net (Note 5)
44,709
44,709
$
5,874,835
$
3,439,941
LIABILITIES
Current
Accounts payable
$
6,000
$
62,589
Accrued liabilities
60,500
74,742
66,500
137,331
Commitments(Note 6c, Note 10)
STOCKHOLDERS’ EQUITY
Share Capital–Statement 3 (Note 7)
Unlimited authorized shares without par value
28,731,940 (Jan. 31, 2007 - 17,986,953) shares issued and outstanding
13,425,925
8,689,012
Contributed Surplus
983,663
983,663
Deficit Accumulated During the Exploration Stage–Statement 3
(8,601,253)
(3,396,527)
5,808,335
3,302,610
$
5,874,835
$
3,439,941
ON BEHALF OF THE BOARD:
“Harry Barr” , Director
“Bernard Barlin” , Director
- See Accompanying Notes -
El Nino Ventures Inc. (An Exploration Stage Company) | Statement 2 |
Statements of Operations |
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|
Canadian Funds |
|
- See Accompanying Notes -
El Nino Ventures Inc. (An Exploration Stage Company) | Statement 3 |
Statement of Stockholders’ Equity (Deficiency) | |
Canadian Funds |
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| Common Shares Shares Amount | Contributed Surplus |
| AccumulatedDeficit |
| Total | |||
Balance – January 31, 2004 | 4,571,546 | $ | 2,977,593 | $ | 38,516 | $ | (3,002,782) | $ | 13,327 |
Issuance of shares for: |
|
|
|
|
|
|
| ||
-Cash | 1,000,000 |
| 200,000 |
| - |
| - |
| 200,000 |
-Exercise of warrants | 85,000 |
| 11,050 |
| - |
| - |
| 11,050 |
Loss for the year | - |
| - |
| - |
| (152,881) |
| (152,881) |
Balance – January 31, 2005 | 5,656,546 | $ | 3,188,643 | $ | 38,516 | $ | (3,155,663) | $ | 71,496 |
Issuance of shares for: |
|
|
|
|
|
|
| ||
-Cash | 416,667 |
| 150,000 |
| - |
| - |
| 150,000 |
-Property | 85,000 |
| 31,250 |
| - |
| - |
| 31,250 |
-Exercise of warrants | 1,710,000 |
| 272,450 |
| - |
| - |
| 272,450 |
-Exercise of options | 10,000 |
| 1,500 |
| - |
| - |
| 1,500 |
Share issuance costs | - |
| (1,400) |
| - |
| - |
| (1,400) |
Future income tax on flow-through(Note 9) | - |
| (17,050) |
| - |
| - |
| (17,050) |
Loss for the year | - |
| - |
| - |
| (240,864) |
| (240,864) |
Balance – January 31, 2006 | 7,878,213 | $ | 3,625,393 | $ | 38,516 | $ | (3,396,527) | $ | 267,382 |
Issuance of shares for: |
|
|
|
|
|
|
| ||
-Cash | 9,916,907 |
| 6,255,909 |
| - |
| - |
| 6,255,909 |
-Fair value assigned to warrants | - |
| (752,335) |
| 752,335 |
| - |
| - |
-Fair value assigned to warrants on finder’s fees | - |
| - |
| 69,866 |
| - |
| 69,866 |
-Property | 30,000 |
| 12,000 |
| - |
| - |
| 12,000 |
-Exercise of options | 50,000 |
| 13,000 |
| (5,500) |
| - |
| 7,500 |
-Exercise of warrants | 111,833 |
| 48,892 |
| (4,125) |
| - |
| 44,767 |
Share issuance costs | - |
| (513,847) |
| - |
| - |
| (513,847) |
Stock-based compensation | - |
| - |
| 132,571 |
| - |
| 132,571 |
Loss for the year | - |
| - |
| - |
| (2,973,538) |
| (2,973,538) |
Balance – January 31, 2007 | 17,986,953 | $ | 8,689,012 | $ | 983,663 | $ | (6,370,065) | $ | 3,302,610 |
Issuance of shares for: |
|
|
|
|
|
|
| ||
-Cash | 9,765,000 |
| 4,507,500 |
| - |
| - |
| 4,507,500 |
-Property | 330,000 |
| 231,300 |
| - |
| - |
| 231,300 |
-Exercise of options | 10,000 |
| 5,000 |
| - |
| - |
| 5,000 |
-Exercise of warrants | 639,987 |
| 252,993 |
| - |
| - |
| 252,993 |
Share issuance costs | - |
| (259,880) |
| - |
| - |
| (259,880) |
Stock-based compensation | - |
| - |
| - |
| - |
| - |
Loss for the year | - |
| - |
| - |
| (2,231,188) |
| (2,231,188) |
Balance – April 30, 2007 | 28,731,940 | $ | 13,425,925 | $ | 983,663 | $ | (8,601,253) | $ | 5,808,335 |
- See Accompanying Notes -
El Nino Ventures Inc. (An Exploration Stage Company) | Statement 4 |
Statements of Cash Flows |
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Canadian Funds |
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Cash Provided by (Used in) |
| 3 Months ended July 31, 2007 |
| 3 Months ended July 31, 2006 | 6 Months ended July 31, 2007 |
| 6 Months ended July 31, 2006 | |
Operating Activities |
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|
|
| ||||
Net loss | $ | (1,482,917) |
| (299,363) | (2,231,188) |
| (445,119) | |
Items not involving cash: |
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|
| |||||
Stock compensation expense |
| - |
| - | - |
| - | |
Shares issued for mineral properties |
| 219,000 |
| - | 231,300 |
| 12,000 | |
Amortization |
| - |
| - | - |
| - | |
|
| (1,263,917) |
| (299,363) | (1,999,888) |
| (433,119) | |
Changes in non-cash working capital: |
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|
| |||||
Accounts receivable |
| 30,015 |
| (510,937) | (200,489) |
| (559,763) | |
Prepaid expenses and deposits |
| (3,821) |
| - | (16,063) |
| - | |
Project advances |
| 239,032 |
| - | 792,218 |
| - | |
Accounts payable |
| (97,692) |
| (5,000) | (56,589) |
| (5,000) | |
Accrued liabilities |
| (2,967) |
| - | (14,242) |
| ||
|
| 164,567 |
| (515,937) | 504,835 |
| (564,763) | |
|
| (1,099,350) |
| (815,300) | (1,495,053) |
| (997,882) | |
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Investing Activities |
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Purchase of auto and equipment |
| - |
| (10,603) | - |
| (41,224) | |
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Financing Activities |
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|
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Issuance of shares for cash |
| 3,265,493 |
| 3,409,563 | 4,765,493 |
| 4,049,563 | |
Share issue costs |
| (121,562) |
| (194,529) | (259,880) |
| (197,729) | |
|
| 3,143,931 |
| 3,215,034 | 4,505,613 |
| 3,851,834 | |
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|
|
| |||||
Net Increase (Decrease) in Cash |
| 2,049,581 |
| 2,389,131 | 3,015,560 |
| 2,812,728 | |
Cash – Beginning of period |
| 999,759 |
| 703,739 | 33,780 |
| 280,142 | |
Cash – End of Period | $ | 3,049,340 |
| 3,092,870 | 3,049,340 |
| 3,092,870 | |
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Non-Cash Financing Activities |
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Shares issued for mineral properties | $ | 219,000 | $ | - | $ | 231,300 | $ | 12,000 |
Shares issued for finders fees | $ | - | $ | 20,000 | $ | - | $ | 40,000 |
- See Accompanying Notes -
El Nino Ventures Inc. (An Exploration Stage Company) | Schedule |
Schedule of Exploration Expenditures | |
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Canadian Funds |
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| July 31, |
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| January 31, 2007 |
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Halo and Silver Crater Properties, Bancroft, Ontario, Canada |
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| ||
Option payments – cash |
| 10,000 |
|
| 10,000 |
Option payments – shares |
| 12,300 |
|
| 12,000 |
Cash - option payments received |
| - |
|
| (125,000) |
Shares - option payments received |
| - |
|
| (261,250) |
|
| 22,300 |
|
| (364,250) |
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|
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Drilling |
| 449,247 |
|
| - |
Exploration expenditures |
| 51,151 |
|
| - |
Geological and field expenses |
| 36,907 |
|
| 14,271 |
Engineering and consulting |
| 28,038 |
|
| 11,490 |
Assays |
| 10,323 |
|
| - |
Reimbursement of expenditures |
| (518,974) |
|
| - |
|
| 56,692 |
|
| 25,761 |
Total |
| 78,992 |
|
| (338,489) |
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| ||
Bathurst Project, New Brunswick, Canada |
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Staking costs |
| - |
|
| 87,513 |
Geological and field expenses |
| 131,477 |
|
| 180,427 |
Geophysics |
| 77,453 |
|
| 1,148,266 |
Assays |
| - |
|
| 21,585 |
Diamond drilling |
| 624,857 |
|
| 657,810 |
Engineering and consulting |
| 45,374 |
|
| 8,682 |
Management fee |
| 50,000 |
|
| 100,000 |
|
| 929,161 |
|
| 2,116,770 |
Total |
| 929,161 |
|
| 2,204,283 |
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Copper Project, Democratic Republic of Congo |
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Cash acquisition costs |
| 280,145 |
|
| - |
Share acquisition costs |
| 219,000 |
|
| - |
Geological and field expenses |
| 51,355 |
|
| - |
Geophysics |
| 97,309 |
|
| - |
Equipment and supplies |
| 80,446 |
|
| - |
Diamond drilling |
| - |
|
| - |
Engineering and consulting |
| 33,600 |
|
| - |
|
|
|
| ||
|
| 761,855 |
|
| - |
Total |
|
|
| - | |
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| ||
Other Properties |
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|
| ||
Geological and field expenses |
| 16,600 |
|
| 13,373 |
|
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Costs for the Period | $ | 1,786,608 | $ | 1,879,167 |
- See Accompanying Notes –
El Nino Ventures Inc. (An Exploration Stage Company) |
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Notes to Financial Statements |
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For the Period Ended July 31, 2007 and 2006 | |
Canadian Funds |
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1.
NATURE OF OPERATIONS
El Nino Ventures Inc. (the “Company") was incorporated on February 19, 1988 in British Columbia, Canada. The Company is an exploration stage company engaged in the acquisitions, exploration and development of mineral properties of merit in Canada, Europe and in Africa with the aim of developing them to a stage where they can be exploited at a profit or to arrange joint ventures whereby other companies provide funding for development and exploitation.
The business of mining and exploring for minerals involves a high degree of risk and there can be no assurance that the current exploration and development programs of the Company will result in profitable mining operations.
2.
SIGNIFICANT ACCOUNTING POLICIES
a)
Basis of Presentation
The consolidated financial statements of the Company and the accompanying notes have been prepared in accordance with generally accepted accounting principles in Canada (“Canadian GAAP”). For the purposes of these financial statements these principles conform in all material respects with generally accepted accounting principles in the United States, except as described in Note 12.
b)
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers cash and cash equivalents to include amounts held in banks and highly liquid debt investments with remaining maturities at point of purchase of three months or less. The Company places its cash and cash investments with institutions of high credit worthiness. At times, such investments may be in excess of federal insurance limits. Cash provided by flow-through financings is disclosed as long-term restricted cash as the Company has contracted with the shareholders to expend the related funds on qualifying mineral property expenditures.
c)
Mineral Property Expenditures
The Company is in the process of developing its mineral properties and capitalizes acquisition costs for property rights. The Company has adopted the policy of expensing mineral exploration costs and periodic option payments incurred prior to the determination that a property has economically recoverable ore reserves.
Capitalized costs for a producing prospect are amortized on a unit-of-production method based on the estimated life of ore reserves, while capitalized costs for prospects abandoned are written off.
Management reviews and evaluates the carrying value of its mineral properties for impairment when events or changes in circumstances indicate that the carrying amount of the related asset may not be recoverable. If the total estimated future operating cash flows on an undiscounted basis are less than the carrying amount of the asset, an impairment loss is recognized and assets are written down to fair value which is normally determined using the discounted value of future cash flows. Where estimates of future net cash flows are not available and where other conditions suggest impairment, management assesses whether carrying value can be recovered by considering alternative methods of determining fair value. When it is determined that a mineral property is impaired it is written down to its estimated fair value.
Ownership in mineral properties involves certain interest risks due to the difficulties of determining and obtaining clear title to claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristics of many mineral properties. The Company has investigated ownership of its mineral properties and, to the best of its knowledge, ownership of its interests are in good standing.
El Nino Ventures Inc. (An Exploration Stage Company) |
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Notes to Financial Statements |
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For the Period Ended July 31, 2007 and 2006 | |
Canadian Funds |
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2.
SIGNIFICANT ACCOUNTING POLICIES-Continued
d)
Marketable Securities
Short-term investments in publicly traded marketable securities are valued at the lower of cost and quoted market value.
e)
Equipment
Equipment is recorded at cost. The Company provides for amortization on office equipment using the 30% declining balance method, with half of this rate used in the year of acquisition.
f)
Earnings (Loss) per Share
Basic earnings (loss) per share is computed by dividing income (or loss) attributable to common shareholders by the weighted average number of common shares outstanding during the year. The computation of diluted earnings per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on earnings per share. The dilutive effect of convertible securities is reflected in diluted earnings per share by application of the "if converted" method. The dilutive effect of outstanding options and warrants and their equivalents is reflected in diluted earnings per share by application of the treasury stock method.
g)
Stock-Based Compensation
All stock-based awards made to employees and non-employees are measured and recognized using a fair value based method. For employees, the fair value of the options is measured at the date of the grant. For non-employees, the fair value of the options is measured on the earlier of the date at which the counterparty performance is complete or the date the performance commitment is reached or the date at which the equity instruments are granted if they are fully vested and non-forfeitable. For employees and non-employees, the fair value of the options is accrued and charged to operations, with the offsetting credit to contributed surplus, on a straight-line basis over the vesting period. If and when the stock options are ultimately exercised, the applicable amounts of contributed surplus are transferred to share capital.
h)
Management Estimates
The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reported years. Actual results could differ from those estimates.
i)
Asset Retirement Obligations
The Company recognizes the legal liability for obligations relating to retirement of property, plant, and equipment, and arising from the acquisition, construction, development, or normal operation of those assets. Such asset retirement costs are recognized at fair value, when a reasonable estimate of fair value can be estimated, in the period in which it is incurred. The amount recognized is added to the carrying value of the asset, and amortized into income on a systematic basis over its useful life.
There are no asset retirement obligations as of January 31, 2006 and 2007.
El Nino Ventures Inc. (An Exploration Stage Company) |
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Notes to Financial Statements |
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For the Period Ended July 31, 2007 and 2006 | |
Canadian Funds |
|
2.
SIGNIFICANT ACCOUNTING POLICIES-Continued
j)
Flow-Through Shares
The Company has adopted the recommendations of the Emerging Issues Committee relating to flow-through shares effective for all flow-through agreements dated after March 19, 2004. Canadian Income Tax Legislation permits an enterprise to issue securities referred to as flow-through shares, whereby the investor can claim the tax deductions arising from the renunciation of the related resource expenditures. When resource expenditures are renounced to the investors and the Company has reasonable assurance that the expenditures will be completed, future income tax liabilities are recognized (renounced expenditures multiplied by the effective tax rate) thereby reducing share capital.
If a company has sufficient unused tax losses and deductions (“losses”) to offset all or part of the future income tax liabilities and no future income tax assets have been previously recognized on such losses, a portion of such unrecognized losses (losses multiplied by the effective corporate tax rate) is recorded as income up to the amount of the future income tax liability that was previously recognized on the renounced expenditures.
k)
Share Capital
Share capital issued for non-monetary consideration is recorded based on fair market value.
l)
Income Taxes
The asset and liability method is used for determining future income taxes. Under the asset and liability method, the change in the net future income tax asset or liability is included in income. The income tax effects of differences in the periods when revenue and expenses are recognized, in accordance with Company accounting practices, and the periods they are recognized for income tax purposes are reflected as future income tax assets or liabilities. Future income tax assets and liabilities are measured using the statutory income tax rates which are expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled.
m)
Tax Credits
The Company recognizes METC amounts and applies those amounts against exploration costs when the Company’s application for tax credits is approved by Canada Revenue Agency. Assessments, if any for taxes, penalties and interest are deducted from the tax credits when assessed.
3.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial instruments consist of cash, GST receivable, deposits, marketable securities, project advances, restricted cash 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 the financial instruments. The fair value of these financial instruments approximates their carrying value due to their short-term maturity or capacity of prompt liquidation.
4.
MARKETABLE SECURITIES
| 2007 | 2007 | 2006 | |||
| Book Value | Market Value | Book Value | |||
Can Am Uranium Corp. 275,000 shares | $ | 261,250 | $ | 261,250 | $ | - |
The Can Am Uranium Corp. shares were received in the transaction with Boulder Creek Explorations Inc. (“Boulder”), which subsequently changed its name to Can Am Uranium Corp. (Note 6b).
El Nino Ventures Inc. (An Exploration Stage Company) |
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Notes to Financial Statements |
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For the Period Ended July 31, 2007 and 2006 | |
Canadian Funds |
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5.
EQUIPMENT
2007 | Cost | Accumulated Amortization | Net | |||
Automotive |
$
28,469
$
4,270
$
24,199
Computers
$
26,300
$
5,790
$
20,510
$
54,769
$
10,060
$
44,709
6.
MINERAL PROPERTIES
a)
Halo Project, Bancroft, Ontario
By agreement dated March 9, 2005 and amended April 14, 2005, the Company may earn a 100% interest in certain properties known as the Halo Project, Bancroft, Ontario, by making, at its option, the following:
|
|
Payments
Shares
Fair value
Exploration Expenditures
Upon execution of agreement
(paid)
$ 2,500
-
$ -
$ -
Upon regulatory approval
(issued)
-
20,000
8,000
-
On or before December 31, 2005
(incurred)
-
-
-
15,000
On or before March 9, 2006
(paid/issued))
5,000
20,000
8,000
-
On or before December 31, 2006
(incurred)
-
-
-
20,000
On or before March 9, 2007
(paid/issued))
5,000
20,000
8,200
-
On or before December 31, 2007
-
-
-
30,000
On or before December 31, 2008
-
-
-
40,000
$12,500
60,000
$24,200
$105,000
Prior to earning its 100% interest the Company may joint venture the property upon payment of 40,000 shares or $5,000 to the optionors.
The property is subject to a 3% NSR. The Company has the option to purchase 1% of the total NSR for $250,000.
The Company is required to reimburse the optionors for all related staking costs.
El Nino Ventures Inc. (An Exploration Stage Company) |
|
Notes to Financial Statements |
|
For the Period Ended July 31, 2007 and 2006 | |
Canadian Funds |
|
6.
MINERAL PROPERTIES -Continued
b)
Silver Crater Project, Bancroft, Ontario
By agreement dated March 9, 2005, the Company may earn a 100% interest in certain properties known as the Silver Crater Project, Bancroft, Ontario by making, at its option, the following:
|
| Payments | Shares | Fair value | Exploration Expenditures |
Upon execution of agreement | (paid) | $2,500 | - | $ - | $ - |
Upon regulatory approval | (issued) | - | 20,000 | 8,000 | - |
On or before December 31, 2005 | (incurred) | - | - | - | 15,000 |
On or before March 9, 2006 | (paid/issue) | 5,000 | 10,000 | 4,000 | - |
On or before December 31, 2006 | (incurred) | - | - | - | 20,000 |
On or before March 9, 2007 | (paid/issue) | 5,000 | 10,000 | 4,100 | - |
On or before December 31, 2007 |
| - | - | - | 30,000 |
On or before December 31, 2008 |
| - | - | - | 40,000 |
|
| $12,500 | 40,000 | $16,100 | $105,000 |
Prior to earning its 100% interest the Company may joint venture the property upon payment of 40,000 shares or $15,000 to the optionors.
The property is subject to a 3% NSR. The Company has the option to purchase 1% of the total NSR for $250,000.
The Company is required to reimburse the optionors for all related staking costs.
By agreement dated October 23, 2006, the Company optioned its Bancroft properties to Boulder Creek Explorations Inc. (“Boulder”). Under the terms of this agreement, the Company received 275,000 shares (fair value $261,250) of Boulder (Note 4) and cash payments totalling CDN $125,000 (received). Boulder can earn a 60% interest by spending CDN $1,000,000 over the next two years and could earn up to 80 % of the project by issuing a further 300,000 shares and spending an additional CDN $1,500,000.
The Company will remain the operator for the first two years of this agreement and will receive a management fee of 10% of exploration expenditures and cash payments of CDN $40,000 for the first year (received) and CDN $20,000 per year thereafter.
El Nino Ventures Inc. (An Exploration Stage Company) |
|
Notes to Financial Statements |
|
For the Period Ended July 31, 2007 and 2006 | |
Canadian Funds |
|
6.
MINERAL PROPERTIES -Continued
c)
Bathurst Project, Bathhurst, New Brunswick
By agreement dated May 26, 2006, the Company entered into an option agreement with Xstrata plc (“Xstrata”) formerly Falconbridge Limited to explore the Bathhurst Mining Camp in New Brunswick.
The Company will initially have the opportunity to earn a 50% interest in a large number of mineral claims and two permitted areas held by Xstrata occupying approximately 108,800 hectares. In order to vest with a 50% interest, the Company is required to spend $5.0 million on exploration by March 31, 2008 with a minimum expenditure of $2.5 million by March 31, 2007. As at January 31, 2007, the Company advanced the minimum $2.5 million as required to Xstrata and Xstrata had expended $2,042,453 on exploration. The balance of $2,237,361 that is held in escrow is shown as project advances at July 31, 2007.
Subsequent to year end, the first $2.5 million has been spent and the remaining $2.5 million has been raised and is in escrow. The New Brunswick Government has contributed $2.5 million to March 2007 and a further $2.0 million has been committed to March 2008.
Upon vesting with a 50% interest in the Property, the Company will have 90 days in which to elect to carve out one or more Project Areas from the existing Property, in each of which the Company can increase its interest to 65% by spending an additional $2.0 million over three years and can increase its interest in each Project Area still further to 75% by spending an additional $3.0 million over another two years. Xstrata can back-in to increase its position from either a 35% or 25% interest level to 50% by contributing 2.5 times the Company expenditures made to increase its interest above 50%. Xstrata may increase its interest in one or more Project Areas from 50% to 70% at any time by electing to complete a Feasibility Study, or expend an additional $20 million on each Project Area within three years: or five years if underground work is necessary to complete the study. Xstrata will have the right to process the Com pany’s share of ore from any future operations.
d)
Copper Project, Democratic Republic of Congo
By agreement dated May 29, 2007, the Company purchased a 70% interest in a Joint Venture with GCP Group Ltd, a private Congolese company with an option to acquire up to 90 % of the project by coming to an agreement with the partners.
An initial cash payment of $250,000 USD has been made after titles of the properties were transferred to a new SPRL Congolese Company. Additional cash payments totaling $300,000 USD will be made in three annual installments. 300,000 shares of the Company have been issued to GCP Group Ltd. and 400,000 additional shares will be issued over a three year period.
El Nino Ventures Inc. (An Exploration Stage Company) |
|
Notes to Financial Statements |
|
For the Period Ended July 31, 2007 and 2006 | |
Canadian Funds |
|
7.
SHARE CAPITAL
a)
Authorized:
Unlimited common voting shares without par value (no additional paid-in capital).
b)
Issued:
| Number of Shares | Amount |
Balance – January 31, 2004 |
4,571,546
$ 2,977,593
Private placement
1,000,000
200,000
Exercise of warrants
85,000
11,050
Balance – January 31, 2005
5,656,546
3.188,643
Private placement (Note 7m)
250,000
100,000
Private placement – flow-through (Note 7n)
166,667
50,000
Mineral properties
85,000
31,250
Exercise of warrants
1,710,000
31,250
Exercise of options
10,000
1,500
Share issuance costs
-
(1,400)
Future income tax on flow-through (Note 9)
-
(17,050)
Balance – January 31, 2006
7,878,213
$ 3,625,393
El Nino Ventures Inc. (An Exploration Stage Company) |
|
Notes to Financial Statements |
|
For the Period Ended July 31, 2007 and 2006 | |
Canadian Funds |
|
7.
SHARE CAPITAL -Continued
| Number of Shares | Amount |
Balance – January 31, 2006 | 7,878,213 | $ 3,625,393 |
Private placement (Note 7g) | 1,680,000 | 420,000 |
Private placement (Note 7h) | 600,000 | 240,000 |
Private placement (Note 7i) | 678,000 | 542,400 |
Private placement – flow-through (Note 7j) | 4,479,750 | 3,583,800 |
Private placement – flow-through (Note 7k) | 530,862 | 398,147 |
Private placement – flow-through (Note 7l) | 1,948,295 | 1,071,562 |
Mineral properties (Notes 6a and 6b) | 30,000 | 12,000 |
Exercise of warrants | 111,833 | 48,892 |
Exercise of options | 50,000 | 13,000 |
Fair value on unit offerings assigned to warrants | - | (752,335) |
Share issuance costs | - | (513,847) |
Balance – January 31, 2007 | 17,986,953 | $8,689,012 |
Mineral properties (Notes 6a and 6b) | 30,000 | 12,300 |
Mineral properties (Notes 6c) | 300,000 | 219,000 |
Private placement – (Note 7g) | 3,750,000 | 1,500,000 |
Private placement – (Note 7h) | 6,015,000 | 3,007,500 |
Exercise of warrants | 639,987 | 252,993 |
Exercise of options | 10,000 | 5,000 |
Share issuance costs | - | (259,880) |
Balance – July 31, 2007 | 28,731,940 | $ 13,425,925 |
c)
The Company adopted a stock option plan (“the plan”) whereby, the Company may grant stock options up to a maximum of 20 percent of the number of issued shares of the Company. At January 31, 2007, the Company has reserved 2,037,642 common shares under the plan (2006 – 1,192,309).
The option plan has the following vesting requirement:
i)
Options granted to employees and consultants conducting investor relations activities will vest with the right to exercise one-quarter of the option upon conclusion of every three months subsequent to the grant date.
ii)
Options granted to other employees, consultants, directors and officers vest immediately.
El Nino Ventures Inc. (An Exploration Stage Company) |
|
Notes to Financial Statements |
|
For the Period Ended July 31, 2007 and 2006 | |
Canadian Funds |
|
7.
SHARE CAPITAL –Continued
d)
The Company has granted stock options to directors, officers, consultants and certain employees. Stock option activity is summarized as follows: (*Weighted average exercise price)
| Number of Options | Exercise Price |
*
Balance outstanding – January 31, 2003 and 2002
250,000
$0.55
Granted – Year ended January 31, 2004
354,000
$0.15
Exercised – Year ended January 31, 2006
(10,000)
$0.15
Cancelled– Year ended January 31, 2006
(25,000)
$0.15
Expired – Year ended January 31, 2006
(250,000)
$0.55
Granted – Year ended January 31, 2007
1,588,642
$0.50
Exercised – Year ended January 31, 2007
(50,000)
$0.15
Cancelled – Year ended January 31, 2007
(330,000)
$0.50
Exercised – Period ended July 31, 2007
(10,000)
$0.50
Granted – Period ended July 31, 2007
1,822,000
$0.60
Balance outstanding – April 30, 2007
3,339,642
$0.53
e)
During the year ended January 31, 2007, the Company granted options to purchase up to 1,588,642 shares. The total estimated fair value of the options is $438,970 and the weighted fair value per share was $0.276. Since the options were granted under a graded vesting schedule, $132,571 of the total fair value has been recorded in the Company accounts as stock-based compensation expenses during the year. The offsetting entry is to contributed surplus.
The fair value of stock options is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighed average assumptions:
| January 31, 2007 | |
Average risk-free interest rate | 4.11% | |
Expected dividend yield | NIL | |
Expected stock price volatility | 79.61% | |
Average expected option life | 5 years |
Option pricing models require the input of highly subjective assumptions including the expected stock price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock options.
El Nino Ventures Inc. (An Exploration Stage Company) |
|
Notes to Financial Statements |
|
For the Period Ended July 31, 2007 and 2006 | |
Canadian Funds |
|
7.
SHARE CAPITAL –Continued
f)
At July 31, 2007, the following warrants were outstanding:
Expiry Date | Number of Shares | Fair value of warrants | Exercise Price |
April 24, 2007 (Notes 7h and 11d) | 560,500 | $ 66,015 | $0.50 |
February 28, 2008 (Note 7g) | 1,100,000 | 132,362 | $0.33 |
April 14, 2007 (Notes 7i and 7j) | 2,122,625 | 387,784 | $1.00 |
August 29, 2007 (Notes 7i and 7j) | 495,550 | 44,675 | $1.00 |
October 19, 2007 (Note 7k) | 49,613 | 6,075 | $0.75 |
December 22, 2007 (Note 7l) | 310,000 | 40,139 | $0.65 |
December 28, 2007 (Note 7l) | 1,501,815 | 129,171 | $0.65 |
December 28, 2007 (Note 7l) | 120,968 | 15,980 | $0.55 |
February 9, 2008 | 1,477,500 | - | $0.55 |
February 9, 2008 | 239,250 | - | $0.55 |
March 7, 2008 | 375,000 | - | $0.55 |
January 9, 2009 | 3,007,500 | $0.60 | |
Balance – April 30, 2007 | 11,360,321 | $822,201 |
The relative pro rata allocation of the fair value of the stock purchase warrants included in unit offerings is estimated on the date of issuance of the unit using the Black-Scholes option-pricing model with the following weighed average assumptions:
| January 31, 2007 | |
Average risk-free interest rate | 4.09% | |
Expected dividend yield | NIL | |
Expected stock price volatility | 72.92% | |
Average expected warrant life | 1.2 years |
Pricing models require the input of highly subjective assumptions including the expected stock price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock purchase warrants.
g)
During the period, the Company closed a non-flow-through unit private placements totaling 6,015,000 units at a price of $0.50 per unit for gross proceeds of $3,007,500 consisting of one common share in the capital of the Company and one-half of one non-transferable share purchase warrant. Each full warrant entitles the holder thereof to purchase one additional common share of the Company for a period of eighteen from the closing date at a price of $0.60 per warrant share. A finder’s fee of $108,150 were issued in connection with this financing.
h)
During the period, the Company closed two non-flow-through unit private placements totaling 3,750,000 units at a price of $0.40 per unit for gross proceeds of $1,500,000 consisting of one common share in the capital of the Company and one-half of one non-transferable share purchase warrant. Each full warrant entitles the holder thereof to purchase one additional common share of the Company for a period of one year from the closing dates at a price of $0.55 per warrant share. A commission of $96,000, a finder’s fee of $22,720 and 240,000 broker warrants were issued in connection with this financing. Each broker warrant entitles the holder thereof to purchase one additional common share of the Company until February 9, 2008 at a price of $0.55 per warrant share.
El Nino Ventures Inc. (An Exploration Stage Company) |
|
Notes to Financial Statements |
|
For the Period Ended July 31, 2007 and 2006 | |
Canadian Funds |
|
7.
SHARE CAPITAL –Continued
i)
Subsequent to the period-end, the Company closed a non-flow-through unit private placement totaling 5,888,889 units at a price of $0.90 per unit for gross proceeds of $5,300,000 consisting of one common share in the capital of the Company and one-half of one non-transferable share purchase warrant. Each full warrant entitles the holder thereof to purchase one additional common share of the Company for a period of eighteen from the closing date at a price of $1.40 per warrant share. A commission of $318,000, and 353,333 broker warrants were issued in connection with this financing. Each broker warrant entitles the holder thereof to purchase one additional common share of the Company until February 28, 2009 at a price of $0.90 per warrant share.
j)
During the prior year, the Company closed a 1,600,000 unit private placement at a price of $0.25 per unit for gross proceeds of $400,000 consisting of one common share in the capital of the Company and one non-transferable share purchase warrant. Each full warrant entitles the holder thereof to purchase one additional common share of the Company until February 28, 2008 at a price of $0.33 per warrant share. A finder’s fee of 80,000 shares fair valued at $20,000 was issued in connection with this financing.
k)
During the prior year, the Company closed a 600,000 unit private placement at a price of $0.40 per unit for gross proceeds of $240,000 consisting of one common share in the capital of the Company and one non-transferable share purchase warrant. Each full warrant entitles the holder thereof to purchase one additional common share of the Company until April 24, 2008 at a price of $0.50 per warrant share.
l)
During the prior year, the Company closed a 678,000 unit private placement at a price of $0.80 per unit for gross proceeds of $542,400 consisting of one common share in the capital of the Company and one-half of one non-transferable share purchase warrant. Each warrant entitles the holder thereof to purchase one additional common share of the Company until July 14, 2007 at a price of $1.00 per warrant share.
m)
During the prior year, the Company closed a 4,454,750 flow-through unit private placement at a price of $0.80 per unit, for gross proceeds of $3,563,800. Each unit consists of one common share in the capital of the Company and one-half of one common non-transferable, non-flow-through share purchase warrant. Each full warrant entitles the holder thereof to purchase one additional common share of the Company until July 14, 2007 at a price of $1.00 per warrant share. A finder’s fee of 25,000 non-flow-through shares fair valued at $20,000 was issued in connection with this financing.
n)
During the prior year, the Company closed a 496,133 common share flow-through placement at a price of $0.75 per unit, for gross proceeds of $372,100. A finder’s fee of 34,729 non-flow-through shares fair valued at $26,047 and 49,613 non-flow-through broker warrants, fair valued at $6,075, were issued in connection with this financing. The broker warrants allow the holder to acquire one common share of the Company until October 19, 2007 at a price of $0.75 per warrant share.
El Nino Ventures Inc. (An Exploration Stage Company) |
|
Notes to Financial Statements |
|
For the Period Ended July 31, 2007 and 2006 | |
Canadian Funds |
|
7.
SHARE CAPITAL –Continued
o)
During the prior year, the Company closed a 1,922,815 flow-through unit private placement at a price of $0.55 per unit, for gross proceeds of $1,057,548. Each unit consists of one common share in the capital of the Company and one common non-transferable, non-flow-through share purchase warrant. Each full warrant entitles the holder thereof to purchase one additional common share of the Company until December 22, 2007 at a price of $0.65 per warrant share. A finder’s fee of 25,480 non-flow-through shares fair valued at $14,014 and 124,705 broker warrants, fair valued at $15,980, were issued in connection with this financing. The broker warrants allow the holder to acquire one common share of the Company until December 28, 2007 at a price of $0.55 per warrant share.
Flow-through shares are shares issued by a company that incurs certain resource expenditures and then renounces them for Canadian tax purposes. This allows the expenditures to flow through to the subscriber for tax purposes. The subscribers may in turn claim the expenditure as a deduction on their personal or corporate tax returns.
The total amount of funds raised through the flow-through shares must be spent on qualified mineral exploration. The use of proceeds from flow-through shares is restricted to certain Canadian Exploration Expenditures under Canadian Income Tax Legislation. Restricted Cash - Flow-Through represents funds received from flow-through issuances that management estimates have not been spent as at the balance sheet date.
p)
During a prior year, shareholders approved the reservation of 298,077 performance shares at an exercise price of $0.01 per share. To date, none of these shares have been allotted, issued and have not been booked into these financial statements as they must receive regulatory approval. During the year, a further 509,410 nominal value performance shares were reserved subject to shareholder and regulatory approval. At the discretion of the Board, these shares may be issued to such arm’s length parties as the Board considers desirable to attract to the Company.
q)
During the period, 330,000 shares were issued for mineral properties at fair value of $231,300.
8.
RELATED PARTY TRANSACTIONS
Except as noted elsewhere in these financial statements, related party transactions are as follows:
a)
During the period, the Company paid $12,000 for management fees to a company controlled by a director.
b)
During the period, the Company paid $33,000 for management fees to a company controlled by the President and CEO and $33,000 in wages.
c)
During the period, the Company paid $12,139 for consulting fees to a company controlled by the Corporate Secretary.
d)
During the period, the Company paid $13,300 for accounting fees to a company controlled by the Chief Financial Officer.
The above transactions, occurring in the normal course of operations, are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
El Nino Ventures Inc. (An Exploration Stage Company) |
|
Notes to Financial Statements |
|
For the Period Ended July 31, 2007 and 2006 | |
Canadian Funds |
|
9.
INCOME TAXES
(a)
Reconcilliation of income taxes at statutory rates with the reported taxes is as follows:
|
| 2007 |
|
| 2006 |
|
|
|
|
|
|
Earnings (Loss) before income taxes | $ | (2,973,538) |
| $ | (257,914) |
Canadian federal and provincial income tax rates |
| 34.12% |
|
| 34.10% |
|
|
|
|
|
|
Income tax expense (recovery) |
| (1,014,571) |
|
| (87,949) |
Increase (decrease) due to: |
|
|
|
|
|
Non-deductible expenses for tax purposes |
| 722,593 |
|
| 58,368 |
Dedcutible expenses for tax purposes |
| (35,160) |
|
| 95 |
Income tax benefit recognized on issuance of |
| 0 |
|
| (17,050) |
flow-through shares |
|
|
|
|
|
Valuation allowance |
| 327,139 |
|
| 29,486 |
Income tax expense (recovery) | $ | 0 |
| $ | (17,050) |
(b)
The significant components of future income tax assets and liabilities are as follows:
|
| 2007 |
|
| 2006 |
|
|
|
|
|
|
Future income tax assets (liabilities) |
|
|
|
|
|
|
|
|
|
|
|
Non-capital loss carry forwards | $ | 527,732 |
| $ | 232,494 |
Net capital loss carry forwards |
| 63,770 |
|
| 63,733 |
Share issue costs |
| 140,546 |
|
| 382 |
Temporary difference in value: |
|
|
|
|
|
Resource property costs |
| 987,384 |
|
| 277,153 |
Equipment |
| 3,432 |
|
| 635 |
Future income tax assets (liabilities) |
| 1,722,865 |
|
| 574,396 |
Valuation allowance |
| (1,722,865) |
|
| (574,396) |
Net future income tax asset (liability) | $ | (0) |
| $ | 0 |
The Company has income tax loss carry forwards of approximately $1,546,600 in Canada, which may be used to reduce future income taxes otherwise payable and expiring through 2027.
The tax benefit of the above noted tax assets have been offset by recognition of a valuation allowance in these financial statements.
El Nino Ventures Inc. (An Exploration Stage Company) |
|
Notes to Financial Statements |
|
For the Period Ended July 31, 2007 and 2006 | |
Canadian Funds |
|
9.
INCOME TAXES–Continued
Future Income Tax Recovery
During 2007, flow-through shares totalling $4,993,448 were issued, which funds were required to be spent on qualifying Canadian Exploration Expenditures. Upon renunciation, completed after January 31, 2007, the Company will no longer have the ability to use the expenditures for tax purposes and the Company will be required to record a future tax liability of approximately $1,704,000. However, since the Company has unused tax losses and resource pools in excess of the renunciation, the future tax liability becomes a future income tax recovery upon the reversal of the related valuation allowance.
During a prior year, flow-through shares totalling $50,000 were issued, which funds were required to be spent on qualifying Canadian Exploration Expenditures. Upon renunciation, the Company no longer had the ability to use the expenditures for tax purposes and the Company recorded a future tax liability of $17,050. However, since the Company had unused tax losses and resource pools in excess of the renunciation, the future tax liability becomes a future income tax recovery the reversal of the related valuation allowance.
10.
COMMITMENTS
By agreement dated December 1, 2006, the Company is committed under an operating lease, for its office premises with the following lease payments to the expiration of the lease on November 30, 2011:
2008 | $ | 38,029 |
2009 |
| 38,029 |
2010 |
| 38,029 |
2011 |
| 38,029 |
2012 |
| 31,691 |
| $ | 183,807 |
11.
SUBSEQUENT EVENTS
a)
Subsequent to period-end, the Company applied for eleven mineral prospecting licences in Ireland and has recently accepted the offer of all eleven licences from the Irish Government. The licences are located in Lower Carboniferous limestones prospective for zinc and lead mineralization.