1
Alpha Gold Corp.
Interim Financial Statements
(Unaudited - Prepared by Management)
November 30, 2006
#
Alpha Gold Corp.
Interim Financial Statements
(Unaudited - Prepared by Management)
November 30, 2006
Interim Statement of Loss
3
Interim Statement of Deficit
4
Interim Balance Sheet
5
Interim Statement of Cash Flows
6
Notes to the Interim Financial Statements
7-13
Interim Schedule of Deferred Expenditures
14
Alpha Gold Corp.
Interim Statement of Loss
(Unaudited - Prepared by Management)
Cumulative, Inception to | 3 months ended November 30, | 9 months ended November 30, | ||||
November 30, 2006 | 2006 | 2005 | 2006 | 2005 | ||
Revenue | $ - | $ - | $ - | $ - | $ - | |
Administrative expenses | ||||||
Amortization | 241,781 | 8,573 | 7,106 | 20,527 | 21,320 | |
Automotive | 107,628 | 4,063 | 1,620 | 9,547 | 7,681 | |
Bad debts | 14,999 |
- |
- |
- |
- | |
Consulting and management fees | 514,263 | 15,000 | 15,000 | 45,000 | 45,000 | |
Financial relations | 59,000 |
- |
- |
- |
- | |
Gain on disposal of exploration property | (7,400) |
- |
- |
- |
- | |
Insurance | 37,197 | (47) | (226) | 5,048 | 4,079 | |
Loss (gain) on disposal of equipment | (37,151) | (8,820) |
- | (15,064) |
- | |
Office, printing and miscellaneous | 327,658 | 3,790 | 4,002 | 10,140 | 12,670 | |
Professional fees | 731,114 | 14,270 | 27,307 | 47,515 | 52,044 | |
Property investigation | 25,052 |
- |
- |
- |
- | |
Regulatory and transfer fees | 178,968 | 699 | 6,067 | 23,751 | 20,528 | |
Rent | 89,430 | 1,500 | 1,500 | 4,500 | 4,500 | |
Repairs and maintenance | 13,291 |
- |
- |
- |
- | |
Shareholder relations | 239,796 | 38,348 | 8,566 | 98,999 | 25,146 | |
Stock-based compensation | 280,300 | 7,500 | 9,300 | 188,000 | 9,300 | |
Telephone | 17,138 | 402 | 1,051 | 2,671 | 2,658 | |
Travel and promotion | 125,618 | 1,245 | 4,313 | 9,777 | 7,075 | |
Wages | 12,864 |
- |
- |
- |
- | |
Write off of exploration properties | 1,133,596 |
- |
- |
- |
- | |
Write down of equipment | 46,527 |
- |
- |
- |
- | |
4,151,669 | 86,523 | 85,606 | 450,411 | 212,001 | ||
Loss before other items | 4,151,669 | (86,523) | (85,606) | (450,411) | (212,001) | |
Other items | ||||||
Insurance proceeds | 12,898 |
- |
- |
- |
- | |
Interest income | 474,685 | 18,329 | 7,103 | 44,793 | 25,019 | |
Gain on disposal of marketable securities | 40,094 |
- |
- |
- |
- | |
Interest, bank charges and foreign exchange | (22,720) | 78 | (178) | (888) | (1,459) | |
Loss on realization of demand debenture | (14,487) |
- |
- |
- |
- | |
490,470 | 18,407 | 6,925 | 43,905 | 23,560 | ||
Future income taxes | (60,053) |
- |
- |
- |
- | |
Loss for the period | $(3,601,146) | $(68,116) | $(78,681) | $(406,506) | $(188,441) | |
Basic and diluted loss per share | $ (0.00) | $ (0.00) | $ (0.02) | $ (0.01) | ||
Weighted average shares outstanding | 28,908,169 | 25,408,944 | 26,999,501 | 24,897,245 |
Alpha Gold Corp.
Interim Statement of Deficit
(Unaudited - Prepared by Management)
Cumulative, Inception to November 30, | 3 months ended November 30, | 9 months ended November 30, | |||||||
2006 | 2006 | 2005 | 2006 | 2005 | |||||
Deficit, beginning | $ - | $(3,533,030) | $(2,888,654) | $(3,194,640) | $(2,778,894) | ||||
Loss for the period | (3,601,146) | (68,116) | (78,681) | (406,506) | (188,441) | ||||
Deficit, end of period | $(3,601,146) | $(3,601,146) | $(2,967,335) | $(3,601,146) | $(2,967,335) |
Alpha Gold Corp.
Interim Balance Sheet
(Unaudited - Prepared by Management)
November 30, 2006 | February 28, 2006 | ||
Assets | |||
Current | |||
Cash and cash equivalents | $1,285,613 | $1,257,178 | |
Other receivables | 32,436 | 4,226 | |
Taxes receivable | 92,532 | 168,278 | |
Prepaid expense | 1,472 | 607 | |
1,412,053 | 1,430,289 | ||
Investment in exploration properties (note 3) | 513,682 | 513,682 | |
Expenditures on exploration properties (note 3 and schedule) | 5,907,861 | 4,805,346 | |
Reclamation bonds | 25,000 | 7,000 | |
Equipment (note 4) | 105,443 | 67,498 | |
$ 7,964,039 | $6,823,815 | ||
Liabilities | |||
Current | |||
Accounts payable and accrued liabilities | $ 13,752 | $ 11,410 | |
Future income tax liability | 863,094 | 814,501 | |
876,846 | 825,911 | ||
Shareholder’s Equity | |||
Share capital (note 5) | 10,406,239 | 9,098,444 | |
Contributed surplus | 282,100 | 94,100 | |
Deficit | (3,601,146) | (3,194,640) | |
7,087,193 | 5,997,904 | ||
$ 7,964,039 | $6,823,815 | ||
Approved by the Directors:
Alpha Gold Corp.
Interim Statement of Cash Flows
(Unaudited - Prepared by Management)
Cumulative, Inception to | 3 months ended November 30, | 9 months ended November 30, | |||||
November 30, 2006 | 2006 | 2005 | 2006 | 2005 | |||
Cash provided by (used in) | |||||||
Operating activities | |||||||
Loss for the period | $(3,601,146) | $(68,116) | $(78,681) | $(406,506) | $(188,441) | ||
Items not involving cash | |||||||
Amortization | 241,781 | 8,573 | 7,106 | 20,527 | 21,320 | ||
Stock-based compensation | 280,300 | 7,500 | 9,300 | 188,000 | 9,300 | ||
Future income taxes | (60,053) | - | - | - | - | ||
Loss (gain) on disposal of equipment | (37,151) | (8,820) | - | (15,064) | - | ||
Gain on disposal of exploration property | (7,400) | - | - | - | - | ||
Write off of exploration properties | 1,133,596 | - | - | - | - | ||
Write down of equipment | 46,527 | - | - | - | - | ||
Gain on disposal of marketable securities |
(40,094) | - | - | - | - | ||
Loss on realization of demand debentures | 14,487 | - | - | - | - | ||
(2,029,153) | (60,863) | (62,275) | (213,043) | (157,821) | |||
Changes in non-cash working capital | (189,179) | (50,977) | 38,490 | 22,428 | (19,457) | ||
(2,218,332) | (111,840) | (23,785) | (190,615) | (177,278) | |||
Financing activity | |||||||
Proceeds on issuance of shares | 11,331,186 | - | - | 1,356,388 | 471,280 | ||
11,331,186 | - | - | 1,356,388 | 471,280 | |||
Investing activities | |||||||
Exploration properties | (7,547,071) | (125,092) | (39,585) | (1,102,515) | (704,003) | ||
Accounts payable for mineral properties | 8,587 | 8,578 | - | 8,587 | - | ||
Proceeds on disposal of exploration property |
20,000 | - | - | - | - | ||
Proceeds on disposal of marketable securities | 60,094 | - | - | - | - | ||
Purchase of equipment | (356,601) | (19,769) | - | (43,410) | (1,988) | ||
Demand debenture | (12,250) | - | - | - | - | ||
(7,827,241) | (136,283) | (39,585) | (1,137,338) | (705,991) | |||
Net increase (decrease) in cash | 1,285,613 | (248,123) | (63,370) | 28,435 | (411,989) | ||
Cash and term deposits, beginning of period | - | 1,533,736 | 1,340,618 | 1,257,178 | 1,689,237 | ||
Cash and term deposits, end of period | $1,285,613 | $1,285,613 | $1,277,248 | $1,285,613 | $1,277,248 | ||
Supplemental cash flow information | |||||||
Interest received | $ 28,853 | $ 2,797 | $ 29,204 | $ 6,150 | |||
Income taxes received | $ 75,746 | $ - | $ 75,746 | $ - |
Alpha Gold Corp. |
Notes to the Interim Financial Statements (Unaudited – Prepared by Management |
November 30, 2006 |
1.
Financial Statement Presentation
These unaudited consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles on a basis consistent with those followed in the most recent audited financial statements. As described in note 8, these principles differ in certain material respects from United States generally accepted accounting principles. These unaudited consolidated financial statements do not include all the information and footnotes required by generally accepted accounting principles for annual financial statements. Therefore readers are advised to refer to the company's annual audited financial statements for the year ended February 28, 2006 for additional information.
2.
Nature of Operations
The investment in and expenditures on exploration properties comprise a significant portion of the company’s assets. Realization of the company’s investment in these assets is dependent upon obtaining the necessary financing to continue exploration and development of the properties, the attainment of successful production from the properties or from the proceeds of their disposal.
The continuing operations of the company are dependent upon its ability to continue to raise capital to funds its exploration and development programs. The company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
3.
Exploration Properties
9 months ended November 30, 2006 | Year ended February 28, 2006 | |
Acquisition costs | $ 513,682 | $ 513,682 |
Deferred expenditures (Schedule) | 5,907,861 | 4,805,346 |
$ 6,421,543 | $ 5,319,028 |
a)
Lust Dust Claims
i)
On July 15, 1989, the Company acquired a 100% interest in certain mineral claims located in the Omineca Mining Division, British Columbia for cash of $170,000. The vendor retains a royalty of 3% of net smelter returns.
ii)
On February 21, 1992, the Company acquired a 100% interest in certain mineral claims located in the Omineca Mining Division, British Columbia for $100,000 cash and 200,000 shares of the company at a deemed consideration of $0.60 each (previously subject to a 5% net profit interest to a maximum of $100,000 and a royalty of 2% of net smelter returns). In July 2003, the company acquired the retained “5% net profit interest and the 2% net smelter return royalty” for $150,000 cash.
Alpha Gold Corp. |
Notes to the Interim Financial Statements (Unaudited – Prepared by Management |
November 30, 2006 |
3.
Exploration Properties(continued)
b)
Goldbanks
During the year ended February 28, 2006, the Company abandoned its interest in Goldbanks. The value of the investment and the related deferred expenditures were written off and charged to operations.
On October 30, 1995, the Company entered into an agreement to acquire a 100% interest in certain mineral claims situated in Pershing County, Nevada, USA. The Company had previously entered into an option agreement to acquire the mineral claims in the 1995 fiscal year. The company and the vendor agreed to terminate the option agreement dated April 30, 1994. Payments under the option agreement totaled $26,400 US and was applied to the purchase. In addition to the above payments, the Agreement calls for the issuance to the vendor of 100,000 shares of Alpha Gold Corp.
4.
Equipment
November 30, 2006 | |||
Cost | Accumulated Amortization | Net Book Value | |
Computer equipment | $ 7,288 | $ 4,345 | $ 2,943 |
Furniture & fixtures | 16,361 | 15,332 | 1,029 |
Trucks | 114,153 | 12,682 | 101,471 |
$ 137,802 | $ 32,359 | $ 105,443 |
February 28, 2006 | Cost | Accumulated Amortization | Net Book Value |
Computer equipment | $ 7,288 | $ 3,490 | $ 3,798 |
Furniture & fixtures | 16,361 | 15,151 | 1,210 |
Trucks | 105,025 | 42,535 | 62,490 |
$ 128,674 | $ 61,176 | $ 67,498 |
Alpha Gold Corp. |
Notes to the Interim Financial Statements (Unaudited – Prepared by Management |
November 30, 2006 |
5.
Share Capital
a)
Authorized
100,000,000
common shares with no par value
b)
Issued
9 months ended November 30, 2006 | Year ended February 28, 2006 | |||
Number | Number | |||
of Shares | Amount | of Shares | Amount | |
Balance - beginning of the period | 28,408,944 | $9,098,444 | 24,451,684 | $8,628,964 |
Issued during the period | ||||
- for cash @ $0.40 | 3,499,225 | 1,399,690 | - | - |
- for cash @ $0.50 | - | - | 957,260 | 478,630 |
Share issue costs | - | (43,302) | - | (9,150) |
Income tax benefits renounced on flow through shares issued |
- | (48,593) | - | - |
Balance – end of the period | 28,908,169 | $10,406,239 | 25,408,944 | $9,098,444 |
c)
Share issuances
During the current period:
3,499,225 units were issued at $0.40 per unit. Each unit consisted of one common share and one half warrant. Each warrant is exercisable to purchase half a common share for $0.60, expiring July 28, 2007.
The Company renounced the income tax benefits attached to the 285,000 flow-through shares issued during the prior year. This renunciation resulted in an increase in the future income tax liability of $48,593 and a reduction in share capital of the same amount.
During the prior year:
957,260 units were issued at $0.50 per unit (of which 285,000 were “flow-through” units). Each unit consisted of one common share and one warrant. Each warrant is exercisable to purchase one additional non-flow-through common share for $0.50, expiring July 25, 2007. Share issue costs on this transaction included a $7,350 finder’s fee paid in cash, and 14,700 broker warrants.
d)
Warrants outstanding
At November 30, 2006 the following share purchase warrants were outstanding:
Number of shares | $ per share | Expiry date |
1,749,612 | $ 0.60 | July 28, 2007 |
971,960 | $ 0.50 | July 25, 2007 |
Alpha Gold Corp. |
Notes to the Interim Financial Statements (Unaudited – Prepared by Management |
November 30, 2006 |
5.
Share Capital(continued)
e)
Options outstanding
The Company has established a share purchase option plan whereby the board of directors may, from time to time, grant options to directors, officers, employees or consultants. The exercise price of an option is not less than the closing price on the Exchange on the last trading day preceding the grant. | ||
Number of options | Weighted average exercise price | |
Balance, February 28, 2006 | 1,350,000 | $ 0.40 |
Granted | 1,200,000 | $ 0.40 |
Expired / cancelled | (850,000) | $ 0.40 |
Balance, November 30, 2006 | 1,700,000 | $ 0.40 |
At November 30, 2006 the following share purchase options were outstanding:
Number of shares | Exercisable | $ per share | Expiry date |
250,000 | 62,500 | $ 0.40 | April 1, 2007 |
950,000 | 950,000 | $ 0.40 | January 26, 2010 |
500,000 | 500,000 | $ 0.40 | January 28, 2010 |
6.
Stock Based Compensation
i) | The Company entered into a twelve-month contract with an investor relations consulting firm at a rate of $7,500 per month, commencing April 1, 2006. At the end of the twelve months the contract will continue on a monthly basis during which either party may terminate the contract with three months notice. | ||||
The Company granted 250,000 stock options to the consulting firm. The fair value of each option granted was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions: | |||||
Dividend rate | 0.00% | Strike price | $ 0.40 | ||
Risk-free interest rate | 4.22% | Spot price | $ 0.43 | ||
Expected life | 1 year | Fair value | $ 0.12 | ||
Expected annual volatility | 59.10% |
25% of the stock options granted for investor relations purposes vest three months after the date of issue, with a further 25% vesting on each successive date that is three months from the date of the previous vesting. Based on the fair values above for the options granted, compensation expense of $7,500 will be recorded in operations on each of the four vesting dates. | |
ii) | During the period, 750,000 stock options that were due to expire April 27, 2007 were cancelled. |
Alpha Gold Corp. |
Notes to the Interim Financial Statements (Unaudited – Prepared by Management |
November 30, 2006 |
6.
Stock Based Compensation(continued)
iii) | The Company granted 950,000 stock options to directors of the company. The fair value of each option granted was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions: | |||||
Dividend rate | 0.00% | Strike price | $ 0.40 | |||
Risk-free interest rate | 4.06% | Spot price | $ 0.41 | |||
Expected life | 3.5 years | Fair value | $ 0.18 | |||
Expected annual volatility | 55.34% |
Based on the fair values above for the options granted, compensation expense of $173,000 was recorded during the period. |
7.
Related Party Transactions
During the fiscal year to date, the company paid fees of $115,000 (2005 - $104,000) for contract negotiation, property investigation, property acquisition, site investigation and management of field programs and administration and management of company affairs, $6,500 (2005 - $6,300) for secretarial and bookkeeping services, and $4,500 (2005 - $4,500) for office rental to a company controlled by a director. These transactions have been recorded at the exchange amount.
8.
Generally Accepted Accounting Principles (“GAAP”) in Canada and the United States
The financial statements have been prepared in accordance with Canadian generally accepted accounting principles (Canadian GAAP) which differ in certain respects from those principles that the Company would have followed had its financial statements been prepared in accordance with United States generally accepted accounting principles (U.S. GAAP).
Differences which materially affect the measurement of items included in the financial statements are:
a)
U.S. GAAP requires that exploration and general and administrative costs (G&A) related to projects be charged to expense as incurred. As such, some of the costs accounted for as deferred exploration property and exploration expenditures under Canadian GAAP would have been charged to earnings under U.S. GAAP. Any other related costs in respect of the properties are charged to earnings under U.S. GAAP and capitalized under Canadian GAAP.
b)
Due to the write off of exploration and general and administrative costs, the future income liability for US GAAP is nil.
Alpha Gold Corp. |
Notes to the Interim Financial Statements (Unaudited – Prepared by Management |
November 30, 2006 |
8.
Generally Accepted Accounting Principles (“GAAP”) in Canada and the United States(continued)
Had the Company followed U.S. GAAP, certain items on the statements of income and deficit would have been reported as follows:
Statements of Operations | Cumulative, inception to November 30, 2006 | November 30, 2006 | November 30, 2005 | |
Loss for the period under | ||||
Canadian GAAP | $(3,601,146) | $ (406,506) | $ (188,441) | |
Exploration property exploration | ||||
and development expenditures | (6,421,543) | (1,102,516) | (704,003) | |
Future income tax recovery | 863,094 | 48,593 | - | |
United States GAAP | $(9,159,595) | $(1,460,429) | $ (892,444) | |
Basic and diluted loss per share – US GAAP | $ (0.05) | $ (0.04) |
Balance Sheets | November 30, 2006 | February 28, 2006 | |||
Canadian GAAP | US GAAP | Canadian GAAP | US GAAP | ||
Current assets | $1,437,053 | $1,437,053 | $1,437,289 | $1,437,289 | |
Exploration properties and deferred costs | 6,421,543 | - | 5,319,028 | - | |
Equipment | 105,443 | 105,443 | 67,498 | 67,498 | |
$7,694,039 | $1,542,496 | $6,823,815 | $1,504,787 | ||
Current liabilities | $ 13,752 | $ 13,752 | $ 11,410 | $ 11,410 | |
Future income tax liability | 863,094 | - | 814,501 | - | |
Share capital | 10,406,239 | 10,406,239 | 9,098,444 | 9,098,444 | |
Contributed surplus | 282,100 | 282,100 | 94,100 | 94,100 | |
Deficit | (3,601,146) | (9,159,595) | (3,194,640) | (7,699,167) | |
$ 7,964,039 | $1,542,496 | $6,823,815 | $1,504,787 |
The statements of comprehensive loss provide a measure of all changes in equity of the company that result from transactions other than those with the shareholders and other economic events that occur during the period. There are no other material differences between Canadian GAAP and United States GAAP other than those presented above with respect to the statements of comprehensive loss.
Alpha Gold Corp. |
Notes to the Interim Financial Statements (Unaudited – Prepared by Management |
November 30, 2006 |
8.
Generally Accepted Accounting Principles (“GAAP”) in Canada and the United States
(continued)
Statements of Cash Flows | Cumulative, inception to November 30, 2006 | November 30, 2006 | November 30, 2005 |
Cash generated (used) for operating purposes under Canadian GAAP |
$(2,201,158) | $ (190,615) | $(177,278) |
Exploration property exploration | |||
and development expenditures | (7,538,484) | (1,093,928) | (704,003) |
Cash generated (used) for operating purposes under US GAAP | $(9,739,642) | $(1,284,543) | $(881,281) |
Cash generated (used) for investing purposes under Canadian GAAP | $(7,827,241) | $(1,137,338) | $(705,991) |
Exploration property exploration | |||
and development expenditures | 7,538,484 | 1,093,928 | 704,003 |
Cash generated (used) for investing purposes under US GAAP | $ (288,757) | $ (43,410) | $ (1,988) |
The Company accounts for its share options under Canadian GAAP, which in the Company’s circumstances are not different from the amounts that would be determined under provisions of U.S. GAAP.
Alpha Gold Corp.
Interim Schedule of Deferred Expenditures
November 30, 2006
Year ended February 28, 2006 | ||
Lust Dust Claims | Lust Dust Claims | |
Exploration | ||
Assaying | $ 81,836 | $ 31,645 |
Camp expenses | 86,385 | 22,739 |
Drilling | 748,630 | 496,140 |
Filing fees & claim assessment | 5,962 | 5,006 |
Fuel | 601 | 242 |
Geological/geochemical | ||
work and reports | 86,784 | 125,682 |
On-site management | 20,000 | 9,000 |
Roadwork/Reclamation | 56,540 | 18,714 |
Travel | 15,777 | 11,342 |
1,102,515 | 720,510 | |
BC Mining tax credit | - | (92,532) |
Expenses for the period | 1,102,515 | 627,978 |
Balance, beginning of period | 4,805,346 | 4,464,572 |
Write-down of mineral property | - | (287,204) |
Balance, end of period | $5,907,861 | $4,805,346 |