FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2011, 2010 AND 2009
(Expressed in Canadian Dollars, unless otherwise stated)
REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
To the Shareholders of Amarc Resources Ltd.
We have audited the accompanying financial statements of Amarc Resources Ltd. (“the Company”), which comprise the balance sheets as at March 31, 2011 and 2010, and the statements of operations and comprehensive loss, shareholders’ equity and cash flows for each of the years in the three-year period ended March 31, 2011, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of Amarc Resources Ltd. as at March 31, 2011 and 2010 and its financial performance and its cash flows for each of the years in the three year period ended March 31, 2011 in accordance with Canadian generally accepted accounting principles.
INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
Vancouver, Canada
July 25, 2011
AMARC RESOURCES LTD. |
Balance Sheets |
(Expressed in Canadian Dollars) |
March 31, | March 31, | |||||
2011 | 2010 | |||||
ASSETS | ||||||
Current assets | ||||||
Cash and equivalents | $ | 6,811,177 | $ | 4,310,460 | ||
Amounts receivable and prepaid expenses (note 13 (a)) | 1,197,540 | 172,223 | ||||
Marketable securities (note 5) | 113,750 | 45,376 | ||||
Balance due from related parties (note 10) | 57,632 | 29,870 | ||||
8,180,099 | 4,557,929 | |||||
Refundable deposits and other prepayment | 162,095 | 92,095 | ||||
Equipment (note 6) | 27,513 | 37,863 | ||||
Mineral property interests (note 7) | 2 | 2 | ||||
$ | 8,369,709 | $ | 4,687,889 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | $ | 64,995 | $ | 32,999 | ||
Shareholders' equity | ||||||
Share capital (note 9) | 46,352,087 | 36,474,363 | ||||
Contributed surplus (note 9(e)) | 1,852,377 | 1,852,377 | ||||
Accumulated other comprehensive income (loss) | 65,749 | (2,625 | ) | |||
Accumulated deficit | (39,965,499 | ) | (33,669,225 | ) | ||
8,304,714 | 4,654,890 | |||||
Nature and continuance of operations (note 1) | ||||||
Commitments (note 7(a), 9(b)) | ||||||
Subsequent events (note 7(a), 9(c), 13) | ||||||
$ | 8,369,709 | $ | 4,687,889 |
The accompanying notes are an integral part of these financial statements.
Approved by the Board of Directors
/s/ Robert A. Dickinson | /s/ Rene G. Carrier |
Robert A. Dickinson | Rene G. Carrier |
Director | Director |
Page 1
AMARC RESOURCES LTD. |
Statements of Operations and Comprehensive Loss |
(Expressed in Canadian Dollars, except for weighted average number of outstanding shares) |
Years ended March 31 | |||||||||
2011 | 2010 | 2009 | |||||||
Expenses | |||||||||
Amortization | $ | 11,791 | $ | 16,228 | $ | 21,704 | |||
Exploration (note 8) | 5,039,366 | 3,195,315 | 4,619,185 | ||||||
Legal, accounting, and audit | 81,770 | 36,289 | 37,120 | ||||||
Management and consulting | 3,965 | 23,241 | 58,464 | ||||||
Office and administration | 196,948 | 153,518 | 178,078 | ||||||
Salaries and benefits | 692,893 | 311,512 | 208,906 | ||||||
Shareholder communication | 174,878 | 103,538 | 122,932 | ||||||
Stock-based compensation (note 9(c)) | – | 138,385 | 244,061 | ||||||
Travel | 77,146 | 48,493 | 53,960 | ||||||
Trust and filing | 33,422 | 59,138 | 25,915 | ||||||
6,312,179 | 4,085,657 | 5,570,325 | |||||||
Other items | |||||||||
Foreign exchange loss (gain) | (115 | ) | 39,576 | (218,818 | ) | ||||
Gain on disposal of fixed assets | – | – | (14,007 | ) | |||||
Interest and other income | (63,470 | ) | (23,688 | ) | (309,149 | ) | |||
Interest expense | 500 | – | – | ||||||
Provision for bad debt | 29,067 | – | – | ||||||
Tax related to flow-through financing (note 9 (b)) | 18,113 | – | 80,809 | ||||||
Loss for the year | $ | 6,296,274 | $ | 4,101,545 | $ | 5,109,160 | |||
Loss for the year | $ | 6,296,274 | $ | 4,101,545 | $ | 5,109,160 | |||
Unrealized loss (gain) on marketable securities | (68,374 | ) | 2,625 | – | |||||
Total comprehensive loss for the year | $ | 6,227,900 | $ | 4,104,170 | $ | 5,109,160 | |||
Basic and diluted loss per share | $ | 0.07 | $ | 0.05 | $ | 0.07 | |||
Weighted average number of common shares outstanding | 89,132,492 | 75,376,733 | 68,465,500 |
The accompanying notes are an integral part of these financial statements.
Page 2
AMARC RESOURCES LTD. |
Statements of Shareholders' Equity |
(Expressed in Canadian Dollars, except for number of shares) |
Year ended March 31, 2011 | Year ended March 31, 2010 | Year ended March 31, 2009 | ||||||||||||||||
Number of | Number of | Number of | ||||||||||||||||
Share capital | shares | shares | shares | |||||||||||||||
Balance at beginning of the year | 83,839,473 | $ | 36,474,363 | 72,739,473 | $ | 31,247,065 | 67,739,473 | $ | 30,747,065 | |||||||||
Common shares issued pursuant to the Newton property option agreement at a fair value of $0.17 per share (note 9(b)) | – | – | 100,000 | 17,000 | – | – | ||||||||||||
Exercise of share warrants at $0.10 per share (note 9(b)) | 5,000,000 | 500,000 | – | – | 5,000,000 | 500,000 | ||||||||||||
Private placement at $0.50 per share, net of issue costs (note 9(b)) | – | – | 11,000,000 | 5,210,298 | – | – | ||||||||||||
Private placement at $0.80 per share, net of issue costs (note 9(b)) | 5,812,500 | 4,449,343 | – | – | – | – | ||||||||||||
Private placement at $0.65 per share, net of issue costs (note 9(b)) | 8,076,923 | 4,928,381 | – | – | – | – | ||||||||||||
Balance at end of the year | 102,728,896 | $ | 46,352,087 | 83,839,473 | $ | 36,474,363 | 72,739,473 | $ | 31,247,065 | |||||||||
Contributed surplus | ||||||||||||||||||
Balance at beginning of the year | $ | 1,852,377 | $ | 1,713,992 | $ | 1,469,931 | ||||||||||||
Stock-based compensation | – | 138,385 | 244,061 | |||||||||||||||
Balance at end of the year | $ | 1,852,377 | $ | 1,852,377 | $ | 1,713,992 | ||||||||||||
Accumulated other comprehensive income (loss) | ||||||||||||||||||
Balance at beginning of the year | $ | (2,625 | ) | $ | – | $ | – | |||||||||||
Unrealized gain (loss) on marketable securities' (note 5) | 68,374 | (2,625 | ) | – | ||||||||||||||
Balance at end of the year | $ | 65,749 | $ | (2,625 | ) | $ | – | |||||||||||
Accumulated deficit | ||||||||||||||||||
Balance at beginning of the year | $ | (33,669,225 | ) | $ | (29,567,680 | ) | $ | (24,458,520 | ) | |||||||||
Loss for the year | (6,296,274 | ) | (4,101,545 | ) | (5,109,160 | ) | ||||||||||||
Balance at end of the year | $ | (39,965,499 | ) | $ | (33,669,225 | ) | $ | (29,567,680 | ) | |||||||||
Total Shareholders' Equity | $ | 8,304,714 | $ | 4,654,890 | $ | 3,393,377 |
Theaccompanying notes are anintegral part of thesefinancialstatements.
Page 3
AMARC RESOURCES LTD. |
Statements of Cash Flows |
(Expressed in Canadian Dollars) |
Years ended March 31 | |||||||||
Cash provided by (used in) | 2011 | 2010 | 2009 | ||||||
Operating activities | |||||||||
Loss for the year | $ | (6,296,274 | ) | $ | (4,101,545 | ) | $ | (5,109,160 | ) |
Adjustments for: | |||||||||
Amortization | 11,791 | 16,228 | 21,704 | ||||||
Common shares received, included in exploration expenses | – | (48,001 | ) | – | |||||
Common shares issued, included in exploration expenses | – | 17,000 | – | ||||||
Unrealized foreign exchange loss (gain) | (18 | ) | 9,863 | (12,216 | ) | ||||
Gain on disposal of equipment | – | – | (14,007 | ) | |||||
Provision for bad debt | 29,067 | – | – | ||||||
Stock-based compensation | – | 138,385 | 244,061 | ||||||
Changes in working capital: | |||||||||
Amounts receivable and prepaid expenses | (1,124,384 | ) | 2,136 | (17,204 | ) | ||||
Balances due from related parties | (27,762 | ) | 70,799 | (282,902 | ) | ||||
Accounts payable and accrued liabilities | 31,996 | (340 | ) | (11,038 | ) | ||||
Cash used in operating activities | (7,375,584 | ) | (3,895,475 | ) | (5,180,762 | ) | |||
Investing activities | |||||||||
Proceeds from sale of equipment | – | 34,148 | – | ||||||
Purchase of equipment | (1,441 | ) | – | (74,097 | ) | ||||
Cash provided by (used in) investing activities | (1,441 | ) | 34,148 | (74,097 | ) | ||||
Financing activities | |||||||||
Proceeds from issuance of shares | 9,877,724 | 5,210,298 | 500,000 | ||||||
Cash provided by financing activities | 9,877,724 | 5,210,298 | 500,000 | ||||||
Increase (decrease) in cash and equivalents | 2,500,699 | 1,348,971 | (4,754,859 | ) | |||||
Cash and equivalents, beginning of the year | 4,310,460 | 2,971,352 | 7,713,995 | ||||||
6,811,159 | 4,320,323 | 2,959,136 | |||||||
Effect of exchange rate fluctuations on cash held | 18 | (9,863 | ) | 12,216 | |||||
Cash and equivalents, end of the year | $ | 6,811,177 | $ | 4,310,460 | $ | 2,971,352 | |||
– | |||||||||
Components of cash and equivalents are as follows: | |||||||||
Cash | $ | 6,811,177 | $ | 4,310,460 | $ | 2,971,352 | |||
Supplementary cash flow information: | |||||||||
Interest received | $ | 63,470 | $ | 23,688 | $ | 309,149 | |||
Interest paid | $ | 500 | $ | – | $ | – | |||
Non cash investing and financing activities: | |||||||||
Issuance of common shares for property option fees | $ | – | $ | 17,000 | $ | – | |||
Marketable securities received | $ | 35,000 | $ | – | $ | – | |||
Common shares received, included in exploration expenses | $ | – | $ | 48,001 | $ | – |
The accompanying notes are an integral part of these financial statements.
Page 4
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
1. | NATURE AND CONTINUANCE OF OPERATIONS |
Amarc Resources Ltd. (the "Company") is incorporated under the laws of the province of British Columbia, and its principal business activity is the acquisition and exploration of mineral properties. Its principal mineral property interests are located in British Columbia. These financial statements have been prepared using Canadian generally accepted accounting principles ("GAAP") assuming a going concern. The Company has incurred losses since inception and its ability to continue as a going concern depends upon its capacity to develop profitable operations and to continue to raise adequate financing. These financial statements do not reflect adjustments, which could be material, to the carrying values of assets and liabilities which may be required should the Company be unable to continue as a going concern. | |
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2. | BASIS OF PRESENTATION |
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These financial statements are prepared in accordance with Canadian GAAP and are presented in Canadian dollars. | |
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3. | SIGNIFICANT ACCOUNTING POLICIES |
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(a) | Cash and equivalents |
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Cash and equivalents consist of cash and highly liquid investments, having maturity dates of three months or less from the date of purchase, which are readily convertible to known amounts of cash. | |
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(b) | Equipment |
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Equipment is recorded at cost and is amortized over its estimated useful life using the declining balance method at various rates ranging from 20% to 30% per annum. | |
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(c) | Mineral property interests and related asset retirement obligations |
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The acquisition costs of mineral properties are deferred until the properties are placed into production, sold or abandoned. These costs are amortized on a unit-of-production basis over the estimated useful life of the related properties following the commencement of production, or written-off if the properties are sold, allowed to lapse or abandoned, or when impairment has been determined to have occurred. If the deferred mineral property costs are determined not to be recoverable over the estimated useful life or are greater than the estimated fair market value, the unrecoverable portion is charged to operations in that period. | |
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Mineral property acquisition costs include the cash consideration and the fair market value of common shares, based on the trading price of the shares, on the date of issue or as otherwise provided under the agreement terms for the mineral property interest. Costs for properties for which the Company does not possess unrestricted ownership and exploration rights, such as option agreements, are expensed in the period incurred or until a feasibility study has determined that the property is capable of commercial production. |
Page 5
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
Exploration costs and option payments are expensed in the period incurred. Option payments which are solely at the Company's discretion are recorded as they are made. | |
Administrative expenditures are expensed in the period incurred. | |
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected from the asset. If the carrying amount of the long-lived asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. | |
The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. The Company also records a corresponding asset value which is amortized over the same basis as the asset being retired. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying the obligation (asset retirement cost). | |
The Company has no material asset retirement obligations as the disturbance at the exploration sites as at March 31, 2011 has been minimal. | |
(d) | Government assistance |
Due to the uncertainty of approval associated with mineral exploration tax credits and other government grants for which the Company applies, government grants are recorded and credited to exploration expenses when the proceeds of these grants are actually received, or when received subsequent to the balance sheet date prior to the issuance of the financial statements. | |
(e) | Share capital |
Common shares issued for mineral property interests are recorded at their fair market value based upon the trading price of the shares on the TSX Venture Exchange on the date of issue or as otherwise provided under the agreement terms to issue the shares. | |
The proceeds from common shares issued pursuant to flow-through share financing agreements are credited to share capital and the tax benefits of the exploration expenditures incurred pursuant to these agreements are transferred to the purchaser of the flow-through shares. | |
Share issue costs are deducted from share capital. | |
(f) | Stock-based compensation |
The Company accounts for all non-cash stock-based payments to non-employees, and employee awards that are direct awards of shares that call for settlement in cash or other assets, or that are share appreciation rights which call for settlement by the issuance of equity instruments, using the fair value method. |
Page 6
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
Under the fair value method, stock-based payments are measured at the fair value of the consideration received, or the fair value of the equity instruments issued, or liabilities incurred, whichever is more reliably measurable. The fair value of non-cash stock-based payments is periodically re-measured until counterparty performance is complete, and any change therein is recognized in the same manner as if the Company had paid cash instead of paying with or using equity instruments. The cost of non-cash stock-based payments to service providers that are fully vested and non-forfeitable at the grant date is measured and recognized at that date. For awards that vest at the end of a vesting period, compensation cost is recognized on a straight-line basis; for awards that vest on a graded basis, compensation cost is recognized on a pro-rata basis over the vesting period. | |
Consideration received by the Company upon the exercise of share purchase options and warrants, and the stock-based compensation previously credited to contributed surplus related to such options and warrants, is credited to share capital. | |
(g) | Use of 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 the disclosure of contingent assets and liabilities as at the balance sheet date, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management estimates include the determination of potential impairments of asset values, rates for amortization of equipment, the determination of future income tax liability and related valuation allowance, and the assumptions used in determining the fair value of non-cash stock-based compensation. Actual results could differ from those estimates. | |
(h) | Foreign currency translation |
Revenues and expenses conducted in foreign currencies are translated at average exchange rates for the period. Amortization is translated at the same exchange rates as the assets to which it relates. Foreign exchange gains or losses are recognized in the statement of operations. | |
(i) | Segment disclosures |
The Company is operating in a single reportable segment – the acquisition, exploration and development of mineral properties in Canada. | |
(j) | Income taxes |
The Company uses the asset and liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are computed based on differences between the carrying amount of assets and liabilities on the balance sheet and their corresponding tax values, generally using the enacted or substantively enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Future income tax assets also result from unused loss carry-forwards and other deductions. |
Page 7
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
Future tax assets are recognized to the extent that they are considered more likely than not to be realized. The valuation of future income tax assets is adjusted, if necessary, by the use of a valuation allowance to reflect the estimated realizable amount. | |
Under the Canadian Income Tax Act, a company may issue securities referred to as flow-through shares whereby the investor may claim the tax deductions arising from the qualifying expenditure of the proceeds by the company. 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 corporate tax rate), thereby reducing share capital. Previously unrecognized tax assets may then offset or eliminate the liability recorded. | |
(k) | Loss per share |
Basic loss per share is calculated by dividing the loss for the period by the weighted average number of common shares outstanding during the period. | |
Diluted loss per share is calculated using the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding used for the calculation of diluted loss per share assumes that the proceeds to be received on the exercise of dilutive stock options and warrants are used to repurchase common shares at the average market price during the period. | |
When the Company is in a net loss position, diluted loss per share is not presented separately as the effect of the outstanding options and warrants would be anti-dilutive. | |
(l) | Impairment of long-lived assets |
The Company reviews and evaluates its long-lived assets, including mineral properties and plant and equipment, for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to its estimated undiscounted future cash flows expected to be generated by the asset. Measurement of an impairment loss is based on the excess of the estimated fair value of the asset over its carrying value. | |
At each reporting period and whenever events or circumstances indicate that an asset's fair value may not be at least equal to its carrying value, management of the Company reviews the net carrying value. These reviews involve consideration of the fair value of each property to determine whether a permanent impairment in value has occurred and whether any asset write down is necessary. | |
(m) | Financial instruments |
All financial instruments, including derivatives, are included on the Company's balance sheet and measured either at fair value or, in certain circumstances when fair value may not be considered most relevant, at cost or amortized cost. Changes in fair value are recognized in the statements of operations or accumulated other comprehensive income, depending on the classification of the related instruments. |
Page 8
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
All financial assets and liabilities are recognized when the entity becomes a party to the contract creating the asset or liability. All financial instruments are classified into one of the following categories: held for trading, held-to-maturity, loans and receivables, available-for-sale financial assets, or other financial liabilities. Initial and subsequent measurement and recognition of changes in the value of financial instruments depends on their initial classification: | ||
Held-to-maturity investments, loans and receivables, and other financial liabilities are initially measured at fair value and subsequently measured at amortized cost. Amortization of premiums or discounts and losses due to impairment are included in current period earnings (loss). | ||
Available-for-sale financial assets are measured at fair value. Changes in fair value are included in other comprehensive income (loss) until the gain or loss is recognized in earnings (loss). | ||
Held for trading financial instruments are measured at fair value. All changes in fair value are included in earnings (loss) in the period in which they arise. | ||
All derivative financial instruments are measured at fair value, even when they are part of a hedging relationship. Changes in fair value are included in earnings (loss) in the period in which they arise, except for cash flow hedge transactions which qualify for hedge accounting treatment in which case gains and losses are recognized in other comprehensive income (loss). | ||
In accordance with this standard, the Company has classified its financial instruments as follows: |
Financial Instrument | Classification | Measurement | |
Amounts receivable | Loans and Receivables | Amortized cost | |
Balance due from related parties | Loans and Receivable | Amortized cost | |
Marketable securities and investments (i) | Available for Sale | Fair Value | |
Accounts payable and accrued liabilities | Other Financial Liability | Amortized cost |
(i) | Marketable securities are classified as available-for-sale securities and are measured at fair market value with unrealized gains or losses recorded in comprehensive income (loss). At the time securities are sold or otherwise disposed of, gains or losses are included in earnings (loss). |
(n) | Comparative figures |
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Certain of the prior years' comparative figures have been reclassified to conform to the financial statement presentation adopted for the current year. |
Page 9
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
4. | CHANGES IN ACCOUNTING POLICIES |
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Accounting standards not yet adopted | |
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International Financial Reporting Standards ("IFRS") | |
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In February 2008, the Accounting Standards Board ("AcSB") announced that 2011 is the changeover date for publicly-listed companies to use IFRS. The date is for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011, although early adoption was permitted. Due to the Company's March 31 fiscal year end, the transition date for the Company is April 1, 2011. | |
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The adoption of IFRS will require the restatement, for comparative purposes, of amounts reported by the Company for the annual and interim periods for prior years. | |
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5. | MARKETABLE SECURITIES |
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As at March 31, 2011 and March 31, 2010, the Company held common shares in several public and private companies. These marketable securities were classified as available-for-sale securities with total initial costs amounting to $48,001 (2010 – $48,001). The estimated fair value of these securities at March 31, 2011 was $113,750 (2010 – $45,376). | |
6. | EQUIPMENT |
Accumulated | Net Book | |||||||||
Cost | Amortization | Value | ||||||||
March 31, 2011 | ||||||||||
Site equipment | $ | 45,498 | $ | 29,040 | $ | 16,458 | ||||
Computers | 30,607 | 19,552 | 11,055 | |||||||
$ | 76,105 | $ | 48,592 | $ | 27,513 | |||||
March 31, 2010 | ||||||||||
Site equipment | $ | 44,057 | $ | 21,986 | $ | 22,071 | ||||
Computers | 30,607 | 14,815 | 15,792 | |||||||
$ | 74,664 | $ | 36,801 | $ | 37,863 |
7. | MINERAL PROPERTY INTERESTS |
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The Company has recorded the following interest in royalties in currently non-producing properties at a nominal value on the balance sheet: |
Page 10
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
March 31 | March 31 | ||||||
2011 | 2010 | ||||||
Ana, Yukon Territory (b) | $ | 1 | $ | 1 | |||
Mann Lake, Saskatchewan (b) | 1 | 1 | |||||
$ | 2 | $ | 2 |
Title to mining properties involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mining properties. The Company has investigated title to all of its mineral properties and, to the best of its knowledge, title to its properties is in good standing. | ||
(a) | British Columbia, Canada | |
(i) | Newton Property | |
In August 2009, the Company entered into an agreement ("Newton Agreement") with Newton Gold Corporation ("NGC") (formerly named New High Ridge Resources Inc.), whereby the Company acquired the right to earn an 80% interest in the Newton property by making a cash payment of $60,000 (paid), issuing 100,000 of the Company's common shares (issued) to the underlying owners and funding exploration expenditures to the amount of $240,000 on or before December 31, 2009 (completed) and an additional $4,700,000 (completed) over seven years from the effective date of the agreement (see note 13 for subsequent events). In consideration of the Company agreeing to issue to the underlying owners 100,000 common shares, NGC has agreed to issue to the Company 100,000 common shares (issued). | ||
The agreement with NGC is subject to an underlying option agreement ("Underlying Agreement") with arm's length parties, whereby NGC has the right to acquire a 100% undivided interest in all the claims held under that agreement through a series of staged payments and share issuances, which payments and share issuances have been completed, and exploration expenditures to the amount of $240,000 on or before December 31, 2009 (completed). The claims held under the Underlying Agreement are subject to a 2% net smelter royalty, which may be purchased by NGC for $2,000,000. Annual advance royalty payments of $25,000 are required starting in January 2011. | ||
Subsequent to March 31, 2011, the Company completed its earn-in requirements under the Newton Agreement, and entered into a joint venture with NGC on this property (the "Newton Joint Venture Agreement") effective May 16, 2011. | ||
(ii) | NEWS claims | |
As at March 31, 2011, the Company had acquired, by staking claims, a 100% interest in the NEWS claims, which extend primarily to the south, and also to the north, from the Newton property. |
Page 11
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
(iii) | Tulox Property | |
The Tulox property (the "Property") was acquired by the Company in stages by staking between 2005 to 2007. | ||
In April 2009, the Company entered into an agreement with Tulox Resources Inc. ("Tulox") (formerly named Sitec Ventures Corp.) and amended on March 23, 2010 and July 27, 2010, an unrelated British Columbia company, whereby Tulox may acquire a 50% interest in the property for consideration of 1,525,000 Tulox common shares (525,000 shares issued) and by incurring $1,000,000 in expenditures on the property over three years. Under this agreement, Tulox may acquire a 100% interest for additional consideration of 1,100,000 of its common shares and by incurring a further $1,000,000 in expenditures on the property on or before August 1, 2013. | ||
Tulox has made cash payment of $10,000 and issued 525,000 common shares to date under the April 2009 Option Agreement. The agreement is subject to certain conditions including regulatory approval. Under the agreement, the Company will receive a 3% net smelter returns ("NSR") royalty following the commencement of commercial production on the property. In addition, the Company receives a "back-in right" whereby the Company can acquire a 60% interest in the property by agreeing, within 90 days of the completion of a pre-feasibility study, to fund a further $10,000,000 of exploration expenditures on the property. However, upon exercise of the "back-in right", the Company's entitlement to NSR will reduce to 1.2% from 3%. | ||
Subsequent to March 31, 2011, Tulox assigned the option agreement to a subsidiary company, Newlox Gold Ventures Corp ("Newlox"), as part of a corporate reorganization and Newlox entered into an amended option agreement with Amarc. Under this amended option agreement, Newlox can acquire a 100% interest in the Property by spending $2,000,000 on the Property and issuing 2,350,000 common shares in its capital to Amarc, in tranches ending August 2013. | ||
(iv) | Galileo and Hubble Properties | |
As at March 31, 2011, the Company held a 100% interest in the Galileo and Hubble properties, which are located within the Blackwater-Davidson district approximately 120 kilometres southwest of Vanderhoof. | ||
(v) | Sitlika Properties | |
The Company acquired by staking 100% interests in several mineral properties located in the Omineca, Cariboo and Clinton Mining Divisions of British Columbia, ranging in location from approximately 110 kilometers northeast of Smithers to approximately 35 kilometers southwest of Williams Lake. As of March 31, 2011, these properties included the Aspira, Huge East, Megamine, and Polymet claims. | ||
(b) | Yukon Territory and Saskatchewan | |
The Company has a 5% net profits interest ("NPI") in the 46 mineral claims comprising the Ana Property in the Yukon, and a 2.5% NPI in a mineral lease comprising the Mann Lake Property in Saskatchewan. These net profit interests have been recorded at a nominal value of $1 each (note 7). The Company has neither active exploration programs nor does it plan to undertake any new programs on these properties at the present time. |
Page 12
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
8. | EXPLORATION SCHEDULE |
Exploration expenses for the year ended March 31, 2011 |
Newton | Sitlika | Other | ||||||||||||||
program | program | Generative | (including | |||||||||||||
BC | BC | BC | METC-BC) | Total | ||||||||||||
Assays and analysis | $ | 539,649 | $ | – | $ | 13,789 | $ | 43,297 | $ | 596,735 | ||||||
Drilling | 1,255,720 | – | – | – | 1,255,720 | |||||||||||
Equipment rental | 134,408 | – | – | 1,800 | 136,208 | |||||||||||
Geological | 2,067,273 | – | 163,057 | 489,028 | 2,719,358 | |||||||||||
Graphics | 35,502 | – | 4,926 | 14,939 | 55,367 | |||||||||||
Helicopter | 25,703 | – | – | – | 25,703 | |||||||||||
Mineral Exploration Tax Credit | – | – | – | (1,127,201 | ) | (1,127,201 | ) | |||||||||
Property fees and assessments | 174,008 | – | 1,125 | 36,063 | 211,196 | |||||||||||
Property option payments | 24,999 | – | – | – | 24,999 | |||||||||||
Site activities | 817,657 | – | 888 | 14,570 | 833,115 | |||||||||||
Sustainability | 184,428 | – | 7,495 | 4,069 | 195,992 | |||||||||||
Travel and accommodation | 104,783 | – | 3,779 | 3,612 | 112,174 | |||||||||||
Incurred during fiscal 2011 | 5,364,130 | – | 195,059 | (519,823 | ) | 5,039,366 | ||||||||||
Cumulative expenditures, March 31, 2010 | 2,472,098 | 7,286,194 | 3,753,086 | 11,752,696 | 25,264,074 | |||||||||||
Cumulative expenditures, March 31, 2011 | $ | 7,836,228 | $ | 7,286,194 | $ | 3,948,145 | $ | 11,232,873 | $ | 30,303,440 |
Exploration expenses for the year ended March 31, 2010
Newton | Sitlika | Other | ||||||||||||||
program | program | Generative | (including | |||||||||||||
BC | BC | BC | METC-BC) | Total | ||||||||||||
Assays and analysis | $ | 149,350 | $ | 23,243 | $ | 54,657 | $ | 24,319 | $ | 251,569 | ||||||
Drilling | 617,938 | 1,178 | – | 51,190 | 670,306 | |||||||||||
Equipment rental | 13,244 | 13,738 | – | 1,547 | 28,529 | |||||||||||
Geological | 1,374,625 | 143,587 | 211,755 | 26,428 | 1,756,395 | |||||||||||
Graphics | 12,946 | 2,198 | 1,980 | 990 | 18,114 | |||||||||||
Helicopter | – | 79,505 | 1,645 | 37,011 | 118,161 | |||||||||||
Mineral Exploration Tax Credit | – | – | – | (252,086 | ) | (252,086 | ) | |||||||||
Property fees and assessments | 9,339 | 26,837 | 12,258 | 26,185 | 74,619 | |||||||||||
Property option payments | 77,000 | – | – | – | 77,000 | |||||||||||
Site activities | 151,796 | 72,675 | 3,956 | 26,620 | 255,047 | |||||||||||
Sustainability | 32,764 | 120,100 | 810 | 2,620 | 156,294 | |||||||||||
Travel and accommodation | 33,096 | 5,362 | 1,270 | 1,639 | 41,367 | |||||||||||
Incurred during fiscal 2010 | 2,472,098 | 488,423 | 288,331 | (53,537 | ) | 3,195,315 | ||||||||||
Cumulative expenditures, March 31, 2009 | – | 6,797,771 | 3,464,755 | 11,806,233 | 22,068,759 | |||||||||||
Cumulative expenditures, March 31, 2010 | $ | 2,472,098 | $ | 7,286,194 | $ | 3,753,086 | $ | 11,752,696 | $ | 25,264,074 |
Page 13
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
Exploration expenses for the year ended March 31, 2009
Newton | Sitlika | Other | ||||||||||||||
program | program | Generative | (including | |||||||||||||
BC | BC | BC | METC-BC) | Total | ||||||||||||
Assays and analysis | $ | – | $ | 462,881 | $ | 24,415 | $ | 109,053 | $ | 596,349 | ||||||
Drilling | – | 806,590 | – | – | 806,590 | |||||||||||
Engineering | – | 370,280 | 500 | – | 370,780 | |||||||||||
Equipment rental | – | 69,988 | 35,953 | 13,203 | 119,144 | |||||||||||
Geological | – | 1,496,369 | 549,721 | 496,574 | 2,542,664 | |||||||||||
Graphics | – | 6,004 | 10,008 | 2,845 | 18,857 | |||||||||||
Helicopter | – | 582,325 | – | 18,170 | 600,495 | |||||||||||
Mineral Exploration Tax Credit | – | – | – | (1,435,072 | ) | (1,435,072 | ) | |||||||||
Property fees and assessments | – | 41,435 | 12,361 | 19,059 | 72,855 | |||||||||||
Property option payments | – | 50,000 | – | 10,000 | 60,000 | |||||||||||
Site activities | – | 353,582 | 40,378 | 95,714 | 489,674 | |||||||||||
Sustainability | – | 15,682 | 1,895 | 628 | 18,205 | |||||||||||
Travel and accommodation | – | 317,731 | 7,039 | 33,874 | 358,644 | |||||||||||
Incurred during fiscal 2009 | – | 4,572,867 | 682,270 | (635,952 | ) | 4,619,185 | ||||||||||
Cumulative expenditures, March 31, 2008 | – | 2,224,904 | 2,782,485 | 12,442,185 | 17,449,574 | |||||||||||
Cumulative expenditures, March 31, 2009 | $ | – | $ | 6,797,771 | $ | 3,464,755 | $ | 11,806,233 | $ | 22,068,759 |
9. | SHARE CAPITAL |
(a) | Authorized share capital |
The Company's authorized share capital consists of an unlimited number of common shares without par value and an unlimited number of preferred shares. | |
(b) | Share issuances |
| |
Fiscal year ended March 31, 2011 | |
During the year ended March 31, 2011, the Company completed a brokered and non-brokered private placement of 13,889,423 of its common shares, consisting of 5,812,500 flow-through shares at a price of $0.80 per share and 8,076,923 non-flow-through shares at a price of $0.65 per share, for aggregate gross proceeds of $9,900,000. The Company incurred costs about $522,000 in finder's and other fees relating to this private placement. In accordance with the terms of the flow-through share agreements, the Company is obligated to spend the proceeds of $4,650,000 from the issuance of the flow-through shares on eligible exploration activities by December 31, 2011. The Company is subject to a tax, calculated monthly, on the portion of the proceeds remaining unspent each month after February 2011. As at March 31, 2011, approximately $3,150,000 remained to be spent on eligible exploration activities. |
Page 14
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
In October 2010, pursuant to the exercise of 5,000,000 share warrants (the "Warrants") the Company issued 5,000,000 flow-through shares for aggregate gross proceeds of $500,000. Prior to the exercise of the Warrants, the Company and the holders of the Warrants (the "Holders") agreed to amend the terms of the Warrants whereby the Holders were entitled to acquire flow through shares instead of non-flow through shares as had been originally stipulated in the terms of the Warrants. Consequently, the Company also entered into flow through share agreements with the Holders, whereby the Company agreed to spend the proceeds from the issuance of the flow-through shares on eligible exploration activities before December 31, 2011 (completed). | |
Fiscal year ended March 31, 2010 | |
During the year ended March 31, 2010, the Company completed a private placement of 11,000,000 of its common shares at a price of $0.50 per share, consisting of 4,800,000 flow- through shares and 6,200,000 non-flow-through shares for aggregate gross proceed of $5,500,000. | |
In August 2009, the Company issued 100,000 common shares pursuant to the Newton property agreement (note 7(a)(i)). The Company recorded this issuance and the corresponding property option fees at $17,000, being the estimated fair value of the shares using the quoted market price on the date of issuance. | |
(c) | Share purchase option compensation plan |
The Company has a share purchase option compensation plan approved by the shareholders that allows the Company to grant up to 10% of the issued and outstanding shares of the Company at any one time, typically vesting over up to two years, subject to regulatory terms and approval, to its directors, employees, officers, and consultants. The exercise price of each option may be set equal to or greater than the closing market price of the common shares on the TSX Venture Exchange on the day prior to the date of the grant of the option, less any allowable discounts. Options have a maximum term of ten years and terminate 90 days following the termination of the optionee's employment, except in the case of retirement or death. | |
The continuity of share purchase options for the year ended March 31, 2011 was: |
Exercise | March 31, | Expired/ | March 31, | ||||||||||||||||
Expiry date | price | 2010 | Granted | Exercised | Cancelled | 2011 | |||||||||||||
July 19, 2011 | $ | 0.70 | 1,615,200 | – | – | (28,000 | ) | 1,587,200 | |||||||||||
April 28, 2012 | $ | 0.70 | 70,000 | – | – | – | 70,000 | ||||||||||||
March 30, 2013 | $ | 0.51 | 50,000 | – | – | – | 50,000 | ||||||||||||
1,735,200 | – | – | (28,000 | ) | 1,707,200 | ||||||||||||||
Weighted average exercise price | $ | 0.69 | – | – | $ | 0.70 | $ | 0.69 |
Subsequent to March 31, 2011, a total of 5,000 options were cancelled and 1,582,200 options expired unexercised.
Page 15
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
The continuity of share purchase options for the year ended March 31, 2010 was:
Exercise | March 31, | Expired/ | March 31, | ||||||||||||||||
Expiry date | price | 2009 | Granted | Exercised | Cancelled | 2010 | |||||||||||||
July 19, 2011 | $ | 0.70 | 1,713,600 | – | – | (98,400 | ) | 1,615,200 | |||||||||||
April 28, 2012 | $ | 0.70 | – | 70,000 | – | – | 70,000 | ||||||||||||
March 30, 2013 | $ | 0.51 | – | 50,000 | – | – | 50,000 | ||||||||||||
1,713,600 | 120,000 | – | (98,400 | ) | 1,735,200 | ||||||||||||||
Weighted average exercise price | – | $ | 0.70 | $ | 0.62 | – | $ | 0.70 | $ | 0.69 |
No options were granted during the 2011 fiscal year. Using an option pricing model with the assumptions noted below, the estimated fair value of all options granted or vesting and which have been reflected in the statements of operations are as follows:
Year ended March 31 | ||||||||||
2011 | 2010 | 2009 | ||||||||
Exploration | ||||||||||
Engineering | $ | – | $ | 5,658 | $ | 18,796 | ||||
Environmental, socioeconomic and land | – | 2,385 | 3,793 | |||||||
Geological | – | 47,961 | 75,889 | |||||||
Exploration | – | 56,004 | 98,478 | |||||||
Operations and administration | – | 82,381 | 145,583 | |||||||
Total compensation cost recognized in operations, credited to contributed surplus | $ | – | $ | 138,385 | $ | 244,061 |
The assumptions used to estimate the fair value of options vesting during the respective periods were as follows:
Year ended March 31 | ||||||||||
2011 | 2010 | 2009 | ||||||||
Risk free interest rate | – | 2.48% | 1.96% | |||||||
Expected life | – | 3 years | 3 years | |||||||
Expected volatility | – | 85% | 83% | |||||||
Expected dividends | – | nil | nil |
No options were granted during the 2011 fiscal year.
Page 16
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
(d) | Share purchase warrants |
The continuity of share purchase warrants (each warrant redeemable for one common share) for the year ended March 31, 2011 was: |
Exercise | March 31, | Exercised | Expired/ | March 31, | |||||||||||||||
Expiry date | Price | 2010 | Issued | (note 9 | (b)) | Cancelled | 2011 | ||||||||||||
February 9, 2011 | $ | 0.10 | 5,000,000 | – | 5,000,000 | – | – | ||||||||||||
Weighted average exercise price | $ | 0.10 | – | $ | 0.10 | – | – |
The continuity of share purchase warrants (each warrant redeemable for one common share) for the year ended March 31, 2010 was:
Exercise | March31, | Expired/ | March 31, | ||||||||||||||||
Expiry date | Price | 2009 | Issued | Exercised | Cancelled | 2010 | |||||||||||||
February 9, 2011 | $ | 0.10 | 5,000,000 | – | – | – | 5,000,000 | ||||||||||||
Weighted average exercise price | $ | 0.10 | – | – | – | $ | 0.10 |
(e) | Contributed surplus |
The components of contributed surplus are: |
March 31, | March 31, | ||||||
2011 | 2010 | ||||||
Estimated fair value of warrants | $ | 982,110 | $ | 982,110 | |||
Cumulative stock-based compensation | 1,275,363 | 1,275,363 | |||||
Contributed surplus transferred to share capital relating to options exercised | (405,096 | ) | (405,096 | ) | |||
Total | $ | 1,852,377 | $ | 1,852,377 |
The warrants exercised during the year ended March 31, 2011 had no fair value assigned to them when granted; consequently there was no impact on contributed surplus upon their exercise. | |
10. | RELATED PARTY BALANCES AND TRANSACTIONS |
Balances receivable | March 31 | March 31 | |||||
2011 | 2010 | ||||||
Hunter Dickinson Services Inc. (a) | $ | 57,632 | $ | 29,870 |
Page 17
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
Transactions | Year ended March 31 | |||||||||
2011 | 2010 | 2009 | ||||||||
Hunter Dickinson Services Inc. (a): | ||||||||||
Services rendered and expenses reimbursed | $ | 2,819,419 | $ | 1,526,583 | $ | 2,658,528 | ||||
Cash advances | $ | 154,750 | $ | – | $ | – | ||||
United Mineral Services Ltd. (b) | ||||||||||
Promissory note issued against receipt of cash | $ | 872,580 | $ | – | $ | – | ||||
Payment of the interest on the promissory note | $ | 500 | $ | – | $ | – | ||||
Farallon Minera Mexicana S.A. de C.V. (c): | ||||||||||
Sale of equipment | $ | – | $ | – | $ | 32,679 |
(a) | Hunter Dickinson Services Inc. ("HDSI") is a private company which has certain directors in common with the Company. Pursuant to an agreement dated July 2, 2010, HDSI provides geological, corporate development, administrative and management services to the Company at annually set rates. As per the agreement with HDSI, the Company may provide advances to, or receive advances from, HDSI for exploration and administrative services. HDSI also incurs third party costs on behalf of the Company. Prior to July 2, 2010, HDSI had provided services to the Company on a full cost recovery basis, pursuant to an agreement dated June 1, 2008. | |
(b) | United Mineral Services Ltd. ("UMS") is a private company controlled by a director of Amarc. Pursuant to a loan agreement dated December 6, 2010, the Company received a loan of $872,580 from UMS against a promissory note payable on demand and bearing interest at a rate of 1% per annum, calculated monthly and payable quarterly. On December 20, 2010, the Company made a partial repayment of $500,000 against the principal amount of the loan. On January 6, 2011, the loan was fully repaid, along with accrued interest. | |
(c) | Farallon Minera Mexicana S.A. de C.V. ("FMM"), a subsidiary of Farallon Resources Ltd., was until recently a public company which had certain directors in common with the Company. During the year ended March 31, 2009, the Company sold some used equipment to FMM at market value, for $32,679. |
Page 18
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
11. | INCOME TAXES |
As at March 31, 2011 and 2010, the estimated tax effects of the significant components within the Company's future income tax assets (liabilities) are as follow: |
March 31 | March 31 | ||||||
2011 | 2010 | ||||||
Future income tax assets (liabilities): | |||||||
Resource pools | $ | 3,110,000 | $ | 2,707,000 | |||
Loss carry forwards | 1,476,000 | 1,057,000 | |||||
Financing expenses | 148,000 | 65,000 | |||||
Equipment | 12,000 | 9,000 | |||||
Available-for-sale financial assets | (9,000 | ) | - | ||||
Subtotal | 4,737,000 | 3,838,000 | |||||
Valuation allowance | (4,737,000 | ) | (3,838,000 | ) | |||
Net future income tax asset | $ | – | $ | – |
Income tax expense differs from the amount that would result from applying the Canadian federal and provincial tax rates to earnings before income taxes. These differences result from the following items:
March 31 | March 31 | ||||||
2011 | 2010 | ||||||
Combined Canadian federal and provincial statutory rate | 28% | 29.6% | |||||
Income tax at statutory rates | $ | (1,763,000 | ) | $ | (1,215,000 | ) | |
Permanent differences | 757,000 | 435,000 | |||||
Tax rate differences | 108,000 | 128,000 | |||||
Adjustments of taxes of prior periods | (1,000 | ) | (41,000 | ) | |||
Change in valuation allowance | 899,000 | 693,000 | |||||
$ | – | $ | – |
At March 31, 2011, the Company had taxable capital losses of $1.6 million (2010 – $1.6 million) that do not expire and $4.3 million (2010 – $2.6 million) in non-capital losses expiring in various periods from 2015 to 2031. | |
12. | CAPITAL MANAGEMENT AND FINANCIAL INSTRUMENTS |
(a) | Capital Management Objectives |
The Company's primary objectives when managing capital are to safeguard the Company's ability to continue as a going concern, so that it can continue to provide returns for shareholders, and to have sufficient liquidity available to fund suitable business opportunities as they arise. The Company considers the components of shareholders' equity, as well as its cash and equivalents as capital. The Company manages its capital structure and makes adjustments to it in 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 equity, sell assets, or return capital to shareholders as well as issue or repay debt. |
Page 19
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
The Company's investment policy is to invest its cash in highly liquid short-term interest-bearing investments, having maturity dates of three months or less from the date of acquisition and that are readily convertible to known amounts of cash. | |
There were no changes to the Company's approach to capital management during the year ended March 31, 2011. | |
(b) | Carrying Amounts and Fair Values of Financial Instruments |
The fair value of a financial instrument is the price at which a party would accept the rights and/or obligations of the financial instrument from an independent third party. Given the varying influencing factors, the reported fair values are only indicators of the prices that may actually be realized for these financial instruments. | |
Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are: | |
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities; | |
Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and | |
Level 3 – Inputs that are not based on observable market data | |
The following table illustrates the classification of the Company's financial instruments within the fair value hierarchy as at March 31, 2011 and 2010. |
Financial assets at fair value as at March 31, 2011 | |||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||
Marketable securities and investments | $ | 78,750 | $ | 35,000 | $ | – | $ | 113,750 |
Financial assets at fair value as at March 31, 2010 | |||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||
Marketable securities and investments | $ | 45,376 | $ | – | $ | – | $ | 45,376 |
(c) | Financial Instrument Risk Exposure and Risk Management |
The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board approves and monitors the risk management processes, inclusive of documented treasury policies, counterparty limits, controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows: |
Page 20
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
(i) | Credit Risk |
The Group's credit risk is primarily attributable to its liquid financial assets including cash and equivalents, and amounts receivable and other assets. The carrying value of the Group's cash and equivalents and amounts receivable and other assets represent the maximum exposure to credit risk.
Carrying Amount | |||||||
March 31, | March 31, | ||||||
Financial assets | 2011 | 2010 | |||||
Cash and equivalent | $ | 6,811,177 | $ | 4,310,460 | |||
Amounts receivable | 1,307,241 | 232,159 | |||||
Available-for-sale financial assets | 113,750 | 45,376 | |||||
Balance due from related parties | 57,632 | 29,870 | |||||
Total | $ | 8,289,800 | $ | $ 4,617,865 |
Impairment losses
At March 31, 2011, the Company has recorded a provision for bad debt amount to $ 29,067 (2010 – $nil)
Cash and equivalents.
The Company limits exposure to credit risk on liquid financial assets through maintaining its cash and equivalents in high quality investments with major financial institutions and in federal government-backed treasury bills.
Amounts receivable
Included in the Company's receivables is the Company's claim for 2009 Mineral Exploration Tax Credit ("BC METC") with interest totaling to an amount of $904,143 and an HST receivable amount of $251,002. The Company received the 2009 BC METC claim in April 2011 and HST claims in June 2011.
(ii) | Liquidity Risk |
The Company ensures that there is sufficient cash in order to meet its short term business requirements, after taking into account the Company's holdings of cash and equivalents. The Company's cash and equivalents are invested in business accounts which are immediately available on demand for the Company's use.
The Company has sufficient cash and equivalents to meet commitments associated with its financial liabilities.
Page 21
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
Carrying Amount | |||||||
March 31, | March 31, | ||||||
Amounts payable and accrued liabilities | 2011 | 2010 | |||||
Carrying amount | $ | 64,995 | $ | 32,999 | |||
Contractual cash flow | $ | 64,995 | $ | 32,999 | |||
Due in following year | $ | 64,995 | $ | 32,999 |
(iii) | Market Risk |
The significant market risk exposures to which the Company is exposed are foreign exchange risk, interest rate risk and price risk.
Foreign exchange risk
The Company incurs substantially all of its expenditures in Canada and a significant portion of its cash and equivalents are denominated in Canadian dollars ("CAD"). At March 31, 2011, the Company was exposed to foreign exchange risk to the extent of exchange rate fluctuation and a resultant change in the value of its cash and equivalents held in US dollars ("USD").
At March 31, 2011, the exposure of the Company's financial assets to foreign exchange risk is cash held in United States dollars with the amount equivalent to $17,323 (2010 – $118,199)
Substantially all of the Company's liabilities are denominated in Canadian dollars.
The Company currently does not engage in foreign currency hedging.
The following significant exchange rates were applied during the year and at the reporting dates:
2011 | 2010 | ||||||
Canadian dollars per United States dollar | |||||||
Closing rate at March 31 | 0.9696 | 1.0158 | |||||
Average rate during the year | 1.0164 | 1.0904 |
Interest rate risk
The Company is subject to interest rate risk with respect to its investments in cash equivalents. The Company's policy is to invest cash in variable rate financial instruments having maturity dates of three months or less from the date of acquisition and cash reserves are to be maintained in cash equivalents in order to maintain liquidity, while achieving a satisfactory return for shareholders.
Assuming that all other variables remain constant, a 10 basis point increase or decrease in interest rates would have resulted in a decrease or increase in the loss of approximately $6,000 in the year (2010 – $2,000).
Page 22
AMARC RESOURCES LTD. |
Notes to the Financial Statements |
Years ended March 31, 2011, 2010, and 2009 |
(Expressed in Canadian Dollars, unless otherwise stated) |
Price risk | |
The Company is subject to price risk in respect of its investments in marketable securities (note 5). | |
13. | SUBSEQUENT EVENTS |
(a) | METC refund |
Subsequent to March 31, 2011, the Company received $872,580 in mineral exploration tax credits in respect of its fiscal year ended March 31, 2009 under the British Columbia Mineral Exploration Tax Credit program. This amount has been included in exploration expenses for the year ended March 31, 2011. The Company also received $31,563 in interest related to this tax credit, which has been recorded as interest income. | |
(b) | Newton joint venture agreement |
Subsequent to March 31, 2011, the Company entered into a joint venture agreement (the "Newton Joint Venture Agreement") with Newton Gold Corp. on the Newton property (note 7(a)(i)). The companies also agreed to incorporate the adjacent NEWS mineral claims into that agreement, resulting in a project area totaling 284 mineral claims. | |
(c) | Tulox Property option agreement |
Subsequent to March 31, 2011, the Company entered into an amended Option Agreement with Newlox Gold Venture Corp on the Tulox Property (note 7(a)(iii)). |
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