EMGOLD MINING CORPORATION
(an exploration stage company)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2008 and 2007
(expressed in United States dollars)
The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
EMGOLD MINING CORPORATION
(an exploration stage company)
Interim Consolidated Balance Sheets
(expressed in United States dollars)
| September 30, | December 31, |
Assets |
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Current assets |
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Cash and cash equivalents | $ 228,141 | $ 176,881 |
Short-term investments | 1,096,598 | 4,640,637 |
Accounts receivable | 40,219 | 103,147 |
Due from related party (note 7) | -- | 100,493 |
Prepaid expenses and deposits | 241,174 | 260,463 |
| 1,606,132 | 5,281,621 |
| ||
Other | 7,577 | 8,061 |
Due from related party(note 7) Equipment(note 5) | 137,927 133,659 | -- 274,565 |
Mineral property interests(note 3) | 984,933 | 942,448 |
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| $ 2,870,228 | $ 6,506,695 |
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Liabilities and Shareholders’ Equity | ||
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Current liabilities | ||
Accounts payable and accrued liabilities | $ 183,647 | $ 325,924 |
Due to related parties (note 7) | 313,965 | 386,369 |
Capital lease obligation (note 4) | 6,242 | 5,843 |
| 503,854 | 718,136 |
Capital lease obligation(note 4) | 20,931 | 25,661 |
Preference shares(notes 6 and 7) | 707,793 | 750,624 |
| 1,232,578 | 1,494,421 |
Shareholders’ equity | ||
Common shares | 38,397,699 | 38,231,882 |
Preference shares (note 6) | 90,902 | 90,902 |
Warrants | 3,021,773 | 3,049,862 |
Contributed surplus | 3,200,021 | 2,972,267 |
Deficit | (42,495,289) | (38,755,183) |
Accumulated other comprehensive income | (577,456) | (577,456) |
| 1,637,650 | 5,012,274 |
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| $ 2,870,228 | $ 6,506,695 |
Basis of presentation and operations (note 1)
Commitments (note 4)
See accompanying notes to interim consolidated financial statements.
Approved by the Directors
“Robin A. W. Elliott”
“Sargent H. Berner”
Director
Director
2
The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
EMGOLD MINING CORPORATION
(an exploration stage company)
Interim Consolidated Statements of Operations and Deficit
(expressed in United States dollars)
Interim Statements of Comprehensive Income
| Three months ended September 30, 2008 | Three months ended September 30, 2007 | Nine months ended September 30, 2008 | Nine months ended September 30, 2007 |
|
Loss for the period before comprehensive income | $ (1,393,538) | $ (1,435,175) | $ (3,740,106) | $ (3,574,482) |
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Other comprehensive income | -- | -- | -- | -- | |
Comprehensive loss for the period | $ (1,393,538) | $ (1,435,175) | $ (3,740,106) | $ (3,574,482) |
|
See accompanying notes to interim consolidated financial statements.
3
The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
EMGOLD MINING CORPORATION
(an exploration stage company)
Interim Consolidated Statements of Shareholders’ Equity
Nine months ended September 30, 2008
(expressed in United States dollars)
See accompanying notes to interim consolidated financial statements.
4
The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
EMGOLD MINING CORPORATION
(an exploration stage company)
Interim Consolidated Statements of Cash Flows
(expressed in United States dollars)
| Three months ended | Nine months ended | |||
| 2008 | 2007 | 2008 | 2007 | |
Cash provided by (used for): |
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Operations: |
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Loss for the period | $ (1,393,538) | $ (1,435,175) | $ (3,740,106) | $ (3,574,482) | |
Items not involving cash |
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Amortization | 87,671 | 42,645 | 151,316 | 125,846 | |
Gain on sale of fixed assets | -- | (3,298) | -- | (3,298) | |
Accretion of debt component of preference shares | 3,291 | 3,282 | 10,105 | 9,330 | |
Increase in provision for doubtful accounts | 250,000 | -- | 250,000 | -- | |
Unrealized foreign exchange loss (gain) | (30,530) |
| (52,452) | 108,623 | |
Recovery of future income taxes | -- | 25,000 | -- | (221,734) | |
Stock-based compensation | 6,874 | -- | 233,955 | -- | |
Changes in non-cash operating working capital | |||||
Accounts receivable | 16,609 | (10,912) | 62,928 | (36,071) | |
Due to/from related parties | (30,006) | 238,069 | (359,838) | 606,926 | |
Prepaid expenses and deposits | 76,129 | 101,967 | 19,289 | 47,313 | |
Accounts payable and accrued liabilities | (58,904) | 288,135 | (142,277) | 337,614 | |
| (1,072,404) | (701,148) | (3,567,080) | (2,599,933) | |
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Investing activities: | |||||
Mineral property acquisition costs | (22,485) | -- | (42,485) | (15,094) | |
Equipment additions | (5,245) | -- | (10,410) | (17,556) | |
Redemption of short term investments | 1,163,871 | (2,105,264) | 3,544,039 | (2,644,052) | |
Proceeds on disposition of prototype equipment | -- | -- | -- | 10,000 | |
| 1,136,141 | (2,105,264) | 3,491,144 | (2,666,702) | |
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Financing activities: | |||||
Common shares issued for cash | -- | 3,575,582 | 131,527 | 3,685,981 | |
Capital lease payments | (1,473) | (1,349) | (4,331) | (4,331) | |
| (1,473) | 3,574,233 | 127,196 | 3,681,650 | |
Decrease in cash and cash equivalents during the period | 62,264 | 767,821 | 51,260 | (1,584,985) | |
Cash, beginning of period | 165,877 | 151,571 | 176,881 | 2,504,377 | |
Cash, end of period | $ 228,141 | $ 919,392 | $ 228,141 | $ 919,392 | |
See accompanying notes to interim consolidated financial statements.
5
The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
EMGOLD MINING CORPORATION
(an exploration stage company)
Notes to Interim Consolidated Financial Statements
For the three and nine month periods ended September 30, 2008 and 2007
(expressed in United States dollars)
1.
Basis of presentation and operations:
The accompanying consolidated financial statements for the three-month and nine-month periods ended September 30, 2008 and 2007, have been prepared using Canadian generally accepted accounting principles (“Canadian GAAP”) and are unaudited, but in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The consolidated financial statements for the interim periods are not necessarily indicative of the results to be expected for the full year and have been prepared using Canadian GAAP applicable to a going concern.
These consolidated financial statements do not contain the detail or footnote disclosure concerning accounting policies and other matters, which would be included in full year financial statements, and therefore should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2007.
As at September 30, 2008, the Company has no source of operating cash flow and has an accumulated deficit of 42,495,289. In addition, the Company has working capital, which is defined as current assets less current liabilities, of $1,102,278 and has capitalized $984,933 in acquisition costs related to the Rozan, Stewart, Jazz and Idaho-Maryland mineral property interests. The Company had a loss of $1,393,538 for the three-month period ended September 30, 2008 and a loss of $3,740,106 for the nine-month period ended September 30, 2008. Operations for the three-month and nine-month periods ended September 30, 2008, have been funded primarily from the redemption of the Company’s short-term investments.
The Company is in the process of exploring its mineral property interests and has not yet determined whether its mineral property interests contain mineral reserves that are economically recoverable. The Company’s continuing operations and the underlying value and recoverability of the amounts shown for mineral property interests are entirely dependent upon the existence of economically recoverable mineral reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of its mineral property interests and on future profitable production or proceeds from the disposition of the mineral property interests or other interests.
The Company’s current financial position and forecast cash flow requirements for the next year to meet its mineral property requirements and corporate requirements indicate that there is substantial doubt about the ability of the Company to continue as a going concern.
The Company’s ability to continue operations is contingent on its ability to obtain additional financing. There is no assurance that management will be successful in achieving this objective.
These consolidated financial statements do not reflect adjustments to the amounts of assets and liabilities, the reported revenues and expenses and balance sheet classifications that would be necessary if the going concern assumption were not appropriate. Such adjustments could be material.
6
The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
EMGOLD MINING CORPORATION
(an exploration stage company)
Notes to Interim Consolidated Financial Statements
For the three and nine month periods ended September 30, 2008 and 2007
(expressed in United States dollars)
2.
Accounting policies:
The accounting policies followed by the Company are set out in note 2 to the audited consolidated financial statements for the year ended December 31, 2007, and have been consistently followed in the preparation of these financial statements except that the Company has adopted the following Canadian Institute of Chartered Accountants guidelines effective for the Company’s first interim period commencing January 1, 2008:
a) Capital disclosures
CICA handbook section 1535, “Capital Disclosures”, establishes standards for disclosing information about the Company’s capital and how it is managed including (i) an entity’s objectives, policies and processes for managing capital, (ii) quantitative data about what an entity considers capital, (iii) whether the entity is in compliance with capital requirements; and (iv) if it has not complied, the consequences of such non-compliance.
b) Financial instruments disclosures
The CICA issued handbook section 3862, “Financial Instruments – Disclosure” and section 3863 “Financial Instruments – Presentation” which are effective for fiscal years beginning on or after October 1, 2007. CICA handbook section 3862, “Financial Instruments – Disclosures”, requires entities to provide disclosure of quantitative and qualitative information in their financial statements. This information enables users to evaluate the significance of financial instruments on the Company’s operations and the nature and extent of risks arising from financial instruments to which the Company is exposed during the period and at the balance sheet date. The Company will be required to disclose the measurement bases used for its financial instruments as well as the criteria used to determine the classification for different types of instruments.
The purpose of CICA handbook section 3863 “Financial Instruments – Presentation” is to enhance the financial statement users’ understanding of the significance of financial instruments to the Company’s financial position, performance and cash flows.
As of September 30, 2008, the Company’s carrying values of cash, short-term investments, accounts receivable, and accounts payable approximate their fair market values.
Credit risk
Financial instruments that potentially subject the Company to credit risk consist of cash, short-term investments, and accounts receivable. The Company deposits cash and short-term investments with Canadian chartered banks with a credit rating of R-1 High or equivalent.
7
The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
EMGOLD MINING CORPORATION
(an exploration stage company)
Notes to Interim Consolidated Financial Statements
For the three and nine month periods ended September 30, 2008 and 2007
(expressed in United States dollars)
2.
New accounting pronouncements (continued):
Liquidity risk
The Company manages liquidity risk by maintaining sufficient cash and short-term investment balances. Liquidity requirements are managed based on expected cash flow to ensure there is sufficient capital to meet short-term obligations.
Market risks
The significant market risks to which the Company is exposed include commodity price risk, interest rate risk and foreign exchange risk.
·
Commodity price risk
The Company’s ability to raise capital to fund exploration or development activities is subject to risk associated with fluctuations in the market price of gold.
·
Interest rate risk
Included in the loss for the period in these financial statements is interest income on Canadian dollar cash and short-term investments. A fluctuation in average interest rates throughout the year of 10 basis points (0.1% increase or decrease), would have only a nominal impact on operations of the Company.
·
Foreign exchange risk
As at September 30, 2008, most of the Company’s cash and short-term investments were held in Canadian dollars. The Company’s functional and reporting currency is the United States dollar. As a result, the Company is exposed to foreign currency risk from fluctuations in the Canadian dollar relative to the United States dollar.
c) General standards on financial statement presentation
CICA handbook section 1400, “General Standards on Financial Statement Presentation”, has been amended to include requirements to assess and disclose a Company’s ability to continue as a going concern. The changes were effective for interim and annual financial statements beginning January 1, 2008.
d)International Financial Reporting Standards ("IFRS")
In 2006, the Canadian Accounting Standards Board ("AcSB") published a new strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected five year transitional period. In February 2008, the AcSB announced that 2011 is the changeover date for publicly-listed companies to use IFRS, replacing Canadian GAAP. The date is for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The transition date of January 1, 2011 will require the restatement for comparative purposes of amounts reported by the Company for the year ended December 31, 2010. While the Company has begun assessing the adoption of IFRS for 2011, the financial reporting impact of the transition to IFRS cannot be estimated at this time.
8
The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
EMGOLD MINING CORPORATION
(an exploration stage company)
Notes to Interim Consolidated Financial Statements
For the three and nine month periods ended September 30, 2008 and 2007
(expressed in United States dollars)
3.
Mineral property interests:
The acquisition costs of the Company’s interests in mineral properties owned or under option, consist of the following:
| September 30, 2008 | December 31, |
Idaho-Maryland Property, California | $ 589,276 | $ 589,276 |
Porph Claims, British Columbia | 6,910 | 6,910 |
Rozan Gold Property, British Columbia | 120,821 | 120,821 |
Jazz Property, British Columbia | 75,169 | 55,169 |
Stewart Property, British Columbia | 192,757 | 170,272 |
| $ 984,933 | $ 942,448 |
Idaho-Maryland Property, California
The term of the initial lease on the Idaho-Maryland property, as amended in fiscal 2002 was for a period of five years, commencing on September 1, 2002, and ending on May 31, 2007. The owners granted the Company the exclusive right and option to purchase all of the leased property. The property is subject to a 3% Net Smelter Royalty (“NSR”) from production if the property is still being leased. Any royalty payments made prior to exercising the purchase option may be deducted from the purchase price. Lease payments of $25,500 were payable quarterly until February 1, 2007, as amended. In February 2007, for a one-time payment of $75,000 the Company negotiated an extension to the initial amended lease, whereby the exercise date was extended from May 31, 2007 to December 31, 2008. The Company agreed to a quarterly lease payment of $75,000 beginning on May 1, 2007, and continuing for the term of the revised lease. All other conditions of the original agreement, including the option purchase price and NSR remain unchanged.
Provided that payments are kept current, the Company may purchase the property at any time. The purchase price for 2008 is $5,194,127, and is increased by 3% each lease-year.
Rozan Gold Property, British Columbia
In 2000, the Company entered into an option agreement to acquire the rights to the Rozan Gold Property, a prospect located south of the community of Nelson in the Red Mountain area of south-eastern British Columbia. The Company earned a 100% interest in the property by making stepped payments totalling Cdn$100,000 and issuing 200,000 common shares. The property is subject to a 3.0% NSR. The Company has the right to purchase 66⅔% of the royalty for the sum of Cdn$1,000,000 and has the first right of refusal to purchase the remaining 33⅓%.
Jazz Property, British Columbia
In April 2004, the Company entered into an option agreement to acquire a 100% interest in the Jazz Property consisting of 24 mineral claims located in the Nelson Mining Division near Nelson, British Columbia. Under the terms of the agreement, the Company has agreed to make stepped cash payments totalling $215,000 ($65,000 paid to date) to the optioner over a ten-year period. Upon completion of the above cash payments, the Company will earn the exclusive right and option to earn 100% interest in the property, subject only to the payment to the optioner of a 3.0% NSR and the completion of Cdn$75,000 in
9
The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
EMGOLD MINING CORPORATION
(an exploration stage company)
Notes to Interim Consolidated Financial Statements
For the three and nine month periods ended September 30, 2008 and 2007
(expressed in United States dollars)
exploration work on the property within two years from the date of the agreement (completed). The Company will have the right to purchase 66⅔% of the NSR from the optioner for $1,000,000 at any time up to and including the commencement of commercial production.
Stewart Property, British Columbia
Pursuant to an option agreement entered into in 2001 and amended in 2006, the Company acquired the rights to the Stewart mineral claims, a prospect located close to Nelson in south eastern British Columbia. The Company earned a 100% interest in the property by making payments totalling Cdn$104,000 (paid) and issuing 260,000 common shares (issued). The Company is vested with 100% right, title and interest in and to the property, subject only to a 3% NSR payable to the optioners. The Company has the right to purchase 66⅔% of the royalty for the sum of Cdn$1,000,000 and has the first right of refusal to purchase the remaining 33⅓%.
Porph Claims, British Columbia
The Company has staked six claims contiguous to the Stewart Property located near Nelson in south-eastern British Columbia.
4.
Capital lease obligation:
The Company leases a vehicle under a capital lease which expires in 2012 and bears simple interest at a rate of 8.69%. At September 30, 2008, future minimum lease payments under capital leases are $27,173, including $8,364 of anticipated interest payments, payable monthly. The current portion is $6,242.
5.
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| Cost | Accumulated Amortization | Net Book Value |
Plant and field equipment | $ 249,472 | $ 215,565 | $ 33,907 |
Office furniture and equipment | 81,451 | 52,803 | 28,648 |
Research equipment | 163,466 | 127,773 | 35,693 |
Computer hardware and software | 128,237 | 115,120 | 13,117 |
Leasehold improvements | 127,324 | 126,388 | 936 |
Vehicle – held under capital lease | 38,833 | 17,475 | 21,358 |
Total | $ 788,783 | $ 655,124 | $ 133,659 |
| Cost | Accumulated Amortization | Net Book Value |
Plant and field equipment | $ 249,472 | $ 146,719 | $ 102,753 |
Office furniture and equipment | 77,018 | 41,675 | 35,343 |
Research equipment | 163,466 | 78,732 | 84,734 |
Computer hardware and software | 122,260 | 102,721 | 19,539 |
Leasehold improvements | 127,324 | 122,311 | 5,013 |
Vehicle – held under capital lease | 38,833 | 11,650 | 27,183 |
Total | $ 778,373 | $ 503,808 | $ 274,565 |
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10
The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
EMGOLD MINING CORPORATION
(an exploration stage company)
Notes to Interim Consolidated Financial Statements
For the three and nine month periods ended September 30, 2008 and 2007
(expressed in United States dollars)
Research equipment is being used for research and development of the Ceramext® Process. During the three-month period ended September 30, 2008, the Company accelerated depreciation on equipment related to the Ceramext® Process resulting in an additional depreciation charge of $57,138.
6.
Share capital:
Authorized
Unlimited number of common shares without par value.
Unlimited number of first preference shares without par value.
Preference shares
Equity portion of Class A Preference Shares | Number of Shares | Amount |
Balance, December 31, 2007 | 3,948,428 | $ 90,902 |
Balance, September 30, 2008 | 3,948,428 | 90,902 |
Debt Portion of Class A Preference Shares | September 30, 2008 | December 31, 2007 |
Balance, beginning of period | $ 750,624 | $ 626,724 |
Accretion of debt | 10,105 | 12,822 |
Foreign exchange (gain) / loss on debt | (52,936) | 111,078 |
| (42,831) | 123,900 |
Balance, end of period | $ 707,793 | $ 750,624 |
The Class A Convertible Preference Shares have no fixed term, rank in priority to the Company’s common shares and are entitled to fixed cumulative preferential dividends at a rate of 7% per annum. The shares are redeemable by the Company at any time after 30 days written notice at a redemption price of Cdn$0.20 per share, but are redeemable by the holder only out of funds available that are not, in the Company’s opinion, otherwise required for the development of the Company’s mineral property interests or to maintain a minimum of Cdn$2,000,000 in working capital.
The Class A Convertible Preference Shares are convertible, at the option of the holder, into common shares at any time at a ratio of one common share for every four Class A Convertible Preference Shares. The Preference Shares also have attached a gold redemption feature by which holders may elect at the time of any proposed redemption to receive gold valued at $300 per ounce in lieu of cash, provided the Company has on hand at the time, gold having an aggregate value of not less than the redemption amount.
The value of the convertible preference shares was split into a debt component and an equity component. This resulted in $90,902 being included in equity. The debt portion of the preference shares fluctuates due to both accretion and fluctuations in the Canadian to U.S. dollar exchange rate. At September 30, 2008, $303,511 (December 31, 2007 - $284,146) has been accrued in due to related parties in relation to the 7% fixed cumulative preferential dividends. Dividends payable on the preference shares are recorded when they are declared by the Board of Directors, but will remain unpaid until the Company has the resources to do so. The debt portion of the convertible preference shares is being accreted over ten years from inception. This period is based on management’s best estimate of the life of the convertible preference shares, and is reassessed annually.
Stock options:
The Company has a rolling stock option plan for its directors and employees to acquire common shares of the Company at a price determined by the fair market value of the shares at the date of grant. The
11
The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
EMGOLD MINING CORPORATION
(an exploration stage company)
Notes to Interim Consolidated Financial Statements
For the three and nine month periods ended September 30, 2008 and 2007
(expressed in United States dollars)
maximum aggregate number of common shares reserved for issuance pursuant to the plan is 10% of the issued and outstanding common shares, or 15,751,964 common shares. During the nine-month period ended September 30, 2008, 1,083,000 stock options expired with exercise prices between $0.15 and $1.00 and 82,500 stock options were exercised by an officer of the Company with an exercise price of $0.15. At September 30, 2008, 14,552,500 stock options were outstanding, exercisable for periods up to ten years.
On May 12, 2008, the Company granted 1,900,000 stock options to employees at an exercise price of $0.20, with an expiry date of May 12, 2013. The fair value of the stock options granted was estimated on the date of grant using a Black-Scholes option-pricing model with weighted average assumptions as follows: risk-free interest rate – 3.60%; expected life– 4.1 years; expected volatility – 78%; and a weighted average fair value per option granted of Cdn$0.12. The options vested immediately under the Company’s 2005 10% rolling Stock Option Plan.
On May 12, 2008, the Company also granted 200,000 stock options to a consultant at an exercise price of $0.20, with an expiry date of May 12, 2013. The fair value of the stock option granted was estimated on the date of grant using a Black-Scholes option-pricing model with weighted average assumptions as follows: risk-free interest rate – 3.60%; expected life– 4.1 years; expected volatility – 78%; and a weighted average fair value per option granted of $0.12. The options vest straight-line over a 12 month-period.
The following table summarizes information about the stock options outstanding at September 30, 2008:
| Number Outstanding and Exercisable at September 30, 2008 | Weighted Average Remaining Contractual Life |
Cdn$0.25 | 170,000 | 0.65 years |
Cdn$0.10 | 390,000 | 3.03 years |
Cdn$1.00 | 2,210,000 | 5.14 years |
Cdn$0.90 | 1,340,000 | 5.78 years |
Cdn$0.36 | 100,000 | 1.74 years |
Cdn$0.29 | 690,000 | 3.15 years |
Cdn$0.15 | 7,552,500 | 4.20 years |
Cdn$0.20 | 2,100,000 | 4.62 years |
| 14,552,500 | 4.41 years |
12
The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
EMGOLD MINING CORPORATION
(an exploration stage company)
Notes to Interim Consolidated Financial Statements
For the three and nine month periods ended September 30, 2008 and 2007
(expressed in United States dollars)
Share purchase warrants
As at September 30, 2008, the following share purchase warrants were outstanding:
Number of Warrants | Exercise Price | Expiry Date |
14,344,105 | Cdn$0.40 | December 6, 2008 |
1,119,000 | Cdn$0.50 | December 6, 2008 |
179,040 | Cdn$0.26 | December 6, 2008 |
1,147,529 | Cdn$0.26 | December 6, 2008 |
89,520* | Cdn$0.50 | December 6, 2008 |
1,147,529* | Cdn$0.40 | December 6, 2008 |
54,519,569 | Cdn$0.15 | September 27, 2009 |
3,393,323 | Cdn$0.11 | March 27, 2009 |
3,393,323* | Cdn$0.15 | March 27, 2009 |
7,358,000 | Cdn$0.15 | October 5, 2009 |
416,080 | Cdn$0.11 | April 5, 2009 |
416,080* | Cdn$0.15 | April 5, 2009 |
11,010,167 | Cdn$0.15 | October 12, 2009 |
622,400 | Cdn$0.11 | April 12, 2009 |
622,400* | Cdn$0.15 | April 12, 2009 |
99,778,065 | Weighted Average Exercise Price: Cdn$0.19 |
|
*Reserved for underlying warrants upon the exercise of broker and finder’s warrants.
The following table summarizes warrant transactions for the year ended December 31, 2007 and the nine-month period ended September 30, 2008.
|
| Weighted Average Exercise Price (Cdn$) |
Balance, December 31, 2006 | 37,099,823 | $0.56 |
Cancelled | (18,360,000) | $0.70 |
Granted | 82,693,842 | $0.15 |
Balance, December 31, 2007 | 101,433,665 | $0.20 |
Exercised | (942,500) | $0.12 |
Expired | (713,100) | $1.00 |
Balance, September 30, 2008 | 99,778,065 | $0.19 |
During the nine months ended September 30, 2008, 392,500 warrants were exercised at an exercise price of $0.15 and 550,000 agent’s warrants were exercised at a price of $0.11. 713,100 warrants with an exercise price of $1.00 expired.
13
The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
EMGOLD MINING CORPORATION
(an exploration stage company)
Notes to Interim Consolidated Financial Statements
For the three and nine month periods ended September 30, 2008 and 2007
(expressed in United States dollars)
7.
Related party transactions and balances
Related party balances are non-interest bearing and are due on demand, with no fixed terms of repayment, with the exception of preference shares (note 6).
Balances receivable from (d): | September 30, 2008 | December 31, 2007 |
LMC Management Services Ltd. (a) | $ 387,927 | $ 100,493 |
Provision for doubtful accounts | $ (250,000) | -- |
Net balances receivable from (d) | 137,927 | 100,493 |
Balances payable to: |
| |
Directors, officers and employees | $ 313,965 | $ 386,369 |
Related party transactions in these interim consolidated financial statements are as follows:
(a)
During the nine months ended September 30, 2008, $392,978 (2007 - $603,516) was incurred in management, administrative, geological and other services provided by LMC Management Services Ltd. (“LMC”), a private company held jointly by the Company and other public companies, to provide services on a full cost recovery basis to the various public entities currently sharing certain personnel costs, office space, and overhead with the Company. Currently, the Company has a 25% interest in LMC. Three months of estimated working capital is required to be on deposit with LMC under the terms of the services agreement. There is no difference between the cost of $1 and equity value, as LMC does not retain any profits in connection with the services it provides. At September 30, 2008, two companies obtaining management services from LMC, ValGold Resources Ltd. (VAL) and Cream Minerals Inc. (CMA) are currently in arrears to the maximu m allowable period under the terms of the agreement with LMC. VAL and CMA are also related to the Company through common directors. The Company has advanced cash in excess of its estimated working capital under the agreement in support of VAL and CMA. As amounts have been outstanding longer than three months, the entire receivable has been reclassified as long term. A provision for doubtful accounts has also been recorded against this balance in the amount of $250,000. The provision has been established given the uncertainty of recovering the entire balance as VAL and CMA may have difficulty raising additional capital, disposing of mineral property interests, and liquidating investment positions in the current economic environment. If VAL and CMA are unable to pay costs of shared employees and services, the Company would have to outsource certain services currently performed by LMC employees or absorb additional salaries, benefits and overhead. The recoverability of the ba lance will continue to be assessed over the next few months.
(b)
Consulting fees of $65,326 (2007 – $39,324) were paid directly to Kent Avenue Consulting Ltd., a private company controlled by a director, Sargent H. Berner. Consulting fees of $57,973 (2007 –$Nil) were also paid directly to 759924 Ontario Ltd., a private company controlled by a director, Kenneth Yurichuk.
(c)
Lang Mining Corporation (“Lang Mining”) is a private company controlled by Frank A. Lang, a significant shareholder of the Company. Mr. Lang and Lang Mining Corporation are the holders of preference shares, which are described in note 6.
(d)
Related party balances are non-interest bearing and are due on demand, with no fixed terms of repayment, except for preference shares, which are described in note 6.
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The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
EMGOLD MINING CORPORATION
(an exploration stage company)
Notes to Interim Consolidated Financial Statements
For the three and nine month periods ended September 30, 2008 and 2007
(expressed in United States dollars)
8.
Exploration expenses:
| Three months ended September 30, | Nine months ended September 30, | ||
| 2008 | 2007 | 2008 | 2007 |
Idaho-Maryland Mine, California |
|
|
|
|
Exploration costs |
|
|
|
|
Assays and analysis | $ -- | $ 2,406 | $ -- | $ 2,465 |
Community relations | 23,990 | 20,548 | 63,232 | 46,019 |
Geological and geochemical | 148,963 | 115,663 | 436,427 | 366,853 |
Land lease and taxes | 75,753 | 75,000 | 228,783 | 251,844 |
Mine planning | 336,925 | 225,121 | 796,712 | 916,623 |
Site activities | 38,772 | 68,467 | 200,496 | 190,236 |
Stock-based compensation | -- | -- | 59,115 | -- |
Transportation | -- | 2,464 | 6,191 | 4,470 |
Incurred during the period | 624,403 | 509,669 | 1,790,956 | 1,778,510 |
Rozan Property, British Columbia | ||||
Exploration costs | ||||
Assays and analysis | -- | 179 | -- | 179 |
Drilling | -- | 1,629 | -- | 1,629 |
Geological and geochemical | -- | 4,974 | 22,678 | 5,834 |
Site activities | -- | 1,368 | 95 | 1,619 |
Transportation | -- | 258 | -- | 258 |
Assistance and recoveries | -- | -- | 900 | (294) |
Incurred during the period | -- | 8,408 | 23,673 | 9,225 |
Stewart Property, British Columbia | ||||
Exploration costs | ||||
Assays and analysis | -- | 20,343 | -- | 20,343 |
Drilling | -- | 262,044 | -- | 262,044 |
Geological and geochemical | -- | 35,833 | 30,029 | 35,870 |
Site activities | -- | 5,349 | 158 | 5,512 |
Transportation | -- | 26,082 | -- | 26,082 |
Assistance and recoveries | -- | -- | 11,079 | (12,465) |
Incurred during the period | -- | 349,651 | 41,266 | 337,386 |
Jazz Property, British Columbia | ||||
Exploration costs | ||||
Geological and geochemical | -- | 9,265 | 479 | 9,534 |
Site activities | -- | 81 | 160 | 125 |
Assistance and recoveries | -- | -- | -- | (307) |
Incurred during the period | -- | 9,346 | 639 | 9,352 |
Exploration costs incurred during the period |
624,403 |
877,074 |
1,856,534 |
2,134,473 |
15
The Company’s independent auditor has not performed a review of these interim consolidated financial statements.
EMGOLD MINING CORPORATION
(an exploration stage company)
Notes to Interim Consolidated Financial Statements
For the three and nine month periods ended September 30, 2008 and 2007
(expressed in United States dollars)
9.
Ceramext® expenses:
| Three months ended | Nine months ended | ||
| 2008 | 2007 | 2008 | 2007 |
Ceramext®expenses |
|
|
|
|
Amortization of equipment |
76,230 |
18,715 |
116,812 |
60,524 |
Ceramext®technology royalties | 40,000 | 20,000 | 120,000 | 60,000 |
Consulting and legal fees | 7,922 | 3,373 | 61,982 | 4,780 |
Engineering salaries | -- | 115,647 | -- | 286,582 |
Office and administration | -- | -- | 23,822 | -- |
Site costs | -- | 21,991 | -- | 86,792 |
Other | -- | 262 | 501 | 8,100 |
Incurred during the period | $ 124,152 | $ 179,988 | $ 323,117 | $ 506,778 |
16
