Emgold Mining Corporation (An Exploration Stage Company) |
| Unaudited Condensed Interim Consolidated Financial Statements |
| For the Nine and Three Months Ended 30 September 2016 |
| Stated in US Dollars |
Notice of No Auditor Review of Condensed Interim Consolidated Financial Statements |
| |
| The accompanying unaudited condensed interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company’s management. |
| |
The Company’s independent auditor has not performed a review of
these condensed interim consolidated financial statements. |
Table of Contents
| Management’s Responsibility | i |
| Condensed Interim Consolidated Statement of Financial Position | 1 |
| Consolidated Interim Consolidated Statement of Comprehensive Loss | 2 |
| Condensed Interim Consolidated Statement of Changes in Equity | 3 |
| Condensed Interim Consolidated Statement of Cash Flows | 4 |
| Notes to the Condensed Interim Consolidated Financial Statements | |
| 1) Nature of operations and going concern | 5 |
| 2) Basis of preparation – Statement of Compliance | 5 |
| 3) Summary of significant accounting policies | 6 |
| 4) Financial instruments and risk management | 6 |
| 5) Equipment | 8 |
| 6) Assets held for sale | 8 |
| 7) Exploration and evaluation assets | 9 |
| 8) Related party transactions | 11 |
| 9) Share capital | 11 |
| 10) Capital disclosures | 13 |
| 11) Segmented disclosure | 14 |
Management’s Responsibility
To the Shareholders of Emgold Mining Corporation:
Management is responsible for the preparation and presentation of the accompanying unaudited condensed interim consolidated financial statements, including responsibility for significant accounting judgments and estimates in accordance with International Financial Reporting Standards. This responsibility includes selecting appropriate accounting principles and methods, and making decisions affecting the measurement of transactions in which objective judgment is required.
In discharging its responsibilities for the integrity and fairness of the unaudited condensed interim consolidated financial statements, management designs and maintains the necessary accounting systems and related internal controls to provide reasonable assurance that transactions are authorized, assets are safeguarded and financial records are properly maintained to provide reliable information for the preparation of financial statements.
The Board of Directors and the Audit Committee are composed primarily of Directors who are neither management nor employees of the Company. The Board is responsible for overseeing management in the performance of its financial reporting responsibilities, and for approving the financial information presented. The Board fulfils these responsibilities by reviewing the financial information prepared by management and discussing relevant matters with management and the external auditors. The Audit Committee has the responsibility of meeting with management, and the external auditors to discuss the internal controls over the financial reporting process, auditing matters and financial reporting issues. The Board is also responsible for recommending the appointment of the Company’s external auditors.
We draw attention to Note 1 in the condensed interim consolidated financial statements which indicates the existence of a material uncertainty that may cast substantial doubt on the Company’s ability to continue as a going concern.
The Company’s independent auditor has not performed a review of these unaudited condensed interim consolidated financial statements.
23 November 2016
| The consolidated financial statements were approved by the Board of Directors on 23 November 2016 and were signed on its behalf by: |
| “David Watkinson” | | “Grant T. Smith” |
| David Watkinson, President & CEO | | Grant T. Smith, CFO |
| Emgold Mining Corporation | Statement 1 |
US Dollars (Unaudited) | |
Condensed Interim Consolidated Statement of Financial Position
| | | | | | As at | | |
| | Note | | | | 30 September 2016 | | 31 December 2015 |
| Assets | | | | | | | |
| Current Assets | | | | | | | |
| Cash and cash equivalents | | | | $ | 106,473 | $ | 3,226 |
| Amounts receivable | | | | | 3,837 | | 905 |
| Prepaid amounts and deposits | | | | | 5,708 | | 6,056 |
| | | | | | 116,018 | | 10,187 |
| Non-current Assets | | | | | | | |
| Reclamation bonds | | | | | 9,531 | | 9,032 |
| Equipment | (5) | | | | 152 | | 610 |
| Assets held for sale | (6) | | | | 154,452 | | 490,508 |
| Exploration and evaluation assets | (7) | | | | 619,113 | | 619,113 |
| | | | | | 783,248 | | 1,119,263 |
| | | | | $ | 899,266 | $ | 1,129,450 |
| Liabilities | | | | | | | |
| Current Liabilities | | | | | | | |
| Accounts payable and accrued liabilities | | | | $ | 139,643 | $ | 147,593 |
| Due to related parties | (8) | | | | 691,123 | | 793,507 |
| | | | | | 830,766 | | 941,100 |
| Equity(statement 3) | | | | | | | |
| Share capital | (9) | | | | 44,035,360 | | 43,975,360 |
| Warrants – contributed surplus | | | | | 686,349 | | 686,349 |
| Options – contributed surplus | | | | | 7,062,781 | | 7,062,781 |
| Deficit | | | | | (51,715,990) | | (51,536,140) |
| | | | | | 68,500 | | 188,350 |
| | | | | $ | 899,266 | $ | 1,129,450 |
| Nature of Operations and Going Concern | (1) | | |
| Basis of Preparation - Statement of Compliance | (2) | | |
| Capital disclosure | (10) | | |
| Segmented disclosure | (11) | | |
| The condensed interim consolidated financial statements were approved by the Board of Directors on 23 November 2016 and were signed on its behalf by: |
| “David Watkinson” | | “Andrew MacRitchie” |
| David Watkinson, Director | | Andrew MacRitchie, Director |
--The accompanying notes form an integral part of the condensed interim consolidated financial statements--
| Emgold Mining Corporation | Statement 2 |
US Dollars (Unaudited) | |
Consolidated Interim Consolidated Statement of Comprehensive Loss
| | | | Nine months ended | | Nine months ended | | Three months ended | | Three months ended |
| | Note | | 30 September 2016 | | 30 September 2015 | | 30 September 2016 | | 30 September 2015 |
| Continuing Operations | | | | | | | | | |
| Expenses | | | | | | | | | |
| Exploration and Evaluation | | | | | | | | | |
| Resource property expense | (7) | $ | 31,782 | $ | 15,958 | $ | 14,877 | $ | 10,757 |
| | | | | | | | | | |
| General and Administrative | | | | | | | | | |
| Management and consulting | | | 88,332 | | 94,378 | | 30,574 | | 31,128 |
| Professional fees | | | 26,303 | | 25,464 | | 15,102 | | 10,112 |
| Listing and filing fees | | | 13,772 | | 12,409 | | 2,568 | | 213 |
| Office and administration | | | 10,752 | | 11,147 | | 7,424 | | 3,026 |
| Insurance | | | 6,049 | | 5,048 | | 1,297 | | 1,009 |
| Shareholder communication | | | 4,642 | | 2,861 | | 441 | | 268 |
| Banking costs | | | 1,547 | | 990 | | 916 | | 584 |
| Amortization | (5) | | 458 | | 858 | | 153 | | 199 |
| | | | 151,855 | | 153,155 | | 58,475 | | 46,539 |
| Net Loss and Comprehensive Loss Before Other Items | | | 183,637 | | 169,113 | | 73,352 | | 57,296 |
| Other Loss (Income) | | | | | | | | | |
| Foreign exchange loss (gain) | | | 11,342 | | (17,007) | | (528) | | (8,759) |
| Loss on sale of property | | | 16,351 | | - | | - | | - |
| (Gain) on sale of equipment | | | - | | (3,500) | | - | | 14 |
| Write-off of AP | | | (31,480) | | (725) | | - | | - |
| | | | (3,787) | | (21,232) | | (528) | | (8,745) |
| Net Loss and Comprehensive Loss | | $ | 179,850 | $ | 147,881 | $ | 72,824 | $ | 48,551 |
| Weighted Average Number of Shares Outstanding | | | 78,882,515 | | 78,107,141 | | 79,004,017 | | 78,295,684 |
| Basic and Diluted Loss per Common Share | | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 |
--The accompanying notes form an integral part of the condensed interim consolidated financial statements--
| Emgold Mining Corporation | Statement 3 |
US Dollars (Unaudited) | |
Condensed Interim Consolidated Statement of Changes in Equity
| | | Shares | | Amount | Warrants | | Amount | Options | | Amount | | Deficit | | Shareholders’ Equity |
| Balance at 01 January 2015 | | 77,823,462 | $ | 43,935,360 | 8,163,575 | $ | 686,349 | 6,966,665 | $ | 7,062,781 | $ | (51,061,187) | $ | 623,303 |
| Options expired | | - | | - | - | | - | (466,665) | | - | | - | | - |
| Warrants expired | | - | | - | (2,850,000) | | - | - | | - | | - | | - |
| Comprehensive loss for the period | | - | | - | - | | - | - | | - | | (48,889) | | (48,889) |
| Balance at 31 March 2015 | | 77,823,462 | $ | 43,935,360 | 5,313,575 | $ | 686,349 | 6,500,000 | $ | 7,062,781 | $ | (51,110,076) | $ | 574,414 |
| Shares issued for properties | | 472,222 | | 40,000 | - | | - | - | | - | | - | | 40,000 |
| Comprehensive loss for the period | | - | | - | - | | - | - | | - | | (50,441) | | (50,441) |
| Balance at 30 June 2015 | | 78,295,684 | $ | 43,975,360 | 5,313,575 | $ | 686,349 | 6,500,000 | $ | 7,062,781 | $ | (51,160,517) | $ | 563,973 |
| Comprehensive loss for the period | | - | | - | - | | - | - | | - | | (48,551) | | (48,551) |
| Balance at 30 September 2015 | | 78,295,684 | $ | 43,975,360 | 5,313,575 | $ | 686,349 | 6,500,000 | $ | 7,062,781 | $ | (51,209,068) | $ | 515,422 |
| Options expired | | - | | - | - | | - | (1,500,000) | | - | | - | | - |
| Warrants expired | | - | | - | (2,813,575) | | - | - | | - | | - | | - |
| Comprehensive loss for the period | | - | | - | - | | - | - | | - | | (327,072) | | (327,072) |
| Balance at 31 December 2015 | | 78,295,684 | $ | 43,975,360 | 2,500,000 | $ | 686,349 | 5,000,000 | $ | 7,062,781 | $ | (51,536,140) | $ | 188,350 |
| Balance at 01 January 2016 | | 78,295,684 | $ | 43,975,360 | 2,500,000 | $ | 686,349 | 5,000,000 | $ | 7,062,781 | $ | (51,536,140) | $ | 188,350 |
| Shares issued for properties | | 708,333 | | 60,000 | - | | - | - | | - | | - | | 60,000 |
| Comprehensive loss for the period | | - | | - | - | | - | - | | - | | (88,899) | | (88,899) |
| Balance at 31 March 2016 | | 79,004,017 | $ | 44,035,360 | 2,500,000 | $ | 686,349 | 5,000,000 | $ | 7,062,781 | $ | (51,625,039) | $ | 159,451 |
| Comprehensive loss for the period | | - | | - | - | | - | - | | - | | (18,127) | | (18,127) |
| Balance at 30 June 2016 | | 79,004,017 | $ | 44,035,360 | 2,500,000 | $ | 686,349 | 5,000,000 | $ | 7,062,781 | $ | (51,643,166) | $ | 141,324 |
| Comprehensive loss for the period | | - | | - | - | | - | - | | - | | (72,824) | | (72,824) |
| Balance at 30 September 2016 | | 79,004,017 | $ | 44,035,360 | 2,500,000 | $ | 686,349 | 5,000,000 | $ | 7,062,781 | $ | (51,715,990) | $ | 68,500 |
--The accompanying notes form an integral part of the condensed interim consolidated financial statements--
| Emgold Mining Corporation | Statement 4 |
US Dollars (Unaudited) | |
Condensed Interim Consolidated Statement of Cash Flows
| | | | Nine months ended | | Nine months ended | | Three months ended | | Three months ended |
| | | | 30 September 2016 | | 30 September 2015 | | 30 September 2016 | | 30 September 2015 |
| Operating Activities | | | | | | | | | |
| Loss for the Period | | $ | (179,850) | $ | (147,881) | $ | (72,824) | $ | (48,551) |
| Items not Affecting Cash | | | | | | | | | |
| Amortization | | | 458 | | 858 | | 153 | | 199 |
| Effect of currency translation | | | (713) | | 1,443 | | (136) | | 689 |
| (Gain) loss on sale of equipment | | | 16,351 | | (3,500) | | - | | - |
| (Gain) loss on settlement of accounts payable | | | (31,480) | | - | | - | | - |
| | | | (195,234) | | (149,080) | | (72,807) | | (47,663) |
| Net Change in Non-cash Working Capital | | | | | | | | | |
| Accounts receivable | | | (2,932) | | (666) | | (1,571) | | (178) |
| Prepaid expenses and deposits | | | 348 | | (86) | | 945 | | 694 |
| Accounts payable and accrued liabilities | | | 23,744 | | (11,023) | | 9,082 | | (17,894) |
| Due to related parties | | | (102,384) | | 127,668 | | (27,267) | | 62,826 |
| | | | (81,224) | | 115,893 | | (18,811) | | 45,448 |
| | | | (276,458) | | (33,187) | | (91,618) | | (2,125) |
| INVESTING ACTIVITIES | | | | | | | | | |
| Resource property royalty payments received | | | 60,000 | | 10,000 | | 25,000 | | - |
| Proceeds from sale of property | | | 350,000 | | - | | - | | - |
| Proceeds from sale of equipment | | | - | | 3,500 | | - | | - |
| Cash expenses for property sale | | | (30,295) | | - | | - | | - |
| | | | 379,705 | | 13,500 | | 25,000 | | - |
| Net Increase (Decrease) in Cash | | | 103,247 | | (19,687) | | (66,618) | | (2,125) |
| Cash position – beginning of period | | | 3,226 | | 26,636 | | 173,091 | | 9,164 |
| Cash Position – End of Period | | $ | 106,473 | $ | 6,949 | $ | 106,473 | $ | 6,949 |
| Schedule of Non-cash Investing and Financing Transactions | | | | | | | | | |
| Shares issued for mineral property acquisition | | $ | 60,000 | $ | 40,000 | $ | - | $ | 40,000 |
--The accompanying notes form an integral part of the condensed interim consolidated financial statements--
| Emgold Mining Corporation | |
US Dollars (Unaudited) | |
Notes to the Condensed Interim Consolidated Financial Statements
| 1) | Nature of operations and going concern |
Emgold Mining Corporation (“the Company” or “Emgold”) is incorporated under the British Columbia Corporations Act and the principle place of business is located at 1010 - 789 West Pender Street, Vancouver, British Columbia, V6C 1H2. 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 shares are traded on the TSX Venture Exchange (“TSX-V”) and the OTC.
These condensed interim consolidated financial statements (“Financial Statements”) have been prepared on the basis of the accounting principles applicable to a going concern, which assumes the Company’s ability to continue in operation for the foreseeable future and to realize its assets and discharge its liabilities in the normal course of operations.
There are several adverse conditions that cast substantial doubt upon the soundness of this assumption. The Company has negative working capital, has incurred operating losses since inception, has no source of significant revenue at this time, is unable to self-finance operations, and has significant on-going cash needs to meet its overhead requirements and maintain its exploration and evaluation assets. Further, the business of mining and exploration involves a high degree of risk and there can be no assurance that current or future exploration programs will result in profitable mining operations. The recoverability of exploration and evaluation assets is dependent upon several factors, which include the discovery of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the development of these properties, and future profitable production or proceeds from disposition of mineral properties.
For the Company to continue to operate as a going concern it must obtain additional financing; there can be no assurance that this will continue in the future.
If the going concern assumption were not appropriate for these financial statements then adjustments would be necessary to the carrying value of assets and liabilities, the reported expenses and the statement of financial position classifications used, and such adjustments could be material.
| Rounded (‘000’s) | | 30 September 2016 | | 31 December 2015 |
| Working capital | $ | (715,000) | $ | (931,000) |
| Accumulated deficit | $ | (51,716,000) | $ | (51,536,000) |
| 2) | Basis of preparation – Statement of Compliance |
These Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting. The Financial Statements have been prepared on a historical cost basis, except for financial instruments classified as financial instruments at fair value through profit and loss, which are stated at their fair value. In addition, these Financial Statements have been prepared using the accrual basis of accounting except for cash flow information.
Since the condensed interim consolidated financial statements do not include all requirements in IAS1, “Presentation of Financial Statement” (IAS1), they should be read in conjunction with the Company’s audited annual financial statements for the year ended 31 December 2015.
The preparation of these financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company’s accounting policies. The judgements, estimates and assumptions made by management affect the application of policies and reported amounts of assets and liabilities, profit and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
| Emgold Mining Corporation |
US Dollars (Unaudited) Notes to the Condensed Interim Consolidated Financial Statements |
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods. Critical estimates and judgement are disclosed more fully in the Company’s audited annual consolidated financial statements for the year ended 31 December 2015.
| 3) | Summary of significant accounting policies |
The accounting policies and methods of computation followed in preparing these Financial Statements are the same as those followed in preparing the most recent audited annual financial statements. For a summary of significant accounting policies, please refer to the Company’s audited annual financial statements for the year ended 31 December 2015.
| 4) | Financial instruments and risk management |
| a) | Financial instrument classification and measurement |
Financial instruments of the Company carried on the Consolidated Statement of Financial Position are carried at amortized cost with the exception of cash and cash equivalents, which is carried at fair value. There are no significant differences between the carrying value of financial instruments and their estimated fair values as at 30 September 2016 and 31 December 2015.
The Company classifies the fair value of these transactions according to the following hierarchy.
| · | Level 1 – quoted prices in active markets for identical financial instruments. |
| · | Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. |
| · | Level 3 – valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
The Company’s cash and cash equivalents have been assessed on the fair value hierarchy described above and classified as Level 1. There have been no changes between levels during the period.
| b) | Fair values of financial assets and liabilities |
The Company’s financial instruments include cash and cash equivalents, amounts receivable, reclamation bonds, assets held for sale, due to related parties, and accounts payable and accrued liabilities. At 30 September 2016 and 31 December 2015, the carrying value of cash and cash equivalents is fair value. Amounts receivable, due to related parties deposits and accounts payable and accrued liabilities approximate their fair value due to their short-term nature.
| Emgold Mining Corporation |
US Dollars (Unaudited) Notes to the Condensed Interim Consolidated Financial Statements |
Market risk is the risk that changes in market prices will affect the Company’s earnings or the value of its financial instruments. Market risk is comprised of commodity price risk and interest rate risk. The objective of market risk management is to manage and control exposures within acceptable limits, while maximizing returns. The Company is not exposed to significant market risk.
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its bank accounts. The Company’s bank accounts are held with major banks in Canada, accordingly the Company believes it is not exposed to significant credit risk.
Interest rate risk is the risk of losses that arise as a result of changes in contracted interest rates. The Company is nominally exposed to interest rate risk.
Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. To manage this risk the Company maintains only the minimum amount of foreign cash required to fund its on-going exploration expenditures. The Company is not exposed to significant foreign currency risk. At 30 September 2016 the Company held currency totalling the following:
| Rounded (‘000’s) | | 30 September 2016 | | 31 December 2015 |
| Canadian dollars | $ | 12,000 | $ | 2,000 |
| United States dollars | $ | 97,039 | $ | 2,000 |
Liquidity risk arises through the excess of financial obligations over available financial assets due at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements at any point in time. As the Company has no significant source of cash flows this is a significant risk.
| Emgold Mining Corporation |
US Dollars (Unaudited) Notes to the Condensed Interim Consolidated Financial Statements |
| | | Plant & Equipment | | Furniture & Equipment | | Computer Hardware | | Asset Under Capital Lease | | Total |
| Cost or Deemed Cost | | | | | | | | | | |
| Balance at 01 January 2015 | $ | 18,712 | $ | 46,164 | $ | 71,945 | $ | 38,833 | $ | 175,654 |
| Additions | | - | | - | | - | | - | | - |
| Balance at 31 December 2015 | $ | 18,712 | $ | 46,164 | $ | 71,945 | $ | 38,833 | $ | 175,654 |
| Balance at 01 January 2016 | $ | 18,712 | $ | 46,164 | $ | 71,945 | $ | 38,833 | $ | 175,654 |
| Additions | | - | | - | | - | | - | | - |
| Balance at 30 September 2016 | $ | 18,712 | $ | 46,164 | $ | 71,945 | $ | 38,833 | $ | 175,654 |
| Depreciation | | | | | | | | | | |
| Balance at 01 January 2015 | $ | 17,489 | $ | 45,719 | $ | 71,945 | $ | 38,833 | $ | 173,986 |
| Depreciation for the period | | 613 | | 445 | | - | | - | | 1,058 |
| Balance at 31 December 2015 | $ | 18,102 | $ | 46,164 | $ | 71,945 | $ | 38,833 | $ | 175,044 |
| Balance at 01 January 2016 | $ | 18,102 | $ | 46,164 | $ | 71,945 | $ | 38,833 | $ | 175,044 |
| Depreciation for the period | | 458 | | - | | - | | - | | 458 |
| Balance at 30 September 2016 | $ | 18,560 | $ | 46,164 | $ | 71,945 | $ | 38,833 | $ | 175,502 |
| Carrying Amounts | | | | | | | | | | |
| At 01 January 2015 | $ | 1,223 | $ | 445 | $ | - | $ | - | $ | 1,668 |
| At 31 December 2015 | $ | 610 | $ | - | $ | - | $ | - | $ | 610 |
| At 30 September 2016 | $ | 152 | $ | - | $ | - | $ | - | $ | 152 |
Emgold has two real estate properties located in Nevada County that were part of the Company’s former Idaho-Maryland Project. Emgold is in the process of selling these properties. On 15 March 2016, the Company sold 27 acres of land in the gross amount of $350,000; the cost of the property was $336,056, after selling costs of $30,295 the net proceeds were $319,705. The proceeds of the sale are being used for general working capital. Emgold has a remaining 7.13 acre parcel of land that is currently listed for sale.
| Assets Held for Sale | | Assets Held for Sale |
| Balance at 01 January 2015 | $ | - |
| Assets transferred to held for sale | | 490,508 |
| Balance at 31 December 2015 | $ | 490,508 |
| Balance at 01 January 2016 | $ | 490,508 |
| Disposition of assets | | (336,056) |
| Balance at 30 September 2016 | $ | 154,452 |
| Emgold Mining Corporation |
US Dollars (Unaudited) Notes to the Condensed Interim Consolidated Financial Statements |
| 7) | Exploration and evaluation assets |
| Property Acquisition Costs | | Idaho-Maryland | | Buckskin Rawhide East | | Buckskin Rawhide West | | Koegel Property | | Stewart Property | | Rozan Property | | Total |
| Balance at 01 January 2015 | $ | 490,508 | $ | 529,052 | $ | 30,029 | $ | 30,030 | $ | 208,719 | $ | 49,225 | $ | 1,337,563 |
| Acquisitions | | - | | - | | 20,000 | | 20,000 | | - | | - | | 40,000 |
| Royalty payments received | | - | | (10,000) | | - | | - | | - | | - | | (10,000) |
| Impairment of assets | | - | | - | | - | | - | | (208,718) | | (49,224) | | (257,942) |
| Assets transferred to held for sale | | (490,508) | | - | | - | | - | | - | | - | | (490,508) |
| Balance at 31 December 2015 | $ | - | $ | 519,052 | $ | 50,029 | $ | 50,030 | $ | 1 | $ | 1 | $ | 619,113 |
| Balance at 01 January 2016 | $ | - | $ | 519,052 | $ | 50,029 | $ | 50,030 | $ | 1 | $ | 1 | $ | 619,113 |
| Acquisitions | | - | | - | | 30,000 | | 30,000 | | - | | - | | 60,000 |
| Royalty payments received | | - | | (60,000) | | - | | - | | - | | - | | (60,000) |
| Balance at 30 September 2016 | $ | - | $ | 459,052 | $ | 80,029 | $ | 80,030 | $ | 1 | $ | 1 | $ | 619,113 |
| Exploration expenditures | | Idaho-Maryland | | Buckskin Rawhide East(1) | | Buckskin Rawhide West | | Koegel Property | | Stewart Property | | Rozan Property | | Total |
| Claim fees | | - | | 2,635 | | 3,492 | | 3,343 | | - | | - | | 9,470 |
| Carrying costs | | 30,332 | | - | | - | | - | | - | | - | | 30,332 |
| Year ended 31 December 2015 | $ | 30,332 | $ | 2,635 | $ | 3,492 | $ | 3,343 | $ | - | $ | - | $ | 39,802 |
| General property search | | 4,860 | | | | | | | | | | | | 4,860 |
| Claim fees | | - | | - | | 5,053 | | 4,483 | | - | | - | | 9,539 |
| Carrying costs | | 17,383 | | - | | - | | - | | - | | - | | 17,383 |
| Period ended 30 September 2016 | $ | 22,243 | $ | - | $ | 5,053 | $ | 4,486 | $ | - | $ | - | $ | 31,782 |
(1) The claim fees were paid by Rawhide Mining LLC. See 7)b) for more details.
| a) | Idaho-Maryland Property, California |
In 2015 Emgold the Company classified the Idaho-Maryland Asset in the amount of $490,508 as held for sale in year 2015. On 15 March 2016, the Company sold 27 acres of land located in Nevada County, California in the amount of $350,000; the cost of the property was $336,056 (Note 6). Emgold has a remaining 7.13 acre parcel (the Round Hole Property) of land that is currently listed for sale.
| b) | Buckskin Rawhide East Property, Nevada |
The Company has a 100% interest in the 52 unpatented mineral claims, totalling 835 acres that make up Buckskin Rawhide East Property, which is located near Fallon, Nevada.
The Buckskin Rawhide Property is leased to Rawhide Mining LLC (RMC), owners of the Denton Rawhide Mine under terms fully disclosed in the audited financial statements of 31 December 2015.
Under the terms of the lease agreement, RMC was to complete $500,000 in exploration related expenditures on the property by the third anniversary or 1 June 2016.
As at 1 June 2016, RMC has completed US$325,000 in exploration activities on the property.
| Emgold Mining Corporation |
US Dollars (Unaudited) Notes to the Condensed Interim Consolidated Financial Statements |
On 1 June 2016, RMC and Emgold mutually agreed to amend the original Lease Agreement whereby RMC can pay Emgold US$175,000, in seven quarterly payments of US$25,000, starting 1 June 2016, to keep the Lease Agreement in good standing. These payments will be in lieu of completing the additional US$175,000 in exploration work required in the original Lease Agreement. The proceeds of these payments will be used by Emgold for general working capital. Emgold received the first and second quarterly payment due 1 June 2016 and 1 September 2016 respectively.
| c) | Buckskin Rawhide West Property, Nevada |
Previously, the Company entered a Lease and Option to Purchase Agreement with Jeremy C. Wire to acquire the PC and RH mineral claims, located 0.3 miles west of Emgold’s existing Buckskin Rawhide Property, in Mineral County, Nevada. The PC and RH claims, called Buckskin Rawhide West, comprise 21 unpatented lode mining claims totalling 420 acres. Pursuant to the lease agreement, advance royalty payments were paid to Jeremy C. Wire in the amount of $10,000 per year during years 2013 to 2014 and $20,000 in 2015. The amount payable escalates to $30,000 per year in years 2016 to 2018. Payments were made in cash or shares, based on the discretion of the Company or the owner, depending on the year. The Company has met all current and past commitments on this property. The Company issued 375,000 common shares during the period for the property payment for the Buckskin Rawhide West property.
| d) | Koegel Rawhide , Nevada |
Previously the Company entered a Lease and Option to Purchase Agreement with Jeremy C. Wire to acquire the RHT and GEL claims, located four miles south of the Company’s Buckskin Rawhide Property in Mineral County, Nevada. The RHT and GEL claims comprise 19 unpatented lode mining claims totalling 380 acres. In addition, Emgold staked 17 additional unpatented lode claims totalling 340 acres. Together, the claims totalling 720 acres make up the Koegel Rawhide Property. Pursuant to the lease agreement, advance royalty payments were paid in the amount of $10,000 per year during years 2013 to 2014 and $20,000 in 2015. The liability increases to $30,000 per year in years 2016 to 2018. Payments were made in cash or shares, based on the discretion of the Company or the owner, depending on the year.
The Company has staked an additional 17 unpatented claims to expand this property to 36 unpatented mineral claims totalling 720 acres. During the period, the Company made the year 2016 lease payments through the issuance of 333,333 Emgold common shares in the deemed value of $30,000.
| e) | Stewart Property, British Columbia |
The Company holds the rights to the Stewart mineral claims, near Ymir British Columbia, totalling 5,789 hectares. Since, the Company did not have any substantive expenditure in the past three years, there are no current exploration plans for this property, and the property is safely held to January 2023 without additional work, an impairment loss of $208,718 was previously recognized in year 2015 bringing the carrying value to $1.
| f) | Rozan Property, British Columbia |
The Company holds the rights to the Rozan mineral claims, near Ymir British Columbia, totalling 1,950 hectares. Since, the Company did not have any substantive expenditure in the past three years, there are no current exploration plans for this property, and the property is safely held until March 2023 without additional work, an impairment loss of $49,224 was previously recognized in year 2015 bringing the carrying value to $1.
| Emgold Mining Corporation |
US Dollars (Unaudited) Notes to the Condensed Interim Consolidated Financial Statements |
| 8) | Related party transactions |
Related party transactions and balances not disclosed elsewhere in the consolidated financial statements are as follows:
| Related Party Disclosure | | | | | |
| Name and Principal Position | Period(i) | | Remuneration or fees(ii) | | Share-based awards |
| CEO and President - management fees | 2016 2015 | $ $ | 69,375 69,375 | $ $ | - - |
| Clearline CPA Corp., A company of which the CFO is a director – management fees | 2016 2015 | $$ | 20,922 24,670 | $$ | - - |
| Clearline CPA Corp., A company of which the CFO is a director – accounting | 2016 2015 | $$ | 6,259 9,738 | $$ | - - |
(i) For the nine month periods ended 30 September 2016 and 2015.
(ii) Amounts disclosed were paid or accrued to the related party.
The following table reports amounts included in due to related parties.
| | | | | | 30 September 2016 | | 31 December
2015 |
| Clearline CPA Corp. | | | | $ | 17,108 | $ | 80,206 |
| David Watkinson, the CEO | | | | | 665,769 | | 713,301 |
| Andrew MacRitchie, Director | | | | | 4,123 | | - |
| William Witte, Director | | | | | 4,123 | | - |
| Total | | | | $ | 691,123 | $ | 793,507 |
During the nine months ended 30 September 2016, the Company recognized a gain of $31,480 from settlement of an amount payable to the CFO for accounting and management services.
As at 30 September 2016, Andrew MacRitchie and William Witte loaned the Company CAD$5,000 each. The loans bear interest at 1% per month and are repayable on demand. Remaining related party balances are measured at their exchange amount, which is the amount of consideration established and agreed to by the related parties. Amounts due to related parties are unsecured, non-interest bearing and have no fixed term of repayment.
Unlimited - Number of common shares without par value.
Unlimited - Number of preference shares without par value.
| Emgold Mining Corporation |
US Dollars (Unaudited) Notes to the Condensed Interim Consolidated Financial Statements |
| b) | Common shares, issued and fully paid |
| Issued Shares | | | | Number | | Amount |
| Balance – 01 January 2015 | | | | 77,823,462 | $ | 43,935,360 |
| Issued for property | | | | 472,222 | | 40,000 |
| Balance – 31 December 2015 | | | | 78,295,684 | | 43,975,360 |
| Issued for property | | | | 708,333 | | 60,000 |
| Balance – 30 September 2016 | | | | 79,004,017 | $ | 44,035,360 |
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 maximum aggregate number of common shares reserved for issuance pursuant to the plan is 10% of the issued and outstanding common shares.
Stock option activity during the period is summarized as follows:
| Stock option activity | 30 September 2016 | | Weighted average exercise price | 31 December 2015 | | Weighted average exercise price |
| Balance – beginning of period | 5,000,000 | $ | 0.12 | 6,966,665 | $ | 0.16 |
| Expired | - | | - | (1,966,665) | | 0.25 |
| Balance – end of period | 5,000,000 | $ | 0.12 | 5,000,000 | $ | 0.12 |
Details of stock options outstanding as at 30 September 2016 are as follows:
| Expiry Date | | Exercise Price (CDN$) | 30 September 2016 | 31 December 2015 |
| 07 May 2017 | $ | 0.15 | 1,800,000 | 1,800,000 |
| 22 May 2017 | $ | 0.15 | 200,000 | 200,000 |
| 11 October 2018 | $ | 0.10 | 3,000,000 | 3,000,000 |
| | | | 5,000,000 | 5,000,000 |
The outstanding options have a weighted-average exercise price of $0.12 (31 December 2015 - $0.12). The weighted-average remaining life of the options is 1.46 years (31 December 2015 – 2.21) years.
As at 30 September 2016, all 5,000,000 (31 December 2015 – 5,000,000) of these outstanding options had vested. As at 30 September 2016 and 31 December 2015, none of the outstanding options were in the money.
| Emgold Mining Corporation |
US Dollars (Unaudited) Notes to the Condensed Interim Consolidated Financial Statements |
Warrant activity during the period is summarized as follows:
| Warrant Activity | 30 September 2016(i) | | Weighted average exercise price | 31 December 2015(i) | | Weighted average exercise price |
| Balance – beginning of period | 2,500,000 | $ | 0.10 | 8,163,575 | $ | 0.19 |
| Expired | (2,500,000) | | - | (5,663,575) | | 0.23 |
| Balance – end of period | - | $ | 0.10 | 2,500,000 | $ | 0.10 |
| (i) | The number of warrants is expressed in equivalent number of common shares, which may be issuable upon exercise of the warrants. |
Details of warrants outstanding as at 30 September 2016 and 31 December 2015 are as follows:
| Issued | Expiry | | Exercise Price | 30 September 2016 | 31 December 2015 |
| 18 July 2014 | 18 July 2016 | | 0.10(i) | - | 2,500,000 |
| | | | | - | 2,500,000 |
| (i) | The exercise prices of these warrants are stated in Canadian funds. |
| e) | Stock-based compensation |
For the period ended 30 September 2016 and the year ended 31 December 2015, the Company did not issue additional stock options.
The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition and exploration of mineral properties. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. The Company defines capital that it manages as share capital.
Management reviews its capital management approach on an on-going basis and believes that this approach is reasonable and appropriate relative to the size of the Company.
The Company is in the business of mineral exploration and has no source of operating revenue. Operations are financed through the issuance of capital stock or liability instruments, or through the sale of property, plant, and equipment. Capital raised is held in cash in an interest bearing bank account until such time as it is required to pay operating expenses or resource property costs. The Company is not subject to any externally imposed capital restrictions. Its objectives in managing its capital are to safeguard its cash and its ability to continue as a going concern, and to utilize as much of its available capital as possible for exploration activities. The Company’s objectives have not changed during the period ended 30 September 2016.
| Emgold Mining Corporation |
US Dollars (Unaudited) Notes to the Condensed Interim Consolidated Financial Statements |
The Company operates in one operating segment, which is acquisition, and exploration of mineral properties. The following provides segmented disclosure on assets and liabilities as reviewed by management regularly:
| Segmented Disclosure(Rounded to 000’s) | | | Canada | | United States | | Total |
| 30 September 2016 | | | | | | | |
| Current assets | | $ | 61,000 | $ | 55,000 | $ | 116,000 |
| Long-term Assets | | | | | | | |
| Plant and equipment | | | - | | - | | - |
| Assets held for sale | | | - | | 154,000 | | 154,000 |
| Resource properties | | | - | | 619,000 | | 619,000 |
| Other | | | 10,000 | | - | | 10,000 |
| Liabilities | | | | | | | |
| Current liabilities | | $ | (94,000) | $ | (737,000) | $ | (831,000) |
| 31 December 2015 | | | | | | | |
| Current assets | | $ | 2,000 | $ | 8,000 | $ | 10,000 |
| Long-term Assets | | | | | | | |
| Plant and equipment | | $ | - | $ | 1,000 | $ | 1,000 |
| Assets held for sale | | | - | | 491,000 | | 491,000 |
| Resource properties | | | - | | 619,000 | | 619,000 |
| Other | | | 9,000 | | - | | 9,000 |
| Liabilities | | | | | | | |
| Current liabilities | | $ | (175,000) | $ | (766,000) | $ | (941,000) |
