UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year endedDecember 31, 2010
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report: _______________
For the transition period from _______________to _______________
Commission file number000-50305
ENTOURAGE MINING LTD.
(Exact name of Registrant as specified in its charter)
Province of British Columbia, Canada
(Jurisdiction of incorporation or organization)
475 Howe Street, Suite 614, Vancouver, British Columbia V6C 2B3
(Address of principal executive offices)
Gregory F. Kennedy, President
Address: Same as above
Telephone: (604) 669-4367
Facsimile: (604) 669-4368
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class | Name of each exchange on which registered |
N/A | N/A |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Common Shares Without Par Value
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 10,268,103 common shares issued and outstanding as of December 31, 2010 and April__, 2011, the date of this Report.
Indicate by check mark if the registrant is a well-seasoned issuer, as defined in Rule 405 of the Securities Act
[ ] Yes [x] No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
[ ] Yes [x] No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[x] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[ ] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12-b of the Exchange Act (Check One):
Large Accelerated Filer [ ] | Accelerated Filer [ ] | Non-accelerated Filer [x] |
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP [x] | International Financial Reporting Standards as Issued | Other [ ] |
By the International Accounting Standards Board [ ] |
If this is an Annual Report, indicate by a check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [x] No
ENTOURAGE MINING LTD.
Form 20-F Annual Report
Table of Contents
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FORWARD-LOOKING STATEMENTS
We caution you that certain important factors (including without limitation those set forth in this Form 20-F) may affect our actual results and could cause such results to differ materially from any forward-looking statements that may be deemed to have been made in this Form 20-F Annual Report, or that are otherwise made by or on our behalf. For this purpose, any statements contained in this annual report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “except,” “believe,” “anticipate,” “intend,” “could,” estimate,” or “continue,” or the negative or other variations of comparable terminology, are intended to identify forward-looking statements.
PART I
ITEM 1 | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
Not Applicable to Annual Reports on Form 20F.
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
Not Applicable to Annual Reports on Form 20F.
ITEM 3. | KEY INFORMATION |
3. A Selected Financial Data
The following tables set forth our financial data for the last five years ended December 31. We derived all figures from our financial statements, which were examined by our independent auditors. This information should be read in conjunction with our financial statements included in this annual report.
Our financial statements included in this annual report and the table set forth below, have been prepared in accordance U.S. GAAP. All amounts are expressed in Canadian dollars.
Selected Financial Data
(CDN$, except per share data)
Year Ended 12/31/10 | Year Ended 12/31/09 | Year Ended 12/31/08 | Year Ended 12/31/07 | Year Ended 12/31/06 | |
Revenue | Nil | Nil | Nil | Nil | Nil |
Net Income (Loss) | 263,194 | (1,092,043) | (414,840) | (598,783) | (2,973,161) |
Earnings(Loss) Per Share (1) | 0.03 | (0.17) | (0.05) | (0.08) | (0.40) |
Dividends Per Share (1) | Nil | Nil | Nil | Nil | Nil |
Wtd. Avg. No. Shares (1) | 9,766,206 | 6,378,834 | 7,698,191 | 7,675,144 | 7,438,028 |
Working Capital (Deficiency) | (229,900) | (883,300) | (553,551) | (139,410) | 87,596 |
Mineral Properties | Nil | Nil | Nil | Nil | Nil |
Long Term Debt | Nil | Nil | Nil | Nil | Nil |
Shareholder’s Equity (Deficit) | (228,733) | (881,751) | (551,487) | (136,647) | 91,312 |
Total Assets | 22,711 | 14,427 | 16,673 | 22,570 | 193,763 |
(1) These line items take into consideration the Company’s 10 for 1 reverse stock split, effective on March 6, 2009. Unless otherwise specified herein, all share information presented herein takes into consideration such reverse stock split.
In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian dollars.
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Since June 1, 1970, the government of Canada has permitted a floating exchange rate to determine the value of the Canadian dollar as compared to the United States dollar. On April 28, 2011, the exchange rate in effect for Canadian dollars exchanged for United States dollars (the US dollars that a Canadian dollar buys) was $0.95. This exchange rate is based on the noon buying rates in New York City, for cable transfers in Canadian dollars, as certified for customs purposes by the Bank of Canada. For the past five years ended December 31 and for the last six month ends from October 1, 2010 to March 31,2011, the following exchange rates were in effect for Canadian dollars exchanged for United States dollars (the US dollars that a Canadian dollar buys), calculated in the same manner as above:
Annual Period | Average |
Year ended Dec 31, 2010 | $0.9750 |
Year ended Dec 31, 2009 | $0.8757 |
Year ended Dec 31, 2008 | $0.9441 |
Year ended Dec 31, 2007 | $0.9913 |
Year ended Dec 31, 2006 | $0.8789 |
Monthly Period | Low - High |
Month ended Oct 31, 2010 | $0.9775 - $0.9857 |
Month ended Nov 30, 2010 | $0.9833 - $0.9902 |
Month ended Dec 31, 2010 | $0.9890 - $0.9950 |
Month ended Jan 31, 2011 | $1.0026 - $1.0089 |
Month ended Feb 28, 2011 | $1.0096 - $1.0534 |
Month ended Mar 31, 2011 | $1.0208 - $1.0270 |
The above information was obtained from the Bank of Canada.
3.B Capitalization and indebtedness
Not Applicable to Annual Reports on Form 20F.
3.C Reasons for the offer and use of proceeds
Not Applicable to Annual Reports on Form 20F.
3.D Risk factors
Any investment in our common shares involves a high degree of risk. You should consider carefully the following information before you decide to buy our common shares. If any of the events discussed in the following risk factors actually occurs, our business, financial condition or results of operations would likely suffer. In this case, the market price of our common shares could decline, and you could lose all or part of your investment in our shares. In particular, you should consider carefully the following risk factors:
We have a history of losses.
We have incurred losses in our business operations since inception, and we expect that we will continue to lose money for the foreseeable future. From our incorporation to December 31, 2010, we have incurred net losses totaling $16,799,406. Very few junior resource companies ever become profitable and typically incur large losses until they enter production or are able to sell a mineral property to a major resource company. Failure to achieve and maintain profitability may adversely affect the market price of our common shares.
Very few mineral properties are ultimately developed into producing mines.
The business of exploration for minerals and mining involves a high degree of risk. Few properties that are explored are ultimately developed into producing mines. Most exploration projects do not result in the discovery of commercially mineable deposits of ore.
Substantial expenditures will be required for us to establish ore reserves through drilling, to develop metallurgical processes, to extract the metal from the ore and to develop the mining and processing facilities and infrastructure at any site chosen for mining.
Although substantial benefits may be derived from the discovery of a major mineral deposit, no assurance can be given that we will discover minerals in sufficient quantities to justify commercial operations or that we can obtain the funds required for development on a timely basis. The economics of developing precious and base metal mineral properties is affected by many factors including the cost of operations, variations in the grade of ore mined, fluctuations in metal markets, costs of processing equipment and other factors such as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection.
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If we do not obtain additional financing, our business will fail.
Our current operating funds are less than necessary to acquire an interest in, and to conduct exploration on, a mineral property, and therefore we will need to obtain additional financing in order to complete our business plan. As at December 31, 2010, we had cash on hand of $3,217 and a working capital deficiency of $229,900. Our business plan calls for significant expenses in connection with the acquisition and exploration of mineral claims. We will require additional financing in order to complete these activities. In addition, we will require additional financing to sustain our business operations if we are not successful in earning revenues once we complete exploration on any mineral property we acquire. We do not currently have any arrangements for financing and we can provide no assurance to investors that we will be able to find such financing if required.
We believe the only realistic source of future funds presently available to us is through the sale of equity capital. Any sale of share capital will result in dilution to existing shareholders.
Because management has only limited formal training in resource exploration, the business has a higher risk of failure.
None of our directors or officers has any significant technical training or experience in resource exploration or mining. We rely on the opinions of consulting geologists that we retain from time to time for specific exploration projects or property reviews. As a result of our management’s lack of formal training in resource exploration, there may be a higher risk of our being unable to complete our business plan.
Mineral exploration involves a high degree of risk against which we are not currently insured.
Unusual or unexpected rock formations, formation pressures, fires, power outages, labour disruptions, flooding, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labour are risks involved in the operation of mines and the conduct of exploration programs. We have relied on and will continue to rely upon consultants and others for exploration expertise.
It is not always possible to fully insure against such risks and we may decide not to take out insurance against such risks as a result of high premiums or other reasons. Should such liabilities arise, they could reduce or eliminate any future profitability and result in increasing costs and a decline in the value of our common stock.
We may require permits and licenses that we may not be able to obtain.
Our operations may require licenses and permits from various governmental authorities. There can be no assurance that we will be able to obtain all necessary licenses and permits that may be required to conduct exploration, development and mining operations at any projects we acquire. Furthermore, as mineral projects near completion proper permitting and environmental review may be required.
Metal prices fluctuate widely.
Factors beyond our control may affect the marketability of any resource we discover. Metal prices have fluctuated widely, particularly in recent years. The effect of these factors cannot accurately be predicted.
The resource industry is very competitive.
The resource industry is intensely competitive in all its phases. We compete with many companies possessing greater financial resources and technical facilities than us for the acquisition of mineral concessions, claims, leases and other mineral interests as well as for the recruitment and retention of qualified employees.
Our operations may be adversely affected by environmental regulations.
Our operations may be subject to environmental regulations promulgated by government agencies from time to time. Environmental legislation provides for restrictions and prohibitions on spills, release or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailings disposal areas, which would result in environmental pollution. A breach of such legislation may result in the imposition of fines and penalties. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner, which means that standards, enforcement, fines and penalties for non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for us and our directors, officers and consultants. The cost of compliance with changes in governmental regulations has a potential to reduce the profitability of our operations.
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We do not maintain environmental liability insurance.
The trading market for our shares is not always liquid.
Although our shares trade on the OTC Bulletin Board of the Financial Industry Regulatory Authority, Inc. (FINRA), the volume of shares traded at any one time can be limited, and, as a result, there may not be a liquid trading market for our shares. We also cannot assure you that any other market will be established in the future. The price of our common stock may be highly volatile and your liquidity may be adversely affected in the future.
Our common stock is thinly traded, so you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.
There is limited market activity in our stock and we are too small to attract the interest of many brokerage firms and analysts. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained. While we are trading on the Over-The-Counter Bulletin Board (“OTC”), our trading volume may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in OTC stocks and certain major brokerage firms restrict their brokers from recommending OTC stocks because they are considered speculative, volatile, thinly traded and the market price of the common stock may not accurately reflect our underlying value. The market price of our common stock could be subject to wide fluctuations in response to quarterly variations in our revenues and operating expenses, announcements of new products or services by us, significant sales of our common stock, the operating and stock price performance of other companies that investors may deem comparable to us, and news reports relating to trends in our markets or general economic conditions.
Our securities may be subject to penny stock regulation.
Our stock is subject to “penny stock” rules as defined in 1934 Securities and Exchange Act rule 3151-1. The Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Our common shares are subject to these penny stock rules. Transaction costs associated with purchases and sales of penny stocks are likely to be higher than those for other securities. Penny stocks generally are equity securities with a price of less than U.S. $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).
The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for our common shares in the United States and shareholders may find it more difficult to sell their shares.
ITEM 4. | INFORMATION ON THE COMPANY |
4.A History and development of the Company
Our Registered Office and principal office is located at 614 – 475 Howe Street, Vancouver, British Columbia, Canada. Our telephone number is (604)-669-4367
We were originally incorporated under the name “Entourage Holdings Ltd.” pursuant to the Business Corporations Act (British Columbia) on June 16, 1995. On June 25, 1996, we changed our name to Entourage Mining Ltd.
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On February 18, 1998, we became a reporting Issuer as defined under the Securities Act of the Province of British Columbia, Canada.
Our shares commenced trading on February 2, 2004 on the OTC Bulletin Board in the United States under the symbol ETGMF. On March 6, 2009, we completed a 10 for 1 reverse stock split and our symbol was subsequently changed to ENMGF. Unless otherwise specified herein, all share information presented herein takes into consideration such reverse stock split.
We do not have any subsidiaries.
We are a reporting issuer in the United States and our Annual Report and 6K filings can be found on the SEC’s EDGAR system atwww.sec.gov. We are a reporting issuer in certain Canadian jurisdictions and our required disclosure filings for Canada can be found at www.sedar.com.
4.B Business overview
We are a natural resource company engaged in the acquisition and exploration of natural resource properties. We commenced operations in 1996 and currently have mineral property option agreements to acquire:
An unencumbered 100% interest in the Pires Gold Project located in Goias State, Central Brazil; and
An unencumbered 65% interest in 47 prospective uranium claim blocks in Costebelle Township known as the Doran property in eastern Quebec.
A description of the properties underlying these interests is set forth below under Item 4.D “Property, plants and equipment.”
We also intend to seek and acquire additional properties worthy of exploration and development.
Competition
The mineral property exploration business, in general, is intensively competitive and there is not any assurance that even if commercial quantities of ore are discovered, a profitable market will exist for sale of same. Numerous factors beyond our control may affect the marketability of any substances discovered. These factors include market fluctuations, the proximity and capacity of natural resource markets and processing equipment, government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of mineral and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may make it difficult for us to receive an adequate return on investment.
We will compete with many companies possessing greater financial resources and technical facilities for the acquisition of mineral concessions, claims, leases and other mineral interests as well as for the recruitment and retention of qualified employees.
The Company is exploring for gold in Central Brazil. Many factors have caused the price of gold to escalate to over US$1,500 per oz. as of April 26, 2011 from $240 per ounce in 2002. There are many junior gold exploration companies in direct competition with the Company and a discovery of gold mineralization by the Company would not have any effect on the price of gold.
The Company is prospecting for uranium in Quebec. It is anticipated that uranium generated power will become more popular in the decades to come as rising oil prices and political strife in the world’s oil producing regions continue. The price of U3O8 (yellow cake) had risen from $7US/ lb in 2005 to $135US/lb. in early 2007.The weekly spot price for U3O8 as a April 25, 2011 was US$55.50.
Regulations
We are subject to the various environmental and business regulations of the jurisdictions in which we conduct mineral exploration.
These regulations can be onerous and, in some cases, expensive to comply with. In particular, we may be required to expend funds to reclaim or restore land disturbed by mineral exploration.
It is possible that we may not be able to afford to comply with various environmental and business regulations in the jurisdictions in which we conduct mineral exploration and would, as a result, have to curtail or cease operations and exploration.
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The jurisdictions in which we are presently operating are, in our view, known as jurisdictions that are friendly to mining activity and we believe that we can meet applicable regulatory requirements.
Management & Employees
We do not have any employees other than our directors and officers.
Our President and Chief Executive Officer, Gregory F. Kennedy, devotes approximately 50% of his business time to our affairs. Mr. Kennedy is paid $2,500 per month on a month-to-month basis to attend to the affairs of the Company.
Where necessary, we employ consultants, who in turn employ labourers, to further exploration on our mineral resource properties.
Office Space
We utilize about 700 square feet of office space in Vancouver, British Columbia. Our rent is approximately $800 per month.
4.C Organizational structure
Not applicable.
4.D Property, plant and equipment
As our properties are not at an advanced stage of exploration, no reserve estimates are made nor are we, as of yet, certain what if any reserves will be on the properties.
The Pires Gold Project
Option Agreement and Claim Information
On June 17, 2009, and as amended November 13, 2009, the Company signed a definitive Mineral Option agreement (the “Option”) with Infogeo Locaçeos Ltda. (“Infogeo”), a private Brazilian company, whereby the Company has the option to earn a 100% unencumbered interest in the Pires Gold Project (formerly known as the” Buon Sucesso Proyecto”) situated in southern Goiás State, Central Brazil.
When acquired, the Pires Gold Project consisted of 5 mineral licenses covering more than 8501 hectares (21,000 acres) located 2.5 hours drive from Brasilia and about 1 hour outside of the small city of Pires do Rio, Goiás State. Subsequent to the acquisition, the Company dropped two of the southernmost claim blocks and acquired 5 new claims: the Garimpo (acquired July 2009) and four other claim blocks surrounding the original land package. At present, the total package is approximately 12, 000 hectares. Subsequent to the changes indicated, the property is rectangular in shape and is approximately 8 kilometres long and 5 kilometres wide. The Pires Property covers sericite schist, chlorite schist and quartzites that have been intensely weathered under oxidizing tropical conditions. Metamorphic foliation of the schists and quartzites dips mainly to the west, and appears to be tightly folded. These metamorphic rocks belong to the Brasilia Belt, a region where terrains from the west have been thrust eastward over the ancient (Archean) Sao Francisco craton.
Under the terms of the Option, the Company must expend:
Expenditure Option
To earn a 40% interest in the property (First Milestone), in year one:
(i) | pay to the Optionor (or its nominee) USD $50,000 as follows: | ||
(A) | USD $25,000 within seven days of the execution of the Agreement (paid), and | ||
(B) | USD $25,000 within 45 days of the execution of the Agreement (paid); and | ||
(ii) | expend not less than USD $300,000 (the “First Target”) in exploration expenditures on the property on or before May 31, 2010 (incurred). |
To earn an additional 20% (60% total) interest in the property (Second Milestone), in year two:
(i) | paying USD $100,000 to the Optionor (or its nominee) on or before January 16, 2010 (paid), and |
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(ii) | expend not less than USD $300,000 (less the amount by which any exploration expenditures pursuant to item (ii) of the First Milestone exceeded the First Target) (the “Second Target”) in exploration expenditures on the property before January 16, 2011*. |
To earn an additional 15% (75% Total) interest in the property option (Third Milestone), in year three:
(i) | issue the Optionor 100,000 common shares of the Company on or before January 16, 2011 (issued subsequent to December 31, 2010), and | |
(ii) | expend up to USD $1,000,000 to complete and submit a final report by January 16, 2012*, (Any excess expended in years one and two is to be applied against this $1,000,000 expenditure requirement.) |
Option to Purchase 25%(100% Total)(Upon completion of the Third Milestone)
Purchase up to 20% of an interest in the property, by paying the Optionor USD$1,000,000 for each 5% incremental interest in the Property, and USD $2,000,000 for the remaining 5% interest.
*Subsequent to December 31, 2010, the Company received an extension from the Pires Gold Project optionor where the terms of its Second Milestone work commitment have been extended from January 16, 2011 to November 1, 2011 and the Third Milestone work commitment from January 16, 2012 to November 1, 2012 for consideration of US$25,000 to be paid no later than July 15, 2011.
Pires Property Description
The Company is exploring for Sediment Hosted Vein (SHV) gold deposits gold on 6 mineral licenses (two claim blocks deleted in the Spring 2010) covering 8,797.7hectares in southern Goiás State, Brazil. Another 4 licenses have been applied for which will extend the property north, east and west by 8000 hectares when the application process is completed. In January 2010, the Company filed two reports to relinquish two claims at the southernmost portion of the property where sampling indicated little mineralization.
Location and Accessibility
Access to the Pires is good, with the property being a two-and-a-half hour drive from Brasilia (capital of Brazil) on a paved highway that crosses the licences.
2010 Exploration Program
The exploration program began with due diligence replication of reported highly enriched gold float samples. Entourage has collected float quartz vein, outcrop and soil samples with enriched gold concentrations. The five highest gold (Au) values to date are 405 grams per tonne (g/t), 297 g/t, 114, g/t, 80 g/t, 77 g/t, 70 g/t and 55 g/t (analyses completed at SGS-Geosol and Intertek Laboratories in Brazil, and ACME Analytical Laboratory in Canada). These highly enriched samples were collected from different parts of the property located up to 15 km apart on strike. Hand trenching has succeeded in exposing some of these occurrences as undeformed quartz veins in or close to bedrock near the float samples, and locally abundant concentrations suggest that other samples are also proximal to source.
The Pires Property covers metasedimentary strata that were deformed during the Neoproterozoic compressional event that formed the Brasilia thrust belt. Syn-deformational quartz veins and boudins comprise one of the two deposit types targeted for exploration on the Pires Property. Post deformational quartz veins carrying high values of gold possibly associated with the regional Transbrasiliano extensional event in the latest Neoproterozoic are the second deposit type targeted at Pires. Mineralization of the second, undeformed extensional quartz vein type is described in 2 places on the Property (the Garimpo, and Point 1 areas) located more than 13 km apart. To date, no mineral resource or reserves have been defined on the Property. The Pires Property merits further exploration and a two-phase program is recommended herein. Phase 1 includes: continuing surface sampling in unsampled or minimally sampled areas of the Property; completion of ongoing structural and geological mapping; surface geochemistry; hand trenching; a ground magnetic test grid; and 450 m of drilling. The estimated budget of the recommended Phase 1 program is CDN$220,500. On February 17, 2010, the Company filed, on SEDAR and EDGAR, a National Instrument 43-101 compliant report on the Pires property.
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The Doran Uranium Property
Option Agreement and Claim Information
In March of 2005, we entered into an option agreement with Fayz Yacoub, a professional geologist and businessman from Vancouver, British Columbia, whereby we acquired 44 claim blocks prospective for uranium situated in Costebelle Township in eastern Quebec. Subsequent to entering into the property agreement, 3 additional claims blocks have been added to the project.
The Doran Uranium property consists of 47-contiguous mineral claims (polygons) covering approximately 2473.3 hectares in the Baie Johan Beetz area of Costebelle Township, Quebec. The claim block is centered at GPS 548009 E and 5572265 N.
Location and Accessibility
The Doran property is located in the southeastern part of Quebec, along the north shore of the Gulf of St. Lawrence, and about 25 kilometres west of Aguanish, approximately 109 kilometres east of Havre St. Pierre. The property extends inland from the Gulf of St Lawrence a distance of approximately 10 kilometres to the north. Locally this area is known as “Moyenne Cote Nord” or middle coast north of the St. Lawrence Seaway.
The property is situated within the Costebelle Township, NTS map sheet 12 L/08. Access to the property is by daily scheduled flights to Natashquan-Aguanish, then by car from Aguanish to the Pashshibou River and to the southern part of the property.
The topography of the property for the most part is rolling hills having a maximum relief of 100 metres with elevation ranging from sea level to 100 metres. All mineralized areas of interest are located comfortably above sea and river levels.
The climate around the property area is characterized by long winters, generally extending from late October until mid-April.
Exploration
Exploration, including geological mapping, rock sampling, trenching and shallow drilling on the Doran Uranium Deposit resulted in the estimation of a historical uranium resource which requires verification to conform to Canadian NI 43-101 geological reporting standards. Before these standards were initiated, previous work on the property, done by Aguanish Uranium Inc., Noranda and Lacana Mining, was successful in locating and partially exposing several potential target areas, including the Doran East Centre target where three holes were drilled (1978) 14 feet apart with cores returning values of 6.4, 6.4 and 9.2 Lbs. Per ton uranium (U3 O8).
We made a down payment of $35,000 to acquire the option and agreed to a work commitment of $200,000 of exploration in the first year of the Doran Uranium Property agreement.
We expended $245,591 in exploration work on the property in fiscal year 2005 and a National Instrument 43-101 compliant report by Eric Ostensoe (P.Geo.) was commissioned. In late February 2006, Mr. Ostensoe completed his report and the Company posted the report on SEDAR and EDGAR (March 9, 2006) as well as on our website. In April 2007 an updated NI 43-101 Technical Report was prepared by Michel Proulx, M.Sc., P. Geo and Michel Boilly, Ph.D., P.Geo, both Qualified Persons as that term is described in National Instrument 43-101, and this report was filed on SEDAR by Abbastar Holdings Ltd. on May 2, 2007.
In May 2006, we advanced to On Track Explorations, the Doran project operator, $150,000CDN to commence drilling and ground exploration work as outlined in Mr. Ostensoe’s report. Drilling commenced thereafter on the “Main Zone” of the Doran property. Our option agreement on the Doran property requires that we expend $300,000 in year two of the agreement.
We spent $346,166 on drilling and exploration in fiscal 2006 and reported drill results on July 20, 2006. As well, in July 2006, the Government of Quebec reimbursed our company $57,745 as part of the Province’s mining exploration incentive program. This rebate was based upon our 2005 drilling exploration expenses.
In early February 2007, we contracted the services of Forages La Virole to commence drilling on the “L” anomaly situated in the north of the Doran property but four to six foot snow drifts prevented the drilling contractor from reaching the “L” anomaly so the work program was cancelled.
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On February 13, 2007, we entered into a Mineral Property Option agreement with Abbastar Holdings Ltd. (“Abbastar”), a Vancouver based TSX Venture listed company, whereby Abbastar could earn up to 70% interest in the Doran property by paying us a one time $100,000 CDN payment (paid) and expending $5,000,000 over four years. The TSX Venture Exchange approved this transaction on May 30, 2007.
On May 11, 2007, our Company and Abbastar announced that drilling had commenced on the “L” anomaly of the Doran project and in all 32 holes were drilled for a total of 3,273.26 metres of diamond drilling and 1158 samples were analyzed representing 2,469.24 linear metres or 75% of the drill hole length. The results of our Phase II drilling campaign were reported August 23, 2007. A sample of the results are as follows:
- Hole H17A (L Anomaly): 16.99m of 0.0435% U3O8 (.87lb/t),
- Hole H18 (L Anomaly): 24.1m of 0.033% U3O8 (.66lb/t) (including 16.5m of .73lb/t announced June 28, 2007),
- Hole H18A (L Anomaly): 7.25m of 0.023% U3O8 (.46lb/t),
- Hole H19 (L Anomaly): 3.52m of 0.039% U3O8 (.78lb/t),
- Hole H22 (L Anomaly): 18.44m of 0.024% U3O8 (.48lb/t),
- Hole H27 (L Anomaly): 5.8m of 0.33% U3O8 (.66lb/t),
- Hole H31 (N Anomaly): 0.66 metres of .29% U3O8 (5.8lb/t)(at surface).
The holes were divided into four zones with particular emphasis on the “L” zone where 18 drill holes were spotted to evaluate the lateral and depth extensions of this zone. The first four drill holes (17, 17A, 18, 18A) drilled at different azimuths and plunge angles and set up to test the L19 anomaly, recorded encouraging near surface results including 16.99 metres (55 feet) of .87lb/short ton U3O8 and 24.1 metres (79 feet) of .66lb/ton U3O8, as well, holes 27 and 27A, intersected three and four pegmatites respectively. The first pegmatite, H27, returned .66lb/ton U3O8 over 5.8 metres. The L zone remains open in all directions while lateral extension and depth extension are unknown. Best interval drill results are posted on our website.
The 2007 drilling program confirmed the existence of uranium mineralization in the northeast grid (L, N, X and Y). Findings corroborated the channel sample results of 2006 that showed mineralization to be non-uniformly distributed among the pegmatites and even within each pegmatite. Drill holes revealed that the thickness of the radioactive pegmatites range from one meter to roughly 20 metres along holes and are presented as sub-parallel multiple slabs slightly dipping to the west and separated from each other by sterile rocks. All pegmatites have been intersected at a maximum of 90 vertical metres from surface.
To date, the Doran Showing, located at the south of Doran (drilled in 2006 & Fall 2007) and the North East grid have both been successfully drilled in confirming the presence of a series of sub-parallel uranium bearing pegmatites.
Senior Project Geologist, Michel Proulx M. Sc. (P.Geo. and a qualified person, as that term is defined in Canadian Mining National Instrument 43-101 policy) recommended follow up drilling on the Doran Showing (Phase III) as well as an additional 4,000 metres of drilling on the L zone to gain a better understanding of the behavior of the uranium-bearing pegmatite bodies, the structural geology context and of uranium phase minerals.
The fall 2007 drilling campaign was completed in early November of that year. The program comprised 1,691 metres of drilling in 15 drill holes and was designed to test the area between the North End zone and the Hot Spot zone, the lateral extent of the Hot Spot zone, and to determine the south extension and thickness of the Hill Top pegmatite, all of which are part of the Doran showing.
This campaign was designed to further delineate the Doran Showing where we drilled in the summer of 2006. The Doran Showing consists of four distinct pegmatite-bearing structures: The Main Zone, the North End Zone, Dyke Zone and Hot Spot.
Results from this drill campaign were announced on February 4, 2008. The 2007 program comprised 1,691 metres of drilling in 15 drill holes and was designed to test the area between the North End zone and the Hot Spot zone, the lateral extent of the Hot Spot zone, and to determine the south extension and thickness of the Hill Top pegmatite, all of which are part of the Doran showing. The fall 2007 drill campaign achieved similar results to the 2006 campaign and all 15 drill holes encountered uranium mineralization.
In total over 6000 metres have been completed on the Doran property by our company and Abbastar and the companies are encouraged that the goal of delineating a Rossing type (Namibia) uranium deposit may be realized.
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Abbastar completed a fall 2008 program in September-October. This program completed the second phase of the Mineral Option Agreement between Entourage and Abbastar dated February 14, 2007 and Abbastar has now earned a 35% interest in the Doran property.
The fall 2008 exploration campaign consisted of channel sampling of previously unexplored anomalies (F, G, H, I, K and LL) situated WSW of the L anomaly that was drilled in the spring of 2007. Additionally, anomalies E, Q, BB, S and RR, located due south of the L anomaly were also tested. On February 24, 2009, Abbastar Uranium released the following information on the Fall 2008 exploration program:
North section of the Doran property:
Results of the 2008 ground-based radiometric survey demonstrated a good spatial correlation between the highest-count rates and the localization of the previously determined airborne anomalies BB, P, Q, R and S.
The G zone represents the most interesting uranium site with an average value of 0.56 lb/ton U3O8 from 22 samples collected with a range of 0.06 to 0.88 U3O8 lb/t, with a high value at 3.11 lb/t U3O8.
Nearby anomalies F and H also display relatively high uranium values (F at 0.63 lb/t U3O8 from six samples with a range of 0.27 to 1.20 U3O8 lb/t and H at 0.5 lb/t U3O8 from four samples with a range of 0.21 to 1.06 lb/t U3O8).
South section of Doran property:
The large extent of the radioactive pegmatite outcrops, the encouraging assay obtained and the proximity of the west zone to the main Doran showing make the former a prime target for future drilling.
The completion of the Fall 2008 exploration program earned Abbastar an additional 15% interest in the property and Abbastar has now earned a 35% interest in the Doran property. As of December 31, 2010, Abbastar had earned a 35% interest in the Doran property but, has allowed the balance of their option to expire.
ITEM 4A. | UNRESOLVED STAFF COMMENTS |
Not applicable.
ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
5.A Operating results
Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not generated any revenues and no revenues are anticipated until we begin removing and selling minerals. Accordingly, we must raise cash from sources other than the sale of minerals found on the properties. That cash must be raised from other sources. Our only other source for cash at this time is investments by others in our Company. We must raise cash to implement our project and stay in business. Even if we raise money, we do not know how long the money will last. It depends upon the amount of exploration we conduct and the cost thereof.
We will attempt to raise additional money through a subsequent private placement, public offering or through loans. If we do not raise all of the money we need, we will have to find alternative sources of funding, like a public offering, a private placement of securities, or loans from our officers or others.
Our exploration program is explained in as much detail as possible in the business section of this annual report. We are not going to buy or sell any plant or significant equipment during the next twelve months. We will not buy any equipment until we have located a body of minerals and we have determined they are economical to extract from the land.
Restatement
The financial statements for the year ended December 31, 2009 have been restated to correct the accounting for warrants that were issued in connection with a previous private placement. The exercise price of these warrants is denominated in United States dollars, which differs from the Company’s functional currency (Canadian dollars) and therefore these warrants cannot be considered to be indexed to the Company’s own stock. Accordingly the fair value of the warrants must be accounted for as a derivative liability with changes in fair value recorded in the statement of operations.
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The effect of the resulting adjustments on the company’s financial statements for the year ended December 31, 2009 is as follows:
Balance sheet as at December 31, 2009 | |||||||||
As previously reported | Adjustment | As restated | |||||||
Derivative liability | $ | - | $ | 256,030 | $ | 256,030 | |||
Share capital | $ | 13,107,970 | $ | (279,622 | ) | $ | 12,828,348 | ||
Deficit | $ | (16,698,240 | ) | $ | (364,360 | ) | $ | (17,062,600 | ) |
Statement of operations for the year ended December 31, 2009 | |||||||||
As previously reported | Adjustment | As restated | |||||||
Net loss | $ | 727,683 | $ | 364,360 | $ | 1,092,043 | |||
Fair value adjustment on derivative liability | $ | - | $ | 364,360 | $ | 364,360 | |||
Loss per common share – basic and diluted | $ | (0.11 | ) | $ | (0.06 | ) | $ | (0.17 | ) |
The Fair value adjustment on derivative liability has no net effect on in the Company’s statement of cash flows.
Income tax notes for the reconciliation of the reported income taxes to the amounts applying statutory rates | |||||||||
As previously reported | Adjustment | As restated | |||||||
Loss before income taxes | $ | 727,683 | $ | 364,360 | $ | 1,092,043 | |||
Expected income tax recovery | $ | 218,000 | $ | 109,000 | $ | 327,000 | |||
Permanent differences and others | $ | 69,000 | $ | 109,000 | $ | 178,000 |
Year ended December 31, 2010 compared to year ended December 31, 2009
Our net income for the year ended December 31, 2010 (“Annual 2010”) totaled $263,194 or $0.03 per share compared to a net loss of $1,092,043 or $0.17 per share for the year ended December 31, 2009 (“Annual 2009”). Net income in Annual 2010 compared to a net loss in Annual 2009 was mainly due to:
The fair value adjustment of derivative liabilities in Annual 2010 was a gain of $634,555 compared to a loss of $364,360, or a difference of $998,915. This is a non-cash expense.
The Company expended $156,155 in mineral property acquisition and exploration costs in Annual 2010, whereas we expended $262,182 in mineral property acquisition and exploration costs in Annual 2009. The Company completed a NI 43-101 technical report on its Pires Property during the year ended December 31, 2010 which can be located on SEDAR.
During Annual 2010, the stock based compensation expense was $Nil whereas during Annual 2009, the stock based compensation was 213,422. This is a non-cash expense and was attributable to the number of options granted and vested during the prior year and the assumptions used for the Black-Scholes option pricing model.
Professional fees were $70,779 during Annual 2010 compared to $108,462 during Annual 2009. This was due to the completion of litigation during Annual 2009 with CMKM and 1010 and the increase in legal costs to effect a 10:1 reverse stock split in March 2009.
During Annual 2010, management fees were $70,500 compared to $78,000 during Annual 2009. This was due to the reduction of remuneration to one of the officers during the year ended December 31, 2010.
However, travel and promotion expenses increased from $5,844 in Annual 2009 to $25,674 in Annual 2010. This was mainly due to increased shareholder disclosure for corporate activities during the year.
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Year ended December 31, 2009 compared to year ended December 31, 2008
Our loss (as well as operating expenses) for the year ended December 31, 2009 (“Annual 2009”) totaled $727,683 or $0.11 per share compared to $414,840 or $0.05 per share for the period ended December 31, 2008 (“Annual 2008”). The losses in Annual 2009 were higher mainly because:
The fair value adjustment of derivative liabilities in Annual 2009 was a loss of $364,360 compared to $Nil in Annual 2008. This is a non-cash expense.
The Company expended $262,182 in mineral property acquisition and exploration costs in Annual 2009, whereas we expended $Nil in mineral property acquisition and exploration costs in Annual 2008 because all the Doran property’s costs were Abbastar’s responsibility. During 2008 we received a refund of $9,485 from the Nevada division of the Bureau of Land Management and received a $49,237 refund from the Quebec government in exploration tax credits from previous years, while in Annual 2009 we received $nil in any government refunds relating to exploration work.
During Annual 2009 the stock based compensation expense was $228,510 whereas during Annual 2008 the stock based compensation was nil. This is a non-cash expense and was attributable to the number of options granted and vested during the year and the assumptions used for the Black-Scholes option pricing model.
As a result of increased business activities during Annual 2009, the office and sundry expenses were $41,932 whereas during Annual 2008 the office and sundry expenses were $34,231.
Professional fees were $108,462 during Annual 2009 compared to $62,006 during Annual 2008. This was due to the completion of litigation during Annual 2009 with CMKM and 1010 and the increase in legal costs to effect a 10:1 reverse stock split in March 2009.
However during Annual 2009 the losses were partly reduced by the following decreased expenses:
During Annual 2009, management fees were $78,000 compared to $300,000 during Annual 2008. This was due to the elimination of management contracts at December 31, 2008.
During annual 2009, the consulting fees were $nil compared to $60,000 during Annual 2008. This was due to elimination of a consulting contract at December 31, 2008.
The promotion and travel expenses were $5,844 in Annual 2009 compared to $15,758 in Annual 2008 due to reduced promotional activities.
5.B Liquidity and capital resources
These audited financial statements have been prepared assuming the Company will continue on a going-concern basis. The ability of the Company to continue as a going-concern depends upon its ability to develop profitable operations and to continue to raise adequate financing. Management is actively targeting sources of additional financing through alliances with financial, exploration and mining entities, or other business and financial transactions which would assure continuation of the Company’s operations and exploration programs. In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing.
There can be no assurance that the Company will be able to continue to raise funds in which case the Company may be unable to meet its obligations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded in these interim financial statements.
The audited financial statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations.
On December 31, 2010, the Company had $3,217 in cash compared to $2,212 on December 31, 2009. On December 31, 2010, we had a working capital deficit of $229,900 compared to a working capital deficit of $883,300 on December 31, 2009.
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During the year ended December 31, 2010, the Company closed a private placement of 1,613,162 units (at a price of US $0.15 per unit) for gross proceeds of US$241,974. Each unit consisted of one common share and one share purchase warrant exercisable on or before January 25, 2011 at a price of US $0.25 per share. The estimated fair value of the warrants is $125,435 using the Black Scholes option pricing model using a 1 year term, an expected volatility of 467% and a risk free interest rate of 0.28% . The fair value of the warrants is included in Derivative liabilities. The Company paid a total $6,868 for legal fees which have been recorded as share issue costs.
During the year ended December 31, 2010, 766,248 shares were issued pursuant to the exercise of warrants at US$0.20 per share. $134,800 was transferred from derivative liabilities to Capital Stock for the exercised warrants.
During the year ended December 31, 2009, the Company completed a non-brokered private placement of 4,037,500 units at a price of U.S$0.15 each for a total proceed of $683,057, and the Company received total proceed of $74,693 from exercise of warrants.
We do not need any funds in the near future for the exploration work on our Doran property since the Company is the 65% unencumbered owner of the Doran property. However, we need to raise funds soon to fund our ongoing general and administrative costs, although there is no guarantee that we will be able to do so.
The Company anticipates it will require additional capital in the future to finance ongoing exploration of its properties and general and administrative expenses, such capital to be derived from the exercise of outstanding stock options and warrants and/or the completion of private placements. The Company may also seek short-term loans from directors and shareholders of the Company. There can be no assurance the Company will be able to obtain required financing in the future on acceptable terms to the Company.
5.C Research and development, patents and licenses, etc.
Our methods of exploration, development and extraction are not unique to our company but are common in our industry.
We do not rely on patents, technological licenses or intellectual property licenses in our operations.
We did not have any research and development expenditures in the year ended December 31, 2010 or any past years.
5.D Trend information
Our Doran mineral property is prospective for uranium. There are few producers of uranium in the world in a market that is dominated by senior producers Cameco (Canada), Areva (formerly Cogema, France) Energy Resources (Australia), Denison (Canada) and SXR (South Africa). The market for uranium is a homogeneous, integrated commodities market.
The market is not one that is particularly susceptible to the influence of one or more large suppliers or buyers. The world average grade from producing uranium mines is 0.15 per cent U3O8, with spot uranium prices having risen from a cyclical low of US$7.10 (U.S.) per pound in late 2000 to US$135/lb. on June 11, 2007. The weekly spot price for U3O8 as at April 25, 2010 was US$55.50/lb.
The Pires property is prospective for gold. Gold is a highly liquid commodity that trades continuously for 24 hours per day in various locations worldwide including New York, London, Sydney and Hong Kong. Brazil hosts many gold deposits of varying grades and sizes. Should our property become a producer, its impact on world gold supplies and price would be negligible.
5.E Off-balance sheet arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
5.F Tabular disclosure of contractual obligations
None
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ITEM 6. | DIRECTORS, SENIOR MANAGEMENTS AND EMPLOYEES |
6.A Directors and senior management
The following is a list of the current directors and senior officers of the Company, their municipalities of residence, their current position with the Company and their principal occupations:
Name of Director | Age | Principal Occupation |
Gregory F. Kennedy President, Director Vancouver, BC | 61 | President of the Company |
Dr. Paul Shatzko Director, Chairman and Secretary Langley, BC | 77 | Director, Chairman and Secretary |
James A. Turner Director, Surrey, BC | 65 | Director |
Executive Officers: | ||
Name of Officer | Age | Office |
Gregory F. Kennedy | 61 | President, Chief Executive Officer |
Paul Shatzko | 77 | Secretary and Chairman |
Pradeep Varshney | 54 | Chief Financial Officer |
Our directors hold office until our next annual meeting of shareholders and until their successors have been elected and qualified. Our officers are elected by our board of directors at our annual meeting after each of our annual meetings of shareholders and hold office until their death, or until they resign or have been removed from office.
The following describes the business experience of our directors and executive officers, including other directorships held in reporting companies:
Gregory F. Kennedy – Director, President and Chief Executive Office
At our annual general meeting in April 2004, Mr. Kennedy was appointed as President of our company. Since May 2003, Greg Kennedy has been a director of the Company. In July 2002, Mr. Kennedy became a Director of Abbastar Holdings Ltd. (TSX:V-ABA.H.), formerly Fountain House Holdings located in Vancouver, British Columbia. In May 2007, ABA.H changed its name from Abbastar Holdings to Abbastar Uranium, reflecting a change of business and graduation to a Tier II listing on the TSX Venture Exchange. Mr. Kennedy ceased to be a director of Abbastar in August 2006. Since October 2007, he has been a director and secretary of Trijet Mining Corp.
Since November 2002, Mr. Kennedy was the President and a Director of Digital Capital.com, Inc., a Delaware corporation, located in Squamish, British Columbia. Digital Capital.com, Inc. was a blank check corporation with no business purpose other than to merge with or acquire another corporation. Digital Capital.com, Inc. did not merge with any entity and the company ceased to exist in 2004.
Due to a medical condition, from December 2000 to July 2001, Mr. Kennedy was not employed and furnished limited consulting services as an independent contractor. From November 1998 to December 2000, Mr. Kennedy was Marketing Director of Titan Trading Analytics Inc. located in Vancouver, British Columbia. Titan Trading is a purveyor of computer software designed for the securities and investment community. From January 1991 to November 1998, Mr. Kennedy was a stockbroker with McDermid St. Lawrence Securities, now Raymond James Canada, located in Vancouver, British Columbia.
Dr. Paul Shatzko – Director, Chairman and Secretary
Dr. Shatzko is a retired radiologist and self employed businessman; he is a director of several public companies and a director of Entourage Mining Ltd. since July 31, 2004. Since October 2007, he has been a director and President of Trijet Mining Corp.
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James A. Turner - Director
Mr. Turner holds a B.Sc. degree from the University of British Columbia. He has been a practicing geologist since 1976. Mr. Turner is a member of the Association of Professional Engineers and Geoscientists of British Columbia and a former fellow of the Geological Association of Canada. He has been involved in mineral explorations with major mining companies such as Teck Cominco Limited, Noranda Inc. and Newmont Explorations of Canada Limited. During his career Mr. Turner has worked in British Columbia, the Northwest Territories, Baffin Island, Yukon Territory, Mali, Ghana, Panama, U.S.A and Brazil. Mr. Turner has extensive experience in exploration for base metals, precious metals, and diamonds.
Pradeep Varshney, Chief Financial Officer
Pradeep Varshney is a Certified General Accountant. In addition, he has an MBA from the University of Western Ontario, and an MS (Chemical Engineering) from the University of New Hampshire, USA. Mr. Varshney has been involved with public companies for the last 16 years. Since October 2007, he has been the CFO of Trijet Mining Corp. From October 2007 till November 2010 he was a director of Trijet Mining Corp. Since April 2011 he has been a director of HFX Holdings Corp. He was formerly the CFO of Mountain Province Diamonds Inc. and Gee-Ten Ventures Inc.
6.B Compensation
We are required, under applicable securities legislation in Canada, to disclose to our shareholders details of compensation paid to our directors. The following fairly reflects all material information regarding compensation paid to our directors in our fiscal year ended December 31, 2010
Summary Compensation Table
NAME AND PRINCIPAL POSITION | YEAR | ANNUAL COMPENSATION | LONG-TERM COMPENSATION | |||||
Salary ($) | Bonus ($) | Other Annual Compensation ($) | Awards | LTIP payouts ($) | All Other Compensation ($) | |||
Restricted Stock Awards ($) | Securities Underlying Options/ SAR’s (#) | |||||||
Gregory F. Kennedy, President, Chief Executive Officer & Director | 2010 | Nil | Nil | 30,000 | Nil | Nil | Nil | Nil |
James A. Turner, Director | 2010 | Nil | Nil | Nil | Nil | Nil | Nil | Nil |
Paul Shatzko, Chairman, Secretary & Director | 2010 | Nil | Nil | 30,000 | Nil | Nil | Nil | Nil |
6.C Board practices
The directors hold office until the next annual general meeting of the shareholders at which time they may stand for re-election. We are required to hold an annual general meeting once in every calendar year and not longer than thirteen months from the last annual general meeting.
No director currently has service contracts with us, nor are they entitled to any termination benefits.
We do not have an executive committee.
Our audit committee is comprised of Gregory F. Kennedy, Dr. Paul Shatzko and James A. Turner. Members of the audit committee oversee our accounting and financial reporting process and the audits of our financial statements. The audit committee also receives and addresses complaints regarding accounting, internal controls, and auditing issues. No complaints have been received by us as of the date hereof. Further, the audit committee provides protection for whistle blowers. Again, no whistle blowing issues have presented themselves to us as of the date hereof. The audit committee functions in a collective manner with respect to all issues that come before it.
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6.D Employees
We have no employees other than our officers and directors. When we engage in exploration of our resource properties, we use geological consultants and contract labor to support them.
6.E Share ownership
Our directors and officers own beneficially the following shares as of the date of this annual report:
Name | Number of Shares Owned | Percentage of Outstanding Common Shares1 |
Gregory F. Kennedy | 775,000 | 7.5% |
Paul Shatzko | 852,5662 | 8.2% |
James A. Turner | Nil | 0.0% |
Pradeep Varshney | 380,0003 | 3.7% |
1. | Based on 10,368,103 issued and outstanding shares as of the date of this Report. | |
2. | Includes common shares held by spouse. | |
3. | Includes common shares held by spouse. |
The Company Stock Option Plan provides for equity participation in the Company by its directors, officers, employees and consultants through the acquisition of common shares pursuant to the grant of options to purchase common shares. The exercise price for options granted under the Stock Option Plan is determined by the closing trading price on the day immediately preceding the date of grant or such other price as the Directors, in their discretion, may determine. The Company has reserved, authorized and granted 720,000 shares under the Stock Option Plan.
Options can be exercisable for a term of up to five years, subject to earlier termination in the event of death or the optionee’s cessation of services to the Company; and options granted under the stock option plan are non-assignable, except by will or the laws of descent and distribution.
ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
7.A Major shareholders
As used in this section, the term “beneficial ownership” with respect to a security is defined by Regulation 228.403 under the Securities Exchange Act of 1934, as amended, as consisting of: (1) any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares voting power (which includes the power to vote, or to direct the voting of such security) or investment power (which includes the power to dispose, or to direct the disposition of, such security); and (2) any person who, directly or indirectly, creates or uses a trust, proxy, power of attorney, pooling arrangement or any other contract, arrangement or device with the purpose or effect of divesting such person of beneficial ownership of a security or preventing the vesting of such beneficial ownership.
As of the date of this annual report, there are 9,696,855 common shares issued and outstanding in our capital stock. We were authorized to issue 100,000,000 common shares at December 31, 2009; subsequent to December 31, 2009, the Company changed its authorized capital to unlimited*.
*Notice of Alteration electronically filed with the BC Registrar of Companies on April 22, 2010 at 9:02 am PDT.
As of the date of this annual report, the following persons known to us were the beneficial owner of more than five percent of our outstanding common shares:
Name | Number of Shares | Percentage of Total |
Gregory F. Kennedy | 775,000 | 7.5% |
Paul Shatzko | 852,566 | 8.3% |
Of our 143 registered shareholders, 46 shareholders are Canadian residents (who hold approximately 66% of our issued and outstanding shares), 92 shareholders are United States residents (who hold approximately 31% of our issued and outstanding shares) and 5 shareholders are foreign residents (who hold approximately 3% of our issued and outstanding shares).
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Each of our issued common shares entitles the holder to one vote in general meeting. There are no disproportionate or weighted voting privileges.
We are not controlled directly or indirectly by any other corporation or any other foreign government or by any other natural or legal person, severally or jointly.
There are no arrangements the operation of which at a subsequent date may result in a change in our control.
Our trust and transfer agent is Computershare Trust Company of Canada, which is located at 4thFloor – 510 Burrard Street, Vancouver, British Columbia, Canada V6C 3B9.
7.B Related party transactions
During the Fiscal Year Ended December 31, 2010
Amounts payable to related parties as of December 31, 2010 of $72,159 (2009 - $91,066) is owing to directors, former directors, to a company controlled by an officer and to a public company with directors in common, for management fees, consulting fees and for expenses paid on behalf of the Company. The amounts are non-interest bearing, unsecured, and have no fixed terms of repayment.
During the year ended December 31, 2010, the Company incurred $70,500 (2009 - $78,000; 2008 - $300,000) in management fees to its directors and officers.
The above transactions have been recorded at exchange amount that is the amount of consideration established and agreed to by the related parties.
From January 1, 2011 to the date of this report
Gregory Kennedy and Paul Shatzko are each earning management fees of $2,500 per month from us.
7.C. Interests of experts and counsel
Not Applicable
ITEM 8. | FINANCIAL INFORMATION |
8.A Consolidated Statements and other Financial Information
The following financial statements for the year ended December 31, 2010 with comparatives for December 31, 2009 and December 31, 2008 (except for the balance sheet, which does not include comparative for December 31, 2008), have been audited by an independent auditor, are accompanied by an audit report and are attached and incorporated herein:
(a) | balance sheet; |
(b) | income statement; |
(c) | statement showing changes in equity; |
(d) | cash flow statement; |
(e) | related notes and schedules required by the comprehensive body of accounting standards pursuant to which the financial statements are prepared; and |
(f) | a note analyzing the changes in each caption of shareholders’ equity presented in the balance sheet. |
Incorporated herewith are the comparative financial statements covering the latest three financial years, audited in accordance with a comprehensive body of auditing standards.
Export Sales
We have not had any export sales in our latest financial year ended December 31, 2010 and, as a result, the percentage of export sales for the Company was zero.
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Legal Proceedings
On August 27, 2007 we filed a Writ of Summons and Statement of claim against 101047025 Saskatchewan Ltd. (“1010”) and CMKM Diamonds Inc. (“CMKM”) for breach of contract of the October 20, 2005 Mineral Property Option and Assignment Agreements among the parties. We sought to have the Supreme Court of British Columbia set aside the aforementioned contracts for failure, on behalf of the defendants, to complete the terms as set out in those contracts. In October 2008 we entered into a proposed settlement agreement that was subsequently agreed to verbally by all parties. This settlement became effective July 03, 2009 and all legal matters among the Company and CMKM have been resolved definitively.
As a result of the settlement, CMKM returned 4,500,000 common shares of the Company in exchange for a cash payment of US $85,000 (paid). The shares were returned to treasury and cancelled. The Company has also settled its claims with 1010 and agreed to return the Smeaton properties in return for the withdrawal of all claims against the Company by 1010.
Management is not aware of any material proceedings in which any director, any member of management or any of the Company’s affiliates are a party adverse to, or have a material interest adverse to, our company.
Dividend Policy
We have not paid dividends on the common shares in any of its last five fiscal years. The directors of our company will determine if and when dividends should be declared and paid in the future based on the Company’s financial position at the relevant time. All of the common shares of our company are entitled to an equal share in any dividends declared and paid.
8.B Significant Changes
There have been no significant changes, as that term is defined in the rules and policies governing the use of the Form 20F, since the date of the audited financial statements included herein.
ITEM 9. | THE OFFER AND LISTING |
9.A. Offer and listing details
Our shares commenced trading on February 2, 2004 on the OTC Bulletin Board in the United States under the symbol ETGMF. On March 6, 2009, we completed a 10 for 1 reverse stock split and our symbol was subsequently changed to ENMGF.
The following table sets forth the high and low closing prices in US funds of our common shares traded, taking into account our 10 for 1 reverse split effective March 6, 2009.
Annual Periods | High | Low |
January 1, 2006 to December 31, 2006 | $5.30 | $1.70 |
January 1, 2007 to December 31, 2007 | $3.30 | $0.60 |
January 1, 2008 to December 31, 2008 | $1.00 | $0.10 |
January 1, 2009 to December 31, 2009 | $0.75 | $0.11 |
January 1, 2010 to December 31, 2010 | $0.45 | $0.10 |
Quarterly Periods | ||
High | Low | |
January 1, 2009 to March 31, 2009 | $0.75 | $0.10 |
April 1, 2009 to June 30, 2009 | $0.72 | $0.12 |
July 1, 2009 to September 30, 2009 | $0.60 | $0.25 |
October 1, 2009 to December 31, 2009 | $0.50 | $0.27 |
January 1, 2010 to March 31, 2010 | $0.48 | $0.21 |
April 1, 2010 to June 30, 2010 | $0.35 | $0.12 |
July 1, 2010 to September 30, 2010 | $0.27 | $0.11 |
October 1, 2010 to December 31, 2010 | $0.21 | $0.11 |
January 1, 2011 to March 31, 2011 | $0.20 | $0.03 |
Monthly Periods | ||
High | Low | |
October 2010 | $0.21 | $0.15 |
November 2010 | $0.20 | $0.11 |
December 2010 | $0.18 | $0.11 |
January 2011 | $0.17 | $0.10 |
February 2011 | $0.20 | $0.10 |
March 2011 | $0.19 | $0.03 |
21
9.B Plan of distribution
Not Applicable to Annual Reports on Form 20F.
9.C Markets
Our shares commenced trading on February 2, 2004 on the OTC Bulletin Board in the United States under the symbol ETGMF, however, a lack of liquidity may make it difficult to resell shares.
On March 6, 2009 we completed a 10 for 1 reverse stock split and our symbol was subsequently changed to ENMGF.
There are no plans, proposals, arrangements or understandings with any person with regard to the development of a trading market in any of our securities.
9.D Selling shareholders
Not Applicable to Annual Reports on Form 20F.
9.E Dilution
Not Applicable to Annual Reports on Form 20F.
9.F Expenses of the issue
Not Applicable to Annual Reports on Form 20F.
ITEM 10. ADDITIONAL INFORMATION
10.A Share Capital
Not Applicable to Annual Reports on Form 20F.
10.B Memorandum and articles of association
We have no bylaws under British Columbia law. We have Articles of Incorporation. A summary of certain provisions of our Articles of Incorporation is provided below.
1. | Our Memorandum and Articles of Incorporation do not limit in any manner our business purpose. As such, no provision relating to the same is contained in the Memorandum or Articles of Incorporation. | |
2. | Directors | |
a. | A director shall disclose the nature and extent of his interest in a contract or transaction. A director shall not vote on any contract or transaction in which he is interested. The foregoing shall not apply to: (1) a loan to us which the director is guaranteeing repayment; (2) any contract or transaction for the benefit of a holding company or a subsidiary corporation of which the a director is a director; (3) any contract by a director to subscribe for or underwrite securities in which a director is interested if all the other directors are interested; (4) determining the remuneration of the directors: (5) purchasing and maintaining insurance to cover directors against liability incurred by them as directors; or, (6) indemnification of any director. | |
b. | Directors are empowered to vote compensation to them even in the absence of an independent quorum. | |
c. | Our board of directors may from time to time on our behalf borrow money. We have no prohibition against loaning money to a director. | |
d. | There are no provisions for retirement or non-retirement of directors under an age limit requirement. | |
e. | There is no number of shares that must be owned for director's qualification. |
22
3. | Shares | |
a. | The board of directors may from time-to-time declare and authorize payment of dividends. No dividend will be paid otherwise than out of funds and/or assets properly available therefore. There is no time limit after which dividend entitlement lapses. | |
b. | Each shareholder shall have one vote for each share of common stock owned by him. At each annual meeting the entire board of directors retire and shareholders shall elect an new board of directors. There are no staggered intervals and cumulative voting is not provided for. | |
c. | Shareholders do not have the right to share in our profits. | |
d. | Shareholders are entitled to share in any surplus upon liquidation, after the payment of all creditors and superior equity securities. | |
e. | We may redeem any of our shares at the price and on the terms as determined by our board of directors. | |
f. | There are no sinking fund provisions. | |
g. | Shareholders are not liable for further capital calls. | |
h. | There are no provisions discriminating against any existing or prospective holder of common stock as a result of a shareholder owning a substantial number of shares of common stock. |
4. | No alteration shall be valid as to any outstanding shares unless the holders of the shares consent thereto or by a resolution passed by 3/4s of the outstanding shares. |
5. | The annual general meeting of shareholders is called by written notice mailed by the board of directors to each shareholder of record. A quorum shall be a least two persons represented at the meeting either in person or by proxy. Extraordinary (special) general meetings are called by written notice mailed by the board of directors to each shareholder of record. The quorum remains the same for Extraordinary Meetings. There are no conditions of admission to the meetings. |
6. | There are no limitations on the rights to own securities, including the rights of non-resident or foreign shareholders to hold or exercise voting rights on the securities, imposed by the laws of British Columbia, or our articles or other constituent document. |
7. | There are no provisions in our articles that would have an effect of delaying, deferring or preventing a change in our control and that would operate only with respect to any merger, acquisition or corporate restructuring involving us. |
8. | There are no provisions in our articles that require the disclosure of shareholder ownership. |
9. | The law applicable to us is not significantly different from that in the host country. |
10. | The conditions imposed by the articles governing changes in the capital are not more stringent than is required by law. |
10.C Material contracts
There are no material contracts except as discussed in this Annual Report and except as entered into in the ordinary course of business. The following material contracts referred to in this Annual Report may be inspected at our offices during normal business hours.
1. | Agreement dated March 15, 2005 between Fayz Yacoub and the Company, and amended March 6, 2007 whereby the Company can acquire a 100% interest in the Doran Uranium Property (referenced by way of the Company’s 20-F filed with the SEC on July 1, 2005); | |
2. | Agreement dated April 21, 2005 between the Company and CMKM Diamonds, Inc. whereby CMKM may acquire up to a 10% interest in the Company’s Black Warrior Project (referenced by way of the Company’s 20-F filed with the SEC on July 1, 2005); | |
3. | Assignment Agreement dated October 20, 2005 between the Company and CMKM Diamonds Inc., whereby the Company assumed all of the rights of CMKM, if any, in the Hatchet Lake Property (referenced by way of the Company’s 6-K filed with the SEC on November 23, 2005); | |
4. | Agreement dated October 20, 2005 between the Company and 101047025 Saskatchewan Ltd., whereby the Company may acquire up to 80% interest in the Smeaton/Forte a la Corne properties (referenced by way of the Company’s 6-K filed with the SEC on November 25, 2005); and |
23
5. | Agreement dated February 13, 2007 between the Company and Abbastar Uranium Corp. (formerly Abbastar Holding Ltd.) whereby Abbastar may earn up to 70% interest in the Doran uranium prospect in Costebelle Township, Quebec. (referenced by way of the Company’s 6-K filed February 14, 2007). |
6. | Agreement dated June 17, 2009 between the Company and Infogeo Servicos e Locacoes Ltda,, whereby the Company can earn a 100% interest in the Pires gold project in south central Brazil. | |
7. | Letter of Intent (“LOI”) signed February 18, 2010 with Ansell Capital Corp., (“Ansell”) a TSX Venture listed company, pursuant to which Ansell proposes to acquire all of the outstanding and issued shares of the Company through a plan of arrangement (the “Arrangement”) under the British Columbia Corporations Act. On July 14, 2010, the Company was notified by Ansell that it would not be proceeding with the LOI. |
10.D Exchange Controls
There is no law or governmental decree or regulation in Canada that restricts the export or import of capital, or affects the remittance of dividends, interest or other payments to a non-resident holder of common shares, other than withholding tax requirements. See “Item 10.ETaxation”.
There is no limitation imposed by Canadian law or by our constituent documents on the right of a non-resident to hold or vote common shares, other than are provided in the Investment Canada Act (Canada). The following summarizes the principal features of the Investment Canada Act (Canada).
The Investment Canada Act (Canada) requires certain “non-Canadian” individuals, governments, corporation or other entities who wish to acquire a “Canadian business” (as defined in the Investment Canada Act), or establish a “new Canadian business” (as defined in the Investment Canada Act) to file either a notification or an application for review with a governmental agency known as “Investment Canada”. The Investment Canada Act requires that certain acquisition of control of Canadian business by a “non-Canadian” must be reviewed and approved by the Minister responsible for the Investment Canada Act on the basis that the Minister is satisfied that the acquisition is “likely to be of net benefit to Canada”, having regard to criteria set forth in the Investment Canada Act. Only acquisitions of control are reviewable under the Investment Canada Act; however, the Investment Canada Act provides detailed rules for the determination of whether control has been acquired and, pursuant to those rules, the acquisition of one-third or more of the voting shares of a corporation may, in some circumstances, be considered to constitute an acquisition of control. Certain reviewable acquisitions of control may not be implemented before being approved by the Minister; if the Minister does not ultimately approve a reviewable acquisition, which has been completed, the acquired Canadian business must be divested. Failure to comply with the review provisions of the Investment Canada Act could result in, amongst other things, an injunction or a court order directing disposition of assets of shares.
10.E Taxation
The following summary is not, and is not to be construed as, tax advice to any particular Shareholder. Each prospective and current Shareholder is urged to obtain independent advice as to the applicable Canadian, U.S. or other tax consequences of an investment in common shares applicable to the Shareholder’s particular circumstances.
Certain US Federal Income Tax Consequences
The following is a general discussion of the material United States Federal income tax law for U.S. holders that hold such common shares as a capital asset, as defined under United States Federal income tax law and is limited to discussion of U.S. Holders that own less than 10% of the common stock. This discussion does not address all potentially relevant Federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of Federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences.
The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended to the date hereof (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. In addition, this discussion does not consider the potential effects, both adverse and beneficial, of any future legislation that, if enacted, could be applied, possibly on a retroactive basis, at any time. The following discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of common shares of the Company and no opinion or representation with respect to the United States Federal income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common shares of the Company should consult their own tax advisors about the Federal, state, local, and foreign tax consequences of purchasing, owning and disposing of common shares of the Company.
24
U.S. Holders
As used herein, a “U.S. Holder” is a holder of common shares of the Company who or which is a citizen or individual resident (or is treated as a citizen or individual resident) of the United States for federal income tax purposes, a corporation or partnership created or organized (or treated as created or organized for federal income tax purposes) in the United States, including only the States and District of Columbia, or under the law of the United States or any State or Territory or any political subdivision thereof, or a trust or estate the income of which is includable in its gross income for federal income tax purposes without regard to its source, if, (i) a court within the United States is able to exercise primary supervision over the administration of the trust and (ii) one or more United States trustees have the authority to control all substantial decisions of the trust.
For purposes of this discussion, a U.S. Holder does not include persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers and Holders who acquired their stock through the exercise of employee stock options or otherwise as compensation.
Distributions on common shares of the Company
U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of the Company are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions to the extent that the Company has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s United States Federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder’s United States Federal taxable income by those who itemize deductions. (See more detailed discussion at “Foreign Tax Credit” below). To the extent that distributions exceed current or accumulated earnings and profits of the Company, they will be treated first as a return of capital up to the U.S. Holder’s adjusted basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Preferential tax rates for long-term capital gains are applicable to a U.S. Holder that is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder that is a corporation.
Dividends paid on the common shares of the Company will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations. A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from the Company if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Company. The availability of this deduction is subject to several complex limitations, which are beyond the scope of this discussion.
Foreign Tax Credit
A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of common shares of the Company may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax. This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations, which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate shares of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source income bears to his or its worldwide taxable income. In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. There are further limitations on the foreign tax credit for certain types of income such as “passive income,” “high withholding tax interest,” “financial services income,” “shipping income” and certain other classifications of income. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and holders and prospective holders of common shares of the Company should consult their own tax advisors regarding their individual circumstances.
25
Disposition of common shares of the Company
A U.S. Holder will recognize gain or loss upon the sale of common shares of the Company equal to the difference, if any, between the amount of cash plus the fair market value of any property received, and the Holder’s tax basis in the common shares of the Company. This gain or loss will be capital gain or loss if the common shares are a capital asset in the hands of the U.S. Holder. Any capital gain will be a short-term or long-term capital gain or loss depending upon the holding period of the U.S. Holder. Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year. Deductions for net capital losses are subject to significant limitations. For U.S. Holders that are individuals, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders which are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.
Certain Canadian Federal Income Tax Consequences
The following discussion summarizes the principal Canadian federal income tax considerations generally applicable to a person who owns one or more common shares of the Company (the “Shareholder”), and who at all material times for the purposes of the Income Tax Act (Canada) (the “Canadian Act”) deals at arm’s length with the Company, holds all common shares solely as capital property, is a non-resident of Canada, and does not, and is not deemed to, use or hold any Common share in or in the course of carrying on business in Canada. It is assumed that the common shares will at all material times be listed on a stock exchange that is prescribed for the purposes of the Canadian Act.
This summary is based on the current provisions of the Canadian Act, including the regulations thereunder, and the Canada-United States Income Tax Convention (1980) (the “Treaty”) as amended. This summary takes into account all specific proposals to amend the Canadian Act and the regulations thereunder publicly announced by the government of Canada to the date hereof and the Company’s understanding of the current published administrative and assessing practices of Canada Customs and Revenue Agency. It is assumed that all such amendments will be enacted substantially as currently proposed, and that there will be no other material change to any such law or practice, although no assurances can be given in these respects. Except to the extent otherwise expressly set out herein, this summary does not take into account any provincial, territorial or foreign income tax law or treaty.
This summary is not, and is not to be construed as, tax advice to any particular Shareholder. Each prospective and current Shareholder is urged to obtain independent advice as to the Canadian income tax consequences of an investment in common shares applicable to the Shareholder’s particular circumstances.
A Shareholder generally will not be subject to tax pursuant to the Canadian Act on any capital gain realized by the Shareholder on a disposition of a Common share unless the Common share constitutes “taxable Canadian property” to the Shareholder for purposes of the Canadian Act and the Shareholder is not eligible for relief pursuant to an applicable bilateral tax treaty. A Common share that is disposed of by a Shareholder will not constitute taxable Canadian property of the Shareholder provided that the Common share is listed on a stock exchange that is prescribed for the purposes of the Canadian Act (the Toronto Stock Exchange is so prescribed), and that neither the Shareholder, nor one or more persons with whom the Shareholder did not deal at arm’s length, alone or together at any time in the five years immediately preceding the disposition owned, or owned any right to acquire, 25% or more of the issued shares of any class of the capital stock of the Company. In addition, the Treaty generally will exempt a Shareholder who is a resident of the United States for the purposes of the Treaty, and who would otherwise be liable to pay Canadian income tax in respect of any capital gain realized by the Shareholder on the disposition of a Common share, from such liability provided that the value of the Common share is not derived principally from real property (including resource property) situated in Canada or that the Shareholder does not have, and has not had within the 12-month period preceding the disposition, a “permanent establishment” or “fixed base,” as those terms are defined for the purposes of the Treaty, available to the Shareholder in Canada. The Treaty may not be available to a non-resident Shareholder that is a U.S. LLC, which is not subject to tax in the U.S. Any dividend on a Common share, including a stock dividend, paid or credited, or deemed to be paid or credited, by the Company to a Shareholder will be subject to Canadian withholding tax at the rate of 25% on the gross amount of the dividend, or such lesser rate as may be available under an applicable income tax treaty. Pursuant to the Treaty, the rate of withholding tax applicable to a dividend paid on a Common share to a Shareholder who is a resident of the United States for the purposes of the Treaty will be reduced to 5% if the beneficial owner of the dividend is a company that owns at least 10% of the voting stock of the Company, and in any other case will be reduced to 15%, of the gross amount of the dividend. It is Canada Customs and Revenue Agency’s position that the Treaty reductions are not available to a Shareholder that is a “limited liability company” resident in the United States. The Company will be required to withhold any such tax from the dividend, and remit the tax directly to Canada Customs and Revenue Agency for the account of the Shareholder.
26
ALL PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE COMMON SHARES.
10.F Dividends and paying agents
Not Applicable to Annual Reports on Form 20F.
10.G Statement by experts
Not Applicable to Annual Reports on Form 20F.
10.H Documents on Display
The documents concerning the Company which are referred to in this Report on Form 20F are located at its principal executive offices at the address on the face page of this Report.
10.I Subsidiary information
We had one subsidiary, Entourage USA Inc. located 711 S. Carson Street, Suite 4, Carson City, NV 89701. The charter of Entourage USA was not renewed in December 2008.
ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
We do not have market portfolios and do not engage in trading risk sensitive instruments or financial instruments. We are an extractive enterprise.
ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
Not applicable.
PART II
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
We have had no material defaults in payment of principal, interest or sinking or purchase fund installments. We are an extractive enterprise.
ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USEOF PROCEEDS |
Not applicable
ITEM 15 | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2010, pursuant to Rule 13a-15(b) of the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2010.
Management’s Annual Report on Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as required by Sarbanes-Oxley (SOX) Section 404 A. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
27
As of December 31, 2010, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that the Company’s management considered to be material weaknesses under COSO and SEC rules were: (1) lack of a functioning audit committee and lack of a majority of independent directors on the Company’s board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (4) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by the Company’s Chief Financial Officer in connection with the preparation of our financial statements as of December 31, 2010 and communicated the matters to our management and board of directors.
Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not have an affect on the Company’s financial results. However, management believes that the lack of a functioning audit committee and lack of a majority of independent directors on the Company’s board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures, could impact the Company’s financial statements for the future years.
We are committed to improving our financial organization. As part of this commitment, we hope to create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to the Company: i) Appointing one or more outside directors to our board of directors who shall be appointed to the audit committee of the Company resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; and ii) Preparing and implementing sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.
Management believes that the appointment of one or more independent directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on the Company’s Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result in proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support the Company if personnel turn over issues within the department occur. This coupled with the appointment of additional outside directors will greatly decrease any control and procedure issues the company may encounter in the future.
Any effort to increase the size of the Board of Directors, appoint independent directors or personnel is conditional upon the Company to raise additional capital.
We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Our management’s report was not subject to attestation by the Company’s registered public accounting firm because our Company is not an accelerated filer or large accelerated filer.
Changes in Internal Control over financial reporting
During the year ended December 31, 2010, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
28
ITEM 16. | [reserved] |
ITEM 16.A | AUDIT COMMITTEE FINANCIAL EXPERT |
We do not have an audit committee financial expert serving on our audit committee. Given the Company’s small size and limited operations, to date we have been unable to attract a financial expert to serve on our board of directors.
ITEM 16.B | CODE OF ETHICS |
We have a written Code of Ethics, which was filed as an exhibit to our Annual Report on Form 20-F for our fiscal year ended December 31, 2007, and which is incorporated by reference as an exhibit hereto.
ITEM 16.C | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
(a) | Audit Fees |
The aggregate fees billed for each of the la
(d) | All Other Fees |
st two fiscal years for professional services rendered by the Company’s principal accountant(s) for the audit of the Company’s annual financial statements, together with services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements were $17,850 for the year ended December 31, 2010 and $19,540 for the year ended December 31, 2009.
(b) | Audit-Related Fees |
The aggregate fees billed for each of the last two fiscal years for assurance and related services by the principal accountant that were reasonably related to the performance of the audit or review of the Company’s financial statements but are not reported under paragraph (a) of this Item were $Nil for the year ended December 31, 2010 and $1,088 for year December 31, 2009.
(c) | Tax Fees |
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning and tax return preparation were $400 for the year ended December 31, 2010 and $400 for the year ended December 31, 2009.
The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant other than services disclosed in paragraphs (a) through (c) of this Item were $nil for the year ended December 31, 2010 and $nil for the year ended December 31, 2009.
ITEM 16.D | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
The disclosure required under Exchange Act Rule 10A-3(d) is not applicable to our company.
ITEM 16.E | PURCHASESOFEQUITYSECURITIESBYTHEISSUERANDAFFILIATEDPURCHASERS |
No purchase was made by or on behalf of our Company or any “affiliated purchaser” of any of our equity securities within the past two years.
ITEM 16.F | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT |
Not Applicable.
ITEM 16.G | CORPORATE GOVERNANCE |
Not Applicable.
PART III
ITEM 17. | FINANCIAL STATEMENTS |
Our financial statements are attached hereto immediately before the signatures section.
29
ENTOURAGE MINING LTD.
(An Exploration Stage Company)
FINANCIAL STATEMENTS
DECEMBER 31, 2010
(Stated in Canadian Dollars)
F-1
INDEPENDENT AUDITORS’ REPORT |
To the Shareholders of Entourage Mining Ltd
We have audited the balance sheets of Entourage Mining Ltd (an exploration stage company) as at December 31, 2010 and 2009 and the statements of operations, stockholders’ deficit and cash flows for the years ended December 31, 2010, 2009 and 2008 and the period from June 16, 1995 (inception) through December 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material respects, the financial position of Entourage Mining Ltd. at December 31, 2010 and 2009 and the results of its operations and its cash flows for the years ended December 31, 2010, 2009 and 2008 and the period from June 16, 1995 (inception) through December 31, 2010 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has not generated revenues since inception, has incurred losses in developing its business, and further losses are anticipated. The Company requires additional funds to meet its obligations and the costs of its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As described in Note 13, the consolidated financial statements for the year ended December 31, 2009 have been restated.
“DMCL” |
DALE MATHESON CARR-HILTON LABONTE LLP |
CHARTERED ACCOUNTANTS |
Vancouver, Canada |
April 22, 2011 |
F-2
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
BALANCE SHEETS |
(Stated in Canadian Dollars) |
DECEMBER 31, | ||||||
2010 | 2009 | |||||
Restated – Note 13 | ||||||
$ | $ | |||||
ASSETS | ||||||
Current | ||||||
Cash | 3,217 | 2,212 | ||||
Advances and prepaid expenses | 6,584 | 1,377 | ||||
Other receivable | 11,743 | 9,289 | ||||
21,544 | 12,878 | |||||
Equipment, net of depreciation(Note 3) | 1,167 | 1,549 | ||||
22,711 | 14,427 | |||||
LIABILITIES | ||||||
Current | ||||||
Accounts payable | 153,212 | 134,268 | ||||
Loan payable (Note 5) | 26,011 | 26,862 | ||||
Due to related parties (Note 8) | 72,159 | 91,066 | ||||
Derivative liabilities (Notes 6, 12 and 13) | 62 | 643,982 | ||||
251,444 | 896,178 | |||||
STOCKHOLDERS’ DEFICIT | ||||||
Capital Stock(Note 7) | ||||||
Authorized: Unlimited common voting shares without par value | ||||||
Issued: 10,268,103 common shares (2009 – 7,738,693) | 13,306,807 | 12,828,348 | ||||
Additional paid in capital | 3,263,866 | 3,263,866 | ||||
Obligation to issue shares(Note 7) | - | 88,635 | ||||
Deficit accumulated during the exploration stage | (16,799,406 | ) | (17,062,600 | ) | ||
(228,733 | ) | (881,751 | ) | |||
22,711 | 14,427 |
CONTINGENCIES AND COMMITMENTS(Notes 1, and 4)
SUBSEQUENT EVENTS(Note 14)
Approved by the Board of Directors:
“Gregory F. Kennedy” | “Paul Shatzko” |
The accompanying notes are an integral part of these financial statements.
F-3
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
STATEMENTS OF OPERATIONS |
(Stated in Canadian Dollars) |
YEARS ENDED | June 16, 1995 | |||||||||||
(inception) | ||||||||||||
DECEMBER 31, | To | |||||||||||
December 31, | ||||||||||||
2010 | 2009 | 2008 | 2010 | |||||||||
Restated – | Restated – | |||||||||||
Note 13 | Note 13 | |||||||||||
$ | $ | $ | $ | |||||||||
Expenses | ||||||||||||
Depreciation | 382 | 515 | 699 | 6,677 | ||||||||
Consulting | 4,715 | - | 60,000 | 272,950 | ||||||||
Consulting – stock based compensation (Note 7) | - | 213,422 | - | 2,926,980 | ||||||||
Financing fee – stock based compensation (Note 7) | - | 15,088 | - | 26,388 | ||||||||
Interest and bank charges | 3,209 | 2,238 | 868 | 19,264 | ||||||||
Management fees (Note 8) | 70,500 | 78,000 | 300,000 | 1,095,654 | ||||||||
Mineral property costs (recovery) | 156,155 | 262,182 | (58,722 | ) | 11,350,524 | |||||||
Office and sundry | 39,947 | 41,932 | 34,231 | 565,121 | ||||||||
Professional fees | 70,779 | 108,462 | 62,006 | 572,513 | ||||||||
Travel and promotion | 25,674 | 5,844 | 15,758 | 300,692 | ||||||||
Loss Before Other Item | (371,361 | ) | (727,683 | ) | (414,840 | ) | (17,136,763 | ) | ||||
Fair value adjustment of derivative liabilities | ||||||||||||
(Notes 1, 6, 12 and 13) | 634,555 | (364,360 | ) | - | 270,195 | |||||||
Income (Loss) Before Income Taxes | 263,194 | (1,092,043 | ) | (414,840 | ) | (16,866,568 | ) | |||||
Deferred income tax recovery | - | - | - | 67,162 | ||||||||
Net Income (Loss) | 263,194 | (1,092,043 | ) | (414,840 | ) | (16,799,406 | ) | |||||
Earnings (Loss) Per Share | ||||||||||||
basic | $ | 0.03 | $ | (0.17 | ) | $ | (0.05 | ) | ||||
diluted | $ | 0.02 | $ | (0.17 | ) | $ | (0.05 | ) | ||||
Weighted Average Common Shares Outstanding | ||||||||||||
basic | 9,766,206 | 6,378,834 | 7,698,191 | |||||||||
diluted | 13,643,412 |
The accompanying notes are an integral part of these financial statements.
F-4
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
STATEMENTS OF STOCKHOLDERS’ DEFICIT |
(Stated in Canadian Dollars) |
DEFICIT | ||||||||||||||||||
ACCUMULATED | ||||||||||||||||||
NUMBER | OBLIGATION | ADDITIONAL | DURING | |||||||||||||||
OF | TO ISSUE | PAID-IN | EXPLORATION | |||||||||||||||
SHARES | AMOUNT | SHARES | CAPITAL | STAGE | TOTAL | |||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||
Share issued for cash | 1 | 1 | - | - | - | 1 | ||||||||||||
Loss for the period | - | - | - | - | (38,624 | ) | (38,624 | ) | ||||||||||
Balance, December 31, 1995 | 1 | 1 | - | - | (38,624 | ) | (38,623 | ) | ||||||||||
Shares issued for cash | 913,000 | 276,500 | - | - | - | 276,500 | ||||||||||||
Loss for the year | - | - | - | - | (210,592 | ) | (210,592 | ) | ||||||||||
Balance, December 31,1996 | 913,001 | 276,501 | - | - | (249,216 | ) | 27,285 | |||||||||||
Loss for the year | - | - | - | - | (74,529 | ) | (74,529 | ) | ||||||||||
Balance, December 31, 1997 | 913,001 | 276,501 | - | - | (323,745 | ) | (47,244 | ) | ||||||||||
Loss for the year | - | - | - | - | (60,148 | ) | (60,148 | ) | ||||||||||
Balance, December 31, 1998 | 913,001 | 276,501 | - | - | (383,893 | ) | (107,392 | ) | ||||||||||
Loss for the year | - | - | - | - | (70,046 | ) | (70,046 | ) | ||||||||||
Balance, December 31, 1999 | 913,001 | 276,501 | - | - | (453,939 | ) | (177,438 | ) | ||||||||||
Loss for the year | - | - | - | - | (66,855 | ) | (66,855 | ) | ||||||||||
Balance, December 31, 2000 | 913,001 | 276,501 | - | - | (520,794 | ) | (244,293 | ) | ||||||||||
Loss for the year | - | - | - | - | (58,749 | ) | (58,749 | ) | ||||||||||
Balance, December 31, 2001 | 913,001 | 276,501 | - | - | (579,543 | ) | (303,042 | ) | ||||||||||
Forgiveness of amounts due to related party | - | - | - | 200,671 | - | 200,671 | ||||||||||||
Loss for the year | - | - | - | - | (59,428 | ) | (59,428 | ) | ||||||||||
Balance, December 31, 2002 | 913,001 | 276,501 | - | 200,671 | (638,971 | ) | (161,799 | ) | ||||||||||
April 25, 2003 – shares issued for mineral property | 600,000 | 60,000 | - | - | - | 60,000 | ||||||||||||
Loss for the year | - | - | - | - | (319,515 | ) | (319,515 | ) | ||||||||||
Balance, December 31, 2003 | 1,513,001 | 336,501 | - | 200,671 | (958,486 | ) | (421,314 | ) | ||||||||||
February 5, 2004 – shares issued for cash at $2.20 per share | 99,750 | 219,450 | - | - | - | 219,450 | ||||||||||||
February 5, 2004 – deferred tax recovery on 10,800 flow-through shares | - | (2,376 | ) | - | - | - | (2,376 | ) | ||||||||||
June 8, 2004 – shares issued for cash at $4.04 per share | 69,800 | 282,331 | - | - | - | 282,331 | ||||||||||||
August 24, 2004 – stock options exercised at $3.30 per share | 10,000 | 32,983 | - | - | - | 32,983 |
The accompanying notes are an integral part of these financial statements.
F-5
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
STATEMENTS OF STOCKHOLDERS’ DEFICIT |
(Stated in Canadian Dollars) |
DEFICIT | ||||||||||||||||||
ACCUMULATED | ||||||||||||||||||
NUMBER | OBLIGATION | ADDITIONAL | DURING | |||||||||||||||
OF | TO ISSUE | PAID-IN | EXPLORATION | |||||||||||||||
SHARES | AMOUNT | SHARES | CAPITAL | STAGE | TOTAL | |||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||
December 31, 2004 – shares issued for cash at $1.80 per share inclusive of 13,250 shares as finders’ fees | 294,800 | 510,876 | - | - | - | 510,876 | ||||||||||||
August 24, 2004 – shares issued for mineral property database at $3.90 per share | 15,000 | 58,788 | - | - | - | 58,788 | ||||||||||||
September 24, 2004 – shares returned on cancellation of escrow | (375,000 | ) | (7,500 | ) | - | 7,500 | - | - | ||||||||||
Stock based compensation | - | - | - | 421,000 | - | 421,000 | ||||||||||||
Loss for the year | - | - | - | - | (956,446 | ) | (956,466 | ) | ||||||||||
Balance, December 31, 2004 | 1,627,351 | 1,431,053 | - | 629,171 | (1,914,932 | ) | 145,292 | |||||||||||
January 6, 2005, refund for overpayment in 2004 private placement | - | (3,000 | ) | - | - | - | (3,000 | ) | ||||||||||
March 21, 2005, shares issued for property acquisition at US $3.00 per share | 12,500 | 45,604 | - | - | - | 45,604 | ||||||||||||
Sept. 22, 2005, flow-through shares Issued at $2.00 per share | 29,500 | 59,000 | - | - | - | 59,000 | ||||||||||||
September, 2005, deferred tax recovery on 29,500 flow-through shares | - | (20,119 | ) | - | - | (20,119 | ) | |||||||||||
Sept. 22, 2005, units issued at US $1.50 per unit | 55,000 | 97,152 | - | - | - | 97,152 | ||||||||||||
Oct. 7, 2005, units issued at US $1.10 per unit | 127,500 | 165,154 | - | - | - | 165,154 | ||||||||||||
Oct.-Dec 2005, shares issued on exercise of stock options at US $1.50 per share | 25,000 | 44,147 | - | - | - | 44,147 | ||||||||||||
Oct. 2005, shares issued on exercise of warrants at $3.00 per share | 5,000 | 15,000 | - | - | - | 15,000 |
The accompanying notes are an integral part of these financial statements.
F-6
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
STATEMENTS OF STOCKHOLDERS’ DEFICIT |
(Stated in Canadian Dollars) |
DEFICIT | ||||||||||||||||||
ACCUMULATED | ||||||||||||||||||
NUMBER | OBLIGATION | ADDITIONAL | DURING | |||||||||||||||
OF | TO ISSUE | PAID-IN | EXPLORATION | |||||||||||||||
SHARES | AMOUNT | SHARES | CAPITAL | STAGE | TOTAL | |||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||
Nov. 17, 2005, units issued at US $1.50 per share inclusive of 20,000 shares finders’ fees | 553,334 | 944,800 | - | - | - | 944,800 | ||||||||||||
Stock based compensation | - | - | - | 163,400 | - | 163,400 | ||||||||||||
Forgiveness of amounts due to related party | - | - | - | 102,327 | - | 102,327 | ||||||||||||
Obligation to issue shares | - | - | 8,638,667 | - | 8,638,667 | |||||||||||||
Loss for the year | - | - | - | (10,068,841 | ) | (10,068,841 | ) | |||||||||||
Balance, December 31, 2005 | 2,435,185 | 2,778,791 | 8,638,667 | 894,898 | (11,983,773 | ) | 328,583 | |||||||||||
January 3, 2006, shares issued for property acquisition at a deemed price of US $1.50 per share | 4,888,889 | 8,638,667 | (8,638,667 | ) | - | - | - | |||||||||||
Jan.-Aug. 2006, shares issued on exercise of stock options at US $1.50 per share | 41,000 | 69,317 | - | - | - | 69,317 | ||||||||||||
February 2006, shares issued on exercise of warrants at $3.00 per share | 74,450 | 223,350 | - | - | - | 223,350 | ||||||||||||
March 7, 2006, shares issued for property acquisition at US $3.60 per share | 12,500 | 51,772 | - | - | - | 51,772 | ||||||||||||
May 24, 2006, shares issued for flow-through private placement at US $2.50 per share | 34,000 | 93,585 | - | - | - | 93,585 | ||||||||||||
Aug.-Nov. 2006, shares issued on exercise of warrants at US $2.50 per share | 95,500 | 269,149 | - | - | - | 269,149 | ||||||||||||
Dec. 2006, shares issued for flow- through private placement at $2.30 per share | 20,000 | 46,000 | - | - | - | 46,000 | ||||||||||||
Stock based compensation | - | - | - | 2,027,384 | - | 2,027,384 | ||||||||||||
Deferred tax recovery on 54,000 flow-through shares | - | (44,667 | ) | - | - | (44,667 | ) | |||||||||||
Loss for the year | - | - | - | - | (2,973,161 | ) | (2,973,161 | ) | ||||||||||
Balance, December 31, 2006 | 7,601,524 | 12,125,964 | - | 2,922,282 | (14,956,934 | ) | 91,312 |
The accompanying notes are an integral part of these financial statements.
F-7
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
STATEMENTS OF STOCKHOLDERS’ DEFICIT |
(Stated in Canadian Dollars) |
DEFICIT | ||||||||||||||||||
ACCUMULATED | ||||||||||||||||||
NUMBER | OBLIGATION | ADDITIONAL | DURING | |||||||||||||||
OF | TO ISSUE | PAID-IN | EXPLORATION | |||||||||||||||
SHARES | AMOUNT | SHARES | CAPITAL | STAGE | TOTAL | |||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||
Balance, December 31, 2006, carried forward | 7,601,524 | 12,125,964 | - | 2,922,282 | (14,956,934 | ) | 91,312 | |||||||||||
March 12, 2007, shares issued for Property option payment at US$3.00 per share deemed price | 50,000 | 175,530 | - | - | - | 175,530 | ||||||||||||
March 27, 2007, shares issued for options exercise at US$1.50 per share | 5,000 | 8,760 | - | - | - | 8,760 | ||||||||||||
March 31, 2007, shares issued for Private Placement at US$1.50 per share net of finder’s fee of $4,537 | 26,669 | 41,647 | - | - | - | 41,647 | ||||||||||||
Stock based compensation | - | - | - | 113,074 | - | 113,074 | ||||||||||||
April 3, 2007, shares issued for Options exercise at US$1.50 per share | 5,000 | 8,507 | - | - | - | 8,507 | ||||||||||||
June 18, 2007, shares issued for debt at US$2.00 per share | 10,000 | 23,306 | - | - | - | 23,306 | ||||||||||||
Loss for the year | - | - | - | - | (598,783 | ) | (598,783 | ) | ||||||||||
Balance, December 31, 2007 | 7,698,193 | 12,383,714 | - | 3,035,356 | (15,555,717 | ) | (136,647 | ) | ||||||||||
Loss for the year | - | - | - | - | (414,840 | ) | (414,840 | ) | ||||||||||
Balance, December 31, 2008 | 7,698,193 | 12,383,714 | - | 3,035,356 | (15,970,557 | ) | (551,487 | ) |
The accompanying notes are an integral part of these financial statements.
F-8
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
STATEMENTS OF STOCKHOLDERS’ DEFICIT |
(Stated in Canadian Dollars) |
DEFICIT | ||||||||||||||||||
ACCUMULATED | ||||||||||||||||||
NUMBER | OBLIGATION | ADDITIONAL | DURING | |||||||||||||||
OF | TO ISSUE | PAID-IN | EXPLORATION | |||||||||||||||
SHARES | AMOUNT | SHARES | CAPITAL | STAGE | TOTAL | |||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||
Balance, December 31, 2008, carried forward | 7,698,193 | 12,383,714 | - | 3,035,356 | (15,970,557 | ) | (551,487 | ) | ||||||||||
Subscriptions received | - | - | 26,375 | - | - | 26,375 | ||||||||||||
June 22, 2009, shares issued for Private Placement at US$0.15 per share | 4,037,500 | 683,057 | - | - | - | 683,057 | ||||||||||||
Transfer derivative liability for warrants granted in the year | - | (339,311 | ) | - | - | - | (339,311 | ) | ||||||||||
Warrants exercise at US$0.20 per share during the year | 353,000 | 74,692 | - | - | - | 74,692 | ||||||||||||
Transfer derivative liability for warrants exercised in the year | - | 59,689 | - | - | - | 59,689 | ||||||||||||
July 24, 2009, shares returned to treasury in exchange for US$85,000 cash payment | (4,500,000 | ) | (95,753 | ) | - | - | - | (95,753 | ) | |||||||||
December 16, 2009, shares issued For amendment to property option agreement at a deemed price of US$0.395 per share | 150,000 | 62,260 | 62,260 | - | - | 124,520 | ||||||||||||
Stock based compensation | - | - | 228,510 | - | 228,510 | |||||||||||||
Loss for the year (restated – Note 13) | - | - | - | - | (1,092,043 | ) | (1,092,043 | ) | ||||||||||
Balance, December 31, 2009 (restated – Note 13) | 7,738,693 | 12,828,348 | 88,635 | 3,263,866 | (17,062,600 | ) | (881,751 | ) |
The accompanying notes are an integral part of these financial statements.
F-9
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
STATEMENTS OF STOCKHOLDERS’ DEFICIT |
(Stated in Canadian Dollars) |
DEFICIT | ||||||||||||||||||
ACCUMULATED | ||||||||||||||||||
NUMBER | OBLIGATION | ADDITIONAL | DURING | |||||||||||||||
OF | TO ISSUE | PAID-IN | EXPLORATION | |||||||||||||||
SHARES | AMOUNT | SHARES | CAPITAL | STAGE | TOTAL | |||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||
Balance, December 31, 2009, carried forward | 7,738,693 | 12,828,348 | 88,635 | 3,263,866 | (17,062,600 | ) | (881,751 | ) | ||||||||||
February 3, 2010, shares issued For amendment to property option agreement at a deemed price of US$0.395 per share | 150,000 | 62,260 | (62,260 | ) | - | - | - | |||||||||||
February 18, 2010, shares issued for Private Placement at US$0.15 per share, net of finance fee | 1,613,162 | 247,214 | (26,375 | ) | - | - | 220,839 | |||||||||||
Transfer derivative liability for warrants granted in the year | - | (125,435 | ) | - | - | - | (125,435 | ) | ||||||||||
Warrants exercise at US$0.20 per share during the year | 766,248 | 159,620 | - | - | - | 159,620 | ||||||||||||
Transfer derivative liability for warrants exercised in the year | - | 134,800 | - | - | - | 134,800 | ||||||||||||
Income for the year | - | - | - | - | 263,194 | 263,194 | ||||||||||||
Balance, December 31, 2010 | 10,268,103 | 13,306,807 | - | 3,263,866 | (16,799,406 | ) | (228,733 | ) |
The accompanying notes are an integral part of these financial statements.
F-10
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
STATEMENTS OF CASH FLOWS |
(Stated in Canadian Dollars) |
June 16, 1995 | ||||||||||||
YEARS ENDED | (inception) | |||||||||||
DECEMBER 31, | to | |||||||||||
December 31, | ||||||||||||
2010 | 2009 | 2008 | 2010 | |||||||||
$ | $ | $ | $ | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
Net Income (Loss ) | 263,194 | (1,092,043 | ) | (414,840 | ) | (16,799,406 | ) | |||||
Adjustments to reconcile net loss to net cash from operating activities: | ||||||||||||
Depreciation | 382 | 515 | 699 | 6,677 | ||||||||
Stock based compensation | - | 228,510 | - | 2,953,368 | ||||||||
Shares issued for mineral property acquisition | - | 62,260 | - | 9,092,621 | ||||||||
Obligation to issue for mineral property acquisition | - | 62,260 | - | - | ||||||||
Shares issued for debt | - | - | - | 23,306 | ||||||||
Deferred tax recovery | - | - | - | (67,162 | ) | |||||||
Fair value adjustment of derivative liabilities | (634,555 | ) | 364,360 | - | 270,195 | |||||||
Changes in non-cash operating working capital items: | ||||||||||||
Advances and prepaid expenses | (5,207 | ) | (293 | ) | - | (6,584 | ) | |||||
Other receivable | (2,454 | ) | 3,342 | 3,853 | (11,743 | ) | ||||||
Accounts payable | 18,944 | (5,140 | ) | 99,844 | 153,212 | |||||||
NET CASH FLOWS USED IN OPERATINGACTIVITIES | (359,696 | ) | (376,229 | ) | (310,444 | ) | (4,863,646 | ) | ||||
CASH FLOWS USED IN INVESTING ACTIVITIES | ||||||||||||
CMKM settlement | - | (95,753 | ) | - | (95,753 | ) | ||||||
Equipment | - | - | - | (7,845 | ) | |||||||
NET CASH FLOWS USED IN INVESTINGACTIVITIES | - | (95,753 | ) | - | (103,598 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
Loan payable | (851 | ) | 26,862 | - | 26,011 | |||||||
Due to related parties | (18,907 | ) | (337,686 | ) | 309,099 | 375,157 | ||||||
Net proceeds on sale of common stock | 406,834 | 757,749 | - | 4,569,293 | ||||||||
Obligation to issue shares | (26,375 | ) | 26,375 | - | - | |||||||
NET CASH FLOWS FROM FINANCING ACTIVITIES | 360,701 | 473,300 | 309,099 | 4,970,461 | ||||||||
INCREASE (DECREASE) IN CASH | 1,005 | 1,318 | (1,345 | ) | 3,217 | |||||||
CASH, BEGINNING OF YEAR | 2,212 | 894 | 2,239 | - | ||||||||
CASH, END OF YEAR | 3,217 | 2,212 | 894 | 3,217 |
SUPPLEMENTAL CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING ACTIVITIES(Note 10)
The accompanying notes are an integral part of these financial statements.
F-11
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
YEARS ENDED DECEMBER 31, 2010 AND 2009 |
(Stated in Canadian Dollars) |
1. | ORGANIZATION AND BASIS OF PRESENTATION | |
Organization | ||
The Company was incorporated in the Province of British Columbia, Canada on June 16, 1995. | ||
Exploration Stage Activities | ||
The Company has not produced any revenues from its principal business or commenced significant commercial operations and is considered an exploration stage company as defined by SEC Guide 7 with reference to Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) topic 915. In the exploration stage, management devotes most of its activities to conducting exploratory programs and developing business plans. | ||
Going Concern Uncertainty | ||
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. This contemplates that assets will be realized and liabilities and commitments satisfied in the normal course of business. The Company has accumulated a net loss of $16,799,406 since its inception. The Company has no sources of revenue. The continuance of the Company is dependent upon its ability to obtain additional financing as needed to pursue new business opportunities and ultimately upon generating profitable operations from its mineral property exploration and development activities. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management has plans to seek additional capital through private placements of its common stock and loans from related parties to fund expenditures for the next year. Although there are no assurances that management’s plans will be realized, management believes that the Company will be able to continue operations in the future. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue as a going concern. | ||
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) . The Company’s functional and reporting currency is the Canadian dollar. The significant accounting policies summarized below: | ||
a) | Accounting Standards Codification | |
On October 1, 2009, the Company adopted changes issued by the FASB to the authoritative hierarchy of GAAP. These changes establish the ASC as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates (“ASU”). ASU will not be authoritative in their own right as they will only serve to update the ASC. These changes do not change GAAP. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the Company’s financial statements. |
F-12
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
YEARS ENDED DECEMBER 31, 2010 AND 2009 |
(Stated in Canadian Dollars) |
2. | SIGNIFICANT ACCOUNTING POLICIES(continued) | |
b) | Basis of Presentation | |
These financial statements include the accounts of the Company and its wholly owned inactive subsidiary, Entourage USA Inc. which was incorporated in the State of Nevada on November 3, 2003. The subsidiary’s charter was not renewed and was allowed to lapse in 2009. | ||
c) | Cash and Cash Equivalents | |
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As at December 31, 2010 and 2009 the Company has only cash on deposit. | ||
d) | Mineral Claim Payments and Exploration Expenditures | |
The Company is engaged in the acquisition and exploration of mineral properties. Mineral property exploration costs are expensed as incurred. Acquisition costs are initially capitalized when incurred. The Company assesses the carrying cost for impairment under the FASB ASC topic 360 at each fiscal quarter end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs subsequently incurred to develop such properties are capitalized. Carrying value will be amortized using the units-of-production method over the established life of the proven and probable reserves. If mineral properties are subsequently abandoned or impaired, any non-recoverable amount will be charged to operations. | ||
e) | Use of Estimates | |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions of future events that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the reporting period. Significant areas requiring the use of management estimates relate to allocations of expenditures to resource property interests, mineral property carrying values, useful lives of equipment for depreciation and amortization, asset impairment tests, and determination of fair value transactions involving common stock, warrants, options, derivative liabilities, deferred tax balances and valuation allowances. Financial results as determined by actual events could differ from those estimates. | ||
f) | Equipment | |
Equipment is stated at cost less accumulated depreciation. Depreciation is calculated using the declining balance method as follows: |
Office furniture | 20% on declining balance basis |
Computer equipment | 30% on declining balance basis |
g) | Environmental Costs | |
Environmental expenditures that relate to current operations are charged to operations or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are charged to operations. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company’s commitments to plan of action based on the then known facts. |
F-13
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
YEARS ENDED DECEMBER 31, 2010 AND 2009 |
(Stated in Canadian Dollars) |
2. | SIGNIFICANT ACCOUNTING POLICIES(continued) | |
h) | Foreign Currency Translation | |
The functional currency of the Company is Canadian dollars and these financial statements are presented in Canadian dollars unless otherwise noted. Foreign denominated monetary assets and liabilities are translated to their Canadian dollar equivalents using foreign exchange rates in effect at the balance sheet date. Non- monetary items are translated at historical exchange rates, except for items carried at market value, which are translated at the rate of exchange in effect at the balance sheet date. Revenues and expenses are translated at average rates of exchange during the year. Exchange gains and losses arising on foreign currency translation are included in the determination of operating results for the period. | ||
i) | Financial Instruments and Risk Management | |
The Company’s financial instruments consist of cash, accounts payable, loan payable and amounts due to related parties. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair value of the Company’s current assets and current liabilities are estimated by management to approximate their carrying values based on the immediate or short-term maturity of these instruments. | ||
Foreign Exchange Risk | ||
The Company is subject to foreign exchange risk for purchases denominated in foreign currencies. The Company operates outside of the U.S. primarily in Canada and Brazil and is exposed to foreign currency risk due to the fluctuation between the currency in which the Company operates and the United States Dollars. Foreign currency risk arises from the fluctuation of foreign exchange rates and the degree of volatility of these rates relative to the United States dollar. | ||
Fair Value of Financial Instruments | ||
The Company accounts for the fair value measurement and disclosure of financial instruments in accordance with FASB ASC topic 820 which requires a publicly traded company to include disclosures about the fair value of its financial instruments. Such disclosures include the fair value of all financial instruments, for which it is practicable to estimate that value, whether recognized or not in the statement of financial position. The related carrying amount of these financial instruments and the method(s) and significant assumptions used to estimate the fair value are also disclosed (Note 12). |
F-14
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
YEARS ENDED DECEMBER 31, 2010 AND 2009 |
(Stated in Canadian Dollars) |
2. | SIGNIFICANT ACCOUNTING POLICIES(continued) |
j) | Income Taxes | ||
Income taxes are accounted for under the asset and liability method as stipulated by ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis together with information on operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities or a change in tax rate is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced to estimated amounts to be realized by the use of a valuation allowance. A valuation allowance is applied when, in management’s view, it is more likely than not that such deferred tax will not be utilized. | |||
In the event that an uncertain tax position exists in which the Company could incur income taxes, the Company would evaluate whether there is a probability that the uncertain tax position taken would be sustained upon examination by the taxing authorities. Reserves for uncertain tax position would then be recorded if the Company determined it is probable that a position would not be sustained upon examination or if a payment would have to be made to a taxing authority and the amount is reasonably estimable. As of December 31, 2010, the Company does not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authorities. | |||
k) | Stock Based Compensation | ||
The Company has a stock-based compensation plan which is described more fully in Note 7. The Company measures the compensation cost of stock options and other stock-based awards to employees and directors at fair value at the grant date and recognizes compensation expense over the requisite service period for awards expected to vest. | |||
Except for transactions with employees and directors, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Additionally, the Company has determined that the dates used to value the transaction are either: | |||
(1) | The date at which a commitment for performance by the counter party to earn the equity instruments is established; or | ||
(2) | The date at which the counter party’s performance is complete. |
F-15
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
YEARS ENDED DECEMBER 31, 2010 AND 2009 |
(Stated in Canadian Dollars) |
2. | SIGNIFICANT ACCOUNTING POLICIES(continued) | |
l) | Basic and Diluted Loss Per Share | |
Basic net loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the reporting period. Diluted net income per common share includes the dilution that could occur upon the exercise of options and warrants to acquire common stock, computed using the treasury stock method which assumes that the increase in the number of shares is reduced by the number of shares that the Company could have repurchased with the proceeds from the exercise of options and warrants (which are assumed to have been made at the average market price of the common shares during the reporting period). | ||
On January 1, 2009, the Company adopted changes issued by the FASB to the calculation of earnings per share. These changes state that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method for all periods presented. The adoption of this change had not impact on the Company’s basic or diluted net loss per share. | ||
Potential shares of common stock are excluded from the diluted loss per share computation in net loss periods as their inclusion would be anti-dilutive. | ||
At December 31, 2010 and 2009, the Company had 10,268,103 and 7,738,693, shares of common stock issued and outstanding, respectively, 1,613,162 and 3,684,500 warrants outstanding, respectively and 720,000 and 720,000 options outstanding, respectively. | ||
m) | Recently adopted accounting policies | |
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial statements. | ||
3. | EQUIPMENT |
2010 | 2009 | ||||||||||||||||||
Cost | Accumulated | Net Book | Accumulated | Net Book | |||||||||||||||
depreciation | Value | Cost | depreciation | Value | |||||||||||||||
$ | $ | $ | $ | $ | $ | ||||||||||||||
Office furniture | 2,812 | 2,149 | 664 | 2,812 | 1,982 | 830 | |||||||||||||
Computer equipment | 5,033 | 4,530 | 503 | 5,033 | 4,314 | 719 | |||||||||||||
7,845 | 6,679 | 1,167 | 7,845 | 6,296 | 1,549 |
F-16
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
YEARS ENDED DECEMBER 31, 2010 AND 2009 |
(Stated in Canadian Dollars) |
4. | MINERAL EXPLORATION PROPERTIES |
(a) | The Pires Gold Project, Brazil |
On June 17, 2009, and as amended on November 13, 2009, the Company signed a definitive Mineral Property Option agreement with Infogeo Servicos E Locacoes (“Infogeo”), a private arms length Brazilian company, whereby the Company received an option to acquire up to a 100% interest in the Pires Gold Project (“Pires” or the “Pires Property”), pursuant to the following terms: | |
To earn a 40% interest in the property (First Milestone), in year one: |
(i) | pay to the Optionor (or its nominee) USD $50,000 as follows: | ||
(A) | USD $25,000 within seven days of the execution of this Agreement (paid), and | ||
(B) | USD$25,000 within 45 days of the execution of this Agreement (paid); and | ||
(ii) | expend not less than USD $300,000 (the “First Target”) in exploration expenditures on the property on or before May 31, 2010 (incurred). |
To earn an additional 20% (60 % total) interest in the property (Second Milestone), in year two:
(i) | paying USD $100,000 to the Optionor (or its nominee) on or before January 16, 2010 (paid), and | |
(ii) | expend not less than USD $300,000 (less the amount by which any exploration expenditures pursuant to item (ii) of the First Milestone exceeded the First Target) (the “Second Target”) in exploration expenditures on the property before January 16, 2011 (Note 14). |
To earn an additional 15% (75% Total) interest in the property option (Third Milestone), in year three:
(i) | issue to the Optionor 100,000 common shares of the Company on or before January 16, 2011, and | |
(ii) | expend up to USD $1,000,000 to complete and submit a final report by January 16, 2012, (Any excess expended in years one and two is to be applied against this $1,000,000 expenditure requirement). |
Term extended (Note 14).
Option to Purchase 25% (100% total) (Upon completion of the Third Milestone)
Purchase up to 20% of the interest in the property, by paying the Optionor USD$1,000,000 for each 5% incremental interest in the Property, and USD $2,000,000 for the remaining 5% interest.
Pursuant to the amendment on November 13, 2009, the Company agreed to issue a total of 300,000 (150,000 issued prior to December 31, 2009 and 150,000 issued prior to December 31, 2010) common shares of the Company in return for extension of the Year 1 exploration expenditures requirement. The Company recorded $62,260 for 150,000 shares issued during the year ended December 31, 2009 in capital stock and $62,260 for remaining 150,000 shares as an obligation to issue shares as at December 31, 2009, and the shares were issued during the year ended December 31, 2010 The shares were valued at $0.40 (US$0.42) per share (Note 7).
F-17
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
YEARS ENDED DECEMBER 31, 2010 AND 2009 |
(Stated in Canadian Dollars) |
4. | MINERAL PROPERTY INTERESTS(continued) | |
(a) | The Pires Gold Project, Brazil (continued) | |
On February 18, 2010, the Company signed a Letter of Intent (“LOI”) with Ansell Capital Corp., (“Ansell”) a TSX Venture listed company, pursuant to which Ansell proposed to acquire all of the outstanding and issued shares of the Company through a plan of arrangement (the “Plan of Arrangement”) under the British Columbia Corporations Act. The terms of the Arrangement will provide for a one to one common share, option and warrant swap between Ansell and the Company’s shareholders. | ||
Pursuant to the terms of the LOI, Ansell agreed to: (a) incur no less than US $200,000 (incurred) to be jointly administered by Ansell and the Company, which funds to be spent on qualifying expenditures to satisfy the Company’s work commitments in respect of the Pires Property work commitment; and (b) advance the Company $75,000 (received) to pay certain agreed payables prior to the execution of the Definitive Agreement for a 25% interest in Entourage’s First Milestone of the Pires Gold project. The Company recorded the $75,000 payment received in 2010 as a reduction of mineral property costs. The Company has the right to re- purchase the 25% interest by paying back all advances by Ansell for a period of 12 months after termination of the LOI. On July 14, 2010 the Company was notified by Ansell that it would not be proceeding with the Plan of Arrangement. | ||
(b) | Doran Property, Quebec |
i) | By agreement dated March 15, 2005, the Company obtained an option to acquire a 100% interest in certain mineral properties in south-central Quebec (the “Doran Property”) in exchange for cash payments of $220,000, the issuance of 75,000 common shares and the expenditure of $1,000,000 on the Doran Property over three years, as follows: | ||
a. | $35,000 and 12,500 common shares within ten business days of the date of approval of the agreement (paid and issued); | ||
b. | $35,000 and 12,500 common shares on or before March 15, 2006 (paid and issued); and expending $200,000 on or before March 15, 2006 (incurred); | ||
c. | $75,000 (paid) and 25,000 common shares on or before March 15, 2007 (issued); and expending $300,000 on or before March 15, 2007 (incurred by Abbastar Holdings Inc. (“Abbastar”) – Note 4b iii); and | ||
d. | $75,000 (paid by Abbastar – Note 4b iii) and 25,000 common shares on or before March 15, 2008 (issued); and expend an additional $500,000 on or before March 15, 2008 (incurred by Abbastar – Note 4b iii). | ||
All the above terms have been met and the Company earned 100% interest of the property. | |||
ii) | The property interest is subject to a 2.5% Net Smelter Return (NSR). The Company has the right to purchase up to three-fifths of the NSR, or 1.5%, for $1,750,000. |
F-18
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
YEARS ENDED DECEMBER 31, 2010 AND 2009 |
(Stated in Canadian Dollars) |
4. | MINERAL PROPERTY INTERESTS(continued) |
(b) | Doran Property, Quebec (continued) |
iii) | On February 13, 2007 the Company entered into an option agreement (the “Option”) with Abbastar, a TSX Venture Exchange listed company, whereby Abbastar may earn up to a 70% interest in the Doran Property by making a one time cash payment of $100,000 CDN (received) Abbastat incurring exploration expenditures of $5,000,000 on the Doran Property over 4 years (The Company retains the right to purchase the NSR on the Doran Property). The terms of the Option provide that Abbastar may earn its interest in the Doran property as follows: |
a. | 20% interest by spending $500,000 in exploration costs on or before February 13, 2008 (incurred); | |
b. | 15% additional interest by expending an additional $1,000,000 on or before February 13, 2009 (incurred); | |
c. | 15% additional interest by expending an additional $1,500,000 on or before February 13, 2010; and | |
d. | 20% additional interest by expending an additional $2,000,000 on or before February 13, 2011. |
As of December 31, 2010, Abbastar had earned a 35% interest in the Doran property but, has allowed the balance of their option to expire. | |
5. | LOAN PAYABLE |
On August 4, 2009, an arms length party loaned the Company US$25,000 for a period of 90 days, at 12% per annum. The loan was unsecured. As further consideration for the loan, the Company granted the lender 100,000 stock options, exercisable at US$0.35 each for a period of five years. The fair value of the stock option grant was recorded as finance expense of $15,088. The principle and interest was repaid in 2010. | |
On September 16, 2010, an arms length party loaned the Company US$25,000 for a period of 90 days, at 12% per annum. The loan is unsecured. The loan was subsequently extended to June 16, 2011. As at December 31, 2010, accrued interest of $876 was included in the loan payable. | |
6. | DERIVATIVE LIABILITIES |
Derivate liabilities consist of warrants that were originally issued in private placements that have exercise prices denominated in United States dollars (Note 13). The fair value of these warrants as at December 31, 2010 and 2009 is as follows: |
Exercise | 2010 | 2009 | ||||||||
price | ||||||||||
3,684,500 warrants expiring on Jun 22, 2010 | US$0.20 | $ | Nil | $ | 643,982 | |||||
1,613,162 warrants expiring on Jan 25, 2011 | US$0.25 | 62 | - | |||||||
$ | 62 | $ | 643,982 |
F-19
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
YEARS ENDED DECEMBER 31, 2010 AND 2009 |
(Stated in Canadian Dollars) |
6. | DERIVATIVE LIABILITIES(continued) |
The fair value of these warrants was determined using the Black-Scholes option pricing model, and adjusted for market factor, using the following assumptions: |
2010 | 2009 | ||||||
Volatility | 155% - 467% | 155% - 507% | |||||
Dividend yield | - | - | |||||
Risk-free interest rate | 0.20% - 0.28% | 0.20% - 0.46% | |||||
Expected life | 0.07 yrs – 1 yrs | 0.47 yrs – 1 yrs |
7. | CAPITAL STOCK | ||
a) | Issued Shares | ||
Effective March 6, 2009, the Company completed a reverse split of its common shares at a ratio of one new share for every ten old share held. All previous references to shares of common stock, weighted average common share outstanding, stock options and warrants have been restated to give effect to the 1:10 reverse stock split unless otherwise stated. | |||
During the year ended December 31, 2009, the Company closed a private placement of 4,037,500 units (at a price of US $0.15 per unit) for gross proceeds of $653,057 (US$605,625). Each unit consisted of one common share and one share purchase warrant exercisable on or before June 12, 2010 at a price of US $0.20 per share. The estimated fair value of the warrants was established upon issuance at $339,311 using the Black Scholes option pricing model using a 1 year term, an expected volatility of 507% and a risk free interest rate of 0.46%. The fair value of the warrants is included in Derivative liabilities. | |||
During the year ended December 31, 2009, the Company settled its outstanding legal disputes with CMKM Diamonds Inc. (“CMKM”) and 101047025 Saskatchewan Ltd ("1010") . As a result of the settlement, CMKM returned 4,500,000 common shares of the Company in exchange for a cash payment of $95,753 (US $85,000). The shares were returned to treasury and cancelled (Note 11). | |||
During the year ended December 31, 2009, 353,000 shares were issued pursuant to the exercise of warrants at US$0.20 per share resulting in $59,689 being transferred from derivative liabilities to Capital Stock. | |||
Pursuant to the amendment to the Mineral Property Option agreement for the Pires Gold Project on November 13, 2009 (Note 4), the Company agreed to issue a total of 300,000 common shares for extension of the year 1 exploration expenditures requirement. Of this 300,000 common shares, 150,000 were issued during the year ended December 31, 2009 with a fair value of $62,260. The remaining 150,000 common shares were recorded as obligation to issue shares as at December 31, 2009 and were issued during the year ended December 31, 2010. | |||
During the year ended December 31, 2010, the Company closed a private placement of 1,613,162 units (at a price of US $0.15 per unit) for gross proceeds of $247,214 (US$241,974). Each unit consisted of one common share and one share purchase warrant exercisable on or before January 25, 2011 at a price of US $0.25 per share. The estimated fair value of the warrants is $125,435 using the Black Scholes option pricing model using a 1 year term, an expected volatility of 467% and a risk free interest rate of 0.28%. The fair value of the warrants is included in Derivative liabilities. The Company paid a total $6,868 for legal fees which have been recorded as share issue costs. | |||
During the year ended December 31, 2010, 766,248 shares were issued pursuant to the exercise of warrants at US$0.20 per share resulting in $134,800 being transferred from derivative liabilities to Capital Stock. |
F-20
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
YEARS ENDED DECEMBER 31, 2010 AND 2009 |
(Stated in Canadian Dollars) |
7. | CAPITAL STOCK(continued) | |
b) | Stock Options | |
In February 2004, the Company implemented a Stock Option Plan (“SOP”) for its officers, directors and employees to allow for up to 160,000 share purchase options to be granted at US $2.50 per share, for a period not to exceed five years. In November 2004, the SOP was amended to provide for the issuance of up to 220,000 incentive stock options to directors, officers, employees and non-investor relations consultants. During January 2006, the Company increased the stock option plan from 220,000 shares to 720,000 shares. | ||
Activity under the SOP is summarized as follows: |
Weighted | ||||||||||
Options | Weighted Average | Average | ||||||||
Outstanding | Exercise Price (U.S. $) | Life | ||||||||
Balance, December 31, 2008 | 639,000 | 2.25 | 0.09 | |||||||
Options granted during the year | 720,000 | 0.35 | 5.00 | |||||||
Options expired during the year | (639,000 | ) | 2.25 | - | ||||||
Balance, December 31, 2009 and 2010 | 720,000 | 0.35 | 3.60 |
During the year ended December 31, 2009 the Company granted a total of 720,000 stock options at an exercise price of US$0.35 per share for a five-year term. At December 31, 2010 these 720,000 stock options were outstanding. The fair value of the stock option grant was calculated using the Black-Scholes option pricing model with the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 336%, (3) risk free interest rate of 3% and, (4) expected life of 5 years. Total expenses of $Nil (2009 -$228,510, 2008 - $Nil) was recorded as stock-based compensation, $Nil (2009 - $213,422, 2008 - $Nil) was related to consulting and $Nil (2009 - $15,088, 2008 - $Nil) was related to financing fee (Note 5).
The following table summarizes information concerning outstanding and exercisable common stock options under the SOP as at December 31, 2010:
Remaining | Number of | ||||
Contractual | Weighted | Options | Weighted | ||
Exercise | Options | Life | Average | Currently | Average Exercise |
Price | Outstanding | (in years) | Exercise Price | Exercisable | Price |
U.S. $0.35 | 720,000 | 3.6 | U.S. $0.35 | 720,000 | U.S. $0.35 |
F-21
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
YEARS ENDED DECEMBER 31, 2010 AND 2009 |
(Stated in Canadian Dollars) |
7. | CAPITAL STOCK(continued) | |
c) | Warrants | |
On June 12, 2009, pursuant to a private placement, the Company issued 4,037,500 warrants at an exercise price of US$0.20 per share of which 2,918,252 warrants expired unexercised on June 12, 2010. | ||
On January 25, 2010, pursuant to a private placement, 1,613,162 warrants at an exercise price of US$0.25 per share were issued. Each warrant is exchangeable for one common share and expires on January 25, 2011. (Note 14) |
Weighted Average | Weighted | |||||||||
Warrants | Exercise Price | Average | ||||||||
Outstanding | (US$) | Life | ||||||||
Balance December 31, 2008 | - | - | - | |||||||
Issued during the year | 4,037,500 | 0.20 | - | |||||||
Exercised during the year | (353,000 | ) | 0.20 | - | ||||||
Balance December 31, 2009 | 3,684,500 | 0.20 | 0.45 | |||||||
Issued during the year | 1,613,162 | 0.25 | - | |||||||
Exercised during the year | (766,248 | ) | 0.20 | - | ||||||
Expired during the year | (2,918,252 | ) | 0.20 | - | ||||||
Balance December 31, 2010 | 1,613,162 | 0.25 | 0.07 |
d) | Obligation to issue shares | ||
The balance as at December 31, 2009 included the followings: | |||
i. | Subscription proceeds of $26,375 for private placement completed after December 31, 2009; and | ||
ii. | 150,000 common shares issued during the year ended December 31, 2010 valued at $62,260 related to an amendment to property option agreement (Note 4). |
8. | RELATED PARTY TRANSACTIONS |
Amounts payable to related parties as of December 31, 2010 of $72,159 (2009 - $91,066) is owing to directors, former directors, to a company controlled by an officer and to a public company with directors in common, for management fees, consulting fees and for expenses paid on behalf of the Company. The amounts are non-interest bearing, unsecured, and have no fixed terms of repayment. | |
During the year ended December 31, 2010, the Company incurred $70,500 (2009 - $78,000; 2008 - $300,000) in management fees to its directors and officers. | |
The above transactions have been recorded at exchange amount being the amount of consideration established and agreed to by the related parties. |
F-22
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
YEARS ENDED DECEMBER 31, 2010 AND 2009 |
(Stated in Canadian Dollars) |
9. | INCOME TAXES |
The actual income tax provisions differ from the expected amounts calculated by applying the Canadian combined federal and provincial corporate income tax rates to the Company’s loss before income taxes. The components of these differences are as follows: |
2010 | 2009 | 2008 | ||||||||
Restated - Note | ||||||||||
13 | ||||||||||
$ | $ | $ | ||||||||
Income (loss) before income tax | 263,194 | (1,092,043 | ) | (414,840 | ) | |||||
Combined statutory rate | 29% | 30% | 31% | |||||||
Expected income tax expense (recovery) | 75,000 | (328,000 | ) | (129,000 | ) | |||||
Increase (decrease) resulting from: | ||||||||||
Change in valuation allowance | (70,000 | ) | 145,000 | (31,000 | ) | |||||
Expiring loss carry forwards | - | 18,000 | 18,000 | |||||||
Impact of tax rate changes | (10,000 | ) | 180,000 | 142,000 | ||||||
Permanent differences | 5,000 | (15,000 | ) | - | ||||||
Future income tax provision (recovery) | - | - | - |
The Company’s tax-effected deferred income tax assets are estimated as follows:
2010 | 2009 | 2008 | ||||||||
$ | $ | $ | ||||||||
Mineral properties tax base in excess of carrying value | 2,797,000 | 2,758,000 | 2,785,000 | |||||||
Non-capital losses available | 536,000 | 482,000 | 469,000 | |||||||
Derivative financial liability | - | 161,000 | - | |||||||
Other | 4,000 | 6,000 | 8,000 | |||||||
Potential deferred income tax assets | 3,337,000 | 3,407,000 | 3,262,000 | |||||||
Less: valuation allowance | (3,337,000 | ) | (3,407,000 | ) | (3,262,000 | ) | ||||
Net Deferred Income Tax Asset | - | - | - |
As the criteria for recognizing deferred income tax assets have not been met due to the uncertainty of realization, a valuation allowance of 100% has been recorded for the current and prior year.
The Company has approximately $2,145,000 (2009 - $1,928,000) of non-capital losses which can be applied to reduce future taxable income, expiring as follows:
Year of Expiry | Amount | ||
$ | |||
2014 | 212,000 | ||
2015 | 211,000 | ||
2026 | 339,000 | ||
2027 | 429,000 | ||
2028 | 422,000 | ||
2029 | 242,000 | ||
2030 | 217,000 | ||
2,145,000 |
The Company has certain resource related deductions and other losses of approximately $11,189,000 (2009 -$11,033,000) which may be available to be offset against future taxable income in Canada. The realization of these tax balances in future years will be recorded as an adjustment to the valuation allowance and corporate tax provision in the year realized.
F-23
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
YEARS ENDED DECEMBER 31, 2010 AND 2009 |
(Stated in Canadian Dollars) |
10. | SUPPLEMENTAL CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING ACTIVITIES |
Year ended | Year ended | Year ended | ||||||||
December 31, 2010 | December 31, 2009 | December 31, 2008 | ||||||||
Cash paid during the year for: | $ | $ | $ | |||||||
Interest | 1,877 | - | 529 | |||||||
Income taxes | - | - | - |
During the year ended December 31, 2010, the Company:
a) | issued 150,000 shares with a fair value of $62,260 under the option agreement to acquire an interest in the Pires Gold Project (Note 4) which was recorded as obligation to issue shares as at December 31, 2009. |
During the year ended December 31, 2009, the Company:
b) | issued 150,000 shares a) above, with a fair value of $62,260 under the option agreement to acquire an interest in the Pires Gold Project; and | |
c) | issued 100,000 stock options, with a fair value of $15,088, in consideration for a loan payable; and | |
d) | issued 620,000 stock options, with a fair value of $213,422. |
There were no non-cash transactions during the year ended December 31, 2008.
11. | SETTLEMENT |
The Company filed a Writ of Summons and Statement of Claim against CMKM and 1010 in the Supreme Court of British Columbia On August 27, 2007 seeking to have the Court set aside two property agreements entered into. During the year ended December 31, 2009 the Company settled its outstanding legal disputes with CMKM and 1010. As a result of the settlement, CMKM returned 4,500,000 common shares of the Company in exchange for a cash payment of US $85,000 (paid). The shares were returned to treasury and cancelled. The Company also settled its claims with 1010 and agreed to return the certain mineral properties in return for the withdrawal of all claims against the Company by 1010. | |
12. | FINANCIAL INSTRUMENTS |
The FASB ASC topic 820 on fair value measurement and disclosures establishes three levels of inputs that may be used to measure fair value: quoted prices in active markets for identical assets or liabilities (referred to as Level 1), observable inputs other than Level 1 that are observable for the asset or liability either directly or indirectly (referred to as Level 2), and unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities (referred to as Level 3). |
F-24
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
YEARS ENDED DECEMBER 31, 2010 AND 2009 |
(Stated in Canadian Dollars) |
12. | FINANCIAL INSTRUMENTS(continued) |
The carrying values and fair values of the Company’s financial instruments are as follows: |
DECEMBER 31, 2010 | DECEMBER 31, 2009 | |||||||||||||||
CARRYING | FAIR | CARRYING | FAIR | |||||||||||||
LEVEL | VALUE | VALUE | VALUE | VALUE | ||||||||||||
Financial assets | ||||||||||||||||
Cash | 1 | $ | 3,217 | $ | 3,217 | $ | 2,212 | $ | 2,212 | |||||||
Financial liabilities | ||||||||||||||||
Accounts payable | 2 | $ | 153,212 | $ | 153,212 | $ | 134,268 | $ | 134,268 | |||||||
Loan payable | 2 | 26,011 | 26,011 | 26,862 | 26,862 | |||||||||||
Due to related parties | 2 | 72,159 | 72,159 | 91,066 | 91,066 | |||||||||||
Derivative liabilities | 3 | 62 | 62 | 643,982 | 643,982 | |||||||||||
$ | 251,444 | $ | 251,444 | $ | 896,178 | $ | 896,178 |
13. | RESTATEMENT |
The financial statements for the year ended December 31, 2009 have been restated to correct the accounting for warrants that were issued in connection with a previous private placement. The exercise price of these warrants is denominated in United States dollars, which differs from the Company’s functional currency (Canadian dollars) and therefore these warrants cannot be considered to be indexed to the Company’s own stock. Accordingly the fair value of the warrants must be accounted for as a derivative liability with changes in fair value recorded in the statement of operations. | |
The effect of the resulting adjustments on the company’s financial statements for the year ended December 31, 2009 is as follows: |
Balance sheet as at December 31, 2009 | ||||||||||
As previously reported | Adjustment | As restated | ||||||||
Derivative liability | $ | - | $ | 643,982 | $ | 643,982 | ||||
Share capital | $ | 13,107,970 | $ | (279,622 | ) | $ | 12,828,348 | |||
Deficit | $ | (16,698,240 | ) | $ | (364,360 | ) | $ | (17,062,600 | ) |
Statement of operations for the year ended December 31, 2009 | ||||||||||
As previously reported | Adjustment | As restated | ||||||||
Net loss | $ | 727,683 | $ | 364,360 | $ | 1,092,043 | ||||
Fair value adjustment on derivative liability | $ | - | $ | 364,360 | $ | 364,360 | ||||
Loss per common share – basic and diluted | $ | (0.11 | ) | $ | (0.06 | ) | $ | (0.17 | ) |
The Fair value adjustment on derivative liability has no net effect on in the Company’s statement of cash flows.
Income tax notes for the reconciliation of the reported income taxes to the amounts applying statutory rates | ||||||||||
As previously reported | Adjustment | As restated | ||||||||
Loss before income taxes | $ | 727,683 | $ | 364,360 | $ | 1,092,043 | ||||
Expected income tax recovery | $ | 218,000 | $ | 109,000 | $ | 327,000 | ||||
Permanent differences and others | $ | 69,000 | $ | 109,000 | $ | 178,000 |
F-25
ENTOURAGE MINING LTD. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
YEARS ENDED DECEMBER 31, 2010 AND 2009 |
(Stated in Canadian Dollars) |
14. | SUBSEQUENT EVENTS | |
Subsequent to December 31, 2010, the Company: | ||
a) | received an extension from the Pires Gold Project optionor where the terms of its Second Milestone work commitment have been extended from January 16, 2011 to November 1, 2011 and the Third Milestone work commitment from January 16, 2012 to November 1, 2012 for consideration of US$25,000 to be paid no later than July 15, 2011 (Note 4); | |
b) | issued 100,000 shares with a fair value of US$15,000 under the terms of the option agreement to acquire an interest in the Pires Gold Project (Note 4); | |
c) | the expiry date of the warrants was extended one year to January 25, 2012 with no other changes to the terms of the warrants. | |
Subsequent events were reviewed to the date the financial statements were issued, and management has determined there are no material transactions that have not been disclosed. |
F-26
ITEM 19. | EXHIBITS |
Exhibit No. | Exhibit |
1.1 | Memorandum and Articles of Incorporation and Amendments thereto (1) |
4.1 | Agreement dated March 17, 2003, between the Company and the YK Group (1) |
4.2 | Agreement dated June 1, 2004 between the Company and Goodsprings Development Corp. whereby the Company can acquire up to a 100% interest in and to the Black Warrior Project (2) |
4.3 | Agreement dated March 15, 2005 between Fayz Yacoub and the Company whereby the Company can acquire a 100% interest in the Doran Uranium Property (2) |
4.4 | Agreement dated April 7, 2005 between Star Uranium Corp. (formerly known as United Carina Resources Corp.) and the Company whereby the Company can acquire a 20% right in the Hatchet Lake Property (2) |
4.5 | Agreement dated April 21, 2005 between the Company and Star Uranium Corp. (formerly known as United Carina Resources Corp.) whereby Star may acquire up to a 10% interest in the Company’s Black Warrior Project (2) |
4.6 | Agreement dated April 21, 2005 between the Company and CMKM Diamonds, Inc. whereby CMKM may acquire up to a 10% interest in the Company’s Black Warrior Project (2) |
4.7 | Agreement between the Company and Star Uranium dated October 21, 2005 whereby the Company may acquire a 50% interest in the Hatchet Lake (3) |
4.8 | Assignment Agreement between the Company and CMKM Diamonds Inc. whereby the Company may acquire any and all interest of CMKM Diamonds Inc.’s interest in the Hatchet Lake Property (3) |
4.9 | Agreement between the Company and 101047025 Saskatchewan Ltd. whereby the Company may acquire an 80% interest in the Smeaton Property (4) |
4.10 | Agreement between the Company and Goodsprings Development Corp. whereby Goodsprings extended the terms of the Company’s June 1, 2006 property payment as four quarterly payments (5) |
4.11 | Entourage-101047025 Saskatchewan Ltd. claim file for the Smeaton Property (5) |
4.12 | Smeaton Property location map with legend (5) |
4.13 | Hatchet Lake Property map with legend (5) |
4.14 | Revised Smeaton claim file (6) |
4.15 | Entourage-Abbastar Uranium Option Agreement Dated February 13, 2007 (7) |
4.16 | Mineral Option Agreement with Infogeo Locaçeos Ltda. (8) |
11.1 | Entourage Mining Company Ethics Policy (7) |
12.1 | |
12.2 | |
13.1 |
*Included as an exhibit hereto. | |
(1) | Incorporated by reference from our Registration Statement on Form 20-F filed with the SEC on June 6, 2003. |
(2) | Incorporated by reference from our 20-F filed with the SEC on July 1, 2005. |
(3) | Incorporated by reference from the Company’s 6-K filed with the SEC on November 23, 2005. |
(4) | Incorporated by reference from the Company’s 6-K filed with the SEC on November 25, 2005. |
(5) | Incorporated by reference from our Annual Report on Form 20-F filed with the SEC on July 3, 2006. |
(6) | Incorporated by reference from our Annual Report on Form 20-F filed with the SEC on June 29, 2007. |
(7) | Incorporated by reference from our Annual Report on Form 20-F filed with the SEC on June 30, 2008. |
(8) | Incorporated by reference from our Annual Report on Form 20-F filed with the SEC on May 3, 2010. |
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SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
ENTOURAGE MINING LTD.
Dated: April 28, 2011
“Gregory F. Kennedy” |
Gregory F. Kennedy |
President, Director |
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