ENTOURAGE MINING LTD.
(An Exploration Stage Company)
INTERIM FINANCIAL STATEMENTS
JUNE 30, 2012
(Stated in Canadian Dollars)
(UNAUDITED – PREPARED BY MANAGEMENT)
THE ACCOMPANYING INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2012 HAVE NOT BEEN REVIEWED OR AUDITED BY THE COMPANY’S AUDITORS. |
1
NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS
Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.
The accompanying unaudited interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management. The Company’s independent auditor has not performed a review of these financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity’s auditor.
“Gregory F. Kennedy”
Gregory F. Kennedy
President and Chief Executive Officer
August 14, 2012
2
ENTOURAGE MINING LTD.
(An Exploration Stage Company)
BALANCE SHEETS
(Stated in Canadian Dollars)
(UNAUDITED – PREPARED BY MANAGEMENT)
June 30, | December 31, | |||||
2012 | 2011 | |||||
$ | $ | |||||
ASSETS | ||||||
Current | ||||||
Cash | 377 | 1,278 | ||||
Prepaid expenses | 1,084 | 1,084 | ||||
Other receivables | 54,056 | 665 | ||||
55,517 | 3,027 | |||||
Equipment, net of depreciation(Note 3) | 777 | 883 | ||||
56,294 | 3,910 | |||||
LIABILITIES | ||||||
Current | ||||||
Accounts payable | 208,363 | 195,195 | ||||
Loans payable (Note 5) | 47,225 | 82,065 | ||||
Due to related parties (Note 8) | 26,235 | 128,771 | ||||
Derivative liabilities (Note 6) | - | 1,115 | ||||
281,823 | 407,146 | |||||
STOCKHOLDERS’ DEFICIT | ||||||
Capital Stock(Note 7) | ||||||
Authorized: Unlimited common voting shares without par value Issued: 13,742,223 common shares (December 31, 2010 – 10,368,103) | 13,490,513 | 13,321,807 | ||||
Additional paid in capital(Note 8) | 3,278,866 | 3,263,866 | ||||
Deficit accumulated during the exploration stage | (16,994,908 | ) | (16,988,909 | ) | ||
(225,529 | ) | (403,236 | ) | |||
56,294 | 3,910 | |||||
CONTINGENCIES AND COMMITMENTS(Notes 1 and 4) |
Approved by the Board of Directors: | |
“Gregory F. Kennedy” | “Paul Shatzko” |
The accompanying notes are an integral part of these unaudited interim financial statements.
3
ENTOURAGE MINING LTD.
(An Exploration Stage Company)
INTERIM STATEMENTS OF OPERATIONS
(Stated in Canadian Dollars)
(UNAUDITED – PREPARED BY MANAGEMENT)
June 16, 1995 | |||||||||||||||
THREE MONTHS | SIX MONTHS | (inception) | |||||||||||||
ENDED JUNE 30, | ENDED JUNE 30, | to | |||||||||||||
2012 | 2011 | 2012 | 2011 | June 30, 2012 | |||||||||||
$ | $ | $ | $ | $ | |||||||||||
Expenses | |||||||||||||||
Depreciation | 53 | 71 | 106 | 142 | 7,067 | ||||||||||
Consulting | - | - | - | - | 272,950 | ||||||||||
Consulting – stock based compensation | - | - | - | - | 2,926,980 | ||||||||||
Financing fee – stock based compensation | - | - | - | - | 90,096 | ||||||||||
Interest and bank charges | 1,208 | 1,952 | 1,259 | 3,015 | 26,102 | ||||||||||
Management fees (Note 8) | 15,000 | 15,000 | 30,000 | 30,000 | 1,185,654 | ||||||||||
Mineral property costs | (25,525 | ) | 9,065 | (69,926 | ) | 60,458 | 11,325,020 | ||||||||
Office and sundry | 15,651 | 3,250 | 23,656 | 10,516 | 616,036 | ||||||||||
Professional fees | 19,678 | 28,433 | 21,516 | 31,510 | 638,827 | ||||||||||
Travel and promotion | 323 | 4,261 | 503 | 4,480 | 307,303 | ||||||||||
Gain/(Loss) Before Other Item | (26,388 | ) | (62,032 | ) | (7,114 | ) | (140,121 | ) | (17,396,035 | ) | |||||
Fair value adjustment ofderivative liabilities(Note 6) | - | (27,269 | ) | 1,115 | (91,913 | ) | 333,965 | ||||||||
Loss Before Income Taxes | (26,388 | ) | (89,301 | ) | (5,999 | ) | (232,034 | ) | (17,062,070 | ) | |||||
Deferred income tax recovery | - | - | - | - | 67,162 | ||||||||||
Net Loss for the period | (26,388 | ) | (89,301 | ) | (5,999 | ) | (232,034 | ) | (16,994,908 | ) | |||||
Gain/(Loss) Per Share, basic and diluted | $ | ( 0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.02 | ) | |||
Weighted Average Common Shares Outstanding | 13,304,692 | 10,368,103 | 11,836,398 | 10,297,385 |
The accompanying notes are an integral part of these unaudited interim financial statements.
4
ENTOURAGE MINING LTD.
(AnExploration StageCompany)
STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Stated inCanadian Dollars)
(UNAUDITED –PREPARED BYMANAGEMENT)
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 unaudited interim financial statements.
5
ENTOURAGE MINING LTD.
(AnExploration StageCompany)
STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Stated inCanadian Dollars)
(UNAUDITED –PREPARED BYMANAGEMENT)
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 unaudited interim financial statements.
6
ENTOURAGE MINING LTD.
(AnExploration StageCompany)
STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Stated inCanadian Dollars)
(UNAUDITED –PREPARED BYMANAGEMENT)
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 market 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 unaudited interim financial statements.
7
ENTOURAGE MINING LTD.
(AnExploration StageCompany)
STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Stated inCanadian Dollars)
(UNAUDITED –PREPARED BYMANAGEMENT)
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 market price of US$3.00 per share | 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 unaudited interim financial statements.
8
ENTOURAGE MINING LTD.
(AnExploration StageCompany)
STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Stated inCanadian Dollars)
(UNAUDITED –PREPARED BYMANAGEMENT)
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 market 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 12) | - | - | - | - | (1,092,043 | ) | (1,092,043 | ) | ||||||||||
Balance, December 31, 2009 | 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 unaudited interim financial statements.
9
ENTOURAGE MINING LTD.
(AnExploration StageCompany)
STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Stated inCanadian Dollars)
(UNAUDITED –PREPARED BYMANAGEMENT)
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 market 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 | ) | ||||||||||
February 22, 2011, shares issued for Property option payment at US$0.15 per share market price | 100,000 | 15,000 | - | - | - | 15,000 | ||||||||||||
Loss for the year | - | - | - | - | (189,503 | ) | (189,503 | ) | ||||||||||
Balance, December 31, 2011 | 10,368,103 | 13,321,807 | - | 3,263,866 | (16,988,909 | ) | (403,236 | ) | ||||||||||
April 11, 2012, units issued for Private Placement at US$0.05 per share | 3,074,120 | 153,706 | - | - | - | 153,706 | ||||||||||||
April 20, 2012, units issued for Property payment at US$0.05 per share | 300,000 | 15,000 | - | - | - | 15,000 | ||||||||||||
Recognition of 3 months management fees waived at $5,000/month | - | - | - | 15,000 | - | 15,000 | ||||||||||||
Loss for the period | - | - | - | - | (5,999 | ) | (5,999 | ) | ||||||||||
Balance, June 30, 2012 | 13,742,223 | 13,490,513 | - | 3,278,866 | (16,994,908 | ) | (225,529 | ) |
The accompanying notes are an integral part of these unaudited interim financial statements.
10
ENTOURAGE MINING LTD.
(An Exploration Stage Company)
INTERIM STATEMENTS OF CASH FLOWS
(Stated in Canadian Dollars)
(UNAUDITED – PREPARED BY MANAGEMENT)
June 16, 1995 | |||||||||||||||
THREE MONTHS | SIX MONTHS | (inception) | |||||||||||||
ENDED JUNE 30, | ENDED JUNE 30, | to | |||||||||||||
2012 | 2011 | 2012 | 2011 | June 30, 2012 | |||||||||||
$ | $ | $ | $ | $ | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||
Net Income (Loss ) | (26,388 | ) | (89,301 | ) | (5,999 | ) | (232,372 | ) | (16,994,908 | ) | |||||
Adjustments to reconcile net loss to net cash from operating activities: | |||||||||||||||
Depreciation | 53 | 71 | 106 | 142 | 7,067 | ||||||||||
Stock based compensation | - | - | - | - | 3,017,076 | ||||||||||
Shares issued for mineral property acquisition | 15,000 | - | 15,000 | 15,000 | 9,184,881 | ||||||||||
Management fees waived | 15,000 | - | 15,000 | - | 15,000 | ||||||||||
Shares issued for debt | - | - | - | - | 23,306 | ||||||||||
Deferred tax recovery | - | - | - | - | (67,162 | ) | |||||||||
Fair value adjustment of derivative liabilities | - | 27,269 | (1,115 | ) | 91,913 | (333,965 | ) | ||||||||
Changes in non-cash operating working capital items: | |||||||||||||||
Advances and prepaid expenses | - | 303 | - | - | (1,084 | ) | |||||||||
Other receivables | (52,246 | ) | (2,392 | ) | (53,391 | ) | 7,276 | (54,056 | ) | ||||||
Accounts payable and accrued liabilities | 4,962 | 21,428 | 13,168 | 50,296 | 208,363 | ||||||||||
NET CASH FLOWS USED IN OPERATINGACTIVITIES | (43,619 | ) | (42,622 | ) | (17,231 | ) | (67,407 | ) | (4,995,482 | ) | |||||
�� | |||||||||||||||
CASH FLOWS USED IN INVESTING ACTIVITIES | |||||||||||||||
CMKM settlement | - | - | - | - | (95,753 | ) | |||||||||
Equipment | - | - | - | - | (7,845 | ) | |||||||||
NET CASH FLOWS USED IN INVESTINGACTIVITIES | - | - | - | - | (103,598 | ) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||||
Loan payable | 1,653 | 826 | (34,840 | ) | 10,952 | 47,225 | |||||||||
Due to related parties | 2,428 | 7,578 | (102,536 | ) | 21,069 | 329,233 | |||||||||
Net proceeds on sale of common stock | 153,706 | - | 153,706 | - | 4,722,999 | ||||||||||
Share subscriptions | (153,706 | ) | 34,200 | - | 34,200 | - | |||||||||
NET CASH FLOWS FROM FINANCINGACTIVITIES | 4,081 | 42,604 | 16,330 | 66,221 | 5,099,457 | ||||||||||
INCREASE (DECREASE) IN CASH | (39,538 | ) | (18 | ) | (901 | ) | (1,186 | ) | 377 | ||||||
CASH, BEGINNING OF PERIOD | 39,915 | 2,049 | 1,278 | 3,217 | - | ||||||||||
CASH, END OF PERIOD | 377 | 2,031 | 377 | 2,031 | 377 |
SUPPLEMENTAL CASH FLOW INFORMATION AND
NON-CASH INVESTING AND FINANCING ACTIVITIES(Note 9)
The accompanying notes are an integral part of these interim financial statements.
11
ENTOURAGE MINING LTD.
(An Exploration Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2012
(Stated in Canadian Dollars)
(UNAUDITED – PREPARED BY MANAGEMENT)
1. | ORGANIZATION AND BASIS OF PRESENTATION |
Organization | |
The Company was incorporated in the Province of British Columbia, Canada on June 16, 1995. The Company is in the business of mineral exploration. | |
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 $16,994,908 since its inception. There is a wording capital deficiency of $226,306 and the Company has no sources of operating 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 |
Accounting policies followed in the preparation of the June 30, 2012 unaudited interim financial statements are consistent with those used in the preparation of the annual audited financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the most recent year, December 31, 2011, as reported in Form 20-F, have been omitted. Operating results for the six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. | |
3. | EQUIPMENT |
Six months ended June 30, 2012 | Year ended December 31, 2011 | ||||||
Cost | Accumulated | Net Book | Cost | Accumulated | Net Book | ||
depreciation | Value | depreciation | Value | ||||
$ | $ | $ | $ | $ | $ | ||
Office furniture | 2,812 | 2,335 | 477 | 2,812 | 2,282 | 530 | |
Computer equipment | 5,033 | 4,733 | 300 | 5,033 | 4,680 | 353 | |
7,845 | 7,068 | 777 | 7,845 | 6,962 | 883 |
1
ENTOURAGE MINING LTD.
(An Exploration Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2012
(Stated in Canadian Dollars)
(UNAUDITED – PREPARED BY MANAGEMENT)
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). |
As at December 31, 2010, the Company had earned 40% interest in the Pires Property.
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. |
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(issued), and | |
(ii) | expend up to USD $1,000,000 to complete and submit a final report by January 16, 2012. |
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 the 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.
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.
2
ENTOURAGE MINING LTD.
(An Exploration Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2012
(Stated in Canadian Dollars)
(UNAUDITED – PREPARED BY MANAGEMENT)
4. | MINERAL PROPERTY INTERESTS(continued) |
(a) The Pires Gold Project, Brazil (continued)
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 repurchase 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.
On March 14, 2012, the Company agreed to sell the Company’s interest in the Pires Gold Project for $100,000 payable in two tranches, the first on signing (received) and the second no later than June 30, 2012(subsequently received). On March 30, 2012, the Company agreed to purchase the 10% interest earned by Ansell Capital in the Pires Gold Project for $10,000 cash (payable) and the issuance of 300,000 shares from treasury (issued) at a deemed value of $0.05 per common share.
(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 in the property subject to Abbastar’s interest (Note 4b iii)). | |||
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. |
3
ENTOURAGE MINING LTD.
(An Exploration Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2012
(Stated in Canadian Dollars)
(UNAUDITED – PREPARED BY MANAGEMENT)
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 (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 June 30, 2012, Abbastar had earned a 35% interest in the Doran property but, has allowed the balance of their option to expire. | |
5. | LOANS PAYABLE |
On September 16, 2010, an arms length party loaned the Company $25,477 (2011:$25,445) (US$25,000) for an initial period of 90 days, at 12% per annum. The loan is unsecured. The loan has been amended to be payable on demand. As at June 30, 2012, accrued interest of $5,470 (December 31, 2011 - $3,940) was included in the loan payable. | |
During the year ended December 31, 2011, a non-arms length party loaned the Company $10,000 for an initial period of 90 days, at 12% per annum. The loan is unsecured. The loan has been amended to be payable on demand. As at June 30, 2012, accrued interest of $1,278 (December 31, 2011 - $1,180) was included in the loan payable. | |
During the year ended December 31, 2011, arms length parties loaned the Company at total of $41,000 that was non-interest bearing and payable on demand. On April 17, 2012, the Company closed a private placement of which 820,000 common Units were issued at $0.05 for the settlement of the loans payable. Each Unit consists of one common share of the Company and one half share purchase warrant. Each whole warrant is exercisable on or before April 13, 2013 at a price of $0.10 per share and on or before April 13, 2014 at a price of US$0.15. | |
During the period ended June 30, 2012, an arms length party loaned the Company $5,000 which was unsecured, non-interest bearing and payable on demand. Subsequent to June 30, 2012, the loan was repaid. |
4
ENTOURAGE MINING LTD.
(An Exploration Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2012
(Stated in Canadian Dollars)
(UNAUDITED – PREPARED BY MANAGEMENT)
6. | DERIVATIVE LIABILITIES |
Derivate liabilities consist of outstanding warrants that have exercise prices denominated in United States dollars. During the period ended June 30, 2012, a total of 1,613,162 warrants expired unexercised and the fair value was written down. The fair value of these warrants as at December 31, 2011 was as follows: |
Exercise | June 30, | December 31, | ||||||||
price | 2012 | 2011 | ||||||||
1,613,162 warrants expiring on January 25, 2012 | US$0.25 | $ | - | $ | 1,115 | |||||
$ | - | $ | 1,115 |
The fair value of these warrants was determined using the Black-Scholes option pricing model, and adjusted for market factor, using the following assumptions:
2012 | 2011 | ||
Volatility | N/A | 413% | |
Dividend yield | - | - | |
Risk-free interest rate | N/A | 0.97% | |
Expected life | N/A | 0.07 yr |
7. | CAPITAL STOCK | |
a) | Issued Shares | |
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 the 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. | ||
Pursuant to the Mineral Property Option agreement for the Pires Gold Project, on February 22, 2011, the Company issued a total of 100,000 common shares with a fair value of US$15,000. | ||
Pursuant to a non-brokered Private Placement, the Company issued at total of 3,074,120 Units for total proceeds of $153,706 at CDN$0.05 per Unit. Each Unit consists of one common share of the Company and one half share purchase warrant. Each whole warrant is exercisable on or before April 13, 2013 at a price of $0.10 per share and on or before April 13, 2014 at a price of US$0.15. | ||
Pursuant to the Mineral Property acquisition agreement for the Pires Gold Project, on March 30, 2012, the Company agreed to purchase the 10% interest earned by Ansell Capital in the Pires Gold Project for $10,000 cash (payable) and the issuance of 300,000 shares from treasury at a deemed value of $0.05 per common share. |
5
ENTOURAGE MINING LTD.
(An Exploration Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2012
(Stated in Canadian Dollars)
(UNAUDITED – PREPARED BY MANAGEMENT)
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, 2010 | 720,000 | 0.35 | 3.60 | |||||||
Options cancelled during the year | 720,000 | 0.35 | - | |||||||
Balance, December 31, 2011 and June 30, 2012 | - | - | - |
At December 31, 2010 these 720,000 stock options were outstanding. The options were cancelled during the year ended December 2011. There has been no activity in number of options outstanding during the six month period ended June 30, 2012. | ||
c) | Warrants | |
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 was exchangeable for one common share and expired on January 25, 2011. During the year ended December 31, 2011, the expiry date of the warrants was extended one year to January 25, 2012 with no other changes to the terms of the warrants. The fair value of the term extension was calculated to be $63,708 using the Black-Scholes option pricing model with the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 164%, (3) risk free interest rate of 1.32% and, (4) expected life of 1 year. The $63,708 was recorded as a stock-based financing fee. The warrants expired unexercised on January 25, 2012. | ||
Activity in warrants is summarized as follows: |
Weighted Average | Weighted | |||||||||
Warrants | Exercise Price | Average | ||||||||
Outstanding | (US$) | Life | ||||||||
Balance, December 31, 2010 and 2011 | 1,613,162 | 0.25 | 0.07 | |||||||
Issued during the period | - | - | - | |||||||
Exercised during the period | - | - | - | |||||||
Expired during the period | (1,613,162 | ) | 0.25 | - | ||||||
Balance, June 30, 2012 | - | - | - |
6
ENTOURAGE MINING LTD.
(An Exploration Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2012
(Stated in Canadian Dollars)
(UNAUDITED – PREPARED BY MANAGEMENT)
8. | RELATED PARTY TRANSACTIONS |
Amounts payable to related parties as of June 30, 2012 of $26,235 (December 31, 2011 - $128,771) is owing to directors, 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 period ended June 30, 2012, the Company incurred $15,000 (2011 - $30,000) in management fees to its directors. Effective April 1, 2012, the directors of the Company agreed to waive their management fees until the Company has the financial resources to extinguish the debt. In accordance with U.S. GAAP, the Company has recorded $15,000 in management fees as an increase to contributed surplus. | |
The above transactions have been recorded at their exchange amount being the amount of consideration established and agreed to by the related parties. | |
9. | SUPPLEMENTAL CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING ACTIVITIES |
Period ended | Year ended | |
June 30, 2012 | December 31, 2011 | |
Cash paid during the period for: | $ | $ |
Interest | - | - |
Income taxes | - | - |
During the period ended June 30, 2012, the Company:
a) | issued 300,000 shares with a fair value of $15,000 pursuant to the Mineral Property acquisition agreement on the Pires Gold Project for the 10% interest earned by Ansell Capital. | |
b) | recorded $15,000 for management fees waived as an increase to contributed surplus. |
During the year ended December 31, 2011, the Company:
c) | issued 150,000 shares with a fair value of $15,000 pursuant to the Mineral Property Option agreement on the Pires Gold Project. |
10. | 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). |
7
ENTOURAGE MINING LTD.
(An Exploration Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2012
(Stated in Canadian Dollars)
(UNAUDITED – PREPARED BY MANAGEMENT)
10. | FINANCIAL INSTRUMENTS(continued) |
The carrying values and fair values of the Company’s financial instruments are as follows: |
JUNE 30, 2012 | DECEMBER 31, 2011 | |||||||||||||||
CARRYING | FAIR | CARRYING | FAIR | |||||||||||||
LEVEL | VALUE | VALUE | VALUE | VALUE | ||||||||||||
Financial assets | ||||||||||||||||
Cash | 1 | $ | 377 | $ | 377 | $ | 1,278 | $ | 1,278 | |||||||
Other receivables | 3 | 54,056 | 54,433 | 665 | 665 | |||||||||||
$ | 54,433 | $ | 54,433 | $ | 1,943 | $ | 1,943 | |||||||||
Financial liabilities | ||||||||||||||||
Accounts payable | 3 | $ | 208,363 | $ | 208,363 | $ | 195,195 | $ | 195,195 | |||||||
Loans payable | 3 | 47,225 | 47,225 | 82,065 | 82,065 | |||||||||||
Due to related parties | 3 | 26,235 | 26,235 | 128,771 | 128,771 | |||||||||||
$ | 281,323 | $ | 281,323 | $ | 406,031 | $ | 406,031 |
8