Knight Resources Ltd.
KNIGHT RESOURCES LTD. (An exploration stage company) Notes to the Financial Statements December 31, 2003 (Unaudited)(Canadian Dollars) |
1. Nature of Operations and Basis of Presentation
The Company is a public company incorporated under the Company Act, British Columbia. Its shares are listed on the TSX Venture Exchange and the Frankfurt Stock Exchange. The principal business of the Company is exploration of mineral and oil and gas properties. As of the date of this report, the Company has not determined whether its properties contain reserves that are economically recoverable. The recoverability of amounts shown for oil and gas properties is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the exploration of the property and future profitable production from the property or proceeds from disposition.
These interim financial statements have been prepared in accordance with Canadian generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and notes to the financial statements required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the three month period ended December 31, 2003 are not necessarily indicative of the results that may be expected for the year ended September 30, 2004. The balance sheet at September 30, 2003 has been derived from the audited financial statements at that da te but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
2. Significant Accounting Policies
These interim financial statements have been prepared by management in accordance with the accounting policies described in the Company’s annual financial statements for the year ended September 30, 2003 except that the Company has adopted the new recommendations of the Canadian Institute of Chartered Accountants Handbook section 3870,Stock-based Compensation and Other Stock-based Payments, effective October 1, 2003.
This new section requires that a fair value based method of accounting must be used for all stock-based payments to employees, directors and non-employees. The old section only required a fair value based method of accounting for direct awards of stock, stock appreciation rights, and awards that call for settlement in cash or other assets. Also, only stock options granted to non-employees had to be accounted for using a fair value based method.
Accordingly, starting October 1, 2003, compensation expense is determined when stock options are granted and is recognized over the vesting period of the options. The compensation expense is determined as the fair value of the option at the date of grant using an option pricing model.
The Company has chosen early adoption of this new policy and therefore will be accounting for the fair value of stock-based payments on a prospective basis with no restatement of prior periods.
For further information, refer to the financial statements and notes thereto included in the Company’s Annual Report to Shareholders for the year ended September 30, 2003.
3. Oil and Gas Property
Maycroft Property
In November 2001, the Company entered into a farmout agreement with Polaris Resources Ltd. (‘Polaris’) to participate and earn a 25% before payout (20% after payout) working interest, subject to a 9% overriding royalty in a gas prospect in the Foothills region of Alberta, Canada. The Company has a director in common with Polaris. Upon signing the agreement, the Company advanced Polaris $125,000 for seismic costs and has advanced an additional $367,500 for preparatory work to obtain a well licence. On December 16, 2003, the Alberta Energy & Utilities Board denied the well licence application. The Company and Polaris are reviewing the decision and are pursuing various means to recover the costs incurred on the project. The Company is of the opinion that as of December 31, 2003 and the da te of this quarterly report, there has been no impairment of carrying value.
3. Oil and Gas Property (cont’d)
Lagarde Property
During the three months ended December 31, 2003, the Company completed the abandonment of the initial test well. The abandonment was completed at a cost that was less than previously estimated which resulted in a recovery of $4,168. The Company sold the used wellhead and used tubing for net proceeds of $8,250.
4. Mineral Property
West Raglan Property
On March 26, 2003, the Company entered into a formal option and joint venture agreement with Anglo American Exploration (Canada) Limited (‘Anglo American’), whereby the Company can earn a 49% participating joint venture interest in the 720km2West Raglan Project (‘the Project’) located in northern Quebec, Canada.
To exercise the option, the Company must incur a total of $11.8 million of expenditures on exploration and related work on or before December 31, 2006, as follows:
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| | 2003 | 2004 | 2005 | 2006 |
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| Minimum work expenditure commitment | $ 1,700,000 | $ 2,300,000 | $ 3,400,000 | $ 4,400,000 |
As at December 31, 2003, the Company has incurred $3,068,590 of exploration expenditures since March 26, 2003 and $1,086,183 for the three months ended December 31, 2003. The Company has agreed to spend $4.4 million in calendar 2004.
5. Share Capital
| | | | Number | Value |
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| Balance at September 30, 2003 | | | 36,215,437 | $ 10,431,488 |
| Exercise of options | | | 1,450,000 | 532,350 |
| Exercise of warrants | | | 1,968,500 | 491,375 |
| Private placement | | | 6,730,769 | 3,500,000 |
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| Balance at December 31, 2003 | | | 46,364,706 | $ 14,955,213 |
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On December 11, 2003, the Company closed a non-brokered private placement in the amount of $3,500,000. The Company issued 6,730,769 units at a price of $0.52 per unit. Each unit is comprised of one common share and one share purchase warrant entitling the holder to purchase one additional common share of the Company at a price of $0.65 expiring June 10, 2005. Of the 6,730,769 common shares and warrants issued, 1,507,500 are flow-through common shares and 1,007,500 are flow-through warrants. For income tax purposes, the subscription funds of $783,900 relating to the flow-through common shares will be applied towards carrying out exploration activities and the expenditures will be renounced in favour of the subscriber. Accordingly, the Company will not have available deductions from taxable income in respect of such expenditures. As at December 31, 2003, $618,900 of the $783,900 flow-through funds remains unspent.
6. Stock-based Compensation
The Company uses the fair value based method of accounting for all stock-based awards. During the three months ended December 31, 2003, the Company granted 2,825,000 stock options with a compensation cost of $1,093,750. The Company calculated the compensation cost by using the Black-Scholes option pricing model assuming a risk-free interest rate of 3.02%, a dividend yield of nil, an expected volatility of 75% and expected lives of the stock options of two years.
7. Related Party Transactions
Related parties are directors, officers and other companies with common directors and/or officers of the Company. Amounts due to related parties are non-interest bearing and without specific terms of repayment.
Related party transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
The following is a summary of the related party transactions that occurred throughout the period:
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| Management fees | $ 59,500 | | $ - |
| Interest expense | $ - | | $ 7,763 |
| KNIGHT RESOURCES LTD. | | | | | | | |
| (An exploration stage company) | | | | | | | |
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| Exploration Expenditures | | | | | | | Schedule 1 |
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| | | | | | | | Three months ended December 31, |
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| Lagarde | | | | | | | |
| Recovery of abandonment costs | | | | | $ (4,168) | | $ - |
| Net proceeds on sale of wellhead and tubing | | | | | (8,250) | | - |
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| | | | | | (12,418) | | - |
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| West Raglan Property | | | | | | | |
| Drilling | | | | | 394,783 | | - |
| Geochemistry | | | | | 37,906 | | - |
| Geology | | | | | 274,956 | | - |
| Geophysics | | | | | 260,022 | | - |
| Other | | | | | 118,516 | | - |
| Refundable tax credits | | | | | (275,000) | | - |
| Mining duties refund | | | | | (65,000) | | - |
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| | | | | | 746,183 | | - |
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| | | | | | $ 733,765 | | $ - |
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| General and Administrative Expenses | | | | | | | Schedule 2 |
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| Administrative fees | | | | | $ 27,000 | | $ 12,000 |
| Amortization | | | | | 761 | | 199 |
| Compensation expense (notes 2 & 6) | | | | | 1,093,750 | | - |
| Consulting fees | | | | | 48,000 | | - |
| Filing fees | | | | | 20,190 | | - |
| Management fees | | | | | 59,500 | | - |
| Office and miscellaneous | | | | | 17,074 | | 61 |
| Rent | | | | | 6,000 | | 3,000 |
| Telephone and communications | | | | | 6,450 | | - |
| Transfer agent | | | | | 6,589 | | 495 |
| Less: interest income | | | | | (12,040) | | (14) |
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| | | | | | $ 1,273,274 | | $ 15,741 |
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KNIGHT RESOURCES LTD. (formerly Knight Petroleum Corp.)Schedule B Supplementary Information For the Three Months Ended December 31, 2003 |
1. Analysis of expenses and deferred costs
Please see the financial statements for the following:
§ Schedule of General and Administrative Expenses
2. Related party transactions
§ See the financial statements for a summary of related party transactions.
3. a) Securities issued during the period
| Date of | | Type of | | | | Type of | Commission |
| Issue | Type of Security | Issue | Number | Price | Proceeds | Consideration | Paid |
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| 01-Oct-03 | Common shares | Warrants | 475,000 | $0.25 | $118,750 | Cash | $0 |
| 02-Oct-03 | Common shares | Warrants | 140,000 | $0.25 | $35,000 | Cash | $0 |
| 06-Oct-03 | Common shares | Warrants | 125,000 | $0.25 | $31,250 | Cash | $0 |
| 07-Oct-03 | Common shares | Warrants | 25,000 | $0.25 | $6,250 | Cash | $0 |
| 09-Oct-03 | Common shares | Warrants | 5,000 | $0.25 | $1,250 | Cash | $0 |
| 16-Oct-03 | Common shares | Warrants | 8,000 | $0.25 | $2,000 | Cash | $0 |
| 21-Oct-03 | Common shares | Warrants | 25,000 | $0.22 | $5,500 | Cash | $0 |
| 21-Oct-03 | Common shares | Options | 250,000 | $0.30 | $75,000 | Cash | $0 |
| 22-Oct-03 | Common shares | Warrants | 10,000 | $0.25 | $2,500 | Cash | $0 |
| 24-Oct-03 | Common shares | Options | 535,000 | $0.51 | $272,850 | Cash | $0 |
| 24-Oct-03 | Common shares | Options | 500,000 | $0.30 | $150,000 | Cash | $0 |
| 24-Oct-03 | Common shares | Warrants | 127,000 | $0.25 | $31,750 | Cash | $0 |
| 30-Oct-03 | Common shares | Warrants | 12,500 | $0.25 | $3,125 | Cash | $0 |
| 31-Oct-03 | Common shares | Warrants | 130,000 | $0.25 | $32,500 | Cash | $0 |
| 7-Nov-03 | Common shares | Warrants | 66,000 | $0.25 | $16,500 | Cash | $0 |
| 14-Nov-03 | Common shares | Options | 72,000 | $0.20 | $14,400 | Cash | $0 |
| 21-Nov-03 | Common shares | Warrants | 112,000 | $0.25 | $28,000 | Cash | $0 |
| 26-Nov-03 | Common shares | Warrants | 50,000 | $0.25 | $12,500 | Cash | $0 |
| 27-Nov-03 | Common shares | Warrants | 50,000 | $0.25 | $12,500 | Cash | $0 |
| 2-Dec-03 | Common shares | Warrants | 5,000 | $0.25 | $1,250 | Cash | $0 |
| 4-Dec-03 | Common shares | Warrants | 249,000 | $0.25 | $62,250 | Cash | $0 |
| 8-Dec-03 | Common shares | Warrants | 10,000 | $0.25 | $2,500 | Cash | $0 |
| 10-Dec-03 | Common shares | Options | 78,000 | $0.20 | $15,600 | Cash | $0 |
| 10-Dec-03 | Common shares | Warrants | 78,000 | $0.25 | $19,500 | Cash | $0 |
| 11-Dec-03 | Common shares | Warrants | 10,000 | $0.25 | $2,500 | Cash | $0 |
| 11-Dec-03 | Common shares | Units | 6,730,769 | $0.52 | $3,500,000 | Cash | $0 |
| 19-Dec-03 | Common shares | Warrants | 256,000 | $0.25 | $64,000 | Cash | $0 |
| 22-Dec-03 | Common shares | Options | 15,000 | $0.30 | $4,500 | Cash | $0 |
b) Options granted during the period
| Date of | | | Exercise | Expiry |
| Grant | Number | Name | Price | Date |
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| 14-Nov-03 | 200,000 | Investor relations | $0.83 | 13-Nov-05 |
| 23-Dec-03 | 900,000 | Harvey Keats | $0.93 | 22-Dec-05 |
| 23-Dec-03 | 900,000 | David Patterson | $0.93 | 22-Dec-05 |
| 23-Dec-03 | 200,000 | Kerry Sparkes | $0.93 | 22-Dec-05 |
| 23-Dec-03 | 25,000 | John Maher | $0.93 | 22-Dec-05 |
| 23-Dec-03 | 100,000 | Erin Walmesley | $0.93 | 22-Dec-05 |
| 23-Dec-03 | 350,000 | Employees | $0.93 | 22-Dec-05 |
| 23-Dec-03 | 150,000 | Investor relations | $0.93 | 22-Dec-05 |
4. a) Authorized share capital
100,000,000 common shares with no par value
b) Issued and outstanding share capital
46,364,706 common shares at a recorded value of $14,955,213
c) Options, warrants and convertible securities
| | | Exercise/ | |
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| Type of Security | Number | Price | Expiry Date |
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| Agent's options | 1,350,000 | $0.20 | May 12, 2005 |
| Options | 237,500 | $0.25 | August 23, 2006 |
| Options | 50,000 | $0.25 | January 17, 2007 |
| Options | 1,157,500 | $0.30 | June 18, 2005 |
| Options | 340,000 | $0.51 | July 28, 2005 |
| Options | 200,000 | $0.83 | November 13, 2005 |
| Options | 2,625,000 | $0.93 | December 22, 2005 |
| Warrants | 525,000 | $0.22 | March 26, 2004 |
| Warrants | 8,000,000 | $0.15 | March 25, 2005 |
| Warrants | 6,988,000 | $0.25 | May 12, 2005 |
| Warrants | 6,730,769 | $0.65 | June 10, 2005 |
d) Number of shares subject to escrow or pooling agreements
None
5. Directors and officers of the Company
Harvey Keats Director, President
David Patterson Director, CEO
Kerry Sparkes Director
John Maher Director
Erin Walmesley Secretary
KNIGHT RESOURCES LTD. (formerly Knight Petroleum Corp.)Schedule C
Management Discussion and Analysis
For the Three Months Ended December 31, 2003
Knight Resources Ltd. is a natural resource exploration company. The Company’s primary project is the West Raglan nickel project located in northern Quebec. The Company also has an interest in a gas well near Fort St. John, British Columbia (the Fort St. John Project) and an interest in an oil and gas prospect in the Foothills Region of Alberta (the Maycroft Project).
West Raglan, Quebec
On March 26, 2003, the Company entered into a formal Option and Joint Venture Agreement with Anglo American Exploration (Canada) Ltd. ('Anglo American') whereby the Company can earn a 49% participating joint venture interest in the 720 square kilometre West Raglan Project located in the Cape Smith Belt in northern Quebec. To exercise the option, the Company must incur a total of $11.8 million of expenditures on exploration and related work on the property on or before December 31, 2006.
Anglo American has the right to increase its interest in the Project from 51% to 70% by completing, at its own cost, a bankable feasibility study. At the Company’s election, Anglo American can further increase its interest in the West Raglan Project to 75% by arranging production financing for both parties.
Anglo American Exploration (Canada) Ltd. is a wholly owned subsidiary of Anglo American plc, of London, England.
The Cape Smith Belt in northern Quebec has recently emerged as one of the most prospective areas in the world to discover new nickel deposits.
Falconbridge's Raglan nickel mine is located 90 kilometres east of the eastern margin of the West Raglan Project. Resources, reserves and mined ore to date at Raglan total 28 million tonnes averaging 2.8% nickel and 0.8% copper with significant platinum group elements and cobalt. Proximity of the Company’s West Raglan Project to Falconbridge’s Raglan mine provides no assurance that economic mineralization exists on the West Raglan Project.
The known nickel deposits in the Cape Smith Belt occur in two different settings: the Raglan Formation at the base of the Chukotat Group, and the Delta Horizon in the Povungnituk Group. All of Falconbridge’s resources and reserves are hosted by the Raglan Formation and occur in nine separate deposits over a 55 kilometre strike length.
In 2002 AAEC confirmed the existence of 65 kilometres of strike length of the Raglan Formation and 65 kilometres of strike length of the Delta Horizon on the West Raglan Project.
The 2003 program began when AAEC flew the entire property with their deep penetrating SPECTREM electromagnetic and magnetic airborne system.
In July 2003, surface sampling discovered high grade locally derived boulders on the West Raglan Project. The best grab sample taken assayed 3.41% nickel, 2.91% copper, 0.09% cobalt, 3.3 grams/tonne palladium and 0.84 grams/tonne platinum. (See news release dated July 16, 2003 on the West Raglan Project).
In 2003, a total of 18 holes were drilled, eight of which intersected significant nickel, copper, cobalt, platinum and palladium mineralization in the Frontier area. The Frontier area, which extends over 3 kilometres east-west by 1 kilometre north-south, has been divided into four zones: Frontier East, Frontier Central, Frontier West and Frontier South. The mineralization occurs in ultramafic rocks of the Raglan Formation.
The discovery hole, WR-08 intersected 14.75 metres of 3.04% nickel in 50% net textured sulphides. The best hole, WR-16, intersected 5.12 metres of 4.16% nickel averaging 35% sulphides, including a 0.67 metre intersection of 11.83% nickel in massive sulphides. (See news releases dated September 8, September 23, October 1, and October 14, 2003.)
2004 Program
Exploration on the West Raglan Project will resume in late spring 2004. The 2004 exploration program will focus on detailed drilling in the Frontier area, target drilling on the virtually unexplored 65 km strike length of the Raglan Formation, and target drilling on the 65 km strike length of the Delta Horizon. The preliminary budget for the 2004 exploration program is $4,400,000.
Maycroft, Alberta
In November 2001, Knight entered into a farmout agreement with Polaris Resources Ltd. ("Polaris") to participate and earn a 25% before payout (20% after payout) working interest, subject to a 9% overriding royalty in a large sour gas prospect near Maycroft in the Foothills region of Alberta, Canada.
The Foothills region of southwest Alberta is one of the most prolific natural gas producing regions of the Western Canadian Sedimentary Basin. Production to date from the well known Mississippian and Devonian gas fields ranges from 234 BCF at Coleman to 3.9 TCF at Waterton. Many of the wells in this region produce in excess of 25 million cubic feet per day and have high deliverability with relatively low decline rates, and consequently a long life. Proximity of the Company’s Maycroft Project to known producing regions of the Western Canadian Sedimentary Basin provides no assurance that economic quantities of oil and gas exist on the Maycroft Project.
The Whaleback Structure is one of the largest known undrilled prospects in the Mississippian and Devonian formations of Southern Alberta, with an undiscovered potential for over 2 TCF of natural gas. A major international oil and gas company proposed drilling of the Whaleback Structure in the early nineties. That proposal involved the drilling of up to 25 wells in a pristine wilderness area. After much consultation, the Provincial Government created the Bob Creek Wildland Provincial Park and the Black Creek Heritage Rangeland. Consequently, development of the subsurface structures under the Parkland cannot occur.
Following the creation of the Provincial Park and the Heritage Rangeland in 1999, Polaris acquired mineral rights near the southern boundary of the protected areas. The 640 acres of petroleum and natural gas rights that Polaris acquired lie one mile outside the Bob Creek Provincial Park. Seismic data acquired by Polaris indicates that a large subsurface geological structure is also present under the lands outside of the Park. Polaris has proposed the drilling of up to four wells from one surface location, thus causing minimal disturbance in this area near the Park.
Polaris, the operator, applied for a well license for the drilling of an initial test well and up to three additional wells from the same site. The Alberta Energy & Utilities Board ('AEUB') conducted a public hearing on the proposed drilling of the initial test well in Maycroft, Alberta in September 2003. On December 16, 2003, the AEUB denied the well license application for the Maycroft Project, submitted by Polaris. The Company and Polaris are reviewing the decision.
The proposed drilling would target the large geophysically and geologically mapped structure that potentially traps natural gas, especially in Mississippian and Devonian Formations. Secondary targets exist in the overlying Cretaceous Formations. It is estimated that the cost of an initial 5,000 metre test well would be $9 million (Knight’s portion would be approximately $2.25 million).
As at December 31, 2003, the Company has spent $495,000 ($35,000 during fiscal 2004) on the Maycroft property and most of the costs incurred have been for preparatory work to obtain a well license. As the Company was denied the well license on the property, the Company is pursuing various means to recover its costs.
Fort St. John, B.C.
The Company has a 15% working interest in a gas well in Fort St. John, B.C. The well has produced approximately 518 million cubic feet of gas since it was tied in on August 2, 2000. Production was limited during 2002 and therefore the Company provided for 100% depletion of the well during the 2002 fiscal year. The well produced approximately 16 million cubic feet of gas during the three months ended December 31, 2003.
Operations and Liquidity
The Company reported a loss of $2,112,423 (2002 - $24,464) and a loss per share of $0.05 (2002 - $0.003) for the three months ended December 31, 2003. The Company’s 2003 loss has increased significantly compared to 2002 due to the Company’s involvement in the West Raglan Project and a change in accounting for stock-based awards. Management anticipates increasing expenditures for fiscal 2004 in order to manage the Company’s involvement in the West Raglan Project and to raise sufficient funds to incur the required exploration expenditures. In particular, the Company expects to incur greater legal fees, travel and promotion costs, filing fees, transfer agent fees and administrative fees.
Effective October 1, 2003, the Company has adopted the new recommendations of the Canadian Institute of Chartered Accountants Handbook section 3870,Stock-based Compensation and Other Stock-based Payments.
The new rules require that a fair value based method of accounting must be used for all stock-based payments to employees, directors and non-employees. The old rules only required a fair value based method of accounting for direct awards of stock, stock appreciation rights, and awards that call for settlement in cash or other assets. Also, only stock options granted to non-employees had to be accounted for using a fair value based method.
Accordingly, starting October 1, 2003, compensation expense is determined when stock options are granted and is recognized over the vesting period of the options. The compensation expense is determined as the fair value of the option at the date of grant using an option pricing model.
The Company has chosen early adoption of this new policy and therefore will be accounting for the fair value of stock-based payments on a prospective basis with no restatement of prior periods.
During the three months ended December 31, 2003, the Company incurred $1,093,750 (2002 - $nil) in compensation expense in accordance with the new accounting rules. The compensation expense is a non-cash item and accordingly did not impact the Company’s working capital position.
The Company expended $1,086,183 (2002 - $nil) on mineral property exploration. All of the exploration costs were incurred on the Company’s West Raglan Project.The Company has accrued $340,000 in tax credits recoverable for the three months ended December 31, 2003. These tax credits recoverable relate to the Government of Quebec’s exploration subsidy program whereby a corporation is entitled to receive a 33.75% refundable tax credit for every exploration dollar spent in Quebec and a 12% mining duties refund on all Quebec exploration expenditures less the 33.75% refundable tax credit. As a result of these credits, the Company’s net expenditures on the West Raglan Project for the three mon ths ended December 31, 2003 were $746,183.
The Company’s first quarter oil and gas operations improved over 2002 as the Fort St. John well provided the Company $12,945 (2002 - $244) in sales. The Company does not anticipate significant production from the well in the future. As of the date of this report, there are no plans to abandon the well in the short term. The Company is not expecting any material future profits or losses from the well.
During the three months ended December 31, 2003, the Company completed the abandonment of the Lagarde initial test well. The abandonment was completed at a cost that was less than previously estimated which resulted in a recovery of $4,168. The Company sold the used wellhead and used tubing for net proceeds of $8,250.
Most of the line items on the consolidated schedule of general and administrative expenses have increased in 2003 compared to 2002. The increase is in large part due to the Company’s recent involvement in the West Raglan Project which resulted in a significant increase in corporate activity and caused the Company to incur more costs in all areas.
Starting October 1, 2003, the Company started to pay its officers management fees as compensation for the time incurred in managing the Company. The Company paid the CEO $36,000 (2002 - $nil), the president $16,000 (2002 - $nil) and the exploration manager $7,500 (2002 - $nil) for the three months ended December 31, 2003.
The Company paid an arms-length private company $27,000 (2002 - $12,000) for administrative and accounting services and paid the same company $6,000 (2002 - $3,000) for rent of office space. The administrative fees have increased because of the Company’s increased business activity and rent has increased because the Company is using more office space.
Promotion and travel costs have also increased significantly during the first three months of fiscal 2004. Management has traveled across Canada and Europe promoting the Company in order to raise money for future exploration expenditures. The Company is also paying two investor relations firms in order to raise awareness of the Company’s activities in North America and Europe (see below for details).
As at December 31, 2003, the Company’s working capital is $5,903,105.
The Company currently does not have any revenue producing assets and therefore will be dependent on additional equity financing in order to continue operations and to finance exploration commitments for the West Raglan Project.
Financings
On December 11, 2003, the Company closed a non-brokered private placement in the amount of $3,500,000. The Company issued 6,730,769 units at a price of $0.52 per unit. Each unit is comprised of one common share and one share purchase warrant entitling the holder to purchase one additional common share of the Company at a price of $0.65 expiring June 10, 2005. Of the 6,730,769 common shares and warrants issued, 1,507,500 are flow-through common shares and 1,007,500 are flow-through warrants. For income tax purposes, the subscription funds of $783,900 relating to the flow-through common shares will be applied towards carrying out exploration activities and the expenditures will be renounced in favour of the subscriber. Accordingly, the Company will not have available deductions from taxable in come in respect of such expenditures. As at December 31, 2003, $618,900 of the $783,900 flow-through funds remains unspent.
During the three months ended December 31, 2003, the Company issued 1,450,000 common shares pursuant to the exercise of stock options for proceeds of $532,350 and 1,968,500 common shares pursuant to the exercise of warrants for proceeds of $491,375.
The Company will be using the funds raised in the above equity offerings for exploration on the West Raglan Project and for general working capital purposes.
Investor Relations
Effective August 1, 2003 the Company engaged Rock Marketing Inc. of Vancouver, British Columbia to provide public relations for an initial term of 12 months. Rock is focused on servicing the Company's European shareholders and introducing and presenting the Company to interested investors. The Company pays Rock $5,000 per month.
Effective October 1, 2003 the Company engaged Vanguard Shareholder Solutions Inc. of Vancouver, British Columbia to provide public relations for an initial term of 12 months. The Company pays Vanguard $8,000 per month.
During the three months ended December 31, 2003, the Company participated in investment and mineral resource conferences held in Calgary and Quebec City.
Subsequent Events
Subsequent to December 31, 2003 and to the date of this report, the Company has issued 115,000 common shares pursuant to the exercise of stock options for proceeds of $29,500 and 477,500 common shares pursuant to the exercise of warrants for proceeds of $119,375.
Subsequent to December 31, 2003, the Company granted 100,000 stock options. The options are exercisable at $1.15 per common share for a period of two years.
