CARDERO RESOURCE CORP.
(An Exploration Stage Company)
Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
Nine months ended July 31, 2014 and 2013
Corporate Head Office
Suite 2300 – 1177 West Hastings Street
Vancouver, British Columbia
V6E 2K3
Tel: 604-408-7488
NOTICE OF NO AUDITOR REVIEW OF
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Under National Instrument 51-102, Part 4, subsection 4.3(3(a)), if an auditor has not performed a review of the condensed interim consolidated financial statements, they must be accompanied by a notice indicating that the condensed interim consolidated financial statements have not been reviewed by an auditor.
The accompanying unaudited condensed interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company’s management.
The Company’s independent auditor has not performed a review of these condensed interim consolidated financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of financial statements by an entity’s auditor.
For further information, please contact:
Blaine Bailey, Chief Financial Officer
Tel: (604) 408-7488
Fax: (604) 408-7499
CARDERO RESOURCE CORP. |
(AN EXPLORATION STAGE COMPANY) |
Condensed Interim Consolidated Financial Statements |
(Expressed in Canadian Dollars) |
(Unaudited – Prepared by Management) |
July 31, 2014 and 2013 |
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Condensed Interim Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
July 31 | October 31 | |||||
2014 | 2013 | |||||
ASSETS | ||||||
Current | ||||||
Cash and cash equivalents | $ 29,963 | $ 291,277 | ||||
Accounts receivable | 1,088,619 | 4,268,527 | ||||
Due from related parties (note 9) | 168,993 | 157,131 | ||||
Deferred financing costs (note 7) | 751,948 | - | ||||
Prepaid expenses | 163,145 | 225,369 | ||||
2,202,668 | 4,942,304 | |||||
Property, Plant and Equipment(note 3) | 240,883 | 561,041 | ||||
Investments(note 4) | 268,236 | 496,746 | ||||
Exploration and Evaluation Advances | 50,000 | 55,000 | ||||
Exploration and Evaluation Assets(note 5) | 57,308,724 | 78,152,654 | ||||
Deposits | 4,875,886 | 4,906,636 | ||||
Total Assets | $ 64,946,397 | $ 89,114,381 | ||||
LIABILITIES | ||||||
Current | ||||||
Accounts payable and accrued liabilities | $ 2,211,846 | $ 5,870,254 | ||||
Short-term loan (note 6) | 2,296,051 | 5,338,312 | ||||
Flow-through premium liabilities (note 10) | - | 232,613 | ||||
Credit facility(note7) | 2,502,290 | - | ||||
Total Liabilities | 7,010,187 | 11,441,179 | ||||
SHAREHOLDERS’ EQUITY | ||||||
Share Capital | 126,163,632 | 125,528,040 | ||||
Contributed Surplus | 28,181,783 | 23,847,997 | ||||
Accumulated Other Comprehensive Income | 6,495 | 12,835 | ||||
Deficit | (96,415,700) | (71,715,670) | ||||
Total Shareholders’ Equity | 57,936,210 | 77,673,202 | ||||
Total Liabilities and Shareholders’ Equity | $ 64,946,397 | $ 89,114,381 | ||||
Subsequent Events(note 11) | ||||||
Going Concern(note 1) |
Approved on behalf of the Board: | ||
“Hendrik Van Alphen” | “Stephan Fitch” | |
Hendrik Van Alphen, Director | Stephan Fitch, Director |
See Notes to Condensed Interim Consolidated Financial Statements | 1 |
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Condensed Interim Consolidated Statements of Loss
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
Three Months Ended | Nine Months Ended | |||||||||||
July 31 | July 31 | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||
Operating Expenses | ||||||||||||
Bad debts | $ | 692 | $ | - | $ | 114,130 | $ | - | ||||
Consulting fees (note 9(b)) | 792 | 485,382 | 219,374 | 998,396 | ||||||||
Corporate development | 6,238 | 21,172 | 52,860 | 167,942 | ||||||||
Depreciation | 13,025 | 59,414 | 100,295 | 177,973 | ||||||||
Insurance | 28,325 | 57,074 | 79,942 | 161,848 | ||||||||
Investor relations | - | 20,768 | 12,926 | 142,596 | ||||||||
Office costs | 102,799 | 179,104 | 361,971 | 623,430 | ||||||||
Professional fees (note 9(b)) | 146,103 | 474,557 | 308,866 | 1,474,733 | ||||||||
Property evaluations | 15,675 | 11,791 | 29,785 | 137,409 | ||||||||
Regulatory and transfer agent fees | 1,648 | 21,539 | 82,428 | 116,551 | ||||||||
Salaries and benefits | 203,085 | 1,119,242 | 800,607 | 2,894,397 | ||||||||
Travel | 21,497 | 39,241 | 44,925 | 226,699 | ||||||||
Impairment losses on property plant and equipment | 377 | - | 62,233 | - | ||||||||
Impairment losses on exploration and evaluation assets (note 5) | 3,523 | 12,736,509 | 21,004,470 | 16,511,763 | ||||||||
Loss on sale of subsidiary | - | - | 81,537 | - | ||||||||
Disposal of mineral property ( note5(a)) | (54,685 | ) | - | (54,685 | ) | - | ||||||
Recovery on impairment - receivable | (26,876 | ) | - | (26,876 | ) | - | ||||||
Loss Before Other Items and Income Tax | (462,218 | ) | (15,225,793 | ) | (23,274,788 | ) | (23,633,737 | ) | ||||
Other Items | ||||||||||||
Other income (expenses) | (17,520 | ) | 16,617 | (51,255 | ) | 394,542 | ||||||
Foreign exchange gain (loss) | 71,253 | (22,844 | ) | (367,789 | ) | (228,885 | ) | |||||
Interest expense (note 6 and 7) | (599,668 | ) | (575,832 | ) | (3,130,489 | ) | (608,512 | ) | ||||
Realized loss on sale of available-for-sale investments (note 4) | 71 | - | (8,542 | ) | 17,230 | |||||||
Realized loss on derivative investment (note 4) | - | - | (87,470 | ) | - | |||||||
Unrealized loss on derivative investment (note 4) | - | (51,564 | ) | - | (468,287 | ) | ||||||
Unrealized loss on fair value through profit or loss investment | - | (2,250 | ) | - | (18,750 | ) | ||||||
Impairment losses on available-for-sale investments (note 4) | (58,532 | ) | (241,454 | ) | (130,661 | ) | (1,353,989 | ) | ||||
Facilitation fee (note 5(a)) | 671,717 | - | 671,717 | - | ||||||||
Flow-through Part XII.6 Tax (note 10) | - | - | (166,152 | ) | - | |||||||
Flow-through - reduced renunciation (note 10) | (227,500 | ) | - | (227,500 | ) | - | ||||||
Gain on Note restructuring (note 6) | - | - | 275,742 | - | ||||||||
Gain (loss) on settlement of accounts payable | 363,363 | - | 1,563,016 | - | ||||||||
203,184 | (877,327 | ) | (1,659,383 | ) | (2,266,651 | ) | ||||||
Loss Before Income Taxes | (259,034 | ) | (16,103,120 | ) | (24,934,171 | ) | (25,900,388 | ) | ||||
Income Taxes | ||||||||||||
Deferred recovery (expense) | (2,211 | ) | 11,442 | 1,528 | 48,741 | |||||||
Current recovery | - | - | 232,613 | - | ||||||||
Net Loss for Period | (261,245 | ) | (16,091,678 | ) | (24,700,030 | ) | (25,851,647 | ) | ||||
Basic and Diluted Loss Per Share | $ | (0.01 | ) | $ | (0.14 | ) | $ | (0.21 | ) | $ | (0.24 | ) |
Weighted Average Number of Shares Outstanding | 117,366,887 | 113,291,487 | 116,768,769 | 107,715,385 |
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Condensed Interim Consolidated Statements of Comprehensive Loss
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
Three Months Ended | Nine Months Ended | |||||||||||
July 31 | July 31 | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||
Net Loss for the Period | $ | (261,245 | ) | $ | (16,0914,678 | ) | $ | (24,700,030 | ) | $ | (25,851,64 | |
Other comprehensive income (loss), net of deferred taxes | ||||||||||||
Exchange differences on translation of foreign operations | (27,132 | ) | 253,860 | (17,035 | ) | 445,41 | ||||||
Other comprehensive income (loss) on available-for-sale securities | (18,650 | ) | (13,440 | ) | 10,695 | (46,62 | ||||||
Other Comprehensive Income (Loss) for the Period, net ofdeferred taxes | (45,782 | ) | 240,420 | 6,340 | 398,79 | |||||||
Comprehensive Loss for the Period | $ | (307,027 | ) | $ | (15,851,258 | ) | $ | (24,693,690 | ) | $ | (25,452,85 |
CARDERO RESOURCE CORP. |
(AN EXPLORATION STAGE COMPANY) |
Condensed Interim Consolidated Statements of Shareholders’ Equity |
(Expressed in Canadian Dollars) |
(Unaudited - Prepared by Management) |
Share Capital | Currency | Available-for- | Total | ||||||||||||||||||
Contributed | Translation | Sale | Shareholders’ | ||||||||||||||||||
Shares | Amount | Deficit | Surplus | Account | Investments | Equity | |||||||||||||||
Balance, October 31, 2012 | 93,416,454 | $ | 117,070,689 | $ | (41,956,007 | ) | $ | 22,278,360 | $ | (148,653 | ) | $ | (17,710 | ) | $ | 97,226,679 | |||||
Net loss for the year | - | - | (29,759,663 | ) | - | - | - | (29,759,663 | ) | ||||||||||||
Other comprehensive income | |||||||||||||||||||||
Unrealized loss on available-for-sale investments | - | - | - | - | - | 13,510 | 13,510 | ||||||||||||||
Functional currency translation | - | - | - | - | 165,688 | - | 165,688 | ||||||||||||||
Shares issued for cash | |||||||||||||||||||||
Private placement | 16,439,816 | 7,277,903 | - | - | - | - | 7,277,903 | ||||||||||||||
Exercise warrants | 480,000 | 60,000 | - | - | - | - | 60,000 | ||||||||||||||
Exercise options | 200,000 | 12,500 | - | - | - | - | 12,500 | ||||||||||||||
Share issue costs | - | (466,452 | ) | - | 47,973 | - | - | (418,479 | ) | ||||||||||||
Shares issued for non-cash | |||||||||||||||||||||
Property acquisition | 900,000 | 203,000 | - | - | - | - | 203,000 | ||||||||||||||
Short-term loan | 2,000,000 | 420,000 | - | - | - | - | 420,000 | ||||||||||||||
Reclassification of contributed surplus on exercise of warrants | - | 662,400 | - | (662,400 | ) | - | - | - | |||||||||||||
Reclassification of contributed surplus on exercise of options | - | 288,000 | - | (288,000 | ) | - | - | - | |||||||||||||
Short-term loan warrants | - | - | - | 1,801,027 | - | - | 1,801,027 | ||||||||||||||
Share-based payments | - | - | - | 671,037 | - | - | 671,037 | ||||||||||||||
Balance, October 31, 2013 | 113,436,270 | $ | 125,528,040 | $ | (71,715,670 | ) | $ | 23,847,997 | $ | 17,035 | $ | (4,200 | ) | $ | 77,673,202 | ||||||
Net loss for the period | - | - | (24,700,030 | ) | - | - | - | (24,700,030 | ) | ||||||||||||
Other comprehensive income | |||||||||||||||||||||
Unrealized loss on available-for-sale investments | - | - | - | - | - | 10,695 | 10,695 | ||||||||||||||
Functional currency translation | - | - | - | - | (17,035 | ) | - | (17,035 | ) | ||||||||||||
Shares issued for cash | |||||||||||||||||||||
Exercise options | 711,000 | 78,210 | - | - | - | - | 78,210 | ||||||||||||||
Share issue costs | - | (315 | ) | - | - | - | - | (315 | ) | ||||||||||||
Shares issued for non-cash | |||||||||||||||||||||
Reclassification of contributed surplus on exercise of options | - | 42,558 | - | (42,558 | ) | - | - | - | |||||||||||||
Shares issued in settlement of trade creditors | 3,219,617 | 515,139 | - | - | - | - | 515,139 | ||||||||||||||
Line of credit warrants | - | - | - | 4,190,559 | - | - | 4,190,559 | ||||||||||||||
Share-based payments | - | - | - | 185,785 | - | - | 185,785 | ||||||||||||||
Balance, July 31, 2014 | 117,366,887 | $ | 126,163,632 | $ | (96,415,700 | ) | $ | 28,181,783 | $ | - | $ | 6,495 | $ | 57,936,210 |
CARDERO RESOURCE CORP. |
(AN EXPLORATION STAGE COMPANY) |
Condensed Interim Consolidated Statements of Cash Flows |
(Expressed in Canadian Dollars) |
(Unaudited – Prepared by Management) |
Nine Months Ended July 31 |
2014 | 2013 | |||||
Operating Activities | ||||||
Net loss for the period | $ | (24,700,030 | ) | $ | (25,851,647 | ) |
Items not involving cash | ||||||
Depreciation | 100,295 | 177,973 | ||||
Share-based payments (note 7) | 185,786 | 671,036 | ||||
Bad debts | 114,130 | - | ||||
Accretion expense | 2,602,698 | 233,467 | ||||
Realized loss (gain) on sale of available-for-sale investments (note 4) | 8,541 | (17,230 | ) | |||
Impairment losses on available-for-sale investments (note 4) | 130,661 | 1,353,989 | ||||
Impairment losses on exploration and evaluation assets (note 5) | 21,004,470 | - | ||||
Impairment losses on property plant and equipment | 62,233 | - | ||||
Unrealized loss on fair value through profit or loss investment (note 4) | - | 18,750 | ||||
Gain on Note restructuring | (275,742 | ) | - | |||
Gain on settlement of accounts payable | (1,563,016 | ) | - | |||
Unrealized loss on derivative investments (note 4) | - | 468,287 | ||||
Realized loss on derivative investment (note 4) | 87,470 | - | ||||
Write-off of exploration and evaluation assets | - | 16,511,763 | ||||
Income taxes recovered | (234,141 | ) | (48,741 | ) | ||
Loss on asset disposal | 15,804 | - | ||||
Unrealized foreign exchange loss | 442,347 | 47,102 | ||||
Changes in non-cash working capital items | ||||||
Deferred financing costs | (751,948 | ) | - | |||
Prepaid expenses | 62,224 | 273,372 | ||||
Due from related parties | (11,862 | ) | 108,439 | |||
Interest payable | 285,974 | 383,741 | ||||
Accounts payable and accrued liabilities | (880,016 | ) | 467,381 | |||
Cash Used in Operating Activities | (3,314,122 | ) | (5,202,318 | ) | ||
Investing Activities | ||||||
Expenditures on exploration and evaluation assets | (855,774 | ) | (13,512,688 | ) | ||
Acquisition of resource related investments | (107,220 | ) | - | |||
Decrease (Increase) in deposits | 30,750 | (52,500 | ) | |||
Proceeds from sale of investments | 121,278 | 126,991 | ||||
Disposal (Purchase) of property, plant and equipment | 124,790 | 184,592 | ||||
Accounts receivable (BC METC) | 3,065,779 | 4,700,553 | ||||
Cash (Used in) Investing Activities | 2,379,603 | (8,553,052 | ) | |||
Financing Activities | ||||||
Proceeds from shares issued, net of issuance costs | 77,895 | 7,351,980 | ||||
Short term loan | (4,518,022 | ) | 5,083,398 | |||
Credit facility | 5,113,332 | - | ||||
Cash Provided by Financing Activities | 673,205 | 12,435,378 | ||||
(Decrease) Increase in Cash and Cash Equivalents | (261,314 | ) | 1,319,992 | |||
Cash and Cash Equivalents, Beginning of the Period | 291,277 | 2,142,499 | ||||
Cash and Cash Equivalents, End of the Period | $ | 29,963 | $ | 822,507 |
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
Nine Months ended July 31, 2014 and 2013
1. | NATURE OF OPERATIONS AND GOING CONCERN |
Cardero Resource Corp. (“Cardero” or the “Company”) and its subsidiaries are engaged in the exploration of mineral properties, primarily in Canada and Argentina. The Company considers itself to be an exploration stage company. | |
The Company is a public company with shares listed on the TSX Stock Exchange and the Frankfurt Stock Exchange. The head office and principal address of the Company are located at 1177 West Hastings Street, Suite 2300, Vancouver, British Columbia, Canada, V6E 2K3. | |
Going Concern | |
While these condensed interim consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes that the Company will be able to meet its commitments, continue operations, realize its assets and discharge its liabilities in the normal course of business for the foreseeable future, the following events and conditions that raise substantial doubt on the validity of that assumption: |
• | During the nine month period ended July 31, 2014, the Company incurred a loss of $24,700,030 and as at July 31, 2014 had an accumulated deficit of $96,415,700 and a working capital deficit of $4,807,519; and | |
• | Additional sources of financing are required to enable the Company to meet its existing obligations and commitments. |
While the Company has been successful in obtaining its required funding in the past, there is no assurance that sufficient funds will be available to the Company in the future. The Company has no assurance that such financing will be available or be available on favorable terms. Factors that could affect the availability of financing include the progress and results of the Company’s exploration properties, the state of international debt and equity markets, investor perceptions and expectations and the global financial and iron ore and metallurgical coal markets. There can be no assurance the Company will be successful in its endeavor to obtain additional financing. These consolidated financial statements do not reflect adjustments in the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used, that would be necessary if the company were unable to realize its assets and settle its liabilities in the normal course of operations. Such adjustments could be material. | ||
2. | SIGNIFICANT ACCOUNTING POLICIES | |
(a) | Basis of presentation | |
Statement of compliance | ||
These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”. The condensed interim consolidated financial statements should be read in conjunction with the annual financial statements for the year ended October 31, 2013, which have been prepared in accordance with IFRS as issued by the IASB. |
6
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
Nine Months ended July 31, 2014 and 2013
2. | SIGNIFICANT ACCOUNTING POLICIES (Continued) | |
(a) | Basis of presentation (continued) | |
Statement of compliance(continued) | ||
The condensed interim consolidated financial statements have been prepared on a historical cost basis except for financial instruments classified as available-for-sale or fair value through profit and loss, which are stated at their fair value. In addition, these condensed interim consolidated financial statements have been prepared using the accrual basis of accounting. The presentation and functional currency of the Company is the Canadian dollar. | ||
The Board of Directors approved the condensed interim consolidated financial statements on September 12, 2014. | ||
(b) | Critical accounting estimates and judgements | |
The preparation of financial statements requires management to use judgment in applying its accounting policies and estimates and assumptions about the future. Estimates and other judgments are continuously evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. The following discusses the most significant accounting judgments and estimates that the Company has made in the preparation of the financial statements. | ||
Mineral property impairment | ||
At the end of each reporting period, the Company assesses each of its mineral resource properties to determine whether any indication of impairment exists. Judgment is required in determining whether indicators of impairment exist, including factors such as: the period for which the Company has the right to explore, expected renewals of exploration rights, whether substantive expenditures on further exploration and evaluation of resource properties are budgeted or planned and results of exploration and evaluation activities on the exploration and evaluation assets. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period. | ||
The Company concluded that, as a result of its withdrawal from the Burns Lease (Note 5(c) (ii)), which forms part of the Carbon Creek property, an impairment indicator existed. The Company determined that all attributed expenditures for acquisition and exploration costs in respect of the coal underlying the crown granted district lots related to the Burns Agreement and the Burns Lease would be written off. The Carbon Creek Joint Venture Agreement (Note 5(c) (iii)) is in good standing and further exploration is planned on the remaining joint venture property once additional financing has been obtained. Based on an impairment test performed on the Company’s remaining interest in the Carbon Creek Joint Venture property the Company concluded that no additional impairment was require as at July 31, 2014. | ||
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss. |
7
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
Nine Months ended July 31, 2014 and 2013
3. | PROPERTY, PLANT AND EQUIPMENT |
Metallurgy Lab | Leasehold Improvements | Other | Total | ||||||||||
Cost | |||||||||||||
Balance, October 31, 2013 | $ | 619,722 | $ | 378,184 | $ | 611,114 | $ | 1,609,020 | |||||
Disposals | (440,119 | ) | - | (11,563 | ) | (451,682 | ) | ||||||
Impairment | (179,603 | ) | - | - | (179,603 | ) | |||||||
Balance, July 31, 2014 | $ | - | $ | 378,184 | $ | 599,551 | $ | 977,735 | |||||
Accumulated depreciation | |||||||||||||
Balance, October 31, 2013 | $ | 344,090 | $ | 246,845 | $ | 457,044 | $ | 1,047,979 | |||||
Depreciation for the year | 61,731 | 11,469 | 27,095 | 100,295 | |||||||||
Disposal | (288,240 | ) | - | (5,601 | ) | (293,841 | ) | ||||||
Impairment | (117,581 | ) | - | - | (117,581 | ) | |||||||
Balance, July 31, 2014 | $ | - | $ | 258,314 | $ | 478,538 | $ | 736,852 | |||||
Carrying amounts | |||||||||||||
At October 31, 2013 | $ | 275,632 | $ | 131,339 | $ | 154,070 | $ | 561,041 | |||||
At July 31, 2014 | $ | - | $ | 119,870 | $ | 121,013 | $ | 240,883 |
The Company operates in one industry segment, the mineral resources industry, and in two geographical segments, Canada and Argentina. All assets are located in Canada. The Metallurgical Testing laboratory, $Nil (2013: $275,632) which was disposed of during the period, was located in the United States. | |
4. | INVESTMENTS |
Shares | ||||||||||||||||
July 31, 2014 | Number | Fair Value | ||||||||||||||
Wealth Minerals Ltd. (“Wealth”) | 5,022,806 | 100,456 | ||||||||||||||
Xiana Mining Inc. (“Xiana”) | 126,800 | 8,242 | ||||||||||||||
Trevali Mining Corporation(“Trevali”) | 30,000 | 39,600 | ||||||||||||||
Abzu Gold Inc. (“Abzu Gold”) | 787,500 | 98,438 | ||||||||||||||
Artha Resources Corporation (“Artha”) | 2,150,000 | 21,500 | ||||||||||||||
$ | 268,236 | |||||||||||||||
Shares | Warrants | |||||||||||||||
October 31, 2013 | Number | Fair Value | Number | Fair Value | Total | |||||||||||
Trevali | - | $ | - | 2,074,761 | $ | 87,470 | $ | 87,470 | ||||||||
Wealth | 5,022,806 | 150,684 | - | - | 150,684 | |||||||||||
Xiana | 126,800 | 17,752 | - | - | 17,752 | |||||||||||
Indico Resources Ltd. (“Indico”) | 50,000 | 5,750 | - | - | 5,750 | |||||||||||
Balmoral Resources Ltd. (“Balmoral”) | 8,000 | 3,040 | - | - | 3,040 | |||||||||||
Abzu Gold | 923,401 | 184,680 | - | - | 184,680 | |||||||||||
Artha | 2,150,000 | 32,250 | - | - | 32,250 | |||||||||||
Ethos Capital Corp.(“Ethos”) | 150,000 | 15,120 | - | - | 15,120 | |||||||||||
$ | 409,276 | $ | 87,470 | $ | 496,746 |
8
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
Nine Months ended July 31, 2014 and 2013
4. | INVESTMENTS (Continued) |
All the resource related companies are considered to be related parties, with the exception of Trevali, Xiana, Abzu and Artha, by virtue of having directors and/or officers in common. All investments in shares are classified as available-for-sale under the financial instruments classification. As investments in warrants are considered to be derivative instruments, they are by definition classified as fair value through profit or loss. | |
During the period ended July 31, 2014 the Company sold investments for net proceeds of $121,278 (2013 - $126,991) at a cost of $129,820 (2013 - $109,761) for net (loss) gains on sale of $(8,542) (2013 - $17,230). Impairment losses on investments amounted to $130,661 (2013 - $1,353,989). | |
During the period ended July 31, 2014, the Company recorded a realized loss on the fair value of derivatives of $87,470 (2013 – $Nil). The Company recorded an unrealized loss on the fair value adjustment of derivatives of $Nil (2013 – $468,287). The Company held 2,074,761 Trevali warrants with an exercise price of $1.10 which expired, unexercised, on January 16, 2014. | |
5. | EXPLORATION AND EVALUATION ASSETS |
The Company’s capitalized acquisition and exploration expenditures on its exploration and evaluation assets are as follows: |
U.S.A. (note 7(c)) | Ghana (note 7(d)) | Canada (note 7(e)) | Total | |||||||||
Balance, October 31, 2012 | $ | 3,770,227 | $ | 11,436,626 | $ | 73,116,935 | $ | 88,323,788 | ||||
Acquisition costs: | ||||||||||||
Acquisition costs – shares | - | 135,000 | 68,000 | 203,000 | ||||||||
Acquisition costs – cash | 557 | 635,500 | 5,625,760 | 6,261,817 | ||||||||
Total acquisition costs | 557 | 770,500 | 5,693,760 | 6,464,817 | ||||||||
Deferred exploration costs: | ||||||||||||
Camp | - | 146,891 | 322,482 | 469,373 | ||||||||
Drilling and analysis | - | - | 410,761 | 410,761 | ||||||||
Personnel and geology | 4,470 | 248,545 | 2,342,717 | 2,595,732 | ||||||||
Total exploration costs | 4,470 | 395,436 | 3,075,960 | 3,475,866 | ||||||||
Total expenditures for the period | 5,027 | 1,165,936 | 8,769,720 | 9,940,683 | ||||||||
Costs recovered – Exploration | - | - | (3,734,000 | ) | (3,734,000 | ) | ||||||
Write-offs – Acquisition costs | (353,540 | ) | (6,820,013 | ) | - | (7,173,553 | ) | |||||
Write-offs – Exploration costs | (3,421,714 | ) | (5,851,846 | ) | - | (9,273,560 | ) | |||||
Total write-offs | (3,775,254 | ) | (12,671,859 | ) | - | (16,447,113 | ) | |||||
Currency translation adjustments | - | 69,296 | - | 69,296 | ||||||||
Balance, October 31, 2013 | $ | - | $ | - | $ | 78,152,654 | $ | 78,152,654 | ||||
Acquisition costs: | ||||||||||||
Acquisition costs – cash | - | - | 66,960 | 66,960 | ||||||||
Total acquisition costs | - | - | 66,960 | 66,960 | ||||||||
Deferred exploration costs: | ||||||||||||
Drilling and analysis | - | - | 8,416 | 8,416 | ||||||||
Personnel and geology | - | - | 85,164 | 85,164 | ||||||||
Total exploration costs | - | - | 93,580 | 93,580 | ||||||||
Total expenditures for the period | - | - | 160,540 | 160,540 | ||||||||
Write-offs – Acquisition costs | - | - | (6,039,601 | ) | (6,039,601 | ) | ||||||
Write-offs – Exploration costs | - | - | (14,964,869 | ) | (14,964,869 | ) | ||||||
Total write-offs | - | - | (21,004,470 | ) | (21,004,470 | ) | ||||||
Balance, July 31, 2014 | $ | - | $ | - | $ | 57,308,724 | $ | 57,308,724 |
9
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
Nine Months ended July 31, 2014 and 2013
5. | EXPLORATION AND EVALUATION ASSETS (Continued) | ||
(a) | Argentina | ||
During the nine month period ended July 31, 2014, the Company’s subsidiary, Cardero Argentina S.A., disposed of the Minas Pirquita property in Argentina for gross proceeds of USD 50,000. The Company received a facilitation fee of USD 850,000 for services rendered in connection with the termination of an option agreement with Artha, thereby permitting the disposition to proceed. The Company paid a finder’s fee of USD 22,500 to an arm’s length individual and USD 212,942 to Artha in consideration of Artha terminating its existing option agreement with respect to the Minas Pirquitas property. | |||
(b) | Ghana | ||
On December 8, 2011, three separate prospecting licenses, Sheini North, Middle Sheini and Sheini South, covering the Sheini Hills Iron Ore deposit were granted and Cardero Ghana and a private Ghanaian company have entered into three separate joint ventures (one for each prospecting license), each dated December 12, 2011 and amended on November 2, 2012 (which replace all previous agreements between the parties, including the November 22, 2010 agreement), to explore and, if warranted, develop the lands subject to the prospecting licenses. Ghanaian government approval to the three joint venture agreements was obtained on April 10, 2012. All expenditures incurred prior to December 8, 2011 have been included in property evaluations in the consolidated statement of loss. All expenditures incurred after December 8, 2011 were capitalized and included in exploration and evaluation assets. | |||
During the year ended October 31, 2012, Cardero Ghana elected not to make a payment of USD 500,000 due December 8, 2012 in respect of the joint venture agreement on the Sheini North prospecting license. Accordingly, the Company determined that the carrying value of the property was impaired and wrote off cumulative costs incurred to date of $374,716 as an impairment charge in the consolidated statement of loss. | |||
Subsequent to the year ended October 31, 2013, Cardero Ghana elected not to make a payment of USD 1,000,000 due December 8, 2012 in respect of the joint venture agreement on the Middle Sheini prospecting license and USD 1,900,000 due December 8, 2013 in respect of the joint venture agreement on the Sheini South prospecting license. Accordingly, the Company determined that the carrying value of the properties were impaired and wrote off cumulative costs incurred to date of $12,671,859 as an impairment charge in the consolidated statement of loss. The Company has made the determination to withdraw from all three joint ventures and has issued a formal Notice of Withdrawal (Note 11). | |||
During the year end October 31, 2013 the Company issued 500,000 common shares at a deemed value of $135,000 for a finder’s fee on the Sheini Hills project. | |||
(c) | Canada – Carbon Creek Property, British Columbia | ||
To acquire its interest in the Carbon Creek Metallurgical Coal Property, Cardero Coal Ltd. (a wholly owned subsidiary of the Company (“Cardero Coal”)) entered into the following agreements: | |||
i) | Johnson Agreement | ||
On May 18, 2010, Cardero Coal entered into a Coal Tenure Option Agreement, as amended on April 14, 2011, January 14, 2013 and April 12, 2013, (“Johnson Agreement”) to acquire, subject to the issuance by the BC Government of certain coal licenses (“Johnson Licenses”) in respect of a coal license application over an area located in the Peace River Land District of British Columbia (4 coal licenses issued June 14, 2012), all of the shares (“Shares”) of a private Alberta company which holds such coal licenses. Consideration for the acquisition of a 100% interest in the Shares consisted of the following payments, share issuance and option grant: |
- | $75,000 on execution of the Johnson Agreement (paid), an additional $275,000 on or before June 24, 2010 (paid) and a final payment of $5,000,000 due within four months of the date of issuance of the Johnson Licenses (October 14, 2012). As permitted by the Johnson Agreement, Cardero Coal extended the deadline for the final payment from October 14, 2012 until January14, 2013 by paying $20,000 per month. The deadline was further extended to April 14, 2013 by Cardero Coal paying a non-refundable cash deposit of $1,000,000 on January 14, 2013 (paid), plus an additional $20,000 per month for each month’s extension ($60,000 paid in total). The deadline was further extended to April 22, 2013 upon payment of a further non-refundable cash deposit of $1,000,000 (paid April 12, 2013). On April 22, 2013, Cardero Coal exercised the option and paid the balance of $3,000,000. Immediately following the exercise of option, the coal licenses and other assets of the private company were transferred to Cardero Coal and thereby became part of the Carbon Creek Joint Venture; |
10
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
Nine Months ended July 31, 2014 and 2013
5. | EXPLORATION AND EVALUATION ASSETS (Continued |
(c) | Canada – Carbon Creek Property, British Columbia (Continued) |
- | issuance of 400,000 common shares (issued), with a fair value of $68,000, of the Company concurrently with the $3,000,000 final option payment; and | |
- | grant of an option to acquire 1,000,000 common shares of Cardero Coal at an exercise price of $0.15 per share (granted). The option was exercised on March 9, 2011 (prior to the acquisition of Cardero Coal by the Company). |
ii. | Burns Agreement | |
On June 15, 2010, Cardero Coal entered into an option agreement (“Burns Agreement”) to acquire a lease of the coal situated on 10 Crown granted district lots (“CGDL”) located in the Peace River Land District of British Columbia. To exercise its option, Cardero Coal was required to pay $6,000,000 (paid). Cardero Coal has exercised the option. | ||
Under the lease agreement (“Burns Lease”), Cardero Coal will pay a 5% “freight on rail” royalty on all coal sold or $2 per metric tonne of coal sold, whichever is greater, and 20% on sales for any coal substances sold or consumed on the CGDL. On May 1, 2013 the Burns Lease was amended to include an Advance Royalty payment to be paid until the commencement of the payment of the Royalty. The Advance Royalty is non-refundable and is to be deducted from the amount required to be paid in respect of the Royalty due. On May 30, 2014 the Company withdrew from the Burns Lease. As a consequence, the Burns Lease no longer forms part of the property subject to the Joint Venture Agreement (Note 5(c) (iii)). The Company determined that the carrying value of its interest in the Carbon Creek project was therefore impaired and wrote off cumulative costs incurred to date of $21,000,947 as an impairment charge in the consolidated statements of loss. | ||
iii. | Joint Venture Agreement | |
On June 15, 2010, Cardero Coal entered into a joint venture agreement (the “Joint Venture Agreement”) with a private Alberta partnership, to participate in common operation and exploration, development and production of the Carbon Creek Property. Under the Joint Venture Agreement, the Carbon Creek Property subject to the joint venture will consist of Cardero Coal’s interest in the Johnson Licenses and, until May 30, 2014, the Burns Lease, 10 coal licenses held by the joint venture partner (once issued), one coal license held by Cardero Coal (once issued) and any additional coal licenses acquired by a joint venturer within 25 kilometres of the balance of the Carbon Creek Property. Pursuant to the Joint Venture Agreement, the Company will have a 75% interest in the joint venture and is responsible for incurring all costs of carrying out the required exploration, development and mining of the Carbon Creek Property and the marketing of the product produced. The joint venture partner will have a 25% interest in the joint venture which interest is carried and the joint venture partner will therefore not be required to contribute to any such costs. The joint venture partner is entitled to receive, in respect of its 25% interest, 25% of the net proceeds of production following Cardero Coal having recovered, from the proceeds of any production, all monies paid under the Johnson Agreement and all costs incurred by Cardero Coal to develop the mine site and put it into production. To acquire its interest in the joint venture, the Company issued 1,600,000 common shares and warrants to purchase an additional 1,600,000 common shares and made payments of $6,000,000. |
11
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
Nine Months ended July 31, 2014 and 2013
5. | EXPLORATION AND EVALUATION ASSETS (Continued) |
(d) | Title and environmental | |
Although the Company has taken steps to verify the title to mineral properties in which it has or had a right to acquire an interest of such properties, these procedures do not guarantee title (whether of the Company or of any underlying vendor(s) from whom the Company may be acquiring its interest). Title to mineral properties may be subject to unregistered prior agreements or transfers, and may also be affected by undetected defects or the rights of indigenous peoples. Environmental legislations are becoming increasingly stringent and costs and expenses of regulatory compliance are increasing. The impact of new and future environmental legislation on the Company’s operations may cause additional expenses and restrictions. If the restrictions adversely affect the scope of exploration and development on the mineral properties, the potential for production on the property may be diminished or negated. |
6. | SHORT-TERM LOANS |
On April 22, 2013, the Company completed a placement of senior secured notes (“Luxor Notes”) in the aggregate principal amount of USD 5.5 million with certain affiliates of Luxor Capital Group, LP. (“Luxor”). The Luxor Notes had a one year term and were issued at a 9.1% discount to net the Company USD 5.0 million ($5,083,398) with interest accruing at the rate of 10% per annum, payable semi-annually (13% after an event of default). The Luxor Notes were secured by a general security agreement over the assets of the Company, as well as a specific pledge of the shares of Cardero Coal. Cardero Coal also provided a corporate guarantee. The Luxor Notes could be redeemed by the Company at any time at par plus accrued interest. Should there be a change of control of Cardero Coal while the Luxor Notes remain outstanding the holders of the Luxor Notes would have the right to put the Luxor Notes to the Company for an amount equal to 110% of par plus accrued interest. | |
As a bonus for subscribing for and purchasing the Luxor Notes, the holders of the Luxor Notes were issued an aggregate of 2,000,000 common shares of the Company (the “Bonus Shares”). The Bonus Shares were subject to a hold period in Canada until August 25, 2013, plus additional restrictions under United States securities laws. | |
On August 9, 2013 the Company completed a private placement of senior secured notes (“Notes”) in the aggregate principal amount of USD 5.7 million with entities controlled by Robert C. Kopple of Los Angles, California, US (“Lenders”). The net proceeds of the Notes were used to pay the indebtedness owing to Luxor immediately following closing. The Company incurred a loss of $686,532 on settlement of the Luxor Notes. | |
Notes in the amount of USD 3.7-million are due no later than December 31, 2013, subsequently extended to February 28, 2014 and further extended to March 14, 2014. The Company paid USD 3,906,794 (representing the USD 3,700,000 principal amount plus USD 206,794 in interest, of which USD 3,360,957 was paid in cash and USD 545,838 was paid from the Company’s line of credit) towards the Notes due on or before March 14, 2014 (Note 11). On modification to the debt term the Company recorded a gain of $275,742. The remaining USD 2.0 million of the Notes is due on August 8, 2014. Interest accrues at the rate of 10 per cent per year payable quarterly. The Notes are secured by a general security agreement over the assets of the Company, as well as a specific pledge of the shares of Cardero Coal. Cardero Coal also provided a corporate guarantee. The notes may be redeemed by the Company at any time at par plus accrued interest. Should there be a change of control of the Company or Cardero Coal while the notes remain outstanding, other than a change of control caused by the Lenders or their associates or affiliates, the holders of the notes will have the right to put the notes to the Company for an amount equal to 110% of par plus accrued interest. |
12
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
Nine Months ended July 31, 2014 and 2013
6. | SHORT-TERM LOANS (Continued) |
As additional consideration for purchasing the Notes, the Lenders were issued transferrable warrants to purchase an aggregate of 28,359,066 common shares of the Company. The warrants have a term of seven years, and are exercisable at a price of 9.5 cents. The warrants, and any shares issuable on the exercise thereof, will be subject to a hold period in Canada of four months from the date of issuance, plus additional restrictions under United States securities laws. Assuming the full exercise of the warrants, the Lenders, together with their associates and affiliates, and including their current shareholdings (but excluding any additional common shares which may be purchased by them), would then hold in excess of 20% of the Company’s then-issued shares (assuming no other share issuances by the Company in the meantime). As this exercise of warrants represents a potential change of control, the Company agreed to seek, and obtained, shareholder approval to the full exercise of the warrants and potential change of control arising therefrom at its 2014 annual general meeting (“2014 AGM”). As a result of such shareholder approval having been obtained, the Lenders may exercise the warrants in full at any time. | |
At July 31, 2014, short-term loan is as follows: |
July 31, 2014 | October 31, 2013 | ||||||
Short-term loan | $ | 2,180,000 | $ | 6,331,988 | |||
Warrant | (1,801,027 | ) | (1,801,027 | ) | |||
Interest payable | 214,233 | 141,693 | |||||
Gain on Note restructuring | (275,742 | ) | - | ||||
Professional fees | (83,071 | ) | (83,071 | ) | |||
Accretion expenses | 2,061,658 | 748,729 | |||||
Balance at July 31, 2014 and October 31, 2013 | $ | 2,296,051 | $ | 5,338,312 |
7. | CREDIT FACILITY |
On December 5, 2013, the Company secured a USD 5.0 million line of credit (“Credit Line”) from the Lenders. | |
The Credit Line reflects or includes all amounts advanced by the Lenders since the purchase of the Notes, interest due under the Notes, and amounts to be advanced in the future. Interest is payable by the Company on the amount outstanding under the Credit Line from time to time at the rate of 10% per annum. The security granted by the Company in connection with the Notes will extend to all indebtedness of the Company under the Credit Line | |
All amounts outstanding under the Credit Line are due and payable on or before January 5, 2016. | |
As additional consideration for the establishment and funding of the Credit Line, the Company has agreed to issue to the Lenders transferrable common share purchase warrants to purchase an aggregate of 38,417,396 common shares of the Company (the “Warrants”). Of this number, 28,359,066 were issued to the Lenders on the closing of the Credit Line on December 5, 2013. The issuance of the additional 10,058,330 Warrants was subject to shareholder approval which was obtained at the 2014 AGM and it is anticipated such warrants will be issued shortly. The Warrants have a term of seven years, and are exercisable at a price of $0.10 (reduced from $0.139 with the approval of the Company’s shareholders obtained at the 2014 AGM). The warrants were valued using the Black-Scholes option pricing model with the following assumptions: expected life of 6.95 years, interest rate of 2.08% and volatility of 81.08%. The value of the warrants of $4,041,810 has been recognized as a deferred financing cost. Of this amount, $3,289,861 was recognized as a transaction cost during the period as the Credit Line was drawn down. Warrants, and any shares issuable on the exercise thereof, will be subject to a hold period in Canada of four months from the date of issuance, plus additional restrictions under United States securities laws. |
13
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
Nine Months ended July 31, 2014 and 2013
7. | CREDIT FACILITY (Continued) |
At July 31, 2014, long term credit facility is as follows: |
Credit Facility | $ | 4,437,698 | ||
Transaction costs | (3,289,861 | ) | ||
Interest payable | 213,434 | |||
Accretion expenses | 1,141,019 | |||
Balance at July 31, 2014 | $ | 2,502,290 |
8. | SHARE CAPITAL | |
(a) | Authorized | |
An unlimited number of common shares without par value. | ||
(b) | Share issuances | |
During the nine months ended July 31, 2014: |
i. | On November 8, 2013, 400,000 stock options were exercised at a price of $0.11 for proceeds of $44,000. | |
ii. | On December 12, 2013 the Company completed debt settlements with a number of arm’s length creditors. The Company settled $1,652,105 of outstanding trade debts by issuing 3,219,617 common shares at a deemed price of $0.16 per share. | |
iii. | On January 7, 2014, 75,000 stock options were exercised at a price of $0.11 for proceeds of $8,250. | |
iv. | On January 27, 2014, 136,000 stock options were exercised at a price of $0.11 for proceeds of $14,960. | |
v. | On February 26, 2014, 100,000 stock options were exercised at a price of $0.11 for proceeds of $11,000. |
(c) | Share purchase warrants | |
The following common share purchase warrants entitle the holders thereof to purchase one common share for each warrant. Warrants transactions are as follows: |
July 31, 2014 | October 31, 2013 | ||||||||||||
Weighted | Weighted | ||||||||||||
Average | Average | ||||||||||||
Number of | Exercise | Number of | Exercise | ||||||||||
Warrants | Price | Warrants | Price | ||||||||||
Warrants outstanding, beginning of the period | 28,948,324 | $ | 0.06 | 6,094,875 | $ | 0.96 | |||||||
Issued(1) | 38,417,396 | $ | 0.10 | 28,948,324 | $ | 0.10 | |||||||
Exercised | - | $ | - | (480,000 | ) | $ | 0.125 | ||||||
Expired | (589,258 | ) | $ | 0.53 | (5,614,875 | ) | $ | 1.25 | |||||
Warrants outstanding, end of the period | 66,776,462 | $ | 0.08 | 28,948,324 | $ | 0.06 |
(1) Shareholder approval for the issuance of 10,058,330 of these warrants has been obtained.
14
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
Nine Months ended July 31, 2014 and 2013
8. | SHARE CAPITAL (Continued) |
(c) | Share purchase warrants (Continued) | |
The weighted average remaining contractual life of warrants outstanding at July 31, 2014 was 6.22 years (2013 – .44 years). | ||
Warrants outstanding are as follows: |
July 31, 2014 | October 31, 2013 | ||||||||||||
Exercise | Number of | Exercise | Number of | ||||||||||
Expiry Date | Price | Warrants | Price | Warrants | |||||||||
December 19, 2013 | $ | - | - | $ | 0.50 | 114,000 | |||||||
December 28, 2013 | $ | - | - | $ | 0.55 | 351,648 | |||||||
February 8, 2014 | $ | - | - | $ | 0.50 | 123,610 | |||||||
August 8, 2020 | $ | 0.095 | 28,359,066 | $ | 0.095 | 28,359,066 | |||||||
December 5, 2020 | $ | 0.10 | 28,539,066 | $ | - | - | |||||||
December 5, 2020(1) | $ | 0.10 | 10,058,330 | $ | - | - | |||||||
66,776,462 | 28,948,324 |
(1) Shareholder approval for the issuance of these warrants has been obtained. | ||
(d) | Stock options | |
The Company has a stock option plan whereby the Company may grant options to directors, officers, employees and consultants to purchase common shares, provided that the aggregate number of shares subject to such options may not exceed 10% of the common shares outstanding at the time of any grant (not including agent or broker options). The exercise price of each option is required to be set at the higher of the closing price of the Company’s common shares on the trading day prior to the date of grant and the five-day volume-weighted average trading price for the five trading days prior to the date of grant (without any discounts). The option term and vesting period is determined by the Board of Directors within regulatory guidelines (the maximum term is ten years). All options are recorded at fair value when granted and are vested at the date for grant. A summary of the status of the stock option plan as of July 31, 2014 and October 31, 2013 and changes during the period ended on those dates is presented below: |
July 31, 2014 | October 31, 2013 | |||||||||||
Weighted | Weighted | |||||||||||
Number of | Average | Number of | Average | |||||||||
Options | Exercise Price | Options | Exercise Price | |||||||||
Options outstanding, beginning of the period | 11,165,000 | $ | 0.22 | 9,566,143 | $ | 0.98 | ||||||
Granted | 2,036,000 | $ | 0.18 | 10,410,000 | $ | 0.14 | ||||||
Expired | (2,000,000 | ) | $ | 0.58 | (8,611,143 | ) | $ | 0.97 | ||||
Exercised | (711,000 | ) | $ | 0.11 | (200,000 | ) | $ | 0.07 | ||||
Options outstanding, end of the period | 10,490,000 | $ | 0.15 | 11,165,000 | $ | 0.22 |
The weighted average remaining contractual life of options outstanding at July 31, 2014 was 4.07 years (2013 – 5.18 years).
The weighted average market price for 711,000 (2013 –Nil) options exercised during the period ended July 31, 2014 was $0.11 (2013 - $Nil).
15
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
Nine Months ended July 31, 2014 and 2013
8. | SHARE CAPITAL (Continued) | |
(d) | Stock options (continued) | |
Stock options outstanding are as follows: |
July 31,2014 | October 31, 2013 | ||||||||||||||||||
Exercise | Number of | Exercisable | Exercise | Number of | Exercisable | ||||||||||||||
Expiry Date | Price | Options | at year End | Price | Options | at year End | |||||||||||||
November 9, 2013 | $ | 1.10 | - | - | $ | 1.10 | 400,000 | 400,000 | |||||||||||
January 26, 2014 | $ | 1.51 | - | - | $ | 1.51 | 225,000 | 225,000 | |||||||||||
March 23, 2014 | $ | 1.16 | - | - | $ | 1.16 | 25,000 | 25,000 | |||||||||||
September 27, 2014 | $ | 0.78 | 125,000 | 125,000 | $ | 0.78 | 225,000 | 225,000 | |||||||||||
January 4, 2015 | $ | 0.45 | - | - | $ | 0.45 | 200,000 | 200,000 | |||||||||||
May 28, 2015 | $ | 0.20 | 1,925,000 | 1,925,000 | $ | 0.20 | 2,575,000 | 2,575,000 | |||||||||||
July 3, 2020 | $ | 0.11 | 6,404,000 | 6,404,000 | $ | 0.11 | 7,515,000 | 7,515,000 | |||||||||||
February 7, 2016 | $ | 0.18 | 2,036,000 | 2,036,000 | - | - | - | ||||||||||||
10,490,000 | 10,490,000 | 11,165,000 | 11,165,000 |
The Company uses the fair value method for determining share-based payments for all options granted. The fair value was determined using the Black-Scholes option pricing model based on the following weighted average assumptions:
For the nine months ended July 31, | 2014 | 2013 | |
Expected life (years) | 2.0 | 2.0 | |
Interest rate | 0.98% | 1.21% | |
Volatility | 95.85% | 62.96% | |
Dividend yield | 0.00% | 0.00% |
Share-based payment charges for the nine months ended July 31, 2014 totalled $l85, 785 (2013 - $671,036), allocated as follows:
2014 | 2013 | ||||||
Consulting | - | 227,154 | |||||
Investor relations | - | 37,644 | |||||
Professional fees | - | 15,464 | |||||
Salaries and benefits | 185,785 | 390,774 | |||||
$ | 185,785 | $ | 671,036 |
The weighted average fair value of options granted during the nine months ended was $0.11 (July 31, 2013 - $0.14) .
16
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
Nine Months ended July 31, 2014 and 2013
9. | RELATED PARTY TRANSACTIONS | |
(a) | Related parties | |
The Company has entered into a retainer agreement dated May 1, 2007 with Lawrence W. Talbot Law Corporation (“LWTLC”), pursuant to which LWTLC agrees to provide legal services to the Company. Pursuant to the retainer agreement, the Company has agreed to pay LWTLC a minimum annual retainer of $82,500 (plus applicable taxes and disbursements). The retainer agreement may be terminated by LWTLC on reasonable notice, and by the Company on one year’s notice (or payment of one year’s retainer in lieu of notice). | ||
(b) | Transactions with related parties | |
During the nine months ended July 31, 2014 and 2013 the Company incurred the following expenses to officers or directors of the Company or companies with common directors: |
2014 | 2013 | ||||||
Consulting fees | $ | 64,000 | $ | 186,000 | |||
Professional fees | $ | 66,205 | $ | 72,799 |
Professional fees include amounts paid to a law firm of which an officer is a shareholder. | ||
(c) | Due from related parties | |
Amounts due from related parties are comprised as follows: |
July 31, | October 31, | ||||||
2014 | 2013 | ||||||
Unsecured promissory notes, 1% per annum, due the earlier of 30 days after demand or the due date, if applicable: | |||||||
Wealth | $ | 53,374 | $ | 42,973 | |||
Indico | 53,387 | 53,172 | |||||
Others | 61,716 | 60,986 | |||||
$ | 168,477 | $ | 157,131 |
These related party transactions have been measured by the exchange amount, which is the amount agreed upon by the transacting parties. | ||
(d) | Management compensation | |
During the nine months ended July 31, 2014 and 2013, the Company incurred the following expenses to CEO, CFO and COO (2013 only): |
For the nine months ended July 31, | 2014 | 2013 | |||||
Wages and benefits | $ | 251,112 | $ | 972,204 | |||
Share-based payments | $ | 68,438 | $ | 253,599 | |||
$ | 319,550 | $ | 1,225,803 |
17
CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Notes to the Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management)
Nine Months ended July 31, 2014 and 2013
10. | INCOME TAXES | |
During the year ended October 31, 2013 the Company recorded a flow through premium liability in the amount of $420,056 pursuant to a private placement with a balance of $232,613. The Company had $1,661,521 of exploration expenditures to be incurred for flow-through purposes by December 31, 2013. The Company did not incur these expenditures and recorded a Flow-Through Part XII.6 interest and penalty in the amount of $166,152 and recorded a deferred tax recovery of $232,613. The Company entered into an agreement with one of the flow-through investors to absorb all of the reduction and accept a reduced renunciation, in consideration of the payment by the Company of the sum of $227,500 (paid). | ||
11. | SUBSEQUENT EVENTS | |
Subsequent to July 31, 2014: | ||
(a) | The Company did not repay the USD 2,000,000 Note due August 8, 2014 (Note 6). The Company and the relevant Lender are presently negotiating a one-year extension to the due date for such Note. | |
(b) | On August 16, 2014, Cardero Ghana sent a formal Notice of Withdrawal to Emmaland withdrawing from the North, Middle and South Sheini Joint Ventures (Note 5(b)). The withdrawal from such joint ventures will become effective 60 days thereafter. | |
(c) | On September 5, 2014, Cardero Coal completed the acquisition of 13 applications for coal licenses referred to as the “South Williston Coal Licence Applications” for $235,000. These applications cover lands contiguous with the eastern and western borders of the Carbon Creek Joint Venture property in north east British Columbia. |
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