STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1998
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Expressed in Canadian Dollars)
AS AT DECEMBER 31
1998 | 1997 | ||
ASSETS | |||
Current | |||
Cash and equivalents | $508,978 | $1,120,870 | |
Receivables | 4,622 | 9,419 | |
Prepaid expenses | 11,172 | 23,194 | |
Total current assets | 524,772 | 1,153,483 | |
Property and equipment (Note 3) | 123,252 | 89,312 | |
Mineral properties (Note 4) | 765,634 | 638,099 | |
Deferred exploration costs (Note 5) | 926,254 | 161,744 | |
Other assets (Note 6) | 74,086 | 54,280 | |
Total assets | $2,413,998 | $2,096,918 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | |||
Current | |||
Accounts payable and accrued liabilities | $157,822 | $67,498 | |
Note payable (Note 7) | 185,421 | - | |
Current portion of long-term debt | 6,644 | 6,071 | |
Total current liabilities | 349,887 | 73,569 | |
Long-term debt (Note 8) | 23,670 | 30,314 | |
Total liabilities | 373,557 | 103,883 | |
Shareholders' equity | |||
Capital stock (Note 9) | |||
Authorized | |||
Unlimited | common shares without par value | ||
Issued | |||
3,415,548 | split-adjusted common shares (1997 – 2,545,217) | 10,037,810 | 8,675,165 |
Deficit | (7,997,369) | (6,682,130) | |
Total shareholders’ equity | 2,040,441 | 1,993,035 | |
Total liabilities and shareholders’ equity | $ 2,413,998 | $ 2,096,918 |
Nature and continuance of operations (Note 1)
On behalf of the Board: | |||
Director | Director | ||
The accompanying notes are an integral part of these consolidated financial statements.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in Canadian Dollars)
YEAR ENDED DECEMBER 31
1998 | 1997 | |
GENERAL AND ADMINISTRATIVE EXPENSES | ||
Advertising | $ 308,400 | $ - |
Amortization | 58,909 | 31,161 |
Consulting fees | 261,636 | 142,818 |
Interest on long-term debt | 2,896 | - |
Management fees | 106,812 | 100,779 |
Office and miscellaneous | 59,683 | 52,988 |
Printing | 4,865 | 4,360 |
Professional fees | 97,003 | 179,667 |
Promotion | 13,648 | 15,387 |
Property investigation | - | 60,545 |
Regulatory fees | 11,636 | 12,215 |
Rent | 26,006 | 21,285 |
Salaries and benefits | 81,064 | 71,246 |
Shareholder communications | 116,891 | 95,120 |
Telephone | 21,924 | 35,719 |
Trade shows and conferences | 130,336 | 144,078 |
Transfer agent | 2,072 | 8,142 |
Travel | 43,323 | 82,836 |
(1,347,104) | (1,058,346) | |
Interest income | 31,865 | 20,573 |
Write-off of mineral property interests | - | (374,101) |
Loss for the year | (1,315,239) | (1,411,874) |
Deficit, beginning of year | (6,682,130) | (5,270,256) |
Deficit, end of year | $ (7,997,369) | $ (6,682,130) |
Basic and diluted loss per share | $ (0.44) | $ (0.70) |
Weighted average number of split-adjusted shares outstanding | 2,980,383 | 2,016,498 |
The accompanying notes are an integral part of these consolidated financial statements.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in Canadian Dollars)
YEAR ENDED DECEMBER 31
1998 | 1997 | ||
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Loss for the year | $ (1,315,239) | $ (1,411,874) | |
Items not affecting cash: | |||
Amortization | 58,909 | 31,161 | |
Write-off of mineral property interests | - | 374,101 | |
Changes in non-cash working capital items: | |||
Decrease in receivables | 4,797 | 1,481 | |
(Increase) decrease in prepaid expenses | 12,022 | (21,693) | |
Increase (decrease) in accounts payable and accrued liabilities | 90,324 | (49,705) | |
Net cash used in operating activities | (1,149,187) | (1,076,529) | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Property and equipment | (70,935) | (100,653) | |
Mineral properties | (88,435) | (533,449) | |
Deferred exploration costs | (764,510) | (177,221) | |
Other assets | (41,720) | (67,850) | |
Net cash used in investing activities | (965,600) | (879,173) |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Special warrants | - | (1,425,913) | |
Capital stock issued | 1,323,545 | 2,734,248 | |
Increase in loan payable | 185,421 | - | |
Loan proceeds (net) | (6,071) | 36,385 | |
Net cash provided by financing activities | 1,502,895 | 1,344,720 | |
Change in cash and equivalents during the year | (611,892) | (610,982) | |
Cash and equivalents, beginning of year | 1,120,870 | 1,731,852 | |
Cash and equivalents, end of year | $ 508,978 | $ 1,120,870 | |
Supplemental disclosure with respect to cash flows | |||
Issuance of capital stock for mineral properties | $ 39,100 | $ 240,200 | |
Cash paid during the year for | |||
Interest | $ 2,896 | $ - | |
Income taxes | - | - |
The accompanying notes are an integral part of these consolidated financial statements.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1998
1.
NATURE AND CONTINUANCE OF OPERATIONS
Strathmore Minerals Corp. (the “Company”) is an exploration stage company incorporated under the laws of the Province of British Columbia.
The Company is in the process of exploring its mineral properties and has not yet determined whether these properties contain ore reserves that are economically recoverable. The recoverability of the amounts shown for mineral properties and related deferred exploration costs is dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete their development and upon future profitable production.
2.
SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Minera Peruran S.A. (incorporated under the laws of Peru), and Strathmore Resources (US) Ltd. (incorporated under the laws of Nevada, USA). Significant inter-company balances and transactions are eliminated on consolidation.
Use of estimates
The preparation of financial statements in accordance with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. Actual results could differ from these estimates.
Cash and equivalents
Cash is comprised of cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.
Foreign currency translation
The Company’s subsidiaries are integrated foreign operations and are translated into Canadian dollar equivalents using the temporal method. The monetary assets and liabilities of the Company that are denominated in foreign currencies are translated at the rate of exchange at the balance sheet date and non-monetary items are translated at historical rates. Revenues and expenses are translated at rates approximating those in effect at the time of the transaction. Exchange gains and losses arising on translation are included in the statement of operations.
Property and equipment
Property and equipment are recorded at cost and amortization is calculated using the declining-balance method at the following annual rates:
Office equipment | 20% | |
Computer equipment | 30% | |
Computer software | 50% | |
Vehicles | 30% |
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1998
2.
SIGNIFICANT ACCOUNTING POLICIES (cont'd…)
Other assets
Other assets, being geological databases, are recorded at cost and are being amortized over five years using the straight-line method.
Mineral property interests and deferred exploration costs
The Company records mineral property interests, which consist of the right to explore for mineral deposits, at cost. The Company records deferred exploration costs, which consist of costs attributable to the exploration of mineral property interests, at cost. All direct and indirect costs relating to the acquisition and exploration of these mineral property interests are capitalized on the basis of specific claim blocks until the mineral property interests to which they relate are placed into production, the mineral property interests are disposed of through sale or where management has determined there to be an impairment. If a mineral property interest is abandoned, the mineral property interest and deferred exploration costs will be written off to operations in the period of abandonment.
On an ongoing basis, the capitalized costs are reviewed on a property-by-property basis to consider if there is any impairment on the subject mineral property interest. Management’s determination for impairment is based on: i) whether the Company’s exploration programs on the mineral property interests have significantly changed, such that previously identified resource targets are no longer being pursued; ii) whether exploration results to date are promising and whether additional exploration work is being planned in the foreseeable future or iii) whether remaining lease terms are insufficient to conduct necessary studies or exploration work.
The recorded cost of mineral property interests and deferred exploration costs is based on cash paid and the value of share considerations issued for mineral property interest acquisitions and exploration costs incurred. The recorded amount may not reflect recoverable value as this will be dependent on future development programs, the nature of the mineral deposit, commodity prices, adequate funding and the ability of the Company to bring its projects into production.
Asset retirement obligations
An asset retirement obligation is a legal obligation associated with the retirement of tangible long-lived assets that the Company is required to settle. The Company recognizes the fair value of a liability for an asset retirement obligation in the year in which it is incurred when a reasonable estimate of fair value can be made. The carrying amount of the related long-lived asset is increased by the same amount as the liability.
Flow-through common shares
The resource expenditure deductions for income tax purposes related to exploration and development activities funded by flow-through share arrangements are renounced to investors in accordance with Canadian income tax legislation. Future income taxes related to temporary differences arising on renunciation of expenditures to subscribers are offset against future income tax assets and the difference, if any, is charged to capital stock.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1998
2.
SIGNIFICANT ACCOUNTING POLICIES (cont'd…)
Stock-based compensation
The Company has a stock-based compensation plan which is described in Note 10. No compensation expense is recognized for this plan when stock or stock options are issued to employees. Any consideration paid by employees on exercise of stock options is credited to capital stock.
Income taxes
Income taxes are recorded using the asset and liability method whereby future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment or enactment occurs. To the extent that the Company does not consider it more likely than not that a future tax asset will be recovered, it provides a valuation allowance against the excess.
Loss per share
The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments. Under this method the dilutive effect on earnings per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the period. For the years presented, this calculation proved to be anti-dilutive.
Basic loss per share is calculated using the split-adjusted weighted average number of shares outstanding during the year.
3.
PROPERTY AND EQUIPMENT
1998 | 1997 | |||||
Cost | Accumulated Amortization | Net Book Value | Cost | Accumulated Amortization | Net Book Value | |
Office equipment | $ 34,524 | $ 11,496 | $ 23,028 | $ 24,102 | $ 7,042 | $ 17,060 |
Computer equipment | 44,212 | 18,531 | 25,681 | 40,499 | 8,320 | 32,179 |
Computer software | 5,109 | 5,109 | - | 5,109 | 2,555 | 2,554 |
Vehicles | 100,940 | 26,397 | 74,543 | 44,140 | 6,621 | 37,519 |
| $ 184,785 | $ 61,533 | $ 123,252 | $ 113,850 | $ 24,538 | $ 89,312 |
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1998
4.
MINERAL PROPERTIES
1998 | 1997 | |
San Rafael River properties | $ 232,500 | $ 197,125 |
Hot Rock properties | 135,204 | 100,204 |
Aurora property | 52,897 | - |
Staked properties | 345,033 | 340,770 |
$ 765,634 | $ 638,099 |
Title to mineral property interests involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral property interests. The Company has investigated title to all of its mineral property interests and, to the best of its knowledge, title to all of its properties are in good standing.
San Rafael River properties
The Company acquired a 100% interest in certain uranium properties in the San Rafael River area of the Green River District, Utah by paying $141,500 (U.S.$100,000) and issuing 14,000 split-adjusted common shares valued at $91,000. A 5% royalty is payable on all uranium sales.
Hot Rock properties
The Company acquired a 100% interest in certain uranium properties in the White Canyon District, Utah by paying $30,954 (U.S.$25,000) and issuing 18,952 split-adjusted common shares valued at $104,250 (U.S.$75,000). The properties are subject to a 4% yellowcake royalty.
Aurora property
The Company acquired an option to purchase a 100% interest in a uranium property in Oregon, paying $48,797 (U.S. $30,000) and issuing 2,000 split-adjusted common shares valued at $4,100. To earn its interest the Company is required to pay an additional U.S.$75,000 by October 16, 2003 and to issue an additional 2,000 split-adjusted common shares by October 16, 2000. The property is subject to a 2% yellowcake royalty.
Staked properties
The Company acquired, by staking, a 100% interest in certain uranium properties in Utah, Wyoming, South Dakota and Oregon in the U.S.A., and in Peru. During fiscal 1997, the Company abandoned certain staked properties and recorded a loss of $55,600.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1998
4.
MINERAL PROPERTIES (cont’d…)
Rio Puerco, Apex - Lowboy properties
During fiscal 1996, the Company acquired an option to purchase a 100% interest in certain uranium properties located in the Rio Puerco area of Sandoval County, New Mexico and in Ladner County, Nevada and, pursuant to the agreement, paid $101,925, issued 20,000 split-adjusted common shares valued at $65,000 and issued 5,000 split-adjusted common shares valued at $16,250 as a finder's fee. During fiscal 1997, the Company issued an additional 20,000 split-adjusted common shares valued at $65,000 and issued 4,600 split-adjusted common shares valued at $14,950 as a finder’s fee. During fiscal 1997 these properties were abandoned and all related costs totalling $318,501, including deferred exploration costs of $55,376, were written-off.
5.
DEFERRED EXPLORATION COSTS
Total | ||||
U.S.A. | Peru | 1998 | 1997 | |
Balance, beginning of year | $ 161,744 | $ - | $ 161,744 | $ 39,899 |
Accommodation and camp costs | - | 26,338 | 26,338 | - |
Communications | - | 16,257 | 16,257 | - |
Geological consulting fees | 96,978 | 166,695 | 263,673 | 60,356 |
General expenditures | 9,110 | 42,386 | 51,496 | 48,785 |
Legal fees | - | 29,700 | 29,700 | - |
Maintenance and claim fees | 131,145 | 16,444 | 147,589 | 26,962 |
Management fees | - | 43,200 | 43,200 | - |
Report and map preparation | - | 14,663 | 14,663 | 22,969 |
Samples | - | 73,482 | 73,482 | - |
Survey | 13,349 | - | 13,349 | - |
Transportation | - | 33,719 | 33,719 | - |
Travel | 5,202 | 45,842 | 51,044 | 18,149 |
Expenditures during the year | 255,784 | 508,726 | 764,510 | 177,221 |
Written-off (Note 4) | - | - | - | (55,376) |
255,784 | 508,726 | 764,510 | 121,845 | |
Balance, end of year | $ 417,528 | $ 508,726 | $ 926,254 | $ 161,744 |
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1998
6.
OTHER ASSETS
Net Book Value | ||||
Cost | Accumulated Amortization | 1998 | 1997 | |
Geological databases | $ 109,570 | $ 35,484 | $ 74,086 | $ 54,280 |
7.
NOTE PAYABLE
The note is for U.S.$118,309 and is due to the Riverton State Bank in Wyoming, U.S.A. It is secured by the Company's bank accounts at the Riverton State Bank, bears interest at 8% per annum and is due on January 15, 1999.
8.
LONG-TERM DEBT
1998 | 1997 | |
Loan bearing interest at 8½% per annum; principal and interest payments of U.S. $532 per month; secured by a Company vehicle. | $ 30,314 | $ 36,385 |
Less: current portion | (6,644) | (6,071) |
$ 23,670 | $ 30,314 |
9.
CAPITAL STOCK
During the year ended December 31, 2000, the Company completed a reverse stock split on the basis of 1 new share of common stock for every 5 old shares of common stock outstanding. All per share amounts have been retroactively restated to reflect the reverse stock split.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1998
9.
CAPITAL STOCK (cont’d…)
Number of Shares | Amount | |
Issued | ||
As at December 31, 1996 | 1,487,780 | $ 5,700,717 |
For cash – options | 60,500 | 198,925 |
For cash – warrants | 118,055 | 300,737 |
For cash – private placements | 100,000 | 803,000 |
For cash – agents' special warrants | 27,170 | 61,750 |
For mineral properties | 45,712 | 225,250 |
For finder's fee | 4,600 | 14,950 |
For special warrants | 660,000 | 1,369,836 |
For agents' warrants | 41,400 | - |
As at December 31, 1997 | 2,545,217 | 8,675,165 |
For cash – private placements | 731,091 | 1,187,045 |
For cash – options | 130,000 | 136,500 |
For mineral properties | 9,240 | 39,100 |
As at December 31, 1998 | 3,415,548 | $ 10,037,810 |
Included in issued capital stock are 75,000 split-adjusted common shares subject to an escrow agreement that may not be transferred, assigned or otherwise dealt with without the consent of the regulatory authorities.
10.
STOCK OPTIONS AND WARRANTS
The Company has a stock option plan whereby, from time to time, at the discretion of the Board of Directors, stock options are granted to directors, officers, employees and certain consultants. The exercise price of each option is based on the market price of the Company’s common stock at the date of grant less an applicable discount. The options can be granted for a maximum term of five years with vesting provisions determined by the Board of Directors.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1998
10.
STOCK OPTIONS AND WARRANTS (cont’d…)
Split-adjusted stock option and share purchase warrant transactions are summarized as follows:
Warrants | Stock Options | ||||
Number | Weighted Average Exercise Price | Number | Weighted Average Exercise Price | ||
Outstanding, December 31, 1996 | 95,455 | $ 2.50 | 96,500 | $ 3.70 | |
Granted | 760,000 | 3.74 | 160,000 | 3.50 | |
Exercised | (145,225) | 1.81 | (60,500) | 3.30 | |
Outstanding, December 31, 1997 | 710,230 | 3.80 | 196,000 | 3.50 | |
Granted | 774,202 | 2.04 | 148,400 | 1.40 | |
Exercised | - | - | (130,000) | 1.05 | |
Expired/cancelled | (690,230) | 3.80 | (40,000) | 1.05 | |
Outstanding, December 31, 1998 | 794,202 | $ 2.08 | 174,400 | $ 1.10 | |
Number currently exercisable | 794,202 | $ 2.08 | 174,400 | $ 1.10 |
As at December 31, 1998, the following incentive split-adjusted stock options were outstanding:
Number of Shares | Exercise Price | Expiry Date | |||
128,400 | $ 1.05 | August 19, 2000 | |||
6,000 | 2.00 | December 11, 2000 | |||
40,000 | 1.05 | June 27, 2002 |
As at December 31, 1998, the following split-adjusted share purchase warrants were outstanding:
Number of Shares | Exercise Price | Expiry Date | ||
300,000 | $ 1.30 | November 18, 2000 | ||
20,000 | 3.65 | August 13, 1999 | ||
474,202 | 2.13 | September 18, 1999 | ||
if not exercised, then at | 2.50 | September 18, 2000 |
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1998
11.
INCOME TAXES
A reconciliation of current income taxes at statutory rates with the reported income taxes is as follows:
1998 | 1997 | |
Loss for the year | $ (1,315,239) | $ (1,411,874) |
Expected income tax recovery | $ 600,012 | $ 644,097 |
Other items not deductible for income tax purposes | (29,987) | (17,726) |
Property investigation | (19,033) | (170,665) |
Write-down of mineral property interests and deferred exploration | - | (27,621) |
Share issue costs | 11,876 | 11,876 |
Unrecognized benefits of non-capital losses | (562,868) | (439,961) |
Future income tax recovery | $ - | $ - |
The significant components of the Company’s future income tax assets are as follows:
1998 | 1997 | |
Future income tax assets: | ||
Equipment | $ 4,058 | $ 4,058 |
Mineral property interests and related exploration expenditures | 304,128 | 304,128 |
Share issuance costs | 28,869 | 40,745 |
Non-capital losses available for future periods | 1,546,252 | 1,546,252 |
1,883,307 | 1,895,183 | |
| ||
Valuation allowance | (1,883,307) | (1,895,183) |
Net future income tax asset | $ - | $ - |
The Company has incurred approximately $4,300,000 of operating losses which, if unutilized, will expire through 2005. Subject to certain restrictions, the Company also has capital losses and resource exploration expenditures available to reduce taxable income of future years. Future tax benefits which may arise as a result of these losses and resource deductions have not been recognized in these financial statements, as their realization is not judged likely to occur.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1998
12.
SEGMENTED INFORMATION
The Company primarily operates in one reportable operating segment, being the exploration of mineral property interests, and considers its loss from operations to relate to this segment.
The Company has mineral property interests located in the USA and Peru and conducts administrative activities from Canada. The total amount of capital assets attributable to Canada is $48,709 (1997 - $51,793), Peru is $629,164 (1997 - $83,414) and the USA is $1,137,267 (1997 - $753,948).
13.
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and equivalents, receivables, accounts payable and accrued liabilities, note payable and long-term debt. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying value, unless otherwise noted. The Company is subject to financial risk arising from fluctuations in foreign currency exchange rates. The Company does not use any derivative instruments to reduce its exposure to fluctuations in foreign currency exchange rates.
14.
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Canada (“Canadian GAAP”). Material variations in the accounting principles, practices and methods used in preparing these consolidated financial statements from principles, practices and methods accepted in the United States (“United States GAAP”) are described and quantified below.
Stock-based compensation
Under United States GAAP, Statements of Financial Accounting Standards No. 123, “Accounting for Stock-based Compensation” (“SFAS 123”) recommended, but did not require, companies to establish a fair market value based method of accounting for stock-based compensation plans. The Company has elected to follow the recommendations of SFAS 123 and has chosen to account for stock-based compensation using the fair value based method.
To determine the additional compensation expense that would have resulted from compliance with SFAS No. 123, the Company uses the Black Scholes Option Pricing Model. During fiscal 1998, the Company granted 148,400 (1997 – 160,000) options to employees, consultants and directors. Total stock-based compensation recognized under United States GAAP in the statement of operations during fiscal 1998 was $172,411 (1997 – $238,215). This amount was recorded as additional paid-in capital on the balance sheet under United States GAAP. In determining the fair value of the Company's incentive stock options, the following assumptions were used:
1998 | 1997 | |
Risk free interest rate | 5.89% | 6.08% |
Expected life | 2 years | 2 years |
Expected volatility | 148.31% | 96.5% |
Expected dividends | - | - |
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1998
14.
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d…)
Stock-based compensation (cont’d…)
The weighted average fair value of stock options granted during fiscal 1998 was $1.16 (1997 - $1.48)
Mineral properties
Mineral property costs and related exploration expenditures are accounted for in accordance with Canadian GAAP as disclosed in Note 2.
For United States GAAP purposes, effective until fiscal 2003, the Company expensed, as incurred, the acquisition and exploration costs relating to unproven mineral property interests. This resulted in a decrease in mineral property interests and deferred exploration costs and a corresponding increase in loss for the year of $892,045 for fiscal 1998 and $576,769 for fiscal 1997. When proven and probable reserves are determined for a property and a feasibility study prepared, subsequent development costs of the property are capitalized. The capitalized costs of such properties are to be amortized using the unit of production method over the estimated life of the ore body based on proven and probable reserves and are measured periodically for recoverability of carrying values.
Effective for fiscal 2004, the Company has adopted the provisions of EITF 04-02 “Whether Mineral Rights are Tangible or Intangible Assets” which concluded that mineral rights are tangible assets. Accordingly, the Company capitalizes certain costs related to the acquisition of mineral property interests. Under United States GAAP, exploration costs on mineral properties prior to the establishment of proven or probable reserves continue to be expensed as incurred.
Loss per share
Under both Canadian GAAP and United States GAAP, basic loss per share is calculated using the weighted average number of common shares outstanding during the year.
Under United States GAAP, the weighted average number of common shares outstanding excludes any shares that remain in escrow, but may be earned out based on the Company incurring a certain amount of exploration and development expenditures. The weighted average number of shares outstanding under United States GAAP for the years ended December 31, 1998 and 1997 were split-adjusted 2,905,383 and 1,941,498, respectively. Accordingly, the loss per share for the years ended December 31, 1998 and 1997 was $(0.82) and $(1.15), respectively.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1998
14.
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont'd…)
The impact of the above differences between Canadian GAAP and United States GAAP on loss for the year would be as follows:
Year Ended December 31, | |||
1998 | 1997 | ||
Loss for the year as reported, Canadian GAAP | $(1,315,239) | $(1,411,874) | |
Less: Stock-based compensation | (172,411) | (238,215) | |
Mineral property acquisition costs | (127,535) | (454,924) | |
Deferred exploration costs | (764,510) | (121,845) | |
Loss for the year in accordance with United States GAAP | $(2,379,695) | $(2,226,858) | |
Basic and diluted loss per share, United States GAAP | $ (0.82) | $ (1.15) | |
Weighted average number of common shares outstanding, United States GAAP | 2,905,383 | 1,941,498 |
The impact of the above differences between Canadian GAAP and United States GAAP on the balance sheets would be as follows:
December 31, 1998 | December 31, 1997 | ||||||
Balance, Canadian GAAP | Adjustments | Balance, United States GAAP | Balance, Canadian GAAP | Adjustments | Balance, United States GAAP | ||
Current assets | $524,772 | $ - | $524,772 | $1,153,483 | $ - | $1,153,483 | |
Property and equipment | 123,252 | - | 123,252 | 89,312 | - | 89,312 | |
Mineral property interests | 765,634 | (765,634) | - | 638,099 | (638,099) | - | |
Deferred exploration costs | 926,254 | (926,254) | - | 161,744 | (161,744) | - | |
Other assets | 74,086 | - | 74,086 | 54,280 | - | 54,280 | |
$2,413,998 | $(1,691,888) | $722,110 | $2,096,918 | $(799,843) | $1,297,075 | ||
Total liabilities | $373,557 | $ - | $373,557 | $103,883 | $ - | $103,883 | |
Capital stock | 10,037,810 | - | 10,037,810 | 8,675,165 | - | 8,675,165 | |
Additional paid-in Capital | - | 468,050 | 468,050 | - | 295,639 | 295,639 | |
Deficit | (7,997,369) | (2,159,938) | (10,157,307) | (6,682,130) | (1,095,482) | (7,777,612) | |
Shareholders' equity | 2,040,441 | (1,691,888) | 348,553 | 1,993,035 | (799,843) | 1,193,192 | |
$2,413,998 | $(1,691,888) | $722,110 | $2,096,918 | $(799,843) | $1,297,075 |
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1998
14.
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont'd…)
The impact of the differences between Canadian GAAP and United States GAAP on the statements of cash flows would be as follows:
15.
RELATED PARTY TRANSACTIONS
The financial statements include transactions with related parties as follows:
a)
The Company paid $106,812 (1997 - $100,779) for management services to a director.
b)
The Company paid $80,554 (1997 - $75,463) for consulting fees to a director or a company controlled by a director.
c)
The Company paid $6,000 (1997 - $32,250) for consulting fees to an officer.
d)
During fiscal 1998, the Company issued Nil (1997 - 4,600) split-adjusted common shares valued at $Nil (1997 - $3.25) per share as a finder's fee, to a director of the Company.