STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2000
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Expressed in Canadian Dollars)
AS AT DECEMBER 31
| |
2000 |
1999 |
| | | |
ASSETS | | |
| | | |
Current | | |
Cash and equivalents | $ 119,207 | $ 681 |
Receivables | 1,410 | 2,402 |
Prepaid expenses | 291 | 1,023 |
| | | |
Total current assets | 120,908 | 4,106 |
| | | |
Property and equipment (Note 3) | 43,002 | 69,420 |
Mineral property interests (Note 4) | 177,150 | 247,631 |
Deferred exploration costs (Note 5) | 696,457 | 718,895 |
Other assets (Note 6) | 30,258 | 52,172 |
| | | |
Total assets | $ 1,067,775 | $ 1,092,224 |
| | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | |
| | | |
Current | | |
Accounts payable and accrued liabilities | $ 9,574 | $ 26,283 |
Due to related parties | 42,613 | 96,091 |
| | | |
Total current liabilities | 52,187 | 122,374 |
| | | |
Total liabilities | 52,187 | 122,374 |
| | | |
Shareholders' equity | | |
Capital stock (Note 7) | | |
Authorized | | |
Unlimited common shares without par value | | |
Issued | | |
4,149,548 common shares (1999 – 3,989,548) | 10,767,430 | 10,647,430 |
Subscriptions received in advance (Note 7) | 325,000 | - |
Deficit | (10,076,842) | (9,677,580) |
| | | |
Total shareholders’ equity | 1,015,588 | 969,850 |
| | | |
Total liabilities and shareholders’ equity | $ 1,067,775 | $ 1,092,224 |
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 AND DEFICIT
(Expressed in Canadian Dollars)
YEAR ENDED DECEMBER 31
| |
2000 |
1999 |
| | | |
| | | |
GENERAL AND ADMINISTRATIVE EXPENSES | | |
Advertising | $ - | $ 75,941 |
Amortization | 48,332 | 49,701 |
Consulting fees | 44,476 | 368,390 |
Interest and bank charges | 16,556 | 9,531 |
Management fees | 43,280 | 73,371 |
Office and miscellaneous | 7,476 | 22,768 |
Printing | - | 4,670 |
Professional fees | 12,436 | 86,707 |
Regulatory fees | 5,242 | 12,221 |
Rent | 11,041 | 29,717 |
Salaries and benefits | - | 53,122 |
Shareholder communications | 30,668 | 85,879 |
Telephone | 7,575 | 19,547 |
Trade shows and conferences | 13,276 | 26,414 |
Transfer agent | 7,516 | 8,329 |
Travel and promotion | 24,477 | 10,869 |
| | | |
Loss before other items | (272,351) | (937,177) |
| | | |
OTHER ITEMS | | |
Interest income | - | 22,382 |
Gain on sale of mineral property (Note 4) | 15,000 | - |
Gain on settlement of debt | - | 99,672 |
Write-off of mineral property interests (Note 4) | (93,181) | (540,221) |
Write-off of deferred exploration costs (Note 5) | (48,730) | (324,867) |
| | |
|
Total of other items | (126,911) | (743,034) |
| | | |
Loss for the year | (399,262) | (1,680,211) |
| | | |
Deficit, beginning of year | (9,677,580) | (7,997,369) |
| | | |
Deficit, end of year | $(10,076,842) | $ (9,677,580) |
| | | |
Basic and diluted loss per share | $ (0.10) | $ (0.47) |
| | | |
Weighted average number of split-adjusted common shares outstanding | 4,082,882 | 3,609,368 |
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
| |
2000 |
1999 |
| | | |
| | | |
CASH FLOWS FROM OPERATING ACTIVITIES | | |
Loss for the year | $ (399,262) | $ (1,680,211) |
Items not affecting cash | | |
Amortization | 48,332 | 49,701 |
Gain on settlement of debt | - | (99,672) |
Write-off of mineral property interests | 93,181 | 540,221 |
Write-off of deferred exploration costs | 48,730 | 324,867 |
| | | |
Changes in non-cash working capital items | | |
Decrease in accounts receivable | 992 | 2,220 |
Decrease in prepaid expenses | 732 | 10,149 |
Decrease in accounts payable and accrued liabilities | (16,709) | (31,867) |
| | | |
Net cash used in operating activities | (224,004) | (884,592) |
| | | |
| | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | |
Acquisition of property and equipment | - | (2,406) |
Mineral property interests | (22,700) | (22,218) |
Deferred exploration costs | (26,292) | (117,508) |
| | | |
Net cash used in investing activities | (48,992) | (142,132) |
| | | |
| | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | |
Increase (decrease) in due to related parties | (53,478) | 96,091 |
Note payable (repayment) | - | (185,421) |
Long-term debt (repayment) | - | (1,863) |
Subscriptions received in advance | 325,000 | - |
Capital stock issued | 120,000 | 609,620 |
| | | |
Net cash provided by financing activities | 391,522 | 518,427 |
| | | |
| | | |
Change in cash and equivalents during the year | 118,526 | (508,297) |
| | | |
| | | |
Cash and equivalents, beginning of year | 681 | 508,978 |
| | | |
| | | |
Cash and equivalents, end of year | $ 119,207 | $ 681 |
Supplemental disclosures with respect to cash flows (Note 9)
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, 2000
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. During fiscal 2000, the Company changed its name from Strathmore Resources Ltd. to Strathmore Minerals Corp. and 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 share and per share amounts have been retroactively restated to reflect the reverse stock split.
The Company is in the process of exploring its mineral property interests 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 conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and 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.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2000
2.
SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
Property and equipment
Property and equipment is recorded at cost and amortization is calculated using the declining-balance method at the following annual rates:
| | Office equipment | 20% |
| | Computer equipment | 30% |
| | Vehicles | 30% |
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 has 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. As at December 31, 2000 and 1999, management believes that, other than amounts disclosed, no impairment relating to the mineral property interests and deferred exploration costs was required.
The recorded cost of mineral property interests and deferred exploration costs is based on cash paid and the assigned value of share consideration 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.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2000
2.
SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
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.
Stock-based compensation
The Company has a stock-based compensation plan which is described in Note 8. 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.
Comparative figures
Certain of the prior years’ comparative figures have been reclassified to conform to the financial statement presentation adopted in the current year.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2000
3.
PROPERTY AND EQUIPMENT
| |
2000 | 1999 |
| | Cost |
Accumulated Amortization | Net Book Value | Cost |
Accumulated Amortization | Net Book Value |
| | | | | | | |
Office equipment | $ 19,634 | $ 9,387 | $ 10,247 | $ 25,820 | $ 9,447 | $ 16,373 |
Computer equipment | 27,278 | 18,180 | 9,098 | 42,125 | 22,874 | 19,251 |
Vehicles | 56,800 | 33,143 | 23,657 | 56,800 | 23,004 | 33,796 |
| | | | | | | |
| $ 103,712 | $ 60,710 | $ 43,002 | $ 124,745 | $ 55,325 | $ 69,420 |
4.
MINERAL PROPERTY INTERESTS
| |
2000 |
1999 |
| | | |
Aurora property | $ 97,815 | $ 75,115 |
Chord property | 33,440 | 33,440 |
Staked properties, U.S.A. | - | 93,181 |
Staked properties, Peru | 45,895 | 45,895 |
| | | |
| | $ 177,150 | $ 247,631 |
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.
Aurora property
The Company acquired an option to purchase a 100% interest in a uranium property in Oregon, paying $93,715 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.$45,000 and to issue an additional 2,000 split-adjusted common shares by October 16, 2003. The property is subject to a 2% yellowcake royalty.
Chord property
The Company acquired an option to purchase a 100% interest in a uranium property in South Dakota, U.S.A., paying $33,440. To earn its interest, the Company is required to pay an additional U.S.$90,000 (U.S.$10,000 per year until July 1, 2009). The property is subject to a 2% gross royalty.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2000
4.
MINERAL PROPERTY INTERESTS (cont’d…)
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 the prior and current years, the Company abandoned its staked U.S.A. properties and all related costs were written-off.
Gain on sale of mineral property
During the current year, the Company received $15,000 for the sale of staked claims in the U.S.A. which had been written-off in 1999.
5.
DEFERRED EXPLORATION COSTS
| |
2000 | |
1999 |
| |
USA |
Peru |
Total | |
USA |
Peru |
Total |
| | | | | | | | |
Balance, beginning | | | | | | | |
of year | $ 162,434 | $ 556,461 | $ 718,895 | | $ 417,528 | $ 508,726 | $ 926,254 |
| | | | | | | | |
Geological consulting | - | - | - | | 26,961 | 40,000 | 66,961 |
General expenditures | - | 12,355 | 12,355 | | 5,271 | 7,735 | 13,006 |
Maintenance and claim fees | 12,436 | 1,501 | 13,937 | | 37,541 | - | 37,541 |
| | | | | | | | |
Expenditures during the year | 12,436 | 13,856 | 26,292 | | 69,773 | 47,735 | 117,508 |
Write-offs | (48,730) | - | (48,730) | | (324,867) | - | (324,867) |
| | | | | | | | |
| | (36,294) | 13,856 | (22,438) | | (255,094) | 47,735 | (207,359) |
| | | | | | | | |
Balance, end of year | $ 126,140 | $ 570,317 | $ 696,457 | | $ 162,434 | $ 556,461 | $ 718,895 |
6.
OTHER ASSETS
| | |
Accumulated |
Net Book Value |
| | Cost | Amortization | 2000 | 1999 |
| | | | | |
Geological databases | $ 109,570 | $ 79,312 | $ 30,258 | $ 52,172 |
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2000
7.
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 share and per share amounts have been retroactively restated to reflect the reverse stock split.
| |
Number of Shares |
Amount |
| | | |
| | | |
Issued | | |
As at December 31, 1998 | 3,415,548 | $ 10,037,810 |
For cash – private placement | 262,400 | 262,400 |
For cash – stock options | 60,400 | 63,420 |
For cash – warrants | 251,200 | 283,800 |
| | | |
As at December 31, 1999 | 3,989,548 | 10,647,430 |
For cash – private placement | 160,000 | 120,000 |
| | | |
| | | |
As at December 31, 2000 | 4,149,548 | $ 10,767,430 |
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.
Subscriptions received in advance
Subsequent to December 31, 2000, the Company issued 1,620,000 units for total proceeds of $414,600 ($325,000 received prior to year end) pursuant to a private placement. Each unit consisted of one common share and one share purchase warrant. Of the warrants, 1,300,000 enable the holders to acquire 1,300,000 additional common shares at $0.30 per share for two years and 320,000 enable the holders to acquire 320,000 additional common shares at $0.38 per share for two years. A finder's fee of 32,000 units was paid. Each unit consisted of one common share and one share purchase warrant enabling the holder to acquire one additional common share at $0.38 per share for two years.
8.
STOCK OPTIONS AND WARRANTS
Stock options
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, 2000
8.
STOCK OPTIONS AND WARRANTS (cont’d…)
Stock options (cont’d…)
Split-adjusted stock option transactions and the number of split-adjusted stock options outstanding are summarized as follows:
| |
Number of Options |
Weighted Average Exercise Price |
| | | |
Outstanding, December 31, 1998 | 174,400 | $ 1.10 |
Granted | 258,000 | 1.10 |
Exercised | (60,400) | 1.05 |
Expired/cancelled | - | - |
| | | |
Outstanding, December 31, 1999 | 372,000 | 1.10 |
Granted | - | - |
Exercised | - | - |
Expired/cancelled | (372,000) | 1.10 |
| | | |
Outstanding, December 31, 2000 | - | - |
| | | |
Number of options currently exercisable | - | $ - |
Warrants
Warrant transactions and the number of split-adjusted warrants outstanding are summarized as follows:
| |
Number of Warrants |
Weighted Average Exercise Price |
| | | |
Outstanding, December 31, 1998 | 794,202 | $ 2.08 |
Granted | - | - |
Exercised | (251,200) | 1.10 |
Expired/cancelled | (20,000) | 3.65 |
| | | |
Outstanding, December 31, 1999 | 523,002 | 2.40 |
Granted | - | - |
Exercised | - | - |
Expired/cancelled | (523,002) | 2.40 |
| | | |
Outstanding, December 31, 2000 | - | $ - |
| | | |
Number of warrants currently exercisable | - | $ - |
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2000
9.
SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS
| |
2000 |
1999 |
| | | |
Cash paid during the period for | | |
Interest | $ 15,143 | $ 6,282 |
Income taxes | - | - |
There were no significant non-cash transactions during the year ended December 31, 2000.
During the year ended December 31, 1999, the Company settled long-term debt totalling $28,451 by assigning a Company vehicle.
10.
RELATED PARTY TRANSACTIONS
The financial statements include transactions with related parties as follows:
a)
The Company paid or accrued $43,280 (1999 - $73,371) for management services to a director.
b)
The Company paid or accrued $44,476 (1999 - $67,249) for consulting fees to a director or a company controlled by a director.
c)
Pursuant to a private placement, the Company issued 160,000 split-adjusted common shares to a director and a company controlled by a director for total proceeds of $120,000.
These 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.
Amounts due to related parties are unsecured, non-interest bearing and have no specific repayment terms.
11.
INCOME TAXES
A reconciliation of current income taxes at statutory rates with the reported income taxes is as follows:
| |
2000 |
1999 |
| | | |
Loss for the year | $ (399,262) | $ (1,680,211) |
| | | |
Expected income tax recovery | $ 182,143 | $ 766,512 |
Write-down of mineral property interests and deferred exploration |
(57,897) |
(394,653) |
Unrecognized benefits of non-capital losses | (124,246) | (371,859) |
| | | |
Future income tax recovery | $ - | $ - |
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2000
11.
INCOME TAXES (cont’d…)
The significant components of the Company’s future income tax assets are as follows:
| |
2000 |
1999 |
| | | |
Future income tax assets: | | |
Equipment | $ 65,779 | $ 53,727 |
Mineral property interests and related exploration expenditures |
475,765 |
411,025 |
Other assets | 38,561 | 53,557 |
Operating losses available for future periods | 2,270,186 | 2,284,181 |
Capital losses available | 125,730 | 125,730 |
| | | |
| | 2,976,021 | 2,928,220 |
Valuation allowance | (2,976,021) | (2,928,220) |
| | | |
Net future income tax asset | $ - | $ - |
The Company has incurred approximately $5,000,000 of operating losses which, if unutilized, will expire through 2007. 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.
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 for fiscal years 2000 and 1999 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 $19,345 (1999 - $35,624), Peru is $639,869 (1999 - $636,152) and the USA is $257,395 (1999 - $364,170).
13.
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and equivalents, receivables, due to related parties, accounts payable and accrued liabilities. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values, unless otherwise noted.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2000
14.
DIFFERENCES BETWEEN CANADIAN AND 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:
| | |
2000 |
1999 |
| | | | |
| | Risk free interest rate | - | 5.6% |
| | Expected life | - | 2 years |
| | Expected volatility | - | 67% |
| | Expected dividends | - | - |
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.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2000
14.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (cont’d…)
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, 2000 and 1999 were 4,007,882 and 3,534,368, respectively. Accordingly, the loss per share for the years ended December 31, 2000 and 1999 was $(0.08) and $(0.30), respectively.
The impact of the differences between Canadian GAAP and United States GAAP on the consolidated balance sheets would be as follows:
| |
2000 | |
1999 |
| |
Balance, Canadian GAAP |
Adjustments |
Balance, United States GAAP | |
Balance, Canadian GAAP |
Adjustments |
Balance, United States GAAP |
| | | | | | | | |
Current assets | $120,908 | $ - | $120,908 | | $ 4,106 | $ - | $4,106 |
Property and equipment | 43,002 | - | 43,002 | | 69,420 | - | 69,420 |
Mineral property interests |
177,150 |
(177,150) |
- | |
247,631 |
(247,631) |
- |
Deferred exploration costs |
696,457 |
(696,457) |
- | |
718,895 |
(718,895) |
- |
Other assets | 30,258 | - | 30,258 | | 52,172 | - | 52,172 |
| | | | | | | | |
| | $1,067,775 | $(873,607) | $194,168 | | $1,092,224 | $(966,526) | $125,698 |
| | | | | | | | |
Total liabilities | $52,187 | $ - | $52,187 | | $122,374 | $ - | $122,374 |
| | | | | | | | |
Capital stock | 10,767,430 | - | 10,767,430 | | 10,647,430 | - | 10,647,430 |
Subscriptions received | 325,000 | - | 325,000 | | - | - | - |
Additional paid-in capital |
- |
569,619 |
569,619 | |
- |
569,619 |
569,619 |
Deficit | (10,076,842) | (1,443,226) | (11,520,068) | | (9,677,580) | (1,536,145) | (11,213,725) |
Shareholders' equity | 1,015,588 | (873,607) | 141,981 | | 969,850 | (966,526) | 3,324 |
| | | | | | | | |
| | $1,067,775 | $(873,607) | $194,168 | | $1,092,224 | $(966,526) | $125,698 |
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2000
14.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (cont’d…)
The impact of the differences between Canadian GAAP and United States GAAP on the consolidated statements of operations would be as follows:
| |
2000 |
1999 |
| | | |
Loss for the year, Canadian GAAP | $(399,262) | $(1,680,211) |
Adjustments: | | |
Stock-based compensation | - | (101,569) |
Mineral property interests | (22,700) | (22,218) |
Deferred exploration costs | (26,292) | (117,508) |
Write-off of mineral property interests, expensed in prior years for United States GAAP | 93,181 | 540,221 |
Write-off of deferred exploration costs, expensed in prior years for United States GAAP | 48,730 | 324,867 |
| | | |
Loss for the year, United States GAAP | $(306,343) | $(1,056,418) |
Basic and diluted loss per share, United States GAAP | $ (0.08) | $ (0.30) |
Weighted average number of common shares outstanding, United States GAAP | 4,007,882 | 3,534,368 |
The impact of the differences between Canadian GAAP and United States GAAP on the consolidated statements of cash flows would be as follows:
| |
2000 |
1999 |
| | | |
| | | |
Cash flows used in operating activities, Canadian GAAP | $ (224,004) | $(884,592) |
Mineral property interests | (22,700) | (22,218) |
Deferred exploration costs | (26,292) | (117,508) |
| | | |
Cash flows used in operating activities, United States GAAP | (272,996) | (1,024,318) |
| | | |
Cash flows used in investing activities, Canadian GAAP | (48,992) | (142,132) |
Mineral property interests | 22,700 | 22,218 |
Deferred exploration costs | 26,292 | 117,508 |
| | | |
Cash flows used in investing activities, United States GAAP | - | (2,406) |
| | | |
Cash flows provided by financing activities, Canadian GAAP | | |
and United States GAAP | 391,522 | 518,427 |
| | | |
Change in cash and equivalents during the year | 118,526 | (508,297) |
| | | |
Cash and equivalents, beginning of year | 681 | 508,978 |
| | | |
Cash and equivalents, end of year | $ 119,207 | $ 681 |
