STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2002
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Expressed in Canadian Dollars)
AS AT DECEMBER 31
2002 | 2001 | |
ASSETS | ||
Current | ||
Cash | $ 11,784 | $ 4,388 |
Receivables | 4,913 | 1,742 |
Prepaid expenses | 2,930 | 531 |
Total current assets | 19,627 | 6,661 |
Property and equipment (Note 3) | 7,690 | 26,677 |
Mineral property interests (Note 4) | 48,640 | 215,755 |
Deferred exploration costs (Note 5) | 60,008 | 760,312 |
Other assets (Note 6) | - | 8,344 |
Total assets | $ 135,965 | $ 1,017,749 |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||
Current | ||
Accounts payable and accrued liabilities | $ 11,580 | $ 7,614 |
Due to related parties (Note 9) | 38,647 | 85,697 |
Total liabilities | 50,227 | 93,311 |
Shareholders' equity | ||
Capital stock (Note 7) | ||
Authorized | ||
Unlimited common shares without par value | ||
Issued and outstanding | ||
8,046,548 common shares (2001 – 5,801,548) | 11,612,230 | 11,182,030 |
Subscription received in advance | - | 110,000 |
Deficit | (11,526,492) | (10,367,592) |
Total shareholders’ equity | 85,738 | 924,438 |
Total liabilities and shareholders’ equity | $ 135,965 | $ 1,017,749 |
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
2002 | 2001 | |
GENERAL AND ADMINISTRATIVE EXPENSES | ||
Amortization | $ 27,331 | $ 38,480 |
Consulting fees (Note 9) | 54,551 | 46,311 |
Management fees (Note 9) | 14,979 | 74,937 |
Office and miscellaneous | 26,624 | 18,411 |
Professional fees (Note 9) | 32,468 | 37,797 |
Regulatory fees | 4,253 | 7,771 |
Rent (Note 9) | 10,875 | 23,297 |
Shareholder communications (Note 9) | 24,715 | 24,427 |
Telephone | 7,160 | 5,744 |
Trade shows and conferences | 17,431 | - |
Transfer agent | 3,929 | 6,379 |
Travel and promotion | 15,146 | 7,196 |
Loss before other items | (239,462) | (290,750) |
OTHER ITEMS | ||
Write-off of mineral property interests (Note 4) | (215,315) | - |
Write-off of deferred exploration costs (Note 5) | (704,123) | - |
Total of other items | (919,438) | - |
Loss for the year | (1,158,900) | (290,750) |
Deficit, beginning of year | (10,367,592) | (10,076,842) |
Deficit, end of year | $ (11,526,492) | $ (10,367,592) |
Basic and diluted loss per share | $ (0.17) | $ (0.05) |
Weighted average number of shares outstanding | 6,961,127 | 5,629,559 |
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
2002 | 2001 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Loss for the year | $ (1,158,900) | $ (290,750) |
Items not affecting cash: | ||
Amortization | 27,331 | 38,480 |
Write-off of mineral property interests | 215,315 | - |
Write-off of deferred exploration costs | 704,123 | - |
Changes in non-cash working capital items: | ||
Increase in receivables | (3,171) | (332) |
Increase in prepaid expenses | (2,399) | (240) |
Increase (decrease) in accounts payable and accrued liabilities | 3,966 | (1,960) |
Net cash used in operating activities | (213,735) | (254,802) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Acquisition of property and equipment | - | (241) |
Mineral property costs | (35,000) | (38,605) |
Deferred exploration costs | (3,819) | (63,855) |
Net cash used in investing activities | (38,819) | (102,701) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Increase (decrease) in due to related parties | (47,050) | 43,084 |
Capital stock issued, net of share issuance costs | 307,000 | 89,600 |
Subscriptions received in advance | - | 110,000 |
Net cash provided by financing activities | 259,950 | 242,684 |
Change in cash during the year | 7,396 | (114,819) |
Cash, beginning of year | 4,388 | 119,207 |
Cash, end of year | $ 11,784 | $ 4,388 |
Supplemental disclosure with respect to cash flows (Note 8)
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, 2002
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 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 property interests 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, 2002
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, 2002 and 2001, 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, 2002
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
Effective January 1, 2002, the Company adopted the new CICA Handbook Section 3870, "Stock-Based Compensation and Other Stock-Based Payments", which recommends that stock options granted to employees and non-employees be accounted for at fair value. This section also permits, and the Company adopted, the use of the intrinsic value-based method for valuing stock options granted to employees. Under this method, compensation cost for options granted to employees is recognized only when the market price exceeds the exercise price at date of grant. However, pro-forma disclosure of loss per share as if the fair value method had been adopted is required.
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 weighted average number of shares outstanding during the year.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2002
3.
PROPERTY AND EQUIPMENT
2002 | 2001 | ||||||
Cost | Accumulated Amortization | Net Book Value | Cost | Accumulated Amortization | Net Book Value | ||
Office equipment | $ 13,555 | $ 8,688 | $ 4,867 | $ 13,555 | $ 7,471 | $ 6,084 | |
Computer equipment | 15,833 | 13,010 | 2,823 | 15,833 | 11,800 | 4,033 | |
Vehicles | 56,800 | 56,800 | - | 56,800 | 40,240 | 16,560 | |
$ 86,188 | $ 78,498 | $ 7,690 | $ 86,188 | $ 59,511 | $ 26,677 |
4.
MINERAL PROPERTY INTERESTS
2002 | 2001 | |
Aurora property, USA | $ - | $ 121,220 |
Chord property, USA | 48,640 | 48,640 |
Staked properties, Peru | - | 45,895 |
$ 48,640 | $ 215,755 |
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, USA
The Company acquired an option to purchase a 100% interest in a uranium property located in Oregon, USA, by paying $117,120 and issuing 10,000 commons shares valued at $4,100. To earn its interest, the Company is required to pay an additional US$30,000 and issue an additional 10,000 common shares by October 16, 2003. The property is subject to a 2% yellowcake royalty. During fiscal 2002, the property was abandoned and all related costs were written-off.
Chord property, USA
The Company acquired an option to purchase a 100% interest in a uranium property located in South Dakota, USA, by paying $48,640. To earn its interest, the Company is required to pay an additional US$80,000 (US$10,000 per year until July 1, 2009). Subsequent to the year ended December 31, 2002, the Company amended the option agreement to allow the Company to issue 50,000 common shares per year or pay cash of US$10,000 per year to earn the interest. 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, 2002
4.
MINERAL PROPERTY INTERESTS (cont’d…)
Staked properties, Peru
The Company acquired, by staking, a 100% interest in certain uranium properties in Peru. During fiscal 2002, the claims were allowed to lapse and all related costs were written-off.
Wemindji East and Portage West properties, Canada
During fiscal 2002, the Company entered into letters of intent to acquire options on the Wemindji East and Portage West properties located in Quebec, Canada. The Company advanced $35,000 and issued 100,000 common shares pursuant to the agreements. The Company also issued 60,000 common shares valued at $13,200 as a finder’s fee. The option agreements did not complete and, accordingly, acquisition costs of $48,200 were written-off to operations in fiscal 2002. The 100,000 common shares issued for the property were returned to treasury in fiscal 2003 (Note 7).
5.
DEFERRED EXPLORATION COSTS
2002 | 2001 | ||||||
USA | Peru | Total | USA | Peru | Total | ||
Balance, beginning | |||||||
of year | $ 155,069 | $ 605,243 | $ 760,312 | $ 126,140 | $ 570,317 | $ 696,457 | |
General expenditures | 3,819 | - | 3,819 | - | 4,992 | 4,992 | |
Maintenance and claim fees | - | - | - | 28,929 | 29,934 | 58,863 | |
3,819 | - | 3,819 | 28,929 | 34,926 | 63,855 | ||
Write-offs | (98,880) | (605,243) | (704,123) | - | - | - | |
(95,061) | (605,243) | (700,304) | 28,929 | 34,926 | 63,855 | ||
Balance, end of year | $ 60,008 | $ - | $ 60,008 | $ 155,069 | $ 605,243 | $ 760,312 |
6.
OTHER ASSETS
2002 | 2001 | ||||||
Cost | Accumulated Amortization | Net Book Value | Cost | Accumulated Amortization | Net Book Value | ||
Database | $ 41,720 | 41,720 | $ - | $ 41,720 | $ 33,376 | $ 8,344 |
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2002
7.
CAPITAL STOCK
Number of Shares | Amount | ||
Issued | |||
As at December 31, 2000 | 4,149,548 | $ 10,767,430 | |
Private placements | 1,620,000 | 414,600 | |
Finder’s fee for private placement | 32,000 | - | |
As at December 31, 2001 | 5,801,548 | 11,182,030 | |
Private placements | 2,085,000 | 417,000 | |
Finder’s fee on mineral property acquisition | 60,000 | 13,200 | |
7,946,548 | 11,612,230 | ||
Shares issued on mineral property acquisition | |||
To be returned to treasury (Note 4) | 100,000 | - | |
As at December 31, 2002 | 8,046,548 | $ 11,612,230 |
During fiscal 2002, the Company issued 550,000 common shares pursuant to a private placement and reclassified the proceeds of $110,000, which had been received during fiscal 2001, into capital stock.
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.
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.
As at December 31, 2002, the following incentive stock options and warrants were outstanding:
Number of Shares | Exercise Price | Expiry Date | ||
Options | 550,000 | $ 0.25 | March 20, 2003 | |
Warrants | 1,535,000 | 0.25 | June 3, 2004 |
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2002
7.
CAPITAL STOCK (cont’d…)
Stock options (cont’d…)
Stock option transactions are summarized as follows:
Number Of Options | Weighted Average Exercise Price | ||
Outstanding, December 31, 2000 | - | $ - | |
Granted | 550,000 | 0.25 | |
Outstanding, December 31, 2002 and 2001 | 550,000 | $ 0.25 | |
Number of options currently exercisable | 550,000 | $ 0.25 |
Warrants
Warrant transactions and the number of warrants outstanding are summarized as follows:
Number of Warrants | Weighted Average Exercise Price | |
Outstanding, December 31, 2000 | - | $ - |
Granted | 1,652,000 | 0.32 |
Exercised | - | - |
Expired/cancelled | - | - |
Outstanding, December 31, 2001 | 1,652,000 | 0.32 |
Granted | 1,535,000 | 0.25 |
Exercised | - | - |
Expired/cancelled | (1,652,000) | 0.32 |
Outstanding, December 31, 2002 | 1,535,000 | $ 0.25 |
Number of warrants currently exercisable | 1,535,000 | $ 0.25 |
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2002
8.
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
2002 | 2001 | |
Cash paid during the year for interest | $ 743 | $ - |
Cash paid during the year for income taxes | $ - | $ - |
During the year ended December 31, 2002, the Company issued 60,000 common shares valued at $13,200 as a finder’s fee on the acquisition of mineral property interests and issued 550,000 common shares pursuant to a private placement for proceeds of $110,000 which were received in fiscal 2001.
During the year ended December 31, 2001, the Company issued 32,000 common shares as a finder’s fee payment on a private placement.
9.
RELATED PARTY TRANSACTIONS
The Company entered into transactions with related parties as follows:
a)
Paid or accrued $14,979 (2001 - $74,937) for management services to a director.
b)
Paid or accrued $47,115 (2001 - $46,311) for consulting fees to a company controlled by a director.
c)
Paid or accrued $3,829 (2001 - $17,273) for rent to a director.
d)
Paid or accrued $18,992 (2001 - $14,000) for shareholder communications to a director.
a)
Paid or accrued $743 (2001 - $Nil) in interest to a company controlled by a director.
f) Paid or accrued $1,608 (2001 - $Nil) for professional fees to the secretary of the Company.
g)
Pursuant to private placements, 1,000,000 (2001 – 1,050,000) common shares were issued to directors and a company controlled by a director for total proceeds of $200,000 (2001 - $272,100).
Amounts due to related parties are, non-interest bearing and have no specific repayment terms.
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.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2002
10.
INCOME TAXES
A reconciliation of current income taxes at statutory rates with the reported income taxes is as follows:
2002 | 2001 | |
Loss for the year | $ (1,158,900) | $ (290,750) |
Expected income tax recovery | $ 458,924 | $ 129,675 |
Other items for non-deductible income tax purposes | (10,823) | (17,162) |
Write-down of mineral property interests and deferred exploration | (364,098) | - |
Unrecognized benefits of non-capital losses | (84,003) | (112,513) |
Future income tax recovery | $ - | $ - |
The significant components of the Company’s future income tax assets are as follows:
2002 | 2001 | |
Future income tax assets: | ||
Equipment | $ 29,630 | $ 38,273 |
Mineral property interests and related exploration expenditures | 926,726 | 689,186 |
Other assets | 22,560 | 23,039 |
Non-capital losses available for future periods | 1,545,563 | 1,900,776 |
2,524,479 | 2,651,274 | |
Valuation allowance | (2,524,479) | (2,651,274) |
Net future income tax asset | $ - | $ - |
The Company has incurred approximately $4,110,000 of non-capital losses which, if unutilized, will expire through 2009. Subject to certain restrictions, the Company also has capital losses of $368,000 and resource exploration expenditures of approximately $2,573,000 available to reduce taxable income for future years. Future tax benefits which may arise as a result of these losses and resources deductions have not been recognized in these financial statements and have been offset by a valuation allowance.
11.
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 2002 and 2001 to relate to this segment.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2002
11.
SEGMENTED INFORMATION (cont’d…)
The Company has mineral property interests located in the United States and conducts administrative activities from Canada. During the prior year, the Company had a mineral property interest located in Peru. The total amount of capital assets attributable to Canada is $7,690 (2001 - $10,117), Peru is $Nil (2001 - $667,698) and the USA is $108,648 (2001 - $324,929).
12.
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, receivables, accounts payable and accrued liabilities and due to related parties. 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 value, unless otherwise noted.
13.
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.
.
Under Canadian GAAP, the reporting of stock-based compensation expense in the Company’s financial statements was not required for the year ended December 31, 2001. New accounting and disclosure standards were introduced under Canadian GAAP (Note 2) for fiscal 2002, however, there were no options granted during fiscal 2002. Accordingly, there is no difference between Canadian GAAP and United States GAAP in the accounting for stock-based compensation for the year ended December 31, 2002.
To determine the additional compensation expense that would have resulted from compliance with SFAS No. 123 for the fiscal year ended December 31, 2001, the Company uses the Black Scholes Option Pricing Model. During the year ended December 31, 2001, the Company granted 550,000 options to employees, consultants and directors. Total stock-based compensation recognized under US GAAP in the statement of operations during the year was $104,181. This amount was recorded as additional paid-in capital on the balance sheet under US GAAP. In determining the fair value of the Company's incentive stock options, the following assumptions were used:
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2002
13.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
Stock-based compensation (cont’d…)
2002 | 2001 | |
Risk free interest rate | - | 4.54% |
Expected life | - | 2 years |
Expected volatility | - | 90.97% |
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.
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, 2002 and 2001 were 6,886,127 and 5,554,559, respectively.
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2002
13.
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 balance sheets would be as follows:
2002 | 2001 | ||||||
Balance, Canadian GAAP | Adjustments | Balance, United States GAAP | Balance, Canadian GAAP | Adjustments | Balance, United States GAAP | ||
Current assets | $ 19,627 | $ - | $ 19,627 | $ 6,661 | $ - | $ 6,661 | |
Property and equipment | 7,690 | - | 7,690 | 26,677 | - | 26,677 | |
Mineral property interests | 48,640 | (48,640) | - | 215,755 | (215,755) | - | |
Deferred exploration costs | 60,008 | (60,008) | - | 760,312 | (760,312) | - | |
Other | - | - | - | 8,344 | - | 8,344 | |
$ 135,965 | $(108,648) | $ 27,317 | $1,017,749 | $(976,067) | $ 41,682 | ||
Total liabilities | $ 50,227 | $ - | $ 50,227 | $ 93,311 | $ - | $ 93,311 | |
Capital stock | 11,612,230 | - | 11,612,230 | 11,182,030 | - | 11,182,030 | |
Subscriptions received | - | - | - | 110,000 | - | 110,000 | |
Additional paid-in capital | - | 673,800 | 673,800 | - | 673,800 | 673,800 | |
Deficit | (11,526,492) | (782,448) | (12,308,940) | (10,367,592) | (1,649,867) | (12,017,459) | |
Shareholders' equity (deficiency) | 85,738 | (108,648) | (22,910) | 924,438 | (976,067) | (51,629) | |
$ 135,965 | $(108,648) | $ 27,317 | $1,017,749 | $(976,067) | $ 41,682 |
STRATHMORE MINERALS CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 2002
13.
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:
2002 | 2001 | |
Loss for the year, Canadian GAAP | $(1,158,900) | $(290,750) |
Adjustments: | ||
Stock-based compensation | - | (104,181) |
Mineral property interests | (48,200) | (38,605) |
Deferred exploration costs | (3,819) | (63,855) |
Write-off of mineral property interests, expensed in
prior years for United States GAAP | 215,315 | - |
Write-off of deferred exploration costs, expensed in
prior years for United States GAAP | 704,123 | - |
Loss for the year, United States GAAP | $(291,481) | $(497,391) |
Basic and diluted loss per share, United States GAAP | $ (0.04) | $ (0.09) |
Weighted average number of common shares outstanding, United States GAAP | 6,886,127 | 5,554,559 |
The impact of the differences between Canadian GAAP and United States GAAP on the statements of cash flows would be as follows:
2002 | 2001 | |
Cash flows used in operating activities, | ||
Canadian GAAP | $(213,735) | $(254,802) |
Mineral property interests | (35,000) | (38,605) |
Deferred exploration costs | (3,819) | (63,855) |
Cash flows used in operating activities, United States GAAP | (252,554) | (357,262) |
Cash flows used in investing activities, Canadian GAAP | (38,819) | (102,701) |
Mineral property interests | 35,000 | 38,605 |
Deferred exploration costs | 3,819 | 63,855 |
Cash flows used in investing activities, United States GAAP | - | (241) |
Cash flows provided by financing activities, Canadian | ||
GAAP and United States GAAP | 259,950 | 242,684 |
Change in cash during the year | 7,396 | (114,819) |
Cash, beginning of year | 4,388 | 119,207 |
Cash, end of year | $ 11,784 | $ 4,388 |