Exhibit 99.6
Consolidated Financial Statements of
CHAP MERCANTILE INC.
(Unaudited – Prepared by Management)
Nine months ended May 31, 2004
CHAP MERCANTILE INC. Consolidated Balance Sheets |
May 31, | August 31, | |||||
2004 | 2003 | |||||
Unaudited | ||||||
ASSETS | ||||||
Current | ||||||
Cash and equivalents | $ | 427,200 | $ | 114,862 | ||
Accounts receivable | 311 | - | ||||
427,511 | 114,862 | |||||
Assets of discontinued operations | - | 592,847 | ||||
$ | 427,511 | $ | 707,709 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
Current | ||||||
Accounts payable and | ||||||
accrued liabilities | $ | 5,628 | $ | 5,367 | ||
Liabilities of discontinued operations | - | 114,914 | ||||
Total Liabilities | 5,628 | 120,281 | ||||
Shareholders' equity | ||||||
Share capital (Note 4) | 945,000 | 945,000 | ||||
Contributed surplus (Note 4) | 12,875 | - | ||||
Deficit | (535,992 | ) | (357,572 | ) | ||
421,883 | 587,428 | |||||
$ | 427,511 | $ | 707,709 |
See accompanying notes to unaudited consolidated financial statements
CHAP MERCANTILE INC. Consolidated Balance Sheets |
Consolidated Statements of Operations and Deficit
(Unaudited – Prepared by Management)
Three Month Period Ended | Nine Month Period Ended | |||||||||||
May 31, | May 31, | |||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||
EXPENSES | ||||||||||||
Compensation expense (Note 5) | $ | 10,014 | $ | - | $ | 10,014 | $ | - | ||||
Management fees | 3,000 | - | 3,000 | - | ||||||||
Office and general | 918 | 2,567 | 12,118 | 7,701 | ||||||||
Professional and consulting fees | 9,154 | - | 9,154 | - | ||||||||
Transfer agent and filing fees | 3,798 | - | 3,798 | - | ||||||||
Wages and salaries | - | 4,500 | 15,500 | 13,500 | ||||||||
Loss before the undernoted | 26,884 | 7,067 | 53,584 | 21,201 | ||||||||
Interest income | 892 | - | 2,469 | - | ||||||||
Net loss from continuing operations | 25,992 | 7,067 | 51,115 | 21,201 | ||||||||
(Loss) income from discontinued | ||||||||||||
operations (Note 2) | - | 49,577 | (127,305 | ) | 64,762 | |||||||
Net (loss) income | (25,992 | ) | 42,510 | (178,420 | ) | 43,561 | ||||||
Deficit, beginning of period | (510,000 | ) | (233,195 | ) | (357,572 | ) | (234,246 | ) | ||||
Deficit, end of period | $ | (535,992 | ) | $ | (190,685 | ) | $ | (535,992 | ) | $ | (190,685 | ) |
Basic and diluted loss per share | $ | (0.003 | ) | $ | 0.005 | $ | (0.021 | ) | $ | 0.005 | ||
Weighed average number of | ||||||||||||
common shares outstanding | 8,600,000 | 8,600,000 | 8,600,000 | 8,600,000 |
See accompanying notes to unaudited consolidated financial statements
CHAP MERCANTILE INC. Consolidated Balance Sheets |
Consolidated Statements of Cash Flows
(Unaudited – Prepared by Management)
Three Month Period Ended | Nine Month Period Ended | |||||||||||
May 31, | May 31, | |||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||
CASH FLOWS FROM | ||||||||||||
OPERATING ACTIVITIES | ||||||||||||
Loss for the period | $ | (25,992 | ) | $ | 42,510 | $ | (178,420 | ) | $ | 43,561 | ||
Items not affecting cash: | ||||||||||||
Non-cash stock-based compensation (Note 6) | 12,875 | - | 12,875 | - | ||||||||
Loss on disposal of subsidiary | - | - | 127,305 | - | ||||||||
Changes in non-cash working capital items | (11,524 | ) | 7,732 | 25,578 | 25,525 | |||||||
Net cash (used in) provided by operating activities | (24,641 | ) | 50,242 | (12,662 | ) | 69,086 | ||||||
CASH FLOWS FROM | ||||||||||||
INVESTING ACTIVITIES | ||||||||||||
Settlement receivable | - | 2,100 | - | (10,000 | ) | |||||||
Proceeds from the sale of subsidiary (Note 2) | - | - | 325,000 | - | ||||||||
Net cash provided by (used in) investing activities | - | 2,100 | 325,000 | (10,000 | ) | |||||||
Change in cash and equivalents during | ||||||||||||
the period | (24,641 | ) | 52,342 | 312,338 | 59,086 | |||||||
Cash and equivalents, beginning of period | 451,841 | 122,272 | 114,862 | 115,528 | ||||||||
Cash and equivalents, end of period | $ | 427,200 | $ | 174,614 | $ | 427,200 | $ | 174,614 |
See accompanying notes to unaudited consolidated financial statements
CHAP MERCANTILE INC. Notes to Unaudited Consolidated Financial Statements May 31, 2004 and 2003 |
1. | SIGNIFICANT ACCOUNTING POLICIES |
These consolidated financial statements have been prepared using the same accounting policies and methods of application as was used in the most recent annual financial statements. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended August 31, 2003. | |
Share Based Compensation | |
The Company issues options to purchase shares under the terms described in Note 5. | |
Effective September 1, 2003, the Company adopted prospectively the new recommendations of the CICA with respect to stock-based compensation. Under the new recommendations, the Company recognizes compensation costs for the granting of all stock options and direct awards of stock using a fair value-based methodology for measuring compensation costs | |
The consideration received on the exercise of share options is credited to share capital. | |
Loss per Share | |
Loss per share is computed on the basis of the weighted average number of shares outstanding for the period. The effect of potential issuance of shares pursuant to outstanding share purchase option agreements and warrants have not been disclosed as they are anti-dilutive. If the Company has outstanding dilutive stock options and warrants in any period, the diluted loss per share will be calculated using the treasury stock method. | |
Use of Estimates | |
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events 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 reporting period. Actual results could differ from these estimates. | |
2. | DISCONTINUED OPERATIONS |
On February 25, 2004, the Company sold its subsidiary, Dial Locksmith Ltd., for the sum of $325,000 to the former directors of the Company. | |
Summarized financial information of the discontinued operations is as follows: |
Three month period ended | Nine month period ended | |||||||||||
May 31, | May 31, | |||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||
Income from operations | $ | - | $ | 49,577 | $ | 25,628 | $ | 64,762 | ||||
Loss on disposal | - | - | (152,933 | ) | - | |||||||
(Loss) income from | ||||||||||||
discontinued operations | $ | - | $ | 49,577 | $ | (127,305 | ) | $ | 64,762 |
CHAP MERCANTILE INC. Notes to Unaudited Consolidated Financial Statements May 31, 2004 and 2003 |
2. | DISCONTINUED OPERATIONS (continued) |
May 31, | August 31, | |||||
2004 | 2003 | |||||
Current assets | $ | - | $ | 473,167 | ||
Long-term assets | - | 119,680 | ||||
Total assets of discontinued operations | $ | - | $ | 592,847 | ||
Current liabilities | $ | - | $ | 76,349 | ||
Long-term liabilities | - | 38,565 | ||||
Total liabilities of discontinued operations | $ | - | $ | 114,914 |
3. | SILVER TRANSACTION |
In July, 2004, the Company agreed to purchase 100% of the silver produced by Wheaton River Minerals Ltd’s. (“Wheaton”) Luismin mining operations in Mexico for an upfront payment of $262 million payable in cash and common shares of the Company plus a per ounce payment of US$3.90, subject to adjustment (the “Silver Transaction”). As part of the transaction the Company will change its name to Silver Wheaton Corporation. In connection with the transaction, the Company announced a private placement to raise up to $70 million through the sale of subscription receipts (See Note 4). | |
4. | SHARE CAPITAL |
Number | Contributed | |||||||
of Shares | Amount | Surplus | ||||||
Authorized: | ||||||||
Unlimited number of common voting shares | ||||||||
Unlimited number of preferred shares | ||||||||
As at August 31, 2003 | 8,600,000 | $ | 945,000 | $ | - | |||
Stock-based compensation | - | - | 12,875 | |||||
As at May 31, 2004 | 8,600,000 | $ | 945,000 | $ | 12,875 |
As part of the Silver Transaction (See Note 3) the Company announced a private placement of up to 175,000,000 subscription receipts at $0.40 per subscription receipt for gross proceeds of $70 million. Each subscription receipt will entitle the holder to acquire one common share and one half of one common share purchase warrant for no additional consideration. Each whole warrant will entitle the holder to purchase one common share at $0.80 per share for a period of five years after the closing date of the Silver Transaction. In connection with the Silver Transaction, the Company will seek shareholder approval to change its name to “Silver Wheaton” and consolidate its outstanding common shares on a one for five basis. |
CHAP MERCANTILE INC. Notes to Unaudited Consolidated Financial Statements May 31, 2004 and 2003 |
4. | SHARE CAPITAL (continued) |
Stock Options and Warrants | |
The Company issues share purchase options to directors, officers, and employees of the Company and persons who provide ongoing services to the Company under an incentive stock option plan and has reserved 10% of the outstanding common shares for issue of share purchase options under this plan. The exercise price of share purchase options will be no less than the closing price of the shares on the business day immediately preceding the date on which the option is granted. Options will normally vest immediately. Options will expire no later than five years from the grant date, except that they will expire within ninety days when the holder is no longer qualified to hold the option (other than for cause, when the option will expire immediately). | |
In accordance with the Company’s stock option plan, the Company issued 450,000 stock options to directors and consultants during the nine months ended May 31, 2004. The stock options issued are exercisable into common shares at a price of $0.15 per share expiring January 27, 2009. | |
A summary of the changes in stock options is presented below. |
Options | |||||
outstanding & | Weighted average | ||||
exercisable | exercise price | ||||
At August 31, 2003 | - | $ | - | ||
Issued | 450,000 | 0.15 | |||
At May 31, 2004 | 450,000 | $ | 0.15 |
The following table summarizes information about the stock options outstanding at May 31, 2004. |
Outstanding & | |||||||
exercisable | Exercise price | Expiry date | |||||
Options | 450,000 | $0.15 | January 27, 2009 |
Subsequent to May 31, 2004, 100,000 options, exercisable at $0.15 per share, were exercised for proceeds of $15,000. |
CHAP MERCANTILE INC. Notes to Unaudited Consolidated Financial Statements May 31, 2004 and 2003 |
5. | STOCK BASED COMPENSATION |
In 2003, the Company adopted, on a prospective basis, the fair value based method of accounting for all stock-based compensation (Note 2). Under this method, compensation expense is recognized when stock options and warrants are granted and vested. The Company issued 100,000 stock options to consultants. Using the Black-Scholes option pricing model, the fair value of the options issued was $2,861 which has been recorded in the statement of operations as consulting fees with corresponding contributed surplus recorded in shareholders’ equity. The Company also granted 350,000 stock options to directors during the nine month period. The fair value of options issued was $10,014 which has been recorded as compensation expense in the statement of operations with corresponding contributed surplus recorded in shareholders’ equity. | |
The following assumptions were used for the Black Scholes valuation of stock options: |
Risk-free interest rate | 3.7% | |
Expected life | 5 years | |
Annualized volatility | 10.0% | |
Dividend rate | 0.00% | |
6. | SEGMENTED INFORMATION The Company currently operates in one business segment, being the acquisition of resource properties. |