PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd.)
Consolidated Financial Statements
September 30, 2005
September 30, 2004
and
June 30, 2005
June 30, 2004
June 30, 2003
(An exploration stage company)
NOTICE TO READER
Under National Instrument 51-102, Part 4, subsection 4.3 (3) (a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.
The accompanying unaudited interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company’s management.
The Company’s independent auditor has not performed a review of these financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity’s auditor.
Portal Resources Ltd. | Trading Symbol: PDO.V | |
Head Office: Suite 750 – 625 Howe Street | Telephone: 604-629-1929 | |
Vancouver, British Columbia, Canada V6C 2T6 | Facsimile: 604-629-1930 |
PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd.)
CONSOLIDATED BALANCE SHEETS
(stated in Canadian dollars)
September 30, | June 30, | |||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||
(Unaudited- prepared by management) | (Unaudited- prepared by management) | |||||||||||
ASSETS | ||||||||||||
Current | ||||||||||||
Cash and cash equivalents | $ 250,335 | $ 357,177 | $ 740,098 | $ 599,027 | ||||||||
Amounts receivable | 7,873 | 21,163 | 4,432 | 14,374 | ||||||||
Prepaid expenses | 28,067 | 14,695 | 16,520 | 6,063 | ||||||||
286,275 | 393,035 | 761,050 | 619,464 | |||||||||
Equipment and software (Note 4) | 37,747 | 9,696 | 41,969 | 8,172 | ||||||||
Mineral rights on unproven properties (Note 5) | 1,755,961 | 661,398 | 1,544,183 | 576,033 | ||||||||
$ 2,079,983 | $ 1,064,129 | $ 2,347,202 | $ 1,203,669 | |||||||||
LIABILITIES | ||||||||||||
Current | ||||||||||||
Accounts payable and accrued liabilities | $ 117,669 | $ 36,705 | $ 231,480 | $ 44,100 | ||||||||
Due to related parties (Note 7) | 6,106 | 2,993 | 10,532 | 31,890 | ||||||||
123,775 | 39,698 | 242,012 | 75,990 | |||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||
Share capital (Note 6) | 2,988,798 | 1,366,017 | 2,969,461 | 1,358,097 | ||||||||
Contributed surplus (Note 6) | 222,896 | 113,612 | 180,493 | 78,808 | ||||||||
Deficit | (1,255,486) | (455,198) | (1,044,764) | (309,226) | ||||||||
1,956,208 | 1,024,431 | 2,105,190 | 1,127,679 | |||||||||
| $ 2,079,983 | $ 1,064,129 | $ 2,347,202 | $ 1,203,669 |
Going Concern (Note 1)
Approved by the Board of Directors:
Gary Nordin | Bruce Winfield |
See notes to the consolidated financial statements
PORTAL RESOURCES LTD. | |||||||||||||||||
(formerly Portal de Oro Resources Ltd.) | |||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT | |||||||||||||||||
(stated in Canadian dollars) | |||||||||||||||||
Three months ended | Years ended | ||||||||||||||||
September 30, | June 30, | ||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2003 | |||||||||||||
(Unaudited- prepared by management) | (Unaudited- prepared by management) | ||||||||||||||||
$ | $ | $ | $ | $ | |||||||||||||
Revenue | - | - | - | - | - | ||||||||||||
Expenses | |||||||||||||||||
Accounting and audit | 12,798 | 7,491 | 41,583 | 14,832 | 3,000 | ||||||||||||
Amortization | 4,222 | 881 | 10,171 | 1,581 | - | ||||||||||||
Bank charges and interest | 3,601 | 1,321 | 11,267 | 2,172 | 235 | ||||||||||||
Consulting and management fees | 8,917 | 171 | 30,390 | 3,171 | 5,500 | ||||||||||||
Foreign exchange | (768) | 4,023 | (706) | 4,894 | - | ||||||||||||
Interest income | (923) | (345) | (3,391) | (3,422) | (3,967) | ||||||||||||
Investor relations | 34,668 | 9,877 | 109,064 | 13,442 | - | ||||||||||||
Legal | 1,474 | 5,492 | 20,180 | 1,075 | 5,396 | ||||||||||||
Office and miscellaneous | 15,018 | 6,426 | 44,790 | 17,758 | 2,738 | ||||||||||||
Rent | 4,936 | 4,936 | 19,746 | 8,068 | 3,600 | ||||||||||||
Project investigation | - | - | 8,995 | 7,470 | - | ||||||||||||
Salaries and benefits | 45,212 | 60,717 | 243,971 | 45,586 | - | ||||||||||||
Stock-based compensation (Note 6) | 46,238 | 34,804 | 103,026 | 78,808 | - | ||||||||||||
Travel | 4,009 | 7,990 | 33,366 | 2,098 | - | ||||||||||||
Transfer agent and filing fees | 1,828 | 2,188 | 17,446 | 15,692 | 7,056 | ||||||||||||
Write-off of mineral property expenses | - | - | - | 12,079 | - | ||||||||||||
Valuation allowance for foreign value added tax credit (IVA) | 29,492 | - | 45,640 | - | - | ||||||||||||
Write-off of non-refundable deposit | - | - | - | - | 25,000 | ||||||||||||
210,722 | 145,972 | 735,538 | 225,304 | 48,558 | |||||||||||||
Net loss for the period | (210,722) | (145,972) | (735,538) | (225,304) | (48,558) | ||||||||||||
Deficit – beginning of period | (1,044,764) | (309,226) | (309,226) | (83,922) | (35,364) | ||||||||||||
Deficit – end of period | (1,255,486) | (455,198) | (1,044,764) | (309,226) | (83,922) | ||||||||||||
Loss per share (Note 2) | $ (0.02) | $ (0.02) | $ (0.08) | $ (0.05) | $ (0.02) | ||||||||||||
Weighted average number of common shares outstanding | 10,811,443 | 8,542,000 | 9,445,368 | 4,386,667 | 2,320,000 | ||||||||||||
See notes to the consolidated financial statements
PORTAL RESOURCES LTD. | |||||||||||||||
(formerly Portal de Oro Resources Ltd.) | |||||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
(stated in Canadian dollars) | |||||||||||||||
Three months ended | Years ended | ||||||||||||||
September 30, | June 30, | ||||||||||||||
2005 | 2004 | 2004 | 2004 | 2003 | |||||||||||
(Unaudited- prepared by management) | (Unaudited- prepared by management) | ||||||||||||||
$ | $ | $ | $ | $ | |||||||||||
Cash provided by (used for): | |||||||||||||||
Operating Activities | |||||||||||||||
Net loss for the period | (210,722) | (145,972) | (735,538) | (225,304) | (48,558) | ||||||||||
Items not involving cash: | |||||||||||||||
Stock-based compensation | 46,238 | 34,804 | 103,026 | 78,808 | - | ||||||||||
Write-down of mineral properties | - | - | - | 12,079 | - | ||||||||||
Amortization | 4,222 | 881 | 10,171 | 1,581 | - | ||||||||||
(160,262) | (110,287) | (622,341) | (132,836) | (48,558) | |||||||||||
Changes in non-cash working capital: | |||||||||||||||
Amounts receivable | (3,441) | (6,789) | 9,942 | (13,525) | (277) | ||||||||||
Prepaid expenses | (11,547) | (8,632) | (10,457) | (4,788) | (250) | ||||||||||
Accounts payable and accrued liabilities | (113,811) | (7,395) | 187,380 | 39,378 | 1,227 | ||||||||||
Due to related parties | (4,426) | (28,897) | (21,358) | (41,899) | (1,035) | ||||||||||
(293,487) | (162,000) | (456,834) | (153,670) | (48,893) | |||||||||||
Investing Activities | |||||||||||||||
Purchase of equipment and software | - | (2,405) | (43,968) | (9,753) | - | ||||||||||
Mineral rights on unproven properties | (211,778) | (85,365) | (968,150) | (192,235) | - | ||||||||||
Acquisition of Portal de Oro (B.V.I.) Ltd. (Note 3) | - | - | - | (122,337) | - | ||||||||||
(211,778) | (87,770) | (1,012,118) | (324,325) | - | |||||||||||
Financing Activities | |||||||||||||||
Shares issued for cash | 15,502 | 7,920 | 1,679,127 | 947,900 | - | ||||||||||
Share issue costs | - | - | (69,104) | (35,551) | - | ||||||||||
15,502 | 7,920 | 1,610,023 | 912,349 | - | |||||||||||
Net cash provided (used) during period | (489,763) | (241,850) | 141,071 | 434,354 | (48,893) | ||||||||||
Cash – beginning of period | 740,098 | 599,027 | 599,027 | 164,673 | 213,566 | ||||||||||
Cash – end of period | 250,335 | 357,177 | 740,098 | 599,027 | 164,673 | ||||||||||
Supplementary information on non-cash transactions | |||||||||||||||
Shares issued to acquire Portal de Oro (B.V.I.) Ltd. | $ - | $ - | $ - | $ 200,000 | $ - | ||||||||||
See notes to the consolidated financial statements
PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd.)
Notes to the Consolidated Financial Statements
For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)
For the years ended June 30, 2005, 2004 and 2003
(stated in Canadian dollars)
1.
NATURE OF OPERATIONS AND GOING CONCERN
Portal Resources Ltd. (“Portal” or “the Company”, formerly Portal de Oro Resources Ltd. and Gateway Enterprises Ltd.) was incorporated on August 14, 2000 under the Company Act of the Province of British Columbia. The Company was called for trading on the TSX Venture Exchange (“the Exchange”) as a “Capital Pool Company” in May 2001.
On March 15, 2004 the Company completed its Qualifying Transaction (“QT”) under the Capital Pool Company rules of the Exchange when it acquired all of the outstanding shares of Portal de Oro (B.V.I.) Ltd. (“Portal (BVI)”), which through its wholly owned subsidiary El Portal de Oro S.A (“Portal S.A.”) has a 100% interest the Arroyo Verde project in Argentina, in consideration for the issuance of 2,000,000 common shares of the Company at a deemed price of $0.10 per share. All of the consideration shares are subject to a three-year value escrow agreement.
Pursuant to a Special Resolution passed by shareholders January 6, 2004, the Company changed its name from Gateway Enterprises Ltd. to Portal de Oro Resources Ltd. Pursuant to a Special Resolution passed by the shareholders on December 10, 2004, the Company changed its name from Portal de Oro Resources Ltd. to Portal Resources Ltd.
The Company is an exploration stage company whose business activity is the exploration of mineral rights located in Argentina. The Company has not yet determined if any of these rights contain economic mineral reserves and, accordingly, the amounts shown for deferred exploration costs represent costs incurred to date, less write-downs, and do not necessarily reflect present or future values. The recovery of these amounts is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the exploration of the rights, and upon the commencement of future profitable production or, alternatively, upon the Company’s ability to dispose of its interests on an advantageous basis.
In order to maintain future exploration expenditures and cover administrative costs, the Company will need to raise additional financing. Although the Company has been successful in raising funds to date, there can be no assurance that the Company will be able to continue to raise funds in the future in which case the Company may be unable to meet its obligations. Should the Company be unable to realize on its assets and discharge its liabilities in the normal course of business the net realizable value of its assets may be materially less than the amounts recorded on the balance sheet.
2.
SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Canada (Canadian GAAP). These interim consolidated financial statements do not include in all respects the annual disclosure requirements of generally accepted accounting principles and should be read in conjunction with the most recent annual consolidated financial statements. The differences between those principles and these that would be applied under U.S. generally accepted accounting principles (U.S. GAAP) are disclosed in note 9.
References to the Company are inclusive of the Canadian parent company and its wholly-owned Argentinean subsidiary.
PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd. and Gateway Enterprises Ltd.)
Notes to the Consolidated Financial Statements
For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)
For the years ended June 30, 2005, 2004 and 2003
(stated in Canadian dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES, (Continued)
Financial Instruments
The Company’s financial instruments consist of current assets and current liabilities. The fair value of these instruments approximate their carrying values due to their short-term nature. Financial risk is the risk arising from fluctuations in foreign currency exchange rates. The Company does not use derivative or hedging instruments to reduce its exposure to fluctuations in foreign currency exchange rates.
Cash Equivalents
Cash equivalents consist of highly liquid investments with maturity dates of less than one year that are readily convertible into known amounts of cash. Interest earned is recognized immediately in operations.
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 amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Mineral rights
Mineral right acquisition costs and their related exploration costs are deferred until the rights are placed into production or disposed of. These costs will be amortized over the estimated useful life of the rights following the commencement of production, or written-off if the rights are disposed of.
Cost includes the cash consideration and the fair market value of shares issued on acquisition of mineral rights. Rights acquired under option agreements or joint ventures, whereby payments are made at the sole discretion of the Company, are recorded in the accounts at such time as the payments are made. The proceeds from options granted are netted against the cost of the related mineral rights and any excess is applied to operations.
The Company reviews capitalized costs on its mineral rights on a periodic basis and will recognize an impairment in value based upon current exploration results and upon management’s assessment of the future probability of profitable revenues from the rights or from the sale of the rights. Management’s assessment of the right’s estimated current fair market value is also based upon a review of other similar mineral rights transactions that have occurred in the same geographic area as that of the rights under review.
Equipment and software
Equipment and software are recorded at cost. Amortization is provided for using the straight-line method at the following annual rates: Computer equipment – 30%; Computer software – 50%, Furniture and fixtures – 20%, Vehicles – 20%.
Share Capital
Common shares issued for non-monetary consideration are recorded at their fair market value based upon the trading price of the Company’s shares on the TSX Venture Exchange.
Stock Option Plan
Effective July 1, 2003, the Company has early adopted the recommendation of the Canadian Institute of Chartered Accountants in accounting for employee stock option plans. Options granted to employees and non-employees are accounted for using the fair value method where compensation expense is calculated using the Black-Scholes options pricing model.
PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd.)
Notes to the Consolidated Financial Statements
For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)
For the years ended June 30, 2005, 2004 and 2003
(stated in Canadian dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES, (Continued)
Stock-based Compensation
The Company records compensation expense for stock options granted at the time of their vesting using the fair value method. The adoption of this accounting policy for stock-based compensation has been applied prospectively to all stock options granted subsequent to January 1, 2003, prior to which the Company followed the policy of disclosing on a pro-forma basis only the effect of accounting for stock options granted to employees and directors on a fair value basis.
The proceeds received by the Company on the exercise of options are credited to share capital.
Loss per share
Loss per share has been calculated using the weighted-average number of common shares outstanding during the period. Fully diluted loss per share amounts are not presented, as they are anti-dilutive.
Income Taxes
The Company accounts for the tax consequences of future tax assets and liabilities attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be settled. When the future realization of income tax assets does not meet the test of being more likely than not to occur, a valuation allowance in the amount of the potential future benefit is taken and no asset is recognized. The Company has taken a valuation allowance for the full amount of all potential net tax assets.
Comparative figures
Certain comparative figures have been reclassified to conform with the presentation adopted in the current period.
3.
ACQUISTION OF PORTAL DE ORO (B.V.I.) LTD.
On March 15, 2004 the Company acquired all of the outstanding shares of Portal de Oro (B.V.I.) Ltd. (“Portal BVI”) whereby the Company acquired 100% of the Arroyo Verde project in Argentina, owned by El Portal de Oro S.A, a wholly owned subsidiary of Portal BVI. Under the purchase agreement, the Company acquired Portal BVI for 2,000,000 common shares of the Company valued at $0.10 per share. The Company incurred acquisition costs of $122,372. The acquisition has been accounted for using the purchase method. The allocation of the purchase price is summarized as follows:
Purchase price:
Shares issued
$
200,000
Acquisition costs
122,372
$
322,372
Assets acquired:
Cash
$
35
Mineral property
395,877
395,912
Liabilities assumed:
Current liabilities
(73,540)
Net assets acquired
$ 322,372
PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd.)
Notes to the Consolidated Financial Statements
For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)
For the years ended June 30, 2005, 2004 and 2003
(stated in Canadian dollars)
4.
EQUIPMENT AND SOFTWARE
September 30, | June 30, | ||||||||||
2005 | 2004 | ||||||||||
(Unaudited – prepared by management) | (Unaudited – prepared by management) | 2005 | 2004 | ||||||||
Cost | Accumulated amortization | Net book value | Net book value | Net book value | Net book value | ||||||
$ | $ | $ | $ | $ | $ | ||||||
Computer equipment | 10,980 | 5,043 | 5,937 | 8,960 | 6,760 | 7,289 | |||||
Computer software | 17,796 | 7,189 | 10,607 | 736 | 12,758 | 883 | |||||
Furniture & fixtures | 1,701 | 255 | 1,446 | - | 1,531 | - | |||||
Vehicles | 23,244 | 3,487 | 19,757 | - | 20,920 | - | |||||
56,804 | 15,974 | 37,747 | 9,696 | 41,969 | 8,172 |
5.
MINERAL RIGHTS ON UNPROVEN PROPERTIES
The Company’s mineral properties are all located in. A breakdown of carrying values by property and significant expenditure category is as follows:
Arroyo Verde | San Rafael | Project Investigation | Total | |||||
Total as at June 30, 2003 | $ - | $ - | $ - | $ - | ||||
Land acquisition & holding costs | 399,079 | 63,018 | 4,989 | 467,086 | ||||
Environmental | 2,172 | - | - | 2,172 | ||||
Geology | 43,535 | 17,984 | 44,262 | 105,781 | ||||
Surface geochemistry | 2,894 | - | 3,300 | 6,194 | ||||
Other | 49 | 5,873 | 957 | 6,879 | ||||
Total expenditures | 447,729 | 86,875 | 53,508 | 588,112 | ||||
Property write-offs | (49) | (5,873) | (6,157) | (12,079) | ||||
Total as at June 30, 2004 | 447,680 | 81,002 | 47,351 | 576,033 | ||||
Land acquisition & holding costs | 48,083 | 120,421 | 1,739 | 170,243 | ||||
Environmental | - | 11,830 | - | 11,830 | ||||
Geology | 307,124 | 64,159 | 14,434 | 385,717 | ||||
Geophysics | 175,255 | - | - | 175,255 | ||||
Surface geochemistry | 24,649 | 4,319 | 101 | 29,069 | ||||
Drilling | 196,036 | - | - | 196,036 | ||||
Total expenditures | 751,147 | 200,729 | 16,274 | 968,150 | ||||
Total as at June 30, 2005 | 1,198,827 | 281,731 | 63,625 | 1,544,183 | ||||
Land acquisition & holding costs | 1,691 | 21 | - | 1,712 | ||||
Geology | 92,801 | 882 | 1,581 | 95,264 | ||||
Surface geochemistry | 28,527 | - | - | 28,527 | ||||
Drilling | 86,275 | - | - | 86,275 | ||||
Total expenditures | 209,294 | 903 | 1,581 | 211,778 | ||||
Total as at September 30, 2005 | $ 1,408,121 | $ 282,634 | $ 65,206 | $ 1,755,961 |
PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd.)
Notes to the Consolidated Financial Statements
For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)
For the years ended June 30, 2005, 2004 and 2003
(stated in Canadian dollars)
5.
MINERAL RIGHTS ON UNPROVEN PROPERTIES, (Continued)
Arroyo Verde
On November 27, 2003, Portal S.A. signed an option to acquire a 100% interest in a series of mining rights in Chubut province of Argentina. Under the terms of the agreement the Company’s payment requirements are as follows:
US$
Within 60 days of reviewing technical data
$ 1,000 (paid)
On signing of the agreement
$ 4,000 (paid)
On or before June 1, 2004
$ 5,000 (paid)
On or before December 1, 2004
$ 20,000 (paid)
On or before December 1, 2005
$ 40,000
On or before December 1, 2006
$ 60,000
On or before December 1, 2007
$ 80,000
On or before December 1, 2008 or upon receipt of a feasibility study, the Company must pay an advance royalty payment of US$1 for each ounce of gold equivalent in the measured and indicated resources with a minimum of US$100,000 and a maximum of US$250,000. This advance royalty can be applied against subsequent royalty obligations. The vendor retains a 2% net smelter royalty that the Company can purchase 1% of, at any time, for US$1,000,000.
San Rafael
The properties in the San Rafael project have been acquired through two separate option agreements.
San Pedro
On June 18, 2004, Portal S.A. signed an option to acquire a 100% interest in a series of mining rights in Mendoza province of Argentina. Under the terms of the agreement the Company’s payment requirements to exercise the option are as follows:
US$
On signing of the agreement
$ 30,000 (paid)
On or before June 18, 2005
$ 20,000 (paid)
On or before June 18, 2006
$ 30,000
On or before June 18, 2007
$ 40,000
On or before June 18, 2008
$ 50,000
On or before June 18, 2009
$ 60,000
On or before June 18, 2010
$200,000
On or before June 18, 2011
$200,000
On or before June 18, 2012
$200,000
PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd.)
Notes to the Consolidated Financial Statements
For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)
For the years ended June 30, 2005, 2004 and 2003
(stated in Canadian dollars)
5.
MINERAL RIGHTS ON UNPROVEN PROPERTIES, (Continued)
Rio de la Plata
On June 18, 2004, Portal S.A. signed an option to acquire a 100% interest in a series of mining rights in Mendoza province of Argentina. Under the terms of the agreement the Company’s payment requirements to exercise the option are as follows:
US$
On signing of the agreement
$ 15,000 (paid)
On or before April 9, 2005
$ 15,000 (paid)
On or before April 9, 2006
$ 15,000
On or before April 9, 2007
$ 50,000
On or before April 9, 2008
$ 70,000
On or before April 9, 2009
$100,000
The Company is obligated to make the initial three annual payments of $15,000. Should the Company wish to develop any of the four areas defined in the agreement, during the term of the option, it must pay the sum of US$50,000 for each area so designated. The Company would then form a new 100% owned subsidiary to which the mining rights in that designated area would be transferred. The new subsidiary would be subject to a 15% to 20% net profit interest to the owner. The Company has the right to purchase 10% of the net profits interest at any time for the sum of US$1,000,000.
6.
SHARE CAPITAL
Authorized
100,000,000 Common Shares without par value, 100,000,000 Preferred shares issuable in series
Issued
Number | Price per share | Amount | ||
Private placement | 1,120,000 | $ 0.09 | $ 100,800 | |
Public offering | 1,200,000 | 0.18 | 216,000 | |
Share issue costs | - | (71,052) | ||
Balance – June 30, 2003 | 2,320,000 | 245,748 | ||
Private placement | 1,000,000 | 0.15 | 150,000 | |
Private placement | 3,170,000 | 0.25 | 792,500 | |
On exercise of options | 30,000 | 0.18 | 5,400 | |
On acquisition of Portal BVI | 2,000,000 | 0.10 | 200,000 | |
Share issue costs | - | (35,551) | ||
Balance – June 30, 2004 | 8,520,000 | 1,358,097 | ||
Private placement | 1,456,000 | 0.75 | 1,092,000 | |
Private placement | 768,943 | 0.75 | 576,707 | |
On exercise of options | 54,000 | 0.19 | 10,420 | |
Transfer upon exercise of options | - | 1,341 | ||
Share issue costs | - | (69,104) | ||
Balance – June 30, 2005 | 10,798,943 | 2,969,461 | ||
On exercise of options | 75,000 | 0.21 | 15,502 | |
Transfer upon exercise of options | - | 3,835 | ||
Balance – September 30, 2005 | 10,873,943 | $ 2,988,798 |
PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd.)
Notes to the Consolidated Financial Statements
For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)
For the years ended June 30, 2005, 2004 and 2003
(stated in Canadian dollars)
6.
SHARE CAPITAL, (Continued)
EscrowedShares
A total of 3,690,000 common shares issued were placed in escrow and their release from escrow is subject to the terms of an agreement between the Company, its stock transfer agent and the beneficial owners of the escrowed shares. These shares are to be released in stages within three years of the completion date of the Qualifying Transaction. On March 15, 2004, 369,000 of the escrowed shares were released, on September 15, 2004, 553,500 were released, on March 15, 2005 553,500 were released and on September 15, 2005 553,500 were released. As at September 30, 2005, there are 1,660,500 common shares remaining in escrow.
Stock Options
The Company has a stock option plan as described in the most recent annual financial statements of the Company. The Company accounts for its grants in accordance with the fair value method of accounting for stock-based compensation.
A summary of changes to stock options outstanding is as follows:
September 30, | June 30, | |||||
(Unaudited-prepared by management) 2005 | 2005 | 2004 | ||||
Weighted- Average | Weighted- Average | Weighted-Average | ||||
Number of shares | Exercise Price | Number of shares | Exercise Price | Number of shares | Exercise Price | |
Outstanding at beginning of year | 1,103,000 | $ 0.43 | 960,000 | $ 0.32 | 232,000 | $ 0.18 |
Granted under plan | 80,000 | $ 0.68 | 347,000 | $ 0.84 | 820,800 | $ 0.34 |
Exercised | (75,000) | $ 0.21 | (54,000) | $ 0.19 | (30,000) | $ 0.18 |
Forfeited or cancelled | - | - | (150,000) | $ 0.79 | (62,800) | $ 0.18 |
Outstanding at end of period | 1,108,000 | $ 0.46 | 1,103,000 | $ 0.43 | 960,000 | $ 0.32 |
Stock-based Compensation
The Company recorded stock-based compensation expense for stock options of $46,238 in the quarter ended September 30, 2005 (2004 - $34,804) and $103,026 for the year ended June 30, 2005 (2004 - $78,808). These costs were offset to contributed surplus of $222,896.
For all stock options that have been granted, the Company will recognize stock-based compensation as the options vest and will expense an additional $49,644 in the remainder of the fiscal year. The remaining $818 will be expensed in the first quarter of the fiscal year ended June 30, 2007.
PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd.)
Notes to the Consolidated Financial Statements
For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)
For the years ended June 30, 2005, 2004 and 2003
(stated in Canadian dollars)
1.
SHARE CAPITAL, (Continued)
On August 17, 2005, the Company entered into an agreement with Coal Harbor Communications Inc. (“Coal Harbor”) for investor relations and marketing services. Under the terms of the agreement, Coal Harbor will receive a fee of $5,000 per month for a one-year term and 50,000 share purchase options of the Company. On August 26, 2005, the company issued the 50,000 stock options at an exercise price of $0.70. These options have a term of one year and vest in equal amounts every three months for one year. The fair value of these options was estimated at $0.14 per option at grant date.
On September 15, 2005, the Company granted an employee 30,000 share purchase options with an exercise price of $0.64. These options have a term of five years and vest in equal amounts every three months for one year. The fair value of these options was estimated at $0.28 per option at grant date.
The fair value of the options granted was estimated using the Black-Scholes option-pricing model, based on the following assumptions:
Sept. 30, 2005 | Sept. 30, 2004 | June 30, 2005 | June 30, 2004 | ||||
Stock compensation | $ 46,238 | $ 34,804 | $ 103,026 | $ 78,808 | |||
Risk-free interest rate | 3.4% | 4% | 4% | 4% | |||
Expected stock price volatility | 49% - 62% | 72% – 76% | 72% | 76% | |||
Expected option life in years | 1-3 years | 3 years | 3 years | 3 years | |||
Expected dividend yeild | Nil | Nil | Nil | Nil |
Option-pricing models require the input of highly subjective assumptions regarding the expected volatility and expected life. Changes in assumptions can materially affect the fair value of the Company’s stock options at the date of grant.
Stock options outstanding as at September 30, 2005 are as follows:
Number | Exercise Price | Expiry Date |
48,800 | $ 0.18 | May 28, 2006 |
632,200 | $ 0.25 | March 15, 2009 |
50,000 | $ 0.75 | June 18, 2009 |
70,000 | $ 0.77 | December 23, 2009 |
227,000 | $ 0.86 | April 14, 2010 |
50,000 | $ 0.70 | August 26, 2006 |
30,000 | $ 0.64 | September 15, 2010 |
1,108,000 |
Warrant outstanding as at September 30, 2005are as follows:
Number | Exercise Price | Expiry Date |
728,000 | $ 0.90 | December 20, 2005 |
384,471 | $ 0.90 | May 5, 2006 |
1,112,471 |
PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd.)
Notes to the Consolidated Financial Statements
For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)
For the years ended June 30, 2005, 2004 and 2003
(stated in Canadian dollars)
7.
RELATED PARTY TRANSACTIONS
Payments to related parties were made in the normal course of operations and were valued at fair value as determined by management. Amounts due to or from related parties are unsecured, non-interest bearing and due on demand.
For the three month period ended September 30, 2005 and 2004 (Unaudited)
During the three months ended September 30, 2005, the Company paid or accrued to pay another public company related by certain common directors $18,711 (2004 - $18,945) for the shared rent of office space and services and expense reimbursements and as at September 30, 2005 owes this company an aggregate of $5,571 (June 30, 2005 - $5,423).
During the three months ended September 30, 2005, the Company paid or accrued to pay a private company with a director in common with the Company an aggregate of $535 (2004 - $54) for fees and expense reimbursements and as at September 30, 2005 owes this company an aggregate of $535 (June 30, 2005 – $803).
As at September 30, 2005 the Company owes certain directors an aggregate of $Nil (June 30, 2005 - $5,108) for expense reimbursements
For the years ended June 30, 2004, 2003, 2002
The Company paid another public company related by certain common directors $63,828 (2004 - $20,750; 2003 - $3,600) for the shared rent of office space and services and as at June 30, 2005 owes this company an aggregate of $5,423 (2004 - $18,504; 2003 - $nil).
The Company paid or accrued to pay a private company with a director in common with the Company an aggregate of $6,382 (2004 - $4,759; 2003 - $1,775) for fees and expense reimbursements and during 2004 paid $5,350 for deferred acquisition costs. As at June 30, 2005 owes this company an aggregate of $803 (2004 - $nil; 2003 - $11).
As at June 30, 2005 the Company owes certain directors an aggregate of $5,108 (2004 - $13,386; 2003 - $238) for expense reimbursements.
8.
INCOME TAXES
A reconciliation of income taxes at statutory rates with reported taxes is as follow:
2005 | 2004 | 2003 | ||||
Loss before income taxes | $ (735,538) | $ (225,304) | $ (48,558) | |||
Expected income taxes (recovery) | $ (261,998) | $ (84,759) | $ (19,229) | |||
Non-deductible (deductible) expenses for tax purposes | 25,054 | (7,923) | (5,627) | |||
Unrecognized benefit on non-capital losses | 236,944 | 92,682 | 24,856 | |||
Total income taxes (recovery) | $ - | $ - | $ - |
PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd.)
Notes to the Consolidated Financial Statements
For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)
For the years ended June 30, 2005, 2004 and 2003
(stated in Canadian dollars)
8.
INCOME TAXES, (Continued)
The significant components of the Company’s future income tax assets for Canadian purposes are as follows:
2005 | 2004 | 2003 | ||||
Future income tax assets | ||||||
Non-capital loss carryforwards | $ 307,218 | $ 372,917 | $ 126,552 | |||
Share issue costs | 27,290 | 42,652 | 28,422 | |||
Equipment | 10,855 | 1,851 | - | |||
Future income tax assets before valuation allowance | 345,363 | 417,420 | 154,974 | |||
Less: valuation allowance | (345,363) | (417,420) | (154,974) | |||
Net future income tax assets | $ - | $ - | $ - |
The Company has incurred losses for Canadian income tax purposes of approximately $862,488, which can be carried forward to reduce taxable income in future years: These losses will expire as follows:
2007 | $ 37,865 |
2008 | 25,919 |
2009 | 62,768 |
2010 | 160,595 |
2011 | 575,341 |
$ 862,488 |
In addition, the Company has non-capital loss carry forwards and related resource property expenditures that are available to reduce income in future years in Argentina. The benefits of these future tax assets have not been recorded in the accounts of the Company.
9.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
Under Canadian GAAP for junior mining exploration companies, mineral exploration expenditures are deferred on prospective mineral rights until such time as it is determined that further exploration work is not warranted, at which time the mineral right costs are written-off. Under U.S. GAAP, all exploration expenditures are expensed until an independent feasibility study has determined that the mineral rights are capable of economic commercial production. The following items (a) to (g) provide a summary of the impact of these financial statements that would result form the application of U.S. accounting principles to deferred mineral rights.
Three months ended | Years ended | ||||||||||||
September 30, | June 30, | ||||||||||||
2005 | 2004 | 2005 | 2004 | 2003 | |||||||||
(Unaudited-prepared by management) | |||||||||||||
$ | $ | $ | $ | $ | |||||||||
a) Assets | |||||||||||||
Deferred Mineral Rights Costs | |||||||||||||
Deferred mineral right costs following |
|
| |||||||||||
Canadian GAAP: | 1,755,961 | 661,398 | 1,544,183 | 576,033 | - | ||||||||
Less deferred mineral rights costs | (1,755,961) | (661,398) | (1,544,183) | (576,033) | - | ||||||||
Deferred mineral rights costs following | |||||||||||||
U.S. GAAP | - | - | - | - | - |
PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd.)
Notes to the Consolidated Financial Statements
For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)
For the years ended June 30, 2005, 2004 and 2003
(stated in Canadian dollars)
9.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (Continued)
Three months ended | Years ended | |||||||||||||
September 30, | June 30, | |||||||||||||
2005 | 2004 | 2005 | 2004 | 2003 | ||||||||||
(Unaudited-prepared by management) | ||||||||||||||
$ | $ | $ | $ | $ | ||||||||||
b) Operations | ||||||||||||||
Net loss following Canadian GAAP | (210,722) | (145,972) | (735,538) | (225,304) | (48,558) | |||||||||
Deferred mineral rights costs expensed | ||||||||||||||
under U.S. GAAP | (211,778) | (85,365) | (968,150) | (576,033) | - | |||||||||
Net loss under U.S. GAAP | (422,500) | (231,337) | (1,703,688) | (801,337) | (48,558) | |||||||||
c) Deficit | ||||||||||||||
Closing deficit under Canadian GAAP | (1,255,486) | (455,198) | (1,044,764) | (309,226) | (83,922) | |||||||||
Adjustment to deficit for accumulated | ||||||||||||||
deferred mineral rights expensed under | ||||||||||||||
U.S. GAAP, net of income items | (1,755,961) | (661,398) | (1,544,183) | (576,033) | - | |||||||||
Closing deficit under U.S. GAAP | (3,011,447) | (1,116,596) | (2,588,947) | (885,259) | (83,922) | |||||||||
| - |
d) Cash Flows – Operating Activities | ||||||||||||||
Cash applied to operations under | ||||||||||||||
Canadian GAAP | (293,487) | (162,000) | (456,834) | (153,670) | (48,893) | |||||||||
Add net loss following Canadian GAAP | 210,722 | 145,972 | 735,538 | 225,304 | 48,558 | |||||||||
Add non cash mineral rights expensed under U.S. GAAP | - | - | - | 275,540 | - | |||||||||
Less net loss following U.S. GAAP | (422,500) | (231,337) | (1,703,688) | (801,337) | (48,558) | |||||||||
Less mineral rights costs expensed under Canadian GAAP | - | - | - | (12,079) | - | |||||||||
Cash applied to operations under U.S. | ||||||||||||||
GAAP | (505,265) | (247,365) | (1,424.984) | (468,242) | (48,893) | |||||||||
e) Cash Flows – Investing Activities | ||||||||||||||
Cash applied under Canadian GAAP | (211,778) | (87,770) | (1,012,118) | (324,325) | - | |||||||||
Add mineral right costs expensed under | ||||||||||||||
U.S. GAAP | 211,778 | 85,365 | 968,150 | 314,572 | - | |||||||||
Cash applied under U.S. GAAP | - | (2,405) | (43,968) | (9,753) | - | |||||||||
PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd.)
Notes to the Consolidated Financial Statements
For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)
For the years ended June 30, 2005, 2004 and 2003
(stated in Canadian dollars)
9.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (Continued)
OTHER DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP
a)
Stockholders’ Equity
Common Stock
Under U.S. GAAP applied to the financial statements of the Company, compensation expense and related assumptions must be disclosed for all stock options granted, requiring the Company to utilize either the intrinsic value method or the fair-value based methods of accounting for stock-based compensation. Under Canadian GAAP, no such expense or related disclosures were required to be recognized prior to 2002.
No stock options were issued or vested during 2002, therefore the Company’s accounting treatment and related disclosures for 2002 were materially congruent with the approach followed under APB 25. In 2003 however, the Company, if required to report under U.S. GAAP, would have elected to apply the provisions of SFAS 123 and to account for all options issued to employees and consultants utilizing the fair-value based method. This approach would have been consistent with new Canadian GAAP standards applied in 2003. As a further similarity, both U.S. and Canadian standards for recording stock-based compensation permit the Company to adopt a fair value methodology on a prospective basis, which the Company has adopted.
b)
Loss per Share
Under Canadian GAAP, shares held in escrow and contingently issuable are included in the calculation of loss per share, however under U.S. GAAP, these shares are excluded until the shares are released for trading.
The following is a reconciliation of the numerators and denominators of the basic and diluted loss per share calculations. Diluted loss per share is not presented as it is anti-dilutive.
Three months ended | Years ended | |||||||||||||
September 30, | June 30, | |||||||||||||
2005 | 2004 | 2005 | 2004 | 2002 | ||||||||||
(Unaudited-prepared by management) | ||||||||||||||
$ | $ | $ | $ | $ | ||||||||||
Numerator: Net loss for the period | ||||||||||||||
under U.S. GAAP | (422,500) | (231,337) | (1,703,688) | (801,337) | (48,558) | |||||||||
Denominator: Weighted-average |
| |||||||||||||
number of shares under Canadian: | ||||||||||||||
and U.S. GAAP | 10,811,443 | 8,542,000 | 9,445,368 | 4,386,667 | 2,320,000 | |||||||||
Adjustment required under U.S. | ||||||||||||||
GAAP (escrow shares) | - | - | - | (720,000) | (1,120,000) | |||||||||
Weighted-average number of shares | ||||||||||||||
under U.S. GAAP | 10,811,443 | 8,542,000 | 9,445,368 | 3,666,667 | 1,200,000 | |||||||||
Basic and fully diluted loss per share | ||||||||||||||
under U.S. GAAP | $ (0.04) | $ (0.03) | $ (0.18) | $ (0.22) | $ (0.04) | |||||||||