PORTAL RESOURCES LTD.
Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the nine months ended
March 31, 2007
(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.
CONSOLIDATED BALANCE SHEETS
(stated in Canadian dollars)
(Unaudited – prepared by management)
March 31, | June 30, | |||
2007 | 2006 | |||
ASSETS | ||||
Current | ||||
Cash and cash equivalents | $2,239,772 | $4,965,228 | ||
Amounts receivable | 41,370 | 18,114 | ||
Prepaid expenses | 91,552 | 105,814 | ||
2,372,694 | 5,089,156 | |||
Equipment and software (Note 4) | 97,511 | 34,465 | ||
Mineral rights on unproven properties (Note 5) | 4,821,269 | 2,602,842 | ||
$7,291,474 | $7,726,463 | |||
LIABILITIES | ||||
Current | ||||
Accounts payable and accrued liabilities | $392,764 | $388,386 | ||
Due to related parties (Note 7) | 7,010 | - | ||
399,774 | 388,386 | |||
SHAREHOLDERS’ EQUITY | ||||
Share capital (Note 6) | 9,746,875 | 9,177,125 | ||
Contributed surplus | 544,638 | 300,473 | ||
Deficit | (3,399,813) | (2,139,521) | ||
6,891,700 | 7,338,077 | |||
| $7,291,474 | $7,726,463 |
Going Concern (Note 1)
Subsequent Events (Note 9)
Approved by the Board of Directors:
“Mark T. Brown” | “Bruce Winfield” | |
Mark T. Brown | Bruce Winfield |
See notes to the consolidated financial statements
PORTAL RESOURCES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(stated in Canadian dollars)
(Unaudited – prepared by management)
For the three months ended March 31, | For the nine months ended March 31, | ||||||
2007 | 2006 | 2007 | 2006 | ||||
$ | $ | $ | $ | ||||
Revenue | - | - | - | - | |||
Expenses | |||||||
Accounting and audit | 16,299 | 11,991 | 51,665 | 41,562 | |||
Amortization | 6,933 | 4,222 | 15,330 | 12,665 | |||
Bank charges and interest | 12,125 | 2,429 | 31,763 | 8,142 | |||
Consulting and management fees | 3,197 | 2,131 | 3,947 | 16,191 | |||
Foreign asset tax | 1,449 | - | 32,525 | - | |||
Foreign exchange | 9,506 | (8,987) | 39,892 | (7,738) | |||
Interest income | (23,547) | (7,617) | (94,707) | (9,043) | |||
Investor relations | 104,624 | 29,426 | 310,401 | 139,018 | |||
Legal | 13,101 | 1,660 | 25,949 | 6,961 | |||
Office and miscellaneous | 34,933 | 22,421 | 88,355 | 49,916 | |||
Rent | 4,936 | 4,936 | 14,809 | 14,809 | |||
Project investigation | 10,947 | 389 | 39,330 | 7,343 | |||
Salaries and benefits | 43,833 | 57,407 | 128,480 | 161,776 | |||
Stock-based compensation (Note 6) | 154,699 | 28,609 | 244,165 | 105,717 | |||
Travel | 9,545 | 9,721 | 27,969 | 14,644 | |||
- Transfer agent and filing fees | 9,836 | 11,891 | 16,451 | 18,910 | |||
Write-off of accounts receivable | - | - | 15,291 | - | |||
Valuation allowance for foreign value added tax credit (IVA) | 58,709 | 6,112 | 268,677 | 37,153 | |||
471,125 | 176,741 | 1,260,292 | 618,026 | ||||
Net loss for the period | (471,125) | (176,741) | (1,260,292) | (618,026) | |||
Deficit – beginning of period | (2,928,688) | (1,486,049) | (2,139,521) | (1,044,764) | |||
Deficit – end of period | (3,399,813) | (1,662,790) | (3,399,813) | (1,662,790) | |||
Loss per share | $ (0.02) | $ (0.01) | $ (0.06) | $ (0.05) | |||
Weighted average number of common shares outstanding | 21,032,539 | 14,351,256 | 21,020,539 | 12,012,214 | |||
See notes to the consolidated financial statements
PORTAL RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(stated in Canadian dollars)
(Unaudited – prepared by management)
For the three months ended March 31 | For the nine months ended March 31 | ||||||
2007 | 2006 | 2007 | 2006 | ||||
$ | $ | $ | $ | ||||
Cash provided by (used for): | |||||||
Operating Activities | |||||||
Net loss for the period | (471,125) | (176,741) | (1,260,292) | (618,026) | |||
Items not involving cash: | |||||||
Stock-based compensation | 154,699 | 28,609 | 244,165 | 105,717 | |||
Write-off of accounts receivable | - | - | 15,291 | - | |||
Amortization | 6,933 | 4,222 | 15,330 | 12,665 | |||
(309,493) | (143,910) | (985,506) | (499,644) | ||||
Changes in non-cash working capital: | |||||||
Amounts receivable | (3,248) | (1,499) | (38,547) | (7,135) | |||
Prepaid expenses | (9,405) | (38,992) | 14,262 | (31,504) | |||
Accounts payable and accrued liabilities | (54,950) | (119,942) | (272,347) | (170,315) | |||
Due to related parties | 1,791 | (18,204) | 7,010 | (3,193) | |||
(375,305) | (322,547) | (1,275,128) | (711,791) | ||||
Investing Activities | |||||||
Purchase of equipment and software | (52,546) | - | (78,376) | - | |||
Mineral rights on unproven properties | (775,825) | (117,051) | (1,941,702) | (438,600) | |||
(828,371) | (117,051) | (2,020,078) | (438,600) | ||||
Financing Activities | |||||||
Shares issued for cash | 569,250 | 3,395,452 | 569,250 | 3,410,954 | |||
Shares subscribed | - | (165,000) | - | - | |||
Share issue costs | - | (139,571) | 500 | (140,726) | |||
569,250 | 3,090,881 | 569,750 | 3,270,228 | ||||
Net cash used during period | (634,426) | 2,651,283 | (2,725,456) | 2,119,837 | |||
Cash and cash equivalents– beginning of period | 2,874,198 | 208,652 | 4,965,228 | 740,098 | |||
Cash and cash equivalents– end of period | 2,239,772 | $2,859,935 | 2,239,772 | $2,859,935 | |||
See notes to the consolidated financial statements
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the nine months ended March 31, 2007(Unaudited – prepared by management)
(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 (B.V.I.)”), 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.
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 have been prepared in accordance with the accounting policies describe in the Company’s annual 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 8.
References to the Company are inclusive of the Canadian parent company and its wholly-owned Argentinean subsidiary.
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the nine months ended March 31, 2007 (Unaudited – prepared by management)
(stated in Canadian dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES, (Continued)
Unproven 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.
Stock-based Compensation
The Company records compensation expense for stock options granted at the time of their vesting using the fair value method. 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. 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.
Comparative figures
Certain comparative figures have been reclassified to conform with the presentation adopted in the current period.
3.
ACQUISITION OF PORTAL DE ORO (B.V.I.) LTD.
On March 15, 2004 the Company acquired all of the outstanding shares of Portal (B.V.I.) whereby the Company acquired 100% of the Arroyo Verde project in Argentina, owned by Portal S.A, a wholly owned subsidiary of Portal (B.V.I.). Under the purchase agreement, the Company acquired Portal (B.V.I.) 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.
Notes to the Consolidated Financial Statements
For the nine months ended March 31, 2007 (Unaudited – prepared by management)
(stated in Canadian dollars)
4.
EQUIPMENT AND SOFTWARE
March 31, | June 30, | |||||||
2007 | 2006 | |||||||
Cost | Accumulated amortization | Net book value | Net book value | |||||
$ | $ | $ | $ | |||||
Computer equipment | 11,992 | 9,738 | 2,254 | 3,466 | ||||
Computer software | 19,516 | 17,079 | 2,437 | 4,155 | ||||
Furniture & fixtures | 4,497 | 952 | 3,545 | 1,191 | ||||
Vehicles | 44,557 | 12,058 | 32,499 | 16,271 | ||||
Field equipment | 61,960 | 5,184 | 56,776 | 9,382 | ||||
142,522 | 45,011 | 97,511 | 34,465 |
5.
UNPROVEN MINERAL RIGHTS
The Company’s mineral properties are all located in Argentina. A breakdown of carrying values by property and significant expenditure category is as follows:
Arroyo Verde | San Rafael | Project Investigation | La Pampa Uranium | Tiger Uranium | Total | |
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 | 53,953 | 80,450 | 1,200 | - | - | 135,603 |
Environmental | - | 1,979 | - | - | - | 1,979 |
Geology | 229,646 | 94,558 | 15,305 | - | - | 339,509 |
Geophysics | - | 97,612 | - | - | - | 97,612 |
Surface geochemistry | 59,423 | 23,687 | - | - | - | 83,110 |
Drilling | 480,976 | - | - | - | 480,976 | |
Total expenditures | 823,998 | 298,286 | 16,505 | - | - | 1,138,789 |
Property write-offs | - | (80,130) | (80,130) | |||
Total as at June 30, 2006 | 2,022,825 | 580,017 | - | - | - | 2,602,842 |
Land acquisition & holding costs | 67,484 | 285,758 | - | 187 | 1,131 | 354,560 |
Environmental | 1,203 | 1,869 | - | - | 901 | 3,973 |
Geology | 279,976 | 223,398 | - | 50,969 | 45,481 | 599,824 |
Geophysics | 27,607 | 64,260 | - | - | - | 91,867 |
Surface geochemistry | 31,510 | 22,388 | - | 1,281 | 1,789 | 56,968 |
Drilling | 788,544 | 322,691 | - | - | - | 1,111,235 |
Total expenditures | 1,196,324 | 920,364 | - | 52,437 | 49,302 | 2,218,427 |
Total as at March 31, 2007 | $3,219,149 | $1,500,381 | $ - | $52,437 | $49,302 | $4,821,269 |
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the quarter ended March 31, 2007 (Unaudited – prepared by management)
(stated in Canadian dollars)
5.
UNPROVEN MINERAL RIGHTS, (Continued)
Arroyo Verde
On November 27, 2003, Portal S.A. signed an option to acquire a 100% interest in a series of mining rights in Chubut province of Argentina. Under the terms of the agreement the Company’s payment requirements are as follows:
US$
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 (paid)
On or before December 1, 2006
$ 60,000 (paid)
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 (paid)
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
$200,000
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the quarter ended March 31, 2007 (Unaudited – prepared by management)
(stated in Canadian dollars)
5.
UNPROVEN MINERAL RIGHTS, (Continued)
Rio de la Plata
On June 18, 2004, Portal S.A. signed an option to acquire a 100% interest in a series of mining rights in Mendoza province of Argentina. Under the terms of the agreement the Company’s payment requirements to exercise the option are as follows:
US$
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 (paid)
On or before April 9, 2007
$ 50,000 (paid)
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 | |
Balance – June 30, 2004 | 8,520,000 | $1,358,097 | |
Private placements | 2,224,943 | 0.75 | 1,668,707 |
On exercise of options | 54,000 | 0.19 | 10,420 |
Fair market value of options exercised | - | 1,341 | |
Share issue costs | - | (69,104) | |
Balance – June 30, 2005 | 10,798,943 | 2,969,461 | |
Private placements | 9,390,000 | 0.65 | 6,144,250 |
On exercise of warrants | 384,471 | 0.90 | 346,024 |
On exercise of options | 166,400 | 0.34 | 55,954 |
Fair market value of options exercised | - | 18,625 | |
Finders fees | 148,225 | 74,113 | |
Share issue costs | - | (431,302) | |
Balance – June 30, 2006 | 20,888,039 | 9,177,125 | |
Share issue costs | - | 500 | |
On exercise of warrants | 759,000 | 0.75 | 569,250 |
Balance – March 31, 2007 | 21,647,039 | $ 9,746,875 |
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the quarter ended March 31, 2007 (Unaudited – prepared by management)
(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 was subject to the terms of an agreement between the Company, its stock transfer agent and the beneficial owners of the escrowed shares. These shares were 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 and 553,500 of the escrowed shares were released on each of the following dates; September 15, 2004, March 15, 2005, September 15, 2005, March 15, 2006, September 15, 2006 and March 15, 2007. As March 31, 2007, there are no common shares remaining in escrow.
Stock-based compensation
The Company has a stock option plan as described in the most recent annual financial statements of the Company. On December 5, 2006, the maximum aggregate number of common shares reserved and authorized to be issued pursuant to options granted under the Stock Option Plan was amended from 1,619,841 to 3,133,205 common shares.
The Company accounts for its grants in accordance with the fair value method of accounting for stock-based compensation. The Company recorded stock-based compensation expense for stock options of $244,165 for the nine months ended March 31, 2007 (2006 - $105,717).
A summary of changes to stock options outstanding is as follows:
March 31 | June 30 | ||||||
2007 | 2006 | 2005 | |||||
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 period | 1,219,700 | $ 0.51 | 1,103,000 | $ 0.43 | 960,000 | $ 0.32 | |
Granted under plan | 1,301,400 | $ 0.54 | 360,000 | $ 0.74 | 347,000 | $ 0.84 | |
Exercised | - | - | (166,400) | $ 0.34 | (54,000) | $ 0.19 | |
Forfeited or cancelled | - | - | (76,900) | $ 0.68 | (150,000) | $ 0.79 | |
Outstanding at end of period | 2,521,100 | $ 0.53 | 1,219,700 | $ 0.51 | 1,103,000 | $ 0.43 | |
Options vested and exercisable at the end of period | 1,545,050 | $ 0.52 | 1,017,200 | $ 0.47 | 841,000 | $ 0.29 |
Stock options outstanding as at March 31, 2007 are as follows:
Number | Exercise Price | Expiry Date |
632,200 | $ 0.25 | March 15, 2009 |
50,000 | $ 0.75 | June 18, 2009 |
60,000 | $ 0.77 | December 23, 2009 |
220,000 | $ 0.86 | April 14, 2010 |
157,500 | $ 0.70 | January 20, 2011 |
100,000 | $ 0.85 | March 21, 2008 |
105,000 | $ 0.75 | October 18,2011 |
1,196,400 | $ 0.52 | December 5, 2011 |
2,521,100 |
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the quarter ended March 31, 2007 (Unaudited – prepared by management)
(stated in Canadian dollars)
6.
SHARE CAPITAL, (Continued)
Warrants
Warrant outstanding as at March 31, 2007 are as follows:
Number | Exercise Price | Expiry Date |
1,317,500 | $ 1.25 | November 18, 2007 (i) |
1,317,500 |
(i)
Effective May 18, 2007, the expiry date for these warrants was extended to November 18, 2007.
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 nine months period ended March 31, 2007 and 2006 (Unaudited)
During the nine months ended March 31, 2007, the Company paid or accrued to pay another public company formerly related by certain common directors $121,207 (2006 - $51,182) for the shared rent of office space and services and expense reimbursements and as at March 31, 2007 owes this company an aggregate of $6,715 (June 30, 2006 - $Nil).
During the nine months ended March 31, 2007, the Company paid or accrued to pay a private company with a director in common with the Company an aggregate of $1,219 (2006- $1,766) for fees and expense reimbursements and as at March 31, 2007 owes this company an aggregate of $Nil (June 30, 2006 – $Nil).
As at March 31 2007 the Company owes certain directors an aggregate of $295 (June 30, 2006 - $Nil) for expense reimbursements
8.
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 (f) 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.
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the quarter ended March 31, 2007 (Unaudited – prepared by management)
(stated in Canadian dollars)
8.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (Continued)
Three months ended | Nine months ended | Year ended | |||||||
March 31, | March 31, | June 30, | |||||||
2007 | 2006 | 2007 | 2006 | 2006 | |||||
$ | $ | $ | $ | $ | |||||
a) Assets | |||||||||
Unproven Mineral Rights Costs | |||||||||
Unproven mineral right costs under Canadian GAAP | 4,821,269 | 1,982,783 | 4,821,269 | 1,982,783 | 2,602,842 | ||||
Less unproven mineral rights costs | (4,821,269) | (1,982,783) | (4,821,269) | (1,982,783) | (2,602,842) | ||||
Unproven mineral rights costs under U.S. GAAP | - | - | - | - | - |
b) Operations | |||||||||
Net loss under Canadian GAAP | (471,125) | (176,741) | (1,260,292) | (618,026) | (1,094,757) | ||||
Unproven mineral rights costs expensed under U.S. GAAP | (415,687) | (117,051) | (2,218,427) | (438,600) | (1,058,659) | ||||
Net loss under U.S. GAAP | (886,812) | (293,792) | (3,478,719) | (1,056,626) | (2,153,416) | ||||
c) Deficit | |||||||||
Closing deficit under Canadian GAAP | (3,399,813) | (1,662,790) | (3,399,813) | (1,662,790) | (2,139,521) | ||||
Adjustment to deficit for accumulated | |||||||||
unproven mineral rights expensed under | |||||||||
U.S. GAAP, net of income items | (4,821,269) | (1,982,783) | (4,821,269) | (1,982,783) | (2,602,842) | ||||
Closing deficit under U.S. GAAP | (8,221,082) | (3,645,573) | (8,221,082) | (3,645,573) | (4,742,363) | ||||
| |||||||||
d) Cash Flows – Operating Activities | |||||||||
Cash applied to operations under Canadian GAAP | (375,305) | (322,547) | (1,275,128) | (711,791) | (814,695) | ||||
Add net loss following Canadian GAAP | 471,125 | 176,741 | 1,260,292 | 618,026 | 1,094,757 | ||||
Add non cash unproven mineral rights expensed under U.S. GAAP | (360,138) | - | 276,725 | - | - | ||||
Less net loss under U.S. GAAP | (886,812) | (293,792) | (3,478,719) | (1,056,626) | (2,153,416) | ||||
Less unproven mineral rights costs expensed under Canadian GAAP | - | - | - | - | (80,130) | ||||
Cash applied to operations under U.S GAAP | (1,151,130) | (493,598) | (3,216,830) | (1,150,391) | (1,953,484) | ||||
e) Cash Flows – Investing Activities | |||||||||
Cash applied under Canadian GAAP | (828,371) | (117,051) | (2,020,078) | (438,600) | (1,149,214) | ||||
Less non cash unproven mineral rights expensed under U.S. GAAP | 360,138 | - | (276,725) | - | - | ||||
Add unproven mineral right costs expensed | |||||||||
under U.S. GAAP | 415,687 | 117,051 | 2,218,427 | 438,600 | 1,138,789 | ||||
Cash applied under U.S. GAAP | (52,546) | - | (78,376) | - | (10,425) | ||||
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the quarter ended March 31, 2007 (Unaudited – prepared by management)
(stated in Canadian dollars)
8.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (Continued)
OTHER DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP
f)
Loss per Share
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 | Nine months ended | Year ended | |||||||
March 31, | March 31, | June 30, | |||||||
2007 | 2006 | 2007 | 2006 | 2006 | |||||
$ | $ | $ | $ | $ | |||||
Numerator: Net loss for the period | |||||||||
under U.S. GAAP | (886,812) | (293,792) | (3,478,719) | (1,056,626) | (2,153,416) | ||||
Denominator: Weighted-average number of shares under Canadian and US GAAP: | 21,032,539 | 14,351,256 | 21,020,539 | 12,012,214 | 13,868,125 | ||||
Basic and fully diluted loss per share | |||||||||
under U.S. GAAP | $ (0.04) | $ (0.02) | $ (0.17) | $ (0.09) | $ (0.16) | ||||
9.
SUBSEQUENT EVENTS
Cerro Solo Uranium Project
On April 20, 2007, the Company signed a letter agreement with Consolidated Pacific Bay Ltd. whereby the Company has the right to acquire a 60% legal and beneficial interest in the Cerro Solo Basin Project located in the Chubut province of Argentina. Under the terms of the agreement the Company’s payment requirements are as follows:
US$
On signing of the agreement
$ 15,000 (paid)
On or before April 20, 2008
$ 30,000
On or before April 20, 2009
$ 50,000
On or before April 20, 2010
$ 50,000
The Company is also obligated to expend an aggregate of US$1,200,000 over a four-year period. The required accumulated minimum expenditures are US$150,000 by the April 20, 2008, US$400,000 by April 20, 2009, US$800,000 by April 20, 20010 and US$1,200,000 by April 20, 2011.
Subsequent to the Company completing the payments and US$1,200,000 accumulated expenditures, the partners will form a joint venture with both parties contributing as to their interest to fund further work.