PORTAL RESOURCES LTD.
Consolidated Financial Statements
(Unaudited)
For the nine months ended
September 30, 2008
(An exploration stage company)
Portal Resources Ltd. | Trading Symbol: PDO | |
Head Office: Suite 750 – 625 Howe Street | Telephone: 604-629-1929 | |
Vancouver, British Columbia, Canada V6C 2T6 | Facsimile: 604-629-1930 |
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NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS
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 Portal Resources Ltd. 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.
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PORTAL RESOURCES LTD.
CONSOLIDATED BALANCE SHEETS
(stated in Canadian dollars)
(Unaudited – prepared by management)
September 30, | June 30, | |||
2007 | 2008 | |||
(Unaudited) | (Audited) | |||
ASSETS | ||||
Current | ||||
Cash and cash equivalents | $ | 233,948 | $ | 187,551 |
Short-term investments | 2,370,819 | 2,861,753 | ||
Amounts receivable | 3,710 | 104,312 | ||
Prepaid expenses | 55,585 | 122,318 | ||
2,664,062 | 3,275,934 | |||
Equipment and software (Note 3) | 71,495 | 78,290 | ||
Unproven mineral rights (Note 4) | 5,071,290 | 4,965,595 | ||
$ | 7,806,847 | $ | 8,319,819 | |
LIABILITIES | ||||
Current | ||||
Accounts payable and accrued liabilities | $ | 96,370 | $ | 81,496 |
Due to related parties (Note 7) | - | - | ||
96,370 | 81,496 | |||
SHAREHOLDERS’ EQUITY | ||||
Share capital (Note 5) | $ | 14,760,161 | $ | 14,760,161 |
Shares subscribed | - | - | ||
Contributed surplus (Note 5) | 785,140 | 783,340 | ||
Deficit | (7,834,825) | (7,305,178) | ||
7,710,476 | 8,238,323 | |||
| $ | 7,806,846 | $ | 8,319,819 |
Approved by the Board of Directors:
“Bruce Winfield” | “David Hottman” | |
Bruce Winfield, Director | David Hottman, Director |
PORTAL RESOURCES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
For the three months ended September 30,
(stated in Canadian dollars)
(Unaudited – prepared by management)
For the three months ended September 30 | ||||||
2008 | 2007 | |||||
Revenue | $ | - | $ | - | ||
Expenses | ||||||
Accounting and audit | $ | 10,727 | $ | 14,231 | ||
Amortization | 6,796 | 6,585 | ||||
Bank charges and interest | 2,408 | 7,669 | ||||
Consulting and management fees | 24,702 | 8,697 | ||||
Foreign asset tax | 342 | 5,949 | ||||
Foreign exchange | 1,626 | 19,338 | ||||
Interest income | (24,968) | (39,384) | ||||
Investor relations | 73,551 | 86,585 | ||||
Legal | 34,462 | 17,536 | ||||
Office and miscellaneous | 41,341 | 28,125 | ||||
Rent | 16,606 | 8,271 | ||||
Project investigation | 38,485 | 15,133 | ||||
Salaries and benefits | 267,828 | 95,792 | ||||
Stock-based compensation (Note 5) | 1,800 | 86,300 | ||||
Travel | 28,103 | 12,976 | ||||
Transfer agent and filing fees | 726 | 743 | ||||
Write-off of mineral rights | 3,438 | - | ||||
Valuation allowance for foreign value added tax credit (IVA) | 1,673 | 18,070 | ||||
529,647 | 392,616 | |||||
Net loss for the period | (529,647) | (392,616) | ||||
Deficit – beginning of period | (7,305,178) | (4,016,745) | ||||
Deficit – end of period | (7,834,825) | (4,409,361) | ||||
Loss per share (Note 2) | $ | (0.02) | $ | (0.02) | ||
Weighted average number of common shares outstanding | 29,651,539 | 28,336,206 | ||||
PORTAL RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended September 30,
(stated in Canadian dollars)
(Unaudited – prepared by management)
2008 | 2007 | |||
Cash provided by (used for): | ||||
Operating Activities | ||||
Net loss for the period | $ | (529,647) | $ | (392,616) |
Items not involving cash: | ||||
Stock-based compensation | 1,800 | 86,300 | ||
Amortization | 6,796 | 6,585 | ||
(521,051) | (299,731) | |||
Changes in non-cash working capital: | ||||
Amounts receivable | 100,602 | 825 | ||
Prepaid expenses | 66,733 | (14,493) | ||
Accounts payable and accrued liabilities | 129,686 | (170,181) | ||
Due to related parties | - | 10,219 | ||
(224,030) | (473,361) | |||
Investing Activities | ||||
Purchase of equipment and software | - | (8,887) | ||
Short-term investments | 490,934 | - | ||
Expenditures on unproven mineral rights | (220,507) | (437,032) | ||
270,427 | (445,919) | |||
Financing Activities | ||||
Shares issued for cash | - | 5,126,550 | ||
On option exercise | - | 2,600.00 | ||
Shares subscribed | - | (59,800) | ||
Share issue costs | - | (194,309) | ||
- | 4,875,041 | |||
Net increase (decrease) in cash and cash equivalents | 46,397 | 3,955,761 | ||
Cash and cash equivalents – beginning of period | 187,551 | 1,069,730 | ||
Cash and cash equivalents– end of period | $ | 233,948 | $ | 5,025,491 |
Supplementary disclosure of non-cash Investing and Financing Activities: | ||||
Deferred expenditures on unproven mineral rights included in accounts payable | $ | 114,812 | $ | 154,076 |
PORTAL RESOURCES LTD.
CONSOLIDATED STATEMENTS OF DEFERRED EXPENDITURES ON UNPROVEN MINERAL RIGHTS
For the year ended June 30, 2008 (audited) and the three months ended September 30, 2008 (unaudited)
(stated in Canadian dollars)
Arroyo Verde (Argentina) | San Rafael (Argentina) | La Pampa Uranium (Argentina) | Tiger Uranium (Argentina) | Slick Rock Uranium (USA) | Golden Snow, Fish and CPG (USA) | Project Investigation | Total | |
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 |
Environment | - | 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 | 72,695 | 221,715 | 17,143 | 1,131 | 132,448 | - | - | 445,132 |
Environment | 1,203 | 2,116 | - | 2,027 | - | - | - | 5,346 |
Geology | 413,219 | 262,537 | 152,632 | 56,292 | 1,070 | - | - | 885,750 |
Geophysics | 27,607 | 64,260 | - | - | - | - | - | 91,867 |
Surface geochemistry | 40,404 | 23,768 | 1,861 | 1,789 | - | - | - | 67,822 |
Drilling | 1,261,256 | 323,344 | - | - | - | - | - | 1,584,600 |
Total expenditures | 1,816,384 | 897,740 | 171,636 | 61,239 | 133,518 | - | - | 3,080,517 |
Total as at June 30, 2007 | 3,839,209 | 1,477,757 | 171,636 | 61,239 | 133,518 | - | - | 5,683,359 |
Land acquisition & holding costs | 108,687 | (27,301) | 11,523 | - | 16,873 | - | - | 109,782 |
Environment | 3,611 | 206 | 4,778 | 1,894 | 21,907 | - | - | 32,396 |
Geology | 155,866 | 101,517 | 415,886 | 6,416 | 62,353 | - | - | 742,038 |
Geophysics | 6,164 | 26,985 | 104 | - | - | - | - | 33,253 |
Surface geochemistry | 4,654 | 297 | 4,806 | - | 9,848 | - | - | 19,605 |
Drilling | 3,636 | 499 | - | - | 123,831 | - | - | 127,966 |
Total expenditures | 282,618 | 102,203 | 437,097 | 8,310 | 234,812 | - | - | 1,065,040 |
- | (1,414,474) | - | - | (368,330) | - | - | (1782,804) | |
- | ||||||||
Total as at June 30, 2008 | $ 4,121,827 | $ 165,486 | $ 608,733 | $ 69,549 | $ - | $ - | $ - | $ 4,965,595 |
Land acquisition & holding costs | 16,332 | - | 26,298 | - | - | 30,677 | - | 73,307 |
Environment | - | - | - | - | - | - | - | - |
Geology | 6,935 | - | 14,619 | 10,663 | 3,438 | - | - | 35,665 |
Geophysics | - | - | - | - | - | - | - | - |
Surface geochemistry | - | - | 171 | - | - | - | - | 171 |
Drilling | - | - | - | - | - | - | - | - |
Total expenditures | 23,267 | - | 41,088 | 10,663 | 3,438 | 30,677 | - | 109,133 |
Property write-offs | - | - | - | - | (3,438) | - | - | (3,438) |
Total as at September 30, 2008 | $ 4,145,094 | $ 165,486 | $ 649,821 | $ 80,212 | $ - | $ 30,677 | $ - | $ 5,071,290 |
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the three months ended September 30, 2008(Unaudited – prepared by management)
(stated in Canadian dollars)
1.
NATURE OF OPERATIONS
Portal Resources Ltd. was incorporated on August 14, 2000 under the Company Act of the Province of British Columbia.
The Company is an exploration stage company whose business activity is the exploration of mineral rights located in Argentina and the United States. 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 the ones 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. All significant inter-company transactions and balances have been eliminated.
The accounting policies followed by the Company are set out in Note 2 to the audited consolidated financial statements for the year ended June 30, 2008 and have been consistently followed in preparation of these interim consolidated financial statements, except with respect to the following new and revised accounting standards which the Company is required to adopt under Canadian GAAP for interim and annual financial statements relating to its fiscal year commencing July 1, 2008.
New accounting policies
Effective July 1, 2007, the Company adopted the new recommendations of the Canadian Institute of Chartered Accountants (CICA) Handbook Section 1530, Comprehensive Income; Section 3251 Equity, Section 3855, Financial Instruments – Recognition and Measurement; and Section 3865, Hedges, retroactively without restatement. These new CICA Handbook Sections, which apply to fiscal years beginning on or after October 1, 2006, provide requirements for the recognition of financial instruments and on the use of hedge accounting.
(a)
Section 1530 – Comprehensive Income: Section 1530 establishes standards for reporting and presenting comprehensive income, with is defined as the change in equity from transactions and other events from non-owner sources. Other comprehensive income refers to items recognized in comprehensive income that are excluded from net income calculated in accordance with generally accepted accounting principles. Under the new standards, policies followed for periods prior to the effective date generally are not reversed and therefore, the comparative figures have not been restated. The adoption of this Handbook Sections has no impact on opening deficit.
(b)
Section 3855 – Financial Instruments – Recognition and Measurement: Section 3855 prescribes when a financial asset, financial liability or non-financial derivative is to be recognized on the balance sheet, and whether fair value or cost-based measures are used to measure the recorded amounts.
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the three months ended September 30, 2008 (Unaudited – prepared by management)
(stated in Canadian dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES, (Continued)
Financial instruments must be classified into one of these five categories: held-for-trading, held-to-maturity, loans and receivables, available-for-sale financial assets or other financial liabilities financial instruments, including derivatives, are measured in the balance sheet at fair value except for loans and receivables, held-to-maturity investments and other financial liabilities, which are measured at amortized cost. Subsequent measurement and changes in fair value depend on their initial classification, as follows: held-for-trading financial instruments are measured at fair value and changes in fair value are recognized in net income; available-for-sale financial instruments are measured at fair value with changes in fair value recorded in other comprehensive income until the investment is derecognized or impaired at which time the amounts would be r ecorded in net income.
The Company has designated it cash and cash equivalents as held-for-trading, which are measured at fair value and accounts receivable are classified as loans and receivables, which are measured at amortized cost. Accounts payable, accrued liabilities and due to/from related parties are classified as other financial liabilities. The Company had neither available-for-sale or held-to-maturity instruments during the three months ended September 30, 2008.
(c)
Section 3865 – Hedges: Section 3865 is applicable when an entity chooses to designate a hedging relationship for accounting purposes. It specifies how hedge accounting is applied and what disclosures are necessary when it is applied. The adoption of this standard has no present impact as the Company is not currently engaged in any hedging activity.
3.
EQUIPMENT AND SOFTWARE
September 30, 2008 | June 30, 2008 | ||||||||||
Cost | Accumulated amortization | Net book value | Cost | Accumulated amortization | Net book value | ||||||
Computer equipment | $ 16,605 | $ 12,549 | $ 4,056 | $ 16,605 | $ 12,127 | $ 4,478 | |||||
Computer software | 20,453 | 19,955 | 498 | 20,453 | 19,789 | 664 | |||||
Furniture & fixtures | 10,036 | 3,086 | 6,950 | 10,036 | 2,584 | 7,452 | |||||
Vehicles | 44,558 | 25,076 | 19,482 | 44,558 | 22,665 | 21,893 | |||||
Field equipment | 65,893 | 25,385 | 40,508 | 65,893 | 22,090 | 43,803 | |||||
$ 157,545 | $ 86,051 | $ 71,494 | $ 157,545 | $ 79,255 | $ 78,290 |
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the three months ended September 30, 2008 (Unaudited – prepared by management)
(stated in Canadian dollars)
4.
UNPROVEN MINERAL RIGHTS
The Company’s mineral properties are all located in Argentina and the United States.
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 had to make cash payments totaling US$210,000 (paid) on or before December 1, 2007.
Portal Resources has completed an internal 43-101 compliant report reviewing the results of the various exploration programs conducted on the project.
Portal is seeking a joint venture partner to continue exploring and developing this project.
On or before December 1, 2008 or upon receipt of the feasibility study, the Company must pay an advance royalty payment of US$1 for each ounce of gold equivalent contained within the measured and indicated resource categories with a minimum payment of US$100,000 and a maximum payment 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.
As of November 12, 2008 an amendment of the agreement was signed where the owner agreed to defer the payment due on December 1, 2008 until December 1, 2009 in exchange for a payment of US$10,000 on December 1, 2008.
San Rafael
The properties in the San Rafael project have been acquired through two separate option agreements.
San Pedro
On June 18, 2004, Portal S.A. signed an option to acquire a 100% interest in a series of mining rights in Mendoza province of Argentina. Under the terms of the agreement the Company must make cash payments totaling US$ 830,000 (US$120,000 paid) on or before June 18, 2012.
Based on exploration to date, especially within the Anchoris copper-gold porphyry zone, as well as the negative environment for mining in the province of Mendoza, management decided to abandon the concessions held under the San Pedro agreement. On March 27, 2008 Portal notified in writing the owners of the San Pedro claims of the decision to return the claims and has not further commitments with respect to this agreement.
Minera 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 original agreement, the Company has paid US$95,000 to date and the subsequent payment requirements to exercise the option are as follows:
US$ | |
On or before April 9, 2008 | $ 70,000 (subsequently amended) |
On or before April 9, 2009 | $100,000 |
The Company is obligated to make the initial three annual payments of $15,000 (paid). 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.
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the three months ended September 30, 2008 (Unaudited – prepared by management)
(stated in Canadian dollars)
4.
UNPROVEN MINERAL RIGHTS (Continued)
The Company has the right to purchase 10% of the net profits interest at any time for the sum of US$1,000,000.
On March 3, 2008 the Minera Rio de la Plata (MRDP) agreement was modified so the US$70,000 payment due April 9, 2008 was deferred to June 10, 2008.
Subsequently, management decided, based on exploration results to date, especially on the Anchoris copper gold porphyry project and the negative mining environment in the province of Mendoza, to return all the claims held under the MRDP agreement, with the exception of nine claims, which will continue to form the Tiger uranium project. On April 22, an amendment to the MRDP agreement was executed by Portal and MRDP to this effect.
On April 30, 2008, MRDP and Portal signed an agreement whereby the due date for the US$70,000 payment as amended to June 10, 2008 was extended until July 10, 2008.
On June 10, 2008, Portal informed MRDP of the Company’s decision to declare the nine claims comprising the Tiger Uranium Project as a “Development Area” under clause 6.4 of the MRDP agreement and to pay MRDP the sum of US$50,000.
On June 17, 2008, Portal received from MRDP notification of its rejection of Portals declaration of a “Development Area”.
On July 18, 2008, Portal received notification from MRDP of their declaration that the MRDP contract is null and void for failure to make the US$70,000 payment due July 10, 2008.
Portal has retained legal counsel in the matter and is of the opinion that the declaration of a Development Area on June 10, 2008 was valid and thus the MRDP contract is valid and in good standing. Portal is pursuing both legal avenues as well as negotiating with MRDP to resolve the dispute.
La Pampa Uranium
On April 20, 2007 Portal signed a letter agreement with Consolidated Pacific Bay Minerals Ltd. whereby Portal has an option to earn a 60% interest in a series of mining rights in Chubut province of Argentina. Under the original terms of the agreement the Company’s payment requirements are as follows:
US$ | |
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 |
In order to maintain the option in good standing, Portal must expend an aggregate of US$1,200,000 by April 20, 2011. The required cumulative required expenditures are as follows:
On or before April 20, 2008 | $ 150,000 |
On or before April 20, 2009 | $ 400,000 |
On or before April 20, 2010 | $ 800,000 |
On or before April 20, 2011 | $ 1,200,000 |
On March 11, 2008, the agreement of April 20, 2007 was modified so that the time periods for the above referenced payment and expenditure commitments will begin on the date that the Argentina Department of Mines gives formal notice that the concessions for the properties have been granted to Consolidated Pacific Bay Minerals Ltd.
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the three months ended September 30, 2008 (Unaudited – prepared by management)
(stated in Canadian dollars)
4.
UNPROVEN MINERAL RIGHTS, (Continued)
Slick Rock Uranium
In 2008 Portal completed a drill program consisting of 18 holes for a total of 12,860 feet (3,920 meters). The results were discouraging and no further work was warranted. The property was returned to the Vendor with no further commitments necessary on behalf of Portal.
Nevada Properties
On September 2, 2008, Portal announced that it had entered into an option agreement under which it has the right to acquire, from Claremont Nevada Mines, Scoonover Exploration and JR Exploration, three properties located in the Walker Lane Belt and Battle Mountain/Eureka Trend in Nevada, USA. Terms of the renewable ten year option include total cash advance royalty payments of US$10,000 on the first anniversary, $15,000 on the second, $20,000 on the third, $25,000 on the fourth and $30,000 on the fifth and each subsequent anniversary date to maintain the option in good standing. Portal, through its subsidiary, Portal Resources US Inc., can acquire a 100% interest in the properties by making an additional payment of $1,000 and delivering a final feasibility study on any of the properties.
The vendors will retain a 3% net smelter returns royalty. Portal has the right to reduce the net smelter returns royalty to 1% for a payment of US$1,000,000.
Golden Snow Property
The Golden Snow property is an advanced Carlin-type gold target comprised of 114 unpatented lode mining claims or 3.5 square miles on the Battle Mountain/Eureka Trend. The property is contiguous to the southern end of Staccato Gold's South Eureka property where Staccato has identified several mineralized areas and has defined a gold resource estimate at the Lookout Mountain deposit.* Additionally, eight miles north of the property lies the East Archimedes Gold Mine where Barrick Gold Corporation is currently mining a Carlin-type sediment hosted gold deposit (677,000 ounces mined, 1.1 million ounces resource/reserve, as reported by the Geological Society of Nevada 2006 Special Publication #43.) Substantial exploration has been conducted on the property including geologic mapping, 932 soil samples and detailed ground-based gravity geophysical surveys. Based on this work, several distinct target zones have been outlined and it is interpreted that the Ratto Ridge Fault zone, which controls the mineralization on the South Eureka property, continues south onto the Golden Snow property. These target areas are well located and permitting with the U.S. Bureau of Land Management (BLM) for a Phase I drilling program is set to begin. *Refer to Staccato's technical report and gold resource estimate for the South Eureka district property dated Jan. 15, 2007, filed on SEDAR.
Fish Project
The Fish Project is situated within the Walker Lane Mineral Belt, Lone Mountain District, Esmeralda County, Nevada about 12 miles west of the historic mining town of Tonopah, Nevada. The project consists of 58 unpatented lode mining claims or 1.9 square miles. This drill ready project is a skarn-manto gold-silver and base metal prospect where rock chip samples returned values ranging from <0.002 opt to 0.307 oz/ton gold, <0.01 opt to 32 oz/ton silver, 0.01% to 32.8% zinc and <0.01% to 16.4% lead. Permitting with the BLM for a Phase I drilling program is well advanced.
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the three months ended September 30, 2008 (Unaudited – prepared by management)
(stated in Canadian dollars)
4.
UNPROVEN MINERAL RIGHTS, (Continued)
CPG Project
The CPG Project, also within the Walker Lane Mineral Belt, is in Mineral County, Nevada and consists of 44 unpatented lode mining claims or 1.3 square miles. The property is 10 miles south of Kennecott's now closed Denton-Rawhide Mine which produced 1.4 million ounces of gold and 10 million ounces of silver between 1990 and 2004. The property hosts an early stage porphyry and skarn-type copper-gold-molybdenum prospect where samples returned values ranging from <0.001 opt to 0.036 oz/ton gold, <0.003 opt to 0.75 oz/ton silver, <0.005% to 13.65% copper and <0.005 % to 0.012% molybdenum. The Walker Lane Mineral Belt, western Nevada, is highly mineralized, containing several world-class epithermal precious metals deposits, e.g. the Comstock Lode (estimated production of 8.6 million ounces of gold and 192 million ounces of silver), and Round Mountain (over 10 million ounces of gold produced since 1906), as well as porphyry copper deposits, e.g. Ye rington (1.75 billion pounds of copper produced from 1953-1978 by the Anaconda Copper Company).
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the three months ended September 30, 2008 (Unaudited – prepared by management)
(stated in Canadian dollars)
5.
SHARE CAPITAL
Authorized
100,000,000 Common Shares without par value
100,000,000 Preferred shares issuable in series
Number | Amount | Contributed surplus | |
Balance – June 30, 2005 | 10,798,943 | $2,969,461 | $180,493 |
Private placements | 9,390,000 | 6,144,250 | - |
On exercise of warrants | 384,471 | 346,024 | - |
On exercise of options | 166,400 | 55,954 | - |
Fair market value of stock options exercised | - | 18,625 | (18,625) |
Stock based compensation | - | - | 138,605 |
Finders fees | 148,225 | 74,113 | - |
Share issue costs | - | (431,302) | - |
Balance – June 30, 2006 | 20,888,039 | 9,177,125 | 300,473 |
Issued for resource property | 100,000 | 78,000 | - |
On exercise of warrants | 759,000 | 569,250 | - |
On exercise of options | 12,500 | 8,300 | - |
Fair market value of stock options exercised | - | 3,681 | (3,681) |
Stock based compensation | - | - | 340,206 |
Share issue costs | 0 | (12,438) | |
Balance – June 30, 2007 | 21,759,539 | 9,823,918 | 636,998 |
Private placement(i) | 7,887,000 | 5,126,550 | - |
On exercise of options | 5,000 | 2,600 | - |
Fair market value of stock options exercised | - | 1,402 | (1,402) |
Stock based compensation | - | - | 147,744 |
Finders fees | - | (151,997) | - |
Share issue costs | - | (42,312) | - |
Balance – June 30, 2008 (audited) | 29,651,539 | 14,760,161 | 783,340 |
Private placement | - | - | - |
On exercise of options | - | - | - |
Fair market value of stock options exercised | - | - | - |
Stock based compensation | - | - | 1,800 |
Finders fees | - | - | - |
Share issue costs | - | - | - |
Balance – September 30, 2008 (unaudited) | 29,651,539 | $14,760,161 | $785,140 |
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the three months ended September 30, 2008 (Unaudited – prepared by management)
(stated in Canadian dollars)
5.
SHARE CAPITAL, (Continued)
i)
On July 20, 2007, the Company completed a private placement for 7,887,000 units at $0.65 for gross proceeds of $5,126,550, with each unit consisting of one common share and one-half share purchase warrant. Each whole share purchase warrant is exercisable at $0.85 until July 18, 2009 and all securities had a four-month hold period. Finder’s fees of $151,997 were paid on this placement.
Stock-based Compensation
The Company has a stock option plan as described in the most recent annual financial statements of the Company. The maximum aggregate number of common shares reserved and authorized to be issued pursuant to options granted under the Stock Option Plan is 4,447,730 common shares.
The exercise price for options granted under the Stock Option Plan is determined by committee upon grant provided the price is not less than the closing trading price on the day immediately preceding the date of grant, less any discounts permitted by the TSX Venture Exchange or such other stock exchanges on which the common shares are listed. Options granted under the Stock Option Plan are subject to a minimum one year vesting schedule whereby 25% of each option will vest on each of the three month anniversaries of the date of grant, up to and including the end of the first year after such grant, or such other more restrictive vesting schedule as the administrator of the Stock Option Plan may determine. Options are non-assignable and are exercisable for a period of up to five years from the date the option is granted, subject to earlier termination after certain events such as the optionee’s cessation of service to the Company or death.
The Company accounts for its grants in accordance with the fair value method of accounting for stock-based compensation. For the three months ended September 30, 2008, the Company recognized $1,800 (2007 - $86,300) in stock-based compensation for employees, directors and consultants.
A summary of changes to stock options outstanding is as follows:
September 30 | June 30 | |||
2008 | 2008 | |||
Weighted Average | Weighted Average | |||
Number of shares | Exercise Price | Number of shares | Exercise Price | |
Outstanding at beginning of period | 2,753,600 | $0.54 | 2,766,100 | $0.51 |
Granted under plan | - | - | 100,000 | $0.32 |
Exercised | - | - | (5,000) | $0.52 |
Forfeited or cancelled | - | - | (107,500) | $0.63 |
Outstanding at end of period | 2,753,600 | $0.54 | 2,753,600 | $0.54 |
At September 30, 2008, the weighted average remaining life of the outstanding options is 2.16 years (June 30, 2008 – 2.63 years).
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the three months ended September 30, 2008 (Unaudited – prepared by management)
(stated in Canadian dollars)
5.
SHARE CAPITAL, (Continued)
Stock options outstanding as at September 30, 2008 are as follows:
Number | Exercise Price | Expiry Date |
100,000 | $0.22 | 19-Dec-08 |
632,200 | $0.25 | 15-Mar-09 |
50,000 | $0.75 | 18-Jun-09 |
50,000 | $0.77 | 23-Dec-09 |
200,000 | $0.86 | 14-Apr-10 |
103,750 | $0.70 | 20-Jan-11 |
100,000 | $0.85 | 21-Mar-09 |
105,000 | $0.75 | 18-Oct-11 |
1,146,400 | $0.52 | 5-Dec-11 |
200,000 | $0.70 | 6-Jun-12 |
75,000 | $0.79 | 19-Jun-12 |
2,762,350 |
Warrants
Warrants outstanding as at September 30, 2008 are as follows:
Number | Exercise Price | Expiry Date |
3,943,500 | $ 0.85 | July 18, 2009 |
6.
COMMITMENTS
The Company has obligations under an operating lease for its corporate office that is in effect until February 28, 2013. The remaining future minimum lease payments for the non-cancellable lease are:
2009 | $82,205 |
2010 | $86,457 |
2011 | $90,709 |
2012 | $94,961 |
2013 | $65,197 |
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 months ended September 30, 2008 and 2007
During the three months ended September 30, 2008, $10,549 (2007 - $8,168) was charged to a public company with a director in common with the Company for rent. As at September 30, 2008, $Nil (June 30, 2008 - $Nil) was receivable from this public company.
During the three months ended September 30, 2008, $Nil (2007 - $5,388) was charged to a private company with certain directors in common with the Company for administrative fees and rent. As at September 30, 2008, $806 (June 30, 2008 - $806) was receivable from this private company.
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the three months ended September 30, 2008 (Unaudited – prepared by management)
(stated in Canadian dollars)
7.
RELATED PARTY TRANSACTIONS, (Continued)
During the three months ended September 30, 2008, $15,484 (2007 - $5,388) was charged to a private company with certain directors in common with the Company for administrative fees and rent. As at September 30, 2008, $170 (June 30, 2008 - $18) was receivable from this private company.
During the three months ended September 30, 2008, $2,508 (2007 - $Nil) was charged to a public company with a director in common with the Company for rent. As at September 30, 2008, $2 (June 30, 2008 - $24) was receivable from this public company.
During the three months ended September 30, 2008 the Company paid or accrued to pay a private company with a director in common with the Company an aggregate of $ 1,575 (2007 - $Nil) for fees and expense. As at September 30, 2008 the Company owes this company an aggregate of $Nil (June 30, 2008 - $Nil).
As at September 30, 2008 the Company owes certain directors and officers an aggregate of $ 8,617 (June 30, 2008 - $nil) for expense reimbursements and consulting fees.
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 (g) provide a summary of the impact of these financial statements that would result from the application of U.S. accounting principles to preferred mineral rights.
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the three months ended September 30, 2008 (Unaudited – prepared by management)
(stated in Canadian dollars)
8.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP), (Continued)
Three months ended September 30 | Year ended June 30 | ||
2008 | 2007 | 2008 | |
a) Assets | |||
Unproven Mineral Rights Costs | |||
Unproven mineral rights costs under Canadian | $ 5,071,290 | $ 6,004,916 | $ 4,965,595 |
Less unproven mineral rights costs | (5,071,290) | (6,004,916) | (4,965,595) |
Unproven mineral rights costs under U.S. GAAP | $ - | $ - | $ - |
b) Operations | |||
Net loss under Canadian GAAP | $ (529,647) | $ (392,616) | $ (3,288,433) |
Unproven mineral rights costs expensed under U.S. GAAP | (105,695) | (321,557) | 717,764 |
Net loss under U.S. GAAP | $ (635,342) | $ (714,173) | $ (2,570,669) |
c) Deficit | |||
Closing deficit under Canadian GAAP | $ (7,834,825) | $ (4,409,361) | $ (7,305,178) |
Adjustment to deficit for accumulated unproven Mineral rights expensed under US GAAP net of | (5,071,290) | (6,004,916) | (4,965,595) |
Closing deficit under U.S. GAAP | $(12,906,115) | $(10,414,277) | $(12,270,773) |
d) Cash Flows – Operating Activities | |||
Cash applied to operations under Canadian GAAP | $ (224,030) | $ (473,361) | $ (1,580,724) |
Add net loss following Canadian GAAP | 529,647 | 392,616 | 3,288,433 |
Add non cash unproven mineral rights expensed under U.S. GAAP | (114,812) | (115,475) | (239,553) |
Less net loss under U.S. GAAP | (635,342) | (714,173) | (2,570,669) |
Less unproven mineral rights costs expensed under Canadian GAAP | - | - | (1,782,804) |
Cash applied to operations under U.S. GAAP | $ (444,537) | $ (910,393) | $ (2,885,317) |
e) Cash Flows – Investing Activities | |||
Cash applied under Canadian GAAP | $ 270,427 | $ (445,919) | $ (4,176,496) |
Less non cash unproven mineral rights expensed under US GAAP | 114,812 | 115,475 | 239,553 |
Add unproven mineral right costs expensed under US GAAP | 105,695 | 321,557 | 1,065,040 |
Cash applied under U.S. GAAP | $ 409,934 | $ (8,887) | $ (2,871,903) |
PORTAL RESOURCES LTD.
Notes to the Consolidated Financial Statements
For the nine months ended September 30, 2008 (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)
Stockholders’ Equity
Common Stock
There are no differences between Canadian and U.S. GAAP for the years ended June 30, 2008, 2007 and 2006 or the three months ended September 30, 2008 with respect to the disclosure of stock-based compensation.
g)
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.
For the three months ended | Year ended | |||||||||
September 30, | June 30, | |||||||||
2008 | 2007 | 2008 | ||||||||
Numerator: Net loss for the period under U.S. GAAP | $(635,342) | $(714,173) | $(2,570,669) | |||||||
Denominator: Weighted-average number of shares under | ||||||||||
Canadian and U.S. GAAP | 29,651,539 | 28,336,206 | 29,322,706 | |||||||
Basic and fully diluted loss per share under U. S. GAAP | $ (0.02) | $ (0.03) | $ (0.09) |