Longview Capital Partners earns $115,000 after-tax profit in Q3 2009
Mon Nov 16, 7:31 PMVancouver, British Columbia CANADA, November 16, 2009 /FSC/ - Longview Capital Partners Inc. (LV - TSX, L6V - FWB, LGVWF - OTCBB_Pink_Sheets), announces its financial results for the three months ended September 30, 2009. The Company earned net income of $115,000 ($0.00 per share (basic)) as a result of unrealized investment gains, versus a net loss of $36.2 million ($0.32 per share (basic)) for the same period in 2008. At period end, the Company held investments with a fair value of $13.7 million ($0.12 per share), compared to $9.4 million ($0.08 per share) at December 31, 2008.
Longview Capital Partners sold no investments in the quarter, and recorded unrealized investment gains of $893,000, compared to realized investment gains of $4.3 million and unrealized investment losses of $53.2 million in the third quarter of 2008. Longview Capital Partners' investment portfolio at September 30, 2009 included 16 public companies. "In the first three quarters of 2009 the Company has made significant advances in resolving issues of an operational strategic nature associated with past transactions and has laid a positive foundation for the future," said John Icke, President and CEO of Longview Capital Partners. "As the global economy recovers, we feel that Longview is now poised to take advantage of some of the exciting opportunities that have presented themselves to us in the natural resources sector." Longview Capital Partners has decided to discontinue with quarterly conference calls at this time due to the minimal shareholder participation in previous conference calls. Shareholders can contact the Company's Investor Relations at 604-696-6515. About Longview Capital Partners Longview Capital Partners is an investment company creating long-term shareholder value by capitalizing on early stage opportunities in the natural resource sector, and having the resultant earnings growth recognized in its share price. Longview Capital Partners first began trading on September 5, 2005 and graduated to the TSX senior Exchange on September 24, 2007 under the same symbol "LV". Attached are the Consolidated Balance Sheet, Statement of Operations and Retained Earnings, and Statement of Cash Flows for the three months ended September 30, 2009 and 2008. Readers should refer to the Notes to the financial statements and to the accompanying Management's Discussion and Analysis for the period then ended, which together form an integral part of the quarterly report, which can be found on the SEDAR website at www.sedar.com or on our website at www.longviewcp.com. For more information on Longview Capital Partners Incorporated, please contact Investor Relations at (604) 696-6515 or visit our website at www.longviewcp.com. Statements in this news release, other than purely historical information, including statements relating to the Company's future plans and objectives or expected results, constitute Forward-looking statements. Such statements are based on numerous assumptions and are subject to all the risks and uncertainties inherent in the Company's business, including risks related to mineral exploration and development. Consequently, actual results may vary materially from those described in the forward-looking statements. LONGVIEW CAPITAL PARTNERS INCORPORATED CONSOLIDATED BALANCE SHEETS AS AT SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 (IN THOUSANDS OF DOLLARS) (Unaudited - Prepared by Management)
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September 30, December 31,
2009 2008
(Unaudited) (Audited)
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,098 $ 1,000
Accounts receivable 208 21
Deposits and prepaid expenses 104 225
Due from related parties (Note 8(c)) 723 298
Related party loans receivable (Note 8(e)) 183 878
Income tax recovery 269 80
---------------------------
2,585 2,502
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Investments (Note 4) 13,701 9,426
Future income tax assets 3,530 4,576
Property and equipment (Note 5) 158 251
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17,389 14,253
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$ 19,974 $ 16,755
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LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 464 $ 388
Due to related parties (Note 8(b)) 341 171
---------------------------
805 559
---------------------------
SHAREHOLDERS' EQUITY
Share capital (Note 6) 38,599 38,599
Contributed surplus (Note 6) 8,587 8,451
Deficit (28,017) (30,854)
---------------------------
19,169 16,196
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$ 19,974 $ 16,755
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Use of Estimates and Measurement Uncertainty - Investments (Note 2(k)) On behalf of the Board: "Hein Poulus" Director Signed November 12, 2009 "Ron Shorr" Director Signed November 12, 2009 - See accompanying notes to the consolidated financial statements - LONGVIEW CAPITAL PARTNERS INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS, COMPREHENSIVE INCOME AND RETAINED EARNINGS (DEFICIT) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE AMOUNTS) (Unaudited - Prepared by Management)
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Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
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REVENUES
Gain on disposal
of investments, net $ - $ 4,317 $ 1,118 $ 13,643
Unrealized gain (loss)
on investments, net 893 (53,216) 4,359 (89,978)
Corporate and advisory
services 147 1,081 749 2,677
Interest, rental and
other income - 124 21 338
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1,040 (47,694) 6,247 (73,320)
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EXPENSES
General and
administrative 429 1,402 2,347 4,475
Bad debts 288 493 288 685
Depreciation 19 20 55 58
Interest expense 2 25 4 62
Stock-based compensation
(Note 7) (2) 64 136 338
Project investigation
and due diligence costs 11 168 87 549
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747 2,172 2,917 6,167
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Operating Income (Loss)
Before Income Taxes
and Other Items 293 (49,866) 3,330 (79,487)
Recovery of bad debts 80 11 596 11
Write down of projects (53) (102) (233) (133)
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Operating Income (Loss)
Before Income Taxes 320 (49,957) 3,693 (79,609)
Provision for
income taxes (205) 13,759 (856) 23,689
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Net Income (Loss) and
Comprehensive Income
(Loss) For the Period 115 (36,198) 2,837 (55,920)
Retained Earnings
(Deficit), Beginning
of Period (28,132) 22,203 (30,854) 41,925
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Retained Earnings
(Deficit), End of
Period $ (28,017) $ (13,995) $ (28,017) $ (13,995)
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Basic Earnings (Loss)
Per Share $ 0.00 $ (0.32) $ 0.03 (0.50)
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Diluted Earnings
(Loss) Per Share $ 0.00 $ (0.32) $ 0.03 $ (0.50)
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Weighted Average Number
Of Common Shares
Outstanding (Note 2)
Basic 112,383,885 112,846,859 112,383,885 110,746,063
Diluted 112,383,885 112,846,859 112,383,885 110,746,063
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- See accompanying notes to the consolidated financial statements - LONGVIEW CAPITAL PARTNERS INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (IN THOUSANDS OF DOLLARS) (Unaudited - Prepared by Management) -***- ------------------------------------------------------------------------- Three Months Ended Nine Months Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2009 2008 2009 2008 ------------------------------------------------------------------------- CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES Net income for the period $115 $(36,198) $2,837 $(55,920) Items not affecting cash: Gain on disposal of investments, net - (4,317) (1,118) (13,643) Unrealized loss (gain) on investments, net (893) 53,216 (4,359) 89,978 Provision (recovery) for income taxes - future 159 (14,774) 1,045 (26,715) Stock-based compensation (2) 64 137 338 Depreciation 19 20 55 58 Bad debts 288 493 288 685 Write down of projects 53 - 233 133 Changes in non-cash working capital items: Decrease (increase) in accounts receivable (337) (151) (1,301) (1,330) Decrease (increase) in income taxes recoverable 46 4,279 (189) 6,748 Decrease (increase) in deposits and prepaid expenses 101 82 121 (25) Increase (decrease) in accounts payable, accrued liabilities and income tax payable (168) 345 279 (2,000) -------------------------------------------- Net cash provided by (used in) operating activities (619) 3,059 (1,972) (1,693) -------------------------------------------- CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES Purchase of investments (235) (8,236) (1,565) (21,632) Proceeds from sale of investments - 8,979 3,760 27,961 Proceeds from loans repaid - - 50 - Loans (140) (2,126) (183) (4,558) (Purchase) sale of fixed assets 8 (1) 8 (33) -------------------------------------------- Net cash from (used in) investing activities (367) 1,384 2,070 1,738 -------------------------------------------- CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES Increase (decrease) in due to brokers - (1,064) - - Changes in non-cash financing item: Shares issued as bonus - - - 950 -------------------------------------------- Net cash from (used in) financing activities - (1,064) - 950 -------------------------------------------- Increase in Cash and Cash Equivalents During the Period (986) 611 98 995 Cash and Cash Equivalents, Beginning of Period 2,084 568 1,000 184 -------------------------------------------- Cash and Cash Equivalents, End of Period $1,098 $1,179 $1,098 $1,179 ======================================================================= Supplementary Cash Flow Information (Note 12) -****- - See accompanying notes to the consolidated financial statements - 1. NATURE OF OPERATIONS Longview Capital Partners Incorporated ("Longview" or the "Company") is an investment company. On March 3, 2006, the Company began trading as a Tier 1 listed issuer on the TSX Venture Exchange ("TSX-V"). The Company graduated to the Toronto Stock Exchange ("TSX") on September 24, 2007, and trades under the ticker symbol: "LV". Longview is primarily focused on investing in privately held, or publicly traded, early-stage natural resource and renewable energy companies and their related technologies. The Company seeks to identify and invest in undervalued opportunities and assist investee companies in raising the capital required to further their exploration and development activities. Longview aims to help navigate private investee companies through the going-public process. 2. SIGNIFICANT ACCOUNTING POLICIES Management has prepared these consolidated financial statements of the Company in accordance with Canadian generally accepted accounting principles. The Company is considered an investment company under the guidelines set out in the Canadian Institute of Chartered Accountants ("CICA") Accounting Guideline 18, Investment Companies ("AcG-18"). (a) Investments At the end of each financial reporting period, the Company's management estimates the fair value of its investments based on the criteria below and records such valuations in the consolidated financial statements. (i) Public Investments Investments in publicly traded companies listed on an active stock exchange are recorded at fair value based upon the closing bid price at the balance sheet date. If an active market does not exist, the investments are recorded at fair value using a valuation technique based upon Management's estimates which consider reliable, observable market inputs. The amounts at which investments in publicly traded companies could be disposed of may differ from fair value as a result of, but not limited to, a number of factors including premiums paid for large blocks of shares, or discounts due to a lack of liquidity. (ii) Private Investments Investments in private companies are initially recorded at cost, being the fair value at the time of acquisition. At each reporting period thereafter, the fair value of an investment may, depending upon the circumstances, be adjusted by applying one or more of the valuation techniques described below. Determining the fair value of the Company's investments in private companies is subject to certain limitations; namely, the lack of available and/or reliable financial information. Application of the valuation techniques described below may involve uncertainties and determinations based on Management's judgment and any value estimated from these techniques may not be realized. 2. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) In addition to the events described below, the Company will take into account general market conditions when determining if an adjustment to the fair value of an investment in a private company is warranted at the end of each reporting period. Absent the occurrence of any of these events, or any significant change in general market conditions, the fair value of the investment is left unchanged. The fair value of an investment in private company may be adjusted upward if: 1) There has been a significant subsequent equity financing provided by outside investors at a premium to the fair value of the investee company. In these instances, the fair value of the investment is adjusted to the value at which that financing took place; or 2) There have been significant corporate, political, operating or economic events affecting the investee company that, in Management's opinion, have a positive impact on the investee company's prospects and, therefore, its fair value. In the circumstances where general market conditions so warrant, an adjustment to the fair value of an investment will be based on Management's judgment and any value estimated may not be realized. The fair value of an investment in a private company may be adjusted downward if: 1) There has been a significant subsequent equity financing provided by outside investors, at a valuation below the current fair value of the investee company, in which case the fair value of the investment is set to the value at which that financing took place; or 2) The investee company is placed into receivership or bankruptcy; or 3) Based on financial information received from the investee company it is apparent to the Company that the investee company is unlikely to be able to continue as a going concern; or 4) There have been significant corporate, political, operating or economic events affecting the investee company that, in Management's opinion, have a negative impact on the investee company's prospects and, therefore, its fair value. The adjustment to the fair value of the investment will be based on Management's judgment and any value estimated may not be realized and may differ from values that might be determined if a ready market existed. Warrants and options not traded on a recognized securities exchange are recorded at fair value using a valuation technique that considers the exercise price, the closing bid price of the underlying shares, time value adjustment and volatility. The amount at which an investment in a privately-held company could be disposed of may differ from its carrying value due to the availability and/or reliability of information available to, and determinations reached by, Management. Any fair value estimated by the application of these techniques may not be realized. Transaction costs incurred in the purchase and sale of investments, such as brokerage commissions, are recorded as an expense in the consolidated statements of operations. Purchases and sales of securities are accounted for on a trade-date basis. 2. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) (b) Cash and cash equivalents Cash and cash equivalents are reported at fair value and consist of highly liquid investments that are readily convertible into known amounts of cash and have original maturities of three months or less. (c) Property and equipment Property and equipment are recorded at cost less accumulated amortization. Expenditures for additions are capitalized. Expenditures for maintenance and repairs are charged to earnings. Upon retirement, or disposal, the cost and related amortization are removed from the accounts and any gain or loss is reflected in earnings. Property and equipment are amortized over the asset's estimated useful life as follows: Computer equipment 30% declining balance Furniture and fixtures 20% declining balance Leasehold improvements are amortized over the term of the lease.The Company assesses the carrying value of long-lived assets for recoverability whenever events or changes in circumstances indicate that the carrying value may not be recoverable from future undiscounted cash flows. An impairment loss equal to the difference in the asset's carrying value and its fair value is recognized in the period in which the determination is made. (d) Revenue recognition Security transactions are recorded on a trade-date basis. Realized gains and losses on the disposal of investments, and unrealized gains and losses in the fair value of investments, are reflected in the consolidated statements of operations and are calculated on an average cost basis. Upon disposal of an investment, previously recognized unrealized gains or losses are reversed, so as to recognize the full realized gain or loss in the period of disposition. Interest is recorded on an accrual basis when reasonable assurance exists regarding measurement and collectability. Revenue for corporate and advisory services is recognized when persuasive evidence of an arrangement exists, services have been rendered, the price is fixed or determinable and collectability is reasonably assured. (e) Loan impairment Impaired loans are accounted for at their face value net of any allowance for loan impairment. When a loan is deemed to be impaired, its carrying amount is reduced to its estimated realizable amount which is measured by discounting expected future cash flows at the effective interest rate inherent in the loans, if such future cash flows can be reasonably estimated, otherwise the net realizable amount is measured as the net recoverable value of any security pledged as collateral for the loan. The amount initially recognized as an impairment, together with any subsequent change, is charged to the allowance for loan impairment. A write-off of the loan will occur when the loan is believed to have no reasonable expectation of collectability. 2. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) (f) Foreign currency translation Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the rate of exchange prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at historical rates. Revenues and expenses denominated in foreign currencies are translated into Canadian dollars at rates of exchange prevailing at the transaction dates. Gains or losses arising from the translation of foreign currencies are included in the determination of net income for the year. Non-monetary assets have been translated at the rate of exchange prevailing at the transaction date. (g) Non-monetary transactions Transactions in which shares, or other non-cash consideration, are exchanged for assets or services are valued at the fair value of the assets or services involved in accordance with Section 3831, "Non-monetary Transactions", of the Canadian Institute of Chartered Accountants Handbook ("CICA Handbook"). (h) Stock-based compensation The Company has a stock option plan as described in Note 7. The Company uses the Black-Scholes option pricing model to estimate the fair value of each stock option at the date of grant. The value of stock options granted to employees, directors and consultants is recorded as stock-based compensation expense and credited to contributed surplus. The value of any stock options issued as compensation for private placements and other financings is recorded as share issue costs and credited to contributed surplus. Any consideration received on the exercise of stock options is credited to share capital and the appropriate amount of the options' fair value is reallocated from contributed surplus to share capital. (i) Earnings (loss) per share Basic earnings (loss) per share ("EPS") is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the year. To compute diluted earnings (loss) per share, adjustments are made to common shares outstanding. The weighted average number of common shares outstanding is adjusted to include the number of additional common shares that would be outstanding if, at the beginning of the period or at time of issuance, all options and warrants were exercised. The proceeds from exercise would be used to purchase the Company's common shares at their average market price during the period, which would reduce the weighted average number of common shares outstanding as calculated under basic earnings per share. If this computation is anti-dilutive, diluted loss per share is the same as basic loss per share. The computation is anti-dilutive for the periods presented and, therefore, diluted EPS is the same as basic EPS. (j) Income taxes The Company follows the asset and liability method of accounting for income taxes. Under this method, current income taxes are recognized for the estimated income taxes payable for the current period. Future income tax assets and liabilities are recognized when a temporary difference between the tax basis and the accounting basis of an asset and/or and liability exists. Future income tax assets and liabilities are recorded using substantively-enacted tax rates. 2. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) (k) Use of estimates and measurement uncertainty The preparation of consolidated financial statements in conformity with Canadian GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. The use of estimates and assumptions are required in the determination of the following: the fair value of investments and loans, the allowance for doubtful accounts, loan impairment provisions, the useful lives of property and equipment, future income tax assets and liabilities and non-monetary transactions. Actual results may differ from those estimates. (l) Reclassifications Certain of the prior period's figures have been reclassified to conform to the current period's method of presentation. Such reclassifications are for presentation purposes only and have no effect on previously reported results. (m) Interim consolidated financial statements Management has prepared these unaudited consolidated financial statements of the Company in accordance with Canadian generally accepted accounting principles ("GAAP") for interim financial reporting. Accordingly, they do not include all of the information and notes required by Canadian GAAP for annual financial statements. In the opinion of Management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included. The results for the interim periods presented are not necessarily indicative of the results that may be expected for any future period. The information contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's audited consolidated financial statements for the year ended December 31, 2008. Accounting policies followed in the preparation of the 2008 annual consolidated financial statements are consistent with those used in the preparation of the September 30, 2009, interim consolidated financial statements except for the adoption of new accounting standards as detailed below. 3. ADOPTION OF NEW ACCOUNTING STANDARDS On or after January 1, 2009, the Company adopted the following recommendations included in the Canadian Institute of Chartered Accountants ("CICA") Handbook: Goodwill and Intangible Assets In February 2008, the CICA issued Handbook Section 3064, "Goodwill and Intangible Assets", which replaces Section 3062, "Goodwill and Other Intangible Assets" and Section 3450 "Research and Development Costs" effective for fiscal years beginning on or after October 1, 2008. The standard intends to reduce the differences with International Financial Reporting Standards (IFRS) in the accounting for intangible assets and results in closer alignment with US GAAP. Under current Canadian standards, more items are recognized as assets than under IFRS or US GAAP. The objectives of Section 3064 are to clarify the criteria for the recognition of assets, and to clarify the application of the concept of matching revenues and expenses such that the current practice of recognizing items that do not meet the definition and recognition criteria as assets is eliminated. The standard also provides guidance for the recognition of internally developed intangible assets, including research and development activities, ensuring consistent treatment of all intangible assets, whether separately acquired or internally developed. Management has determined that this standard has no affect on the Company's consolidated financial statements. 3. ADOPTION OF NEW ACCOUNTING STANDARDS (cont'd...) Credit Risk and the Fair Value of Financial Assets and Financial Liabilities In January 2009, the CICA approved EIC- 173, "Credit Risk and the Fair Value of Financial Assets and Financial Liabilities". This guidance clarified that an entity's own credit risk and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and financial liabilities including derivative instruments. This guidance is applicable to fiscal periods ending on or after January 20, 2009. The Company is continually evaluating its counterparties and their credit risks. There was no significant impact on the Company's consolidated financial statements as a result of applying this abstract. Mining Exploration Costs On March 27, 2009, the Emerging Issues Committee of the CICA approved EIC-174, "Mining Exploration Costs", which provides guidance on the capitalization of exploration costs related to mining properties in particular and on the impairment of long-lived assets in general. There was no significant impact on the Company's consolidated financial statements as a result of applying this abstract. New Accounting Pronouncements The recent accounting pronouncements that have been issued as new sources of GAAP, but are not yet in effect, are described below: A. IFRS Canadian publicly listed enterprises will be required to adopt IFRS in replacement of Canadian generally accepted accounting principles ("GAAP") on January 1, 2011. This transition will require the Company to present its financial statements under IFRS starting with its first quarterly report dated March 31, 2011, with restated comparative information for the comparative quarter of March 31, 2010, also under IFRS. The conversion to IFRS will impact the Company's accounting policies, information technology processes and financial reporting systems, including internal controls over financial reporting, data systems and disclosure controls and procedures. The transition may also impact certain business processes, accounting for contractual agreements, debt covenants and compensation arrangements. The Company is assessing the potential impacts of this changeover and has developed its implementation plan. At this time, the impact on the Company's future financial position and results of operations cannot be reasonably determined. The Company has established a project team that reports to Management and the Audit Committee to ensure a seamless transition to IFRS. The project team has identified four phases in its implementation plan: . Phase 1 - Impact assessment . Phase 2 - Planning & solution development . Phase 3 - Implementation . Phase 4 - Post implementation review 3. ADOPTION OF NEW ACCOUNTING STANDARDS (cont'd...) Phase 1 - Impact assessment The impact assessment included a diagnostic of the major differences between current Canadian GAAP and IFRS that will impact the company's financial statements, beginning with third-party training of the Company's accounting department. This diagnostic has identified and ranked the key IFRS-to-Canadian GAAP differences applicable to the Company and assessed the potential impact to the financial statements, note disclosures and exemptions available on transition. A detailed project plan with timelines and key milestones will be completed by the project team and is being continually updated to take into account any timetable changes as required. At this time, key standards which are expected to affect the Company, include: accounting for business combinations (IFRS 3), accounting for financial instruments (IFRS 7) and accounting for stock-based payments (IFRS 2). The overall adoption of IFRS is governed by IFRS 1, "First-time adoption of International Financial Reporting Standards". Phase 2 - Planning & solution development Planning & solution development requires detailed analysis of each of the key IFRS conversion topics identified, while continually monitoring any implemented or proposed changes to IFRS. Many IFRS policies in effect at the date of this report are expected to change by the time the Company adopts IFRS on January 1, 2011. An analysis will be completed for all accounting policies as part of the conversion process, according to IFRS 1. The Company has begun this analysis. Phase 3 - Implementation During the implementation phase, activities will include implementing the required changes to accounting and operational information systems, disclosure controls and internal controls over financial reporting and determining accounting policies and additional training of employees. The majority of this phase will be executed over the first half of 2010, preparing the Company for the date of adoption on January 1, 2011. Phase 4 - Post implementation review The post implementation and review phase will involve a continuation of the monitoring of changes in IFRS, International Accounting Standards and associated interpretation bulletins. Timing The table below summarizes the estimated timing of activities related to the Company's transition to IFRS:
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ACTIVITY ESTIMATED TIMING
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* Initial analysis of key areas for which Completed
changes to accounting policies may be required
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Detailed analysis of all relevant IFRS First quarter 2010
requirements and identification of areas
requiring accounting policy changes or
those with accounting policy alternatives
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* Assessment of first-time adoption (IFRS 1) First quarter 2010
requirements and alternatives
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* Final determination of changes to accounting Q3(September 30, 2010) -
policies and choices to be made with respect Q4(December 31, 2010)
to first-time adoption alternatives
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* Resolution of the accounting policy change Q3(September 30, 2010) -
implications on information technology Q4(December 31, 2010)
processes, internal controls and
contractual arrangements
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* Management and employee education Throughout the
and training transition process
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* Quantification of the Financial Statement Throughout fiscal 2011
Impact of changes in accounting policies
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3. ADOPTION OF NEW ACCOUNTING STANDARDS (cont'd...) Accountability The Company's Audit Committee is overseeing the IFRS conversion project and holds Management accountable for a successful IFRS transition. The Company will continue to communicate progress of this conversion in future quarterly reports. B. Business combinations In January 2008, the CICA introduced Handbook Section 1582, "Business Combinations", to replace Handbook Section 1581, "Business Combinations", and Sections 1601, "Consolidated Financial Statements", and 1602, "Non-controlling Interests", to replace Handbook Section 1600, "Consolidated Financial Statements". The adoption of Section 1582 and collectively Sections 1601 and 1602 provides the Canadian equivalent to IFRS 3 "Business Combinations", and International Accounting Standards ("IAS") 27, "Consolidated and Separate Financial Statements". CICA 1582 applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011. CICA 1601 and CICA 1602 apply to interim and annual consolidated financial statements relating to years beginning on or after January 1, 2011. Management has not yet determined the impact of these standards on the Company's consolidated financial statements.
4. INVESTMENTS
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At September 30, 2009, the Company held the following investments:
Company Number of Number of Number of Fair
Shares Warrants Options Cost Value
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Public Companies:
Lions Gate Metals Inc.
2,730,937 1,099,137 - $3,740 $3,085
Mega Moly Inc.
28,108,000 - 300,000 892 2,683
Oriental Minerals Inc.
19,149,612 4,224,741 - 5,482 1,716
Maudore Minerals Ltd.
500,000 - - 1,123 1,270
Cue Resources Ltd.
9,795,735 - - 4,273 784
Teslin River Resources Corp.
10,716,420 - - 998 696
Pacific Coast Nickel Corp.
10,768,500 - 100,000 929 378
Salmon River Resources Ltd.
2,137,010 - - 236 363
Sheen Resources Ltd.
818,266 166,667 - 2,100 189
Total of 7 other public company investments, each valued under $100
462 187
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$20,235 $11,351
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Private Companies:
UrAmerica PLC
4,000,000 2,857,143 - $699 $1,729
Mineral Mountain Res. Ltd.
3,190,000 - - 406 130
Shoal Point Energy Ltd.
2,500,000 - - 250 61
Argentina Power Mining Corp.
4,000,000 2,857,143 - 564 56
Coral Rapids Minerals Inc.
20,000,000 - - 100 48
Tanzania Minerals Corp.
2,000,000 - - 100 39
Tarim Resources Co. Ltd.
2,500,000 - - 625 30
Total of 11 other private company investments and other resource projects each valued under $20 10,455 257
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$13,199 $2,350
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Total fair value of investments $33,434 $13,701
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At December 31, 2008, the Company held the following investments:
-***-
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At September 30, 2008, the Company held the following investments:
Company Number of Number of Number of Fair
Shares Warrants Options Cost Value
----------------------------------------------------------------------
Public Companies:
Lions Gate Metals Inc.
2,730,937 1,099,137 - $3,740 $2,408
Maudore Minerals Ltd.
856,100 - - 1,922 1,070
Oriental Minerals Inc.
13,563,650 - 100,000 4,825 953
Mega Moly Inc.
25,558,000 - 300,000 765 898
Cue Resources Ltd.
6,753,235 673,418 250,000 3,915 645
Pacific Coast Nickel Corp.
10,152,500 - 100,000 908 204
Pencari Mining Corp.
12,124,000 7,500,000 - 2,099 187
CMYK Capital Inc.
5,000,000 - - 250 178
Salmon River Resources Ltd.
2,137,000 - - 236 149
Total of 18 other public company investments, each valued under $100
1,534 302
----------------
$20,194 $6,994
----------------
Private Companies:
UrAmerica PLC
4,000,000 2,857,143 - $699 $1,089
Tanzania Mineral Corp.
10,000,000 - - 50 605
Mineral Mountain Res. Ltd.
2,690,000 - - 406 81
Big Sky Uranium Res.
300,000 - - 75 75
Argentina Power Mining Corp.
4,000,000 2,857,143 - 564 45
Shoal Point Energy Ltd.
2,500,000 - - 250 38
Coral Rapids Minerals Inc.
20,000,000 - - 100 30
Total of 10 other private company investments and other resource projects each valued under $20 11,180 469
----------------
$13,324 $2,432
----------------
Total fair value of investments $33,518 $9,426
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5. PROPERTY AND EQUIPMENT
-----------------------------------------------------------------
Cost Accumulated Net Book
Amortization value
-----------------------------------------------------------------
Balance, September 30, 2009
Computer equipment $ 161 $ 101 $ 60
Furniture and fixtures 211 113 98
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$ 372 $ 214 $ 158
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Balance, December 31, 2008
Computer equipment $ 162 $ 72 $ 90
Furniture and fixtures 218 86 132
Leasehold improvements 40 11 29
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$ 420 $ 169 $ 251
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6. SHARE CAPITAL
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Number
of Shares Amount
----------------------------------------------------------------------
Authorized:
An unlimited number of common voting shares without par value
Issued:
As at December 31, 2007 109,328,336 $ 37,774
Issued for Employee Bonus (a) 3,518,511 950
Cancelled portion of Employee Bonus (b) (462,962) (125)
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As at December 31, 2008 and September 30, 2009
112,383,885 $ 38,599
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(a)On June 12, 2008, the Company issued 3,518,511 common shares to employees for payment of fiscal 2007 bonuses. (b)On October 7, 2008, 462,962 of the bonus shares were returned to treasury, valued at $125.
CONTRIBUTED SURPLUS:
Amount
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Balance, December 31, 2007 $ 8,119
Stock-based compensation 332
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Balance, December 31, 2008 $ 8,451
Stock-based compensation 136
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Balance, September 30, 2009 $ 8,587
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WARRANTS: All warrants expired in the first quarter of 2009. At December 31, 2008, there were outstanding warrants enabling the holders to acquire 1,000,000 shares as follows:
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Number Exercise
of Warrants Price Expiry Date
---------------------------------------------------------------------
Warrants 1,000,000 2.00 March 15, 2009
Total 1,000,000
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7. STOCK OPTIONS The Board of Directors of the Company may from time to time, in its discretion, and in accordance with Exchange requirements, grant to directors, officers, employees and consultants to the Company, non-transferable options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares, exercisable for a period of up to five years from the date of grant. The Company's Stock Option Plan requires that options vest 20% each six months, with 20% tradable on the date of grant. The Board of Directors may, however, change such provisions in its discretion or as required on a grant by grant basis. On January 30, 2009, the Company re-priced 4,000,000 outstanding stock options that had exercise prices ranging from $0.15 to $1.23 per share, to be exercisable at $0.055 per share. At September 30, 2009, the Company had outstanding stock options enabling the holders to acquire 4,475,000 shares as follows: ----------------------------------------------------------------- Number Number Vested Exercise Expiry of Options and Exercisable Price Date ----------------------------------------------------------------- 500,000 500,000 0.150 September 23, 2010 600,000 600,000 0.055 September 23, 2010 200,000 200,000 0.055 April 19, 2011 50,000 50,000 0.055 August 1, 2011 50,000 50,000 0.055 August 8, 2011 100,000 100,000 0.055 June 12, 2012 25,000 25,000 0.055 September 24, 2012 40,000 32,000 0.055 October 1, 2012 1,000,000 800,000 0.055 December 14, 2012 75,000 45,000 0.055 July 2, 2013 1,835,000 734,000 0.060 February 8, 2014 ---------------------------------------------------------------- Total 4,475,000 3,136,000 ---------------------------------------------------------------- At December 31, 2008, the Company had outstanding stock options enabling the holders to acquire 5,990,000 shares as follows: ---------------------------------------------------------------- Number Number Vested Exercise Expiry of Options and Exercisable Price Date ---------------------------------------------------------------- 2,350,000 2,350,000 0.15 September 23, 2010 500,000 500,000 0.15 October 14, 2010 300,000 300,000 0.43 April 19, 2011 575,000 575,000 0.64 August 1, 2011 50,000 50,000 0.66 August 8, 2011 50,000 50,000 0.86 November 10, 2011 100,000 100,000 0.91 November 21, 2011 500,000 500,000 1.35 December 12, 2011 100,000 100,000 1.17 February 8, 2012 100,000 100,000 1.45 March 1, 2012 100,000 100,000 1.23 June 12, 2012 25,000 15,000 0.82 September 24, 2012 40,000 24,000 0.70 October 1, 2012 200,000 200,000 0.70 October 30, 2012 1,000,000 1,000,000 0.62 December 14, 2012 ---------------------------------------------------------------- Total 5,990,000 5,964,000 ---------------------------------------------------------------- -****- 7. STOCK OPTIONS (cont'd...)
The following is a summary of the recent stock option transactions:
Weighted average
Number of shares exercise price
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Outstanding at December 31, 2008 5,990,000 $ 0.49
Granted 4,620,000 0.08
Expired and forfeited (6,135,000) 0.35
-----------------------------------
Outstanding at September 30, 2009 4,475,000 $ 0.07
=======================================================================
The fair value of stock options granted during the nine months ended September 30, 2009, was $136, and was $322 for the year ended December 31,2008, which was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions:
2009 2008
-------------------------------------
Risk-free interest rate 1.20%-1.65% 3.28%-4.80%
Expected life of option 2.5 YEARS 2.5 years
Annualized volatility 105%-120% 90%-115%
Dividend rate 0% 0%
8. RELATED PARTY TRANSACTIONS (a) For the nine months ended September 30, 2009, the Company has: (i) Paid or accrued consulting fees of $292 (2008 - $171) to officers of the company. (ii) Paid or accrued directors' fees of $124 (2008 - $132). (iii) Earned fees for corporate secretarial, corporate development, administrative and accounting services totaling $684 (2008 - $1,819) from related companies. (b) As at September 30, 2009, the Company owed $341 (2008 - $51) to related parties, comprised of $193 for directors fees related to board and committee meetings over the current and prior periods, and $135 to the CEO for services rendered. (c) At September 30, 2009, the Company was owed $723 (2008 - $298) from related parties comprised of the above noted fees (8(a)(iii)) earned in the current and prior periods, and includes amounts totaling $421 (December 31, 2008 - $129) due from the former CEO of the Company for advances in lieu of expenses. The amounts owing by the former CEO are unsecured and non-interest bearing. The Company is taking the appropriate steps to collect the amounts, and at the date of this report, the Company was negotiating a Debt Agreement in respect of the total amount owing. (d) The Company's investments in which a director or officer of the investee company is or was also a director, officer or a member of management of the Company and the Company holds greater than 10% of the outstanding share capital of the investee company, are as follows: Anglo Columbia Mines Inc., Betics Range Resources Inc., Central Nickel Company Inc., Cue Resources Ltd., Cuthill Copper Inc., It's Your Nickel Exploration Ltd., Lions Gate Metals Inc., Mega Moly Inc., Northwest Uranium Co., Oriental Minerals Inc., Pacific Coast Nickel Corp. and Western Australian Diamonds Inc. 8. RELATED PARTY TRANSACTIONS (cont'd...) (e) Loans Receivable At September 30, 2009, the Company had total related party loans receivable of $183, as follows:
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Balance Balance
December 31, Loans New loans September 30,
Related party 2008 repaid provided 2009
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Altus Agritech Inc.
$ - $ - $ 100 $ 100
Canamara Energy Corp.
- - 14 14
Kyoto Planet Group Inc.
210 (210) - -
Oriental Minerals Inc.
564 (564) - -
Pan Asia Biofuels Inc.
54 (54) - -
Sheen Resources Ltd.
- - 69 69
Teslin River Resources Inc.
50 (50) - -
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$ 878 $ (878) $ 183 $ 183
=========================================================================
No impairments were recorded during the current period. Refer to Note 12. (f) The Company has a committed obligation, effective January 1, 2008, whereby the Board of Directors and corporate officers have the option to participate collectively in up to 20% of any founding stock in all new private company investments. All of the above-noted transactions were considered to be in the normal course of operations and were measured at the amount of consideration established and agreed to by the related parties. 9. MANAGEMENT OF CAPITAL The Company considers the following as its components of capital:
--------------------------------------------------------
September 30, December 31,
2009 2008
--------------------------------------------------------
Cash and cash equivalents $ 1,098 $ 1,000
Share capital 38,599 38,599
Contributed surplus 8,587 8,451
Retained earnings (deficit) (28,017) (30,854)
--------------------------------------------------------
Total Capital $ 20,267 $ 17,196
========================================================
9. MANAGEMENT OF CAPITAL (cont'd...) The Company's objectives when managing capital are: (a) To ensure that the Company maintains the level of capital necessary to meet its operational requirements; (b) To allow the Company to respond to changes in economic and/or marketplace conditions by maintaining its ability to purchase new investments; (c) To create sustained growth in shareholder value by increasing shareholders' equity and minimizing shareholder dilution; and (d) To maintain a flexible capital structure which optimizes the cost of capital at acceptable levels of risk. The Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its underlying assets. The Company maintains or adjusts its capital level to enable it to meet its objectives, by: (a) Realizing proceeds from the disposition of its investments; and (b) Raising funds through equity financings. The Company is not subject to any externally imposed capital requirements. The Company's management monitors the Company's capital to ensure capital resources will be sufficient to discharge its liabilities on an on-going basis. 10. FINANCIAL INSTRUMENTS (a) Classification Financial instruments of a company are classified into one of five categories: held-for-trading, held-to-maturity, loans and receivables, available-for-sale financial assets and other financial liabilities. All financial instruments are measured 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 accounting for changes in the value of these instruments will depend on their initial classification as follows: a) held-for-trading financial assets are measured at fair value with changes in fair value recognized in operations, and b) Available-for-sale financial instruments are measured at fair value with changes in fair value recorded in other comprehensive income until the change in value is realized or the instrument is derecognized or permanently impaired. The Company has classified its cash and cash equivalents as held-for-trading. The accounting method for the Company's present investments under AcG-18 is consistent with a classification as held-for-trading, as investments are accounted for at fair value with changes in fair value recognized in operations. Accounts receivable, amounts due from related parties and related party loans receivable are classified as loans and receivables and are initially measured at amortized cost with a subsequent measurement reduction for an allowance for doubtful accounts or a provision for impairment. Accounts payable and amounts due to related parties are classified as other liabilities. 10. FINANCIAL INSTRUMENTS (cont'd...) (b) Fair value The Company has determined the fair value of its financial instruments as follows: (i) The carrying values of cash and cash equivalents, amounts due from related parties, accounts receivable, amounts due to related parties and accounts payable and accrued liabilities in the consolidated balance sheets approximate their fair values due to the short-term nature of these instruments. (ii) The carrying value of the related party loans receivable approximates their fair value as the amounts presented are stated net of an impairment provision (see Note 8(e)). (iii) Investments are carried at amounts in accordance with the Company's accounting policies. (iv) The Company does not have any Other Comprehensive Income (Loss) components and, as such, comprehensive income (loss) is equal to net income (loss). (c) Risk management The Company is or may be subject to certain risks including interest rate risk, currency risk, credit risk and market risk. Risk management strategies may expose the Company to further gains or losses, but serve to stabilize future cash flows, reduce the volatility of operating results, and increase overall financial strength. Individual risks are discussed as follows: Interest rate risk The Company has loans receivable and, therefore, may be subject to interest rate risk. However, the interest amounts are immaterial given the current low global interest rate environment. This risk to date is further mitigated by locking interest rates, where possible, at the inception of the loans, and not allowing the instruments to be subject to floating interest rates. Currency risk The Company has foreign investments and subsidiaries and, therefore, is subject to currency risk. However, these amounts are not significant and there are no material foreign currency commitments. The currency risk is therefore manageable and not significant. The Company does not currently use any derivative instruments to reduce its exposure to fluctuations in foreign currency exchange rates. Credit risk Credit risk is the risk associated with the inability of a third party to fulfill its payment obligations. The Company is exposed to the risk that third parties that owe money or securities in connection with services provided, or for other purposes, will default on their underlying obligations. Credit risk from accounts receivable and loans receivable encompasses the default risk of the customers. The Company manages its exposure to credit risk by reviewing the outstanding balances on an ongoing basis, monitoring the amount attributable to each customer and the length of time taken for amounts to be settled. Where necessary, Management takes appropriate action to follow up on those balances considered overdue. 10. FINANCIAL INSTRUMENTS (cont'd...) The Company is also exposed, in the normal course of business, to credit risk from the sale of its investments and on amounts due from related parties. The maximum exposure to losses arising from accounts receivable, amounts due from related parties and related party loans receivable are equal to their carrying amounts. As at September 30, 2009, the Company recorded a bad debts expense of $288 against overdue accounts, the collection of which is doubtful. Market Risk Market risk is the risk that the fair value of, or future cash flows from, the Company's financial instruments will significantly fluctuate due to changes in market prices. The value of the financial instruments can be affected by changes in interest rates, foreign exchange rates and equity and commodity prices. The Company is exposed to market risk in trading its investments, and unfavourable market conditions could result in dispositions of investments at less than favourable prices. The Company manages market risk by having a portfolio which is not singularly exposed to any one issuer or class of issuers. The Company's investments are primarily concentrated in the natural resource industry, which results in exposure to higher volatility than broader market investments and indexes. The Company's investments are accounted for at estimated fair values and are sensitive to changes in market bid prices, such that changes in market prices result in a proportionate change in the carrying value of the Company's investments. 11. SUBSEQUENT EVENTS On October 20, 2009, the Company granted a total of 1,630,000 stock options at an exercise price of $0.08 per share expiring October 19, 2014. Of this total, 550,000 were granted to directors and officers of the Company, with the balance being granted to employees and consultants. These options are subject to certain vesting provisions. On November 4, 2009, a cease trade order was issued by the Alberta and BC Securities Commission against Oriental Minerals Inc. ("Oriental"), one of the Company's investments, due to failure to file the annual audited financial statements. Oriental has advised the Company that it is taking the necessary steps to rectify this situation. The Company acquired 2,725,000 units of Cue Resources Ltd., at a subscription price of $0.10 per unit for an aggregate purchase price of $272,500. Each unit consists of one common share and one share purchase warrant entitling the holder to acquire one additional common share at a price of $0.15 for a period of 24 months from the date of closing.
12. SUPPLEMENTARY CASH FLOW INFORMATION
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Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
NON CASH INVESTING ACTIVITIES
Loan receivable received in shares:
Kyoto Planet Group Inc.
$ 210 $ - $ 210 $ -
Oriental Minerals Inc.
- - 54 -
Pan Asia Biofuels Inc.
54 - 54 -
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264 - 828 -
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Source: Longview Capital Partners Incorporated (LV - TSXV) www.longviewcp.com Maximum News Dissemination by Filing Services Canada Inc. * www.usetdas.com
158.94 (1.43%)
