FINANCIAL STATEMENTS
For the six months ended June 30, 2006.
VEDRON GOLD INC.
Responsibility for Financial Statements
The accompanying interim financial statements for Vedron Gold Inc. have been prepared by management in accordance with Canadian Generally Accepted Accounting Principles consistently applied. The most significant of these policies have been set out in the December 31, 2005 audited financial statements. These statements are presented on an accrual basis of accounting. Accordingly, a precise determination of many assets and liabilities is dependent upon future events. Therefore, estimates and approximations have been made using careful judgment. Recognizing that the Corporation is responsible for both the integrity and objectivity of the financial statements, management is satisfied that these financial statements have been fairly stated.
VEDRON GOLD INC.
BALANCE SHEET
As at June 30, 2006
(unaudited)
June 30, 2006
(unaudited)
December 31, 2005
(audited))
ASSETS
Current
Cash
$2,772,263
$409,523
Accounts receivable
41,143
38,543
Marketable security
-
100,000
Prepaid expenses and deposits
69,065
7,581
2,882,471
555,647
Loan receivable, note 2
300,000
300,000
Property and equipment, note 3
865,773
31,123
Royalty interests, note 6
104,000
104,000
Mineral resource properties and deferred exploration costs, note 5
17,136,828
16,196,017
$21,289,072
$17,186,787
LIABILITIES
Current
Accounts payable and accrued liabilities
$44,127
$50,381
Promissory notes payable, note 4
400,000
200,000
444,127
250,381
Contingent liability, note 11
SHAREHOLDERS’ EQUITY
Capital stock, note 7
42,473,488
37,962,394
Contributed surplus, note 10
351,485
284,510
Deficit
(21,980,028)
(21,310,498)
20,844,945
16,936,406
$21,289,072
$17,186,787
Approved on behalf of the board:
___________________________ Director
___________________________ Director
See accompanying notes to the financial statements
VEDRON GOLD INC.
Statement of Operations and Deficit
For the Six Months Ended June 30, 2006
(Unaudited)
Three Months Ended June 30, 2006
Three Months Ended June 30, 2005
Six Months Ended June 30, 2006
Six Months Ended June 30, 2005
Cumulative from Date of Commencement of Development Stage January 1, 1995
Revenues
Option payments
$-
$-
$-
$-
$370,000
Interest
51
72
101
202
53,516
51
72
101
202
423,516
Expenses
Write-down of mineral resource properties
-
-
-
-
1,234,492
General and administrative
305,679
166,641
593,363
330,208
3,732,417
Stock based compensation
-
-
66,975
-
351,485
Proceeds on sale of marketable securities
3,277
-
3,277
(51,107)
40,170
Loss on disposal of royalty interest
-
-
-
-
45,000
Gain on recovery of notes receivable
(30,000)
-
(30,000)
-
(2,833)
Interest on notes payable
12,666
-
12,666
-
12,666
Amortization
22,300
1,150
23,350
2,300
75,663
313,922
167,791
669,631
281,401
5,489,060
Net loss for the period
(313,871)
(167,719)
(669,530)
(281,199)
$(5,065,544)
Deficit, beginning of period
(21,666,157)
(19,103,495)
(21,310,498)
(18,990,015)
Deficit, end of period
$(21,980,028)
$(19,271,214)
$(21,980,028)
$(19,271,214)
Loss per share – basic and fully diluted
$(0.005)
$(0.004)
$(0.010)
$(0.006)
Weighted average number of common shares outstanding (in thousands)
64,631
43,809
64,631
43,809
See accompanying notes to the financial statements
VEDRON GOLD INC.
Statement of Cash Flows
For the Six Months Ended June 30, 2006
(Unaudited)
Three Months Ended June 30, 2006
Three Months Ended June 30, 2005
Six Months Ended June 30, 2006
Six Months Ended June 30, 2005
Cumulative from the Date of Commencement of Development Stage January 1, 1995
Operating activities
Net loss for the period
($313,871)
($167,719)
($669,530)
($281,199)
$(5,065,544)
Adjustments for:
Amortization
22,300
1,150
23,350
2,300
75,676
Loss on sale of marketable securities
3,277
-
3,277
(51,107)
40,170
Stock based compensation
-
-
66,975
-
351,485
Loss on disposal of royalty interest
-
-
-
-
45,000
Write down of mineral resource properties
-
-
-
-
1,231,853
Write off of loan payable
-
-
-
-
21,167
(288,294)
(166,569)
(575,928)
(330,006)
(3,300,193)
Changes in non-cash working capital balances, note 8
(17,367)
135,468
(70,338)
(8,233)
(7,302,421)
Cash flows used in operating activities
(305,661)
(31,101)
(646,266)
(338,239)
(10,602,615)
Cash flows from investing activities
Increase in royalty interests
-
-
-
-
(20,362)
Purchase of property and equipment
-
-
(858,000)
-
(876,878)
Decrease (increase) in loan receivable
-
-
-
-
(312,500)
Decrease (increase) in marketable securities
96,723
-
96,723
74,123
(67,170)
Increase in mineral resource properties
(611,274)
(259,219)
(940,811)
(642,095)
(9,589,648)
(514,551)
(259,219)
(1,702,088)
(567,972)
(10,866,558)
Cash flows from financing activities
Increase in capital stock, net of provision for future income taxes
3,571,044
-
4,511,094
-
21,644,465
Increase (decrease) in notes payable
-
-
200,000
-
93,023
Increase in due to shareholders
-
192,200
-
192,200
-
Increase in issue of warrants
-
-
-
-
2,521,450
Increase in issue of convertible debenture
-
-
-
-
(32,141)
3,571,044
192,200
4,711,094
192,200
24,226,797
Net (decrease) increase in cash during the period
2,750,832
(98,120)
2,362,740
(714,011)
2,757,624
Cash position, beginning of period
21,431
120,637
409.523
736,528
14,639
Cash position, end of period
$2,772,263
$22,517
$2,772,263
$22,517
$2,772,263
See accompanying notes to the financial statements
VEDRON GOLD INC
Statements of Continuity of Mining Interests
Six months Ended June 30, 2006
Three months ended June 30, 2006
Three months ended June 30, 2005
Six months ended June 30, 2006
Six months ended June 30, 2005
Expenses
Direct Exploration and Development
$450,144
$159,219
$769,681
$282,095
Acquisition cost
161,130
100,000
171,130
460,000
Balance, beginning of period
16,525,554
14,086,516
16,196,017
13,603,640
Balance, end of period
$17,136,828
$14,345,735
$17,136,828
$14,345,735
See accompanying notes to the financial statements
VEDRON GOLD INC.
Notes to Financial Statements
June 30, 2006
(unaudited)
1 Summary of Significant Accounting Policies
The unaudited financial statements of Vedron Gold Inc. have been prepared by management in accordance with Canadian generally accepted accounting principles. These unaudited financial statements have been prepared following the same accounting policies and methods of computation as the audited financial statements for the fiscal year ended December 31, 2005. The disclosures provided below are incremental to those included with the audited annual financial statements. These unaudited financial statements should be read in conjunction with the Company’s audited financial statements and notes for the year ended December 31, 2005.
2 Loan receivable
The Company, as partial consideration of a preferential milling and tailing agreement, has advanced the mill owner $300,000 for a period of 24 months. This loan is non-interest bearing and secured by a first charge on the mill property.
3 Property and equipment
June 30, 2006
December 31, 2006
Cost
Accumulated
Amortization
Net book value
Net book value
Power lines and electrical equipment
$141,921
$122,709
$19,212
$20,222
Office and computer equipment
18,886
9,075
9,811
10,901
Mill equipment
858,000
21,250
836,750
-
$1,018,807
$153,034
$865,773
$31,123
4 Promissory notes payable
A promissory note payable of $200,000 is due to Laurion Gold Inc. as partial consideration due under the terms of the second amendment of the Laurion option agreement with respect to the Davidson Tisdale Property. The promissory note is interest bearing at 6%, unsecured and due August 31, 2006.
A promissory note of $200,000 bearing interest at 8% is due February 7, 2007. This resulted from the completion in February 2006 of an August 2005 agreement to purchase gold mining equipment with an estimated grinding capacity of up to 1,000 tons per day. The transaction was from an arm’s length vendor.
VEDRON GOLD INC.
Notes to Financial Statements
June 30, 2006
(unaudited)
5 Mineral resource properties and deferred exploration costs
a) Fuller Property
The Company has a 100% interest in the Fuller Property which is situated on two claims, the Fuller and the Dobie. Management is currently completing an updated resource estimate and applying for the permitting necessary to commence mining operations. The Dobie claim is subject to a 20% net profits interest calculated after all capital and operating costs have been recovered.
b) Buffalo Ankerite
The Company commenced work on the Buffalo Ankerite property during the year. The Company has the option to purchase a 100% interest in the property, prior to November 4, 2007, for $25,000, subject to an existing net profits interest.
6 Royalty interests
June 30, 2006
December 31, 2006
Pipestone Bay Properties – Red Lake
$51,000
$51,000
Augdome Property
53,000
53,000
$104,000
$104,000
a) The Company has a 1.5% net smelter royalty interest on the Pipestone Bay Property in Red Lake, Ontario.
b) The Company has a 2% net smelter royalty interest on the Augdome Property in Timmins, Ontario.
VEDRON GOLD INC.
Notes to Financial Statements
June 30, 2006
(unaudited)
7 Capital stock
Authorized:
An unlimited number of common shares
(a) Issued
Common
Number of Shares
Value
Balance – December 31, 2005
61,419,732
$37,962,394
Issued for common shares
4,912,334
2,947,400
Issued for flow-through shares
1,375,750
770,300
Less: financing costs
-
(198,856)
Issued on option exercise
1,080,000
268,750
Issued on warrant exercise
577,500
115,500
Issued for mill equipment
800,000
608,000
Finders fees on private placement
6,948
-
Balance – June 30, 2006
70,172,264
$42,473,488
The company completed private placements totaling 4,912,334 units, with each unit being comprised of one common share of the Company and one-half of one warrant, with each warrant being exercisable for one common share of the Company at an exercise price of $0.66 per common share and 1,375,750 flow through shares, for gross proceeds of $3,607,400.
8 Warrants and Options
Stock Options
Number of Options
Outstanding as at Dec. 31, 2005
2,800,000
Exercised
(1,080,000)
Issued exercisable @ 0.55
200,000
Balance, June 30, 2006
1,920,000
Warrants
Number of Warrants
Outstanding at Dec. 31, 2005
5,263,250
Exercised @ $0.20
(596,250)
Granted @ $0.66 expiring December 29, 2006
2,701,784
Granted @ $0.60 expiring May 12, 2007
596,333
Granted @ $0.60 expiring May 26, 2007
4,900
Balance, June 30, 2006
7,970,017
VEDRON GOLD INC.
Notes to Financial Statements
June 30, 2006
(unaudited)
8 Warrants and Options (continued)
The corporation’s stock option plan has been amended to fix the number of common shares issuable pursuant to the number of options under the plan at 7,000,000, as approved at the corporation’s annual meeting held on June 29, 2006.
9 Income taxes
The 2005 year income tax expense differs from the amounts that would have been computed by applying the combined Federal and Ontario statutory income tax rates of approximately 35% to the net loss for the year per the financial statements.. This difference is the result of the following:
Net loss for the year
$ (669,530)
Stock based compensation
66,975
Gain on recovery of notes receivable
(30,000)
Loss (gain) on disposal of marketable securities
3,277
Taxable income
$ (629,278)
Recovery of income taxes at statutory rate
(220,247)
Less valuation allowance
220,247
Provision for current year income taxes
$ -
The Company has non-capital loss carryforwards in the amount of $1,943,072 which may be used prior to 2014 to reduce future taxable income.
2006
$ 103,133
2007
132,720
2008
23,386
2009
80,623
2010
212,587
2014
508,495
2015
882,128
$ 1,943,072
In addition the Company has the following resource deductions, which may be applied against certain profits realized on its mining properties, exclusive of amounts transferred to investors of flow through shares as follows:
Canadian Development Expenditures $115,000
Canadian Exploration Expenditures $1,026,390
Foreign Exploration and Development Expenditures $151,343
For the year ended December 31, 2005 the Company made Canadian exploration expenditures in the amount of $827,397 of which $289,700 was renounced in favour of flow through shareholders.
VEDRON GOLD INC.
Notes to Financial Statements
June 30, 2006
(unaudited)
10 Contributed surplus
As at June 30, 2006
Balance, December 31, 2003
$ 37,800
Stock based compensation
71,110
Balance December 31, 2004
108,910
Stock based compensation
175,600
Balance December 31, 2005
284,510
Stock based compensation
66,975
Balance June 30, 2006
$ 351,485
11 Contingent liability
On December 17, 2002 the Mining Lands Commissioner issued an Order with respect to the Buffalo Ankerite mine site formerly owned by the Company. The Order requires the Company to use its best efforts to remediate the open pit on the site and maintain site security. The estimated cost to perform this work is $284,000 of which no liability has been accrued in these financial statements as mining activities on the property have not been determined to be completed in their entirety.
12 Related party transactions
Included in the accounts for the quarter ended June 30, 2006 are payments made to companies under the control significant influence of officers or to officers and directors directly, are as follows:
Management fees paid to a director and to management of the Company
$67,500
The Company entered into a sub-lease agreement to rent office space at $1,028 per month from a company with one director who is also a director of the Company
$2,056
The Company paid legal fees to a firm in which an officer of the Company is also a partner of the law firm
$18,452
Director fees paid/accrued to directors of the Company
$18,000
All related party transactions entered into by the Company are recorded at fair market value as determined by the Issuer’s directors with no beneficial interest in respect of a particular transaction.
VEDRON GOLD INC.
Notes to Financial Statements
June 30, 2006
(unaudited)
13 Supplemental Cash Flow Information
Six Months Ended June 30, 2006
Six Months Ended June 30, 2005
Changes in non-cash working balances
Accounts receivable
Prepaids
Accounts payable and accrued liabilities
$(2,600)
(61,484)
(6,254)
$3,148
(83,905)
72,524
$(70,338)
$(8,233)
14 Comparative figures
The comparative figures for the three months and six months ended June 30, 2005 were neither audited
nor reviewed.
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