Galantas Gold Regulatory News (GAL)

15 Aug 2006 11:00

Galantas Gold Corporation15 August 2006 NOTICE TO SHAREHOLDERS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 GALANTAS GOLD CORPORATION (A Development Stage Company) Responsibility for Consolidated Financial Statements The accompanying consolidated financial statements for Galantas Gold Corporationhave been prepared by management in accordance with Canadian generally acceptedaccounting principles consistently applied. The most significant of theseaccounting principles have been set out in the December 31, 2005 auditedconsolidated financial statements. Only changes in accounting information havebeen disclosed in these consolidated financial statements. These statements arepresented on the accrual basis of accounting. Accordingly, a precisedetermination of many assets and liabilities is dependent upon future events.Therefore, estimates and approximations have been made using careful judgment.Recognizing that the Company is responsible for both the integrity andobjectivity of the consolidated financial statements, management is satisfiedthat these consolidated financial statements have been fairly presented. Auditors' involvement The auditors of Galantas Gold Corporation have not performed a review of theunaudited consolidated financial statements for the three and six months endedJune 30, 2006 and June 30, 2005. GALANTAS GOLD CORPORATION(A Development Stage Company) CONSOLIDATED BALANCE SHEETS (PREPARED BY MANAGEMENT) June 30, December 31, 2006 2005 (Unaudited) (Audited)AssetsCurrentCash $ 321,659 $ 1,121,985Accounts receivable and advances 243,849 144,727Inventory 98,516 101,363Future income taxes 302,900 302,900 966,924 1,670,975 Property, plant and equipment (Note 2(a)) 4,426,734 2,903,165 Deferred development costs (Note 2(b)) 5,619,033 4,314,368 Future income taxes 466,900 466,900 $ 11,479,591 $ 9,355,408 Liabilities CurrentAccounts payable and accrued liabilities $ 536,456 $ 297,785Current portion of financing facility (Note 3) 218,706 99,207Due to directors - 253,103 755,162 650,095 Long-term portion of financing facility (Note 3) 444,533 271,664 1,199,695 921,759 Shareholders' Equity Share capital (Note 4) 21,203,528 18,400,862 Warrants (Note 5) - 175,166 Contributed surplus (Note 7) 820,324 656,658 22,023,852 19,232,686 Deficit (11,743,956) (10,799,037) 10,279,896 8,433,649 $ 11,479,591 $ 9,355,408 GALANTAS GOLD CORPORATION(A Development Stage Company)CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT(PREPARED BY MANAGEMENT)(UNAUDITED) Cumulative since development stage on Three Months Ended Six Months Ended January 1, 2003 June 30, June 30, June 30, 2006 2006 2005 2006 2005 Sales $ 468,438 $ 11,047 $ 15,623 $ 14,892 $ 36,120 Cost of goods sold 519,208 4,277 18,671 5,900 43,166 (50,770) 6,770 (3,048) 8,992 (7,046) Expenses Accounting and corporate 90,931 10,575 11,100 22,855 19,630 Bank charges and interest 21,564 1,563 3,553 3,334 3,553 Consulting 64,757 14,007 16,250 14,007 19,500 Foreign exchange (gain)loss (101,629) 13,036 33,675 22,191 20,236 Legal and audit 378,296 123,176 36,384 180,434 66,018 Management fees 247,500 - 25,000 - 50,000 Operating expenses 1,230,475 26,407 157,914 51,049 231,953 Shareholder communication and public relations 679,519 172,261 - 448,073 - Stock-based compensation 686,266 51,666 214,200 163,666 214,200 Transfer agent 80,732 11,419 7,496 16,954 8,750 Travel and general office 186,764 (6,325) 10,396 31,348 30,157 3,565,175 417,785 515,968 953,911 663,997 Loss before income taxes (3,615,945) (411,015) (519,016) (944,919) (671,043) Income tax recovery 769,800 (9,200) - - - Loss for the period (2,846,145) (420,215) (519,016) (944,919) (671,043) DEFICIT, beginning of period (8,897,811) (11,323,741) (10,912,632) (10,799,037) (10,760,605) DEFICIT, end of period $(11,743,956) $(11,743,956) $(11,431,648) $(11,743,956) $(11,431,648) Loss per share $ 0.00 $ 0.00 $ 0.01 $ 0.01 Weighted average number of shares outstanding 143,177,902 123,293,089 135,744,586 107,297,472 GALANTAS GOLD CORPORATION(A Development Stage Company)CONSOLIDATED STATEMENTS OF CASH FLOWS (PREPARED BY MANAGEMENT)(UNAUDITED) Cumulative since development stage on Three Months Ended Six Months Ended January 1, 2003 June 30, June 30, June 30, 2006 2006 2005 2006 2005 CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES Net loss for theperiod $ (2,846,145) $ (420,215) $ (519,016) $ (944,919) $ (671,043) Adjustment for Amortization 165,975 1,599 24,479 3,017 41,025 Stock-based compensation 686,266 51,666 214,200 163,666 214,200 Future income taxes (769,800) 9,200 - - - Net change in non-cash working capital (Note 10) 143,864 (143,605) (97,301) 142,396 (25,445) (2,619,840) (501,355) (377,638) (635,840) (441,263) INVESTING ACTIVITIES Purchase of property, plant and equipment (2,871,582) (1,133,957) (545,932) (1,664,350) (545,932) Deferred development costs (2,165,794) (731,563) - (1,166,901) - Marketable securities 2,096 - - - - (5,035,280) (1,865,520) (545,932) (2,831,251) (545,932) FINANCING ACTIVITIES Issue of common shares for cash 7,764,053 1,757,583 2,413,783 2,627,500 3,279,283 Share issue costs (360,400) - - - - Advances from financing facility 920,400 - 461,498 365,400 454,168 Repayments of financing facility (313,303) (51,989) - (73,032) - Advances to directors (127,140) (104,303) (387,482) (253,103) (318,861) 7,883,610 1,601,291 2,487,799 2,666,765 3,414,590 NET CHANGE IN CASH 228,490 (765,584) 1,564,229 (800,326) 2,427,395 CASH, beginning of period 93,169 1,087,243 996,922 1,121,985 133,756 CASH, end of period $ 321,659 $ 321,659 $ 2,561,151 $ 321,659 $ 2,561,151 GALANTAS GOLD CORPORATION(A Development Stage Company)CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (PREPARED BY MANAGEMENT)(UNAUDITED) Shares issued and subscribed Warrant Contributed (#) of Shares Share Value Value Surplus Deficit Total Balance at January 1, 2003 71,115,222 $ 13,082,493 $ - $ 1,420 $ (8,897,811) $ 4,186,102 Shares issued on exercise of warrants 250,000 27,461 - - - 27,461 Common shares issued, net of issue costs 8,707,860 1,048,524 - - - 1,048,524 Common shares issued for debt settlement 7,416,395 741,640 - - - 741,640 Valuation of agents options - - - 20,751 - 20,751 Valuation of warrants issued - (78,537) 78,537 - - - Loss for theyear - - - - (676,142) (676,142) Balance at December 31, 2003 87,489,477 14,821,581 78,537 22,171 (9,573,953) 5,348,336 Shares issued on exercise of warrants 945,554 159,089 - - - 159,089 Common shares issued, net of issue costs 2,866,825 395,318 - - - 395,318 Valuation of stock options granted - - - 287,649 - 287,649 Valuation of warrants issued - (71,671) 71,671 - - - Valuation of warrants exercised or expired - 17,570 (78,537) 60,967 - - Loss for theyear - - - - (1,186,652) (1,186,652) Balance at December 31, 2004 91,301,856 15,321,887 71,671 370,787 (10,760,605) 5,003,740 Common shares issued, net of issue costs 35,033,333 3,254,141 - - - 3,254,141 Valuation of warrants issued - (175,166) 175,166 - - - Valuation of warrants expired - - (71,671) 71,671 - - Valuation of stock optionsgranted - - - 214,200 - 214,200 Loss for the year - - - - (38,432) (38,432) Balance at December 31,2005 126,335,189 18,400,862 175,166 656,658 (10,799,037) 8,433,649 Shares issued on exercise of warrants 17,516,666 2,627,500 - - - 2,627,500 Valuation of warrantsexercised - 175,166 (175,166) - - - Valuation of stock optionsgranted - - - 163,666 - 163,666 Loss for theperiod - - - - (944,919) (944,919) Balance at June 30, 2006 143,851,855 $ 21,203,528 $ - $ 820,324 $(11,743,956) $10,279,896 GALANTAS GOLD CORPORATION(A Development Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (PREPARED BY MANAGEMENT)THREE AND SIX MONTHS ENDED JUNE 30, 2006(UNAUDITED) 1. NATURE OF OPERATIONS AND GOING CONCERN These consolidated financial statements have been prepared on a going concernbasis which contemplates that Galantas Gold Corporation (the "Company") will beable to realize assets and discharge liabilities in the normal course ofbusiness. The recoverability of these consolidated amounts, which includes theconsolidated results of the Company's wholly-owned subsidiary CavanacawCorporation ("Cavanacaw"), is dependent on the ability of the Company to obtainfuture financing and to recover its investment in Omagh Minerals Limited("Omagh"). Cavanacaw has a 100% shareholding in Omagh which is engaged in theacquisition, exploration and development of gold properties, mainly in Omagh,Northern Ireland. The Company is considered to be in the development stage as ithas yet to earn substantial revenues and it is devoting substantially all of itsefforts toward the development of this process. As at December 31, 2001, studies performed on Omagh's mineral property confirmedthe existence of economically recoverable reserves. The mineral property iscurrently in the development stage of operation and the directors believe thatthe capitalized development expenditures will be fully recovered by the futureoperation of the mine. The recoverability of Omagh's capitalized developmentcosts is thus dependent on the ability to secure financing, future profitableproduction or proceeds from the disposition of the mineral property. Thesedevelopment expenditures will be amortized over the estimated life of the orebody. Management is confident that it will be able to secure the required financing toenable the Company to continue as a going concern. However, this is of subjectto a number of factors including market conditions. These consolidatedfinancial statements do not reflect adjustments to the carrying value of assetsand liabilities, the reported expenses and balance sheet classifications usedthat would be necessary if the going concern assumption was not appropriate.Such adjustments could be material. The Company was formed on September 20, 1996 under the name Montemor ResourcesInc. on the amalgamation of 1169479 Ontario Inc. and Consolidated Deer CreekResources Limited. The name was changed to European Gold Resources Inc. byarticles of amendment dated July 25, 1997. On May 5, 2004, the Company changedits name from European Gold Resources Inc. to Galantas Gold Corporation. TheCompany was incorporated to explore for and develop mineral resource properties,principally in Europe. Its first exploration project was a property inPortugal. In 1997, it purchased all of the shares of Omagh which owns a mineralproperty in Northern Ireland, including a delineated gold deposit. Omaghobtained full planning and environmental consents necessary to bring itsproperty into production. The Company entered into an agreement on April 17, 2000, approved byshareholders on June 26, 2000, whereby Cavanacaw, a private Ontario corporation,acquired Omagh. Cavanacaw has established an open pit mine to extract theCompany's gold deposit near Omagh. Cavanacaw also has developed a premiumjewellery business founded on the gold produced under the name Galantas IrishGold Limited ("Galantas"). Cavanacaw operations include the consolidated results of Cavanacaw and itswholly-owned subsidiaries Omagh and Galantas. The unaudited consolidated financial statements have been prepared in accordancewith Canadian generally accepted accounting principles for interim financialinformation. Accordingly, they do not include all of the information and notesto the consolidated financial statements required by Canadian generally acceptedaccounting principles for annual consolidated financial statements. In theopinion of management, all adjustments (consisting of normal recurring accruals)considered necessary for a fair presentation have been included. Operatingresults for the three and six month periods ended June 30, 2006 may notnecessarily be indicative of the results that may be expected for the yearending December 31, 2006. GALANTAS GOLD CORPORATION(A Development Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (PREPARED BY MANAGEMENT)THREE AND SIX MONTHS ENDED JUNE 30, 2006(UNAUDITED) 1. NATURE OF OPERATIONS AND GOING CONCERN (Continued) The consolidated balance sheet at December 31, 2005 has been derived from theaudited consolidated financial statements at that date but does not include allof the information and footnotes required by Canadian generally acceptedaccounting principles for complete consolidated financial statements. Theinterim consolidated financial statements have been prepared by management inaccordance with the accounting policies described in the Company's annualconsolidated financial statements for the year ended December 31, 2005. Forfurther information, refer to the consolidated financial statements and notesfor the year ended December 31, 2005. New accounting pronouncement In January 2005, the Canadian Institute of Chartered Accountants issued four newaccounting standards: Handbook Section 1530, Comprehensive Income, HandbookSection 3251, Equity, Handbook Section 3855, Financial Instruments -Recognition and Measurement and Handbook Section 3865, Hedges. These standardsare effective for interim and annual consolidated financial statements for theCompany's fiscal years beginning January 1, 2007. As of June 30, 2006, theimpact of implementing these new standards is not yet determinable. 2. PROPERTY, PLANT AND EQUIPMENT AND DEFERRED DEVELOPMENT COSTS (a) Property, plant and equipment 2006 2005 Accumulated Cost Amortization Net Net Freehold land and buildings $ 3,009,697 $ 36,243 $ 2,973,454 $ 1,743,967 Plant and machinery 1,885,322 470,850 1,414,472 1,115,756 Motor vehicles 34,511 28,124 6,387 7,214 Office equipment 71,275 38,854 32,421 36,228 Moulds 81,802 81,802 - - $ 5,082,607 $ 655,873 $ 4,426,734 $ 2,903,165 GALANTAS GOLD CORPORATION(A Development Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (PREPARED BY MANAGEMENT)THREE AND SIX MONTHS ENDED JUNE 30, 2006(UNAUDITED) 2. PROPERTY, PLANT AND EQUIPMENT AND DEFERRED DEVELOPMENT COSTS (Continued) (b) Deferred development costs Three months Six months ended ended June 30, 2006 June 30, 2006 Opening balance $ 4,811,687 $ 4,314,368 Additions during the period: Leases 153,375 153,527 Consultants 53,809 124,218 Fuel 53,147 80,441 Wages 174,385 364,530 Interest 12,883 19,889 Travelling 41,699 68,676 Repairs and maintenance 25,750 72,582 Construction 194,510 246,301 General 22,003 36,737 Amortization of plant equipment 75,785 137,764 807,346 1,304,665 Total deferred development costs $ 5,619,033 $ 5,619,033 3. FINANCING FACILITY On March 17, 2006, the Company received a loan from Barclays Mercantile BusinessFinance Ltd. in the amount of $365,400 (180,000 GBP)(i) to assist in thepurchase of certain metallurgical equipment having a cost of $728,770 (359,000GBP). The loan is for a period of three years at 3.97% (flat interest) withmonthly blended installments of $11,132 (5,578 GBP). Amounts payable on the long term debt are as follows: June 30, December 31, Interest 2006 2005 Financing facility 3.71% $ 324,975 $ 370,871 Financing facility (i) 3.97% 338,264 - 663,239 370,871 Less current portion 218,706 99,207 $ 444,533 $ 271,664 Principal repayments over the next three years are as follows: 2007 $ 218,706 2008 235,899 2009 208,634 $ 663,239 GALANTAS GOLD CORPORATION(A Development Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (PREPARED BY MANAGEMENT)THREE AND SIX MONTHS ENDED JUNE 30, 2006(UNAUDITED) 4. SHARE CAPITAL (a) AUTHORIZED Unlimited number of common and preference shares issuable in Series (b) COMMON SHARES ISSUED NUMBER OF STATED SHARES VALUE Balance, January 1, 2006 126,335,189 $ 18,400,862Warrant exercise 17,516,666 2,627,500Warrant exercise - valuation - 175,166Balance, June 30, 2006 143,851,855 $ 21,203,528 5. WARRANTS During the period, 11,666,666 warrants expiring April 4, 2006 and 5,850,000warrants expiring April 15, 2006 were exercised for gross proceeds of$2,627,500. As of June 30, 2006, there were no warrants outstanding. 6. STOCK OPTIONS The Company has a stock option plan as detailed in Note 7(c) of the December 31,2005 audited consolidated financial statements. Number of Weighted Average Stock Options Exercise Price $ Balance, January 1, 2006 7,900,000 0.11Options granted 1,000,000 0.26Expired/cancelled (1,400,000) 0.15Balance, June 30, 2006 7,500,000 0.14 Details of the stock options outstanding as of June 30, 2006 are: Exercisable Number Exercise Expiry Options of Options Price Date $ 1,500,000 1,500,000 0.12 May 17, 2007 2,800,000 2,800,000 0.15 April 10, 2008 2,000,000 2,000,000 0.10 April 1, 2009 133,334 200,000 0.10 May 13, 2010 333,334 1,000,000 0.26 June 14, 2011 6,766,668 7,500,000 GALANTAS GOLD CORPORATION(A Development Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (PREPARED BY MANAGEMENT)THREE AND SIX MONTHS ENDED JUNE 30, 2006(UNAUDITED) 6. STOCK OPTIONS (Continued) During the period, 1,000,000 stock options were granted to employees of theCompany to purchase common shares at a price of $0.26 per share until June 14,2011. The fair value of these stock options was estimated using the Black-Scholes option pricing model with the following assumptions: dividend yield -0%; volatility - 60%; risk-free interest rate - 4.26% and an estimated life of 5years. The estimated fair value of $143,000 will be expensed in the statement ofoperations and deficit and credited to contributed surplus as the options vestover a three year period. Stock-based compensation includes $47,666 related tothe vested portion of these stock options. Stock-based compensation also includes $116,000 relating to 733,333 options thathave vested from previous stock option grants. On February 13, 2006, 1,000,000 stock options at an exercise price of $0.15expired and 400,000 options at an exercise price of $0.15 expiring April 10,2008 were cancelled. 7. CONTRIBUTED SURPLUS The following table reflects the continuity of contributed surplus: Contributed Surplus Balance, January 1, 2006 $ 656,658 Stock-based compensation charged to the statement of operations anddeficit (Note 6) 163,666 Balance, June 30, 2006 $ 820,324 8. RELATED PARTY TRANSACTIONS As at June 30, 2006, the Company was indebted to directors in the amount of $nil(2005 - $110,850). This amount represents amounts paid by the directors onbehalf of the Company along with unpaid management fees. These amounts areinterest-free and there are no fixed terms of repayment. During the period, the Company was charged $nil (2005 - $50,000) by directors ofthe Company for management services which are in the normal course of operationsand are measured at the exchange amount established and agreed to by the relatedparties. Accounts payable includes $nil (2005 - $50,000) owing to thesedirectors for management services and repayment of expenses incurred on behalfof the Company. The Company was charged $24,926 (2005 - $19,630) for accounting and corporatesecretarial services by companies associated to an officer of the Company.Accounts payable includes $12,494 (2005 - $1,738) owing to these companies. 9. SEGMENT DISCLOSURE The Company, after reviewing its reporting systems, has determined that it hasone reportable segment. The Company's operations are substantially all relatedto its investment in Cavanacaw and its subsidiaries, Omagh and Galantas.Substantially all of Cavanacaw's revenues, costs and assets of the business thatsupport these operations are derived or located in Northern Ireland. GALANTAS GOLD CORPORATION(A Development Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (PREPARED BY MANAGEMENT)THREE AND SIX MONTHS ENDED JUNE 30, 2006(UNAUDITED) 10. SUPPLEMENTAL CASH FLOW INFORMATION (a) Net change in non-cash working capital Three months Three months Six months Six months ended ended ended ended June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005 Accounts receivable andadvances $ (12,140) $ (81,510) $ (99,122) $ (48,326)Inventory 3,006 13,925 2,847 25,837Accounts payable andaccrued liabilities (134,471) (29,716) 238,671 (2,956) $ (143,605) $ (97,301) $ 142,396 $ (25,445) (b) Supplemental information Interest paid $ 14,447 $ 3,553 $ 23,223 $ 3,553 Interest paid includes $19,889 (2005 - $nil) of interest paid on the financingfacility. This amount was charged to deferred development costs. 11. OTHER INFORMATION Effective March 31, 2006 the Company's shares were successfully admitted totrading on the Alternative Investment Market ("AIM") of the London StockExchange. As a result, the Company is dual-listed on both AIM and the TSXVenture Exchange in Canada. 12. SUBSEQUENT EVENT The Company closed a private placement (the "Offering") for gross proceeds of$3,500,000. Pursuant to this offering, the Company issued 14,000,000 units ofthe Company (each a "Unit") at the price of $0.25 per Unit (including an over-allotment of 1,200,000 Units (the "Over-Allotment") and 2,000,000 Units forsubscribers specifically identified by management (the "President's List"). EachUnit consists of one common share of the Company and one warrant of the Company.Each warrant entitles the purchaser to purchase one common share at a price of$0.32 per share at any time until July 26, 2008. The shares will carry a 4-monthminimum hold period. An application will be made to admit any new shares issuedunder the placing to trading on AIM on the same day that they become eligiblefor trading on the TSX Venture Exchange. Union Securities Ltd., acting as agent (the "Agent") was paid a cash fee of$260,000 representing 8% in cash commission based on Units sold under theOffering and the Over-Allotment Option (excluding Units sold pursuant to thePresident's List) and 4% in cash for Units sold pursuant to the President'sList. In addition, the Company issued to the Agent 1,300,000 compensationoptions (the "Agent's Compensation Options") equal to 10% of all Units soldpursuant to the Offering and the Over-Allotment Option (excluding Units soldpursuant to the President's List) and 5% of all Units sold pursuant to thePresident's List. Each Agent's Compensation Option entitles the Agent topurchase one Unit of the Company at $0.25 per Unit at any time prior to July26, 2008. This information is provided by RNS The company news service from the London Stock Exchange