UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 20-F – AMENDMENT NO. 1
ANNUAL REPORT – 2007
FOR FISCAL YEAR ENDED DECEMBER 31, 2006
(Mark One)
[ ]
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[x]
ANNUAL REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-50031
ACREX VENTURES LTD.
(Exact name of Registrant as specified in its charter)
ACREX VENTURES LTD.
(Translation of Registrant's name into English)
British Columbia, Canada
(Jurisdiction of incorporation or organization)
1400 – 570 Granville Street, Vancouver, B.C., Canada V6C 3P1
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act
Title of each class
Name of each exchange on which registered
Common voting
Nil
February 14, 2008
H:\My Documents\Acrex\SEC Forms\2008 version\Form 20-F-Final-with financials- at Feb.14-08.doc
2
Securities registered or to be registered pursuant to Section 12(g) of the Act
Common voting
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act
Nil
(Title of Class)
Indicate the number of outstanding shares of each of the Company's classes of capital or common stock as of the closing of the period covered by the annual report
Not applicable
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days
Yes
x
No
Indicate by check mark which financial statement item the Registrant has elected to follow
Item 17 x
Item 18
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes
No
x
not applicable
NOTE: All references to monies herein are to Canadian dollars unless otherwise specifically indicated
3
TABLE OF CONTENTS
Definitions
5
PART I
5
Item 1.
Identity of Directors, Senior Management and Advisers
5
Item 2.
Offer Statistics and Expected Timetable
5
A.
Selected financial data
6
B.
Capitalization and indebtedness
7
C.
Reasons for the offer and use of proceeds
7
D.
Risk factors
7
Item 4.
Information on the Company
13
A.
History and development of the Company
13
B.
Business overview and description
14
C.
Plan of Operations
31
D.
Property, plants and equipment
31
Item 5.
Operating and Financial Review and Prospects
31
A.
Operating results
31
B.
Liquidity and capital resources
32
C.
Contractual Obligations
33
D.
Research and development, patents and licences
33
E.
Trend information
33
Item 6.
Directors, Senior Management and Employees
34
A.
Directors and senior management
34
B.
Compensation
37
C.
Board practices
39
D.
Employees
39
E.
Share ownership
39
Item 7.
Major Shareholders and Related Party Transactions
40
A.
Major shareholders
40
B.
Related party transactions
40
Item 8.
Financial Information
41
A.
Financial Statements and Other Financial Information
41
B.
Significant Changes
41
Item 9.
The Offer and Listing
41
Item 10.
Additional Information
42
A.
Share capital
42
B.
Memorandum and articles of association
43
C.
Material contracts
44
D.
Exchange controls
44
E.
Taxation
44
F.
Dividends and paying agents
46
G.
Statements by Experts
46
H.
Documents on display
46
Item 11.
Quantitative and Qualitative Disclosures About Market Risk
46
Item 12.
Description of Securities Other than Equity Securities
46
PART II
46
Item 13.
Defaults, Dividend Arrears and Delinquencies
46
4
Item 14.
Material Modifications to the Rights of Security Holders and Use of
47
Proceeds
47
Item 15.
Controls and Procedures
47
Item 16A.
Audit Committee financial expert
47
Item 16B.
Code of Ethics
47
Item 16C.
Principal Accountant Fees and Services
47
Item 16D.
Exemptions from the Listing Standards for Audit Committees
48
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
48
PART III
48
Item 17.
Financial Statements
48
Item 18.
Financial Statements and Exhibits
48
SIGNATURE
47
Exhibit Index
48
Certifications
49
Audited Financial Statements – December 31, 2006
FORWARD LOOKING STATEMENTS
The Company cautions readers regarding forward looking statements found in this Annual Report and in any other statement made by, or on behalf of the Company, whether or not in future filings with the United States Securities Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control and many of which, with respect to future business decisions, are subject to change. See “Item 3. Key Information - D. Risk Factors”. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially fro m those expressed in any forward looking statements made by or on behalf of the Company. The Company disclaims any obligation to update forward looking statements.
5
Definitions
All references in this document to Items, Sections and sub-clauses are to Items, Sections or sub-clauses of this document. The following names or words used in this Statement have the following described meaning:
“Company” – means Acrex Ventures Ltd.
“Exchange” – means the TSX Venture Exchange, the stock exchange upon which the shares of the Company are listed for trading – which is a successor to the Canadian Venture Exchange, which was, in turn, a successor to the Vancouver Stock Exchange.
“Michaud Joint Venture” means the Joint Venture comprised of the Company and Moneta.
“Michaud Property” means the Michaud Property described in Item 4.B.1.
“Michaud Project” – means the exploration programme which the Company is carrying out on the Michaud Property as described in Item 4.B.1.
“Moneta” means Moneta Porcupine Mines Inc.
“Moneta Agreement” means the agreement between the Company and Moneta relating to the Michaud Property.
“Properties” means the Michaud and Spanish Mountain Properties – and other property interests the Company has held in the past.
“Shares” – means the voting common shares of the Company, both issued and unissued.
“Spanish Mountain Property” - means the Spanish Mountain property described in Item 4.B.2.
This Form 20F Amendment is being filed to clarify and expand on certain information contained in the original version. It does not bring the information up to date.
PART I
Item 1.
Identity of Directors, Senior Management and Advisers
Not applicable for Annual Report – see Item 6A.
Item 2.
Offer Statistics and Expected Timetable
Not applicable. The Company is not making, or proposing to make, an offering of its securities.
6
Item 3.
Key Information
A.
Selected financial data
The following information is provided as of the various dates specified. The Company’s fiscal year-end is December 31.
| Year ended Dec. 31, 2006 $ | Year ended Dec. 31, 2005 $ | Year ended Dec. 31, 2004 $ | Year ended Dec. 31, 2003 $ | Year ended Dec. 31, 2002 $ |
Net sales/operating revenues | Nil | Nil | Nil | Nil |
Nil |
Income (loss) from operations (before extraordinary items) | (531,360) | (510,027) | (409,347) | (453,279) | (236,855) |
Net income (loss) | (531,360) | (510,027) | (409,347) | (453,279) | (236,855) |
Net income (loss) from operations per share | (0.02) | (0.03) | (0.03) | (0.05) | (0.04) |
Total assets | 2,433,851 | 1,588,692 | 1,316,305 | 1,717,723 | 972,513 |
Net shareholder’s equity | 2,415,859 | 1,555,386 | 1,261,593 | 1,618,740 | 957,059 |
Capital Stock | 7,019,882 | 5,629,706 | 4,931,283 | 4,879,083 | 3,876,123 |
Dividends declared per share | Nil | Nil | Nil | Nil | Nil |
Accumulated deficit | 4,823,077 | 4,291,717 | 3,781,690 | 3,372,343 | 2,919,064 |
No. of shares issued | 26,908,936 | 20,115,991 | 13,417,616 | 13,167,616 | 8,038,616 |
|
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|
|
|
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The financial statements of the Company are denominated in Canadian currency and the above data is provided in Canadian currency.
Table 3A (ii) - Summary of Exchange Rates for the 5-year Period - 2002 to 2006
The following table sets forth, for each of the years indicated, the exchange rate of the United States dollar into Canadian currency at the end of such year, the average exchange rate during each such year and the range of high and low rates for each such year as supplied by the Bank of Canada.
Exchange Rate | 2006 | 2005 | 2004 | 2003 | 2002 |
Rate at the End of the Period(1) | 1.1654 | 1.1630 | 1.2020 | 1.2965 | 1.5591 |
Average Rate (2) | 1.342 | 1.2114 | 1.3000 | 1.4015 | 1.5703 |
High Rate (1) | 1.1794 | 1.2585 | 1.3957 | 1.5777 | 1.6033 |
Low Rate (1) | 1.0948 | 1.1630 | 1.1759 | 1.2839 | 1.5276 |
Notes:
(1)
The rate of exchange is the Bank of Canada closing rate for the period.
(2)
The average rate means the average of the exchange rates during the year.
The high and low rates of exchange for each of the 6 months from October 2006 to March 2007 are as follows:
7
| Oct. 2006 | Nov. 2006 | Dec. 2006 | Jan. 2007 | Feb. 2007 | March 2007 |
Closing | 1.1231 | 1.1422 | 1.654 | 1.177 | 1.1698 | 1.1546 |
Average | 1.1281 | 1.1376 | 1.1525 | 1.1572 | 1.1488 | 1.1574 |
Hi | 1.1415 | 1.1495 | 1.167 | 1.1848 | 1.1878 | 1.1817 |
Low | 1.1146 | 1.1256 | 1.138 | 1.163 | 1.1563 | 1.15 |
B.
Capitalization and indebtedness
Omitted – not required for Annual Report
C.
Reasons for the offer and use of proceeds
This item is not applicable as the Company is not involved in making, or proposing to make, an offering of its securities.
D.
Risk factors
The securities of the Company must be considered speculative, generally because of the nature of the Company’s business and its stage of development. In addition to the other information in this Annual Report the following risks should be considered:
(a)
Mineral exploration is a highly risky and speculative business
The Properties are in the exploration stage and without a known body of – or reserves of -commercial ore. Development of a Property will only proceed upon obtaining satisfactory exploration results. Mineral exploration involves a high degree of risk and few properties which are explored are ultimately developed into producing mines. There is no assurance that even if a body of commercial ore is discovered on the Properties, a mine will be brought into commercial production. The feasibility of developing a mineral deposit once discovered is dependent on a number factors, including the particular attributes of the deposit, such as size, grate and proximity to infrastructure, metal prices and government regulations.
The long-term profitability of the Company’s operations will be in part directly related to the cost and success of its exploration programmes, which may be affected by a number of factors which are beyond the control of the Company.
(b)
The Properties contain no known economically mineable mineral reserves
The Properties contain no known economically mineable mineral reserves. It is possible that the Properties will not be found to contain commercially mineable ore reserves and that the funds spent on exploration of the Properties will be lost.
(c)
Mineral exploration involves many operating hazards and risks
Mineral exploration involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. The operations which the Company proposes to undertake will be subject to all the hazards and risks normally incidental to exploration - which
8
could result in work stoppages and damage to persons or property or the environment and possible legal liability for any and all damage. Fires, power outages, labour disruptions, flooding, explosions, cave-ins, land slides and the inability to obtain suitable or adequate machinery, equipment or labour are some of the risks involved in the operation of mines and the conduct of exploration programmes. Although the Company will, when appropriate, secure additional liability insurance in an amount which it considers adequate, the nature of these risks is such that liabilities might exceed policy limits, the liabilities and hazards might not be insurable, or the Company might elect not to insure itself against such liabilities due to high premium costs or other reasons, in which event the Company could incur significant costs or uninsured losses that could have a material adverse effect upon its financial condition.
(d)
The economics of exploring and developing mineral properties is uncertain and unpredictable due to many factors that can vary
Substantial expenditures are required to establish reserves through drilling, to develop metallurgical processes to extract metal from ore and to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities or grades to justify development of the deposit, or that the funds required for development can be obtained on a timely basis.
The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond the Company’s control and which cannot be predicted, such as metal price and market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. Depending on the price of minerals produced, the Company may determine that it is not commercially feasible to commence or continue commercial production.
(e)
All phases of the Company’s work on its properties will be subject to environmental and other Government regulation
All phases of the Company’s operations will subject to environmental regulation – pursuant to the laws and regulations of the Provinces of British Columbia and Ontario, Canada. Environmental legislation is evolving in a manner which requires stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulations, if any, will not adversely affect the Company’s operations. There is no assurance that regulatory and environmental approvals will be obtained on a timely basis or at all. The cost of compliance with changes in governmental regulations has the potential to reduce the profitability of operations or to preclude entirely the economic development of a p roperty. Environmental hazards may exist on the Property which are unknown to the Company at present which have been caused by previous or existing owners or operators of the Property.
The exploration programmes carried on by the Company on the Properties in the past - and to be carried out on the Properties through 2007 – do not entail significant environmental risk and no separate amount is budgeted to comply with environmental requirements. It is not possible to, at
9
this date, calculate what, if any, costs might be incurred in subsequent years to comply with environmental regulations. In basic mineral exploration complying with environmental regulations is carried out as part of the regular work and no special or separate efforts are required or undertaken.
The primary environmental requirements while the Company is carrying on surface exploration are that land disturbed be returned, so far as possible, to its previous state, that chemicals not be discharged onto the land or into lakes or streams, that permits be obtained – which are routinely available – before work is commenced which will require trees to be cut or land surfaces to be disturbed, and that exploration sites be cleaned up following the completion of work.
If the Company elects to continue its work by developing underground operations it will have to obtain additional permits. The difficulty and cost of getting the further permits cannot be predicted or calculated until the features and location of the underground workings are determined. The Company will likely have to post a bond to cover the costs of the eventual clean-up of the underground works – but the size of – and the cost of obtaining – the bond can also not be predicted at this date.
(f)
Activities by the Company beyond mid-2007 will require the raising of additional financing which the Company may not be able to raise
The Company had, at March 31, 2007, working capital of approximately $450,000. Management anticipates that this funding will be sufficient to pay all of the costs of maintaining the Company through at least December 31, 2007 - and to pay all of the costs that are anticipated on exploration work on the Properties until June 30, 2007. The exploration of the Properties beyond June 30, 2007 will therefore depend on the Company’s ability to obtain additional required financing. The Company has limited financial resources and there is no assurance that additional funding will become available to allow the Company to fulfill its obligations on the Properties. If the Company’s exploration programmes are successful, additional financing will be required to develop the Properties and to place them into commercial production. The ongoing exploration of the Properties is, therefore, dependent upon th e Company’s ability to obtain financing through the joint venturing of projects, debt financing, equity financing or other means. Failure to obtain additional financing could result in delay or indefinite postponement of further exploration and the possible loss of the Company’s interests in the Properties.
(g)
Fluctuations in metal prices may have an adverse effect on the Company’s ability to raise more funding and on the trading price of the Company’s stock and future mineral prices may not support corporate profits
The Company’s revenues, if any, are expected to be in large part derived from the mining and sale of gold and base metals or interests related thereto. The price of those commodities has fluctuated widely, particularly in recent years, and is affected by numerous factors beyond the Company’s control including international economic and political conditions, expectations of inflation, international currency exchange rates, interest rates, global or regional consumption patterns, speculative activities, levels of supply and demand, increased production due to new mine developments and improved mining and production methods, availability and costs of metal substitutes, metal stock levels maintained by producers and others and inventory carrying costs. The
10
effect of these factors on the price of base and precious metals, and therefore the economic viability of the Company’s operations cannot be accurately predicted.
(h)
The Company and other parties the Company may deal with are subject to industry competition
The resource industry is intensively competitive in all of its phases, and the Company competes with many companies possessing far greater financial resources and technical facilities than itself. Competition could adversely affect the Company’s ability to acquire suitable properties for exploration in the future.
The Company may, in the future, be unable to meet its share of costs incurred under agreements to which it is a party and the Company may, as a result, have its interest in the properties subject to such agreements reduced as a result. Furthermore, if other parties to such agreements do not meet their share of such costs, the Company may be unable to finance the cost required to complete recommended programmes.
(i)
Existing and future Governmental regulations may limit the Company’s activities or make them economically unattractive
Exploration of the Property will be affected to varying degrees by: (i) government regulations relating to such matters as environmental protection, health, safety and labour; (ii) mining law; (iii) restrictions on production; price controls; tax increases; (iv) maintenance of claims; (v) tenure; and (vi) expropriation of property. There is no assurance that future changes in such regulation, if any, will not adversely affect the Company’s operations.
Government approvals and permits are required in connection with the exploration activities proposed for the Property. To the extent such approvals are required and not obtained, the Company’s planned exploration activities may be delayed, curtailed, or cancelled entirely.
Failure to comply with applicable laws, regulations and requirements may result in enforcement action against the Company, including orders calling for the curtailment or termination of operations on the Property, or calling for corrective or remedial measures requiring considerable capital investment. Parties engaged in mineral exploration and mining activities may be subject to civil and criminal liability as a result of failure to comply with applicable laws and regulations.
Amendments to current laws, regulations and permitting requirements affecting mineral exploration and mining activities could have a material adverse impact on the Company’s operations and prospects.
It is not possible to, at this date, calculate what, if any, separate costs might be incurred by the Company in subsequent years to comply with government regulations. Compliance with governmental regulations is included in the Company’s regular performance of its work and the Company has no separate budget for, nor undertakes any separate or special efforts to, regulation compliance.
11
(j)
The Company has no guarantee of clear title to its mineral claims – and they may be subject to aboriginal claims
Aboriginal rights may be claimed with respect to Crown properties or other types of tenure with respect to which mining rights have been conferred. The Company is not aware of any aboriginal land claims having been asserted or any legal actions relating to aboriginal issues having been instituted with respect to the Properties. The Company is aware of the mutual benefits afforded by co-operative relationships with indigenous people in conducting exploration activity and is supportive of measures established to achieve such cooperation.
Other parties may dispute the Company’s title to the interests held by it in the Properties and the Properties may be subject to prior unregistered agreements or transfers or land claims by aboriginal peoples, and title may be affected by undetected encumbrances or defects or government actions.
The Company’s mining claims have not been surveyed and accordingly the precise location of the boundaries of the claims and ownership of mineral rights on specific tracts of lands comprising the claims may be in doubt.
(k)
Management of the Company may be inadequate to support expanded future efforts by the Company
The Company does not have any employees and its affairs are managed by its officers with the assistance of its non-executive directors. Development of the Company will be dependent upon it having the funds necessary to, and being successful in, employing and retaining skilled personnel. The Company does not have employment contracts with its officers – nor does it maintain key-man life insurance on them. If Company efforts are expanded, it will have to engage additional support for Management.
(l)
Dilution of existing shareholders will occur if the Company does additional equity financing at prices lower than current trading prices
Because all of the Company’s outstanding share purchase options and warrants are exercisable for amounts in excess of the present net book value of the Company’s shares, the exercise of the warrants or options will not result in any dilution of the net book value of the outstanding shares. If the Company, to raise required additional capital, issues shares at prices at less than those prevailing at the time, dilution of the value of the shareholders’ interests will occur.
(m)
Conflicts of Interest potentially exist as a result of Company’s Directors serving as directors or officers of other mineral exploration companies
There are no existing material conflicts of interest between the Company and any of its directors or officers. However, all of the directors and officers of the Company (except Mr. Powell) are directors, officers and/or shareholders of other companies, including companies engaged in mineral exploration. To the extent that such other companies may be interested or participate in or be affected by opportunities or transactions involving the Company, these directors and officers of the Company may have conflicting interests in negotiating and settling terms of such transactions. Conflicts of interest affecting the directors and officers of the Company will be governed by the Business CorporationsAct (British Columbia) and other applicable laws. In the event that such a conflict of interest arises at a meeting of the Board of Directors of the Company, a director who has
12
such a conflict must disclose the nature and extent of his interest and abstain from voting for or against matters concerning the venture.
(n)
Difficulties will exist for U.S. Investors to effect process of service against the Company to enforce the civil liabilities of the Company
Investors may encounter difficulties in enforcing civil liabilities in Canada against the Company and its Directors and Officers. Because the Company has no establishment or Registered Agent in the United States, and because none of its directors or officers are residents of the United States, Investors residing in the United States will encounter difficulties in enforcing their rights against the Company and its directors and officers and, in particular:
(i)
Service in Canada can be done by serving the required documentation on the Company’s registered office address. To effect service on directors or officers would require personal service on the individuals to be served; provided that in case an individual director or officer appears to be avoiding service an Order might be obtained from the Supreme Court of British Columbia providing for some appropriate alternative form of service;
(ii)
As a practical matter, investors resident in the United States would not be able to enforce judgments obtained in United States courts based on the civil liability provisions of the U.S. Federal Securities laws so long as neither the Company nor its directors or officers have any presence in – or assets in – the United States.
(iii)
Investors resident in the United States who obtain United States judgments based on the civil liability provisions of the US Federal Securities laws can enforce those judgments against the Company or its directors or officers in the jurisdiction in which they reside – presently British Columbia, Canada – by registering the judgment with the Supreme Court of British Columbia.
(iv)
A United States investor can bring an original action against the Company or its directors or officers in the Supreme Court of British Columbia, in Canada, to enforce liabilities against the Company or its directors or officers based on the civil liability provisions of the U.S. Federal Securities laws. In this instance, investors might be required to prove again the validity of their claims, and may not be able to rely solely on the holding of a United States judgment.
(v)
In either of the instances described in sub-clauses (iii) or (iv) the Company or directors or officers named in the process will be entitled to dispute the process pursuant to their normal rights to dispute any process brought against them.
(vi)
To bring action to enforce a U.S. judgment or to commence an original action in Canada would require the engagement of Canadian legal counsel and the incurring of the costs of doing so.
(o)
History of volatility of the common stock share prices
In recent years, securities markets in Canada have experienced a high level of price and volume volatility, and the market price of many resource companies, particularly those considered
13
speculative exploration companies, have experienced wide fluctuations in price. The trading market for mineral exploration companies is characteristically volatile, with wide fluctuation of price and volume only in part related to progress of exploration. There can be no assurance that continued fluctuations in the Company’s share price and volume will not occur.
Item 4.
Information on the Company
A.
History and development of the Company
1.
Organization and incorporation of Company
The Company was incorporated under the British Columbia Companies Act August 1, 1969 under the name St. Elias Explorations Ltd. (N.P.L.). The Company’s name was changed to Cutlass Exploration Ltd. (N.P.L.) on October 6, 1972, and to Great Hercules Resources Inc. (N.P.L.) on April 27, 1977. The name was further changed to Pacific Coast Funding & Resources Inc. April 4, 1979, and then to Alliance Resources Ltd. June 12, 1986. On February 7, 1994 the name was changed to the present name, Acrex Ventures Ltd.
The Head Office of the Company is located at 1400 - 570 Granville Street, Vancouver, B.C. V6C 3P1, telephone No. (604) 618-1758. The Records and Registered Offices of the Company are located at 1710 – 1177 West Hastings Street, Vancouver, B.C. V6E 2L3.
The authorized capital of the Company consists of an unlimited number of common shares without par value. All of the shares of the Company rank equally as to dividends, voting rights and as to any distribution of assets on winding-up or liquidation. There are no indentures or agreements limiting the payment of dividends and there are no conversion rights, special liquidation rights, pre-emptive rights or subscription rights attached to the common shares of the Company. None of the Company’s currently outstanding common shares are subject to any call or assessment.
The only principal capital expenditures by the Company since January 1, 2001 are the:
(a)
Michaud Property – on which the Company had expended $75,000 on acquisition costs and $1,169,312 on exploration to December 31, 2006; and
(b)
Spanish Mountain – on which the Company had expended $43,248 as acquisition costs and $417,399 on exploration to December 31, 2006
The Company has had two principal divestitures since January 1, 2004, being:
(a)
The Company formerly held an option on a British Columbia mining property known as the “Referendum Property”. The Company paid $5,000 to the optionor upon the signing of the agreement. After doing exploration work on the Referendum property - at a cost of $92,383 - Management made a decision that the property did not have sufficient merit to warrant making further expenditures or paying further option payments pursuant to the Option Agreement. Accordingly, the option was terminated in August, 2005.
(b)
The Company, in 2003, had acquired, by paying the costs of staking, a group of 150 mineral claims located in the Ungava Region of northern Quebec, Canada. Pursuant to agreements
14
dated in 2003 and 2004 the Company sold its interests in the mineral claims to Resolve Ventures Inc. (“Resolve”), an arm’s-length company, for $85,000 and 650,000 shares in the capital of Resolve. The Company, pursuant to the agreement with Resolve, has retained the right to receive, if there shall ever be mineral production from the claims, a 3% net smelter royalty entitlement. The 650,000 shares of Resolve have been consolidated on a 1:10 basis to 65,000 shares. The Company has not sold its 65,000 shares.
The Company has voluntarily registered its shares under the United States Securities Exchange Act of 1934 to provide more information to United States persons who are shareholders of the Company, and to brokers, dealers or persons who might be interested in effecting secondary trades of issued Shares with additional information about the Company.
2.
General Development of the Business
Over the past 5 years the Company has not carried on any active business. Until it opened the negotiations, in July 2001, which successfully resulted in the Company signing the Moneta Agreement, the Company had sought to acquire business assets and funding – essentially without any long-term success. Since signing the Agreement relative to the Michaud Property, the Company and its management devoted all of their efforts to raising funding to satisfy its operating requirements and to enable it to initiate an exploration programme on the Property. Since July 2001 it has carried out exploration and drilling work on the Properties and concluded the agreements with Moneta described in Item 4.B.1 below. Since that date the Company has acquired, and in some cases disposed of or surrendered, various interests in various mineral properties in Canada.
The Company presently has public liability insurance coverage of $2,000,000 (Cdn.) for injury, property damage and fire fighting costs.
The Company has a web site atwww.acrexventures.com.
3.
Funding during 2006
On May 1, 2006 the Company issued 3,000,000 Units at $0.235 per Unit for gross proceeds of $705,000. Each Unit consisted of one common share of the Company and one share purchase warrant. Each warrant entitles the holder to acquire an additional share of the Company for $0.30 until May 1, 2007.
No flow-through shares or units were sold to any United States persons.
3,079,315 previously issued share purchase warrants were exercised, providing the Company with proceeds of $550,988.
B.
Business overview and description
The Company is considered to have only one reportable industry segment – namely mineral exploration - and two geographic segments - namely British Columbia and Ontario, Canada.
1.
The Michaud Project – Moneta Porcupine Mines Inc. agreement
15
The Company’s interest in the Michaud Property – except the three claims known as the “Dyment Claims” is held pursuant to an agreement dated September 1, 2001, as amended on January 17, 2003 (the “Moneta Agreement”) with Moneta Porcupine Mines Inc. (“Moneta”) of Timmins, Ontario, Canada pursuant to which the Company had to spend $1,000,000 on exploration of the Property within 36 months of the filing date of the original agreement in order to earn a 50% interest in the Property. The Company exercised its rights under the Moneta Agreement by spending more than $1,000,000 on the Property, and thereby acquired a 50% joint venture interest in what was previously described as the westerly portion of the Property.
The Company and Moneta have settled and signed a Joint Venture Agreement dated November 26, 2004, which governs the operations of the joint venture interests of the parties, creating the Moneta Joint Venture. It provides, among other details, that Moneta is the operator of the Moneta Joint Venture so long as it maintains its 50% interest, and that the Company will become the operator if Moneta’s interest in the joint venture declines below 50% - which would result in the Company’s interest simultaneously increasing to more than 50%. If Moneta or the Company wish to sell any of their interests in the Michaud Property the other will have a 30-day first right of refusal to purchase such interests.
The Joint Venture Agreement contains provisions pursuant to which the Company and Moneta can settle on exploration programmes to be carried on on the Michaud Property. The Agreement also contains provisions that provide that if one of the parties do not pay its share of work programme expenditures its interests will be diluted. Further, if a party is, as a result of non-payment of its share of joint ventures costs, diluted to the point where its interest is reduced to 15% its interest will be automatically converted from a participating joint venture interest in the Michaud Property to a 15% net profits royalty interest. To date both the Company and Moneta have paid their 50% share of all costs, and their interests in the Joint Venture continue to be 50% each.
In a supplemental Agreement dated March 31, 2006 the Company and Moneta agreed that Moneta would assign to the Company a 50% interest in an adjoining group of three mineral claims known as the “Dyment 3” claims, giving the Company a net 37.5% interest. The interests are held subject to an agreement between Moneta and St. Andrew Goldfields Ltd. pursuant to which that company has retained a 25% carried interest in the claims and a 2.0% net smelter royalty interest. The Company paid Moneta $50,000 for the assignment. Moneta and the Company have agreed that the interests now held jointly by them are included in their Joint Venture.
The Company has expended $1,244,312 on the Michaud Property as of December 31, 2006 - being $75,000 of acquisition costs and $1,169,312 of exploration costs.
Lease 105465 expires November 30, 2010 and Lease 105466 expires December 31, 2010. Ontario Mineral Leases are subject to renewal by fulfillment of conditions mandated by a department of the Ontario government. Minimal rent and land taxes are payable of which the Company’s share is $446.56 per year.
Staked Claims, to be maintained in valid existence, require the performance on them of $400 each of exploration assessment work. The Company’s share of the annual work requirement is $10,850.
The Michaud Property is without known reserves and the work the Company proposes to conduct on it will be exploratory in nature.
16
The Company’s Qualified Person, pursuant to Canada’s National Instrument 43-101, for the Michaud Property is Rainer Skeries, P.Geo.
(a)
PROPERTY DESCRIPTION and LOCATION
The Michaud Property optioned by the Company consists of 62 contiguous whole or partial claims situated within the southern part of Michaud Township in the Larder Lake Mining Division about 100 kilometres east of Timmins and 30 kilometres west of the Ontario-Quebec border in east-central Ontario. The group is comprised of 24 whole or partial leased claims covered by Ontario Government Leases 105465 and 105466, and 22 whole or partial staked claims. The Propert covers 1,108 hectares (approximately 2,738 acres). A central point within the claims block corresponds to 480 28’ North Latitude and 800 05’ West Longitude.
The various claims comprising the Michaud property are:
Whole or partial Claims held under Leases 105465 and 105466 | Staked Claims |
L521394 L521396 L521398 L653636 L653637 L653638 L653639 L591315 L591314 L521408 L521406 L591305 L591306 L591307 L591309 L591310 L772975 L772976 L767348 L772744 L772745 L772746 L772747 L772748 | L1199994 L1226673 L1226789 L1226791 L1235305 L1235308 L1235309 L1235312 L1235314 L1238680 L1243890 L1243891 L1243892 L1247523 L1247524 L1247525 L1240789 L1240790 L1248410 Dyment Staked Claims: L1225544 L1199892 L1167280 |
Figure 1 shows the location of the claims within the Province of Ontario, Canada. The configurations of the various claims are shown in Figure 2. The central 3 unhatched claims are privately owned and excluded from the Property.
17
(b)
ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE and PHYSIOGRAPHY
The property is easily accessible by truck from Timmins (100km to the west). Locally it lies approximately 32 km easterly along Highway 101 from Matheson, and thence southerly over an extensive network of logging and drilling roads that cover the greater area of the claims. The area is primarily muskeg and comprised of low stands of spruce, fir, alder and birch. Drilling operations are best carried out over the winter months from January to April when the ground is frozen.
18
19
20
Climate is typical of northeastern Ontario with below freezing temperatures (-50 to 400 C) from November to April and brief periods of hot weather in the summer from 100to 300C. Precipitation averages 80 centimetres a year, with a substantial portion in the form of snow averaging 2.4 metres per year.
Topography is generally flat with less than 25 metres of relief. The southern portion of the property is swampy whereas the northern portion, overlain by sands and outwash from an esker, has slightly higher relief.
A skilled labour force for mining and exploration is available in Matheson, Kirkland Lake andTimmins. Timmins and Kirkland Lake are also major supply and service centers for the mining industry.
Communications and power are available along highway 101.
The Perry Lake Lodge on Highway 101 provides accommodations and meals.
(c)
GEOLOGICAL SETTING AND REGIONAL GEOLOGY
Michaud Township is situated within the western part of the Abitibi Greenstone Belt that is here comprised of mafic to ultramafic volcanic assemblages that contain or are bounded by sedimentary basins. Syn-volcanic to post tectonic felsic to ultramafic instrusives are abundant in the volcano-sedimentary assemblage.
The Destor Porcupine Fault Zone (DPFZ) is a most prolific gold-bearing structure in this part of the belt.
The Property is located within Archean Timiskaming-type elastic strata south of the main east-west DPFZ. This regional structural break is an important geological feature, which hosts numerous and geologically varied gold deposits in this part of the Abitibi greenstone belt.
(d)
HISTORY
The first recorded claims in the area of the Property were staked in 1944 as a consequence of an Ontario Department of Mines report which suggested that the DPFZ passes through Michaud Township. Various portions of the Property have been held and tested by a succession of companies since that time. Moneta’s land position was primarily acquired through staking and by a series of joint venture agreements in the late 1980’s. Subsequent to 1998, Moneta assumed a 100% interest.
The following is a copy of the Press Release of the Company dated May 4, 2006 which announced the start of a 2006 programme on the Michaud Property:
Acrex Ventures Ltd. (“Acrex”) and Moneta Porcupine Mines Inc. (“Moneta”) are pleased to announce the start of the 2006 drill program on the Michaud Joint Venture’s gold property located along the Destor Porcupine Fault Zone (“DestorPFZ”) in Michaud Township east of Timmins in northern Ontario. The initial phase of the planned 2006 program consists of up to 1,600 metres of diamond drilling (NQ size) in three to five drill holes depending on access conditions. Drilling is presently underway and assay results are expected to become available in about six weeks.
21
The Joint Venture partners plan to test the gold potential of the Timiskaming sediments in contact with the ultramafic volcanics of the DestoPFZ on the Dyment 3 claims and a new target midway between the previously discovered55andWestern Zones. This geological setting has proven to be highly prospective for gold mineralization as evidenced by the presence of several nearby gold zones, including the 624,500 ounce inferred resource ofMoneta’sSouthwest Zone, located 3 kilometres on strike from the 2006 drill program.
The program is also expected to test extensions east and west of the55 Zonewhere only 18 drill holes have been completed to-date. Drilling in 2005 intersected multiple zones of gold mineralization in most holes with exceptional intersections noted in four holes:11.23 g/t gold over 1.70 metres in hole MA-05-27,5.81 g/t gold over 7.40 metres in hole MA-05-30,10.90 g/t gold over 2.00 metres in hole MA-05-31, and9.04 g/t gold over 5.90 metresin hole MA-05-32, all over drilled widths.
The Michaud Joint Venture was formed in November 2004 byAcrex andMoneta to continue exploration on a 50/50 basis of a group of 65 claim units in Michaud Township. Acrex completed the expenditure of $1,000,000 in 2004 to earn a 50% interest in the claim group. Prior drilling has resulted in the expansion of the“55”and discovery of the Western Zoneson the property, which are both located along the DestorPFZ.
AcrexandMoneta have also reached agreement on the acquisition by the Michaud Joint Venture of the Dyment 3 claim group optioned byMoneta from St Andrew Goldfields Ltd. in September 2004. Acrex will make two cash payments toMoneta to reimburseMoneta for the costs of acquisition and the current ownership of the Joint Venture (50/50) will remain the same.
The following is a brief description of work done on the properties comprising the Joint Venture properties in 2006.
Michaud JV
The 2006 drill program on the Michaud JV property consisted of a 5 drill hole 1,117 metres drill program from April to June 2006 of which only three were successfully completed. The program was originally intended to test the gold potential of the Dyment property.
Dyment 3
In spite of an early termination to the program due to poor spring ground conditions, the drilling produced encouraging results which confirmed the continuity of the overall geological setting and established the presence of gold mineralization underlying the property. The best gold values were 3.11 grammes per ton (“g/t”) over 1.15 metres and 7.51 g/t over 0.50 metres within a zone of 2.10 g/t gold over 2.55 metres in MA-06-33, all as drilled widths in altered greywacke. This initial hole had to be abandoned in a sand seam at 341 meters. The two successive drill holes were also abandoned due to poor ground conditions (104m) and surface conditions (60m) respectively. As a subsequent event, drilling was resumed in February 2007 utilizing the previous 60m drill hole and completing 4 additional holes. Assay results are still pending.
55 Zone
The 2006 drill program included a western stepout hole to the55 Zone intersecting gabbroic rocks over much of its length thereby not being able to test the target stratigraphy, but did return 2.28 g/t gold over 1.3 metres. A final drill hole “scissored” previous drilling in the55 Zone where only 18 drill holes had been completed. Multiple zones of gold mineralization were intersected in most drill holes in the 2005 program including 11.23 g/t over 1.70 metres (MA-05-27), 5.81 g/t over 7.40 metres (MA-05-30), 10.90 g/t over 2.00 metres (MA-05-31), and 9.04 g/t over 5.90 metres (MA-05-32), all over drilled widths. The new hole (MA-06-37) was intended mainly for structural and interpretation purposes returning encouraging gold values generally in the 0.5 to 6 g/t range with the best value being 57.18 g/t Au over 0.31 metres, close to true width.
22
Table Of Significant Assay Results
Drill hole | From (m) | To (m) | Interval (m)* | Assay (g/t) | Comments |
MA06-33 includes | 238.85 242.45 242.45 | 240.00 245.00 242.95 | 1.15 2.55 0.50 | 3.11 2.10 7.51 | abandoned in sand seam |
MA06-34 |
|
|
| nsv | ~15m sediments, abandoned |
MA06-35 |
|
|
| na | casing only |
MA06-36 | 71.70 | 73.00 | 1.30 | 2.28 | Max. 3.12 g/t / 0.60 m |
MA06-37 Includes includes | 73.50 80.00 80.00 140.30 143.10 152.99 180.43 215.70 222.66 233.20 | 77.56 83.00 81.30 144.35 144.35 155.49 186.65 219.45 224.46 233.51 | 4.06 3.00 1.30 4.05 1.25 2.50 6.22 3.75 1.80 0.31 | 1.01 1.76 3.36 0.95 1.20 1.64 1.21 1.43 2.60 57.18** | max. 2.76 g/t / 0.90 m max. 3.48 g/t / 0.50 m max. 1.79 g/t / 0.80 m max. 3.36 g/t / 0.85 m max. 5.27 g/t / 0.32 m max. 2.73 g/t / 0.98 m max. 6.86 g/t / 0.50 m vein |
* drilled width
** average includes “2nd and 3rd cut” assays from reject (remaining coarse fraction)
R. Skeries, P.Geo., is the "Qualified Person" for the Michaud Property for the purposes of National Instrument 43-101.
(e)
SAMPLING AND QUALITY CONTROL
Drill core samples are prepared at Moneta’s core logging and storage facility, a gated area outside Timmins, Ontario, where all core from drilling is stored. A permanent insulated building, suitable for winter operations, is available for core logging and sample preparation including two diamond saws, office area and core logging and display areas.
All mineralized sections of drill core considered significant are split after being marked and tagged using a diamond saw with one half being retained as a reference sample and the other being used for assay purposes as directed by the project geologist. Sample intervals and corresponding sample numbers are entered into the standardized core log sheets by computer. The samples selected for assay are individually bagged and shipped to Swastika Laboratories in Swastika, near Kirkland Lake, Ontario or other labs such as Laboratoire Expert in Rouyn-Noranda, Quebec.
At the Laboratory core samples are dried, crushed by jaw crusher and further reduced to about 6 mesh using Sturtevant rolls. The rolls are cleaned with a wire brush and air jet. A Jones riffle is used to take a 400-gram sub-sample for pulverizing. The remaining reject portion is bagged and stored. After reducing a nominal –100 mesh with a Braun pulverizer, the sample is thoroughly blended and sent to the fire assay department. A 1 assay ton portion (29.166 g) is used for fire assaying. This process results in a particle of gold, that in the normal assay method, is weighed on a Cahn Electrobalance.
For geochemical analysis or where lower detection is required, the gold is dissolved and determined by Atomic Absorption Spectrophotometry. This is done after collecting the precious metals with a fire assay fusion.
23
External commercial standards and local blanks are inserted on a regular basis into the sample stream monitoring laboratory accuracy and sample preparation. Repeat or check assays are done regularly on original pulp and occasionally on second pulp prepared from the stored reject. Selected samples, on the basis of determining significant discrepancies, defining zones, and noting visible gold during logging, are reprocessed internally by the laboratory using metallic assay methodologies. Up to 15% of pulps displaying a range of values, are re-assayed by ALS Chemex or Laboratoire Expert as checks using internal standards. Rejects and pulps are stored for any additional analytical work.
2.
Spanish Mountain Property
By an Option Agreement dated July 23, 2005 (“Option Agreement”) the Company secured an option to earn a 100% interest in the mineral claims comprising the Spanish Mountain Property (“Property”). To complete the earning of the 100% interest, the Company must pay to the Optionor a total of $100,000 cash over a period running to mid-2009 - of which $20,000 has been paid. The Company must also issue to the Optionor 200,000 shares in its capital by instalments over a period ending in mid-2008 - of which 100,000 shares have been issued. A further 100,000 shares will have to be issued to the Optionor if and when the Company receives a positive feasibility study on the Property. If the Company earns a 100% interest in the Property it will be subject to the reservation to the Optionor of a 3.0% net smelter return entitlement; provided that the Company will have the right to purchase 66.666% of the NSR for $1,000,000 upon the commencement of commercial production of mineral products from the Property.
Acrex negotiated to acquire the Option Agreement on the Property after encouraging results of exploration on adjoining properties, particularly those reported by the joint venture work of Wildrose Resources Ltd. and Skygold Ventures Ltd.
Effective February 6, 2007 the Company purchased two adjoining mineral claims from arm’s-length vendors for $10,000 and the issuance of 200,000 shares of the Company.
The Company’s total cost to December 31, 2006 with respect to the property is $460,647 - being $417,399 on exploration work and $43,248 for the acquisition and maintenance of the interests in the Property.
The Property is without known reserves and the work the Company proposes to conduct on it will be exploratory in nature.
The Company’s Qualified Person for the Spanish Mountain Property is Perry Grunenberg, P.Geo.
(a)
PROPERTY DESCRIPTION AND LOCATION
The Spanish Mountain Property is located in the Cariboo Mining Division and consists of 2 claim blocks comprised of 10 claims totaling 1,473.76 hectares – approximately 3,642 acres. The Property is located approximately 5 kilometres from the village of Likely and 70 kilometres northeast of Williams Lake, BC. Figure 4 shows the location of the claims within British Columbia and Figure 3 shows more details of the shape and location of the claims.
24
FIGURE 4 – Property Location
25
FIGURE 3 – Spanish Mountain Claims
26
The Claims comprising the Property are listed in Table I, below. All claims are located on crown land. The claims have not been surveyed. The Golden Airport, Gold Trend, Goldie, Gold and Gold 3 are referred to as the “Hepburn Lake group” in this document, and the Spanish 1, 2, and 3 are referred to as the “Spanish Mountain group”.
CLAIM INFORMATION
CLAIM NAME | RECORD NUMBER | CLAIM AREA (Ha) | ANNIVERSARY DATE |
GOLDEN AIRPORT | 510115 | 274.821 | 2006/04/03 |
GOLD TREND | 514947 | 117.755 | 200/606/21 |
GOLDIE | 517056 | 58.900 | 2006/07/12 |
GOLD | 517007 | 19.635 | 2006/0/712 |
GOLD 3 | 517098 | 39.261 | 2006/07/12 |
SPANISH 1 | 502372 | 491.331 | 2006/01/12 |
SPANISH 2 | 502608 | 157.233 | 2006/01/12 |
SPANISH 3 | 503338 | 196.584 | 2006/01/14 |
MOOREHEAD 12 | 537371 | 78.52 | 2007/07/18 |
MOOREHEAD 13 | 537372 | 39.72 | 2007/07/18 |
(b)
ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY
The Property covers the flanks and flat areas surrounding Spanish Mountain, to the south and west of Spanish Lake. Elevations range from approximately 910 metres at Spanish Lake to 1470 metres on Spanish Mountain. Outcrop is evident at higher elevations on hillslopes but is less exposed in the flat-lying lower elevations.
Access to the Property from 150 Mile house is by paved road for 85 kilometres to Likely, then by the Spanish Lake-Abbott Creek forestry road. An extensive network of logging and mining access roads bisects both of the claim blocks. These are in variable condition depending on the level of maintenance provided by on-going activities.
Climate is typical of central British Columbia with cold, snowy winters and long warm summers. The area receives approximately 40 centimetres of annual precipitation, most of which falls as winter snow.
The village of Likely is located within 10 kilometres of the property and provides basic amenities such as motel, corner store, restaurant and fuel. The area has a history of placer mining and heavy equipment is available for exploration work. The larger city of Williams Lake, located approximately 70 kilometres south, provides further support for exploration and mining in the area.
The Property is located within the Quesnel Highland of the Interior Plateau. The Quesnel River drainage includes Spanish and Cedar Creeks, which drain the property area. Most valley bottoms contain thick glacial cover attributed to Quaternary glaciation.
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Hillsides support heavy growths of hemlock, balsam and cedar on northern slopes with spruce and pine on higher ridges. Some of the Property has been historically logged and contains various states of regenerated growth.
(c)
GEOLOGICAL SETTING
REGIONAL GEOLOGY
The Quesnel and Horsefly rivers of central British Columbia traverse the northwesterly trending axis of the central Quesnel belt, known as the 'Quesnel Trough'. Recent economic interest has been concentrated on the Mount Polly (Cariboo-Bell) alkalic porphyry copper-gold deposit, the QR intrusion-related propylite-type gold deposit and the Frasergold and CPW (Spanish Mountain) auriferous quartz vein prospects in the black phyllite basal map unit.
Studies in the area, all within 'Quesnel Terrane', confirm the presence of a regional synclinal structure formed within a Triassic continent-margin basin. It was infilled first with Triassic sediments and then Triassic to Jurassic volcanic rocks. Together these rocks constitute the Quesnel Trough. The basal lithologic units consist of mid-Triassic siliceous rocks to mainly younger pelitic, thinly bedded deposits with overlying, more massive volcaniclastic sediments. The younger epiclastic units pass upward or interfinger with Upper Triassic subaqueous volcanic deposits, mainly volcanic flow and breccia units. They are overlain in turn by subaqueous to subaerial Lower Jurassic volcanic flow and pyroclastic rocks and overlapping lower to Middle Jurassic sedimentary assemblages. The volcanic rocks, and some Early Jurassic plutons, form the extensive magmatic edifice that defines the medial axis of the Quesnel island arc.
LOCAL GEOLOGY
The Spanish Mountain area is underlain by a northwest trending assemblage of phyllite, shale and siltstone interbedded with volcanic tuff and debris flows. Grey lithic tuff is the most abundant rock type with black graphite siltstones containing rounded fragments of light grey tuffaceious rocks thought to be the result of debris flows. Other rocks include carbonate rich volcanic wackes and mariposite altered crystal tuff. Dykes and minor intrusioins of diorite and rhyolite porphyry have been noted on the property. Black graphite shales and massive siltstone are the dominant rock types on the north slopes of Spanish Mountain with minor interbedded intermediate to felsic pyroclastics. Volcanic rocks form the upper part of Spanish Mountain and its souther slopes.
(d)
DEPOSIT TYPES
The Quesnel Trough hosts a wide variety of mineral deposits. The area contains 82 mineral occurrences recorded up to 1989 in the government files. Fifty-six of these are bedrock hosted base and precious metal deposits with the remainder being placer deposits or other deposits including industrial minerals.
The main properties of economic significance are alkalic intrusion-related porphyry copper-gold deposits and gold-bearing propylitic altered zones formed in volcanic rocks peripheral to intrusions.
These include the Mount Polley and Boss Mountain Mines, located to the west of the Spanish Mountain area.
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Other important targets are the gold-bearing quartz veins hosted within black phyllite metasedimentary rocks, such as those explored by the Skygold-Wildrose joint venture adjacent to the Property.
Gold bearing quartz veins in black phyllite include two similar looking but possibly genetically distinctive types. The veins in some black phyllite members have potential to be mined as large tonnage, low grade deposits. Other veins systems exhibit the potential for high-grade production, with apparent low-temperature quartz-calcite veins indicating potential epithermal deposition.
The black phyllites that underlie the Property have the potential to host both high-grade and bulk tonnage gold vein deposits. The two styles of mineralization are thought to be similar in age with orogenic derivation. The formation of quartz veins was synchronous with regional metamorphism and deformation. Deformed and undeformed veins occur on all scales along the limbs and within the hinge zones of regional folds. Vein fillings are likely the product of fluids that were generated during dewatering reactions during late Jurassic metamorphic events. The fluids would have migrated along cleavage surfaces and deposited as veins in dilations zones. Recent exploration indicates that where fluids migrated marginal to more porous wacke bedding, they may have deposited as replacements within these layers, creating broad zones with potential disseminated gold mineralization.
(e)
MINERALIZATION
Skygold Ventures Ltd. has reported that gold has been noted in a number of different modes and occurrences. These include: axial plane shear zones that contain quartz veinlets with disseminated pyrite and anomalous gold; quartz veins near fold crests that contain more base metals (galena and sphalerite) and coarse visible gold; anastomising quartz stockworks that occupy shear zones in shaley siltstone with gold found as residual particles and wires within pyrite boxworks; quartz-carbonate-sericite veins mineralized with pyrite, galena, chalcopyrite, sphalerite and native gold within more competent siltstones and tuffs; and disseminated gold deposition in graphitic shale and siltstone with pyrite.
A British Columbia Government Bulletin reports that the Spanish Mountain quartz veins contain gold and minor base metals. Much of the area is affected by pervasive carbonate-silica replacements and listwanite alteration associated with quartz veins or fractures. Gold occurs in quartz veins that range from less than 1 up to 4 metres in width. The fracture-controlled style of mineralization suggests that the veins postdate metamorphism and deformation. The mineralized zones are located on the northeast limb of a northwest trending anticline that is cut by numerous northwest trending thrust faults. The northwest trending structures are crosscut by a series of prominent northeast to east trending normal faults. These cross-cutting structures were found to control the mineralization.
(f)
HISTORY
The Cariboo region has a history as one of the most productive placer gold mining districts in British Columbia. This includes rich discoveries of placer gold at Quesnel Forks near Likely, and in bench deposits along Cedar Creek in the Spanish Mountain area in 1921.
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In 1933, gold was discovered in quartz veins on the northwest flank of Spanish Mountain. Extensive exploration on – and in the area of – the Property is reported to have been conducted in the decades since then. Ultimately the mineral claims which are essentially between the two blocks of claims held by the Company were acquired by Skygold Ventures Ltd. and Wildrose Resources Ltd. who formed a Joint Venture to own and control their claims. Skygold, Wildrose and latterly their Joint Venture have reported work on their claims since 2002.
During 2004 and 2005, the Skygold and Wildrose Joint Venture continued exploration of their joint venture property, including diamond and reverse circulation drilling. In a November 25, 2005 news release, the companies announced that step-out drilling dramatically extended the bulk tonnage mineralized corridor by over 450 metres to the north on their Spanish Mountain property. Drill holes from within the central portion of the known zone continued to significantly expand the tonnage potential with some of the longest continuous intercepts received to date.
The Hepburn Lake Group soil geochemistry indicates strong gold values over a 1,000 by 800 metre area through the southern portion of the grid. The general values and orientation of the gold in soils geochemistry is consistent with those found within the adjacent Skygold-Wildrose joint venture property to the east. The gold-in-soil elevated values indicate a trend that is open to the east, west and south. The northern boundary of the grid is cut off by Hepburn Lake.
The valley bottom along the Spanish Creek corridor contains a significant amount of historic and current placer gold mining. There is a documented presence of fluvial, glacial and glaciofluvial deposition along the valley bottom and margins. Care is required when exploring for bedrock gold occurrences to ensure that values obtained are not due to the presence of gold in the overlying unconsolidated materials. However, the on-going exploration within the valley, including that undertaken by the Skygold Wildrose Joint Venture, indicates that some of the best intersections of gold in bedrock occur within or in close proximity to some of the actively mined placer channels located along the slopes of Spanish Mountain.
(g)
EXPLORATION WORK CONDUCTED IN 2006 BY ACREX
Diamond drilling was completed on the Hepburn Lake area of the Spanish Mountain Property. A total of 15 widely spaced drill holes were designed to test extensive soil geochemical anomalies previously outlined by sampling. All drill core was submitted to accredited laboratories for analysis. A total of 1207 samples were submitted for analysis.
Results of the drilling indicate a wide distribution of low gold values, ranging from 0.1 to 2.54 g/t within the bedrock underlying the gold-in-soil geochemical anomalies. Drill holes that were completed along the north-eastern margins of the soil anomalies returned higher gold values. Hole 06SM-15, the best hole, returned three intersections of greater than 0.5 g/t gold, including 2.54 g/t over 1.51 m and 2.29 g/t over 1.52 m.
The following table summarizes the drill holes that contained elevated levels of gold:
Hole # | Interval (m)* | Width (m) | Gold g/t |
06SpM-02 | 178.92 to 180.45 | 1.53 | 0.19 |
06SpM-03 | 127.1 to 128.6 | 1.50 | 0.21 |
06SpM-04 | 53.94 to 55.20 | 1.26 | 0.21 |
| 59.50 to 61.00 | 1.50 | 0.26 |
| 145.39 to 146.9 | 1.51 | 0.22 |
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06SpM-06 | 101.2 to 104.2 | 3.00 | 0.20 |
06SpM-09 | 105.77 to 108.81 | 3.04 | 0.22 |
06SpM-10 | 109.20 to 110.30 | 1.10 | 0.38 |
06SpM-11 | 85.00 to 86.50 | 1.50 | 0.20 |
| 98.42 to 111.86 | 13.44 | 0.22 |
including | 101.20 to 102.72 | 1.52 | 0.43 |
and | 102.72 to 104.30 | 1.58 | 0.31 |
06SpM-12 | 142.34 to 143.95 | 1.61 | 0.17 |
06SpM-14 | 60.05 to 61.50 | 1.45 | 0.31 |
| 73.75 to 75.29 | 1.54 | 0.31 |
06SpM-15 | 73.1 to 75.29 | 2.19 | 0.53 |
| 139.29 to 140.80 | 1.51 | 2.54 |
| 158.50 to 160.02 | 1.52 | 2.29 |
*indicates drill hole intercept width
The highest gold values were obtained from the final drill hole, 06SpM-15. In this hole gold grades increased near the bottom of the hole and the final 1.52 metres returned 2.29 g/t gold. The final stages of drilling, including holes 11 through 15, were targeted from geologic information and interpretation obtained from the preceding 10 drill holes. Information obtained from these final drill holes lead Acrex’s consultants to conclude that a structural corridor of interest is located within a belt of mudstone intercepted in hole 15. The higher gold values obtained near to the bottom of that drill hole suggest that this corridor has gold potential both laterally and at depth that requires investigation.
The geology intersected in this drilling program is consistent with the regional geology that trends through the Skygold-Wildrose exploration area, located immediately to the east, onto the Acrex property. The geology consists of sedimentary formations that have been altered, and in places, sheared. They host significant fine quartz and carbonate veining as well as common pyritic-bearing sections. To date, the best gold-bearing intercepts from the Acrex drilling have been returned from samples of carbonaceous mudstone containing veined and disseminated pyrite, typical for large bulk-mineable sediment hosted gold deposits.
Carbonaceous mudstones that host gold-bearing formations are commonly graphitic. The graphitic sections can be mapped by electromagnetic variations using geophysical procedures. Acrex’s consultants recommend that an airborne magnetic/electromagnetic survey be completed on the property in order to define sedimentary horizons with potential to host gold-bearing structures, and to tie the gold-bearing intercepts of hole 15 to the trend of the regional sedimentary structures. Follow-up detailed soil geochemical sampling, combined with bedrock trenching and eventual drilling of targets produced from this work is also recommended.
(h)
RECOMMENDATIONS
A programme is recommended for the Property for 2007 consisting of further diamond drilling – but the details of the programme have not been settled yet pending the completion of an airborne geophysical survey of the property which is scheduled to be done during the month of May, 2007.
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3.
Permitting
The Company foresees no permitting obstacles for the work that it might conduct on its various properties in 2007. If and when larger programmes are undertaken various permits will be required from the applicable governmental authorities - which will include permits from the Departments concerned with preventing damage to the environment or to fisheries. All of the permits that the Company will require in the foreseeable future are permits which are normally available upon making the properly supported application and paying whatever may be the relatively nominal government fees.
C.
Plan of Operations
The Company, under the guidance of its Directors Gregory Crowe P.Geo. and Arthur Troup, P.Eng., and geological consultants it engages from time to time, will continue with the exploration work on the Properties which has been recommended – all of which will be done by contractors. As results from the various work programmes and drilling are received there will be ongoing analysis of those results and the proposed work programmes will be adjusted from time to time based on the results received, the interpretation of those results and the funds then available.
D.
Property, plants and equipment
The Company does not own any property, plant or equipment – other than minor incidental office equipment items.
E.
General
The Company does not have any employees – other than its President, T.J. Malcolm Powell, who is engaged under a service contract on a part-time basis. All other efforts on behalf of the Company are done by consultants and contractors – or by directors and officers. The Company does not anticipate engaging any employees in the foreseeable future.
The Company does not have any subsidiaries.
Item 5.
Operating and Financial Review and Prospects
A.
Operating results
Because the Company has not carried on any business operations and has had no income generating activities no meaningful discussion and analysis can be done of the Company's operations. Because the Company has not carried on any income generating activity during the past three fiscal years its financial statements do not reflect meaningful revenue or income. The Company has incurred expense each year to maintain itself in existence, to maintain itself in good standing under the requirements of the applicable securities regulatory authorities and, latterly, to negotiate various agreements with respect to its Properties and to conduct exploration work on the Michaud and Spanish Mountain Properties.
The major components of the Company’s exploration expenditures during 2006 were $67,771, being the Company’s 50% share of the costs of a small drilling programme on the Michaud Property, and $401,744 on a drilling programme on the Company’s optioned Spanish Mountain Property. The Company also made property acquisition payments of $15,000 pursuant to the
32
Option Agreement held by it on the Spanish Mountain property – and a $50,000 payment to have the three additional Dyment 3 claims added to the Michaud property. With respect to the general and administration expenses incurred by the Company during fiscal year 2007 there was no significant change in the total from the 2006 figure. Expenditures on investor relations increased to $127,849 compared to $61,419 in 2005.
Year Ended December 31, 2006
Net loss for the year ended December 31, 2006 was $531,360 or $0.02 per share compared to a net loss of $510,027 or $0.03 per share in the prior year. Interest income totaled $38,370 compared to $9,444 for the prior year as a result of larger cash balances earning interest during the year. Expenses totaled $569,730 compared to $511,234 for the prior year. The increase in expenses is attributable to the increased activity of the Company in relation to its mineral properties and the increase in equity financings conducted during the year. The largest expenses for the year were $138,000 in management fees paid to directors of the Company, $127,849 in investor relations fees, $68,038 in promotion and travel, and $51,596 in general office expenses.
Year Ended December 31, 2005
Net loss for the year ended December 31, 2005 was $510,027 or $0.03 per share. Expenses totaled $511,234. The largest expenses were $138,000 in management fees paid to directors of the Company, $73,884 in stock based compensation relating to stock options granted during the year, $61,419 in investor relations fees, and loss on termination of mineral property options of $97,383. The expenses for the year were partially offset by a gain on sale of a mineral property interest of $94,999, interest income of $9,444 and a future income tax recovery of $22,263.
Year Ended December 31, 2004
Net loss for the year ended December 31, 2004 was $409,347 or $0.03 per share. Expenses totaled $394,569. The largest expenses were management fees of $138,000 paid to directors of the Company and legal fees of $59,793 which were primarily expended in respect to mineral property acquisitions. The expenses for the year were partially offset by a gain on the sale of a mineral property interest of $12,049 and interest income of $10,361.
There were, in the 2006 fiscal year, no other factors, unusual or infrequent events, or new developments which materially impacted the Company’s loss from operations.
The Company’s annual audited financial statements, which are attached, are stated in Canadian dollars and are prepared in accordance with Canadian Generally Accepted Accounting Principles (“GAAP”), the application of which, in the case of the Company, conforms, in all material respects for the years presented in the financial statements, with United States GAAP except as disclosed in Note 11 to the financial statements.
B.
Liquidity and capital resources
Because of the “start-up” status of the Company it does not have liquidity, either short or long term. It does not have any material unused sources of liquidity.
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The Company had working capital at December 31, 2006 of $710,900 - and as of March 31, 2007 of approximately $492,700. The current working capital is the balance left from the proceeds of its equity fundings, after deducting the costs of raising that funding, payment of outstanding accounts payable, payment of the Company’s general and administrative costs, and the monies which have been spent acquiring and exploring the Properties. The Company’s working capital is considered by the Company’s Management to be sufficient to meet the Company’s expenditure requirements during the current fiscal year.
The Company does not have any material commitments for capital expenditures. The Company does not have any debt instruments outstanding. The Company does not anticipate having to commit to undertake any significant capital expenditures in the foreseeable future.
The Company’s expenditures to date have satisfied the various conditions necessary to maintain the Company’s 50% interest in the Michaud Joint Venture and to maintain the Company’s option rights pursuant to the agreements it holds on the Spanish Mountain and Finger Lake properties.
C.
Contractual Obligations
(a)
To pay its 50% share of any expenditures agreed upon by the Michaud Joint Venture;
(b)
To pay the Company’s President, T.J.M. Powell, $9,000 per month for his management services to the Company and to pay the Company’s Chairman $2,500 per month as fees for his acting as a director of the Company - pursuant to unwritten agreements.
(c)
To pay for auditing, accounting, legal, geological or other services rendered to the Company – and for all office costs – pursuant to unwritten agreements.
The Company’s liabilities as of December 31, 2006 were only its normal year-end accounts payable of $17,992.
The Company has no contingent liabilities.
D.
Research and development, patents and licences
The Company has not carried on any research and development during the past three years and has no research and development policies.
E.
Trend information
The Company cannot identify any significant trends which are applicable to it or its plans. The Company’s principal focus in exploring the Property is to discover deposits of gold-bearing ores which would be economically mineable. The potential economics of a gold mining property are entirely dependent on the price at which gold trades from time to time on the international gold market. In the period since early 2002 there has been an upward movement in the international price of gold – but Management of the Company is not in a position to predict how long that trend will continue.
The Company can never be assured that its future mineral exploration activities will produce the favourable results that would be necessary to justify the Company continuing its exploration
34
activities or to retain the properties on which the work is performed. Further, the Company cannot be assured that if it wishes to undertake significant exploration or development work on its properties in the future it can raise the necessary funding. Otherwise, the Company cannot identify any specific uncertainties, demands, commitments or possible events which would be likely to have a material effect on its operating results, liquidity or capital resources – or which would cause the Company’s reported financial information to be not necessarily indicative of future results or financial conditions.
Item 6.
Directors, Senior Management and Employees
A.
Directors and senior management
Name, age and countries of residence | Offices held with the Company | Principal business activities outside the Company |
T.J. Malcolm Powell Age 67 Canada | Director, Promoter and President and Chief Executive Officer of the Company since August 3, 2000 | Engaged as public relations and business consultant through his wholly owned company, Arbutus Enterprises Ltd. Since November, 1998 investor, shareholder and public relations agent for the Lang Group of Companies in Vancouver, B.C. |
Frank A. Lang Age 82 Canada | Director and Chairman of the Board since October 2, 2001 | Director and President or Chairman of the various companies comprising the Lang Group of Companies; President and CEO of Cream Minerals Ltd. and Chairman of Sultan Minerals Inc. |
Carl R. Jonsson Age 72 Canada | Director since November 30, 1998. Secretary since August 3, 2000. Chief Financial Officer | Principal/Partner of Vancouver law firm Tupper Jonsson & Yeadon, Solicitors for the Company. Director of various public companies |
Gregory G. Crowe Age 52 Canada | Director since July 25, 2001 | P.Geol. P.Geo. Self-employed as geological consultant. Employee, Director and Executive Officer of Yuma Copper Corp. from 1994 to December, 1997. Director, President and CEO of Entreé Gold Ltd. since July, 2002 |
Arthur G. Troup Age 63 Canada | Director since September 25, 2001 | Since January 1997 Vice-President Exploration of the companies comprising the Lang Group of Companies. Prior to that, self-employed as consultant |
Robin M. Merrifield Age 64 Canada | Director since December 5, 2005 | Director of Corporate Communications for Sultan Minerals Inc. March 2004 - March 2006; Chief Financial Officer, Gulf International Minerals Ltd., London, England - October 2004 - September 2005; Senior Vice-President of Eurasia Energy Ltd. April 1, 2006 - present |
The Lang Group of Companies are publicly traded companies controlled by Frank A. Lang. They are ValGold Resources Ltd., Emgold Mining Corporation, Sultan Minerals Inc., and Cream Minerals Ltd.
The following additional information is provided with respect to the Directors and Officers of the Company:
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T.J. Malcolm Powell Mr. Powell, as President, is responsible for managing and leading the Company. He was appointed Chief Executive Officer November 30, 2001. Mr. Powell does not work full-time for the Company and considers that he spends – and will spend in the foreseeable future – approximately 50% of his time on the affairs of the Company. Mr. Powell does not have any written contractual relationship with the Company. Mr. Powell has, since November, 1998, acted in an independent contractor capacity, as the person responsible for shareholder, investor and public relations for the various companies comprising the Lang Group of Companies – on a full-time basis until November 30, 2001, and since then on a part-time basis. Mr. Powell is able to achieve this arrangement as he, the Company and the Lang Group of Companies share office space. Mr. Powell has been a director and the president of various small public companies since 1985, some of which engaged in minor mineral exploration activities. While Mr. Powell has no significant experience in managing mineral exploration programs, or a mineral exploration company, he shares office facilities with – or near to - Company Directors Frank A. Lang, Gregory C. Crowe and Arthur G. Troup – all of whom have extensive experience managing mineral exploration programs and mineral exploration companies. With the advice and input of Messrs. Lang, Crowe and Troup being available to Mr. Powell, for his guidance and assistance, it is not considered that Mr. Powell’s relative lack of experience is a risk to the Company or its shareholders. Mr. Powell also has regular and constant access to and contact with Carl Jonsson who also has experience with respect to mineral exploration and the management of mineral exploration companies. |
Frank A. Lang, M.A., P.Eng. Mr. Lang has no assigned responsibilities except to act as the Chairman of the Board and provide incidental public Company and mineral exploration advice to the Board of the Company and to members of the Company’s management. Mr. Lang was appointed to his positions with the Company on October 2, 2001 and does not expend, or consider that he will be expected to expend, more than 1% of his time on the affairs of the Company. Mr. Lang has no contractual relationship with the Company. He is currently paid a Director’s fee of $2,500 per month. During the past 5 years Mr. Lang’s full-time occupation has been to act as a director and President, CEO and/or Chairman of the Board of the various companies which have comprised the Lang Group of Companies, all of which are involved in mineral exploration. Mr. Lang has been involved, in one capacity or another, in mineral exploration activities for more than 20 years. |
Carl R. Jonsson, LL.B.
Mr. Jonsson’s responsibilities are primarily as the lawyer for the Company, and it is incidental to that capacity that he also holds positions as a Director and the Secretary of the Company. He was also appointed Chief Financial Officer November 30, 2001. Mr. Jonsson holds a Bachelor of Laws Degree and is a member of the Law Society of British Columbia. Other than attending at meetings of the Board of Directors and time spent as the Company’s Chief Financial Officer, Mr. Jonsson’s
36
services are rendered to the Company as a principal of the law firm of Tupper Jonsson & Yeadon. Mr. Jonsson does not have any other contractual relationship with the Company. He estimates that he spends 5% of his time on the affairs of the Company – not including the time he spends as the Company’s lawyer.
Mr. Jonsson’s principal occupation during the past 5 years has been acting as a lawyer and many of his clients have, during that period, been involved in aspects of mineral and natural resource exploration. Many of Mr. Jonsson’s functions during that period have been to advise his clients as to the requirements of the securities regulatory authorities having jurisdiction over them and the stock exchanges upon which their shares have been listed for trading. Mr. Jonsson has acted primarily as a corporate and securities lawyer for in excess of 35 years and holds directorships in various publicly traded companies, some of which are, or have been, in mineral exploration.
Mr. Jonsson’s directorships include positions as a director – and as a member of the Audit Committees – of Comaplex Minerals Corp. (“Comaplex”), Bonterra Energy Income Trust (Bonterra”) and Pine Cliff Energy Ltd. (“Pine Cliff”) – all of which are head-officed in Calgary, Alberta, Canada. Comaplex, the shares of which trade on the TSX Stock Exchange, conducts mineral exploration on a number of properties in Iqaluit (one of the Northwest Territories of Canada). Bonterra, the Trust Units of which trade on the TSX Stock Exchange, is an oil and gas producer. Pine Cliff is listed for trading on the TSX Venture Exchange and is involved in oil and gas exploration in Canada and South America. Mr. Jonsson is also a Director of Caledonia Mining Corporation, the shares of which trade on the TSX Stock Exchange, the NASD Over-the-Counter Bulletin Board in the United States and th e AIM market in London, and is head officed in Johannesburg, South Africa. It is carrying on exploration activities in South Africa and East Africa, and has also carried on extensive mining exploration activities (during the period Mr. Jonsson has been a director) in Northern Canada, Scotland, Spain, South Africa and East Africa. Caledonia has operated mines in Spain and South Africa and is presently operating a mine in Zimbabwe. Because of Mr. Jonsson’s experience, through being a director of mineral exploration companies, he is able to provide legal, management and financial advice to the Company’s Board of Directors and, in particular, to Mr. Powell.
Mr. Jonsson could have potential conflicts of interest relating to his functioning as outside counsel for the Company and his role as a director and officer of the Company. If Mr. Jonsson or any other director or officer of the Company perceives a conflict of interest Mr. Jonsson would disqualify himself from acting as counsel for the Company and advise the Company to seek independent outside counsel. To this date, such a situation has never arisen. Mr. Jonsson would also, as a result of the ethical rules applicable to him as a lawyer in Canada, be required to disqualify himself from acting for the Company in the case of a conflict of interest.
Gregory C. Crowe, M.Sc., P.Geo., P.Geol. Mr. Crowe, as a Director of the Company, has no responsibilities except to participate as a Director of the Company and to provide advice to the Board and to Management on occasion – primarily of a geological nature. Mr. Crowe is a registered P.Geol. in the Province of Alberta and a registered P.Geo. in the Province of British Columbia. Mr. Crowe, until May, 2002, devoted an estimated 10% of his time to the Company. For the period between June, 2002 and mid-July, 2002 he was employed full-time in supervising and conducting work on or in relation to the Property. He earlier, for a period, acted as Vice-President Exploration of the Company. He does not have a |
37
written contractual relationship with the Company. During the past several years Mr. Crowe has acted as a geological consultant to various companies involved in mineral exploration and has served on the Board of Directors of several junior resource companies. Since July , 2002 Mr. Crowe has been the President and Chief Executive Officer of Entree Gold Inc. - which is conducting mineral exploration programs on properties in Mongolia. Mr. Crowe has been active in mineral exploration for 20 years. For the period between October, 1994 and December 1997, Mr. Crowe was a director, officer and employee of Yuma Copper Corporation. |
Arthur G. Troup, M.Sc., P.Eng. Mr. Troup, as a Director of the Company, has no responsibilities except to participate as a Director of the Company and to provide advice to the Board and to Management on occasion – primarily of a geological nature. Mr. Troup is a registered Professional Engineer. Mr. Troup has, since his appointment September 25, 2001, devoted an estimated 5% of his time to the Company. He does not have a contractual relationship with the Company. During the past 5 years Mr. Troup has been the Vice-President Exploration of the Lang Group of Companies. Latterly his principal activity has been as President of Sultan Minerals Ltd. - a member of the Lang Group. Mr. Troup has been active in mineral exploration for more than 30 years. |
Robin M. Merrifield
Mr. Merrifield, as a Director of the Company, has no responsibilities except to participate as a Director of the Company and to act as a member of its Audit Committee, and to provide advice to the Board and to Management on occasion - primarily of an administrative or financial nature. Mr. Merrifield is a member of the South African Institute of Chartered Accountants. Since his appointment he has devoted an estimated 2% of his time to the Company. He does not have a contractual relationship with the Company.
During the past 5 years Mr. Merrifield’s employment - except during the period between September 2001 and February 2004, when he was retired - has been as a Chief Financial Officer or Vice-President of Finance of companies involved in mining and mineral exploration in various countries - Canada and elsewhere. Mr. Merrifield has been qualified as a South African Chartered Accountant since 1969.
B.
Compensation
(a)
T.J. Malcolm Powell is paid $9,000 per month for his management services to the Company. The funds are paid to him indirectly through the payment of his wholly owned private company, Arbutus Enterprises Ltd.
(b)
Arthur Troup, Gregory Crowe and Robin Merrifield are not paid for their services to the Company as a Director or member of the Audit Committee - although Gregory Crowe was in earlier years paid fees for occasional geological services rendered to the Company.
(c)
Carl R. Jonsson is not paid for his services as a director and officer of the Company, per se. However, he is a senior principal of Tupper Jonsson & Yeadon, the Vancouver, Canada law firm which provides legal services to the Company – which are primarily provided by Mr.
38
Jonsson. Mr. Jonsson therefore indirectly benefits from the legal fees which the Company pays to Tupper Jonsson & Yeadon.
(d)
Mr. Troup does not receive any cash or cash equivalent compensation for acting as Director of the Company.
(e)
Frank Lang is paid a fee of $2,500 per month for acting as a Director of the Company.
(f)
All of the Directors have been granted share purchase incentive options entitling them to purchase the numbers of common shares of the Company as follows:
T.J. Malcolm Powell | 200,000 shares exercisable until June 3, 2007 at $0.30 per share; 340,000 shares exercisable until November 4, 2008 at $0.28 per share; and 360,000 shares exercisable until July 7, 2010 at $0.12 per share | Total - 900,000 |
Frank Lang | 100,000 shares exercisable until June 3, 2007 at $0.30 per share; 25,000 shares exercisable until November 4, 2008 at $0.28 per share; and 25,000 shares exercisable until July 7, 2010 at $0.12 per share | Total - 150,000 |
Gregory Crowe | 150,000 shares exercisable until June 3, 2007 at $0.30 per share; 75,000 shares exercisable until November 4, 2008 at $0.28 per share; and 25,000 shares exercisable until July 7, 2010 at $0.12 per share | Total - 250,000 |
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Arthur Troup | 100,000 shares exercisable until June 3, 2007 at $0.30 per share; 100,000 shares exercisable until November 4, 2008 at $0.28 per share; 100,000 shares exercisable until October 13, 2010 at $0.12 per share; and 50,000 shares exercisable until July 7, 2010 at $0.12 per share | Total - 350,000 |
Carl Jonsson | 50,000 shares exercisable until June 3, 2007 at $0.30 per share; 25,000 shares exercisable until November 4, 2008 at $0.28 per share; and 25,000 shares exercisable until July 7, 2010 at $0.12 per share | Total - 100,000 |
Robin Merrifield | 100,000 shares exercisable until December 5, 1010 at $0.12 per share | Total - 100,000 |
| TOTALS: | 1,850,000 |
The Company does not provide any pension, retirement or similar benefits to its Directors or Officers – nor is it accruing any liability to them with respect to any such benefits.
C.
Board practices
1.
The Company’s Board of Directors has only one committee – the Audit Committee. The members of the Audit Committee do not have any fixed terms for holding their positions and are appointed and replaced from time to time by resolution of the Board of Directors.
2.
All Directors, when elected or appointed, are to hold office until the next Annual General Meeting of the Shareholders that is held, at which time it is deemed that they all cease to hold office and are subject to reappointment at the Meeting. The next Annual General Meeting of the Shareholders of the Company has been scheduled to be held June 5, 2006.
3.
None of the service contracts under which Directors supply services to the Company have any provisions for individuals receiving benefits on any termination of such contracts.
4.
The members of the Audit Committee – currently comprised of Directors Frank Lang, Arthur Troup and Robin Merrifield – receive no separate remuneration for acting as a member of the Committee, nor are their appointments for any fixed term. Their appointments are not subject to any specific terms of reference.
D.
Employees
The Company does not have any employees – nor has it ever had any employees.
E.
Share ownership
The Directors and Officers of the Company hold, as at the date of this Statement, the numbers of Shares set opposite their names below – which are the percentage of the Company’s 27,108,939 issued shares (as of March 31, 2007) also set opposite their names:
| Shares held – directly and indirectly | Percentage of issued shares - % |
T.J. Malcolm Powell | 1,313,415 | 4.84 |
Frank A. Lang | 371,833 | 1.37 |
Carl R. Jonsson | 275,525 | 1.02 |
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Greg Crowe | 23,196 | 0.09 |
Arthur G. Troup | 35,100 | 0.13 |
Robin M. Merrifield | Nil | Nil |
TOTAL | 2,019,069 |
|
Of the shares shown held by Mr. Powell, a portion is held by him directly and a portion is held by Mr. Powell’s wholly owned company Arbutus Enterprises Ltd.
During the last completed fiscal year – January 1, 2006 to December 31, 2006 - the Company has issued shares on a number of different dates for different prices and consideration – as detailed in Item 10.A.3 below. As of the Company’s fiscal year-end there were 26,908,939 shares issued of which the Directors and Officers owned 2,019,069 shares (being 7.45% of the issued shares). During the period between December 31, 2006 and March 31, 2007 the Company issued 200,000 shares.
During the past three years there was no change in the voting rights attached to the Shares – nor any other special rights or restrictions attached or changed. All of the Shares comprising the Company’s authorized and issued capital are voting common shares, with each share carrying 1 non-cumulative vote. All decisions with respect to the issuance of Shares and the terms thereof are by resolution of the Board of Directors of the Company.
Item 7.
Major Shareholders and Related Party Transactions
A.
Major shareholders
1.
To the best of the knowledge of the Company and its management no shareholder holds, directly or indirectly, more than 5% of the issued shares of the Company. This does not constitute any significant change in the percentage ownership held by any major shareholders during the past three years.
2.
The Company is not, to the best of the best of the knowledge of the Company and its Directors and Officers, directly or indirectly owned or controlled by another corporation or by any foreign government.
3.
The Company's outstanding shares are in registered form but it is known to the Company and its management that the registered holders of the outstanding shares are, in large part, not the beneficial owners of the outstanding shares and that significant numbers of the outstanding shares are held registered in the names of various nominees on behalf of the beneficial owners of such shares. As a result it is not possible for the Company or its management to know who are all of the beneficial owners of its outstanding shares or how many outstanding shares may be beneficially owned by any single shareholder. As at March 31, 2007 the Company had 203 shareholders of record of which 185 were resident outside of the United States holding between them 26,628,200 shares, and 18 were resident in the U.S.A. holding between them 480,736 shares.
4.
There are no arrangements known to the Company, the operation of which may at a subsequent date result in a change in the control of the Company.
B.
Related party transactions
(a)
There have not been any material related party transactions between the Company and any of the directors, officers, associates or major shareholders of the Company since January 1, 2006.
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(b)
Certain directors have received compensation – as disclosed in Item 6A above.
Item 8.
Financial Information
A.
Financial Statements and Other Financial Information
1.
Exhibited hereto are the following financial statements prepared as at the last fiscal year-end, December 31, 2006, with comparative figures shown as of December 31, 2005 and 2004, with attached audit report;
2.
The Company does not have any sales and accordingly the financial statements show no sales revenues.
3.
The Company does not have a dividend policy.
B.
Significant Changes
No significant changes have occurred since the various dates of the financial statements which are exhibited.
Item 9.
The Offer and Listing
A.
The Company is not proposing any offering of its securities. This Statement is not filed or issued with respect to any proposed offering or listing of its securities, or other distribution of its securities.
B.
Trading of the Company’s shares on the Canadian Venture Exchange (now the TSX Venture Exchange) was suspended until May 16, 2002. The following trading information is given for the following specified periods since then, for trades on the Exchange.
Periods | High - $ | Low - $ |
May 31, 2002 - December 31, 2002 January 1, 2003 - December 31, 2003 January 1, 2004 - March 31, 2004 April 1, 2004 - June 30, 2004 July 1, 2004 - September 30, 2004 October 1, 2004 - December 31, 2004 January 1, 2005 - March 31, 2005 April 1, 2005 - June 30, 2005 July 1, 2005 - September 30, 2005 October, 2005 November, 2005 December, 2005 January, 2006 February, 2006 March, 2006 April, 2006 May, 2006 June, 2006 July, 2006 August, 2006 September, 2006 | 0.43 0.40 0.315 0.27 0.275 0.245 0.20 0.145 0.14 0.14 0.18 0.14 0.225 0.22 0.22 0.46 0.445 0.355 0.36 0.42 0.44 | 0.15 0.135 0.20 0.14 0.15 0.185 0.115 0.095 0.095 0.085 0.08 0.095 0.11 0.17 0.18 0.195 0.18 0.26 0.30 0.25 0.34 |
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October, 2006 November, 2006 December, 2006 January, 2007 February, 2007 March, 2007 | 0.38 0.36 0.35 0.265 0.245 0.21 | 0.30 0.25 0.24 0.135 0.18 0.175 |
The shares of the Company trade on the TSX Venture Exchange in Canada, and on the NASD Over The Counter Bulletin Board and the Pink Sheets in the United States. The shares previously traded in the United States only on the Pink Sheets. During the 1-year period ending March 31, 2007 the shares traded on the Pink Sheets at a range of from a low of $0.1369 to a high of $0.41 per share. During the period January 1, 2007 – April 30, 2007 the shares traded a total of 147,000 shares on the OTC Bulletin Board at prices between a high of $0.22 and a low of $0.1369 per share. The figures given in this paragraph are United States dollars.
Item 10.
Additional Information
A.
Share capital
1.
The authorized capital of the Company consists of an unlimited number of common voting shares without par value. As at the close of business on March 31, 2007 there are 27,108,936 shares issued – all of which were issued as fully paid shares. Each Share has attached to it one non-cumulative vote. There are no persons who hold any preferential or pre-emptive rights for purchasing any additional Shares in the Company other than the holders of the share purchase warrants and share purchase options detailed in sub-clause 2. below. Certain of the options are held by Company Directors as detailed in Item 6.B above.
There have not been, during the past three years, any changes in the rights attaching to the Company’s shares. There are no resolutions, authorizations or approvals in existence or outstanding pursuant to which any further shares or securities convertible to shares, will be created or issued.
2.
As of the date of this Statement there are share purchase warrants and options (including those held by Directors as disclosed in Item 6.B above) outstanding pursuant to which the holders will be entitled to purchase the following numbers of shares at the following prices on or before the following dates:
Number of shares issuable upon exercise of warrants and options | Warrant exercise price per share | Expiry dates |
3,000,000 | $0.30 | May 2, 2007 |
3.
During the fiscal year ended December 31, 2006 and during the period since then to March 31, 2007 the Company issued shares as follows:
No. of Shares issued | Dates, Terms and Conditions |
3,000,000 | Issued as part of 3,000,000 Units privately placed at $0.235 per Unit for gross proceeds of $705,000. Each Unit consisted of 1 share of the Company and 1 share purchase warrant. The warrants are those described in sub-clause 2 above. |
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200,000 | Issued to vendors of two Spanish Mountain mineral claims purchased by the Company February 6, 2007 |
3,079,315 | Issued pursuant to the exercise of previously issued share purchase warrants for total proceeds of $550,988. |
B.
Memorandum and articles of association
1.
The Company was incorporated in British Columbia, Canada, on August 1, 1969. The Company does not have any stated “objects” or “purposes” as such are not required by the corporate laws of the Province of British Columbia. Rather, the Company is, by such corporate laws, entitled to carry on any activities whatsoever which are not specifically precluded by other statutory provisions of the Province of British Columbia. The Memorandum and Articles of the Company can be viewed at its Registered Office in Vancouver, Canada.
2.
The powers and functioning of the Directors are set forth in the Articles of the Company. They provide:
(a)
subject to the obligation of a Director to disclose his potential interest in a proposal, arrangement or contract being considered by the Company, a Director may vote with respect to such matter in certain instances and in certain instances shall not vote;
(b)
the Directors may, in the absence of an independent quorum, vote compensation to themselves;
(c)
there are no limitations on the exercise by the Directors of the Company’s borrowing powers;
(d)
there are no provisions for the retirement or non-retirement of Directors under an age limit;
(e)
there is no requirement for a Director to hold any shares in the Company.
3.
As all of the Company’s authorized and issued shares are of one class there are no special rights or restrictions of any nature or kind attached to any of the shares.
4.
To alter the rights of holders of issued shares of the Company such alteration must be approved by the majority vote of 66.666% of the issued shares of the Company attending and voting, and in a separate meeting by a 66.666% majority of the shares that are the subject of the proposed alterations attending and voting at the meeting.
5.
Annual General Meetings are called and scheduled upon decision by the Board of Directors. The Directors may convene an extraordinary general meeting of the shareholders. The holders of not less than 5% of the issued shares of the Company may requisition an extraordinary meeting of the shareholders. All meetings of the shareholders may be attended by registered shareholders or persons who hold powers of attorney or proxies given to them by registered shareholders.
6.
There are no limitations prohibiting shares being held by non-residents, foreigners or any other group.
44
7.
There are no provisions in the Company’s Articles or charter documents that would have an effect of delaying, deferring or preventing a change in the control of the Company, or that would operate with respect to any proposed merger, acquisition or corporate restructuring of the Company.
8.
There are no bylaw provisions requiring share ownership to be disclosed. The securities laws of the Province of British Columbia require disclosure of shareholdings by insiders who are generally directors, officers, employees or others holding more than 10% of the issued shares of the company and their affiliates.
9.
There are no provisions in the Company’s Memorandum or Articles governing changes in the Company’s capital which are more stringent than required by law.
C.
Material contracts
The only material contracts which the Company has entered into, and which are not in the ordinary course of its business within the past 2 years, are:
1.
Joint Venture Agreement dated November 26, 2004 between the Company and Moneta Porcupine Mines Inc. relating to the Michaud Property - described in Item 4.B.1;
2.
Option Agreement dated February 10, 2005 with Tom Cherry relating to the Referendum Property – since terminated;
3.
Option Agreement dated July 23, 2005 with Lloyd Addie relating to the Spanish Mountain property - described in Item 4.B3.
4.
Option Agreement dated January 26, 2006 with Frederick Critchlow relating to the Finger Lake property – since terminated.
D.
Exchange controls
There are no Canadian laws, decrees, regulations or exchange controls which would affect the import or export of capital or the availability of cash for use by the Company, nor the remittance of dividends, interest or other payments to non-resident holders of the Company’s securities.
E.
Taxation
(i)
Canadian Federal Income Tax Considerations
The following summary of the material Canadian federal income tax consequences is based upon the provisions of the Income Tax Act of Canada and the regulations thereunder (the “Tax Act”) and the Canada-United States Tax Convention (the “Tax Convention”)) as at the date of this Statement. The summary is restricted to the case of a holder (a “Holder”) of one or more common shares of the Company (“Common Shares”) who for the purposes of the Tax Act is a non-resident of Canada, is a United States person, holds his Common Shares as capital property and deals at arm’s length with the Company.
Dividends. A holder will be subject to Canadian withholding tax (“Part XIII Tax”) equal to 25%, or such lower rates as may be applicable, of the gross amount of any dividend paid or deemed to be paid on his Common Shares. Under the Tax Convention, the rate of Part XIII Tax applicable to a dividend on Common Shares paid to a Holder who is a resident of the United States is, if the Holder is a company that beneficially owns at least 10% of the voting stock of the Company, 5% and, in any other
45
case, 15% of the gross amount of the dividend. The Company will be required to withhold the applicable amount of Tax from each dividend paid and remit it to the Receiver General for Canada for the account of the Holder.
Disposition of Common Shares. A Holder who disposes of Common Shares, including by deemed disposition on death, will not be subject to Canadian tax on any capital gain thereby realized unless the Common Shares constituted “taxable Canadian property” as defined by the Tax Act. Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder unless he held the common share as capital property used by him carrying on a business in Canada, or he or persons with whom he did not deal at arm’s length alone or together held or held options to acquire, at any time within the 60 months preceding the disposition, 25% or more of the issued shares of any class of the capital stock of the company.
A Holder who is a resident of the United States and realizes a capital gain on disposition of Common Shares that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax unless (a) more than 50% of the value of the Common Shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resources properties, (b) the Common Shares formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 months preceding disposition, or (c) the Holder (i) was a resident of Canada at any time within the 10 years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the Common Shares when he ceased to be resident in Canada.
A Holder who is subject to Canadian tax in respect of a capital gain realized on disposition of Common Shares must include one-half of the capital gain (“taxable capital gain”) in computing his taxable income earned in Canada, subject to the deduction of certain capital losses that may have been sustained by the Holder.
(ii)
United States Taxation
For federal income tax purposes, an individual who is a citizen or resident of the United States or a domestic corporation (“U.S. Taxpayer”) will recognize a gain or loss on the sale of the Company’s shares equal to the difference between the proceeds from such sale and the adjusted tax basis of the shares. The gain or loss will be a capital gain or capital loss if the Company’s shares are a capital asset in the hands of the U.S. Taxpayer.
For federal income tax purposes, a U.S. Taxpayer will be required to include in gross income dividends received on the Company’s shares. A U.S. Taxpayer who pays Canadian tax on a dividend on shares will be entitled, subject to certain limitations, to a credit (or alternatively, a deduction) against federal income tax liability. A domestic corporation that owns at least 10% of the voting shares of the Company should consult its tax advisor as to applicability of the deemed paid foreign tax credit with respect to dividends paid on the Company’s shares.
Under a number of circumstances, a U.S. Taxpayer acquiring shares of the Company may be required to file an information return with the Internal Revenue Service Centre where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Centre, Philadelphia, PA 19255. In particular, any United States Taxpayer who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return. Other filing requirements may apply. Holders and prospective holders should therefore consult their own tax advisors with respect to their particular circumstances and the requirements applicable to them.
There may be a possibility of the Company being deemed, for United States tax purposes, a Foreign Personal Holding Company, a Foreign Investment Company, a Passive Foreign Investment Company
46
or a Controlled Foreign Corporation. If that should happen U.S. Taxpayers holding or selling Company Shares, or receiving dividends on Company Shares, will be subject to U.S. taxation at possibly adverse or higher rates and under a system that may be complicated and unfamiliar to them.
F.
Dividends and paying agents
Omitted – not required for Annual Report
G.
Statements by Experts
Omitted – not required for Annual Report
H.
Documents on display
Any of the documents referred to above can be viewed at the Company’s Registered Office, which is located at Suite 1710, 1177 West Hastings Street, Vancouver, B.C., Canada V6E 2L3. All of the documents referred to above are in English.
Item 11.
Quantitative and Qualitative Disclosures About Market Risk
(a)
The Company is not presently involved in borrowing money and does not have any dealings in, nor plan to have any dealings in, derivatives or other financial instruments, and does not carry on business which makes it specifically sensitive to currency exchange variations. If and when the Company borrows money it will have to consider the interest rates that would then be applicable to it.
(b)
As the Company is only still in a “start-up” mode and has undertaken no business activities or the sale of its products or services, it is not in a position to do any quantitative analysis of either general risk factors applicable to it or risk factors applicable to its potential markets.
(c)
The Company has identified risk factors that are applicable to it, which are described in Item 3.D above.
Item 12.
Description of Securities Other than Equity Securities
The Company is not, by this Statement, registering any debt securities or other securities – other than its voting common shares.
PART II
Item 13.
Defaults, Dividend Arrears and Delinquencies
(a)
The Company has not committed any default in the payment of any principal, interest, sinking or purchase fund installment, or any other indebtedness.
(b)
As the Company has never declared any dividends it is not in arrears with respect to the payment of dividends, nor is it in any deficiency with respect to any rights or obligations outstanding with respect to its issued shares.
47
Item 14.
Material Modifications to the Rights of Security Holders and Use of
Nil
Item 15.
Controls and Procedures
(a)
Evaluation of disclosure controls and procedures. Our chief executive officer and principal financial officer evaluate the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act), as of each fiscal year end - the last such evaluation having been as of December 31, 2006. Based on such evaluation, they have concluded that the Company’s disclosure controls and procedures are effective and sufficient to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is accurately and adequately recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms.
(b)
Management’s annual report on internal control over financial reporting. Not required as the Registrant is a Foreign Private Issuer.
(c)
Attestation Report of registered public accounting firm. Not required as the Registrant is a Foreign Private Issuer.
(d)
Changes in internal controls over financial reporting. There were no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of 17 CFR 240.13a-15 or 240.15d-15 that occurred during the period covered by this annual report that has effected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting.
Item 16A.
Audit Committee financial expert
(a)
The registrant’s board of directors has determined that the registrant has at least one audit committee financial expert serving on its audit committee.
(b)
The financial expert serving on the audit committee is Mr. Robin M. Merrifield.
Item 16B.
Code of Ethics
The Company has not adopted a Code of Ethics. It has not considered a Code of Ethics necessary due to the small size of its exploration activities and financing – and the small number of persons comprising its Board and Management.
Item 16C.
Principal Accountant Fees and Services
(a)
For 2006 the Company’s auditor’s fees were $13,750. The auditor’s fees for 2005 were $15,500.
(b)
Nil.
(c)
Nil.
48
(d)
Nil.
(e)
Prior to the start of the audit process, the Company’s audit committee receives an estimate of the costs from its auditors and reviews such costs for their reasonableness. After their review and pre-approval of the fees, the audit committee recommend to the board of directors to accept the estimated audit fees given by the auditors.
(f)
Not applicable.
Item 16D.
Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The Company has never repurchased any of its issued securities.
PART III
Item 17.
Financial Statements
The financial statements of the Company which are furnished and attached hereto are prepared according to Canadian Generally Accepted Accounting Principles and in the Accountant’s Report attached thereto, and in the Notes thereto, reference is made to the material variations in accounting principles, practices and methods used in preparing financial statements pursuant to Canadian Generally Accepted Accounting Principles in comparison to United States Generally Accepted Accounting Principles.
Item 18.
Financial Statements and Exhibits
Index of Exhibits attached: Financial Statements audited as at December 31, 2006 - with comparative figures for 2005 and 2004 attached. The Statements include U.S. oriented Comments by the Auditors and Note 13 dealing with U.S. Generally Accepted Accounting Principles.
49
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on its behalf.
ACREX VENTURES LTD.
“Carl R. Jonsson”
Carl R. Jonsson,
Secretary and Chief Financial Officer
Date:
April 30, 2007
50
The following exhibits are attached to and form part of this Annual Report
Exhibit Index
Exhibit Nos. |
|
Exhibit 12 | Certifications by Company Chief Executive Officer and Chief Financial Officer |
Exhibit 13(a) | Certifications pursuant to Sarbanes-Oxley Act of 2002 |
51
EXHIBIT 12
CERTIFICATION
I,T.J. Malcolm Powell, certify that:
1.
I have reviewed this annual report on Form 20-F of Acrex Ventures Ltd.
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and have:
(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designated under our supervision, to ensure that material information relating to the Company is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b )
evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c)
disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the Annual Report that has materially affected, or is likely to materially affect, the Company’s internal control over financial reporting; and
5.
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
Date:
February 14, 2008
(signed) ”T.J. Malcolm Powell”
President and Chief Executive Officer
52
EXHIBIT 12
CERTIFICATION
I,Carl R. Jonsson, certify that:
1.
I have reviewed this annual report on Form 20-F of Acrex Ventures Ltd.
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and have:
(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designated under our supervision, to ensure that material information relating to the Company is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b )
evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c)
disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the Annual Report that has materially affected, or is likely to materially affect, the Company’s internal control over financial reporting; and
5.
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
Date:
February 14, 2008
(signed) “Carl R. Jonsson”
Secretary and Chief Financial Officer
53
Exhibit 13a
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 20-F of Acrex Ventures Ltd. (“Acrex”) for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) I, T.J. Malcolm Powell, President of Acrex, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Acrex.
By:
(signed) “T.J. Malcolm Powell”
T.J. Malcolm Powell, President
Acrex Ventures Ltd.
April 30, 2007
A signed original of this written statement required by Section 906 has been provided by T.J.M. Powell and will be retained by Acrex and furnished to the Securities and Exchange Commission or its staff upon request.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 20-F of Acrex Ventures Ltd. (“Acrex”) for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) I, Carl R. Jonsson, Chief Financial Officer of Acrex, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Acrex.
By:
(signed) “Carl R. Jonsson”
Carl R. Jonsson, Chief Financial Officer
Acrex Ventures Ltd.
April 30, 2007
A signed original of this written statement required by Section 906 has been provided by T.J.M. Powell and will be retained by Acrex and furnished to the Securities and Exchange Commission or its staff upon request.
FINANCIAL STATEMENTS
ACREX VENTURES LTD.
(An Exploration Stage Company)
VANCOUVER, BRITISH COLUMBIA, CANADA
December 31, 2006, 2005 and 2004
1. AUDITORS’ REPORT
2. STATEMENTS OF OPERATIONS AND DEFICIT
3. BALANCE SHEETS
4. STATEMENTS OF STOCKHOLDERS' EQUITY
5. STATEMENTS OF CASH FLOWS
6. NOTES TO FINANCIAL STATEMENTS
H:\My Documents\Acrex\SEC Forms\2008 version\Form 20-F-Final-with financials- at Feb.14-08.doc
A PARTNERSHIP OF INCORPORATED PROFESSIONALS | AMISANO HANSON |
| CHARTEREDACCOUNTANTS |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of ACREX Ventures Ltd.
We have audited the accompanying balance sheets of ACREX Ventures Ltd. (An Exploration Stage Company) as at December 31, 2006 and 2005 and the statements of operations and deficit, stockholders' equity and cash flows for the years ended December 31, 2006, 2005 and 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards and with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2006 and 2005 and the results of its operations and its cash flows for the years ended December 31, 2006, 2005 and 2004 in accordance with Canadian generally accepted accounting principles.
Vancouver, Canada | “AMISANO HANSON” |
February 28, 2007 | Chartered Accountants |
750 WEST PENDER STREET, SUITE 604 TELEPHONE: 604-689-0188 |
VANCOUVER CANADA FACSIMILE: 604-689-9773 |
V6C 2T7 E-MAIL: amishan@telus.net |
ACREX Ventures Ltd.
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS AND DEFICIT
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
| 2006 | 2005 | 2004 |
EXPENSES |
|
|
|
Management fees – Note 7 | $ 138,000 | $ 138,000 | $ 138,000 |
Directors fees – stock-based compensation – Note 6 | - | 73,884 | - |
Legal fees and disbursements – Note 7 | 34,914 | 53,802 | 59,793 |
Office and general – Note 7 | 51,593 | 37,102 | 40,700 |
Consulting fees – Note 6 | 21,575 | 400 | 9,202 |
Promotion and travel | 68,038 | 41,785 | 31,199 |
Accounting fees | 31,250 | 33,630 | 35,700 |
Advertising | 30,007 | 23,432 | 41,213 |
Investor relations – Note 6 | 127,849 | 61,419 | 23,677 |
Filing fees | 24,259 | 23,065 | 6,244 |
Rent – Note 7 | 13,380 | 10,680 | 12,502 |
Transfer agent fees | 10,936 | 9,151 | 7,888 |
Insurance | 2,500 | 2,500 | 500 |
Gain on sale of interest in mineral property | - | (94,999) | (12,049) |
Loss on termination of mineral property option | 15,429 | 97,383 | - |
|
|
|
|
Net loss before other items and income tax | (569,730) | (511,234) | (394,569) |
|
|
|
|
OTHER ITEMS |
|
|
|
Interest income | 38,370 | 9,444 | 10,631 |
Write-down of marketable securities | - | (30,500) | (25,409) |
|
|
|
|
| 38,370 | (21,056) | (14,778) |
|
|
|
|
Net loss before income taxes | (531,360) | (532,290) | (409,347) |
|
|
|
|
Future income tax recovery | - | 22,263 | - |
|
|
|
|
NET LOSS | (531,360) | (510,027) | (409,347) |
|
|
|
|
Deficit, beginning of the year | (4,291,717) | (3,781,690) | (3,372,343) |
|
|
|
|
DEFICIT, end of the year | $ (4,823,077) | $ (4,291,717) | $ (3,781,690) |
|
|
|
|
NET LOSS PER SHARE – BASIC/DILUTED | $ (0.02) | $ (0.03) | $ (0.03) |
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | 24,484,995 | 17,585,434 | 13,168,301 |
3
ACREX Ventures Ltd.
(An Exploration Stage Company)
BALANCE SHEETS
December 31, 2006 and 2005
Expressed in Canadian dollars
| 2006 | 2005 |
|
|
|
ASSETS |
|
|
|
|
|
Current |
|
|
Cash and short-term investments | $ 662,965 | $ 408,332 |
Marketable securities | 16,000 | 16,000 |
Other receivables | 42,420 | 11,667 |
Deposit and prepaid expenses | 7,507 | - |
|
|
|
Total current assets | 728,892 | 435,999 |
|
|
|
Mineral properties – Note 3 | 1,704,959 | 1,152,693 |
|
|
|
Total assets | $ 2,433,851 | $ 1,588,692 |
|
|
|
LIABILITIES |
|
|
|
|
|
Current |
|
|
Accounts payable and accrued expenses – Note 7 | $ 17,992 | $ 33,306 |
|
|
|
Total liabilities | 17,992 | 33,306 |
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
Share capital – Note 4 | 7,019,882 | 5,629,706 |
Contributed surplus – Note 5 | 219,054 | 217,397 |
Deficit | (4,823,077) | (4,291,717) |
|
|
|
Total stockholders’ equity | 2,415,859 | 1,555,386 |
|
|
|
Total liabilities and stockholders’ equity | $ 2,433,851 | $ 1,588,692 |
Nature of Operations – Note 1
Commitments – Notes 3, 4 and 6
Subsequent Events – Note 10
APPROVED ON BEHALF OF THE BOARD |
| ||
|
| ||
|
| ||
“Malcolm Powell” | Director | “Carl R. Jonsson” | Director |
Malcolm Powell |
| Carl R. Jonsson |
|
3
ACREX Ventures Ltd.
(An Exploration Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
| Common Stock | Contributed | Accumulated |
| |
| Shares | Amount | Surplus | Deficit | Total |
|
|
|
|
|
|
Balance, December 31, 2003 | 13,167,616 | $ 4,879,083 | $ 112,000 | $ (3,372,343) | $ 1,618,740 |
|
|
|
|
|
|
Common stock issued for: |
|
|
|
|
|
Private placement | 250,000 | 52,200 | - | - | 52,200 |
Net loss | - | - | - | (40,347) | (409,347) |
|
|
|
|
|
|
Balance, December 31, 2004 | 13,417,616 | 4,931,283 | 112,000 | (3,781,690) | 1,261,593 |
|
|
|
|
|
|
Common stock issued for: |
|
|
|
|
|
Cash (net of issue costs) | 6,587,500 | 736,568 | - | - | 736,568 |
Mineral properties | 100,000 | 14,000 | - | - | 14,000 |
Finance fees | 10,875 | - | - | 1,631 | |
Agents’ options and warrants | - | 31,513 | - | - | |
Future income taxes on expenditures renounced to shareholders | - | (22,263) | - | - | (22,263) |
Stock-based compensation | - | - | 73,884 | - | 73,884 |
Net loss | - | - | - | (510,027) | (510,027) |
|
|
|
|
|
|
Balance, December 31, 2005 | 20,115,991 | 5,629,706 | 217,397 | (4,291,717) | 1,555,386 |
Common stock issued for: |
|
|
|
|
|
Private placements | 3,000,000 | 705,000 | - | - | 705,000 |
Mineral properties | 50,000 | 17,000 | - | - | 17,000 |
Options | 663,630 | 79,636 | - | - | 79,636 |
Warrants | 3,079,315 | 550,988 | - | - | 550,988 |
Transferred from contributed surplus for stock options and agents’ warrants exercised | - | 37,552 | (37,552) | - | - |
Stock-based compensation | - | - | 39,209 | - | 39,209 |
Net loss | - | - | - | (531,360) | (531,360) |
|
|
|
|
|
|
Balance, December 31, 2006 | 26,908,936 | $ 7,019,882 | $ 219,054 | $ (4,823,077) | $ 2,415,859 |
3
ACREX Ventures Ltd.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
| 2006 | 2005 | 2004 |
|
|
|
|
OPERATIONS |
|
|
|
|
|
|
|
Net loss | $ (531,360) | $ (510,027) | $ (409,347) |
Add (deduct) items not involving cash: |
|
|
|
Loss on termination of mineral property option | 15,429 | 97,383 | - |
Write-down of marketable securities | - | 30,500 | 25,409 |
Stock-based compensation | 39,209 | 73,884 | - |
Future income tax recovery | - | (22,263) | - |
Gain on sale of interest in mineral property | - | (94,999) | (12,049) |
|
|
|
|
Changes in non-cash working capital balances: |
|
|
|
Decrease (increase) in other receivables | (30,753) | 4,563 | 36,246 |
Increase in deposits and prepaid expenses | (7,507) | - | - |
Decrease in accounts payable and accrued expenses | (15,314) | (21,406) | (44,271) |
|
|
|
|
Cash used in operations | (530,296) | (442,365) | (404,012) |
|
|
|
|
FINANCING |
|
|
|
|
|
|
|
Shares issued | 1,335,624 | 738,199 | 52,200 |
|
|
|
|
Cash provided by financing | 1,335,624 | 738,199 | 52,200 |
|
|
|
|
INVESTING |
|
|
|
|
|
|
|
Proceeds on sale of mineral property | - | 65,000 | 5,000 |
Increase in mineral properties | (550,695) | (181,733) | (452,311) |
Purchase of marketable securities | - | - | (6,659) |
|
|
|
|
Cash used in investing | (550,695) | (116,733) | (453,970) |
|
|
|
|
Increase (decrease) in cash | 254,633 | 179,101 | (805,782) |
|
|
|
|
Cash and short-term investments, beginning of the year | 408,332 | 229,231 | 1,035,013 |
|
|
|
|
CASH AND SHORT-TERM INVESTMENTS, end of the year | $ 662,965 | $ 408,332 | $ 229,231 |
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION |
|
|
|
|
|
|
|
Cash paid during the year for interest | $ - | $ - | $ - |
|
|
|
|
Cash paid during the year for income taxes | $ - | $ - | $ - |
Non-cash transactions - Note 9
4
ACREX Ventures Ltd.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
1. NATURE OF OPERATIONS | |
|
|
ACREX Ventures Ltd., incorporated in British Columbia, is a public company listed on the TSX Venture Exchange ("TSX") in Canada and on the NASD over-the-counter Bulletin Board ("OTCBB") in the U.S.
The Company is in the exploration stage and its principal business activity is the sourcing and exploration of mineral properties in Canada.
At December 31, 2006 the Company was in the process of exploring its principal mineral properties and has not yet determined whether the properties contain ore reserves that are economically recoverable. The recoverability of amounts shown for mineral properties and related deferred exploration costs is dependent upon the discovery of economically recoverable reserves, confirmation of the Company's interest in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete the development and upon future profitable production or proceeds from the disposition thereof.
2. SIGNIFICANT ACCOUNTING POLICIES | |
|
|
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in Canada and, except as described in Note 11, conform in all material respects with accounting principles generally accepted in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgement. Actual results may differ from these estimates.
The financial statements have, in management's opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:
Marketable securities- Marketable securities are carried at the lower of cost or market value.
Mineral properties - The Company accounts for mineral property costs in accordance with the Canadian Institute of Chartered Accountants Handbook Section 3061, “Property, plant and equipment” (“CICA 3061”), and abstract EIC-126, “Accounting by Mining Enterprises for Exploration Costs” (“EIC-126”) of the Emerging Issues Committee. CICA 3061 provides for the capitalization of the acquisition and exploration costs of a mining property where such costs are considered to have the characteristics of property, plant and equipment. EIC-126 provides that a mining enterprise is not precluded from considering exploration costs to have the characteristics of property, plant and equipment when it has not established mineral reserves objectively and therefore does not have a basis for preparing a projection of the estimated future net cash flow from the property.
Mineral property costs include initial acquisition costs and related option payments, which are recorded when paid. Exploration and development costs are capitalized until properties are brought into production, when costs are amortized on a unit-of-production basis over economically recoverable reserves. Option payments are credited against mineral property costs when received. No gain or loss on disposition of a partial interest is recorded until all carrying costs of the interest have been offset by proceeds of sale or option payments received.
7
ACREX Ventures Ltd.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
2. SIGNIFICANT ACCOUNTING POLICIES (continued) | |
|
|
CICA 3061 also provides that property, plant and equipment be written down when the long-term expectation is that the net carrying amount will not be recovered. EIC-126 states that a mining enterprise which has not objectively established mineral reserves and therefore does not have a basis for preparing a projection of the estimated future cash flow from a property is not obliged to conclude that the capitalized costs have been impaired. However, EIC-126 references certain conditions that should be considered in determining subsequent write-downs, such as changes or abandonment of a work program or poor exploration results, and management reviews such conditions to determine whether a write-down of capitalized costs is required. When the carrying value of a property exceeds its net recoverable amount, provision is made for the impairment in value.
Accounting standards subsequently issued by the CICA dealing with Intangible Assets (CICA 1581 and CICA 3062) include reference to “Use rights such as drilling, water, air, mineral, timber cutting, and route authorities” as examples of intangible assets. CICA 3062 also states,inter alia, that intangible assets should be amortized over their useful life and tested for impairment. Management has reviewed this potential reporting conflict with the previously issued standards and is of the opinion that it is appropriately accounting for its mineral properties as having the characteristics of property, plant and equipment.
The Company is an exploration stage company as defined in Statement of Financial Accounting Standards No. 7 and the Securities and Exchange Commission Act Guide 7. The Company is devoting its present efforts to exploring and developing its mineral properties and none of its planned principal operations have commenced. All losses accumulated since inception have been considered as part of the Company's exploration stage activities.
Asset Retirement Obligations - The fair value of obligations associated with the retirement of tangible long-lived assets are recorded in the period the asset is put into use, with a corresponding increase to the carrying amount of the related asset. The obligations recognized are statutory, contractual or legal obligations. The liability is accreted over time for changes in the fair value of the liability through charges to accretion, which is included in depletion, depreciation and accretion expense. The costs capitalized to the related assets are amortized in a manner consistent with the depletion and depreciation of the related asset. At December 31, 2006, the fair value of the mineral properties’ site restoration costs are not significant.
Stock-based compensation - The Company has a stock option plan which is described in Note 6. The Company follows the recommendations of CICA Handbook Section 3870, "Stock-Based Compensation and Other Stock-Based Payments", which provides standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services. In accordance with these recommendations, stock options are recorded at their fair value on the date of grant as compensation expense, and agents’ options and warrants issued in connection with common share placements are recorded at their fair value on the date of issue as share issuance costs. On the exercise of stock options and agents’ options and warrants, share capital is credited for consideration received and for fair value amounts previously credited to contributed surplus. The Company uses the Black-Scholes option pricing model to estimate the fair value of stock-based compensation.
Loss per share - The Company uses the “treasury stock method” in computing earnings per share. Under this method, basic loss per share is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding during the year.
For the years ended December 31, 2006, 2005 and 2004 the existence of warrants and options affects the calculation of loss per share on a fully diluted basis. As the effect of this dilution is to reduce the reported loss per share, fully diluted loss per share information has not been shown.
8
ACREX Ventures Ltd.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
2. SIGNIFICANT ACCOUNTING POLICIES (continued) | |
|
|
Income taxes - Future income taxes relate to the expected future tax consequences of differences between the carrying amount of balance sheet items and their corresponding tax values. Future income tax assets, if any, are recognized only to the extent that, in the opinion of management, it is more likely than not that future income tax assets will be realized. Future income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates at the date of enactment or substantive enactment.
Financial instruments - The Company's financial instruments consist of cash and short-term investments, marketable securities, other receivables and accounts payable and accrued expenses. It is management's opinion that the Company is not exposed to significant interest, currency or credit risk arising from its financial instruments and that their fair values approximate their carrying values, unless otherwise noted.
Flow-through shares - The Company has financed a portion of its exploration activities through the issuance of flow-through shares. Under the terms of the flow-through share agreements, the tax attributes of the related exploration expenditures are renounced to subscribers. To recognize the foregone tax benefits to the Company, the carrying value of the shares issued is reduced by the tax effect of the tax benefits renounced to subscribers.
The Company follows the recommendations of the Emerging Issues Committee (“EIC”) of the Canadian Institute of Chartered Accountants (“CICA”) with respect to flow-through shares, as outlined in EIC-146. The application of EIC-146 requires the recognition of the foregone tax benefit on the date the Company renounces the tax credits associated with the exploration expenditures, provided there is reasonable assurance that the expenditures will be made. The recommendations apply to all flow-through share transactions initiated after March 19, 2004.
Government assistance – Refundable Mining tax credits are accrued at the time the related costs are incurred provided that their recovery is reasonably assured. Refundable credits arising from capital expenditures are applied to the cost of the assets and refundable credits arising from other expenditures are applied as a reduction of such expenses. Where recovery is not reasonably assured they will be recorded or accrued when assurance of reasonable recovery is determined. Amounts to be recovered may be adjusted based upon assessment by the Canada Revenue Agency.
9
ACREX Ventures Ltd.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
3. MINERAL PROPERTIES | |
|
|
|
| Spanish | Nachako/ |
|
| Michaud | Mountain | Referendum | Total |
|
|
|
|
|
December 31, 2005: |
|
|
|
|
|
|
|
|
|
Acquisition costs |
|
|
|
|
Balance, beginning of the year | $ 25,000 | $ - | $ - | $ 25,000 |
Option payments | - | 10,500 | 13,500 | 24,000 |
Less: termination of mineral property option | - | - | (13,500) | (13,500) |
|
|
|
|
|
Balance, end of the year | 25,000 | 10,500 | - | 35,500 |
|
|
|
|
|
Exploration costs |
|
|
|
|
Balance, beginning of the year | 1,029,341 | - | - | 1,029,344 |
Drilling | 52,206 | - | 47,771 | 99,977 |
Consulting | 7,019 | 2,977 | 20,241 | 30,237 |
Surveying and linecutting | 5,784 | 4,336 | 5,553 | 15,673 |
Assays | 5,504 | 5,112 | 4,062 | 14,678 |
Other | 1,681 | 3,230 | 6,256 | 11,167 |
Less: termination of mineral property option | - | - | (83,883) | (83,883) |
|
|
|
|
|
Balance, end of the year | 1,101,538 | 15,655 | - | 1,117,193 |
|
|
|
|
|
| $ 1,126,538 | $ 26,155 | $ - | $ 1,152,693 |
|
|
|
|
|
December 31, 2006: |
|
|
|
|
|
|
|
|
|
Acquisition costs |
|
|
|
|
Balance, beginning of the year | $ 25,000 | $ 10,500 | $ - | $ 35,500 |
Option payments | 50,000 | 32,748 | 9,781 | 92,529 |
Less: termination of mineral property option | - | - | (9,781) | (9,781) |
|
|
|
|
|
Balance, end of the year | 75,000 | 43,248 | - | 118,248 |
|
|
|
|
|
Exploration costs |
|
|
|
|
Balance, beginning of the year | 1,101,538 | 15,655 | - | 1,117,193 |
Drilling | 50,000 | 254,416 | - | 304,419 |
Assays | 2,535 | 72,387 | 1,570 | 76,492 |
Other | - | 39,489 | 376 | 39,865 |
Consulting | 7,370 | 18,675 | 2,200 | 28,245 |
Vehicles | - | 9,936 | 1,502 | 11,438 |
Support | 7,866 | - | - | 7,866 |
Lodging | - | 6,841 | - | 6,841 |
Less: termination of mineral property option | - | - | (5,648) | (5,648) |
|
|
|
|
|
Balance, end of the year | 1,169,312 | 417,399 | - | 1,586,711 |
|
|
|
|
|
| $ 1,244,312 | $ 460,647 | $ - | $ 1,704,959 |
8
ACREX Ventures Ltd.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
3. MINERAL PROPERTIES (continued) | |
|
|
Michaud gold claims, Ontario, Canada - Pursuant to an Agreement dated September 1, 2001 and amended January 17, 2003 and February 17, 2004 (“Agreement”) with Moneta Porcupine Mines Inc. (“Moneta”), the Company acquired an option to earn interests in 65 mineral claims in the Michaud Township, Ontario, Canada (the “Property”). The Property is divided into two areas.
Pursuant to the Agreement the Company could have earned a 60% interest in the first area by expending a minimum of $1,000,000 on exploration of the area by May 15, 2005 and completing a bankable feasibility study on the area by May 15, 2007. The Company was required to give notice to Moneta by December 31, 2004 of its intention to conduct further exploration on this area. The notice was not provided and as a result the Company lost all of its rights to earn any interest in the first area.
During 2004 the Company fulfilled the requirements to earn a 50% interest in the second area. On November 26, 2004, the Company entered into a Joint Venture Agreement with Moneta to engage in the exploration, development and mining of the second area. The agreement also includes terms for the acquisition of additional mining or mineral claims or other real property interests within the area of interest.
In order to earn an additional 20% interest in the second area the Company was required to give notice to Moneta by December 31, 2004 of its intent to expend a minimum of $2,750,000 on exploration of the property by May 15, 2007. The Company decided to not give such notice and as a result relinquished the right to earn the additional 20% in the second area.
The Agreement also includes terms for the acquisition of additional mineral claims within the area of interest. Pursuantto these provisions, the Company has agreed with Moneta to acquire 50% of the net 75% interest (i.e. a net 37.5% interest) in three adjoining mineral claims known to the parties as the Dyment Claims - which cover approximately 48 hectares. To reimburse Moneta for its costs of the original acquisition of interests in the Dyment Claims, the Company has agreed to pay Moneta $50,000, all of which has been paid as of December 31, 2006.
Spanish Mountain claims, British Columbia, Canada- On July 23, 2005, the Company entered into an Option Agreement (the "Agreement") to acquire a 100% interest in the Spanish Mountain property, consisting of 8 mineral claims covering approximately 1,350 hectares located near Likely in Northeastern British Columbia, Canada.
Acrex may earn the interest by making certain cash payments and issuing shares to the Optionor as follows:
|
|
|
Due Date | Cash Payment | Share Issuance |
|
|
|
July 25, 2005 (completed) | $ 5,000 | 50,000 |
April 25, 2006 (completed) | 5,000 | - |
July 25, 2006 (completed) | 10,000 | 50,000 |
July 25, 2007 | 20,000 | 50,000 |
July 25, 2008 | 20,000 | 50,000 |
July 25, 2009 | 40,000 | - |
|
|
|
| $ 100,000 | 200,000 |
In addition, 200,000 shares of the Company are to be issued upon receipt of a positive feasibility study.
The Agreement is subject to a 3% net smelter return (“NSR”). The Company has the right to purchase 66.67% of the NSR for $1,000,000 upon commencement of commercial production of the property.
11
ACREX Ventures Ltd.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
3. MINERAL PROPERTIES (continued) | |
|
|
Nachako claims, British Columbia, Canada – On January 26, 2006 the Company signed a Letter of Intent (the “Letter”) with a prospector (the “Optionor”) giving it a right to negotiate option agreements on certain mineral claims, covering a total of approximately 1,200 Units (approximately 25,000 hectares) in the north central area of British Columbia. The Company earned the rights by paying the costs (aggregating $9,781) of the Optionor filing mineral claims over the areas.
The Company terminated its option on the Nachako claims by electing to not sign the formal option agreement with the Optionor and the agreement accordingly expired effective July 31, 2006.
Referendum claims, British Columbia, Canada -On February 10, 2005, the Company entered into an Option Agreement (the "Agreement") to acquire a 100% interest in the Referendum gold-copper property, consisting of 15 mineral claims covering approximately 850 hectares in the Nelson mining division in British Columbia, Canada.
The Company terminated its option on the Referendum claims on August 5, 2005.
Raglan Ungava claims, Quebec, Canada – On May 12, 2003, the Company acquired a 100% interest in 150 mineral claims in the Ungava region of Northern Quebec.
In 2003, the Company granted Resolve Ventures Inc. (“Resolve”) an option to acquire a 70% interest in the claims. Pursuant to the option, Resolve made cash payments to the Company of $20,000 and issued 150,000 Resolve shares.
On July 24, 2005, the Company sold 100% of its interest in these claims to Resolve for a further cash payment of $65,000 and an additional 500,000 common shares of Resolve. The Company will retain a 3% net smelter royalty on these claims.
4. SHARE CAPITAL | |
|
|
On November 16, 2004 the shareholders of the Company passed a special resolution providing that the articles of the Company be altered by canceling the existing articles and creating and adopting of new articles. Included in the new articles was an amendment to allow an increase of authorized share capital to an unlimited number of common voting shares without par value.
The following share transactions occurred during the years ended December 31, 2006 and 2005:
(i) On May 1, 2006 the Company issued 3,000,000 units at $0.235 per unit for gross proceeds of $705,000 under a non-brokered private placement. Each unit consisted of one common share and one common share purchase warrant. Each full warrant entitles the holder to acquire an additional common share for $0.30 per share until May 1, 2007.
(ii) On October 18, 2005, the Company issued 650,000 units at $0.12 per unit for gross proceeds of $78,000 under a non-brokered private placement. Each unit consisted of one common share and one-half common share purchase warrant. Each full warrant entitles the holder to acquire an additional common share for $0.18 per share until October 18, 2006.
12
ACREX Ventures Ltd.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
4. SHARE CAPITAL (continued) | |
|
|
(iii) On May 16, 2005, the Company issued 4,336,500 units at $0.12 per unit for gross proceeds of $520,380. Each unit consisted of one common share and one-half common share purchase warrant. Each full warrant entitles the holder to acquire an additional common share for $0.18 per share until May 16, 2006. The agent received a commission of $52,038 and an option to acquire 520,380 units at $0.12 per unit until May 16, 2006. The Company has recognized the fair value of the agent's options as a share issue cost.
(iv) On March 24, 2005, the Company issued 1,200,000 units at $0.15 per unit for gross proceeds of $180,000 under a brokered private placement. Each unit consisted of one common share and one-half common share purchase warrant. Each full warrant entitles the holder to acquire an additional common share for $0.20 until March 24, 2006. The agents received fees and commissions of $15,400, 10,875 shares and 190,875 warrants exercisable at $0.15 per share until March 24, 2006. The Company has recognized the fair value of the agents' warrants as a share issue cost.
(v) On March 10, 2005, the Company issued 401,000 units at $0.15 per unit for gross proceeds of $60,150 under a non-brokered private placement. Each unit consisted of one common share and one-half common share purchase warrant. Each full warrant entitles the holder to acquire an additional common share for $0.20 per share until March 10, 2006.
Warrants – The Company has stock purchase warrants outstanding as follows:
|
|
|
|
|
|
|
| Outstanding |
|
|
| Outstanding |
|
| December 31, |
|
|
| December 31, |
|
Exercise Price | 2005 | Issued | Exercised | (Expired) | 2006 | Expiry date |
|
|
|
|
|
|
|
$0.20 | 200,500 | - | (125,250) | (75,250) | - | March 10, 2006 |
$0.20 | 600,000 | - | - | (600,000) | - | March 24, 2006 |
$0.15 | 190,875 | - | (190,875) | - | - | March 24, 2006 |
$0.18 | 2,428,440 | - | (2,428,440) | - | - | May 15, 2006 |
$0.18 | 325,000 | - | (325,000) | - | - | October 18, 2006 |
$0.30 | - | 3,000,000 | - | - | 3,000,000 | May 1, 2007 |
|
|
|
|
|
|
|
| 3,744,815 | 3,000,000 | (3,069,565) | (675,250) | 3,000,000 |
|
5. CONTRIBUTED SURPLUS | |
|
|
| 2006 | 2005 |
|
|
|
Balance, beginning of the year | $ 217,397 | $ 112,000 |
Stock-based compensation – Note 6 | 39,209 | 73,884 |
Agents’ options and warrants | - | 31,513 |
Options and warrants exercised | (37,552) | - |
|
|
|
Balance, end of the year | $ 219,054 | $ 217,397 |
13
ACREX Ventures Ltd.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
6. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION | |
|
|
The Company has established a stock option plan for directors, employees, and consultants. The following table summarizes the stock options outstanding at December 31, 2006:
|
|
|
|
Price | Number Outstanding | Number Exercisable | Expiry Date |
|
|
|
|
$0.30 | 600,000 | 600,000 | June 3, 2007 |
$0.28 | 565,000 | 565,000 | November 4, 2008 |
$0.12 | 485,000 | 485,000 | July 7, 2010 |
$0.12 | 100,000 | 100,000 | October 13, 2010 |
$0.12 | 100,000 | 100,000 | December 5, 2010 |
$0.30 | 100,000 | 100,000 | June 19, 2011 |
$0.30 | 50,000 | 50,000 | June 29, 2011 |
|
|
|
|
| 2,000,000 | 2,000,000 |
|
Under the Company's stock option plan, the exercise price of each option is determined by the Board, subject to the pricing policies of the TSX Venture Exchange. Options vest immediately when granted and expire five years from the date of the grant, unless the Board establishes more restrictive terms.
The aggregate number of shares issuable pursuant to options granted under the plan is limited to 10% of the Company's issued shares at the time the options are granted. The aggregate number of options granted to any one optionee in a 12-month period is limited to 5% of the issued shares of the corporation.
A summary of the changes in the Company's stock options for the years ended December 31, 2006 and 2005 is presented below:
| 2006 | 2005 | ||
|
| Weighted |
| Weighted |
|
| Average |
| Average |
| Number | Exercise Price | Number | Exercise Price |
|
|
|
|
|
Outstanding, beginning of the year | 2,520,380 | $0.22 | 1,305,000 | $0.29 |
Granted | 150,000 | $0.30 | 835,000 | $0.12 |
Agents’ options | - | $ - | 520,380 | $0.12 |
Exercised | (663,630) | $0.12 | - | $ - |
Cancelled or expired | (6,750) | $0.12 | (140,000) | $0.30 |
|
|
|
|
|
Outstanding, end of the year | 2,000,000 | $0.23 | 2,520,380 | $0.22 |
As described in Note 2, the Company follows the recommendations of the Canadian Institute of Chartered Accountants (“CICA”) with respect to stock-based compensation. The Company uses the Black-Scholes option pricing model to value stock options. The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The model requires management to make estimates which are subjective and may not be representative of actual results. Changes in assumptions can materially affect estimates of fair values.
14
ACREX Ventures Ltd.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
6. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION (continued) | |
|
|
During the year ended December 31, 2006, a compensation charge associated with stock options granted to directors and consultants of the Company in the amount of $39,209 (consulting fees of $13,400 and investor relations of $25,809) (2005: $73,884; 2004: $Nil) was recognized in the financial statements. For purposes of the calculation, the following assumptions were used under the Black-Scholes model:
| 2006 | 2005 |
|
|
|
Risk free interest rate | 4.32% | 3.37% |
Expected dividend yield | 0% | 0% |
Expected stock price volatility | 127% | 122% |
Expected life | 5 years | 4.28 years |
The grant-date fair value of options granted during the year ended December 31, 2006 was $0.26 (2005: $0.09).
7. RELATED PARTY TRANSACTIONS | |
|
|
The Company incurred legal fees of $34,914 (2005: $53,802; 2004: $48,950) from a law firm of which a director is a principal. Accounts payable includes $Nil (2005: $6,681) due to the law firm.
The Company incurred management fees of $108,000 (2005: $108,000; 2004: $108,000) and equipment rental charges (included in office and general) of $11,396 (2005: $10,063; 2004: $10,068) from a company owned by a director and management fees of $30,000 (2005: $30,000; 2004:$30,000) from a company owned by another director.
The Company incurred rent expense of $13,380 (2005: $10,680; 2004: $12,502) from a company which has a common director.
These charges were measured by the exchange amount, which is the amount agreed upon by the transacting parties.
8. INCOME TAXES | |
|
|
At December 31, 2006, the Company has accumulated resource deduction expenses totalling $1,222,534 and non-capital losses totalling $2,316,955 available to reduce taxable income of future years. The non-capital losses expire as follows:
|
|
2007 | $ 55,156 |
2008 | 91,793 |
2009 | 270,556 |
2010 | 395,904 |
2014 | 445,585 |
2015 | 508,593 |
2026 | 549,368 |
|
|
| $ 2,316,955 |
15
ACREX Ventures Ltd.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
8. INCOME TAXES (continued) | |
|
|
The significant components of the Company’s approximate future income tax assets (liabilities), at an average corporate tax rate of 34.12%, are as follows:
| 2006 | 2005 |
|
|
|
Non-capital losses | $ 790,545 | $ 619,000 |
Resource property costs | (164,603) | (174,000) |
Share issue costs | 30,378 | 60,000 |
|
|
|
| $ 656,320 | $ 505,000 |
The potential income tax benefit of these losses and expenses have not been recorded in the financial statements due to the uncertainty of realization.
9. NON-CASH TRANSACTIONS | |
|
|
Investing and financing activities that do not have a direct impact on current cash flows are excluded from the cash flow statement.
During the year ended December 31, 2006, the following transaction was excluded from the statement of cash flows:
i)
The Company issued 50,000 shares at a fair value of $17,000 for mineral properties.
During the year ended December 31, 2005, the following transactions were excluded from the statement of cash flows:
i)
The Company issued 100,000 shares at a value of $14,000 for mineral properties,
ii)
The Company issued 10,875 common shares at a value of $1,631 as agent's fees; and
iii)
The Company received 500,000 common shares of Resolve Ventures Inc. at a value of $30,000 as partial consideration for the sale of the Raglan Ungava claims – Note 3.
During the year ended December 31, 2004, the following transaction was excluded from the statement of cash flows:
The Company received the second of three scheduled payments, consisting of $5,000 in cash and $12,000 in shares of the purchaser, in connection with the optioning of a partial interest in the Raglan Ungava mineral claims. The non-cash portion of this payment was excluded from the statement of cash flows.
10. SUBSEQUENT EVENTS | |
|
|
Subsequent to December 31, 2006:
i)
the Company entered into an agreement to acquire a 100% interest in two mineral claims situated in the Cariboo Mining Division, BC. As consideration, the Company paid $10,000 cash and issued 200,000 common shares of the Company to the vendors; and
ii)
the Company granted stock options to a consultant to purchase 100,000 shares at $0.20 per share, exercisable up to but not after February 7, 2012.
16
ACREX Ventures Ltd.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
11. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES | |
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These financial statements prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) conform to those generally accepted in the United States (“U.S. GAAP”), in all material respects, except as noted below:
Marketable securities - Under Canadian GAAP marketable securities are carried at the lower of cost or fair value, with unrealized holding losses included in earnings. Under U.S. GAAP, the Company's marketable securities are classified as "trading securities" as they are held primarily for sale in the near term. Trading securities are carried at fair value, with unrealized holding gains and losses included in earnings. Because of the unrealized holding losses, there is no adjustment required under U.S. GAAP.
Mineral properties - Under Canadian GAAP, acquisition and exploration costs are capitalized. Under U.S. GAAP, costs are expensed as incurred unless commercial feasibility is established.
Under U.S. GAAP, mineral properties are reviewed by management for impairment whenever circumstances change which could indicate that the carrying amount of these assets may not be recoverable. Such review has not been completed as there are no capitalized properties for U.S. GAAP purposes.
Flow-through shares - Under U.S. GAAP, proceeds from the issuance of flow-through shares are allocated amongst the fair value of the stock issued and the price the investor pays. The difference between the fair value and the price paid is recognized as a liability for accounting purposes. The liability is relieved and the corresponding future tax liability is recorded when the Company renounces its exploration expenditures to the flow-through share investors.
During the year ended December 31, 2004, the Company issued 250,000 flow-through shares; however, as of December 31, 2004 none of the flow-through funds raised had been renounced, resulting in a year end liability of $7,500. During the year ended December 31, 2005, the Company renounced the $62,500 and as at December 31, 2006 there was no remaining liability.
Additionally, under U.S. GAAP proceeds from the sale of flow-through shares would be classified as restricted cash until the expenditure actually occurs. As at December 31, 2006, for U.S. GAAP purposes, $Nil (2005: $Nil, 2004:$62,500) would have been restricted.
Net earnings per share and escrow shares -Under U.S. GAAP, performance-based escrow shares are considered to be contingently issuable until the performance criteria has been satisfied and are excluded from the computation of the weighted average of shares outstanding. The Company's escrow shares are not performance-based and therefore no adjustments have been made to the calculation of earnings per share.
On November 2, 2001, the Company entered into an escrow agreement with certain of its shareholders in respect of their 1,283,415 shares. The shares were being released from escrow on a pro-rata basis at 15% semi-annually, with the final release occurring on May 21, 2005.
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ACREX Ventures Ltd.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
11. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued) | |
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Reconciliation of losses reported to U.S. GAAP:
| 2006 | 2005 | 2004 |
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Net loss as reported in accordance with Canadian GAAP | $ (531,360) | $ (510,027) | $ (409,347) |
Adjustments: |
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Mineral property costs expensed | (552,266) | (98,349) | (447,360) |
Future income tax benefit related to flow-through shares | - | (14,763) | - |
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Net loss under U.S. GAAP | $ (1,083,626) | $ (623,139) | $ (856,707) |
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Net loss per share under U.S. GAAP | $ (0.04) | $ (0.04) | $ (0.07) |
Reconciliation of total assets, liabilities, and shareholder equity to U.S. GAAP:
| 2006 | 2005 |
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Total assets under Canadian GAAP | $ 2,433,851 | $ 1,588,692 |
Adjustments: |
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Mineral property costs expensed | (1,704,959) | (1,152,693) |
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Total assets under U.S. GAAP | $ 728,892 | $ 435,999 |
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Total liabilities under Canadian GAAP | $ 17,992 | $ 33,306 |
Adjustments to U.S. GAAP | - | - |
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Total liabilities under U.S. GAAP | 17,992 | 33,306 |
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Total stockholders’ equity under Canadian GAAP | 2,415,859 | 1,555,386 |
Adjustments to U.S. GAAP | (1,704,959) | (1,152,693) |
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Total equity under U.S. GAAP | 710,900 | 402,693 |
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Total equity and liabilities under U.S. GAAP | $ 728,892 | $ 435,999 |
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ACREX Ventures Ltd.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 2006, 2005 and 2004
Expressed in Canadian dollars
11. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued) | |
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Reconciliation of statements of cash flows to U.S. GAAP:
| 2006 | 2005 | 2004 |
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Cash used in operating activities under Canadian GAAP | $ (530,296) | $ (442,365) | $ (404,012) |
Adjustments to U.S. GAAP |
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Exploration expenses for the period | (550,695) | (181,733) | (447,360) |
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Cash used in operating activities under U.S. GAAP | $ (1,080,991) | $ (624,098) | $ (851,372) |
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Cash used in investing activities under Canadian GAAP | $ (550,695) | $ (116,733) | $ (453,970) |
Adjustments to U.S. GAAP |
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Exploration expenses for the period | 550,695 | 181,733 | 447,360 |
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Cash from (used in) investing activities under U.S. GAAP | $ - | $ 65,000 | $ (6,610) |
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Cash flow from financing activities under Canadian GAAP | $ 1,335,624 | $ 738,199 | $ 52,200 |
Adjustments to U.S. GAAP | - | - | - |
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Cash flow from financing activities under U.S. GAAP | $ 1,335,624 | $ 738,199 | $ 52,200 |
Certain figures in the statements of cash flows for the year ended December 31,2005 have been reclassified to conform with the presentation used for the year ended December 31,2006.
Under U.S. GAAP the Company must provide a reconciliation of the numerators and the denominators of basic and diluted earnings per share:
| 2006 | 2005 | 2004 |
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Numerator |
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Net loss under U.S. GAAP | $ (1,083,626) | $ (623,139) | $ (856,707) |
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Denominator |
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Weighted average number of common shares outstanding | 24,484,995 | 17,585,434 | 13,168,301 |
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Basic and diluted net loss per share | $ (0.04) | $ (0.04) | $ (0.07) |
Diluted net loss per share reflects the potential dilution of securities that could result from the exercise of dilutive options and warrants. As of December 31, 2006, the Company had 2,000,000 (2005: 2,520,380, 2004: 1,305,000) stock options outstanding and 3,000,000 (2005: 3,744,815, 2004: 8,893,733) warrants outstanding which have not been included in the calculation of diluted net loss per share because their effect would have been antidilutive.
12. RECENT PRONOUNCEMENTS
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted could have a material effect on the accompanying financial statements.
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