EX-1 4 junif.htm JUNE 30, 2004 INTERIM FINANCIALS Quarterly Report FORM 61



BUFFALO GOLD LTD.

(An Exploration Stage Company)

FINANCIAL STATEMENTS

(Expressed in Canadian dollars)

(Unaudited, Prepared by Management)


JUNE 30, 2004
















NOTICE TO READER

These unaudited consolidated financial statements for the second financial quarter ended June 30, 2004 have not been reviewed by our auditors, Davidson & Company, Chartered Accountants. They have been prepared by Buffalo Gold Ltd.'s management in accordance with accounting principles generally accepted in Canada, consistent with previous quarters and years. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2003.

 

____________________________________________________________________________________________________________________________________

BUFFALO GOLD LTD.
(An Exploration Stage Company)

Balance Sheets
(Expressed in Canadian dollars)
As at June 30, 2004 and December 31, 2003
(Unaudited, Prepared by Management)

_________________________________________________________________________________________________________________________________________________________

 

 

June 30,
2004
(Unaudited)

December 31,
2003
                       

Assets

 

 

Current

 

 

 

Cash and cash equivalents

$        8,798 

$      12,890 

 

Receivables

6,468 

20,743 

 

Notes receivable (note 3)

97,264 

-  

 

Prepaid expenses

                -  

       13,857 

 

 

112,530 

47,490 

Exploration properties and deferred costs (note 3)

                -  

               -   

 

 

$    112,530 

$      47,490 
Liabilities And Shareholders' Deficiency

 

 

Current

 

 

 

Accounts payable and accrued liabilities (note 7)

$    503,931 

$    443,573 

 

Share subscriptions received (note 4)

-  

-  

 

Loans payable

      152,131 

    152,131 

 

 

656,062 

595,704 

Amounts due to shareholders

          6,272 

        6,272 

 

 

      662,334 

    601,976 

Shareholders' deficiency

 

 

 

Share capital (note 4)

 

 

 

Authorized

 

 

 

          Unlimited common shares without par value

 

 

 

Issued

 

 

 

          4,086,726 (2003 - 4,008,890) common shares

4,252,602 

4,232,769 

 

Contributed surplus

54,000 

54,000 

 

Deficit

  (4,856,406)

  (4,841,255)

 

 

     (549,804)

     (554,486)

 

 

$     112,530 

$        47,490 


Going concern (note 2)

On behalf of the Board:

 

 

 


John Tully
John Tully


Director


James Stewart
James Stewart


Director

 

The accompanying notes are an integral part of these financial statements.



___________________________________________________________________________________________________________







BUFFALO GOLD LTD.
(An Exploration Stage Company)

Statements of Operations and Deficit
(Expressed in Canadian dollars)
Quarter Ended June 30, 2004
(Unaudited, Prepared by Management)

____________________________________________________________________________________________________________________________

 

 

Three Months
Ended

Six Months
Ended

 

 

June 30, 2004

June 30, 2003

June 30, 2004

June 30, 2003
Expenses

 

 

 

 

 

Consulting fees

$        7,500 

$        84,000 

$        20,250 

$        114,000 

 

Exploration costs

-  

47,789 

2,500 

87,314 

 

Listing, filing and transfer fees

4,670 

12,478 

9,968 

23,147 

 

Office and miscellaneous

4,859 

5,796 

10,997 

9,834 

 

Professional fees

9,290 

15,494 

36,915 

58,318 

 

Public relations

-  

-  

- 

3,870 

 

Rent

2,700 

-  

7,500 

4,000 

 

Travel and promotion

            2,130 

                 294 

            15,178 

             3,309 

 

 

 

 

 

 

 

Loss before other items

        (31,149)

        (165,851)

        (103,308)

        (303,792)

 

 

 

 

 

 
Other Items

 

 

 

 

 

Recovery of property evaluation and
due diligence costs (note 3)

-  

-  

94,955 

-  

 

Interest expense

(9,128)

-  

(9,128)

-  

 

Interest income

                2,309 

                       1 

                 2,330 

                    12 

 

 

 

 

 

 

Income (loss) for the period

(37,968)

(165,850)

(15,151)

(303,780)

 

 

 

 

 

 

 

Deficit, beginning of period

        (4,818,438)

        (4,018,810)

        (4,841,255)

        (3,880,880)

 

 

 

 

 

 

Deficit, end of period

$       (4,856,406)

$       (4,184,660)

$       (4,856,406)

$       (4,184,660)

 

 

 

 

 

 

Income (loss) per share, basic and fully diluted

 

 

 

 

 

Income (loss) per share

$                (0.01)

$                (0.05)

$                (0.00)

$                (0.10)

 

 

 

 

 

 

Weighted average number of
shares outstanding

 

 

 

 

 

Basic and fully diluted

          4,086,726 

          3,552,480 

          4,061,493 

          3,109,494 

 



The accompanying notes are an integral part of these financial statements.










_________________________________________________________________________________________________________________________________







BUFFALO GOLD LTD.

(An Exploration Stage Company)



Statements of Cash Flows

(Expressed in Canadian dollars)

Quarter Ended June 30, 2004

(Unaudited, Prepared by Management)


_____________________________________________________________________________________________________________________________________________________






 



 



Three Months

       Ended       



Six Months Ended

______________________________________






 



 



June 30, 2004



June 30, 2003



June 30, 2004



June 30, 2003






Cash Flows From (Used In) Operating Activities



 



 



 



 






       Income (loss) for the period



$    (37,968)  



$    (165,850)  



$    (15,151)  



$    (303,780)  






 



 



 



 



 



 






         Items not involving cash



 



 



 



 






         Stock-based compensation



-   



54,000   



-   



54,000   






 



 



 



 



 



 






       Changes in non-cash working capital items:



 



 



 



 






              Decrease (increase) in receivables



(1,094)  



(6,022)  



14,275   



(14,284)  






              Increase in notes receivable



-   



-   



(94,955)  



-   






              Decrease in prepaid expenses



-   



-   



13,857   



-   






              Increase in accounts payable and 

             accrued liabilities





        31,823   





        6,566   





        58,049   





        35,423   






 



 



 



 



 



 






              Net cash provided by (used in) 

             operating activities





        (7,239)  





   (111,306)  





      (23,925)  





    (228,641)  






 



 



 



 



 



 






Cash Flows From Financing Activities



 



 



 



 






       Accounts payable to be settled with 

       capital stock



-   



-   



-   



-   






       Share subscriptions received (returned) 

       (note 4)



(44,167)  



-   



-   



-   






       Proceeds from private placement (note 4)



                 -   



                -   



      19,833   



     300,638   






 



 



 



 



 



 






       Net cash provided by financing activities



     (44,167)  



 



    19,833   



 






 



 



 



 



 



 






Cash Flows Used In Investing Activities 



 



 



 






       Expenditures on exploration properties



                 -   



                 -   



                 -   



                 -   






 



 



 



 



 



 






       Net cash provided by (used in) investing activities



                 -   



                 -   



                 -   



                 -   






 



 



 



 



 



 






Change in cash and cash equivalents during the period 



(51,406)  



(111,306)  



(4,092)  



 71,997   






 



 



 



 



 



 






Cash and cash equivalents, beginning of period



      60,204   



       189,508   



        12,890   



          6,205   






 



 



 



 



 






Cash and cash equivalents, end of period



$        8,798   



$        78,202   



$        8,798   



$      78,202   







 


 


 


The accompanying notes are an integral part of these financial statements.


 


 


 


 


________________________________________________________________________________________________________________________________


BUFFALO GOLD LTD.

(An Exploration Stage Company)



Notes to the Financial Statements

(Expressed in Canadian dollars)

Quarter Ended June 30, 2004

(Unaudited, Prepared by Management)


_______________________________________________________________________________________________________________________________






1.     BASIS OF PRESENTATION



On February 17, 2003, the Company changed its name from Buffalo Diamonds Ltd. to Buffalo Gold Ltd. and consolidated its share capital on a 10 old for one new basis (note 4).


The Company is in the process of evaluating mineral properties for potential acquisition. To date, the Company has not earned significant revenues and is considered to be in the exploration stage.


The accompanying unaudited financial statements do not include all information and footnote disclosures required for an annual set of financial statements under Canadian or United States generally accepted accounting principles. In the opinion of management, all adjustments (consisting solely of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows as at June 30, 2004 and for all periods presented, have been included. Interim results for the three-month period ended June 30, 2004 are not necessarily indicative of the results that may be expected for the fiscal year as a whole. 


These financial statements have been prepared in accordance with Canadian generally accepted accounting principles for interim financial information. These financial statements conform, in all material respects, with generally accepted accounting principles ("GAAP") in the United States. 


These financial statements should be read in conjunction with the financial statements and notes for the fiscal year ended December 31, 2003. The accounting principles applied in these interim consolidated financial statements are consistent to those applied in the annual consolidated financial statements.





2.     GOING CONCERN



These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Canada with the on-going assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. However, certain conditions noted below currently exist which raise substantial doubt about the Company's ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.


At June 30, 2004, the Company has a working capital deficiency of $552,532 (2003 - $548,214), and, without additional funding, is unable to meet its obligations as they fall due. The Company has a significant working capital deficiency and, accordingly, there is substantial doubt about the ability of the Company to continue as a going concern. Management is actively pursuing additional funds by way of private placement to meet its reduced level of general and administrative expenditures. While the Company has been successful in raising funds in the past, there can be no assurance that it will be able to do so in the future.


The operations of the Company have primarily been funded by the issuance of share capital and debt. Continued operation of the Company is dependent on the Company's ability to complete additional equity financings or generate profitable operations in the future. Such financings may not be available or may not be available on reasonable terms.





3.     EXPLORATION PROPERTIES AND DEFERRED COSTS


        Calling Lake and Varlaam, Alberta



The Company has an undivided 100% working interest in several mineral exploration permits in the Calling Lake region of Alberta. Pursuant to a letter of agreement dated September 10, 1998, as amended on August 26, 1999, the Company has also acquired a 50% interest in exploration claims, known as the Varlaam property, located contiguous to the Calling Lake property. The Company paid the vendor, New Claymore Resources Inc. ("New Claymore") $50,000 and issued 25,000 common shares of the Company.


In February 2002, the Company and New Claymore granted an option to BHP Billiton Diamonds Inc. ("BHP") to acquire up to a 70% interest in their Calling Lake and Varlaam properties in Alberta. On September 12, 2003, the Company received notice that BHP Billiton Diamonds Inc. had terminated its option to acquire an interest in the Calling Lake and Varlaam Properties owned by the Company and New Claymore. The Company now maintains an ownership interest of 65% with the remaining 35% held by New Claymore. 


In 2003, management of the Company decided to write down the carrying value of the properties to $Nil.



        Terrawest Properties, Peoples Republic of China



During the year ended December 31, 2003, the Company entered into an agreement to acquire an interest in certain gold properties in the People's Republic of China from Terrawest Resource Holdings Ltd. ("Terrawest"). The Company conducted property evaluation and due diligence in 2003. In March 2004, the agreement effectively ended when Terrawest received a notice from its Chinese partners terminating Terrawest's underlying agreement on the subject properties. The Company agreed to abandon any claim against Terrawest in consideration of Terrawest and its principals providing two joint and several promissory notes totalling $100,000. The promissory notes are each for $50,000, fall due on July 30, 2004 and December 31, 2004 respectively and bear interest at the rate of 10% per year after their due dates. The present value of these promissory notes was $94,955 at the date of issue and $97,264 at June 30, 2004. Subsequent to June 30, 2004, the Company received the $50,000 due July 30, 2004.


 



4.      CAPITAL STOCK


__________________________________________________________________________________________________________________________________







Number of    Shares   





Share Capital



Contributed    Surplus   
















Balance at December 31, 2000



1,895,095   



$  3,545,697   



$         -   






         For exploration properties



      10,000   



         15,000   



            -   
















Balance at December 31, 2001



1,905,095   



3,560,697   



-   






         Settlement of accounts payable



81,834   



81,834   



-   






         Private placement



      200,000   



      100,000   



            -   
















Balance at December 31, 2002



2,186,929   



   3,742,531   



   -   






         Private placement



1,333,330   



300,639   



-   






         Settlement of accounts payable



32,221   



28,999   



-   






         Private placement



423,077   



151,717   



-   






         Exercise of warrants



33,333   



8,883   



-   






         Stock-based compensation



                  -   



                  -   



      54,000   
















Balance at December 31, 2003



4,008,890   



4,232,769   



54,000   






         Exercise of warrants



77,836   



19,833   



-   






         Share subscription received



                  -   



                  -   



               -   
















Balance at June 30, 2004



4,086,726   



$   4,252,602   



$   54,000   







___________________________________________________________________________________________________________________________________




        Share subscriptions receive



In February 2004, the Company received $44,167 in respect of a planned exercise of share purchase warrants. The share subscription did not complete and in April 2004 this amount was returned to the subscriber.



        Share consolidation



Effective February 17, 2003, the Company consolidated its issued share capital on a 10 old for one new basis. The authorized share capital remained unchanged. As a result of the share consolidation, the Company's issued share capital decreased from 21,869,294 shares to 2,186,929 shares. The decrease was reflected retroactively as a change in issued share capital. In addition, references to share capital, options and warrants in these financial statements and all prior loss per share information were retroactively restated to give effect to the share consolidation.



        Discovery Bonus



In connection with acquiring the Chain Lakes and Calling Lake properties, the Company entered into a Discovery Bonus Agreement for the issuance of up to 200,000 common shares at $0.01 per Discovery Bonus Share, with 100,000 common shares to be issued upon discovery of a diamondiferous kimberlite pipe on the Company's mineral properties and a further 100,000 common shares to be issued upon providing a bankable final feasibility study on a commercial diamondiferous pipe. As at June 30, 2004, these milestones have not been achieved, and, none of these shares have been issued.





5.      STOCK OPTIONS



In 2003 the Company adopted an incentive stock option plan (the "Plan") to grant options to directors, officers, employees and consultants of the Company. The maximum number of shares reserved for issuance under the Plan shall not exceed 10% of the issued share capital of the Company. Under the Plan, the exercise price of each option may not be less than the market price of the Company's shares at the date of grant. Options granted under the Plan will have a term not to exceed five years.


As at June 30, 2004, the following stock options are outstanding and exercisable:



______________________________________________________________________________________________________________








Number    

of Shares    



Exercise

   Price   



Expiry Date






21,956    



$      2.10



December 6, 2004






256,000    



$US 0.50



April 16, 2008






277,956    













_______________________________________________________________________________________________________________


 



The change in stock options outstanding is as follows:



__________________________________________________________________________________________________________________________________






 



June 30, 2004



 



June 30, 2003






 







Warrants

Outstanding



Weighted

Average

Exercise

    Price    



 







Warrants

Outstanding



Weighted

Average

Exercise

    Price  






 



 



 



 



 



 






At January 1



277,956  



$             0.79  



 



95,815  



$            2.10    






 



 



 



 



 



 






Granted



-   



-   



 



256,000  



$ US     0.50    






Exercised



-   



-   



 



-   



-    






Expired



                  -   



               -   



 



                  -   



                  -    






At end of period



          277,956  



$            0.79  



 



         315,815  



$               1.07 









_______________________________________________________________________________________________________________________________






6.      WARRANTS


          As at June 30, 2004, the following share purchase warrants were outstanding:


___________________________________________________________________________________________________________________






 

Number

of Shares



Exercise

      Price    



Expiry Date












32,221   









US$   0.60





April 17, 2004










  423,077   







US$   0.35



September 9, 2004










  455,298   







 



 









__________________________________________________________________________________________________________________


 



The change in share purchase warrants outstanding is as follows:


______________________________________________________________________________________________________________







 



June 30, 2004



 



June 30, 2003






 







Warrants

Outstanding



Weighted

Average

Exercise

    Price    



 





 

Warrants

Outstanding



Weighted

Average

Exercise

      Price






 



 



 



 



 



 






At January 1



1,088,630   



$      0.35   



 



200,000   



$   1.00   






 



 



 



 



 



 






Granted



-   



-   



 



698,886   



0.22   






Exercised



(77,836)  



   0.26   



 



-   



-   






Expired



(555,496)  



   0.26   



 



(200,000)  



-   






 



 



 



 



 



 






At end of period



455,298   



$   0.50   



 



698,886   



$   0.22   









 __________________________________________________________________________________________________________________





The Company has also granted the right to purchase 200,000 shares pursuant to the Discovery Bonus Agreement, as noted in note 4.


 



7.      RELATED PARTY TRANSACTIONS



         The Company incurred the following expenses with a law firm and consulting firms controlled by directors, an officer and a former director:


 


__________________________________________________________________________________________________________________________________






 



3 months ended June 30, 2004



3 months ended June 30, 2003



6 months ended June 30, 2004



6 months ended June 30, 2003








Consulting fees





$            7,500   





$            25,500   





$            10,000   





$            55,000   






Property evaluation and due diligence costs



$                   -   



$            40,640   



$              2,500   



$            63,252   






Professional fees



$                   -   



$            15,244   



$              2,500   



$            47,031   






Rent 



$           2,700   



$              4,500   



$              7,500   



$              5,000   









__________________________________________________________________________________________________________________________________



 


Included in accounts payable and accrued liabilities at June 30, 2004 is $158,082 (2003 - $103,095) due to a law firm controlled by a director and $174,213 (2003 - $108,543) due to consulting companies controlled by directors, an officer and a former director. 


These transactions were in the normal course of operations and were measured at the exchange value which represented the amount of consideration established and agreed to by the related parties.



 


8.      DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES





These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Canada. These financial statements also conform, in all material respects, with accounting principles generally accepted in the United States with respect to recognition, measurement and presentation.