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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
-----ACT OF 1934
For the quarterly period ended: September 30, 2009
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-----EXCHANGE ACT OF 1934
For the transition period from: _____________ to _____________
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GOLDEN RIVER RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 0-16097 98-0079697
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
Level 8, 580 St Kilda Road Melbourne, Victoria, 3004, Australia
(Address of Principal Executive Office) (Zip Code)
011 (613) 8532 2866
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
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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.
---- ----
x Yes No
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Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer., or a smaller reporting company.
---- ----
Large accelerated filer Accelerated filer
---- ----
Non-accelerated filer Smaller reporting company x
---- ----
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).
---- ----
Yes x No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. There were 177,280,840
outstanding shares of Common Stock as of November 15, 2009.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 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.
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Yes No
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Table Of Contents
PAGE NO
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements 2
Item 2 Management's Discussion and Analysis or Plan of Operations 20
Item 3 Quantitative and Qualitative Disclosure about Market Risk 23
Item 4 Controls and Procedures 23
PART II OTHER INFORMATION
Item 1 Legal Proceedings 25
Item 1A Risk Factors 25
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 25
Item 3 Defaults Upon Senior Securities 25
Item 4 Submission of Matters to a Vote of Security Holders 25
Item 5 Other Information 25
Item 6 Exhibits 25
SIGNATURES 26
EXHIBIT INDEX 27
Exh. 31.1 Certification 28
Exh. 31.2 Certification 30
Exh. 32.1 Certification 32
Exh. 32.2 Certification 33
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Introduction to Interim Consolidated Financial Statements.
The interim consolidated financial statements included herein have been
prepared by Golden River Resources Corporation ("Golden River Resources" or the
"Company") without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (the "Commission"). Certain information and
footnote disclosure normally included in consolidated financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. These interim consolidated financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the year ended June 30, 2009.
In the opinion of management, all adjustments, consisting of normal
recurring adjustments and consolidating entries, necessary to present fairly the
consolidated financial position of the Company and subsidiaries as of September
30, 2009, the results of its consolidated operations for the three month periods
ended September 30, 2009 and September 30, 2008, and the changes in its
consolidated cash flows for the three month periods ended September 30, 2009 and
September 30, 2008, have been included. The results of consolidated operations
for the interim periods are not necessarily indicative of the results for the
full year.
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from
those estimates.
Foreign Currency Translation
Prior to July 1, 2009, the Company's functional and reporting currency
was the Australian dollar and its subsidiary, Golden Bull Resources
Corporation's functional currency was the Canadian dollar. However, as a result
of the purchase of the controlling interest in Acadian Mining Corporation in
Canada in July 2009, the Company's fiscal 2010 revenue and expenses will be
primarily denominated in Canadian dollars (CDN$). ASC Topic 830 "Foreign
Currency Matters" states that the functional currency of an entity is the
currency of the primary economic environment in which the entity operates.
Accordingly the Company determined that from July 1, 2009 the functional and
reporting currency of the Company is the Canadian dollar. Assets, liabilities
and portions of equity were translated at the rate of exchange at July 1, 2009
and portions of equity were translated at historical exchange rates. Revenue and
expenses were translated at actual rates. Translation gains and losses were
included as part of accumulated other comprehensive loss.
Restatement of comparative numbers was made for the change in
functional and reporting currency. The change was adopted prospectively
beginning July 1, 2009 in accordance with ASC Topic 830.
UNLESS OTHERWISE INDICATED, ALL FINANCIAL INFORMATION PRESENTED IS IN
CANADIAN DOLLARS.
2
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Balance Sheet
September 30, June 30,
2009 2009
CDN$000's CDN$000's
(Unaudited)
ASSETS
Current Assets
Cash 900 19
Receivables 9 7
Inventories 17 -
Prepaid expenses and deposits 65 -
------------------------------------
Total Current Assets 991 26
------------------------------------
Non Current Assets
Cash held for site remediation (note 11) 925 -
Property, plant and equipment (note 12) 8,053 -
Investment in Non Consolidated Entity (note 13) 783 745
Mineral Rights (note 10) 86,798 -
------------------------------------
Total Non Current Assets 96,559 745
------------------------------------
Total Assets 97,550 771
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts Payable and Accrued Expenses 3,071 116
Lease Liability 3,916 -
Advances from Affiliates (note 3) 3,847 1,138
------------------------------------
Total Current Liabilities 10,834 1,254
------------------------------------
Non Current Liabilities
Accrued site remediation (note 14) 1,400 -
Deferred Tax Liability (note 15) 12,634 -
------------------------------------
Total Non Current Liabilities 14,034 -
------------------------------------
Total Liabilities 24,868 1,254
------------------------------------
Commitments (Note 9)
Stockholders' Equity (Deficit):
Common Stock: $.0001 par value
200,000,000 shares authorized,
177,280,840 and 126,714,130 issued and outstanding 22 16
Additional Paid-in-Capital 43,881 35,951
Less Treasury Stock at Cost, 2,500 shares (19) (19)
Accumulated Other Comprehensive Loss (355) (394)
Retained Profit(Deficit) during exploration stage 16,352 (11,289)
Retained Deficit prior to exploration stage (24,748) (24,748)
------------------------------------
Golden River Resources Stockholders Equity (Deficit) 35,133 (483)
Non Controlling Interests (note 10) 37,549 -
------------------------------------
Total Stockholders' Equity (Deficit) 72,682 (483)
------------------------------------
Total Liabilities and Stockholders' Equity 97,550 771
====================================
See Notes to Consolidated Financial Statements
3
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Operations
Three Months Ended September 30, 2009 and 2008 and for the cumulative period
July 1, 2002 (inception of exploration activities) to September 30, 2009
(Unaudited)
Three Months Three Months July 1,
Ended Ended 2002
Sep 30, 2009 Sep 30, to
CDN$000's 2008 Sep 30,
CDN$000's 2009
CDN$000's
-----------------------------------------------
Revenues - - -
-----------------------------------------------
Costs and Expenses:
Stock Based Compensation 33 80 2,754
Exploration Expenditure 260 39 3,571
Amortization 463 - 463
Loss on Disposal of Equipment 384 - 385
Interest Expense, net 99 - 496
Legal, Accounting and Professional 108 37 1,177
Administrative 174 25 3,560
-----------------------------------------------
(1,521) (181) (12,406)
-----------------------------------------------
(Loss) from Operations (1,521) (181) (12,406)
Foreign Currency Exchange Gain (Loss) (5) (7) (164)
Adjustment to fair value on stepped acquisition (note 10) 16,098 - 16,098
Gain on bargain purchase (note 10) 24,626 - 24,626
Other Income:
Interest - net, related entity - - 5
- other - - 10
-----------------------------------------------
Profit/(Loss) before Income Tax and Equity in Profits of Non -Consolidated
Entities 39,198 (188) 28,169
Provision for Deferred Income Tax (note 15) (12,634) - (12,634)
-----------------------------------------------
Profit/(Loss) before Profits of Non- Consolidated Entities 26,564 (188) 15,535
Equity in Profits of Non-Consolidated Entities 396 - 136
-----------------------------------------------
Net Profit/(Loss) 26,960 (188) 15,671
Net Loss attributable to Non-Controlling Interests 681 - 681
-----------------------------------------------
Net Profit (Loss) attributable to Golden River Resources stockholders 27,641 (188) 16,352
-----------------------------------------------
Basic Net Profit/(Loss) Per Common Equivalent Shares $0.20 $(0.01) $0.47
-----------------------------------------------
Diluted Net Profit/(Loss) Per Common Equivalent Shares $0.20 $(0.01) $0.47
-----------------------------------------------
Basic Weighted Number of Common Equivalent Shares Outstanding (000's) 139,378 36,714 34,800
-----------------------------------------------
Diluted Weighted Number of Common Equivalent Shares Outstanding (000's) 139,378 36,714 34,800
-----------------------------------------------
See Notes to Consolidated Financial Statements
4
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
Three Months Ended September 30, 2009 and 2008 and for the cumulative period
July 1, 2002 (inception of exploration activities) to September 30, 2009
(Unaudited)
July 1, 2002
2009 to Sep 30, 2009
CDN$000's 2008 CDN$000's
--------- CDN$000's ---------
---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit/(Loss) 27,641 (188) 16,352
Adjustments to reconcile net profit (loss) to net cash provided
by(used)
in Operating Activities
Foreign Currency Exchange Loss 5 7 144
Depreciation /amortization of Plant and Equipment 463 - 489
Stock based compensation 33 80 2,754
Provision for Deferred Income tax 12,634 - 12,634
Equity in profits of non-consolidated entities (396) - (136)
Net loss attributable to non controlling interests (681) - (681)
Adjustment to fair value on stepped acquisition (16,098) - (16,098)
Bargain purchase of controlled entities (24,626) - (24,626)
Accrued interest added to principal - 173
Net Change net of acquisition in:
Receivables (2) 15 (8)
Staking Deposit - - 22
Prepayments and Deposits (82) - (82)
Accounts Payable and Accrued Expenses 1,335 110 1,454
------------------------------------------------------
Net Cash Provided by(Used) in Operating Activities 226 24 (7,609)
------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of majority owned subsidiary net of cash acquired (3,585) - (3,585)
Purchase of Plant and Equipment - - (25)
------------------------------------------------------
Net Cash (Used) in Investing Activities (3,585) - (4,610)
------------------------------------------------------
CASH FLOW PROVIDED BY FINANCING ACTIVITIES
Net Borrowings from (repayments to) Affiliates (650) - 316
Proceeds from Issuance of Stock 5,568 - 5,568
Repayment of Borrowings (99) - (99)
Sale of Warrants (net) - - 4,749
Re-Purchase of Warrants (579) - (579)
Proceeds from Loan Payable - - 3,261
------------------------------------------------------
Net Cash Provided by Financing Activities 4,240 - 13,216
------------------------------------------------------
Effects of Exchange Rate on Cash - (7) (97)
------------------------------------------------------
Net Increase in Cash 881 17 900
Cash at Beginning of Period 19 7 -
------------------------------------------------------
Cash at End of Period 900 24 900
------------------------------------------------------
Supplemental Disclosures
Interest Paid 99 - 439
NON CASH FINANCING ACTIVITY
Debt repaid through issuance of shares - - 5,771
Stock Options recorded as Deferred Compensation - - 1,258
Extinguishment of Related Party Debt - - 593
Acquisition of subsidiary (note 10)
See Notes to Consolidated Financial Statements
5
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
September 30, 2009
and for the cumulative period July 1, 2002
(inception of exploration activities) to September 30, 2009
(Unaudited)
Retained
Profit/ Retained Accumulated
(Deficit) (Deficit) Other
Common Treasury Additional (during the (prior to Deferred Compre- Non-
Stock Stock, at Paid-in Exploration Exploration Compen- hensive Controlling
Shares Amount Cost Capital stage) stage) sation Loss Interests Total
----------------------------------------------------------------------------------------------------------
000's CDN$000's CDN$000's CDN$000's CDN$000's CDN$000's CDN$000's CDN$000's CDN$000's CDN$000's
Balance June 30, 2002 6,347 $1 $(19) $24,060 - $(24,748) - $(461) - $(1,167)
Net loss - - - - $(639) - - - - (639)
----------------------------------------------------------------------------------------------------------
Balance June 30, 2003 6,347 $1 $(19) $24,060 $(639) $(24,748) - $(461) - $(1,806)
Issuance of 1,753,984
shares and warrants
in lieu of debt
repayment 1,754 - - $2,331 - - - - - $2,331
Sale of 1,670,000
shares and warrants 1,670 - - $2,221 - - - - - $2,221
Issuance of 6,943,057
shares on cashless
exercise of options 6,943 $1 - $(1) - - - - - $0
Net unrealized loss on
foreign exchange - - - - - - - $(317) - $(317)
Net (loss) - - - - $(1,616) - - - - $(1,616)
----------------------------------------------------------------------------------------------------------
Balance June 30, 2004 16,714 $2 $(19) $28,611 $(2,255) $(24,748) - $(778) - $813
Issuance of 1,400,000
options under 2004
stock option plan - - - $1,646 - - $(1,646) - - $0
Amortization of
1,400,000 options
under 2004 stock
option plan - - - - - - $1,095 - - $1,095
Net unrealized gain on
foreign exchange - - - - - - - $(17) - $(17)
Net/(loss) - - - - $(3,173) - - - - $(3,173)
----------------------------------------------------------------------------------------------------------
Balance June 30, 2005 16,714 $2 $(19) $30,257 $(5,411) $(24,748) $(551) $(795) - $(1,265)
See Notes to Consolidated Financial Statements
6
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
September 30, 2008
and for the cumulative period July 1, 2002
(inception of exploration activities) to September 30, 2009
(Unaudited) Continued
Retained
Profit/ Retained Accumulated
(Deficit) (Deficit) Other
Common Treasury Additional (during the (prior to Deferred Compre- Non-
Stock Stock, at Paid-in Exploration Exploration Compen- hensive Controlling
Shares Amount Cost Capital stage) stage) sation Loss Interests Total
------------------------------------------------------------------------------------------------------------
000's CDN$000's CDN$000's CDN$000's CDN$000's CDN$000's CDN$000's CDN$000's CDN$000's CDN$000's
To eliminate deferred
compensation against
Additional Paid-In
Capital - - - $ (551) - - $ 551 - - $ 0
Issuance of
10,000,000 shares
and 20,000,000
options in lieu of
debt repayment 10,000 $ 1 - $ 3,320 - - - - - $ 3,321
Capital gain on
shares and options
issued in lieu of
debt repayment - - - $ (1,610) - - - - - $(1,610)
Sale of 20,000,000
normal warrants - - - $ 827 - - - - - $ 827
Sale of 10,000,000
special warrants - - - $ 887 - - - - - $ 887
Amortization of
1,400,000 options
under 2004 stock
option plan - - - 532 - - - - - 532
Net unrealized loss
on foreign exchange - - - - - - - $ (369) - $ (369)
Net (loss) - - - - $ (1,588) - - - - $(1,588)
------------------------------------------------------------------------------------------------------------
Balance June 30, 2006 26,714 $ 3 $ (19) $ 33,662 $ (6,999) $(24,748) $ - $ (426) - $ 1,473
Costs associated with
sale of normal and
special warrants - - - $ (3) - - - - - $ (3)
Amortization of
1,400,000 options
under 2004 stock
option plan - - - $ 19 - - - - - $ 19
Amortization of
4,650,000 options
under 2006 stock
option plan - - - $ 510 - - - - - $ 510
Net unrealized gain
on foreign exchange - - - - - - - $ 48 - $ 48
Net (loss) - - - - $ (1,965) - - - - $(1,965)
------------------------------------------------------------------------------------------------------------
Balance June 30, 2007 26,714 $ 3 $ (19) $ 34,188 $ (8,964) $(24,748) $ - $ (378) - $ 82
See Notes to Consolidated Financial Statements
7
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
September 30, 2009
and for the cumulative period July 1, 2002
(inception of exploration activities) to September 30, 2009
(Unaudited) Continued
Retained
Profit/ Retained Accumulated
(Deficit) (Deficit) Other
Common Treasury Additional (during the (prior to Deferred Compre- Non-
Stock Stock, at Paid-in Exploration Exploration Compen- hensive Controlling
Shares Amount Cost Capital stage) stage) sation Loss Interests Total
------------------------------------------------------------------------------------------------------------
000's CDN$000's CDN$000's CDN$000's CDN$000's CDN$000's CDN$000's CDN$000's CDN$000's CDN$000's
Amortization of
4,650,000 options
under 2006 stock
option plan - - - $333 - - - - - 333
Net unrealized gain
on foreign exchange - - - - - - - $27 - $27
Net (loss) - - - - $(1,073) - - - - $(1,073)
------------------------------------------------------------------------------------------------------------
Balance June 30, 2008 26,714 $3 $(19) $34,521 $(10,037) $(24,748) $- $(351) - $(631)
Amortization of
4,650,000 options
under 2006 stock
option plan - - - $173 - - - - - 173
Sale of 100,000,000
shares 100,000 $13 - $669 - - - - - 682
Net unrealised loss
on foreign exchange - - - - - - - $(43) - $(43)
Forgiveness of
advances from
affiliate (Note 5) - - - $588 - - - - - 588
Net (loss) - - - - $(1,252) - - - - $(1,252)
------------------------------------------------------------------------------------------------------------
Balance June 30, 2009 126,714 $16 $(19) $35,951 $(11,289) $(24,748) $- $(394) - $(483)
Amortization of
4,650,000 options
under 2006 stock
option plan - - - $33 - - - - $33
Sale of 50,566,710
shares 50,567 $6 - $5,562 - - - - - $5,568
Re-Purchase of
warrants - - - $(579) - - - - - $(579)
Net unrealised gain
on foreign exchange - - - - - - - 39 - 39
Net profit - - - - $26,960 - - - - $26,960
Adjustment for
additional
investment in
consolidated
subsidary - - - $2,914 - - - - - $2,914
Fair value of non-
controlling interest - - - - - - - - $38,230 $38,230
Net loss attributable
to non-controlling
interests - - - - $681 - - - $(681) $(0)
------------------------------------------------------------------------------------------------------------
Balance September 30,
2009 177,281 $22 $(19) $43,881 $16,352 $(24,748) - $(355) $37,549 $72,682
------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
8
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2009
(1) Organisation
Golden River Resources Corporation ("Golden River Resources"), formerly
Bay Resources Ltd, is incorporated in the State of Delaware. The principal
shareholders of Golden River Resources are companies associated with Mr JI
Gutnick and Mrs S Gutnick. These companies owned 90.2% of Golden River Resources
as of September 30, 2009.
During fiscal 1998, Golden River Resources incorporated a further
subsidiary, Baynex.com Pty Ltd, under the laws of Australia. Baynex.com Pty Ltd
has not traded since incorporation. On August 21, 2000, Golden River Resources
incorporated a new wholly owned subsidiary, Bay Resources (Asia) Pty Ltd, a
corporation incorporated under the laws of Australia. In May 2002, the Company
incorporated a new wholly owned subsidiary, Golden Bull Resources Corporation
(formerly 4075251 Canada Inc), a corporation incorporated under the laws of
Canada. Golden Bull Resources Corporation is undertaking exploration activities
for gold in Canada. On March 8, 2006, shareholders approved the change of the
Company's name to Golden River Resources.
Golden River Resources as part of its business strategy is increasing
its gold and base metal exploration activity in Canada and is continually
sourcing new ground in Canada which is one of the most prospective areas in for
new gold discoveries. On March 17, 2009, the Company announced that it had
reached agreement with Acadian Mining Corporation (TSX: ADA) ("Acadian") to
subscribe in a private placement transaction for up to 338,111,334 common shares
("Offering") in Acadian for aggregate gross investment of up to CDN$10 million.
The Offering was contemplated to close in two or more tranches. Following
closing of all tranches, Golden River will hold 68.45% of Acadian.
The closing of the first tranche, for an aggregate of CDN$1.0 million
(38,111,334 shares) was subject to receipt of the required regulatory approvals,
including the approval of the Toronto Stock Exchange which occurred in early
June 2009. Upon completion of closing of the initial tranche, the Company was
entitled to nominate one member to the board of directors of Acadian and
nominated Mr Menachem Vorchheimer. The Company held a 19.9% interest in Acadian
at June 30, 2009.
The balance of the subscription by Golden River Resources into Acadian
of CDN$9 million (300,000,000 shares at CDN$0.03 per share) was expected to be
completed in one or more tranches upon the receipt of all necessary regulatory
approvals, approval of the shareholders of Acadian and the satisfaction of
certain other conditions precedent, including completion of due diligence by the
Company. Acadian obtained approval from its shareholders at its annual meeting
in June 2009.
Throughout July 2009, Golden River Resources subscribed for further
shares to a value of CDN$4 million and at July 31, 2009, the Company held a
52.764% interest in Acadian. As a result, Golden River Resources has since that
time consolidated the results of Acadian. On September 30, 2009, a further
closing for an aggregate of CDN$1 million occurred increasing the Company
interest in Acadian to 57.145% and during October 2009, Golden River Resources
completed its subscription in Acadian by subscribing for shares to the value of
CDN$4 million which increased its interest in Acadian to 68.7%.
The financial statements presented herein have been prepared on a
consolidated basis to include the accounts of Golden River Resources, Acadian
and its other subsidiaries (collectively "the Company"). All intercompany
balances and transactions have been eliminated in consolidation.
The Company's consolidated financial statements are prepared using
generally accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business.
9
(2) Summary of Significant Accounting Policies
(i) Functional and Reporting Currency
Prior to July 1, 2009, the Company's functional and reporting currency
was the Australian dollar and its subsidiary, Golden Bull Resources
Corporation's functional currency was the Canadian dollar. However, as a result
of the purchase of the controlling interest in Acadian Mining Corporation in
Canada in July 2009, the Company's fiscal 2010 revenue and expenses will be
primarily denominated in Canadian dollars (CDN$). ASC Topic 830 "Foreign
Currency Matters" states that the functional currency of an entity is the
currency of the primary economic environment in which the entity operates.
Accordingly the Company determined that from July 1, 2009 the functional and
reporting currency of the Company is the Canadian dollar. Assets, liabilities
and portions of equity were translated at the rate of exchange at July 1, 2009
and portions of equity were translated at historical exchange rates. Revenue and
expenses were translated at actual rates. Translation gains and losses were
included as part of accumulated other comprehensive loss.
Restatement of comparative numbers was made for the change in
functional and reporting currency. The change was adopted prospectively
beginning July 1, 2009 in accordance with ASC Topic 830.
(ii) Property, plant and equipment
Property, plant and equipment are recorded at cost. Depreciation is
provided for on office assets using the declining balance method at the
following annual rates (in the year of acquisition one-half of the calculated
depreciation is recognized):
Vehicles 30%
Building 5%
Office fixtures and computer equipment 20%
Mine site assets are depreciated on a straight line balance method over
the expected life of the mine at thirteen and one half years; assets under
capital lease are depreciated on a straight line basis over the four year term
of the lease.
All other assets are depreciated over a period covering their estimated
useful lives.
(iii) Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash,
receivables, payables, advances from and payables to affiliates. The Company
believes that the fair values of the Company's financial instruments approximate
the carrying values, unless otherwise stated.
(iv) Lease Liability
Leases meeting certain criteria are accounted for as a capital lease.
Imputed interest is charged against income. The capitalised value of the assets
is depreciated over the term of the lease. The Company has entered into leasing
agreements of four year terms for mining equipment. Obligations under capital
lease are reduced by the rental payments net of imputed interest. All other
leases are treated as operating leases.
(v) Net Earnings/Loss per Share
The Company follows the FASB ASC topic 260 "Earnings per Share"
provisions which require the reporting of both basic and diluted earnings (loss)
per share. Basic earnings (loss) per share is computed by dividing net income
(loss) available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings (net loss) per share reflect
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. Anti-dilutive
effects on net income (loss) per share are excluded
10
(vi) Impairment of Long-Lived Assets
In accordance with FASB ASC topic 360, "Impairment or Disposal of
Long-Lived Assets," the Company assesses potential impairments to its long-lived
assets including property, plant and equipment when there is evidence that
events or changes in circumstances indicate that the carrying value may not be
recoverable. If such an indication exists, the recoverable amount of the asset,
being the higher of the asset's fair value less costs to sell, is compared to
the asset's carrying value. Any excess of the asset's carrying value over its
recoverable amount is expensed to the statement of consolidated operations. In
assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate.
(3) Affiliate Transactions
Golden River Resources advances to and receives advances from various
affiliates. All advances between consolidated affiliates are eliminated on
consolidation.
During the three months ended September 30, 2009 and 2008, AXIS
advanced the Company CDN$120,602 and CDN$65,643 respectively and provided
services in accordance with the service agreement of CDN$26,791 and CDN$38,683
respectively. The amount owed to AXIS at September 30, 2009 and 2008 under
current liabilities - accounts payable and accruals was CDN$684,235 and
CDN$610,497 respectively. During the three months ended September 30, 2009 and
2008 AXIS did not charge interest. AXIS is affiliated through common management
and ownership.
In order to settle the first tranche of the acquisition of Acadian,
Wilzed Pty Ltd, a company associated with Mr Joseph I Gutnick, President and
Chief Executive Officer of the Company advanced C$582,790 (A$650,000) to the
Company. The Company repaid the advance on July 24 2009. Wilzed did not charge
interest on the advance.
During the three months ended September 30, 2009, the Company entered
into a subscription agreement with Northern Capital Resources Corp ("NCRC")
whereby NCRC would subscribe, by March 31, 2010, for 85 million shares at an
issue price of US$0.10 per share to raise US$8.5 million. During the September
30, 2009 quarter and pursuant to the subscription agreement, the Company has
closed in private placement transactions with NCRC, the sale of 50,566,710
shares of common stock at an issue price of US$0.10 per share raising
CDN$5,567,587. The proceeds have been utilized to fund the closing of several
further tranches of the acquisition of shares in Acadian and for working capital
purposes Mr. Joseph Gutnick is the Chairman and Chief Executive Officer of NCRC
and certain companies with which Mr. Gutnick is associated own approximately 67%
of the outstanding common stock of NCRC.
Acadian shares office facilities with Royal Roads Corp and Buchans
River Ltd (non-consolidated entities of Acadian). During the period ended
September 30, 2009 Acadian charged $61,585 in common costs to these companies.
The amount charged is estimated to be the fair value of the costs.
At September 30, 2009, there were CDN$2,583,459 in advances payable to
Royal Roads Corp by ScoZinc Ltd, a 100% owned subsidiary of Acadian, which is
due on November 30, 2009. Royal Roads Corp charges interest at 10% per annum,
payable quarterly. Acadian guaranteed the full amount of the debt and, as
security, granted security over all of its assets, including the shares of Royal
Roads Corp. that Acadian owns. During the quarter, Acadian paid CDN$64,472 in
interest to Royal Roads Corp.
During the quarter, Acadian paid CDN$12,000 in consulting fees to a
director of Acadian.
Acadian acquired the remaining 50% of the 15 Mile Stream mineral claims
for a cash payment of CDN$70,000 and a non-interest bearing note for CDN$1.0
million due one year from the date of acquisition and 1% Net Smelter Royalty
payable to Mr. Will Felderhof, President and CEO of Acadian, and members of his
family. Amounts due are included in accounts payable and accrued liabilities at
September 30, 2009. Acadian also paid an amount due to Mr. Felderhof of
CDN$9,610
11
(4) Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board ("FASB") issued
the FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles, also known as FASB Accounting Standards
Codification ("ASC") 105-10, Generally Accepted Accounting Principles, ("ASC
105-10"). ASC 105-10 establishes the FASB Accounting Standards Codification
("Codification") as the single source of authoritative US GAAP recognized by the
FASB to be applied by nongovernmental entities. Rules and interpretive releases
of the Securities and Exchange Commission ("SEC") under authority of federal
securities laws are also sources of authoritative US GAAP for SEC registrants.
The subsequent issuances of new standards will be in the form of Accounting
Standards Updates ("ASU") that will be included in the Codification. Generally,
the Codification is not expected to change US GAAP. All other accounting
literature excluded from the Codification will be considered non-authoritative.
This ASC is effective for financial statements issued for interim and annual
periods ending after September 15, 2009. The Company adopted this ASC for its
quarter ended September 30, 2009. The adoption did not have any effect on our
financial condition or results of operations. All accounting references have
been updated, and therefore SFAS references have been replaced with ASC
references.
In December 2007, the FASB issued amended ASC Topic 805, Business
Combinations. ASC 805 establishes principles and requirements for how the
acquirer of a business recognizes and measures in its financial statements the
identifiable assets acquired and the liabilities assumed. The provisions of ASC
805 are effective for the Company's fiscal year beginning July 1, 2009 which
applies prospectively to all business combinations entered into on or after such
date. Golden River's acquisition of Acadian (see note 11) was and any other
future acquisitions will be impacted by application of this statement.
In April 2008, the FASB issued amended ASC Topic 350, Intangibles -
Goodwill and Other ("ASC 350"). ASC 350 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under former SFAS No. 142, Goodwill
and Other Intangible Assets. This new guidance applies prospectively to
intangible assets that are acquired individually or with a group of other assets
in business combinations and asset acquisitions. ASC 350 is effective for
financial statements issued for fiscal years and interim periods beginning after
December 15, 2008. The adoption of ASC 350 has had no impact on the Company's
financial position, results of operations, or cash flows.
The Company adopted the "Financial Instruments Topic", ASC 825 on April
1, 2009. This standard requires disclosures about fair value of financial
instruments in interim financial statements as well as in annual financial
statements.
In April 2009, the FASB issued ASC Topic 320-10-65, "Recognition and
Presentation of Other-Than-Temporary Impairments" ("ASC 320-10-65"). ASC
320-10-65 amends the other-than-temporary impairment guidance for debt
securities to make the guidance more operational and to improve the presentation
and disclosure of other-than-temporary impairments on debt and equity securities
in the financial statements. ASC 320-10-65 does not amend existing recognition
and measurement guidance related to other-than-temporary impairments of equity
securities. ASC 320-10-65 is effective for interim and annual reporting periods
ending after June 15, 2009, with early adoption permitted for periods ending
after March 15, 2009. ASC 320-10-65 does not require disclosures for earlier
periods presented for comparative purposes at initial adoption. In periods after
initial adoption, ASC 320-10-65 requires comparative disclosures only for
periods ending after initial adoption. The adoption of ASC 320-10-65 has had no
impact on the Company's financial position, results of operations or cash flows.
Effective July 1, 2009, the Company adopted the provisions of ASC Topic
820, Fair Value Measurements and Disclosures. This topic defines fair value,
establishes a hierarchal disclosure framework for measuring fair value, and
requires expanded disclosures about fair value measurements. The provisions of
this topic apply to all financial instruments that are being measured and
reported on a fair value basis. The adoption of ASC 820 has not and is not
expected to have a material impact on the Company's financial position or
results of operations.
In May 2009, the FASB issued ASC Topic 855, Subsequent Events. This
topic requires management to evaluate subsequent events through the date the
financial statements are either issued, or available to be issued. Companies
will be required to disclose the date through which subsequent events have been
evaluated. The Company adopted the provisions of ASC 855 effective for the
quarter ended June 30, 2009. The adoption of this topic did not have a material
effect on our financial position or results of operations.
In August 2009, the FASB issued Accounting Standards Update No. ("ASU")
2009-05, "Measuring Liabilities at Fair Value." ASU 2009-05 supplements and
amends the existing definition of fair value while reintroducing the concept of
entry value (amount an entity would receive to enter into an identical
liability) into the definition. Additionally, ASU 2009-05 clarifies that
restrictions preventing the transfer of a liability should not be considered as
a separate input or adjustment in the measurement of its fair value. ASU 2009-05
is effective for the first reporting period, including interim periods,
beginning after August 2009. The Company is currently assessing the impact that
ASU 2009-05 may have on our consolidated financial statements; however, the
Company does not anticipate that it will have a material impact.
12
(5) Comprehensive Income (Loss)
The Company follows ASC Topic 220 "Comprehensive Income" ("ASC 220").
ASC 220 requires a company to report comprehensive profit (loss) and its
components in a full set of financial statements. Comprehensive income (loss) is
the change in equity during a period from transactions and other events and
circumstances from non-owner sources, such as unrealized gains (losses) on
foreign currency translation adjustments. There are no material differences
between net income (loss) and other comprehensive income/(loss) for the periods
presented.
(6) Going Concern
The accompanying consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the United States
of America, which contemplate continuation of the Company as a going concern.
The Company is in the exploration stage, has sustained recurring losses which
raises substantial doubts as to its ability to continue as a going concern.
In addition the Company has historically relied on loans and advances
from corporations affiliated with the President of the Company. Based on
discussions with these affiliate companies, the Company believes this source of
funding will continue to be available. Other than the arrangements noted above,
the Company has not confirmed any other arrangement for ongoing funding. As a
result the Company may be required to raise funds by additional debt or equity
offerings in order to meet its cash flow requirements during the forthcoming
year.
The accumulated deficit of the Company from inception through September
30, 2009 amounted to CDN$8,396,000 of which CDN$16,352,000 is accumulated
profits from July 2002, the date the Company entered the Exploration Stage,
through September 30, 2009.
(7) Issue of Options under Stock Option Plan
The Company follows the provisions of ASC Topic 718 Compensation-Stock
Compensation ( "ASC 718"), which addresses the accounting for share-based
payment transactions in which a company receives employee services in exchange
for (a) equity instruments of that company or (b) liabilities that are based on
the fair value of the company's equity instruments or that may be settled by the
issuance of such equity instruments
The Company has accounted for all options issued based upon their fair
market value using either the Black Scholes or Binomial option pricing method.
Prior to 2006, the Company used the Black Scholes option pricing method to
determine the fair market value of options issued. In 2006, the Company changed
from using the Black Scholes option pricing method to the Binomial option
pricing model. The Binomial option pricing model breaks down the time to
expiration into a number of steps or intervals and can therefore be used to
value American style options, taking into account the possibility of early
exercise and reflect changing inputs over time. The options issued in 2006 have
three vesting periods and therefore, the Company believed the Binomial option
pricing model is a more accurate measure of the fair value of the options.
In October 2004, the Board of Directors and Remuneration Committee of
the Company adopted a Stock Option Plan and agreed to issue 1,400,000 options to
acquire shares of common stock in the Company, at an exercise price of US$1.00
per option, subject to shareholder approval which was subsequently received on
January 27, 2005. All such options were vested by July 2006. The exercise price
of US$1.00 was derived from the issue price of common stock from the placement
of shares on September 30, 2004 and is considered by the Company's Directors to
be the fair value of the common stock. The options expire on October 15, 2014.
13
The Company calculated the fair value of the 1,400,000 options using
the Black Scholes valuation method using a fair value share price of US$1.00,
strike price of US$1.00, maturity period of 5 years 7 1/2 months, risk free
interest rate of 5.15% and volatility of 20%. This equates to a value of US31.85
cents per option. The total value of the options equates to CDN$1,645,780
(US$1,352,820) and such amount was amortized over the vesting period. At
September 30, 2009, the options were fully vested.
Consistent with the provisions of ASC 718, the Company recorded the
fair value of stock option grants in stockholders equity. Under ASC 718 an
equity instrument is not considered to be issued until the instrument vests.
Accordingly, as provided in ASC 718 effective July 1, 2005, the Company has
reversed CDN$551,000 (US$445,900) being the unamortized restricted stock
compensation at June 30, 2005 included in stockholders equity for the unvested
portions of stock option grants awarded prior to the effective date of ASC 718.
Since the issue of the options, 600,000 options have lapsed following
the termination of participants to the issue.
A summary of the options outstanding and exercisable at September 30,
2009 are as follows:
Outstanding Exercisable
Number of options 800,000 800,000
Exercise price US$1.00 US$1.00
Expiration date October 15, 2014 October 15, 2014
On October 19, 2006, the Directors of the Company agreed to offer a
further 4,650,000 options under the Stock Option Plan. The options have no issue
price, an exercise price of US30.84 cents, and a latest exercise date of October
19, 2016. The options vest 1/3 on October 19, 2007 ("T1"), 1/3 on October 19,
2008 ("T2") and 1/3 on October 19, 2009 ("T3"). The Company obtained an external
valuation on the options from an unrelated third party.
The Company, through an unrelated third party consultant, has
calculated the fair value of the 4,650,000 options using the binomial option
pricing model using a fair value share price of US$0.30, exercise price of
US30.84 cents, expected life T1 - 5 years 6 months, T2 - 6 years, T3 - 6 years 6
months, risk-free interest rate of 4.75% and volatility of 90%. The total value
of the options equates to CDN$1,207,860 (US$1,060,200) and is being amortised
over the vesting periods. For the three months ended September 30, 2009, the
amortization amounted to CDN$32,971 and no options were forfeited. At September
30, 2009, the remaining value of the unamortized deferred compensation of these
4,050,000 outstanding options amounted to CDN$6,450.
Since the issue of the options, 600,000 options have lapsed following
the termination of participants to the issue.
A summary of the options outstanding and exercisable at September 30,
2009 are as follows:
Outstanding Exercisable
Number of options 4,050,000 2,750,000
Exercise price US$0.308 US$0.308
Expiration date October 19, 2016 October 19, 2016
(8) Profit(Loss) per share
Basic profit/(loss) per share is computed based on the weighted average
number of common shares outstanding during the period. In prior periods the
Company had on issue 10,000,000 special warrants which are exercisable at any
time until expiration and for no consideration. On July 1, 2009 the Company
re-purchased the warrants and immediately cancelled the options.
14
Earnings per share
The Company calculates profit/(loss) per share in accordance with ASC
Topic 260, "Earnings per Share".
The following table reconciles the weighted average shares outstanding
used for the computation:
Three months ended
September 30
2009 2008
Weighted average shares 000's 000's
Outstanding - basic 139,378 26,714
- Warrants - 10,000
-----------------------
Weighted average shares outstanding 139,378 36,714
=======================
The following table reconciles the diluted weighted average shares
outstanding used for the computation:
Three months ended
September 30
2009 2008
Diluted weighted average shares 000's 000's
Basic 139,378 36,714
Effect of employee stock based awards - -
-----------------------
Diluted weighted average shares outstanding 139,378 36,714
=======================
Options to acquire 4,850,000 shares of common stock were not included
in the diluted weighted average shares outstanding as such effects would be
anti-dilutive.
(9) Commitments
In June 2008, the Company agreed on terms with Tahera Diamond
Corporation to obtain full control of the mining properties that are listed in
the Tahera/GRR agreement through the issuance of 3,000,000 shares of common
stock and the payment of CDN$86,000. The CDN$86,000 was paid prior to June 30,
2008. The issuance of 3,000,000 shares of common stock has not been brought to
account in the financial statements as the final agreements have not yet been
executed.
During the calendar year end 2008 Acadian raised CDN$1,500,000 in
capital through the issue of flow through shares. At September 30, 2009, Acadian
had spent CDN$842,785 on qualifying activities. If Acadian does not expend the
balance of funds of CDN$657,215, prior to December 31, 2009, Acadian will be
liable to repay the investors the tax credits claimed on these funds. The
estimated maximum liability is one half of the funds not spent.
(10) Acquisitions
Golden River Resources as part of its business strategy is increasing
its gold and base metal exploration activity in Canada and is continually
sourcing new ground in Canada which is one of the most prospective areas for new
gold discoveries. On March 17, 2009, the Company announced that it had reached
agreement with Acadian Mining Corporation (TSX: ADA) ("Acadian") to subscribe in
a private placement transaction for up to 338,111,334 common shares ("Offering")
in Acadian for aggregate gross investment of up to CDN$10 million. The Offering
was contemplated to close in two or more tranches. Following closing of all
tranches, Golden River will hold 68.45% of Acadian.
15
The closing of the first tranche, for an aggregate of CDN$1.0 million
(38,111,334 shares) was subject to receipt of the required regulatory approvals,
including the approval of the Toronto Stock Exchange which occurred in early
June 2009. Upon completion of closing of the initial tranche, the Company was
entitled to nominate one member to the board of directors of Acadian and
nominated Mr Menachem Vorchheimer. The Company held a 19.9% interest in Acadian
at June 30, 2009.
The balance of the subscription by Golden River Resources into Acadian
of CDN$9 million (300,000,000 shares at CDN$0.03 per share) was expected to be
completed in one or more tranches upon the receipt of all necessary regulatory
approvals, approval of the shareholders of Acadian and the satisfaction of
certain other conditions precedent, including completion of due diligence by the
Company. Acadian obtained approval from its shareholders at its annual meeting
in June 2009.
Throughout July 2009, Golden River Resources subscribed for further
shares to a value of CDN$4 million and at July 31, 2009, the Company held a
52.764% interest in Acadian. As a result, Golden River Resources has since that
time consolidated the results of Acadian. On September 30, 2009, a further
closing for an aggregate of CDN$1 million occurred increasing the Company
interest in Acadian to 57.145% and during October 2009, Golden River Resources
completed its subscription in Acadian by subscribing for shares to the value of
CDN$4 million which increased its interest in Acadian to 68.7%.
The transaction was accounted for using the acquisition method required
by ASC Topic 805, Business Combinations. The Company has prepared an interim
estimate of the fair value of the net assets of Acadian at September 30, 2009.
On the acquisition date, the fair value of the non-controlling interest was
CDN$41,130,198. The fair value of non-controlling interest was based on an
estimate of the fair value of Acadian's net assets. The assignment of the total
consideration including the fair value of the net assets of the non-controlling
interest as of acquisition date is as follows:
CDN$000's
Cash and cash equivalents 1,413
Receivables 44
Property, plant & equipment (net) 10,033
Prepayments 71
Investment in Royal Roads Corp 855
Cash held for remediation 925
Mineral rights 86,798
Accounts payable & accruals (3,807)
Lease liability (4,723)
Equipment loans payable (371)
Advance from Royal Roads Corp (2,654)
Accrued site remediation (1,400)
-------------------
Total fair value 87,184
Less fair value of non-controlling interest (41,130)
Less gain recognised on acquisition (24,626)
-------------------
Total consideration 21,428
-------------------
Fair valuation methods used for identifiable net assets acquired in the
acquisition make use of (i) the draft re-start study for the ScoZinc mine which
has been adjusted using a net present value discount rate of 10%; and (ii) the
valuation of 1,711,000 ounces of gold in the categories of mineralized material
using a yardstick valuation of CDN$30.42 supplied by an external third party.
Accordingly, the Company has attributed a fair value of CDN$86,798,238 to
Mineral Rights.
Management believes that the carrying value of receivables of
CDN$$44,464, which is the gross contractual amount represents fair value at
acquisition date and does not have any evidence that the amount will not be
collectable.
16
Management has also reviewed the property, plant & equipment and other
assets and believes the fair values of those assets at acquisition date equate
to the realisable values of such assets through disposal or usage.
The acquisition of Acadian was achieved in stages. The acquisition date
fair value of the equity interest in Acadian immediately before the acquisition
date was CDN$17,319,353 and the amount of the gain recognized as a result of
remeasuring to fair value the equity interest in Acadian before the business
combination amounted to CDN$16,097,557 and has been recognized in the
consolidated statement of operations as "Adjustment to fair value on stepped
acquisition".
The Company has recorded a gain on bargain purchase of CDN$24,626,130
which is disclosed separately on the consolidated statement of operations. The
gain represents the excess of the fair value of the net assets acquired over (i)
fair value of the non controlling interest; (ii) fair value of the equity
investment held prior to acquisition; and, (iii) the cash consideration paid.
Subsequent to acquiring a majority interest in Acadian, the Company acquired an
additional 4.81% interest for CDN$1 million which resulted in the Company's
ownership interest in Acadian being increased from 52.764% to 57.145%.. As a
result of this additional investment, the Company recorded a credit to
Additional Paid-In Capital of CDN$2,914,126. The Company entered into the a
fixed price agreement with Acadian in early 2009 to subscribe CDN$10 million for
a 68.7% interest in Acadian, at a time when the world stock markets were at a
low point given the world economic crisis at that time. The transaction
contemplated several closings and was subject to several pre-conditions
including approval by TSX and due diligence. Between the time of entering into
the agreement and the acquisition date, world economic conditions have improved,
metal prices have increased significantly and world stock markets have rallied.
This resulted in significantly higher fair values for the assets of Acadian
compared to the values at the time the agreement was entered into. Furthermore,
Acadian was in a distressed state at the time the agreement was entered into.
The gain on the identifiable net assets of Acadian caused a difference
in the carrying value of the Company's Acadian investment between financial
reporting and income taxes and resulted in a deferred tax liability (see note
15).
The amount of revenue of Acadian since the acquisition date included in
the consolidated statement of operations for the reporting period is CDN$nil and
the amount of loss is CDN$1,442,533.
The consolidated statement of operations includes the operations since
July 31, 2009, which is the acquisition date. The following unaudited pro-forma
information presents the results of operations for the three months ended
September 30, 2009 and 2008, as if the acquisition of Acadian had occurred on
July 1, 2008.
2009 2008
CDN$000's CDN$000's
Revenue - -
Net income(loss) 5 (347)
Basic and diluted earnings(loss) per share 0.00 (0.01)
(11) Cash held for Site Remediation
Acadian has agreed with the relevant authorities in Canada to remediate
exploration and mine sites to an agreed status at the end of exploration and /or
mining operations at the sites. Currently the Company has CDN$925,000 on deposit
with the relevant authorities in Canada to cover the cost of this remediation
work.
17
(12) Property, Plant and Equipment
Accumulated
Cost Depreciation Net
CDN$ CDN$ CDN$
Office
Building 130,840 13,821 117,019
Automotive equipment
122,748 63,552 59,196
Equipment
165,000 132,975 32,025
Office fixtures and computer equipment 527,423 127,795 399,628
-----------------------------------------------------------
946,011 338,143 607,868
-----------------------------------------------------------
Mine Site
Land 566,950 -
566,950
Building 2,370,491 394,877
1,975,614
Automotive equipment 392,547 141,462
251,085
Mobile equipment under capital lease* 4,293,901 3,496,589
797,312
Equipment 5,789,255 1,935,261 3,853,994
-----------------------------------------------------------
13,413,144 5,968,189 7,444,955
-----------------------------------------------------------
Other 6,589 6,589 -
-----------------------------------------------------------
Balance September 30, 2009 14,365,744 6,512,921
8,052,823
-----------------------------------------------------------
(13) Investment in Non-Consolidated Subsidiary
At September 30, 2009, Acadian owned approximately 32.7 million shares
of Royal Roads Corp. representing 29.18% of the issued and outstanding shares of
Royal Roads Corp. The investment is accounted for using the equity method of
accounting and is recorded on the accompanying balance sheet at CDN$783,000. The
TSX Venture Exchange quoted market value of the investment at September 30, 2009
was CDN$2,617,117.
(14) Accrued Site Remediation
Acadian has agreed with the relevant authorities in Canada to remediate
exploration and mine sites to an agreed status at the end of exploration and /or
mining operations at the sites. The estimated cost of this remediation work is
CDN$1,400,000.
(15) Income Taxes
The Company recognises deferred tax assets or liabilities for the
expected future consequences attributable to differences between the financial
statement carrying amount of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are measured using the
enacted tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled.
The Company's net deferred tax liability at September 30, 2009 is
summarized as follows:
CDN$000s
Deferred tax asset
Net operating loss carry forward and tax credits
11,987
Deferred tax liability
Investment in subsidiary (24,621)
-------------------
Net deferred tax lability non-current (12,634)
-------------------
18
The Company has available net operating losses carry forward aggregating
approximately CDN$29 million as of June 30, 2009 which should expire in 2028.
Such losses are comprised of net operating loss carry forwards in Canada and in
the United States. The Company will need to file its United States income tax
returns for the applicable years for which income tax returns are not filed to
establish the tax benefits of such losses.
(16) Subsequent Events
The Company has evaluated subsequent events through November 15, 2009
and has determined that there were no subsequent events or transactions which
would require recognition or disclosure in the consolidated financial
statements, other than noted herein.
In October 2009, Northern Capital Resources Corp ("NCRC") provided an
advance of CDN$4 million to enable the Company to complete the final closing of
its acquisition of Acadian, which occurred on October 22, 2009. It is the
intention of NCRC and the Company to convert the CDN$4 million into shares of
common stock in the Company, following the Company increasing its authorized
capital.
19
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
FUND COSTS CONVERSION
The consolidated statements of operations and other financial and
operating data contained elsewhere here in and the consolidated balance sheets
and financial results have been reflected in Canadian dollars unless otherwise
stated.
The following table shows the average rate of exchange of the Canadian
dollar as compared to the US dollar and Australian dollar during the periods
indicated:
3 months ended September 30, 2008 CDN$1.00 = US$.96216
3 months ended September 30, 2009 CDN$1.00 = US$.91035
3 months ended September 30, 2008 CDN$1.00 = A$1.08306
3 months ended September 30, 2009 CDN$1.00 = A$1.09450
RESULTS OF OPERATION
Three Months Ended September 30, 2009 vs. Three Months Ended September 30, 2008.
Golden River Resources as part of its business strategy is increasing
its gold and base metal exploration activity in Canada and is continually
sourcing new ground in Canada which is one of the most prospective areas in for
new gold discoveries. On March 17, 2009, the Company announced that it had
reached agreement with Acadian Mining Corporation (TSX: ADA) ("Acadian") to
subscribe in a private placement transaction for up to 338,111,334 common shares
("Offering") in Acadian for aggregate gross investment of up to CDN$10 million.
The Offering was contemplated to close in two or more tranches. Following
closing of all tranches, Golden River will hold 68.45% of Acadian.
The closing of the first tranche, for an aggregate of CDN$1.0 million
(38,111,334 shares) was subject to receipt of the required regulatory approvals,
including the approval of the Toronto Stock Exchange which occurred in early
June 2009. Upon completion of closing of the initial tranche, the Company was
entitled to nominate one member to the board of directors of Acadian and
nominated Mr Menachem Vorchheimer. The Company held a 19.9% interest in Acadian
at June 30, 2009.
The balance of the subscription by Golden River Resources into Acadian
of CDN$9 million (300,000,000 shares at CDN$0.03 per share) was expected to be
completed in one or more tranches upon the receipt of all necessary regulatory
approvals, approval of the shareholders of Acadian and the satisfaction of
certain other conditions precedent, including completion of due diligence by the
Company. Acadian obtained approval from its shareholders at its annual meeting
in June 2009.
Throughout July 2009, Golden River Resources subscribed for further
shares to a value of CDN$4 million and at July 31, 2009, the Company held a
52.764% interest in Acadian. As a result, Golden River Resources has since that
time consolidated the results of Acadian. On September 30, 2009, a further
closing for an aggregate of CDN$1 million occurred increasing the Company
interest in Acadian to 57.145% and during October 2009, Golden River Resources
completed its subscription in Acadian by subscribing for shares to the value of
CDN$4 million which increased its interest in Acadian to 68.7%.
The financial statements presented herein have been prepared on a
consolidated basis to include the accounts of Golden River Resources, Acadian
and its other subsidiaries ("collectively "the Company"). All intercompany
balances and transactions have been eliminated in consolidation.
Prior to July 1, 2009, the Company's functional and reporting currency
was the Australian dollar and its subsidiary, Golden Bull Resources
Corporation's functional currency was the Canadian dollar. However, as a result
of the purchase of the controlling interest in Acadian Mining Corporation in
Canada in July 2009, the Company's fiscal 2010 revenue and expenses will be
primarily denominated in Canadian dollars (CDN$). ASC Topic 830 "Foreign
Currency Matters" states that the functional currency of an entity is the
currency of the primary economic environment in which the entity operates.
Accordingly the Company determined that from July 1, 2009 the functional and
reporting currency of the Company is the Canadian dollar. Assets, liabilities
and portions of equity were translated at the rate of exchange at July 1, 2009
and portions of equity were translated at historical exchange rates. Revenue and
expenses were translated at actual rates. Translation gains and losses were
included as part of accumulated other comprehensive loss.
20
Restatement of comparative numbers was made for the change in
functional and reporting currency. The change was adopted prospectively
beginning July 1, 2009 in accordance with ASC Topic 830.
The Company's financial statements are prepared in Canadian dollars
(CDN$). A number of the costs and expenses of the Company are incurred in US and
Australian dollars and the conversion of these costs to CDN$ means that the
comparison of the three months ended September 30, 2009 to the three months
ended September 30, 2008 does not always present a true comparison.
Costs and expenses increased from CDN$181,000 in the three months ended
September 30, 2008 to CDN$1,521,000 in the three months ended September 30,
2009.
The increase in costs and expenses is a net result of:
a) an increase in legal, accounting and professional expense from
CDN$37,000 for the three months ended September 30, 2008 to CDN$108,000
for the three months ended September 30, 2009, primarily as a result of
costs associated with the Company's SEC compliance obligations.
Included within legal, accounting and professional expense for the
three months ended September 30, 2009 is CDN$35,000 for Acadian which
relates to general legal work, audit and stock transfer costs.
b) an increase in administrative costs including salaries from CDN$25,000
in the three months ended September 30, 2008 to CDN$174,000 in the
three months ended September 30, 2009. Included within administrative
expense for the three months ended September 30, 2009 is CDN$146,000
for Acadian which includes head office salaries, rent, office related
costs and travel.
c) an increase in the exploration expenditure expense from CDN$39,000 for
the three months ended September 30, 2008 to CDN$260,000 for the three
months ended September 30, 2009. The costs related to consultants
providing exploration reviews and advice. No field work was undertaken
during the quarters ended September 30, 2008 or 2009 by the Company on
the Slave and Committee Bay properties. Included within exploration
expenditure expense for the three months ended September 30, 2009 is
CDN$229,000for Acadian which undertook field planning activities on its
gold properties and certain maintenance work on its Scotia mine which
is currently on care and maintenance.
d) a decrease in stock based compensation from CDN$80,000 for the three
months ended September 30, 2008 to CDN$33,000 for the three months
ended September 30, 2009 as a result of a decrease in the number of
options outstanding combined with a number of options being fully
expensed prior to the current period. See Note 7 concerning the
Company's outstanding stock options.
e) an increase in amortization expense from CDN$nil for the three months
ended September 30, 2008 to CDN$463,000 for the three months ended
September 30, 2009. The amortization expenses for the three months
ended September 30, 2009 relates to the activities of Acadian which is
amortizing the mine and mill (which is on care and maintenance), and
equipment.
f) an increase in loss on disposal of equipment expense from CDN$nil for
the three months ended September 30, 2008 to CDN$384,000 for the three
months ended September 30, 2009. The loss on disposal of equipment
expense for the three months ended September 30, 2009 relates to the
activities of Acadian.
g) an increase in interest expense from CDN$nil for the three months ended
September 30, 2008 to CDN$99,000 for the three months ended September
30, 2009. The interest expenses for the three months ended September
30, 2009 relates to the activities of Acadian which was paying interest
on capital debt and the cost of having the debtor in possession
financing in place.
As a result of the foregoing, the loss from operations increased from
CDN$181,000 for the three months ended September 30, 2008 to CDN$1,521,000 for
the three months ended September 30, 2009.
21
The Company recorded a foreign currency exchange loss of CDN$5,000 for
the three months ended September 30, 2009 compared to a foreign currency
exchange loss of CDN$7,000 for the three months ended September 30, 2008.
On March 17, 2009, the Company announced that it had reached agreement
with Acadian Mining Corporation (TSX: ADA) ("Acadian") to subscribe in a private
placement transaction for up to 338,111,334 common shares ("Offering") in
Acadian for aggregate gross investment of up to CDN$10 million. The closing of
the first tranche, for an aggregate of CDN$1.0 million (38,111,334 shares) was
subject to receipt of the required regulatory approvals, including the approval
of the Toronto Stock Exchange which occurred in early June 2009. Throughout July
2009, further closings for an aggregate of CDN$4 million occurred and at July
31, 2009, the Company held a 52.764% interest in Acadian. In accordance with
accounting principles generally accepted in the United States of America, the
Company calculated the difference between the fair market value and the carrying
amount of the Company's 19.9% interest in Acadian at the acquisition date of
July 31, 2009 and recorded an adjustment to fair value on stepped acquisition of
CDN$16,098,000, for which there was no comparable amount in 2008.
The Company has recorded a gain on bargain purchase of CDN$24,626,130
which is disclosed separately on the consolidated statement of operations. The
gain represents the excess of the fair value of the net assets acquired over (i)
fair value of the non controlling interest; (ii) fair value of the equity
investment held prior to acquisition; and, (iii) the cash consideration paid.
Subsequent to acquiring a majority interest in Acadian, the Company acquired an
additional 4.81% interest for CDN$1 million which resulted in the Company's
ownership interest in Acadian being increased from 52.764% to 57.145%.. As a
result of this additional investment, the Company recorded a credit to
Additional Paid-In Capital of CDN$2,914,126. The Company entered into the a
fixed price agreement with Acadian in early 2009 to subscribe CDN$10 million for
a 68.7% interest in Acadian, at a time when the world stock markets were at a
low point given the world economic crisis at that time. The transaction
contemplated several closings and was subject to several pre-conditions
including approval by TSX and due diligence. Between the time of entering into
the agreement and the acquisition date, world economic conditions have improved,
metal prices have increased significantly and world stock markets have rallied.
This resulted in significantly higher fair values for the assets of Acadian
compared to the values at the time the agreement was entered into. Furthermore,
Acadian was in a distressed state at the time the agreement was entered into.
There was no comparable amount in 2008.
The profit before income tax and equity in profits of non-consolidated
entities for the three months ended September 30, 2009 was CDN$39,198,000
compared to a loss for the three months ended September 30, 2008 of CDN$188,000.
The Company has recorded a provision for tax of CDN$12,634,000 for the
three months ended September 30, 2009 compared to a provision for tax of CDN$nil
for the three months ended September 30, 2008, as a result of the acquisition of
majority interest in Acadian.
The profit before equity in profits of non-consolidated entities for
the three months ended September 30, 2009 was CDN$26,564,000 compared to a loss
for the three months ended September 30, 2008 of CDN$188,000.
As noted above, the Company held a 19.89% interest in Acadian at June
30, 2009 which increased to 52.764% at July 31, 2009. The Company accounted for
its 19.89% interest in Acadian for the month of July 2009 using the equity
method of accounting). Further, the Company via Acadian, held a 29.18% interest
in Royal Roads Corp which is also accounted for using the equity method of
accounting and its share of the loss of the non-consolidated entities for the
three months ended September 30, 2009 was A$396,000 (2008: $nil).
The net profit was CDN$29,960,000 for the three months ended September
30, 2009 compared to a net loss of CDN$188,000 for the three months ended
September 30, 2008.
The share of the loss attributable to the non-controlling interests of
Acadian amounted to A$681,000, for which there was no comparable amount in 2008.
22
The net profit attributable to Golden River Resources stockholders
amounted to CDN$27,641 for the three months ended September 30, 2009 compared to
a net loss of CDN$188,000 for the three months ended September 30, 2008.
Liquidity and Capital Resources
For the three months ended September 30, 2009, net cash from operating
activities was CDN$226,000 primarily consisting of the net profit of
CDN$27,641,000; adjustment to fair value on stepped acquisition of
CDN$16,098,000; gain on bargain purchase of CDN$24,626,000; provision for
deferred tax of CDN$12,634,000;an increase in accounts payable and accrued
expenses of CDN$1,335,000; net cash used in investing activities of
CDN$3,487,000 being the net cost of the additional investment in Acadian to
52.764%; and net cash provided by financing activities of CDN$4,240,000 being
funds from the sale of common stock of CDN$5,568,000; repayment of borrowing
from affiliate CDN$650,000; re-purchase of warrants CDN$579,000 and repayment of
borrowings CDN$99,000.
As of September 30, 2009, the Company had short-term obligations of
CDN$10,834,000 comprising accounts payable and accrued expenses, lease
liabilities and advance from related parties/associates.
We have CDN$900,000 in cash at September 30, 2009.
In October 2009, Northern Capital Resources Corp ("NCRC") provided an
advance of CDN$4 million to enable the Company to complete the final closing of
its acquisition of Acadian, which occurred on October 22, 2009.
The Company will be required to raise further cash to fund its
exploration activities in 2010 and for working capital purposes.
We are currently investigating capital raising opportunities which may
be in the form of either equity or debt, to provide funding for working capital
purposes and future exploration programs. There can be no assurance that such a
capital raising will be successful, or that even if an offer of financing is
received by the Company, it is on terms acceptable to the Company.
Cautionary Safe Harbor Statement under the United States Private Securities
Litigation Reform Act of 1995.
Certain information contained in this Form 10-Q's forward looking
information within the meaning of the Private Securities Litigation Act of 1995
(the "Act"). In order to obtain the benefits of the "safe harbor" provisions of
the act for any such forwarding looking statements, the Company wishes to
caution investors and prospective investors about significant factors which
among others have affected the Company's actual results and are in the future
likely to affect the Company's actual results and cause them to differ
materially from those expressed in any such forward looking statements. This
Form 10-Q report contains forward looking statements relating to future
financial results. Actual results may differ as a result of factors over which
the Company has no control including, without limitation, the risks of
exploration and development stage projects, political risks of development in
foreign countries, risks associated with environmental and other regulatory
matters, mining risks and competition and the volatility of gold and copper
prices, movements in the foreign exchange rate and the availability of
additional financing for the Company. Additional information which could affect
the Company's financial results is included in the Company's Form 10-K on file
with the Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
At September 30, 2009, the Company had outstanding loan facilities of
CDN$7,463,000 and a 100 basis points increase in interest rates would have a
CDN$746,300 effect on the statement of consolidated operations. At September 30,
2009, assuming no change in the cash at bank, a 10% change in the CDN$ versus
US$ exchange rate would have a CDN$9,000 effect on the consolidated statement of
operations.
Item 4. Controls and Procedures.
a) Evaluation of Disclosure Controls and Procedures
23
Our principal executive officer and our principal financial officer
evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934
as amended) as of the end of the period covered by this report. Based on that
evaluation, such principal executive officer and principal financial officer
concluded that, the Company's disclosure control and procedures were effective
as of the end of the period covered by this report.
b) Change in Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred
during our most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect our internal control over financial
reporting.
c) Other
We believe that a controls system, no matter how well designed and
operated, can not provide absolute assurance that the objectives of the controls
system, no matter how well designed and operated, can not provide absolute
assurance that the objectives of the controls system are met, and no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within a company have been detected.
24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not Applicable
Item 1A. Risk Factors.
Not Applicable for Smaller Reporting Company
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not Applicable
Item 3. Defaults Upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
Item 5. Other Information.
Not Applicable
Item 6. Exhibits.
(a) Exhibit No. Description
31.1 Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the
Exchange Act
31.2 Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the
Exchange Act
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley act of 2002
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley act of 2002
25
(FORM 10-Q)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Golden River Resources Corporation
By:
/s/ Joseph I. Gutnick
Joseph I. Gutnick
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
By:
/s/ Peter Lee
Peter Lee
Director, Secretary and
Chief Financial Officer
(Principal Financial Officer)
Dated 15 November, 2009
26
EXHIBIT INDEX
Exhibit No. Description
31.1 Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the
Exchange Act
31.2 Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the
Exchange Act
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley act of 2002
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley act of 2002
27