interim financial statements - march 31, 2012 - sedar final

7/31/2019 Interim Financial Statements - March 31, 2012 - SEDAR Final

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VENGA AEROSPACE SYSTEMS INC.

Condensed Interim Consolidated Financial Statementsfor the Three Month Period Ended March 31, 2012

(Expressed in Canadian Dollars)

(Unaudited Prepared by Management)


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Notice of No Auditor Review of Condensed InterimConsolidated Financial Statements

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor hasnot performed a review of interim consolidated financial statements, they must beaccompanied by a notice indicating that the financial statements have not beenreviewed by an auditor.

The accompanying condensed interim unaudited consolidated financial statementsof the company have been prepared by and are the responsibility of theCompany's management. These condensed interim unaudited consolidatedfinancial statements reflect management's best estimates and judgment based oninformation currently available as of May 29, 2012.

The Company's independent auditor has not performed a review of thesecondensed interim unaudited consolidated financial statements in accordance withthe standards established by the Canadian Institute of Chartered Accountants for areview of interim consolidated financial statements by an entity's auditor.

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Venga Aerospace Systems Inc.(Incorporated under the laws of the Province of Ontario)

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION(Expressed in Canadian Dollars)(Unaudited - Prepared by Management)

As at

March 31, 201

December 31, 20

$$

(Unaudite(Audite

ASSETS

Current Assets

Cash and cash equivalents

3,703

5,108

Prepaids and sundry receivables

3

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4,0

5,1

Other Assets

Investment (Notes 3(b) and 10)51,051,0

Investment in Global Mineral Investments, LLC (Notes 3(a) and 12)

485,4

485,4

Total Assets

540,4

541,5

LIABILITIES AND SHAREHOLDERS EQUITY

Current Liabilities

Accounts payable and accrued charges26,459

20,772

Due to Directors (Note 7)39,039,0

Total Liabilities

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65,4

59,7

Shareholders' Equity

Capital Stock (Note 6)17,268,917,268,9

Contributed Surplus890,6890,6

Deficit(17,684,69(17,677,84

Total Equity

474,9

481,8

Total Liabilities and Shareholders' Equity

540,4

541,5

Going Concern (Note 2)

The accompanying notes are an integral part of these condensed interim unaudited consolidated financialstatements

"Hirsh Kwinter" (signed)

Director

"Dr. Ezra Franken ("signed")

Director

Hirsh Kwinter

Dr. Ezra Franken

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The accompanying notes are an integral part of these condensed interim unaudited consolidated financial statements

Venga Aerospace Systems Inc.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(Expressed in Canadian Dollars)(Unaudited - Prepared by Management)

Share Capital

# of Shares AmountContributed

SurplusDeficit Total

Balance January 1, 2011 239,171,893 $ 17,268,966 $ 890,684 $ (17,501,620) $ 658,03

Net loss and comprehensiveoss for the period (7,043) (7,04

Balance March 31, 2011 239,171,893 $17,268,966

$ 890,684 $ (17,508,663) $ 605,98

Balance January 1, 2012 239,171,893 $ 17,268,966 $ 890,684 $ (17,677,849) $ 481,80

Net loss and comprehensiveoss for the period

(6,849) (6,84

Balance March 31, 2012 239,171,893 $ 17,268,966 $ 890,684 $ (17,684,698) $ 474,95

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The accompanying notes are an integral part of these condensed interim unaudited consolidated financial statements


CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW(Expressed in Canadian Dollars)(Unaudited - Prepared by Management)

Three Months EndedMarch 31, 2012

Three Months EndedMarch 31, 2011

OPERATING ACTIVITIES

Net Loss $ (6,849) $ (7,043)

Changes in non-cash working capital items

Prepaids and sundry receivables (243) 331

Accounts payable and accrued charges 5,687 (8,793)

Cash Flow Used in Operating Activities (1,405) (15,505)

FINANCING ACTIVITIES

Loan from Directors 0 7,000

Cash Flow From Financing Activities 0 7,000

Net Decrease in Cash (1,405) (8,505)

Cash and cash equivalents, beginning of period 5,108 9,809

Cash and cash equivalents, end of period $ 3,703 $ 1,304

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The accompanying notes are an integral part of these condensed interim unaudited consolidated financialstatements


Notes to the Condensed Interim Consolidated Financial Statementsfor the Period Ended March 31, 2012(Expressed in Canadian Dollars)(Unaudited - Prepared by Management)

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1. CORPORATE PROFILE

Venga Aerospace Systems Inc. (the Company) was originally incorporated under the Business Corporations A(Ontario) by certificates of amalgamation dated April 26, 1979, amalgamating Frodac Mines Ltd., Great BeSilver Mines Limited and Silver Monarch Mines Limited to become Frodac Consolidated Energy Resources LOn July 25, 1985, the Company changed its name to Global Aerospace Systems Inc. and on November 3, 198the Company further changed its name to Venga Aerospace Systems Inc.

In addition, these condensed interim unaudited consolidated financial statements include the wholly ownedsubsidiary Venga Joint Venture Ltd., which is inactive.

2. GOING CONCERN

These condensed interim unaudited consolidated financial statements have been prepared in accordance wIFRS applicable accounting principles to the presentation of interim financial statements and to a going concewhich assumes that the Company will be able to realize its assets, including the ultimate realization of its lonterm investments, and discharge its liabilities in the normal course of business. Recurring sources of revenhave not yet proven to be sufficient. The Company needs to obtain additional financing to enable it to continue business. In the absence of additional financing, the Company may not have sufficient funds to meet obligations. Management continues to monitor the cash needs and consider various alternatives to raadditional financing. However, management is reasonably confident but can offer no guarantee that it will be abto secure the necessary financing to enable the Company to continue as a going concern. These condensinterim unaudited consolidated financial statements do not give effect to adjustments that would be necessashould the Company be unable to continue as a going concern. There is no assurance that this will be successfu

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If the going concern basis is not appropriate, material adjustments may be necessary in the carrying amounand/or classification of assets and liabilities and the loss for the period reported in these condensed interunaudited consolidated financial statements.

3. OPERATIONS

(a) Mining and Resource Unit

The Company initially acquired a 3% interest, together with an option to acquire up to an additional 15%interest, in Global Mineral Investments, LLC (GMI), a private U.S. corporation that proposed to lease anddevelop gold mining concessions in West Africa. On August 31, 2007, GMI was awarded four Class B GoldMining Licences (the GMI Mining Licences) by the Ministry of Lands, Mines and Energy of the Republic ofLiberia (the Ministry) for four, separate concessions (the GMI Concessions) located in the Sanquin MiningZone in the Republic of Liberia. In consideration for business and management services that the Companyrendered GMI, on September 6, 2007, the Companys ownership interest in GMI was increased from 3% to4%.

On October 10, 2008, the Company announced that it entered into a funding and operating agreement (theFunding Agreement) with GMI and a number of investors to raise, by way of a non-brokered privateplacement (the Offering or the Placement), the sum of $535,000.00 through the issue of 10,700,000common shares at a price of $0.05 per share. The announced use of the proceeds from the Offering was tofund GMIs Proposed Dredging



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3. OPERATIONS (continued)

(a) Mining and Resource Unit (continued)

Operations (the "Proposed Dredging Operations") that GMI planned to carry out in those portions of the UpperTartweh River system flowing through the GMI Concessions; to acquire an additional 16% equity interest inGMI (giving Venga a 20% total interest) and for general corporate purposes. The Company and GMIspecifically agreed that the Funding Agreement did not create (whether directly or by implication) apartnership between the Company and GMI, nor did the Funding Agreement create, whether directly orindirectly, a joint venture between the parties. Under the terms of the Funding Agreement, the Companysecured an immediate 20% investment interest in GMI with:

GMI retaining full and complete operational control of all GMIs business operations including, but notlimited to, the Proposed Dredging Operations and Venga being given management of the financial affairsof the Proposed Dredging Operations;

Venga being given the entitlement to receive an annual financial management fee (which fee, nor anyportion of same, have yet to be received by the company as of the date of these financial statements)calculated as being the greater of $120,000.00 or an amount equal to 1% of all monies received,disbursed or distributed by the Company as the financial manager of the Proposed Dredging Operations;

Revenues derived from the recovery of all minerals other than gold, including diamonds, being for thebenefit of all parties to the Funding Agreement so that such revenues will be included in the calculation ofthe distributable profits from the Proposed Dredging Operations that are payable to such parties pursuantto the terms of the Funding Agreement;

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Subject to the approval of the Ministry, the records of the Ministry with respect to the GMIs Concessionsto be amended to reflect Vengas direct ownership of these concessions in a percentage that is equal toVengas then equity ownership position in GMI; and

Any additional mining concessions secured or negotiated by GMI or Venga in Liberia or West Africa to beacquired in the joint names of GMI and Venga reflecting the parties equal ownership of such additionalconcessions.

(b) 3D Graphics Unit

In November of 2006, the Company entered into a joint venture agreement (the JV Agreement) with 3DP NorAmerica, Inc., of Kenner, Louisiana; United Business & Capital Services, LLC of Kenner, Louisiana; EKG, LLCLafayette, Louisiana and Armadillo Photo Supply, Inc. of Houston, Texas creating a new commercial entity, th3DP North America Joint Venture (the New JV), to provide a range of advanced 3D products and print servicfor both commercial and consumer customers. The Company retains a 30% ownership interest in the New JV w3DP North America, Inc., who acts as the managing venturer of the New JV, owning the remaining 70% of thventure.

(c) Aerospace Unit

The Company, in association with ARINC Incorporated (www.arinc.com), made an unsolicited proposal to tCanadian government to provide replacement jet aircraft for the Canadian Forces' Snowbirds aerial demonstratisquadron. As a direct result of the continuing delays in the Canadian government's decision with respectselecting a program to replace or upgrade the Snowbirds' aircraft, the Company is holding its Snowbirds' aircrreplacement proposal in abeyance pending receipt of a positive response from the Canadian government



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4.BASIS OF PREPARATION

(a) Statement of Compliance

These condensed interim unaudited consolidated financial statements have been prepared using accountingpolicies consistent with the International Financial Reporting Standards (IFRS) issued by the International

Accounting Standards Board (IASB) and Interpretations of the International Financial Reporting InterpretationsCommittee (IFRIC). These condensed interim unaudited consolidated financial statements have beenprepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordinglythey do not include all of the information required for full annual financial statements required by IFRS as issued

by IASB and interpretations issued by IFRIC.

These condensed interim unaudited consolidated financial statements for the period ended March 31, 2012have been prepared by management, reviewed by the Audit Committee and approved and authorized for issueby the Board of Directors on May 29, 2012. Shortly thereafter, the financial statements are made available toshareholders and others through filing on the System for Electronic Document Analysis and Retrieva(SEDAR).

(b)Basis of Presentation

These condensed interim unaudited consolidated financial statements have been prepared on the historical cosbasis except for financial instruments, which are measured at fair value. These financial statements have been

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prepared using IFRS principles applicable to a going concern, which contemplate the realization of assets andsettlement of liabilities in the normal course of business as they come due. All amounts are presented in Canadiandollars, unless otherwise indicated.

(c)Adoption of New and Revised Standards and Interpretations

The IASB issued a number of new and revised International Accounting Standards, International Financia

Reporting Standards, amendments and related interpretations which are effective for the Companys financiayear beginning on or after January 1, 2011. For the purpose of preparing and presenting the financiastatements for the relevant periods, the Company has consistently adopted all these new standards.

At the date of authorization of these condensed interim unaudited consolidated financial statements, the IASBand IFRIC have issued the following new and revised Standards and Interpretations which are not yet effectivefor the relevant reporting periods.

IFRS 9 Financial Instruments IFRS 9 Financial Instruments is part of IASBs wider project to replaceIFRS 39 Financial Instruments: Recognition and Measurement. IFRS 9 retains but simplifies the mixedmeasurement model and establishes two primary measurement categories for financial assets: amortizedcost and fair value. The basis of classification depends on the entitys business model and the contractualcash flow characteristics of the financial asset. The standard is effective for annual periods beginning on

our after January 1, 2015. The Company is in the process of evaluating the impact of the new standard onthe accounting for available-for-sale investment.

IFRS 10 Consolidated Financial Statements IFRS 10 establishes principles for the presentation andpreparation of consolidated financial statements when an entity controls one or more entities. IFRS 10replaces the consolidation requirements of SIC-12 Consolidation Special Purpose Entities and IAS 27Consolidated and Separate Financial Statements and is effective for annual periods beginning on or afterJanuary 1, 2013. Earlier adoption is permitted. IFRS 10 builds upon existing principles by identifying theconcept of control as the determining factor in whether an entity should be included within theconsolidated



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4.BASIS OF PREPARATION (continued)

(c)Adoption of New and Revised Standards and Interpretations (continued)

financial statements of the parent company. The standard provides additional guidance to assist in thedetermination of control where this is difficult to assess. The Company is currently assessing the financial

impact of the new standard.

IFRS 12 Disclosure of Interests in Other Entities IFRS 12 is a new and comprehensive standard ondisclosure requirements for all forms of interests in other entities, including subsidiaries, jointarrangements, associates and unconsolidated structured entities. IFRS is effective for annual periodsbeginning on or after January 1, 2013. The Company is currently assessing the financial impact of thenew standard.

IFRS 13 Fair-Value Measurement IFRS 13 Fair Value Measurement aims to improve consistency andreduce complexity by providing a precise definition of fair value and a single source of fair valuemeasurement and disclosure requirements for use across IFRSs. The effective date of this new standardis for annual periods beginning on or after January 1, 2013. The Company is currently assessing thefinancial impact of the new standard.

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5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These condensed interim unaudited consolidated financial statements follow the same accounting policies andmethods of application as the Company's most recent annual financial statement.

a) Basis of Presentation

The Company has prepared these comparative condensed interim unaudited consolidated financial statementson a consolidated basis which includes its wholly-owned subsidiary, Venga Joint Venture Ltd.

(b) Principles of Consolidation

These condensed interim unaudited consolidated financial statements include the accounts of VengaAerospace Systems Inc. ("the Company") and its subsidiary.

(c) Use of Estimates

The preparation of these condensed interim unaudited consolidated financial statements in accordance withIFRS requires management to make judgments, estimates and assumptions that affect the application ofaccounting policies and the reported amounts of assets, liabilities, revenues and expenses as well as thedisclosure of contingent assets and liabilities at the date of the financial statements. Judgements, estimates andunderlying assumptions are reviewed on a continuous basis and are based on managements experience and

other factors, including expectations of future events that are believed to be reasonable under thecircumstances. Actual outcomes could differ from those estimates.

Significant areas of financial reporting the require managements estimates and judgements are as follows:

Accrued liabilities

The Company uses estimates to record the expenses that have been incurred but payments have not beenmade.



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5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(c) Use of Estimates (continued)

Impairment of long- term investments

The Company records impairment of long-term investments based on managements determination. Judgment

is required to determine the extent of impairment.

(d) Financial Instruments

Financial assets

Financial assets are classified into three categories:

Fair value through profit or loss (FVTPL)

Held to maturity (HTM); and

Loans and receivables.

Financial assets at fair value through profit or loss (FVTPL)

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A financial asset is classified at fair value through profit or loss if it is classified as held-for-trading or isdesignated as such upon initial recognition. Financial assets are designated as at FVTPL if the Companymanages such investments and makes purchase and sale decisions based on their fair value in accordancewith the Companys risk management strategy. Attributable transaction costs are recognized in profit or losswhen incurred. FVTPL are measured at fair value, and changes are recognized in the statements of operationsand comprehensive loss. Cash is categorized as FVTPL and is carried at fair value.

Held to maturity (HTM)

These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities thathe Companys management has the positive intention and ability to hold to maturity. These assets aremeasured at amortized costs using the effective interest method. If there is objective evidence that the asset isimpaired, determined by reference to external credit ratings and other relevant indicators, the financial asset ismeasured at the present value of estimated future cash flows. Any changes to the carrying amount of theinvestment, including impairment losses, are recognized in the statements of operations and comprehensiveloss.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted on an activemarket. Such assets are initially recognized at fair value plus any direct attributable transaction costsSubsequent to initial recognition, loans and receivables are measured at amortized cost using the effectiveinterest method, less any impairment loss. The Company classified its financial assets which consisted ofprepaids and sundry receivables as loans and receivables.

Financial liabilities

Financial liabilities are classified as other financial liabilities. This category includes accounts payable and accruecharges and due to directors, all of which are recognized at amortized cost.

Venga Aerospace Systems Inc.Notes to the Condensed Interim Consolidated Financial Statementsfor the Period Ended March 31, 2012(Expressed in Canadian Dollars)(Unaudited - Prepared by Management)

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(d) Financial Instruments (continued)

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial asse

are impaired when there is objective evidence that, as a result of one or more events that occurred after the initrecognition of the financial assets, the estimated future cash flows of the investments have been affected.

For all financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or it becomes probable that the borrower will enter bankruptcy or financial re-organization.

For certain categories of financial assets, such as receivables, assets that are assessed not to be impairedindividually are subsequently assessed for impairment on a collective basis. The carrying amount of financialassets is reduced by the impairment loss directly for all financial assets except receivables, where thecarrying amount is reduced through the use of an allowance account. Subsequent recoveries of receivables

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previously written off are credited against the allowance account. Changes in the carrying amount of theallowance account are recognized in the statement of comprehensive loss. If, in a subsequent year, theamount of the impairment loss decreases and the decrease can be related objectively to an event occurringafter the impairment was recognized, the previously recognized impairment loss is reversed through thestatement of loss and comprehensive loss to the extent that the carrying amount of the investment at the datethe impairment is reversed does not exceed what the amortized cost would have been had the impairment notbeen recognized.

(e) Income Taxes

The Company uses the asset and liability method of accounting for income taxes under which future taxassets and liabilities are recognized for differences between the financial statement carrying amounts ofexisting assets and liabilities and their respective tax bases. Future tax assets and liabilities are measuredusing substantively enacted tax rates in effect in the year in which those temporary differences are expectedto be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognizedas part of the provision for income taxes in the year that includes the enactment date. A valuation allowance isrecorded to the extent there is uncertainty regarding realization of future tax assets.

(f) Translation of Foreign Currencies

Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchangeprevailing at the year end, non-monetary assets and liabilities are translated at historical rates and revenueand expenses are translated at the rate of exchange in effect on the transaction dates. Exchange gains andlosses arising on translation of monetary items are included in income in the year in which they occur.

(g) Long-term Investments

Long-term investments are recorded at cost. Long-term investments classified as held-to maturity financialinstruments, are valued at amortized cost, with changes in valuation charged to operations. Long-terminvestments classified as available-for-sale financial instruments, are valued at fair market value, withchanges in valuation charged to comprehensive income. Long-term investments in equity instruments that donot have a quoted market price in an active market and whose fair value cannot be reliably measured aremeasured at cost Gains and losses are recognized when investments are sold. Income is recognized only tothe extent dividends are received



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h) Impairment of Long-lived Assets

Long-lived assets, including capital assets, are amortized over their useful lives. The Company reviews long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount maynot be recoverable. If the sum of the undiscounted cash flows expected to result from the use and eventualdisposition of a group of assets is less than its carrying amount, it is considered impaired. An impairment lossis measured as the amount by which the carrying amount of the group of assets exceeds its fair value.

(i) Basic and Diluted Loss per Share

The Canadian Institute of Chartered Accountants ("CICA") recommends the use of the treasury stock methodin computing earnings/loss per share. Under this method, basic loss per share is computed by dividingearnings available to common shareholders by the weighted average number of common shares outstandingduring the year. In computing the loss per share on a fully diluted basis, the treasury stock method assumes

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that proceeds received from in-the-money stock options are used to repurchase common shares at theprevailing market rate. The weighted average number of common shares outstanding during the period was239,171,893 (2011 - 239,171,893).

(j) Revenue Recognition

Revenue is recognized to the extent that it is probable that future economic benefits will flow to the Companyand the revenue can be reliably measured. Revenue is measured at the fair value of the consideration

received or to be received.

Revenue is earned from the provision of consulting services, licence fees and if and when the Companyreceives its share of profits from the Company's 3D graphics and mining and resources business units. TheCompany recognizes revenue from consulting services when performance of the consulting services arecomplete and recognizes revenue from the Company's 3D graphics and mining and resources business unitswhen such profit distributions are received. Licence fees represent fees that the New JV is contractuallyrequired to pay the Company for use of the Company's CLIK 3D trade name.

6.CAPITAL STOCK

Authorized: Unlimited common stock and special shares without par value

Issued: March 31, 2012 March 31, 2011

239,171,893 239,171,893

$17,268,966 $17,268,966

As of March 31, 2012, the Company had not issued any warrants or options nor were there any outstandingwarrants or options.



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7. RELATED PARTY TRANSACTIONS

Directors of the Company advanced the Company the sum of $39,000 as loans due and payable on demandwhich loans are non - interest bearing. These funds were to be used by the Company for its ongoingcorporate and business operations.

8.CAPITAL MANAGEMENT

The Companys objectives when managing capital are to safeguard its ability to continue as a going concernto pursue the development of its three business segments and to maintain a flexible capital structure whichoptimizes the cost of capital within a framework of acceptable risk. In the management of capital, theCompany includes share capital, contributed surplus and deficit.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions

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and the risk characteristics of the underlying assets. To maintain or adjust its capital structure, the Company mayissue new shares, issue new debt, acquire or dispose of assets or adjust the amount of cash and cash equivalents.

The Company is dependent on the capital markets and potential private investors as its sole source of operatingcapital and the Companys capital resources are largely determined by the strength of the junior public markets andby the status of the Companys projects in relation to these markets and its ability to compete for investor support ofits projects.

The Company is not subject to externally imposed capital requirements

10. INVESTMENT IN NEW JV

March 31, 2012March 31, 2011

$$

Investment, end of period

51,000

200,000

Pursuant to the terms of the JV Agreement, and in order to provide the New JV with working or operational capital,the Company advanced $600,000 USD to the New JV. The Company has no management rights or further fundingrequirements or obligations with respect to the New JV. The Companys participation in the New JV is limited to the

Companys right to receive 30% of the New JVs net profits as and when such profits are distributed to the jointventurers in accordance with the terms and provisions of the New JV Agreement. As a consequence of both thecontinuing delays in the New JV becoming operational and the New JVs outstanding and unfulfilled obligation topay the Company a licensing fee as required pursuant to the terms of the New JV Agreement, Managementelected in 2008 to take write down its investment interest in the New JV for impairment to $300,000 and to take afurther write down for impairment loss of $100,000 in 2010. With the New JV continuing to experience delays inbecoming operational and following an appraisal by 3DP North America Inc. of the fair market value of JVs assets,management decided to record a further impairment loss of $149,000 of the Company's interest in the New JV in2011.



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10. INVESTMENT IN NEW JV (continued)

The Company is only liable to the extent of its investment and is indemnified from the other joint venturers for anyexcess losses and liabilities. Upon termination of the New JV, the Company is entitled to its capital account sharein net assets of the New JV.

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11. VENGA'S LICENCE FEE

Pursuant to the terms of the New JV Agreement, the Company granted the New JV a licence (the "Venga Licence")during the currency of the New JV Agreement to use, market, operate and commercially exploit the business tradename 'CLIK 3D'. In consideration of the Company's granting of the Venga Licence, the New JV agreed to pay Venga,the sum of fifty thousand ($50,000.00) dollars (the "Venga Licence Fee") each year or part year during the currency

of the New JV Agreement. Notwithstanding the terms of the New JV Agreement, the New JV has failed to pay theCompany the required Venga Licence Fee for the years 2006 through 2011. The Company has advised the New JVthat the Company is not waiving any right to recover any portion of the accumulated, unpaid and outstanding amountfor the Venga Licence Fee and that the Company is and continues to regard the accumulated, unpaid andoutstanding amount for the Venga Licence Fee a valid, legal debt owed by the New JV to the Company. However, inaccordance with the Companys significant accounting policies with respect to revenue recognition, revenue withrespect to Vengas licence fee has not been recorded for the periods ended March 31, 2012 or March 31, 2011.

12. INVESTMENT IN GLOBAL MINERAL INVESTMENTS LLC

Pursuant to the terms and provisions of the Funding Agreement, the Company, currently has a 20% (March 312011 - 20%) interest. The Funding Agreement provides that the Company will participate in the profitsgenerated through from the Companys management of the financial aspects of the Proposed Dredging

Operation, for which the Company is entitled to receive a management fee in accordance with the terms of theFunding Agreement, the Company has no management rights or ongoing funding requirements with respect toGMI or the Proposed Dredging Operation. The Company and GMI have specifically agreed that no termcondition or provision in the Funding Agreement will act to, or be deemed to, create or establish in law, orotherwise, a form of partnership between GMI and the Company nor will the terms, conditions and provisions ofthe Funding Agreement create, or be deemed to create or establish, in law or otherwise, a joint venture betweenthe Company and GMI with respect to the Proposed Dredging Operation or otherwise.

As of the date of these condensed interim unaudited consolidated financial statements the Company has yet toreceive confirmation as to the results of GMI's dredge mining operations that were recommenced in February2011. On April 11, 2011, the Company announced that GMI had signed a funding and operational agreemen(the "Operational Agreement") with Kiwi, Inc., a Liberian based mining company to fund and manage GMI'sdredge mining and planned land based mining operations at GMI's Kumasi Hill 15 and Kumasi Hill 18concessions ("GMI's Planned Land Based Operations") located in Sinoe County, Liberia. Pursuant to the terms

of the Operational Agreement, Kiwi, Inc. agreed to commence full mining operations at GMI's two Kumasi Hilsites by October 1, 2011. While the Corporation has received confirmation from GMI that the original October 12011 date for the commencement of mining operations at GMI's two Kumasi Hill sites has been extended, as ofthe date of these condensed interim unaudited consolidated financial statements the Company has yet toreceive confirmation as to when, or even if, such mining operations will begin. The Operational Agreementfurther provides that Kiwi, Inc. will have full operational management of GMI's dredge mining operations andPlanned Land Based Operations, with all profit derived from such operations being divided equally betweenKiwi, Inc. and GMI.

In Managements opinion the investment in GMI is not impaired as of March 31, 2012.


Notes to the Condensed Interim Consolidated Financial Statements

for the Period Ended March 31, 2012(Expressed in Canadian Dollars)(Unaudited - Prepared by Management)

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13. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

(a) Measurement and Fair Value

The Companys financial assets and liabilities are classified and measured as follows:

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Classification Measurement Fair ValueMarch 31, 2012

Fair vaMarch 31, 2

$

$

Financial assets:

Cash and cash equivalent

Prepaids and sundry receivables

Held for trading

Loans and receivables

Fair value

Amortized cost

3,703

308

1,

Financial liabilities:

Accounts payable and accrued charges

Due to Directors

Other financial liabilities

Other financial liabilities

Amortized cost

Amortized cost

26,459

39,000

29,

7,

Fair value is the amount at which a financial instrument could be exchanged between willing parties, based onthe current markets for instruments with the same risk, principal and remaining maturity. The fair values of theCompanys financial instruments approximate their carrying values because of the short-term nature of theseinstruments.

Financial instruments recorded at fair value at the balance sheet date are classified using a fair value hierarchythat reflects the significance of the inputs used in making the measurements. The fair value hierarchy has thefollowing levels:

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identicalassets or liabilities.

Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1

that are not observable for the asset or liability, either directly(i.e. as prices) or indirectly (i.e. derived from prices);and

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset orliability that are not based on observable market data.

The fair value of cash is measured based on Level 1 inputs referred to in the three levels of the hierarchy notedabove. The Company does not have any Level 2 or 3 fair value measurements. There have been no significanttransfers between levels.

(b) Risk

The Company has exposure to a credit risk; liquidity risk; foreign currency risk and interest risk from its usefinancial instruments. The Company's cash is held in major Canadian banks and their subsidiaries. Managemeapproves and



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13. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

(b) Risk (continued)

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monitors the risk management process. There has been no change in the Company's risk management procefor the period ended March 31, 2012.

Credit Risk

Credit risk represents the financial loss that the Company would experience if a counterparty to a financinstrument failed to meet its obligations to the Company. Cash consists of cash bank balances held in a majCanadian financial institution. As a result, there is no significant credit risk related to the Company's assets. T

carrying amounts of this financial asset represent the maximum credit exposure.

Liquidity Risk

The Company ensures, including arranging a loan from a director, that there is sufficient capital in order to meshort-term business requirements after taking into account the Company's holdings of cash. The Company's cais held in major Canadian banks and their subsidiaries. As of the period ended March 31, 2012, the Compahad cash of $3,703 and thus the Company faces a liquidity risk.

Foreign Currency Risk

While the Company's functional currency is the Canadian dollar, the Company is subject to normal market risincluding fluctuations in foreign exchange rates. The Company has not entered into any derivatives or contracto hedge or otherwise mitigate this exposure. As at March 31, 2012, the Company held no financial instrumen

subject to foreign exchange rates.

Interest Rate Risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes market interest rates. The risk that the Company will realize a loss due to a change in interest rates is limitbecause the Company as at March 31, 2012, had no interest bearing financial assets or liabilities.

14. COMMITMENTS AND CONTRACTUAL OBLIGATIONS

The Company had no contractual or other obligations as at March 31, 2012.

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interim financial statements - march 31, 2012 - sedar final

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