6-K 1 condor-6k1q2005.txt CONDOR 6K 1Q 022805 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 6K Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the quarter ended: February 28, 2005 Commission File Number: 000-31168 CONDOR GOLD CORP. ----------------------------------------------- (Translation of registrant's name into English) 50 Richmond Street East, Toronto, Ontario M5C 1N7 (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F Form 20-F [X] Form 40-F [ ] Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ] Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ] Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes [ ] No [X] If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b) 82. ================================================================================ CONDOR GOLD CORP. CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTH PERIOD ENDED FEBRUARY 28, 2005 CONTENTS Balance Sheet Statement of Shareholders' Deficit Statement of Earnings Statement of Cash Flows Notes to Financial Statements 2 CONDOR GOLD CORP. Consolidated Balance Sheet (Stated in Canadian Dollars) February 28, 2005 (prepared by Management) Period Ended Year ended February 28, November 30, 2005 2004 (unaudited) (audited) ----------- ----------- ASSETS Current Cash $ 157 $ 157 Deferred Expenses -- 12,500 Property and Equipment 6,480,812 6,480,812 ----------- ----------- $ 6,480,969 $ 6,493,469 =========== =========== LIABILITIES Current Liabilities Accounts Payable $ 627,562 $ 607,530 Due to related parties 879,737 835,679 Notes payable, current portion 3,115,092 3,025,092 ----------- ----------- 4,622,391 4,468,301 Non Controlling Interest 444,097 444,097 ----------- ----------- 5,066,488 4,912,398 ----------- ----------- SHAREHOLDERS' EQUITY Share Capital 8,536,967 8,536,967 Contributed Surplus 127,493 127,493 Cumulative Translation Adjustment 636,380 636,380 Deficit (7,886,359) (7,719,769) ----------- ----------- 1,414,481 1,581,071 $ 6,480,969 $ 6,493,469 =========== =========== The accompanying notes are an integral part of these financial statements. 3 CONDOR GOLD CORP. Consolidated Statement of Shareholders' Deficit (Stated in Canadian Dollars) For the Period Ended February 28, 2005 (prepared by Management) Period Ended Year ended February 28, November 30, 2005 2004 (unaudited) (audited) ----------- ----------- Deficit - beginning of period $ 7,719,769 $ 6,674,329 Net profit/(loss) for the period (166,590) 99,497 ----------- ----------- Deficit - end of period $ 7,886,359 $ 6,574,832 =========== =========== The accompanying notes are an integral part of these financial statements. 4 CONDOR GOLD CORP. Consolidated Statement of Earnings & Expenses (Stated in Canadian Dollars) For the Period Ended February 28, 2005 (prepared by Management) Period Ended Year ended February 28, November 30, 2005 2004 (unaudited) (audited) ----------- ----------- Expenses General and administrative $ 9,545 $ 51,873 Consulting fees -- 26,420 Interest expense 110,045 112,090 Management fees 35,000 128,400 Professional fees 12,000 37,000 Forgiveness of debt -- (66,172) Reversal of reserve for loss contingency -- (458,147) ----------- ----------- Total expenses 166,590 (168,536) Non controlling interest -- 69,039 ----------- ----------- NetProfit/(Loss) $ (166,590) $ 99,497 =========== =========== The accompanying notes are an integral part of these financial statements. 5 CONDOR GOLD CORP. Consolidated Statement of Cash Flows (Stated in Canadian Dollars) For the Period Ended February 28, 2005 (prepared by Management) Period Ended Year ended February 28, November 30, 2005 2004 (unaudited) (audited) ----------- ----------- Cash Flows from Operating Activities Net profit/(loss) $(166,590) $ 99,497 Adjustments to reconcile net loss to net cash used in operating activities Accounts Payable 20,032 (15,927) Reserve for loss contingency -- (462,000) Non cash interest expense 90,000 74,590 Non cash financing charge 12,500 37,500 Non Controlling interest -- 69,039 --------- --------- (44,058) (197,301) --------- --------- Cash Flows from Investing Activities -- -- --------- --------- Cash Flows from Financing Activities Proceeds from issuance of common shares 56,100 Proceeds from notes payable (15,000) Advances from related parties 44,058 156,201 --------- --------- 44,058 197,301 --------- --------- Net (Drecease) Increase in Cash -- -- Cash beginning of year 157 -- --------- --------- Cash - end of period $ 157 $ -- ========= ========= The accompanying notes are an integral part of these financial statements. 6 CONDOR GOLD CORP. Notes to Consolidated Financial Statements For the Three Month Period Ended February 28, 2005 (Unaudited - prepared by management) Readers are cautioned that these statements may not be appropriate for their purposes 1. Operations ---------- The Corporation was originally incorporated on June 19, 1997 under the Business Corporations Act (Ontario) under the name Findore Gold Resources Ltd. and was in the business of investing in resource related activities. On October 17th, 2001 the shareholders approved the name change to Ripped Canada Artists Inc. ("RCA") and a change of business to the entertainment industry and TV, Film and Video production and distribution. On September 20, 2002, Ripped Canada Artists Inc. ("RCA") and the shareholders of Northville Gold Corp. ("Northville") entered into a Securities Exchange Agreement ("Agreement") whereby RCA acquired all of the issued and outstanding securities of Northville in exchange for equivalent securities on a one for one basis. Upon consummation, the shareholders of Northville exchanged each of their common shares for one post-consolidation common share of RCA. Northville shareholders acquired control of RCA, a US publicly quoted company with 94.88% interest in the post consolidated securities. Accordingly, this transaction has been accounted for as a reverse takeover whereby Northville was deemed to have acquired RCA. The ongoing business will continue as that of Northville. Subsequently, RCA has changed its name to Condor Gold Corp. (the "Company"). The company is engaged in the exploration and development of gold and diamond properties in Canada. Since inception, the efforts of the Company have been devoted to assessing whether properties have sufficient mineral reserves for production. To date, the Company has earned no revenues. Condor owns or controls interests in gold properties in the townships of Chester, Benneweis, and Yeo in Northern Ontario (collectively, the "Northville Properties"). In addition, in the search for diamond properties, the Company has staked over 95,000 acres of land in the James Bay Lowlands of Northern Ontario. 2. Summary of Significant Accounting Policies ------------------------------------------ Management in accordance with generally accepted accounting principles in Canada has prepared the financial statements of the Corporation. The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements, in management's opinion, have been properly prepared using careful judgment with reasonable limits of materiality. These interim financial statements do not contain all disclosures required under generally accepted accounting principles for annual financial statements and should therefore be read in conjunction with the most recent annual financial statements. The auditor of Condor Gold Corp. has not performed a review of the unaudited financial statements for the three months ended February 28, 2005 and February 29, 2004 The significant accounting policies follow that of the most recently reported annual financial statements 7 CONDOR GOLD CORP. Notes to Consolidated Financial Statements For the Three Month Period Ended February 28, 2005 (Unaudited - prepared by management) a) Going Concern The Company's financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced recurring losses since inception and has negative working capital and cash flows from operations that raise substantial doubt as to its ability to continue as a going concern. For the three months ended February 28, 2005 and the year ended November 30, 2004, the Company experienced net losses of $166,590 and $1,045,440, respectively. The Company's ability to continue as a going concern is also contingent upon its ability to secure additional financing, initiating sale of its product and attaining profitable operations. On January 5, 2005 the Treelawn note came due and payment was demanded. The Company is in discussions with Treelawn with a view to restructuring the loan. Management is pursuing various sources of equity financing. Although the Company plans to pursue additional financing, there can be no assurance that the Company will be able to secure financing when needed or obtain such on terms satisfactory to the Company, if at all. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. b) Unit of Measurement The Canadian dollar has been used as the unit of measurement in these financial statements. The functional currency of the operations are denominated in Canadian currency. c) Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned and controlled subsidiaries, Northville Gold Corp., Condor Diamond Corp., Dialex Minerals Inc., 1478837 Ontario Inc., 1485210 Ontario Inc., 1564447 Ontario Inc. and 1571218 Ontario Inc. Intercompany accounts and transactions have been eliminated on consolidation. These consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods reported. d) Mineral Exploration Properties Property acquisition costs are capitalized until the property to which they relate is placed into production, sold, abandoned or management determines that there has been an impairment in value. On the commencement of commercial production, these costs will be charged to operations on the units-of-production method based upon estimated recoverable proven and probable reserves. As at February 28, 2005, there has not been any production at any of the properties. 8 CONDOR GOLD CORP. Notes to Consolidated Financial Statements For the Three Month Period Ended February 28, 2005 (Unaudited - prepared by management) The amount shown for mineral property interests represents costs incurred and deferred to date and does not necessarily reflect present and future values. Exploration expenditures are expensed as incurred. e) Use of Estimates The preparation of the Company's financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions. These assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. 3. Deferred Expenses On January 6th, 2003 the Company arranged for senior secured debt financing from Treelawn Investment Corp. in the gross aggregate amount of $1,500,000. the net proceeds from the loan were $1,200,000. The $300,000 financing charge was set up as deferred expenses with the amount expensed equally over the 24 month life of the loan, amounting to $ 12,500 expense per month. 4. Property February 28, 2005 November 30, 2004 ----------------- ----------------- Accumulated Accumulated Cost Amortization Cost Amortization ----------- ------------ ----------- ------------ Exploration Properties $6,471,139 0 $6,471,139 0 Net Carrying Amount -- $6,471,139 -- $6,471,139 5. Notes Payable February 28 November 30 ------------ ------------ 2004 2004 Notes payable, non-interest bearing and maturing on April 15, 2005, and repayable from proceeds of production from one of the Company's properties $ 223,900 $ 223,900 Notes payable bearing interest at 12% and has no specified terms of repayment 255,000 255,000 Notes payable non-interest bearing and has no specified terms of repayment 438,219 422,192 Notes payable bearing interest at 20% and has no specified terms of repayment 49,000 49,000 Note payable from Treelawn, bearing interest at 20%, repayable from proceeds of production from one of the Company's properties and matures on January 6, 2005 2,148,973 2,075,000 ------------ ------------ $ 3,115,092 $ 3,025,092 9 CONDOR GOLD CORP. Notes to Consolidated Financial Statements For the Three Month Period Ended February 28, 2005 (Unaudited - prepared by management) As at February 28, 2005, the senior secured debt financing from Treelawn Investment Corp. ("Treelawn"), amounted to $1,500,000 principal and accrued interest of $648,973. 6. Reserve for Loss Contingencies In prior periods the Company had recorded a $462,000 liability for loss contingencies. This reserve was established as a result of a potential liability of Dialex Minerals Inc. ("Dialex"), a controlled subsidiary, to the Internal Revenue Service (IRS) as a result of actions by the former principal of Video Home Shopping Inc., which has led to an investigation by the IRS. The Company has contacted the IRS for information and has no indication that the investigation concerns the Company directly. The IRS has further confirmed that the company is not indebted to it. The Department of Justice has confirmed that its investigation is concluded with no action taken affecting the Company. The Company has now determined that the reserve can be eliminated. 7. Share Capital Authorized Unlimited number of common shares, no par value Issued Number of Shares $ Value ------ ---------------- ----------- Balance beginning of period 76,678,683 $8,536,967 Issued during period 0 $ 0 Balance at end of period 76,678,683 $8,536,967 During the period, no common shares were issued 8. Related Party Transactions Advances due to related parties are payable either to shareholders or to private companies which are owned by shareholders who may be officers and/or directors of the Company. The amounts payable are non-interest bearing and have no specified terms of repayment The following table summarizes the Company's related party transactions that occurred in the normal course of operations for the three month period. Amounts Paid to Shareholders and Directors February 28 February 29 2005 2004 ----------- ----------- General and administrative expenses $ 7,500 $ 16,050 Management fees 35,000 128,400 Consulting 0 6,420 10 CONDOR GOLD CORP. Notes to Consolidated Financial Statements For the Three Month Period Ended February 28, 2005 (Unaudited - prepared by management) 9. Commitments and Contingencies a) On January 6, 2003 the Company issued an option to enter into a Royalty Agreement with Treelawn. Upon the payment of the exercise price of $100,000 to the Company, the royalty agreement will entitle Treelawn to royalties from the Company of: (i) $100 per ounce of gold produced from the surface stockpile to a maximum of 70,000 ounces of gold less any repayments made towards the Note referred to in Note 6; and (ii) $50 per ounce of gold produced from the ramp of the Murgold Property located in Chester Township to a maximum of 68,000 ounces of gold. b) Condor Gold Corp. is the plaintiff in an action initiated on August 19, 2003 against former shareholders and directors of Condor. The purpose of Condor's action was to claim damages for negligence, defamation and breach of contract by the defendants. In a statement of defence and counterclaim filed on or about November 20, 2003, the defendants joined the subsidiary companies of Condor as defendants by counterclaim. The counter claim has not been formally served on the subsidiary companies. It is management's opinion and that of its legal counsel that the counterclaim action is frivolous, vexatious and without merit and as such, management has made no provision for it in these financial statements. 10. Comparative Information Certain figures for the periods and the year ended February 28, 2005, February 29, 2004 and November 30, 2004 respectively, have been reclassified to conform with the current period's financial statement presentation. 11. Subsequent Events On March 16, 2005, through a share purchase from certain shareholders there was a change in controlling shareholders of Dialex Minerals Inc. Contemporaneously with the acquisition of control the then board of directors resigned. Dialex changed its name to Reliant Home Warranty Corporation and approved a reverse split of its common stock on a 1 for 22 basis for the purpose of recapitalizing the Reliant for a potential business transaction. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following is a discussion of the consolidated financial position, results of operations and cash flows of Condor Gold Corp. for the three month period ended February 28, 2005 and February 29, 2004, and should be read in conjunction with the company's most recent annual consolidated financial statements as at and for the year ended November 30, 2004. The financial statements are reported in accordance with Canadian GAAP. References herein to "Condor", "the company", "we" and "our" mean Condor Gold Corp. and its subsidiaries, unless otherwise noted. This Management's discussion and Analysis of Financial Condition and Results of Operations contains Condor Gold Corp forward-looking statements that involve risks and uncertainties, which may cause actual results to differ materially from the statements made. When used in this document, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions are intended to identify forward-looking statements. We believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, based on information available to us on the date hereof, but we cannot assure you that these assumptions and expectations will prove to have been correct or that we will take any action that we may presently be planning. Many factors could cause our actual results to differ materially from the statements made, including those factors discussed in other filings made by us with Canadian securities regulatory authorities. Should one or more of these risks and uncertainties materialize, or should assumptions underlying the forward looking financial statements prove incorrect, actual results may vary materially for those described herein as intended, planned, anticipated or expected. You should understand that forward-looking statements made in this report are necessarily qualified by these factors. We do not intent and do not assume any obligation to update these forward-looking statements. Results of Operations --------------------- Revenues -------- The company is engaged in the exploration and development of gold and diamond properties in Canada. To date, the Company has earned no revenues. Expenses -------- Three Month Period Ended February 28, 2005 Compared To The Three Month Period Ended February 29, 2004 ---------------------------------------------------------------------- For the three-month period ended February 28, 2005 operating losses totaled $166,590 compared to a profit of $168,536 for the same period 2004. The operating profit in 2004 resulted from the write down of Accounts Payable of $66,172 and the elimination of a reserve of $458,147 in the Dialex Minerals subsidiary. In the first quarter 2005, there was an overall reduction in expenses in all categories reflecting cutback in activity. General and administrative expenses decreased from $51,873 in 2004 to $9,545 in 2005 reflecting reductions in salaries and office overheads. Management and Consulting fees in total decreased by $119,820 and Professional fees decreased by $25,000 in the period reflecting decrease in legal fees. Interest expense was lower by $2,045 as the deferred interest expense was fully amortized in January 2005. 12 Liquidity and Capital Resources ------------------------------- The Company's ability to continue as a going concern is also contingent upon its ability to secure additional financing, initiating sale of its product and attaining profitable operations. Management is pursuing various sources of equity financing. Although the Company plans to pursue additional financing, there can be no assurance that the Company will be able to secure financing when needed or obtain such on terms satisfactory to the Company, if at all. For the three month period ended February 28, 2005 the Company issued no shares and raised no capital during the period. Activity was financed through increased trade payables and advances from related parties. During the three month period ended February 29, 2004, the Company received $30,000 through the sale of common shares, and issued shares in the amount of $26,100 to note holders to retire $15,000 of notes payable and pay $11,100 of accrued interest. Off-Balance Sheet Arrangements ------------------------------ The Company is not party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company's results of operations or financial condition. Contractual Obligations and Commitments --------------------------------------- As at February 28, 2005, the Company did not have any long term debt, capital lease obligations, operating leases, purchase obligations or contractual obligations and commitments Proposed Transactions --------------------- None. Critical Accounting Policies ---------------------------- The preparation of its consolidated financial statements requires the Company to use estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. The Company's accounting policies are described in Note 2 to its interim consolidated financial statements. Changes in Accounting Policies including Initial Adoption --------------------------------------------------------- None. Financial Instruments and Other Instruments ------------------------------------------- None. Investor Relations ------------------ No investor relations activities were undertaken by or on behalf of the Company during the period. 13 Management's Responsibility for Financial Statements ---------------------------------------------------- The information provided in this report, including the financial statements, is the responsibility of management. In the preparation of these statements, estimates are sometimes necessary to make a determination of future values for certain assets or liabilities. Management believes such estimates have been based on careful judgments and have been properly reflected in the accompanying financial statements. Management maintains a system of internal controls to provide reasonable assurance that the Company's assets are safeguarded and to facilitate the preparation of relevant and timely information. Other MD&A Requirements ----------------------- Additional information relating to the Company, including the Company's Annual Information Form, is available on SEDAR at www.sedar.com/ Filings for SEC are available at www.sec.gov SIGNATURES -------------------------------------------------------------------------------- In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONDOR GOLD CORP. Date April 29, 2005 /s/* Alexander G. Stewart ------------------------------------ (Signature) Alexander G. Stewart Chief Executive Officer Date April 29, 2005 /s/* L. Kirk Boyd ------------------------------------ (Signature) L. Kirk Boyd Chief Financial Officer *Print the name and title of each signing officer under his signature. 14

CONDOR GOLD CORP. (A DEVELOPMENT STAGE COMPANY) Consolidated Statements of Earnings (Stated in Canadian Dollars) Year Ended November 30, 2004 Cumulative from inception 2004 2003 on March 7, 2001 ------------- ------------- ------------- Expenses Writedown of goodwill $ 260,001 $ -- $ 707,714 General and administrative 445,254 384,746 1,654,019 Financial 396,937 442,397 839,334 Finance charges 150,111 -- 150,111 Management fees 120,000 330,178 885,304 Consulting fees 20,000 784,461 1,272,628 Exploration -- 691,809 1,439,956 Professional fees 30,597 342,033 578,292 Amortization 4,407 3,519 7,926 Rent 45,458 -- 45,458 Forgiveness of debt (66,172) -- (66,172) Reversal of reserve for loss contingency (458,147) -- (458,147) ------------- ------------- ------------- 948,446 2,979,143 7,056,423 Other Income -- 98,048 100,000 ------------- ------------- ------------- Loss from Operations (948,446) (2,881,095) (6,956,423) ------------- ------------- ------------- Non Controlling Interest 69,039 -- 69,039 Loss on Sale of Marketable Securities 27,955 -- 27,955 ------------- ------------- ------------- Net Loss $ (1,045,440) $ (2,881,095) $ (7,053,417) ------------- ------------- ------------- Basic Loss per Share $ (0.01) (0.04) ------------- ------------- Basic Weighted Average Number of Shares 76,569,933 70,091,681 ------------- ------------- Fully Diluted Loss Per Share $ (0.01) $ (0.03) ------------- ------------- Fully Diluted Weighted Average Number of Shares 117,099,333 103,955,014 ------------- -------------

CONDOR GOLD CORP. (A DEVELOPMENT STAGE COMPANY) Consolidated Statements of Cash Flows (Stated in Canadian Dollars) Year Ended November 30, 2004 Cumulative from inception 2004 2003 on March 7, 2001 ----------- ----------- ----------- Cash Flows from Operating Activities Net loss $(1,045,440) $(2,881,095) $(7,053,417) Adjustments to reconcile net loss to net cash used in operating activities Amortization 4,407 3,519 7,926 Deficit of acquired subsidiary -- (386,037) (386,037) Writedown of goodwill 260,001 -- 260,001 Issuance of shares for services -- 450,000 1,502,200 Issuance of shares for reverse takeover of Ripped Canada Artists Inc. -- -- 389,556 Reversal of reserve for loss contingencies (462,000) 462,000 -- Non cash interest expense -- 275,000 275,000 Non cash financing charge -- 137,500 137,500 Deferred expenses 150,000 -- 150,000 Accounts payable (26,811) 430,931 607,580 Deposits (100,000) -- -- Non-controlling interest 444,097 -- 444,097 ----------- ----------- ----------- (775,746) (1,508,182) (3,665,594) ----------- ----------- ----------- Cash Flows from Investing Activities Investment in mining properties (705,467) (160,000) (2,878,039) Purchase of equipment -- (17,599) (17,599) Purchase of goodwill (260,001) -- (260,001) ----------- ----------- ----------- (965,468) (177,599) (3,155,639) ----------- ----------- ----------- Cash Flows from Financing Activities Proceeds from issuance of common shares 30,000 504,333 2,865,747 Proceeds from notes payable 729,634 1,200,000 2,483,634 Proceeds from related parties 345,357 -- 878,985 Repayment of advances from related parties -- (43,356) (43,356) ----------- ----------- ----------- 1,104,991 1,660,977 6,185,010 ----------- ----------- ----------- Net Decrease in Cash (636,223) (24,804) (636,223) Increase in Cumulative Translation Adjustment 636,380 -- 636,380 Cash - beginning of year -- 24,804 -- ----------- ----------- ----------- Cash - end of year $ 157 $ -- $ 157 ----------- ----------- -----------

2004 2003 Accumulated Accumulated Cost Amortization Cost Amortization ---------- ---------- ---------- ---------- Mining properties $6,471,139 $ -- $5,765,672 $ -- Furniture and equipment 10,264 2,874 10,264 1,026 Computer hardware 3,357 1,074 3,357 503 Computer software 3,978 3,978 3,978 1,989 ---------- ---------- ---------- ---------- $6,488,738 $ 7,926 $5,783,271 $ 3,518 ---------- ---------- ---------- ---------- Net carrying amount $6,480,812 $5,779,753 ========== ==========

2004 2003 ----------- ----------- Notes payable, non-interest bearing and maturing on January 20, 2004, repayable from proceeds of production from one of the Company's properties $ 223,900 $ 250,000 Notes payable bearing interest at 12% and no specified terms of repayment 255,000 255,000 Notes payable non-interest bearing and no specified terms of repayment 49,000 49,000 Notes payable bearing interest at 20% and no specified terms of repayment 422,192 -- Note payable from Treelawn, bearing interest at 20%, repayable from proceeds of production from one of the Company's properties, maturing on January 6, 2005 2,075,000 1,775,000 ----------- ----------- 3,025,092 2,329,000 Current portion (3,025,092) (554,000) ----------- ----------- Long-term portion $ -- $ 1,775,000 ----------- -----------

Authorized Unlimited number of common shares, no par value 2004 2003 Issued 76,678,683 common shares (2003 - 75,564,183) $ 8,536,967 $ 8,473,426 ============ ============

2004 2003 Amounts Paid to Shareholders and Directors General and administrative expenses $ 46,000 $ 156,711 Management fees $ 120,000 $ 330,178 Consulting $ -- $ 91,121 Financial $ -- $ 24,500 At the end of the year, the advances from related entities are as follows: Included in Accounts Payable - due to directors and management of the Company $ 42,900 $ 319,249 Advances from shareholders and private companies controlled by the shareholder $ 835,678 $ 490,322 Notes payable from a company related to a shareholder $ 304,000 $ 304,000 10. Income Taxes The Company's effective income tax rate differs from the amount that would be computed by applying the federal and provincial statutory rate of 37% (2003-37%) to the net loss for the year. The reasons for the differences are as follows: 2004 2003 Income tax recovery based on statutory rate $(200,000) $(1,065,000) Unrecorded tax benefit of losses 200,000 1,065,000 =======================

Non-capital loss carryforward $ 2,260,000 Income tax recovery based on statutory rate 2,395,000 Plant and equipment 3,000 ------------ 4,658,000 Valuation allowance (4,658,000) ----------- $ -- =========== At December 31, 2004, the Company had non-capital loss carryforward which expire as follows: 2008 $ 484,287 2009 2,194,882 2010 2,878,576 2011 539,963 ----------- $ 6,097,708 ===========

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