SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of May , 2004.
----- ----
IMA EXPLORATION INC.
-------------------------------------------
(Translation of registrant's name into English)
#709 - 837 West Hastings Street, Vancouver, British Columbia, V6C 3N6, Canada
--------------------------------------------------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of 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-_____________
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 of the
undersigned, thereunto duly authorized.
IMA EXPLORATION INC.
-------------------------------------
(Registrant)
Date May 19, 2004 By /s/ Joseph Grosso
------------------------------ -------------------------------------
(Signature)
Joseph Grosso,
President & CEO
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IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2003, 2002 AND 2001
(Expressed in Canadian Dollars)
--------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS
PricewaterhouseCoopers LLP
Chartered Accountants
PricewaterhouseCoopers Place
#700 - 250 Howe Street
Vancouver, BC Canada
V6C 3S7
Tel: 604-806-7000
Fax: 604-806-7806
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF
IMA EXPLORATION INC.
We have audited the consolidated balance sheets of IMA EXPLORATION INC. as at
December 31, 2003 and 2002 and the consolidated statements of loss and deficit
and cash flows for the years ended December 31, 2003, 2002 and 2001. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards
in Canada and the United States. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 2003
and 2002 and the results of its operations and its cash flows for the years
ended December 31, 2003, 2002 and 2001 in accordance with Canadian generally
accepted accounting principles.
/s/ PricewaterhouseCoopers LLP
CHARTERED ACCOUNTANTS
Vancouver, B.C., Canada
April 27, 2004 (except for note 12(b) which is as of May 3, 2004)
COMMENTS BY AUDITORS FOR US READERS ON CANADA-US REPORTING DIFFERENCE
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when there is a
change in accounting principles that has a material effect on the comparability
of the company's financial statements such as the changes described in Note 2 to
the financial statements. Our report dated April 27, 2004 is expressed in
accordance with Canadian reporting standards, which do not require reference to
such a change in accounting principles in the auditor's report when the change
is properly accounted for and adequately disclosed in the financial statements.
/s/ PricewaterhouseCoopers LLP
CHARTERED ACCOUNTANTS
Vancouver, BC, Canada
April 27, 2004
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2003 AND 2002
(EXPRESSED IN CANADIAN DOLLARS)
2003 2002
$ $
ASSETS
CURRENT ASSETS
Cash and cash equivalents 4,454,241 1,436,124
Amounts receivable and prepaids 176,030 79,661
Marketable securities (Note 4) 543,460 23,460
------------ ------------
5,173,731 1,539,245
EQUIPMENT net of accumulated depreciation
of $228,692 (2002 - $201,771) 40,472 45,517
MINERAL PROPERTIES AND DEFERRED COSTS (Note 5) 6,883,641 5,847,727
------------ ------------
12,097,844 7,432,489
============ ============
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 426,494 108,351
------------ ------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 6) 27,707,597 21,354,823
CONTRIBUTED SURPLUS 1,541,116 128,260
DEFICIT (17,577,363) (14,158,945)
------------ ------------
11,671,350 7,324,138
------------ ------------
12,097,844 7,432,489
============ ============
NATURE OF OPERATIONS (Note 1)
SUBSEQUENT EVENTS (Note 12)
APPROVED BY THE BOARD
/s/ Joseph Grosso , Director
-------------------------------
/s/ Art Lang , Director
-------------------------------
The accompanying notes are an integral part of these consolidated
financial statements.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
2003 2002 2001
$ $ $
EXPENSES
Administrative and management services 243,515 224,109 219,891
Bank charges and interest 10,319 10,492 7,464
Corporate development and investor relations 352,706 249,373 88,198
Depreciation 26,920 22,772 24,657
General exploration 226,956 180,321 109,875
Office and sundry 57,959 34,823 37,875
Printing 46,388 22,304 12,133
Professional fees 297,763 172,828 105,052
Rent, parking and storage 72,192 72,268 68,522
Salaries and employee benefits 199,411 196,042 193,544
Stock based compensation (Note 6 (d)) 1,487,235 128,260 -
Telephone and utilities 37,934 34,368 25,138
Transfer agent and regulatory fees 34,078 35,831 15,596
Travel and accommodation 105,950 80,485 37,740
Cost recoveries (Note 7(d)) (35,110) (6,000) -
------------ ------------ ------------
3,164,216 1,458,276 945,685
------------ ------------ ------------
OTHER EXPENSE (INCOME)
Foreign exchange 25,916 8,415 (17,030)
Interest and other income (66,561) (26,585) (97,280)
Gain on options and disposition of mineral properties (481,779) - -
Write-off of mineral properties and deferred costs 776,626 - 21,483
Write-down of marketable securities - - 22,483
Loss on sale of marketable securities - - 6,534
------------ ------------ ------------
254,202 (18,170) (63,810)
------------ ------------ ------------
LOSS FOR THE YEAR (3,418,418) (1,440,106) (881,875)
DEFICIT - BEGINNING OF YEAR (14,158,945) (12,718,839) (11,836,964)
------------ ------------ ------------
DEFICIT - END OF YEAR (17,577,363) (14,158,945) (12,718,839)
============ ============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE $(0.11) $(0.06) $(0.06)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 32,251,753 23,188,485 15,104,239
============ ============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
2003 2002 2001
$ $ $
CASH PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES
Net loss for the year (3,418,418) (1,440,106) (881,875)
Items not affecting cash
Depreciation 26,920 22,772 24,657
Stock based compensation 1,487,235 128,260 -
Gain on options and disposition of mineral properties (481,779) - -
Write-down of marketable securities - - 22,483
Loss on sale of marketable securities - - 6,534
Write-off of mineral properties and deferred costs 776,626 - 21,483
------------ ------------ ------------
(1,609,416) (1,289,074) (806,718)
Increase in amounts receivable and prepaids (96,369) (9,772) (17,984)
Increase (decrease) in accounts payable and accrued liabilities 318,143 (7,365) (73,703)
------------ ------------ ------------
(1,387,642) (1,306,211) (898,405)
------------ ------------ ------------
INVESTING ACTIVITIES
Expenditures on mineral properties and deferred costs (1,850,761) (1,266,555) (1,320,777)
Purchase of equipment (21,875) (11,201) (8,012)
Proceeds on sale of marketable securities - - 16,966
------------ ------------ ------------
(1,872,636) (1,277,756) (1,311,823)
------------ ------------ ------------
FINANCING ACTIVITIES
Issuance of common shares 6,467,245 3,453,382 1,563,940
Share issuance costs (188,850) (189,056) (100,684)
------------ ------------ ------------
6,278,395 3,264,326 1,463,256
------------ ------------ ------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 3,018,117 680,359 (746,972)
CASH AND CASH EQUIVALENTS
- BEGINNING OF YEAR 1,436,124 755,765 1,502,737
------------ ------------ ------------
CASH AND CASH EQUIVALENTS - END OF YEAR 4,454,241 1,436,124 755,765
============ ============ ============
CASH AND CASH EQUIVALENTS IS COMPRISED OF:
CASH 1,654,241 631,255 605,765
TERM DEPOSITS 2,800,000 804,869 150,000
------------ ------------ ------------
4,454,241 1,436,124 755,765
============ ============ ============
SUPPLEMENTARY CASH FLOW INFORMATION (Note 11)
The accompanying notes are an integral part of these consolidated
financial statements.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED SCHEDULE OF MINERAL PROPERTY INTERESTS
FOR THE YEAR ENDED DECEMBER 31, 2003
(EXPRESSED IN CANADIAN DOLLARS)
ARGENTINA
----------------------------------------------------------------------------
LIRIO RIO DE LAGUNA DE
GROUP NAVIDAD LAS TAGUAS EVELINA LOS TOROS
$ $ $ $ $
Balance, beginning of year 1,966,934 5,090 543,889 107,209 138,203
------------ ------------ ------------ ------------ ------------
Expenditures during the year
Assays - 62,232 - 14,048 -
Contractors - access - 10,923 - 18,268 -
Contractors - surveying - 102,595 - - -
Contractors - environmental - 40,664 - 301 -
Drilling - 193,836 - 191,923 -
Field supplies - 28,423 - 3,801 -
Field workers - - - - -
Geological 2,250 297,005 - 27,990 1,207
Geological supplies - 50,317 - 4,896 -
Geochemistry - 1,659 - - -
Geophysics - 88,886 - - -
Geophysics supplies - 29,702 - - -
Legal fees 2,382 198 - 162 162
Option payments 90,810 - - - -
Staking and statutory fees 1,900 2,900 - - -
Taxes 204 669 191 417 214
Travel - 37,369 - 9,595 50
Office 746 9,924 704 1,262 53
Other 5,327 - - - -
Project management 659 10,879 279 2,002 973
Vehicles - 28,940 - 9,431 2
------------ ------------ ------------ ------------ ------------
104,278 997,121 1,174 284,096 2,661
------------ ------------ ------------ ------------ ------------
Option payments received and cost recoveries (94,803) - - - -
Write-off of mineral properties (649,094) - - - -
Proceeds on sale of mineral properties - - - - -
Foreign value added tax - - - - -
------------ ------------ ------------ ------------ ------------
(743,897) - - - -
------------ ------------ ------------ ------------ ------------
Balance, end of year 1,327,315 1,002,211 545,063 391,305 140,864
============ ============ ============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
CONSOLIDATED SCHEDULE OF MINERAL PROPERTY INTERESTS, 2003 - CONTINUED
ARGENTINA PERU TOTAL
---------------------------- ------------ ------------
RIO
MOGOTE OTHER TABACONAS
$ $ $ $
Balance, beginning of year 107,940 312,012 2,666,450 5,847,727
------------ ------------ ------------ ------------
Expenditures during the year
Assays 8,050 13,233 1,580 99,143
Contractors - access 1,483 - - 30,674
Contractors - surveying - - - 102,595
Contractors - environmental - - 104,844 145,809
Drilling - - - 385,759
Field supplies 9,013 501 12,036 53,774
Field workers - - 18,850 18,850
Geological 52,011 4,626 146,576 531,665
Geological supplies 3,859 2,244 - 61,316
Geochemistry - - - 1,659
Geophysics - - - 88,886
Geophysics supplies - - - 29,702
Legal fees 2,375 3,760 54,336 63,375
Option payments 15,291 - 41,247 147,348
Staking and statutory fees 825 80,979 49,260 135,863
Taxes 237 21,899 14 23,845
Travel 718 285 38,176 86,193
Office 1,434 826 18,286 33,236
Other - - 1,958 7,285
Project management 2,431 7,557 - 24,780
Vehicles 498 4,970 8,849 52,690
------------ ------------ ------------ ------------
98,225 140,880 496,012 2,124,447
------------ ------------ ------------ ------------
Option payments received and cost recoveries (206,165) (45,979) - (346,947)
Write-off of mineral properties - (127,532) - (776,626)
Proceeds on sale of mineral properties - (22,981) - (22,981)
Foreign value added tax - 55,929 2,092 58,021
------------ ------------ ------------ ------------
(206,165) (140,563) 2,092 (1,088,533)
------------ ------------ ------------ ------------
Balance, end of year - 312,329 3,164,554 6,883,641
============ ============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED SCHEDULE OF MINERAL PROPERTY INTERESTS
FOR THE YEAR ENDED DECEMBER 31, 2002
(EXPRESSED IN CANADIAN DOLLARS)
ARGENTINA
----------------------------------------------------------------------------
LIRIO RIO DE LAGUNA DE
GROUP NAVIDAD LAS TAGUAS EVELINA LOS TOROS
$ $ $ $ $
Balance, beginning of year 1,879,134 - 540,720 7,853 72,017
------------ ------------ ------------ ------------ ------------
Expenditures during the year
Assays - - 19 39,836 20,251
Contractors - access - - - - -
Contractors - surveying - - - - -
Contractors - environmental - 487 - 856 -
Drilling - - - - -
Field supplies - - 100 - -
Field workers - - - - -
Geological 1,941 785 - 43,799 37,815
Geological supplies - - - 2,451 1,092
Geochemistry - - - - -
Geophysics - - - - -
Geophysics supplies - - - - -
Legal fees 2,343 - - 34 34
Option payments 71,585 - - - -
Staking and statutory fees - 3,818 3 - 1,232
Taxes 1,653 - 1,653 121 562
Travel - - - 7,445 575
Office 10,278 - 385 729 1,014
Other - - - - -
Project management - - 1,009 36 36
Vehicles - - - 4,049 3,575
------------ ------------ ------------ ------------ ------------
87,800 5,090 3,169 99,356 66,186
------------ ------------ ------------ ------------ ------------
Foreign value added tax - - - - -
------------ ------------ ------------ ------------ ------------
Balance, end of year 1,966,934 5,090 543,889 107,209 138,203
============ ============ ============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
CONSOLIDATED SCHEDULE OF MINERAL PROPERTY INTERESTS, 2002 - CONTINUED
ARGENTINA PERU TOTAL
---------------------------- ------------ ------------
RIO
MOGOTE OTHER TABACONAS
$ $ $ $
Balance, beginning of year 74,565 203,169 1,803,714 4,581,172
------------ ------------ ------------ ------------
Expenditures during the year
Assays - - 24,428 84,534
Contractors - access - - - -
Contractors - surveying - - 20,923 20,923
Contractors - environmental - - 112,689 114,032
Drilling - - - -
Field supplies 1,220 - 18,122 19,442
Field workers - - 49,790 49,790
Geological 14,034 57,075 236,231 391,680
Geological supplies - - - 3,543
Geochemistry - - - -
Geophysics - - - -
Geophysics supplies - - - -
Legal fees 469 - 63,266 66,146
Option payments 13,969 - 227,079 312,633
Staking and statutory fees 757 39,753 - 45,563
Taxes 424 - - 4,413
Travel 1,710 - 41,856 51,586
Office 792 - 19,266 32,464
Other - - 12,882 12,882
Project management - - - 1,081
Vehicles - - 36,204 43,828
------------ ------------ ------------ ------------
33,375 96,828 862,736 1,254,540
------------ ------------ ------------ ------------
Foreign value added tax - 12,015 - 12,015
------------ ------------ ------------ ------------
Balance, end of year 107,940 312,012 2,666,450 5,847,727
============ ============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
1. NATURE OF OPERATIONS
The Company is in the process of exploring its mineral properties in
South America and evaluating other mineral properties. The Company
presently has no proven or probable reserves and on the basis of
information to date, it has not yet determined whether these properties
contain economically recoverable ore reserves. Consequently the Company
considers itself to be an exploration stage company. The amounts shown
as mineral properties and deferred costs represent costs incurred to
date, less amounts amortized and/or written off, and do not necessarily
represent present or future values. The underlying value of the mineral
properties and deferred costs is entirely dependent on the existence of
economically recoverable reserves, securing and maintaining title and
beneficial interest in the properties, the ability of the Company to
obtain the necessary financing to complete development, and future
profitable production. The Company considers that it has adequate
resources to maintain its core operations for the next fiscal year. See
also Note 12.
2. CHANGE IN ACCOUNTING POLICY
Effective January 1, 2003, the Company prospectively adopted the fair
value method of accounting for the stock options granted to employees
and directors, as recommended by the Canadian Institute of Chartered
Accountants' Handbook ("CICA 3870") Stock-Based Compensation and Other
Stock Based Payments. CICA 3870 provides alternative methods of
transition for the adoption of the fair value method and as permitted,
the Company has elected the prospective application, which allows the
fair value method to be applied to stock options granted, modified or
settled on or after January 1, 2003 to employees and directors.
Pro-forma disclosure for stock options issued prior to January 1, 2003,
as required by the standard, had the Company used the fair value method
is presented in Note 6 (d).
Stock-based compensation has been credited to contributed surplus.
The fair value of stock options is determined by using the
Black-Scholes Option Pricing Model with assumptions for risk-free
interest rates, dividend yields, volatility factors of the expected
market price of the Company's common shares and an expected life of the
options.
For stock options granted to other than employees and directors the
Company continues to apply the fair value method.
3. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles
("Canadian GAAP"). The significant measurement differences between
those principles and those that would be applied under United States
generally accepted accounting principles ("US GAAP") as they affect the
Company are disclosed in Note 10.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
USE OF ESTIMATES
The preparation of financial statements in conformity with Canadian
GAAP requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the
period. Significant areas requiring the use of management estimates
relate to the determination of environmental obligations and impairment
of mineral properties and deferred costs. Actual results may differ
from these estimates.
PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include the accounts of the
Company and all its subsidiaries. The Company's principal subsidiaries
are IMPSA Resources Corporation (80.69%), Minera Imp-Peru S.A. (100%)
and Inversiones Mineras Argentinas S.A. (100%). All intercompany
transactions and balances have been eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and short-term investments
maturing within 90 days of the original date of acquisition.
MARKETABLE SECURITIES
Marketable securities are carried at the lower of cost or market.
MINERAL PROPERTIES AND DEFERRED COSTS
Direct costs related to the acquisition and exploration of mineral
properties held or controlled by the Company are deferred on an
individual property basis until the viability of a property is
determined. Administration costs and general exploration costs are
expensed as incurred. When a property is placed in commercial
production, deferred costs will be depleted using the
units-of-production method. Management of the Company periodically
reviews the recoverability of the capitalized mineral properties.
Management takes into consideration various information including, but
not limited to, results of exploration activities conducted to date,
estimated future metal prices, and reports and opinions of outside
geologists, mine engineers and consultants. When it is determined that
a project or property will be abandoned or its carrying value has been
impaired, a provision is made for any expected loss on the project or
property.
The Company also accounts for foreign value added taxes paid as part of
mineral properties and deferred costs. The recovery of these taxes will
commence on the beginning of foreign commercial operations. Should
these amounts be recovered they would be treated as a reduction in
carrying costs of mineral properties and deferred costs.
Although the Company has taken steps to verify title to mineral
properties in which it has an interest, these procedures do not
guarantee the Company's title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected
defects.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
From time to time, the Company acquires or disposes of properties
pursuant to the terms of option agreements. Options are exercisable
entirely at the discretion of the optionee and, accordingly, are
recorded as mineral property costs or recoveries when the payments are
made or received.
EQUIPMENT
Equipment, which comprise leasehold improvements and office furniture
and equipment, are recorded at cost less accumulated depreciation
calculated using the straight-line method over their estimated useful
lives of five years.
ASSET RETIREMENT OBLIGATIONS
The fair value of a liability for an asset retirement obligation is
recognized when a reasonable estimate of fair value can be made. The
asset retirement obligation is recorded as a liability with a
corresponding increase to the carrying amount of the related long-lived
asset. Subsequently, the asset retirement cost is allocated to expenses
using a systematic and rational method and is adjusted to reflect
period-to-period changes in the liability resulting from passage of
time and revisions to either timing or the amount of the original
estimate of the undiscounted cash flow. As at December 31, 2003, the
Company does not have any asset retirement obligations.
LONG-LIVED ASSETS IMPAIRMENT
Long-lived assets are reviewed for impairment when changes in
circumstances suggest their carrying value has become impaired.
Management considers assets to be impaired if the carrying value
exceeds the estimated undiscounted future projected cash flows to
result from the use of the asset and its eventual disposition. If
impairment is deemed to exist, the assets will be written down to fair
value. Fair value is generally determined using a discounted cash flow
analysis.
TRANSLATION OF FOREIGN CURRENCIES
The Company's foreign operations are integrated and translated using
the temporal method. Under this method, the Company translates monetary
assets and liabilities denominated in foreign currencies at period-end
rates. Non-monetary assets and liabilities are translated at historical
rates. Revenues and expenses are translated at average rates in effect
during the period except for depreciation and amortization which are
translated at historical rates. The resulting gains or losses are
reflected in the operating results in the period of translation.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a
significant concentration of credit risk consist primarily of cash and
cash equivalents and amounts receivable. The Company limits its
exposure to credit loss by placing its cash and cash-equivalents with
major financial institutions.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments consisting of
cash and cash equivalents, amounts receivable and accounts payable and
accrued liabilities approximate their carrying values. As of December
31, 2003, the market value of marketable securities was $1,032,546
(2002 - $78,200).
INCOME TAXES
The Company uses the liability method of accounting for future income
taxes. Under this method of tax allocation, future income tax
liabilities and assets are recognized for the estimated tax
consequences attributable to differences between the amounts reported
in the consolidated financial statements and their respective tax
bases, using substantively enacted tax rates and laws that are expected
to be in effect in the periods in which the future income tax assets or
liabilities are expected to be settled or realized. The effect of a
change in income tax rates on future income tax liabilities and assets
is recognized in income in the period that the change occurs. Future
income tax assets are recognized to the extent that they are considered
more likely than not to be realized.
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing income
available to common shareholders by the weighted average number of
common shares outstanding during the year. The computation of diluted
earnings per share assumes the conversion, exercise or issuance of
securities only when such conversion, exercise or issuance would have a
dilutive effect on earnings per share. The dilutive effect of
outstanding options and warrants and their equivalents is reflected in
diluted earnings per share by application of the treasury stock method.
COMPARATIVE FIGURES
Certain of the 2002 and 2001 fiscal year figures have been reclassified
to conform with the presentation used in fiscal 2003.
4. MARKETABLE SECURITIES
2003 2002
---------------------------- ----------------------------
QUOTED QUOTED
RECORDED MARKET RECORDED MARKET
VALUE VALUE VALUE VALUE
$ $ $ $
Ballad Gold & Silver Ltd.
- 500,000 common shares 250,000 325,000 - -
Amera Resources Corporation ("Amera")
- 600,000 common shares 270,000 546,000 - -
Other 23,460 161,546 23,460 78,200
------------ ------------ ------------ ------------
543,460 1,032,546 23,460 78,200
============ ============ ============ ============
The Company has entered into option and sale agreements on certain of
its non-core mineral property holdings in which the Company received
common shares of publicly-traded companies as partial consideration.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
5. MINERAL PROPERTIES AND DEFERRED COSTS
2003 2002
-------------------------------------------- ------------
DEFERRED
ACQUISITION EXPLORATION
COSTS COSTS TOTAL TOTAL
$ $ $ $
Argentina
Navidad - 1,002,211 1,002,211 5,090
Lirio Group 221,020 1,106,295 1,327,315 1,966,934
Rio de las Taguas 133,262 411,801 545,063 543,889
Evelina - 391,302 391,302 107,209
Laguna de los Toros - 140,867 140,867 138,203
Other 11,639 300,690 312,329 419,952
------------ ------------ ------------ ------------
365,921 3,353,166 3,719,087 3,181,277
Peru
Rio Tabaconas 741,293 2,423,261 3,164,554 2,666,450
------------ ------------ ------------ ------------
1,107,214 5,812,132 6,883,641 5,847,727
============ ============ ============ ============
(a) Argentinean Properties
The Company has either staked, fully paid or holds options to
acquire 100% working interests in mineral properties, located
in San Juan Province and Chubut Province in Argentina.
As of December 31, 2003, the Company must make further
payments with respect to option agreements on the Lirio Group
of properties, totalling US $240,000, as follows:
YEAR US $
2004 70,000
2005 170,000
------------
240,000
============
The Company has also agreed to pay net smelter return
royalties ("NSR") of up to US $7,000,000 once commercial
production is achieved on the Lirio Group of properties.
During fiscal 2003, the Company reviewed its non-core mineral
properties and determined to write off mineral properties and
related deferred exploration costs of $776,626.
(b) Rio Tabaconas, Peru
The Company holds an option to acquire a 100% interest in
three concessions, in the Cajamarca Department of San Ignacio
Province in northern Peru. In addition, the Company owns ten
concessions, which surround and overlie the optioned
concessions. Collectively these are known as the Rio Tabaconas
Project.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
5. MINERAL PROPERTIES AND DEFERRED COSTS (continued)
Under the terms of the option agreement, the Company has paid
US $185,000 and was required to make further payments
totalling US $1,340,000. On June 28, 2002, the Company
suspended further exploration activities at the Rio Tabacanos
project. This decision was made in response to the local
community expressing its concerns with mineral exploration
activities. The Company has deferred any further exploration
until an agreement with the local community has been
finalized. As a result the Company declared force majeure, as
allowed under its option agreement. Accordingly, the Company
and the optionor have deferred payment of the remaining US
$1,155,000 option payments until the force majeure is
discontinued. On August 1, 2003, the Company commenced paying
US $1,500 per month to the optionor as compensation during
this waiting period.
(c) During fiscal 2003, the Company entered into agreements with
Amera, a publicly-traded company with common management and
shareholders, whereby the Company:
(i) optioned its Mogote Property in the NW San Juan
Region of Argentina. Amera has the option to earn a
51% interest in the 8,009 hectare Mogote Property by
issuing a total of 1,650,000 common shares of Amera
to the Company and by incurring US $1.25 million of
expenditures, including work programs and underlying
option payments, all over a five year period ending
July 1, 2007. Amera has also agreed to reimburse the
Company for past payments made and expenditures which
had been incurred by the Company on the Mogote
Property. As at December 31, 2003, Amera has
reimbursed the Company $192,952, and $4,902 remained
outstanding and is included in amounts receivable.
The Company has also received 100,000 shares of Amera
at a recorded amount of $45,000.
On April 8, 2004, the Company and Amera entered into
a further agreement whereby Amera can earn an
additional 24% interest, for a total 75% interest,
after earning the initial 51% interest, by issuing
300,000 shares of Amera (issued) and conducting an
additional US $3 million of exploration expenditures
over a three year period ending May 20, 2007.
(ii) sold a 100% undivided interest in three mineral
properties, comprising 24,280 hectares (the "Chubut
Properties"), located in Chubut Province, Argentina,
for 500,000 common shares of Amera for a recorded
amount of $225,000. In addition, in the event that a
decision is made to place the Chubut Properties into
commercial production, Amera will pay the Company a
bonus of US$250,000 and a 3% net smelter returns
royalty.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
6. SHARE CAPITAL
Authorized - 100,000,000 common shares without par value
- 100,000,000 preferred shares without par value
NUMBER $
Issued - common shares
Balance, December 31, 2000 13,529,219 16,627,241
Private placements 5,063,000 1,563,940
Less share issue costs - (100,684)
------------ ------------
Balance, December 31, 2001 18,592,219 18,090,497
Private placements 5,703,026 2,552,870
Exercise of options 170,000 68,000
Exercise of warrants 2,085,361 837,512
Less share issue costs - (194,056)
------------ ------------
Balance, December 31, 2002 26,550,606 21,354,823
Private placement 2,900,000 2,610,000
Exercise of options 1,855,850 895,859
Exercise of warrants 4,969,066 2,940,428
Exercise of agent's options 105,930 95,337
Less share issue costs - (188,850)
------------ ------------
Balance, December 31, 2003 36,381,452 27,707,597
============ ============
(a) During fiscal 2003, the Company completed a brokered private
placement for 2,900,000 units at a price of $0.90 per unit,
for cash proceeds of $2,421,150, net of share issue costs of
$188,850. Each unit consisted of one common share of the
Company and one-half non-transferable common share purchase
warrant. One whole warrant entitles the holder to purchase one
common share for the exercise price of $1.10 per share on or
before April 28, 2004. Certain officers and directors of the
Company purchased 445,000 units of the private placement.
In connection with the financing, the Company granted the
agent an option to purchase 195,750 units on the same basis
and terms as the private placement. The agent has exercised
options to purchase 105,930 units, for $95,337 cash, and, as
of December 31, 2003, 89,820 units remained outstanding.
(b) During fiscal 2002, the Company completed the following
private placements:
i) 637,000 units at a price of $0.38 for cash proceeds of
$222,695, net of share issue costs of $19,365. Each
unit consisted of one common share of the Company and
one warrant. Two warrants entitled the holder to
purchase an additional common share for the exercise
price of $0.45 on or before March 31, 2003. The Company
also issued agents warrants to purchase 63,700 common
shares at a price of $0.45 on or before March 31, 2003;
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
6. SHARE CAPITAL (continued)
ii) 1,777,778 units at a price of $0.45 per unit for cash
proceeds of $686,132, net of share issue costs of
$118,868. Each unit consisted of one common share of
the Company and one warrant. Two warrants entitle the
holder to purchase an additional common share at a
price of $0.54 per share on or before April 9, 2003.
The Company also issued 11,111 shares to the agents, at
a price of $0.45 per share. The Company also issued
agents warrants to purchase 355,556 common shares at a
price of $0.54 per share on or before April 9, 2003;
iii) 1,722,222 units at a price of $0.45 per unit, for cash
proceeds of $751,000 net of share issue costs of
$24,000. Each unit consisted of one common share of the
Company and one warrant. Each warrant entitled the
holder to purchase an additional common share of the
Company at a price of $0.53 per share on or before May
23, 2003 and $0.60 per share on or before May 23, 2004.
Certain directors purchased 191,111 units. The Company
also issued agents warrants to purchase 66,666 common
shares at a price of $0.53 per share on or before May
23, 2003; and
iv) 1,554,915 units at a price of $0.47 for cash proceeds
of $698,987, net of share issue costs of $31,823. Each
unit consisted of one common share of the Company and
one warrant. Each warrant entitles the holder to
purchase an additional common share of the Company at a
price of $0.55 per share on or before September 27,
2003 and $0.60 on or before September 27, 2004. Certain
directors purchased 325,000 units. The Company also
issued agents warrants to purchase 37,496 common shares
at a price of $0.50 per share on or before September
27, 2003.
(c) During fiscal 2001, the Company completed the following
private placements:
i) 3,000,000 units at a price of $0.26 for cash proceeds
of $746,250, net of share issue costs of $33,750. Each
unit consisted of one common share of the Company and
one-half warrant. Each full warrant entitled the holder
to purchase one common share for the exercise price of
$0.40 on or before July 3, 2002. The President of the
Company purchased 240,000 units. The Company also
issued agents warrants to purchase 259,000 common
shares at a price of $0.35 on or before July 3, 2002;
ii) 2,063,000 units at a price of $0.38 for cash proceeds
of $717,006, net of share issue costs of $66,934. Each
unit consisted of one common share of the Company and
one-half warrant. Each full warrant entitled the holder
to purchase one common share for the exercise price of
$0.45 on or before March 31, 2003. The Company also
issued agents warrants to purchase 206,300 common
shares for the exercise price of $0.45 on or before
March 31, 2003.
(d) Stock Options
The Company grants stock options in accordance with the
policies of the TSX Venture Exchange ("TSXV"). A summary of
the Company's outstanding options at December 2003, 2002 and
2001 and the changes for the years ending on those dates is
presented below:
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
6. SHARE CAPITAL (continued)
2003 2002 2001
---------------------- ---------------------- ----------------------
OPTIONS WEIGHTED OPTIONS WEIGHTED OPTIONS WEIGHTED
OUTSTANDING AVERAGE OUTSTANDING AVERAGE OUTSTANDING AVERAGE
AND EXERCISE AND EXERCISE AND EXERCISE
EXERCISABLE PRICE EXERCISABLE PRICE EXERCISABLE PRICE
$ $ $
Balance,
beginning of year 2,465,500 0.44 1,635,500 0.40 1,224,000 0.54
Granted 1,918,500 1.60 1,050,000 0.50 1,635,500 0.40
Exercised (1,855,850) 0.44 (170,000) 0.40 - -
Cancelled - - (50,000) 0.40 (1,224,000) 0.54
------------ ------------ ------------
Balance, end of year 2,528,150 1.32 2,465,500 0.44 1,635,500 0.40
============ ============ ============
Stock options outstanding and exercisable at December 31, 2003
are as follows:
NUMBER EXERCISE PRICE EXPIRY DATE
$
254,150 0.40 July 19, 2006
159,000 0.50 May 2, 2007
225,000 0.50 September 23, 2007
195,000 0.84 March 7, 2008
300,000 0.90 May 30, 2008
1,395,000 1.87 August 27, 2008
---------
2,528,150
=========
During fiscal 2002, the Company granted 540,000 stock options
to its employees and directors and applied the intrinsic value
based method of accounting. Had the Company followed the fair
value based method of accounting in fiscal 2002, the Company
would have recorded an additional compensation expense of
$140,840 in respect of its employees and directors' stock
options. Pro- forma loss and loss per share information
determined under the fair value method in fiscal 2002 are as
follows:
$
Net loss for fiscal 2002
- as reported (1,440,106)
- compensation expense (140,840)
------------
- pro-forma (1,580,946)
============
Basic and diluted loss per share
- as reported (0.06)
- pro-forma (0.07)
During fiscal 2002, the Company recognized compensation
expense of $128,260 for stock options granted to consultants.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
6. SHARE CAPITAL (continued)
The fair value of stock options granted to employees,
directors and consultants is estimated on the dates of grants
using the Black-Scholes option pricing model with the
following assumptions used for the grants made during the
year:
2003 2002
Risk-free interest rate 3.76% - 4.16% 3.89% - 4.25%
Estimated volatility 74% - 78% 73% - 87%
Expected life 2.5 years 2.5 years
The weighted average fair value per share of stock options,
calculated using the Black-Scholes option pricing model,
granted during the period to the Company's employees,
directors and consultants was $0.63 (2002 - $0.26) per share.
Option-pricing models require the use of estimates and
assumptions including the expected volatility. Changes in the
underlying assumptions can materially affect the fair value
estimates and, therefore, existing models do not necessarily
provide reliable measure of the fair value of the Company's
stock options.
(e) Warrants
A summary of the number of common shares reserved pursuant to
the Company's outstanding warrants and agents warrants
outstanding at December 31, 2003, 2002 and 2001 and the
changes for the years ending on those dates is as follows:
2003 2002 2001
Balance, beginning of year 9,511,550 6,588,967 3,592,167
Issued 1,502,965 5,007,944 2,996,800
Exercised (4,969,066) (2,085,361) -
Expired (3,001) - -
------------ ------------ ------------
Balance, end of year 6,042,448 9,511,550 6,588,967
============ ============ ============
Common shares reserved pursuant to warrants and agent warrants
outstanding at December 31, 2003 are as follows:
NUMBER EXERCISE PRICE EXPIRY DATE
$
1,477,222 0.60 May 23, 2004
778,471 0.60 September 27, 2004
1,066,822 0.75 September 15, 2004
1,253,667 0.90 March 16, 2005
173,667 0.75 April 19, 2004
1,292,599 1.10 April 28, 2004
---------
6,042,448
=========
(f) See also Note 12.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
7. RELATED PARTY TRANSACTIONS
(a) During fiscal 2003, the Company paid $330,600 (2002 -
$136,276; 2001 - $157,825) to companies controlled by current
and former directors and officers of the Company, for
accounting, management, and consulting services provided.
(b) The Company has agreements with a company controlled by the
President of the Company for the rental of office premises.
The Company is required to make monthly rent payments of
$5,077. During fiscal 2003, the Company paid $60,924 (2002 -
$60,924; 2001 - $60,924) for rent.
(c) During fiscal 2003, the Company recorded $61,067 (2002 -
$64,641; 2001 - $45,381) for reimbursement of expenditures and
disbursements incurred on behalf of the Company by the
President of the Company. As at December 31, 2003, $7,538
(2002 - $1,496 ; 2001 - $17,683) remains unpaid and has been
included in accounts payable and accrued liabilities.
(d) The Company shares its office facilities with Amera. Amera is
currently paying a minimum of $2,500 per month to the Company
for shared rent and administration costs. During fiscal 2003,
the Company received $35,110 (2002 - $6,000; 2001 - $nil) from
Amera.
(e) The President of the Company provides his services on a
full-time basis under a contract with a private company
controlled by the President. The President is paid an annual
amount of $102,000. The contract also provides that, in the
event the services are terminated without cause or upon a
change in control of the Company, a termination payment would
include a bonus of $6,500 per month, retroactive to July 1,
1999, plus an additional three years of compensation at
$15,000 per month. If the termination had occurred on December
31, 2003, the amount under the agreement would be $891,000.
(f) Other related party transactions are disclosed elsewhere in
these consolidated financial statements.
8. INCOME TAXES
The recovery of income taxes shown in the consolidated statements of
operations and deficit differs from the amounts obtained by applying
statutory rates to the loss before provision for income taxes due to
the following:
2003 2002 2001
$ $ $
Statutory tax rate 37.62% 39.62% 44.62%
Provision for income taxes based on statutory
Canadian combined federal and provincial
income tax rates (1,286,009) (570,570) (393,493)
Differences in foreign tax rates (383,116) (4,234) 179,918
Losses for which an income tax benefit
has not been recognized 1,669,125 574,804 213,575
------------ ------------ ------------
- - -
============ ============ ============
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
8. INCOME TAXES (continued)
The significant components of the Company's future tax assets are as
follows:
2003 2002
$ $
Future income tax assets
Financing costs 116,985 98,934
Operating loss carryforward 4,051,130 4,164,745
Excess of tax values of mineral
properties and property, plant
and equipment over book value 465,045 330,957
------------ ------------
4,633,160 4,594,636
Valuation allowance for future tax assets (4,633,160) (4,594,636)
------------ ------------
- -
============ ============
The Company has Canadian non-capital loss carryforwards of $9,002,084
that may be available for tax purposes. The losses expire as follows:
EXPIRY DATE $
2004 1,554,225
2005 1,266,386
2006 1,255,915
2007 1,277,771
2008 845,836
2009 1,319,284
2010 1,482,667
------------
9,002,084
============
9. SEGMENTED INFORMATION
The Company is involved in mineral exploration and development
activities, which are conducted principally in Argentina and Peru. The
Company is in the exploration stage and, accordingly, has no reportable
segment revenues or operating results for each of fiscal 2003, 2002 and
2001.
The Company's total assets are segmented geographically as follows:
2003
------------------------------------------------------------
CORPORATE ARGENTINA PERU TOTAL
$ $ $ $
Current assets 5,075,092 65,637 32,999 5,173,728
Equipment 28,974 7,032 4,466 40,472
Mineral properties and deferred costs - 3,719,087 3,164,554 6,883,641
------------- ------------ ------------ ------------
5,104,066 3,791,756 3,202,019 12,097,844
============= ============ ============ ============
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
9. SEGMENTED INFORMATION (continued)
2002
------------------------------------------------------------
CORPORATE ARGENTINA PERU TOTAL
$ $ $ $
Current assets 4,161,455 49,117 40,914 1,539,245
Equipment 34,323 5,817 5,377 45,517
Mineral properties and deferred costs - 3,181,277 2,666,450 5,847,727
------------ ------------ ------------ ------------
4,196,278 3,236,211 2,712,741 7,432,489
============ ============ ============ ============
10. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
The consolidated financial statements of the Company have been prepared
in accordance with Canadian GAAP, which differ in certain material
respects from US GAAP.
The significant measurement differences between Canadian GAAP and US
GAAP for certain items on the consolidated balance sheets, statements
of operations and deficit and statements of cash flows are as follows:
2003 2002 2001
$ $ $
CONSOLIDATED STATEMENTS OF OPERATIONS
Loss for the year under Canadian GAAP (3,418,418) (1,440,106) (881,875)
Mineral properties and deferred costs for the year (i) (1,812,540) (1,266,555) (1,320,777)
Mineral properties and deferred costs written off
during the year which would have been
expensed in the year incurred (i) 776,626 - 21,483
Stock-based compensation (iii) (144,000) (102,150) -
------------ ------------ ------------
Loss for the year under US GAAP (4,598,332) (2,808,811) (2,181,169)
Unrealized gains on available-for-sale securities (ii) 434,346 54,740 -
------------ ------------ ------------
Comprehensive loss (iv) (4,163,986) (2,754,071) (2,181,169)
============= ============ ============
Loss per share under US GAAP (0.14) (0.12) (0.14)
============= ============ ============
Diluted loss per share under US GAAP (0.14) (0.12) (0.14)
============= ============ ============
2003 2002
$ $
SHAREHOLDERS' EQUITY
Balance per Canadian GAAP 11,671,350 7,324,138
Mineral properties and deferred costs expensed (i) (6,883,641) (5,847,727)
Accumulated other comprehensive income (ii) 489,086 54,740
------------ ------------
Balance per US GAAP 5,276,795 1,531,151
============ ============
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
10. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (continued)
2003 2002
$ $
MINERAL PROPERTIES AND DEFERRED COSTS
Balance per Canadian GAAP 6,883,641 5,847,727
Mineral properties and deferred costs
expensed under US GAAP (i) (6,883,641) (5,847,727)
------------ ------------
Balance per US GAAP - -
============ ============
2003 2002 2001
$ $ $
CONSOLIDATED STATEMENTS OF CASH FLOWS
OPERATING ACTIVITIES
Cash used per Canadian GAAP (1,387,642) (1,306,211) (898,405)
Mineral properties and deferred costs (i) (1,850,761) (1,266,555) (1,320,777)
------------ ------------ ------------
Cash used per US GAAP (3,238,403) (2,572,766) (2,219,182)
============ ============ ============
2003 2002 2001
$ $ $
INVESTING ACTIVITIES
Cash used per Canadian GAAP (1,872,636) (1,277,756) (1,311,823)
Mineral properties and deferred costs (i) 1,850,761 1,266,555 1,320,777
------------ ------------ ------------
Cash provided (used) per US GAAP (21,875) (11,201) 8,954
============ ============ ============
i) Mineral properties and deferred costs
Mineral properties and deferred costs are accounted for in
accordance with Canadian GAAP as disclosed in Note 3. For US
GAAP purposes, the Company expenses acquisition and
exploration costs relating to unproven mineral properties as
incurred. When proven and probable reserves are determined for
a property, subsequent exploration and development costs of
the property are capitalized. The capitalized costs of such
properties would then be assessed, on a periodic basis, to
determine whether the carrying value can be recovered on an
undiscounted cash flow basis. If the carrying value cannot be
recovered on this basis, the mineral properties would be
written down to fair value determined using discounted cash
flows.
ii) Investments
The Company's marketable securities are classified as
available-for-sale investments under US GAAP and carried at
the lower of cost and market value for Canadian GAAP purposes.
Such investments are not held principally for the purpose of
selling in the near term and, for US GAAP purposes, must have
holding gains and losses reported as a separate component of
shareholders' equity until realized or until an other than
temporary impairment in value occurs.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
10. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (continued)
iii) Accounting for stock-based compensation
For US GAAP purposes, the Company accounted for stock-based
employee compensation arrangements using the intrinsic value
method prescribed in Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees"
until 2003.
Under US GAAP, when stock options are cancelled and
immediately reissued at a revised price (the "Repricing"),
these options are accounted for as variable compensation from
the date of the Repricing. Under this method, following the
repricing date, compensation expense is recognized when the
quoted market value of the Company's common shares exceeds the
amended exercise price. Should the quoted market value
subsequently decrease, a recovery of a portion, or all of the
previously recognized compensation expense, will be
recognized.
During fiscal 2003, for US GAAP purposes, the Company has
prospectively adopted the fair based method of accounting for
stock-based compensation in accordance with FAS 148. This
application is consistent with the early application of CICA
3870 under Canadian GAAP (Note 3). Accordingly there is no
difference on accounting for stock-based compensation under
Canadian and US GAAP.
iv) Comprehensive income
US GAAP requires disclosure of comprehensive income (loss)
which is intended to reflect all other changes in equity
except those resulting from contributions by and payments to
owners.
v) New Accounting Standards
In May 2003, the FASB issued Statement No. 150, "Accounting
for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity" ("SFAS No. 150"), which addresses how
to classify and measure certain financial instruments with
characteristics of both liabilities (or assets in some
circumstances) and equity. SFAS No. 150 is effective for
financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. Adoption of SFAS
No. 150 on July 1, 2003 had no impact on the Company's
financial position and results of operations.
In January 2003, the FSAB issued Interpretation No. 46
"Consolidation of Variable Interest Entities" ("FIN No. 46")
(revised December 2003). FIN No. 46 clarifies the application
of Accounting Research Bulletin No. 51 "Consolidated Financial
Statements" to only certain entities in which equity investors
do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the
equity to finance its activities without additional
subordinated financial support from other parties. FIN No. 46
applies immediately to variable interest entities created
after January 31, 2003, and the variable interest entities
obtained after that date. It applies at the end of the first
annual reporting period beginning after June 15, 2003, to
variable interests in which an enterprise holds a variable
interest which was acquired before February 1, 2003. Adoption
of FIN No. 46 on January 1, 2004 will not materially impact
the Company's financial position or results of operations.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
10. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (continued)
A similar guideline has been introduced in Canada, Accounting
Guideline 15 "Consolidation of Variable Interest Entities".
This guideline applies to annual and interim periods beginning
on or after November 1, 2004. The Company is continuing to
evaluate the potential impact of Accounting Guideline 15.
In July 2003, the CICA released Section 1100 "Generally
Accepted Accounting Principles". This new section establishes
standards for financial reporting in accordance with generally
accepted accounting principles. It describes what constitutes
Canadian GAAP and its sources, replacing "Financial Statement
Concepts" paragraph 1000.59-61. Also, in July 2003, the CICA
released Section 1400, "General Standards of Financial
Statement Presentation". This section clarifies what
constitutes fair presentation in accordance with Canadian
GAAP. Both these sections are effective for fiscal years
beginning on or after October 1, 2003 and the Company is
currently evaluating their impact.
11. SUPPLEMENTARY CASH FLOW INFORMATION
Non-cash investing and financing activities were conducted by the
Company as follows:
2003 2002 2001
$ $ $
Investing activities
Proceeds on disposition of mineral properties (272,982) - -
Acquisition of marketable securities 272,982 - -
------------ ------------ ------------
- - -
============ ============ ============
Financing activities
Finder's fees payable - (5,000) -
Shares issued for payment of finder's fees - 5,000 -
Shares issued on exercise of options 74,379 - -
Contributed surplus (74,379) - -
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- - -
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Other supplementary cash flow information:
2003 2002 2001
$ $ $
Interest paid in cash - - -
============ ============ ============
Income taxes paid in cash - - -
============ ============ ============
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(EXPRESSED IN CANADIAN DOLLARS)
12. SUBSEQUENT EVENTS
a) In March 2004, Minera Aquiline Argentina S.A., a wholly-owned
subsidiary of Aquiline Resources Inc., commenced a legal
proceeding against the Company, asserting that the Company
unlawfully used confidential information, and is seeking a
constructive trust over the Navidad Project and other
surrounding properties in Chubut Province, Argentina. The
Company is defending this action and, as at the date of the
Auditor's Report, the outcome is not determinable.
b) On May 3, 2004, the Company announced a corporate
restructuring which would have the result of dividing its
existing portfolio of mineral properties into two separate
public companies. Following the corporate restructuring the
Company will continue to hold the Navidad project, while the
newly created company will hold all other mineral property
interests. The proposed reorganization of the Company will be
accomplished by way of a statutory plan of arrangement and is
subject to shareholder, regulatory and court approvals.
c) Subsequent to December 31, 2003, the Company:
(i) completed a brokered private placement of 1,500,000
units at $3.10 per unit, for proceeds of $4,307,500 net
of $279,000 agent's commission and $63,500 of related
issue costs. Each unit consisted of one common share
and one half non-transferable share purchase warrant.
Each whole warrant entitles the holder to purchase a
common share for $3.70 per share on or before February
23, 2005. The Company also issued 200,000 units, at a
recorded amount of $620,000 to its agent;
(ii) granted 1,462,000 stock options for $3.10 per share to
its directors, employees and consultants for a period
of five years; and
(iii) issued 2,634,291 common shares for $2,308,015 on the
exercises of stock options and warrants.