EX-99.5 24 strathmore9monthfs.htm STRATHMORE 9-MONTH FINANCIAL STATEMENTS 9 Month Financial Statements













STRATHMORE MINERALS CORP.

(An Exploration Stage Company)


CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


SEPTEMBER 30, 2006





Unaudited Interim Financial Statements


Notice



In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed the unaudited financial statements for the period ended September 30, 2006.





STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

(Unaudited)


 

September 30,

2006

December 31,

2005

   
   

ASSETS

  
   

Current

  

Cash and equivalents

$ 7,166,428

$12,143,821

Short term investments

27,068,037

9,001,064

Receivables

230,541

240,244

Prepaid expenses

     377,433

         26,651

   
   

Equipment

207,908

208,229

Mineral property interests (Note 3)

7,828,847

5,579,778

Deferred exploration costs (Note 4)

   9,131,625

   3,570,990

   
 

$52,010,819

$30,770,777

   
   
   

LIABILITIES AND SHAREHOLDERS’ EQUITY

  
   

Current

  

Accounts payable and accrued liabilities

$  566,844

$  171,356

Due to related parties (Note 7)

21,191

14,291

   
 

     588,035

      185,647

   
   

Shareholders’ equity

  

Capital stock (Note 5)

66,573,169

41,299,968

Subscriptions received in advance

-

3,600

Contributed surplus (Note 5)

1,969,338

4,857,621

Deficit

(17,119,723)

(15,576,059)

   
 

51,422,784

30,585,130

   
 

$52,010,819

$30,770,777



Basis of presentation (Note 1)

Subsequent events (Note 9)


On behalf of the Board:

   
    
    
 

Director

 

Director

    

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





STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT

(Unaudited)


 

Three Month Period Ended September 30, 2006

Three Month

Period Ended

September 30,

2005

Nine Month

Period Ended

September 30,

2006

Nine Month

Period Ended

September 30,

2005

     
     
     

GENERAL AND ADMINISTRATIVE EXPENSES

    

Advertising and promotion

$     12,350

$    35,674

$      68,666

$       49,380

Amortization

16,494

13,734

42,301

28,592

Business development

32,097

6,181

83,021

65,332

Consulting fees

203,424

148,774

609,377

470,098

Investors Relations

13,938

27,788

13,938

108,276

Office and miscellaneous

30,080

119,329

79,288

195,640

Professional fees

136,601

22,959

311,495

71,463

Regulatory fees

2,419

-

38,017

14,499

Rent

15,480

9,657

43,147

31,120

Shareholder communications

3,322

-

43,839

7,961

Short term investment fees

13,655

-

48,436

-

Stock-based compensation  (Note 5)

91,633

-

407,073

419,198

Telephone

8,561

7,568

29,432

29,589

Transfer agent

3,447

5,130

14,318

14,103

Trade shows and conferences

86,942

73,083

296,538

181,960

Travel

16,860

7,347

47,766

29,405

Wages and benefits

       95,745

         59,115

       250,239

        127,814

     

Loss before other item

(783,048)

(536,339)

(2,426,891)

(1,844,430)

     

OTHER ITEM

    

Investment income

    485,313

       150,850

      883,227

        326,136

     

Loss before income taxes

(297,735)

(385,489)

(1,543,664)

(1,518,294)

     

Future income tax recovery

                  -

                    -

                    -

          356,125

     

Loss for the period

(297,735)

(385,489)

(1,543,664)

(1,162,169)

     
     

Deficit, beginning of period

(16,821,988)

 (14,730,237)

 (15,576,059)

 (13,953,557)

     
     

Deficit, end of period

$(16,821,988)

$(15,115,726)

$(17,119,723)

$(15,115,726)

     
     

Basic and diluted loss per common share

$      (0.01)

$       (0.01)

$      (0.02)

$      (0.02)

     
     

Weighted average number of common shares outstanding

69,404,695

51,239,209

65,033,256

47,643,722


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



STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF CASH FLOWS

 (Unaudited)


 

Three Month Period Ended September 30, 2006

Three Month Period Ended September 30, 2005

Nine Month Period Ended September 30, 2006

Nine Month Period Ended September 30, 2005

     
     

CASH FLOWS FROM OPERATING ACTIVITIES

    

Loss for the period

$(297,735)

$(385,489)

$(1,543,664)

$(1,162,169)

Items not affecting cash

    

Amortization

16,494

13,734

42,301

28,592

Stock-based compensation

91,633

-   

407,073

419,198

Future income taxes

               -

               -

                 -

  (356,125)

 

(189,608)

(371,755)

(1,094,290)

(1,070,504)

     

Changes in non-cash working capital items:

    

(Increase) decrease in receivables

22,237

(253,710)

9,703

(324,570)

(Increase) decrease in prepaid expenses

(359,604)

(34,731)

(350,782)

(21,415)

Increase in short term investments

(416,308)

-

(18,066,973)

-

(Decrease) increase in accounts payable and accrued liabilities


  237,272


   (53,161)


        395,487


      66,569

     

Cash used in operating activities

(706,011)

(713,357)

(19,106,855)

(1,349,920)

     
     

CASH FLOWS FROM INVESTING ACTIVITIES

    

Deferred exploration costs

(2,323,691)

(845,963)

(5,262,967)

(1,831,784)

Equipment purchased

(26,282)

(62,804)

(41,979)

(168,861)

Mineral property interests

       (2,790)

(103,239)

(339,737)

(258,322)

   


 

Cash used in investing activities

(2,352,763)

(1,012,006)

(5,644,683)

(2,258,967)

     
     

CASH FLOWS FROM FINANCING ACTIVITIES

    

Increase (decrease) in due to related parties

(5,595)

(18,865)

6,900

1,085

Share issuance costs

(4,769)

(18,869)

(684,014)

(1,141,481)

Capital stock issued

     31,250

478,701

20,451,259

17,537,761

     

Cash provided by financing activities

     20,886

440,967

19,774,145

16,397,365

     
     

Change in cash and equivalents during the period

(3,037,888)

(1,284,396)

(4,977,393)

12,788,478

     
     

Cash and equivalents, beginning of period

10,204,316

23,155,900

12,143,821

9,083,026

     
     

Cash and equivalents, end of period

$7,166,428

$21,871,504

$7,166,428

$21,871,504


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



STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SEPTEMBER 30, 2006





1.

BASIS OF PRESENTATION


The consolidated financial statements contained herein include the accounts of Strathmore Minerals Corp. (the “Company”) and its wholly owned subsidiaries, Minera Peruran S.A., and Strathmore Resources (US) Ltd.  Significant inter-company balances and transactions are eliminated on consolidation.


The interim period consolidated financial statements have been prepared by the Company in accordance with Canadian generally accepted accounting principles.  All financial summaries included are presented on a comparative and consistent basis showing the figures for the corresponding period in the preceding year.  The preparation of financial data is based on accounting principles and practices consistent with those used in the preparation of annual consolidated financial statements.  Certain information and footnote disclosure normally included in financial statements prepared in accordance with Canadian generally accepted accounting principles has been condensed or omitted.  These interim period statements should be read together with the audited consolidated financial statements and the accompanying notes included in the Company's latest annual filing.  In the opinion of the Company, its unaudited interim consolidated financial statements contain all adjustments necessary in order to present a fair statement of the results of the interim periods presented.



2.

NATURE OF OPERATIONS


The Company's principal business activity is the acquisition and exploration of mineral property interests.



3.

MINERAL PROPERTY INTERESTS


 


September 30, 2006


December 31, 2005

   

Athabasca property, Canada

$

459,702

$

459,702

Chord property, USA

137,282

137,282

Comstock property, Canada

494,271

297,271

Dieter Lake property, Canada

618,792

421,792

Duddridge Lake property, Canada

382,245

191,245

Fort Mcleod property, Canada

299,070

-

New Mexico properties, USA

1,718,043

1,272,616

Staked properties, Canada

811,420

798,153

Staked properties, Peru

69,580

69,580

Wyoming properties, USA

2,548,198

1,615,698

Pre-acquisition property costs

290,244

316,439

   
 

$

7,828,847

$

5,579,778


Title to mineral property interests involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral property interests.  The Company has investigated title to all of its mineral property interests and, to the best of its knowledge, title to all of its properties are in good standing.



STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SEPTEMBER 30, 2006





3.

MINERAL PROPERTY INTERESTS (cont’d…)


Athabasca property, Canada


The Company acquired an option to purchase a 100% interest in a uranium property located in Alberta, Canada, by paying $98,192, incurring additional costs of $29,510 and issuing 200,000 common shares valued at $332,000. The property is subject to a 0.75% net smelter returns royalty on certain mineral production and a 4% gross over riding royalty on all diamond production from the property.


Chord property, USA


The Company acquired an option to purchase a 100% interest in a uranium property located in South Dakota, USA, by paying $48,640.  During fiscal 2003, the Company amended the terms of the lease agreement for consideration of 100,000 shares of the Company valued at $56,000 and incurred additional fees of $6,468.  To earn its interest, the Company is required to make annual payments of either 50,000 common shares or US$10,000 per year to July 1, 2009. In fiscal 2005, the Company paid $12,558 (US$10,000), 2004 - $13,616 (US$10,000).  The property is subject to a 2% gross royalty.


Comstock property, Canada


The Company acquired an option to purchase a 100% interest in certain claims located in British Columbia, Canada by issuing 300,000 common shares valued at $491,000 and incurring additional fees of $3,271.


Dieter Lake property, Canada


The Company acquired an option to purchase a 100% interest in certain claims located in Quebec, Canada by issuing 300,000 common shares valued at $603,000 and incurring additional costs of $15,792. An additional 200,000 shares will be issued in the event a resource of more than 60 million pounds containing U3O8 (Uranium) is confirmed at the property.


Duddridge Lake property, Canada


The Company acquired an option to purchase a 100% interest in certain claims located in Saskatchewan, Canada by issuing 200,000 common shares valued at $344,000 and incurring additional fees of $38,245.


Fort Mcleod property, Canada


The Company acquired an option to purchase a 100% interest in certain claims located in Alberta, Canada, by paying $34,070 for staking costs and issuing 100,000 shares valued at $265,000. To earn its interest, the company is required to issue an additional 100,000 common shares.


New Mexico properties, USA


The Company acquired an option to purchase a 100% interest in certain claims located in New Mexico, USA, by paying $293,752, incurring additional costs of $315,791 and issuing 600,000 common shares valued at $1,108,500. Certain claims are subject to a 1% royalty.





STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SEPTEMBER 30, 2006




3.

MINERAL PROPERTY INTERESTS (cont’d…)


Staked properties, Canada


The Company acquired, by staking, a 100% interest in the following uranium properties located in north-central Saskatchewan: Davy Lake, Hall Lake, Patterson Lake, Virgin River, and Waterbury Lake.


Staked properties, Peru


The Company acquired, by staking, a 100% interest in certain uranium properties located in Peru.


Wyoming properties, USA


The Company acquired an option to purchase a 100% interest in a certain claims located in Wyoming, USA by paying $87,560, incurring additional costs of $261,888 and issuing 1,150,000 common shares valued at $2,198,750. To earn its interest, the Company is required to issue an additional 100,000 common shares in stages over two years.


Pre-acquisition property costs


The pre-acquisition property costs represent expenditures related to mineral property interests prior to implementation of the acquisition.  These costs will be added to the mineral property interest costs to which they relate on completion of the acquisition or written-off to operations should the acquisition not proceed.


4.

DEFERRED EXPLORATION COSTS


 


Canada


USA


Peru


Total

     

As at December 31, 2004

$ 103,933

$63,716

$           -

$  167,649

Airborne geophysics surveys

1,497,325

-   

-   

1,497,325

Camp costs

41,534

-   

4,573

46,107

Claim fees

38,178

168,188

22,165

228,531

Geologists fees and supplies

418,162

370,852

129,554

918,568

General expenses

16,326

8,074

1,861

26,261

Helicopter rental and equipment fuel

586,482

-   

-   

586,482

Lab analysis and sampling

38,802

-   

-   

38,802

NI 43-101 reports

21,334

3,841

-   

25,175

Report/map preparation

   33,869

      606

   1,615

    36,090

     

As at December 31, 2005

2,795,945

615,277

159,768

3,570,990

Airborne geophysics surveys

1,690,728

-    

-   

1,690,728

Camp costs

91,883

-    

-   

91,883

Claim fees

160,007

352,244

27,102

539,353

Geologists fees & supplies

1,325,590

933,421

84,313

2,343,324

     

~continued~



STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SEPTEMBER 30, 2006



4.

DEFERRED EXPLORATION COSTS (cont’d…)


~continued~


 


Canada


USA


Peru


Total

General expenses

45,410

48,860

   33,151

127,421

Travel

297,524

113,206

15,117

425,847

Helicopter rental & equipment fuel

266,335

494

-   

266,829

Lab analysis & sampling

19,990

-   

-   

19,990

NI 43-101 reports

6,741

-   

-   

6,741

Report/Map preparation

     46,979

          779

          761

    48,519

     

As at September 30, 2006

$6,747,132

$2,064,281

$320,212

$9,131,625


5.

CAPITAL STOCK AND CONTRIBUTED SURPLUS


 


Number

of Shares


Capital

Stock


Contributed

Surplus

    

Authorized

   

Unlimited number of common shares, without par value

   
    

Issued

   

As at December 31, 2004

36,241,257

$23,457,405

$2,420,262

Private placements


10,144,286

12,752,584

2,505,917

Exercise of options

887,000

466,080

(169,381)

Exercise of warrants

7,082,971

4,280,507

(875,269)

Acquisition of mineral property interests

1,400,000

2,377,750

-   

Stock-based compensation


-   

-   

476,610

Share issuance costs

-   

(1,657,834)

499,482

Tax benefits renounced to flow through share subscribers

                -

   (376,524)

                -

    

As at December 31, 2005

55,755,514

41,299,968

4,857,621

Private placements

3,265,950

8,699,795

-   

Exercise of options

1,615,000

1,398,848

(446,798)

Exercise of warrants

7,936,166

13,738,923

(2,935,909)

Acquisition of mineral property interests

900,000

2,207,000

-   

Stock-based compensation


-

 -

407,073

Share issuance costs

                -

    (771,365)

    87,351               

    

As at September 30, 2006

69,472,630

$66,573,169

$1,969,338


Included in issued capital stock are 75,000 common shares subject to an escrow agreement that may not be transferred, assigned or otherwise dealt with without the consent of the regulatory authorities.



STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SEPTEMBER 30, 2006



5.

CAPITAL STOCK AND CONTRIBUTED SURPLUS (cont’d…)


In January, 2005, the Company issued 30,000 flow-through common shares at a price of $1.95 per share for proceeds

of $58,500 which were received in fiscal 2004.


In February, 2005, the Company issued 10,000,000 units at $1.50 per unit for gross proceeds of $15,000,000. Each unit consists of one common share and one half of one share purchase warrant. One whole warrant is exercisable at $1.75 until February 21, 2006 and thereafter at $2.00 expiring February 21, 2007. An estimated fair value of $2,480,945 was allocated to the warrants and is included in contributed surplus. In connection with the placement the Company issued agent options to purchase 1,027,180 common shares at a price of $1.75 per share in the first year and $2.00 per share in the second year and paid commissions of $1,027,180, of which $169,892 was allocated to the commissions on the warrants and is included in contributed surplus.  The fair value of the agents options, being


$802,026, was determined using the Black-Scholes option pricing model with a volatility of 62%, risk-free interest rate of 2.92%, expected life of 2 years, and a dividend rate of 0%.


In October, 2005, the Company issued 114,286 units at $1.75 per unit for gross proceeds of $200,001.  Each unit consists of one common share and one half of one share purchase warrant exercisable at $2.00 per share until October 26, 2007.  An estimated fair value of $24,972 was allocated to the warrants and is included in contributed surplus.


In May, 2006, the Company issued 1,697,300 flow-through shares at $3.00 per share and 1,568,650 units at $2.30 per unit for total proceeds of $8,699,795. Each unit consists of one common share and one half of one share purchase warrant. One whole warrant is exercisable at $3.25 and expires November 9, 2007. In connection with the placement, the Company paid commissions of $521,988 in cash and issued 195,957 Agents’ options. Each warrant entitles the Agent to purchase one common share at $2.55 per share and expires May 9, 2007. The fair value of the agents’ warrants, being $87,351, was determined using the Black Scholes option pricing model with a volatility of 53%, risk-free interest rate of 4.26%, expected life of 1 year, and a dividend rate of 0%.


Stock options and warrants


The Company has a stock option plan whereby, from time to time, at the discretion of the Board of Directors, stock options are granted to directors, officers, employees and certain consultants.  The exercise price of each option is based on the market price of the Company’s common stock at the date of grant less an applicable discount.  The options can be granted for a maximum term of 5 years.


Stock option and share purchase warrant transactions are summarized as follows:

 


Warrants

 


Stock Options

 





Number


Weighted

Average

Exercise

Price

 





Number


Weighted

Average

Exercise

Price

      

Outstanding, December 31, 2004

10,081,638

$     0.54

 

3,275,000

$     0.68

Granted

6,084,323

1.75

 

1,600,000

1.69

Exercised

(7,082,971)

0.48

 

(887,000)

0.33


~continued~


STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SEPTEMBER 30, 2006





5.

CAPITAL STOCK AND CONTRIBUTED SURPLUS (cont’d…)


~continued~


 


Warrants

 


Stock Options

 





Number


Weighted

Average

Exercise

Price

 





Number


Weighted

Average

Exercise

Price

Expired/cancelled

-   

-   

 

(100,000)

1.44

Outstanding, December 31, 2005

9,082,990

$    1.37

 

3,888,000

$     1.16

Granted

980,282

3.11

 

2,040,000

1.76

Exercised

(7,936,166)

1.36

 

(1,615,000)

0.59

Expired/cancelled

(2,500)

0.76

 

(63,000) 

1.86

     


Outstanding, September 30, 2006

2,124,606

$    2.51

 

4,250,000

$    2.01

     


Number currently exercisable

2,124,606

$    2.51

 

1,127,000

$    1.89

     



As at September 30, 2006, incentive stock options and share purchase warrants were outstanding as follows:


 


Number

of Shares


Exercise

Price

 



Expiry Date

  


  

Options

675,000

1.25

 

November 3, 2006

 

250,000

1.75

 

January 14, 2007

 

20,000

2.25

 

February 8, 2007

 

300,000

2.20

 

April 29, 2007

 

125,000

2.50

 

April 13, 2009

 

100,000

1.95

 

February 15, 2009

 

965,000

1.50

 

October 6, 2010

 

50,000

1.75

 

June 14, 2011

 

    1,765,000

1.70

 

August 31, 2011

Total

4,250,000


  
  


  

Warrants

1,087,181

2.00

 

February 21, 2007

 

     195,957

2.55

 

May 9, 2007

 

     57,143

2.00

 

October 26, 2007

 

     784,325

3.25

 

November 9, 2007

Total

2,124,606


  



STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SEPTEMBER 30, 2006




5.

CAPITAL STOCK AND CONTRIBUTED SURPLUS (cont’d…)


Stock-based compensation


During the nine month period ended September 30, 2006, the Company granted 2,040,000 (2005 – 600,000) options to employees, consultants and directors.  Accordingly, using the Black-Scholes option pricing model, the stock options are recorded at fair value in the statement of operations.  Total stock-based compensation recognized in the statement of operations was $407,074 (2005 - $195,201).  This amount was also recorded as contributed surplus on the balance sheet.


The following assumptions were used for the valuation of stock options and warrants:




2006


2005

   

Risk-free interest rate

4.13%

3.00%

Expected life

4 years

2.3 years

Annualized volatility

46%

60%

Dividend rate

0.00%

0.00%



6.

SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS



 

Three Month Period Ended September 30, 2006

Three Month Period Ended September 30, 2005

Nine Month Period Ended September 30, 2006

Nine Month Period Ended September 30, 2005

     

Cash paid during the period for

         interest and income taxes


$

-   


$

-   


$

-   


$

-   

     


During the nine month period ended September 30, 2006 the Company issued 900,000 (2005 – 725,000) common shares valued at $2,207,000 (2005 -$1,406,750) pursuant to the acquisition of mineral property interests. During the period ended September 30, 2005, the Company issued 1,150,000 common shares valued at $2,010,250 purusant to the acquisition of mineral property interests and issued 1,027,180 warrants valued at $802,026 as finders’ fees on private placements.


7.

RELATED PARTY TRANSACTIONS



The Company paid or accrued the following amounts to related parties:


Nine month period ended September 30


2006


2005

   

Consulting fees

$

426,770

$

272,292


STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SEPTEMBER 30, 2006




7.

RELATED PARTY TRANSACTIONS (cont’d…)


These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the parties.


Amounts due to related parties are non-interest bearing, unsecured and have no specific repayment terms.



8.

SEGMENTED INFORMATION


The Company primarily operates in one reportable operating segment, being the exploration of mineral property interests and considers its loss from operations for periods ended September 30, 2006 and 2005 to relate to this segment.


The Company has mineral property interests located in the USA, Canada and Peru and conducts administrative activities from Canada.  The total amount of capital assets attributable to Canada is $10,602,536 (2005 - $7,060,039), Peru is $322,876 (2005 - $139,755) and the USA is $6,242,968 (2005 - $2,159,203).



9.

SUBSEQUENT EVENTS


a)

Pursuant to the exercise of stock options, the Company issued 735,000 common shares for proceeds of $956,250.

b)

Pursuant to the exercise of share purchase warrants the Company issued 213,334 common shares for proceeds of $426,668.

c)

Granted 700,000 stock options at $2.10 per share exercisable for a period of 5 years.


10.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED

ACCOUNTING PRINCIPLES


These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Canada (“Canadian GAAP”).  Material variations in the accounting principles, practices and methods used in preparing these consolidated financial statements from principles, practices and methods accepted in the United States (“United States GAAP”) are described and quantified below.


Mineral property interests and deferred exploration costs


Mineral property costs and related exploration expenditures are accounted for in accordance with Canadian GAAP.  


For United States GAAP purposes, effective until fiscal 2003, the Company expenses, as incurred, the acquisition and exploration costs relating to unproven mineral property interests.  When proven and probable reserves are determined for a property and a feasibility study prepared, subsequent development costs of the property are capitalized.  The capitalized costs of such properties would then be amortized using the unit of production method over the estimated life of the ore body based on proven and probable reserves and would be measured periodically for recoverability of carrying values.






STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SEPTEMBER 30, 2006




10.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED

ACCOUNTING PRINCIPLES (cont’d…)


Mineral property interests and deferred exploration costs (cont’d…)


Effective for fiscal 2004, the Company has adopted the provisions of EITF 04-02 “Whether Mineral Rights are Tangible or Intangible Assets” which concluded that mineral rights are tangible assets.  Accordingly, the Company capitalizes certain costs related to the acquisition of mineral property interests.  Under United States GAAP, exploration costs on mineral properties prior to the establishment of proven or probable reserves continue to be expensed as incurred.



Flow-through shares


Under Canadian income tax legislation, the Company is permitted to issue shares whereby the Company agrees to incur qualifying expenditures (as defined under the Income Tax Act of Canada) and renounce the related income tax deductions to the investors. Under United States GAAP, any difference between the fair value of the non flow-through shares and the fair value of the flow-through shares must be recorded as a liability if a premium is paid by investors for the flow-through shares.  The liability is charged to income as the flow-through share proceeds are expended on qualifying expenditures and the related income tax deductions are renounced to investors.


During fiscal 2006, the Company issued 1,697,000 flow-through shares for total proceeds of $5,091,000. The Company has recorded a liability of $1,137,191 for the premium received on the flow-through shares. The liability will be charged to income as the flow-through share proceeds are expensed on qualifying expenditures and the related income tax deductions are renounced to investors.


During fiscal 2005, the Company issued 30,000 flow-through shares for total proceeds of $58,500.  As the value of the compensation received for the flow-through shares issued during fiscal 2005 exceeded the fair value of the non-flow through shares on the date issued, the Company recorded a difference in capital stock and related income tax expenses of $11,699 on renunciation during fiscal 2005.   



Stock-based compensation


Under United States GAAP, Statements of Financial Accounting Standards No. 123, “Accounting for Stock-based Compensation” (“SFAS 123”) recommended, but did not require, companies to establish a fair market value based method of accounting for stock-based compensation plans. The Company had incorrectly disclosed in previous filings that it had chosen to account for stock-based compensation using Accounting Principles Board Opinion No.

25

 “Accounting for Stock Issued to Employees” (“APB 25”), in which compensation cost for stock options was measured as the excess, if any, of the quoted market price of the Company’s stock at the date of grant over the option Price. However, the Company elected to follow the recommendations of SFAS 123 and has chosen to account for stock-based compensation using the fair value based method.


New accounting and disclosure standards were introduced under Canadian GAAP for the fiscal year ending December 31, 2003. During the year ended December 31, 2002, under Canadian GAAP, the Company adopted, on a prospective basis, the fair value based method of accounting for all stock-based compensation.  Accordingly, there is no difference between Canadian GAAP and United States GAAP in the accounting for stock-based compensation for the nine months ended September 2006 and 2005.




STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SEPTEMBER 30, 2006




10.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED

ACCOUNTING PRINCIPLES (cont’d…)



Short Term investments


Under Canadian GAAP, temporary investments are carried at the lower of aggregate cost or current market value, with any unrealized gain or loss included in the statement of operations.


Under United States GAAP, SFAS 115 requires that certain debt and equity investments must be classified into available-for-sale or trading securities and stated at fair market values.  Any unrealized holding gains or losses are reported as a separate component of shareholders’ equity until realized for available-for-sale securities, and included in earnings for trading securities.  For United States GAAP purposes, the Company's investment in debt securities have been classified as trading securities.  Under SFAS 115, for the nine months ended September 30, 2006 there was no difference under Canadian GAAP or United States GAAP as these debt securities have been stated at their fair market value, with an unrealized gain of $160,393 (2005 - $Nil)included in the consolidated statement of operations.



Loss per share

Under both Canadian GAAP and United States GAAP, basic loss per share is calculated using the weighted average number of common shares outstanding during the year.

Under United States GAAP, the weighted average number of common shares outstanding excludes any shares that remain in escrow, but may be earned out based on the Company incurring a certain amount of exploration and development expenditures.  The weighted average number of shares outstanding under United States GAAP for the nine months ended September 30, 2006 and September 30, 2005 were 64,958,256 and 47,568,722 respectively.  Accordingly, the loss per share for the nine months ended September 30, 2006 and September 30, 2005 was $(0.11), and $(0.05), respectively.



New accounting pronouncements


In September 2006, the FASB issued SFAS No. 157 (“FAS 157”), “Fair Value Measurements.” Among other requirements, FAS 157 defines fair value and establishes a framework for measuring fair value and also expands disclosure about the use of fair value to measure assets and liabilities. FAS 157 is effective beginning the first fiscal year that begins after November 15, 2007. The Company is currently evaluating the impact of FAS 157 on its financial position and results of operations. In July 2006, the FASB issued Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109” (“FIN 48”), which is a change in accounting for income taxes. FIN 48 specifies how tax benefits for uncertain tax positions are to be recognized, measured, and derecognized in financial statements; requires certain disclosures of uncertain tax matters; specifies how reserves for uncertain tax positions should be classified on the balance sheet; and provides transition and interim period guidance, among other provisions. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company does not expect the adoption of FIN 48 will have a material impact on its financial position or results of operations



STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SEPTEMBER 30, 2006





10.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED

ACCOUNTING PRINCIPLES (cont’d…)


New accounting pronouncements (cont’d…)



In February, 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 155 “Accounting for Certain Hybrid Financial Instruments” and in March 2006, the FASB issued SFAS No. 156 “Accounting for Servicing of Financial Assets”, but they will not have any relationship to the operations of the Company. Therefore a description and its impact for each on the Company’s operations and financial position have not been disclosed.


In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154, “Accounting Changes and Error Corrections – A Replacement of APB Opinion No. 20 and SFAS No. 3”. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of SFAS No. 154 are effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.



In March 2005, the EITF issued EITF 04-6, "Accounting for Stripping Costs in the Mining Industry".  The consensus indicated that costs of removing overburden and waste materials ("stripping costs") after production begins, represent variable production costs and should be considered a component of mineral inventory cost subject to the guidance in Chapter 4 of Accounting Research Bulletin No. 43, "Restatement and Revision of Accounting Research Bulletins".  EITF 04-6 is effective for fiscal years beginning after December 15, 2005 and upon adoption, can be applied by either retroactively restating prior periods or using a cumulative catch-up adjustment.  The Company believes this Statement will have no impact on the financial statements of the Company once adopted.



In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29”. The guidance in APB Opinion No. 29, “Accounting for Nonmonetary Transactions”, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. SFAS No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Early application is permitted and companies must apply the standard prospectively. The adoption of this standard did not have a material effect on the Company’s results of operations or financial position. FASB has also issued SFAS No. 151 and No. 152 but they will not have any relationship to the operations of the Company therefore a description and its impact for each on the Company’s operations and financial position have not been disclosed.




STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SEPTEMBER 30, 2006





10.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED

ACCOUNTING PRINCIPLES (cont’d…)



New accounting pronouncements (cont’d…)



The impact of the differences between Canadian GAAP and United States GAAP on the consolidated balance sheets would be as follows:


 


 September 30, 2006

 


December 31, 2005

 


Balance,

Canadian

GAAP




Adjustments


Balance,

United States

GAAP

 


Balance,

Canadian

GAAP




Adjustments


Balance,

United States

GAAP

 


      

Current assets

$34,842,439

$    160,393 

$35,002,832

 

$21,411,780

$            -   

$21,411,780

Equipment

207,908

 

207,908

 

208,229

-   

208,229

Mineral property

  interests


7,828,847


(2,100,038)


5,728,809

 


5,579,778


(2,057,969)


3,521,809

Deferred exploration

  costs


9,131,625


(9,131,625)


              -

 


3,570,990


(3,570,990)


                 -

        
 

$52,010,819

(11,071,270)

40,939,549

 

$30,770,777

$(5,628,959)

$25,141,818

   


  



Total liabilities

$588,035

$1,137,191

$1,725,226

 

$185,647

$            -   

$185,647

        

Capital stock

66,573,169

(1,041,257)

65,531,912

 

$41,299,968

95,934

41,395,902

Subscriptions received

-   

-   

-   

 

3,600

-   

3,600

Contributed surplus (Additional paid-in capital)



1,969,338



673,800



2,643,138

 



4,857,621



673,800



5,531,421

Deficit

(17,119,723)

(11,841,004)

(28,960,727)

 

(15,576,059)

(6,398,693)

(21,974,752)

        

Shareholders' equity

51,422,784

(12,208,461)

39,214,323

 

30,585,130

(5,628,959)

24,956,171

        
 

$52,010,819

$(11,071,270)

$40,939,549

 

$30,770,777

$(5,628,959)

$25,141,818





STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SEPTEMBER 30, 2006





10.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED

ACCOUNTING PRINCIPLES (cont’d…)



New accounting pronouncements (cont’d…)


The impact of the differences between Canadian GAAP and United States GAAP on the consolidated statements of operations would be as follows:


 

Nine Months

Ended

September 30, 2006

Nine Months

Ended

September 30, 2005

   

Loss for the period, Canadian GAAP

$ (1,543,664)

$ (1,162,169)

Adjustments:

  

Mineral property interests

(42,069)

(63,509)

Deferred exploration costs

(5,560,635)

(1,357,744)

Unrealized gain on short term investments

160,393

-

Renunciation of flow-through shares

                      -

        (84,235)

   

Loss for the year, United States GAAP

$  (6,985,975)

$ (2,667,657)

   

Basic and diluted loss per share, United States GAAP

$           (0.11)

$          (0.06)

   

Weighted average number of common shares

  

outstanding, United States GAAP

64,958,256

47,568,722



The impact of the differences between Canadian GAAP and United States GAAP on the statements of cash flows would be as follows:


 

Nine Months

Ended

September 30,

2006

Nine Months

Ended

September 30,

2005

   

Cash flows provided by (used in) operating activities,

  

Canadian GAAP

$(19,106,855)

$(1,349,920)

Mineral property interests

(339,737)

(258,322)

Deferred exploration costs

(5,262,967)

(1,831,784)

   

Cash flows used in operating activities, United States GAAP

(24,709,559)

(3,440,026)

   

Cash flows used in investing activities, Canadian GAAP

(5,644,683)

(2,258,967)

Mineral property interests

339,737

258,322

Deferred exploration costs

5,262,967

1,831,784


~continued~

STRATHMORE MINERALS CORP.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

SEPTEMBER 30, 2006





10.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED

ACCOUNTING PRINCIPLES (cont’d…)



New accounting pronouncements (cont’d…)


~continued~


 

Nine Months

Ended

September 30,

2006

Nine Months

Ended

September 30,

2005

   

Cash flows used in investing activities, United States GAAP

(41,979)

(168,861)

   

Cash flows provided by financing activities, Canadian GAAP

  

     and United States GAAP

19,774,145

16,397,365

   

Change in cash during the period

(4,977,393)

12,788,478

   

Cash, beginning of period

12,143,821

9,083,026

   

Cash, end of period

$7,166,428

$21,871,504