-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
Jwz2ZKZVdHEudz6ivx26YOjOlWxEdhKqOmdABzUyYUX/ERzku8RgDjSmONwtG7P3
XLCERvNNJLIbWemirmyNVQ==
UNITED STATES FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16
OR 15d-16 For the month of August, 2006 Commission File Number: 000-51570 SUTCLIFFE RESOURCES LTD. 420-625 Howe Street, Vancouver Indicate by check mark whether the registrant files or will
file annual reports under cover Form 20-F or Form 40-F. [ x ] Form 20-F [ ]
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- _________
SUBMITTED HEREWITH Exhibits SIGNATURES Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized. To the Shareholders of Sutcliffe Resources Ltd. These interim financial statements for the second quarter ended
June 30, 2006 and 2005, comprised of the balance sheet and the statements of
operations and deficit as well as cash flows have been compiled by management.
These interim financial statements, along with the accompanying summary of
significant accounting policies and notes have been reviewed and approved by the
members of the Companys audit committee. In accordance with Canadian Securities
Administrators National Instrument 51-102, the Company discloses that these
unaudited interim financial statements have not been reviewed by the Companys
auditors. (See accompanying summary of significant accounting policies and
notes to the financial statements) (See accompanying summary of significant accounting policies and
notes to the financial statements) (See accompanying summary of significant accounting policies and
notes to the financial statements) While the interim financial statements have been prepared
on the basis of accounting principles applicable to a going concern, the
occurrence of significant losses in recent years and the Companys deficit
raise substantial doubt about the validity of this assumption. If the
going concern assumption was not appropriate for these interim financial
statements, then adjustments would be necessary to the carrying value of
assets and liabilities, the reported net loss and the balance sheet
classifications used. The Companys interim financial statements as at June
30, 2006 and 2005 do not include such adjustments. The Companys continued existence as a going concern is
dependent upon its ability to continue to obtain adequate financing
arrangements and to achieve profitable operations. Managements plans in
this regard are to diversify its resource property holdings and obtain
sufficient equity or debt financing to enable the Company to continue its
efforts towards the exploration and development of new mineral properties.
While the Company is expending its best efforts to
achieve the above plans, there is no assurance that any such activity will
generate sufficient funds for operations. The Company considers cash to include amounts held in
banks and highly liquid investments with maturities at point of purchase
of three months or less. The Company places its cash and cash investments
with institutions of high-credit worthiness. At times, such cash and
investments may be in excess of federal insurance limits. Acquisition, exploration and development costs relating
to mineral properties are deferred until such time as it is determined
that the costs are not likely to be recouped or mineral properties are
brought into production, abandoned, or sold, at which time they are
amortized on the unit of production basis over the estimated life of the
property or written off to earnings. Revenue incidental to exploration and
development activities, including the proceeds on sales of partial
properties, is credited against the cost of related properties. Aggregate
costs related to abandoned properties are charged to operations at the
time of any abandonment or when there is an expectation that the carrying
amount of those costs will not be recovered. Inactive properties are
carried at cost unless there is an abandonment of the Companys interest,
at which time the cost is written off. Gains or losses on partial sales of
properties are reflected in the Statement of Operations and Deficit in the
period of sale. Where the Company enters into an option agreement for the
acquisition of an interest in mining properties which provides for
periodic payments, such amounts unpaid are not recorded as a liability
since they are payable entirely at the Companys option.
Income taxes are accounted for by the liability method.
Under this method, income taxes reflect the deferral of such taxes to
future years. The deferral is a result of temporary differences which
arise when certain costs, principally deferred exploration, are claimed
for tax purposes in different time periods than the related amounts are
amortized in the accounts. The preparation of interim financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the interim financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates. The assets
which required management to make significant estimates and assumptions in
determining carrying value include resource properties and stock-based
compensation. Basic loss per share is calculated by dividing the net
loss available to common shareholders by the weighted average number of
shares outstanding during the year. Diluted earnings per share reflects
the potential dilution of securities that could share in earnings of an
entity. In a loss year, potentially dilutive common shares are excluded
from the loss per share calculation as the effect would be anti-dilutive.
Basic and diluted loss per share are the same for the years presented. For
the interim periods ended June 30, 2006 and 2005, common equivalent shares
(relating to options and warrants outstanding at period end) totaling
15,109,223 (2005 13,875,400) were not included in the computation of
loss per share because their effect was anti-dilutive. Financial instruments include cash, receivables,
flow-through share proceeds, accounts payable and accrued liabilities and
loans payable. It is managements opinion that the Company is not exposed
to significant interest, currency or credit risks arising from these
financial instruments. Unless otherwise noted, due to their current
maturities, fair values approximate carrying values for these financial
instruments. Effective January 1, 2004, the Company has retroactively
adopted the new recommendations of the Canadian Institute of Chartered
Accountants (CICA) Handbook Section 3870, Stock-based compensation and
other stock based payments, which now requires companies to adopt the fair
value based method for all stock-based awards granted on or after January
1, 2002. Previously the Company was only required to disclose the pro
forma effect of stock options issued to employees and directors in the
notes to the financial statements. The Company has retroactively applied
this new accounting policy to prior years and restated the financial
statements accordingly. The effect of the restatement was to increase the
net loss for 2003 by $122,500 for options granted to employees in that
year, and to increase accumulated deficit as of December 31, 2003 by the
same amount. Contributed surplus was restated for the corresponding effect
of these restatements. Effective March 19, 2004, the Canadian Institute of
Chartered Accountants issued additional guidance on the accounting
treatment of Canadian flow- through shares through its Emerging Issues
Committee Abstract (EIC) No. 146. All flow-through shares issued by the
Company on or after March 19, 2004 are accounted for in accordance with
this Abstract. The Abstract recommends that upon renunciation to the
shareholders, the Company will reduce share capital and recognize a
temporary future income tax liability for the amount of tax reduction
renounced to the shareholders. In instances where the Company has
sufficient available tax loss carryforwards or other deductible temporary
differences available to offset the renounced tax deduction, the
realization of the deductible temporary differences will be credited to
income in the period of renunciation. Proceeds received from the issuance of flow-through
shares are restricted to be used only for Canadian resource property
exploration expenditures within a two year period. The portion of the
proceeds received but not yet expensed at the end of the Companys fiscal
period was disclosed separately as Flow-through Share Proceeds on the
Balance Sheets. Amounts of proceeds received in the period were recorded
as Increase in Restricted Cash and the amounts expensed during the period
were recorded as Decrease in Restricted Cash on the Statements of Cash
Flows. The amount of Restricted Cash spent in the first six months of 2006
on resource property exploration was $1,159,182 (2005 - $nil). Asset Retirement Obligations Effective January 1, 2004, the Company has adopted CICA
3110, Asset Retirement Obligations which requires companies to record the
fair value of an asset retirement obligation as a liability in the period
in which it incurred a legal obligation associated with the retirement of
tangible long- lived assets that result from the acquisition,
construction, development, and/or normal use of the assets. The obligation
is measured initially at fair value using present value methodology and
the resulting costs are capitalized into the carrying amount of the
related asset. In subsequent periods, the liability will be adjusted for
any changes in the amount or timing of the underlying future cash flows.
Capitalized asset retirement costs are depreciated on the same basis as
the related asset and the discounted accretion of the liability is
included in determining the results of operations. There was no material impact on the interim financial
statements resulting from the adoption of Section 3110 in the current or
prior periods presented, as the Company has only performed preliminary
exploratory work on its mineral properties and has not incurred
significant reclamation obligations. Certain financial statement line items from prior periods
have been reclassified to conform with the current periods presentation.
These reclassifications had no effect on the net loss, loss per share and
accumulated deficit as previously presented. Nature of Business The Company is in the business of exploring and
developing resource properties. The Companys main properties of interest
as of June 30, 2006 are the Beale Lake Project located in the Liard Mining
District and the Harrison Lake property located in the New Westminster
Mining District , both of which are in British Columbia. Other projects,
both domestic and overseas, are also being assessed by the Company as
potential acquisitions. Resource Properties Beale Lake Property, Liard Mining District,
British Columbia By a Letter of Intent dated February 5, 2003 and amended
by addendum on September 15, 2004, the Company acquired an option to
purchase a 100% undivided interest in two mineral claims known as the
Beale Lake property located in the Liard Mining District of British
Columbia, subject to a 2 1/2% net smelter return royalty payable to the
vendor, and for the following payments and share issuances which have all
been completed: An exploration program on the Beale
Lake property totaling $1,550,000 is to be completed as follows: A bonus of 650,000 common shares is
payable to the vendor in the event that a positive feasibility study is
completed and/or commercial production is attained. The Company, upon the
payment of $1,000,000, also has the option to buy out 1% of the net smelter
return royalty (40% of the total net smelter return royalty). There is also a
yearly $20,000 advance on the royalty commencing October 1, 2008. Resource Properties - Continued By a Purchase Agreement dated
September 29, 2005, the Company acquired a 100% interest in 53 mining
claims representing approximately 22,800 hectares surrounding the Beale
Lake property. The agreement required a cash payment of $200,000 (paid),
the issuance of 2,500,000 shares (issued see Note 4) and is subject to a
2% net smelter return royalty. A finders fee of 300,000 shares has also
been paid (Note 4). Harrison Property, New Westminster Mining District,
British Columbia By a Sale, Purchase and Assignment Agreement dated March
7, 2003 and amended on November 5, 2004, the Company acquired the
exclusive right to purchase a 50% interest in 92 contiguous mineral claims
comprising 906 claim units, situated in the New Westminster Mining
District near Harrison Lake, British Columbia. This agreement also
subjects the Company to a pro-rated 50% obligation with respect to a 2%
net smelter return royalty on production, a 7.5% rock royalty on gross
rock revenues as well as a yearly advance royalty of $18,000 starting on
July 31, 2009 as long as the Company holds an interest in the Harrison
Property Claims. The terms of the agreement required an initial payment of
$5,000 by September 5, 2003 (paid), an additional payment of $20,000 by
November 30, 2004 (paid), the issuance of 200,000 common shares by March
15, 2005 (issued) and a minimum work program of $300,000 plus filing fees
for assessment purposes to be completed by December 31, 2005
(completed). The Harrison property agreements stipulated that upon
completion of the purchase terms a joint venture will be formed with the
owner of the remaining 50% interest in the mineral claims. As at June 30,
2006, the Company had not entered a joint venture with respect to this
property. By a letter agreement dated September 5, 2005, the
Company purchased a 100% interest in the Bloom 1 10 mineral claims,
located west of and adjoining the Harrison Lake property. The terms
required a purchase price of $40,000 (paid), the issuance of 500,000
shares (issued) and a 2% net smelter return royalty payable to the
vendor. Resource Properties Continued Resource property investigation
expenditures In the first six months of 2006, funds were advanced to a
Russian corporation, Chukot Gold Ltd. (Chukot), by the Company as an
initial expression of interest in possible acquisitions of mineral
properties. These funds were expensed at the end of the period as property
investigation expenditures since there was no agreement in place at that
time and no assurance that the funds may be recoverable in the future.
Effective in July, 2006 an agreement has been signed between the Company
and Chukot (See Note 7. Subsequent Events) granting Sutcliffe the sole and
exclusive right to acquire all of Chukots interests in certain properties
in Russia. Share Capital Issued common shares: The Company has authorized an unlimited number of common
shares without par value. (1) Net of share issue costs of $50,517
(2005 - $423,697) paid in cash. On February 14, 2006, pursuant to a
non-brokered private placement, the Company issued 4,768,500 units for gross
proceeds of $2,622,675. Each unit consisted of one common share and one share
purchase warrant entitling the holder to purchase one common share at an
exercise price of $0.75 for a two-year period. On June 30, 2006, the Company issued
100,000 common shares at a price of $0.75 per share to the vendors of the Beale
Lake property (Note 2 (a)). The shares were valued based on the market price of
the shares at the time of issuance. Shares in Escrow Pursuant to escrow agreements among the Company, the
Trustee and directors of the Company, a total of 3,672,000 common shares
that the directors as a group beneficially own, directly or indirectly,
were placed in escrow under a time release agreement. The release was as
follows: 10% on the date on which the Companys shares were listed for
trading and 15% every six months after the initial release so that all
escrowed shares will have been released within thirty-six months of the
listing date. Warrants The following table summarizes the number of fully
exercisable warrant transactions during the first six months of
2006: A summary of the warrants outstanding
at June 30, 2006 is as follows: Share Capital - Continued Stock Options The following table summarizes the number of stock option
transactions and the weighted average exercise prices thereof for the
first six months of 2006: A summary of the common share options
that are outstanding at June 30, 2006 is as follows:
Stock-Based Compensation The Company follows the fair value method of accounting
for its stock-based compensation plans. The fair value of the stock
options awarded is determined at the grant date for all options that are
vested using the Black-Scholes option pricing model. The related
compensation cost of $131,801 (2005 - $nil) was recognized in the
Statements of Operations and Deficit for the six month period ended June
30, 2006 under the relevant administrative expense as
follows:
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Translation of registrant's name into English)
British Columbia, Canada V6C 2T6
(Address of principal executive offices)
Sutcliffe Resources Ltd.
(Registrant)
Date: August 30, 2006
By:
/s/ Laurence Stephenson
Laurence Stephenson
Title:
Chairman, President & CEO
SUTCLIFFE RESOURCES LTD.
INTERIM FINANCIAL STATEMENTS
FOR THE SECOND QUARTER ENDED
JUNE 30, 2006 and 2005
(Exploration Stage Company)
(Presented in Canadian Dollars)
(Unaudited Prepared by Management)
Vancouver, B,C.
August 28, 2006
MANAGEMENT
SUTCLIFFE RESOURCES LTD.
INTERIM BALANCE SHEETS
JUNE 30, 2006
(Unaudited Prepared by Management)
(Exploration Stage Company)
(Presented in Canadian Dollars)
Jun 30,
Dec 31,
2006 $
2005 $
(Unaudited)
(Audited)
ASSETS
CURRENT
Cash
3,379,955
35,271
Receivables
113,060
59,970
Prepaid expenses
9,748
20,848
Flow-through share proceeds (Notes 3)
-
1,159,182
3,502,763
1,275,271
RESOURCE PROPERTIES (Note 2)
4,019,001
2,608,898
7,521,764
3,884,169
LIABILITIES
CURRENT
Accounts payable and accrued liabilities
19,693
93,852
Unratified stock compensation
(Note 4)
-
202,879
19,693
296,731
FUTURE INCOME TAXES (Note 5)
589,457
589,457
609,150
886,188
SHAREHOLDERS'
EQUITY
SHARE CAPITAL (Note 3)
14,434,996
9,614,917
SUBSCRIPTIONS RECEIVABLE
-
(75,000
)
CONTRIBUTED SURPLUS (Note 4)
575,181
240,502
ACCUMULATED DEFICIT
(8,097,563
)
(6,782,438
)
6,912,614
2,997,981
7,521,764
3,884,169
APPROVED BY THE DIRECTORS:
"Laurence Stephenson"
Director
"Glen
J. Indra"
Director
SUTCLIFFE RESOURCES LTD.
INTERIM STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE SECOND QUARTER ENDED JUNE 30
(Unaudited Prepared by Management)
(Exploration Stage Company)
(Presented in Canadian Dollars)
Second Quarter ended
Six Months ended
June 30
June 30
June 30
June 30
2006 $
2005 $
2006 $
2005 $
GENERAL AND ADMINISTRATIVE EXPENSES
Automotive and travel
481
450
7,512
913
Bank charges and interest
584
398
819
1,256
Consulting fees (Note 4)
84,028
16,308
270,198
16,308
Financing fees
-
53,874
-
53,874
Interest on demand loans
-
27,647
-
45,772
Investor relations and communication (Note 4)
18,663
324
39,995
324
Management fees (Note 4 and 6)
19,500
7,500
108,591
15,000
Office, rent and supplies
7,731
9,717
19,255
12,717
Professional fees (Note 4)
44,779
31,249
75,630
40,999
Regulatory and transfer agent fees
11,712
29,830
42,091
36,663
Property investigation
expenditures (Note 2 (d))
504,100
-
766,840
-
LOSS BEFORE THE FOLLOWING
691,578
177,297
1,330,931
223,826
Interest income
(13,878
)
(109
)
(15,806
)
(186
)
NET LOSS
677,700
177,188
1,315,125
223,640
ACCUMULATED DEFICIT, beginning of
period
6,782,438
5,902,234
7,419,863
5,855,782
ACCUMULATED DEFICIT, end of period
8,097,563
6,079,422
8,097,563
6,079,422
LOSS PER SHARE basic and diluted
(0.02
)
(0.01
)
(0.04
)
(0.02
)
WEIGHTED AVERAGE SHARES OUTSTANDING
41,068,252
12,920,264
37,237,987
12,299,470
SUTCLIFFE RESOURCES LTD.
INTERIM STATEMENTS OF CASH FLOWS
FOR THE SECOND QUARTER ENDED JUNE 30
(Unaudited Prepared by Management)
(Exploration Stage Company)
(Presented in Canadian Dollars)
Second Quarter ended
Six Months ended
June 30
June 30
June 30
June 30
2006 $
2005 $
2006 $
2005 $
OPERATING ACTIVITIES
Net Loss
(677,700)
(177,188)
(1,315,125)
(223,640)
Non cash items:
Stock-based compensation
-
-
131,801
-
Non-cash working capital items:
Accounts receivable
12,375
(12,685)
(53,090)
(383)
Prepaid expenses
(2,400)
(86,000)
11,100
(86,000)
Accounts payable and accrued liabilities
(379,037)
83,020
(74,160)
117,387
(1,046,762)
(192,853)
(1,299,474)
(192,636)
FINANCING ACTIVITIES
Subscriptions received
-
-
75,000
-
Issuance of shares net of
issuance costs
188,950
2,051,303
4,820,079
2,081,303
Loans payable
-
(144,999)
-
(144,999)
188,950
1,906,304
4,895,079
1,936,304
INVESTING ACTIVITIES
Resource properties
(623,476)
(72,588)
(1,410,103)
(116,099)
Decrease in restricted cash
372,555
-
1,159,182
-
(250,921)
(72,588)
(250,921)
(116,099)
INCREASE (DECREASE) IN CASH
(1,108,733)
1,640,863
3,344,684
1,627,569
CASH, beginning
4,488,688
36,954
35,271
50,248
CASH, ending
3,379,955
1,677,817
3,379,955
1,677,817
SUTCLIFFE RESOURCES LTD.
Summary of Significant Accounting Policies
June 30, 2006 and 2005
(Exploration Stage Company)
(Presented in Canadian Dollars)
Ability to Continue as a
Going Concern
Cash
Resource Properties
SUTCLIFFE RESOURCES LTD.
Summary of Significant Accounting Policies
June 30, 2006 and 2005
(Exploration Stage Company)
(Presented in Canadian Dollars)
Future Income Taxes
Estimates and
Assumptions
Loss Per Share
Financial Instruments
Stock-Based Compensation
SUTCLIFFE RESOURCES LTD.
Summary of Significant Accounting Policies
June 30, 2006 and 2005
(Exploration Stage Company)
(Presented in Canadian Dollars)
Flow Through Shares
Comparative Figures
SUTCLIFFE RESOURCES LTD.
Notes to the Financial Statements
June 30, 2006 and 2005
(Exploration Stage Company)
(Presented in Canadian Dollars)
1.
2.
a)
Date
Payment
Share Issuance
On signing Letter of Intent
$ 7,500
nil
September 30, 2003
$15,000
nil
June 30, 2004
$17,500
nil
Closing of Prospectus Offering
nil
150,000 common shares
June 30, 2005
$30,000
100,000 common shares
June 30, 2006
$50,000
100,000 common shares
Date
Expenditure
Expended to June 30, 2006
October 31, 2005
$300,000
$
300,000
October 31, 2006
$350,000
$
350,000
October 31, 2007
$400,000
$
400,000
October 31, 2008
$500,000
$
500,000
SUTCLIFFE RESOURCES LTD.
Notes to the Financial Statements
June 30, 2006 and 2005
(Exploration Stage Company)
(Presented in Canadian Dollars)
2.
b)
SUTCLIFFE RESOURCES LTD.
Notes to the Financial Statements
June 30, 2006 and 2005
(Exploration Stage Company)
(Presented in Canadian Dollars)
2.
c)
Resource Properties expenditure breakdown for the six month
period ended June 30:
British Columbia, Canada
2006
($)
2005
($)
Beale Lake, Liard Mining District
Property acquisition
costs (cash)
50,000
30,000
Property acquisition costs (shares)
75,000
71,000
125,000
101,000
Deferred exploration and development:
Assays and reports
15,552
2,023
Consulting
and engineering
91,314
-
Diamond drilling
328,523
-
Equipment
rental and supplies
562,713
-
Field personnel
234,906
-
Mobilization/Demobilization
50,595
-
Travel
1,500
-
Deferred exploration and development
costs for the period
1,285,103
2,023
Harrison Lake, New Westminster Mining District
Property acquisition
costs (shares)
-
30,000
-
30,000
Deferred exploration
and development:
Assays and
reports
-
300
Equipment rental and supplies
-
5,573
Field
personnel
-
2,520
Geophysical survey
-
8,183
Deferred exploration and development
costs for the period
-
16,576
Total Resource Properties Costs for the Period
1,410,103
149,599
Total Expenditures, Balance, Beginning of Period
2,608,898
357,680
Total Expenditures, Balance, June 30
4,019,001
507,279
d)
SUTCLIFFE RESOURCES LTD.
Notes to the Financial Statements
June 30, 2006 and 2005
(Exploration Stage Company)
(Presented in Canadian Dollars)
3.
a)
June 30, 2006
June 30, 2005
Number
Number
Of Shares
Amount
of Shares
Amount
Balance, beginning of period
28,191,625
$
9,614,917
11,633,900
$
5,753,710
Issued during the period for:
Common shares cash (1)
4,768,500
2,572,158
9,700,000
2,001,303
Warrants exercised
8,195,952
2,160,421
-
-
Options exercised
50,000
12,500
50,000
12,500
Property
100,000
75,000
450,000
101,000
Reclassification of contributed surplus
-
-
-
5,104
Balance, end of period
41,306,077
$
14,434,996
21,833,900
$
7,873,617
b)
SUTCLIFFE RESOURCES LTD.
Notes to the Financial Statements
June 30, 2006 and 2005
(Exploration Stage Company)
(Presented in Canadian Dollars)
3.
Share Capital Continued
Pursuant to this agreement 550,800 shares were
released from escrow during the six months ended June 30, 2006 (2005
367,200 shares). As of June 30, 2006 there were 2,203,200 shares remaining
in escrow (2005 3,304,800).
c)
Weighted Average
Number
Exercise price ($)
Balance, January 1, 2006
12,986,675
0.30
Issued:
4,768,500
0.75
Exercised:
(8,195,952
)
0.26
Balance, June 30, 2006
9,559,223
0.56
Number
Exercise
Expiry Date
Price $
3,735,673
0.35
June 21, 2007
617,550
0.25
June 21, 2007
437,500
0.60
December 30, 2007
4,768,500
0.75
February 14, 2008
9,559,223
SUTCLIFFE RESOURCES LTD.
Notes to the Financial Statements
June 30, 2006 and 2005
(Exploration Stage Company)
(Presented in Canadian Dollars)
3.
d)
Number of
Weighted Average
options
Exercise Price ($)
Outstanding at December 31, 2005
4,350,000
0.25
Granted
1,250,000
0.60
Exercised
(50,000
)
0.25
Outstanding at June 30, 2006
5,550,000
0.33
Date of Grant
Outstanding
Vested
Exercise Price
Expiry Date
December 30, 2003
1,100,000
1,100,000
$ 0.25
December 30, 2008
July 11, 2005
3,200,000
1,066,666
$ 0.25
July 11, 2010
January 13, 2006
1,250,000
416,666
$ 0.60
January 13, 2011
5,550,000
2,583,332
4.
June 30, 2006 | June 30, 2005 | ||||||
$ | $ | ||||||
Income statement items | |||||||
Consulting fees | 52,720 | - | |||||
Investor relations and communications | 5,272 | - | |||||
Management fees | 69,591 | - | |||||
Professional fees | 4,218 | - | |||||
131,801 | - |
SUTCLIFFE RESOURCES LTD. |
Notes to the Financial Statements |
June 30, 2006 and 2005 |
(Exploration Stage Company) |
(Presented in Canadian Dollars) |
4. |
Stock-Based Compensation - Continued |
Weighted average assumptions used in calculating compensation expense in respect of options granted to consultants and employees were as follows: | |
|
June 30, 2006 | June 30, 2005 | ||||||
Risk-free rate | 3.34% | - | |||||
Dividend yield | Nil% | - | |||||
Volatility factor of the expected market price | |||||||
of the Companys common shares | 80% | - | |||||
Weighted average expected life of the options | |||||||
(months) | 60 | - |
5. |
Income Taxes |
During the year ended December 31, 2005, the Company renounced $1,727,600 (2004 - $nil) of expenditures and recorded a future income tax liability of $589,457 (2004 - $nil) in accordance with the accounting treatment of Canadian flow-through shares. The Company had a commitment to spend $1,159,182 (2004 - $nil) on Canadian exploration expenditures which was completed by June 30, 2006. | |
6. |
Related Party Transactions |
Related party transactions not disclosed elsewhere in these financial statements include: | |
For the quarter ending June 30, 2006, management fees charged by a director totaled $19,500 (2005 - $7,500). | |
7. |
Subsequent Events |
In July, 2006, the Company granted options to acquire a total of 2,690,000 shares at an exercise price of $0.66 per share and expiring in July, 2011.
In August, 2006, the Company announced a private placement of 3,334,000 units at $0.75 per unit to raise net proceeds of $2,500,500. Each unit will consist of one common share and one-half of a share purchase warrant with each full warrant exercisable at $0.85 per share for a period of two years.
The Company has signed an agreement, effective July, 2006, with Chukot Gold Ltd. (Chukot) whereby Sutcliffe has the exclusive option to acquire Chukots interest in one or more of three mineral properties known as the Tumannoye, Svobodnoye and Elvenei Ore Fields as well additional future properties, all situated in the Chukotka Autonomous Region of Russia. In August, 2006, the Company was informed that Chukot was awarded two exploration properties, the Elvenei and the Tumannoye, at the Russian Federal Subsoil Agency auction held in Anadyr, Chukotka.
SUTCLIFFE RESOURCES LTD. |
Notes to the Financial Statements |
June 30, 2006 and 2005 |
(Exploration Stage Company) |
(Presented in Canadian Dollars) |
8. |
Differences Between Canadian and United States Generally Accepted Accounting Principles | |
As discussed in the Summary of Significant Accounting Policies, these financial statements have been prepared in accordance with generally accepted accounting principles in Canada (CDN GAAP) which conform in all material respects with those in the United States (US GAAP), except as follows: | ||
a) |
Exploration Expenditures | |
Under Canadian GAAP, mineral exploration expenditures are capitalized or considered to be investing cash flows until the property is sold or abandoned. If developed, the expenditures are amortized over the expected benefit period. If there can be no assurance of the commencement of operations, US GAAP requires that exploration expenditures be expensed as incurred, or is considered as operating cash flow, until it is determined that commercially viable operations exist and the expenditures then incurred are recoverable. Such costs would only be capitalized after a bankable feasibility study was completed that demonstrates proven reserves. For 2004, the Company initially adopted EITF 04-2 for treating mineral property acquisition costs as tangible assets for US GAAP purposes but due to the uncertainty of recovery, these costs were written off for all the periods presented. | ||
b) |
Escrow Shares |
Under CDN GAAP shares issued with escrow restrictions are recorded at their issued price and are not revalued upon release from escrow. Under US GAAP, escrow shares which are released upon the Company meeting certain criteria are considered to be contingently issuable. These shares are excluded from the weighted average shares calculation and the difference between the fair market value of the shares at the time of their release from escrow and the shares original issue price (being the market price at that time) is accounted for as a compensation expense and share capital at the time shares are released from escrow. The release of the Companys escrow shares is not performance-based and therefore no adjustments have been made to the calculation of loss per share. | ||
c) |
Stock option compensation | |
Statement of Financial Accounting Standard (SFAS) No. 123, Accounting for Stock-Based Compensation, requires the Company to record compensation to non- employees using the fair value based method prescribed therein similar to accounting principles in effect in Canadian GAAP. The Company has not granted options to employees. |
SUTCLIFFE RESOURCES LTD. |
Notes to the Financial Statements |
June 30, 2006 and 2005 |
(Exploration Stage Company) |
(Presented in Canadian Dollars) |
8. | Differences Between Canadian and United States Generally Accepted Accounting Principles - Continued |
|
d) | Flow-through Shares |
|
Under Canadian income tax regulations, a company is permitted to issue shares whereby the company agrees to incur qualifying expenditures and renounce the related income tax deductions to the investors. The Company has accounted for the issuance of flow-through shares using the deferral method in accordance with EIC No. 146 under Canadian GAAP. At the time of issue, the funds received are recorded as share capital and upon renunciation to the shareholders, the Company reduces share capital and records a temporary future income tax liability for the amount of tax reduction renounced to the shareholders. In instances where the Company has sufficient available tax loss carryforwards or other deductible temporary differences available to offset the renounced tax deduction, the realization of the deductible temporary differences is credited to income in the period of renunciation. As at December 31, 2005, the Company renounced $1,727,600 in expenses and recorded, under Canadian GAAP, an income tax recovery of $589,457. |
||
For US GAAP, the proceeds of the sale of flow-through shares should be allocated between the offering of shares and the sale of tax benefits. The allocation is calculated based on the difference between the quoted market value of the Companys shares and the proceeds received and a liability is recognized for this difference. The liability is reversed upon renunciation and a deferred tax liability is recognized. The difference between the liability recognized at the time of issuance and the deferred tax liability will be included as income tax expense. As the flow-through units were sold for proceeds equal to the quoted market value of the Companys common shares, no liability was recognized for all the periods presented. |
||
For the purposes of accounting under Canadian GAAP, the Company has presented activities for both restricted and unrestricted cash in the Statement of Cash Flows. The Company reflects the proceeds received from flow-through shares as a cash inflow from financing activities. As the related flow-through proceeds are restricted for Canadian exploration activities, these proceeds are then reflected as a cash outflow and an increase in restricted cash under investing activities, even in periods that such cash is not expended. When eligible exploration expenses are incurred, they are reflected as a cash inflow and a decrease in restricted cash under investing activities. |
SUTCLIFFE RESOURCES LTD. |
Notes to the Financial Statements |
June 30, 2006 and 2005 |
(Exploration Stage Company) |
(Presented in Canadian Dollars) |
8. | Differences Between Canadian and United States Generally Accepted Accounting Principles - Continued |
|
e) | Comprehensive Income (loss) |
|
US GAAP requires the Company to present comprehensive income (loss) in accordance with SFAS No. 130, Reporting Comprehensive Income, which establishes standards for reporting and display of comprehensive income (loss), its components and accumulated balances. Comprehensive income comprises net income (loss) and all charges to shareholders equity except those resulting from investments by owners and distributions to owners. Net loss and comprehensive loss per US GAAP are the same. |
||
The impact of the above on the financial statements is as follows: |
STATEMENTS OF OPERATIONS AND DEFICIT | |||||||
June 30, | December 31, | ||||||
2006 $ | 2005 $ | ||||||
Net loss per Canadian GAAP | (1,315,125 | ) | (926,656 | ) | |||
Adjustments related to: | |||||||
Write-off of resource property expenditures | (1,285,103 | ) | (656,718 | ) | |||
Cash for resource property acquisitions | (50,000 | ) | (291,000 | ) | |||
Shares for resource property acquisitions | (75,000 | ) | (1,303,500 | ) | |||
Net loss per US GAAP | (2,725,228 | ) | (3,177,874 | ) | |||
Loss per share per US GAAP | (0.07 | ) | (0.18 | ) | |||
Basic and diluted | |||||||
Shareholders equity (deficit) per Canadian GAAP | 6,912,614 | 2,997,981 | |||||
Adjustment related to: | |||||||
Resource property and expenditure write-off | (4,019,001 | ) | (2,608,898 | ) | |||
Shareholders equity (deficit) per US GAAP | 2,893,613 | 389,083 | |||||
BALANCE SHEETS | |||||||
Total assets per Canadian GAAP | 7,521,764 | 3,884,169 | |||||
Adjustment related to: | |||||||
Resource property and expenditure write-off | (4,019,001 | ) | (2,608,898 | ) | |||
Total assets per US GAAP | 3,502,763 | 1,275,271 |
SUTCLIFFE RESOURCES LTD. |
Notes to the Financial Statements |
June 30, 2006 and 2005 |
(Exploration Stage Company) |
(Presented in Canadian Dollars) |
8. |
Differences Between Canadian and United States Generally Accepted Accounting Principles - Continued |
STATEMENTS OF CASH FLOWS | |||||||
June 30, | December, 31 | ||||||
2006 $ | 2005 $ | ||||||
Cash flows used in operating activities per Canadian GAAP | (1,299,474 | ) | (643,398 | ) | |||
Adjustments for mineral properties and exploration costs | (1,410,103 | ) | (947,718 | ) | |||
Cash flows used in operating activities per US GAAP | (2,709,577 | ) | (1,591,116 | ) | |||
Cash flows used in investing activities per Canadian GAAP | (250,921 | ) | (2,106,900 | ) | |||
Adjustment for mineral properties and exploration costs | 1,410,103 | 947,718 | |||||
Cash flows used in investing activities per US GAAP | 1,159,182 | (1,159,182 | ) |
f) | New Accounting Pronouncements |
On December 16, 2004, the Financial Accounting Standards Board (FASB) issued (SFAS) No. 123 (revised 2004), Share-Based Payment. SFAS No. 123(R) requires the Company to measure all employee stock-based compensation awards using a fair value method and record such expense in its financial statements. In addition, SFAS No. 123(R) requires additional accounting related to the income tax effects and additional disclosure regarding the cash flow effects resulting from share-based payment arrangements. For public entities that do not file as a small business issuer, SFAS No. 123(R) is effective for annual reporting periods of the registrants first fiscal year beginning on or after December 31, 2005.
In February 2006, FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments an Amendment of FASB Statements No. 133 and 140. Among other things, SFAS No. 155 permits the election of fair value remeasurement for certain hybrid financial instruments that would otherwise require bifurcation under Statement 133, Accounting for Derivative Instruments and Hedging Activities. These hybrid financial instruments would include both assets and liabilities. SFAS No. 155 is effective for fiscal years beginning after September 15, 2006.
The Company has not yet determined the effect of future implementation of these new standards on its financial statements.
SUTCLIFFE RESOURCES LTD.
Managements Discussion & Analysis
For the quarter ended June 30, 2006
Form 51-102F1 as at August 28, 2006
DESCRIPTION OF BUSINESS
The Company is in the business of acquiring and developing mineral exploration projects. The Company has interests in the Harrison Lake nickel-copper and precious metal project in southwestern British Columbia and in the Beale Lake gold property located in northern British Columbia. The Company has also recently formalized its agreement with Chukot Gold Ltd., a Russian corporation which is acquiring interest in mineral properties in the Chukotka Autonomous Region of Russia.
The Harrison Lake Project is a belt of ultramafic and metavolcanics and metasediments which extend from the site of the former B.C. Nickel Mine, 7 kilometres north of Hope, B.C., over 60 kilometres along the east side of Harrison Lake. The Company had previously identified 15 high priority sulphide related Airborne ElectroMagnetic (AEM) targets and combined with the data from detailed ground geophysical surveying had selected drill hole locations.
The Beale Lake Project, 75 kilometers northeast of Dease Lake, B.C., is a sheeted stockwork quartz-sulphide-scheelite vein and siliceous replacement mineralization system that has characteristics of both the Alaska Fort Knox and Pogo intrusion related gold deposits. An Induced Polarization (IP) survey was designed to follow up on high grade gold showings and used to select drill targets. The Company carried out a drill program and has completed 10 diamond drill holes out of 24 permitted for.
OPERATIONS AND EXPENDITURES
During the first quarter of 2006 a drilling program for the Beale Lake property was started. The target was a bulk tonnage, intrusive-related mesothermal quartz-carbonate-stockwork gold-silver deposition. Ten diamond drill holes of a planned 24 hole drilling program were completed to date, totally 1,928 metres. Results are expected to be released in early September, 2006.
SUMMARY OF QUARTERLY RESULTS
2006 | 2005 | 2004 | ||||||||||||||||||||||
Jun 30 $ | Mar 31 $ | Dec 31 $ | Sep 30 $ | Jun 30 $ | Mar 31 $ | Dec 31 $ | Sep 30 $ | |||||||||||||||||
Total revenue | nil | nil | nil | nil | nil | nil | nil | nil | ||||||||||||||||
Gen & Admin. | 559,777 | 492,552 | 232,876 | 149,259 | 177,188 | 46,452 | 16,806 | 27,610 | ||||||||||||||||
Expenses | ||||||||||||||||||||||||
Loss | (691,578 | ) | (624,353 | ) | (232,876 | ) | (470,140 | ) | (177,188 | ) | (46,452 | ) | (16,806 | ) | (27,610 | ) | ||||||||
Net Loss | (677,700 | ) | (622,425 | ) | (232,876 | ) | (470,140 | ) | (177,188 | ) | (46,452 | ) | (49,018 | ) | (30,610 | ) | ||||||||
Loss/share | (0.02 | ) | (0.02 | ) | (0.01 | ) | (0.02 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||||
Def. Min. Prop. | 623,476 | 786,627 | 1,635,309 | 499,810 | 72,588 | 43,511 | 140,051 | 32,496 | ||||||||||||||||
Costs | ||||||||||||||||||||||||
Total Assets | 7,521,764 | 8,389,551 | 3,884,169 | 1,812,746 | 2,302,417 | 490,281 | 472,366 | 316,812 |
Page 2
GENERAL AND ADMINISTRATIVE EXPENSES
Quarter ended | Quarter ended | |||||
Jun 30, 2006 | Jun 30, 2005 | |||||
Professional fees | $ | 44,779 | $ | 31,249 | ||
Consulting | 84,028 | 16,308 | ||||
Management and administration fees | 19,500 | 7,500 | ||||
Office, rent & supplies | 7,731 | 9,717 | ||||
Financing fees | - | 53,874 | ||||
Investor relations and communications | 18,663 | 324 | ||||
Regulatory and transfer agent fees | 11,712 | 29,830 | ||||
Resource property investigation expenditures | 504,100 | - | ||||
Automotive and travel | 481 | 450 | ||||
Interest on demand loans | 27,647 | |||||
Bank charges and interest | 584 | 398 | ||||
Total general and administrative expenses | ||||||
for the quarter | $ | 691,578 | $ | 177,297 |
The administrative expenditures made during the first quarter were indicative of the Companys increased corporate activities due to the private placement financings and the exploration program on the Beale Lake project Almost all categories are much higher compared to the previous fiscal period due to the increased ancillary costs associated with these developments and the costs involved in investor relations and communications.
The major expenditure in the second quarter involved the resource property investigation in Russia. Subsequent to the quarter end, the Company signed an exclusive agreement with Chukot Gold Ltd. to acquire their rights in respect to tenders for mineral properties in the Chukotka Autonomous Region of northeastern Russia.
RELATED PARTY TRANSACTIONS
For the quarter ending June 30, 2006, management fees charged by a director totaled $19,500 (2005 - $7,500).
LIQUIDITY AND SOLVENCY
The Company had working capital for the quarter ending June 30, 2006 of $3,483,070 compared to a working capital of $978,540 for the year ended December 31, 2005. The continued operations of the Company are dependent upon its ability to raise adequate financing. To this end the Company will be seeking future funding through private placement offerings as well as the exercise of outstanding share purchase warrants to maintain adequate working capital and to raise funds for exploration expenditures.
Jun 30, 2006 | Jun 30, 2005 | |||||
Working Capital | $ | 3,483,070 | $ | 1,404,312 | ||
Accumulated Deficit | $ | (8,097,563 | ) | $ | (6,079,422 | ) |
There have been no changes in accounting policies and the Company has made no off-balance sheet arrangements and none are contemplated in the future. The Company does not utilize financial or other instruments in its operations.
Page 3
DISCLOSURE OF OUTSTANDING SHARE DATA as of August 28, 2006
Share Capital Authorized unlimited common shares
Share Capital Issued 42,038,427
Shares held in escrow
Warrants Outstanding
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
I, | Laurence Stephenson, Chief Executive Officer of Sutcliffe Resources Ltd., certify that: | |
1. | I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) of Sutcliffe Resources Ltd. (the Issuer) for the interim period ending June 30, 2006; | |
2. | Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; | |
3. | Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the Issuer, as of the date and for the periods presented in the interim filings. | |
4. | The Issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the Issuer, and we have: | |
(a) | designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the Issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared; and | |
(b) | designed such internal control over financial reporting, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Issuer's GAAP; and | |
5. | I have caused the Issuer to disclose in the interim MD&A any change in the Issuer's internal control over financial reporting that occurred during the Issuer's most recent interim period that has materially affected, or is reasonably likely to materially affect, the Issuer's internal control over financial reporting. |
Date: August 29, 2006 | |
"Laurence Stephenson" | |
Chief Executive Officer |
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
I, | Susan Wong, Chief Financial Officer of Sutcliffe Resources Ltd., certify that: |
|
1. | I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) of Sutcliffe Resources Ltd. (the Issuer) for the interim period ending June 30, 2006; | |
2. | Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; | |
3. | Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the Issuer, as of the date and for the periods presented in the interim filings. | |
4. | The Issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the Issuer, and we have: | |
(a) | designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the Issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared; and | |
(b) | designed such internal control over financial reporting, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Issuer's GAAP; and | |
5. | I have caused the Issuer to disclose in the interim MD&A any change in the Issuer's internal control over financial reporting that occurred during the Issuer's most recent interim period that has materially affected, or is reasonably likely to materially affect, the Issuer's internal control over financial reporting. |
Date: August 29, 2006 | |
"Susan Wong" | |
Chief Financial Officer |
Press Release SR #09-06
August 16, 2006
PRIVATE PLACEMENT UNIT FINANCING
Sutcliffe Resources Ltd. (the Company) is announcing a private placement of 3,334,000 units at $0.75 per unit to raise $2,500,500. Each unit will consist of one common share and one-half of a share purchase warrant. Each full share purchase warrant will entitle the warrant holder to purchase an additional share at $0.85 per share for a period of two years from the closing of the financing.
The funds raised will be used for general corporate purposes.
Finders fees will be paid, where applicable, commensurate with TSX Venture Exchange policies.
On behalf of the Board of Directors
Laurence Stephenson
Laurence Stephenson,
President
Forward-looking statements - statements included in this news release that are not historical facts may be considered "forward-looking statements". All estimates and statements that describe the Company's objectives, goals or future plans are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties where actual results could differ materially from those currently anticipated.
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
420-625 Howe Street, Vancouver, British Columbia CANADA V6C
2T6
Tel.: 604.608.0223 - Fax: 604.608.0344 - North America Toll-free:
1.877.233.2244
REPORT FILED BY ELIGIBLE INSTITUTIONAL
INVESTOR
UNDER PART 4 OF NATIONAL INSTRUMENT 62-103
Re: SUTCLIFFE RESOURCES LTD. (the Issuer)
(a) | The name and address of the Eligible Institutional Investor: |
Firebird Global Master Fund, Ltd. (the Investor) | |
c/o | |
Citco Fund Services (Cayman Islands) Limited | |
Corporate Centre | |
West Bay Road | |
P.O. Box 31106 SMB | |
Grand Cayman | |
Cayman Islands, British West Indies |
(b) | The designation and number or principal amount of voting or equity securities of the Issuer in respect of which the report is being filed and the securityholding percentage of the Investor in the class of securities: |
The Investor reports that the aggregate number of securities of the Issuer held by the Investor at the end of July 2006 is 2,150,000 common shares and 2,000,000 warrants to acquire the same number of common shares in the share capital of the Issuer. | |
The 2,150,000 common shares held by the Investor represent approximately 5.25% of the outstanding common shares of the Issuer. | |
In addition, assuming the exercise by the Investor of the above-mentioned warrants to acquire additional common shares of the Issuer, the Investors total securityholding in the share capital of the Issuer would be 4,150,000 common shares representing approximately 9.67% of the outstanding common shares of the Issuer, including the common shares deemed to be acquired pursuant to the exercise of such warrants. | |
(c) | Statement: |
The Investor is eligible to file this report under Part 4 of National Instrument 62-103 with respect to the Issuer. |
- 2 -
DATED this 9th day of August, 2006.
FIREBIRD GLOBAL MASTER FUND,
LTD. | ||
Per: | (s) James Passin | |
Name: | James Passin | |
Title: | Director |