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Condensed Interim Consolidated Financial Statements for the Three and Nine Month Periods Ended September 30, 2011
(Expressed in Canadian Dollars) (Unaudited Prepared by Management)
Notice of No Auditor Review of Condensed Interim Consolidated Financial Statements Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of interim consolidated financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor. The accompanying unaudited condensed interim consolidated financial statements of the company have been prepared by and are the responsibility of the Company's management. These condensed interim consolidated financial statements reflect management's best estimates and judgment based on information currently available as of November 28, 2011. The Company's independent auditor has not performed a review of these condensed interim consolidated financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review of interim consolidated financial statements by an entity's auditor.
$ $ $
ASSETS
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Prepaids and sundry receivables 87 717 10,102
Investment in Global Mineral Investments, LLC (Notes 3 (c) and 14) 485,400 485,400 485,400
Current Liabilities
Capital Stock (Note 8) 17,268,966 17,268,966 17,268,966 Contributed Surplus 890,684 890,684 890,684 Deficit (17,516,226) (17,501,620) (17,346,907) Total Equity 643,424
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658,030 812,743 Total Liabilities and Shareholders' Equity 704,981 695,926 837,527 Going Concern (Note 2) The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements Approved on behalf of the Board
"Hirsh Kwinter" (signed) Director "Dr. Ezra Franken ("signed") Director Hirsh Kwinter Dr. Ezra Franken
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in Canadian Dollars) (Unaudited - Prepared by Management) Three Months Ended
September 30, 2011 September 30, 2010
2,012 0 2,012
$ (2,012)
$ (0.00001)
(0.00006)
(0.00006)
(0.0002)
239,171,893
239,171,893
239,171,893
239,171,893
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements
Amount $ 17,268,966
Deficit (17,346,907) $
Total 812,743
239,171,893
(40,651) (772,092)
(114,062) 658,030
(14,606) 643,424
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements
(Note 5) OPERATING ACTIVITIES Net Loss Changes in non-cash working capital items Prepaids and sundry receivables Accounts payable and accrued charges Cash Flow Used in Operating Activities FINANCING ACTIVITIES Loan from Directors Cash Flow From Financing Activities Net Increase (Decrease) in Cash Cash beginning of period Cash end of period $ 20,000 20,000 17,575 1,919 19,494 $ 0 0 (3,874) 15,408 11,534 $ 39,000 39,000 9,685 9,809 19,494 $ 0 0 (30,491) 42,025 11,534 618 (1,031) (2,425) 10,362 244 (3,874) 630 (15,339) (29,315) 10,016 144 (30,491) $ (2,012) $ (14,480) $ (14,606) $ (40,651)
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements
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Notes to the Condensed Interim Consolidated Financial Statements for the Period Ended September 30, 2011 (Expressed in Canadian Dollars) (Unaudited - Prepared by Management) ____________________________________________________________________________________ 1. CORPORATE PROFILE Venga Aerospace Systems Inc. (the Company) was originally incorporated under the Business Corporations Act (Ontario) by certificates of amalgamation dated April 26, 1979, amalgamating Frodac Mines Ltd., Great Bear Silver Mines Limited and Silver Monarch Mines Limited to become Frodac Consolidated Energy Resources Ltd. On July 25, 1985, the Company changed its name to Global Aerospace Systems Inc. and on November 3, 1987, the Company further changed its name to Venga Aerospace Systems Inc. In addition, these unaudited condensed interim consolidated financial statements include the wholly owned subsidiary Venga Joint Venture Ltd., which is inactive. 2. GOING CONCERN These unaudited condensed interim consolidated financial statements have been prepared in accordance with IFRS applicable accounting principles to the presentation of interim financial statements and to a going concern which assumes that the Company will be able to realize its assets, including the ultimate realization of its longterm investments, and discharge its liabilities in the normal course of business. Recurring sources of revenue have not yet proven to be sufficient. The Company needs to obtain additional financing to enable it to continue its business. In the absence of additional financing, the Company may not have sufficient funds to meet its obligations. Management continues to monitor the cash needs and consider various alternatives to raise additional financing. However, management is reasonably confident but can offer no guarantee that it will be able to secure the necessary financing to enable the Company to continue as a going concern. These unaudited condensed interim consolidated financial statements do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern. There is no assurance that this will be successful. If the going concern basis is not appropriate, material adjustments may be necessary in the carrying amounts and/or classification of assets and liabilities and the loss for the period reported in these unaudited condensed interim consolidated financial statements. 3. OPERATIONS (a) Aerospace Unit The Company, in association with ARINC Incorporated (www.arinc.com), has made an unsolicited proposal to the Canadian government to provide replacement jet aircraft for the Canadian Forces' Snowbirds aerial demonstration squadron. In July of 2007, ARINC advised the Company that as a consequence of ARINC's decision to discontinue its aircraft maintenance division, ARINC was withdrawing from further participation in the Company's Snowbirds' aircraft replacement proposal. As a direct result of the continuing delays in the Canadian government's decision with respect to selecting a program to replace or upgrade the Snowbirds' aircraft, the Company is holding its Snowbirds' aircraft replacement proposal in abeyance pending receipt of a positive response from the Canadian government. (b) 3D Graphics Unit In November of 2006, the Company entered into a joint venture agreement (the JV Agreement) with 3DP North America, Inc., of Kenner, Louisiana; United Business & Capital Services, LLC of Kenner, Louisiana; EKG, LLC of Lafayette, Louisiana and Armadillo Photo Supply, Inc. of Houston, Texas creating a new commercial entity, the 3DP North America Joint Venture (the New JV), to provide a range of advanced 3D products and print services for both commercial and consumer customers. The Company retains a 30% ownership interest in the New JV with 3DP North America, Inc., who acts as the managing venturer of the New JV, owning the remaining 70% of the venture. Pursuant
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disbursed or distributed by the Company as the financial manager of the Proposed Dredging Operations;
Operations In June of 2009, the Company announced that GMI had commenced both land and river based gold mining operations at one of the GMI Concessions and that these initial mining operations had produced 14 ounces of gold. GMI suspended all gold mining operations in July of 2009 with the onset of the Liberian rainy season. In November of 2009, GMI resumed its Liberian gold mining operations with dredging activities at GMI's Dugbe River site. In each of the months of March and April, 2010 GMI's gold mining operations produced a further 19 ounces of gold. As a direct consequence of the early on set of the Liberian rainy season, GMI ceased all mining operations in early May of 2010 and only recommenced dredge mining operations at GMI's Dugbe River site in late February, 2011. As of the date of these unaudited condensed interim consolidated financial statements the Company has yet to receive confirmation as to the results of GMI's dredge mining operations that were recommenced in February, 2011. On April 11, 2011, the Company announced that GMI had signed a funding and operational agreement (the "Operational Agreement") with Kiwi, Inc., a Liberian based mining company to fund and manage GMI's dredge mining and planned land based mining operations at GMI's Kumasi Hill 15 and Kumasi Hill 18 concessions ("GMI's Planned Land Based Operations") located in Sinoe County, Liberia. Pursuant to the terms of the Operational Agreement, Kiwi, Inc. agreed to commence full mining operations at GMI's two Kumasi Hill sites by October 1, 2011. While the Corporation has received confirmation from GMI that the original October 1, 2011 date for the commencement of mining operations at GMI's two Kumasi Hill sites has been extended, as of the date of these unaudited condensed interim consolidated financial statements the Company has yet to receive confirmation as to when, or even if, such mining operations will begin. The Operational Agreement further provides that Kiwi, Inc. will have full operational management of GMI's dredge mining operations and Planned Land Based Operations, with all profit derived from such operations being divided equally between Kiwi, Inc. and GMI. Financings In February of 2010, the Company announced that GMI had signed a letter of intent ("LOI") with RAM Consulting Group ("RAM Consulting") of Charlotte, North Carolina wherein RAM agreed, on a best efforts basis, to raise $12 million dollars to finance GMI's proposed land based gold mining operations in Liberia. As of the date of these financial statements GMI has not finalized or received any funding from RAM Consulting with respect to the LOI or otherwise.
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assist Tawana in the development and operation of the Sinoe Project, retain and independently develop certain identified gold mining sites within the Sinoe Project and continue to pursue GMI's current and planned gold dredging operations in GMI's mining concessions.
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These condensed interim consolidated financial statements are unaudited and have been prepared in accordance with IAS 34 Interim Financial Reporting (IAS 34) using accounting policies consistent with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and Interpretations of the International Financial Reporting Interpretations Committee (IFRIC). These are the
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IFRS 12 Disclosure of Interests in Other Entities - effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, requires the disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with its interests in other entities and the effects of those interests on its financial position, financial performance and cash flows. IFRS 13 Fair Value Measurement - effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, provides the guidance on the measurement of fair value and related disclosures through a fair value hierarchy.
These condensed unaudited interim consolidated financial statements have been prepared by the Company in
accordance with IFRS applicable to the preparation of interim financial statements, including IAS 34 - Interim Financial Reporting. Subject to certain transition elections disclosed in Note 6(a), the Company has consistently applied the same accounting policies in its opening IFRS statement of financial position at January 1, 2010 and throughout all periods presented, as if these accounting policies had always been in effect. Note 6(b) discloses the impact of the transition to IFRS on the Companys reported financial position, financial performance and cash flows, including, if any, the nature and effect of significant changes in accounting policies from those used in the Companys annual financial statements for the year ended December 31, 2010. The policies applied in these condensed unaudited interim consolidated financial statements are based on IFRS issued and outstanding as of November 28, 2011, the date that the Board of Directors approved the financial statements. Any subsequent changes to IFRS that are given effect in the Company's annual financial statements for the year ending December 31, 2011 could result in restatement of these condensed interim consolidated financial statements, including the transition adjustments recognized on change-over to IFRS. IFRS employs a conceptual framework that is similar to Canadian GAAP. The adoption of IFRS has not changed the Company's Statement of Financial Position, Statement of Comprehensive Loss, Statement of Changes in Equity and Statement of Cash Flows as previously reported under GAAP. As noted below, no transitional adjustments were made when converting from GAAP to IFRS. These condensed unaudited interim consolidated financial statements should therefore be read in conjunction with the Company's audited Canadian GAAP annual financial statements for the year ended December 31, 2010 and the accompanying notes as well
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as the Company's condensed interim consolidated financial statements for the period ended March 31, 2011.
6. TRANSITION TO IFRS The effect, if any, of the Companys transition to IFRS, is summarized in as follows:
a) Exemptions and exceptions from full retrospective application elected by the Company
A number of optional exemptions from full retrospective application are available to the Company upon adoption of IFRS. The impact or non impact of all these optional exemptions on the Company is listed below:
Exemption
Application of exemption
The Company has applied the business combinations exemption in IFRS 1. It has not restated business combinations that took place prior to January 1, 2010 transition date. No adjustment was required.
Reason for not applying the exemption The Company has not issued any compound instruments. This exemption is not applicable. There was no cumulative translation differences previously recorded under Canadian GAAP. This exemption is not applicable. The Company has no securities classified as available-for-sale investments or as financial assets at the fair value through profit and loss. This exemption is not applicable.
The Company has no defined benefit plans. This exemption is not applicable.
Employee benefits exemption Exemption from restatement of comparatives for IAS 32 and IAS 39 Fair value as deemed cost exemption Fair value measurement of financial assets or liabilities at initial recognition
The Company has no hedging relationships or derivatives. This exemption is not applicable. The Company has elected not to measure any items of property, plant and equipment at fair value as at January 1, 2010. This exemption is not applicable. The Company has not applied the exemption offered by the revision of IAS 39 on the initial recognition of the financial instruments measured at the fair value through profit and loss
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where there is no active market. This exemption is not applicable.
The Company has elected not to apply the share-based payment exemption. No adjustment was required.
Description of exception and application to the Company Assets held for sale or discontinued operations are recognized in accordance with IFRS 5. The Company did not have any assets that met the held-for-sale criteria during the period presented. No adjustment was required. Financial assets and liabilities derecognized before January 1, 2010 are not re-recognized under IFRS. The Company has no financial assets and liabilities that were de-recognized thus the application of this exemption has no impact on the Company. Estimates under IFRS at January 1, 2010 should be consistent with estimates made for the same date under previous GAAP, unless there is evidence that those estimates were in error. No adjustments for estimates have been made. The Company has never applied hedge accounting. This exception is not applicable.
Estimates exception
b) Reconciliation between IFRS and Canadian GAAP IFRS employs a conceptual framework that is similar to Canadian GAAP. The adoption of IFRS may result in significant changes to a company's reported financial position, results of operations, and cash flows. Presented below are the Company's determinations as to any reconciliations necessary or required to reconcile IFRS treatment the Company's assets, liabilities, equity, net loss and cash flows as such items may differ from those reported under Canadian GAAP: Reconciliation of the Statements of Financial Position
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There were no material differences between the Statements of Financial Position presented under IFRS and the cash flow statements presented under Canadian GAAP for the three and nine months ended September 30, 2010 and the year ended December 31, 2010 on the Company's adoption of IFRS.
7. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These condensed unaudited interim consolidated financial statements follow the same accounting policies and methods of application as the Company's most recent annual financial statement. (a) Principles of Consolidation The consolidated unaudited interim financial statements include the accounts of the Company and its subsidiary. b) Basis of Presentation The Company has prepared these comparative financial statements on a consolidated basis which includes its wholly-owned subsidiary, Venga Joint Venture Ltd. (c) Use of Estimates The preparation of these condensed unaudited interim consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from these estimates. Significant estimates include
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prepaid expenses and certain accrued liabilities. (d) Financial Instruments Fair Value The Company's financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities and loans from directors. Fair value is the amount at which a financial instrument could be exchanged between willing parties, based on the current markets for instruments with the same risk, principal and remaining maturity. The fair values of these financial instruments approximate their carrying values, unless otherwise noted.
Fair Value Measurements Using Quoted prices in Significant other Significant active markets for observable inputs unobservable identical instruments inputs (Level 1) (Level 2) (Level 3) $ $ $ Cash 19,494 -
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are not observable for the asset or liability, either directly(i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data.
The fair values of other financial instruments, which include accounts receivable, accounts payable and accrued liabilities and loan from director approximate their carrying values due to the relatively short-term maturity of these instruments. Risk The Company has exposure to a credit risk; liquidity risk; foreign currency risk and interest risk from its use of financial instruments. The Company's cash is held in major Canadian banks and their subsidiaries. Management approves and monitors the risk management process. There has been no change in the Company's risk management process for the period ending September 30, 2011 or for the year ended December 31, 2010. Credit Risk Credit risk represents the financial loss that the Company would experience if a counterparty to a financial instrument failed to meet its obligations to the Company. Cash consists of cash bank balances held in a major
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Canadian financial institution. The Company's secondary exposure to risk is on its receivables. This risk is minimal as receivables consist of refundable, government of Canada taxes. As a result, there is no significant credit risk related to the Company's assets. The carrying amounts of this financial asset represent the maximum credit exposure. Liquidity Risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company's normal
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(f) Translation of Foreign Currencies Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange prevailing at the year end, non-monetary assets and liabilities are translated at historical rates and revenue and expenses are translated at the rate of exchange in effect on the transaction dates. Exchange gains and losses arising on translation of monetary items are included in income in the year in which they occur.
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8. CAPITAL STOCK Authorized: Issued: Unlimited common stock and special shares without par value September 30, 2011 239,171,893 $17,268,966 September 30, 2010 239,171,893 $17,268,966
As of September 30, 2011, the Company had not issued any warrants or options nor were there any outstanding warrants or options.
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Pursuant to the terms of the JV Agreement, the Company granted the New JV a licence (the "Venga Licence") during the currency of the JV Agreement to use, market, operate and commercially exploit the business trade name 'CLIK 3D' In consideration of the Company's granting of the Venga Licence, the New JV agreed to pay Venga, the sum of fifty thousand ($50,000.00) dollars (the "Venga Licence Fee") each year or part year during the currency of the JV Agreement. Notwithstanding the terms of the JV Agreement, the New JV has failed to pay the Company the required Venga Licence Fee for the years 2006 through 2010. The Company has advised the New JV that the Company is not waiving any right to recover any portion of the accumulated, unpaid and outstanding amount for the Venga Licence Fee and that the Company is and continues to regard the accumulated, unpaid and outstanding amount for the Venga Licence Fee a valid, legal debt owed by the New JV to the Company. 13. IMPAIRMENT OF LONG TERM INVESTMENT In fiscal year 2008, as a direct consequence of the accumulated and unexpected delays that the New JV (notes 3(b) and 8) has encountered in becoming operational, management decided to record approximately 50% as a write-down of the Company's investment interest in the New JV. As a result of the further delays that the New JV has
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2030 54,713 1,041,872