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LIABILITIES
Current Liabilities
Accounts payable and accrued charges $ 16,025 $ 21,726
Deferred revenue 3,579 3,579
Due to Director (note 11) 10,000 0
29,604 25,305
SHAREHOLDERS’ EQUITY
_____________________________________________________________________________________________
Sales $ 0 $ 0
Expenses
Professional fees 0 2,109
General and administrative 7,804 19,412
7,804 21,521
Net Loss (7,804) (21,521)
OPERATING ACTIVITIES
FINANCING ACTIVITIES
1. THE COMPANY
The Company was incorporated under the Business Corporations Act (Ontario) by
certificate 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, it 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 consolidated financial statements include the wholly owned subsidiary
Venga Joint Venture Ltd., which is inactive.
2. GOING CONCERNS
These consolidated interim financial statements have been prepared in accordance with
Canadian generally accepted accounting principles applicable to a going concern which
assumes that the Company will be able to realize its assets, including the ultimate
realization of its long-term 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 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 financial statements.
During 2007, the Company changed its accounting policy for the treatment of its investment
in 3DP North America Joint Venture (the "New JV"). In the prior period, when the investment
arose, it was accounted for using the proportionate consolidation method applicable to joint
ventures, whereby the Company's proportionate share of revenues, expenses, assets and
liabilities were included in the Company's accounts. In the current period, this same
investment has been accounted for using the cost method. It was determined that the cost
method was a more appropriate method to use as the New JV does not meet the definition
of a joint venture, as defined in CICA Handbook section 3055 Interests in Joint Ventures.
Furthermore, it was determined that because the Company does not have significant
influence over the New JV investment, the equity method would not be appropriate either.
The financial statements of 2006 have been restated to correct this error. The effect of the
restatement on those financial statements is summarized below.
Venga’s aeronautics division was engaged in the development of a full scale, composite jet
drone/aircraft known as the TG-10 Brushfire. In May of 1998, a full-scale prototype of the
Company’s drone/aircraft was completely destroyed in a fire. Further development of
Venga’s composite drone/aircraft program has been held in abeyance, pending the securing
of adequate funding for the program.
On June 17, 2004, the Company entered into a development agreement with Air Combat
Warfare International (“ACWI”) of Ayr, Ontario, wherein both parties agreed to make
coordinated efforts to attempt to exploit ACWI’s existing and potential head and sub-
contracts to supply flight and combat support services for the U.S. military and the military
forces of Canada and various other NATO countries. Though the Company has extended its
development agreement with ACWI to April 3, 2008, the Company is currently taking no
further actions to exploit any potential contracts with or through ACWI.
b. 3D Graphics Unit
In November of 2006, the Company entered into a joint venture agreement (the “New 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 business venture, 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 markets. The Company has 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 business venture. Pursuant to the terms of the New
JV Agreement, the Company advanced $600,000 USD of capital to the New JV and upon
termination of the New JV, the Company is entitled to its capital account share in assets of
the New JV. The Company has no management rights or further funding requirements or
obligations with respect to the New JV. The Company’s participation in the New JV is limited
to the Company’s right to receive 30% of the New JV’s net profits as and when such profits
are distributed to the joint venturers in accordance with the terms and provisions of the New
JV Agreement. The Company is only liable to the extent of its investment and is indemnified
from the other joint venturers for any excess losses and liabilities. The New JV has entered
into a purchase agreement to acquire two specialized 3D print / processors and subject to
the terms of this purchase agreement has paid deposits towards the purchase of this
equipment. In June of 2007, the New JV began to process 3D film orders that had been
previously forwarded to the Company’s CLIK 3D business unit. In January of 2008, the first
of the specialized 3D print / processors was delivered to the New JV’s Houston, Texas
production facility. The Second of the purchased 3D print / processors is expected to be
delivered in the summer of 2008.
On March 12, 2008 the Company signed an agreement with GMI (the “Venga / GMI Funding
Agreement”) wherein the parties agreed that in consideration of the Company providing GMI with
one million dollars USD in financing (the “GMI Funding”) for GMI’s proposed gold dredging
operation in those portions of the Upper Tartweh River that flows through the GMI Concessions
(the “Proposed Dredging Operations”), the Company’s equity ownership interest in GMI would be
increased to 25%; the Company would be granted a gross overriding royalty on all revenues
derived from the Proposed Dredging Operations (the “GMI Royalty”) and the Company would be
given full and complete control and manage of all financial aspects of the Proposed Dredging
Operation. The parties further agreed that all rights to any other mining concession in Liberia and
West Africa that the parties wished to secure would be registered in the Company’s sole name.
On March 12, 2008, the Company signed a term sheet (the “Term Sheet”) with Anchor Securities
Limited of Toronto, Canada (Anchor Securities”) wherein the Company would receive up to $1.75
million CDN (the “Issue Amount”) in financing. Investors providing the Issue Amount would receive
units that were comprised of common shares, warrants and a participatory share in a gross
overriding royalty (“GOR”) on the revenues derived from the Proposed Dredging Operations (the
“Calculated Revenues”). Each investor will receive a pro rata share of the GOR which starts at 8%
of the Calculated Revenues and then is reduced, first to 4% and then to 2% of the Calculated
Revenues as certain, specified distribution milestones are reached to a maximum return or
payout to the investors of $17.5 million CDN. In addition, the GOR provides that all net revenues
derived from the Proposed Dredging Operations are paid to the investors until the investors have
received distributions totaling the Issue Amount. To insure that the investors receive payment of
the GOR in accordance with the Term Sheet, the Company has agreed and warranted in the Term
Sheet to hold the GMI Royalty for the benefit of the investors and to pay the proceeds of the GMI
Royalty to the investors in accordance with the terms and provisions of the GOR as set out in the
Term Sheet. The financing contemplated by the Term Sheet is conditional on the Company
securing the TSX Venture Exchange’s approval of a private placement that would see the issue of
35 million common shares at $0.05 per share, plus the issue of a similar number of warrants, that
are exercisable for a period of two years at a rate of two warrants for one common share at a price
of $0.15 per share. The Company announced that it would use the net proceeds of the Issue
Amount to provide the Company with general working capital and, pursuant to the terms and
conditions of the Venga / GMI Funding Agreement, to increase the Company’s equity position in
GMI to 25% and finance the Proposed Dredging Operations.
a. Principles of Consolidation
These consolidated interim financial statements include the accounts of the Company and
its wholly-owned subsidiary, Venga Joint Ventures Ltd.
b. Basis of Presentation
c. Use of Estimates
The Company classifies all financial instruments. The Company classifies cash, accounts
receivable, accounts payable and accrued liabilities as held for trading financial instruments.
Investments with a maturity date and fixed or determinable payments that the entity has the
positive intention and ability to hold to maturity are classified as held-to maturity financial
instruments. Investments that do not have fixed terms or determinable payments and are
not actively bought and sold for the purpose of profit taking, are classified as available-for-
sale financial instruments
e. Income Tax
The Company uses the asset and liability method of accounting for income taxes under
which future tax assets and liabilities are recognized for differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases.
Future tax assets and liabilities are measured using substantively enacted tax rates in effect
in the year in which those temporary differences are expected to be recovered or settled.
The effect on future tax assets and liabilities of a change in tax rates is recognized as part
of the provision for income taxes in the year that includes the enactment date. A valuation
allowance is recorded to the extent there is uncertainty regarding realization of future tax
assets.
Monetary assets and liabilities denominated in foreign currencies are translated at the rate
of exchange prevailing at the end of the quarter (March 31, 2008), 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.
g. Long-term Investments
Long-lived assets, including capital assets, are amortized over their useful lives. The
Company reviews long-lived assets for impairment when events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the sum of the
undiscounted cash flows expected to result from the use and eventual disposition of a group
of assets is less than its carrying amount, it is considered impaired. An impairment loss is
measured as the amount by which the carrying amount of the group of assets exceeds its
fair value. At March 31, 2008, no such impairment has occurred.
The Canadian Institute of Chartered Accountants (“CICA”) recommends the use of the
treasury stock method in computing earnings/loss per share. Under this method, basic loss
per share is computed by dividing earnings available to common shareholders by the
weighted average number of common shares outstanding during the year. In computing the
loss per share on a fully diluted basis, the treasury stock method assumes that proceeds
received from in-the-money stock options are used to repurchase common shares at the
prevailing market rate.
The weighted average number of common shares outstanding at March 31, 2008 was
228,271,893 (March 31, 2007 - 228,271,893).
j. Revenue Recognition
Revenue is earned from the provision of consulting services; licence fees and providing 3D
film print / processing services. The Company recognizes revenue from consulting services
when performance of the consulting services are complete and recognizes revenue from
the provision of 3D film print / processing services when the printed 3D images are shipped
to the customer. Deferred revenue is amortized to income as it is earned. The licence fees
represent an annual fee that the New JV pays the Company for use of the Company’s CLIK
3D trade name.
k. Comparative Figures
The Company has restated the March 31, 2007 comparative figures to reflect the change in
deficit at the beginning of the year due to the previously noted accounting error.
5. FINANCIAL INSTRUMENTS
Consulting contracts billed in U.S. dollars by the Company are recorded at the exchange
rate in effect at the time of sale, and are collected on standard trade payable terms. Excess
U.S. dollar balances are converted to Canadian dollars on a regular basis. The Company
does not enter into foreign currency hedges. Further devaluation in the U.S. dollar relative
to the Canadian dollar could impact the Company's ability to continue at current sales
growth rates and attain cash positive operations as substantially all of the sales contracts
are denominated in U.S. dollars.
6. INVESTMENT IN NEW JV
The Company, which holds a 30% interest in the New JV has no management rights or
ongoing funding requirements or obligations with respect to the New JV. The Company's
participation in the management and operation of the New JV is limited to the Company's
right to receive 30% of the New JV's net profits or losses as and when such profits or losses
are distributed to the joint venturers in accordance with the terms and provisions of the New
JV Agreement. The Company is only liable to the extent of its investment and is indemnified
from the other joint venturers for any excess losses and liabilities. Upon termination of the
New JV, the Company is entitled to its capital account share in net assets of the New JV.
The Company, currently has a 4% interest and an option to acquire up to an additional 15%
interest in GMI, a private U.S. corporation engaged in the leasing and development of gold
mining concessions in West Africa. On August 31, 2007, GMI was awarded the GMI
Concessions.
8.. CAPITAL STOCK
On March 12, 2008 the Company announced that, pursuant to TSX Venture Exchange’s Policy
4.3 – Shares for Debt, it had completed a series of agreements to settle outstanding debts with
unsecured creditors. These agreements require the issuance of 3,200,000 common shares
(the “Consideration Shares”) at a price of $0.05 CDN per common share for a total of
$160,000.00 CDN. The TSX Exchange has yet to grant its final approval to the issuance of
the Consideration Shares.
9. INCOME TAXES
The Company has accumulated losses for income tax purposes totaling approximately
$1,160,455 for which the tax benefits have not been recognized in the financial statements.
These losses can be deducted from future years' taxable income and expire as follows:
$
2008 109,455
2009 47,853
2018 113,718
2014 345,277
2015 244,780
2026 219,473
2027 80,428
1,160,984
On April 11, 2008 the Company announced that the Term Sheet had lapsed. The Company
further announced that it was in continuing discussions with Anchor Securities with respect to the
raising of financing for the Proposed Dredging Operations and that these discussions included the
possible extension of the terms of the original Term Sheet and the possibility of the parties
securing a NI 43 – 101 compliant technical report that would analyze and estimate the levels of
mineralization of the GMI Concessions. As direct result of the lapse of the Term Sheet, the Venga
/ GMI Funding Agreement also lapsed and the Company’s equity interest in GMI remained at 4%.
11. DUE TO DIRECTORS
Dr. Ezra Franken advanced the sum of $10,000 on behalf of Company to Anchor Securities as a
refundable advance of fees that were payable by Venga to Anchor Securities in the event of the
closing of the Term Sheet. These monies are repayable by the Company to Dr. Franken on
demand and without interest.