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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
--- ACT OF 1934
For the quarterly period ended: September 30, 2008
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the transition period from: _____________ to _____________
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GOLDEN RIVER RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 0-16097 98-0079697
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
Level 8, 580 St Kilda Road Melbourne, Victoria, 3004, Australia
(Address of Principal Executive Office) (Zip Code)
011 (613) 8532 2866
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
x Yes No
---- ----
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer., or a smaller reporting company.
Large accelerated filer Accelerated filer
---- ----
Non-accelerated filer Smaller reporting company x
---- ----
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).
Yes x No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. There were 26,711,630
outstanding shares of Common Stock as of November 12, 2008. (Does not include
10,000,000 shares of common stock that are issuable upon exercise of Special
Warrants, without the payment of any additional consideration.)
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
---- ----
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Table Of Contents
PAGE NO
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PART I. FINANCIAL INFORMATION
Item 1 Financial Statements 2
Item 2 Management's Discussion and Analysis or Plan of Operations 14
Item 3 Quantitative and Qualitative Disclosure about Market Risk 16
Item 4 Controls and Procedures 16
PART II OTHER INFORMATION
Item 1 Legal Proceedings 17
Item 1A Risk Factors 17
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 17
Item 3 Defaults Upon Senior Securities 17
Item 4 Submission of Matters to a Vote of Security Holders 17
Item 5 Other Information 17
Item 6 Exhibits 17
SIGNATURES 18
EXHIBIT INDEX 19
Exh. 31.1 Certification 20
Exh. 31.2 Certification 22
Exh. 32.1 Certification 24
Exh. 32.2 Certification 25
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Introduction to Interim Financial Statements.
The interim financial statements included herein have been prepared by
Golden River Resources Corporation ("Golden River Resources" or the "Company")
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (the "Commission"). Certain information and footnote
disclosure normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. These
interim financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended June 30, 2008.
The 2007 financial statements have been restated to reflect certain
adjustments resulting from the valuation of the Company's stock option grants
(refer to Note 2).
In the opinion of management, all adjustments, consisting of normal
recurring adjustments and consolidating entries, necessary to present fairly the
financial position of the Company and subsidiaries as of September 30, 2008, the
results of its operations for the three month periods ended September 30, 2008
and September 30, 2007, and the changes in its cash flows for the three month
periods ended September 30, 2008 and September 30, 2007, have been included. The
results of operations for the interim periods are not necessarily indicative of
the results for the full year.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ from those
estimates.
UNLESS OTHERWISE INDICATED, ALL FINANCIAL INFORMATION PRESENTED IS IN
AUSTRALIAN DOLLARS.
2
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Balance Sheet
September 30, 2008 June 30, 2008
A$000's A$000's
(Unaudited)
ASSETS
Current Assets
Cash $25 $8
Receivables 14 30
------------------------------------
Total Current Assets 39 38
------------------------------------
Total Assets $39 $38
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts Payable and Accrued Expenses $827 $711
------------------------------------
Total Current Liabilities 827 711
------------------------------------
Total Liabilities 827 711
------------------------------------
Commitments and Contingencies (Notes 10 and 11)
Stockholders' Equity (Deficit):
Common Stock: $.0001 par value
100,000,000 shares authorized,
26,714,130 issued 3 3
Additional Paid-in-Capital 36,548 36,462
Less Treasury Stock at Cost, 2,500 shares (20) (20)
Accumulated Other Comprehensive Loss (7) (9)
Retained Deficit during exploration stage (10,910) (10,707)
Retained Deficit prior to exploration stage (26,402) (26,402)
------------------------------------
Total Stockholders' Equity (Deficit) (788) (673)
------------------------------------
Total Liabilities and Stockholders' Equity (Deficit) $39 $38
====================================
See Notes to Consolidated Financial Statements
3
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Operations
Three Months Ended September 30, 2008 and 2007 and for the cumulative period
July 1, 2002 (inception of exploration activities) to September 30, 2008
(Unaudited)
Three Three July 1,
Months Months 2002
Ended Ended to
Sep 30, Sep 30, Sep 30,
2008 2007 2008
A$000's A$000's A$000's
restated
Revenues A$- A$- A$-
-----------------------------------------------
Costs and Expenses:
Stock Based Compensation 86 110 2,788
Exploration Expenditure 43 75 3,400
Loss on Disposal of Equipment - - 1
Interest Expense, net - - 423
Legal, Accounting and Professional 40 17 740
Administrative 26 138 3,434
-----------------------------------------------
195 340 10,786
-----------------------------------------------
(Loss) from Operations (195) (340) (10,786)
Foreign Currency Exchange Gain (Loss) (8) (6) (132)
Other Income:
Interest - net, related entity - - 5
- net, related entity
- other - - 3
-----------------------------------------------
(Loss) before Income Tax (203) (346) (10,910)
Provision for Income Tax - - -
-----------------------------------------------
Net (Loss) (203) (346) (10,910)
-----------------------------------------------
Basic net (Loss) Per Common Equivalent Shares $(0.01) $(0.01) $(0.52)
-----------------------------------------------
Weighted Number of Common
Equivalent Shares Outstanding (000's) 36,714 36,714 20,786
-----------------------------------------------
See Notes to Consolidated Financial Statements
4
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
Three Months Ended September 30, 2008 and 2007 and for the cumulative period
July 1, 2002 (inception of exploration activities) to September 30, 2008
(Unaudited)
July 1, 2002
2008 2007 to Sep 30, 2008
A$000's A$000's A$000's
------- ------- -------
restated
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) (203) (346) (10,910)
Adjustments to reconcile net (loss) to net cash (used)
in Operating Activities
Foreign Currency Exchange Loss 8 6 110
Depreciation of Plant and Equipment - - 27
Stock based compensation 86 110 2,788
Accrued interest added to principal - - 184
Net Change in:
Receivables 16 (8) (14)
Staking Deposit - - 23
Prepayments and Deposits - (5) -
Accounts Payable and Accrued Expenses 118 (73) 339
Short Term Advance - Affiliates - - -
------------------------------------------------------
Net Cash (Used) in Operating Activities 25 (316) (7,453)
------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Plant and Equipment - - (27)
------------------------------------------------------
Net Cash (Used) in Investing Activities - - (27)
------------------------------------------------------
CASH FLOW PROVIDED BY FINANCING ACTIVITIES
Net Borrowings from Affiliates - - 1,031
Sale of Warrants (net) - - 4,311
Proceeds from Loan Payable - - 2,273
------------------------------------------------------
Net Cash Provided by Financing Activities - - 7,615
------------------------------------------------------
Effects of Exchange Rate on Cash (8) (12) (111)
------------------------------------------------------
Net Increase (decrease) in Cash 17 (328) 24
Cash at Beginning of Period 8 349 1
------------------------------------------------------
Cash at End of Period 25 21 25
------------------------------------------------------
Supplemental Disclosures
Interest Paid - 363
NON CASH FINANCING ACTIVITY
Debt repaid through issuance of shares - - 6,156
Stock Options recorded as Deferred Compensation - - 1,342
See Notes to Consolidated Financial Statements
5
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
September 30, 2008
and for the cumulative period July 1, 2002
(inception of exploration activities) to September 30, 2008
(Unaudited)
Common Treasury Additional Retained Retained Deferred Accumulated
Stock Stock, at Paid-in (Deficit) (Deficit) Compen- Other
Shares Cost Capital (during the (prior to sation Compre- Total
------ ---- ------- Exploration Exploration ------ hensive -----
Amount stage) stage) Loss
------ ------ ------ ----
000's A$000's A$000's A$000's A$000's A$000's A$000's A$000's A$000's
Balance June 30, 2002 6,347 $1 $(20) $25,175 - $(26,402) - - $(1,246)
Net loss - - - - $(681) - - - (681)
--------------------------------------------------------------------------------------------
Balance June 30, 2003 6,347 $1 $(20) $25,175 $(681) $(26,402) - - $(1,927)
Issuance of 1,753,984 shares and
warrants in lieu of debt repayment 1,754 - - $2,273 - - - - $2,273
Sale of 1,670,000 shares and warrants 1,670 - - $2,253 - - - - $2,253
Issuance of 6,943,057 shares on cashless
exercise of options 6,943 $1 - $(1) - - - - -
Net unrealized loss on foreign exchange - - - - - - - $(9) $(9)
Net (loss) - - - - $(1,723) - - - $(1,723)
--------------------------------------------------------------------------------------------
Balance June 30, 2004 16,714 $2 $(20) $29,700 $(2,404) $(26,402) - $(9) $867
Issuance of 1,400,000 options under 2004
stock option plan - - - $1,720 - - $(1,720) - -
Amortization of 1,400,000 options under
2004 stock option plan - - - - - - $1,144 - $1,144
Net unrealized gain on foreign exchange - - - - - - - $6 $6
Net/(loss) - - - - $(3,367) - - - $(3,367)
--------------------------------------------------------------------------------------------
Balance June 30, 2005 16,714 $2 $(20) $31,420 $(5,771) $(26,402) $(576) $(3)$(1,350)
See Notes to Consolidated Financial Statements
6
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
September 30, 2008
and for the cumulative period July 1, 2002
(inception of exploration activities) to September 30, 2008
(Unaudited) Continued
Common Treasury Additional Retained Retained Deferred Accumulated
Stock Stock, at Paid-in (Deficit) (Deficit) Compen- Other
Shares Amount Cost Capital (during the (prior to sation Compre- Total
------ ------ ---- ------- Exploration Exploration ------ hensive -----
stage) stage) Loss
------ ------ ----
000's A$000's A$000's A$000's A$000's A$000's A$000's A$000's A$000's
To eliminate deferred
compensation against
Paid-In Capital - - - $(576) - - $576 - -
Issuance of 10,000,000
shares and 20,000,000
options in lieu of debt
repayment 10,000 $1 - $3,882 - - - - $3,883
Capital gain on shares
and options issued in
lieu of debt repayment - - - $(1,883) - - - - $(1,883)
Sale of 20,000,000
normal warrants - - - $997 - - - - $997
Sale of 10,000,000
special warrants - - - $1,069 - - - - $1,069
Amortization of
1,400,000 options under
2004 stock option plan - - - 597 - - - - 597
Net unrealized loss on
foreign exchange - - - - - - - $(8) $(8)
Net (loss) - - - - $(1,694) - - - $(1,694)
------------------------------------------------------------------------------------------------------------
Balance June 30, 2006
(Note 2) 26,714 $3 $(20) $35,466 $(7,465) $(26,402) $- $(11) $1,571
Costs associated with
sale of normal and
special warrants - - - $(5) - - - - $(5)
Amortization of
1,400,000 options under
2004 stock option plan - - - $20 - - - - $20
Amortization of
4,650,000 options under
2006 stock option plan - - - $593 - - - - $593
Net unrealized loss on
foreign exchange - - - - - - - $5 $5
Net (loss) - - - - $(2,097) - - - $(2,097)
------------------------------------------------------------------------------------------------------------
Balance June 30, 2007
(Note 2) 26,714 $3 $(20) $36,074 $(9,562) $(26,402) $- $(6) $87
See Notes to Consolidated Financial Statements
7
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
September 30, 2008
and for the cumulative period July 1, 2002
(inception of exploration activities) to September 30, 2008
(Unaudited) Continued
Common Treasury Additional Retained Retained Deferred Accumulated
Stock Stock, at Paid-in (Deficit) (Deficit) Compen- Other
Shares Amount Cost Capital (during the (prior to sation Compre- Total
Exploration Exploration hensive
stage) stage) Loss
Amortization of 4,650,000
options under 2006 stock
option plan - - - $388 - - - - $388
Net unrealized loss on
foreign exchange - - - - - - - $(3) $(3)
Net (loss) - - -- - $(1,145) - - - $(1,1455)
--------------------------------------------------------------------------------------------------------
Balance June 30, 2008 26,714 $3 $(20) $36,462 $(10,707) $(26,402) $- $(9) $(673)
--------------------------------------------------------------------------------------------------------
Amortization of 4,650,000
options under 2006 stock
option plan - - - $86 - - - - $86
Net unrealized gain on
foreign exchange - - - - - - - $2 $2
Net (loss) - - -- - $(203) - - - $(203)
--------------------------------------------------------------------------------------------------------
Balance September 30, 2008 26,714 $3 $(20) $36,548 $(10,910) $(26,402) $- $(7) $(788)
--------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
8
GOLDEN RIVER RESOURCES CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2008
(1) Organisation
------------
Golden River Resources Corporation ("Golden River Resources"), formerly
Bay Resources Ltd, is incorporated in the State of Delaware. The principal
shareholders of Golden River Resources are companies associated with Mr JI
Gutnick and Mrs S Gutnick. These companies owned 77.48% of Golden River
Resources as of September 30, 2008. During fiscal 1998, Golden River Resources
incorporated a further subsidiary, Baynex.com Pty Ltd, under the laws of
Australia. Baynex.com Pty Ltd has not traded since incorporation. On August 21,
2000, Golden River Resources incorporated a new wholly owned subsidiary, Bay
Resources (Asia) Pty Ltd, a corporation incorporated under the laws of
Australia. In May 2002, the Company incorporated a new wholly owned subsidiary,
Golden Bull Resources Corporation (formerly 4075251 Canada Inc), a corporation
incorporated under the laws of Canada. Golden Bull Resources Corporation is
undertaking exploration activities for gold in Canada. On March 8, 2006,
shareholders approved the change of the Company's name to Golden River
Resources.
(2) Adjustments and Restatement of Financial Statements
---------------------------------------------------
The financial statements for the three months ended September 30, 2007
have been restated to revise the Company's estimated fair value of certain stock
option grants.
In October 2006, the Company granted 4,650,000 options under the Stock
Option Plan to the Company's officers, directors and consultants. The Company
utilized the services of an external valuer to determine the value of the
options using the binomial option pricing model. At the time, the market price
used in the binomial option pricing model was US$0.166 which was based on the
price that the Company had been able to conclude a private placement and at the
time believed this to be the fair value of the shares of common stock. The
Company has now determined the market price (US$0.30) of the shares of common
stock at the time of the issue of options as quoted on the OTCBB should have
been used in the binomial option pricing model. The effect of the adjustment is
an increase in Stock-Based Compensation expense in the three months ended
September 30, 2007 by approximately A$56,000.
In October 2004, the Company granted 1,400,000 options under the Stock
Option Plan to the Company's officers, directors and consultants. The Company
has recorded an adjustment to the estimated fair value of these options based
upon a revision to the original volatility rate used in the fair value
calculation. The effect of the adjustment is an increase in the opening retained
earnings (deficit) at July 1, 2006 and additional paid-in capital by
approximately A$1.1 million. Such adjustment had no effect on total
stockholders' equity or the Company's cashflows, and has also been reflected in
the 2005 and 2006 statement of stockholders' equity included in the accompanying
consolidated financial statements.
The effects of the above adjustments are as follows :
Consolidated statement of operations for the three months ended
September 30, 2007
As previously Adjustment to
filed restate Restated
A$ A$ A$
Stock Based Compensation expense 54 56 110
-----------------------------------------------------------
Net (loss) (290) (56) (346)
-----------------------------------------------------------
Basic net (loss) per Common Equivalent
Shares $(0.01) $(0.00) $(0.01)
-----------------------------------------------------------
9
(3) Affiliate Transactions
----------------------
Golden River Resources advances to and receives advances from various
affiliates. All advances between consolidated affiliates are eliminated on
consolidation.
Included in payables at September 30, 2008 was A$716,126 due to AXIS.
During the three months ended September 30, 2008 and 2007 AXIS advanced Golden
River Resources A$77,000 and A$nil respectively, provided services in accordance
with the service agreement of A$46,549 and A$136,450 respectively and
advanced/reimbursed AXIS A$30,500 and A$192,500 respectively for outstanding
amounts, including carried forward outstanding amounts. During the three months
ended September 30, 2007 and 2008 AXIS did not charge interest. AXIS is
affiliated through common management and ownership.
(4) Recent Accounting Pronouncements
--------------------------------
In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements which provides enhanced guidance for using fair value to measure
assets and liabilities. SFAS No. 157 provides a common definition of fair value
and establishes a framework to make the measurement of fair value in generally
accepted accounting principles more consistent and comparable. SFAS No. 157 also
requires expanded disclosures to provide information about the extent to which
fair value is used to measure assets and liabilities, the methods and
assumptions used to measure fair value, and the effect of fair value measures on
earnings. SFAS No. 157 is effective for financial statements issued in fiscal
years beginning after November 15, 2007 and for interim periods within those
fiscal years. In February 2008, the FASB staff issued Staff Position No. 157-2
"Effective date of FASB Statement No. 157" ("FSP FAS 157-2"). FSP FAS 157-2
delayed the effective date of FAS 157 for nonfinancial assets and nonfinancial
liabilities, except for items that are recognised or disclosed at fair value in
the financial statements on a recurring basis ( at least annually). The
provisions of FSP FAS 157-2 are effective for the Company's fiscal year
beginning July 1, 2009. The adoption of this interpretation has not and is not
expected to have a material impact on the Company's future reported financial
position or results of operations.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option
for Financial Assets and Financial Liabilities - Including an Amendment of FASB
Statement No. 115", which permits companies to choose to measure many financial
instruments and certain other items at fair value. The provisions of FAS 159 are
effective for the Company's fiscal year which commenced July 1, 2008. The
adoption of FAS 159 did not have a material impact on the Company's consolidated
financial position, results or operations or cash flows.
In December 2007, the FASB issued SFAS No. 141(R), "Business
Combinations" ("SFAS 141(R)"), which replaces SFAS 141. SFAS 141(R) requires
assets and liabilities acquired in a business combination, contingent
consideration, and certain acquired contingencies to be measured at their fair
values as of the date of acquisition. SFAS 141(R) also requires that
acquisition-related costs and restructuring costs be recognized separately from
the business combination. SFAS 141(R) is effective for fiscal years beginning
after December 15, 2008 and will be effective for business combinations entered
into by the Company after July 1, 2009. The Company is currently evaluating the
potential impact of adopting this statement on the Company's financial position,
results of operations or cash flows.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling
Interests in Consolidated Financial Statements, an Amendment of ARB No. 51"
("SFAS 160"). SFAS 160 clarifies the accounting for noncontrolling interests and
establishes accounting and reporting standards for the noncontrolling interest
in a subsidiary, including classification as a component of equity. SFAS 160 is
effective for fiscal years beginning after December 15, 2008. The Company does
not currently have any minority interests.
In March 2008, the FASB issued FSAB Statement No. 161 "Disclosure about
Derivative Instruments and Hedging Activities-an amendment of FASB statements
No. 133 ( "FAS 161") which provides revised guidance for enhanced disclosures
about how and why an entity uses derivative instruments, how derivative
instruments and related hedged items are accounted for under FAS 133, and how
derivative instruments and the related hedged items affect and entity's
financial position, financial performance and cash flows. FAS 161 is effective
for the Company's fiscal and interim periods beginning after November 15, 2008.
The Company does not currently have any derivative instruments and is not
involved in any hedging activities.
10
In May 2008, the FASB issued SFAS No. 162 "The Hierarchy of Generally
Acceptable Accounting Principles" ("SFAS 162"). SFAS 162 identifies the sources
of accounting principles and the framework for selecting the principles to be
used in the preparation of financial statements of non-governmental entities
that are presented in conformity with generally accepted accounting principles
in the United States. This statement is effective 60 days following the SEC's
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, "The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles". Although the Company will continue to evaluate
the application of SFAS 162, the Company does not believe the adoption of SFAS
162 will have a material impact on its financial statements.
(5) Comprehensive Income (Loss)
---------------------------
The Company follows SFAS No. 130 "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 requires a company to report comprehensive income (loss)
and its components in a full set of financial statements. Comprehensive income
(loss) is the change in equity during a period from transactions and other
events and circumstances from non-owner sources, such as unrealized gains
(losses) on foreign currency translation adjustments. Changes in unrealized
foreign currency gains or (losses) during the three months to September 30, 2008
and 2007 amounted to A$2,000 and A$(6,586) respectively. Accordingly,
comprehensive loss for the three months ended September 30, 2008 and 2007
amounted to A$(201,000) and A$(354,000) respectively.
(6) Going Concern
-------------
The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles, which contemplate
continuation of Golden River Resources as a going concern. Golden River
Resources is in the exploration stage, has sustained recurring losses which
raises substantial doubts as to its ability to continue as a going concern.
In addition Golden River Resources has historically relied on loans and
advances from corporations affiliated with the President of Golden River
Resources. Based on discussions with these affiliate companies, Golden River
Resources believes this source of funding will continue to be available. Other
than the arrangements noted above, Golden River Resources has not confirmed any
other arrangement for ongoing funding. As a result Golden River Resources may be
required to raise funds by additional debt or equity offerings in order to meet
its cash flow requirements during the forthcoming year.
The accumulated deficit of the Company from inception through September
30, 2008 amounted to A$37,311,000 of which A$10,910,000 has been accumulated
from July 2002, the date the Company entered the Exploration Stage, through
September 30, 2008.
(7) Income Taxes
------------
Golden River Resources should have carried forward losses of
approximately US$37.1 million as of June 30, 2008 which will expire in the year
2009 through 2028. Golden River Resources will need to file tax returns for
those years having losses on which returns have not been filed to establish the
tax benefits of the net operating loss carry forwards. Due to the uncertainty of
the availability and future utilization of those operating loss carry forwards,
management has provided a full valuation against the related tax benefit.
(8) Issue of Options under Stock Option Plan
----------------------------------------
The Company follows the provisions of SFAS No.123(R), Share-Based
payment, which addresses the accounting for share-based payment transactions in
which a company receives employee services in exchange for (a) equity
instruments of that company or (b) liabilities that are based on the fair value
of the company's equity instruments or that may be settled by the issuance of
such equity instruments.
11
The Company has accounted for all options issued based upon their fair
market value using either the Black Scholes or Binomial option pricing method.
Prior to 2006, the Company used the Black Scholes option pricing method to
determine the fair market value of options issued. In 2006, the Company changed
from using the Black Scholes option pricing method to the Binomial option
pricing model. The Binomial option pricing model breaks down the time to
expiration into a number of steps or intervals and can therefore be used to
value American style options, taking into account the possibility of early
exercise and reflect changing inputs over time. The options issued in 2006 have
three vesting periods and therefore, the Company believed the Binomial option
pricing model is a more accurate measure of the fair value of the options.
In October 2004, the Board of Directors and Remuneration Committee of
the Company adopted a Stock Option Plan and agreed to issue 1,400,000 options to
acquire shares of common stock in the Company, at an exercise price of US$1.00
per option, subject to shareholder approval which was subsequently received on
January 27, 2005. All such options were vested by July 2006. The exercise price
of US$1.00 was derived from the issue price of common stock from the placement
of shares on September 30, 2004 and is considered by the Company's Directors to
be the fair value of the common stock. The options expire on October 15, 2014.
The Company calculated the fair value of the 1,400,000 options using
the Black Scholes valuation method using a fair value share price of US$1.00,
strike price of US$1.00, maturity period of 5 years 7 1/2 months, risk free
interest rate of 5.15% and volatility of 20%. This equates to a value of US31.85
cents per option. The total value of the options equates to A$1,744,800
(US$1,352,820) and such amount was amortized over the vesting period. At
September 30, 2008, the options were fully vested.
Since the issue of the options, 600,000 options have lapsed following
the termination of participants to the issue.
A summary of the options outstanding and exercisable at September 30,
2008 are as follows:
Outstanding Exercisable
Number of options 800,000 800,000
Exercise price US$1.00 US$1.00
Expiration date October 15, 2014 October 15, 2014
On October 19, 2006, the Directors of the Company agreed to offer a
further 4,650,000 options under the Stock Option Plan. The options have no issue
price, an exercise price of US30.84 cents, and a latest exercise date of October
19, 2016. The options vest 1/3 on October 19, 2007 ("T1"), 1/3 on October 19,
2008 ("T2") and 1/3 on October 19, 2009 ("T3"). The Company obtained an external
valuation on the options from an unrelated third party.
The Company, through an unrelated third party consultant, has
calculated the fair value of the 4,650,000 options using the binomial option
pricing model using a fair value share price of US$0.30, exercise price of
US30.84 cents, expected life T1 - 5 years 6 months, T2 - 6 years, T3 - 6 years 6
months, risk-free interest rate of 4.75% and volatility of 90%. The total value
of the options equates to A$1,406,287 (US$1,060,200) and is being amortised over
the vesting periods. For the three months ended September 30, 2008, the
amortization amounted to A$86,487 and no options were forfeited. At September
30, 2008, the remaining value of the unamortized deferred compensation of these
4,050,000 outstanding options amounted to A$157,025.
Since the issue of the options, 600,000 options have lapsed following
the termination of participants to the issue.
12
A summary of the options outstanding and exercisable at September 30,
2008 are as follows:
Outstanding Exercisable
Number of options 4,050,000 1,350,000
Exercise price US$0.308 US$0.308
Expiration date October 19, 2016 October 19, 2016
(9) Loss per share
--------------
Basic (loss) per share is computed based on the weighted average number
of common shares outstanding during the period. Dilutive loss per share has not
been presented as the effects of common stock equivalents are anti-dilutive. The
Company has on issue 10,000,000 special warrants which are exercisable at any
time until expiration and for no consideration. However, there is a restriction
in the subscription agreement that does not allow the Company to process a
warrant exercise notice if the holder (and its associates) would hold more than
9.99% of the shares of common stock unless the holder provides the Company with
61 days prior notice in which case the holder can exercise the entire 10,000,000
warrants. Accordingly, the Company has included 10,000,000 shares issuable by
exercise of the special warrants in the weighted number of common equivalent
shares outstanding.
Earnings per share
The Company calculates loss per share in accordance with SFAS No. 128,
"Earnings per Share".
The following table reconciles the weighted average shares outstanding
used for the computation:
Three months ended
September 30
2008 2007
Weighted average shares 000's 000's
Outstanding - basic 26,714 26,714
- Warrants 10,000 10,000
-------------------------
Weighted average shares outstanding 36,714 36,714
=========================
The options to purchase 4,850,000 shares of common stock are not
included in the earnings per share computation as such amounts would be
anti-dilutive.
(10) Contingent Liability
--------------------
The Company has received an invoice from a corporation that conducted
the pegging of the claims in Canada on behalf of the Company. A number of claims
that were pegged were not ultimately issued to the Company due to a number of
errors by the pegging company. The Company had advised the pegging company that
it does not believe any further payments are due to the pegging company as a
result of the economic loss incurred by Golden River Resources. The Company
believes that if it is unsuccessful in defending any claim that is brought
against it, the maximum potential liability is CDN$59,000 (A$66,218). No accrued
liability has been recorded in the accompanying financial statement pending the
ultimate disposition of this matter.
(11) Commitments
-----------
In June 2008, the Company agreed on terms with Tahera Diamond
Corporation to obtain full control of the mining properties that are listed in
the Tahera/GRR agreement through the issuance of 3,000,000 shares of common
stock and the payment of CDN$86,000. The CDN$86,000 was paid prior to June 30,
2008. The issuance of 3,000,000 shares of common stock has not been brought to
account in the financial statements as the final agreements have not yet been
executed.
13
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
FUND COSTS CONVERSION
The consolidated statements of operations and other financial and
operating data contained elsewhere here in and the consolidated balance sheets
and financial results have been reflected in Australian dollars unless otherwise
stated.
The following table shows the average rate of exchange of the
Australian dollar as compared to the US dollar and Canadian dollar during the
periods indicated:
3 months ended September 30, 2007 A$1.00 = US$.7893
3 months ended September 30, 2008 A$1.00 = US$.9178
3 months ended September 30, 2007 A$1.00 = CDN$.9207
3 months ended September 30, 2008 A$1.00 = CDN$.9390
RESULTS OF OPERATION
Three Months Ended September 30, 2008 vs. Three Months Ended September 30, 2007.
Costs and expenses decreased from A$339,000 in the three months ended
September 30, 2007 to A$195,000 in the three months ended September 30, 2008.
The Company's financial statements are prepared in Australian dollars (A$). A
number of the costs and expenses of the Company are incurred in US$ and CDN$ and
the conversion of these costs to A$ means that the comparison of the three
months ended September 30, 2008 to the three months ended September 30, 2007
does not always present a true comparison.
The decrease in costs and expenses is a net result of:
a) An increase in legal, accounting and professional expense from A$17,000
for the three months ended September 30, 2007 to A$40,000 for the three
months ended September 30, 2008, primarily as a result of costs
associated with the Company's SEC compliance obligations.
b) a decrease in administrative costs including salaries from A$137,000 in
the three months ended September 30, 2007 to A$26,000 in the three
months ended September 30, 2008, primarily as a result of a decrease in
the cost of services provided by AXIS in accordance with the service
agreement.
c) a decrease in the exploration expenditure expense from A$75,000 for the
three months ended September 30, 2007 to A$43,000 for the three months
ended September 30, 2008. The costs related to consultants providing
exploration reviews and advice. No field work was undertaken during the
quarters ended September 30, 2007 or 2008.
d) a decrease in stock based compensation from A$110,000 for the three
months ended September 30, 2007 to A$86,000 for the three months ended
September 30, 2008 as a result of a decrease in the number of options
outstanding combined with a number of options being fully expensed
prior to the current period. See Note 6 concerning the Company's
outstanding stock options.
As a result of the foregoing, the loss from operations decreased from
A$339,000 for the three months ended September 30, 2007 to A$195,000 for the
three months ended September 30, 2008.
The Company recorded a foreign currency exchange loss of A$8,000 for
the three months ended September 30, 2008 compared to a foreign currency
exchange loss of A$6,000 for the three months ended September 30, 2007.
The net loss was A$203,000 for the three months ended September 30,
2008 compared to a net loss of A$346,000 for the three months ended September
30, 2007.
14
Liquidity and Capital Resources
For the three months ended September 30, 2008, net cash from operating
activities was A$25,000 primarily consisting of the net loss of A$203,000;
offset by a decrease in receivables of A$16,000, an increase in accounts payable
and accrued expenses of A$118,000 and an increase in stock based compensation of
A$86,000.
As of September 30, 2008 the Company had short-term obligations of
A$827,000 comprising accounts payable and accrued expenses.
We have A$25,000 in cash at September 30, 2008.
During fiscal 2004 and 2005, we undertook a field exploration program
on our Committee Bay and Slave Properties. In relation to the Committee Bay
Properties, this was more than the minimum required expenditure and as a result,
we do not have a legal obligation to undertake further exploration on those
properties during their life. However our properties are prospective for gold
and other minerals. We undertook further exploration in August 2006 on the Slave
Properties and we spent A$502,000 on such exploration activities in fiscal 2007
and to date A$93,000 in fiscal 2008 for maintenance cost. We are currently
investigating capital raising opportunities which may be in the form of either
equity or debt, to provide funding for working capital purposes and future
exploration programs. There can be no assurance that such a capital raising will
be successful, or that even if an offer of financing is received by the Company,
it is on terms acceptable to the Company.
Cautionary Safe Harbor Statement under the United States Private Securities
Litigation Reform Act of 1995.
Certain information contained in this Form 10-Q's forward looking
information within the meaning of the Private Securities Litigation Act of 1995
(the "Act"). In order to obtain the benefits of the "safe harbor" provisions of
the act for any such forwarding looking statements, the Company wishes to
caution investors and prospective investors about significant factors which
among others have affected the Company's actual results and are in the future
likely to affect the Company's actual results and cause them to differ
materially from those expressed in any such forward looking statements. This
Form 10-Q report contains forward looking statements relating to future
financial results. Actual results may differ as a result of factors over which
the Company has no control including, without limitation, the risks of
exploration and development stage projects, political risks of development in
foreign countries, risks associated with environmental and other regulatory
matters, mining risks and competition and the volatility of gold and copper
prices, movements in the foreign exchange rate and the availability of
additional financing for the Company. Additional information which could affect
the Company's financial results is included in the Company's Form 10-KSB on file
with the Securities and Exchange Commission.
15
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
At September 30, 2008, the Company had no outstanding loan facilities.
At September 30, 2008, assuming no change in the cash at bank, a 10% change in
the A$ versus US$ exchange rate would have a nil effect on the Company's cash
position.
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
Our principal executive officer and our principal financial officer
evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934
as amended) as of the end of the period covered by this report. Based on that
evaluation, such principal executive officer and principal financial officer
concluded that, the Company's disclosure control and procedures were effective
as of the end of the period covered by this report.
(b) Change in Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred
during our most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect our internal control over financial
reporting.
(c) Other
We believe that a controls system, no matter how well designed and
operated, can not provide absolute assurance that the objectives of the controls
system, no matter how well designed and operated, can not provide absolute
assurance that the objectives of the controls system are met, and no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within a company have been detected.
16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not Applicable
Item 1A. Risk Factors.
Not Applicable
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not Applicable
Item 3. Defaults Upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
Item 5. Other Information.
Not Applicable
Item 6. Exhibits.
(a) Exhibit No. Description
---------- -----------
31.1 Certification of Chief Executive Officer
required by Rule 13a-14(a)/15d-14(a) under the
Exchange Act
31.2 Certification of Chief Financial Officer
required by Rule 13a-14(a)/15d-14(a) under the
Exchange Act
32.1 Certification of Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley act
of 2002
32.2 Certification of Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley act
of 2002
17
(FORM 10-Q)
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.
Golden River Resources Corporation
By: /s/ Joseph I. Gutnick
------------------------------------
Joseph I. Gutnick
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Peter Lee
------------------------------------
Peter Lee
Director, Secretary and
Chief Financial Officer
(Principal Financial Officer)
Dated November 14, 2008
18
EXHIBIT INDEX
Exhibit No. Description
---------- -----------
31.1 Certification of Chief Executive Officer
required by Rule 13a-14(a)/15d-14(a) under the
Exchange Act
31.2 Certification of Chief Financial Officer
required by Rule 13a-14(a)/15d-14(a) under the
Exchange Act
32.1 Certification of Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley act
of 2002
32.2 Certification of Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley act
of 2002
19