UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of MARCH, 2007.
Commission File Number: 001-32558
IMA EXPLORATION INC.
--------------------------------------------------------------------------------
(Translation of registrant's name into English)
#709 - 837 West Hastings Street, Vancouver, British Columbia, V6C 3N6, Canada
--------------------------------------------------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F: FORM 20-F [X] 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 the registrant by furnishing the information
contained in this Form, 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-_____________
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 of the
undersigned, thereunto duly authorized.
IMA EXPLORATION INC.
-------------------------------------
Date: March 28, 2008 /s/ Joseph Grosso
------------------------------ -------------------------------------
Joseph Grosso,
President & CEO
IMA EXPLORATION INC.
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of the Company have been
prepared by management in accordance with accounting principles generally
accepted in Canada and reconciled to accounting principles generally accepted in
the United States as set out in Note 11 and contain estimates based on
management's judgment. Management maintains an appropriate system of internal
controls to provide reasonable assurance that transactions are authorized,
assets safeguarded, and proper records maintained.
The Audit Committee of the Board of Directors has met with the Company's
independent auditors to review the scope and results of the annual audit, and to
review the financial statements and related financial reporting matters prior to
submitting the financial statements to the Board for approval.
The Company's independent auditors, PricewaterhouseCoopers LLP, are appointed by
the shareholders to conduct an audit in accordance with generally accepted
auditing standards in Canada and the Public Company Accounting Oversight Board
(United States), and their report follows.
/s/Joseph Grosso /s/ Art Lang
Joseph Grosso Art Lang
President Chief Financial Officer
March 28, 2008
PRICEWATERHOUSECOOPERS
PRICEWATERHOUSECOOPERS LLP
CHARTERED ACCOUNTANTS
PricewaterhouseCoopers Place
250 Howe Street, Suite 700
Vancouver, British Columbia
Canada V6C 3S7
Telephone +1 604 806 7000
Facsimile +1 604 806 7806
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF
IMA EXPLORATION INC.
We have audited the consolidated balance sheets of IMA EXPLORATION INC. (the
"Company") as at December 31, 2007 and 2006 and the consolidated statements of
loss, comprehensive loss and deficit, cash flows and changes in shareholders'
equity for each of the years in the three-year period ended December 31, 2007.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing
standards and the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2007
and 2006 and the results of its operations and its cash flows for each of the
years in the three-year period ended December 31, 2007 in accordance with
Canadian generally accepted accounting principles.
(signed) PricewaterhouseCoopers LLP
CHARTERED ACCOUNTANTS
Vancouver, B.C.
March 19, 2008
PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP
and the other member firms of PricewaterhouseCoopers International Limited, each
of which is a separate and independent legal entity.
IMA EXPLORATION INC.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2007 AND 2006
(Expressed in Canadian Dollars)
2007 2006
$ $
ASSETS
CURRENT ASSETS
Cash 183,628 391,420
Short-term investments (Note 4) 6,813,462 8,500,000
Other receivables, prepaids and deposits (Note 8) 627,400 405,205
Navidad interest (Notes 2 and 13) 18,500,000 -
------------ ------------
26,124,490 9,296,625
NAVIDAD INTEREST (Note 2) - 17,949,521
------------ ------------
26,124,490 27,246,146
============ ============
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities (Note 8) 105,724 236,612
------------ ------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 6) 58,753,501 58,664,727
WARRANTS (Note 6) 1,281,946 1,281,946
CONTRIBUTED SURPLUS (Note 7) 6,157,412 6,152,265
DEFICIT (40,174,093) (39,089,404)
------------ ------------
26,018,766 27,009,534
------------ ------------
26,124,490 27,246,146
============ ============
NATURE OF OPERATIONS (Note 1)
NAVIDAD INTEREST (Notes 2 and 13)
COMMITMENTS (Note 8)
APPROVED BY THE BOARD
/s/ David Horton , Director
------------------------
/s/ Robert Stuart Angus , Director
------------------------
The accompanying notes are an integral part of these
consolidated financial statements.
IMA EXPLORATION INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF LOSS, COMPREHENSIVE LOSS AND DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
2007 2006 2005
$ $ $
EXPENSES
Administrative and management services 209,201 461,553 294,828
Corporate development and investor relations 167,817 328,779 496,538
General exploration 99,589 186,572 55,914
Office and sundry 238,220 181,913 148,015
Professional fees 1,022,321 1,124,144 2,212,190
Rent, parking and storage 49,023 96,263 72,791
Salaries and employee benefits 244,337 652,530 585,560
Stock-based compensation (Note 6) 34,421 393,120 1,800,000
Telephone and utilities 12,053 17,432 26,648
Transfer agent and regulatory fees 80,122 103,457 199,715
Travel and accommodation 35,230 93,392 256,035
Navidad holding costs (Note 2) 109,666 312,349 -
------------ ------------ ------------
2,302,000 3,951,504 6,148,234
------------ ------------ ------------
LOSS BEFORE OTHER ITEMS (2,302,000) (3,951,504) (6,148,234)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Foreign exchange gain (loss) (8,324) (2,865) 232,954
Interest and other income 675,156 373,009 150,406
Navidad recovery (Note 2) 550,479 - -
------------ ------------ ------------
1,217,311 370,144 383,360
LOSS AND COMPREHENSIVE LOSS FOR THE YEAR (1,084,689) (3,581,360) (5,764,874)
DEFICIT - BEGINNING OF YEAR (39,089,404) (35,508,044) (29,597,304)
DISTRIBUTION OF EQUITY ON SPIN-OFF OF ASSETS
TO GOLDEN ARROW RESOURCES CORPORATION - - (145,866)
------------ ------------ ------------
DEFICIT - END OF YEAR (40,174,093) (39,089,404) (35,508,044)
============ ============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE $(0.02) $(0.07) $(0.12)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 52,099,787 51,263,575 46,197,029
============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
IMA EXPLORATION INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
2007 2006 2005
$ $ $
CASH PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES
Loss for the year (1,084,689) (3,581,360) (5,764,874)
Items not affecting cash
Stock-based compensation 34,421 393,120 1,800,000
Navidad recovery (Note 2) (550,479) - -
------------ ------------ ------------
(1,600,747) (3,188,240) (3,964,874)
Change in non-cash working capital
balances(Note 12) (353,083) (596,912) 115,256
------------ ------------ ------------
(1,953,830) (3,785,152) (3,849,618)
------------ ------------ ------------
INVESTING ACTIVITIES
Expenditures on mineral properties and
deferred costs - (4,491,524) (7,025,492)
Increase (decrease) in short-term investments 1,686,538 (920,000) (3,280,000)
Proceeds from sale of equipment - - 46,589
------------ ------------ ------------
1,686,538 (5,411,524) (10,258,903)
------------ ------------ ------------
FINANCING ACTIVITIES
Issuance of common shares 59,500 10,308,450 14,215,165
Share issuance costs - (871,749) (736,737)
------------ ------------ ------------
59,500 9,436,701 13,478,428
------------ ------------ ------------
INCREASE (DECREASE) IN CASH (207,792) 240,025 (630,093)
CASH TRANSFERRED TO GOLDEN ARROW
RESOURCES CORPORATION - - (145,866)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (207,792) 240,025 (775,959)
CASH - BEGINNING OF YEAR 391,420 151,395 927,354
------------ ------------ ------------
CASH - END OF YEAR 183,628 391,420 151,395
============ ============ ============
SUPPLEMENTARY CASH FLOW INFORMATION (Note 12)
The accompanying notes are an integral part of these
consolidated financial statements.
IMA EXPLORATION INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Expressed in Canadian Dollars)
2007 2006 2005
$ $ $
SHARE CAPITAL
Balance at beginning of year 58,664,727 50,414,672 36,982,307
Private placements - 10,027,500 10,000,020
Warrant valuation - (1,298,981) -
Exercise of options 59,500 280,950 577,000
Contributed surplus reallocated on the
exercise of options 29,274 95,300 131,270
Exercise of warrants - - 3,784,011
Proceeds collected and paid on behalf of
Golden Arrow shares - - (145,866)
Share issue costs - (854,714) (914,070)
------------ ------------ ------------
Balance at end of year 58,753,501 58,664,727 50,414,672
------------ ------------ ------------
WARRANTS
Balance at beginning of year 1,281,946 - -
Warrant valuation from private placement
warrants granted - 1,298,981 -
Warrant valuation from agent's warrants granted - 110,164 -
Warrant issue costs - (127,199) -
------------ ------------ ------------
Balance at end of year 1,281,946 1,281,946 -
------------ ------------ ------------
CONTRIBUTED SURPLUS
Balance at beginning of year 6,152,265 5,854,445 3,428,382
Contributed surplus as a result of
stock options granted 34,421 393,120 2,380,000
Warrant valuation from agent's warrants granted - - 177,333
Contributed surplus reallocated on the
exercise of stock options (29,274) (95,300) (131,270)
------------ ------------ ------------
Balance at end of year 6,157,412 6,152,265 5,854,445
------------ ------------ ------------
DEFICIT
Balance at beginning of year (39,089,404) (35,508,044) (29,597,304)
Loss for the year (1,084,689) (3,581,360) (5,764,874)
Distribution of equity on spin-off of assets to
Golden Arrow Resources Corporation - - (145,866)
------------ ------------ ------------
Balance at end of year (40,174,093) (39,089,404) (35,508,044)
------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 26,018,766 27,009,534 20,761,073
============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
1. NATURE OF OPERATIONS
IMA Exploration Inc. (the "Company") is a natural resource company
engaged in the business of acquisition, exploration and development of
mineral properties. The Company presently has no proven or probable
reserves and on the basis of information to date, it has not yet
determined whether these properties contain economically recoverable
ore reserves. Consequently the Company considers itself to be an
exploration stage company. The amounts that were shown as mineral
properties and deferred costs represent costs incurred to date, less
amounts amortized and/or written off, and do not necessarily represent
present or future values. As at December 31, 2007 the Company had no
mineral property interests. The Company considers that it has adequate
resources to maintain its core operations for the next fiscal year.
2. NAVIDAD INTEREST
On March 5, 2004, Aquiline Resources Inc. ("Aquiline"), through its
subsidiary, Minera Aquiline Argentina SA, filed a claim in the Supreme
Court of British Columbia against the Company seeking a constructive
trust over the Navidad properties and damages. On July 14, 2006 the
court released its judgment on the claim. The Company was not
successful in its defense and the court found in Aquiline's favour.
The Order reads in part:
"(a) that Inversiones Mineras Argentinas SA ("IMA SA") transfer the
Navidad Claims and any assets related thereto to Minera
Aquiline or its nominee within 60 days of this order;
(b) that IMA take any and all steps required to cause IMA SA to
comply with the terms of this order;
(c) that the transfer of the Navidad Claims and any assets related
thereto is subject to the payment to IMA SA of all reasonable
amounts expended by IMA SA for the acquisition and development
of the Navidad Claims to date; and
(d) any accounting necessary to determine the reasonableness of
the expenditures referred to in (c) above shall be by
reference to the Registrar of this court."
On October 18, 2006, the Company and Aquiline reached a definitive
agreement for the orderly conduct of the Navidad Project pending the
determination of the appeal by the Company against the judgment of the
trial court. The parties have agreed that the transactions outlined in
the agreement were in satisfaction of the Order referenced above. The
principal terms and conditions of the agreement are as follows:
(a) control of the Navidad Project will be transferred to Aquiline
in trust for the ultimately successful party in the appeal;
(b) the Company and Aquiline have agreed to the costs spent to
date developing the Navidad Project in the amount of
$18,500,000. Upon transfer of control of the Navidad Project,
Aquiline paid $7,500,000 of the costs into trust and the
balance will be expended by Aquiline in developing the Navidad
Project during the period of the appeal and secured under the
terms of the trust conditions;
(c) in the event that the Company is unsuccessful on appeal, the
Company will be paid such $18,500,000 amount.
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
2. NAVIDAD INTEREST (continued)
The effective date of the transfer of the Navidad project was November
16, 2006.
The Company's appeal of this judgment was heard by the British Columbia
Court of Appeal between April 10 and April 12, 2007. The Court of
Appeal dismissed the Company's appeal and released their reasons for
judgment on June 7, 2007.
The Company filed an application for leave to appeal to the Supreme
Court of Canada in October 2007. On December 20, 2007 the Supreme Court
of Canada denied the Company's appeal. This brought the lawsuit to a
close. The Navidad property has been transferred to Aquiline.
As at December 31, 2007, the Company has recorded a Navidad interest
balance of $18,500,000, the components of which are as follows:
$
Mineral properties and deferred costs (i) 17,763,521
Marketable securities (ii) 186,000
------------
17,949,521
Navidad recovery (iii) 550,479
------------
Navidad interest 18,500,000
============
(i) The mineral property and deferred costs represent the carrying
value of the acquisition and exploration costs the Company has
incurred in the development of the Navidad project.
(ii) Marketable securities represents the carrying value of the
common shares of publicly traded companies the Company
received as partial consideration for entering into option and
sale agreements for certain of its non-core mineral property
holdings relating to the Navidad Project. Accordingly, these
marketable securities were subject to transfer to Aquiline in
relation to the July 2006 court order.
(iii) The Company has recorded an additional recovery of $550,479 to
bring the total Navidad interest amount recoverable to
$18,500,000.
The Company received the $7.5 million held in trust on January 8, 2008
plus interest that had accrued in the amount of $341,380. The balance
of $11 million was received on February 11, 2008.
The Company expensed Navidad holding costs of $109,666 in the year
ended December 31, 2007. These are costs the Company incurred in order
to maintain basic operations in Argentina subsequent to the transfer of
control of the Navidad project to Aquiline.
3. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles
("Canadian GAAP"). The significant measurement differences between
those principles and those that would be applied under United States
generally accepted accounting principles ("US GAAP") as they affect the
Company are disclosed in Note 11.
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
USE OF ESTIMATES
The preparation of financial statements in conformity with Canadian
GAAP requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the
period. Significant areas requiring the use of management estimates
include the assumptions used in the determination of the fair value of
stock based compensation. Actual results may differ from these
estimates.
PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly owned. All
inter-company transactions and balances have been eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and money market investments,
maturing less than 3 months from the date of initial investment.
SHORT-TERM INVESTMENTS
Short-term investments include money market investments maturing
between 3 and 12 months from the date of initial investment.
MINERAL PROPERTIES AND DEFERRED COSTS
Direct costs related to the acquisition and exploration of mineral
properties held or controlled by the Company are deferred on an
individual property basis until the viability of a property is
determined. Administration costs and general exploration costs are
expensed as incurred. When a property is placed in commercial
production, deferred costs will be depleted using the
units-of-production method. Management of the Company periodically
reviews the recoverability of the capitalized mineral properties.
Management takes into consideration various information including, but
not limited to, results of exploration activities conducted to date,
estimated future metal prices, and reports and opinions of outside
geologists, mine engineers and consultants. When it is determined that
a project or property will be abandoned then the costs are written-off,
or if its carrying value has been impaired, then the mineral properties
and deferred costs are written down to fair value.
The Company accounts for foreign value added taxes paid as part of
mineral properties and deferred costs. The recovery of these taxes will
commence on the beginning of foreign commercial operations. Should
these amounts be recovered they would be treated as a reduction in
carrying costs of mineral properties and deferred costs.
Although the Company has taken steps to verify title to mineral
properties in which it has an interest, these procedures do not
guarantee the Company's title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected
defects.
From time to time, the Company acquires or disposes of properties
pursuant to the terms of option agreements. Options are exercisable
entirely at the discretion of the optionee and, accordingly, are
recorded as mineral property costs or recoveries when the payments are
made or received. After costs are recovered, any remaining balance of
the payments received is recorded as a gain on option or disposition of
mineral property.
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
ASSET RETIREMENT OBLIGATIONS
Asset retirement obligations are recognized when a legal or
constructive obligation arises. This liability is recognized at the
fair value of the asset retirement obligation. When the liability is
initially recorded the Company capitalizes the cost by increasing the
carrying amount of the related long-lived assets. Over time the
liability is accreted to its present value each period, and the
capitalized cost is amortized on the same basis as the related asset.
Upon settlement of the liability, the Company may incur a gain or loss.
As at December 31, 2007 the Company does not have any asset retirement
obligations.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets are reviewed for impairment when events or
circumstances suggest their carrying value has become impaired.
Management considers assets to be impaired if the carrying value
exceeds the estimated undiscounted future projected cash flows to
result from the use of the asset and its eventual disposition. If
impairment is deemed to exist, the assets will be written down to fair
value. Fair value is generally determined using a discounted cash flow
analysis.
TRANSLATION OF FOREIGN CURRENCIES
The Company's foreign operations are integrated and are translated
using the temporal method. Under this method, the Company translates
monetary assets and liabilities denominated in foreign currencies at
period-end rates. Non-monetary assets and liabilities are translated at
historical rates. Revenues and expenses are translated at average rates
in effect during the period except for depreciation and amortization
which are translated at historical rates. The resulting gains or losses
are reflected in operating results in the period of translation.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a
significant concentration of credit risk consist primarily of cash,
short-term investments and other receivables. The Company limits its
exposure to credit loss by placing its cash and short-term investments
with major financial institutions.
INCOME TAXES
The Company uses the asset and liability method of accounting for
future income taxes. Under this method of tax allocation, future income
tax liabilities and assets are recognized for the estimated tax
consequences attributable to differences between the amounts reported
in the consolidated financial statements and their respective tax
bases, using substantively enacted tax rates and laws that are expected
to be in effect in the periods in which the future income tax assets or
liabilities are expected to be settled or realized. The effect of a
change in income tax rates on future income tax liabilities and assets
is recognized in income in the period that the change occurs. Potential
future income tax assets are not recognized to the extent that they are
not considered more likely than not to be realized.
LOSS PER SHARE
Loss per share is calculated based on the weighted average number of
common shares issued and outstanding during the year. In years in which
a loss is incurred, the effect of potential issuances of shares under
options and warrants would be anti-dilutive and therefore basic and
diluted losses per share are the same. Information regarding securities
that could potentially dilute basic earnings per share in the future is
presented in Note 6.
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
STOCK-BASED COMPENSATION
The Company has an employee stock option plan. The Company recognizes
an expense or addition to exploration properties and deferred
exploration expenditures arising from stock options granted using the
fair value method. The fair value of option grants is established at
the date of grant using a Black Scholes option pricing model and the
expense or addition to mineral properties is recognized over the option
vesting period.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2007, the Company adopted the following new
accounting standards issued by the Canadian Institute of Chartered
Accountants ("CICA").
(a) Section 3855, Financial Instruments - Recognition and
Measurement and Section 3861, Financial Instruments -
Disclosure and Presentation, prescribe the criteria for
recognition and presentation of financial instruments on the
balance sheet and the measurement of financial instruments
according to prescribed classifications. These sections also
address how financial instruments are measured subsequent to
initial recognition and how the gains and losses are
recognized.
The Company is required to designate its financial instruments
into one of the following five categories: held for trading;
available for sale; held to maturity; loans and receivables;
and other financial liabilities. All financial instruments are
to be initially measured at fair value. Financial instruments
classified as held for trading or available for sale are
subsequently measured at fair value with any change in fair
value recorded in net earnings and other comprehensive income,
respectively. All other financial instruments are subsequently
measured at amortized cost.
The Company has designated its financial instruments as
follows:
(i) Cash and short-term investments are classified as
"Available-for-sale". Due to their short-term nature,
their carrying value is equal to their fair value.
(ii) Amounts receivable and deposits are classified as
"Loans and Receivables". These financial assets are
recorded at values that approximate their amortized
cost using the effective interest method.
(iii) Accounts payable and accrued liabilities are
classified as "Other Financial Liabilities". These
financial liabilities are recorded at values that
approximate their amortized cost using the effective
interest method.
As a result of adopting Section 3855, on January 1, 2007
interest accrued from short-term investments in the amount of
$65,075 was reclassified from amounts receivable, prepaids and
deposits to short-term investments.
(b) Section 1530, Comprehensive Income, introduces a new financial
statement "Statement of Comprehensive Income" and provides
guidance for the reporting and display of other comprehensive
income. Comprehensive income represents the change in equity
of an enterprise during a period from transactions and other
events arising from non-owner sources including gains and
losses arising on translation of self-sustaining foreign
operations, gains and losses from changes in fair value of
available for sale financial assets and changes in the fair
value of the effective portion of cash flow hedging
instruments. The Company has not recognized any adjustments
through other comprehensive income for the year ended December
31, 2007.
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Section 3865, Hedges specifies the criteria under which hedge
accounting may be applied, how hedge accounting should be
performed under permitted hedging strategies and the required
disclosures. This standard did not have an impact on the
Company for the year ended December 31, 2007.
Effective January 1, 2008, new accounting standards were issued by the
Canadian Institute of Chartered Accountants ("CICA") which may impact
the Company in the future as follows:
GENERAL STANDARDS ON FINANCIAL STATEMENT PRESENTATION
CICA Handbook Section 1400, General Standards on Financial Statement
Presentation, has been amended to include requirements to assess and
disclose a company's ability to continue as a going concern. The
changes are effective for interim and annual financial statements
beginning January 1, 2008. The Company does not expect the adoption of
these changes to have an impact on its financial statements.
ACCOUNTING CHANGES
Effective January 1, 2007, the Company adopted the revised CICA
Handbook Section 1506 "Accounting Changes", which requires that: (a) a
voluntary change in accounting principals can be made if, and only if,
the changes result in more reliable and relevant information, (b)
changes in accounting policies are accompanied with disclosures of
prior period amounts and justification for the change and (c) for
changes in estimates, the nature and amount of the change should be
disclosed. The Company has not made any voluntary change in accounting
principles since the adoption of the revised standard.
CAPITAL DISCLOSURES
CICA Handbook Section 1535, Capital Disclosures, establishes standards
for disclosing information about the company's capital and how it is
managed. Under this standard the Company will be required to disclose
the following, based on the information provided internally to the
company's key management personnel:
(i) qualitative information about its objectives,
policies and processes for managing capital.
(ii) summary quantitative data about what it manages as
capital.
(iii) whether during the period it complied with any
externally imposed capital requirements to which it
is subject.
(iv) when the company has not complied with such
externally imposed capital requirements, the
consequences of such non-compliance.
This standard is effective for interim and annual financial statements
beginning on January 1, 2008. The Company has not yet determined the
impact of the adoption of this change on the disclosure in our
financial statements.
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
INVENTORIES
CICA Handbook Section 3031, Inventories prescribes the accounting
treatment for inventories and provides guidance on the determination of
costs and its subsequent recognition as an expense, including any
writedown to net realizable value. It also provides guidance on the
cost formulas that are used to assign costs to inventories.
This standard is effective for interim and annual financial statements
beginning on January 1, 2008. The Company has not yet determined the
impact of the adoption of this change on the disclosure in our
financial statements.
GOODWILL AND INTANGIBLE ASSETS
CICA Handbook Section 3064, Goodwill and Intangible Assets, establishes
revised standards for recognition, measurement, presentation and
disclosure of goodwill and intangible assets. Concurrent with the
introduction of this standard, the CICA withdrew EIC 27, Revenues and
Expenses during the preoperating period. As a result of the withdrawal
of EIC 27, companies will no longer be able to defer costs and revenues
incurred prior to commercial production at new mine operations. The
changes are effective for interim and annual financial statements
beginning January 1, 2009. The Company has not yet determined the
impact of the adoption of this change on the disclosure in our
financial statements.
FINANCIAL INSTRUMENTS DISCLOSURES
In March 2007, the CICA issued section 3862 Financial Instruments -
Disclosures and Section 3863 Financial Instruments - Presentation,
which together comprise a complete set of disclosure and presentation
requirements that revise and enhance current disclosure requirements.
Section 3862 requires disclosure of additional detail by financial
asset and liability categories. Section 3863 establishes standards for
presentation of financial instruments and non-financial derivatives.
The standard deals with the classification of financial instruments,
from the perspective of the issuer, between liabilities and equity, the
classification of related interest, dividends, losses and gains, and
the circumstances in which financial assets and financial liabilities
are offset. These sections are effective January 1, 2008 but are not
expected to have an impact on the Company's disclosure and
presentation.
4. SHORT-TERM INVESTMENTS
As at December 31, 2007 and 2006, the Company held short-term
investments comprised of the following:
DECEMBER 31, 2007
-------------------------------
PRINCIPAL
AND ACCRUED
MATURITY INTEREST
$
12 month term deposit
- 4.45% annual interest rate
($6,700,000 principal) August 13, 2008 6,813,462
--------------- ------------
6,813,462
============
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
4. SHORT-TERM INVESTMENTS (continued)
DECEMBER 31, 2006
--------------------------------
MATURITY PRINCIPAL
$
12 month term deposit
- 3.7% annual interest rate March 20, 2007 500,000
12 month term deposit
- 4.2% annual interest rate November 5, 2007 8,000,000
---------------- ------------
8,500,000
============
All term deposits are fully redeemable in full or portion at the
Company's option without penalty. Interest is paid on amounts redeemed
subsequent to 30 days from the date of investment. The principal and
interest are unconditionally guaranteed by the Bank of Montreal.
5. MARKETABLE SECURITIES
2007 2006 2005
------------ ------------ ----------------------------
QUOTED
RECORDED RECORDED RECORDED MARKET
VALUE VALUE VALUE VALUE
$ $ $ $
Tinka Resources Limited
- 300,000 common shares - - 96,000 126,000
Consolidated Pacific Bay Minerals Ltd.
- 900,000 common shares - - 90,000 144,000
------------ ------------ ------------ ------------
- - 186,000 270,000
============ ============ ============ ============
The Company acquired the marketable securities as a result of entering
into option and sale agreements for certain of its non-core mineral
property holdings relating to the Navidad Project for which the Company
received common shares of publicly traded companies as partial
consideration. These marketable securities were subject to transfer to
Aquiline under to the July 2006 court order. Accordingly, at December
31, 2007, the carrying value of these marketable securities is a
component of the Navidad interest balance (see Note 2 above).
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
6. SHARE CAPITAL
Authorized - unlimited common shares without par value - 100,000,000
preferred shares without par value
NUMBER $
Issued - common shares ------------ ------------
Balance, December 31, 2004 43,816,207 36,982,307
Private placement 3,333,340 10,000,020
Exercise of options 10,000 31,000
Exercise of agents' options 168,000 546,000
Contributed surplus reallocated on
exercise of options - 131,270
Exercise of warrants 1,485,517 3,784,011
Proceeds collected and paid on behalf of
Golden Arrow shares - (145,866)
Less share issue costs - (914,070)
------------ ------------
Balance, December 31, 2005 48,813,064 50,414,672
Private placement 2,865,000 10,027,500
Warrants valuation - (1,298,981)
Exercise of options 335,000 280,950
Contributed surplus reallocated on
exercise of options - 95,300
Less share issue costs - (854,714)
------------ ------------
Balance, December 31, 2006 52,013,064 58,664,727
Exercise of options 119,000 59,500
Contributed surplus reallocated on
exercise of options - 29,274
------------ ------------
Balance, December 31, 2007 52,132,064 58,753,501
============ ============
(a) During fiscal 2007, 119,000 stock options were exercised at
$0.50 per share for proceeds of $59,500.
(b) During fiscal 2006, the Company completed a syndicated
brokered private placement financing of 2,865,000 special
warrants at $3.50 per warrant for gross proceeds of
$10,027,500. Each special warrant entitled the holder to
acquire one unit consisting of one common share and one half
common share purchase warrant. All special warrants were
converted into common shares on May 25, 2006. Each full
warrant entitles the holder thereof to purchase one additional
common share in the capital of the Company at a price of $3.80
per share until March 21, 2010. In addition to a cash
commission of 6% the underwriters were granted 171,900 agent's
warrants, representing 6% of the number of special warrants
issued. Each agent's warrant is exercisable for one share at a
price of $3.80, for a period of twenty four months, expiring
on March 21, 2008.
The fair value of warrants and agent's warrants were as
follows:
i) value assigned to 1,432,500 warrants was $1,186,053,
net of share issue costs of $112,928
ii) value assigned to the 171,900 agent's warrant was
$95,893, net of share issue costs of $14,271
The Black-Scholes Pricing Model was used to value the warrants
and agent's warrants. The warrants were valued at $0.91 based
on the following assumptions: dividend yield 0%, risk-free
rate 4.0%, expected volatility 55% and expected life of 24
months. The agent's warrants were valued at $0.64 based on the
following assumptions: dividend yield 0%, risk-free rate 4.0%,
expected volatility 61% and expected life of 12 months. At
December 31, 2007, no warrants or agent's warrants had been
exercised.
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
6. SHARE CAPITAL (continued)
(c) During fiscal 2005, the Company completed a brokered private
placement for 3,333,340 units at $3.00 per unit, for proceeds
of $9,263,283 net of $600,001 agent's commission and $136,736
of related issue costs. Each unit consisted of one common
share and one half common share purchase warrant. Each full
warrant entitles the holder thereof to purchase one additional
common share at a price of $3.45 per share until September 14,
2009. In addition to the cash commission the underwriters were
granted as commission 233,334 underwriter's warrants,
representing 7% of the number of units issued. Each
underwriter's warrant is exercisable for one share at a price
of $3.25, for a period of twenty four months, expiring on
September 12, 2007. The underwriter's warrants were valued
using the Black-Sholes Pricing Model. The warrants were valued
at $0.76 per warrant for a total value of $177,333 and have
been recorded as share issue costs with a corresponding
increase to contributed surplus. At December 31, 2007, all of
underwriter's warrants expired unexercised.
(d) Stock options and stock-based compensation
The Company has established a rolling stock option plan (the
"Plan"), in which the maximum number of common shares which
can be reserved for issuance under the Plan is 10% of the
issued and outstanding shares of the Company. The exercise
price of the options is set at the Company's closing share
price on the grant date, less allowable discounts in
accordance with the policies of the TSX Venture Exchange. The
stock options granted during 2007 are subject to a four month
hold period and exercisable for a period of five years. A
summary of the Company's outstanding options at December 31,
2007, 2006 and 2005 and the changes for the years ending on
those dates is presented below:
--------------------- --------------------- ----------------------
2007 2006 2005
--------------------- --------------------- ----------------------
OPTIONS WEIGHTED OPTIONS WEIGHTED OPTIONS WEIGHTED
OUTSTANDING AVERAGE OUTSTANDING AVERAGE OUTSTANDING AVERAGE
AND EXERCISE AND EXERCISE AND EXERCISE
EXERCISABLE PRICE EXERCISABLE PRICE EXERCISABLE PRICE
$ $ $
Balance,
Beginning of year 4,624,000 2.69 4,848,500 2.53 3,543,500 2.09
Granted 100,000 0.47 283,000 3.21 1,360,000 3.74
Exercised (119,000) 0.50 (315,000) 0.61 (20,000) 2.48
Cancelled/Forfeited (160,000) 3.66 (187,500) 2.96 (35,000) 4.16
Expired (115,000) 0.50 (5,000) 0.40 - -
------------ ------------ ------------
Balance, end of year 4,330,000 2.72 4,624,000 2.69 4,848,500 2.53
============ ============ ============
Stock options outstanding and exercisable at December 31, 2007
are as follows:
NUMBER EXERCISE PRICE EXPIRY DATE
$
25,000 0.84 March 7, 2008
300,000 0.90 May 30, 2008
1,170,000 1.87 August 27, 2008
1,347,000 3.10 March 24, 2009
785,000 4.16 March 16, 2010
380,000 2.92 November 16, 2010
223,000 3.21 June 22, 2011
100,000 0.47 October 23, 2012
-----------
4,330,000
===========
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
6. SHARE CAPITAL (continued)
During fiscal 2007, the Company granted 100,000 stock options
(2006 - 273,000; 2005 - 1,360,000).
The fair value of stock options granted is estimated on the
dates of grants using the Black-Scholes Option Pricing Model
with the following assumptions used for the grants made during
the year:
2007 2006 2005
Risk-free interest rate 4.21% 4.0% 3.3% - 3.7%
Estimated volatility 136% 70% 70% - 77%
Expected life 2.5 years 2.5 years 2.5 years
Expected dividend yield 0% 0% 0%
For 2007, stock-based compensation of $34,421 (2006: $393,120;
2005: $2,380,000) was recorded by the Company, of which
$34,421 (2006: $393,120; 2005: $1,800,000) is included in
expenses and Nil (2006: $Nil; 2005: $580,000l) is included in
capitalized mineral property expenditures, with a
corresponding increase in contributed surplus.
The weighted average fair value per share of stock options
granted during the year was $0.34 per share (2006: $1.44;
2005: $1.76). Option pricing models require the use of
estimates and assumptions including the expected volatility.
Changes in the underlying assumptions can materially affect
the fair value estimates and, therefore, existing models do
not necessarily provide reliable measure of the fair value of
the Company's stock options.
(e) Warrants
A continuity summary of warrant equity is presented below:
$
Balance, December 31, 2005 -
Warrant valuation from private placement
warrants granted 1,298,981
Warrant valuation from agent's warrants
granted 110,164
Warrant issue costs (127,199)
------------
Balance, December 31, 2006 and 2007 1,281,946
============
A summary of the number of common shares reserved pursuant to
the Company's outstanding warrants and agents warrants
outstanding at December 31, 2007, 2006 and 2005 and the
changes for the years ending on those dates is as follows:
2007 2006 2005
Balance, beginning of year 3,504,404 1,900,004 1,422,017
Issued - 1,604,400 1,984,004
Exercised - - (1,485,517)
Expired (233,334) - (20,500)
------------ ------------ ------------
Balance, end of year 3,271,070 3,504,404 1,900,004
============ ============ ============
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
6. SHARE CAPITAL (continued)
Common shares reserved pursuant to warrants and agent warrants
outstanding at December 31, 2007 are as follows:
NUMBER EXERCISE PRICE EXPIRY DATE
$
1,666,670 3.45 September 14, 2009
171,900 3.80 March 21, 2008
1,432,500 3.80 March 21, 2010
-----------
3,271,070
===========
7. CONTRIBUTED SURPLUS
A continuity summary of contributed surplus is presented below:
$
Balance, December 31, 2004 3,428,382
Contributed Surplus as a result of stock options granted 2,380,000
Contributed Surplus as a result of brokers' warrants granted 177,333
Contributed Surplus reallocated on exercise of stock options (131,270)
------------
Balance, December 31, 2005 5,854,445
Contributed Surplus as a result of stock options granted 393,120
Contributed Surplus reallocated on exercise of stock options (95,300)
------------
Balance, December 31, 2006 6,152,265
Contributed Surplus as a result of stock options granted 34,421
Contributed Surplus reallocated on exercise of stock options (29,274)
------------
Balance, December 31, 2007 6,157,412
============
8. RELATED PARTY TRANSACTIONS
(a) The Company engages Grosso Group Management Ltd. (the "Grosso
Group") to provide services and facilities to the Company. The
Grosso Group is a private company owned by the Company, Golden
Arrow Resources Corporation, Amera Resources Corporation,
Astral Mining Corporation, Gold Point Energy Corp. and Blue
Sky Uranium Corp., each of which owns one share. The Grosso
Group provides its shareholder companies with geological,
corporate development, administrative and management services.
The shareholder companies pay monthly fees to the Grosso
Group. The fee is based upon a pro-rating of the Grosso
Group's costs including its staff and overhead costs among
each shareholder company with regard to the mutually agreed
average annual level of services provided to each shareholder
company. During fiscal 2007, the Company incurred fees of
$349,143 (2006: $724,902; 2005: $730,802) to the Grosso Group:
$330,305 (2006: $764,115; 2006: $764,012 ) was paid in twelve
monthly payments and $18,838 is included in accounts payable
(2006: $39,213 included in amounts receivable; 2005: $33,210
included in amounts receivable) as a result of a review of the
allocation of the Grosso Group costs to the member companies
for the year. In addition, included in other receivables,
prepaids and deposits is other receivables of a $205,000
(2006: $205,000) deposit to the Grosso Group for the purchase
of equipment and leasehold improvements and for operating
working capital which is callable on demand.
(b) During fiscal 2007, the Company paid $353,283 (2006: $533,917;
2005: $241,088) to directors and officers or companies
controlled by directors and officers of the Company, for
accounting, management and consulting services provided.
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
8. RELATED PARTY TRANSACTIONS (continued)
(c) The President of the Company provides his services on a
full-time basis under a contract with a private company
controlled by the President. On April 12, 2006 the Board
accepted the recommendation from the Compensation Committee to
increase the monthly fee, effective May 1, 2006, to $20,833
from $8,500 and to pay a bonus of $150,000. The total
compensation paid to the President in 2007 was $250,000 (2006
- $350,667). This amount is included in the total amount paid
to directors and officers discussed in Note 8(b) above.
In the event the contract is terminated by the Company or as a
result of a change of control, a payment is payable to the
President consisting of (i) any monthly compensation due to
the date of termination, (ii) options as determined by the
board of directors (iii) three years of monthly compensation
(which may be adjusted annually) and (iv) bonus of $461,500.
If the termination had occurred on December 31, 2007, the
amount payable under the contract would be $1,211,500. In the
event the contract is terminated by the Company as a result of
the President's death or permanent disability while providing
services to the Company, a bonus in the amount of $461,500 is
payable.
Effective May 1, 2007, the Company negotiated agreements with
the five other shareholder companies of the Grosso Group for
the President of the Company to provide services for a monthly
fee. The agreements may be terminated at any time at the other
companies' discretion upon 30 days written notice. The Company
reserves its right to restrict services provided by the
President to the other shareholder companies based on its own
requirements for the President's services, at which time the
fee would be adjusted accordingly. For the year ended December
31, 2007, the Company received a total $66,667 from the other
shareholder companies which has been recorded as a reduction
in Administrative and management services expense. The fees
will be reviewed and adjusted on a periodic basis.
All of the related party transactions and balances in these
consolidated financial statements arose in the normal course of
operations and are measured at the exchange amount, which is the amount
of consideration established and agreed to by the related parties.
9. INCOME TAXES
The recovery of income taxes shown in the consolidated statements of
loss, comprehensive loss and deficit differs from the amounts obtained
by applying statutory rates to the loss before provision for income
taxes due to the following:
2007 2006 2005
Statutory tax rate 34.12% 34.12% 34.12%
============ ============ ============
$ $ $
Loss for the year 1,084,689 (3,581,360) (5,764,874)
Provision for income taxes based on
statutory Canadian combined federal
and provincial income tax rates (370,096) (1,221,960) (1,966,975)
Differences in foreign tax rates (707) (526) -
Non-deductible differences 26,288 149,332 625,988
Losses for which an income tax benefit
has not been recognized 344,515 956,653 1,340,987
Other - 116,501 -
------------ ------------ ------------
- - -
============ ============ ============
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
9. INCOME TAXES (continued)
The significant components of the Company's future tax assets are as
follows:
2007 2006 2005
$ $ $
Future income tax assets
Operating loss carryforward 4,307,036 4,950,897 4,709,496
Share issue costs 288,455 509,317 472,437
Resource deductions 268,425 306,710 -
Other 22,150 45,442 -
------------ ------------ ------------
4,886,066 5,812,366 5,181,933
Valuation allowance for future tax assets (4,886,066) (5,812,366) (5,181,933)
------------ ------------ ------------
- - -
============ ============ ============
FUTURE INCOME TAX LIABILITIES
For certain acquisitions and other payments for mineral property
interests, the Company records a future income tax liability and a
corresponding adjustment to the related asset carrying amount. During
the year ended December 31, 2006, as a result of the uncertainty
regarding the status of the mineral properties balance (included in
Navidad interest), the Company eliminated the future income tax
liability of $1,760,110 that existed as of December 31, 2005 and made a
corresponding adjustment to mineral properties. During the year ended
December 31, 2005, the Company recorded an $875,017 increase to the
future income tax liability and a corresponding adjustment to mineral
properties.
2007 2006 2005
$ $ $
Future income tax
liabilities - - 1,760,110
============ ============ ============
The Company has Canadian capital loss carryforwards of $161,172 and
non-capital loss carryforwards of $15,951,984 that may be available for
tax purposes. The Company's capital losses do not expire and may be
carried forward indefinitely. The non-capital losses expire as follows:
EXPIRY DATE $
2008 841,160
2009 1,317,730
2010 1,545,964
2014 2,752,324
2015 4,708,790
2026 3,282,352
2027 1,503,664
------------
15,951,984
============
10. SEGMENTED INFORMATION
The Company is involved in mineral exploration and development
activities. The Company is in the exploration stage and, accordingly,
has no reportable segment revenues or operating results for each of
fiscal 2007 and 2006.
The Company's total assets are segmented geographically as follows:
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
10. SEGMENTED INFORMATION (continued)
DECEMBER 31, 2007
--------------------------------------------
CANADA ARGENTINA TOTAL
$ $ $
Current assets 26,102,160 22,330 26,124,490
------------ ------------ ------------
26,102,160 22,330 26,124,490
============ ============ ============
DECEMBER 31, 2006
--------------------------------------------
CANADA ARGENTINA TOTAL
$ $ $
Current assets 9,217,352 79,273 9,296,625
Navidad interest - 17,949,521 17,949,521
------------ ------------ ------------
9,217,352 18,028,794 27,246,146
============ ============ ============
11. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
The consolidated financial statements of the Company have been prepared
in accordance with Canadian GAAP, which differ in certain material
respects from US GAAP.
The effects of significant measurement differences between Canadian
GAAP and US GAAP for certain items on the consolidated balance sheets,
statements of operations and deficit and statements of cash flows are
as follows:
2007 2006 2005
$ $ $
CONSOLIDATED STATEMENTS OF OPERATIONS
Loss for the year under Canadian GAAP (1,084,689) (3,581,360) (5,764,874)
Mineral properties and deferred costs for the year (i) - (4,491,524) (8,480,509)
Reversal of Future income tax liability (i) - - 875,017
Realization of Navidad interest (iv) 17,682,521 - -
------------ ------------ ------------
Income (loss) for the year under US GAAP 16,597,832 (8,072,884) (13,370,366)
Unrealized losses on available-for-sale securities (ii) - (3,000) -
------------ ------------ ------------
Comprehensive loss (iii) 16,597,832 (8,075,884) (13,370,366)
============ ============ ============
Basic and diluted income (loss) per share under US GAAP 0.32 (0.16) (0.29)
============ ============ ============
Weighted average number of common shares outstanding 52,099,787 51,263,575 46,197,029
============ ============ ============
2007 2006 2005
$ $ $
SHAREHOLDERS' EQUITY
Balance per Canadian GAAP 26,018,766 27,009,534 20,761,073
Mineral properties and deferred costs expensed (i)
(In 2006, classified as a component of Navidad
interest - Note 2) - (17,763,521) (15,032,107)
Reversal of Future income tax liability (i) - - 1,760,110
Accumulated other comprehensive income (ii) - 81,000 84,000
------------ ------------ ------------
Balance per US GAAP 26,018,766 9,327,013 7,573,076
============ ============ ============
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
11. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (continued)
2007 2006 2005
$ $ $
NAVIDAD INTEREST / MINERAL PROPERTIES
Balance per Canadian GAAP 18,500,000 17,949,521 15,032,107
Transfer of marketable securities (ii) - 81,000 -
Mineral properties and deferred costs
expensed under US GAAP (i) - (17,763,521) (15,032,107)
------------ ------------ ------------
Balance per US GAAP 18,500,000 267,000 -
============ ============ ============
2007 2006 2005
$ $ $
FUTURE INCOME TAX LIABILITY
Balance per Canadian GAAP - - 1,760,110
Reversal of Future income tax liability (i) - - (1,760,110)
------------ ------------ ------------
Balance per US GAAP - - -
============ ============ ============
2007 2006 2005
$ $ $
CONSOLIDATED STATEMENTS OF CASH FLOWS
OPERATING ACTIVITIES
Cash used per Canadian GAAP (1,953,830) (3,785,152) (3,849,618)
Mineral properties and deferred costs (i)
(In 2006, classified as a component of Navidad
interest - Note 2) - (4,491,524) (7,025,492)
------------ ------------ ------------
Cash used per US GAAP (1,953,830) (8,276,676) (10,875,110)
============ ============ ============
2007 2006 2005
$ $ $
INVESTING ACTIVITIES
Cash used per Canadian GAAP (1,686,538) (5,411,524) (10,258,903)
Mineral properties and deferred costs (i)
(In 2006, classified as a component of Navidad
interest - Note 2) - 4,491,524 7,025,492
------------ ------------ ------------
Cash provided by (used) per US GAAP (1,686,538) (920,000) (3,233,411)
============ ============ ============
i) Mineral Properties and Deferred Costs
Mineral properties and deferred costs are accounted for in
accordance with Canadian GAAP as disclosed in Note 3. For US
GAAP purposes, the Company expenses exploration costs relating
to unproven mineral properties as incurred, and reverses any
associated future income tax liabilities. When proven and
probable reserves are determined for a property, subsequent
exploration and development costs of the property are
capitalized.
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
11. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (continued)
ii) Investments
For the 2005 fiscal year, the Company's marketable securities
were classified as available-for-sale investments under US
GAAP and carried at the lower of cost and market value for
Canadian GAAP purposes. Such investments are not held
principally for the purpose of selling in the near term and,
for US GAAP purposes, must have holding gains and losses
reported as a separate component of shareholders' equity until
realized or until an other than temporary impairment in value
occurs. For the 2006 fiscal year, the Company's marketable
securities were classified as available for sale investments
under US GAAP until July 14, 2006, the date of the Navidad
judgment. Subsequently, the marketable securities were
transferred to the Navidad interest balance (see Note 2
above).
iii) Comprehensive Income
US GAAP requires disclosure of comprehensive income (loss)
which is intended to reflect all other changes in equity
except those resulting from contributions by and payments to
owners.
iv) Realization of Navidad interest
For US GAAP purposes the Company had previously expensed the
exploration and other costs that comprised the amount shown as
Navidad interest. Following the conlcusion of the appeal
process, the Company has recognized income of $17,682,521.
(See Note 2).
Accounting for Uncertainty in Income Taxes
In July 2006, the Financial Accounting Standards Board (FASB)
issued FIN 48, Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement 109. This Interpretation
applies to all tax positions related to income taxes subject
to SFAS 109, Accounting for Income Taxes. FIN 48 uses a
two-step approach for evaluating tax positions. The first
step, recognition, occurs when an enterprise concludes that a
tax position, based solely on its technical merits, is more
likely than not to be sustained upon examination. The second
step, measurement, is only addressed if the recognition
threshold is met; under this step, the tax benefit is measured
as the largest amount of the benefit, determined on a
cumulative probability basis, that is more likely than not to
be realized upon settlement. FIN 48's use of the term "more
likely than not" represents a greater than 50 percent
likelihood of occurrence.
The cumulative effect of applying the provisions of this
Interpretation shall be reported as an adjustment to the
opening balance of retained earnings for fiscal year in which
the enterprise adopts the Interpretation. FIN 48 is effective
for fiscal years beginning after December 15, 2006. Earlier
application is permitted if the reporting enterprise has not
publicly issued financial statements, including interim
financial statements, for that fiscal year. Accordingly, the
Company adopted the provisions of this Interpretation in its
fiscal 2007 year. This interpretation did not have an impact
on the Company for the year ended December 31, 2007.
Fair Value Measurements
In September 2006, FASB issued SFAS No. 157, "Fair Value
Measurements", which establishes a framework for measuring
fair value. It also expands disclosures about fair value
measurements and is effective for the first quarter of 2008.
The Company is currently reviewing the guidance to determine
the potential impact, if any, on its consolidated financial
statements.
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
11. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (continued)
RECENTLY ISSUED US GAAP ACCOUNTING STANDARDS:
i) In September 2006, FASB issued SFAS No. 157, "Fair
Value Measurement", effective for fiscal periods
beginning after November 15, 2007. SFAS defines fair
value, establishes a framework for measuring accepted
accounting principles, and expands disclosures about
fair value measurements. In December 2007, the FASB
issued SFAS157-b, which provided for a one year
deferral of the implementation of SFAS 157 for
non-financial assets and liabilities. However, SFAS
is still required to be adopted effective January 1,
2008 for financial assets and liabilities that are
carried at fair value. The Company is currently
evaluating the impact of the adoption of this
standard on its Consolidated Financial sv) Impact of
recently issued accounting standards.
ii) In February 2007, FASB issued SFAS No. 159, "Fair
value option for financial assets and liabilities"
which permits entities to choose to measure various
financial instruments and certain other items at fair
value. We do not expect the adoption of this
Interpretation to have a significant effect on the
Company's results of operations or financial
position.
iii) In December 2007, the FASB issued SFAS 160 a standard
on accounting for noncontrolling interests and
transactions with non-controlling interest holders in
consolidated financial statements. The standard is
converged with standards issued by the AcSB and IASB
on this subject. This statement specifies that
non-controlling interests are to be treated as a
separate component of equity, not as a liability or
other item outside of equity. Because non-controlling
interests are an element of equity, increases and
decreases in the parent's ownership interest that
leave control intact are accounted for as capital
transactions rather than as a step acquisition or
dilution gains or losses. The carrying amount of the
non-controlling interests is adjusted to reflect the
change in ownership interests, and any difference
between the amount by which the non-controlling
interests are adjusted and the fair value of the
consideration paid or received is recognized directly
inequity attributable to the controlling interest.
This standard requires net income and comprehensive
income to be displayed for both the controlling and
the non-controlling interests. Additional required
disclosures and reconciliations include a separate
schedule that shows the effects of any transactions
with the non-controlling interests on the equity
attributable to the controlling interest.
The statement is effective for periods beginning on
or after December 15, 2008. SFAS 160 will be applied
prospectively to all non-controlling interests,
including any that arose before the effective date.
The Company has not determined the effect of the
adoption of this Interpretation to the Company's
results of operations or financial position.
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
11. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (continued)
iv) In December 2007, the FASB issued a revised standard
on accounting for business combinations, SFAS 141R.
The major changes to accounting for business
combinations are summarized as follows:
- all business acquisitions would be measured at
fair value.
- the existing definition of a business would be
expanded.
- pre-acquisition contingencies would be measured at
fair value.
- most acquisition-related costs would be recognized
as expense as incurred (they would no longer be
part of the purchase consideration).
- obligations for contingent consideration would be
measured and recognized at fair value at
acquisition date (would no longer need to wait
until contingency is settled).
- liabilities associated with restructuring or exit
activities be recognized only if they meet the
recognition criteria of SFAS 146, Accounting for
Costs Associated with Exit or Disposal Activities,
as of the acquisition date.
- non-controlling interests would be measured at
fair value at the date of acquisition (i.e. 100%
of the assets and liabilities would be measured at
fair value even when an acquisition is less than
100%).
- goodwill, if any, arising on a business
combination reflects the excess of the fair value
of the acquiree, as a whole, over the net amount
of the recognized identifiable assets acquired and
liabilities assumed. Goodwill is allocated to the
acquirer and the non-controlling interest.
- in accounting for business combinations achieved
in stages, commonly called step acquisitions, the
acquirer is to re-measure its pre-existing
non-controlling equity investment in the acquiree
at fair value as of the acquisition date and
recognize any unrealized gain or loss in income.
The statement is effective for periods beginning on or after
December 15, 2008. The Company does not expect the adoption of
this Interpretation to have a significant effect on the
Company's results of operations or financial position.
12. SUPPLEMENTARY CASH FLOW INFORMATION
Non-cash investing and financing activities were conducted by the
Company as follows:
2007 2006 2005
$ $ $
Investing activities
Expenditures on mineral properties and deferred costs - - (580,000)
Stock-based compensation capitalized - - 580,000
------------ ------------ ------------
- - -
============ ============ ============
IMA EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Expressed in Canadian Dollars)
12. SUPPLEMENTARY CASH FLOW INFORMATION (continued)
2007 2006 2005
$ $ $
Financing activities
Shares issue costs - (95,893) (177,333)
Warrant issue costs - (14,271)
Warrants - 110,164
Shares issued on exercise of options 29,274 74,800 -
Contributed surplus (29,274) (74,800) 177,333
------------ ------------ ------------
- - -
============ ============ ============
13. SUBSEQUENT EVENTS
The Company received the funds representing the Navidad interest as
follows:
o $7.5 million, which was previously held in trust, on January
8, 2008 plus interest that had accrued in the amount of
$341,380
o The balance of $11 million was received on February 11, 2008.
IMA EXPLORATION INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2007
INTRODUCTION
The following management discussion and analysis and financial review, prepared
as of March 28, 2008, should be read in conjunction with the Company's audited
annual consolidated financial statements and related notes for the years ended
December 31, 2007, 2006 and 2005. The consolidated financial statements have
been prepared in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP"). Except as otherwise disclosed all dollar figures
in this report are stated in Canadian dollars. Additional information relevant
to the Company can be found on the SEDAR website at www.sedar.com.
FORWARD LOOKING STATEMENTS
Certain of the statements made and information contained herein is
"forward-looking information" within the meaning of the Ontario Securities Act
or "forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934 of the United States. Forward-looking statements
are subject to a variety of risks and uncertainties which could cause actual
events or results to differ from those reflected in the forward-looking
statements, including, without limitation, risks and uncertainties relating to
foreign currency fluctuations; risks inherent in mining including environmental
hazards, industrial accidents, unusual or unexpected geological formations,
risks associated with the estimation of mineral resources and reserves and the
geology, grade and continuity of mineral deposits; the possibility that future
exploration, development or mining results will not be consistent with the
Company's expectations; the potential for and effects of labour disputes or
other unanticipated difficulties with or shortages of labour; the inherent
uncertainty of future production and cost estimates and the potential for
unexpected costs and expenses, commodity price fluctuations; uncertain political
and economic environments; changes in laws or policies, foreign taxation, delays
or the inability to obtain necessary governmental permits; and other risks and
uncertainties, including those described under Risk Factors Relating to the
Company's Business in the Company's Annual Information Form and in each
management discussion and analysis. Forward-looking information is in addition
based on various assumptions including, without limitation, the expectations and
beliefs of management, that the Company can access financing, appropriate
equipment and sufficient labour. Should one or more of these risks and
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in forward-looking
statements. Accordingly, readers are advised not to place undue reliance on
forward-looking statements.
FUTURE OUTLOOK
The Company has been actively reviewing many projects and opportunities for
future acquisitions. The Company has $25 million of cash available and is well
funded to acquire projects and properties and to then further develop their
potential for 2008 and beyond. The Company's reviews have focused on projects
with a defined resource combined with future potential or which have had
previous positive exploration activities. In the fall of 2007 Dr. Greg Myers was
retained to assist the existing staff and management in this search. Management
is very cognizant of the shareholders' expectations for the Company to return to
active exploration and development. However, this is a process that cannot be
rushed. Proper due diligence takes time and resources, then followed by
negotiations with the property vendors and then whatever regulatory approvals
may also be required.
The Company is well placed to apply strict criteria to its selection and given
current market conditions expects to be presented with excellent opportunities
for one or more acquisitions on which to act.
OVERVIEW
The Company is a natural resource company engaged in the business of
acquisition, exploration and development of mineral properties. At present, the
Company has no producing properties and consequently has no current operating
income or cash flows. As of this date the Company is an exploration stage
company and has not generated any revenues. The Company is entirely dependent on
the equity market for its source of funds. There is no assurance that a
commercially viable mineral deposit exists on any of the properties. Further
evaluation and exploration will be required before the economic viability of any
of the properties is determined.
- 1 -
In March 2004 Aquiline Resources Inc. ("Aquiline") commenced an action against
the Company seeking a constructive trust over the Navidad properties and
damages. The trial commenced on October 11, 2005 and ended on December 12, 2005.
On July 14, 2006 Justice Koenigsberg issued her reasons for judgment and order.
The Company was not successful in its defense and the court found in Aquiline's
favour.
The Order reads in part:
"(a) that Inversiones Mineras Argentinas SA ("IMA SA") transfer the
Navidad Claims and any assets related thereto to Minera
Aquiline or its nominee within 60 days of this order;
(b) that IMA take any and all steps required to cause IMA SA to
comply with the terms of this order;
(c) that the transfer of the Navidad Claims and any assets related
thereto is subject to the payment to IMA SA of all reasonable
amounts expended by IMA SA for the acquisition and development
of the Navidad Claims to date; and
(d) any accounting necessary to determine the reasonableness of
the expenditures referred to in (c) above shall be by
reference to the Registrar of this court."
On October 18, 2006, the Company and Aquiline reached a definitive agreement for
the orderly conduct of the Navidad Project pending the determination of the
appeal by the Company against the judgment of the trial court. The parties have
agreed that the transactions outlined in the agreement are in satisfaction of
the Order referenced above. The principal terms and conditions of the agreement
are as follows:
(i) control of the Navidad Project will be transferred to Aquiline
in trust for the ultimately successful party in the appeal;
(ii) the Company and Aquiline have agreed to the costs spent to
date developing the Navidad Project in the amount of
$18,500,000. Upon transfer of control of the Navidad Project,
Aquiline will pay $7,500,000 of the costs into trust and the
balance will be expended by Aquiline in developing the Navidad
Project during the period of the appeal and secured under the
terms of the trust conditions;
(iii) in the event that the Company is unsuccessful on appeal, the
Company will be paid such $18,500,000 amount.
The effective date of the transfer of the Navidad project was November 16, 2006.
A copy of the agreement has been posted on the SEDAR website as one of the
Company's public documents and is titled "Interim Project Development
Agreement".
The Company's appeal of this judgment was heard by the British Columbia Court of
Appeal between April 10 and April 12, 2007. The Court of Appeal dismissed the
Company's appeal and released their reasons for judgment on June 7, 2007.
The Company filed an application for leave to appeal to the Supreme Court of
Canada in October 2007. On December 20, 2007 the Supreme Court of Canada denied
the Company's appeal. This brought the lawsuit to a close. The Navidad property
has been transferred to Aquiline.
Subsequent to December 31, 2007, the Company was paid $18,500,000 as
consideration for Navidad interest. The Company received the $7.5 million held
in trust on January 8, 2008 plus interest that had accrued in the amount of
$341,380. The balance of $11 million was received on February 11, 2008.
- 2 -
SELECTED QUATERLY FINANCIAL INFORMATION AND FOURTH QUARTER
The following selected consolidated financial information is derived from the
unaudited consolidated interim financial statements of the Company. The
information has been prepared in accordance with Canadian GAAP.
------------------------------------------------- -------------------------------------------------
2007 2006
------------------------------------------------- -------------------------------------------------
DEC 31 SEP 30 JUN 30 MAR 31 DEC 31 SEP 30 JUN 30 MAR 31
$ $ $ $ $ $ $ $
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Revenues Nil Nil Nil Nil Nil Nil Nil Nil
Net Income (Loss) 325,822 (515,787) (408,518) (486,206) (1,126,568) (836,136) (1,112,336) (506,320)
Net Income (Loss) per Common
Share - Basic and Diluted 0.01 (0.01) (0.01) (0.01) (0.02) (0.02) (0.02) (0.01)
------------------------------------------------- -------------------------------------------------
The net income (loss) for the period includes the following:
o Net income includes $550,479 related to the Navidad recovery compared
to $Nil in the 2006 period.
o Interest income increased by $325,683 to $418,321 compared to $92,638
as a result of the $7.5 million dollars held in trust that was received
on January 8, 2008.
o General Exploration costs decreased to $93,175 compared to $178,824 in
the 2006 period.
o Office and sundry expenses increased by $43,951 to $81,039 compared to
$37,008 in 2006 due to additional insurance premiums being expensed
during the period.
o Salaries and Employment benefits decreased to $73,834 during the period
compared to $109,328 in 2006.
o Stock-based compensation increased to $34,421 in 2007 compared to $Nil
in 2006 as a result of 100,000 stock options being granted.
o Professional fees decreased by $262,042 to $186,326 compared to
$448,368 in the 2006 due to less legal costs being incurred associated
with the Aqualine litigation .
o Navidad holding costs decreased by $300,106 to $12,243 compared to
$312,349 in the 2006 period as result of the Company expensing all
Navidad related costs that would otherwise have been capitalized in the
2006 period.
SELECTED ANNUAL FINANCIAL INFORMATION
The following selected consolidated financial information is derived from the
audited consolidated financial statements and notes thereto. The information has
been prepared in accordance with Canadian GAAP.
--------------------------------------------
YEARS ENDED DECEMBER 31
--------------------------------------------
2007 2006 2005
$ $ $
------------ ------------ ------------
Total Assets 26,124,490 27,246,146 23,497,994
Long Term Financial Liabilities - - -
Total Revenues - - -
General and Administrative Expenses 2,302,000 3,951,504 6,148,234
Net Loss (1,084,689) (3,581,360) (5,764,874)
Net Loss per Common Share
Basic and Diluted (0.02) (0.07) (0.12)
------------ ------------ ------------
SUMMARY OF FINANCIAL RESULTS
For the year ended December 31, 2007, the Company reported a consolidated loss
of $1,084,689 ($0.02 per share), a decrease of $2,496,671 from the loss of
$3,581,360 ($0.07 per share) for the year ended December 31, 2006. The decrease
in the loss in 2007, compared to 2006 amount, can primarily be attributed to a
$1,649,504 decrease in operating expenses and $847,167 increase in other income
items.
RESULTS OF OPERATIONS
The Company's operating expenses for the year ended December 31, 2007 were
$2,302,000, a decrease of $1,649,504 from $3,951,504 in 2006.
Professional fees decreased $101,823 to $1,022,321 in 2007, as the Company
incurred significant legal costs incurred in connection with the Aquiline legal
action. The Company's 2007 legal fees primarily consist of costs related to the
appeal to the British Columbia Court of Appeal in and the application of leave
- 3 -
to appeal the Supreme Court of Canada. In 2007 the Company recorded non-cash
stock-based compensation of $34,421 compared to $393,120 in 2006, for stock
options granted to its employees, consultants and directors.
Other notable changes in the operating expenses are:
(i) Administrative and management services decreased by $252,352 primarily
as a result of decreased fees paid for the services of the president of
the Company which included a bonus of $150,000 paid in 2006 (see
discussion on related party transactions below).
(ii) Corporate development and investor relations decreased by $160,962
primarily as a result of the Company's termination of its third-party
investor relation contracts in 2006 as well as decreased investor
relations activity during the year.
(iii) General exploration decreased by $86,983, as the 2006 expenses included
payments made to review properties.
(iv) Office and sundry increased by $56,307 as a result of increased
insurance purchased during the year.
(v) Salaries decreased $408,193 to $244,337 in 2007 due to a decrease in
activity levels and bonuses paid in 2006 totalling $100,000.
(vi) Travel and accommodation decreased $58,162 due to decreased activity
during the year.
(vii) Navidad holding costs decreased $202,683 to $109,666. These are costs
incurred in order to maintain basic operations in Argentina subsequent
to the transfer of control of the Navidad project to Aquiline. The
Company expensed all Navidad related costs that would otherwise being
capitalized from September 30, 2006. In 2006 the Company funded costs
during the transfer of the Navidad project in October and November. As
the full amount of the costs agreed to, between the Company and
Aquiline, were received ($18,500,000) a recovery of overhead costs in
the amount of $550,479 was recorded in 2007 representing the excess
over the Navidad carrying costs.
In 2007 the Company recorded interest income of $675,156 compared to $373,009 in
2006. As a result of the transfer of $7.5 million amount of funds in trust on
January 8, 2008 interest of $341,380 was recorded in 2007. A loss of $8,324 for
foreign exchange was recorded in 2007 compared to loss of $2,865 in 2006.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at December 31, 2007 was $183,628, a decrease of
$207,792 from December 31, 2006. Short-term investments decreased $1,686,538 to
$6,813,462 at December 31, 2007 from $8,500,000 at December 31, 2006. Total
assets at December 31, 2007 were $26,124,490, a decrease of $1,121,656 from
$27,246,146 at December 31, 2006. This decrease is mainly due to the activity
during the year resulting in decreases in the cash and short-term investment
balances.
Stock options were exercised which resulted in cash proceeds of $59,500. No
warrants were exercised in 2007.
The Company has received $Nil from the exercise of options and warrants from
January 1 to March 28, 2008. As at March 28, 2008, the Company had working
capital of approximately $25,450,000.
The Company considers that it has adequate resources to maintain its operations
for the next fiscal year. The funds on hand and received in January and February
will allow the company to acquire viable advance stage exploration assets. The
Company will continue to rely on successfully completing additional equity
financing to further exploration and development of mineral exploration projects
as needed. There can be no assurance that the Company will be successful in
obtaining the required financing.
Except as disclosed the Company does not know of any trends, demand,
commitments, events or uncertainties that will result in, or that are reasonably
likely to result in, its liquidity either materially increasing or decreasing at
present or in the foreseeable future.
- 4 -
The Company does not now and does not expect to engage in currency hedging to
offset any risk of currency fluctuations.
OPERATING CASH FLOW
Cash outflow from operating activities for the year ended December 31, 2007 was
$1,953,830, compared to cash outflow for 2006 of $3,785,152 primarily as a
result of decreased operating activities in the 2007 period.
FINANCING ACTIVITIES
During the year ended December 31, 2007, the Company received $59,500 from the
issue of common shares from the exercise of stock options, compared to
$10,308,450, less costs of $871,749, for the year ended December 31, 2006.
INVESTING ACTIVITIES
Investing activities required cash of $1,686,538 during 2007, compared to
$5,411,524 for 2006. In 2007, this was a result of a decrease in short-term
investments. In 2006 investing activities included additions of $4,491,524 to
the Navidad Project in Argentina and an increase of $920,000 in short-term
investments.
RELATED PARTY TRANSACTIONS
The Company engages Grosso Group Management Ltd. (the "Grosso Group") to provide
services and facilities to the Company. The Grosso Group is a private company
owned by the Company, Golden Arrow Resources Corporation, Amera Resources
Corporation, Astral Mining Corporation, Gold Point Energy Corp. and Blue Sky
Uranium Corp., each of which owns one share. The Grosso Group provides its
shareholder companies with geological, corporate development, administrative and
management services. The shareholder companies pay monthly fees to the Grosso
Group. The fee is based upon a pro-rating of the Grosso Group's costs including
its staff and overhead costs among each shareholder company with regard to the
mutually agreed average annual level of services provided to each shareholder
company. During fiscal 2007, the Company incurred fees of $349,143 (2006:
$724,902; 2005: $730,802) to the Grosso Group: $330,305 (2006: $764,115; 2006:
$764,012 ) was paid in twelve monthly payments and $18,838 (2006: $39,213
included in amounts receivable; 2005: $33,210 included in amounts receivable) is
included in accounts payable as a result of a review of the allocation of the
Grosso Group costs to the member companies for the year. In addition, included
in other receivables, prepaids and deposits is other receivables of a $205,000
(2006: $205,000; 2005: $205,000) deposit to the Grosso Group for the purchase of
equipment and leasehold improvements and for operating working capital.
Effective February 29, 2008, Gold Point Energy Corp. withdrew from Grosso Group.
During fiscal 2007, the Company paid $353,283 (2006: $533,917; 2005: $241,088)
to directors and officers or companies controlled by directors and officers of
the Company, for accounting, management and consulting services provided.
The President of the Company provides his services on a full-time basis under a
contract with a private company controlled by the President. On April 12, 2006
the Board accepted the recommendation from the Compensation Committee to
increase the monthly fee, effective May 1, 2006, to $20,833 from $8,500 and to
pay a bonus of $150,000. The total compensation paid to the President in 2007
was $250,000 (2006 - $350,667). This amount is included in the total amount paid
to directors and officers.
In the event the contract is terminated by the Company or as a result of a
change of control, a payment is payable to the President consisting of (i) any
monthly compensation due to the date of termination, (ii) options as determined
by the board of directors (iii) three years of monthly compensation (which may
be adjusted annually) and (iv) bonus of $461,500. If the termination had
occurred on December 31, 2007, the amount payable under the contract would be
$1,211,500. In the event the contract is terminated by the Company as a result
of the President's death or permanent disability while providing services to the
Company, a bonus in the amount of $461,500 is payable.
Effective May 1, 2007, the Company negotiated agreements with the other
shareholder companies of the Grosso Group for the President of the Company to
provide services for a monthly fee. The agreements may be terminated at any time
at the other companies' discretion upon 30 days written notice. The Company
reserves its right to restrict services provided by the President to the other
shareholder companies based on its own requirements for the President's
- 5 -
services, at which time the fee would be adjusted accordingly. For the year
ended December 31, 2007, the Company received a total $66,667 from the other
shareholder companies which has been recorded as a reduction in Administrative
and management services expense. The fees will be reviewed and adjusted on a
periodic basis.
CRITICAL ACCOUNTING ESTIMATES AND RECENT ACCOUNTING PRONOUNCEMENTS
The preparation of financial statements in conformity with Canadian GAAP
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount of
revenues and expenses during the year. Actual results may differ from these
estimates.
Reference should be made to the Company's significant accounting policies
contained in Note 3 of the Company's consolidated financial statements for the
years ended December 31, 2007, 2006 and 2005. These accounting policies can have
a significant impact of the financial performance and financial position of the
Company.
New Accounting Policies
Effective January 1, 2007, the Company adopted the following new accounting
standards issued by the Canadian Institute of Chartered Accountants ("CICA").
(a) Section 3855, Financial Instruments - Recognition and Measurement and
Section 3861, Financial Instruments - Disclosure and Presentation,
prescribe the criteria for recognition and presentation of financial
instruments on the balance sheet and the measurement of financial
instruments according to prescribed classifications. These sections
also address how financial instruments are measured subsequent to
initial recognition and how the gains and losses are recognized.
The Company is required to designate its financial instruments into one
of the following five categories: held for trading; available for sale;
held to maturity; loans and receivables; and other financial
liabilities. All financial instruments are to be initially measured at
fair value. Financial instruments classified as held for trading or
available for sale are subsequently measured at fair value with any
change in fair value recorded in net earnings and other comprehensive
income, respectively. All other financial instruments are subsequently
measured at amortized cost.
The Company has designated its financial instruments as follows:
(i) Cash and short-term investments are classified as
"Available-for-sale". Due to their short-term nature, their
carrying value is equal to their fair value.
(ii) Amounts receivable, prepaids and deposits are classified as
"Loans and Receivables". These financial assets are recorded at
values that approximate their amortized cost using the effective
interest method.
(iii) Accounts payable and accrued liabilities are classified as
"Other Financial Liabilities". These financial liabilities are
recorded at values that approximate their amortized cost using
the effective interest method.
As a result of adopting Section 3855, on January 1, 2007 interest
accrued from short-term investments in the amount of $65,075 was
reclassified from amounts receivable, prepaids and deposits to
short-term investments.
(b) Section 1530, Comprehensive Income, introduces a new financial
statement "Statement of Comprehensive Income" and provides guidance for
the reporting and display of other comprehensive income. Comprehensive
income represents the change in equity of an enterprise during a period
from transactions and other events arising from non-owner sources
including gains and losses arising on translation of self-sustaining
foreign operations, gains and losses from changes in fair value of
available for sale financial assets and changes in the fair value of
the effective portion of cash flow hedging instruments. The Company has
not recognized any adjustments through other comprehensive income for
the year ended December 31, 2007.
- 6 -
(c) Section 3865, Hedges specifies the criteria under which hedge
accounting may be applied, how hedge accounting should be performed
under permitted hedging strategies and the required disclosures. This
standard did not have an impact on the Company for the nine year ended
December 31, 2007.
In addition to the above, reference should be made to the recent accounting
pronouncements in Canada and in United States that are described in Note 11 of
the Company's consolidated financial statements for the years ended December 31,
2007, 2006 and 2005.
Reference should be made to the recent accounting pronouncements in Canada and
in US that described in Notes 2 and 11 of the Company's consolidated financial
statements for the years ended December 31, 2007, 2006 and 2005.
FINANCIAL INSTRUMENTS
The Company's financial instruments as at December 31, 2007 consist of cash,
short-term investments, amounts receivable (including Navidad interest) and
deposits and accounts payable and accrued liabilities. For discussion of the
valuation of these financial instruments for financial reporting purposes, refer
to the Critical Accounting Estimates and Recent Accounting Pronouncements
section above.
RISK FACTORS
The Company's operations and results are subject to a number of different risks
at any given time. These factors, include but are not limited to disclosure
regarding exploration, additional financing, project delay, titles to
properties, price fluctuations and share price volatility, operating hazards,
insurable risks and limitations of insurance, management, foreign country and
regulatory requirements, currency fluctuations and environmental regulations
risks. Exploration for mineral resources involves a high degree of risk. The
cost of conducting programs may be substantial and the likelihood of success is
difficult to assess.
Financial Markets: The Company is dependent on the equity markets as its sole
source of operating working capital and the Company's capital resources are
largely determined by the strength of the junior resource markets and by the
status of the Company's projects in relation to these markets, and its ability
to compete for the investor support of its projects.
Political Risk: Projects are currently being reviewed in South America. This
exposes the Company to risks that may not otherwise be experienced if all
operations were domestic. Political risks may adversely affect the Company's
existing assets and operations. Real and perceived political risk in some
countries may also affect the Company's ability to finance exploration programs
and attract joint venture partners, and future mine development opportunities.
Currency Risk: Business is transacted by the Company in a number of currencies.
Fluctuations in exchange rates may have a significant effect on the cash flows
of the Company. Future changes in exchange rates could materially affect the
Company's results in either a positive or negative direction.
Environmental Risk: The Company seeks to operate within environmental protection
standards that meet or exceed existing requirements in the countries in which
the Company operates. Present or future laws and regulations, however, may
affect the Company's operations. Future environmental costs may increase due to
changing requirements or costs associated with exploration and the developing,
operating and closing of mines. Programs may also be delayed or prohibited in
some areas. Site restoration costs are a component of exploration expenses.
DISCLOSURE CONTROL AND PROCEDURES
Management has designed disclosure controls and procedures, or has caused them
to be designed under its supervision, to provide reasonable assurance that
material information relating to the Company, is made known to management by
others within those entities, particularly during the period in which the annual
filings are being prepared. Management has also designed such internal control
over financial reporting, or caused it to be designed under management's
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and preparation of the financial statements for the year
ended December 31, 2007 in accordance with Canadian Generally Accepted
Accounting Principles. There has been no change in the Company's disclosure
controls and procedures or in the Company's internal control over financial
- 7 -
reporting that occurred during the completed year that has materially affected,
or is reasonably likely to materially affect, the Company's disclosure controls
and procedures or internal control over financial reporting.
SHARE DATA INFORMATION
As of March 28, 2008 there were 52,013,064 common shares, 3,271,070 warrants and
4,305,000 stock options outstanding.
INVESTOR RELATIONS
The Company currently does not engage any outside investor relations
consultants. Mr. Sean Hurd is the Company's Vice-President, Investor Relations
and coordinates investor relations' activities. The Company maintains a website
at www.imaexploration.com.
- 8 -
FORM 52-109F1 CERTIFICATION OF ANNUAL FILINGS
I, Joseph Grosso, President and Chief Executive Officer of IMA Exploration Inc.,
certify that:
1. I have reviewed the annual filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings) of IMA Exploration Inc. (the issuer) for
the period ending December 31, 2007;
2. Based on my knowledge, the annual 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 annual filings;
3. Based on my knowledge, the annual financial statements together with
the other financial information included in the annual 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 annual 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 annual filings are being prepared;
(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
(c) evaluated the effectiveness of the issuer's disclosure
controls and procedures as of the end of the period covered by
the annual filings and have caused the issuer to disclose in
the annual MD&A our conclusions about the effectiveness of the
disclosure controls and procedures as of the end of the period
covered by the annual filings based on such evaluation; and
5. I have caused the issuer to disclose in the annual 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: March 28, 2008
/s/ Joseph Grosso"
------------------
Joseph Grosso,
President & CEO
FORM 52-109F1 CERTIFICATION OF ANNUAL FILINGS
I, Arthur Lang, Chief Financial Officer of IMA Exploration Inc., certify that:
1. I have reviewed the annual filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings) of IMA Exploration Inc. (the issuer) for
the period ending December 31, 2007;
2. Based on my knowledge, the annual 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 annual filings;
3. Based on my knowledge, the annual financial statements together with
the other financial information included in the annual 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 annual 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 annual filings are being prepared;
(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
(c) evaluated the effectiveness of the issuer's disclosure
controls and procedures as of the end of the period covered by
the annual filings and have caused the issuer to disclose in
the annual MD&A our conclusions about the effectiveness of the
disclosure controls and procedures as of the end of the period
covered by the annual filings based on such evaluation; and
5. I have caused the issuer to disclose in the annual 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: March 28, 2008
/s/ Arthur Lang
-----------------------
Arthur Lang,
Chief Financial Officer