CA Filed by Filing Services Canada Inc. 403-717-3898

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

 

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

For the transition period from _________ to __________________

 

000-54416

(Commission File Number)

 

EMC METALS CORP.

(Exact name of registrant as specified in its charter)

 

British Columbia, Canada 98-1009717
(State or other jurisdiction   (IRS Employer
of incorporation or organization)   Identification No.)
     

 

 

 

1430 Greg Street, Suite 501, Sparks, Nevada 89431

(Address of principal executive offices) (Zip Code)

 

(775) 355-9500

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by sections 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]     No [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]     No [ ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Large accelerated filer [ ]    Accelerated filer [ ]    Non-accelerated filed [ ]    Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act. Yes [ ]    No [X]

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: As of November 7, 2013, the registrant’s outstanding common stock consisted of 165,358,337 shares.



 

 

 

 

 

   
   

PART I. FINANCIAL INFORMATION

 

 











 (An Exploration Stage Company)

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS AND QUARTER ENDED SEPTEMBER 30, 2013
 
 
 
 
 
 
1

 
 
EMC Metals Corp.
 
(An Exploration Stage Company)
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(Expressed in US Dollars) (Unaudited)
 
   
As at:
 
September 30, 2013
   
December 31, 2012
 
             
ASSETS
           
             
Current
           
Cash
  $ 15,629     $ 190,215  
Prepaid expenses and receivables
    25,509       109,335  
                 
Total Current Assets
    41,138       299,550  
                 
Restricted cash (Note 3)
    154,713       160,217  
Property, plant and equipment (Note 1 & 4)
    11,236       30,193,679  
Assets held for sale (Note 1 & 4)
    5,177,110       -  
Mineral interests (Note 5)
    1,663,203       753,182  
                 
Total Assets
  $ 7,047,400     $ 31,406,628  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
Current
               
Accounts payable and accrued liabilities
  $ 1,248,608     $ 656,499  
                 
    Convertible debentures (Note 8)
    649,175       1,861,373  
                 
Promissory notes payable (Note 7)
    4,368,507       4,680,688  
                 
Total Current Liabilities
    6,266,290       7,198,560  
                 
Total Liabilities
    6,266,290       7,198,560  
                 
Stockholders’ Equity
               
Capital stock (Note 9) (Authorized: Unlimited number of shares; Issued and outstanding: 165,358,337 (2012 – 165,358,337))
    87,310,708       87,310,708  
Treasury stock (Note 10)
    (1,264,194 )     (1,264,194 )
Additional paid in capital (Note 9)
    2,099,801       2,033,718  
                 
    Accumulated other comprehensive loss
    (2,844,668 )     (2,844,668 )
                 
Deficit accumulated during the exploration stage
    (84,520,537 )     (61,027,496 )
Total Stockholders’ Equity
    781,110       24,208,068  
                 
Total Liabilities and Stockholders’ Equity
  $ 7,047,400     $ 31,406,628  
 
Nature and continuance of operations (Note 1)
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
2

 
 
EMC Metals Corp.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in US Dollars) (Unaudited)
 
   
Cumulative amounts from incorporation on July 17, 2006 to September 30, 2013
   
Three month
period ended September 30,
2013
   
Three month
period ended
September 30,
2012
   
Nine month
period ended September 30,
2013
   
Nine month
period ended September 30,
2012
 
                               
                               
EXPENSES
                             
Amortization (Note 4)
  $ 2,355,150     $ 5,927     $ 46,214     $ 17,781     $ 173,987  
Consulting
    2,522,479       67,700       82,933       154,906       178,561  
Exploration
    15,063,260       18,918       339,587       328,033       762,634  
General and administrative
    7,714,348       184,925       133,046       362,926       351,555  
Insurance
    1,041,319       20,193       28,763       67,385       64,506  
Professional fees
    3,178,460       25,551       50,686       104,995       194,919  
Research and development
    3,042,091       -       -       -       -  
Salaries and benefits
    8,036,428       227,895       285,124       740,890       703,333  
Stock-based compensation (Note 9)
    5,406,459       1,886       115,273       66,083       313,860  
Travel and entertainment
    1,605,530       711       15,119       16,282       62,090  
                                         
Loss before other items
    (49,965,524 )     (553,706 )     (1,096,745 )     (1,859,281 )     (2,805,445 )
                                         
                                         
OTHER ITEMS
                                       
Foreign exchange gain (loss)
    447,800       (6,871 )     139,663       20,912       (16,191 )
Gain on transfer of marketable securities
    181,238       -       -       -       -  
Gain on settlement of convertible debentures
    1,268,246       -       -       -       -  
Gain on sale of marketable securities
    1,720,016       -       -       -       -  
Write-off of mineral interests and property, plant and equipment (Note 4)
    (37,401,184 )     (21,436,015 )     -       (21,436,015 )     -  
Write-off of land and water rights (Note 4)
    (3,243,685 )     -       -       -       -  
Gain on insurance proceeds
    912,534       -       -       -       -  
Interest expense
    (1,047,651 )     (154,635 )     (191,134 )     (513,591 )     (520,646 )
Other income
    761,397       90,369       -       294,934       -  
Gain on disposition of assets
    933,075       -       -       -       -  
Change in fair value of derivative liability
    453,790       -       -       -       -  
Unrealized loss on marketable securities
    (3,070,425 )     -       -       -       -  
                                         
      (38,084,849 )     (21,507,152 )     (51,471 )     (21,633,760 )     (536,837 )
                                         
Loss before income taxes
    (88,050,373 )     (22,060,858 )     (1,148,216 )     (23,493,041 )     (3,342,282 )
                                         
Deferred income tax recovery
    6,020,527       -       -       -       -  
                                         
Loss for the period
    (82,029,846 )     (22,060,858 )     (1,148,216 )     (23,493,041 )     (3,342,282 )
Foreign currency translation adjustment
    (2,844,668 )     -       1,659,649       -       1,116,618  
Comprehensive loss for the period
  $ (84,874,514 )   $ (22,060,858 )   $ 511,433     $ (23,493,041 )   $ (2,225,664 )
                                         
Basic and diluted loss per common share
          $ (0.13 )   $ (0.01 )   $ (0.14 )   $ (0.02 )
                                         
Weighted average number of common shares outstanding
            165,358,337       158,549,764       165,358,337       153,321,548  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
3

 
 
EMC Metals Corp.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in US Dollars) (Unaudited)
 
   
Cumulative amounts from incorporation on July 17, 2006 to September 30, 2013
   
Nine month
period ended September 30,
2013
   
Nine month
period ended
September 30,
2012
 
                   
CASH FLOWS FROM OPERATING ACTIVITIES
                 
Loss for the period
  $ (82,029,846 )   $ (23,493,041 )   $ (3,342,282 )
Items not affecting cash:
                       
Amortization
    2,355,150       17,781       173,987  
Research and development
    3,042,091       -       -  
Consulting paid with common shares
    9,379       -       -  
Gain on disposal of assets
    (933,075 )     -       -  
Convertible debenture costs
    (1,149,630 )     -       -  
Unrealized foreign exchange
    789,395       5,504       43,510  
Stock-based compensation
    5,406,459       66,083       313,860  
Unrealized gain on marketable securities
    (46,707 )     -       -  
Realized gain on marketable securities
    (1,720,016 )     -       -  
Write-off of mineral properties and property, plant & equipment
    37,401,184       21,436,015       -  
Write-off of land and water rights
    3,243,685       -       -  
Realized loss on transfer of marketable securities
    2,935,895       -       -  
Change in fair value of derivative liability
    (453,790 )     -       -  
Deferred income tax recovery
    (6,020,527 )     -       -  
Finance charge
    504,479       207,940       212,872  
      (36,665,874 )     (1,759,718 )     (2,598,053 )
Changes in non-cash working capital items:
                       
Decrease (increase) in prepaids and receivables
    8,017       83,826       (14,515 )
Increase (decrease) in accounts payable and accrued liabilities
    419,876       660,615       (285,417 )
Increase in due to related parties
    1,091,043       -       -  
Asset retirement obligations
    (999,176 )     -       -  
      (36,146,144 )     (1,015,277 )     (2,897,985 )
CASH FLOWS FROM INVESTING ACTIVITIES
                       
Cash acquired from subsidiary
    4,543,435       -       -  
Cash paid for Subsidiary
    (10,602,498 )     -       -  
Spin-out of Golden Predator Corp.
    (66,890 )     -       -  
Restricted cash
    (161,161 )     -       -  
Reclamation bonds
    747,862       -       -  
Proceeds from sale of marketable securities, net
    (3,881,287 )     -       -  
Proceeds from sale of property, plant and equipment
    633,294       -       -  
Purchase of property, plant and equipment
    (19,920,751 )     -       (3,376 )
Proceeds from sale of mineral interests
    517,550       -       -  
Additions to unproven mineral interests
    (4,224,388 )     (1,108,484 )     (157,696 )
      (32,414,834 )     (1,108,484 )     (161,072 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES
                       
Common shares issued
    52,484,603       -       683,227  
Share issuance costs
    (1,190,801 )     -       -  
Special warrants
    12,095,274       -       -  
Options exercised
    370,812       -       -  
Warrants exercised
    10,534,109       -       -  
Notes payable
    (9,272,423 )     -       -  
Receipt of promissory note
    2,300,000       1,300,000       2,000,000  
Convertible debenture
    2,679,175       649,175       1,000,000  
Debt issuance costs
    (249,827 )     -       (253,929 )
Payment of promissory note
    (1,685,228 )     -       (500,000 )
Advances from related party
    191,508       -       -  
Loans advanced to Midway
    (1,822,651 )     -       -  
Loan repayment from Midway
    1,760,221       -       -  
      68,164,772       1,949,175       2,929,303  
                         
Effect of foreign exchange on cash flows
    411,835       -       (103,362 )
                         
Change in cash during the period
    15,629       (174,586 )     (233,116 )
Cash, beginning of period
    -       190,215       791,438  
                         
Cash, end of period
  $ 15,629     $ 15,629     $ 558,322  
   
Supplemental disclosure with respect to cash flows (Note 12)
 
   
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
4

 
 
EMC Metals Corp.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Expressed in US Dollars) (Unaudited)
 
    Capital Stock                                
           
Additional
     
Treasury
     Accumulated Other Comprehensive    
 Deficit
Accumulated
During the Exploration
       
   
Number of Shares
   
Amount
   
Paid in Capital
   
Stock
   
Loss
   
Stage
   
Total
 
          $       $       $       $       $       $    
Balance, July 17, 2006
    -       -       -       -       -       -       -  
Private placements
    5,000,000       3,017,350       -       -       -       -       3,017,350  
Excess of exchange amount over carrying amount of Springer Mining Company
    -       -       -       -       -       (2,490,691 )     (2,490,691 )
Loss for the period
    -       -       -       -       -       (316,382 )     (316,382 )
                                                         
Balance, December 31, 2006
    5,000,000       3,017,350       -       -       -       (2,807,073 )     210,277  
Private placements
    17,577,500       35,598,475       -       -       -       -       35,598,475  
Conversion of special warrants
    5,390,000       5,590,529       -       -       -       -       5,590,529  
Exercise of warrants
    50,000       74,235       -       -       -       -       74,235  
Share issuance costs – broker’s fees
    -       (1,202,721 )     97,56500       -       -       -       (1,105,156 )
Share issuance costs – shares issued
    100,000       99,910       -       -       -       -       99,910  
Shares issued for mineral properties
    100,000       95,822       -       -       -       -       95,822  
Stock-based compensation
    40,000       38,314       472,489       -       -       -       510,803  
Loss for the year
    -       -       -       -       -       (5,579,477 )     (5,579,477 )
                                                         
Balance, December 31, 2007
    28,257,500       43,311,914       570,054       -       -       (8,386,550 )     35,495,418  
Private placements
    5,322,500       10,543,444       -       -       -       -       10,543,444  
Conversion of special warrants
    7,610,000       7,484,629       -       -       -       -       7,484,629  
Share issuance costs – broker’s fees
    -       (263,169 )     -       -       -       -       (263,169 )
Shares issued for mineral properties
    110,000       206,229       -       -       -       -       206,229  
Acquisition of Gold Standard Royalty Corp.
    2,050,000       4,088,552       138,529       -       -       -       4,227,081  
Acquisition of Great American Minerals Inc.
    1,045,775       2,065,059       419,891       -       -       -       2,484,950  
Acquisition of Fury Explorations Ltd.
    10,595,814       12,963,070       7,343,879       (1,964,364 )     -       -       18,342,585  
Exercise of stock options
    6,637,224       9,690,543       (178,482 )     -       -       -       9,512,061  
Shares issued for repayment of promissory note
    4,728,000       2,017,257       -       -       -       -       2,017,257  
Stock-based compensation
    -       -       2,251,500       -       -       -       2,251,500  
Loss for the year
    -       -       -       -       -       (16,979,873 )     (16,979,873 )
                                                         
Balance, December 31, 2008
    66,356,813       92,107,528       10,545,371       (1,964,364 )     -       (25,366,423 )     75,322,112  
Private placements
    14,500,000       1,123,489       -       -       -       -       1,123,489  
Exercise of stock options
    101,000       110,689       (92,970 )     -       -       -       17,719  
Shares issued for mineral properties
    2,765,643       311,606       -       -       -       -       311,606  
Settlement of convertible debentures
    7,336,874       2,299,061       49,278       -       -       -       2,348,339  
Shares issued for consulting
    89,254       9,168       -       -       -       -       9,168  
Shares issued for acquisition of TTS
    19,037,386       1,976,697       -       -       -       -       1,976,697  
Stock-based compensation before spin-out
    -       -       799,008       -       -       -       799,008  
Spin-out of GPD
    -       (18,044,538 )     (11,300,687 )     -       -       -       (29,345,225 )
Stock-based compensation after spin-out
    -       -       935,995       -       -       -       935,995  
Foreign currency translation adjustment
    -       -       -       -       (2,536,527 )     -       (2,536,527 )
Loss for the year
    -       -       -       -       -       (18,954,099 )     (18,954,099 )
                                                         
Balance, December 31, 2009
    110,186,970       79,893,700       935,995       (1,964,364 )     (2,536,527 )     (44,320,522 )     32,008,282  
Private placements
    30,252,442       4,563,680       441,565       -       -       -       5,005,245  
Exercise of stock options
    1,320,000       443,329       (219,732 )     -       -       -       223,597  
Exercise of warrants
    7,300,000       1,060,257       -       -       -       -       1,060,257  
Stock-based compensation
    -       -       772,179       -       -       -       772,179  
Foreign currency translation adjustment
    -       -       -       -       99,091       -       99,091  
Loss for the year
    -       -       -       -       -       (4,585,644 )     (4,585,644 )
                                                         
Balance, December 31, 2010
    149,059,412       85,960,966       1,930,007       (1,964,364 )     (2,437,436 )     (48,906,166 )     34,583,007  
Exercise of stock options
    250,000       140,466       (76,796 )     -       -       -       63,670  
Exercise/expiry of warrants
    1,369,301       378,563       (700,170 )     700,170       -       -       378,563  
Stock-based compensation
    -       -       296,127       -       -       -       296,127  
Foreign currency translation adjustment
    -       -       -       -       (984,896 )     -       (984,896 )
Loss for the year
    -       -       -       -       -       (7,156,033 )     (7,156,033 )
                                                         
Balance, December 31, 2011
    150,678,713       86,479,995       1,449,168       (1,264,194 )     (3,422,332 )     (56,062,199 )     27,180,438  
Private placements
    13,679,624       790,508       -       -       -       -       790,508  
Stock-based compensation
    -       -       331,794       -       -       -       331,794  
Shares issued for mineral properties
    1,000,000       40,205       -       -       -       -       40,205  
Issue of convertible debenture warrants
    -       -       252,756       -       -       -       252,756  
Foreign currency translation adjustment
    -       -       -       -       577,664       -       577,664  
Loss for the year
    -       -       -       -       -       (4,965,297 )     (4,965,297 )
Balance, December 31, 2012
    165,358,337       87,310,708       2,033,718       (1,264,194 )     (2,844,668 )     (61,027,496 )     24,208,068  
Stock-based compensation
    -       -       66,083       -       -       -       66,083  
Loss for the period
    -       -       -       -       -       (23,493,041 )     (23,493,041
Balance, September 30, 2013
    165,358,337       87,310,708       2,099,801       (1,264,194 )     (2,844,668 )     (84,520,537 )     781,110  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
5

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Expressed in US Dollars) (Unaudited)
 
1.
NATURE AND CONTINUANCE OF OPERATIONS

EMC Metals Corp. (the “Company”) is incorporated under the laws of the Province of British Columbia.  The Company is focused on specialty metals exploration and production and has recently acquired various metallurgical technologies and licenses that it is utilizing to gain access to a number of specialty metals opportunities.  The Company’s principal properties are located in the United States, Australia, and Norway.

The Company’s principal asset was the Springer Tungsten mine and mill, held by the Springer Mining Company. On September 13, 2013, the Company signed a binding Letter Of Intent (LOI) to sell 100% of the Springer Mining Company entity, its assets and mineral and water rights to Americas Bullion Royalty Corp. (AMB), for $5 million cash.

At the signing of the LOI, AMB paid US$3.1 million directly to the existing convertible debt holder to retire a maturing debt plus accumulated interest.
·  
Cash paid by AMB to the convertible debt holder paid the debt in full and released the security interest in the Springer property and assets,
·  
The cash advanced by AMB formed a new loan, with AMB as lender, as at September 13, 2013,
·  
The new loan carries a zero interest rate, and
·  
AMB agreed to additionally fund all Springer property carrying costs until the final payment and closing date.

The sale transaction is intended to be completed within 90 days of the LOI signing date (effectively December 12, 2013), or sooner, if possible.  Until such time as the transaction is fully funded and completed, it will be treated as a pending sale in EMC’s financial statements, and is treated as such in Q3 2013.
·  
Should the transaction not close by December 12, 2013, the LOI terms can be extended by mutual agreement, and
·  
In the event a sale is subsequently consummated with another entity, the AMB loan will become secured with the assets and interests of Springer Mining company, will carry interest at 5% per annum from December 12th to the closing date on the final sale, and a $150,000 break fee will be payable to AMB.

The LOI and pending sale also include the transfer of interests in the Company’s Carlin Vanadium property mineral assets and the Copper King property tungsten assets in Nevada to AMB, along with Springer tungsten.  Should EMC introduce any buyers of these properties to AMB, AMB will pay a 6% finder’s fee, subject to certain conditions.

With the completion of the sale of the Tungsten asset, the Company’s focus of operations is on the exploration and development of our specialty metals assets, specifically the Nyngan scandium deposit located in New South Wales, Australia and the Tørdal scandium/rare earth minerals deposit in Norway. As such, the Company is an exploration stage company and anticipates incurring significant additional expenditures prior to production at any and all of its properties.

These consolidated financial statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of liabilities at their carrying values in the normal course of business for the foreseeable future.  Some interest payments that were due in respect of certain debt obligations are unpaid. These financial statements do not reflect any adjustments that may be necessary if the Company is unable to continue as a going concern.

The Company currently earns no operating revenues and will require additional capital in order to advance both the Nyngan and Tordal properties. The Company’s ability to continue as a going concern is uncertain and is dependent upon the generation of profits from mineral properties, obtaining additional financing and maintaining continued support from its shareholders and creditors.  These are material uncertainties that raise substantial doubt about the Company’s ability to continue as a going concern.   In the event that additional financial support is not received or operating profits are not generated, the carrying values of the Company’s assets may be adversely affected.

2.
BASIS OF PRESENTATION

Basis of presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”).  The interim condensed consolidated financial statements include the consolidated accounts of EMC Metals Corp. (the “Company”) and its wholly-owned subsidiaries with all significant intercompany transactions eliminated.  In the opinion of management, all adjustments necessary for a fair statement of the consolidated financial position, results of operations and cash flows for the interim periods have been made.  Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations.  These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2012 and with our Annual Report on Form 10-K filed with the SEC on March 27, 2013.  Operating results for the nine-month period ended September 30, 2013 may not necessarily be indicative of the results for the year ending December 31, 2013.

Change in functional and presentation currency

The Company’s expenses and overheads are now primarily being incurred in United States Dollars (“USD”) and it is anticipated that cash flows will continue to be primarily in USD.  Accordingly the Company has decided that effective January 1, 2013 to change the functional currency from the Canadian Dollar to the USD for the parent company and its wholly owned subsidiaries.
 
 
6

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Expressed in US Dollars) (Unaudited)

2.
BASIS OF PRESENTATION (cont’d…)
 
Effective December 31, 2012, the Company changed its presentation currency from the Canadian dollar to the US dollar.  The Company’s consolidated financial statements for the year ended December 31, 2012 are the Company’s first financial statements that were presented in U.S. dollars.  As a result of changing the presentation currency, all the comparative assets and liabilities were translated using the closing rate at the balance sheet date, all comparative equity items were translated at the exchange rates at the dates of transaction and the comparative statements of loss were translated at the average exchange rate for the period covered.  All resulting exchange differences are recognized in the accumulated other comprehensive loss in the balance sheets’ equity section.

A change in presentation currency is accounted for as a change in accounting policy and is applied retrospectively, as if the new presentation currency had always been the presentation currency.  Consequently, the comparatives for the nine months and quarter ended September 30, 2012 have been restated to be presented in United States dollars.  The exchange rates applied for translation purposes were as follows:

Date or period
Exchange rate
For the nine months ended September 30, 2012
1 USD = 1.00230 CAD

Use of estimates

The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.  Actual results experienced by the Company may differ materially and adversely from the Company’s estimates.

Fair value of financial assets and liabilities

The Company measures the fair value of financial assets and liabilities based on US GAAP guidance which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
 
The Company classifies financial assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other financial liabilities depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition, except for those arising from certain related party transactions which are accounted for at the transferor’s carrying amount or exchange amount.
 
Financial assets and liabilities classified as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified as held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale are measured at fair value, with unrealized gains and losses being recognized as other comprehensive income until realized, or if an unrealized loss is considered other than temporary, the unrealized loss is recorded in income.
 
Financial instruments, including receivables, accounts payable and accrued liabilities, convertible debentures and promissory notes payable are carried at amortized cost, which management believes approximates fair value due to the short term nature of these instruments. Investments in trading securities are classified as held for trading, with unrealized gains and losses being recognized in income.

The following table presents information about the assets that are measured at fair value on a recurring basis as of September 30, 2013, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and included situations where there is little, if any, market activity for the asset:
 
   
September 30,
2013
   
Quoted Prices
in Active Markets
(Level 1)
   
Significant Other
Observable Inputs
(Level 2)
   
Significant
Unobservable Inputs
(Level 3)
 
Assets:
                       
Cash and restricted cash
  $ 170,342     $ 170,342     $     $  
                                 
Total
  $ 170,342     $ 170,342     $     $  
 
The fair values of cash and restricted cash are determined through market, observable and corroborated sources.
 
Recently Adopted and Recently Issued Accounting Standards
 
The Company reviewed significant newly issued accounting pronouncements and concluded that they are either not applicable to the Company’s business or that no material effect is expected on the consolidated financial statements as a result of future adoption.
 
 
7

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Expressed in US Dollars) (Unaudited)
 
3.
RESTRICTED CASH

The Company has a Bank of Montreal line of credit of up to C$159,400 as a security deposit related to a Vancouver office lease obligation. The letter of credit is secured by a short-term cash investment of C$159,400 with the bank bearing interest at prime less 2.05% maturing on May 8, 2014, contemporaneous with the date the office lease expires.
 
4.
PROPERTY, PLANT AND EQUIPMENT AND ASSETS HELD FOR SALE

2013
 
   
December 31, 2012
Net Book Value
   
Additions (disposals)
(write-offs)
   
Amortization
   
Currency
Translation Adjustment
   
September 30, 2013 Net Book Value
 
Land and water rights
  $ 4,252,146     $ (4,252,146 )   $ -     $ -     $ -  
Plant and equipment
    25,749,852       (25,749,852 )     -       -       -  
Buildings
    165,959       (157,786 )     (8,173 )     -       -  
Automobiles
    11,262       (4,878 )     (6,384 )     -       -  
Computer equipment
    3,402       -       (857 )     -       2,545  
Office Equipment
    11,058       -       (2,367 )     -       8,691  
Property, plant and equipment
  $ 30,193,679     $ (30,164,662 )   $ (17,781 )   $ -     $ 11,236  
Assets held for sale
  $ -     $ 5,177,110     $ -     $ -     $ 5,177,110  
 
2012
 
   
December 31, 2011 Net Book Value
   
Additions (disposals) (write-offs)
   
 
Amortization
   
Currency
Translation Adjustment
   
December 31, 2012 Net Book Value
 
Land and water rights
  $ 4,595,829     $ (443,499 )   $ -     $ 99,816     $ 4,252,146  
Plant and equipment
    25,190,293       -       -       559,559       25,749,852  
Cosgrave plant and equipment
    71,244       -       (72,484 )     1,240       -  
Buildings
    173,301       -       (11,139 )     3,797       165,959  
Automobiles
    19,995       -       (9,138 )     405       11,262  
Computer equipment
    795       3,338       (800 )     69       3,402  
Small tools and equipment
    98,283       -       (99,994 )     1,711       -  
Office Equipment
    13,904       -       (3,140 )     294       11,058  
Property, plant and equipment
  $ 30,163,644     $ (440,161 )   $ (196,695 )   $ 666,891     $ 30,193,679  

Land and water rights are in respect of properties in Nevada.  The plant and equipment is comprised of the Springer Plant and Mill in Nevada which is currently under care and maintenance.

Impairment of land and water rights

During the year ended December 31, 2012, the Company reviewed the carrying value of its land and water rights for impairment and compared the carrying value to the estimated recoverable amount and wrote down its land and water rights by $443,499.

5.
MINERAL INTERESTS

September 30, 2013
 
Scandium and other
   
Tungsten
   
Total
 
                   
Acquisition costs
                 
                   
Balance, December 31, 2012
  $ 554,719     $ 198,463     $ 753,182  
Additions
    1,108,484       -       1,108,484  
Write-off
    -       (198,463 )     (198,463 )
Translation adjustment
    -       -       -  
                         
Balance, September 30, 2013
  $ 1,663,203     $ -     $ 1,663,203  
 
 
8

 

EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Expressed in US Dollars) (Unaudited)
 
5. 
MINERAL INTERESTS (cont’d…)

December 31, 2012
 
Scandium and other
   
Tungsten
   
Total
 
                   
Acquisition costs
                 
                   
Balance, December 31, 2011
  $ 474,199     $ 194,150     $ 668,349  
Additions
    75,205       -       75,205  
Sold
    (4,910 )     -       (4,910 )
Translation adjustment
    10,225       4,313       14,538  
                         
Balance, December 31, 2012
  $ 554,719     $ 198,463     $ 753,182  
 
Title to mineral property interests involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral property interests.  The Company has investigated title to all of its mineral property interests and, to the best of its knowledge, title to all of its properties is in good standing.

TUNGSTEN PROPERTY

Springer Property

On November 21, 2006, the Company acquired all outstanding and issued shares of Springer Mining Company (“Springer”).  Included in the assets of Springer and allocated to property, plant and equipment (Note 4) are the Springer Mine and Mill located in Pershing County, Nevada.  The Company agreed to sell Springer Mining Company in Q3, 2013 (see Note 1), for $5 million, along with the Copper King Tungsten property and the Carlin Vanadium property.  The transaction is expected to be competed and fully funded in Q4, 2013.

SCANDIUM PROPERTIES

Nyngan, New South Wales Property

On February 5, 2010, the Company entered in to an earn-in agreement with Jervois Mining Limited (“Jervois”), whereby it would acquire a 50% interest in the Nyngan Scandium property (the “Nyngan Project”) located in New South Wales, Australia.  The JV Agreement, as amended, gave us the right to earn a 50% interest in a joint venture with Jervois, for the purpose of holding and developing the Nyngan Project.  On June 22, 2012, we received notice of a lawsuit filed against the Company with regard to the achievement of certain milestones required under the JV Agreement. On February 6, 2013, we announced agreement of an out of court settlement to the dispute with Jervois. The terms of the settlement transferred 100% ownership and control of the Nyngan Project to the Company, in return for AUD$2.6 million cash payments and a percentage royalty payable to Jervois on sales of product from the project.  A total of $1,108,484 (AUD$1.2 million) was paid in June 2013 as part of the settlement.

Tørdal and Evje-Iveland properties, Norway

During fiscal 2012 the Company entered into an option agreement with REE Mining AS (“REE”) to earn up to a 100% interest in the Tørdal and Evje-Iveland properties pursuant to which the Company paid $130,000 and issued 1,000,000 common shares valued at $40,000.  To earn its interest, the original agreement required the Company to pay REE an additional $500,000, incur $250,000 of exploration work and issue 250,000 common shares upon releasing the second of two full feasibility studies on the two properties.  The Company subsequently renegotiated the payments required to earn the interest and the Evje-Iveland property was removed from the option agreement.  Pursuant to the amendment, the Company earned a100% interest in the Tørdal property by paying an additional $35,000 and granting a 1% Net Smelter Return (“NSR”) payable to REE.

Fairfield property, Utah

In 2011 the Company entered into an earn-in agreement with Mineral Exploration Services LLC, whereby the Company had an option to earn a 100% interest in a patented mining claim and former scandium property known as The Little Green Monster near Fairfield, Utah.

The Company returned the property to its former owner, under terms of the earn-in agreement, and wrote off its investment of $4,910 in this project in fiscal 2012.

Hogtuva property, Norway

During fiscal 2011 the Company entered into an option agreement with REE Mining AS (“REE”) to earn a 100% interest in three scandium and beryllium exploration sites in Norway pursuant to which the Company paid $50,000.  To earn its interest, the original agreement required the Company to pay REE an additional $100,000 and issue up to 200,000 common shares.  During fiscal 2013, the Company renegotiated the payments required to earn the interest and removed two of the exploration sites from the agreement.
 
 
9

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Expressed in US Dollars) (Unaudited)
 
5. 
MINERAL INTERESTS (cont’d…)

Pursuant to the amendment, the Company earned a 100% interest in the Hogtuva property in consideration for the $50,000 original payment and the grant of a 1% NSR payable to REE.

6.
RELATED PARTY TRANSACTIONS

A promissory note due to a director of the Company (principal balance of $500,000) matured and was paid during June 2012. The promissory note was issued as part of the purchase of a subsidiary company during November 2009.

During the nine months ended September 30, 2013, the Company expensed a consulting fee of $76,500 for one of its directors. This amount remains unpaid at period end. There were no such fees paid in the corresponding quarter of 2012.

The $650,000 loan financing completed on February 22, 2013, the $1,200,000 financing completed on June 24, 2013 and the 100,000 financing completed on August 27, 2013, were funded from a combination of Directors, insiders, and independent shareholders.

7.
PROMISSORY NOTES PAYABLE

 
   
September 30, 2013
   
December 31, 2012
 
             
Promissory note with a principal balance of $3,750,000, bearing interest at 6% per annum, maturing July 3, 2013 and secured by land and water rights.
 
During fiscal 2008 the Company entered into a promissory note for $6,750,000 as consideration for the acquisition of land and water rights. The Company subsequently made principal payments of $3,000,000 consisting of a cash payment of $1,000,000 and 4,728,000 units of the Company equity valued at $2,000,000. Each unit consisted of one common share and one-half share purchase warrant exercisable at C$0.75 each and exercisable for a period of two years. The note was secured by a First Deed of Trust on the Cosgrave property land and water rights.
 
In June 2013 the Company returned to the note holder the Cosgrave Ranch for the value of the promissory note thereby extinguishing this debt. (Note 4)
 
$ Nil
    $ 3,750,000  
               
During the year ended December 31, 2012 the Company completed a $3,000,000 loan financing which included a $1,000,000 note payable bearing interest at 7% per annum maturing August 15, 2013. Presented is this principal balance less financing and costs which are amortized over the term of the debt using the effective interest method. This resulted in a carrying amount of $831,841 upon deducting a debt discount of $168,159 from the principal balance of $1,000,000. During the first nine months of 2013, the Company recognized $69,313 in accretion through interest expense. During fiscal 2012, the Company recognized $98,847 in accretion through interest expense. The note payable is secured by an interest in the assets of the Company’s subsidiary, Springer Mining Company.
 
Nil
      930,688  
               
On June 24, 2013 the Company completed a $1,200,000 financing consisting of a series of insider and non-insider loans. The loans have a maturity date of June 24, 2014 and bear interest at 10% per annum. The loans are secured by the ownership interest the Company has or earns in the Nyngan Scandium Project. As an inducement to enter into loan, the lenders received a royalty of 0.2% of average scandium sales value, produced from the Nyngan property, on the first 100 tonnes of scandium oxide product produced and sold. The royalty is capped at $370,000 and EMC retains a right to buy back the royalty from the lenders or their assigns for $325,000 at any time up to the commencement of first production, or three years from loan date, whichever occurs first.
    1,200,000       -  
 
On August 27, 2013, the Company completed a $100,000 loan financing consisting of insider loans. The loan does not bear any interest for 90 days, is immediately due and payable when the Company can make the repayment based on completion of the Springer transaction, and is secured by an interest in the Bank of Montreal Guaranteed Investment Certificate that matures in May of 2014.
    100,000       -  
                 
As part of the Letter of Intent entered into upon sale of the Springer Mining Company, Americas Bullion Royalty Corporation (AMB) agreed to pay out the convertible debenture financing along with accrued interest, that was due in Q3, 2013, The new loan from AMB does not carry any interest. Should the transaction with AMB not complete by December 13, 2013, this new loan will carry a 5.0% per annum interest rate effective December 12, 2013 and the new loan will be secured by the assets of the Springer Mining Company.
    3,068,507       -  
      4,368,507       4,680,688  
                 
Less current portion
    (4,368,507 )     (4,680,688 )
                 
    $ Nil     $ Nil  
 
 
10

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Expressed in US Dollars) (Unaudited)
 
8.
CONVERTIBLE DEBENTURE

On February 22, 2013, the Company completed a $649,175 loan financing consisting of convertible debentures.  The convertible debenture has a maturity date of February 22, 2014 and bears interest at 10% per annum.  The lenders may convert the loan into 13,000,000 common shares of the Company.  There is no beneficial conversion feature associated with the conversion option.  The loan is secured by an interest in the assets of the Company’s wholly owned subsidiary, Wolfram Jack Mining Corp. and the Company’s interest in the Hogtuva and Tordal properties in Norway.

On February 17, 2012, the Company completed a $3,000,000 loan financing consisting of a term loan of $1,000,000 (Note 7), a convertible debenture of $2,000,000 and warrants to acquire 3,000,000 common shares. The convertible debenture has a maturity date of August 15, 2013 and bears interest at 7% per annum.  The lender may convert a maximum of $2,000,000 of the principal amount of the loan into 10,000,000 common shares of the Company.  The loan is secured by an interest in the assets of the Company’s subsidiary, Springer Mining Company.  There is no beneficial conversion feature associated with the conversion option. The warrants are exercisable at C$0.20 per share expiring February 15, 2014.  A relative fair value of $217,267 was assigned to the warrants and recorded in additional paid in capital.  The Company paid financing costs of $249,827 and also issued 750,000 purchase warrants exercisable at C$0.20 per share expiring February 15, 2014.  These warrants were valued at $58,716 with a volatility of 120%, expected life of 2 years, risk free rate of 1.0% and expected dividend yield of 0.0% and recorded in additional paid in capital.  The financing costs were allocated between debt and the equity components.  This resulted in a convertible debenture carrying amount of $1,663,681 upon deducting a debt discount of $336,319 from the principal balance of $2,000,000.  During the nine months ended September 30, 2013, the Company recognized $138,627 in accretion through interest expense.  During fiscal 2012, the Company recognized $197,692 in accretion through interest expense.

9.
CAPITAL STOCK AND ADDITIONAL PAID IN CAPITAL

On December 20, 2012, the Company issued 1,000,000 common shares at a value of $40,205 for the Tørdal and Hogtuva projects in Norway.

On December 16, 2012, the Company issued 2,000,000 common shares at a value of C$0.05 per common share for total proceeds of C$100,000.

On July 24, 2012, the Company issued 11,679,624 common shares at a value of C$0.06 per common share for total proceeds of C$700,777.

On December 3, 2010, the Company issued 18,929,740 common shares at a value of C$0.19 per common share for total proceeds of C$3,596,651.  A total of C$210,249 was received during fiscal 2011.

On November 25, 2010, the Company issued 6,100,000 units at a value of C$0.10 per unit for total proceeds of C$610,000.  Each unit consisted of one common share and one-half of one share purchase warrant exercisable at C$0.18 expiring on November 25, 2011. The warrants have a calculated total fair value of C$142,358 using the Black-Scholes pricing model with a volatility of 142.52%, risk-free rate of 1.73%, expected life of 1 year, and a dividend rate of 0%.

On June 30, 2010, the Company issued 2,947,702 units at a value of C$0.10 per unit for total proceeds of C$294,770.  Each unit consisted of one common share and one-half of one share purchase warrant exercisable at C$0.18 until June 30, 2011. The warrants have a calculated total fair value of C$35,638 using the Black-Scholes pricing model with a volatility of 123.84%, risk-free rate of 1.39%, expected life of 1 year, and a dividend rate of 0%.

On February 17, 2010, the Company issued 2,275,000 units at a value of C$0.20 per unit for total proceeds of C$455,000.  Each unit consisted of one common share and one-half of one share purchase warrant exercisable at C$0.25 until February 17, 2011.  The warrants have a calculated total fair value of C$78,113 using the Black-Scholes pricing model with a volatility of 131.19%, risk-free rate of 1.34%, expected life of 1 year, and a dividend rate of 0%.  All of the warrants were exercised during fiscal 2011.

On November 17, 2009, the Company issued 13,000,000 units at a value of C$0.08 per unit for total proceeds of C$1,040,000.  Each unit consisted of one common share and one-half of one share purchase warrant.  Each full warrant entitled the holder to purchase an additional share at C$0.15 per share until November 17, 2010.
 
 
11

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Expressed in US Dollars) (Unaudited)
 
9.
CAPITAL STOCK AND ADDITIONAL PAID IN CAPITAL (cont’d…)
 
On October 13, 2009, the Company issued 500,000 common shares at a value of C$45,000 for the Fostung Tungsten project.

On August 27, 2009, the Company issued 1,500,000 units at a value of C$0.10 per unit, pursuant to a non-brokered private placement for proceeds of C$150,000.  Each unit consisted of one common share and one-half of one share purchase warrant.  Each full warrant entitled the holder to purchase an additional share at C$0.15 per share until August 27, 2010.

On May 13, 2009, the Company issued 89,254 common shares at a value of C$0.12 per share to a consultant for settlement of consulting fees for Fury Explorations Ltd. (“Fury”), a subsidiary of GPD, under the plan of Arrangement of spin-out. On April 21, 2009, the Company issued 51,859 common shares at a value of C$0.10 per share for the Platte River property.

On January 21, 2009, the Company issued 66,784 common shares at a value of C$0.20 per share for the Guijoso property for Fury.

On January 6, 2009, the Company issued 2,147,000 common shares at a value of $250,000 for the Adelaide and Tuscarora projects for Golden Predator Mines US Inc., a wholly owned subsidiary of the Company prior to the spin-out.

On November 17, 2008, the Company issued 76,274 common shares in connection with the acquisition of the subsidiary, Great American Minerals Inc.

On October 18, 2008, the Company issued 4,728,000 units to Cosgrave for repayment of a promissory note at a value of $2,000,000.  Each unit consisted of one common share of the Company and one-half of one common share purchase warrant with a two year life and exercisable at C$0.75.

In July 2008, the Company completed a private placement consisting of 2,500,000 common shares at C$2.00 per share for proceeds of C$5,000,000.  In connection with this private placement the Company paid a finder’s fee of $250,000.
 
In January 2008, the Company completed a private placement consisting of 2,822,500 units at C$2.00 per unit for gross proceeds of C$5,645,000.  Included in the proceeds was C$3,620,000 received in advance as of December 31, 2007.  Each unit consisted of one common share and one half of one share purchase warrant.  Each whole warrant entitled the holder to acquire one additional common share at C$3.00 for a period of 12 months.

In November 2007, the Company completed private placements consisting of 17,577,500 units at C$2.00 per unit for proceeds of C$35,155,000.  Each unit consisted of one common share and one half of one common share purchase warrant.  Each whole warrant entitled the holder to acquire one additional common share at C$3.00 for a period of 12 months following the closing of the placement.

In December 2007, the Company issued 5,390,000 common shares pursuant to the conversion of special warrants.  The Company paid C$1,016,074 and issued 100,000 common shares valued at C$100,000 as issuance costs and finder’s fees.  The Company also granted warrants to acquire 300,000 common shares exercisable at C$1.50 expiring September 22, 2008.  The warrants were valued at C$99,000 with the Black-Scholes option pricing model using an expected volatility of 115%, life of one year, a risk free interest rate of 4% and a dividend yield of 0%.
 
In December 2006, the Company issued 5,000,000 common shares at C$0.70 per common share for gross proceeds of C$3,500,000.
 
 
12

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Expressed in US Dollars) (Unaudited)
 
9.
CAPITAL STOCK AND ADDITIONAL PAID IN CAPITAL (cont’d…)
 
Stock Options and Warrants

The Company established a stock option plan (the “Plan”) under which it is authorized to grant options to executive officers and directors, employees and consultants and the number of options granted under the Plan shall not exceed 15% of the shares outstanding.  Under the Plan, the exercise period of the options may not exceed five years from the date of grant and vesting is determined by the Board of Directors. 

Stock option and share purchase warrant transactions are summarized as follows:

   
Warrants
   
Stock Options
 
   
Number
   
Weighted average exercise price in Canadian $
   
 
Number
   
Weighted average
exercise price in Canadian $
 
                         
                         
Outstanding, December 31, 2011
    -     $ -       11,848,750     $ 0.19  
Granted
    3,750,000       0.20       3,885,000       0.08  
Cancelled
    -       -       (2,187,500 )     0.28  
Exercised
    -       -       -       -  
                                 
Outstanding, December 31, 2012
    3,750,000       0.20       13,546,250       0.14  
Granted
    -       -       2,100,000       0.07  
Cancelled
    -       -       (532,500 )     0.48  
Exercised
    -       -       -       -  
                                 
Outstanding, September 30, 2013
    3,750,000     $ 0.20       15,113,750     $ 0.12  
                                 
Number currently exercisable
    3,750,000     $ 0.20       14,519,750     $ 0.12  
 
As at September 30, 2013, incentive stock options were outstanding as follows:

   
Number of
options
   
Exercise
Price in Canadian $
   
Expiry Date
                 
Options
    645,000         0.200    
October 31, 2013
      537,500         0.300    
January 23, 2014
      50,000         0.300    
February 26, 2014
      1,020,000         0.160    
June 16, 2014
      225,000         0.120    
August 27, 2014
      200,000         0.105    
December 16, 2014
      601,250         0.250    
January 4, 2015
      4,800,000         0.100    
November 5, 2015
      250,000         0.315    
May 4, 2016
      500,000         0.250    
May 16, 2016
      300,000         0.155    
September 15, 2016
      2,335,000         0.080    
April 24, 2017
      1,550,000         0.070    
August 8, 2017
      600,000         0.050    
March 18, 2018
      1,000,000         0.100    
May 9, 2018
      500,000         0.050    
May 9, 2015
                       
      15,113,750                
 
As at September 30, 2013, warrants were outstanding as follows:

Warrants
 
Number of
Warrants
   
Exercise
Price in Canadian $
   
Expiry Date
                 
      3,750,000     $ 0.20    
February 15, 2014
 
 
13

 
 
EMC Metals Corp.
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Expressed in US Dollars) (Unaudited)
 
9.
CAPITAL STOCK AND ADDITIONAL PAID IN CAPITAL (cont’d…)
 
Stock-based compensation

During the nine months ended September 30, 2013, the Company recognized stock-based compensation of $66,083 (September 30, 2012 - $313,860) in the statement of operations as a result of incentive stock options granted and vested in the current period.  There were 2,100,000 stock options issued during the nine months ended September 30, 2013 (September 30, 2012 – 3,885,000).

The weighted average fair value of the options granted in the period was C$0.07 (2012 - C$0.07).

The fair value of all compensatory options and warrants granted is estimated on grant date using the Black-Scholes option pricing model.  The weighted average assumptions used in calculating the fair values are as follows:

   
2013
   
2012
 
             
Risk-free interest rate
    0.62 %     0.51 %
Expected life
 
5 years
   
5 years
 
Volatility
    144.60 %     136.82 %
Forfeiture rate
    0.00 %     N/A  
Dividend rate
    0.00 %     N/A  
 
10.
TREASURY STOCK

   
Number
   
Amount
 
             
Treasury shares, September 30, 2013 and December 31 2012
    1,033,333     $ 1,264,194  
                 
      1,033,333     $ 1,264,194  

Treasury shares comprise shares of the Company which cannot be sold without the prior approval of the TSX.

11.
SEGMENTED INFORMATION

The Company’s mineral properties are located in Norway, Australia, and the United States and its capital assets’ geographic information is as follows:

September 30, 2013
 
Norway
   
Australia
   
United States
   
Total
 
                         
Property, plant and equipment
  $ -     $ -     $ 11,236