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7/31/2019 Annual Financial Statements -December 31 2011 Final - Sedar Filed
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VENGA AEROSPACE SYSTEMS INC.
Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010
(Expressed in Canadian Dollars)
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Managements Responsibility for Financial Reporting
The accompanying consolidated financial statements of Venga Aerospace Systems Inc. were prepared bymanagement in accordance with International Financial Reporting Standards (IFRS). Managementacknowledges responsibility for the preparation and presentation of the consolidated financial statements,
including responsibility for significant accounting judgments and estimates and the choice of accountingprinciples and methods that are appropriate to the Companys circumstances. The significant accountingpolicies of the Company are summarized in note 6 to the consolidated financial statements.
Management has established a system of internal control over the financial reporting process, which isdesigned to provide reasonable assurance that relevant and reliable information is produced.
The Board of Directors is responsible for reviewing and approving the consolidated financial statements, theaccompanying Managements Discussion and Analysis and for ensuring that management fulfills its financialreporting responsibilities. An Audit Committee which is comprised of a majority of independent non-executivedirectors assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets withmanagement as well as with the independent auditor to review the internal controls over the financialreporting process, the consolidated financial statements and the auditors report. The Audit Committee reports
its findings to the Board of Directors for its consideration in approving the consolidated financial statements forissuance to the shareholders.Management recognizes its responsibility for conducting the Companys affairs in compliance with establishedfinancial standards, and applicable laws and regulations, and for maintaining proper standards of conduct forits activities.
Signed by:Hirsh Kwinter Dr. Ezra FrankenPresident Chief / Financial Officer Director
April 29, 2012
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INDEPENDENT AUDITORS' REPORT
To the Shareholders of Venga Aerospace Systems Inc.
We have audited the accompanying consolidated financial statements of VENGAAEROSPACE SYSTEMS INC., which comprise the consolidated statements of financialposition as at December 31, 2011, December 31, 2010 and January 1, 2010,consolidated statements of operations and comprehensive loss, consolidatedstatements of changes in equity, and consolidated statements of cash flow for theyears ended December 31, 2011 and December 31, 2010, and a summary of significantaccounting policies and other explanatory information.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financialstatements in accordance with internal control as management determines isnecessary to enable the preparation of financial statements that are free from materialmisstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on ouraudit. We conducted our audit in accordance with Canadian auditing standards. Those
standards require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether the financial statements are freefrom material misstatement.
An audit involves performing procedures to obtain audit evidence about the amountsand disclosures in the financial statements. The procedures selected depend on our
judgment, including the assessment of the risks of material misstatement of thefinancial statements, whether due to fraud or error. In making those risk assessments,we consider internal control relevant to the entitys preparation and fair presentation ofthe financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe entitys internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient andappropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements present fairly, in all materialrespects, the financial position of VENGA AEROSPACE SYSTEMS INC. as at December31, 2011, December 31, 2010 and January 1, 2010, and its results of operations and itscash flows for the years ended December 31, 2011 and December 31, 2010 in
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accordance with International Financial Reporting Standards.
Emphasis of MatterWithout qualifying our opinion, we draw attention to Note 2 in the consolidatedfinancial statements which indicates that none of the Companys ventures have beguncommercial operations and thus recurring sources of revenue have not yet proven tobe sufficient. The Company needs to obtain additional financing to enable it to continueits business. These conditions, along with other matters as set forth in Note 2 indicatethe existence of a material uncertainty that may cast significant doubt about theCompany's ability to continue as a going concern.
Rich Rotstein LLPChartered Accountants Toronto, CanadaLicensed Public Accountants April 29, 2012
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Venga Aerospace Systems Inc.(Incorporated under the laws of the Province of Ontario)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION(Expressed in Canadian Dollars)
As at
December 31, 2011
December 31, 2010
January 1, 2010
$
$$
ASSETS
(Note 6)
(Note 6)
Current Assets
Cash and cash equivalents
5,108
9,809
42,025
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Prepaids and sundry receivables
65
717
10,102
5,173
10,526
52,127
Other Assets
Investment (Notes 3(b) and 10)51,000
200,000300,000
Investment in Global Mineral Investments, LLC (Notes 3 (a) and 12)
485,400
485,400
485,400
Total Assets
541,573
695,926
837,527
LIABILITIES AND SHAREHOLDERS EQUITY
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Current Liabilities
Accounts payable and accrued charges20,772
37,896
24,784
Due to Directors (Note 8)39,000
0
0
Total Liabilities
59,772
37,896
24,784
Shareholders Equity
Capital Stock17,268,96617,268,96617,268,966
Contributed Surplus890,684890,684
890,684
Deficit(17,677,849)(17,501,620)(17,346,907)
Total Equity
481,801
658,030
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812,743
Total Liabilities and Shareholders Equity
541,573
695,926
837,527
Going Concern (Note 2)
The accompanying notes are an integral part of these consolidated financial statements
Approved on behalf of the Board
Hirsh Kwinter (signed)
Director
Dr. Ezra Franken (signed)
Director
Hirsh Kwinter
Dr. Ezra Franken
Venga Aerospace Systems Inc.(Incorporated under the laws of the Province of Ontario)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
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for the Years Ended December 31, 2011 and 2010
(Expressed in Canadian Dollars)
2011 2010$ $
EXPENSES
Office and general 14,643 40,224
Professional fees 12,586 14,489
27,229 54,713
LOSS FROM OPERATIONS (27,229) (54,713)
Impairment of long-term investments (Note 10) (149,000) (100,000)
NET LOSS AND COMPREHENSIVE LOSS (176,229) (154,713)
Net loss per share basic and fully diluted (0.0007) (0.0006)
Weighted average number of shares 239,171,893 239,171,893
The accompanying notes are an integral part of these consolidated financial statements
Venga Aerospace Systems Inc.(Incorporated under the laws of the Province of Ontario)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
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for the Years Ended December 31, 2011 and 2010
(Expressed in Canadian Dollars)
Share Capital
# of Shares AmountContributed
Surplus Deficit Total
Balance January 1, 2010 239,171,893 $17,268,966
$ 890,684 (17,346,907) $ 812,7
Net loss and comprehensiveloss for the year endedDecember 31, 2010
(154,713) (154,7
Balance December 31,2010
239,171,893 17,268,966 $ 890,684 (17,501,620) 658,0
Net loss and comprehensiveloss for the year endedDecember 31, 2011 (176,229)
(176,229)
Balance December 31,2011
239,171,893 17,268,966 $ 890,684 (17,677,849) 481,8
The accompanying notes are an integral part of these consolidated financial statements
Venga Aerospace Systems Inc.
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(Incorporated under the laws of the Province of Ontario)
CONSOLIDATED STATEMENTS OF CASH FLOWfor the Years Ended December 31, 2011 and 2010
(Expressed in Canadian Dollars)
2011 2010$ $
OPERATING ACTIVITIES
Net Loss (176,229) (154,713)
Adjustments not effecting cash:
Impairment of long-term investments (Note 10) 149,000100,000
Changes in non-cash working capital items
Prepaids and sundry receivables 652 9,385
Accounts payable and accrued charges (17,124) 13,112
Cash Flow Used in Operating Activities (43,701) (32,216)
FINANCING ACTIVITIES
Loan from Directors 39,000 0
Cash Flow From Financing Activities 39,000 0
Net Decrease in Cash (4,701) (32,216)
Cash and cash equivalents beginning of year 9,809 42,025
Cash and cash equivalents end of year 5,108 9,809
The accompanying notes are an integral part of these consolidated financial statements
Venga Aerospace Systems Inc.
Notes to the Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010
(Expressed in Canadian Dollars)____________________________________________________________________________________
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1. CORPORATE PROFILE
Venga Aerospace Systems Inc. (the Company) was originally incorporated under the Business CorporationsAct (Ontario) by certificates of amalgamation dated April 26, 1979, amalgamating Frodac Mines Ltd., GreatBear Silver Mines Limited and Silver Monarch Mines Limited to become Frodac Consolidated EnergyResources Ltd. On July 25, 1985, the Company changed its name to Global Aerospace Systems Inc. and onNovember 3, 1987, the Company further changed its name to Venga Aerospace Systems Inc. The registered
head office is 2822 Danforth Avenue, Toronto, Ontario, M4C 1M1.
In addition, these consolidated financial statements include the wholly owned subsidiary Venga Joint VentureLtd., which is inactive.
2. GOING CONCERN
These financial statements have been prepared in accordance with IFRS applicable accounting principles to agoing concern which assumes that the Company will be able to realize its assets, including the ultimaterealization of its long-term investments, and discharge its liabilities in the normal course of business. None ofthe Companys ventures have begun commercial operations thus recurring sources of revenue have not yetproven to be sufficient. The Company needs to obtain additional financing to enable it to continue itsbusiness. In the absence of additional financing, the Company may not have sufficient funds to meet itsobligations. Management continues to monitor the cash needs and consider various alternatives to raiseadditional financing. These financial statements do not give effect to adjustments that would be necessaryshould the Company be unable to continue as a going concern. There is no assurance that this will besuccessful.
3. OPERATIONS
(a) Mining and Resource Unit
The Company initially acquired a 3% interest, together with an option to acquire up to an additional 15%interest, in Global Mineral Investments, LLC (GMI), a private U.S. corporation that proposed to leaseand develop gold mining concessions in West Africa. On August 31, 2007, GMI was awarded four ClassB Gold Mining Licences (the GMI Mining Licences) by the Ministry of Lands, Mines and Energy of theRepublic of Liberia (the Ministry) for four, separate concessions (the GMI Concessions) located in the
Sanquin Mining Zone in the Republic of Liberia. In consideration for business and management servicesthat the Company rendered GMI, on September 6, 2007, the Companys ownership interest in GMI wasincreased from 3% to 4%.
On October 10, 2008, the Company announced that it entered into a funding and operating agreement (theFunding Agreement) with GMI and a number of investors to raise, by way of a non-brokered privateplacement (the Offering or the Placement), the sum of $535,000.00 through the issue of 10,700,000common shares at a price of $0.05 per share. The announced use of the proceeds from the Offering wasto fund GMIs Proposed Dredging Operations (the "Proposed Dredging Operations") that GMI planned tocarry out in those portions of the Upper Tartweh River system flowing through the GMI Concessions; toacquire an additional 16% equity interest in GMI (giving Venga a 20% total interest) and for generalcorporate purposes. The Company and GMI specifically agreed that the Funding Agreement did notcreate (whether directly or by implication) a partnership between the Company and GMI, nor did the
Funding Agreement create, whether directly or indirectly, a joint venture between the parties. Under theterms of the Funding Agreement, the Company secured an immediate 20% investment interest in GMIwith:
GMI retaining full and complete operational control of all GMIs business operations including, but notlimited to, the Proposed Dredging Operations and Venga being given management of the financialaffairs of the Proposed Dredging Operations;
Venga Aerospace Systems Inc.
Notes to the Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010
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(Expressed in Canadian Dollars)____________________________________________________________________________________
3. OPERATIONS
(a) Mining and Resource Unit (continued)
Venga being given the entitlement to receive an annual financial management fee (which fee, nor anyportion of same, have yet to be received by the company as of the date of these financial statements)calculated as being the greater of $120,000.00 or an amount equal to 1% of all monies received,disbursed or distributed by the Company as the financial manager of the Proposed DredgingOperations;
Revenues derived from the recovery of all minerals other than gold, including diamonds, being for thebenefit of all parties to the Funding Agreement so that such revenues will be included in thecalculation of the distributable profits from the Proposed Dredging Operations that are payable tosuch parties pursuant to the terms of the Funding Agreement;
Subject to the approval of the Ministry, the records of the Ministry with respect to the GMIsConcessions to be amended to reflect Vengas direct ownership of these concessions in apercentage that is equal to Vengas then equity ownership position in GMI; and
Any additional mining concessions secured or negotiated by GMI or Venga in Liberia or West Africa
to be acquired in the joint names of GMI and Venga reflecting the parties equal ownership of suchadditional concessions.
(b) 3D Graphics Unit
In November of 2006, the Company entered into a joint venture agreement (the JV Agreement) with 3DPNorth America, Inc., of Kenner, Louisiana; United Business & Capital Services, LLC of Kenner, Louisiana;EKG, LLC of Lafayette, Louisiana and Armadillo Photo Supply, Inc. of Houston, Texas creating a newcommercial entity, the 3DP North America Joint Venture (the New JV), to provide a range of advanced 3Dproducts and print services for both commercial and consumer customers. The Company retains a 30%ownership interest in the New JV with 3DP North America, Inc., who acts as the managing venturer of theNew JV, owning the remaining 70% of the venture.
(c) Aerospace Unit
The Company, in association with ARINC Incorporated (www.arinc.com), made an unsolicited proposal to theCanadian government to provide replacement jet aircraft for the Canadian Forces' Snowbirds aerialdemonstration squadron. As a direct result of the continuing delays in the Canadian government's decisionwith respect to selecting a program to replace or upgrade the Snowbirds' aircraft, the Company is holding itsSnowbirds' aircraft replacement proposal in abeyance pending receipt of a positive response from theCanadian government
4.BASIS OF PREPARATION
(a) Statement of Compliance
These consolidated financial statements are audited and have been prepared using accounting policiesconsistent with the International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB) and Interpretations of the International Financial ReportingInterpretations Committee (IFRIC).These are the Companys first IFRS annual consolidated financial statements. Previously, the Companyprepared its annual consolidated financial statements in accordance with Canadian Generally Accepted
Accounting Principles (Canadian GAAP).
Venga Aerospace Systems Inc.
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Notes to the Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010
(Expressed in Canadian Dollars)____________________________________________________________________________________
4. BASIS OF PREPARATION(continued)
(a)Statement of Compliance (continued)
The consolidated financial statements of the Company for the years ended December 31, 2011 and 2010have been prepared by management, reviewed by the Audit Committee and approved and authorized forissue by the Board of Directors on April 29, 2012. Shortly thereafter, the financial statements are madeavailable to shareholders and others through filing on the System for Electronic Document Analysis andRetrieval (SEDAR).
(b)Basis of Presentation
The financial statements have been prepared on the historical cost basis except for financial instruments, whichare measured at fair value. These financial statements have been prepared using IFRS principles applicable toa going concern, which contemplate the realization of assets and settlement of liabilities in the normal course ofbusiness as they come due. All amounts are presented in Canadian dollars, unless otherwise indicated.
(c)Adoption of New and Revised Standards and Interpretations
The IASB issued a number of new and revised International Accounting Standards, International FinancialReporting Standards, amendments and related interpretations which are effective for the Companysfinancial year beginning on or after January 1, 2011. For the purpose of preparing and presenting theFinancial Statements for the relevant periods, the Company has consistently adopted all these newstandards.
At the date of authorization of these Consolidated Financial Statements, the IASB and IFRIC have issuedthe following new and revised Standards and Interpretations which are not yet effective for the relevantreporting periods.
An amendment to IAS 1, Presentation of Financial Statements (IAS 1) was issued by the IASB in June2011. The amendment requires separate presentation for items of other comprehensive income that wouldbe reclassified to the statement of income in the future if certain conditions are met, from those that wouldnever be reclassified to the statement of income. The effective date is July 1, 2012, and earlier adoption ispermitted.
IAS 12 Income Taxes Limited scope amendment (recovery of underlying assets) (effective for annualperiods beginning on or after January 1, 2012).
IAS 27, Separate Financial Statements (IAS 27) was re-issued by the IASB in May 2011, to onlyprescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures andassociates when an entity prepares separate financial statements. The consolidation guidance will now beincluded in IFRS 10. The amendments to IAS 27 are effective for annual periods beginning on or afterJanuary 1, 2013.
IAS 28, Investments in Associates and Joint Ventures (IAS 28) was re-issued by the IASB in May 2011.IAS 28 continues to prescribe the accounting for investments in associates but is now the only source ofguidance describing the application of the equity method. The amended IAS 28 will be applied by all entitiesthat have an ownership interest with joint control of, or significant influence over, an investee. Theamendments to IAS 28 are effective for annual periods beginning on or after January 1, 2013.
IAS 32, Financial Instruments: Presentation (IAS 32) was amended by the IASB in December 2011. Theamendment clarifies that an entity has a legally enforceable right to offset financial assets and financialliabilities if that right is not contingent on a future event and it is enforceable both in the normal course ofbusiness and in the event of default, insolvency or bankruptcy of the entity and all counterparties. Theamendments to IAS 32 are effective for annual periods beginning on or after January 1, 2014.
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Venga Aerospace Systems Inc.
Notes to the Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010
(Expressed in Canadian Dollars)____________________________________________________________________________________
4. BASIS OF PREPARATION (continued)
(c) Adoption of New and Revised Standards and Interpretations (continued)
IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine (IFRIC 20) was issued by the IASBin October 2011. IFRIC 20 is effective for annual periods beginning on or after January 1, 2013. Thestandard requires stripping costs incurred during the production phase of a surface mine to be capitalizedas part of an asset, if certain criteria are met, and depreciated on a units of production basis unless anothermethod is more appropriate.
IFRIC 7, Financial Instruments: Disclosure (IFRS 7) was amended by the IASB in December 2011. Theamendment contains new disclosure requirements for financial assets and financial liabilities that are offsetin the statement of financial position or subject to master netting arrangements or similar agreements.
These new disclosure requirements will enable users of the financial statements to better compare financialstatements prepared in accordance with IFRS. IFRS 7 is effective for annual periods beginning on or afterJanuary 1, 2013.
IFRS 9, Financial Instruments (IFRS 9) was issued by the IASB in November 2009 and will replace IAS39, Financial Instruments: Recognition and Measurement (IAS 39). IFRS 9 replaces the multiple rules inIAS 39 with a single approach to determine whether a financial asset is measured at amortized cost or fairvalue and a new mixed measurement model for debt instruments having only two categories: amortizedcost and fair value. The approach in IFRS 9 is based on how an entity manages its financial instruments inthe context of its business model and the contractual cash flow characteristics of the financial assets. Thisstandard also requires a single impairment method to be used, replacing the multiple impairment methodsin IAS 39. In December 2011, the IASB issued amendments to IFRS 9 that defer the mandatory effectivedate to annual periods beginning on or after January 1, 2015. The amendments also provide relief from therequirement to restate comparative financial statements for the effect of applying IFRS 9 which wasoriginally limited to companies that chose to apply IFRS 9 prior to 2012. Alternatively, additional transitiondisclosures will be required to help investors understand the effect that the initial application of IFRS 9 hason the classification and measurement of financial instruments.
IFRS 10, Consolidated Financial Statements (IFRS 10) was issued by the IASB in May 2011, and willreplace SIC 12, Consolidation Special Purpose Entities and parts of IAS 27, Consolidated and SeparateFinancial Statements. Under the existing IFRS, consolidation is required when an entity has the power togovern the financial and operating policies of an entity so as to obtain benefits from its activities. IFRS 10establishes principles for the presentation and preparation of consolidated financial statements when anentity controls one or more other entities. This standard (i) requires an entity that controls one or more otherentities to present consolidated financial statements; (ii) defines the principle of control and establishescontrol as the basis for consolidation; (iii) sets out how to apply the principle of control to identify whether aninvestor controls an investee and therefore must consolidate the investee; and (iv) sets out the accounting
requirements for the preparation of consolidated financial statements. IFRS 10 is effective for annualperiods beginning on or after January 1, 2013.
IFRS 11, Joint Arrangements (IFRS 11) was issued by the IASB in May 2011, and will supersede IAS 31,Interest in Joint Ventures and SIC 13, Jointly Controlled Entities Non-Monetary Contributions byVenturers by removing the option to account for joint ventures using proportionate consolidation andrequiring equity accounting. Venturers will transition the accounting for joint ventures from the proportionateconsolidation method to the equity method by aggregating the carrying values of the proportionatelyconsolidated assets and liabilities into a single line item on their financial statements. In addition, IFRS 11will require joint arrangements to be classified as either joint operations or joint ventures. The structure ofthe joint arrangement will no longer be the most significant factor when classifying the joint arrangement aseither a joint operation or a joint venture. IFRS 11 is effective for annual periods beginning on or afterJanuary 1, 2013.
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Venga Aerospace Systems Inc.
Notes to the Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010
(Expressed in Canadian Dollars)__________________________________________________________________________________________
4. BASIS OF PREPARATION (continued)
(c)Adoption of New and Revised Standards and Interpretations (continued)
IFRS 12, Disclosure of Interests in Other Entities (IFRS 12) was issued by the IASB in May 2011. IFRS12 requires enhanced disclosure of information about involvement with consolidated and unconsolidatedentities, including structured entities commonly referred to as special purpose vehicles or variable interestentities. IFRS 12 is effective for annual periods beginning on or after January 1, 2013.
IFRS 13, Fair Value Measurement (IFRS 13) was issued by the IASB in May 2011. This standardclarifies the definition of fair value, required disclosures for fair value measurement, and sets out a singleframework for measuring fair value. IFRS 13 provides guidance on fair value in a single standard, replacing
the existing guidance on measuring and disclosing fair value which is dispersed among several standards.IFRS 13 is effective for annual periods beginning on or after January 1, 2013.
The Company has not early adopted these standards, amendments and interpretations, however theCompany is currently assessing what impact the application of these standards or amendments will have onthe consolidated financial statements of the Company. These Standards and Interpretations will be firstapplied in the financial report of the Company that relates to the annual reporting period beginning on orafter the effective date of each pronouncement.
5.FIRST TIME ADOPTION OF IFRS
The Company has adopted IFRS on January 1, 2011 with a transition date of January 1, 2010. IFRS 1,
First-time Adoption of International Financial Reporting Standards (IFRS 1), provides guidance for theinitial adoption of IFRS. Under IFRS 1, the IFRS are applied retrospectively at the transition date with alladjustments to assets and liabilities as stated under Canadian GAAP taken to accumulated deficit unlesscertain mandatory exceptions and optional exemptions are applied.
Mandatory exceptions
The mandatory exceptions applicable to the Company include the following:
Estimates
In accordance with IFRS 1, hindsight was not used to create or revise estimates. The estimates previouslymade by the Company under Canadian GAAP were not revised for application of IFRS except wherenecessary to reflect any differences in accounting policies between Canadian GAAP and IFRS.
Optional exemptions and elections
In addition to the mandatory exceptions, a number of optional exemptions from full retrospective applicationare available to the Company upon adoption of IFRS. The impact or non impact of all these optionalexemptions on the Company is listed below:
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Venga Aerospace Systems Inc.
Notes to the Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010
(Expressed in Canadian Dollars)__________________________________________________________________________________________
5.FIRST TIME ADOPTION OF IFRS (continued)
The Company has applied the following exemptions:
Exemption Application of exemption
Business Combinations exemption The Company has applied the business combinations exemption inIFRS 1. It has not restated business combinations that took place
prior to January 1, 2010 transition date. No adjustment wasrequired.
The Company has not applied the following exemptions:
Exemption Reason for not applying the exemption
Share-Based payment transaction exemption The Company has elected not to apply the share-based paymentexemption. No adjustment was required.
Optional exemptions and elections (continued)
The Company has applied the following mandatory exceptions from retrospective application:
Exception Description of exception and application to the Company
Estimates exception Estimates under IFRS at January 1, 2010 should be consistentwith estimates made for the same date under previous GAAP,unless there is evidence that those estimates were in error. Noadjustments for estimates have been made.
Reconciliation between IFRS and Canadian GAAP
IFRS employs a conceptual framework that is similar to Canadian GAAP. The adoption of IFRS may result insignificant changes to a company's reported financial position, results of operations, and cash flows.Presented below are the Company's determinations as to any reconciliations necessary or required toreconcile IFRS treatment the Company's assets, liabilities, equity, net loss and cash flows as such items maydiffer from those reported under Canadian GAAP:
Reconciliation of the Statements of Financial Position
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There were no reportable changes to the Statements of Financial Position on adoption of IFRS as at thetransition date of January 1, 2010.
Venga Aerospace Systems Inc.
Notes to the Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010
(Expressed in Canadian Dollars)________________________________________________________________________________________
5.FIRST TIME ADOPTION OF IFRS (continued)Reconciliation between IFRS and Canadian GAAP(continued)
Reconciliation of the Statements of Assets, Liabilities and Equity
There were no reportable changes to the Statements of Assets, Liabilities and Equities for the year ended atDecember 31, 2011 or for the year ended at December 31, 2010 on adoption of IFRS.
Reconciliation of Loss and Comprehensive Loss
There were no reportable changes to the Statements of Loss and Comprehensive Loss for the year endedDecember 31, 2011 or for the year ended at December 31, 2010 on adoption of IFRS.
Reconciliation of the Statements of Cash Flows
There were no reportable changes to the Statements of Cash Flows for the year ended December 31, 2011 orfor the year ended at December 31, 2010 on adoption of IFRS.
6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements follow the same accounting policies and methods of application asthe Company's most recent annual financial statement.
a) Basis of Presentation
The Company has prepared these comparative financial statements on a consolidated basis which includesits wholly-owned subsidiary, Venga Joint Venture Ltd.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of Venga Aerospace Systems Inc. ("theCompany") and its subsidiary.
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Venga Aerospace Systems Inc.
Notes to the Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010
(Expressed in Canadian Dollars)________________________________________________________________________________________
6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Use of Estimates
The preparation of the consolidated financial statements in accordance with IFRS requires management tomake judgments, estimates and assumptions that affect the application of accounting policies and thereported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingentassets and liabilities at the date of the financial statements. Judgements, estimates and underlyingassumptions are reviewed on a continuous basis and are based on managements experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.Actual outcomes could differ from those estimates.
Significant areas of financial reporting the require managements estimates and judgements are as follows:
Accrued liabilities
The Company uses estimates to record the expenses that have been incurred but payments have not beenmade.
Impairment of long- term investments
The Company records impairment of long-term investments based on managements determination.Judgement is required to determine the extent of impairment. (Note 10)
(d) Financial Instruments
Financial assets
Financial assets are classified into four categories:
Fair value through profit or loss (FVTPL)
Held to maturity (HTM)
Loans and receivables; and
Financial assets at fair value through profit or loss (FVTPL)
A financial asset is classified at fair value through profit or loss if it is classified as held-for-trading or isdesignated as such upon initial recognition. Financial assets are designated as at FVTPL if the Companymanages such investments and makes purchase and sale decisions based on their fair value in accordancewith the Companys risk management strategy. Attributable transaction costs are recognized in profit or losswhen incurred. FVTPL are measured at fair value, and changes are recognized in the statements ofoperations and comprehensive loss. Cash is categorized as FVTPL and is carried at fair value.
Held to maturity (HTM)
These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that
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the Companys management has the positive intention and ability to hold to maturity. These assets aremeasured at amortized costs using the effective interest method. If there is objective evidence that the assetis impaired, determined by reference to external credit ratings and other relevant indicators, the financial assetis measured at the present value of estimated future cash flows. Any changes to the carrying amount of theinvestment, including impairment losses, are recognized in the statements of operations and comprehensiveloss.
Venga Aerospace Systems Inc.Notes to the Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010
(Expressed in Canadian Dollars)________________________________________________________________________________________
6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
d) Financial Instruments (continued)
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted on anactive market. Such assets are initially recognized at fair value plus any direct attributable transaction costs.Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effectiveinterest method, less any impairment loss. The Company classified its financial assets which consisted ofprepaids and sundry receivables as loans and receivables.
Financial liabilities
Financial liabilities are classified as Other financial liabilities. This category includes Accounts payable andaccrued charges and Due to directors, all of which are recognized at amortized cost.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at the end of each reporting period. Financialassets are impaired when there is objective evidence that, as a result of one or more events that occurredafter the initial recognition of the financial assets, the estimated future cash flows of the investments havebeen affected.
For all financial assets, objective evidence of impairment could include: significant financial difficulty of the issuer or counterparty; or it becomes probable that the borrower will enter bankruptcy or financial re-organization.
For certain categories of financial assets, such as receivables, assets that are assessed not to be impairedindividually are subsequently assessed for impairment on a collective basis. The carrying amount of financialassets is reduced by the impairment loss directly for all financial assets except receivables, where thecarrying amount is reduced through the use of an allowance account. Subsequent recoveries of receivables
previously written off are credited against the allowance account. Changes in the carrying amount of theallowance account are recognized in the statement of comprehensive loss. If, in a subsequent year, theamount of the impairment loss decreases and the decrease can be related objectively to an event occurringafter the the impairment was recognized, the previously recognized impairment loss is reversed through thestatement of loss and comprehensive loss to the extent that the carrying amount of the investment at the datethe impairment is reversed does not exceed what the amortized cost would have been had the impairment notbeen recognized.
(e) Income Taxes
The Company uses the asset and liability method of accounting for income taxes under which future taxassets and liabilities are recognized for differences between the financial statement carrying amounts of
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existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measuredusing substantively enacted tax rates in effect in the year in which those temporary differences are expectedto be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognizedas part of the provision for income taxes in the year that includes the enactment date. A valuation allowance isrecorded to the extent there is uncertainty regarding realization of future tax assets.
Venga Aerospace Systems Inc.
Notes to the Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010
(Expressed in Canadian Dollars)________________________________________________________________________________________
6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(f) Translation of Foreign Currencies
Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchangeprevailing at the year end, non-monetary assets and liabilities are translated at historical rates and revenueand expenses are translated at the rate of exchange in effect on the transaction dates. Exchange gains andlosses arising on translation of monetary items are included in income in the year in which they occur.
(g) Long-term Investments
Long-term investments are recorded at cost. Long-term investments classified as held-to maturity financialinstruments, are valued at amortized cost, with changes in valuation charged to operations. Long-terminvestments classified as available-for-sale financial instruments, are valued at fair market value, withchanges in valuation charged to comprehensive income. Long-term investments in equity instruments that do
not have a quoted market price in an active market and whose fair value cannot be reliably measured aremeasured at cost Gains and losses are recognized when investments are sold. Income is recognized only tothe extent dividends are received
h) Impairment of Long-lived Assets
Long-lived assets, including capital assets, are amortized over their useful lives. The Company reviews long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount maynot be recoverable. If the sum of the undiscounted cash flows expected to result from the use and eventualdisposition of a group of assets is less than its carrying amount, it is considered impaired. An impairment lossis measured as the amount by which the carrying amount of the group of assets exceeds its fair value
(i) Basic and Diluted Loss per Share
The Canadian Institute of Chartered Accountants ("CICA") recommends the use of the treasury stock methodin computing earnings/loss per share. Under this method, basic loss per share is computed by dividingearnings available to common shareholders by the weighted average number of common shares outstandingduring the year. In computing the loss per share on a fully diluted basis, the treasury stock method assumesthat proceeds received from in-the-money stock options are used to repurchase common shares at theprevailing market rate. The weighted average number of common shares outstanding during the year was239,171,893 (2010 - 239,171,893).
(j) Revenue Recognition
Revenue is recognized to the extent that it is probable that future economic benefits will flow to the Companyand the revenue can be reliably measured. Revenue is measured at the fair value of the considerationreceived or to be received.
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Revenue is earned from the provision of consulting services, licence fees and if and when the Companyreceives its share of profits from the Company's 3D graphics and mining and resources business units. TheCompany recognizes revenue from consulting services when performance of the consulting services arecomplete and recognizes revenue from the Company's 3D graphics and mining and resources business unitswhen such profit distributions are received. Licence fees represent fees that the New JV is contractuallyrequired to pay the Company for use of the Company's CLIK 3D trade name.
Venga Aerospace Systems Inc.
Notes to the Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010(Expressed in Canadian Dollars)
_________________________________________________________________________________________
7.CAPITAL STOCK
Authorized: Unlimited common stock and special shares without par value
Issued: December 31, 2011 December 31, 2010
239,171,893 239,171,893
$17,268,966 $17,268,966
As of December 31, 2011, the Company had not issued any warrants or options nor were there anyoutstanding warrants or options.
8. RELATED PARTY TRANSACTIONS
Directors of the Company advanced the Company the sum of $39,000 as loans due and payable on demandwhich loans are non - interest bearing. These funds were to be used by the Company for its ongoingcorporate and business operations.
9.CAPITAL MANAGEMENT
The Companys objectives when managing capital are to safeguard its ability to continue as a goingconcern to pursue the development of its three business segments and to maintain a flexible capitalstructure which optimizes the cost of capital within a framework of acceptable risk. In the management ofcapital, the Company includes share capital, contributed surplus and deficit.
The Company manages the capital structure and makes adjustments to it in light of changes in economicconditions and the risk characteristics of the underlying assets. To maintain or adjust its capital structure,the Company may issue new shares, issue new debt, acquire or dispose of assets or adjust the amount ofcash and cash equivalents.
The Company is dependent on the capital markets and potential private investors as its sole source ofoperating capital and the Companys capital resources are largely determined by the strength of the juniorpublic markets and by the status of the Companys projects in relation to these markets and its ability tocompete for investor support of its projects.
The Company is not subject to externally imposed capital requirements
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Venga Aerospace Systems Inc.
Notes to the Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010(Expressed in Canadian Dollars)
_________________________________________________________________________________________
.
10. INVESTMENT IN NEW JV
2011 2010
$$
Investment, beginning of year
Less: Impairment loss
200,000
149,000
300,000
100,000
Investment, end of year 51,000 200,000
Pursuant to the terms of the JV Agreement, and in order to provide the New JV with working or operationalcapital, the Company advanced $600,000 USD to the New JV. The Company has no management rights orfurther funding requirements or obligations with respect to the New JV. The Companys participation in theNew JV is limited to the Companys right to receive 30% of the New JVs net profits as and when such profitsare distributed to the joint venturers in accordance with the terms and provisions of the New JV Agreement.
As a consequence of both the continuing delays in the New JV becoming operational and the New JVsoutstanding and unfulfilled obligation to pay the Company a licensing fee as required pursuant to the terms ofthe New JV Agreement, Management elected in 2008 to take write down its investment interest in the New JVfor impairment to $300,000 and to take a further write down for impairment loss of $100,000 in 2010. With theNew JV continuing to experience delays in becoming operational and following an appraisal by 3DP North
America Inc. of the fair market value of JVs assets, management decided to record a further impairment lossof $149,000 of the Company's interest in the New JV in 2011.
The Company is only liable to the extent of its investment and is indemnified from the other joint venturersfor any excess losses and liabilities. Upon termination of the New JV, the Company is entitled to its capitalaccount share in net assets of the New JV.
11. VENGA'S LICENCE FEE
Pursuant to the terms of the New JV Agreement, the Company granted the New JV a licence (the "Venga
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Licence") during the currency of the New JV Agreement to use, market, operate and commercially exploit thebusiness trade name 'CLIK 3D'. In consideration of the Company's granting of the Venga Licence, the New JVagreed to pay Venga, the sum of fifty thousand ($50,000.00) dollars (the "Venga Licence Fee") each year orpart year during the currency of the New JV Agreement. Notwithstanding the terms of the New JV Agreement,the New JV has failed to pay the Company the required Venga Licence Fee for the years 2006 through 2011.The Company has advised the New JV that the Company is not waiving any right to recover any portion of theaccumulated, unpaid and outstanding amount for the Venga Licence Fee and that the Company is and
continues to regard the accumulated, unpaid and outstanding amount for the Venga Licence Fee a valid, legaldebt owed by the New JV to the Company. However, in accordance with the Companys significantaccounting policies with respect to revenue recognition, revenue with respect to Vengas licence fee has notbeen recorded for the years ended December 31, 2011 or December 31, 2010.
Venga Aerospace Systems Inc.
Notes to the Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010(Expressed in Canadian Dollars)
_________________________________________________________________________________________
12. INVESTMENT IN GLOBAL MINERAL INVESTMENTS LLC
Pursuant to the terms and provisions of the Funding Agreement, the Company, currently has a 20%(December 31, 2011 - 20%) interest. The Funding Agreement provides that the Company will participate inthe profits generated through from the Companys management of the financial aspects of the ProposedDredging Operation, for which the Company is entitled to receive a management fee in accordance with theterms of the Funding Agreement, the Company has no management rights or ongoing funding requirementswith respect to GMI or the Proposed Dredging Operation. The Company and GMI have specifically agreedthat no term, condition or provision in the Funding Agreement will act to, or be deemed to, create or establishin law, or otherwise, a form of partnership between GMI and the Company nor will the terms, conditions andprovisions of the Funding Agreement create, or be deemed to create or establish, in law or otherwise, a jointventure between the Company and GMI with respect to the Proposed Dredging Operation or otherwise.
As of the date of these consolidated financial statements the Company has yet to receive confirmation as tothe results of GMI's dredge mining operations that were recommenced in February, 2011. On April 11, 2011,the Company announced that GMI had signed a funding and operational agreement (the "Operational
Agreement") with Kiwi, Inc., a Liberian based mining company to fund and manage GMI's dredge mining andplanned land based mining operations at GMI's Kumasi Hill 15 and Kumasi Hill 18 concessions ("GMI'sPlanned Land Based Operations") located in Sinoe County, Liberia. Pursuant to the terms of the Operational
Agreement, Kiwi, Inc. agreed to commence full mining operations at GMI's two Kumasi Hill sites by October 1,2011. While the Corporation has received confirmation from GMI that the original October 1, 2011 date forthe commencement of mining operations at GMI's two Kumasi Hill sites has been extended, as of the date ofthese consolidated financial statements the Company has yet to receive confirmation as to when, or even if,such mining operations will begin. The Operational Agreement further provides that Kiwi, Inc. will have fulloperational management of GMI's dredge mining operations and Planned Land Based Operations, with all
profit derived from such operations being divided equally between Kiwi, Inc. and GMI.In managements opinion the investment in GMI is not impaired at December 31, 2011.
13. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Measurement and Fair valueThe Companys financial assets and liabilities are classified and measured as follows:
Classification Measurement Fair Value2011
Fair value2010
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$ $
Financial assets:
Cash and cash equivalent
Prepaids and sundryreceivables
Held for trading
Loans andreceivables
Fair value
Amortizedcost
5,108
65
9,809
717
Financial liabilities:
Accounts payable and accruedcharges
Due to Directors
Other financialliabilities
Other financial
liabilities
Amortizedcost
Amortizedcost
20,772
39,000
37,896
0
Venga Aerospace Systems Inc.
Notes to the Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010(Expressed in Canadian Dollars)
_________________________________________________________________________________________
13. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
Measurement and Fair value (continued)Fair value is the amount at which a financial instrument could be exchanged between willing parties, based on
the current markets for instruments with the same risk, principal and remaining maturity. The fair values of theCompanys financial instruments approximate their carrying values because of the short-term nature of theseinstruments.
Financial instruments recorded at fair value at the balance sheet date are classified using a fair valuehierarchy that reflects the significance of the inputs used in making the measurements. The fair valuehierarchy has the following levels:
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identicalassets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1that are not observable for the asset or liability, either directly(i.e. as prices) or indirectly (i.e. derived from prices);and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or
liability that are not based on observable market data.
The fair value of cash is measured based on Level 1 inputs referred to in the three levels of the hierarchynoted above. The Company does not have any Level 2 or 3 fair value measurements. There have been nosignificant transfers between levels.
Risk
The Company has exposure to a credit risk; liquidity risk; foreign currency risk and interest risk from its use offinancial instruments. The Company's cash is held in major Canadian banks and their subsidiaries.Management approves and monitors the risk management process. There has been no change in theCompany's risk management process for the year ended December 31, 2011.
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Credit Risk
Credit risk represents the financial loss that the Company would experience if a counterparty to a financialinstrument failed to meet its obligations to the Company. Cash consists of cash bank balances held in a majorCanadian financial institution. As a result, there is no significant credit risk related to the Company's assets.The carrying amounts of this financial asset represent the maximum credit exposure.
Liquidity Risk
The Company ensures, including arranging a loan from a director, that there is sufficient capital in order tomeet short-term business requirements after taking into account the Company's holdings of cash. TheCompany's cash is held in major Canadian banks and their subsidiaries. As of the year ended December 31,2011, the Company had cash of $5,108 and thus the Company faces a liquidity risk.
Foreign Currency Risk
While the Company's functional currency is the Canadian dollar, the Company is subject to normal marketrisks including fluctuations in foreign exchange rates. The Company has not entered into any derivatives orcontracts to hedge or otherwise mitigate this exposure. As at December 31, 2011, the Company held nofinancial instruments subject to foreign exchange rates.
Venga Aerospace Systems Inc.
Notes to the Consolidated Financial Statementsfor the Years Ended December 31, 2011 and 2010(Expressed in Canadian Dollars)
_________________________________________________________________________________________
13. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
Risk (continued)
Interest Rate Risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because ofchanges in market interest rates. The risk that the Company will realize a loss due to a change in interestrates is limited because the Company as at December 31, 2011, had no interest bearing financial assets orliabilities.
14. INCOME TAX
Income tax recovery and future income tax assets
The reconciliation of income taxes attributable to operations computed at the combined statutory income taxrate of 28.25% (2010 31%) to income tax recovery shows that income tax recovery of $49,785 (2010 -$47,961) is entirely absorbed by a valuation allowance resulting in no provision for income tax recoverysince there is uncertainty as to whether the Company can utilize losses for income tax purposes. Similarlyfuture income tax assets which reflect the net tax effects of temporary differences between the carryingamounts of assets and liabilities for financial reporting purposes and the amounts for tax purposes are $0(2010 $0).
The Company has accumulated losses for income tax purposes totaling approximately $1,041,892 forwhich the tax benefits have not been recognized in the financial statements. These losses can be deductedfrom future years' taxable income and expire as follows:
$
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2014 345,2772015 244,7802026 219,4732027 82,4462028 60,8242029 34,3592030 54,713
1,041,892
15. COMMITMENTS AND CONTRACTUAL OBLIGATIONS
The Company had no contractual or other obligations as at December 31, 2011.
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