UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of Aguust, 2006.
Commission File Number: 001-32558
IMA EXPLORATION INC.
--------------------------------------------------------------------------------
(Translation of registrant's name into English)
#709 - 837 West Hastings Street, Vancouver, British Columbia, V6C 3N6, Canada
--------------------------------------------------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F: FORM 20-F [X] FORM 40-F [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): _______
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): _______
Indicate by check mark whether the registrant by furnishing the information
contained in this Form, is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
YES [ ] NO [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3- 2(b): 82-_____________
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned, thereunto duly authorized.
IMA EXPLORATION INC.
-------------------------------------
Date: August 14, 2006 /s/ Joseph Grosso
------------------------------ -------------------------------------
Joseph Grosso,
President & CEO
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 30, 2006 and 2005
(EXPRESSED IN CANADIAN DOLLARS)
(UNAUDITED - PREPARED BY MANAGEMENT)
MANAGEMENT'S COMMENTS ON UNAUDITED
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements of IMA
Exploration Inc. for the six months ended June 30, 2006 have been prepared by
management and are the responsibility of the Company's management. These
statements have not been reviewed by the Company's external auditors.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED BALANCE SHEETS
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
JUNE 30, DECEMBER 31,
2006 2005
$ $
ASSETS
CURRENT ASSETS
Cash and cash equivalents 12,462,354 7,731,395
Accounts receivable, prepaids and deposits (Note 8) 519,956 548,492
Marketable securities (Note 1 and 4) 186,000 186,000
------------ ------------
13,168,310 8,465,887
MINERAL PROPERTIES AND DEFERRED
COSTS (Notes 1 and 5) 18,754,753 15,032,107
------------ ------------
31,923,063 23,497,994
============ ============
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 867,046 976,811
FUTURE INCOME TAX LIABILITIES 2,113,532 1,760,110
------------ ------------
2,980,578 2,736,921
------------ ------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 6) 59,771,856 50,414,672
CONTRIBUTED SURPLUS (Note 7) 6,297,329 5,854,445
DEFICIT (37,126,700) (35,508,044)
------------ ------------
28,942,485 20,761,073
------------ ------------
31,923,063 23,497,994
============ ============
NATURE OF OPERATIONS AND CONTINGENCY (Note 1)
COMMITMENTS (Note 8)
APPROVED BY THE BOARD
/s/ DAVID HORTON , Director
-----------------------
/s/ ROBERT STUART ANGUS , Director
-----------------------
The accompanying notes are an integral part of these interim
consolidated financial statements.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
2006 2005 2006 2005
$ $ $ $
EXPENSES
Administrative and management services 206,460 40,078 233,342 72,314
Corporate development and investor relations 159,153 202,140 247,831 322,726
General exploration - 76,032 3,739 95,066
Office and sundry 45,670 40,609 89,456 77,172
Professional fees 80,549 273,093 170,210 588,317
Rent, parking and storage 18,471 30,739 47,482 41,063
Salaries and employee benefits 237,610 141,231 385,883 263,605
Stock based compensation 407,520 - 407,520 1,800,000
Telephone and utilities 3,665 6,241 9,743 15,749
Transfer agent and regulatory fees 49,125 75,628 129,927 105,445
Travel and accommodation 19,400 74,309 64,039 145,989
------------ ------------ ------------ ------------
1,227,623 960,100 1,789,172 3,527,446
------------ ------------ ------------ ------------
LOSS BEFORE OTHER ITEMS (1,227,623) (960,100) (1,789,172) (3,527,446)
------------ ------------ ------------ ------------
OTHER EXPENSE (INCOME)
Foreign exchange 7,063 44,221 10,344 23,714
Interest and other income (122,350) (31,428) (180,860) (60,796)
------------ ------------ ------------ ------------
(115,287) 12,793 (170,516) (37,082)
------------ ------------ ------------ ------------
LOSS FOR THE PERIOD (1,112,336) (972,893) (1,618,656) (3,490,364)
DEFICIT - BEGINNING OF PERIOD (36,014,364) (32,297,003) (35,508,044) (29,597,304)
DISTRIBUTION OF EQUITY ON
SPIN-OFF OF ASSETS TO GOLDEN ARROW(Note 2) - - - (145,866)
------------ ------------ ------------ ------------
DEFICIT - END OF PERIOD (37,126,700) (33,270,953) (37,126,700) (33,270,953)
============ ============ ============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE (0.02) (0.02) (0.03) (0.08)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 51,678,065 45,479,724 50,411,767 44,937,274
============ ============ ============ ============
The accompanying notes are an integral part of these interim
consolidated financial statements.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
2006 2005 2006 2005
$ $ $ $
CASH PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES
Net loss for the period (1,112,336) (972,893) (1,618,656) (3,490,364)
Items not affecting cash
Stock-based compensation 407,520 - 407,520 1,800,000
------------ ------------ ------------ ------------
(704,816) (972,893) (1,211,136) (1,690,364)
Change in non-cash working capital balances (222,206) 712,931 (81,229) 496,257
------------ ------------ ------------ ------------
(927,022) (259,962) (1,292,365) (1,194,107)
------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Expenditures on mineral properties and
deferred costs (2,011,506) (1,809,930) (3,369,224) (3,330,471)
Purchase of equipment - (5,076) - (8,258)
------------ ------------ ------------ ------------
(2,011,506) (1,815,006) (3,369,224) (3,338,729)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES
Issuance of common shares 28,050 - 10,228,450 4,215,145
Share issue costs (72,809) - (835,902) -
------------ ------------ ------------ ------------
(44,759) - 9,392,548 4,215,145
------------ ------------ ------------ ------------
(DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (2,983,287) (2,074,968) 4,730,959 (317,691)
CASH TRANSFERRED TO GOLDEN
ARROW (Note 2) - - - (145,866)
------------ ------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (2,983,287) (2,074,968) 4,730,959 (463,557)
CASH AND CASH EQUIVALENTS
- BEGINNING OF PERIOD 15,445,641 6,838,765 7,731,395 5,227,354
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS
- END OF PERIOD 12,462,354 4,763,797 12,462,354 4,763,797
============ ============ ============ ============
CASH AND CASH EQUIVALENTS
COMPRISED OF:
Cash 962,354 1,263,797 962,354 1,263,797
Term deposits 11,500,000 3,500,000 11,500,000 3,500,000
------------ ------------ ------------ ------------
12,462,354 4,763,797 12,462,354 4,763,797
============ ============ ============ ============
The accompanying notes are an integral part of these interim
consolidated financial statements.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED SCHEDULE OF MINERAL PROPERTY INTERESTS
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
NAVIDAD
NAVIDAD AREAS IVA TAX TOTAL
$ $ $ $
Balance, beginning of period 13,466,957 113,426 1,451,724 15,032,107
------------ ------------ ------------ ------------
Expenditures during the period
Acquisition costs 110,807 - - 110,807
Assays 69,439 - - 69,439
Communications 27,496 - - 27,496
Drilling 1,198,482 - - 1,198,482
Engineering 29,274 - - 29,274
Environmental and social 186,982 - - 186,982
Geophysics 36,565 - - 36,565
Metallurgy 189,864 - - 189,864
Office and other 179,673 - - 179,673
Salaries and Contractors 348,914 - - 348,914
Supplies and Equipment 93,144 - - 93,144
Transportation 169,287 - - 169,287
Project Development 328,285 - - 328,285
IVA Tax - - 401,012 401,012
------------ ------------ ------------ ------------
2,968,212 - 401,012 3,369,224
------------ ------------ ------------ ------------
Future income tax 353,422 - - 353,422
------------ ------------ ------------ ------------
Balance, end of period 16,788,591 113,426 1,852,736 18,754,753
============ ============ ============ ============
The accompanying notes are an integral part of these interim
consolidated financial statements.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
1. NATURE OF OPERATIONS AND CONTINGENCY
The Company is a natural resource company engaged in the business of
acquisition, exploration and development of mineral properties in
Argentina. The Company presently has no proven or probable reserves and
on the basis of information to date, it has not yet determined whether
these properties contain economically recoverable ore reserves.
Consequently the Company considers itself to be an exploration stage
company. The amounts shown as mineral properties and deferred costs
represent costs incurred to date, less amounts amortized and/or written
off, and do not necessarily represent present or future values. The
underlying value of the mineral properties and deferred costs is
entirely dependent on the existence of economically recoverable
reserves, securing and maintaining title and beneficial interest in the
properties, the ability of the Company to obtain the necessary
financing to complete development, and future profitable production.
The Company considers that it has adequate resources to maintain its
ongoing operations for the balance of the year.
On July 14, 2006 the Supreme Court of British Columbia released its
judgment in Aquiline Resources Inc.'s ("Aquiline") lawsuit against the
Company. The Company was not successful in its defense and the court
has found in Aquiline's favour.
The Order reads in part:
"(a) that Inversiones Mineras Argentinas SA ("IMA SA") transfer the
Navidad Claims and any assets related thereto to Minera
Aquiline or its nominee within 60 days of this order;
(b) that IMA take any and all steps required to cause IMA SA to
comply with the terms of this order;
(c) that the transfer of the Navidad Claims and any assets related
thereto is subject to the payment to IMA SA of all reasonable
amounts expended by IMA SA for the acquisition and development
of the Navidad Claims to date; and
(d) any accounting necessary to determine the reasonableness of
the expenditures referred to in (c) above shall be by
reference to the Registrar of this court."
The Company believes that the reference to cost recovery in (c) in the
order is applicable to all costs that have been incurred on a
consolidated basis by the Company in the exploration and development of
Navidad. The Company's valuation of the recoverable costs has not yet
been finalized and agreed to with Aquiline.
The Company has filed an appeal of this judgment. While the Company is
confident of a favourable result from its appeal it recognizes that
this will take a substantial period of time and the costs will be
significant, with no guarantee of a successful outcome for the Company.
The Company has not provided for any future legal costs and will
expense the legal costs of the appeal as they occur.
2. SPIN-OFF OF ASSETS
On July 7, 2004, the Company completed a corporate restructuring plan
(the "Reorganization") which resulted in dividing the Company's assets
and liabilities into two separate companies. Following the
Reorganization the Company continued to hold the Navidad Area
properties, while all other mineral property interests, certain
marketable securities and cash were spun-off to Golden Arrow Resources
Corporation ("Golden Arrow"), a newly created company. The Navidad
project, located in the province of Chubut Argentina, was staked by the
Company in late 2002 and continues to be the focus of the Company's
activities. The Reorganization of the Company was accomplished by way
of a statutory plan of arrangement. The shareholders of the Company
were issued shares in Golden Arrow on the basis of one Golden Arrow
share for ten shares of the Company.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
2. SPIN-OFF OF ASSETS (continued)
During the six months ended June 30, 2005 the Company paid $145,866 to
Golden Arrow from the exercise of warrants of the Company that resulted
in the issue of Golden Arrow shares as required by the terms of the
Reorganization. As all warrants that were outstanding as of the
effective date of the Reorganization were exercised by March 31, 2005
the Company has no further obligation to pay amounts to Golden Arrow
for the issue of its shares on the exercise of the Company's warrants.
3. SIGNIFICANT ACCOUNTING POLICIES
The interim consolidated financial statements of the Company have been
prepared by management in accordance with Canadian generally accepted
accounting principles. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates. The
consolidated financial statements have, in management's opinion, been
properly prepared using careful judgement within reasonable limits of
materiality. These interim consolidated financial statements should be
read in conjunction with the most recent annual consolidated financial
statements. The significant accounting policies follow that of the most
recently reported annual consolidated financial statements.
4. MARKETABLE SECURITIES
At June 30, 2006, marketable securities had a quoted market value of
$250,500 (December 31, 2005 - $270,000). The Company holds these
marketable securities as a result of entering into option and sale
agreements for certain of its non-core mineral property holdings for
which the Company received common shares of publicly traded companies
as partial consideration. These marketable securities may be
considered "Navidad related assets" and subject to transfer to
Aquiline.
5. MINERAL PROPERTIES AND DEFERRED COSTS
(a) Under the terms of the July 14, 2006 court order the Company's
ownership of Navidad must be transferred to Aquiline and the
Company accordingly cautions readers that until the British
Columbia Court of Appeal rules on the matter the Company may
only recover the costs incurred in the development of Navidad.
The Company's valuation of the recoverable costs has not yet
been finalized and agreed to with Aquiline. The Company's
position is that it will be successful in its appeal and will
recover all or a significant portion of its ownership interest
in Navidad.
(b) Direct costs related to the acquisition and exploration of
mineral properties held or controlled by the Company are
deferred on an individual property basis until the viability
of a property is determined. Administration costs and general
exploration costs are expensed as incurred. When a property is
placed in commercial production, deferred costs will be
depleted using the units-of-production method. Management of
the Company periodically reviews the recoverability of the
capitalized mineral properties. Management takes into
consideration various information including, but not limited
to, results of exploration activities conducted to date,
estimated future metal prices, and reports and opinions of
outside geologists, mine engineers and consultants. When it is
determined that a project or property will be abandoned then
the costs are written-off, or if its carrying value has been
impaired, then the mineral properties and deferred costs are
written down to fair value.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
5. MINERAL PROPERTIES AND DEFERRED COSTS (continued)
The Company accounts for foreign value added taxes paid as
part of mineral properties and deferred costs. The recovery of
these taxes will commence on the beginning of foreign
commercial operations. Should these amounts be recovered they
would be treated as a reduction in carrying costs of mineral
properties and deferred costs.
From time to time, the Company acquires or disposes of
properties pursuant to the terms of option agreements. Options
are exercisable entirely at the discretion of the optionee
and, accordingly, are recorded as mineral property costs or
recoveries when the payments are made or received. After costs
are recovered, the balance of the payments received are
recorded as a gain on option or disposition of mineral
property.
6. SHARE CAPITAL
Authorized - unlimited common shares without par value
- 100,000,000 preferred shares without par value
NUMBER $
Issued - common shares
Balance, December 31, 2004 43,816,207 36,982,307
Private placement 3,333,340 10,000,020
Exercise of options 10,000 31,000
Exercise of agents' options 168,000 546,000
Contributed surplus reallocated on exercise of options - 131,270
Exercise of warrants 1,485,517 3,784,011
Proceeds collected and paid on behalf of Golden Arrow shares - (145,866)
Less share issue costs - (914,070)
------------ ------------
Balance, December 31, 2005 48,813,064 50,414,672
Private placement 2,865,000 10,027,500
Exercise of options 135,000 200,950
Contributed surplus reallocated on exercise of options - 74,800
Less share issue costs - (946,066)
------------ ------------
Balance, June 30, 2006 51,813,064 59,771,856
============ ============
(a) On March 21, 2006 the Company completed a syndicated brokered
private placement financing of 2,865,000 special warrants at
$3.50 per warrant for gross proceeds of $10,027,500. Each
special warrant entitled the holder to acquire one unit
consisting of one common share and one half common share
purchase warrant. All special warrants were converted into
common shares on May 25, 2006. Each full warrant entitles the
holder thereof to purchase one additional common share in the
capital of the Company at a price of $3.80 per share until
March 21, 2010. In addition to a cash commission of 6% the
underwriters were granted 171,900 agents' warrants,
representing 6% of the number of special warrants issued. Each
agents' warrant is exercisable for one share at a price of
$3.80, for a period of twenty four months, expiring on March
21, 2008. The underwriter's warrants were valued using the
Black-Scholes Pricing Model. The warrants were valued at $0.64
per warrant for a total value of $110,164 and have been
recorded as share issue costs with a corresponding increase to
contributed surplus. At June 30, 2006, no underwriter's
warrants had been exercised.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
6. SHARE CAPITAL (continued)
(b) Stock Options and Stock-Based Compensation
The Company grants stock options in accordance with the
policies of the TSX Venture Exchange ("TSXV"). During the six
months ended June 30, 2006, the Company granted 283,000 stock
options.
The fair value of stock options granted is estimated on the
dates of grants using the Black-Scholes Option Pricing Model
with the following assumptions used for the grants made during
the period:
Risk-free interest rate 4%
Estimated volatility 70%
Expected life 2.5 years
Expected dividend yield 0%
The weighted average fair value per share of stock options,
calculated using the Black-Scholes Option Pricing Model,
granted during the period was $1.44 per share. Option-pricing
models require the use of estimates and assumptions including
the expected volatility. Changes in the underlying assumptions
can materially affect the fair value estimates and, therefore,
existing models do not necessarily provide reliable measure of
the fair value of the Company's stock options.
A summary of the Company's outstanding stock options at June
30, 2006, and the changes for the six months ended June 30,
2006, is presented below:
OPTIONS WEIGHTED
OUTSTANDING AVERAGE
AND EXERCISE
EXERCISABLE PRICE
$
Balance, beginning of period 4,881,000 2.54
Granted 283,000 3.21
Exercised (135,000) 1.49
------------
Balance, end of period 5,029,000 2.60
============
Stock options outstanding and exercisable at June 30, 2006 are
as follows:
NUMBER EXERCISE PRICE EXPIRY DATE
$
205,000 0.40 July 19, 2006
119,000 0.50 May 2, 2007
115,000 0.50 September 23, 2007
40,000 0.84 March 7, 2008
300,000 0.90 May 30, 2008
1,220,000 1.87 August 27, 2008
1,347,000 3.10 March 24, 2009
25,000 3.10 March 24, 2007
50,000 4.20 December 01, 2009
865,000 4.16 March 16, 2010
460,000 2.92 November 16, 2010
283,000 3.21 June 22, 2011
----------
5,029,000
==========
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
6. SHARE CAPITAL (continued)
(c) Warrants
A summary of the number of common shares reserved pursuant to
the Company's outstanding warrants and agents warrants
outstanding at June 30, 2006 and the changes for the six
months ended June 30, 2006, is as follows:
NUMBER
Balance, beginning of period 1,900,004
Issued 1,604,400
------------
Balance, end of period 3,504,404
============
Common shares reserved pursuant to warrants and special
warrants outstanding at June 30, 2006 are as follows:
NUMBER EXERCISE PRICE EXPIRY DATE
$
1,666,670 3.45 September 14, 2009
233,334 3.25 September 13, 2007
171,900 3.80 March 21, 2008
1,432,500 3.80 March 21, 2010
-----------
3,504,404
===========
7. CONTRIBUTED SURPLUS
A continuity summary of contributed surplus is presented below:
$
Balance, Dec.31, 2005 5,854,445
Contributed surplus reallocated on exercise
of stock options (74,800)
Contributed surplus as a result of stock
options granted 407,520
Contributed surplus as a result of brokers'
warrants issued 110,164
------------
Balance, June 30, 2006 6,297,329
============
8. RELATED PARTY TRANSACTIONS
(a) Effective January 1, 2005 the Company engaged the Grosso Group
Management Ltd. (the "Grosso Group") to provide services and
facilities to the Company. The Grosso Group is a private
company now owned by the Company, Golden Arrow, Amera
Resources Corporation, Astral Mining Corporation and Gold
Point Energy Corp., each of which owns one share. The Grosso
Group provides its shareholder companies with geological,
corporate development, administrative and management services.
The shareholder companies pay monthly fees to the Grosso
Group. The fee is based upon a reasonable pro-rating of the
Grosso Group's costs including its staff and overhead costs
among each shareholder company with regard to the mutually
agreed average annual level of services provided to each
shareholder company. During the six months ended June 30,
2006, the
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
8. RELATED PARTY TRANSACTIONS (continued)
Company incurred fees of $364,897 to the Grosso Group:
$378,876 was paid in monthly payments and $13,979 is included
in accounts receivable as a result of a review of the
allocation of the Grosso Group costs to the member companies
for the period. In addition, included in accounts receivable,
prepaids and deposits is a $205,000 deposit to the Grosso
Group for the purchase of equipment and leasehold improvements
and for operating working capital.
(b) On May 6, 2005, on the signing of an Administration Services
Agreement, the Company transferred its corporate equipment and
leasehold improvements to Grosso Group at their carrying
values of $93,177 as of December 31, 2004. As of June 30, 2006
the Company has received $46,589 from the Grosso Group for
these assets. The remaining balance due from the Grosso Group
is included in accounts receivable.
(c) The President of the Company provides his services on a
full-time basis under a contract with a private company
controlled by the President. On April 12, 2006 the Board
accepted the recommendation from the Compensation Committee to
increase the monthly fee, effective May 1, 2006, to $20,833
(previously $8,500) and to pay a bonus of $150,000. The total
compensation paid to the President during the period was
$225,667. Additionally, during six months ended June 30, 2006,
the Company paid $137,800 to directors and officers or
companies controlled by directors and officers of the Company,
for technical, management and consulting services provided.
(d) The Company has agreements with a company controlled by the
wife of the President of the Company for the rental of office
premises. Effective January 1, 2005 the Company subleased the
office premises to the Grosso Group.
(e) In the event the agreement is terminated by the Company or as
a result of a change of control, a payment is payable to the
President consisting of (i) any monthly compensation due to
the date of termination, (ii) options as determined by the
board of directors (iii) three years of monthly compensation
(which may be adjusted annually) and (iv) bonus of $461,500.
If the termination had occurred on June 30, 2006, the amount
payable under the agreement would be $1,211,500.
In the event the agreement is terminated by the Company as a
result of the President's death or permanent disability while
providing services to the Company, a bonus in the amount of
$461,500 is payable.
IMA EXPLORATION INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED - PREPARED BY MANAGEMENT)
(EXPRESSED IN CANADIAN DOLLARS)
9. SEGMENTED INFORMATION
The Company is involved in mineral exploration and development
activities, which are conducted principally in Argentina. The Company
is in the exploration stage and, accordingly, has no reportable segment
revenues or operating results for the six months ended June 30, 2006.
The Company's total assets are segmented geographically as follows:
--------------------------------------------
JUNE 30, 2006
--------------------------------------------
CORPORATE ARGENTINA TOTAL
$ $ $
Current assets 12,964,151 204,159 13,168,310
Mineral properties and deferred costs - 18,754,753 18,754,753
------------ ------------ ------------
12,964,151 18,958,912 31,923,063
============ ============ ============
--------------------------------------------
DECEMBER 31, 2005
--------------------------------------------
CORPORATE ARGENTINA TOTAL
$ $ $
Current assets 8,331,000 134,887 8,465,887
Mineral properties and deferred costs - 15,032,107 15,032,107
------------ ------------ ------------
8,331,000 15,166,994 23,497,994
============ ============ ============
10. SUPPLEMENTARY CASH FLOW INFORMATION
Non-cash financing activities were conducted by the Company as follows:
SIX MONTHS ENDED JUNE 30,
----------------------------
2006 2005
$ $
Financing activities
Share issue costs (110,164) -
Contributed surplus 110,164 -
------------ ------------
- -
============ ============
11. SUBSEQUENT EVENT
Subsequent to June 30, 2006, the Company issued 200,000 common shares
for $80,000 on the exercises of stock options.
See Note 1 for discussion of the July 14, 2006 court decision.
IMA EXPLORATION INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2006
INTRODUCTION
The following management discussion and analysis and financial review, prepared
as of August 14, 2006, should be read in conjunction with the Company's
unaudited interim consolidated financial statements for the six months ended
June 30, 2006 and audited annual consolidated financial statements and related
notes for the year ended December 31, 2005. The consolidated financial
statements have been prepared in accordance with Canadian generally accepted
accounting principles ("Canadian GAAP"). Except as otherwise disclosed all
dollar figures in this report are stated in Canadian dollars. Additional
information relevant to the Company can be found on the SEDAR website at
WWW.SEDAR.COM.
FORWARD LOOKING STATEMENTS
Certain of the statements made and information contained herein is "forward-
looking information" within the meaning of the Ontario Securities Act or
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934 of the United States. Forward-looking statements are
subject to a variety of risks and uncertainties which could cause actual events
or results to differ from those reflected in the forward-looking statements,
including, without limitation, risks and uncertainties relating to foreign
currency fluctuations; risks inherent in mining including environmental hazards,
industrial accidents, unusual or unexpected geological formations, risks
associated with the estimation of mineral resources and reserves and the
geology, grade and continuity of mineral deposits; the possibility that future
exploration, development or mining results will not be consistent with the
Company's expectations; the potential for and effects of labour disputes or
other unanticipated difficulties with or shortages of labour; the inherent
uncertainty of future production and cost estimates and the potential for
unexpected costs and expenses, commodity price fluctuations; uncertain political
and economic environments; changes in laws or policies, foreign taxation, delays
or the inability to obtain necessary governmental permits; and other risks and
uncertainties, including those described under Risk Factors Relating to the
Company's Business in the Company's Annual Information Form and in each
management discussion and analysis. Forward-looking information is in addition
based on various assumptions including, without limitation, the expectations and
beliefs of management, the assumed long term price of silver and lead; that the
Company can access financing, appropriate equipment and sufficient labour and
that the political environment within Argentina will continue to support the
development and operation of mining projects. Should one or more of these risks
and uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in forward-looking
statements. Accordingly, readers are advised not to place undue reliance on
forward-looking statements.
OVERVIEW
The Company is a natural resource company engaged in the business of
acquisition, exploration and development of mineral properties in Argentina. At
present, the Company has no producing properties and consequently has no current
operating income or cash flows. As of this date the Company is an exploration
stage company and has not generated any revenues. The Company is entirely
dependent on the equity market for its source of funds. There is no assurance
that a commercially viable mineral deposit exists on any of the properties.
Further evaluation and exploration will be required before the economic
viability of any of the properties is determined.
On July 14, 2006 the Supreme Court of British Columbia released its judgment in
Aquiline Resources Inc.'s ("Aquiline") lawsuit against the Company. The Company
was not successful in its defense and the court has found in Aquiline's favour.
The Order reads in part:
"(a) that Inversiones Mineras Argentinas SA ("IMA SA") transfer the Navidad
Claims and any assets related thereto to Minera Aquiline or its
nominee within 60 days of this order;
(b) that IMA take any and all steps required to cause IMA SA to comply
with the terms of this order;
- 1 -
(c) that the transfer of the Navidad Claims and any assets related thereto
is subject to the payment to IMA SA of all reasonable amounts expended
by IMA SA for the acquisition and development of the Navidad Claims to
date; and
(d) any accounting necessary to determine the reasonableness of the
expenditures referred to in (c) above shall be by reference to the
Registrar of this court."
The Company believes that the reference to cost recovery in (c) in the order is
applicable to all costs that have been incurred on a consolidated basis by the
Company in the exploration and development of Navidad. The Company's valuation
of the recoverable costs has not yet been finalized and agreed to with Aquiline.
The Company has filed an appeal of this judgment. While the Company is confident
of a favourable result from its appeal it recognizes that this will take a
substantial period of time and the costs will be significant, with no guarantee
of a successful outcome for the Company. The Company has not provided for any
future legal costs and will expense the legal costs of the appeal as they occur.
PROPERTIES UPDATE
NAVIDAD
On February 3, 2003 the Company announced the discovery of silver-lead-copper
mineralization at its 100% owned 10,000 hectare (24,700 acres) Navidad property
in north central Chubut Province, Argentina. A Phase I drill program commenced
in November 2003 and was completed in late March 2004. A Phase II drill program
commenced in late May 2004 and was completed in September 2004. Phase III drill
program commenced in November 2004 and was completed in September 2005. The
Company commenced a Phase IV drill program in January 2006 that was completed in
June. The Company announced results from Phase IV drill results on April 5th,
May 30th and June 10th.
Under the terms of the July 14th court order the Company's ownership of Navidad
must be transferred to Aquiline and the Company accordingly cautions readers
that until the British Columbia Court of Appeal rules on the matter the Company
may only recover the costs incurred in the development of Navidad. The Company's
valuation of the recoverable costs has not yet been finalized and agreed to with
Aquiline. The Company's position is that it will be successful in its appeal and
will recover all or a significant portion of its ownership interest in Navidad.
SELECTED QUATERLY FINANCIAL INFORMATION AND SECOND QUARTER
The following selected consolidated financial information is derived from the
unaudited consolidated interim financial statements of the Company. The
information has been prepared in accordance with Canadian GAAP.
----------------------- ------------------------------------------------- -----------------------
2006 2005 2004
----------------------- ------------------------------------------------- -----------------------
JUN 30 MAR 31 DEC 31 SEP 30 JUN 30 MAR 31 DEC 31 SEP 30
$ $ $ $ $ $ $ $
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Revenues Nil Nil Nil Nil Nil Nil Nil Nil
Loss from Continuing
Operations (1,112,336) (506,320) (1,041,118) (1,233,392) (972,893) (2,517,470) (1,164,504) (492,562)
Loss per Common Share from
Continuing Operations (0.02) (0.01) (0.02) (0.03) (0.02) (0.06) (0.03) (0.01)
Loss Allocated to Spin-off
Assets Nil Nil Nil Nil Nil Nil Nil Nil
Net Loss (1,112,336) (506,320) (1,041,118) (1,233,392) (972,893) (2,517,470) (1,164,955) (492,562)
Net Loss per Common Share
Basic and Diluted (0.02) (0.01) (0.02) (0.03) (0.02) (0.06) (0.02) (0.01)
----------------------- ------------------------------------------------- -----------------------
SUMMARY OF FINANCIAL RESULTS
For the six months ended June 30, 2006, the Company reported a consolidated loss
of $1,618,656 ($0.03 per share), a decrease of $1,871,708 from the loss of
$3,490,364 ($0.08 per share) for the six months ended June 30, 2005. The
decrease in the loss in 2006, compared to the 2005 amount, was due to a number
of factors of which $1,738,274 can be attributed to decreases in operating
expenses and $133,434 change in other items.
- 2 -
RESULTS OF OPERATIONS
The Company's operating expenses for the six months ended June 30, 2006, were
$1,789,172, a decrease of $1,738,274 from $3,527,446 in the 2005 period.
In the 2006 period the Company recorded non-cash stock based compensation of
$407,520 compared to $1,800,000 in the 2005 period for the stock options granted
during the periods. Other notable changes in the operating expenses are: (i)
Professional fees decreased $418,107 to $170,210 in 2006 from $588,317 in the
2005 period, primarily due to the decrease in legal costs incurred in connection
with the Aquiline legal action. (ii) Salaries increased $122,278 due to
increases in staff, increases in salary levels and bonuses of $100,000. (iii)
Administrative and management services increased $161,028 mainly due to a
$150,000 bonus paid to the President during the 2006 period. The bonuses were
recommended by the Compensation Committee and approved by the Board of Directors
of the Company. (iv) Corporate development and investor relations decreased
$74,895 mainly due to the decrease in printing costs and decrease in corporate
development consulting costs during the 2006 period. (v) Travel and
accommodation decreased $81,950 due to reduced travel in the 2006 period. (vi)
General exploration decreased $91,327 due to decrease in the Company's general
exploration activities during the 2006 period.
In 2006 the Company recorded interest income of $180,860 compared to $60,796 in
2005, primarily as a result of an increase in funds on deposit.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at June 30, 2006 was $12,462,354, an increase of
$4,730,959 from December 31, 2005. Total assets increased to $31,923,063 at June
30, 2006 from $23,497,994 at December 31, 2005. This increase is mainly due to
the increase in Navidad carrying value and in cash balance.
On March 21, 2006 the Company completed a syndicated brokered private placement
financing of 2,865,000 special warrants at $3.50 per warrant for gross proceeds
of $10,027,500. Each special warrant entitles the holder to acquire one unit
consisting of one common share and one half common share purchase warrant. Each
full warrant entitles the holder thereof to purchase one additional common share
in the capital of the Company at a price of $3.80 per share until March 21,
2010. In addition to a cash commission of 6% the underwriters were granted
171,900 agents' warrants, representing 6% of the number of special warrants
issued. Each agents' warrant is exercisable for one share at a price of $3.80,
for a period of twenty four months, expiring on March 21, 2008.
The Company has received $200,950 from the exercise of options from January 1 to
June 30, 2006. Subsequent to June 30, 2006 the Company received $80,000 from the
exercise of options. As at August 14, 2006, the Company had working capital of
approximately $11,500,000.
Options and warrants were exercised which resulted in cash proceeds of
$4,215,145 from January 1 to June 30, 2005. The Company paid $145,866 to Golden
Arrow Resources Corporation ("Golden Arrow") from the exercise of warrants that
resulted in the issue of Golden Arrow's shares as required by the terms of the
reorganization. As all warrants that were outstanding as of the effective date
of the reorganization have been exercised the Company has no further obligation
to pay amounts to Golden Arrow for the issue of its shares on the exercise of
the Company's warrants.
The Company considers that it has adequate resources to maintain its ongoing
operations for the balance of the year. The Company will continue to rely on
successfully completing additional equity financing. There can be no assurance
that the Company will be successful in obtaining the required financing. The
failure to obtain such financing could result in the loss of or substantial
dilution of its interest in its properties.
Except as disclosed elsewhere in this MD&A the Company does not know of any
trends, demand, commitments, events or uncertainties that will result in, or
that are reasonably likely to result in, its liquidity either materially
increasing or decreasing at present or in the foreseeable future. Material
increases or decreases in liquidity will be substantially determined by the
success of the appeal of the Supreme Court of British Columbia judgement in the
Aquiline lawsuit.
The Company does not now and does not expect to engage in currency hedging to
offset any risk of currency fluctuations.
- 3 -
OPERATING CASH FLOW
Cash outflow from operating activities for the six months ended June 30, 2006,
was $1,292,365, compared to cash outflow for 2005 period of $1,194,107 as a
result of changes in the level of activities and in non-cash working capital.
FINANCING ACTIVITIES
During the six months ended June 30, 2006, the Company received $10,027,500 less
costs of $835,902 from a brokered private placement and $200,950 on the exercise
of options, compared to $4,215,145, less costs of $Nil, for the period ended
June 30, 2005.
INVESTING ACTIVITIES
Investing activities required cash of $3,369,224 during six months ended June
30, 2006, compared to $3,338,729 for the 2005 period, these investing activities
were for additions to the Navidad Project in Argentina.
RELATED PARTY TRANSACTIONS
Effective January 1, 2005 the Company engaged the Grosso Group Management Ltd.
(the "Grosso Group") to provide services and facilities to the Company. The
Grosso Group is a private company now owned by the Company, Golden Arrow
Resources Corporation, Amera Resources Corporation, Astral Mining Corporation
and Gold Point Energy Corp., each of which owns one share. The Grosso Group
provides its shareholder companies with geological, corporate development,
administrative and management services. The shareholder companies pay monthly
fees to the Grosso Group. The fee is based upon a reasonable pro-rating of the
Grosso Group's costs including its staff and overhead costs among each
shareholder company with regard to the mutually agreed average annual level of
services provided to each shareholder company. During the six months ended June
30, 2006, the Company incurred fees of $364,897 to the Grosso Group: $378,876
was paid in monthly payments and $13,979 is included in accounts receivable as a
result of a review of the allocation of the Grosso Group costs to the member
companies for the period. In addition, included in accounts receivable, prepaids
and deposits is a $205,000 deposit to the Grosso Group for the purchase of
equipment and leasehold improvements and for operating working capital.
On May 6, 2005, on the signing of an Administration Services Agreement, the
Company transferred its corporate equipment and leasehold improvements to Grosso
Group at their carrying values of $93,177 as of December 31, 2004. As of June
30, 2006 the Company has received $46,589 from the Grosso Group for these
assets. The remaining balance due from the Grosso Group is included in accounts
receivable.
The President of the Company provides his services on a full-time basis under a
contract with a private company controlled by the President. On April 12, 2006
the Board accepted the recommendation from the Compensation Committee to
increase the monthly fee, effective May 1, 2006, to $20,833 (previously $8,500)
and to pay a bonus of $150,000. The total compensation paid to the President
during the period was $225,667. Additionally, during six months ended June 30,
2006, the Company paid $137,800 to directors and officers or companies
controlled by directors and officers of the Company, for technical, management
and consulting services provided.
The Company has agreements with a company controlled by the wife of the
President of the Company for the rental of office premises. Effective January 1,
2005 the Company subleased the office premises to the Grosso Group.
In the event the agreement is terminated by the Company or as a result of a
change of control, a bonus is payable to the President consisting of (i) any
monthly compensation due to the date of termination, (ii) options as determined
by the board of directors, (iii) three years of monthly compensation (which may
be adjusted annually) and (iv) bonus of $461,500. If the termination had
occurred on June 30, 2006, the amount payable under the agreement would be
$1,211,500.
In the event the agreement is terminated by the Company as a result of the
President's death or permanent disability while providing services to the
Company, a bonus in the amount of $461,500 is payable.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with Canadian GAAP
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount of
- 4 -
revenues and expenses during the period. Significant areas requiring the use of
management estimates relate to the determination of environmental obligations
and impairment of mineral properties and deferred costs. Actual results may
differ from these estimates.
Reference should be made to the Company's significant accounting policies
contained in Note 3 of the Company's consolidated financial statements for the
years ended December 31, 2005, 2004 and 2003. These accounting policies can have
a significant impact of the financial performance and financial position of the
Company.
RECENT ACCOUNTING PRONOUNCEMENTS
Reference should be made to the recent accounting pronouncements in Canada and
in United States that are described in Note 10 of the Company's consolidated
financial statements for the years ended December 31, 2005, 2004 and 2003.
MINERAL PROPERTIES AND DEFERRED COSTS
Consistent with the Company's accounting policy disclosed in Note 3 of the
annual consolidated financial statements, direct costs related to the
acquisition and exploration of mineral properties held or controlled by the
Company have been capitalized on an individual property basis. For certain
acquisitions and related payments for mineral property interests, the Company
records a future income tax liability and a corresponding adjustment to the
related asset carrying amount if the expenditures do not have the corresponding
tax basis. It is the Company's policy to expense any exploration associated
costs not related to specific projects or properties. Management of the Company
periodically reviews the recoverability of the capitalized mineral properties.
Management takes into consideration various information including, but not
limited to, results of exploration activities conducted to date, estimated
future metal prices, and reports and opinions of outside geologists, mine
engineers and consultants. When it is determined that a project or property will
be abandoned or its carrying value has been impaired, a provision is made for
any expected loss on the project or property. In 2006 and in 2005 no impairment
of long-lived assets was identified.
FINANCIAL INSTRUMENTS
The Company's financial instruments consisting of cash and cash equivalents,
accounts receivable and accounts payable and accrued liabilities approximate
their carrying values due to the short-term nature of those instruments. As of
June 30, 2006, the market value of marketable securities was $250,500 (June 30,
2005 - $258,000). These marketable securities will be considered "Navidad
related assets" and subject to transfer to Aquiline.
RISK FACTORS
The Company's operations and results are subject to a number of different risks
at any given time. These factors, include but are not limited to disclosure
regarding exploration, additional financing, project delay, titles to
properties, price fluctuations and share price volatility, operating hazards,
insurable risks and limitations of insurance, management, foreign country and
regulatory requirements, currency fluctuations and environmental regulations
risks. Exploration for mineral resources involves a high degree of risk. The
cost of conducting programs may be substantial and the likelihood of success is
difficult to assess. For a more complete discussion of these risks and others,
reference should be made to the December 31, 2005 Management Discussion and
Analysis.
SHARE DATA INFORMATION
As of August 14, 2006 there were 52,013,065 common shares, 3,504,404 warrants
and 4,829,000 stock options outstanding.
INVESTOR RELATIONS
The Company currently does not engage any outside investor relations
consultants. Mr. Sean Hurd is the Company's Vice-President, Investor Relations
and coordinates investor relations activities. The Company also maintains a web
site at WWW.IMAEXPLORATION.COM .
- 5 -
FORM 52-109F2 CERTIFICATION OF INTERIM FILINGS
I, Joseph Grosso, President & Chief Executive Officer of IMA Exploration Inc.,
certify that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings) of IMA Exploration Inc. (the issuer) for
the interim period ending June 30, 2006;
2. Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated or that is necessary to make a statement not misleading in
light of the circumstances under which it was made, with respect to the
period covered by the interim filings;
3. Based on my knowledge, the interim financial statements together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, results of
operations and cash flows of the issuer, as of the date and for the
periods presented in the interim filings;
4. The issuer's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures and
internal control over financial reporting for the issuer, and we have:
(a) designed such disclosure controls and procedures, or caused
them to be designed under our supervision, to provide
reasonable assurance that material information relating to the
issuer, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which the interim filings are being prepared; and
(b) designed such internal control over financial reporting, or
caused it to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with the issuer's GAAP; and
5. I have caused the issuer to disclose in the interim MD&A any change in
the issuer's internal control over financial reporting that occurred
during the issuer's most recent interim period that has materially
affected, or is reasonably likely to materially affect, the issuer's
internal control over financial reporting.
Date: August 14, 2006
/s/ JOSEPH GROSSO
___________________________________
Joseph Grosso,
President & Chief Executive Officer
FORM 52-109F2 CERTIFICATION OF INTERIM FILINGS
I, Arthur Lang, Chief Financial Officer of IMA Exploration Inc., certify that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings) of IMA Exploration Inc. (the issuer) for
the interim period ending June 30, 2006;
2. Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated or that is necessary to make a statement not misleading in
light of the circumstances under which it was made, with respect to the
period covered by the interim filings;
3. Based on my knowledge, the interim financial statements together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, results of
operations and cash flows of the issuer, as of the date and for the
periods presented in the interim filings;
4. The issuer's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures and
internal control over financial reporting for the issuer, and we have:
(a) designed such disclosure controls and procedures, or caused
them to be designed under our supervision, to provide
reasonable assurance that material information relating to the
issuer, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which the interim filings are being prepared; and
(b) designed such internal control over financial reporting, or
caused it to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with the issuer's GAAP; and
5. I have caused the issuer to disclose in the interim MD&A any change in
the issuer's internal control over financial reporting that occurred
during the issuer's most recent interim period that has materially
affected, or is reasonably likely to materially affect, the issuer's
internal control over financial reporting.
Date: August 14, 2006
/s/ ARTHUR LANG
____________________________________
Arthur Lang, Chief Financial Officer