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EX-32.1 - EX321 - FIRST COLOMBIA GOLD CORP.ex321.htm
EX-31.1 - EX311 - FIRST COLOMBIA GOLD CORP.ex311.htm
EX-31.2 - EX312 - FIRST COLOMBIA GOLD CORP.ex312.htm
 

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_________________

FORM 10Q
_________________
(Mark One)
 
   x            QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended  June 30, 2013
 
   o             TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from __________ to ___________

Commission file number:  000-51203

FIRST COLOMBIA GOLD CORP.
(Exact name of registrant as specified in its charter)

Nevada
98-0425310
(State of Incorporation)
(IRS Employer ID Number)

Paseo de Bernardez #95, Fracc. Lomas de Bernardez, Guadalupe 98610, Zac. Mexico
(Address of principal executive offices)

888-224-6561
(Registrant's Telephone number)

 (Former Address and phone of principal executive offices)

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

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

Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   o
Accelerated filer                      o
Non-accelerated filer     o
Smaller reporting company    x
(Do not check if a smaller reporting company)
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o  No  x

Indicate the number of share outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

As of  June 30, 2013, there were 197,552,085 shares of the registrant’s common stock issued and outstanding.
 
 
 



 
 
 

 
 
FORM 10-Q
FIRST COLOMBIA GOLD CORP.
 
 
 
 
 
 
 
Page
 
PART I – FINANCIAL INFORMATION
 
Item 1.
3
     
Item 2.
4
     
Item 3.
27
     
Item 4.
27
     
PART II – OTHER INFORMATION
     
Item 1.
28
     
Item 1A.
28
     
Item 2.
28
     
Item 3.
28
     
Item 4.
28
     
Item 5.
28
     
Item 6.
29
     
   
     
   

 
 
 

 



 
 
 
 
PART I – FINANCIAL INFORMATION



Our unaudited interim consolidated financial statements included in this Form 10-Q for the three and six months ended June 30, 2013 is as follows:

F-1
Unaudited Interim Consolidated Balance Sheet as of June 30, 2013 and audited Balance Sheet as of December 31, 2012.
   
F-2
Unaudited Interim Consolidated Statements of Operations for the six months ended June 30, 2013 and 2012 and from inception on September 5, 1997 to June 30, 2013.
   
F-3
Unaudited Interim Consolidated Statements of Cash Flows for six months ended June 30, 2013 and 2012 and from inception on September 5, 1997 to June 30, 2013
   
F-4
Notes to the Unaudited Interim Consolidated Financial Statements.

These unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended June 30, 2013 are not necessarily indicative of the results that can be expected for the full year.




 
 
 
 

 



 
 

 
First Colombia Gold Corp.
(An Exploration Stage Company)
Interim Consolidated Balance Sheets
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)

 
   
As at
30 June
2013
   
As at
31 December
2012
(Audited)
 
    $       $    
Assets
               
                 
Current
               
Amounts receivable (Note 6)
    -       27,500  
                 
Mineral property interests (Note 3)
    -       32,500  
                 
Property and equipment (Note 4)
    4,993       5,874  
                 
      4,993       65,874  
                 
Liabilities
               
                 
Current
               
Bank indebtedness
    -       13  
Accounts payable and accrued liabilities (Note 5)
    331,908       528,255  
Current portion of convertible promissory notes (Note 6)
    41,987       69,730  
                 
      373,985       597,998  
                 
Promissory notes (Note 7)
    90,000       -  
                 
      463,895       597,998  
                 
Stockholders’ deficiency
               
                 
Common stock (Note 9)
               
Authorized
               
850,000,000 common shares, par value $0.00001 and
               
150,000,000 blank check preferred shares, no par value
               
50,000,000 designated class A preferred shares, par value $0.001
               
Issued and outstanding
               
30 June 2013 – 47,568,500 class A preferred shares, par value $0.001
               
31 December 2012 – Nil class A preferred shares, par value $0.001
    47,569       -  
30 June 2013 – 197,552,085 common shares, par value $0.00001
               
31 December 2012 – 83,686,238 common shares, par value $0.00001
    1,976       837  
Additional paid in capital
    18,756,201       18,554,809  
Deficit, accumulated during the exploration stage
    (19,264,648 )     (19,087,770 )
                 
      (458,902 )     (532,124 )
                 
      4,993       65,874  

Nature, Basis of Presentation and Continuance of Operations (Note 1), Commitments and Contingencies (Note 10) and Subsequent Events (Note 14)

 
The accompanying notes are an integral part of the interim consolidated financial statements.



 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Interim Consolidated Statements of Operations
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)

 
   
For the period
from the date
of inception on 5 September 1997
 to 30 June
2013
   
For the
 three month
period ended
30 June
2013
   
For the
 three month
 period ended
30 June
2012
   
For the
six month
period ended
30 June
2013
   
For the
six month
period ended
30 June
2012
 
    $       $       $       $       $    
                                         
Expenses
                                       
Amortization – property and equipment (Note 4)
    44,616       440       899       881       1,798  
Amortization – website development costs
    40,001       -       -       -       -  
Bank charges and interest (Note 6)
    1,699,749       35,465       21,648       57,694       34,455  
Consulting and management fees (Note 8)
    5,377,982       16,800       9,750       36,300       18,750  
Foreign exchange loss
    19,657       -       -       -       -  
Investor communication and promotion
    642,021       275       -       9,275       -  
Office and administrative
    112,589       1,195       13       1,795       17  
Professional fees
    906,747       18,456       28,970       33,479       31,131  
Rent
    57,016       -       300       -       600  
Stock-based compensation (Note 9)
    22,399       -       -       -       -  
Telephone
    54,659       -       -       -       -  
Transfer agent and filing fees
    117,181       9,940       12,504       16,661       18,495  
Travel and accommodation
    377,754       -       -       -       -  
Website maintenance
    86,000       -       -       -       -  
Mineral property expenditures (Note 3)
    5,132,574       16,500       9,750       29,500       17,500  
                                         
Net operating loss before other items
    (14,690,945 )     (99,071 )     (83,834 )     (185,585 )     (122,746 )
                                         
Other items
                                       
Forgiveness of debt (Note 5)
    84,357       -       -       45,357       -  
Gain on sale of oil and gas property
    10,745       -       -       -       -  
Interest income
    102,561       -       -       -       -  
Recovery of expenses
    4,982       -       -       -       -  
Provision for write-down of mineral property interests (Note 3)
    (5,069,650 )     (36,650 )     -       (36,650 )     -  
Write-down of incorporation cost
    (12,500 )     -       -       -       -  
Write-down of assets
    (14,111 )     -       -       -       -  
                                         
Net operating loss before income taxes
    (19,584,562 )     (135,721 )     (83,834 )     (176,878 )     (122,746 )
                                         
Future income tax recovery
    2,319,871       -       -       -       -  
                                         
Net operating loss from continuing operations
    (17,264,690 )     (135,721 )     (83,834 )     (176,878 )     (122,746 )
                                         
Discontinued operations of  Beardmore Holdings, Inc.
    (1,999,958 )     -       -       -       -  
                                         
Net operating loss and comprehensive loss for the period
    (19,264,648 )     (135,721 )     (83,834 )     (176,878 )     (122,746 )
                                         
Basic and diluted loss per common share
            (0.00 )     (0.00 )     (0.00 )     (0.00 )
                                         
Weighted average number of common shares used in per share calculations
            173,367,694       42,075,014       137,921,248       41,790,878  


The accompanying notes are an integral part of the interim consolidated financial statements.
 
 



 
First Colombia Gold Corp.
(An Exploration Stage Company)
Interim Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)

 
   
For the period
from the date
of inception on 5 September 1997
to 30 June
2013
   
For the
three month
 period ended
30 June
2013
   
For the
three month
period ended
30 June
2012
   
For the
six month
period ended
 30 June
2013
   
For the
six month
period ended
 30 June 2012
 
    $       $       $       $       $    
                                         
Cash flows used in operating activities
                                       
Net loss for the period
    (17,264,690 )     (135,721 )     (83,834 )     (176,878 )     (122,746 )
Adjustments to reconcile loss to net cash used by operating activities
                                       
Amortization
    84,617       440       899       881       1,798  
Accrued interest
    1,683,473       35,465       21,261       57,707       33,856  
Consulting fees
    40,200       -       -       -       -  
Forgiveness of debt
    (69,357 )     -       -       (45,357 )     -  
Future income tax recovery
    (2,319,871 )     -       -       -       -  
Gain on sale of oil and gas property
    (10,745 )     -       -       -       -  
Mineral property acquisition
    1,816,000       -       -       -       -  
Stock-based compensation
    3,609,399       -       -       -       -  
Provision for write-down of mineral property interests
    5,069,650       36,650       -       36,650       -  
Changes in operating assets and liabilities
                                       
Amounts receivable
    -       -       -       27,500       -  
Accounts payable and accrued liabilities
    571,835       32,416       38,886       43,660       34,942  
                                         
Net cash used in continuing operating activities
    (6,789,489 )     (30,750 )     (22,788 )     (55,837 )     (52,150 )
                                         
Net cash used in discontinued operations
    (186,440 )     -       -       -       -  
                                         
Cash flows from financing activities
                                       
Bank indebtedness
    -       -       -       (13 )     -  
Cost of repurchase of common stock
    (1,000 )     -       -       -       -  
Convertible promissory notes
    190,000       32,500       27,500       60,000       65,000  
Warrants exercised
    100,000       -       -       -       -  
Issuance of common stock, net of share issue costs
    8,311,915       -       -       -       -  
                                         
Net cash used from continuing financing activities
    8,600,915       32,500       27,500       59,987       65,000  
                                         
Cash flows used in investing activities
                                       
Proceeds from sale of oil and gas property
    46,200       -       -       -       -  
Oil and gas property acquisitions
    (2,846 )     -       -       -       -  
Oil and gas exploration
    (22,609 )     -       -       -       -  
Mineral property acquisition
    (52,759 )     (1,750 )     -       (4,150 )     -  
Purchase of equipment
    (53,550 )     -       -       -       -  
Website development cost
    (40,000 )     -       -       -       -  
                                         
Net cash used in continuing investing activities
    (125,564 )     (1,750 )     -       (4,150 )     -  
                                         
Net cash used in discontinued operations
    (1,499,422 )     -       -       -       -  
                                         
Increase  in cash and cash equivalents
    -       -       4,712       -       12,850  
                                         
Cash and cash equivalents, beginning of period
    -       -       10,332       -       2,194  
                                         
Cash and cash equivalents, end of period
    -       -       15,044       -       15,044  

Supplemental Disclosures with Respect to Cash Flows (Note 12)

The accompanying notes are an integral part of the interim consolidated financial statements.




 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 
 

1.  
Nature, Basis of Presentation and Continuance of Operations

First Colombia Gold Corp. (the “Company”) was incorporated under the laws of the State of Nevada, U.S.A. under the name “Gondwana Energy, Ltd.” on 5 September 1997. On 23 January 2007, the Company changed its name to “Finmetal Mining Ltd.”. On 27 November 2006, the Company completed the acquisition of 100% of the shares of Finmetal Mining OY (“Finmetal OY”), a company incorporated under the laws of Finland. During the fiscal year ended 31 December 2006, the Company changed its operational focus from development of oil and gas properties, to acquisition of, exploration for and development of mineral properties in Finland.
 
On 22 May 2008, the Company changed its name to “Amazon Goldsands Ltd.” and on 18 September 2008, the Company entered into a Mineral Rights Option Agreement and concurrently re-focused on the acquisition of, exploration for and development of mineral properties located in Peru. On 29 November 2010, the Company changed its name to “First Colombia Gold Corp.”. The Company changed its name pursuant to a parent/subsidiary merger between the Company (as Amazon Goldsands Ltd.) and its wholly-owned non-operating subsidiary, First Colombia Gold Corp., which was established for the purpose of giving effect to this name change. In 2011 the Company expanded geographic focus to include North America, acquiring two mineral property interests while terminating its agreements related to the mineral property located in Peru in September 2011.
 
The Company is an exploration stage enterprise, as defined in Accounting Standards Codification (the “Codification” or “ASC”) 915-10, “Development Stage Entities”. The Company is devoting all of its present efforts in securing and establishing a new business. Its planned principal operations have not commenced and no revenue has been derived during the organization period.
 
The business of mining and exploring for minerals involves a high degree of risk and there can be no assurance that current exploration programs will result in profitable mining operations. The recoverability of the carrying value of exploration properties and the Company’s continued existence are dependent upon the preservation of its interest in the underlying properties, the discovery of economically recoverable reserves, the achievement of profitable operations, or the ability of the Company to raise alternative financing, if necessary, or alternatively upon the Company’s ability to dispose of its interests on an advantageous basis. Changes in future conditions could require material write downs of the carrying values.
 
Although the Company has taken steps to verify the title to the properties on which it is conducting exploration and in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property title may be subject to unregistered prior agreements and non-compliance with regulatory requirements.
 
The accompanying interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Finmetal OY, a company incorporated under the laws of Finland, since its date of acquisition on 27 November 2006 and the results of Beardmore Holdings, Inc. (“Beardmore”), a company incorporated under the laws of Panama, to the date of disposal on 21 September 2011.

 
 
 
 


First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


The accompanying interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) applicable to exploration stage enterprises, and are expressed in U.S. dollars. The Company’s fiscal year end is 31 December.

The Company’s interim consolidated financial statements as at 30 June 2013 and for the six month period then ended have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

The Company had a net loss of $176,878 for the six month period ended 30 June 2013 (30 June 2012 - $122,746, cumulative - $19,264,648) and has a working capital deficit of $373,985 at 30 June 2013 (31 December 2012 – $570,498), but management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. The Company’s solvency, ability to meet its liabilities as they become due and to continue its operations, is essentially solely dependent at present on funding provided by Asher Enterprises, Inc. (“Asher”). If Asher is unwilling to provide ongoing funding to the Company and/or if the Company is unable to raise additional capital in the immediate future, the Company will need to curtail operations, liquidate assets, seek additional capital on less favourable terms and/or pursue other remedial measures or cease operations. This material uncertainty may cast significant doubt about the ability of the Company to continue as a going concern. These interim consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern including adjustments related to employee severance pay and other costs related to ceasing operations.

2.  
Significant Accounting Policies

The following is a summary of significant accounting policies used in the preparation of these interim consolidated financial statements.

Principles of consolidation

All inter-company balances and transactions have been eliminated in these interim consolidated financial statements.

Cash and cash equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

Property and equipment

Furniture, computer equipment, office equipment and computer software are carried at cost and are amortized over their estimated useful lives at rates as follows:

Furniture, computer and office equipment
    30 %
Computer software
    100 %

 
 
 
 

 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 
 
 
The property and equipment is written down to its net realizable value if it is determined that its carrying value exceeds estimated future benefits to the Company.

Mineral property costs

Mineral property acquisition costs are initially capitalized as tangible assets when purchased. At the end of each fiscal quarter, the Company assesses the carrying costs for impairment. If proven and probable reserves are established for a property and it has been determined that a mineral property can be economically developed, costs will be amortized using the units-of-production method over the estimated life of the probable reserve.

Mineral property exploration costs are expensed as incurred.

Estimated future removal and site restoration costs, when determinable, are provided over the life of proven reserves on a units-of-production basis. Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards. Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.

As of the date of these interim consolidated financial statements, the Company has not established any proven or probable reserves on its mineral properties and incurred only acquisition and exploration costs.

Although the Company has taken steps to verify title to mineral properties in which it has an interest, according to the usual industry standards for the stage of exploration of such properties, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

Segments of an enterprise and related information

ASC 280, “Segment Reporting” establishes guidance for the way that public companies report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in financial statements issued to the public. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. ASC 280 defines operating segments as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

Environmental costs

Environmental expenditures that are related to current operations are charged to operations or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are charged to operations. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company’s commitments to a plan of action based on the then known facts.
 
 
 
 


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 

Comparative figures

Certain comparative figures have been adjusted to conform to the current period’s presentation.

Comprehensive loss

ASC 220, “Comprehensive Income” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at 30 June 2013, the Company did not have items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the interim consolidated financial statements.

Foreign currency translation

The Company’s functional and reporting currency is U.S. dollars. The interim consolidated financial statements of the Company are translated to U.S. dollars in accordance with ASC 830, “Foreign Currency Matters.” Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the date of these interim consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

Stock-based compensation

Effective 1 January 2006, the Company adopted the provisions of ASC 718, “Compensation – Stock Compensation”, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employees’ requisite service period (generally the vesting period of the equity grant). The Company adopted ASC 718 using the modified prospective method, which requires the Company to record compensation expense over the vesting period for all awards granted after the date of adoption, and for the unvested portion of previously granted awards that remain outstanding at the date of adoption. Accordingly, the financial statements for the periods prior to 1 January 2006 have not been restated to reflect the fair value method of expensing stock-based compensation. The adoption of ASC 718 did not change the way the Company accounts for stock-based payments to non-employees, with guidance provided by ASC 505-50, “Equity-Based Payments to Non-Employees”.

Long-lived assets impairment

Long-term assets of the Company are reviewed for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable, pursuant to guidance established in ASC 360-10-35-15, “Impairment or Disposal of Long-Lived Assets”. Management considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations (undiscounted and without interest charges). If impairment is deemed to exist, the assets will be written down to fair value. Fair value is generally determined using a discounted cash flow analysis.
 
 
 
 



 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


Financial instruments

The carrying value of accounts payable and convertible promissory notes approximates their fair value because of the short maturity of these instruments. The Company’s financial risk is the risk that arises from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.

Basic and diluted loss per share

The Company computes net loss per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excluded all dilutive potential shares if their effect was anti-dilutive.

Income taxes

Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with ASC 740, “Income Taxes”, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax losses and credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides for deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than not.

Convertible debt

The Company has adopted ASC 470-20, “Debt with Conversion and Other Options” and applies this guidance retrospectively to all periods presented upon those fiscal years. ASC 470-20 requires the liability and equity components to be separately accounted for in a manner that will reflect the entity’s nonconvertible debt borrowing rate. The Company will allocate a portion of the proceeds received from the issuance of convertible notes between a liability and equity component by determining the fair value of the liability component using the Company’s nonconvertible debt borrowing rate. The difference between the proceeds of the notes and the fair value of the liability component will be recorded as a discount on the debt with a corresponding offset to paid-in capital. The resulting discount will be accreted by recording additional non-cash interest expense over the expected life of the convertible notes using the effective interest rate method.
 
 
 
 


 
 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 

Asset retirement obligations

The Company has adopted ASC 410, “Assets Retirement and Environmental Obligations”, which requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. ASC 410 requires the Company to record a liability for the present value of the estimated site restoration costs with a corresponding increase to the carrying amount of the related long-lived assets. The liability will be accreted and the asset will be depreciated over the life of the related assets. Adjustments for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation will be made. As at 30 June 2013, the Company did not have any asset retirement obligations.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. Actual results may differ from those estimates.

Recent Accounting Pronouncements

In April 2013, FASB issued Accounting Standards Update (“ASU”) No. 2013-07, “Presentation of Financial Statements”. The objective of this Update is to clarify when an entity should apply the liquidation basis of accounting and to provide principles for the measurement of assets and liabilities under the liquidation basis of accounting, as well as any required disclosures. ASU No. 2013-07 will be effective for fiscal years, and interim periods within those years beginning after 15 December 2013, with early adoption permitted. The Company does not expect the adoption of this update will have a material effect on its interim consolidated financial statements.

In April 2013, FASB issued ASU No. 2013-06, “Not-for-Profit Entities”. The objective of this Update is to address the diversity in practice about what guidance not-for-profit entities should apply for recognizing and measuring personnel services received from an affiliate, that is, a party that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the recipient not-for-profit entity. ASU No. 2013-06 will be effective for fiscal years, and interim periods within those years, beginning after 15 June 2014, with early adoption permitted. The Company does not expect the adoption of this update will have a material effect on its interim consolidated financial statements.

 
 
 
 
 


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 
 
In March 2013, FASB issued ASU No. 2013-05, “Foreign Currency Matters”. The amendments in this update resolve the diversity in practice about whether Subtopic 810-10, “Consolidation – Overall”, or Subtopic 830-30, “Foreign Currency Matters - Translation of Financial Statements”, applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. In addition, the amendments in this update resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. ASU No. 2013-05 will be effective for fiscal years, and interim periods within those years, beginning after 15 December 2013, with early adoption permitted, and should be applied retrospectively to all prior periods presented. The Company does not expect the adoption of this update will have a material effect on its interim consolidated financial statements.

In February 2013, FASB issued ASU No. 2013-04, “Liabilities”. This update requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of: (1) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (2) any additional amount the reporting entity expects to pay on behalf of its co-obligors. ASU No. 2013-04 will be effective for fiscal years, and interim periods within those years, beginning after 15 December 2013, with early adoption permitted. The Company does not expect the adoption of this update will have a material effect on its interim consolidated financial statements.

3.  
Mineral Property Interests

The Company’s exploration and evaluation properties expenditures for the six month period ended 30 June 2013 and for the year ended 31 December 2012 are as follows:

   
South Idaho
Silver Project
   
Boulder Hill
Claims
   
Boulder Hill
Project
   
Skip Silver
Prospect
   
Total
 
    $       $       $       $       $    
                                         
As at 31 December 2011
    32,500       15,000       18,000       -       65,500  
Additions
    -       -       -       -          
Write-down
    -       (15,000 )     (18,000 )     -       (33,000 )
                                         
As at 31 December 2012
    32,500       -       -       -       32,500  
Additions
    4,150       -       -       -       4,150  
Provision for write-down
    (36,650 )     -       -       -       (36,650 )
                                         
As at 30 June 2013
    -       -       -       -       -  
 
 
 
 

 

 
F - 10


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 

South Idaho Silver Project

On 7 December 2011 (the “Effective Date”), the Company entered into an Assignment and Assumption Agreement (the “CCS Assignment”) with Castle Creek Silver Inc. (“Castle Creek”), an Idaho corporation, and Robert Ebisch (“Robert E”) to acquire by way of assignment from Castle Creek all of its rights, responsibilities and obligations under an Option to Purchase and Royalty Agreement (the “Purchase Agreement”) dated 15 July 2011, by and between Castle Creek and Robert E. Castle Creek, under the Purchase Agreement, had the option to acquire an undivided 100% of the right, title and interest of Robert E in the unpatented mining claims owned and situated in Owyhee County, Idaho (the “South Idaho Property”).

Pursuant to the terms of the CCS Assignment, Castle Creek transferred and assigned the Company all of its right, title and interest, in, to and under the Purchase Agreement and the Company assumed the assignment of the Purchase Agreement agreeing to be bound, the same extent as Castle Creek, to the terms and conditions of the Purchase Agreement.  The Company agreed to make the following considerations to Castle Creek (Note 10):

·  
Issue 1,000,000 restricted shares of the Company’s common stock by 12 December 2011 (issued on 7 December 2011 and valued at $30,000) (Note 9);

·  
Pay $50,000 by 15 July 2013 (unpaid) (Note 10); and

·  
Castle Creek will be entitled to a 1% net smelter return (“NSR”) from any ore produced from the South Idaho Property. At any time from the Effective Date, the Company has the right to acquire the 1% NSR payable to Castle Creek for $250,000.

The Purchase Agreement and assignment of Castle Creek’s right, title and interest, in, to and under the Purchase Agreement provide that the Company will have exercised the option to acquire an undivided 100% of Robert E’s right, title and interest in and to the Property after incurring an aggregate of $210,000 in exploration expenditures, paying Robert E an aggregate of $80,000 plus 5% of any JVBP.  The Purchase Agreement provides that the cash payments payable to Robert E shall be made according to the following schedule (Note 10):

·  
$2,500 on or before 31 January 2012 plus 5% of any JVBP (paid);

·  
$2,500 on or before 20 June 2013 plus 5% of any JVBP (paid);

·  
$5,000 on or before 15 September 2013 plus 5% of any JVBP;

·  
$10,000 on or before 15 September 2014 plus 5% of any JVBP;

·  
$15,000 on or before 15 September 2015 plus 5% of any JVBP;

·  
$20,000 on or before 15 September 2016 plus 5% of any JVBP; and

·  
$25,000 on or before 15 September 2017 plus 5% of any JVBP.
 
 
 
 
 

 
F - 11


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 

The Purchase Agreement provides that the exploration expenditures of an aggregate of not less than $210,000 on the South Idaho Property shall be incurred as follows (Note 10):

·  
On or before 15 April 2012, incur not less than an aggregate of $10,000 in exploration expenditures (an aggregate of $10,000 incurred);

·  
On or before 15 July 2013, incur not less than an aggregate of $20,000 in exploration expenditures (an aggregate of $28,620 incurred);

·  
On or before 15 September 2013, incur not less than an aggregate of $100,000 in exploration expenditures; and

·  
On or before 15 September 2014, incur not less than an aggregate of $210,000 in exploration expenditures.

In addition to the foregoing cash payments, exploration expenditures and filing fees, in order to maintain its interest in the South Idaho Property the Company will be responsible for the following (Note 10):

·  
Make advance royalty payments to Robert E of $25,000 per year, commencing on 15 September 2015 and continuing on 15 September each and every year thereafter for so long as the Company retains its interest in the South Idaho Property; and

·  
Incur a minimum of $100,000 of annual exploration expenditures on the South Idaho Property on or before 15 September each and every year after 15 September 2015, which could be offset by exploration expenditures in excess of $100,000 in any prior annual period.

On 7 December 2012, the Company entered into an agreement with Castle Creek to waive certain required cash payment and/or exploration expenditure related to the South Idaho Property until renegotiation after 31 March 2013 and before 30 June 2013, provided that a cash payment of $1,200 is paid prior to 31 March 2013 (paid).

On 31 May 2013, the Company entered into an agreement with Castle Creek to waive certain required cash payment and/or exploration expenditure related to the South Idaho Property until 15 July 2013, provided that a cash payment of $3,500 is paid prior to 15 July 2013 (unpaid).  Further, the Company may secure a waiver at any time during the year ended 31 December 2013 for the requirements that become due in 2014 in exchange for cash payment of or issuance of common shares valued at $50,000 (Note 10).

Included in accounts payable and accrued liabilities as at 30 June 2013 are exploration expenditures of $Nil (31 December 2012 – $10,245) related to the South Idaho Silver Project (Notes 5 and 12).

The Company is currently in default with regards to certain obligations related to the South Idaho Property and is in the process of renegotiating the terms with Castle Creek (Note 14).

During the six month period ended 30 June 2013, the Company recorded a provision for write-down of mineral property interests in the amount of $36,650 (30 June 2012 - $Nil, cumulative - $36,650) related to the South Idaho Property (Notes 10, 12 and 14).
 
 
 
 
 

 
F - 12


 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 

Boulder Hill Claims

On 16 December 2011, the Company entered into a Purchase and Sale Agreement (the “BHM Purchase”) with Boulder Hill Mines, Inc., an Idaho corporation (“Boulder Hill”), to purchase from Boulder Hill three unpatented mining claims situated in Lincoln County, Montana (the “Boulder Hill Claims”) by making the following considerations to Boulder Hill:

·  
Issue 500,000 restricted shares of the Company’s common stock by 21 December 2011 (issued on 16 December 2011 and valued at $15,000) (Note 9);

·  
Pay $25,000 in cash by 5 May 2013 (unpaid) (Note 10); and

·  
Pay $25,000 in cash by 16 December 2013.

On 15 January 2013, the Company amended the agreement entered into on 12 October 2012 with Boulder Hill to extend the waiver of certain required cash payment and/or exploration expenditure related to the Boulder Hill Claims until 5 May 2013.

During the year ended 31 December 2012, the Company was in default related to certain obligations related to the Boulder Hill Claims.  The Company recorded a write-down of mineral property in the amount of $15,000 related to the Boulder Hill Claims.

Boulder Hill Project

On 30 September 2011, the Company entered into a non-binding letter of intent (“LOI”) with Boulder Hill to acquire by way of an assignment from Boulder Hill all of its rights, responsibilities and obligations under a state mineral lease and agreement (the “Option Agreement”) dated 15 July 2008 by and among Boulder Hill, James Ebisch (“James E”) and Ryan Riech (“Riech”).

James E and Riech, under the terms of the Option Agreement, hold the mining and mineral rights to a certain Montana State Metallferrous Gold Lease entered into with the State of Montana (the “Montana Gold Lease”) under which Boulder Hill was granted the exclusive right to prospect, explore, develop and mine for gold, silver and other minerals on a property situated in Lincoln County, Montana (the “Boulder Hill Property”). The Montana Gold Lease is for a 10-year term and is subject to the 5% net smelter return (“NSR”) due to the State of Montana. The Option Agreement was amended on 1 August 2011 to reflect James E as the sole owner of the Montana Gold Lease.

On 16 December 2011 (the “Effective Date”), the Company entered into an Assignment and Assumption Agreement (“BHM Assignment”) with Boulder Hill and James E, whereby Boulder Hill transferred and assigned the Company all of its right, title and interest, in, to and under the Option Agreement and the Company assumed the assignment of the Option Agreement agreeing to be bound, the same extent as Boulder Hill, to the terms and conditions of the Option Agreement.
 
 
 
 
 


 
F - 13


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


The BHM Assignment required the Company to make the following considerations to Boulder Hill:

·  
Issue 500,000 restricted shares of the Company’s common stock by 21 December 2011 (issued on 16 December 2011 and valued at $15,000) (Note 9);

·  
Pay $25,000 in cash by 30 September 2013; and

·  
Pay $25,000 in cash by 16 December 2013.

The Option Agreement and the BHM Assignment provide that the Company will have exercised the option to acquire an undivided 100% of James E’s right, title and interest in and to the Montana Gold Lease after incurring an aggregate of $210,000 in exploration expenditures, paying James E an aggregate of $80,000 plus 5% of any joint-venture and buyout payments (the “JVBP”) and paying filing fees over the term of the Option Agreement.

The Option Agreement provides that the cash payments payable to James E shall be made according to the following schedule:

·  
$20,000 on or before 30 September 2013 plus 5% of any JVBP, of which an initial payment of $3,000 is to be made on or before 30 October 2011 ($3,000 paid on 12 January 2012);

·  
$15,000 on or before 30 September 2013 plus 5% of any JVBP;

·  
$20,000 on or before 15 July 2014 plus 5% of any JVBP; and

·  
$25,000 on or before 15 July 2015 plus 5% of any JVBP.

The Option Agreement and claim purchase agreement require that the exploration expenditures of an aggregate of not less than $210,000 on the Property shall be incurred as follows:

·  
On or before 30 September 2013, incur not less than an aggregate of $49,000 in exploration expenditures (an aggregate of $31,769 incurred); and

·  
On or before 13 December 2013, incur not less than an aggregate of $210,000 in exploration expenditures.

In addition to the foregoing cash payments and exploration expenditures, in order to maintain James E’s leasehold interest in the Boulder Hill Property the Company will be responsible for paying filing fees over the term of the Option Agreement and Boulder Hill Agreement and the following:

·  
Make advance royalty payments to James E of $25,000 per year, commencing on 15 July 2015 and continuing on 15 July each and every year thereafter for so long as the Company retains its leasehold interest in the Boulder Hill Property; and

 
 
 
 
 

 
F - 14


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


·  
Incur a minimum of $100,000 of annual exploration expenditures on the Boulder Hill Property on or before 15 July each and every year after 15 July 2011 (not incurred), which could be offset by exploration expenditures in excess of $100,000 in any prior annual period.

On 15 January 2013, the Company amended the agreement entered into on 12 October 2012 with Boulder Hill and James E to extend the waiver of certain required cash payment and/or exploration expenditure related to the Boulder Hill Property until 5 May 2013.

On 5 May 2013, the Company amended the waiver entered into on 15 January 2013 with Boulder Hill and James E to extend the waiver of certain required cash payment and/or exploration expenditure related to the Boulder Hill Property until 30 September 2013.

Included in accounts payable and accrued liabilities as at 30 June 2013 are mineral property acquisition costs and exploration expenditures of $1,091 (31 December 2012 – $19,394) related to the Boulder Hill Project (Notes 5 and 12).

During the year ended 31 December 2012, the Company was in default related to certain obligations related to the Boulder Hill Project and as a result, the Company recorded a write-down of mineral property in the amount of $18,000 related to the Boulder Hill Project.

Skip Silver Prospect

The Company acquired by right of location two unpatented mining claims in the state of Montana in 2012 covering approximately forty acres.

4.  
Property and Equipment

               
Net Book Value
 
   
Cost
   
Accumulated
Amortization
   
30 June
2013
   
31 December 2012 (Audited)
 
    $       $       $       $    
Furniture, computer and office equipment
                               
    47,433       42,440       4,993       5,874  

During the six month period ended 30 June 2013, total additions to property and equipment were $Nil (30 June 2012 - $Nil).

5.  
Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities are non-interest bearing, unsecured and have settlement dates within one year.

On 31 January 2013, the Company issued a total of 37,022,900 class A preferred shares valued at $81,450 ($0.0022 per share) for the settlement of liabilities totaling $126,807 with unrelated parties. The Company recorded a gain of $45,357 related to this settlement (Notes 9 and 12).
 
 
 
 

 
F - 15


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


On 30 June 2013, the Company entered into agreement with various vendors to convert $90,000 the amounts payable to the vendors to long-term promissory notes. The promissory notes have a term of two years, are unsecured, and bear interest of 5% per annum (Notes 7 and 12).

Included in accounts payable and accrued liabilities as at 30 June 2013 is an amount due to a former officer of the Company of $3,551 (31 December 2012 – $3,876). These amounts are non-interest bearing, unsecured and have no fixed terms of repayment (Note 8).

Included in accounts payable and accrued liabilities as at 30 June 2013 is an amount due to a director of the Company of $8,112 (31 December 2012 – $10,817). This amount is non-interest bearing, unsecured and have no fixed terms of repayment (Note 8).

Included in accounts payable and accrued liabilities as at 30 June 2013 is an amount due to an officer of the Company of $8,735 (31 December 2012 – $10,000). This amount is non-interest bearing, unsecured and have no fixed terms of repayment (Note 8).

Included in accounts payable and accrued liabilities as at 30 June 2013 is an amount due to an officer of the Company of $4,750 (31 December 2012 – $4,150). This amount is non-interest bearing, unsecured and have no fixed terms of repayment (Note 8).

Included in accounts payable and accrued liabilities as at 30 June 2013 are mineral property acquisition costs and exploration expenditures of $1,091 (31 December 2012 – $19,394) related to the Boulder Hill Project (Notes 3 and 12).

Included in accounts payable and accrued liabilities as at 30 June 2013 are exploration expenditures of $Nil (31 December 2012 – $10,245) related to the South Idaho Silver Project (Notes 3 and 12).

6.  
Convertible Promissory Notes

a.  
On 23 November 2011, the Company issued a convertible note to Asher in the amount of $37,500, bearing interest at a rate of 8% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due and payable upon maturity on 28 August 2012 (the “Asher Note”). Any amount of principal or interest amount not paid on 28 August 2012 (the “Default Amount”) shall bear interest of 22% per annum commencing on 28 August 2012 to the date the amount is paid.

Asher has the option to convert any portion of the unpaid principal balance plus accrued and unpaid interest plus the Default Amount into the Company’s common shares at any time commencing 6 months after the date of issuance up to the later of 28 August 2012 or the date of the Default Amount is paid, at a conversion price equal to 58% of the market price for the common shares during the 10 trading days prior to the conversion.

 
 
 
 

 
F - 16


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


The Asher Note contains a provision limiting the number of shares of common stock into which the Asher Note is convertible to 4.99% of the outstanding shares of the Company’s common stock. However, the provision in the Asher Note may be waived by Asher upon 61 days’ prior notice. The Company has a right of prepayment of the Asher Note anytime from the date of the Asher Note until 180 days thereafter, subject to a prepayment penalty in the amount of 130% to 150% of the outstanding principal and interest of the Asher Note based on the date of prepayment.

The fair value of the beneficial conversion feature was estimated at $27,155 and was recorded as additional paid-in capital.

During the year ended 31 December 2012, the Company issued a total of 42,182,653 common shares to Asher valued at $34,900 upon various conversions of Asher Note, reducing the principal amount to $2,600 as at 31 December 2012 (Notes 9 and 12).

During the six month period ended 30 June 2013, the Company accrued interest expense of $8 (30 June 2012 - $20,132, cumulative - $30,416), of which $Nil relates to the amortization of debt discount (30 June 2012 – $18,648, cumulative - $27,155) (Note 12).

During the six month period ended 30 June 2013, the Company issued a total of 5,945,378 common shares to Asher valued at $4,100 upon various conversions of Asher Note, reducing the principal amount by $2,600 to $Nil, and accrued interest amount by $1,500 to $1,761 as at 30 June 2013 (Notes 9 and 12).

During the six month period ended 30 June 2013, the Company recorded a write-down of accrued interest of $1,761 related to the Asher Note (30 June 2012 - $Nil, cumulative - $1,761) (Note 12).

b.  
On 16 March 2012, the Company issued a convertible note to Asher in the amount of $37,500, bearing interest at a rate of 8% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due and payable upon maturity on 20 December 2012 (the “Asher Note #2”). Any amount of principal or interest amount not paid on 20 December 2012 (the “Default Amount #2”) shall bear interest of 22% per annum commencing on 20 December 2012 to the date the amount is paid.

Asher has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time commencing 6 months after the date of issuance up to the later of 20 December 2012 or the date of the Default Amount #2 is paid, at a conversion price equal to 58% of the market price for the common shares during the 10 trading days prior to the conversion.

The Asher Note #2 contains a provision limiting the number of shares of common stock into which the Asher Note #2 is convertible to 4.99% of the outstanding shares of the Company’s common stock. However, the provision in the Asher Note #2 may be waived by Asher upon 61 days’ prior notice. The Company has a right of prepayment of the Asher Note #2 anytime from the date of the Asher Note #2 until 180 days thereafter, subject to a prepayment penalty in the amount of 140% to 150% of the outstanding principal and interest of the Asher Note #2 based on the date of prepayment.

 
 
 
 

 
F - 17


 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


The fair value of the beneficial conversion feature was estimated at $27,155 and was recorded as additional paid-in capital.

During the six month period ended 30 June 2013, the Company accrued interest expense of $1,625 (30 June 2013 – $11,257, cumulative - $31,321), of which $Nil relates to the amortization of debt discount (30 June 2012 - $10,377, cumulative - $27,155) (Notes 9 and 12).

During the six month period ended 30 June 2013, the Company issued a total of 47,527,322 common shares to Asher valued at $39,000 upon various conversions of Asher Note #2, reducing the principal amount by $37,500 to $Nil and accrued interest amount by $1,500 to $2,666 as at 30 June 2013 (Notes 9 and 12).

During the six month period ended 30 June 2013, the Company recorded a write-down of accrued interest of $2,666 related to the Asher Note #2 (30 June 2012 - $Nil, cumulative - $2,666) (Note 12).

c.  
On 6 June 2012, the Company issued a convertible note to Asher in the amount of $27,500, bearing interest at a rate of 8% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due and payable upon maturity on 6 March 2013 (the “Asher Note #3”). Any amount of principal or interest amount not paid on 6 March 2013 (the “Default Amount #3”) shall bear interest of 22% per annum commencing on 6 March 2013 to the date the amount is paid.

Asher has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time commencing 6 months after the date of issuance up to the later of 6 March 2013 or the date of the Default Amount #3 is paid, at a conversion price equal to 51% of the market price for the common shares during the 10 trading days prior to the conversion.

The Asher Note #3 contains a provision limiting the number of shares of common stock into which the Asher Note #3 is convertible to 9.99% of the outstanding shares of the Company’s common stock. However, the provision in the Asher Note #3 may be waived by Asher upon 61 days’ prior notice. The Company has a right of prepayment of the Asher Note #3 anytime from the date of the Asher Note #3 until 180 days thereafter, subject to a prepayment penalty in the amount of 140% to 150% of the outstanding principal and interest of the Asher Note #3 based on the date of prepayment.

The fair value of the beneficial conversion feature was estimated at $26,422 and was recorded as additional paid-in capital.

During the six month period ended 30 June 2013, the Company was in default of the Asher Note #3 and the Company recorded a penalty in the amount of $13,750 (50% of the original principal) pursuant to the Asher Note #3 agreement, which has been recorded as interest expense (Note 12).

During the six month period ended 30 June 2013, the Company accrued interest expense of $20,847 (30 June 2012 - $2,467, cumulative - $42,232), of which $6,291 relates to the amortization of the debt discount (30 June 2012 - $2,323, cumulative - $26,422) and $13,750 relates to the default penalty (30 June 2012 - $Nil, cumulative - $13,750) (Note 12).
 
 
 


 
F - 18


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


During the six month period ended 30 June 2013, the Company issued a total of 60,393,147 common shares to Asher valued at $42,350 upon various conversions of Asher Note #3, reducing the principal amount by $41,250 to $Nil and accrued interest amount by $1,100 to $960 as at 30 June 2013 (Notes 9 and 12).

During the six month period ended 30 June 2013, the Company recorded a write-down of accrued interest of $960 related to the Asher Note #3 (30 June 2012 - $Nil, cumulative - $960) (Note 12).

d.  
On 18 December 2012, the Company issued a convertible note to Asher in the amount of $27,500, bearing interest at a rate of 8% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due and payable upon maturity on 20 September 2013 (the “Asher Note #4”). Any amount of principal or interest amount not paid on 20 September 2013 (the “Default Amount #4”) shall bear interest of 22% per annum commencing on 20 September 2013 to the date the amount is paid.

Asher has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time commencing 6 months after the date of issuance up to the later of 20 September 2013 or the date of the Default Amount #4 is paid, at a conversion price equal to 45% of the market price for the common shares during the 30 trading days prior to the conversion.

The Asher Note #4 contains a provision limiting the number of shares of common stock into which the Asher Note #4 is convertible to 9.99% of the outstanding shares of the Company’s common stock. However, the provision in the Asher Note #4 may be waived by Asher upon 61 days’ prior notice. The Company has a right of prepayment of the Asher Note #4 anytime from the date of the Asher Note #4 until 180 days thereafter, subject to a prepayment penalty in the amount of 140% to 150% based on the date of repayment.

The fair value of the beneficial conversion feature was estimated at $27,500 and was recorded as additional paid-in capital.

During the six month period ended 30 June 2013, the Company accrued interest expense of $19,120 (30 June 2012 - $Nil, cumulative - $20,493), of which $18,035 relates to the amortization of debt discount (30 June 2012 - $Nil, cumulative - $19,330) (Note 12).

e.  
On 21 February 2013, the Company issued a convertible note to Asher in the amount of $27,500, bearing interest at a rate of 8% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due and payable upon maturity on 25 November 2013 (the “Asher Note #5”). Any amount of principal or interest amount not paid on 25 November 2013 (the “Default Amount #5”) shall bear interest of 22% per annum commencing on 25 November 2013 to the date the amount is paid.

Asher has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time commencing 6 months after the date of issuance up to the later of 25 November 2013 or the date of the Default Amount #5 is paid, at a conversion price equal to 45% of the market price for the common shares during the 30 trading days prior to the conversion.
 
 
 
 

 
F - 19


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


The Asher Note #5 contains a provision limiting the number of shares of common stock into which the Asher Note #5 is convertible to 9.99% of the outstanding shares of the Company’s common stock. However, the provision in the Asher Note #5 may be waived by Asher upon 61 days’ prior notice. The Company has a right of prepayment of the Asher Note #5 anytime from the date of the Asher Note #5 until 180 days thereafter, subject to a prepayment penalty in the amount of 140% to 150% based on the date of repayment.

The fair value of the beneficial conversion feature was estimated at $27,500 and was recorded as additional paid-in capital.

During the six month period ended 30 June 2013, the Company accrued interest expense of $13,578 (30 June 2012 - $Nil, cumulative - $13,578), of which $12,807 relates to the amortization of debt discount (30 June 2012 - $Nil, cumulative - $12,807) (Note 12).

f.  
On 29 April 2013, the Company issued a convertible note to Asher in the amount of $32,500, bearing interest at a rate of 8% per annum on any unpaid principal balance, unsecured, with principal and interest amounts due and payable upon maturity on 31 January 2014 (the “Asher Note #6”). Any amount of principal or interest amount not paid on 31 January 2014 (the “Default Amount #6”) shall bear interest of 22% per annum commencing on 31 January 2014 to the date the amount is paid.

Asher has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time commencing 6 months after the date of issuance up to the later of 31 January 2014 or the date of the Default Amount #6 is paid, at a conversion price equal to 45% of the market price for the common shares during the 30 trading days prior to the conversion.

The Asher Note #6 contains a provision limiting the number of shares of common stock into which the Asher Note #6 is convertible to 9.99% of the outstanding shares of the Company’s common stock. However, the provision in the Asher Note #6 may be waived by Asher upon 61 days’ prior notice. The Company has a right of prepayment of the Asher Note #6 anytime from the date of the Asher Note #6 until 180 days thereafter, subject to a prepayment penalty in the amount of 140% to 150% based on the date of repayment.

The fair value of the beneficial conversion feature was estimated at $32,500 and was recorded as additional paid-in capital.

During the six month period ended 30 June 2013, the Company accrued interest expense of $7,916 (30 June 2012 - $Nil, cumulative - $7,916), of which $7,274 relates to the amortization of debt discount (30 June 2012 - $Nil, cumulative - $7,274) (Note 12).
 
 
 
 


 
F - 20


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


g.  
The following is the summary of convertible promissory notes that are issued and outstanding as at 30 June 2013 and 31 December 2012:

     
As at
30 June
2013
   
As at
31 December
2012
(Audited)
 
      $       $    
                   
Asher Note
Principal, net of debt discount
    -       2,600  
 
Accrued interest
    -       3,253  
                   
        -       5,853  
                   
Asher Note #2
Principal, net of debt discount
    -       37,500  
 
Accrued interest
    -       2,541  
                   
        -       40,041  
                   
Asher Note #3
Principal, net of debt discount
    -       21,209  
 
Accrued interest
    -       1,254  
                   
        -       22,463  
                   
Asher Note #4
Principal, net of debt discount
    19,330       1,295  
 
Accrued interest
    1,163       78  
                   
        20,493       1,373  
                   
Asher Note #5
Principal, net of debt discount
    12,807       -  
 
Accrued interest
    771       -  
                   
        13,578       -  
                   
Asher Note #6
Principal, net of debt discount
    7,274       -  
 
Accrued interest
    642       -  
                   
        7,916       -  
                   
        41,987       69,730  

 
 
 

 
F - 21


 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 

 
7.  
Promissory Notes

On 30 June 2013, the Company entered into agreement with various vendors to convert $90,000 the amounts payable to the vendors to long-term promissory notes. The promissory notes have a term of two years, are unsecured, and bear interest of 5% per annum that is payable quarterly beginning 30 September 2013 (Note 5).

During the six month period ended 30 June 2013, the Company accrued interest of $Nil (30 June 2012 - $Nil, cumulative - $Nil).  As at 30 June 2013, the balance of promissory notes consists of principal of $90,000 (31 December 2012 - $Nil) and interest of $Nil (31 December 2012 - $Nil) (Note 12).

8.  
Due to Related Parties and Related Party Transactions

Included in accounts payable and accrued liabilities as at 30 June 2013 is an amount due to a former officer of the Company of $3,551 (31 December 2012 – $3,876). These amounts are non-interest bearing, unsecured and have no fixed terms of repayment (Note 5).

Included in accounts payable and accrued liabilities as at 30 June 2013 is an amount due to a director of the Company of $8,112 (31 December 2012 – $10,817). This amount is non-interest bearing, unsecured and have no fixed terms of repayment (Note 5).

Included in accounts payable and accrued liabilities as at 30 June 2013 is an amount due to an officer of the Company of $8,735 (31 December 2012 – $10,000). This amount is non-interest bearing, unsecured and have no fixed terms of repayment (Note 5).

Included in accounts payable and accrued liabilities as at 30 June 2013 is an amount due to an officer of the Company of $4,750 (31 December 2012 – $4,150). This amount is non-interest bearing, unsecured and have no fixed terms of repayment (Note 5).

During the six month period ended 30 June 2013, the Company paid or accrued $5,000 (30 June 2012 – $1,750) for consulting fees to an officer of the Company.

During the six month period ended 30 June 2013, the Company paid or accrued $7,000 (30 June 2012 – $1,517) for consulting fees to a director of the Company.

During the six month period ended 30 June 2013, the Company paid or accrued $8,500 (30 June 2012 - $ Nil) for consulting fees to a director of the Company.

During the six month period ended 30 June 2013, the Company issued a total of 10,545,600 class A preferred shares valued at $23,200 ($0.0022 per share) for the settlement of liabilities totaling $23,200 with officers and directors of the Company (Notes 9 and 12).
 
 
 
 


 
F - 22


 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


9.  
Common Stock

Authorized

The total authorized capital consists of

·  
850,000,000 common shares with par value of $0.00001
·  
150,000,000 blank check preferred shares with no par value
·  
50,000,000 designated class A preferred shares with par value of $0.001

Issued and outstanding

As at 30 June 2013, the total issued and outstanding capital stock is 197,552,085 common shares with a par value of $0.00001 per share.
 
As of 30 June 2013, the total issued and outstanding series A preferred shares is 47,568,500 with a par value of $0.001.
 
On 10 May 2013, the Company issued 2,840,909 common shares valued at $1,250 upon conversion of Asher Note #3 (Note 6).
 
On 8 May 2013, the Company issued 11,111,111 common shares valued at $6,000 upon conversion of Asher Note #3 (Note 6).
 
On 3 May 2013, the Company issued 11,666,667 common shares valued at $6,300 upon conversion of Asher Note #3 (Note 6).
 
On 1 May 2013, the Company issued 11,694,915 common shares valued at $6,900 upon conversion of Asher Note #3 (Note 6).
 
On 29 April 2013, the Company issued 11,625,000 common shares valued at $9,300 upon conversion of Asher Note #3 (Note 6).
 
On 25 April 2013, the Company issued 11,454,545 common shares valued at $12,600 upon conversion of Asher Note #3 (Note 6).
 
On 24 April 2013, the Company issued 2,150,000 common shares valued at $2,580 upon conversion of Asher Note #2 (Note 6).
 
On 23 April 2013, the Company issued 5,833,333 common shares valued at $7,000 upon conversion of Asher Note #2 (Note 6).
 
On 16 April 2013, the Company issued 11,766,666 common shares valued at $14,120 upon conversion of Asher Note #2 (Note 6).

 
 
 
 

 
F - 23


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


On 20 March 2013, the Company issued 4,883,721 common shares valued at $2,100 upon conversion of Asher Note #2 (Note 6).
 
On 5 March 2013, the Company issued 4,878,049 common shares valued at $2,000 upon conversion of Asher Note #2 (Note 6).
 
On 15 February 2013, the Company issued 5,000,000 common shares valued at $2,700 upon conversion of Asher Note #2 (Note 6).
 
On 8 February 2013, the Company issued 4,354,839 common shares valued at $2,700 upon conversion of Asher Note #2 (Note 6).
 
On 4 February 2013, the Company issued 4,375,000 common shares valued at $2,800 upon conversion of Asher Note #2 (Note 6).
 
On 31 January 2013, the Company issued a total of 47,568,500 class A preferred shares valued at $104,650 ($0.0022 per share) in settlement of liabilities to officers, directors and unrelated parties (Notes 5, 8 and 12).
 
On 24 January 2013, the Company issued 4,285,714 common shares valued at $3,000 upon conversion of Asher Note #2 (Note 6).
 
On 23 January 2013, the Company amended its number of authorized shares of common stock and the related par value from 200,000,000 to 850,000,000 subsequent to the approval of the Board of Directors and the holders of a majority of the outstanding shares of the common stock and class A Preferred Convertible stock.
 
On 16 January 2013, the Company issued 3,088,235 common shares valued at $2,100 upon conversion of Asher Note (Note 6).
 
On 2 January 2013, the Company issued 2,857,143 common shares valued at $2,000 upon conversion of Asher Note (Note 6).
 
On 19 December 2012, the Company issued 2,739,726 common shares valued at $2,000 upon conversion of Asher Note (Note 6).
 
On 11 December 2012, the Company issued 2,857,143 common shares valued at $2,000 upon conversion of Asher Note (Note 6).
 
On 6 December 2012, the Company issued 2,784,810 common shares valued at $2,200 upon conversion of Asher Note (Note 6).
 
On 29 November 2012, the Company issued 2,876,712 common shares valued at $2,100 upon conversion of Asher Note (Note 6).

 
 
 
 

 
F - 24


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


On 15 November 2012, the Company designated 50,000,000 of the 200,000,000 authorized preferred shares as class A preferred shares with a par value of $0.001 per share. Each class A preferred share is convertible into two common shares of the Company at the option of the holder and may be redeemed with 10 days’ notice at $0.01 per class A preferred share.
 
On 9 November 2012, the Company issued 2,758,621 common shares valued at $1,600 upon conversion of Asher Note (Note 6).
 
On 2 November 2012, the Company issued 2,833,333 common shares valued at $1,700 upon conversion of Asher Note (Note 6).
 
On 18 October 2012, the Company issued 2,878,788 common shares valued at $1,900 upon conversion of Asher Note (Note 6).
 
On 10 October 2012, the Company issued 2,784,810 common shares valued at $2,200 upon conversion of Asher Note (Note 6).
 
On 2 October 2012, the Company issued 2,784,810 common shares valued at $2,200 upon conversion of Asher Note (Note 6).
 
On 1 October 2012, the Company issued 2,151,899 common shares valued at $1,700 upon conversion of Asher Note (Note 6).
 
On 27 September 2012, the Company issued 2,117,647 common shares valued at $1,800 upon conversion of Asher Note (Note 6).
 
On 12 September 2012, the Company issued 2,100,000 common shares valued at $2,100 upon conversion of Asher Note (Note 6).
 
On 7 September 2012, the Company issued 2,166,667 common shares valued at $2,600 upon conversion of Asher Note (Note 6).
 
On 28 August 2012, the Company issued 2,121,212 common shares valued at $2,100 upon conversion of Asher Note (Note 6).
 
On 27 August 2012, the Company issued 2,121,212 common shares valued at $2,100 upon conversion of Asher Note (Note 6).
 
On 17 August 2012, the Company issued 2,105,263 common shares valued at $2,000 upon conversion of Asher Note (Note 6).
 
On 4 June 2012, the Company issued 2,000,000 common shares valued at $2,600 upon conversion of Asher Note (Note 6).

 
 
 

 
F - 25


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


On 16 December 2011, the Company issued a total of 1,000,000 common shares valued at $30,000 as consideration to Boulder Hill pursuant to the BHM Purchase and BHM Assignment. The fair value is equal to the market price of the Company’s stock on the date of the transaction (Note 3).
 
On 7 December 2011, the Company issued 1,000,000 common shares valued at $30,000 as consideration to Castle Creek pursuant to the CCS Assignment. The fair value is equal to the market price of the Company’s stock on the date of the transaction (Note 3).
 
On 14 February 2011, the Company issued 1,000,000 common shares upon the exercise of share purchase warrants with an exercise price of $0.10 per warrant for total proceeds of $100,000.
 
On 14 December 2010, the Company issued 1,500,000 common shares upon the exercise of share purchase warrants with an exercise price of $0.10 per warrant for total proceeds of $150,000.
 
On 30 November 2010, the Company issued 150,000 common shares upon the exercise of share purchase warrants with an exercise price of $0.10 per warrant for total proceeds of $15,000.
 
On 25 March 2010, the Company issued 18,750,000 units at a price of $0.10 per unit (the “Units”) for proceeds of $1,775,000, net of share issue costs of $100,000. Each Unit consists of one common share with par value $0.00001 and one share purchase warrant. Each share purchase warrant entitles the holder to purchase one common share at a price of $0.10 commencing six months from the closing date of the offering up to 25 March 2011. During the year ended 31 December 2011, 1,000,000 of the related share purchase warrants in this series were exercised. As at 30 June 2013, none of the related share purchase warrants in this series remain outstanding.
 
On 9 March 2010, the Company issued 5,000,000 common shares valued at $1,250,000 ($0.25 per common share) pursuant to the Temasek Agreement. The fair value is equal to the market price of the Company’s stock on the date of the transaction.
 
During the year ended 31 December 2009, the Company issued 3,500,000 common shares valued at a $385,000 ($0.11 per common share) pursuant to the Temasek Agreement. The fair value is equal to the market price of the Company’s stock on the date of the transaction.
 
During the year ended 31 December 2009, the Company issued 140,000 common shares for total proceeds of $18,900 ($0.15 per common share), net of share issue costs of $2,100.
 
During the year ended 31 December 2009, the Company issued 5,272,333 common shares for total proceeds of $711,765 ($0.15 per common share), net of share issue costs of $79,085.
 
During the year ended 31 December 2008, the Company issued 2,500,000 common shares valued at $625,000 ($0.25 per common share) pursuant to the Temasek Agreement. The fair value is equal to the market price of the Company’s stock on the date of the transaction.

 
 
 
 

 
F - 26


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 

During the year ended 31 December 2008, the Company completed a one new for twenty old common share reverse stock split. The Company’s share transactions, including the weighted average number of common shares outstanding calculation for purposes of determining earnings per share, have been restated retroactively to reflect all of the above corporate capital transactions in these interim consolidated financial statements.

Stock options

The following stock options are outstanding as at 30 June 2013 (31 December 2012 – 325,000):

   
Number of
options
   
Exercise
price
   
Remaining life
(years)
 
          $          
                     
Options
    250,000       0.07       0.45  
Options
    75,000       0.15       8.34  
                         
      325,000                  

During the year ended 31 December 2007, the Company adopted the Stock Incentive Plan (the “Plan”), which provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, performance shares and performance units, and stock awards to officers, directors or employees of, as well as advisers and consultants to, the Company.
 
All stock options and rights are to vest over a period determined by the Board of Directors and expire not more than ten years from the date granted. Pursuant to the Plan, the maximum aggregate number of shares that may be issued for awards is 500,000 and the maximum aggregate number of shares that may be issued for incentive stock options is 500,000.
 
During the year ended 31 December 2007, the Company granted 167,500 options to officers, directors and consultants of the Company to purchase common shares of the Company at a price of $25 per common share on or before 17 April 2017 and vesting as to one-quarter of the common shares under the stock option on 17 April 2007 and one-quarter every six months thereafter in accordance with the terms and conditions of the Company’s Plan.  During the year ended 31 December 2008, all of the related stock options in this series were forfeited.
 
During the year ended 31 December 2011 the Company granted 250,000 options at a price of $0.07 per share expiring on 10 December 2013, 75,000 options at a price of $0.07 per share expiring on 28 November 2012 and 75,000 options at a price of $0.15 per share expiring on 31 October 2021.  All of these stock options vest immediately.
 
The Company had no stock option activities during the six month periods ended 30 June 2013 and 2012.
 
 
 
 


 
F - 27


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


Warrants

As at 30 June 2013, there were Nil (31 December 2012 - Nil) share purchase warrants outstanding.

The Company had no warrant activities during the six month periods ended 30 June 2013 and 2012.

10.  
Commitments and Contingencies

a.  
Subsequent to the six month period ended 30 June 2013, the Company became in default with regards to certain obligations related to the South Idaho Property and is in the process of renegotiating the terms with Castle Creek (Notes 3 and 14).

b.  
As at 30 June 2013, the Company is in default with regards to certain obligations related to the Boulder Hill Claims and is in the process of renegotiating the terms with Boulder Hill (Note 3).

c.  
As at 30 June 2013, the Company is in default with regards to certain obligations related to the Boulder Hill Project and is in the process of renegotiating the terms with James E (Note 3).

d.  
In November 2011, the Company entered into a contract, commencing 1 December 2011, with each of an unrelated individual and an unrelated company, to provide consulting services, subject to the supervision of the Company’s Chief Executive Officer, related to the exploration and development of mineral properties, operational activities and international business operations for a monthly payment of $2,500 each.

e.  
The Company is committed to making repayments related to the convertible promissory notes payable to Asher (Note 6).

f.  
The Company is committed to making repayments related to the promissory notes issued on 30 June 2013 payable to various vendors (Note 7).

g.  
During the six month period ended 30 June 2013, the Company entered into a memorandum of understanding (the “MOU”) with an unrelated party to enter into a definitive agreement within 180 days for the Company to earn a fifty percent interest in the Nile Mine project. The Company has not entered into a final and definitive agreement at the time.

11.  
Geographic Areas

Prior to the operations of acquisition and exploration of mineral properties, the Company’s areas of operations were primarily in the South America. Since the commencement of acquisition and exploration of mineral properties, during the year ended 31 December 2006, the Company’s principal mineral property activities have been in Finland. During the year ended 31 December 2008, the Company re-focused its acquisition and exploration of mineral properties operations to Peru. During the year ended 31 December 2011, the Company re-focused its activities to Colombia and the United States. During the six month period ended 30 June 2013, the Company does not have any material activities outside of the United States. As at 30 June 2013, the Company does not have any material assets outside of the United States.
 
 
 
 

 
F - 28


 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


12.  
Supplemental Disclosures with Respect to Cash Flows

   
For the period
from the date
of inception
on 5 September
1997 to 30
June 2013
   
For the
six month
period ended
30 June
2013
   
For the
six month
period ended
30 June
2012
 
    $       $       $    
                         
Supplemental cash flows information
                       
Interest expense
    1,906       -       -  
Foreign exchange (gain) loss
    21,787       -       -  
Income taxes paid
    -       -       -  
                         
Supplemental disclosure of non-cash investing and financing
                       
Common shares issued for oil and gas property ($25 per share)
    10,000       -       -  
Common shares issued for services ($6 per share)
    50,000       -       -  
Donated consulting services
    16,200       -       -  
Common shares cancelled and returned
    (2 )     -       -  
Common shares issued for equity acquisition of Finmetal ($25.60 per share)
    1,280,000       -       -  
Restricted shares issued ($24.80 per share)
    2,418,000       -       -  
Common shares issued for finder’s fee ($10 per unit)
    254,500       -       -  
Warrants issued
    100,421       -       -  
Common shares issued for finder’s fee for mineral property interests ($26.80 per share)
    536,000       -       -  
Common shares issued for acquisition of mineral rights (deemed at $0.003 to $0.25 per share)
    2,320,000       -       -  
Common shares issued upon conversions of promissory note ($0.00011 to $0.0080 per share)
    120,350       85,450       -  
Preferred shares issued for settlement of debt ($0.0022 per share)
    104,650       104,650       -  

Included in accounts payable and accrued liabilities as at 30 June 2013 are mineral property acquisition costs and exploration expenditures of $1,091 (31 December 2012 – $19,394) related to the Boulder Hill Project (Notes 3 and 5).
 
Included in accounts payable and accrued liabilities as at 30 June 2013 are exploration expenditures of $Nil (31 December 2012 – $10,245) related to the South Idaho Silver Project (Notes 3 and 5).
 
During the year ended 31 December 2012, the Company recorded a write-down of mineral property in the amount of $33,000 in relation to the Boulder Hill Claims and Boulder Hill Property (Note 3).
 
During the six month period ended 30 June 2013, the Company recorded a provision for write-down of mineral property in the amount of $36,650 (30 June 2012 - $Nil) in relation to the South Idaho Property (Notes 3, 10 and 14).
 
 
 
 
 

 
F - 29


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


During the six month period ended 30 June 2013, the Company accrued a total interest expense of $63,094 (30 June 2012 – $33,856) related to the convertible debentures, of which $44,407 relates to the amortization of debt discount (30 June 2012 – $31,348) and $13,750 relates to the default penalty (30 June 2012 - $Nil) (Note 6).
 
During the six month period ended 30 June 2013, the Company recorded a write-down of accrued interest in the amount of $5,387 (30 June 2012 - $Nil) in relation to the Asher Note, Asher Note #2 and Asher Note #3 (Note 6).
 
During the six month period ended 30 June 2013, the Company issued a total of 47,568,500 class A preferred shares valued at $104,650 ($0.0022 per share) for the settlement of liabilities totaling $150,007 with officers, directors and unrelated parties. The Company recorded a gain of $45,357 related to this settlement (Notes 5, 8 and 9).
 
On 30 June 2013, the Company entered into agreement with various vendors to convert $90,000 the amounts payable to the vendors to long-term promissory notes. The promissory notes have a term of two years, are unsecured, and bear interest of 5% per annum.  During the six month period ended 30 June 2013, the Company accrued interest of $Nil (30 June 2012 - $Nil, cumulative - $Nil) (Notes 5 and 7).

13.  
Fair Value of Financial Instruments

A fair value hierarchy was established that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurements).

The fair values of the financial instruments were determined using the following input levels and valuation techniques:

 
Level 1:
classification is applied to any asset or liability that has a readily available quoted market price from an active market where there is significant transparency in the executed/quoted price.

 
Level 2:
classification is applied to assets and liabilities that have evaluated prices where the data inputs to these valuations are observable either directly or indirectly, but do not represent quoted market prices from an active market.

 
Level 3:
classification is applied to assets and liabilities when prices are not derived from existing market data and requires us to develop our own assumptions about how market participants would price the asset or liability.

As at 30 June 2013, the carrying amounts of accounts payable and convertible promissory notes approximated their estimated fair values because of the short maturity of these financial instruments.

As at 30 June 2013, the carrying amount of long-term debt and other financing was $90,000 (31 December 2012 - $Nil).
 
 
 
 
 

 
F - 30


 
 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


The fair value of the beneficial conversion feature was estimated at $60,000 (31 December 2012 – $81,077), and was recorded as a component of equity, of which $60,000 (31 December 2012 - $81,077) would be a Level 1 fair value and $Nil (31 December 2012 - $Nil) would be a Level 2 fair value.

Credit Risk
 
Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises primarily from the Company’s cash and cash equivalents. The Company manages its credit risk relating to cash and cash equivalents by dealing only with highly-rated United States financial institutions. As a result, credit risk is considered insignificant.
 
Currency Risk
 
The majority of the Company’s cash flows and financial assets and liabilities are denominated in US dollars, which is the Company’s functional and reporting currency. Foreign currency risk is limited to the portion of the Company’s business transactions denominated in currencies other than the US dollar.
 
The Company monitors and forecasts the values of net foreign currency cash flow and balance sheet exposures and from time to time could authorize the use of derivative financial instruments such as forward foreign exchange contracts to economically hedge a portion of foreign currency fluctuations. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.
 
Liquidity Risk
 
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk by continuously monitoring actual and projected cash flows and matching the maturity profile of financial assets and liabilities. The Company had a working capital deficit of $373,985 at 30 June 2013 (31 December 2012 – $570,498), but management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital.
 
Other Risks
 
Unless otherwise noted, the Company is not exposed to significant interest rate risk and commodity price risk.

 
 
 
 

 
F - 31


 
First Colombia Gold Corp.
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
30 June 2013

 


14.  
Subsequent Events

The following events occurred during the period from the six month period ended 30 June 2013 to the date the interim consolidated financial statements were available to be issued on 16 August 2013:

a.  
As at 15 July 2013, the Company is in default related to the South Idaho Property as it did not meet certain obligations of the Purchase Agreement.  The Company is currently in the process of renegotiating the terms with Castle Creek.  During the six month period ended 30 June 2013, the Company recorded a provision for write-down of mineral property in the amount of $36,650 (Notes 3, 10 and 12).

b.  
During the period from 23 July 2013 to 1 August 2013, the Company issued a total of 52,962,963 common sh