Note 15 Prior Year Restatement
| i) | Mineral Property Option Costs |
| The Company reviewed its accounting policy for the capitalization of mineral option costs, and has determined that the mineral option costs incurred in the year ended November 30, 2010, amounting to $59,600 were expensed, when they should have been capitalized and accordingly, the results for the year ended November 30, 2010, were restated. The effect of the restatement was to increase the value of the Mineral Property Option by $59,600 at November 30, 2010, 2011 and 2012 and to reduce the loss for the year ended November 30, 2010 by $59,600, resulting in the accumulated deficit being reduced by $59,600 at November 30, 2010, 2011 and 2012, respectively. |
| ii) | Convertible Notes Payable |
| The Company has determined that certain transactions relating to the convertible notes payable were not correctly accounted for in the three and six month periods ended May 31, 2012 and accordingly the results of the six and three month periods ended May 31, 2012 have been restated. |
The Company did not recognize any embedded derivative liabilities arising upon the inception or during the term of certain convertible notes payable. As a result of this, at May 31, 2012, the value of the convertible notes on the balance sheet was overstated by $150,724 and derivative liabilities were understated by $170,900.
In the condensed consolidated statement of loss, for the six month period ended May 31, 2012 accretion of convertible debt and interest discount expense was overstated by $68,311, interest expense on beneficial conversion feature of convertible notes was overstated by $140,000 gain on elimination of convertible debt was overstated by $21,888 and interest expense was understated by $162,868. Finally, the loss on change in fair value of derivative liability was understated by $40,200.
In the condensed consolidated statement of loss, for the three month period ended May 31, 2012 accretion of convertible debt and interest discount expense was overstated by $30,630, interest expense on beneficial conversion feature of convertible notes was overstated by $50,000 gain on elimination of convertible debt was overstated by $21,888 and interest expense was understated by $66,434. Finally the loss on change in fair value of derivative liability was understated by $21,000.
| iii) | Accumulated Other Comprehensive Income |
| The Company also determined the accounting for foreign exchange with respect to the translation adjustments arising on the translation of its Canadian subsidiary had been incorrectly recorded. Such gains or losses arising had been included in the operations of the year, rather than being treated as elements of other comprehensive income, which forms a separate part of equity. |
| As a result of the restatement, the Company has increased the balance of other comprehensive income at November 30, 2011 by $6,388 and also increased the accumulated deficit by a corresponding amount. During the six month period ended May 31, 2012, foreign exchange charged to the income statement was reduced by $830 and a corresponding reduction to accumulated comprehensive income was recorded. During the three month period ended May 31, 2012, foreign exchange credited to the income statement was reduced by $454 and a corresponding increase to accumulated comprehensive income was recorded. |
The net effect of the above restatements at May 31, 2012 is to increase the carrying value of the mineral property by $59,600 to $139,600, reduce the carrying value of the convertible notes payable from $357,432 to $206,708 and to increase the derivative liability from $nil to $170,900. Accumulated other comprehensive income increased from $nil to $6,561. Also the previously reported loss for the six month period ended May 31, 2012, was increased by $16,095 to $416,491 and the previously reported loss for the three month period ended May 31, 2012 increased by $29,145 to $221,476. The previously reported accumulated deficit at May 31, 2012 increased by 44,176 from $3,300,141 to $3,255,965.