EX-99.2 3 ex99_2.htm EXHIBIT 99.2 Exhibit 99.2
AVINO SILVER & GOLD MINES LTD.
Consolidated Balance Sheets
(Prepared by Management)
 
     
 
  
As at:
  
October 31, 2006
  
 
January 31, 2006
  
   
(Unaudited)
  
(Audited)
  
ASSETS
              
               
Current
              
Cash and cash equivalents
  
$
11,461,598
  
$
3,067,011
  
Interest receivable
    
39,556
   
-
 
Share subscriptions receivable
    
-
   
56,732
 
Taxes recoverable
    
67,337
   
35,009
 
Prepaid expenses
    
39,869
   
13,544
 
Exploration advance
    
-
   
39,000
 
     
11,608,360
   
3,211,296
 
               
Property, Plant & Equipment (Note 4)
    
1,123,154
   
2,611
 
Reclamation Bonds
    
4,000
   
3,000
 
Mineral Properties Interests (Notes 4,5)
    
7,987,578
   
447,899
 
Due from a Related Company (Note 7(b))
    
64,933
   
83,000
 
Investment in Cia Minera Mexicana de Avino, S.A. de C.V. (Note 4)
    
-
   
1
 
Investments in Related Companies 
    
210,085
   
210,085
 
 
  
$
20,998,110
  
$
3,957,892
  
               
LIABILITIES
              
               
Current
              
Accounts payable and accrued liabilities
  
$
1,150,278
  
$
62,700
  
Due to related parties (Note 7(c))
    
11,117
   
181,418
 
 
    
1,161,395
   
244,118
 
               
Non-controlling interest
    
(8,056
)
  
-
 
               
Obligation towards equity loss in Cia Minera Mexicana de Avino, S.A. de C.V
    
-
   
342,596
 
     
1,153,339
   
586,714
 
SHAREHOLDERS' EQUITY
              
               
Subscriptions Received in Advance
    
-
   
247,730
 
Share Capital (Note 6(a))
    
36,770,011
   
19,264,265
 
Contributed Surplus
    
3,043,566
   
1,070,699
 
Treasury Shares (14,180 Shares, at cost)
    
(101,869
)
  
(101,869
)
Deficit
    
(19,866,937
)
  
(17,109,647
)
 
    
19,844,771
   
3,371,178
 
 
  
$
20,998,110
  
$
3,957,892
  

Note 1 - Nature of Operations

Approved by the Board of Directors:

    “Louis Wolfin”      Director        “David Wolfin”         Director

AVINO SILVER & GOLD MINES LTD.
Consolidated Interim Statements of Operations and Deficit
(Unaudited - Prepared by Management)
 
   
Three Months Ended
  
Nine Months Ended
  
   
October 31,
  
October 31,
  
 
  
2006
  
2005
  
2006
  
2005
  
Operating and Administrative Expenses
                  
Amortization
  
$
196
  
$
190
  
$
588
  
$
682
  
General exploration
    
35,268
   
-
   
133,587
   
-
 
Management fees
    
24,000
   
15,000
   
63,000
   
45,000
 
Office and miscellaneous
    
52,189
   
22,825
   
95,449
   
81,013
 
Professional fees
    
13,196
   
63,158
   
56,128
   
105,934
 
Regulatory and compliance fees
    
5,242
   
3,378
   
71,940
   
18,386
 
Salaries and benefits
    
20,536
   
17,353
   
51,675
   
55,614
 
Shareholder and investor relations
    
51,633
   
12,302
   
208,051
   
60,365
 
Stock-based compensation
    
53,990
   
53,400
   
2,471,316
   
539,500
 
Travel and entertainment
    
29,488
   
19,255
   
69,110
   
54,547
 
Loss from operations
    
(285,738
)
  
(206,861
)
  
(3,220,844
)
  
(961,041
)
                           
Other income and expenses
                          
Interest income
    
119,257
   
11,617
   
315,584
   
32,032
 
Foreign exchange gain (loss)
    
17,269
   
-
   
17,269
   
-
 
Recovery of advances receivable
    
-
   
-
   
133,919
   
-
 
Due diligence review of Cia Minera Mexicana de Avino, S.A. de C.V
    
-
   
(69,830
)
  
-
   
(242,297
)
Equity losses in Cia Minera Mexicana de Avino, S.A. de C.V
    
-
   
-
   
(11,274
)
  
-
 
                           
Loss before non-controlling interest
    
(149,212
)
  
(265,074
)
  
(2,765,346
)
  
(1,171,306
)
                           
Non-controlling interest
    
8,056
   
-
   
8,056
   
-
 
LOSS FOR THE PERIOD
    
(141,156
)
  
(265,074
)
  
(2,757,290
)
  
(1,171,306
)
DEFICIT, beginning of period
    
(19,725,781
)
  
(15,459,163
)
  
(17,109,647
)
  
(14,552,931
)
DEFICIT, end of period
  
$
(19,866,937
)
$
(15,724,237
)
$
(19,866,937
)
$
(15,724,237
)
BASIC LOSS PER SHARE
    
(0.01
)
  
(0.02
)
  
(0.16
)
  
(0.11
)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
    
20,566,297
   
10,999,575
   
17,535,635
   
10,790,385
 



AVINO SILVER & GOLD MINES LTD.
Consolidated Interim Statements of Cash Flows
(Unaudited - Prepared by Management)
 
   
Three Months Ended
  
Nine Months Ended
  
   
October 31,
  
October 31,
  
 
  
2006
  
2005
  
2006
  
2005
  
CASH PROVIDED BY (USED IN):
                          
                           
OPERATING ACTIVITIES
                          
Loss for the year
  
$
(141,156
)
$
(265,074
)
$
(2,757,290
)
$
(1,171,306
)
Items not requiring cash in the period:
                          
- Amortization
    
196
   
190
   
588
   
682
 
- Stock-based compensation
    
53,990
   
53,400
   
2,471,316
   
539,500
 
- Non-controlling interest
    
(8,056
)
  
-
   
(8,056
)
  
-
 
- Acquisition of Cia Minera
    
56,385
   
-
   
(1,108,069
)
  
-
 
- Equity loss on Cia Minera
    
-
   
-
   
11,274
   
-
 
     
(38,641
)
  
(211,484
)
  
(1,390,237
)
  
(631,124
)
Net change in non-cash working capital items:
                  
- Share subscriptions receivable
    
-
   
-
   
56,732
   
-
 
- Interest receivable
    
(39,556
)
  
-
   
(39,556
)
  
-
 
- Taxes recoverable
    
(49,071
)
  
(20,703
)
  
(32,328
)
  
986
 
- Prepaid expenses
    
(4,745
)
  
6,679
   
(26,325
)
  
18,352
 
- Exploration advance
    
39,000
   
-
   
39,000
   
-
 
- Due from related parties
    
18,067
   
26,164
   
18,067
   
-
 
- Accounts payable and accrued liabilities
    
(75,001
)
  
7,177
   
1,087,578
   
(23,874
)
- Due to related parties
    
(30,459
)
  
49,252
   
(170,301
)
  
(84,142
)
 
    
(180,406
)
  
(142,915
)
  
(457,370
)
  
(719,802
)
                           
FINANCING ACTIVITIES
                          
Share subscriptions received in advance
    
-
   
-
   
(247,730
)
  
-
 
Shares issued for cash, net
    
25,650
   
143,890
   
9,791,776
   
470,995
 
 
    
25,650
   
143,890
   
9,544,046
   
470,995
 
                           
INVESTING ACTIVITIES
                          
Reclamation bonds
    
(1,000
)
  
-
   
(1,000
)
  
(3,000
)
Property, plant and equipment purchases
    
(1,131
)
  
(768
)
  
(1,131
)
  
(768
)
Mineral property exploration expenditures
    
(340,816
)
  
(132,711
)
  
(347,362
)
  
(162,374
)
Obligation towards equity loss in Cia Minera
    
(56,385
)
  
-
   
(342,596
)
  
-
 
 
    
(399,332
)
  
(133,479
)
  
(692,089
)
  
(166,142
)
Increase (decrease) in cash
    
(554,088
)
  
(132,504
)
  
8,394,587
   
(414,949
)
 
CASH AND CASH EQUIVALENTS, beginning of period
    
12,015,686
   
2,001,090
   
3,067,011
   
2,283,535
 
 
CASH AND CASH EQUIVALENTS, end of period
  
$
11,461,598
  
$
1,868,586
  
$
11,461,598
  
$
1,868,586
  

AVINO SILVER & GOLD MINES LTD.
Notes to Consolidated Interim Financial Statements
October 31, 2006
(Unaudited - Prepared by Management)
Note 1 - Nature of Operations

Avino Silver & Gold Mines Ltd. (“Avino”) was incorporated under the laws of the Province of British Columbia. Its principal business activities include the exploration for and development of mineral properties. The Company owns interests in mineral properties in British Columbia and Yukon, Canada.

Avino is in the exploration stage of its mineral properties interests in Canada and has not yet determined whether these properties contain ore reserves which are economically recoverable.

Avino owns 88.25% of the issued common shares of Cia Minera Mexicana de Avino, S.A. de C.V. (“Cia Minera”) a company incorporated in Mexico. Cia Minera’s operations involve the mining of commercial ores and resource exploration and development, including the operation of a silver mine in Mexico. The silver mine has been shut down since November 2001, when operations became uneconomical.

The recoverability of amounts shown for mineral property interests and property and related deferred costs is dependent upon the discovery of economically recoverable reserves, confirmation of the Company’s legal interest in mineral claims, further financing for exploration of its mineral claims, re-development of its mining and processing operations and commencement of future profitable production, or proceeds from the sale of all or an interest in its mineral properties interests.


Note 2 - Basis of Presentation

These unaudited interim financial statements have been prepared in accordance with the instructions for the preparation of such financial statements contained in the CICA Handbook Section 1751. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such instructions. These unaudited interim financial statements should be read in conjunction with the audited financial statements and accompanying notes thereto for the fiscal year ended January 31, 2006. These interim financial statements have not been reviewed by an auditor.

In the opinion of the Company’s management, all adjustments considered necessary for a fair presentation of these unaudited financial statements have been included and all such adjustments are of a normal recurring nature. Operating results for the nine month period ended October 31, 2006 are not necessarily indicative of the results that can be expected for the year ended January 31, 2007.


Note 3 - Comparative Figures

Certain fiscal 2005 comparative figures have been reclassified to conform to the financial statement presentation adopted for 2006.


Note 4 - Cia Minera Mexicana De Avino, S.A. De C.V. Acquisition

On July 17, 2006, the Company completed the acquisition of a further 39.25% equity interest in Cia Minera, in consideration of the issuance of an aggregate of 3,164,702 common shares of the Company at a deemed value of $1.00 per share. The Company now owns 88.25% of the total issued shares of Cia Minera.
 
 
AVINO SILVER & GOLD MINES LTD.
Notes to Consolidated Interim Financial Statements
October 31, 2006
(Unaudited - Prepared by Management)

Note 4 - Cia Minera Mexicana De Avino, S.A. De C.V. Acquisition (continued)

The acquisition is accounted for by the purchase method with effect from the date of closing. Using the fair market value of the Company’s shares at the date of closing of $2.28 per share, total acquisition costs have been allocated to identifiable assets acquired and liabilities assumed based on their estimated fair values as follows:
 
Cash
  
$
29,983
  
Taxes recoverable
    
3,887
  
Prepaid expenses
    
6,554
  
Property, plant & equipment
    
1,120,000
  
Mineral Properties
    
7,248,702
  
Accounts payable and accrued liabilities
    
(924,528
)
Taxes payable
    
(244,371
)
         
   
$
7,240,227
  


Note 5 - Mineral Properties Interests

The following is a summary of mineral property expenditures for the nine months ended October 31, 2006:

Balance, January 31, 2006
        
$
447,899
  
               
Expenditures in the period:
              
Cia Minera
              
Acquisition
  
$
7,192,317
        
Exploration
    
264,989
       
           
7,457,306
 
Olympic/Kelvin property
              
Assessment and taxes
    
2,411
       
Exploration
    
1,867
       
Geological
    
610
       
           
4,888
 
Aumax property
              
Geological
    
3,020
       
           
3,020
 
Minto property
              
Assays
    
701
       
Drilling
    
53,837
       
Exploration
    
9,150
       
Geological
    
10,777
       
           
74,465
 
               
Balance, October 31, 2006
        
$
7,987,578
  

 
AVINO SILVER & GOLD MINES LTD.
Notes to Consolidated Interim Financial Statements
October 31, 2006
(Unaudited - Prepared by Management)
Note 5 - Mineral Properties Interests (continued)

Cia Minera was involved in the mining of commercial ores and resource exploration and development, including the operation of a silver mine in the Province of Durango, Mexico. Cia Minera ceased operations in fiscal 2002 when the operations of its silver mine became uneconomical.

Up until the time of the acquisition of Cia Minera on July 17, 2006, the Company has incurred due diligence costs of $395,804 which is comprised of $91,795 for assaying, engineering, and metallurgical services and $304,009 for advances to Cia de Minera on account of its operations.

Prior to the acquisition of the further 39.25%, the Company accounted for its 49% investment in Cia Minera using the equity method. Prior to fiscal 2006, the Company had determined that it did not have a commitment or obligation towards Cia Minera and accordingly did not recorded its equity interest in the losses of Cia Minera. During fiscal 2006 the Company determined that it had an intended commitment towards Cia Minera. Accordingly, it commenced to recognize in operations its equity interest in the previously unrecorded losses of Cia Minera, with the equity interest in the losses first being applied towards prior period advances and investments in Cia Minera which were previously charged to operations.


Note 6 - Share Capital

(a)    Authorized:    Unlimited common shares without par value

(b)    Issued:

   
2006
  
2005
  
 
  
Shares
  
Amount
  
Shares
  
Amount
  
Balance, January 31
    
11,962,075
  
$
19,264,265
    
10,521,775
  
$
17,030,084
  
                           
Shares issued for cash:
                          
- exercise of stock options
   
353,000
    
448,881
    
-
    
-
  
- exercise of warrants
    
-
    
-
    
176,380
    
260,804
  
                           
Private placement
    
5,000,000
    
10,000,000
    
-
    
-
  
Less share issuance costs
    
-
    
(779,795
)
  
-
    
-
  
                           
Stock-based compensation on the Exercise of stock options
    
-
    
397,390
    
-
    
-
  
                           
Balance, April 30
    
17,315,075
  
$
29,330,741
    
10,698,155
  
$
17,290,888
  
                           
Shares issued for cash:
                          
- exercise of stock options
   
72,700
    
93,915
    
-
    
-
  
- exercise of warrants
    
1,250
    
3,125
    
126,920
    
66,301
  
                           
Share issued in acquisition of Cia Minera
    
3,164,702
    
7,215,521
    
-
    
-
  
                           
Stock-based compensation on the Exercise of stock options
    
-
    
82,309
              
                           
Balance, July 31 carried forward
    
20,553,727
  
$
36,725,611
    
10,825,075
  
$
17,357,189
  

 

 
AVINO SILVER & GOLD MINES LTD.
Notes to Consolidated Interim Financial Statements
October 31, 2006
(Unaudited - Prepared by Management)
Note 6 - Share Capital (continued)

(b)    Issued: (continued) 

   
2006
  
2005
  
 
  
Shares
  
Amount
  
Shares
  
Amount
  
Balance, July 31 brought forward
    
20,553,727
  
$
36,725,611
    
10,825,075
  
$
17,357,189
  
                           
Shares issued for cash:
                          
- exercise of stock options
   
21,000
    
25,650
    
85,000
    
53,150
  
- exercise of warrants
    
-
    
-
    
174,500
    
90,740
  
                           
Stock-based compensation on the Exercise of stock options
    
-
    
18,750
    
-
    
-
  
                           
Balance, October 31
    
20,574,727
  
$
36,770,011
    
11,084,575
  
$
17,501,079
  
                           

During the three month period ended April 30, 2006, the Company closed a non-brokered private placement of 5,000,000 units at a price of $2.00 per unit (the “Offering”), each unit consisting of one common share and one-half of a non-transferable share purchase warrant. Each whole warrant under the Offering entitles the investor to purchase one additional share at a price of $2.50 until March 20, 2008. The hold period for all securities issued under this private placement expires on July 21, 2006. The Company paid a total of $779,795 cash as finder’s fees.

(c)    Share Purchase Warrants 

   
 
Underlying Shares
  
Weighted Average
Exercise Price
  
Warrants outstanding, January 31, 2006
    
-
    
-
  
Issued
    
2,500,000
  
$
2.50
  
               
Warrants outstanding, April 30, 2006
    
2,500,000
  
$
2.50
  
Exercised
    
(1,250
)
$
2.50
  
 
Warrants outstanding, July 31, 2006
    
2,498,750
  
$
2.50
  
Exercised
    
-
    
-
  
 
Warrants outstanding, October 31, 2006
    
2,498,750
  
$
2.50
  


The following share purchase warrants were outstanding as at October 31, 2006:

Warrants Outstanding
Expiry Date
Exercise Price
2,498,750
March 20, 2008
$2.50


 
AVINO SILVER & GOLD MINES LTD.
Notes to Consolidated Interim Financial Statements
October 31, 2006
(Unaudited - Prepared by Management)
Note 6 - Share Capital (continued)

(d)    Stock Options

A summary of the stock options granted and exercised at the period ended October 31, 2006 is as follows:

   
 
Underlying Shares
  
Weighted Average
Exercise Price
  
Stock options outstanding, January 31, 2006
    
813,000
  
$
1.31
  
Granted
    
1,120,000
  
$
3.85
  
Exercised
    
(353,000
)
$
1.29
  
               
Stock options outstanding, April 30, 2006
    
1,580,000
  
$
3.12
  
Exercised
    
(72,700
)
$
1.29
  
               
Stock options outstanding, July 31, 2006
    
1,507,300
  
$
3.20
  
Exercised
    
(21,000
)
$
1.22
  
               
Stock options outstanding, October 31, 2006
    
1,486,300
  
$
3.23
  


During the three months ended April 30, 2006, the Company granted 120,000 stock options to a consultant of the Company at an exercise price of $2.72 per share. These stock options vest over a twelve month period from the date of grant and expire over 5 years. The Company also granted 1,000,000 stock options to directors, officers, employees, and consultants of the Company at an exercise price of $3.99 per share. These stock options vested immediately and expire over 5 years. The Company has recorded a total of $2,417,316 for stock-based compensation expense in the nine month period ended October 31, 2006.

The following stock options were outstanding as at October 31, 2006:


Stock Options Outstanding
Expiry Date
Exercise Price
46,800
October 21, 2008
$1.20
267,000
April 5, 2010
$1.35
52,500
September 26, 2010
$1.35
120,000
March 15, 2011
$2.72
1,000,000
April 26, 2011
$3.99


 
AVINO SILVER & GOLD MINES LTD.
Notes to Consolidated Interim Financial Statements
October 31, 2006
(Unaudited - Prepared by Management)

Note 7 - Related Party Transactions

Balances and transactions with related parties not disclosed elsewhere in these financial statements are as follows:

(a)    During the nine month period ended October 31, 2006 the company paid, or made provision for the future payment of the following amounts to related parties:

i)    $96,185 for administrative expenses (rent, salaries, office supplies and other miscellaneous disbursements) to Oniva International Services Corp (“Oniva”), a private company beneficially owned by the Company and a number of other public companies related through common directors;

ii)   $63,000 to a private company controlled by a Director for management fees;

iii)    
$22,500 to a private company controlled by a director of a related company for consulting fees.

(b)   The amount due from a related party of $64,933 is due from ABC Drilling Services Inc. (“ABC Drilling”), a private company that is a 100% owned subsidiary of Oniva. The amount due is non-interest bearing, unsecured and has no stated terms of repayment. The Company had also paid an exploration advance of $39,000 in a prior period of which the entire amount has been applied to drilling services performed during the current period.

(c)    Amounts due to related parties consist of $3,146 to a public company with common directors and $7,971 to Oniva.

(d)   An allowance in the amount of $264,096 had been accrued in respect of advances made to Oniva in prior years. During the period an amount of $133,919 has been recovered which has reduced the allowance to $130,177.

The amounts due to related parties are non-interest bearing, unsecured and due on demand.


Note 8 - Commitments

The Company entered into a cost sharing agreement dated October 1, 1997, and amended November 1, 2003 to reimburse Oniva for a variable percentage of its overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred on behalf of the company, and to pay a percentage fee based on the total overhead and corporate expenses. The agreement may be terminated with one-month notice by either party.

The Company entered into an agreement in March 2006 with National Media Associates ("National Media") to provide financial relations, media relations and public market development services. The Company will pay National Media the sum of US$6,000 per month plus expenses for a term of one year, provided that the contract can be terminated after September 15, 2006 upon 30 days' notice by the Company.

The Company entered into a 12 month Investor Relations Agreement with Investor Relations Group Inc., formerly called Investors Relations Services Group John Mullen & Partners (“IRS”), to provide investor relations services in Europe. In consideration for the services rendered, the Company has agreed to pay IRS fees totaling $24,000 plus expenses.


 
AVINO SILVER & GOLD MINES LTD.
Notes to Consolidated Interim Financial Statements
October 31, 2006
(Unaudited - Prepared by Management)
 
Note 9 - Subsequent Events

Subsequent to the period end, the Company has had 10,000 stock options exercised for total proceeds of $12,750.