Terra Nova Gold Corp.
 (formerly Globenet Resources Inc.)
 
 
 Consolidated Financial Statements
 For The Years Ended July 31, 2003 and 2002





TERRA NOVA GOLD CORP. (formerly Globenet Resources Inc.)(An exploration stage company)Consolidated Balance Sheets(Canadian Dollars)July 31,

July 31,2003

2002ASSETSCurrentCash and cash equivalents
$ 43,501

$ 292,484Marketable securities
-

38,500Amounts receivable
18,064

4,419Advances for exploration
4,010

-Prepaid expenses
-

16,92965,575

352,332Property, plant and equipment (note 5)
7,859

3,357Mineral properties (note 6)
137,540

8,840$ 210,974

$ 364,529LIABILITIESCurrentAccounts payable and accrued liabilities
$ 67,049

$ 20,820Loans payable (note 7)
8,300

-75,349

20,820SHAREHOLDERS' EQUITYShare capital (note 8)
11,794,888

11,337,138Deficit
(11,659,263)

(10,993,429)135,625

343,709$ 210,974

$ 364,529Commitments (note 6)Approved by the Directors:"Harvey Keats""David Patterson"







TERRA NOVA GOLD CORP. (formerly Globenet Resources Inc.)(An exploration stage company)Consolidated Statements of Deficit(Canadian Dollars)Year ended

Year endedJuly 31,

July 31,2003

2002Deficit, beginning of year




$ (10,993,429)

$ (10,845,209)Loss for the year




(665,834)

(148,220)Deficit, end of year




$ (11,659,263)

$ (10,993,429)







TERRA NOVA GOLD CORP. (formerly Globenet Resources Inc.)(An exploration stage company)Consolidated Statements of Operations(Canadian Dollars)Year ended

Year endedJuly 31,

July 31,2003

2002ExpensesAccounting and audit fees




$ 13,781

$ 24,135Administration fees




52,000

-Amortization




5,845

839Consulting fees




41,056

46,188Exploration expenditures (see schedule)




236,463

-Filing fees




20,212

9,715Legal fees




46,649

27,178Management fees




-

15,000Office and miscellaneous




20,637

5,564Printing




22,425

1,225Promotion




110,624

4,899Rent




27,400

2,600Telephone and communications




19,386

4,232Transfer agent fees




7,584

3,739Travel




33,242

16,189Less: interest income




(1,765)

(435)Loss before other items




(655,539)

(161,068)Other itemsGain on sale of marketable securities




3,105

12,848Write-down of marketable securities




(13,400)

-Loss for the year




$ (665,834)

$ (148,220)Basic and diluted loss per share




$ (0.09)

$ (0.04)Weighted average number ofshares outstanding




7,792,644

3,933,978







TERRA NOVA GOLD CORP. (formerly Globenet Resources Inc.)(An exploration stage company)Consolidated Statements of Cash Flows(Canadian Dollars)Year ended

Year endedJuly 31,

July 31,Cash provided by (used for):




2003

2002Operating activitiesLoss for the period




$ (665,834)

$ (148,220)Items not involving cash:Amortization




5,845

839Gain on sale of marketable securities




(3,105)

(12,848)Write-down of marketable securities




13,400

-Changes in non-cash operatingworking capital items:Amounts receivable




(13,645)

(3,846)Advances for exploration




(4,010)

-Prepaid expenses




16,929

(16,929)Accounts payable and accrued liabilities




46,229

18,057(604,191)

(162,947)Financing activitiesLoans payable




8,300

-Common shares issued for cash




355,400

387,500363,700

387,500Investing activitiesSale of marketable securities




28,205

17,848Mineral property acquisition costs




(26,350)

(6,440)Purchases of capital assets




(10,347)

-(8,492)

11,408Increase (decrease) in cash




(248,983)

235,961Cash and cash equivalents, beginning of period




292,484

56,523Cash and cash equivalents, end of period




$ 43,501

$ 292,484Non-cash investing activities:Shares issued for acquisitionof mineral properties




$ 102,350

$ 2,400Acquisition of marketable securities




$ -

$ 33,500







TERRA NOVA GOLD CORP. (formerly Globenet Resources Inc.)
(An exploration stage company)
Notes to the Consolidated Financial Statements
July 31, 2003 and 2002
(Canadian Dollars)  1.  Nature of Operations
 
 The Company is a public company incorporated under the Company Act, British Columbia, Canada. The Companys principal business activity is the exploration of mineral properties. During the fiscal year ended July 31, 2003, the Company began exploring for gold in Newfoundland, Canada.
 
 The Company has not yet determined whether its mineral properties contain ore reserves that are economically recoverable. The recoverability of amounts shown for mineral properties and related deferred costs is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development and future profitable production from the property or proceeds from disposition.
 
 
 2.  Significant Accounting Policies
 
 These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principals ("Canadian GAAP").
 
 a)  Principles of consolidation
 
 The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Globenet Resources (Delaware) Corp. (see note 4).
 
 b)  Cash and cash equivalents
 
 Cash and cash equivalents include short term money market instruments with terms to maturity, at the date of issue, not exceeding ninety days.
 
 c)  Property, plant and equipment
 
 Property, plant and equipment is recorded at cost and amortized over the estimated useful lives of the assets on the following basis:
 
 Computer software 100% declining balance per annum
 Office furniture and equipment 20% declining balance per annum
 
 The Company periodically evaluates the recoverability of its property, plant and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimates of future cash flows expected to result from the use of an asset and its eventual disposition are less than its carrying amount.
 
 d)  Mineral properties
 
 All direct costs related to the acquisition of mineral property interests are capitalized by property. Exploration costs are charged to operations in the period incurred until such time as it has been determined that a property has economically recoverable reserves, in which case subsequent exploration costs and the costs incurred to develop a property are capitalized.
 
 
 
 
  
 
 
 2.  Significant Accounting Policies (contd)
 
 Gains and losses are recognized on property dispositions when the value of the consideration received exceeds and is less than, respectively, the carrying value of the property. Partial dispositions or option proceeds with respect to undeveloped properties are credited against the cost of the related property except that, when the proceeds exceed the cost, the excess is credited to operations. The aggregate costs related to abandoned properties are charged to operations.
 
 The Company regularly reviews the carrying values of mineral property interests on a regular basis by reference to the project economics, including the timing of the exploration work, the work programs and exploration results experienced by the Company and others. When the carrying value of a property exceeds its estimated net recoverable amount, an impairment provision is made for the other than temporary decline in value.
 
 e)  Loss per share
 
 Basic earnings per common share is computed by dividing earnings by the weighted average number of common shares outstanding during the period. Diluted per share amounts reflect the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted to common shares. The treasury stock method is used to determine the dilutive effect of stock options, warrants and other dilutive instruments.
 
 f)  Use of estimates
 
 The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
 
 g)  Stock-based compensation
 
 The Company has adopted the recommendations of the new CICA Handbook section 3870, Stock-based Compensation and Other Stock-based Payments , effective August 1, 2002. This section establishes standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services. The standard requires that all stock-based awards made to non-employees be measured and recognized using a fair value based method. The standard encourages the use of a fair value based method for all awards granted to employees, but only requires the use of a fair value based method for direct awards of stock, stock appreciation rights, and awards that call for settlement in cash or other assets.
 
 Awards that a company has the ability to settle in stock are recorded as equity, whereas awards that the entity is required to or has a practice of settling in cash are recorded as liabilities.
 
 Compensation expense is recognized when stock options are issued to employees and directors for the excess, if any, of the quoted market price at the date of grant over the exercise price. Any consideration paid by employees and directors on exercise of stock options is credited to share capital. If stock options are repurchased, the excess of consideration paid over the carrying amount of the stock option is charged to deficit.
 
 Compensation expense is determined when stock options are issued to non-employees and is recognized over the vesting period of the option. The compensation expense is determined as the fair value of the option at the date of grant using an option pricing model.
 
 
 
  2.  Significant Accounting Policies (contd)
 
 h)  Income taxes
 
 Future income taxes relate to the expected future tax consequences of differences between the carrying amount of balance sheet items and their corresponding tax values. Future tax assets, if any, are recognized only to the extent that, in the opinion of management, it is more likely than not that the future income tax assets will be realized. Future income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment or substantive enactment.
 
 i)  Comparative figures
 
 The Comparative consolidated financial statements have been reclassified , where applicable, to conform with the presentation adopted in the current period.
 
 3.  Change in Accounting Policy
 
 Effective July 31, 2003, the Company changed its method of accounting for mineral exploration expenditures, from deferring them until the viability of a project was determined, to charging them to operations as incurred. Under the new policy, only expenditures incurred on properties identified as having substantial evidence that a commercial body of ore has been located are capitalized and accounted for in accordance with the Companys accounting policy for mineral properties.
 
 The new policy is consistent with current reporting practices in the mining industry and management considers the change will appropriately present the Companys operations and financial position. This change in accounting policy has been applied retroactively to 2002 and has increased the 2003 net loss by $236,463 (2002 - $nil) and loss per share by $(0.03) (2002 - $nil).
 
 4.  Dissolution
 
 On March 27, 2003, the Company dissolved its wholly owned subsidiary, Globenet Resources (Delaware) Corp. From the time of the subsidiarys incorporation, July 22, 2002, to the date of dissolution, there was no active business carried out through the subsidiary and the subsidiary had no assets or liabilities. The dissolution of Globenet Resources (Delaware) Corp. resulted in no gain or loss.
 
 5.  Property, plant and equipment
 
 2003





2002Accumulated

Net Book

Net BookCost

Amortization

Value

ValueComputer software
$ 10,347

$ 5,173

$ 5,174

$ -Office equipment and furniture
14,526

11,841

2,685

3,357$ 24,873

$ 17,014

$ 7,859

$ 3,357
 
 
 
 
 
  
 6.  Mineral Properties
 
 The Companys mineral properties are comprised of two option earn-in agreements in Cape Ray and South Quinn Lake, Newfoundland, Canada.
 
 South Quinn Lake Property
 
 On May 24, 2002, the Company entered into an option agreement with South Coast Ventures Inc. ("South Coast") to acquire a 100% undivided interest in and to 36 mineral claims comprising the South Quinn Lake gold property located in central Newfoundland. In order to earn the interest, the Company must pay the optionor $75,000, issue the optionor 300,000 common shares and expend $400,000 on exploration by May 23, 2005 as follows:
 
 Cash

Share

ExplorationPayments to be made on or before
Payments

Payments

ExpendituresMay 23, 2002
$ 5,000
(paid)
20,000
(issued)November 23, 2002
$ 5,000
(paid)
30,000
(issued)May 23, 2003
$ 15,000
(paid)
75,000
(issued)May 23, 2004
$ 20,000

75,000May 23, 2005
$ 30,000

100,000

$ 400,000
 The property is subject to a 2.5% net smelter royalty (NSR) from the proceeds of production from the property. The Company may reduce the 2.5% NSR to a 1.5% NSR at any time by paying $1 million.
 
 On May 12, 2003, the Company entered into an option and joint venture agreement with Bayswater Ventures Corp. ("Bayswater"), a company related by virtue of common directors, whereby the Company has granted to Bayswater an option to acquire 95% of the Companys interest in the South Quinn Lake Property (the "Property"). Bayswater will earn its interest in the Property in consideration and through direct or indirect assumption of all of the Companys remaining obligations to South Coast pursuant to the May 24, 2002 option agreement, as follows:
 
 a)  Bayswater must pay to South Coast the following amounts which remain payable:
 
 i.  $15,000 on or before May 23, 2003 (paid);
 ii.  an additional $20,000 on or before May 23, 2004; and
 iii.  an additional $30,000 on or before May 23, 2005;
 
 b)  Bayswater must incur an aggregate of $344,029 of work expenditures on the Property (the Company has incurred an aggregate of $55,971 of the required $400,000 of work expenditures on the Property) under the May 24, 2002 option agreement on or before May 23, 2005, of which Bayswater must incur at least $75,000 of expenditures on or before December 31, 2003; and
 
 c)  The Company will remain responsible for the delivery of the Company share payments to South Coast pursuant to the May 24, 2002 option agreement, and in lieu thereof Bayswater will pay to the Company the market price equivalent (as of the date of each delivery) of the following shares of the Company:
 
 i.  75,000 shares on or before May 23, 2003 (issued) (see note 10);
 ii.  75,000 shares on or before May 23, 2004; and
 iii.  100,000 shares on or before May 23 ,2005.
 
 
 
  6.  Mineral Properties (contd)
 
 d)  At any time during the 12 months following Bayswaters exercise of the Option, the Company shall have the right, exercisable upon at least 30 days prior written notice, to purchase from Bayswater an additional 20% interest in the Property (to hold a 25% working interest therein), through the payment to Bayswater of an amount equal to 30% of the actual or deemed amounts of the Option Price paid hereunder and any subsequent amounts paid as expenditures on the Property, to the date of the notice.
 
 Cape Ray
 
 On August 15, 2002, the Company entered into an option agreement with South Coast to acquire a 100% interest in the Cape Ray property. The Cape Ray property consists of 46 mineral claims located in southwest Newfoundland.
 
 In order to earn the 100% interest, the Company will be required to pay a total of $420,000, to issue common shares with a total value of $580,000, to incur exploration expenditures of $1,900,000, and to carry out a feasibility study. The cash payments, share payments and expenditures are required to be made as follows:
 
 Cash

Share

ExplorationPayments to be made on or before
Payments

Payments

ExpendituresUpon signing
$ 5,000
(paid)September 13, 2002
$ 10,000
(paid)
$ 30,000
(issued)March 13, 2003
$ 25,000
(paid)
$ 50,000
(issued)
$ 50,000
(paid)December 31, 2003
$ 50,000

$ 75,000

$ 400,000December 31, 2004
$ 55,000

$ 75,000

$ 450,000December 31, 2005
$ 125,000

$ 150,000

$ 500,000December 31, 2006
$ 150,000

$ 150,000

$ 500,000
 The Company will have the option of making cash payments, in lieu of share payments, if the Companys common shares are trading at a price of less than $0.50 per share. The two initial share payments will be based on the average closing price of the Companys common shares on the 20 trading days prior to the common share issuance. The remaining share payments will be based on the average closing price of the Companys common shares over the prior calendar year.
 
 The Company has also agreed to pay South Coast an NSR from the proceeds of production from the property. The amount of the NSR will be based on the price of gold and calculated as follows:
 
 NSR  gold price/ounce
 1%  up to and including $350 U.S./oz
 2%  from $351 U.S./oz up to and including $400 U.S./oz
 3%  from $401 U.S./oz up to and including $450 U.S./oz
 4%  above $450 U.S./oz
 
 Upon completion of a positive feasibility study, the Company will pay South Coast a bonus of $250,000.
 
  
  6.  Mineral Properties (contd)
 
 Cape
SouthProperty Acquisition Costs

Ray
Quinn
TotalBalance at July 31, 2001

$ -
$ -
$ -Option payments - cash

-
5,000
5,000Option payments - shares

-
2,400
2,400Staking costs

-
1,440
1,440Balance at July 31, 2002

-
8,840
8,840Option payments - cash

40,000
5,000
45,000Option payments - shares

80,000
22,350
102,350Option reimbursement

-
(18,750)
(18,750)Staking costs

100
-
100Balance at July 31, 2003

$ 120,100
$ 17,440
$ 137,540
 7.  Loans Payable
 
 The loans payable are due from an arms length private company, unsecured, due on demand and non-interest bearing.
 
 8.  Share Capital
 
 a)  Authorized: 100,000,000 common shares without par value
 
 b)  Issued and outstanding:
 Number
ValueBalance at July 31, 2001


3,893,636
$ 10,947,238Private placements


2,925,000
387,500Property acquisition


20,000
2,400Balance at July 31, 2002


6,838,636
11,337,138Private placements (c)


456,756
155,000Exercise of warrants


1,482,000
179,400Exercise of options


60,000
21,000Property acquisition


320,844
102,350Balance at July 31, 2003


9,158,236
$ 11,794,888
 c)  During the year ended July 31, 2003, the Company completed the following private placements:
 
 i)  Issued 200,000 common shares at a price of $0.30 per share totaling $60,000. Along with the common shares, the company issued 200,000 share purchase warrants entitling the holder to purchase one additional common share at $0.40 per share expiring on October 15, 2004.
 
 
 
   8.  Share Capital (contd)
 
 ii)  Issued 256,756 flow-through common shares at a price of $0.37 per share totaling $95,000. Along with the common shares, the company issued 256,756 flow-through share purchase warrants entitling the holder to purchase one additional common share at $0.50 per share expiring on January 10, 2005. For income tax purposes, the subscription funds of $95,000 will be applied towards carrying out exploration activities and the expenditures will be renounced in favour of the subscriber. Accordingly, the Company will not have available deductions from taxable income in respect of such expenditures.
 
 d)  As at July 31, 2003, warrants exercisable and outstanding are as follows:
 
 ExerciseNumber
Price
Expiry Date505,000
$0.12
July 8, 2004938,000
$0.25
July 17, 2004200,000
$0.40
October 15, 2004256,756
$0.50
January 10, 20051,899,756
 e)  As at July 31, 2003, the Company had 620,000 stock options outstanding. A summary of the status of the Companys stock options as of July 31, 2003 and 2002 and changes during the years ending on those dates is presented below:
 Weighted-Weighted-
averageNumber of
average
remainingShares
exercise price
life (years)Balance at July 31, 2001

175,000
$0.75
1.57Cancelled

(100,000)
0.78Expired

(10,000)
0.75Balance at July 31, 2002

65,000
$0.71
0.42Cancelled

(65,000)
0.71Granted

680,000
0.36Exercised

(60,000)
0.35Balance at July 31, 2003

620,000
$0.37
1.01
 
 
 
 
  8.  Share Capital (contd)
 
 As at July 31, 2003, stock options exercisable and outstanding are as follows:
 
 ExerciseNumber
Price
Expiry Date555,000
$0.35
August 6, 200440,000
$0.40
August 21, 200425,000
$0.67
September 10, 2004620,000
 9.  Stock Options
 
 The Company uses the intrinsic value based method of accounting for stock-based awards granted to employees. Under this method, compensation cost is only recorded when the exercise price is below the market price of the stock on the date of grant. During the year ended July 31, 2003, the Company granted a total of 680,000 stock options to employees and the exercise prices equaled the market prices on the dates of grant. There were no stock options granted to non-employees during the period.
 
 If the Company used the fair value based method of accounting for stock-based awards granted to employees and directors, the cost of the options granted during the year ended July 31, 2003 would have been estimated on the date of grant using the Black-Scholes option pricing model, with the following assumptions for each grant:
 
 Expected
Risk-free



Pro FormaNumber
Life
Interest
Expected
Dividend
Fair
CompensationDate of Grant
Granted
(years)
Rate
Volatility
Yield
Value
CostAugust 6, 2002
615,000
2
3.08%
127.00%
0.00%
$0.22
$ 135,300August 21, 2002
40,000
2
3.38%
127.00%
0.00%
$0.26
10,400September 10, 2002
25,000
2
3.34%
127.15%
0.00%
$0.43
10,750Total fair value compensation cost






156,450Less: intrinsic value compensation cost






-Additional compensation cost






$ 156,450
 If the Company had used the fair value based method, pro forma loss would have amounted to $822,284 (an increase of $156,450) and pro forma loss per share would have been $0.11 (an increase of $0.02) for the year ended July 31, 2003.
 
 10.  Related Party Transactions
 
 Related parties are directors, officers and other companies with common directors and/or officers of the Company. Amounts due to/from related parties are non-interest bearing and without specific terms of repayment.
 
 Related party transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
 
 
 
  
 10.  Related Party Transactions (contd)
 
 The following is a summary of the related party transactions that occurred throughout the year:
 
 2003

2002Accounting services
$ -

$ 18,000Consulting fees
$ -

$ 29,800Management fees
$ -

$ 15,000Promotion
$ 16,000

$ -Rent
$ -

$ 2,600Accounts receivable (settled by receipt of 335,000 common sharesfrom a company related by a common officer)
$ (33,500)

$ 33,500South Quinn Lake Property - option reimbursement
$ 18,750

$ -
 
 11.  Financial Instruments
 
 The Companys financial instruments consist of cash and cash equivalents, amounts receivable, advances for exploration, accounts payable and accrued liabilities and loans payable. Unless otherwise noted, it is managements opinion that the Company is not exposed to significant interest, currency, or credit risks arising from these financial instruments. The fair value of these financial instruments approximate their carrying values, unless otherwise noted.
 
 12.  Income Taxes
 
 The reported income tax recovery differs from the amount computed by applying the Canadian basic statutory rate to the loss before income taxes. The reasons for this difference and the related tax effect are as follows:
 
 2003

2002Canadian basic statutory tax rate
38.5%

42.6%Potential income tax recovery based on reported loss
$ 256,346

$ 63,142Unrecognized tax losses
(117,979)

(51,338)Temporary differences not recognized during the year
(2,250)

(357)Permanent and other differences
(136,117)

(11,447)$ -

$ -
 The Company has accumulated non-capital losses of approximately $1,300,000 which may be deducted in the calculation of taxable income in future years. The losses expire on various dates to 2011. Also, the Company has approximately $10,000 of capital losses and $7,200,000 of Canadian and foreign resource tax pools which may be deducted in the calculation of taxable income in future years. These losses and pools can be carried forward indefinitely.
 
 Future income taxes result primarily from temporary differences in the recognition of certain revenue and expense items for financial and income tax reporting purposes. Significant components of the companys future tax assets and liabilities are as follows:
 
 
 
  
 
 
 12.  Income Taxes (contd)
 
 2003

2002Canadian basic statutory tax rate
38.5%

42.6%Future income tax assetsTax value of resource properties in excess of book value
$ 2,762,891

$ 2,996,858Non-capital losses carried forward
486,748

466,820Capital losses carried forward
1,982

-Tax value of property, plant and equipment in excess of book value
3,643

1,541Valuation allowance for future income tax assets
(3,255,264)

(3,465,219)Net future income tax assets
-

-Future income tax liabilities
-

-Future income tax assets
$ -

$ -
 Due to the uncertainty surrounding the realization of income tax assets in future years, the Company has a 100% valuation allowance against its potential future income tax assets.
 
 13.  Subsequent Event
 
 On August 27, 2003, the Company completed an investment agreement with Ocean Resources Capital Holdings Plc. ("ORCH"), whereby, ORCH issued to the Company a total of 5,200,000 units in the capital of ORCH (the "Units") at the deemed price of £0.50 per Unit (each Unit consisting of one share and one warrant); and the Company issued to ORCH a loan note (the "Note") in the principal amount of £2,600,000. The Note is convertible and redeemable into common shares of the Company, unsecured and bearing interest at 12% per annum payable by half yearly installments on December 31 and June 30 of each year. The Company sold the 5,200,000 Units and realized net sale proceeds of $2,159,406.
 
 In accordance with the terms of the investment agreement, ORCH converted the entire £2,600,000 principal amount of the Note to common shares of the Company at C$0.60 per share, for 10,825,966 shares (the "Conversion Shares"), calculated on a previously agreed conversion ratio between the British pound and the Canadian dollar of 1 to 2.4983. No interest was due or payable on the Note at that time, and so no interest was converted.
 
 In addition, the Company issued to ORCH 2,000,000 share purchase warrants entitling ORCH to acquire up to 2,000,000 common shares of the Company at $0.45 per common share expiring on September 8, 2005.
 
 The Company paid a finders fee in the amount of 4% of the net sale proceeds.
 
 
 
  
  TERRA NOVA GOLD CORP. (formerly Globenet Resources Inc.)(An exploration stage company)Schedule of Exploration Expenditures(Canadian Dollars)Year ended

Year endedJuly 31,

July 31,2003

2002Cape Ray PropertyDrilling




$ 166,148

$ -Geochemistry




1,185

-Geology




87,242

-Geophysics




13,942

-Government grants




(77,897)

-190,620

-South Quinn Lake PropertyGeology




44,843

-Geophysics




1,000

-45,843

-$ 236,463

$ -
   
 TERRA NOVA GOLD CORP. (formerly Globenet Resources Inc.) Schedule B
Supplementary Information
For the Year Ended July 31, 2003  1.  Analysis of expenses and deferred costs
 
 Please see the financial statements for a breakdown of deferred mineral property expenditures.
 
 2.  Related party transactions
 
 Please see the financial statements for a breakdown of the related party transactions.
 
 3.  a)  Securities issued during the period
 
 Date of

Type of



Type of
CommissionIssue
Type of Security
Issue
Number
Price
Proceeds
Consideration
Paid13-Sep-02
Common shares
Property
51,370
$0.584
$30,000
Property
$0Private15-Oct-02
Common shares
Placement
200,000
$0.30
$60,000
Cash
$020-Dec-02
Common shares
Options
60,000
$0.35
$21,000
Cash
$0Private10-Jan-03
Common shares
Placement
256,756
$0.37
$95,000
Cash
$021-Jan-03
Common shares
Warrants
275,000
$0.12
$33,000
Cash
$018-Feb-03
Common shares
Warrants
545,000
$0.12
$65,400
Cash
$018-Feb-03
Common shares
Warrants
12,000
$0.25
$3,000
Cash
$025-Mar-03
Common shares
Property
30,000
$0.12
$3,600
Property
$025-Mar-03
Common shares
Property
164,474
$0.304
$50,000
Property
$023-Apr-03
Common shares
Warrants
200,000
$0.12
$24,000
Cash
$018-Jun-03
Common shares
Warrants
100,000
$0.12
$12,000
Cash
$023-Jun-03
Common shares
Warrants
175,000
$0.12
$21,000
Cash
$026-Jun-03
Common shares
Warrants
175,000
$0.12
$21,000
Cash
$014-Jul-03
Common shares
Property
75,000
$0.25
$18,750
Property
$0
 b)  Options granted during the period
 
 Date of


Exercise
ExpiryGrant
Number
Name
Price
Date06-Aug-02
75,000
Harvey Keats
$0.35
06-Aug-0406-Aug-02
75,000
Kerry Sparkes
$0.35
06-Aug-0406-Aug-02
50,000
David Patterson
$0.35
06-Aug-0406-Aug-02
110,000
Shirley Mooney
$0.35
06-Aug-0406-Aug-02
305,000
Employees
$0.35
06-Aug-0421-Aug-02
40,000
Rex Gibbons
$0.40
21-Aug-0410-Sep-02
25,000
Employees
$0.67
10-Sep-04
 
 
 4.  a)  Authorized share capital
 
 100,000,000 common shares without par value
 
 
 b)  Issued and outstanding share capital
 
 9,158,236 shares at a recorded value of $11,794,888
 
 c)  Options, warrants and convertible securities
 
 Type of

ExerciseSecurity
Number
Price
Expiry DateOptions
555,000
$0.35
August 6, 2004Options
40,000
$0.40
August 21, 2004Options
25,000
$0.67
September 10, 2004Warrants
505,000
$0.12
July 8, 2004Warrants
938,000
$0.25
July 17, 2004Warrants
200,000
$0.40
October 15, 2004Warrants
256,756
$0.50
January 10, 2005
 
 d)  Number of shares subject to escrow or pooling agreements
 
 None
 
 5.  Directors and officers of the Company
 
 David Patterson  Chairman of the Board of Directors
 Harvey Keats  Director and President
 Kerry Sparkes  Director
 Rex Gibbons  Director
 Shirley Mooney  Secretary
 
 
 
 
  
   Principal Activity of the Company
 
 On January 28, 2003, the Company changed its name from Globenet Resources Inc. to Terra Nova Gold Corp. in order to better reflect the nature of the Companys operations. Terra Nova Gold Corp. is a gold exploration company with two projects in Newfoundland, Canada, the Cape Ray Project and the South Quinn Lake Project.
 
 Cape Ray Project, Newfoundland
 
 In August 2002, the Company entered into an option agreement with South Coast Ventures Inc. to acquire a 100% interest in the Cape Ray Property, located in southwest Newfoundland.
 
 The Cape Ray Gold Project is an advanced stage exploration project, consisting of 46 claims, with four known deposits related to the Cape Ray Fault Zone. The Project has three separate claim groups: 1) the Cape Ray claim group, which contains the 04 and 41 deposits; 2) the Big Pond claim group, which contains the Big Pond deposit; 3) the Isle aux Morts claim group, which contains the Isle aux Morts deposit.
 
 In order to earn the 100% interest, the Company will be required to pay a total of $420,000, to issue common shares with a total value of $580,000, to incur exploration expenditures of $1,900,000, all before December 31, 2006, and to carry out a feasibility study.
 
 The Company has also agreed to pay South Coast a net smelter return royalty from the proceeds of production from the property. The amount of the net smelter return royalty ranges from 1% to 4% and will be based on the price of gold.
 
 Within six months of the identification of a Measured Mineral Resource of 250,000 ounces of gold, and an Indicated Mineral Resource of 250,000 ounces of gold on the Cape Ray Property, and completion of an in-house scoping study confirming the basic economics of the project, the Company has agreed to begin a feasibility study. Upon completion of a positive bankable feasibility study (minimum 20% net rate of return using a discount rate acceptable to financial institutions), the Company will pay South Coast a bonus of $250,000. Terms of reference and extent of the scoping study and feasibility study will be determined at the sole discretion of the Company.
 
 If the Property is not in production within one year of the completion of the positive bankable feasibility study, the Company has agreed to pay South Coast $50,000 per year in advance royalty payments.
 
 
 Fall 2002 Program
 
 In late November 2002, the Company began a diamond drill program in the Isle aux Morts area where previous drilling in the 1990s intersected two styles of mineralization. Gold mineralization occurs in metal rich quartz veins and adjacent gold bearing pyritic sediments at the base of a sedimentary package in contact with an underlying granite. The majority of the intersections in the previous drilling at Isle aux Morts are within 50 metres of surface.
 
 The objective of the program was to further outline the known mineralization, to explore the open pit potential at Isle aux Morts and to test a one line IP anomaly to the northeast of the known deposit. Six drill holes were completed during the program, which was suspended on November 29, 2002 due to the onset of extreme winter conditions.
 
 Five of the holes were drilled into the known Isle aux Morts deposit. All five holes intersected gold mineralization both in quartz veins and adjacent pyritic sediments.
 
 One additional hole, IMR 2002-01, was drilled 275 metres to the northeast of the known deposit, into a one line geophysical IP anomaly similar to the IP response over the Isle aux Morts deposit, but did not intersect any significant mineralization.
 
 The results of the Fall 2002 Program were discussed in detail in the Companys news release dated December 12, 2002.
 
 The Company received support from the Government of Newfoundland & Labrador in the form of a $48,605 grant under its Junior Company Exploration Assistance Program. The grant partially reimburses expenditures on the Fall 2002 Program.
 
 Spring 2003 Program
 
 In May/June 2003 the Company carried out a 7 hole drill program on the Cape Ray Gold Project to explore for extensions to known mineralization and to fill in gaps in known veins in the 04 and 41 deposits. Six of the seven holes were drilled on the 04 deposit, where previous owners carried out over 9,000 metres of drilling in 35 holes, and identified two principal veins (the A and B veins) with significant gold mineralization.
 
 The seventh hole was drilled in the 41 deposit where previous owners carried out over 11,000 metres of drilling in 54 holes, and identified five mineralized vein systems with significant gold mineralization.
 
 The Spring 2003 Program drilling expanded the 04 deposit down dip and down plunge, and traced the known mineralization to surface. The results of the Spring 2003 Program were reported in the Companys news releases dated June 17 and June 23.
 
 The Company received support from the Government of Newfoundland & Labrador in the form of a $56,180 grant under its Junior Company Exploration Assistance Program, of which $26,888 was received subsequent to July 31, 2003. The grant partially reimbursed expenditures on the Spring 2003 Program.
 
 Fall 2003 Program
 
 In late September 2003, the Company began a two month, 3,000 metre diamond drill program focused on the Big Pond and Isle aux Morts areas. It is expected that the results from this program will be reported in mid-November.
 
 The drill program at Big Pond is designed to better define the known mineralized shoots, identify their down plunge extension, and to investigate the possibility of additional mineralized shoots.
 
 In August 2003 an IP geophysical survey was carried out over a portion of the Isle aux Morts property by Discovery International Geophysics Inc. Several highly chargeable and resistive targets similar to, but distinct from, the known Isle aux Morts deposit were identified and were the focus of the Fall 2003 Program drilling at Isle aux Morts. Two holes were also drilled in the Isle aux Morts deposit.
 
 The Company will be applying for two grants in the amount of $121,079 to the Government of Newfoundland & Labrador under its Junior Company Exploration Assistance Program. The grants will partially reimburse expenditures on the Fall 2003 Program.
 
 South Quinn Lake Project, Newfoundland
 
 The Company has an option to acquire a 100% interest in the South Quinn Lake property, which is comprised of 12 mineral claims located in central Newfoundland.
 
 Noranda previously held the South Quinn claims and discovered high grade gold mineralization in quartz bearing boulders related to regional till geochemistry anomalies. Several strong soil geochemical and geophysical anomalies are coincident with the highest grade boulders. Values in the boulders range from 9.4 grams per tonne gold to 30.8 grams per tonne gold. The source of the high grade boulders has never been found.
 
 
 In August 2002, the Company began an initial phase of work consisting of re-establishing the grid, geological mapping, prospecting and geophysics to trace the full extent of the previously identified mineralized zone, to verify existing targets in preparation for drilling. The program which was completed in October 2002, re-established the grid and identified gold geochemical anomalies which are coincident with untested geophysical anomalies. These targets are now ready for drill testing.
 
 On May 12, 2003 the Company announced that it had entered into an option and joint venture agreement with Bayswater Ventures Corp. ("Bayswater") whereby the Company has agreed to grant Bayswater an option to acquire 95% of the Companys interest in the South Quinn Lake Project. Bayswater will earn its interest in the Property in consideration and through direct or indirect assumption of all of the Companys remaining obligations to South Coast pursuant to the Underlying Option Agreement, as follows:
 
 1.  Bayswater must pay to South Coast the following amounts which remain payable:
 
 i.  $15,000 on or before May 23, 2003;
 ii.  an additional $20,000 on or before May 23, 2004; and
 iii.  an additional $30,000 on or before May 23, 2005;
 
 2.  Bayswater must incur an aggregate of $344,029 of work expenditures on the Property (the Company has incurred an aggregate of $55,971 of the required $400,000 of work expenditures on the Property under the Underlying Option Agreement) on or before May 23, 2005, of which Bayswater must incur at least $75,000 of expenditures on or before December 31, 2003; and
 
 3.  The Company will remain responsible for the delivery of the Company shares to South Coast pursuant to the Underlying Option Agreement, and in lieu thereof Bayswater will pay to the Company the market price equivalent (as of the date of each delivery) of the following shares of the Company:
 
 i.  75,000 shares on or before May 23, 2003;
 ii.  75,000 shares on or before May 23, 2004; and
 iii.  100,000 shares on or before May 23, 2005.
 
 4.  At any time during the 12 months following Bayswaters exercise of the Option, the Company shall have the right, exercisable upon at least 30 days prior written notice, to purchase from Bayswater an additional 20% interest in the Property (to hold a 25% working interest therein), through the payment to Bayswater of an amount equal to 30% of the actual or deemed amounts of the Option Price paid hereunder and any subsequent amounts paid as expenditures toward exploration and development of the Property, to the date of the notice. Upon the Company exercising its claw-back right as referred to herein, the Company and Bayswater shall enter into a joint venture agreement concerning the Property.
 
 Operating Results
 
 The Company incurred a loss of $665,834 (2002 - $148,220). The Companys loss per share was $0.09 for 2003 compared to a loss per share of $0.04 for 2002. The Company resumed active business in June 2002 and as a result operating expenses were significantly higher in 2003 compared to 2002. Almost every line item on the statement of operations has increased significantly in 2003.
 
 Effective July 31, 2003, the Company changed its method of accounting for mineral exploration expenditures, from deferring them until the viability of a project was determined, to charging them to operations as incurred. Under the new policy, only expenditures incurred on properties identified as having substantial evidence that a commercial body of ore has been located are capitalized and accounted for in accordance with the Companys accounting policy for mineral properties.
 
 The new policy is consistent with current reporting practices in the mining industry and management considers the change will appropriately present the Companys operations and financial position. This change in accounting policy has been applied retroactively to 2002 and has increased the 2003 net loss by $236,463 (2002 - $nil) and loss per share by $(0.03) (2002 - $nil).
 
 Of the $236,463 expended on exploration during 2003, $190,620 was expended on the Cape Ray property, net of $77,897 in government grants received during the year. The Company completed two drill programs on the Cape Ray property. The Company spent only $45,843 on the South Quinn property as it optioned the property to Bayswater in May 2003.
 
 Management of the Company has traveled extensively throughout Canada and Europe to promote the Company and to seek additional equity financing for the exploration and option commitments on its two projects and for general working capital.
 
 During the year ended July 31, 2003, the Company revised and updated its internet web site ( www.terranovagold.com ), printed promotional material, enhanced shareholder communication and incurred consulting services to help obtain and manage its Berlin Stock Exchange and Frankfurt Stock Exchange listings.
 
 In October, 2002, the Company was approved for listing on the Berlin Stock Exchange. The Company paid $9,456 in consulting services and $7,942 in filing fees to obtain the Berlin listing. In May, 2003, the Company was approved for listing on the Frankfurt Stock Exchange.
 
 Office and miscellaneous, printing and telephone and communications have increased by $51,427 over 2002. During 2003, the Company disseminated more news releases to a broader range of shareholders and potential investors, printed a greater quantity of brochures, news releases and financial statements, and incurred significant postage and mailout costs associated with the Extraordinary General Meeting held on April 9, 2003.
 
 The Company has made no payments to any of its directors or officers except $16,000 was paid to the secretary for services provided to the Company, which services included responding to shareholder inquiries.
 
 The Company paid a private company $52,000 (2002 - $nil) for accounting, secretarial and general administrative services and paid the same private company $13,000 (2002 - $nil) for rent. Rent has increased in 2003 because the Company has increased the amount of office space that it is using.
 
 The Company purchased new geological computer software for $10,347 during year. This software will help the Company model the Cape Ray Project deposits in three dimensions.
 
 Liquidity and Capital Resources
 
 The Company had a working capital deficit at July 31, 2003 of $9,774 compared to a positive working capital position of $331,512 at July 31, 2002. The decrease in working capital is mainly due to the Companys increased operating expenditures, exploration expenditures and expenditures on computer software.
 
 The Company raised $355,400 during the year pursuant to the issuance of common shares.
 
 The Company sold all of its marketable securities during the year for proceeds of $28,205. This resulted in a gain of $3,105.
 
 Subsequent to the year, on August 27, 2003, the Company completed an investment agreement with Ocean Resources Capital Holdings Plc. ("ORCH"), whereby, ORCH issued to the Company a total of 5,200,000 units in the capital of ORCH (the "Units") at the deemed price of £0.50 per Unit (each Unit consisting of one share and one warrant); and the Company issued to ORCH a loan note (the "Note") in the principal amount of £2,600,000. The Note is convertible and redeemable into common shares of the Company, unsecured and bearing interest at 12% per annum payable by half yearly installments on December 31 and June 30 of each year. The Company sold the 5,200,000 Units and realized net sale proceeds of $2,159,406.
 
 In accordance with the terms of the investment agreement, ORCH converted the entire £2,600,000 principal amount of the Note to common shares of the Company at C$0.60 per share, for 10,825,966 shares (the "Conversion Shares"), calculated on a previously agreed conversion ratio between the British pound and the Canadian dollar of 1 to 2.4983. No interest was due or payable on the Note at that time, and so no interest was converted.
 
 In addition, the Company issued to ORCH 2,000,000 share purchase warrants entitling ORCH to acquire up to 2,000,000 common shares of the Company at $0.45 per common share expiring on September 8, 2005.
 
 The Company paid a finders fee in the amount of 4% of the net sale proceeds.
 
 It is anticipated that this new financing will be sufficient to cover the Companys fiscal 2004 operating costs and exploration commitments.
 
 Investor Relations
 
 The Company responded to shareholder inquiries. The Company also utilized the services of Rock Marketing Inc. of Vancouver, British Columbia to provide public relations for 3 months, at a cost of $5,000 per month.
 
 The Company hosted luncheon presentations in numerous European cities in September 2002. The Company also participated with the Newfoundland Chamber of Mines in a series of presentations in numerous European cities in October 2002.
 
 The Company attended investment conferences in New York in September 2002, San Francisco in December 2002 and Vancouver in January 2003. The Company also attended the Prospector and Developments Association Conference in Toronto in March 2003.