Attached files
| file | filename |
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| EX-21.1 - EX211 - FIRST COLOMBIA GOLD CORP. | ex211.htm |
| 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,
D.C. 20549
Form
10-K
ý ANNUAL REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
fiscal year ended December 31,
2009
¨ TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from
to _______.
Commission
file number: 000-51203
Amazon
Goldsands Ltd.
(Exact
name of registrant as specified in its charter)
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Nevada
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98-0425310
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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Jiron
Caracas 2226, Jesús María, Lima, Peru
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(Address
of principal executive
offices) (Zip
Code)
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Registrant’s
telephone, including area code: +(51 1) 989
184706
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Securities
registered under Section 12(b) of the Exchange
Act: None.
Securities
registered under Section 12(g) of the Exchange Act:
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Common
Stock, $0.00001 par value
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Not
Applicable
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(Title
of class)
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(Name
of each exchange on which
registered)
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes ¨ No ý
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes ¨ No ý
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 such filing requirements for the
past 90 days. Yes ý No ¨
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 of 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 ý No ¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (229.405 of this chapter) is not contained herein, and will be
contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ý
Indicate
by check mark whether the registrant is a large accelerated filer, 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 ¨ Accelerated
filer ¨
Non-accelerated
filer ¨ (Do not check if a
smaller reporting
company)
Smaller reporting company ý
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No ý
As of
June 30, 2009, the aggregate market value of the Company’s common equity held by
non-affiliates computed by reference to the closing price $0.11
was: $1,165,845
The
number of shares of our common stock outstanding as of April 7, 2010 was: 36,853,585
FORM
10-K
AMAZON
GOLDSANDS LTD.
DECEMBER
31, 2009
PART
I
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Page
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Item
1. Business.
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5
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Item
1A. Risk
Factors.
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8
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Item
1B. Unresolved
Staff Comments.
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15
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Item
2. Properties.
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15
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Item
3. Legal Proceedings.
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23
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Item
4. Reserved.
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23
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PART
II
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23
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Item
6. Selected Financial Data.
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25
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25
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32
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32
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32
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Item
9A. Controls and
Procedures.
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32
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Item
9B. Other
Information.
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33
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PART
III
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34
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Item
11. Executive Compensation.
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36
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38
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39
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39
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PART
IV
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Cautionary
Note Regarding Forward Looking Statements
This
annual report contains forward-looking statements as that term is defined in
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. In some cases,
you can identify forward-looking statements by terminology such as “may,”
“should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential,” “continue,” “intends,” and other variations of these
words or comparable words. In addition, any statements that refer to
expectations, projections or other characterizations of events, circumstances or
trends and that do not relate to historical matters are forward-looking
statements. These forward-looking statements are based largely on our
expectations or forecasts of future events, can be affected by inaccurate
assumptions, and are subject to various business risks and known and unknown
uncertainties, a number of which are beyond our control. Therefore,
actual results could differ materially from the forward-looking statements
contained in this document, and readers are cautioned not to place undue
reliance on such forward-looking statements. These statements are
only predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in the section entitled “Risk Factors” that may
cause our or our industry’s actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.
Important
factors that may cause the actual results to differ from the forward-looking
statements, projections or other expectations include, but are not limited to,
the following:
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·
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risk
that we fail to meet the requirements of the agreements under which we
acquired our options, including any payments or any exploration
obligations that we have regarding these properties, which could result in
the loss of our right to exercise the options to acquire certain mining
and mineral rights underlying these
properties;
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·
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risk
that we cannot attract, retain and motivate qualified personnel,
particularly employees, consultants and contractors for our operations in
Peru;
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·
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risks
and uncertainties relating to the interpretation of drill results, the
geology, grade and continuity of mineral
deposits;
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·
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results
of initial feasibility, pre-feasibility and feasibility studies, and the
possibility that future exploration, development or mining results will
not be consistent with our
expectations;
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·
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mining
and development risks, including risks related to accidents, equipment
breakdowns, labor disputes or other unanticipated difficulties with or
interruptions in production;
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the
potential for delays in exploration or development activities or the
completion of feasibility studies;
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·
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risks
related to the inherent uncertainty of production and cost estimates and
the potential for unexpected costs and
expenses;
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·
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risks
related to commodity price
fluctuations;
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·
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the
uncertainty of profitability based upon our history of
losses;
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·
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risks
related to failure to obtain adequate financing on a timely basis and on
acceptable terms for our planned exploration and development
projects;
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·
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risks
related to environmental regulation and
liability;
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·
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risks
that the amounts reserved or allocated for environmental compliance,
reclamation, post-closure control measures, monitoring and on-going
maintenance may not be sufficient to cover such
costs;
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·
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risks
related to tax assessments;
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·
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political
and regulatory risks associated with mining development and exploration;
and
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·
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other
risks and uncertainties related to our prospects, properties and business
strategy.
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Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. You should not place undue reliance on these
forward-looking statements, which speak only as of the date of this
report. Except as required by law, we do not undertake to update or
revise any of the forward-looking statements to conform these statements to
actual results, whether as a result of new information, future events or
otherwise.
As used
in this annual report, “Amazon,” the “Company,” “we,” “us,” or “our” refer to
Amazon Goldsands Ltd., unless otherwise indicated.
If you
are not familiar with the mineral exploration terms used in this report, please
refer to the definitions of these terms under the caption “Glossary” at the end
of Item 15 of this report.
PART
I
ITEM 1. Business.
Corporate
History
We were
incorporated in the state of Nevada under the name Gondwana Energy, Ltd. on
September 5, 1997, and previously operated under the name FinMetal Mining
Ltd. We were previously focused on the acquisition and development of
our interests in the mineral rights on properties located in
Finland.
In
September 2008, we reorganized our operations and our current focus is on the
acquisition and development of our interests in the mineral rights on properties
located in northeastern Peru. Effective June 6, 2008, we merged with
our wholly-owned subsidiary, Amazon Goldsands Ltd., pursuant to Articles of
Merger that we filed with the Nevada Secretary of State. We decided
to change our name to "Amazon Goldsands Ltd." to better reflect our current
focus on the acquisition and development of certain mining and mineral rights
underlying properties located in South America.
We
allowed our options to acquire properties located in Finland to lapse and revert
back to the optionors so that we can pursue the development of our interests in
the mining and mineral rights to properties located in northeastern
Peru.
Exploration
Stage Company
We are
considered an exploration or exploratory stage company because we are involved
in the examination and investigation of land that we believe may contain
valuable minerals, for the purpose of discovering the presence of ore, if any,
and its extent. There is no assurance that a commercially viable mineral deposit
exists on any of the properties underlying our mineral property interests, and a
great deal of further exploration will be required before a final evaluation as
to the economic and legal feasibility for our future exploration is determined.
We have no known reserves of any type of mineral. To date, we have not
discovered an economically viable mineral deposit on any of the properties
underlying our mineral property interests, and there is no assurance that we
will discover one. If we cannot acquire or locate mineral deposits,
or if it is not economical to recover any mineral deposits that we do find, our
business and operations will be materially and adversely affected.
Summary
of our Mineral Property Interests
A
description of each of our options to acquire the mineral and mining rights
underlying properties located in Peru and the conditions that we must meet in
order to exercise these options is set forth in Item 2 of this annual
report.
Effect
of Governmental Regulation on Our Business
We will
be required to comply with all regulations, rules and directives of governmental
authorities and agencies applicable to the exploration of minerals in Peru.
The discussion that follows is a summary of the most significant
government regulations which we anticipate will impact our
operations.
Peru is
located on the western coast of South America and has a population of
approximately 28 million people. It covers a geographic area of
approximately 1.3 million square kilometres and is bordered by Bolivia, Brazil,
Chile, Colombia and Ecuador. Lima is the capital of Peru and its
principal city with a population of approximately 7 million people.
Peru has
become a leading country for mining activities. No special taxes or
registration requirements are imposed on foreign-owned companies and foreign
investment is treated as equal to domestic capital. Peruvian law
allows for full repatriation of capital and profits and the country’s mining
legislation provides access to mining concessions under an efficient
registration system.
Peruvian
Mining Law
Under
Peru’s Uniform Text of Mining Law (“UTM”), the right to explore for and exploit
minerals is granted by the government by way of concessions. A
Peruvian mining concession is a property right, independent from the ownership
of surface land on which it is located. There are no restrictions or
special requirements applicable to foreign companies or individuals regarding
the holding of mining concessions in Peru unless the concessions are within 50
kilometres of Peru's borders. The rights granted by a mining
concession can be transferred, or sold and, in general, may be the subject of
any transaction or contract. Mining concessions may be privately
owned and no state participation is required.
The
application for a mining concession involves the filing of documents before the
mining administrative authority. The mining concession boundaries are
specified in the application documents, with no requirement to mark the
concession boundaries in the field since the boundaries are fixed by UTM
coordinates. In order to conduct exploration or mining activities,
the holder of a mining concession must purchase the surface land required for
the project or reach agreement with the owner for its temporary
use. If any of this is not possible, a legal easement may be
requested from the mining authorities, although these easements have been rarely
granted.
Mining
concessions are irrevocable as long as their holders pay an annual fee of US $3
per hectare and reach minimum production levels within the terms set forth by
law or otherwise pay penalties, as applicable. Non-compliance with
any of these mining obligations for two consecutive years will result in the
cancellation of the mining concession.
Pursuant
to the original legal framework, in force since 1992, holders of mining
concessions are obliged to achieve a minimum production of US $100 per hectare
per year within six years following the year in which the respective mining
concession title is granted. If this minimum production is not reached, as of
the first six months of the seventh year, the holder of the concession shall pay
a US $6 penalty per hectare per year until such production is reached and
penalties increase to US $20 in the twelfth year. Likewise, it is possible to
avoid payment of the penalty if evidence is submitted to the mining authorities
that an amount ten times the applicable penalty or more had been
invested.
However,
this regime has been recently and partially amended providing for, among other
matters, increased minimum production levels, new terms for obtaining such
minimum production, increased penalties in case such minimum production is not
reached, and even the cancellation of mining concessions if minimum production
is not reached within certain terms. Pursuant to this new regime, the
holder of the mining concession should achieve a minimum production of at least
one tax unit (S/. 3,500, approximately US $1,100) per hectare per year, within a
ten-year term following the year in which the mining concession title is
granted. If such minimum production is not reached within the
referred term, the holder of the concession shall pay penalties equivalent to
10% of the tax unit.
If the
minimum production is not reached within a fifteen-year term following the
granting of the concession title, the mining concession shall be cancelled by
the mining authority, unless (i) a qualified force majeure event is evidenced to
and approved by the mining authority, or (ii) by paying the applicable penalties
and concurrently evidencing minimum investments of at least ten times the amount
of the applicable penalties; in which cases the concession may not be cancelled
up to a maximum term of five additional years. If minimum production
is not reached within a twenty-year term following the granting of the
concession title, the concession shall inevitably be cancelled.
This
amended regime is currently applicable to all new mining concessions granted
since October 11, 2008. Regarding those mining concessions existing
prior to such date, the new term for obtaining the increased minimum production
level or otherwise being required to pay the increased penalties pursuant to the
amended regime shall be counted as from the first business day of
2009. Nevertheless, until such new term for obtaining the increased
minimum production level does not expire, the minimum production level, the term
for obtaining such minimum production, the amount of the penalties and the
causes for cancellation of the mining concessions shall continue to be those
provided in the original legal framework existing since 1992.
The
amended regime shall not be applicable to those concessions handed by the
Peruvian State through private investment promotion procedures, which shall
maintain the production and investment obligations contained in their respective
agreements, or to titleholders of concessions with mining stability agreements
in force.
Environmental
Laws
The
Peruvian Ministry of Energy and Mines ("MEM") regulates environmental affairs in
the mining sector, including establishing environmental protection regulations;
while the Office for Supervising Investment in Energy and Mining verifies
environmental compliance and imposes administrative sanctions, although it is
likely that in the near future these functions be assumed by the recently
created Ministry of Environment.
Each
stage of exploration or mining requires some type of authorization or permit,
beginning with an application for an environmental permit for initial
exploration and continuing with an Environmental Impact Assessment ("EIA") for
mining, which includes public hearings.
For
permitting purposes, exploration activities in Peru are classified in two
categories:
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·
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Category
I projects: Mining exploration
activities that comprise any of the following: (i) a maximum of
twenty drilling platforms; (ii) a disturbed area of less than ten hectares
considering drilling platforms, trenches, auxiliary facilities and access
means; and, (iii) the construction of tunnels with a total maximum length
of fifty meters. Holders of these projects must submit an
Environmental Impact Statement (“EIS”) before the MEM, which in principle,
is subject to automatic approval upon its filing, and subject to
subsequent (ex post) review by the latter. Nevertheless, in any
of the following cases, the project shall not be subject to automatic
approval and shall necessarily obtain an express prior approval by MEM,
which should be granted, in principle, within a term of two months since
filing the EIS: (i) the project is located in a protected natural area or
its buffer zone; (ii) the project is oriented to determining the existence
of radioactive minerals; (iii) the platforms, drill holes, trenches,
tunnels or other components would be located within certain specially
environmental sensitive areas specified in the applicable regulations
(e.g., glaciers, springs, water wells, groundwater wells, protection
lands, primary woods, etc.); (iv) the project covers areas where mining
environmental contingencies or non-environmental rehabilitated previous
mining works, already exist.
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·
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Category
II projects: Mining exploration activities that comprise
any of the following: (i) more than twenty drilling platforms; (ii) a
disturbed area of more than ten hectares considering drilling plants,
trenches, auxiliary facilities and access means; and, (iii) the
construction of tunnels over a total length of fifty
meters. These projects require an authorization that are
typically granted once the semi-detailed Environmental Impact Assessment
(EIA) is approved by the MEM. In general, such authorization
should be able to be completed within approximately four
months.
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Before
initiating construction or exploitation activities and before the expansion of
existing operations, an EIA approval should be obtained. This process
of authorization involves public hearings in the place where the project is
located and, in general, should conclude within a term of 120 calendar days,
although such process can require between eight months and one
year.
Holders
of mining activities performing mining exploration are required to conduct
remediation works of disturbed areas, as part of the progressive closure of the
project. Likewise, they are required to undertake the final closure
and post closure actions as set forth in the terms and conditions in the
approved environmental instrument.
If the
holder carries out mining exploration activities involving the removal of more
than 10,000 tonnes of material, or more than 1,000 tonnes of material with a
potential neutralization (“PN”) over potential acidity (“PA”) relation lower
than 3 (PN/PA<3), then they shall be required to file a Mine Closure Plan,
along with the corresponding environmental instrument, as well as to establish a
financial guarantee to secure compliance with such Mine Closure
Plan.
Holders
of mining exploitation activities must file a Mine Closure Plan with the MEM
within one year of the approval of their EIA. The Mine Closure Plan
must be implemented from the beginning of the mining
operation. Semi-annual reports must be filed evidencing compliance
with the Mine Closure Plan. An environmental guarantee covering the
Mine Closure Plan’s estimated costs is also required to be granted.
Mining
Royalties
Peruvian
law requires that concession holders pay a mining royalty as consideration for
the extraction of mineral resources. The mining royalty is payable
monthly on a variable cumulative rate of 1% to 3% of the value of the ore
concentrate or equivalent, calculated in accordance with price quotations in
international markets, subject to certain deductions such as indirect taxes,
insurance, freight and other specified expenses. The mining royalty
payable is determined based on the following schedule: (i) under US $60 million
of annual sales of concentrates: 1% royalty; (ii) in excess of US $60
million and up to US $120 million of annual sales: 2% royalty; and (iii) in
excess of US $120 million of annual sales: 3% royalty.
Competition
We are an
exploration stage mineral resource exploration company that competes with other
mineral resource exploration companies for financing and for the acquisition of
new mineral properties. Many of the mineral resource exploration
companies with whom we compete have greater financial and technical resources
than those available to us. Accordingly, these competitors may be
able to spend greater amounts on acquisitions of mineral properties of merit, on
exploration of their mineral properties and on development of their mineral
properties. In addition, they may be able to afford more geological
expertise in the targeting and exploration of mineral
properties. This competition could result in competitors having
mineral properties of greater quality and interest to prospective investors who
may finance additional exploration and development. This competition
could adversely impact on our ability to achieve the financing necessary for us
to conduct further exploration of our mineral properties. We will
also compete with other mineral exploration companies for financing from a
limited number of investors that are prepared to make investments in mineral
exploration companies. The presence of competing mineral exploration
companies may impact on our ability to raise additional capital in order to fund
our exploration programs if investors are of the view that investments in
competitors are more attractive based on the merit of the mineral properties
under investigation and the price of the investment offered to
investors. We will also compete with other mineral companies for
available resources, including, but not limited to, professional geologists,
camp staff, mineral exploration supplies and drill rigs.
Intellectual
Property
We do not
own, either legally or beneficially, any patent or trademark.
Employees
We have
no full-time employees at the present time. Our sole executive
officer does not devote his services full time to our operations. We
engage contractors from time to time to consult with us on specific corporate
affairs or to perform specific tasks in connection with our exploration
programs. As of December 31, 2009, we engaged two contractors that
provided work to us on a recurring basis.
Research
and Development Expenditures
We have
not incurred any research or development expenditures since our
incorporation.
Subsidiaries
Subsequent
to the year ended December 31, 2009, we acquired a 50% interest in the
issued and outstanding stock of Beardmore Holdings, Inc. ("Beardmore"), a
corporation incorporated under the laws of Panama. The remaining 50%
interest in the issued and outstanding stock of Beardmore is owned by Temasek
Investments Inc., a company incorporated under the laws of
Panama. Beardmore indirectly owns the mineral rights to certain
properties located in Peru held by its subsidiary, Rio Santiago Minerales
S.A.C.
ITEM 1A. Risk
Factors.
You
should carefully consider the following risk factors in evaluating our business
and us. The factors listed below represent certain important factors
that we believe could cause our business results to differ. These
factors are not intended to represent a complete list of the general or specific
risks that may affect us. It should be recognized that other risks
may be significant, presently or in the future, and the risks set forth below
may affect us to a greater extent than indicated. If any of the
following risks occur, our business, financial condition or results of
operations could be materially and adversely affected. You should
also consider the other information included in this Annual Report and
subsequent quarterly reports filed with the SEC.
Risk
Factors
Risks
Associated With Our Business
Our
accountants have raised substantial doubt with respect to our ability to
continue as a going concern.
As noted
in our financial statements, we have incurred a net loss of $9,714,204 for the
period from inception on September 5, 1997 to December 31, 2009 and have
presently no source of revenue. At December 31, 2009, we had a working
capital deficit of $808,681. As of December 31, 2009, we had cash and
cash equivalents in the amount of US $4,214. We will have to raise
additional funds to meet our currently budgeted operating requirements for the
next twelve months.
The audit
report of James Stafford, Chartered Accountants for the fiscal year ended
December 31, 2009 contained a paragraph that emphasizes the substantial doubt as
to our continuance as a going concern. This is a significant risk
that we may not be able to generate or raise enough capital to remain
operational for an indefinite period of time.
We
own the options to acquire certain mining and mineral rights underlying certain
properties and if we fail to perform the obligations necessary to exercise these
options, we will lose our options and cease operations.
We hold
options to acquire certain mining and mineral rights underlying properties
located in northeastern Peru, subject to certain conditions. If we
fail to meet the requirements of the agreement under which we acquired such
options, including any payments or any exploration obligations that we have
regarding these properties, we may lose our right to exercise the options to
acquire certain mining and mineral rights underlying these properties located in
northeastern Peru. If we do not fulfill these conditions, then our
ability to commence or continue operations could be materially limited.
Accordingly, any adverse circumstances that affect the areas covered by these
options and our rights thereto would affect us and your entire investment in
shares of our common stock. If any of these situations were to arise,
we would need to consider alternatives, both in terms of our prospective
operations and for the financing of our activities. Management cannot
provide assurance that we will ultimately achieve profitable operations or
become cash-flow positive, or raise additional debt and/or equity
capital. If we are unable to raise additional capital in the near
future, we will experience liquidity problems and management expects that we
will need to curtail operations, liquidate assets, seek additional capital on
less favorable terms and/or pursue other remedial measures, including ceasing
operations.
We
have a limited operating history and have incurred losses that we expect to
continue into the future.
We have
not yet located any mineral reserve and we have never had any revenues from our
operations. In addition, we have a very limited operating history upon which an
evaluation of our future success or failure can be made. We have only
recently taken steps in a plan to engage in the acquisition of interests in
exploration and development properties in Peru, and it is too early to determine
whether such steps will prove successful. Our business plan is in its
early stages and faces numerous regulatory, practical, legal and other
obstacles. At this early stage of our operation, we also expect to
face the risks, uncertainties, expenses and difficulties frequently encountered
by companies at the start-up stage of their business development. We cannot be
sure that we will be successful in addressing these risks and uncertainties, and
our failure to do so could have a materially adverse effect on our financial
condition.
No
assurance can be given that we will be able to successfully complete the
purchase of mining rights to any properties, including the ones for which we
currently hold options. Our ability to achieve and maintain
profitability and positive cash flow over time will be dependent upon, among
other things, our ability to (i) identify and acquire gold mining properties or
interests therein that ultimately have probable or proven gold reserves, (ii)
sell such gold mining properties or interests to strategic partners or third
parties or commence mining of gold, (iii) produce and sell gold at profitable
margins, and (iv) raise the necessary capital to operate during this possible
extended period of time. At this stage in our development, it cannot
be predicted how much financing will be required to accomplish these
objectives.
We
have no known reserves and we may not find any mineral resources or, if we find
mineral resources, the deposits may be uneconomic or production from those
deposits may not be profitable.
Our due
diligence activities have been limited, and to a great extent, have relied upon
information provided to us by third parties. We have not established
that any of the properties for which we hold options contain adequate amounts of
gold or other mineral reserves to make mining any of the properties economically
feasible to recover that gold or other mineral reserves, or to make a profit in
doing so. If we do not, our business will fail. If we
cannot find economic mineral resources or if it is not economic to recover the
mineral resources, we will have to cease operations.
We
may not have access to all of the supplies and materials we need to begin
exploration that could cause us to delay or suspend operations.
Competition
and unforeseen limited sources of supplies in the industry could result in
occasional spot shortages of supplies, such as explosives, and certain
equipment, such as bulldozers and excavators, that we might need to conduct
exploration. We have not attempted to locate or negotiate with any
suppliers of products, equipment or materials. We will attempt to
locate products, equipment and materials. If we cannot find the
products and equipment we need, we will have to suspend our exploration plans
until we do find the products and equipment we need.
We
do not have enough money to complete our exploration and consequently may have
to cease or suspend our operations unless we are able to raise additional
financing.
We
presently do not have sufficient capital to exercise our options to acquire
interests in property located in Peru. Although management believes
that sources of financing are available to complete the acquisition of these
property interests, no assurance can be given that these financing sources will
ultimately be sufficient. Other forms of financing, if available, may
be on terms that are unfavorable to our stockholders.
As we
cannot assure a lender that we will be able to successfully explore and develop
our mineral properties, we will probably find it difficult to raise debt
financing from traditional lending sources. We have traditionally
raised our operating capital from sales of equity and debt securities, but there
can be no assurance that we will continue to be able to do so. If we cannot
raise the money that we need to continue exploration of our mineral properties,
we may be forced to delay, scale back, or eliminate our exploration activities.
If any of these were to occur, there is a substantial risk that our business
would fail.
Our
success is dependent upon a limited number of people.
The
ability to identify, negotiate and consummate transactions that will benefit us
is dependent upon the efforts of our management team. The loss of the
services of any member of our management could have a material adverse effect on
us.
Our
business will be harmed if we are unable to manage growth.
Our
business may experience periods of rapid growth that will place significant
demands on our managerial, operational and financial resources. In
order to manage this possible growth, we must continue to improve and expand our
management, operational and financial systems and controls, particularly those
related to subsidiaries that will be doing business in Peru. We will
need to expand, train and manage our employee base. We must carefully
manage our mining exploration activities. No assurance can be given
that we will be able to timely and effectively meet such demands.
We
may not be able to attract and retain qualified personnel necessary for the
implementation of its business strategy and gold exploration
programs.
Our
future success depends largely upon the continued service of board members,
executive officers and other key personnel. Our success also depends
on our ability to continue to attract, retain and motivate qualified personnel,
particularly employees, consultants and contractors for our operations in
Peru. Personnel represents a significant asset, and the competition
for such personnel is intense in the gold exploration industry. We
may have particular difficulty attracting and retaining key personnel in the
initial phases of our operations, particularly in Peru.
Our
officers and sole director may have conflicts of interest and do not devote full
time to our operations.
Our
officers and sole director may have conflicts of interest in that they are and
may become affiliated with other mining companies. In addition, our
officers do not devote their full time to our operations. Until such
time that we can afford executive compensation commensurate with that being paid
in the marketplace, our officers will not devote their full time and attention
to our operations. No assurance can be given as to when we will be
financially able to engage our officers on a full-time basis or engage
additional officers.
Because
our officers and sole director are located outside of the United States, you may
have no effective recourse against us or our management for misconduct and may
not be able to enforce judgment and civil liabilities against our officers,
director, experts and agents.
Our sole
director and officers are nationals and/or residents of countries other than the
United States, and all or a substantial portion of such persons' assets are
located outside the United States. As a result, it may be difficult for
investors to enforce within the United States any judgments obtained against our
officers or our sole director, including judgments predicated upon the civil
liability provisions of the securities laws of the United States or any state
thereof.
Risks
Associated With Mining
All
of our properties are in the exploration stage. There is no assurance
that we can establish the existence of any mineral resource on any of our
properties in commercially exploitable quantities. Until we can do so, we cannot
earn any revenues from operations and if we do not do so we will lose all of the
funds that we expend on exploration. If we do not discover any mineral resource
in a commercially exploitable quantity, our business will fail.
We have
not established that any of our properties contain any commercially exploitable
mineral reserve, nor can there be any assurance that we will be able to do so.
If we do not, our business will fail. A mineral reserve is defined by
the Securities and Exchange Commission in its Industry Guide 7 (which can be
viewed over the Internet at http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7)
as that part of a mineral deposit which could be economically and legally
extracted or produced at the time of the reserve determination. The probability
of an individual prospect ever having a “reserve” that meets the requirements of
the Securities and Exchange Commission’s Industry Guide 7 is extremely remote;
in all probability our mineral resource property does not contain any ‘reserve’
and any funds that we spend on exploration will probably be lost.
Even if
we do eventually discover a mineral reserve on one or more of our properties,
there can be no assurance that we will be able to develop our properties into
producing mines and extract those resources. Both mineral exploration and
development involve a high degree of risk and few properties that are explored
are ultimately developed into producing mines. If we do discover
mineral resources in commercially exploitable quantities on any of our
properties, we will be required to expend substantial sums of money to establish
the extent of the resource, develop processes to extract it and develop
extraction and processing facilities and infrastructure.
The
commercial viability of an established mineral deposit will depend on a number
of factors including, by way of example, the size, grade and other attributes of
the mineral deposit, the proximity of the resource to infrastructure such as a
smelter, roads and a point for shipping, government regulation and market
prices. Most of these factors will be beyond our control, and any of them could
increase costs and make extraction of any identified mineral resource
unprofitable.
Mineral
operations are subject to applicable law and government regulation. Even if we
discover a mineral resource in a commercially exploitable quantity, these laws
and regulations could restrict or prohibit the exploitation of that mineral
resource. If we cannot exploit any mineral resource that we might
discover on our properties, our business may fail.
Both
mineral exploration and extraction require permits from various foreign,
federal, state, provincial and local governmental authorities and are governed
by laws and regulations, including those with respect to prospecting, mine
development, mineral production, transport, export, taxation, labor standards,
occupational health, waste disposal, toxic substances, land use, environmental
protection, mine safety and other matters. There can be no assurance
that we will be able to obtain or maintain any of the permits required for the
continued exploration of our mineral properties or for the construction and
operation of a mine on our properties at economically viable
costs. If we cannot accomplish these objectives, our business could
fail.
We
believe that we are in compliance with all material laws and regulations that
currently apply to our activities but there can be no assurance that we can
continue to do so. Current laws and regulations could be amended and
we might not be able to comply with them, as amended. Further, there
can be no assurance that we will be able to obtain or maintain all permits
necessary for our future operations, or that we will be able to obtain them on
reasonable terms. To the extent such approvals are required and are
not obtained, we may be delayed or prohibited from proceeding with planned
exploration or development of our mineral properties.
If
we establish the existence of a mineral reserve on any of our properties, we
will require additional capital in order to develop the property into a
producing mine. If we cannot raise this additional capital, we will not be able
to exploit the reserve and our business could fail.
If we do
discover a mineral reserve on any of our properties, we will be required to
expend substantial sums of money to establish the extent of the reserve, develop
processes to extract it and develop extraction and processing facilities and
infrastructure. Although we may derive substantial benefits from the
discovery of a reserve, there can be no assurance that it will be large enough
to justify commercial operations, nor can there be any assurance that we will be
able to raise the funds required for development on a timely
basis. If we cannot raise the necessary capital or complete the
necessary facilities and infrastructure, our business may fail.
Because
our property interest and exploration activities in Peru are subject to
political, economic and other uncertainties, situations may arise that could
have a significantly adverse material impact on us.
Our
activities in Peru are subject to political, economic and other uncertainties,
including the risk of expropriation, nationalization, renegotiation or
nullification of existing contracts, mining licenses and permits or other
agreements, changes in laws or taxation policies, currency exchange
restrictions, changing political conditions and international monetary
fluctuations. Future government actions concerning the economy,
taxation, or the operation and regulation of nationally important facilities
such as mines could have a significant effect on our plans and on our ability to
operate. No assurance can be given that our plans and operations will
not be adversely affected by future developments in Peru.
Because
we presently do not carry title insurance and do not plan to secure any in the
future, we are vulnerable to loss of title.
We do not
maintain insurance against title. Title on mineral properties and
mining rights involves certain inherent risks due to the difficulties of
determining the validity of certain claims as well as the potential for problems
arising from the frequently ambiguous conveyance history characteristic of many
mining properties. Disputes over land ownership are common,
especially in the context of resource developments. We cannot give
any assurance that title to such properties will not be challenged or impugned
and cannot be certain that we will have or acquire valid title to these mining
properties. The possibility also exists that title to existing
properties or future prospective properties may be lost due to an omission in
the claim of title. As a result, any claims against us may result in
liabilities we will not be able to afford, resulting in the failure of our
business.
Because
we are subject to various governmental regulations and environmental risks, we
may incur substantial costs to remain in compliance.
Our
activities in Peru are subject to Peruvian and local laws and regulations
regarding environmental matters, the abstraction of water, and the discharge of
mining wastes and materials. Any significant mining operations will
have some environmental impact, including land and habitat impact, arising from
the use of land for mining and related activities, and certain impact on water
resources near the project sites, resulting from water use, rock disposal and
drainage run-off. No assurance can be given that such environmental
issues will not cause our operations in the future to fail.
The
Peruvian and/or local government could require us to remedy any negative
environmental impact. The costs of such remediation could cause us to
fail. Future environmental laws and regulations could impose
increased capital or operating costs on us and could restrict the development or
operation of any gold mines.
We have,
and will in the future, engage consultants to assist us with respect to our
operations in Peru. We are beginning to address the various
regulatory and governmental agencies, and the rules and regulations of such
agencies, in connection with the options for the properties in
Peru. No assurances can be given that we will be successful in our
efforts. Further, in order for us to operate and grow our business in
Peru, we need to continually conform to the laws, rules and regulations of such
country and local jurisdiction. It is possible that the legal and
regulatory environment pertaining to the exploration and development of gold
mining properties will change. Uncertainty and new regulations and
rules could dramatically increase our cost of doing business, or prevent us from
conducting its business; both situations could cause us to fail.
Mineral
exploration and development is subject to extraordinary operating risks. We do
not currently insure against these risks. In the event of a cave-in or similar
occurrence, our liabilities may exceed our resources, which could cause our
business to fail.
Mineral
exploration, development and production involves many risks which even a
combination of experience, knowledge and careful evaluation may not be able to
overcome. Our operations will be subject to all the hazards and risks
inherent in the exploration, development and production of resources, including
liability for pollution, cave-ins or similar hazards against which we cannot
insure or against which we may elect not to insure. Any such event could result
in work stoppages and damage to property, including damage to the
environment. We do not currently maintain any insurance coverage
against these operating hazards. The payment of any liabilities that
arise from any such occurrence could cause us to fail.
Mineral
prices are subject to dramatic and unpredictable fluctuations.
We expect
to derive revenues, if any, from the extraction and sale of precious and base
metals such as gold and silver. The price of those commodities has
fluctuated widely in recent years, and is affected by numerous factors beyond
our control including international, economic and political trends, expectations
of inflation, currency exchange fluctuations, interest rates, global or regional
consumptive patterns, speculative activities and increased production due to new
extraction developments and improved extraction and production
methods. The effect of these factors on the price of base and
precious metals, and, therefore, the economic viability of any of our
exploration projects, cannot accurately be predicted.
The
mining industry is highly competitive and there is no assurance that we will
continue to be successful in acquiring property interests. If we cannot continue
to acquire interests in properties to explore for mineral resources, we may be
required to reduce or cease operations.
The
mineral exploration, development, and production industry is largely
unintegrated. We compete with other exploration companies looking for
mineral resource properties. While we compete with other exploration
companies in the effort to locate and license mineral resource properties, we
will not compete with them for the removal or sales of mineral products from our
properties if we should eventually discover the presence of them in quantities
sufficient to make production economically feasible. Readily
available markets exist worldwide for the sale of gold and other mineral
products. Therefore, we will likely be able to sell any gold or
mineral products that we identify and produce.
We
compete with many companies possessing greater financial resources and technical
facilities. This competition could adversely affect our ability to acquire
suitable prospects for exploration in the future as well as our ability to
recruit and retain qualified personnel. Accordingly, there can be no assurance
that we will acquire any interest in additional mineral resource properties that
might yield reserves or result in commercial mining
operations.
Risks
Relating to our Common Stock
Trading on the over-the-counter
bulletin board may be volatile and sporadic, which could depress the market
price of our common stock and make it difficult for our stockholders to resell
their shares.
Our
common stock is quoted on the over-the-counter bulletin board service of the
Financial Industry Regulatory Authority (the “OTCBB”). Trading in
stock quoted on the OTCBB is often thin and characterized by wide fluctuations
in trading prices, due to many factors that may have little to do with our
operations or business prospects. This volatility could depress the
market price of our common stock for reasons unrelated to operating
performance. Moreover, the OTCBB is not a stock exchange, and trading
of securities on the OTCBB is often more sporadic than the trading of securities
listed on a quotation system like Nasdaq or a stock exchange like
Amex. Accordingly, shareholders may have difficulty reselling any of
the shares.
Because
our common stock is quoted and traded on the OTCBB, short selling could increase
the volatility of our stock price.
Short
selling occurs when a person sells shares of stock which the person does not yet
own and promises to buy stock in the future to cover the sale. The
general objective of the person selling the shares short is to make a profit by
buying the shares later, at a lower price, to cover the
sale. Significant amounts of short selling, or the perception that a
significant amount of short sales could occur, could depress the market price of
our common stock. In contrast, purchases to cover a short position may have the
effect of preventing or retarding a decline in the market price of our common
stock, and together with the imposition of the penalty bid, may stabilize,
maintain or otherwise affect the market price of our common stock. As
a result, the price of our common stock may be higher than the price that
otherwise might exist in the open market. If these activities are
commenced, they may be discontinued at any time. These transactions
may be effected on the OTCBB or any other available markets or
exchanges. Such short selling if it were to occur could impact the
value of our stock in an extreme and volatile manner to the detriment of our
shareholders.
We
have never paid dividends and have no plans to in the future.
Holders
of shares of our common stock are entitled to receive such dividends as may be
declared by our board of directors. To date, we have paid no cash
dividends on our shares of common stock and we do not expect to pay cash
dividends on our common stock in the foreseeable future. We intend to
retain future earnings, if any, to provide funds for operation of our
business. Therefore, any return investors in our common stock will
have to be in the form of appreciation, if any, in the market value of their
shares of common stock.
We
have additional securities available for issuance, which, if issued, could
adversely affect the rights of the holders of our common stock.
Our
Articles of Incorporation authorize the issuance of 200,000,000 shares of our
common stock and 200,000,000 shares of blank check preferred
stock. The common stock or blank check preferred stock can be issued
by our board of directors, without stockholder approval. Any future
issuances of our common stock would further dilute the percentage ownership of
our common stock held by public shareholders.
If
we issue shares of blank check preferred stock with superior rights than our
common stock, it could result in the decrease in the value of our common stock
and delay or prevent a change in control of us.
Our board
of directors is authorized to issue up to 200,000,000 shares of blank check
preferred stock. Our board of directors has the power to establish the dividend
rates, liquidation preferences, voting rights, redemption and conversion terms
and privileges with respect to any series of blank check preferred stock. The
issuance of any shares of blank check preferred stock having rights superior to
those of the common stock may result in a decrease in the value or market price
of the common stock. Holders of blank check preferred stock may have
the right to receive dividends, certain preferences in liquidation and
conversion rights. The issuance of blank check preferred stock could,
under certain circumstances, have the effect of delaying, deferring or
preventing a change in control of us without further vote or action by the
shareholders and may adversely affect the voting and other rights of the holders
of common stock.
Because
the SEC imposes additional sales practice requirements on brokers who deal in
our shares that are penny stocks, some brokers may be unwilling to trade them.
This means that you may have difficulty in reselling your shares and may cause
the price of the shares to decline.
Our stock
is a penny stock. The Securities and Exchange Commission has adopted
Rule 15g-9 which generally defines “penny stock” to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established
customers and “accredited investors”. The term “accredited investor”
refers generally to institutions with assets in excess of $5,000,000 or
individuals with a net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with their spouse. The penny stock rules
require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document in a
form prepared by the SEC which provides information about penny stocks and the
nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny
stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer’s account. The bid and offer quotations and the
broker-dealer and salesperson compensation information must be given to the
customer orally or in writing prior to effecting the transaction and must be
given to the customer in writing before or with the customer’s
confirmation. In addition, the penny stock rules require that prior
to a transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser’s written
agreement to the transaction. These disclosure requirements may have
the effect of reducing the level of trading activity in the secondary market for
the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in, and limit the marketability of, our common stock.
In
addition to the “penny stock” rules promulgated by the Securities and Exchange
Commission, FINRA has adopted rules that require that in recommending an
investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior to
recommending speculative, low-priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer’s financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA
believes that there is a high probability that speculative low-priced securities
will not be suitable for at least some customers. The FINRA
requirements make it more difficult for broker-dealers to recommend that their
customers buy our common stock, which may limit your ability to buy and sell our
stock.
Indemnification
of officers and directors.
Our
Articles of Incorporation and Bylaws contain broad indemnification and liability
limiting provisions regarding our officers, directors and employees, including
the limitation of liability for certain violations of fiduciary
duties. Our shareholders therefore will have only limited recourse
against the individuals.
ITEM 1B. Unresolved Staff
Comments.
None.
ITEM 2.
Properties.
Description
of our Mineral Property Interests
Our
properties are located in northeastern Peru and are in the exploration
stage. These properties are without known reserves and the proposed
plan of exploration detailed below is exploratory in nature. These
properties are described below.
Peru
Property
Our
property interests located in Peru are in the exploration
state. These properties are without known reserves and the proposed
plan of exploration detailed below is exploratory in nature. These
properties are described below.
We
entered into a Mineral Right Option Agreement with Temasek Investments Inc.
(“Temasek”), a company incorporated under the laws of Panama, on September 18,
2008 (the “Effective Date”), as amended and supplemented by Amendment No. 1
dated May 12, 2009 (“Amendment No. 1”) and Amendment No. 2 dated February 3,
2010 (“Amendment No. 2”) (collectively, the “Option Agreement”), in order to
acquire four separate options from Temasek, each providing for the acquisition
of a twenty-five percent interest in certain mineral rights (the “Mineral
Rights”) in certain properties in Peru, potentially resulting in our acquisition
of one hundred percent of the Mineral Rights. The Mineral Rights are
currently owned by Rio Santiago Minerales S.A.C. ("Rio
Santiago"). Beardmore Holdings, Inc. ("Beardmore") owns 999 shares of
the 1,000 shares of Rio Santiago that are issued and
outstanding. Temasek owns the single remaining share of Rio
Santiago. Our acquisition of each twenty-five percent interest in the
Mineral Rights is structured to occur through the transfer to us of twenty-five
percent of the outstanding shares of Beardmore upon the exercise of each of the
four options.
A
description of the Mineral Rights is set forth below:
|
Name
|
Area
(ha)
|
Code
|
Title
Nº
|
Owner
|
|
Bianka
1
|
1000
|
01-03905-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Bianka
2
|
1000
|
01-03878-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Bianka
3
|
900
|
01-03879-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Bianka
4
|
1000
|
01-03883-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Bianka
6
|
1000
|
01-03881-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Bianka
7
|
1000
|
01-03888-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dalma
1
|
1000
|
01-03859-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dalma
2
|
1000
|
01-03863-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dalma
3
|
1000
|
01-03857-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dalma
4
|
800
|
01-03865-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dalma
5
|
500
|
01-03866-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dorotea
1
|
1000
|
01-03909-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dorotea
2
|
900
|
01-03906-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dorotea
3
|
1000
|
01-03904-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dorotea
4
|
800
|
01-03908-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dorotea
5
|
1000
|
01-03910-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dorotea
6
|
1000
|
01-03901-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dorotea
7
|
1000
|
01-03899-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
We
exercised the initial twenty-five percent option, which provided for the
acquisition of a twenty-five percent interest in the Mineral Rights, by paying
Temasek a total of $500,000 and issuing 2,500,000 shares of our common stock to
Temasek on or about January 12, 2009 in accordance with the terms of the Option
Agreement.
We
exercised the second twenty-five percent option, which resulted in our
acquisition of an aggregate fifty percent interest in the Mineral Rights, by
paying Temasek a total of $750,000 and issuing 3,500,000 shares of our common
stock to Temasek on or about March 22, 2010 in accordance with the terms of the
Option Agreement.
Under the
terms of the Option Agreement, as amended, we could have exercised the
third, twenty-five percent option, resulting in our acquisition of a
seventy-five percent interest in the Mineral Rights, after fulfilling the
following conditions:
|
·
|
Complete
the exercise of the second, twenty-five percent option, resulting in our
acquisition of a fifty percent interest in the Mineral
Rights;
|
|
·
|
Issuance
of 5,000,000 shares of our common stock to Temasek, or whoever persons
Temasek indicates, by March 5, 2010, which is within 30 days of the
effective date of Amendment No. 2 (which shares were issued on March 9,
2010);
|
|
·
|
Payment
of $250,000 to the order and the direction of Temasek by March 5, 2010,
which is within 30 days of the effective date of Amendment No. 2 (which
payment was made on March 22, 2010);
and
|
|
·
|
Payment
of $1,000,000 to the order and the direction of Temasek on or before
March 18, 2010, which is within eighteen months of the Effective
Date.
|
We could
have exercised the fourth, twenty-five percent option, resulting in our
acquisition of a one hundred percent interest in the Mineral Rights, after
fulfilling the following conditions by March 18, 2010, which is within eighteen
months of the Effective Date:
|
·
|
Exercise
and complete the initial, second, and third, twenty-five percent
options;
|
|
·
|
Payment
of an additional amount $2,500,000 to Temasek;
and
|
|
·
|
Issuance
of 5,500,000 additional shares of common stock to
Temasek.
|
As of the
end of the first quarter of 2010, we did not have sufficient financing to be
able to make the required cash payments to exercise the third and fourth
twenty-five percent options within the time period set forth in the Option
Agreement. We are in negotiations with Temasek to enter into another
amendment to the Option Agreement in order to revise the terms required for us
to exercise the third and fourth twenty-five percent options. There
can be no assurance that we will be successful in amending the Option Agreement
or securing the necessary funding to exercise the third or fourth twenty-five
percent options. In the event that we are unable to enter into
another amendment to the Option Agreement, our ownership interest in the Mineral
Rights would be limited to our fifty percent interest, we would lose our ability
to acquire the third and fourth twenty-five percent options to acquire an
aggregate seventy-five and one hundred percent interest in the Mineral Rights,
respectively, and not be entitled to recover the $250,000 paid and 5,000,000
shares of our common stock issued as partial consideration for the exercise of
the third twenty-five percent option.
If we are
able to complete the acquisition of a one hundred percent interest in the
Mineral Rights, Temasek will hold its single share of Rio Santiago in trust for
our sole benefit and hold the share strictly in accordance with our
instructions.
If we are
able to complete the acquisition of a one hundred percent interest in the
Mineral Rights, Temasek will be entitled to an annual 2.5% net returns
royalty. However, if we pay Temasek $2,000,000 within ninety days of
our acquisition of a one hundred percent interest in the Mineral Rights, Temasek
will only be entitled to an annual 1.5% net returns royalty.
If we
exercise the second, twenty-five percent option, resulting in our acquisition of
a fifty percent interest in the Mineral Rights, but fail to acquire a one
hundred percent interest in the Mineral Rights, the Option Agreement provides
that we and Temasek will form a joint venture for the purpose of placing the
Peru Property into commercial production. In the event that this
condition is satisfied and we enter into a joint venture with Temasek, out
responsibilities under the joint venture would include developing a feasible
mining project and all necessary facilities, and Temasek shall retain a carried
free interest in the mining rights. If we enter into a joint venture
with Temasek, but do not develop a feasible mining project within three years of
the Effective Date (or by September 18, 2011), we will be required to pay
Temasek an advance minimum mining royalty of $500,000 per year, which will be
deducted from Temasek's net return royalty.
Planned
Exploration Program
An
exploration base is being set up in the town of Saramiriza, which is located in
the center of the Manseriche alluvial camp on the western bank of the
Marañón.
Provided
we are successful in securing additional financing, we intend to conduct a
seismic survey along selected lines across the Marañón gravels in order to
define the gravel-bedrock contact. This information is needed to plan a
drilling program and to assist with locating drill collar
positions. The selection of seismic lines will be made on the basis
of interpretation of aerial photos and satellite images, as well as from
reconnaissance-scale mapping of sedimentary features. Scout drilling
utilizing churn drills will be undertaken on favorable areas, and anomalous
zones will be followed up with reverse circulation drilling (Becker) in order to
fully develop resources and reserves.
Provided
we are successful in securing additional financing and before implementing the
drilling plan, we intend to identify the landowners of the plots on which
the mines are located so as to determine who the legal owners or current
occupants are and/or the kind of tenancy or tenancy claim over the surface of
the land, as well as the location of Native or Creole communities within the
project’s area of influence. This process has commenced, but cannot
be completed without securing additional financing.
An
Environmental Impact Report will also be required to be drafted so as to obtain
the Environmental Impact Declaration from the Peruvian Mining Authorities, which
is an essential requirement for any kind of exploration in Peru.
We intend
to collect by backhoe and excavator a number of bulk samples for metallurgical
testing, and to confirm drill results. At the same time, mine
development planning, process design, and other engineering studies will be
conducted with a view to completing a feasibility study within an eighteen month
period. Permitting work will be initiated as early in the exploration
and development cycle as possible, so that trial or pilot dredging can be
started as soon as feasibility has been established. If we are able
to secure sufficient additional financing, we anticipate that we will commence
shortly thereafter the mapping and geophysics with the initial drilling to
follow.
Our
current cash on hand is insufficient to complete any of the activities set forth
in our planned exploration program. If we are unable to secure
additional financing in the near future, we will be forced to postpone the
commencement of our exploration and development program. Provided we
are able to secure additional financing through private equity offerings, we
anticipate that we will incur the following costs for the next twelve
months:
|
Activity
|
USD 000s
|
|
|
MINERAL
PROPERTY COSTS:
|
||
|
Annual
Fee
|
50
|
|
|
Surface
Rights Access
|
15
|
|
|
EXPLORATION
|
||
|
Mapping
|
25
|
|
|
Geophysics
– Seismic
|
50
|
|
|
DRILLING
|
||
|
Churn
Drilling
|
200
|
|
|
TECHNICAL
SERVICES
|
||
|
Consultants
|
90
|
|
|
Personnel
|
100
|
|
|
CAMP
AND FIELD EXPENSES
|
||
|
Camp
|
100
|
|
|
Field
|
75
|
|
|
TRANSPORT
AND LOGISTICS
|
||
|
Air
Transport
|
90
|
|
|
Water
Transport
|
40
|
|
|
Ground
Transport
|
25
|
|
|
EQUIPMENT
& PERMITTING
|
55
|
|
|
COMMUNITY
OUTREACH
|
25
|
|
|
ADMINISTRATION
NEW
BUSINESS
|
75
|
|
|
TOTAL
|
1,015
|
|
We also,
as part of new business activities, intend to focus on seeking additional mining
opportunities, some of which may be mineral deposits that are fully defined and
have already completed the feasibility stage of development and are ready to
produce. In other cases, the mineral deposits we may seek to acquire
may have a significant amount of proven and probable resources with what we
believe to be excellent potential for expansion. We may also seek to
acquire other drill-ready exploration projects that contain little or no proven
resources, as with the options we currently hold to acquire existing mining
projects in Peru, but that are strategically positioned to offer what we
perceive as exceptional potential at a comparatively minimal
expense. In order to acquire any additional mining properties or
exploration projects, we will need to secure additional financing. We
have not made any progress in indentifying any such properties due to our
current financial position and require additional financing to perform the
requisite due diligence and complete the acquisition of any property
interest.
Due to
the extensive and expensive development programs required to prove mineral
resources and reserves, as is typical in the mining business, companies such as
ours sometimes are able to acquire deposits at significant discounts of the
known in-the-ground value of the gold, silver, or other
minerals. In the event that we do locate a commercially
exploitable mineral deposits, we may determine that it is commercially
advantageous to sell our property interests rather than enter into production of
any commercially mineral deposits on the property ourselves.
Location
and Access
The
Mineral Rights are located in the Manseriche and Condercanqui gold camps along
the Rio Marañón in northeastern Peru. These areas lie near the
Manseriche gorge which cuts through the last ridge of hills that marks the
interface between the Andean highlands and the Amazon foreland
basin. These camps straddle the boundary of the Loreto (eastern) and
Amazonas (western) departments of northeastern Peru approximately 350km from the
regional center of Iquitos which lies on the Amazon River.
Both
Iquitos to the east as well as Tarapoto to the south are served with daily
flights from Lima. The project area can be reached from either of these
towns by charter flights while supplies and heavy equipment can be barged in
from either Yurimaguas (on the Rio Huallaga) or Iquitos, or trucked in from
Bagua on a fair weather road to the village of Saramiriza located in the center
of the Manseriche gold camp along the southwestern bank of the Rio
Marañón.
The
general location of the Mineral Rights within Peru is indentified on the map
below:
The
specific location of the Mineral Rights is indentified on the map
below:
Previous
Exploration History
According
to reports publicly available, the first record of gold production from the
Manseriche camp was in the 1940’s, when a German-owned company operated a
dragline on the Rio Marañón river. Since then, Canadian, Brazilian,
Swiss and Peruvian interests have operated various types of equipment on the Rio
Marañón river with various degrees of success.
The most
notable operation was that of a Peruvian company, Monica de Iquitos, who
completed approximately 500 drill holes and established a considerable resource
south of the town of Saramiriza. This work was verified and confirmed
by a Russian government consulting company, Sojuzkarta, which twinned some holes
and took bulk samples by backhoe. Their drill results as well as
those from the collection of bulk samples were used to estimate a grade of
295mg/m3 based on a finess of 850 for correction to pure gold.
Subsequent
studies have indicated that grades tended to increase with depth, and that much
of the gold tends to be considerably fine in size, indicating the possibility of
increased recovery, and therefore grade, with appropriate recovery techniques,
e.g., jigs and bowl concentrators.
Geology
and Mineralization
The
Alegría, Condorcanqui, and Manseriche gold camps form part of the
Marañón-Santiago Alluvial District (see Marañón-Santiago River Basin Map), one
of four major alluvial gold fields in Peru (the others are, Iquitos, Ucayali,
and Madre de Dios-Pando).
Such
large-scale alluvial gold fields tend to form in environments associated with
convergent plate boundaries, particularly at the interface between fold belts
and foreland basins. An essential requirement for the development of
such gold deposits is a gold-rich hinterland and a river system that can
transfer gold from the zone of production in the upper reaches of the drainage
basin, along the main trunk of the river system to the zone of deposition,
usually where the river profile flattens-out at the limit between the highlands
and alluvial plains. The Manseriche camp is indeed located exactly at
such a juncture.
The
Maranon-Santiago drainage basin covers an area of some 120,000 km2 and contains
a number of gold deposits as well as some of the largest gold deposits and gold
mining operations in the world, including Newmont’s Yanacocha (40m oz Au),
Goldfield’s Cerro Corona (which currently produce 350 000 oz Au per annum), and
Kinross’/ Aurelian’s Fruta del Norte deposit (14m oz Au).
The age
of most of the gold mineralization in the highlands of the Marañón-Santiago
river system is tertiary, and specifically Miocene. However,
Eocene-aged tectonism resulted in the formation of the eastern foothills of the
Andes ,which effectively formed a barrier directing all erosion from the
hinterland towards a basin on the western side of the Manseriche
Gorge. Glacial erosion of the gold deposits in the hinterland
resulted in tills and moraines, which were subsequently concentrated in
glacio-fluvial deposits by melting ice and intense rains in interglacial periods
of which a number have been identified in Peru. These sediments were
retained by the eastern fold belt of anticlines. The Pajacuse thrust
event during the Pliocene then led to the breaching of the closed basin and the
subsequent formation of the Manseriche Gorge. This released the
gold-rich glacio-fluvial sediments to be reconcentrated and deposited in the Rio
Marañón flood plain east of the Gorge.
All the
gold that is eroded form the primary deposits in this drainage basin has only
one exit point, and that is through the Manseriche gorge. Moreover,
it is also at this focus point that the fast-running waters from the highlands
are slowed down to a languid pace resulting in the deposition of the high-energy
sedimentary load and its golden cargo. It is the sequence of constant
erosion, glacio-fluvial concentration, fluvial transport, collection in an
intermediate (or series of intermediate) basin(s), and final alluvial
concentration in the Rio Marañón flood plain, that provided the mixing and
concentration which accounts for the regular gold values in the sands and
gravels as indicated by all the work carried out to date.
A map
below detailing the geology in the approximately area of the Mineral Rights is
set forth below:
ITEM 3. Legal
Proceedings.
None.
ITEM 4. Removed.
PART
II
ITEM 5. Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
Market
Prices
Our
common stock is currently quoted on the OTCBB under the symbol
“AZNG.” Prior to June 9, 2008, when we operated under the name
FinMetal Mining Ltd., we were quoted on the OTCBB under the symbol
“FNMM.”
The
following table sets forth the range of high and low bid quotations for our
common stock for each of the periods indicated as reported by the
OTCBB. These quotations below reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions.
|
Fiscal
Year Ended December 31, 2009
|
||
|
High
Bid
|
Low
Bid
|
|
|
Fiscal Quarter
Ended:
|
||
|
March
31, 2009
|
$0.40
|
$0.11
|
|
June
30, 2009
|
$0.18
|
$0.06
|
|
September
30, 2009
|
$0.27
|
$0.11
|
|
December
31, 2009
|
$0.26
|
$0.13
|
|
Fiscal
Year Ended December 31, 2008
|
||
|
High
Bid
|
Low
Bid
|
|
|
Fiscal Quarter
Ended:
|
||
|
March
31, 2008
|
$0.199
|
$0.041
|
|
June
30, 2008
|
$0.95
|
$0.045
|
|
September
30, 2008
|
$0.70
|
$0.20
|
|
December
31, 2008
|
$0.55
|
$0.15
|
Holders
of Common Stock
As of
December 31, 2009, we had approximately ninety-nine (99) holders of record of
our common stock. Several other shareholders hold shares in street
name.
Dividend
Policy
To date,
we have not declared or paid cash dividends on our shares of common
stock. The holders of our common stock will be entitled to
non-cumulative dividends on the shares of common stock, when and as declared by
our board of directors, in its discretion. We intend to retain all
future earnings, if any, for our business and do not anticipate paying cash
dividends in the foreseeable future.
Any
future determination to pay cash dividends will be at the discretion of our
board of directors and will be dependent upon our financial condition, results
of operations, capital requirements, general business conditions and such other
factors as our board of directors may deem relevant.
Securities
Authorized for Issuance under Equity Compensation Plans
Our board
of directors adopted the 2007 Stock Incentive Plan (the “Stock Incentive Plan”)
in April 2007. The number of shares of common stock issuable under
the Stock Incentive Plan was reduced from 10,000,000 shares to 500,000 shares
resulting from the one share-for-twenty shares reverse stock split of our Common
Stock (“reverse split”) which became effective at the close of business on June
6, 2008. As of December 31, 2009, there were no outstanding awards
granted under the Stock Incentive Plan. After an adjustment to give
effect to the reverse split, 500,000 shares remain available under the Stock
Incentive Plan for future equity grants as of December 31, 2009.
The Stock
Incentive Plan authorizes us to grant awards in the form of shares of common
stock, including unrestricted shares of common stock; options to purchase shares
of common stock; stock appreciation rights or similar rights with a fixed or
variable price related to the fair market value of the shares of common stock
and with an exercise or conversion privilege related to the passage of time, the
occurrence of one or more events, or the satisfaction of performance criteria or
other conditions; any other security with the value derived from the value of
the shares of common stock, such as restricted stock and restricted stock units;
deferred stock units; dividend equivalent rights; or any combination of the
foregoing.
The Stock
Incentive Plan allows for the grant of incentive stock options, non-qualified
stock options and restricted stock awards. The exercise price of any
option shall be determined at the time the option is granted by the board of
directors. However, the exercise price may generally not be less than 100
percent of the fair market value of the shares of common stock on the date of
the grant. Each option expires on the date determined by the board of directors,
but not later than ten years after the grant date. The board of directors may
determine in its discretion whether any option shall be subject to vesting and
the terms and conditions of any such vesting. The Stock Incentive
Plan also provides for the immediate vesting of options, as well as authorizes
the board of directors, or any committee thereof, to cancel outstanding options
or to make adjustments to the transfer restrictions on those options in the
event of certain changes in corporate control of the company. Awards,
including options, made under the Stock Incentive Plan are not assignable and
also subject to any restrictions and conditions imposed by the board of
directors, or any committee thereof.
The
following table sets forth certain information regarding the Stock Incentive
Plan as of December 31, 2009:
|
Plan
category
|
|
Number of securities
to
be issued upon
exercise
of outstanding options, warrants
and rights
(a)
|
|
Weighted-average
exercise
price of
outstanding
options,
warrants
and rights
(b)
|
|
Number
of securities
remaining available
for
future
issuance under
equity
compensation plans
(excluding
securities
reflected
in column (a))
(c)
|
|
|
Equity
compensation plans approved by stockholders
|
|
-
|
|
-
|
|
-
|
|
|
Equity
compensation plans not approved by stockholders 1
|
|
-
|
|
-
|
|
500,000
|
|
|
Total
|
|
-
|
|
-
|
|
500,000
|
|
|
|
_______________________
|
|
|
1
|
The
Stock Incentive Plan was approved by our board of directors in April 2007
and 500,000 shares remain available for future awards under the Stock
Incentive Plan as of December 31,
2009.
|
Recent
Issuances of Unregistered Securities
There
were no issuances of securities without registration under the Securities Act of
1933 during the reporting period which were not previously included in a
Quarterly Report on Form 10-Q or Current Report on Form 8-K.
ITEM 6. Selected Financial
Data.
Not
applicable.
ITEM 7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
The
following discussion and analysis should be read in conjunction with the
consolidated financial statements and related notes included elsewhere in this
Annual Report on Form 10-K. This discussion contains forward-looking statements
reflecting our current expectations, estimates and assumptions concerning events
and financial trends that may affect our future operating results or financial
position. Actual results and the timing of events may differ materially from
those contained in these forward-looking statements due to a number of factors,
including those discussed in the sections entitled “Risk Factors” and
“Cautionary Note Regarding Forward-Looking Statements” appearing elsewhere in
this Annual Report on Form 10-K.
Recent
Developments for the Company
Overview
We were
incorporated in the state of Nevada under the name Gondwana Energy, Ltd. on
September 5, 1997, and previously operated under the name FinMetal Mining
Ltd. We are an exploration stage company engaged in the assessment,
acquisition and exploration of mineral properties. We were previously
focused on the acquisition and development of our interests in the mineral
rights on properties located in Finland.
In
September 2008, we reorganized our operations and our current focus is on the
acquisition and development of our interests in the mineral rights on properties
located in Peru. We no longer have any interest in any properties
located in Finland and have allowed our options on these properties to lapse in
order to pursue the development of our interests in the mineral rights on
properties located in Peru. Effective June 6, 2008, we merged with
our wholly-owned subsidiary, Amazon Goldsands Ltd., pursuant to Articles of
Merger that we filed with the Nevada Secretary of State. We decided
to change our name to "Amazon Goldsands Ltd." to better reflect our current
focus on the acquisition and development of the mineral rights on properties
located in South America. We are an exploration-stage company and
there is no assurance that commercially exploitable reserves of gold exists on
any of our property interests. In the event that commercially
exploitable reserves of gold exist on any of our property interests, we cannot
guarantee that we will make a profit. If we cannot acquire or locate
gold deposits, or if it is not economical to recover the gold deposits, our
business and operations will be materially and adversely
affected.
For
the Years Ended December 31, 2009 and 2008
Revenues
We have
not generated any revenues from our operations in either of the past two fiscal
years.
Operating
Expenses
We
reported operating expenses in the amount of $829,031 for the year ended
December 31, 2009, compared to a credit balance of operating expenses of
$964,069 for the year ended December 31, 2008. Operating expenses
were significantly lower for the year ended December 31, 2008, as compared to
the year ended December 31, 2009, as a result of stock-based compensation being
credited back to operations in the amount of $2,048,882 for the year ended
December 31, 2008 attributable the cancellation of stock options during the
reporting period. Excluding consulting and management fees, which
include stock-based compensation, operating expenses for the year ended December
31, 2009 decreased to $458,315 from $1,084,813 for the year ended December 31,
2008.
This decrease
in reported expenses was primarily attributable to a decrease in mineral
property exploration expenditures and expenses associated with investor
communication and promotion activities. We incurred
property exploration expenditures of $191,937, for the year ended December
31, 2009, compared to $380,685 for the year ended December 31,
2008. The decrease in mineral property exploration expenditures
is attributable to management’s decision not to proceed with the exercise of
options to acquire certain mineral property interests located in
Finland. Our expenditures were also lower as a result of our limited
resources during the reporting period. We incurred investor
communication and promotion expenditures of $61,347, for the year ended December
31, 2009, compared to $251,304 for the year ended December 31,
2008. The decrease in investor communication and promotion
expenditures is attributable to management curtailing these expenditures due to
our limited resources.
Other
Items
We
reported other loss of $8,597 for the year ended December 31, 2009 and
other income of $18,996 for the year ended December 31, 2008. Other
income during the year ended December 31, 2008 consisted of interest income,
forgiveness of debt and the expense for the write-down of
assets.
Net
(Income) Loss
We had
net income of $1,482,243 for the year ended December 31, 2009, as compared to
net income of $983,065 for the year ended December 31, 2008. We
had a future income tax recovery of $2,319,871 as a result of applying
previously unrecognized future income tax assets against the future income tax
liability from the acquisition of Beardmore Holdings, Inc.
Liquidity
and Capital Resources
At
December 31, 2009, we had cash and cash equivalents of $4,214, compared to
$492,903 at December 31, 2008, and a working capital deficit of $808,681,
compared to working capital of $186,455 at December 31, 2008. Our
proposed plan of exploration anticipates that we will incur exploration related
expenditures of $1,015,000 over the next twelve months. We will be
required to make a payment of at least $1,000,000 if we are able to increase our
ownership interest in the Mineral Rights from a fifty percent interest to a
seventy-five percent interest and a payment of at least $2,500,000 if we are
able to further increase our interest in the Mineral Rights from a seventy-five
percent interest to a one hundred percent interest. We anticipate
spending approximately $70,000 in ongoing general and administrative expenses
per month for the next twelve months, for a total anticipated expenditure of
$840,000 over the next twelve months. The general and administrative
expenses for the year will consist primarily of professional fees for the audit
and legal work relating to our regulatory filings throughout the year, as well
as transfer agent fees and general office expenses. Our current cash
on hand is insufficient to be able to make our planned exploration expenditures
and to pay for our general administrative expenses over the next twelve
months. Accordingly, we must obtain additional financing in order to
continue our plan of operations during and beyond the next twelve months. We
believe that debt financing will not be an alternative for funding additional
phases of exploration as we have limited tangible assets to secure any debt
financing. We anticipate that additional funding will be in the form of equity
financing from the sale of our common stock. We are currently seeking
additional funding in the form of equity financing from the sale of our common
stock, but cannot provide investors with any assurance that we will be able to
raise sufficient funding from the sale of our common stock to fund our complete
exploration program. In the absence of such financing, we will not be able to
pursue our exploration program and maintain our mineral property interests in
good standing. If we do not fulfill the terms of any of these option
agreements according to our business plan, then our ability to commence or
continue operations could be materially limited. We also may be
forced to abandon our mineral property interests. If we are
unable to raise additional capital in the near future, we will experience
liquidity problems and management expects that we will need to curtail
operations, liquidate assets, seek additional capital on less favorable terms
and/or pursue other remedial measures.
We may
consider entering into a joint venture arrangement to provide the required
funding to explore the properties underlying our mineral property interests. We
have not undertaken any efforts to locate a joint venture participant. Even if
we determine to pursue a joint venture participant, there is no assurance that
any third party would enter into a joint venture agreement with us in order to
fund exploration of the properties underlying our mineral property interests. If
we enter into a joint venture arrangement, we would likely have to assign a
percentage of our interest in our mineral property interests to the joint
venture participant.
Cash
Used in Operating Activities
Operating
activities in the year ended December 31, 2009 and 2008 used cash of $307,740
and $1,790,069, respectively, which reflect our recurring operating
losses. General and administrative expenses, including mineral
property exploration expenditures, for year ended December 31, 2009 was the
primary reason for our negative operating cash flow.
Cash
Used in Investing Activities
For the
year ended December 31, 2009, we used $298,031 in investing activities, as
compared to $288,467 used in investing activities during the year ended December
31, 2008. For the year ended December 31, 2009, we expended $249,422
for the acquisition of mineral rights and $48,609 on mineral property
exploration, as compared to $8,467 for purchase of equipment, $30,000 for
website development costs and $250,000 for the acquisition of mineral rights for
the year ended December 31, 2008.
Cash
from Financing Activities
As we
have had no revenues since inception, we have financed our operations primarily
by using existing capital reserves and through private placements of our
stock. Net cash flows provided by financing activities for the year
ended December 31, 2009 was $117,082, all of which was from received from
subscriptions for shares of our common stock. Net cash flows provided
by financing activities for the year ended December 31, 2008 was $613,583, all
of which was from proceeds from the issuance of common stock.
Off
Balance Sheet Arrangements
We do not
have any off-balance sheet debt nor did we have any transactions, arrangements,
obligations (including contingent obligations) or other relationships with any
unconsolidated entities or other persons that may have material current or
future effect on financial conditions, changes in the financial conditions,
results of operations, liquidity, capital expenditures, capital resources, or
significant components of revenue or expenses.
Going
Concern
We have
incurred net losses for the period from inception on September 5, 1997 to
December 31, 2009 of $9,714,204 and have no source of revenue. The
continuity of our future operations is dependent on our ability to obtain
financing and upon future acquisition, exploration and development of profitable
operations from our mineral properties. These conditions raise
substantial doubt about our ability to continue as a going concern.
Critical
Accounting Policies
In
December 2001, the SEC requested that all registrants list their most “critical
accounting polices” in the Management Discussion and Analysis. The
SEC indicated that a “critical accounting policy” is one which is both important
to the portrayal of a company’s financial condition and results, and requires
management’s most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain. We believe the following critical accounting estimates
affect our more significant judgments and estimates used in the preparation of
our consolidated financial statements:
Cash
and cash equivalents
We
consider all highly liquid instruments with a maturity of three months or less
at the time of issuance to be cash equivalents. As at December 31,
2009, the Company has cash and cash equivalents in the amount of $4,214
(December 31, 2008 – $492,903).
Website
and software development costs
We
recognize the costs incurred in the development of our website in accordance
with ASC 350-50, “Website
Development Costs”. Accordingly, direct costs incurred during
the application stage of development are capitalized and amortized over the
estimated useful life of three years on a straight line basis. Fees
incurred for website hosting are expensed over the period of the
benefit. Costs of operating a website are expensed as
incurred.
Property
and equipment
Furniture,
computer equipment, office equipment and computer software are carried at cost
and are amortized over their estimated useful lives as follows:
Furniture, computer and office
equipment
30%
Computer
software
100%
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 end, we assess 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 consolidated financial statements, we have not established any
proven or probable reserves on our mineral properties and incurred only
acquisition and exploration costs.
Although
we have 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.
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 our commitments to a plan of action based on the then known
facts.
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 December 31, 2009
and 2008, we have no items that represent a comprehensive loss and, therefore,
has not included a schedule of comprehensive loss in the consolidated financial
statements.
Foreign
currency translation
Our
functional and reporting currency is U.S. dollars. The 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 consolidated financial statements, entered into derivative instruments to
offset the impact of foreign currency fluctuations.
Stock-based
compensation
Effective
January 1, 2006, we 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). We adopted ASC 718 using the modified prospective method,
which requires us 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, financial statements for the periods prior to
January 1, 2006 have not been restated to reflect the fair value method of
expensing share-based compensation. Adoption of ASC 718 does
not change the way we account for share-based payments to non-employees, with
guidance provided by ASC 505-50, “Equity-Based Payments to
Non-Employees”.
Basic
and diluted net income (loss) per share
We
compute net income (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 income (loss)
available to common shareholders (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 is
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. We provide for deferred taxes for the estimated future tax
effects attributable to temporary differences and carry-forwards when
realization is more likely than not.
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.
Asset
retirement obligations
We have
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 us to record a
liability for the present value of the estimated site restoration costs with
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 December 31, 2009 and 2008, the Company does 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.
Financial
instruments
The
carrying value of cash and cash equivalents and accounts payable approximates
their fair value because of the short maturity of these
instruments. Our operations are in Peru and Canada and virtually all
of our assets and liabilities are giving rise to significant exposure to
market risks from changes in foreign currency rates. Our financial
risk is the risk that arises from fluctuations in foreign exchange rates and the
degree of volatility of these rates. Currently, we do not use
derivative instruments to reduce its exposure to foreign currency
risk.
International
Financial Reporting Standards
In
November 2008, the Securities and Exchange Commission (“SEC”) issued for comment
a proposed roadmap regarding potential use of financial statements prepared in
accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board. Under the proposed
roadmap, we would be required to prepare financial statements in accordance with
IFRS in fiscal year 2014, including comparative information also prepared under
IFRS for fiscal 2013 and 2012. We are currently assessing the
potential impact of IFRS on our consolidated financial statements and will
continue to follow the proposed roadmap for future developments.
Changes
in Accounting Policies
In June
2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principle – a
replacement of FASB Statement No. 162”. The Codification
reorganized existing U.S. accounting and reporting standards issued by the FASB
and other related private sector standard setter into a single source of
authoritative accounting principles arranged by topic. The
Codification supersedes all existing U.S. accounting standards; all other
accounting literature not included in the Codification (other than Securities
and Exchange Commission guidance for publicly-traded companies) is considered
non-authoritative. The Codification was effective on a prospective
basis for interim and annual reporting periods ending after September 15,
2009. The adoption of the Codification changed our references to GAAP
accounting standards but did not impact our results of operations, financial
position or liquidity.
In May
2009, the FASB issued new guidance for accounting for subsequent
events. The new guidance, which is now part of ASC 855, “Subsequent Events” is
intended to establish general standards of accounting for and disclosure of
events that occur after the balance sheet date, but before financial statements
are issued or are available to be issued. It requires the disclosure
of the date through which an entity has evaluated subsequent events and the
basis for that date. This disclosure should alert all users of
financial statements that an entity has not evaluated subsequent events after
that date in the set of financial statements being presented. The new
guidance was effective on a prospective basis for interim or annual reporting
periods ending after June 15, 2009. The adoption of this guidance did
not have a material impact on our consolidated financial
statements.
In May
2008, the FASB issued new guidance for accounting for convertible debt
instruments that may be settled in cash. The new guidance, which is
now part of ASC 470-20, “Debt
with Conversion and Other Options” requires the liability and equity
components to be separately accounted for in a manner that will reflect the
entity’s nonconvertible debt borrowing rate. We 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. The new
guidance was to be applied retrospectively to all periods presented upon those
fiscal years. The adoption of this guidance did not have a material
impact on our consolidated financial statements.
In April
2008, the FASB issued new guidance for determining the useful life of an
intangible assets. The new guidance, which is now part of ASC 350,
“Intangibles – Goodwill and
Other”. In determining the useful life of intangible assets,
ASC 350 removes the requirement to consider whether an intangible asset can be
renewed without substantial cost of material modifications to the existing terms
and conditions and, instead, requires an entity to consider its own historical
experience in renewing similar arrangements. ASC 350 also requires
expanded disclosure related to the determination of intangible asset useful
lives. The new guidance was effective for financial statements issued
for fiscal years beginning after December 15, 2008. The adoption of
this guidance did not have a material impact on our consolidated financial
statements.
In March
2008, the FASB issued new guidance on the disclosure of derivative instruments
and hedging activities. The new guidance, which is now part of ASC
815, “Derivatives and Hedging
Activities” requires qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about fair value
amounts of, and gains and losses on, derivative instruments, and disclosures
about credit-risk-related contingent features in derivative
agreements. The new guidance was effective prospectively for
financial statements issued for fiscal years beginning after November 15, 2008,
with early application encouraged. The adoption of this guidance did
not have a significant impact on our consolidated financial
statements.
In
December 2007, the FASB issued revised guidance for accounting for business
combinations. The revised guidance, which is now part of ASC 805,
“Business Combinations”
requires the fair value measurement of assets acquired, liabilities assumed and
any noncontrolling interest in the acquiree, at the acquisition date with
limited exceptions. Previously, a cost allocation approach was used
to allocate the cost of the acquisition based on the estimated fair value of the
individual assets acquired and liabilities assumed. The cost
allocation approach treated acquisition-related costs and restructuring costs
that the acquirer expected to incur as a liability on the acquisition date, as
part of the cost of the acquisition. Under the revised guidance,
those costs are recognized in the consolidated statement of income separately
from the business combination. The revised guidance applies to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008. The adoption of this guidance did not have a
material impact on our consolidated financial statements.
In
December 2007, the FASB issued new guidance for accounting for noncontrolling
interests. The new guidance, which is now part of ASC 810, “Consolidation” establishes
accounting and reporting standards for ownership interests in subsidiaries held
by parties other than the parent, the amount of consolidated net income
attributable and to the noncontrolling interest, changes in a parent’s ownership
interest, and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated. The new guidance also establishes
disclosure requirements that clearly identify and distinguishes between the
interests of the parent and the interests of the noncontrolling
owners. The new guidance was effective for fiscal years beginning
after December 15, 2008. The adoption of this guidance did not have a
material effect on our results of operations, financial position or cash
flows.
Recent
Accounting Pronouncements
In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R)”. SFAS No. 167, which amends ASC 810-10, “Consolidation”, prescribes a
qualitative model for identifying whether a company has a controlling financial
interest in a variable interest entity (“VIE”) and eliminates the quantitative
model. The new model identifies two primary characteristics of a
controlling financial interest: (1) provides a company with the power to direct
significant activities of the VIE, and (2) obligates a company to absorb losses
of and/or provides rights to receive benefits from the VIE. SFAS No.
167 requires a company to reassess on an ongoing basis whether it holds a
controlling financial interest in a VIE. A company that holds a
controlling financial interest is deemed to be the primary beneficiary of the
VIE and is required to consolidate the VIE. SFAS No. 167, which is
referenced in ASC 105-10-65, has not yet been adopted into the Codification and
remains authoritative. SFAS No. 167 is effective January 1, 2010. We
do not expect that the adoption of SFAS No. 167 will have a material impact on
our consolidated financial statements.
In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfer of Financial
Assets – an amendment of FASB Statement”. SFAS No. 166 removes
the concept of a qualifying special-purpose entity from ASC 860-10, “Transfers and Servicing”, and
removes the exception from applying ASC 810-10, “Consolidation”. This
statements also clarifies the requirements for isolation and limitations on
portions of financial assets that are eligible for sale
acconting. SFAS No. 166, which is referenced in ASC 105-10-65, has
not yet been adopted into the Codification and remains
authoritative. This statement is effective January 1,
2010. We do not expect that the adoption of SFAS No. 166 will have a
material impact on our consolidated financial statements.
In August
2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, “Fair Value Measurement and
Disclosure (Topic 820) – Measuring Liabilities at Fair Value”, which
provides valuation techniques to measure fair value in circumstances in which a
quoted price in an active market for the identical liability is not
available. The guidance provided in this update is effective January
1, 2010. We do not expect that the adoption of this guidance will
have a material impact on our consolidated financial statements.
Other ASUs that have been issued or proposed by the FASB ASC that do
not require adoption until a future date are not expected to have a material
impact on the consolidated financial statements upon adoption.
ITEM 7A. Quantitative and
Qualitative Disclosures About Market Risk.
Not
applicable.
ITEM 8.
Financial Statements and Supplementary Data.
The
financial statements are listed in Part IV Item 15 of this Annual
Report on Form 10-K and are incorporated by reference in this
Item 8.
ITEM 9.
Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure.
None.
ITEM 9A. Controls and
Procedures.
Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures
Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934. Based on their evaluation as of
December 31, 2009, the end of the period covered by this Annual Report on
Form 10-K, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures were
effective at a reasonable assurance level to ensure that the information
required to be disclosed in reports filed or submitted under the Securities
Exchange Act of 1934, including this Annual Report, were recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms, and was accumulated and communicated to management, including our
principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.
Management’s
Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Our internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:
|
·
|
Pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the
Company;
|
|
·
|
Provide
reasonable assurance that the transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of
management and directors of the Company;
and
|
|
·
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that
could have a material effect on the financial
statements.
|
All
internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of compliance with the
policies or procedures may deteriorate.
In
connection with the filing of our Annual Report on Form 10-K, our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2009. In making this assessment,
our management used the criteria set forth by Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control—Integrated
Framework. Based on our assessment using those criteria,
management believes that, as of December 31, 2009, our internal control
over financial reporting is effective based on those criteria.
This
annual report does not include an attestation report of our Company's registered
public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management's report in
this annual report.
Changes
in Internal Control Over Financial Reporting
There
have been no changes in our internal controls over financial reporting during
the quarter ended December 31, 2009, that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.
ITEM 9B. Other
Information.
None.
PART
III
ITEM 10. Directors,
Executive Officers and Corporate Governance.
The
following information sets forth the names of our current director and executive
officers, their ages and their present positions.
|
Name
|
Age
|
Position
|
Served
Since
|
|
Kenneth
Phillippe
|
58
|
Chief
Executive Officer, Chief Financial Officer, Secretary &
Treasurer
|
2009
|
|
John
Keenan
|
61
|
Vice
President of Exploration
|
2008
|
|
Robert
Van Tassell
|
74
|
Director
|
2006
|
Kenneth
Phillippe. Mr. Phillippe previously served as our Secretary,
Treasurer, Chief Financial Officer and Principal Accounting Officer from October
2006 to September 2008. Mr. Phillippe is a Chartered Accountant with over 25
years experience working with public companies in the capacities of director,
officer, financial advisor or consultant. Mr. Phillippe obtained a Bachelor of
Commerce degree from the University of British Columbia in 1976. He articled
with Thorne Riddell (now KPMG) and obtained his professional accounting
designation in 1981. In 1982, Mr. Phillippe established his own accounting
practice. Between February 2000 and August 2005 he served in various positions
including director, officer and chair of the audit committee of MDX Medical
Inc., a Vancouver-based medical device company. Between January and December
2006, Mr. Phillippe served as chief financial officer of Columbia Goldfields
Ltd., a junior gold mining company that is a reporting company under the
Exchange Act. Since March 2006, Mr. Phillippe has served as Chief Financial
Officer of Exchequer Resource Corp. (TSX-V (NEX)). Since October 2006, Mr.
Phillippe has served as Chief Financial Officer and Secretary of Bold Ventures
Inc., which was listed on the TSX-V on October 29, 2007. In addition, Mr.
Phillippe has served as the Secretary, Treasurer, Chief Financial Officer and
Principal Accounting Officer of Constitution Mining Corp. since May 14, 2009 and
previously held these positions from December 13, 2007 to August 20,
2008.
John
Keenan. Mr. Keenan has served as our Vice President of
Exploration since October 3, 2008. Mr. Keenan has approximately 39
years experience working as a geologist. Mr. Keenan obtained a
Bachelor of Science degree in Geology from the University of London in 1969 and
a Master of Science in Mineral exploration from the Imperial College Royal
School of Mines in London in 1971. Since May 2008, Mr. Keenan has
also served as the Papua New Guinea representative for Tasman Goldfields Ltd.
and is responsible for directing its exploration activities. Since
February 2006, Mr. Keenan has served as an Exploration Manager for Buffalo Gold
Ltd. in Papua New Guinea and is responsible for supervising and directing
exploration activities. From August 2003 to January 2006, Mr. Keenan
served as a contract geologist for Triumph Gold Corporation where his
responsibilities included directing exploration programs for properties located
in Venezuela. Between August 2003 and July 2004, Mr. Keenan worked as
an independent geological and geotechnical consultant for various gold
exploration projects in South America and geotechnical investigations in the
Caribbean islands.
Robert Van Tassell. Mr. Van Tassell has served on our Board of
Directors since December 2006. Mr. Van Tassell has been involved in the Canadian
mining industry for over fifty years. Before retiring from full-time ventures in
1998, he spent the prior sixteen years (1982-1998) as Vice President of
Exploration for the precious metals venture Goldcorp Inc., formerly known as
Dickenson Mines. Exploration teams led by Mr. Van Tassell are credited with such
significant discoveries as the Husky Mine, the Minto copper deposit currently
being mined by Captstone Mining , and more recently, Goldcorp's High Grade Zone.
From 1984 through 1993, Mr. Van Tassell served as a board member of the
Prospectors and Developers Association of Canada (PDAC), including as Chairman
of the PDAC's Program and Environmental Committees. Mr. Van Tassell also served
as a director of the Yukon Chamber of mines for eleven years, two of them as
President. He served four terms on the board of the Northern Resource
Conferences, two of them as Chairman, and has taught introductory and advanced
prospecting courses for the Chamber of Mines. He is a Life Member of the CIM and
a member of the Geological Association of Canada.
Mr. Van
Tassell has been credited with leading the discovery of several mines in Canada
and has served as Vice President of Exploration with a world leading mining
company. Mr. Van Tassell brings to our Board a depth of understanding
as to our company’s business, history and organization and the various
challenges we face in the current economic environment.
Our
Directors are elected annually and hold office until the next annual meeting of
our stockholders or until their successors are elected and
qualified. Officers are elected annually and serve at the discretion of the
Board of Directors. Board vacancies are filled by a majority vote of the
Board.
Family
Relationships
There are
no family relationships between or among the directors, executive officers or
persons nominated or chosen by us to become directors or executive
officers.
Audit
Committee
We do not
have a separately-designated standing audit committee. The Board of
Directors performs the functions of an audit committee, but no written charter
governs the actions of the Board when performing the functions of that would
generally be performed by an audit committee. The Board approves the
selection of our independent accountants and meets and interacts with the
independent accountants to discuss issues related to financial
reporting. In addition, the Board reviews the scope and results of
the audit with the independent accountants, reviews with management and the
independent accountants our annual operating results, considers the adequacy of
our internal accounting procedures and considers other auditing and accounting
matters including fees to be paid to the independent auditor and the performance
of the independent auditor.
For the
fiscal year ending December 31, 2009, the Board:
|
·
|
Reviewed
and discussed the audited consolidated financial statements with
management, and
|
|
·
|
Reviewed
and discussed the written disclosures and the letter from our independent
auditors on the matters relating to the auditor's
independence.
|
Based
upon the Board’s review and discussion of the matters above, the Board
authorized inclusion of the audited consolidated financial statements for
the year ended December 31, 2009 to be included in the Annual Report on Form
10-K and filed with the Securities and Exchange Commission.
Our Board
of Directors examined the Commission's definition of "audit committee financial
expert" and concluded that we do not currently have a person that qualifies as
such an expert. Currently, there is only one director serving on our
Board, and we are not in a position at this time to attract, retain and
compensate additional directors in order to acquire a director who qualifies as
an "audit committee financial expert," but we intend to retain an additional
director who will qualify as such an expert, as soon as reasonably
practicable. While our current director does not meet the
qualifications of an "audit committee financial expert," he has, by virtue of
his past employment experience, knowledge of financial statements, finance, and
accounting, and has significant employment experience involving financial
oversight responsibilities. Accordingly, we believe that our current director
capably fulfills his duties and responsibilities in the absence of such an
expert.
Section 16(a)
Beneficial Ownership Reporting
Section 16(a)
of the Securities Act of 1934, as amended, requires our executive officers and
directors, and persons who own more than ten percent (10%) of our common
stock, to file with the Securities and Exchange Commission reports of ownership
of, and transactions in, our securities and to provide us with copies of those
filings. To our knowledge, based solely on our review of the copies
of such forms received by us, or written representations from certain reporting
persons, we believe that during the year ended December 31, 2009, all
filing requirements applicable to our officers, directors and greater than ten
percent beneficial owners were complied with, with the following exceptions: Mr.
Phillippe failed to file his initial report on Form 3 in a timely fashion during
fiscal 2009.
Code
of Ethics and Conduct
Our Board
of Directors has adopted a Code of Ethics and Conduct
that is applicable to all of our employees, officers and
directors. Our Code
of Ethics and Conduct is intended to ensure that our employees act in
accordance with the highest ethical standards. The Code of Ethics and Conduct
was filed as an exhibit to our Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2005.
ITEM 11. Executive
Compensation.
The
following table presents information concerning the total compensation of the
Company’s Chief Executive Officer, Chief Financial Officer and the other most
highly compensated officers during the last fiscal year (the “Named Executive
Officers”) for services rendered to the Company in all capacities for the years
ended December 31, 2009 and 2008:
Summary
Compensation Table
|
Name
(a)
|
Year
|
Salary
($)
(1)
|
Bonus
($)
(1)
|
Stock
Awards
($)
|
Option
Awards
($)
|
All
Other
Compensation
($)
(2)
|
Total
($)
|
|
Hector
Ponte
Former
CEO, Former President (3)
|
2009
2008
|
-
-
|
-
-
|
-
-
|
-
-
|
58,435
-
|
58,435
-
|
|
Carlos
Stocker
Former
CFO, Former Secretary, Former Treasurer (4)
|
2009
2008
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
|
John
Keenan
Vice
President of Exploration
|
2009
2008
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
|
Gustavo
Janeiro
Former
CFO, Former Secretary, Former Treasurer (5)
|
2009
2008
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
|
Kenneth
Phillippe
CEO,
CFO, Secretary, Treasurer (6)
|
2009
2008
|
-
-
|
-
-
|
-
-
|
-
-
|
37,800
37,830
|
37,800
37,830
|
___________
|
(1)
|
No
executive officers received any salary or bonus during the fiscal years
ended December 31, 2009 or 2008.
|
|
(2)
|
The
amounts listed under the Column entitled “All Other Compensation” in the
“Summary Compensation Table” related to consulting fees paid during
2008.
|
|
(3)
|
Mr.
Ponte served as our Chief Executive Officer from July 24, 2008 until his
resignation on November 9, 2009.
|
|
(4)
|
Mr.
Stocker served as our Chief Financial Officer, Secretary, and Treasurer
from September 18, 2008 until his resignation on June 3,
2009.
|
|
(5)
|
Mr.
Janeiro served as our Chief Financial Officer, Secretary, and Treasurer
from July 2, 2009 until his resignation from this position on November 9,
2009.
|
|
(6)
|
Mr.
Phillippe served as our Treasurer, Chief Financial Officer and Secretary
from October 25, 2006 until his resignation on September 18,
2008. On November 17, 2009, he was appointed as our Chief
Executive Officer, Chief Financial Officer, Principal Executive Officer,
President, Secretary, and
Treasurer.
|
Compensation
Components
Base
Salary. At this time, we do not compensate our executive
officers by the payment of salaries.
Bonuses. At
this time, we do not compensate our executive officers by the payment of bonus
compensation.
Stock
Options. Stock option awards are determined by the Board of
Directors based on numerous factors, some of which include responsibilities
incumbent with the role of each executive to the Company and tenure with the
Company. We did not grant any stock options to our executive officers
during 2009.
At no
time during the last fiscal year was any outstanding option repriced or
otherwise modified. There was no tandem feature, reload feature, or
tax-reimbursement feature associated with any of the stock options we granted to
our executive officers or otherwise.
Other. At
this time, we have no profit sharing plan in place.
Outstanding
Equity Awards at Fiscal Year-End
There
were no outstanding equity awards issued to any of our named executive officers
at December 31, 2009.
Stock
Option Plans
In 2007,
our Board adopted the 2007 Stock Incentive Plan (the “Stock Incentive Plan”).
The Stock Incentive Plan authorizes us to reserve shares for future grants under
it, of which 500,000 shares remain available for issuance.
The Stock
Incentive Plan authorizes us to grant (i) to the key employees incentive
stock options to purchase shares of common stock and non-qualified stock options
to purchase shares of common stock and restricted stock awards, and (ii) to
non-employee directors and consultants’ non-qualified stock options and
restricted stock. The Plan Administrator will administer the Plan by making
recommendations to the board or determinations regarding the persons to whom
options or restricted stock should be granted and the amount, terms, conditions
and restrictions of the awards.
Incentive
stock options granted under the Stock Incentive Plan must have an exercise price
at least equal to 100% of the fair market value of the common stock as of the
date of grant. Incentive stock options granted to any person who owns,
immediately after the grant, stock possessing more than 10% of the combined
voting power of all classes of our stock, or of any parent or subsidiary
corporation, must have an exercise price at least equal to 110% of the fair
market value of the common stock on the date of grant. Non-statutory stock
options may have exercise prices as determined by the Plan
Administrator.
The Plan
Administrator is also authorized to grant restricted stock awards under the
Stock Incentive Plan. A restricted stock award is a grant of shares of the
common stock that is subject to restrictions on transferability, risk of
forfeiture and other restrictions and that may be forfeited in the event of
certain terminations of employment or service prior to the end of a restricted
period specified by the Plan Administrator.
Equity
Compensation Plan Information
as
of December 31, 2009
|
Plan
category
|
Number of securities
to
be issued
upon
exercise of
outstanding options,
warrants
and rights
(a)
|
Weighted-average
exercise
price of
outstanding options,
warrants
and rights
(b)
|
Number of securities
remaining available for
future
issuance under
equity compensation plans
(excluding
securities
reflected
in column (a))
(c)
|
||||||
|
Equity
compensation plans approved by security holders
|
- | $ | - | - | |||||
|
Equity
compensation plans not approved by security holders
|
- | $ | - | 500,000 | |||||
|
Total
|
- | $ | - | 500,000 | |||||
Compensation
of Directors
Our
directors did not receive any compensation for their service during the year
ended December 31, 2009. No options were granted or exercised in
2009.
Employment
Contracts; Termination of Employment and Change-in-Control
Arrangements
We do not
have any employment agreements with any of our executive officers.
ITEM 12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The
following table sets forth, as of April 7, 2010, the number and percentage of
outstanding shares of common stock beneficially owned by (a) each person
known by us to beneficially own more than five percent of such stock,
(b) each director of the Company, (c) each named officer of the
Company, and (d) all our directors and executive officers as a group. We
have no other class of capital stock outstanding.
|
Amount and Nature of Beneficial
Ownership
|
||||||||||
|
Name and Address of Beneficial Owner (1)
|
Shares Owned (2)
|
Options
Exercisable
Within 60 Days (3)
|
Percent
of
Class
|
|||||||
|
Directors
and Executive Officers
|
||||||||||
|
Kenneth
Phillippe
|
0 | - | - | |||||||
|
John
Keenan
|
0 | - | - | |||||||
|
Robert
Van Tassell
|
5,000 | - | * | |||||||
|
All
current directors and executive officers as a group (three
persons)
|
5,000 | - | * | |||||||
|
More
Than 5% Beneficial Owners
|
||||||||||
|
Temasek
Investments Inc.
Suite
1-A, #5
Calle
Eusebio A. Morales
El
Cangrejo, Panama City
Panama
|
2,500,000 | - | 6.8 | % | ||||||
|
*
|
Represents
less than 1% of the class.
|
|
(1)
|
Unless
otherwise provided, the address of each person is c/o Jiron Caracas 2226,
Jesús María, Lima 11, Perú
|
|
(2)
|
Except
as otherwise indicated, all shares shown in the table are owned with sole
voting and investment power.
|
|
(3)
|
This
column represents shares not included in “Shares Owned” that may be
acquired by the exercise of options within 60 days of March 10,
2010.
|
The above
beneficial ownership information is based on information furnished by the
specified persons and is determined in accordance with Rule 13d-3 under the
Exchange Act, as required for purposes of this annual report; accordingly, it
includes shares of Amazon Goldsands Ltd. common stock that are issuable upon the
exercise of stock options exercisable within 60 days of April 7, 2010. Such
information is not necessarily to be construed as an admission of beneficial
ownership for other purposes.
ITEM 13. Certain
Relationships and Related Transactions, and Director
Independence.
Except as
set forth below, none of our directors or executive officers, nor any proposed
nominee for election as a director, nor any person who beneficially owns,
directly or indirectly, shares carrying more than 5% of the voting rights
attached to all of our outstanding shares, nor any members of the immediate
family (including spouse, parents, children, siblings, and in-laws) of any of
the foregoing persons has any material interest, direct or indirect, in any
transaction since the beginning of our last fiscal year on January 1, 2009 or in
any presently proposed transaction which, in either case, has or will materially
affect us.
As
described above in Item 2 of this annual report, we entered into a Mineral Right
Option Agreement with Temasek Investments Inc. (“Temasek”), a company
incorporated under the laws of Panama, on September 18, 2008 (the “Effective
Date”), as amended and supplemented by Amendment No. 1 dated May 12, 2009
(“Amendment No. 1”) and Amendment No. 2 dated February 3, 2010 (“Amendment No.
2”) (collectively, the “Option Agreement”). Pursuant to the Option
Agreement, we acquired four separate options from Temasek, each providing for
the acquisition of a twenty-five percent interest in certain mineral rights (the
"Mineral Rights") in certain properties in Peru (the “Peru Property”)
potentially resulting in our acquisition of one hundred percent of the Mineral
Rights. We exercised the initial option to acquire a twenty-five
percent interest in the Mineral Rights by paying to Temasek a total of $500,000
and issuing to Temasek 2,500,000 shares of our common stock, which resulted in
Temasek owning more than 5% of our common stock. On June 23, 2009, we
issued 3,500,000 shares of our common stock to Temasek and its designees as
partial consideration for the exercise of the second twenty-five percent option
to acquire an aggregate fifty percent interest in the Mineral
Rights. On March 9, 2010 we issued 5,000,000 shares of our common
stock to Temesak and its designees and paid Temasek $1,000,000 on March 22,
2010. In order to acquire one hundred percent of the Mineral Rights,
we will be required to pay Temasek an aggregate of an additional $3,500,000 in
cash and 5,500,000 shares of our common stock.
ITEM 14. Principal
Accounting Fees and Services.
The
following table is a summary of the fees billed to us by James Stafford,
Chartered Accountants and by I Vellmer Inc., Chartered Accountants for
professional services for the fiscal year ended December 31, 2009 and for
professional services for the fiscal year ended December 31,
2008:
|
Fiscal
2009
Fees
|
Fiscal
2008
Fees
|
|||||||
|
Fee
Category
|
||||||||
|
Audit
Fees
|
$ | 34,214 | $ | 46,467 | ||||
|
Audit-Related
Fees
|
- | - | ||||||
|
Tax
Fees
|
- | - | ||||||
|
All
Other Fees
|
- | - | ||||||
|
Total
Fees
|
$ | 34,214 | $ | 46,467 | ||||
Audit
Fees. Consists of fees
billed for professional services rendered for the audit of our consolidated
financial statements and review of the interim consolidated financial statements
included in quarterly reports and services that are normally provided by our
independent registered public accounting firms in connection with statutory and
regulatory filings or engagements.
Audit-Related
Fees. Consists of fees
billed for assurance and related services that are reasonably related to the
performance of the audit or review of our consolidated financial statements and
are not reported under “Audit Fees.” These services include employee benefit
plan audits, accounting consultations in connection with acquisitions, attest
services that are not required by statute or regulation, and consultations
concerning financial accounting and reporting standards.
Tax
Fees. Consists of fees
billed for professional services for tax compliance, tax advice and tax
planning. These services include assistance regarding federal, state and
international tax compliance, tax audit defense, customs and duties, mergers and
acquisitions, and international tax planning.
All Other
Fees. Consists of fees for
products and services other than the services reported above. In fiscal 2009 and
2008, these services included administrative services.
Our
practice is to consider and approve in advance all proposed audit and non-audit
services to be provided by our independent registered public accounting
firm.
The audit
report of James Stafford, Chartered Accountants on the consolidated financial
statements of the Company for the year ended December 31, 2009 did not
contain an adverse opinion or disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope or accounting principles, except that
the audit reports on the consolidated financial statements of the Company for
the fiscal years ended December 31, 2009 and December 31, 2008 contained an
uncertainty about the Company’s ability to continue as a going
concern.
During
our fiscal year ended December 31, 2009, there were no disagreements with
James Stafford, Chartered Accountants, on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures,
which disagreements if not resolved to James Stafford, Chartered Accountants’
satisfaction would have caused it to make reference to the subject matter of
such disagreements in connection with its reports on the consolidated financial
statements for such period. During our fiscal year ended December 31,
2008, there were no disagreements with I Vellmer Inc., Chartered Accountants on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which disagreements if not resolved
to I Vellmer Inc., Chartered Accountants’ satisfaction would have caused it to
make reference to the subject matter of such disagreements in connection with
its report on the consolidated financial statements for such
periods.
During
our fiscal years ended December 31, 2009 and 2008, there were no reportable
events (as described in Item 304(a)(1)(v) of
Regulation S-K).
PART
IV
ITEM 15. Exhibits,
Financial Statement Schedules.
(a)(1)
|
Index
to Financial Statements
|
Page
(s)
|
|||
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|||
|
Financial
Statements:
|
||||
|
Consolidated
Balance Sheets - December 31, 2009 and 2008
|
F-2
|
|||
|
Consolidated
Statements of Operations for the Years Ended December 31, 2009, 2008
and 2007 and from Inception on September 5, 1997 to December 31,
2009
|
F-3
|
|||
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and
2007 and from Inception on September 5, 1997 to December 31,
2009
|
F-4 | |||
|
Consolidated
Statements of Changes in Stockholders’ Equity from Inception on September
5, 1997 to December 31, 2009
|
F-5
|
|||
|
Notes
to Consolidated Financial Statements
|
F-6
|
|||
James Stafford
James
Stafford, Inc.
Chartered
Accountants
Suite 350
– 1111 Melville Street
Vancouver,
British Columbia
Canada
V6E 3V6
Telephone
+1 604 669 0711
Facsimile
+1 604 669 0754
Report
of Independent Registered Public Accounting Firm
To
the Board of Directors and Stockholders of
Amazon
Goldsands Ltd.
We have
audited the accompanying consolidated balance sheet of Amazon Goldsands Ltd. (An
Exploration Stage Company) (the “Company”) as at 31 December 2009, and the
related consolidated statements of operations, cash flows and changes in
stockholders’ equity for the year then ended. These consolidated
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit. The consolidated financial statements of the
Company as of 31 December 2008 and 2007 were audited by other auditors whose
reports dated 31 March 2009 and 4 April 2008, respectively, expressed an
unqualified opinion on those statements.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of 31
December 2009 and the results of its operations, its cash flows and its changes
in stockholders’ equity for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1
to the consolidated financial statements, conditions exist which raise
substantial doubt about the Company’s ability to continue as a going concern
unless it is able to generate sufficient cash flows to meet its obligations and
sustain its operations. Management’s plans regarding those matters
are also described in Note 1. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/
James
Stafford
Chartered
Accountants
Vancouver, Canada
15 March
2010, except for Note 14, as to which the date is 29 March 2010.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Consolidated
Balance Sheets
(Expressed
in U.S. Dollars)
|
As
at
31
December
2009
|
As
at
31
December
2008
|
|||||||
| $ | $ | |||||||
|
Assets
|
||||||||
|
Current
|
||||||||
|
Cash
and cash equivalents (Note 2)
|
4,214 | 492,903 | ||||||
|
Taxes
recoverable
|
- | 4,394 | ||||||
|
Prepaid
expenses and deposit
|
- | 1,962 | ||||||
| 4,214 | 499,259 | |||||||
|
Mineral property interests
(Note 4)
|
7,361,401 | 875,000 | ||||||
|
Property and equipment
(Note 5)
|
17,125 | 25,964 | ||||||
|
Website development cost
(Note 6)
|
10,833 | 24,167 | ||||||
| 7,393,573 | 1,424,390 | |||||||
|
Liabilities
|
||||||||
|
Current
|
||||||||
|
Accounts
payable and accrued liabilities (Note 3)
|
812,895 | 312,804 | ||||||
|
Due to related parties
(Note 8)
|
109,767 | - | ||||||
| 922,662 | 312,804 | |||||||
|
Stockholders’
equity
|
||||||||
|
Common stock (Note
7)
|
||||||||
|
Authorized
|
||||||||
|
200,000,000
common shares, par value $0.00001 and
|
||||||||
|
200,000,000
blank check preferred shares, par value $0.001
|
||||||||
|
Issued
and outstanding
|
||||||||
|
31
December 2009 – 13,103,585 common shares, par value
$0.00001
|
||||||||
|
31
December 2008 – 4,191,252 common shares, par value
$0.00001
|
131 | 42 | ||||||
|
Share subscriptions received in
advance (Note 7)
|
- | 613,583 | ||||||
|
Additional
paid in capital
|
12,809,984 | 11,694,408 | ||||||
|
Deficit,
accumulated during the exploration stage
|
(9,714,204 | ) | (11,196,447 | ) | ||||
| 3,095,911 | 1,111,586 | |||||||
|
Non-controlling interest
(Note 13)
|
3,375,000 | - | ||||||
| 6,470,911 | 1,111,586 | |||||||
| 7,393,573 | 1,424,390 | |||||||
Nature, Basis of Presentation and
Continuance of Operations (Note 1), Commitments (Note 9) and Subsequent Events (Note
14)
The
accompanying notes are an integral part of the consolidated financial
statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Consolidated
Statements of Operations
(Expressed
in U.S. Dollars)
|
For
the period
from
the date
of
inception
on
5
September
1997
to
31
December
2009
(Unaudited)
|
For
the
year
ended
31
December
2009
|
For
the
year
ended
31
December
2008
|
For
the
year
ended
31
December
2007
|
|||||||||||||
| $ | $ | $ | $ | |||||||||||||
|
Expenses
|
||||||||||||||||
|
Amortization
– property and equipment
|
32,484 | 8,839 | 13,777 | 9,004 | ||||||||||||
|
Amortization
– website development cost
|
29,168 | 13,334 | 11,667 | 3,334 | ||||||||||||
|
Bank
charges and interest
|
9,597 | 1,516 | 2,838 | 2,246 | ||||||||||||
|
Consulting
and management fees (recovery) (Note 8)
|
4,931,292 | 370,716 | (2,048,882 | ) | 6,282,962 | |||||||||||
|
Foreign
exchange (gain) loss
|
20,831 | 4,485 | (2,412 | ) | (1,235 | ) | ||||||||||
|
Investor
communication and promotion
|
618,571 | 61,347 | 251,304 | 262,776 | ||||||||||||
|
Office
and administrative (recovery)
|
116,335 | (6,512 | ) | 47,665 | 43,032 | |||||||||||
|
Professional
fees
|
576,211 | 139,927 | 211,165 | 161,509 | ||||||||||||
|
Rent
|
54,416 | 12,000 | 18,806 | 15,438 | ||||||||||||
|
Telephone
|
54,659 | 276 | 19,257 | 30,598 | ||||||||||||
|
Transfer
agent and filing fees
|
42,290 | 5,048 | 4,984 | 10,778 | ||||||||||||
|
Travel
and accommodation
|
377,754 | 1,118 | 105,077 | 172,533 | ||||||||||||
|
Website
maintenance
|
66,000 | 25,000 | 20,000 | 18,000 | ||||||||||||
|
Mineral
property exploration expenditures
|
5,235,144 | 191,937 | 380,685 | 2,583,124 | ||||||||||||
|
Net
operating income (loss) before other items
|
(12,164,752 | ) | (829,031 | ) | 964,069 | (9,594,099 | ) | |||||||||
|
Other
items
|
||||||||||||||||
|
Forgiveness
of debt
|
39,000 | - | 15,000 | - | ||||||||||||
|
Gain
on sale of oil and gas property
|
10,745 | - | - | - | ||||||||||||
|
Interest
income
|
102,561 | - | 9,510 | 82,642 | ||||||||||||
|
Recovery
of expenses
|
4,982 | - | - | - | ||||||||||||
|
Write-down
of incorporation cost
|
(12,500 | ) | - | - | - | |||||||||||
|
Write-down
of assets
|
(14,111 | ) | (8,597 | ) | (5,514 | ) | - | |||||||||
|
Net
operating income (loss) before income taxes
|
(12,034,075 | ) | (837,628 | ) | 983,065 | (9,511,457 | ) | |||||||||
|
Future
income tax recovery
|
2,319,871 | 2,319,871 | - | - | ||||||||||||
|
Net
operating income (loss) and comprehensive income (loss) for the
period
|
(9,714,204 | ) | 1,482,243 | 983,065 | (9,511,457 | ) | ||||||||||
|
Basic and diluted income (loss)
per common share
|
0.15 | 0.39 | (5.40 | ) | ||||||||||||
|
Weighted
average number of common shares
used
in per share calculations
|
10,110,386 | 2,537,534 | 1,762,782 | |||||||||||||
The
accompanying notes are an integral part of the consolidated financial
statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Consolidated
Statements of Cash Flows
(Expressed
in U.S. Dollars)
|
For
the period
from
the date
of
inception
on
5
September
1997
to
31
December
2009
(Unaudited)
|
For
the
year
ended
31
December 2009
|
For
the
year
ended
31
December 2008
|
For
the
year
ended
31
December 2007
|
|||||||||||||
| $ | $ | $ | $ | |||||||||||||
|
Cash
flows used in operating activities
|
||||||||||||||||
|
Net
income (loss) for the period
|
(9,714,204 | ) | 1,482,243 | 983,065 | (9,511,457 | ) | ||||||||||
|
Adjustments
to reconcile income (loss) to net cash used by operating
activities
|
||||||||||||||||
|
Amortization
|
61,652 | 22,173 | 25,444 | 12,338 | ||||||||||||
|
Consulting
fees
|
40,200 | - | - | - | ||||||||||||
|
Forgiveness
of debt
|
(24,000 | ) | - | - | - | |||||||||||
|
Future
income tax recovery
|
(2,319,871 | ) | (2,319,871 | ) | - | - | ||||||||||
|
Gain
on sale of oil and gas property
|
(10,745 | ) | - | - | - | |||||||||||
|
Mineral
property acquisition
|
1,816,000 | - | 3,940 | 536,000 | ||||||||||||
|
Stock-based
compensation (recovery)
|
3,587,000 | - | (2,519,736 | ) | 5,960,016 | |||||||||||
|
Write-down
of assets
|
3,940 | - | - | |||||||||||||
|
Changes
in operating assets and liabilities
|
||||||||||||||||
|
(Increase)
decrease in taxes recoverable
|
- | 4,394 | 14,832 | (4,981 | ) | |||||||||||
|
(Increase)
decrease in exploration program advances
|
- | - | 87,600 | (87,600 | ) | |||||||||||
|
Decrease
in prepaid expenses and deposits
|
- | 1,962 | 3,761 | 58,187 | ||||||||||||
|
Increase
(decrease) in accounts payable and accrued liabilities
|
763,098 | 450,294 | (334,610 | ) | 590,723 | |||||||||||
|
Increase
(decrease) in due to related parties
|
51,065 | 51,065 | (54,365 | ) | (39,198 | ) | ||||||||||
| (5,745,865 | ) | (307,740 | ) | (1,790,069 | ) | (2,485,972 | ) | |||||||||
|
Cash
flows from financing activities
|
||||||||||||||||
|
Shares
subscriptions received in advance
|
- | (613,583 | ) | 613,583 | - | |||||||||||
|
Cost
of repurchase of common stock
|
(1,000 | ) | - | - | - | |||||||||||
|
Proceeds
from issuance of common stock, net of share issue costs
|
6,371,915 | 730,665 | - | 2,832,550 | ||||||||||||
| 6,370,915 | 117,082 | 613,583 | 2,832,550 | |||||||||||||
|
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 exploration
|
(48,609 | ) | (48,609 | ) | - | - | ||||||||||
|
Business
acquisition, net of cash received
|
(499,422 | ) | (249,422 | ) | (250,000 | ) | - | |||||||||
|
Purchase
of equipment
|
(53,550 | ) | - | (8,467 | ) | (37,536 | ) | |||||||||
|
Website
development cost
|
(40,000 | ) | - | (30,000 | ) | - | ||||||||||
| (620,836 | ) | (298,031 | ) | (288,467 | ) | (37,536 | ) | |||||||||
|
Increase
(decrease) in cash and cash equivalents
|
4,214 | (488,689 | ) | (1,464,953 | ) | 309,042 | ||||||||||
|
Cash
and cash equivalents, beginning of period
|
- | 492,903 | 1,957,856 | 1,648,814 | ||||||||||||
|
Cash
and cash equivalents, end of period
|
4,214 | 4,214 | 492,903 | 1,957,856 | ||||||||||||
Supplemental Disclosures with Respect
to Cash Flows (Note 11)
The accompanying notes are an integral part of the consolidated
financial statements.
F -
4
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Consolidated
Statements of Changes in Shareholders’ Equity (Deficiency)
(Expressed
in U.S. Dollars)
|
Number
of
shares
issued
|
Common
stock
|
Additional
paid-in
capital
|
Deferred
stock-based
compensation
|
Share
subscriptions
received
in
advance
|
Deficit,
accumulated
during
the
exploration
stage
|
Total
stockholders’
equity
(deficiency)
|
||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
|
Balance
at 5 September 1997 (inception)
|
- | - | - | - | - | - | - | |||||||||||||||||||||
|
Common
shares issued for cash ($0.25 per share)
|
4,000 | 1 | 999 | - | - | - | 1,000 | |||||||||||||||||||||
|
Net
loss for the period
|
- | - | - | - | - | (2,522 | ) | (2,522 | ) | |||||||||||||||||||
|
Balance
at 30 September 1997
|
4,000 | 1 | 999 | - | - | (2,522 | ) | (1,522 | ) | |||||||||||||||||||
|
Common
shares issued for acquisition of oil and gas properties ($25 per
share)
|
400 | - | 10,000 | - | - | - | 10,000 | |||||||||||||||||||||
|
Common
shares issued for cash ($0.25 per share)
|
4,000 | 1 | 999 | - | - | - | 1,000 | |||||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (1,246 | ) | (1,246 | ) | |||||||||||||||||||
|
Balance
at 30 September 1998
|
8,400 | 2 | 11,998 | - | - | (3,768 | ) | 8,232 | ||||||||||||||||||||
|
Common
shares issued for cash ($25 per share)
|
4,000 | 1 | 99,999 | - | - | 100,000 | ||||||||||||||||||||||
|
Common
shares repurchased for cash ($0.25 per share)
|
(4,000 | ) | (1 | ) | (999 | ) | - | - | - | (1,000 | ) | |||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (9,569 | ) | (9,569 | ) | |||||||||||||||||||
|
Balance
at 30 September 1999
|
8,400 | 2 | 110,998 | - | - | (13,337 | ) | 97,663 | ||||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (34,290 | ) | (34,290 | ) | |||||||||||||||||||
|
Balance
at 30 September 2000
|
8,400 | 2 | 110,998 | - | - | (47,627 | ) | 63,373 | ||||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (14,296 | ) | (14,296 | ) | |||||||||||||||||||
|
Balance
at 30 September 2001
|
8,400 | 2 | 110,998 | - | - | (61,923 | ) | 49,077 | ||||||||||||||||||||
|
Net
income for the year
|
- | - | - | - | - | 10,954 | 10,954 | |||||||||||||||||||||
|
Balance
at 30 September 2002
|
8,400 | 2 | 110,998 | - | - | (50,969 | ) | 60,031 | ||||||||||||||||||||
|
Net
income for the year
|
- | - | - | - | - | 2,387 | 2,387 | |||||||||||||||||||||
|
Balance
at 30 September 2003
|
8,400 | 2 | 110,998 | - | - | (48,582 | ) | 62,418 | ||||||||||||||||||||
|
Common
shares issued for cash ($1.50 per share) and for services ($6 per
share)
|
8,569 | 1 | 62,699 | - | - | - | 62,700 | |||||||||||||||||||||
|
Donated
capital
|
- | - | 5,000 | - | - | - | 5,000 | |||||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (64,175 | ) | (64,175 | ) | |||||||||||||||||||
|
Balance
at 30 September 2004
|
16,969 | 3 | 178,697 | - | - | (112,757 | ) | 65,943 | ||||||||||||||||||||
|
Donated
capital
|
- | - | 3,000 | - | - | - | 3,000 | |||||||||||||||||||||
|
Net
loss for the period
|
- | - | - | - | - | (7,750 | ) | (7,750 | ) | |||||||||||||||||||
|
Balance
at 31 December 2004
|
16,969 | 3 | 181,697 | - | - | (120,507 | ) | 61,193 | ||||||||||||||||||||
|
Common
shares repurchased ($0.25 per share)
|
(4,000 | ) | (1 | ) | (999 | ) | - | - | - | (1,000 | ) | |||||||||||||||||
|
Donated
capital
|
- | - | 8,200 | - | - | - | 8,200 | |||||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (40,652 | ) | (40,652 | ) | |||||||||||||||||||
|
Balance
at 31 December 2005
|
12,969 | 2 | 188,898 | - | - | (161,159 | ) | 27,741 | ||||||||||||||||||||
The
accompanying notes are an integral part of the consolidated financial
statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Consolidated
Statements of Changes in Shareholders’ Equity (Deficiency)
(Expressed
in U.S. Dollars)
|
Number
of
shares
issued
|
Common
stock
|
Additional
paid-in
capital
|
Deferred
stock-based
compensation
|
Share
subscriptions
received
in
advance
|
Deficit,
accumulated
during
the
exploration
stage
|
Non-
controlling
interest
|
Total
stockholders’
equity
(deficiency)
|
|||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
|
Balance
at 31 December 2005
|
12,969 | 2 | 188,898 | - | - | (161,159 | ) | - | 27,741 | |||||||||||||||||||||||
|
Common
shares issued for cash ($0.125 per share)
|
1,200,000 | 12 | 149,988 | - | - | - | - | 150,000 | ||||||||||||||||||||||||
|
Common
shares cancelled
|
(8,467 | ) | (1 | ) | 1 | - | - | - | - | - | ||||||||||||||||||||||
|
Common
shares issued for purchase of Finmetal OY (deemed at $25.60 per
share)
|
50,000 | 1 | 1,279,999 | - | - | - | - | 1,280,000 | ||||||||||||||||||||||||
|
Common
shares issued as stock-based compensation (deemed at $24.80 per
share)
|
97,500 | 1 | 2,417,999 | (2,321,280 | ) | - | - | - | 96,720 | |||||||||||||||||||||||
|
Common
shares issued for cash ($10 per share)
|
279,950 | 2 | 2,799,498 | - | - | - | - | 2,799,500 | ||||||||||||||||||||||||
|
Share
issue costs
|
- | (254,500 | ) | - | - | - | - | (254,500 | ) | |||||||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (2,506,896 | ) | - | (2,506,896 | ) | ||||||||||||||||||||||
|
Balance
at 31 December 2006
|
1,631,952 | 17 | 6,581,883 | (2,321,280 | ) | - | (2,668,055 | ) | - | 1,592,565 | ||||||||||||||||||||||
|
Common
shares issued for cash ($25 per unit) (Note 7)
|
121,800 | 1 | 2,944,578 | - | - | - | - | 2,944,579 | ||||||||||||||||||||||||
|
Share
issue costs
|
- | - | (212,450 | ) | - | - | - | - | (212,450 | ) | ||||||||||||||||||||||
|
Warrants
issued (Note 7)
|
- | - | 100,421 | - | - | - | - | 100,421 | ||||||||||||||||||||||||
|
Common
shares issued as stock-based compensation (deemed at $29 per share) (Note
7)
|
46,250 | 1 | 1,341,249 | (1,341,250 | ) | - | - | - | - | |||||||||||||||||||||||
|
Common
shares issued for finder’s fee for mineral interests (deemed at
$26.80) per share (Notes 4, 7 and 11)
|
20,000 | 1 | 535,999 | - | - | - | - | 536,000 | ||||||||||||||||||||||||
|
Stock-based
compensation
|
- | - | 3,023,282 | 2,936,734 | - | - | - | 5,960,016 | ||||||||||||||||||||||||
|
Stock
awards cancelled
|
(97,500 | ) | (1 | ) | 1 | - | - | - | - | - | ||||||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (9,511,457 | ) | - | (9,511,457 | ) | ||||||||||||||||||||||
|
Balance
at 31 December 2007
|
1,722,502 | 18 | 14,314,963 | (725,796 | ) | - | (12,179,512 | ) | - | 1,409,674 | ||||||||||||||||||||||
|
Stock-based
compensation
(Note 7)
|
- | - | - | 725,796 | - | - | - | 725,796 | ||||||||||||||||||||||||
|
Stock awards
cancelled (Note 7)
|
(31,250 | ) | (1 | ) | 1 | - | - | - | - | - | ||||||||||||||||||||||
|
Stock
options
forfeited
(Note 7)
|
- | - | (3,245,532 | ) | - | - | - | - | (3,245,532 | ) | ||||||||||||||||||||||
|
Common
shares issued for acquisition of mineral rights ($0.25 per share) (Notes
4, 7 and 11)
|
2,500,000 | 25 | 624,975 | - | - | - | - | 625,000 | ||||||||||||||||||||||||
|
Share
subscriptions received in advance
|
- | - | - | - | 613,583 | - | - | 613,583 | ||||||||||||||||||||||||
|
Net
income for the year
|
- | - | - | - | 983,065 | - | 983,065 | |||||||||||||||||||||||||
|
Balance
at 31 December 2008
|
4,191,252 | 42 | 11,694,408 | - | 613,583 | (11,196,447 | ) | - | 1,111,586 | |||||||||||||||||||||||
|
Common
shares issued for cash ($0.15 per unit) (Note 7)
|
5,412,333 | 54 | 811,796 | - | (613,583 | ) | - | - | 198,267 | |||||||||||||||||||||||
|
Share
issue costs
|
- | - | (81,185 | ) | - | - | - | - | (81,185 | ) | ||||||||||||||||||||||
|
Common
shares issued for acquisition of mineral rights ($0.11 per share) (Notes
4, 7 and 11)
|
3,500,000 | 35 | 384,965 | - | - | - | - | 385,000 | ||||||||||||||||||||||||
|
Business
acquisition
|
- | - | - | - | - | - | 3,375,000 | 3,375,000 | ||||||||||||||||||||||||
|
Net
income for the year
|
- | - | - | - | - | 1,482,243 | - | 1,482,243 | ||||||||||||||||||||||||
|
Balance
at 31 December 2009
|
13,103,585 | 131 | 12,809,984 | - | - | (9,714,204 | ) | 3,375,000 | 6,470,911 | |||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
Amazon
Goldsands Ltd. (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 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 23 January 2007, the Company changed its
name to “FinMetal Mining Ltd.”. 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. The Company is currently in the exploration stage.
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, and its planned principle operations have not commenced, and,
accordingly, no revenue has been derived during the organization
period.
The
accompanying 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. The Company also follows ASC 810-10 “Consolidation” and fully
consolidates the assets, liabilities, revenues and expenses of Beardmore
Holdings, Inc. (“Beardmore”), a company incorporated under the law of
Panama. The Company owns a 25% interest in Beardmore. It
recognizes the other owner’s equity under the heading non-controlling interest
(Note 13).
The
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 consolidated financial statements as at 31 December 2009 and for the
year 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 income of $1,482,243
for the year ended 31 December 2009 (31 December 2008 – $983,065) and has a
working capital deficit of $808,681 at 31 December 2009 (31 December 2008 –
working capital of $186,455).
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. As at 31 December 2009, the Company’s assets only consisted
of cash and cash equivalents in the amount of $4,214. Management believes that
the Company’s capital resources are not adequate to continue operating and
maintaining its business strategy for the fiscal year ending 31 December
2010. Because the Company does not have any assets or revenue from
operations, it does not believe it will be able to raise capital from
traditional lending sources. Although the Company has historically
raised capital from sales of equity, there is no assurance that it will be able
to continue to do so. If the Company is unable to raise additional
capital in the near future, due to the Company’s liquidity problems, management
expects that the Company will need to curtail or cease operations. These
consolidated financial statements do not include any adjustments related to the
recoverability and classification of assets or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
|
2.
|
Significant
Accounting Policies
|
The
following is a summary of significant accounting policies used in the
preparation of these consolidated financial statements.
Principles
of consolidation
All
inter-company balances and transactions have been eliminated in these
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. As at 31 December 2009,
the Company has cash and cash equivalents in the amount of $4,214 (31 December
2008 – $492,903).
Website
and software development costs
The
Company recognizes the costs incurred in the development of the Company’s
website in accordance with ASC 350-50, “Website Development
Costs”. Accordingly, direct costs incurred during the
application stage of development are capitalized and amortized over the
estimated useful life of three years on a straight line basis. Fees
incurred for website hosting are expensed over the period of the
benefit. Costs of operating a website are expensed as
incurred.
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 | % |
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.
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 interim 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. The Company has evaluated this Codification and does not
believe it is applicable at this time.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
Mineral
property costs
Mineral
property acquisition costs are initially capitalized as tangible assets when
purchased. At the end of each fiscal quarter end, 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 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.
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.
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 31 December 2009
and 2008, the Company has no items that represent a comprehensive loss and,
therefore, has not included a schedule of comprehensive loss in the consolidated
financial statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
Foreign
currency translation
The
Company’s functional and reporting currency is U.S. dollars. The
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 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, financial statements for the periods prior to 1 January 2006
have not been restated to reflect the fair value method of expensing share-based
compensation. Adoption of ASC 718 does not change the way the Company
accounts for share-based payments to non-employees, with guidance provided by
ASC 505-50, “Equity-Based
Payments to Non-Employees”.
Basic
and diluted net income (loss) per share
The
Company computes net income (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 income (loss)
available to common shareholders (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 is
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.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
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.
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 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 31 December 2009 and 2008, the Company does 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.
Financial
instruments
The
carrying value of cash and cash equivalents and accounts payable approximates
their fair value because of the short maturity of these
instruments. The Company’s operations are in Peru and Canada and
virtually all of its assets and liabilities are giving rise to significant
exposure to market risks from changes in foreign currency rates. 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.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
Comparative
figures
Certain
comparative figures have been adjusted to conform to the current year’s
presentation.
International
Financial Reporting Standards
In
November 2008, the Securities and Exchange Commission (“SEC”) issued for comment
a proposed roadmap regarding potential use of financial statements prepared in
accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board. Under the proposed
roadmap, the Company would be required to prepare financial statements in
accordance with IFRS in fiscal year 2014, including comparative information also
prepared under IFRS for fiscal 2013 and 2012. The Company is
currently assessing the potential impact of IFRS on its consolidated financial
statements and will continue to follow the proposed roadmap for future
developments.
Changes
in accounting policies
In June
2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principle – a
replacement of FASB Statement No. 162”. The Codification
reorganized existing U.S. accounting and reporting standards issued by the FASB
and other related private sector standard setter into a single source of
authoritative accounting principles arranged by topic. The
Codification supersedes all existing U.S. accounting standards; all other
accounting literature not included in the Codification (other than Securities
and Exchange Commission guidance for publicly-traded companies) is considered
non-authoritative. The Codification was effective on a prospective
basis for interim and annual reporting periods ending after 15 September
2009. The adoption of the Codification changed the Company’s
references to GAAP accounting standards but did not impact the Company’s results
of operations, financial position or liquidity.
In May
2009, the FASB issued new guidance for accounting for subsequent
events. The new guidance, which is now part of ASC 855, “Subsequent Events” is
intended to establish general standards of accounting for and disclosure of
events that occur after the balance sheet date, but before financial statements
are issued or are available to be issued. It requires the disclosure
of the date through which an entity has evaluated subsequent events and the
basis for that date. This disclosure should alert all users of
financial statements that an entity has not evaluated subsequent events after
that date in the set of financial statements being presented. The new
guidance was effective on a prospective basis for interim or annual reporting
periods ending after 15 June 2009. The adoption of this guidance did
not have a material impact on the Company’s consolidated financial
statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
In May
2008, the FASB issued new guidance for accounting for convertible debt
instruments that may be settled in cash. The new guidance, which is
now part of ASC 470-20, “Debt
with Conversion and Other Options” 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. The new guidance was to be applied retrospectively to all
periods presented upon those fiscal years. The adoption of this
guidance did not have a material impact on the Company’s consolidated financial
statements.
In April
2008, the FASB issued new guidance for determining the useful life of an
intangible assets. The new guidance, which is now part of ASC 350,
“Intangibles – Goodwill and
Other”. In determining the useful life of intangible assets,
ASC 350 removes the requirement to consider whether an intangible asset can be
renewed without substantial cost of material modifications to the existing terms
and conditions and, instead, requires an entity to consider its own historical
experience in renewing similar arrangements. ASC 350 also requires
expanded disclosure related to the determination of intangible asset useful
lives. The new guidance was effective for financial statements issued
for fiscal years beginning after 15 December 2008. The adoption of
this guidance did not have a material impact on the Company’s consolidated
financial statements.
In March
2008, the FASB issued new guidance on the disclosure of derivative instruments
and hedging activities. The new guidance, which is now part of ASC
815, “Derivatives and Hedging
Activities” requires qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about fair value
amounts of, and gains and losses on, derivative instruments, and disclosures
about credit-risk-related contingent features in derivative
agreements. The new guidance was effective prospectively for
financial statements issued for fiscal years beginning after 15 November 2008,
with early application encouraged. The adoption of this guidance did
not have a significant impact on the Company’s consolidated financial
statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
In
December 2007, the FASB issued revised guidance for accounting for business
combinations. The revised guidance, which is now part of ASC 805,
“Business Combinations”
requires the fair value measurement of assets acquired, liabilities assumed and
any noncontrolling interest in the acquiree, at the acquisition date with
limited exceptions. Previously, a cost allocation approach was used
to allocate the cost of the acquisition based on the estimated fair value of the
individual assets acquired and liabilities assumed. The cost
allocation approach treated acquisition-related costs and restructuring costs
that the acquirer expected to incur as a liability on the acquisition date, as
part of the cost of the acquisition. Under the revised guidance,
those costs are recognized in the consolidated statement of income separately
from the business combination. The revised guidance applies to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after 15 December
2008. The adoption of this guidance did not have a
material impact on the Company’s consolidated financial statements.
In
December 2007, the FASB issued new guidance for accounting for noncontrolling
interests. The new guidance, which is now part of ASC 810, “Consolidation” establishes
accounting and reporting standards for ownership interests in subsidiaries held
by parties other than the parent, the amount of consolidated net income
attributable and to the noncontrolling interest, changes in a parent’s ownership
interest, and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated. The new guidance also establishes
disclosure requirements that clearly identify and distinguishes between the
interests of the parent and the interests of the noncontrolling
owners. The new guidance was effective for fiscal years beginning
after 15 December 2008. The adoption of this guidance did not have a
material effect on the Company’s results of operations, financial position or
cash flows.
Recent
accounting pronouncements
In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R)”. SFAS No. 167, which amends ASC 810-10, “Consolidation”,
prescribes a qualitative model for identifying whether a company has a
controlling financial interest in a variable interest entity (“VIE”) and
eliminates the quantitative model. The new model identifies two
primary characteristics of a controlling financial interest: (1) provides a
company with the power to direct significant activities of the VIE, and (2)
obligates a company to absorb losses of and/or provides rights to receive
benefits from the VIE. SFAS No. 167 requires a company to reassess on
an ongoing basis whether it holds a controlling financial interest in a
VIE. A company that holds a controlling financial interest is deemed
to be the primary beneficiary of the VIE and is required to consolidate the
VIE. SFAS No. 167, which is referenced in ASC 105-10-65, has not yet
been adopted into the Codification and remains authoritative. SFAS
No. 167 is effective 1 January 2010. The Company does not expect that
the adoption of SFAS No. 167 will have a material impact on its consolidated
financial statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfer of Financial Assets
– an amendment of FASB Statement”. SFAS No. 166 removes the concept
of a qualifying special-purpose entity from ASC 860-10, “Transfers and
Servicing”, and removes the exception from applying ASC 810-10, “Consolidation”.
This statement also clarifies the requirements for isolation and limitations on
portions of financial assets that are eligible for sale
accounting. SFAS No. 166, which is referenced in ASC 105-10-65, has
not yet been adopted into the Codification and remains
authoritative. This statement is effective 1 January
2010. The Company does not expect that the adoption of SFAS No. 166
will have a material impact on its consolidated financial
statements.
In August
2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, “Fair
Value Measurement and Disclosure (Topic 820) – Measuring Liabilities at Fair
Value”, which provides valuation techniques to measure fair value in
circumstances in which a quoted price in an active market for the identical
liability is not available. The guidance provided in this update is
effective 1 January 2010. The Company does not expect that the
adoption of this guidance will have a material impact on its consolidated
financial statements.
Other
ASUs that have been issued or proposed by the FASB ASC that do not require
adoption until a future date are not expected to have a material impact on the
consolidated financial statements upon adoption.
|
3.
|
Accounts
Payable and Accrued Liabilities
|
Included
in accounts payable and accrued liabilities as at 31 December 2009
are amounts due to a director and to an officer of the Company of $42,224 (31
December 2008 – $Nil). The amounts are non-interest bearing,
unsecured and due on demand.
Included
in accounts payable and accrued liabilities as at 31 December 2009 is an amount
due to a Company with directors and officers in common with the Company of
$88,435 (31 December 2008 – $30,000). The amount is non-interest
bearing, unsecured and due on demand.
Included
in accounts payable and accrued liabilities as at 31 December 2009 is an advance
received from a former officer of the Company of $28,084 (31 December 2008 –
$28,084). The amount is non-interest bearing, unsecured and has no
fixed terms of repayment.
The
Temasek Properties
Effective
18 September 2008 (the “Effective Date”), the Company entered into a Mineral
Right Option Agreement with Temasek Investments Inc. (“Temasek”), a company
incorporated under the laws of Panama (the “Temasek
Agreement”).
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
Pursuant
to the Temasek Agreement, the Company acquired four separate options from
Temasek, each providing for the acquisition of a 25% interest in certain mineral
rights in Peru potentially resulting in the acquisition of 100% of the mineral
rights (the “Mineral Rights”). The Mineral Rights are owned by Rio
Santiago Minerales S.A.C. (“Rio Santiago”). Beardmore, a wholly-owned
subsidiary of Temasek, owns 999 shares of the 1,000 shares of Rio Santiago that
are issued and outstanding. Temasek owns the single remaining share
of Rio Santiago. The acquisition of each 25% interest in the Mineral
Rights will occur through the transfer to the Company of 25% of the outstanding
shares of Beardmore (Note 13).
The
Company may exercise the initial 25% option to acquire a 25% interest in the
Mineral Rights after fulfilling the following conditions:
|
·
|
Pay
$250,000 (paid) to Temasek on the date the Agreement is
executed;
|
|
·
|
Issue
2,500,000 common shares (issued) of the Company to Temasek within five
business days from the Effective Date (Notes 7 and 11);
and
|
|
·
|
Pay
an additional $250,000 (paid) to Temasek within ninety days of the
Effective Date.
|
The
Company entered into an amending agreement dated 12 May 2009 with Temasek
related to the Temasek Properties, further amended pursuant to an agreement
dated 3 February 2010 (the “Second Amending Temasek
Agreement”). Under the Second Amending Temasek Agreement, the Company
may now exercise the second 25% option resulting in the acquision of a 50%
interest in the Mineral Rights by fulfilling the following conditions as set out
in the Second Amending Temasek Agreement within 30 days from the Effective
Date:
|
·
|
Exercise
and complete the initial 25% option
(completed);
|
|
·
|
Issue
3,500,000 additional common shares of the Company to Temasek (issued)
(Notes 7 and 11); and
|
|
·
|
Pay
an additional $750,000 to Temasek by 5 March 2010 (not paid) (Note
14).
|
The
Company may exercise the third 25% option resulting in the acquisition of a 75%
interest in the Mineral Rights after fulfilling the following conditions by 5
March 2010:
|
·
|
Exercise
and complete the initial and second 25% options (not completed) (Note
14);
|
|
·
|
Pay
an additional $250,000 to Temasek by 5 March 2010 (not paid) (Note 14);
and
|
|
·
|
Issue
5,000,000 additional common shares of the Company to Temasek by 5 March
2010 (not issued) (Note 14);
|
|
·
|
Pay
an additional $1,000,000 to Temasek by 18 March 2010 (not paid) (Note
9).
|
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
The
Company may exercise the fourth and final 25% option resulting in the
acquisition of a 100% interest in the Mineral Rights after fulfilling the
following conditions by 18 March 2010 (Note 9):
|
·
|
Exercise
and complete the initial, second and third 25% options (not
completed);
|
|
·
|
Pay
an additional $2,500,000 to Temasek (not paid);
and
|
|
·
|
Issue
5,500,000 additional common shares of the Company to Temasek (not
issued).
|
Upon the
acquisition of a 100% interest in the Mineral Rights, Temasek will hold its
single share of Rio Santiago in trust for the Company’s sole benefit and hold
the share strictly in accordance with the Company’s instructions. Upon the
Company’s acquisition of a 100% interest in the Mineral Rights, Temasek is
entitled to an annual 2.5% net returns royalty. However, if the
Company pays Temasek $2,000,000 within ninety days of the acquisition of a 100%
interest in the Mineral Rights, Temasek will only be entitled to an annual 1%
net returns royalty.
If the
Company exercises the second 25% option, resulting in the Company’s acquisition
of a 50% interest in the Mineral Rights, and fails to acquire a 100% interest in
the Mineral Rights, the Company and Temasek will form a joint venture in which
the Company will be wholly responsible for developing a feasible mining project
and all necessary facilities and Temasek shall retain a carried free interest in
the mining rights. If the Company does not develop a feasible mining
project within three years from the Effective Date, the Company will be
responsible to pay Temasek an advance minimum mining royalty of $500,000 per
year, which will be deducted from Temasek’s net returns royalty.
Temasek
became a significant shareholder of the Company through the issuance of the
2,500,000 common shares on exercise of the option to acquire the initial 25%
interest in the Mineral Rights and an additional 3,500,000 common shares on
exercise of the partial payment toward the exercise of the option to acquire the
second 25% interest (Note 7).
The
Apofas Properties
Pursuant
to an agreement dated 22 January 2007, the Company had the option to acquire a
100% interest in five mineral concessions, known as the Poronmannikko and
Sarkiahonkangas projects, located in Finland (the “Apofas Agreement”). Under the
terms of the Apofas Agreement, the Company had the right to acquire a 100%
interest in two projects by making cash payments totalling
€1,000,000:
· Initial
payment of €150,000 due on or before 1 April 2007 (paid);
· Second
payment of €150,000 due on or before 1 April 2008 (extended by agreement to 30
April 2008);
· Third
payment of €300,000 due on or before 1 April 2009; and
· Final
payment of €400,000 due on or before 1 April 2010.
Concurrent
with ratification of the Apofas Agreement on 4 May 2007, the Company issued
20,000 common shares as a finder’s fee. The mineral concessions were subject to
a 2% gross proceeds royalty. The Apofas Agreement was signed with a
company controlled by a former president of the Company. During the year ended
31 December 2008, the Company determined not to proceed with the option to
acquire these projects.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
The
Magnus Properties
Pursuant
to an agreement dated 6 October 2006 with Magnus Minerals Oy (“Magnus”), a
company in which the Company’s former president has an ownership interest, the
Company had the option to acquire a 100% interest in four different mineral
properties (Petrovaara, Poskijarvi-Kokka, Rautavaara and Tainiovaara) by paying
option payments for a total of €1,000,000 in cash for each property over a
period of four years (the “Magnus Agreement”). The option payments
were to be paid annually at the beginning of each year as follows:
|
·
|
First
year of €100,000 (paid);
|
|
·
|
Second
year of €100,000;
|
|
·
|
Third
year of €300,000; and
|
|
·
|
Fourth
year of €500,000 per property for a total of €4,000,000 if all four
properties are acquired fully; and by making a work commitment of
€1,000,000 on each property, of which 25% must be conducted
annually.
|
All
properties were subject to a 2% net smelter return.
The first
year payments for all four properties totaling $523,400 (€400,000) were paid
during the year ended 31 December 2006. The due date of the second
option payment of €100,000 with respect to the Rautavaara Property was extended
pursuant to an amendment agreement to 30 April 2008 in consideration of a
€10,000 extension payment (paid) and payment of applicable government and
landowner payments according to Finnish law (paid). The due date for the first
year work commitment of €250,000 with respect to the Rautavaara Property was
extended to 31 August 2008 and the first year work commitment of €250,000 with
respect to the Tainiovarra. The Property was extended to 31 May
2008.
On 11
June 2007, the Company entered into an Option Agreement with Magnus (the “Option
Agreement”), pursuant to which the Company entered into a joint venture to
explore the “Enonkoski area” in Finland primarily for nickel-copper-platinum
group elements.
Under the
terms of the Option Agreement, the Company had the right to acquire ownership
from Magnus of up to a 51% interest in certain claim reservations, and pending
claims comprising the Property as more particularly set forth in the Option
Agreement.
It was
intended that the Company be the operator of the joint venture and can earn a
51% interest in the Property by fulfilling $10,000,000 in work commitments and
€3,000,000 in option payments.
In order
to exercise the option, the Company was required to spend $10,000,000 in work
commitments with minimum expenditures as follows:
|
·
|
$1,800,000
by 30 November 2008;
|
|
·
|
$2,200,000
by 30 November 2009;
|
|
·
|
$2,800,000
by 30 November 2010; and
|
|
·
|
$3,200,000
by 30 November 2011.
|
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
In
addition, the Company was required to make a total of €3,000,000 in option
payments to Magnus over four years as follows:
|
·
|
€30,000
by 22 May 2007 (paid);
|
|
·
|
€270,000
upon execution of the Option Agreement
(paid);
|
|
·
|
€600,000
by 30 November 2008;
|
|
·
|
€900,000
by 30 November 2009; and
|
|
·
|
€1,200,000
by 30 November 2010.
|
During
the year ended 31 December 2008, the Company decided not to exercise the option
with respect to this Property.
|
5.
|
Property
and Equipment
|
|
Net
Book Value
|
||||||||||||||||
|
Cost
|
Accumulated
amortization
|
31
December 2009
|
31
December 2008
|
|||||||||||||
| $ | $ | $ | $ | |||||||||||||
|
Furniture,
computer and office equipment
|
38,505 | 21,380 | 17,125 | 24,464 | ||||||||||||
|
Computer
software
|
8,928 | 8,928 | - | 1,500 | ||||||||||||
| 47,433 | 30,308 | 17,125 | 25,964 | |||||||||||||
During
the year ended 31 December 2009, total additions to property and equipment were
$Nil (31 December 2008 - $8,467).
|
6.
|
Website
Development Cost
|
|
Net
Book Value
|
||||||||||||||||
|
Cost
|
Accumulated
amortization
|
31
December 2009
|
31
December 2008
|
|||||||||||||
| $ | $ | $ | $ | |||||||||||||
|
Website
development
|
40,000 | 29,167 | 10,833 | 24,167 | ||||||||||||
During
the year ended 31 December 2009, total additions to website development were
$Nil (31 December 2008 - $30,000).
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
|
7.
|
Common
Stock
|
Authorized
The total
authorized capital consists of
|
·
|
200,000,000
common shares with par value of
$0.00001
|
|
·
|
200,000,000
blank check preferred shares with par value of
$0.001
|
Issued
and outstanding
As at 31
December 2009, the total issued and outstanding capital stock is 13,103,585
common shares with a par value of $0.00001 per share.
On 23
June 2009, the Company issued 3,500,000 common shares valued at a $385,000
($0.11 per common share) pursuant to the Temasek Agreement (Notes 4 and
11). The fair value is equal to the market price of the Company’s
stock on the date of the transaction.
On 8 May
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.
On 31
March 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, a total of 167,500 stock options
expired.
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
(Notes 4 and 11). 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 2008, the Company completed a one new for twenty old
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 consolidated
financial statements.
During
the year ended 31 December 2007, the Company issued 121,800 units at a price of
$25 per share for proceeds of $2,832,550, net of share issue costs of
$212,450. Each unit consists of one share of common stock with par
value $0.00001 and one-half share purchase warrant. Each full share purchase
warrant entitles the holder to purchase one common share at a price of $35 up to
17 April 2008. As at 31 December 2007, all of the related share
purchase warrants in this series remain outstanding. During the year
ended 31 December 2008, all of the related share purchase warrants in
this series expired.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
During
the year ended 31 December 2007, the Company granted 37,500 restricted shares at
a deemed price of $29 per share to officers and directors of the
Company. The deemed price is equal to the market price of the
Company’s stock on the date of the transaction. During the year ended
31 December 2008, 30,000 restricted shares were cancelled and returned to
treasury. Fifty percent of the remaining 7,500 shares vested during
the year ended 31 December 2008 and the balance have been deemed to have
vested. The related stock-based compensation of $705,365 has been
recorded in the consolidated statement of operations during the year ended 31
December 2008.
During
the year ended 31 December 2007, the Company granted 8,750 restricted shares at
a deemed price of $3.60 per share to consultants of the Company. The deemed
price is equal to the market price of the Company’s stock as of 31 December
2007. During the year ended 31 December 2008, 1,250 restricted shares
were cancelled and returned to treasury. Fifty percent of the
remaining shares vested during the year ended 31 December 2008 and the balance
have been deemed to have vested. The related stock-based compensation
of $20,431 has been recorded in the consolidated statement of operations during
the year ended 31 December 2008.
Stock
options
As at 31 December 2009, there are Nil
incentive stock options outstanding (31 December 2008 – Nil).
During
the year ended 31 December 2007, the Company granted 167,500 incentive stock
options to officers, directors and consultants of the Company to purchase common
stock 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 Stock Incentive Plan (the
“Plan”). As at 31 December 2007, all of the related stock options in
this series remain outstanding.
During
the year ended 31 December 2007, the Company adopted 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 2008, all of the related stock options in this series
were forfeited.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
The
following is a summary of option activities during the years ended 31 December
2009 and 2008:
|
Number
of options
|
Weighted
average exercise price
|
|||||||
| $ | ||||||||
|
Outstanding
and exercisable at 1 January 2009
|
- | - | ||||||
|
Granted
|
- | - | ||||||
|
Exercised
|
- | - | ||||||
|
Expired
|
- | - | ||||||
|
Outstanding
and exercisable at 31 December 2009
|
- | - | ||||||
|
Weighted
average fair value of options granted during the year
|
- | |||||||
|
Outstanding
and exercisable at 1 January 2008
|
167,500 | 25.00 | ||||||
|
Granted
|
- | - | ||||||
|
Exercised
|
- | - | ||||||
|
Expired
|
(167,500 | ) | (25.00 | ) | ||||
|
Outstanding
and exercisable at 31 December 2008
|
- | - | ||||||
|
Weighted
average fair value of options granted during the year
|
- |
Warrants
As at 31
December 2009, there are Nil warrants outstanding (31 December 2008 –
Nil).
During
the year ended 31 December 2007, as part of the 121,800 unit private placement,
the Company issued 60,900 share purchase warrants. Each share
purchase warrant entitles the holder to purchase one common share at a price of
$35 up to 17 April 2008. As at 31 December 2007, all of the related
share purchase warrants in this series remain outstanding. During the
year ended 31 December 2008, all of the related share purchase warrants in this
series expired.
During
the year ended 31 December 2007, the Company issued 8,358 agent compensation
warrants for services rendered by a private placement agent. Each
warrant entitles the holder to purchase one common share at a price of $35 up to
17 April 2008. As at 31 December 2007, all of the related share
purchase warrants in this series remain outstanding. During the year
ended 31 December 2008, all of the related share purchase warrants in this
series expired.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
The
following is a summary of warrant activities during the years ended 31 December
2009 and 2008:
|
Number
of warrants
|
Weighted
average exercise price
|
|||||||
| $ | ||||||||
|
Outstanding
and exercisable at 1 January 2009
|
- | - | ||||||
|
Granted
|
- | - | ||||||
|
Exercised
|
- | - | ||||||
|
Expired
|
- | - | ||||||
|
Outstanding
and exercisable at 31 December 2009
|
- | - | ||||||
|
Weighted
average fair value of warrants granted during the year
|
- | |||||||
|
Outstanding
and exercisable at 1 January 2008
|
69,258 | 35.00 | ||||||
|
Granted
|
- | - | ||||||
|
Exercised
|
- | - | ||||||
|
Expired
|
(69,258 | ) | (35.00 | ) | ||||
|
Outstanding
and exercisable at 31 December 2008
|
- | - | ||||||
|
Weighted
average fair value of warrants granted during the year
|
- |
|
8.
|
Related
Party Transactions
|
As at 31
December 2009, the amount due to related parties consists of $109,767 (31
December 2008 - $Nil) payable to companies controlled by shareholders and/or
directors of Rio Santiago.
During
the year ended 31 December 2009, the Company paid or accrued $58,435 (31
December 2008 – $253,702) for consulting and management fees to former officers
and directors of the Company.
During
the year ended 31 December 2009, the Company paid or accrued $37,800 (31
December 2008 – $37,830) to a current officer of the Company.
During
the year ended 31 December 2009, the Company paid or accrued $8,595 (31 December
2008 – $11,731) consulting fees to a current director of the
Company.
During
the year ended 31 December 2009, the Company paid or accrued $Nil (31 December
2008 – $25,486) for consulting fees included in mineral property exploration
expenditures, to a company controlled by a former officer of the
Company.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
|
9.
|
Commitments
|
|
a.
|
During
the year ended 31 December 2008, the Company entered into a one-year
contract for consulting services, commencing 1 October 2008, with a party
to provide investor relation services for a monthly payment of
$10,000. This contract was terminated effective 31 May
2009.
|
|
b.
|
During
the year ended 31 December 2008, the Company entered into a one-year
contract for consulting services, commencing 1 June 2008, with a party to
provide investor relations services for a monthly payment of $10,000. This
contract was terminated effective 30 June
2009.
|
|
c.
|
The
Company is subject to certain outstanding and future commitments related
to the Temasek Agreement (Note 4). The Company is in the process of
renegotiating the terms of the Temasek
Agreement.
|
Prior to
the operations of acquisition and exploration of mineral properties, the
Company’s areas of operations were primarily in Canada. 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. As at 31 December 2009, the Company does not have any
material assets outside of South America.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
|
11.
|
Supplemental Disclosures with
Respect to Cash Flows
|
|
For
the
period
from
the
date of
inception
on 5 September
1997
to
31
December
2009
(Unaudited)
|
For
year
ended
31
December
2009
|
For
year
ended
31
December
2008
|
For
the
year
ended
31
December
2007
|
|||||||||||||
| $ | $ | $ | $ | |||||||||||||
|
Supplemental
cash flows information
|
||||||||||||||||
|
Interest
expense
|
1,906 | - | - | - | ||||||||||||
|
Foreign
exchange (gain) loss
|
20,832 | 4,486 | (2,412 | ) | (1,235 | ) | ||||||||||
|
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 | - | - | 100,421 | ||||||||||||
|
Common
shares issued for finder’s fee for mineral property interests ($26.80 per
share)
|
536,000 | - | - | 536,000 | ||||||||||||
|
Common
shares issued for acquisition of mineral rights (deemed at $0.25 per
share)
|
625,000 | - | 625,000 | - | ||||||||||||
|
Common
shares issued for acquisition of mineral rights (deemed at $0.11 per
share)
|
385,000 | 385,000 | - | - | ||||||||||||
During
the year ended 31 December 2009, the Company accrued interest expense of $Nil
(31 December 2008 – $Nil) related to unpaid amount of the Temasek option payment
(Note 4).
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
|
12.
|
Income
Taxes
|
The
Company has losses carried forward for income tax purposes to 31 December
2009. The Company has fully reserved for any benefits of these
losses. The deferred tax consequences of temporary differences in
reporting items for financial statement and income tax purposes are recognized,
as appropriate. Realization of the future tax benefits related to the deferred
tax assets is dependent on many factors, including the Company’s ability to
generate taxable income within the net operating loss carry-forward
period. Management has considered these factors in reaching its
conclusion as to the valuation allowance for financial reporting
purposes.
The
provision for refundable federal income tax consists of the
following:
|
For
the
year
ended
31
December
2009
|
For
the
year
ended
31
December
2008
|
|||||||
| $ | $ | |||||||
|
Refundable
federal tax asset (liability) attributable to:
|
||||||||
|
Current
operations
|
(283,923 | ) | (554,106 | ) | ||||
|
Contributions
to capital by related parties
|
- | - | ||||||
|
Less:
Change in valuation allowance
|
(2,035,948 | ) | 554,106 | |||||
|
Future
income tax recovery
|
2,319,871 | - | ||||||
The
composition of the Company’s deferred tax assets as at 31 December 2009 and 2008
are as follows:
|
As
at
31
December
2009
|
As
at
31
December
2008
|
|||||||
| $ | $ | |||||||
|
Net
income tax operating loss carryforward
|
5,305,056 | 4,467,428 | ||||||
|
Statutory
federal income tax rate
|
26% - 34 | % | 26% - 34 | % | ||||
|
Future
income tax assets (liabilities)
|
470,644 | 2,506,592 | ||||||
|
Less:
Valuation allowance
|
(470,644 | ) | (2,506,592 | ) | ||||
|
Future
income tax assets (liabilities)
|
- | - | ||||||
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
|
13.
|
Interest
in Variable Interest Entity
|
In
January 2009, the Company acquired a 25% interest in Beardmore, the registered
owner of 999 shares of the 1,000 shares of Rio Santiago that are issued and
outstanding. Rio Santiago is the beneficial owner of 100% interest in
certain mineral rights in Peru. The aggregate purchase price was
$1,125,000, in which the Company paid $500,000 in cash and issued 2,500,000
common shares valued at $625,000 (Note 7). The acquisition of Beardmore expands
the Company’s business of acquiring and exploring mineral
properties. The Company also has the exclusive right to purchase the
remaining 75% share interest in Beardmore, upon certain terms and conditions
(Note 4).
The
Company follows ASC 810-10 and fully consolidates the assets, liabilities,
revenues and expenses of Beardmore. A valuation of certain assets was
completed and the Company internally determined the fair value of others assets
and liabilities. In determining the fair value of acquired assets,
standard valuation techniques were used including market and income
approach.
The
purchase price allocation has been determined as follows:
|
Assets
purchased:
|
||||
|
Cash
and cash equivalents
|
$ | 578 | ||
|
Mineral
property interests
|
6,927,792 | |||
|
Total
assets acquired
|
$ | 6,928,370 | ||
|
Liabilities
assumed:
|
||||
|
Accounts
payable and accrued liabilities
|
$ | 49,797 | ||
|
Due
to related parties
|
58,702 | |||
|
Future
income tax liabilities
|
2,319,871 | |||
|
Total
liabilities assumed
|
$ | 2,428,370 | ||
|
Non-controlling
interest:
|
$ | 3,375,000 | ||
|
Purchase
price
|
$ | 1,125,000 | ||
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
31
December 2009
Pro
forma information
The
following unaudited consolidated pro forma financial information presents the
combined results of operations of the Company and Beardmore for the years ended
31 December 2009 and 2008 as if the acquisition had occurred at 1 January
2008:
|
Unaudited
Consolidated Pro Forma
|
||||||||
|
For
the year ended
|
||||||||
|
31
December 2009
|
31
December 2008
|
|||||||
| $ | $ | |||||||
|
Revenue
|
- | - | ||||||
|
Net
income (loss)
|
1,482,243 | 982,496 | ||||||
|
Basic
and diluted income (loss) per common share
|
0.15 | 0.39 | ||||||
The
amounts of revenue and net loss of Beardmore since the acquisition date included
in the consolidated income statement for the year ended 31 December 2009 are
$Nil and $2,611, respectively.
The
unaudited consolidated pro forma financial information does not include
adjustments to remove certain private company expenses, which may not be
incurred in future periods. Similarly, the unaudited consolidated pro
forma financial information does not include adjustments for additional
expenses, such as rent, insurance, and other expenses that would have been
incurred subsequent to the acquisition date. The unaudited
consolidated pro forma financial information does not necessarily reflect the
results of operations that would have been occurred had the Company and
Beardmore been a single entity during these periods.
|
14.
|
Subsequent
Events
|
The
following events occurred during the period from the year ended 31 December 2009
to the date the consolidated financial statements were available to be issued on
29 March 2010:
On 3
February 2010, the Company amended the terms related to its mineral property
agreements (Note 4).
On 9
March 2010, the Company issued a total of 5,000,000 shares of common stock to
Temasek and its designees as partial consideration for the exercise of the third
25% option to acquire an aggregate 75% interest in the Mineral Rights (Note
4).
On 22
March 2010, the Company paid $1,000,000 to Temasek to exercise the second 25%
option resulting in the acquisition of a 50% interest in the Mineral Rights and
partial consideration for the third 25% option (Note 4).
On 25
March 2010, the Company completed a private equity offering of 18,750,000 units
at $0.10 per unit (the “Units”). Each Unit consisted of one share of
common stock, par value $0.00001, and one common stock purchase warrant (the
“Warrant”) to purchase one share of the Company’s common stock, exercisable
commencing six months from the closing date of the offering and terminating one
year from the closing date of the offering. As a result, the Company
issued a total of 18,750,000 shares of common stock and Warrants to purchase
18,750,000 shares of common stock. The exercise price of the Warrant
is $0.10 per share. The gross proceeds the Company received from this
private equity offering was $1,875,000.
(a)(2) Not Applicable.
(a)(3) Exhibits.
See
(b) below.
(b) Exhibits.
See the
Exhibit Index following the signature page of this report, which is
incorporated herein by reference.
(c) Financial
Statements Excluded From Annual Report to Shareholders
Not
Applicable.
|
Bowl
concentrators -
|
A
device for removing gold from black sand concentrates.
|
|
Churn
drills -
|
A
large drilling machine that bores large diameter holes in the ground. In
mining, churn drills are used to drill into the soft carbonate rocks of
lead and zinc hosted regions to extract bulk samples of the
ore.
|
|
Convergent
plate boundaries -
|
The
point at which the seismic plates of the earth’s crust are destroyed and
recycled back into the interior of the earth as one plate dives under
another.
|
|
Drill-collar
positions -
|
Points
at which the drill collar is tightened or loosened to control the amount
of force applied to the bit, used to carefully monitor the surface weight
measured while the bit is just off the bottom of the
wellbore.
|
|
Eocene-aged
tectonism -
|
Movement
of the seismic plates of the Earth during the Eocene
period.
|
|
Fluvial
transport -
|
The
movement of sediment and minerals by water.
|
|
Fold-belt
of anticlines -
|
A
fold or wrinkle in the earth’s surface that is convex up and has its
oldest beds at its core.
|
|
Glacio-fluvial
-
|
Pertaining
to streams fed by melting glaciers, or to the deposits and landforms
produced by such streams.
|
|
Gravel-bedrock
contact -
|
Contact
with the layer of earth’s surface defined as where gravel gives way to
bedrock.
|
|
Jig
-
|
A
piece of milling equipment used to concentrate ore on a screen submerged
in water, either by the reciprocating motion of the screen or by the
pulsation of water through it.
|
|
Metallurgical
-
|
Extraction
of metal from ore.
|
|
Mineral
-
|
A
naturally occurring homogeneous substance having definite physical
properties and chemical composition and, if formed under favorable
conditions, a definite crystal form.
|
|
Mineral
Reserve -
|
That
part of a mineral deposit which could be economically and legally
extracted or produced at the time of the reserve
determination.
|
|
Miocene
-
|
A
geological epoch of the Neogene period and extends from about 23.03 to
5.33 million years before the present
|
|
Moraine
-
|
Any
glacially formed accumulation of unconsolidated glacial debris (soil and
rock) which can occur in currently glaciated and formerly glaciated
regions, such as those areas acted upon by a past ice
age.
|
|
Pliocene
-
|
A
period in the geologic timescale that extends from 5.332 million to 1.806
million years before present.
|
|
Reverse
circulation drilling (Becker)
|
Heavy
duty percussive drill used for drilling in alluvial and glacial
terrains.
|
|
Scout
drilling
|
Used
to find and delineate targets for more defined
drilling.
|
|
Sedimentary
features
|
Features
that were part of the sediments when they were
deposited
|
|
Tertiary
|
A
geologic period 65 million to 1.8 million years ago
|
|
Tills
|
Areas
of unstratified soil deposited by a glacier; consisting of sand and clay
and gravel and boulders mixed together within a matrix of a fine powdery
material.
|
|
zone
of deposition
|
The
area at the end of a glacier or river where deposits of sediment
occur.
|
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report on Form 10-K to be signed on
its behalf by the undersigned, thereunto duly authorized, this 14th day of
April, 2010.
AMAZON GOLDSANDS LTD.,
a Nevada corporation
By: /s/ Kenneth
Phillippe
Kenneth Phillippe
President, Chief Executive Officer
&
Chief Financial Officer
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
report has been signed below by following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
|
Signature
and Title
|
|
Date
|
|
/s/
Kenneth
Phillippe
|
|
April
14, 2010
|
|
Kenneth
Phillippe, Chief Executive Officer,
Chief
Financial Officer, President, Secretary,
and
Treasurer (Principal Executive Officer,
Principal
Financial Officer and Principal Accounting Officer)
|
|
|
|
/s/
Robert Van
Tassell
|
|
April
14, 2010
|
|
Robert
Van Tassell, Director
|
|
|
AMAZON
GOLDSANDS LTD.
|
Exhibit
Number
|
Description
|
Incorporated
by Reference to:
|
Filed
Herewith
|
|
2.1
|
Articles
of Merger
|
Exhibit
2.1 to the Company’s Current Report on Form 8-K filed May 27,
2008
|
|
|
2.2
|
Agreement
and Plan of Merger
|
Exhibit
2.2 to the Company’s Current Report on Form 8-K filed May 27,
2008
|
|
|
3.1
|
Articles
of Incorporation
|
Exhibit
3.1 to the Company’s Form 10 Registration Statement (SEC File
No. 000-51203)
|
|
|
3.2
|
Certificate
of Amendment to Articles of Incorporation, evidencing name change to
"FinMetal Mining Ltd."
|
Exhibit
3.3 to the Company’s Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2007.
|
|
|
3.3
|
Certificate
of Change Pursuant to NRS 78.209
|
Exhibit
3.1 to the Company’s Current Report on Form 8-K filed May 27,
2008
|
|
|
3.4
|
Amended
and Restated By-laws of the Company
|
Exhibit
10.1 to the Company’s Current Report on Form 8-K filed September 2,
2008
|
|
|
10.1
|
Mineral
Right Option Agreement between the Company and Temasek Investments
Inc.
|
Exhibit
10.1 to the Company’s Current Report on Form 8-K filed September 22,
2008
|
|
|
10.2
|
Amendment
to Mineral Right Option Agreement between the Company and Temasek
Investments, Inc.
|
Exhibit
10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
May 20, 2009.
|
|
|
10.3
|
Second
Amendment to Mineral Right Option Agreement, dated February
3, 2010
|
Exhibit
10.1 to the Company’s Current Report on Form 8-K filed February 3,
2010
|
|
|
10.8
|
2007
Stock Incentive Plan.
|
Exhibit
10.6 to the Company’s Annual Report on Form 10KSB for the Year ending
December 31, 2007.
|
|
|
14.1
|
Code
of Ethics and Code of Conduct.
|
Exhibit
14.1 to the Company’s Annual Report on Form 10KSB for the Year ending
December 31, 2005.
|
|
|
21.1
|
X
|
||
|
31.1
|
X
|
||
|
31.2
|
X
|
||
|
32.1
|
X
|
- 45
-