EL CAPITAN PRECIOUS METALS INC - FORM 10-Q

Attached files

file	filename
EX-31.1 - EL CAPITAN PRECIOUS METALS INC	v184813_ex31-1.htm
EX-32.2 - EL CAPITAN PRECIOUS METALS INC	v184813_ex32-2.htm
EX-31.2 - EL CAPITAN PRECIOUS METALS INC	v184813_ex31-2.htm
EX-32.1 - EL CAPITAN PRECIOUS METALS INC	v184813_ex32-1.htm

U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended March 31, 2010

¨	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________.

Commission File Number 333-56262

EL CAPITAN PRECIOUS METALS, INC.

(Exact name of small business issuer as specified in its charter)

NEVADA	88-0482413
(State of other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

15225 North 49th Street

Scottsdale, AZ 85254

(Address of Principal Executive Offices)

(303) 472-3298

(Issuer’s Telephone Number)

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act 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 x NO ¨

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 x

Indicate by check mark whether the registrant is a shell company (as referred in Rule 12b-2 of the Exchange Act). YES ¨ NO x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 90,829,111 shares of common stock, par value $0.001, issued and outstanding as of May 12, 2010.

EL CAPITAN PRECIOUS METALS, INC. AND SUBSIDIARY

(An Exploration Stage Company)

Form 10-Q for the Quarter Ended March 31, 2010

Table of Contents

		Page
PART I	Financial Information

Item 1.	Financial Statements

	Consolidated Balance Sheets – March 31, 2010 and September 30, 2009 (Unaudited)	F-1
	Consolidated Statements of Expenses –Three and six months ended March 31, 2010 and 2009 and for the period from July 26, 2002 (inception) through March 31, 2010 (Unaudited)	F-2
	Consolidated Statements of Stockholders’ Equity (Deficit) - period from July 26, 2002, (inception) through March 31, 2010 (Unaudited)	F-3
	Consolidated Statements of Cash Flows – Six months ended March 31, 2010 and 2009 and for the period from July 26, 2002 (inception) through March 31, 2010 (Unaudited)	F-6
	Notes to the Consolidated Financial Statements (Unaudited)	F-8

Item 2.	Management’s Discussion and Analysis or Plan of Operations	1

Item 4T.	Controls and Procedures	4

PART II	Other Information	4

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4

Item 5.	Other Information	4

Item 6.	Exhibits	4

SIGNATURES		4

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

This form 10-Qq may contain certain “forward-looking” statements as such term is defined by the securities and exchange commission in its rules, regulations and releases, which represent the registrant’s expectations or beliefs, including but not limited to, statements concerning the registrant’s operations, economic performance, financial condition, growth and acquisition strategies, investments, and future operational plans. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intent,” “could,” “estimate,” “might,” “plan,” “predict” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond the registrant’s control, and actual results may differ materially depending on a variety of important factors, including uncertainty related to acquisitions, governmental regulation, managing and maintaining growth, the operations of the company and its subsidiaries, volatility of stock price, commercial viability of any mineral deposits and any other factors discussed in this and other registrant filings with the securities and exchange commission. The company does not intend or undertake to update the information in this form 10-Q if any forward-looking statement later turns out to be inaccurate. The following should be read in conjunction with the information presented in the company’s annual report on form 10-K for the year ended September 30, 2009.

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

EL CAPITAN PRECIOUS METALS, INC. AND SUBSIDIARY

(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31, 2010			September 30, 2009

ASSETS
CURRENT ASSETS :
Cash	$	1,419		$	2,348
Prepaid expenses and other current assets		6,827			26,189
Total Current Assets		8,246			28,537

Furniture and equipment net of accumulated depreciation of $26,359 and $23,495, respectively		5,813			8,677

OTHER ASSETS:
Investment in El Capitan, Ltd.		788,808			788,808
Deposits		22,440			22,440
Total Assets	$	825,307		$	848,462

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	112,231		$	144,494
Accrued liabilities		329,106			357,711
Interest payable		48,111			48,111
Due affiliated company		176,090			47,061
Short term debt		1,130			7,913
Total Current Liabilities		666,668			605,290

STOCKHOLDERS’ EQUITY :

Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued and outstanding		—			—

Common stock, $0.001 par value; 300,000,000 shares authorized; 89,297,723 and 88,587,369 issued and outstanding, respectively		89,298			88,587
Additional paid-in capital		18,192,747			18,117,553
Deficit accumulated during the exploration stage		(18,123,406	)		(17,962,968	)
Total Stockholders’ Equity		158,639			243,172
Total Liabilities And Stockholders’ Equity	$	825,307		$	848,462

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

F-1

EL CAPITAN PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF EXPENSES

(Unaudited)

	Three Months Ended March 31,						Six Months Ended March 31,						Period From July 26, 2002 (Inception) Through March 31,
	2010			2009			2010			2009			2010

OPERATING EXPENSES:
Professional fees	$	1,978		$	17,264		$	2,983		$	41,391		$	3,253,728
Officer compensation expense		-			135,000			-			270,000			2,863,833
Administrative consulting fees		34,675			-			69,256			-			1,198,766
Management fees, related parties		-			-			-			-			320,500
Legal and accounting fees		13,250			41,122			30,836			83,089			1,280,891
Exploration expenses		22,949			14,599			33,839			47,618			2,328,426
Warrant, option and stock compensation expenses		-			110,305			-			249,761			4,076,578
Other general and administrative		11,382			28,189			40,838			59,534			1,200,342
Write-off of accounts payable		(15,253	)		-			(15,253	)		-			(15,253	)
(Gain) loss on asset dispositions		-			(20,000	)		-			(20,000	)		34,733
		68,981			326,479			162,499			731,393			16,542,544
LOSS FROM OPERATIONS		(68,981	)		(326,479	)		(162,499	)		(731,393	)		(16,542,544	)

OTHER INCOME (EXPENSE):
Interest income		-			5			-			10			36,250
Forgiveness of debt		-			-			-			-			115,214
Interest expense:
Related parties		-			-			-			-			(68,806	)
Other		(169	)		(722	)		(398	)		(1,307	)		(308,684	)
Gain (loss) on extinguishment of liabilities		2,459			-			2,459			-			(222,748	)
Accretion of notes payable discounts		-			-			-			-			(1,132,088	)
		2,290			(717	)		2,061			(1,297	)		(1,580,862	)
NET LOSS	$	(66,691	)	$	(327,196	)	$	(160,438	)	$	(732,690	)	$	(18,123,406	)

Basic and diluted net loss per common share	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)

Weighted average number of common shares outstanding		89,221,595			88,452,480			88,932,865			87,534,096

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

F-2

EL CAPITAN PRECIOUS METALS, INC. AND SUBSIDIARY

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

July 26, 2002 (Inception) to March 31, 2010

(Unaudited)

	Common Stock Shares		Common Stock Amount		Stock Subscriptions			Additional Paid in Capital			Deficit Accumulated During The Exploration Stage			Total
Initial Issuance of Common Stock		3,315,000	$	3,315		—		$	(3,306	)	$	—		$	9
Net loss		—		—		—			-			(21,577	)		(21,577	)
		3,315,000	$	3,315	$	—		$	(3,306	)	$	(21,577	)	$	(21,568	)

Issuance of common stock to Gold and Minerals Company, Inc. in connection with purchase of interests in assets of El Capitan, Ltd. In November 2002		35,685,000		35,685		—			(35,663	)		—			22
Acquisition of DML Services on March 17, 2003		6,720,000		6,720		—			(56,720	)	—				(50,000	)
Common stock issued for interest expense related to a note payable		525,000		525		—			16,975			—			17,500
Common stock and warrants issued for services		150,000		150		—			188,850			—			189,000
Common stock issued for compensation		2,114,280		2,115		—			847,885			—			850,000
Issuance of common stock to Gold and Minerals Company, Inc. in connection with purchase of COD property in August 2003, $0.00 per share		3,600,000		3,600		—			(3,600	)		—			-
Net loss		—		—		—			-			(1,561,669	)		(1,561,669	)
Balances at September 30, 2003 (Unaudited)		52,109,280	$	52,110	$	—		$	954,421		$	(1,583,246	)	$	(576,715	)

Cost associated with warrants and options issued		—		—		—			108,000			—			108,000
Common stock issued for compensation		3,650,164		3,650		—			516,350			—			520,000
Common stock issued for services and expenses		2,082,234		2,083		—			393,682			—			395,765
Common stock issue for notes payable		1,827,938		1,827		—			381,173			—			383,000
Beneficial conversion of notes payable		—		—		—			75,000			—			75,000
Common stock issued for acquisition of Weaver property interest in July 2004		3,000,000		3,000		—			(3,000	)		—			-
Stock subscriptions		—		—		50,000			-			—			50,000
Net loss		—		—		—			-			(1,314,320	)		(1,314,320	)
Balances at September 30, 2004 (Unaudited)		62,669,616	$	62,670	$	50,000		$	2,425,626		$	(2,897,566	)	$	(359,270	)

Subscribed stock issued		200,000		200		(50,000	)		49,800			—			-
Common stock issued for services		2,290,557		2,290		—			1,254,245			—			1,256,535
Common stock sold in private placement		3,865,000		3,865		—			1,785,272			—			1,789,137
Common stock issued for notes payable		383,576		384		—			153,042			—			153,426
Beneficial conversion of notes payable		—		—		—			21,635			—			21,635
Cost associated with warrants and options issued		—		—		—			149,004			—			149,004
Discounts on notes payable		—		—		—			113,448			—			113,448
Net loss		—		—		—			-			(3,244,841	)		(3,244,841	)
Balances at September 30, 2005 (Unaudited)		69,408,749	$	69,409	$	—		$	5,952,072		$	(6,142,407	)	$	(120,926	)

F-3

EL CAPITAN PRECIOUS METALS, INC. AND SUBSIDIARY

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

July 26, 2002 (Inception) to March 31, 2010

	Common Stock Shares		Common Stock Amount		Stock Subscriptions		Additional Paid in Capital			Deficit Accumulated During The Exploration Stage			Total
Common stock issued for services		310,000		310		—		274,690			—			275,000
Common stock sold in private placement		2,189,697		2,190		—		1,158,775			—			1,160,965
Common stock issued for notes payable		2,124,726		2,125		—		1,147,875			—			1,150,000
Beneficial conversion of note payable		—		—		—		128,572			—			128,572
Discounts on issuance of convertible notes payable		—		—		—		1,018,640			—			1,018,640
Costs associated with warrants and options issued		—		—		—		163,750			—			163,750
Common stock issued for exercise of options and warrants		498,825		499		—		256,251			—			256,750
Common stock issued for compensation		364,912		364		—		286,772			—			287,136
Provision for deferred income tax related to		—		—		—		(80,322	)		-			(80,322	)
Net loss		—		—		—		—			(4,041,802	)		(4,041,802	)
Balances at September 30, 2006 (Unaudited)		74,896,909	$	74,897	$	—	$	10,307,075		$	(10,184,209	)	$	197,763

Stock issued for conversion of notes payable		1,500,000		1,500		—		748,500			—			750,000
Common stock sold in private placement		50,000		50		—		24,950			—			25,000
Common stock sold by the exercise of warrants and options		2,258,000		2,258		—		1,121,742			—			1,124,000
Common stock issued for compensation		966,994		968		—		604,583			—			605,551
Reverse provision for deferred income tax related to timing difference on debt discount		—		—		—		80,322			—			80,322
Common stock issued for services		80,216		81		—		52,325			—			52,406
Cost associated with issuance of warrants and options		—		—		—		2,249,475			—			2,249,475
Net loss		—		—		—		—			(4,437,775	)		(4,437,775	)
Balances at September 30, 2007		79,752,119	$	79,754	$	—	$	15,188,972		$	(14,621,984	)	$	646,742

Common stock sold in private placement		300,000		300		—		149,700			—			150,000
Common stock issued for exercise of cashless warrants		12,000		12		—		(12	)		—			—
Common stock sold by the exercise of warrants and options		1,257,500		1,257		—		176,568			—			177,825
Common stock issued for compensation		1,637,356		1,637		—		358,774			—			360,411
Common stock issued for services		3,213,150		3,212		—		662,035			—			665,247
Warrant and option expense		—		—		—		1,156,590			—			1,156,590
Net loss		—		—		—		—			(2,387,483	)		(2,387,483	)
Balances at September 30, 2008		86,172,125	$	86,172	$	—	$	17,692,627		$	(17,009,467	)	$	769,332

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

F-4

EL CAPITAN PRECIOUS METALS, INC. AND SUBSIDIARY

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

July 26, 2002 (Inception) to March 31, 2010

	Common Stock Shares		Common Stock Amount		Stock Subscriptions		Additional Paid in Capital		Deficit Accumulated During The Exploration Stage			Total
Common stock issued for services		1,127,744		1,127		—		95,205		—			96,332
Common stock sold by the exercise of warrants & options		725,000		725		—		35,525		—			36,250
Common stock issued for compensation		562,500		563		—		44,437		—			45,000
Warrant and option expense		—		—		—		249,759		—			249,759
Net loss		—		—		—		-		(953,501	)		(953,501	)
Balances at September 30, 2009		88,587,369	$	88,587	$	—	$	18,117,553	$	(17,962,968	)	$	243,172

Common stock issued for services		363,955		364		—		44,365		—			44,729
Conversion of accounts payable and accrued liabilities to equity		346,399		347		—		30,829		—			31,176
Net loss		—		—		—		—		(160,438	)		(160,438	)
Balances at March 31, 2010 (Unaudited)		89,297,723	$	89,298	$	—	$	18,192,747	$	(18,123,406	)	$	158,639

The accompanying notes are an integral part of these consolidated financial statements

F-5

EL CAPITAN PRECIOUS METALS, INC. AND SUBSIDIARY

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

							July 27, 2002
							(Inception)
	Six Months Ended March 31,						Through March 31,
	2010			2009			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(160,438	)	$	(732,690	)	$	(18,123,406	)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Warrant and option expense		—			249,759			4,076,578
Beneficial conversion of notes payable		—			—			225,207
Non-cash expense with affiliate		—			—			7,801
Share-based compensation		44,729			129,332			5,643,112
Accretion of discount on notes payable		—			—			1,132,088
(Gain) loss on disposition of fixed assets		—			(20,000	)		34,733
Write-off of accounts payable		(15,253	)		—			(15,253	)
Forgiveness of debt		—			—			(115,214	)
(Gain) on conversion of debt to equity		(2,459	)		—			(2,459	)
Provision for uncollectible note receivable		—			—			62,500
Depreciation		2,864			4,400			71,758
Changes in operating assets and liabilities:
Miscellaneous receivable		—			(9,860	)		4,863
Interest Receivable		—			—			(13,611	)
Prepaid expenses and other assets		19,362			38,589			(9,300	)
Expense advances (to) from on behalf of affiliated company		129,029			(10,774	)		(386,900	)
Accounts payable		(11,010	)		72,373			127,754
Accounts payable - related party		—			924			364
Accrued liabilities		(970	)		237,250			489,259
Interest payable, other		—			—			49,750
Net Cash Provided by (Used in) Operating Activities		5,854			(40,697	)		(6,740,376	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property interest		—			—			(100,000	)
Purchase of furniture and equipment		—			—			(148,140	)
Proceeds from asset dispositions		—			20,000			32,001
Deposits		—			4,335			(22,440	)
Issuance of notes receivable		—			—			(249,430	)
Payments received on notes receivable		—			—			66,930
Cash paid in connection with acquisition of DML Services, Inc.		—			—			(50,000	)
Net Cash Provided by (Used in) Investing Activities		—			24,335			(471,079	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock		—			—			3,456,606
Costs associated with the sale of stock		—			—			(19,363	)
Proceeds from notes payable, related parties		—			—			219,900
Proceeds from warrant exercise		—			36,250			1,338,075
Proceeds from notes payable, other		—			—			2,322,300
Increase in finance contracts		—			—			117,479
Repayment of notes payable, related parties		—			—			(61,900	)
Payments on finance contracts		(6,783	)		(27,362	)		(116,349	)
Repayment of notes payable, other		—			—			(43,874	)
Net Cash (Used in) Provided by Financing Activities		(6,783	)		8,888			7,212,874

F-6

							July 27, 2002
							(Inception)
	Three Months Ended March 31,						Through March 31,
	2010			2009			2010
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(929	)		(7,474	)		1,419

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		2,348			32,456			—

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,419		$	24,982		$	1,419

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	398		$	1,307		$	172,861
Cash paid for income taxes	$	—		$	—		$	—

NON-CASH INVESTING AND FINANCING ACTIVITIES :
Accounts payable and accrued liabilities converted to equity	$	31,176		$	—		$	31,176

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

F-7

EL CAPITAN PRECIOUS METALS, INC. AND SUBSIDIARY

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of El Capitan Precious Metals, Inc. (“El Capitan or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, the financial statements do not include all information and footnotes required by generally accepted accounting principles in the United States (“GAAP”) for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed interim financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending September 30, 2010, or for any subsequent period. These interim financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended September 30, 2009, included in the Company’s Annual Report on Form 10-K, filed December 30, 2009. The consolidated balance sheet at September 30, 2009, has been derived from the audited financial statements included in the 2009 Annual Report.

Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2009 as reported in the Form 10−K have been omitted.

Certain prior year amounts have been reclassified to conform to the current year presentation.

NOTE 2 - GOING CONCERN

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. El Capitan is an exploration stage company and since its inception has had no revenues and through March 31, 2010, has incurred recurring losses aggregating $18,123,406 during the exploration stage. In addition, the Company does not have a revolving credit facility with any financial institution. These factors raise substantial doubt about El Capitan’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on raising additional capital, negotiating adequate financing arrangements and on achieving sufficiently profitable operations. The financial statements do not include any adjustments relating 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.

NOTE 3 - DUE FROM AFFILIATES

During the period October 2004 through March 2010 El Capitan made net payments on behalf of Gold & Minerals Company, Inc. (“Minerals”) aggregating $2,483,149 relating to costs incurred on behalf of El Capitan, Limited (“ECL”) on the El Capitan property site. Pursuant to an agreement with Minerals effective October 1, 2004, costs incurred by ECL at the El Capitan site are to be split between the companies in accordance with their percentage ownership interest. El Capitan holds a 40% equity interest in ECL, and Minerals holds the remaining 60% equity interest. Through March 31, 2010, Minerals has reimbursed or advanced El Capitan $2,659,239 of the incurred site costs. At March 31, 2010, El Capitan owed Minerals $176,090.

NOTE 4 - STOCKHOLDERS’ EQUITY

Issuances of Common Stock, Warrants and Options

Common Stock

During the quarter ended December 31, 2009, the Company issued 66,667 shares of the Company’s S-8 common stock in payment of accrued consulting services valued at $6,000.

During the quarter ended March 31, 2010, the Company issued 100,000 shares of the Company’s S-8 common stock in payment of consulting services valued at $17,000.

F-8

During the quarter ended March 31, 2010, the Company issued 543,687 shares of the Company’s S-8 common stock valued at $52,905 to an officer of the Company for accrued and current period compensation.

Warrants

During the six months ended March31, 2009, 300,000 warrants at an exercise price of $0.60 expired.

During the six months ended March 31, 2010, the Company did not issue any warrants. The following table sets forth certain terms of the Company’s outstanding warrants and exercisable warrants as of March 31, 2010.

	Warrants Outstanding					Warrants Exercisable
	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Balance, September 30, 2009		1,235,031		$	0.59		1,235,031		$	0.59
Granted		—			—		—			—
Expired/Cancelled		(300,000	)	$	(0.60)		(300,000	)	$	(0.60)
Exercised		—			—		—			—
Balance, March 31, 2010		935,031		$	0.59		935,031		$	0.59

Weighted average contractual life in years		.63					.63
Aggregate intrinsic value	$	—				$	—

At March 31, 2010, the Company had no outstanding warrants which had a right to call feature.

Options

During the six months ended March 31, 2010, the Company did not grant any options.

The following table sets forth certain terms of the Company’s outstanding options and exercisable options as of March 31, 2010:

	Options Outstanding				Options Exercisable
	Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Balance, September 30, 2009		3,250,000	$	0.35		3,250,000	$	0.35
Granted		—		—		—		—
Exercised		—		—		—		—
Expired/Cancelled		—		—		—		—
Balance, March 31, 2010		3,250,000	$	0.35		3,250,000	$	0.35

Weighted average contractual life in years		2.3				2.3

Aggregate intrinsic value	$	—			$	—

The intrinsic value of each option or warrant share is the difference between the fair market value of the common stock and the exercise price of such option or warrant share to the extent it is "in-the-money". Aggregate intrinsic value represents the pretax value that would have been received by the holders of in-the-money options had they exercised their options on the last trading day of the quarter and sold the underlying shares at the closing stock price on such day. The intrinsic value calculation is based on the $0.33 closing stock price of the Company’s Common Stock on March 31, 2010. There were no in-the-money options and warrants vested and exercisable as of March 31, 2010. The intrinsic value amounts change based on the market price of the Company’s stock.

F-9

The Company has a Stock Incentive Plan under which 16,000,000 shares are reserved and registered for stock and option grants. There were 3,903,170 shares available for grant under the Plan at March 31, 2010, excluding the 3,250,000 options outstanding.

NOTE 5 – SUBSEQUENT EVENTS

In April 2010, the Company issued 31,388 shares of the Company’s common stock in payment of compensation to an officer valued at $5,527.

In April 2010, the Company received advances from its affiliated company aggregating $12,000 for working capital purposes.

In April 2010, the Board of Directors granted to each of the three directors, 500,000 shares of the Company’s S-8 stock valued at an aggregate of $525,000 based upon the closing price of the Company’s stock on the date of the grant.

The Company’s Board reviewed various prior Board Written Actions, Minutes and Company status updates and the Board actions dated September 9, 2008, referencing the cancellation and reissuance of new stock options at a reduced exercise price and the removal of prior terms and conditions for the vesting of the options to then current two officers of the Company. The details of these option transactions are disclosed in the Company’s Form 8-K filing dated September 11, 2008. Upon review and detailed discussion of the previous actions and Company’s direction at the time of the reissuance, on April 10, 2010, the Board cancelled the outstanding vested stock options of the two officers which aggregated 1,750,000.

F-10

Item 2 - Management’s Discussion and Analysis and Plan of Operation

RESULTS OF OPERATIONS

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Revenues

We have not yet realized any revenue from operations, nor do we expect to realize potential revenues until one of our properties is sold. There is no guaranty that we will achieve proven viable precious metals at any of our property site locations.

Expenses and Net Loss

Our operating expenses decreased $257,498 from $326,479 for the three months ended March 31, 2009 to $68,981 for the three months ended March 31, 2010. The decrease is mainly attributable to decreases in professional fees of $15,286; officer compensation of $100,325, net of current period administrative consulting of $34,675; legal and accounting of $27,872; other general and administrative of $16,807; warrant and option expense of $110,305; and a gain from the write-off of accounts payable of $15,253 during the three months ended March 31, 2010. These decreases were offset by an increase of $8,350 for exploration expenses relating to research on a recovery process and no recognized gain on asset dispositions in the current period.

Our net loss for the three months ended March 31, 2010 decreased to $66,691 from a net loss of $327,196 incurred for the comparable three month period ended March 31, 2009. The decrease in net loss of $260,505 for the current period is attributable to the aforementioned net decreases in operating expenses.

Six Months Ended March 31, 2010 Compared to Six Months Ended March 31, 2009

Revenues

Expenses and Net Loss

Our operating expenses decreased $568,894 from $731,393 for the six months ended March 31, 2009 to $162,499 for the six months ended March 31, 2010. The decrease is mainly attributable to decreases in professional fees of $38,408; officer compensation of $200,744, net of the current six month period administrative consulting of $69,256; legal and accounting of $52,253; other general and administrative of $18,696; exploration expenses of $13,779; warrant and option expense of $249,761; and a gain from the write-off of accounts payable of $15,253 during the six months ended March 31, 2010. These decreases were offset by no recognized gain on asset dispositions in the current six month period.

Our net loss for the six months ended March 31, 2010 decreased to $160,438 from a net loss of $732,690 incurred for the comparable six month period ended March 31, 2009. The decrease in net loss of $572,252 for the current six month period is attributable to the aforementioned net decreases in operating expenses.

PLAN OF OPERATION

To address the going concern problem addressed in our financial statements, we will require raising additional working capital. We will also require additional working capital funds for continuing payments for the continued implementation of our business strategies, necessary corporate personnel, and related general and administrative expenses.

We have not generated any revenue from the production of gold or other metals since our inception, and historically have relied on equity and debt financings to finance our ongoing operations. We generated a net loss of $160,438 for the six months ended March 31, 2010. We have a total accumulated deficit of $18,123,406 at March 31, 2010. To continue as a going concern, we are dependent on continued fund raising. However, we have no commitment from any party to provide additional capital and there is no assurance that such funding will be available when needed, or if available, that its terms will be favorable or acceptable to us.

We are dependent on obtaining additional financing or equity placements to continue our exploration, metallurgical and recovery program efforts on the Capitan project. We have no current plans or arrangements for these additional capital requirements, and we anticipate that we will continue to seek the additional financing scenarios during the second calendar quarter of 2010.

The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. Our inability to access various capital markets or acceptable financing could have a material effect on our results of operations, deployment of our business strategies and severely threaten our ability to operate as a going concern. Should we be unable to continue as a going concern, we may be unable to realize the carrying value of our assets and to meet our obligations as they become due.

During the remainder of our current fiscal year, we will continue to concentrate on raising the necessary working capital through equity financing and an acceptable debt facility to ensure our ability to implement our business strategies. To the extent that additional capital is raised through the sale of equity or equity related securities, the issuance of such securities may result in dilution of our current stockholders.

Our objective is to continue the evaluation of geologic and metallurgical opportunities presented by the El Capitan deposit with the intent to carry on the implementation of the previously announced strategic plan for the development or sale of this asset. Over the past several years there has been a significant effort to develop an understanding of the metallurgical properties of this deposit. We have learned that the complex poly-metallic nature of the rock prevents analysis by standard fire assay techniques typically applied to gold/silver deposits. Further, the oxide nature of the material does not appear to respond well to nickel-sulfide analytical techniques typically used for sulfide platinum group metal (“PGM”) deposits. These factors have resulted in a reduction in the level of activity directed towards force-fitting the El Capitan gold, silver, and PGM deposit into the traditional analytical framework of a gold & silver or sulfide PGM deposit. We do not have “reserves” as defined by Industry Guide 7 of the SEC, and it is possible it may never have reserves. Previous exploration efforts have focused on private, patented land

and nearby federal claims.

In order to ensure continued timely and appropriate permitting, we hired an experienced New Mexico headquartered environmental services firm to manage this effort. When the permit is granted, it will provide the opportunity for a professional and methodical investigation into the additional geologic potential of this portion of our holdings without requiring further time-consuming permitting efforts. The area being permitted will allow access to a number of high-potential targets identified through previous surface sampling and remote sensing efforts, as well as to the prospective area to the west of the existing deposit, which remains open to geologic resource extension. This United States Forest Service (“USFS”) permitting effort, governed by the National Environmental Policy Act (NEPA) of 1972, is a robust process that can take a significant amount of time to complete. The typical process generally takes longer than the prescribed regulatory time frame, and is dependent upon a number of factors outside of our control, including, without limitation, governmental approvals, licensing and permitting, as well as potential opposition by third parties. Concurrently, GL Environmental has submitted a permit application with the New Mexico Mining & Minerals Division. Both permits must be approved prior to the commencement of drilling activity.

On July 14, 2008, we announced that we had entered into a Memorandum of Understanding with the USFS related to the permitting of 112 exploration drill holes planned on 2,000 acres of the El Capitan claims in Lincoln County, New Mexico. The action signals the initiation of the Federal Environmental Assessment (“EA”) permitting process. Based upon recent USFS EA completion timelines, we currently anticipate receipt of permits in the third calendar quarter of 2010, at which time exploration activity could resume.

On July 23, 2008 we announced that the proposed merger with Gold and Minerals reached the stage at which we were ready to file a Form S-4 registration statement with the Securities and Exchange Commission. Due to the time consuming nature of the preparation of a Form S-4 and the uncertainty of the timing of the SEC review process, the companies had worked with counsel to examine alternative structures for the transaction. While alternatives were identified, none held significant promise to be less time consuming or more cost effective for stockholders. Both companies have concluded that the Form S-4 registration process will be the optimal path forward, and have decided to continue to pursue the original merger structure.

After numerous delays in the merger process, on September 18, 2009, Gold and Minerals gave a Notice of Termination to the Company referencing the Agreement and Plan of Merger, dated February 12, 2008, between the companies. The election to terminate was made pursuant to subparagraph (d) of Paragraph 10.1 of Article X of the Agreement. The main basis for the election to terminate was that the circumstances surrounding the Plan of Merger had changed since the execution of the Agreement.

In April 2010 our Board of Directors voted to continue the merger transaction with Minerals and Minerals concurred. The parties will proceed to draft and re-enter into a new Agreement and Plan of Merger based on the current circumstances. The Companies will proceed to raise the necessary working capital to complete all aspects of the merger process of the companies; continue the research work on the extraction and assay processes; and the necessary working capital for payment of the general and administrative expenses.

The Company and its affiliated company are continuing to work on new fire assay techniques for the Capitan ore. Upon perfecting this process we will have the process observed on multiple samples and have the process fully documented by a PhD chemist. Upon completion of this process, the chemist will then take the same samples to a second commercial lab to have the results verified by having them rerun the samples utilizing our procedure under his observation.

The Company is currently discussing alternative avenues for raising the required working capital with multiple sources. Management and the Board of Directors of the Company and Minerals will analyze the various financing scenarios upon completion of the due diligence process and make a determination as to the most advantageous avenue to proceed and achieve the long range goals of the Company and Minerals and the merger process.

Liquidity

As of March 31, 2010, we had $1,419 of cash on hand. We will be required to raise additional working capital in equity or financing transactions in order to satisfy our expected cash expenditures. In the event that we are unable to obtain additional working capital, we may be forced to reduce our operating expenditures or to cease development and operations altogether. Currently we are dependent on our affiliated company for working capital funds and are currently reviewing alternative sources to raise the required working capital to complete our Company business strategy.

Additionally, we continually evaluate business opportunities such as joint venture processing agreements with the objective of creating cash flow to sustain the Company and provide a source of funds for growth and continued research on the El Capitan deposit. There are no assurances of success in our ability to obtain continued financing through capital markets, joint ventures, or other acceptable arrangements. If management’s plans are not successful, operations and liquidity may be adversely impacted. In the event that we are unable to obtain additional working capital, we may be forced to reduce our operating expenditures or to cease development and operations altogether.

Factors Affecting Future Operating Results

We have generated no revenues, other than interest income, since inception. As a result, we have only a limited operating history upon which to evaluate our future potential performance. Our potential must be considered by evaluation of all risks and difficulties encountered by new companies which have not yet established business operations.

The price of gold has experienced an increase in value over the past three years. Any significant drop in the price of gold, other precious metals or iron ore prices may have a materially adverse affect on the future results of potential operations unless we are able to offset such a price drop by substantially increased production or may affect our ability to market the sale Capitan property site.

We have no proven or probable reserves as defined by the SEC’s Guide 7 and we currently have no ability to measure or prove our reserves on the El Capitan mine site in New Mexico. We are currently having geological work performed on samples from this site and having an economically feasible precious metals recovery process developed by an outside metallurgical firm for the ore at this site.

Off-Balance Sheet Arrangements

During the quarter ended March 31, 2010, we did not engage in any off balance sheet arrangements as defined in item 303(c) of the SEC’s Regulation S-B.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which require us to make estimates and judgments that significantly affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Note 1, “Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in our Form 10-K for the year ended September 30, 2009, describe our significant accounting policies which are reviewed by management on a regular basis.

New Accounting Pronouncements

We do not expect the adoption of any recently issued accounting pronouncements to have a significant impact on our financial position, results of operations or cash flows.

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4T - Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance the objectives of the control system are met.

As of March 31, 2010, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2010.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act, during the quarter ended March 31, 2010, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended March 31, 2010, the Company issued 100,000 shares of the Company’s S-8 common stock in payment of consulting services valued at $17,000.

Item 5 – Other Information

None

Item 6 - Exhibits

(a) Exhibits

31.1	Certification of Charles C. Mottley pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Stephen J. Antol pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Mottley pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Stephen J. Antol pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: February 14, 2010	EL CAPITAN PRECIOUS METALS, INC.

	By:	/s/ Charles C. Mottley
		Charles C. Mottley
		President, Chief Executive Officer and Director

Dated: February 14, 2010	By:	/s/ Stephen J. Antol
		Stephen J. Antol
		Chief Financial Officer

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