Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - Nilam Resources Inc.Financial_Report.xls
EX-31.1 - Nilam Resources Inc.nila_ex31-1.htm
EX-32.1 - Nilam Resources Inc.nila_ex32-1.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
 
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended July 31, 2011
 
[   ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period ______________to _____________
 
Commission File Number 333-135980
 
NILAM RESOURCES INC.
 (Exact name of small Business Issuer as specified in its charter)
 
Nevada
98-0487414
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
 
Calle Alcanfores 761 - 1701
Miraflores, Lima 18, Peru
Issuer’s telephone number, including area code 1-917-294-4072
 
_______________
(Former name, former address and former fiscal year, if changed since last report)


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 preceding 12 months (or 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 has submitted electronically and posted on the 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 proceeding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes [   ]  No [X]

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 defined 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 stock, as of the latest practicable date: 50,375,595 Class “A” Common Shares at a par value of $0.001 of the issuer Capital Stock are issued and outstanding as of July 31, 2011.  The total number of authorized shares is 345,000,000.
 
 

 


 
 

 

PART I - FINANCIAL INFORMATION

Safe Harbor Statement

This report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.

These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs, and risk of declining revenues. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements. The following discusses our financial condition and results of operations based upon our consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the United States. It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.

Item 1. Financial Statements

The unaudited interim consolidated financial statements of Nilam Resources, Inc. (the “Company”, “Nilam”, “we”, “our”, “us”) follow. All currency references in this report are in U.S. dollars unless otherwise noted.

The accompanying Condensed Consolidated Financial Statements of Nilam Resources, Inc. should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended April 30, 2011. Significant accounting policies disclosed therein have not changed except as noted below.

Nilam Resources
(A Development Stage Company)
Unaudited
(Express in U.S. Dollars)

July 31, 2011


 
 

 




 
2

 


 
NILAM RESOURCES INC.
 
(AN EXPLORATION STAGE COMPANY)
 
CONSOLIDATED FINANCIAL STATEMENTS
 
July 31, 2011
 
 
(Stated in US Dollars)
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 

 
3

 

 

 
NILAM RESOURCES INC.
 
(AN EXPLORATION STAGE COMPANY)
 
 
CONTENTS
 









 
 

 













 
4

 


NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
(STATED IN U.S. DOLLARS)

   
July 31, 2011
   
April 30, 2011
(Audited)
 
ASSETS
           
             
          CURRENT ASSETS
           
          Cash
  $ 2,346     $ 1,502  
      2,346       1,502  
          Investments
    522,000       -  
          Mineral property (Note 3)
    115,000       100,000  
          TOTAL ASSETS
  $ 639,346     $ 101,502  
                 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
          CURRENT LIABILITIES
               
          Accounts payable and accrued liabilities
  $ 350,810     $ 318,399  
          Subscriptions received in advance (Note 5)
    7,776          
          Due to related parties  (Note 6)
    16,158       16,158  
          Notes payable – related parties (Note 4)
    10,338       10,338  
                 
          TOTAL LIABILITIES
    385,082       344,895  
                 
          STOCKHOLDERS’ EQUITY
               
          Preferred stock, $0.001 par value, 1,000,000 shares authorized, none issued and outstanding
    -       -  
              
               
Common stock, $0.001 par value, 345,000,000 shares authorized, 52,055,595 shares and 50,375,595 shares issued and outstanding, respectively (Note 5)
    52,056       50,376  
              
               
          Additional paid in capital  (Note 5)
    3,649,535       3,616,535  
                 
          Accumulated deficit during exploration stage
    (2,435,327 )     (3,910,304 )
          Accumulated other comprehensive income
    (1,012,000 )     -  
          Total stockholders’ deficit
    254,264       (243,393 )
                 
 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 639,346     $ 101,502  
 
Nature of Operations (Note 1)
 
 
Subsequent Events (Note 8)
 
 
Approved on Behalf of the Board:
 
 
/s/ Shahin Tabatabaei, Director
 
 
See accompanying notes to financial statements.
 

 
5

 


NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
 (STATED IN U.S. DOLLARS)

 
   
For the Three Months Ended
July 31, 2011
   
For the Three Months Ended July 31, 2010
   
For the Period From July 11, 2005 (Inception) to
July 31, 2011
 
OPERATING EXPENSES
                 
Accounting and auditing fees
  $ 2,810     $ 2,950     $ 135,929  
Consulting fees  (Note 6)
    48,190       30,000       587,190  
Exploration costs and expenses
    -       -       59,555  
General and administrative
    4,294       8,320       66,407  
Insurance
    -       -       27,000  
Investor relation
    -       -       55,393  
Listing and filing fees
    -       -       15,868  
Legal fees
    3,729       800       105,551  
Management fees
    -       -       330,000  
Stock-based compensation
    -       -       100,977  
Travel
    -       -       14,695  
Wages
    -       -       20,630  
Impairment of mineral property
    -       -       8,000  
Total Operating Expenses
    59,023       42,070       1,527,195  
INCOME  FROM OPERATIONS
    (59,023 )     (42,070 )     (1,527,195 )
                         
OTHER INCOME (EXPENSE)
                       
                         
Foreign currency transaction gain
    -       -       908  
Interest income
    -       -       8  
Loss on settlement of debt
    -       -       (2,243,048 )
Gain on sale of mineral properties
    1,534,000       -       1,534,000  
                         
Total Other Income
    1,534,000       -       (708,132 )
                         
NET INCOME   (LOSS)
  $ 1,474,977     $ (42,070 )   $ (2,235,327 )
Net unrealized gains (losses) on available for sale securities:
    (1,012,000 )     -       (1,012,000 )
COMPREHENSIVE INCOME (LOSS)
  $ 462,977     $ (42,070 )   $ (3,247,327 )
                         
                         
Basic and Diluted Income per Common Share
  $ 0.03     $ (0.00 )   $ 0.14  
                         
Weighted average number of shares outstanding during the period – basic and diluted
    50,463,048       37,160,779       15,772,812  
 

 
 

 
 
See accompanying notes to financial statements.
 

 
6

 
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE PERIOD FROM JULY 11, 2005 (INCEPTION) TO JULY 31, 2011
(STATED IN U.S. DOLLARS)

 
 
 
         
Accumulated
   
Accumulated
       
   
 
   
Additional
   
Other
   
Deficit During
       
   
Common Stock
   
Paid-In
   
Comprehensive
   
Exploration
       
   
Shares
   
Amount
   
Capital
   
Income
   
Stage
   
Total
 
                                     
Common stock issued to founders for cash ($0.01 per share)
    600,000     $ 600     $ 5,400     $ -       -     $ 6,000  
Common stock issued for cash ($0.10 per share)
    550,000       550       54,450       -       -       55,000  
Net loss for the period from July 11, 2005 (inception) to April 30, 2006
    -       -       -       -       (10,193 )     (10,193 )
                                                 
BALANCE, APRIL 30, 2006
    1,150,000       1,150       59,850       -       (10,193 )     50,807  
In-kind contribution of stock to officer
    -       -       30,000               -       30,000  
Net loss for the year
    -       -       -       -       (68,479 )     (68,479 )
                                                 
                                                 
BALANCE, APRIL 30, 2007
    1,150,000       1,150       89,850       -       (78,672 )     12,328  
In-kind contribution of property
    -       -       5,000       -       -       5,000  
In-kind contribution of expenses
    -       -       5,950       -       -       5,950  
Stock-base compensation
    -       -       100,977       -       -       100,977  
Common stock issued for cash ($25 per share)
                                               
Net loss for the year
    -       -       -       -       (342,242 )     (342,242 )
                                                 
                                                 
BALANCE, APRIL 30, 2008
    1,160,779       1,161       471,203       -       (420,914 )     51,450  
Common stock issued on property acquisition
    20,000,000       20,000       180,000       -       -       200,000  
In-kind contribution of expenses
    -       -       56,474       -       -       56,474  
Net loss for the period
    -       -       -       -       (483,077 )     (483,077 )
                                                 
                                                 
BALANCE, APRIL 30, 2009
    21,160,779     $ 21,161     $ 707,677     $ -       (903,991 )   $ (175,153 )
In-kind contribution of expenses
    -       -       7,217       -       -       7,217  
Debt settlement
    16,000,000       16,000       284,000       -       -       300,000  
Loss on debt settlement
                    1,780,000       -       (1,620,000 )     160,000  
Issuance of convertible debentures
                    14,000       -       -       14,000  
Net loss for the period
 
    -       -       -       -       (753,625 )     (753,625 )
                                                   
BALANCE, APRIL 30, 2010
    37,160,779     $ 37,161     $ 2,792,894     $ -       (3,277,616 )   $ (447,561 )
In-kind contribution of expenses
    -       -       4,324       -       -       4,324  
Debt settlement
    12,214,816       12,215       808,527       -       -       820,742  
Issuance of convertible debentures
                    1,790       -       -       1,790  
Common stock issued for cash ($0.01 per share)
    1,000,000       1,000       9,000       -       -       10,000  
Net loss for the period
    -       -       -       -       (632,688 )     (632,688 )
                                                   
BALANCE, APRIL 30, 2011
    50,375,595     $ 50,376     $ 3,616,534     $ -       (3,910,304 )   $ (243,394 )
In-kind contribution of expenses
    -       -       1,081       -       -       1,081  
Common stock issued for cash ($0.02 per share)
    1,680,000       1,680       31,920       -       -       33,600  
Unrealized loss on available for sale investments
    -       -       -       (1,012,000 )     -       (1,012,000 )
Net income for the period
    -       -       -       -       1,474,977       1,474,977  
                                                   
                                                   
BALANCE, JULY 31, 2011
    52,055,595     $ 52,056     $ 3,649,535     $ (1,012,000 )     (2,435,327 )   $ 254,264  
 
See accompanying notes to financial statements.
 
7

 

 
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(STATED IN U.S. DOLLARS)
 

   
For the Three Months Ended
July 31, 2011
   
For the Three Months Ended
July 31, 2010
   
For the Period From
July 11, 2005
 (Inception) to
July 31, 2011
 
CASH FLOWS USED IN OPERATING ACTIVITIES:
                 
Net income for the period
  $ 1,474,977     $ (42,070 )   $ (2,435,327 )
Adjustments to reconcile net loss to net cash used in operating activities:
                       
Impairment of mineral properties
    -       -       205,000  
Gain on sale of mineral properties
    (1,534,000 )     -       (1,534,000 )
In-kind contribution of expenses
    1,081       1,081       74,956  
In-kind contribution of shares
    -       -       30,003  
Accretion interest (Note 7)
    -       7,074       15,790  
Loss on debt settlement (Note 5)
    -       -       2,243,048  
Settlement of accounts payable
    -       -       (14,803 )
Stock-based compensation
    -       -       100,977  
Changes in operating assets and liabilities:
                       
Prepaid
    -       -       -  
Accounts receivable
    -       -       -  
Accounts payable and accrued expenses
    32,410       32,054       937,416  
Subscriptions received in advance
    7,776               7,776  
Due to related parties
    -       -       26,158  
Net Cash Provided/Used In Operating Activities
    (17,756 )     (1,861 )     (343,006 )
                         
CASH FLOWS USED IN INVESTING ACTIVITIES:
                       
Purchase of mineral rights
    (15,000 )     -       (65,000 )
Net Cash Used In Investing Activities
    (15,000 )     -       (65,000 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES:
                       
Issuance of common shares
    33,600       -       374,036  
Notes payable – related parties
    -       -       10,338  
Net increase of Convertible debenture
    -       1,917       25,978  
Net Cash Used By Financing Activities
    33,600       -       410,352  
                         
NET INCREASE IN CASH
    844       56       2,346  
                         
CASH AT BEGINNING OF PERIOD
    1,502       -       -  
                         
CASH AT END OF PERIOD
  $ 2,346     $ 56     $ 2,346  
                         
Supplemental disclosure of cash flow information (Note 10)
 
Interest paid
  $ -     $ -     $ -  
Taxes paid
  $ -     $ -     $ -  
 
 
See accompanying notes to financial statements.

 
8

 

NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
AS OF July 31, 2011
 
NOTE 1 NATURE OF OPERATIONS
 
These consolidated financial statements inclusive of the accounts of the Nilam Resources Inc. and its Peruvian subsidiary Nilam Resources Peru SAC. Nilam Resources Inc. (an exploration stage company) (the “Company”) was incorporated under the laws of the State of Nevada on July 11, 2005. The Company is a natural resource exploration company with an objective of acquiring, exploring and if warranted and feasible, developing natural resource properties.   On November 23, 2007, the Company incorporated Nilam Resources Peru SAC, in Peru, as a wholly-owned subsidiary.  The purpose of the new subsidiary is to hold the Company’s Peruvian properties and to carry on such business in Peru as is necessary to maintain, explore and develop the Company’s properties.  Nilam Resources Peru SAC. holds the Company’s rights in respect of the Llippa property.  The continuation of the Company is in the exploration stage of its mineral property development and to date has not yet established any proven mineral reserves on its existing properties.  The continued operations of the Company and the recoverability of the carrying value of its assets are ultimately dependent upon the ability of the Company to achieve profitable operations.

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. 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.  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 liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures.  These 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.

 
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
(A) Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission.

(B) Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Nilam Resources Peru SAC. Intercompany accounts and transactions have been eliminated in consolidation.
 
(C) Use of Estimates
 
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and revenues and expenses during the year reported.  By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be significant. Significant areas requiring management’s estimates and assumptions are determining the fair value of transactions involving common stock, valuation and impairment losses on mineral property acquisitions and valuation of convertible debentures.
 
(D) Cash and Cash Equivalents

For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.



 
9

 

(E) Mineral Properties

The Company is primarily engaged in the acquisition, exploration and development of mineral properties. Mineral property acquisition costs are initially capitalized when incurred. The Company assesses the carrying costs for impairment under Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 360-10, “Property Plant and Equipment”. The ASC requires mining companies to consider cash flows related to the economic value of mining assets (including mineral properties and rights) beyond those assets’ proven and probable reserves, as well as anticipated market price fluctuations, when testing the mining assets for impairment in accordance with FASB ASC 360-10.

(F) Investments

The Company classifies Investment as available-for-sale in its Consolidated Balance Sheets. Securities held for indefinite periods of time, including any securities that may be sold to assist in the clearing of payment service obligations or in the management of the investment portfolio, are classified as available-for-sale securities. These securities are recorded at fair value, with the net after-tax unrealized gain or loss recorded as a separate component of stockholder deficit. Realized gains and losses and other than-temporary impairments are recorded in the Consolidated Statements of Income (Loss).

(G) Loss Per Share

Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC 260, “Earnings Per Share.” Basic loss per share includes no dilution and it`s computed by dividing loss attributable to common stockholders by the weighted average number of common shares outstanding for the period.  Diluted earnings per share reflect the potential dilution of securities that could share in the earnings (loss) of the Company.  The common shares potentially issuable on conversion of outstanding warrants were not included in the calculation of weighted average number of shares outstanding because the effect would be anti-dilutive.

(H) Income Taxes

The Company accounts for income taxes under FASB ASC 740, “Income Taxes”.  Under FASB ASC 740, deferred tax assets and liabilities 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.  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.  Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(I) Foreign Currency Translation

The financial statements are presented in United States dollars.  In accordance with FASB ASC 830-30, “Translation of Financial Statements”, foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date.  Revenue and expenses are translated at average rates of exchange during the year.  Related translation adjustments are reported as a separate component of stockholders’ equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations.
 
(J) Business Segments
 
The Company operates in one industry segment within two geographical areas, Canada and Peru. The mineral property is held solely in the Peru segment.
 
(K) Business Combinations

In December 2007, the FASB issued FASB ASC 805 (revised 2007), “Business Combinations”(“ASC 805”). ASC 805 significantly changes the accounting for business combinations in a number of areas including the treatment of contingent consideration, pre-acquisition contingencies, transaction costs, in-process research and development, and restructuring costs.
 

 

 
10

 

In addition, under ASC 805, changes in an acquired entity's deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. ASC 805 is effective for fiscal periods beginning after December 15, 2008. The Company has adopted ASC 805 on May 1, 2009. This standard did not have a material impact on the Company’s financial statements.

(L) Derivative Instruments

In March 2008, the FASB issued ASC 815, “Disclosures about Derivative Instruments and Hedging Activities”(“ASC 815”). ASC 815 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This statement is effective for financial statements issued for fiscal periods beginning after November 15, 2008. The Company has adopted ASC 815 on May 1, 2009. Adoption of this standard did not have a material impact on the Company’s financial position, results of operations, or cash flows.
 
(M) Concentration of Credit Risk

Cash includes deposits at a Canadian financial institution in US currency which is not covered by either the US FDIC limits or the Canadian CDI limits. The Company has placed its cash in a high credit quality financial institution.
 
(N) Fair Value of Financial Instruments

FASB ASC 820, “Fair Value Measurements and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. FASB ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, accounts payable, amounts due to related parties, notes payable, and convertible debenture. Pursuant to FASB ASC 820, the fair value of the Company’s cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of its other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

(O) Comprehensive Income

FASB ASC 220, “Comprehensive Income” establishes standards for the reporting and display of comprehensive income and its components in the financial statements.  As at April 30, 2011, no element of comprehensive income or loss was noted.

(P) Recently Adopted Accounting Pronouncements

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets—an amendment of FASB Statement” (“SFAS 166”). SFAS No. 166 is intended to establish standards of financial reporting for the transfer of assets and transferred assets to improve the relevance, representational faithfulness, and comparability. SFAS 166 was established to clarify derecognition of assets under FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 166 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2009. The Company adopted this standard on May 1, 2010. The standard did not have a material impact on the Company’s financial statements.
 

 
11

 

In May 2008, the FASB issued ASC 470-20, “Debt with conversion and other options” (formerly FSP No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)”). ASC 470-20 applies to convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement, unless the embedded conversion option is required to be separately accounted for as a derivative under ASC 815.  ASC 470-20 require that the liability and equity components of convertible debt instruments within the scope of ASC 470-20 be separately accounted for in a manner that reflects the entity’s nonconvertible debt borrowing rate. This will require an allocation of the convertible debt proceeds between the liability component and the embedded conversion option (i.e., the equity component). The difference between the principal amount of the debt and the amount of the proceeds allocated to the liability component would be reported as a debt discount and subsequently amortized to earnings over the instrument’s expected life using the effective interest method. ASC 470-20 is effective for the Company’s fiscal year beginning May 1, 2010 and will be applied retrospectively to all periods presented.  The Standard did not have a material impact on the Company’s financial statements.

In July 2009, the FASB issued ASC 105, “Generally Accepted Accounting Principles” (formerly, SFAS No. 168, "FASB Accounting Standards Codification"), as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). ASC 105 was implemented on July 1, 2009 and is effective for interim and annual periods ending after September 15, 2009. This standard did not have a significant effect upon the financial statements.

In September 2009, the FASB issued ASC 820-10 Measuring Liabilities at Fair Values (“ASC 820-10”). ASC 820-10 provides additional guidance on how companies should measure liabilities at fair value. Specifically, the fair value of a liability is not adjusted to reflect the impact of contractual restrictions that prevent its transfer. The Company does not expect adoption of this standard to have a material impact on its consolidated financial position, results of operations, and cash flows.

In February 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements”. The amendments in the ASU remove the requirement for a Securities and Exchange Commission (SEC) filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of U.S. GAAP. The FASB also clarified that if the financial statements have been revised, then an entity that is not an SEC filer should disclose both the date that the financial statements were issued or available to be issued and the date the revised financial statements were issued or available to be issued. The FASB believes these amendments remove potential conflicts with the SEC's literature. All of the amendments in the ASU were effective upon issuance except for the use of the issued date for conduit debt obligors. That amendment is effective for interim or annual periods ending after June 15, 2010. The Company does not expect the adoption of this guidance to have a material impact on the Financial Statements.

(Q) Recent Accounting Pronouncements

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS No. 167”). SFAS No. 167 eliminates the exception to consolidate a qualifying special-purpose entity, changes the approach to determining the primary beneficiary of a variable interest entity and requires companies to more frequently re-assess whether they must consolidate variable interest entities. Under the new guidance, the primary beneficiary of a variable interest entity is identified qualitatively as the enterprise that has both (a) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance, and (b) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity.

SFAS No. 167 becomes effective for the Company’s fiscal 2011 year-end and interim reporting periods thereafter. The Company does not expect SFAS No. 167 to have a material impact on its financial statements.

In December 2010, the FASB updated guidance to clarify the acquisition date that should be used for reporting the pro forma financial information disclosures when comparative financial statements are presented. The updated guidance is effective for 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, 2010.


 
12

 

NOTE 3 MINERAL PROPERTIES

Llippa Property

On December 10, 2007, the Company, through its wholly owed Peruvian subsidiary, entered into an agreement with MRC 1 Exploraciones EIRL of Peru, to purchase the Llippa Project, Peru, for $100,000. Llippa is a mineral claim consisting of two major mining concessions, the Prospera mine and La Prospera XXI.

Linderos Property

On June 27, 2011, the Company entered into an agreement to sell all rights, title and interest for the Linderos 4 mining concession to Portage Resources Inc. Total consideration for the sale is 10,000,000 common shares of Portage Resources Inc.

On July 4, 2011, the Company entered into an agreement to sell all rights, title and interest for the Linderos 5 mining concession to Portage Resources Inc. Total consideration for the sale is 8,000,000 common shares of Portage Resources Inc.

Both of the concessions sold are located in the Tabaconas District, San Ignacio Province, Department of Cajamarca, Peru. During the year ended April 30, 2010, the Company recognized an impairment loss of $200,000 related to the Linderos mining concessions. Consequently, these concessions had a carrying value of $nil at the sale agreement dates.

Others

On July 22, 2011, the Company entered into an agreement with (Proyecto Rocas) to develop the project of exploration of possible reserves in LA concession in the province of Bolognesi, Department of Ancash, Peru for $10,000. The Company will share 55% of the utilities and products of LA concession.

On July 22, 2011, the Company entered into an agreement with (Proyecto Rocas I) to develop the project of exploration of possible reserves in LA concession in the province of Bolognesi, Department of Ancash, Peru for $5,000. The Company will share 55% of the utilities and products of LA concession.

The company capitalized $15,000 towards mineral cost


NOTE 4 NOTES PAYABLE – RELATED PARTY

On August 28, 2007, the Company issued a promissory note in the amount of $10,000 to a related party.  This promissory note is unsecured, bears no interest and is due on demand.

On November 6, 2007, a shareholder loaned the Company $338 to establish a bank account in Peru. There are no terms of repayment and the amount is non-interest bearing.

On November 20, 2007, the Company issued a promissory note in the amount of $60,000 to a related party for their interest in the Llippa property.  The value of the transfer occurred at fair value. This promissory note is unsecured, bears no interest and is due on demand. On June 10, 2009, this promissory note was settled with 12,000,000 common shares of the Company (Note 5).
 
 
NOTE 5 STOCKHOLDERS’ DEFICIT

On June 10, 2009, the Company converted $60,000 of its debt into 12,000,000 common shares (Note 4 and 6).

On February 4, 2010, the company converted $240,000 of its debt into 4,000,000 common shares. The common shares issued on settlement of the notes were assigned a value of $400,000, which was calculated based on the trading value of the Company’s stock on the date the settlement was approved by the Board of Directors. As a result of this settlement the Company recorded a loss of $160,000.

During fiscal 2010, the Company calculated imputed interest of $1,217 and fair value of a Director’s fee of $6,000, which are all reflected as an in-kind contribution of expenses.

 
13

 

On November 1, 2010, the company converted $120,000 of its debt into 4,000,000 common shares. The common shares issued on the settlement were assigned a value of $200,000, which was calculated based on the trading value of the Company’s stock on the date the settlement was approved by the Board of Directors. As a result of this settlement, the Company has recorded a loss of $80,000.

On November 2, 2010, the company converted $27,694 of its debt and convertible debentures and convertible loans into 1,214,816 common shares (Note 7).  The common shares issued on the settlement were assigned a value of $60,741, which was calculated based on the trading value of the Company’s stock on the date the settlement was approved by the Board of Directors. As a result of this settlement, the Company has recorded a loss of $33,047.

On January 24, 2011, the company converted $210,000 management fees owing to the officers of the Company into 7,000,000 common shares. The common shares issued on the settlement were assigned a value of $560,000, which was calculated based on the trading value of the Company’s stock on the date the settlement was approved by the Board of Directors. As a result of this settlement, the Company has recorded a loss of $350,000.

During fiscal 2011, the Company calculated imputed interest of $724 and fair value of a Director's fee of $3,600, which are all reflected as an in-kind contribution of expenses.

For the three months ended July 31, 2011, the Company calculated imputed interest of $181 and fair value of a Director's fee of $900, which are all reflected as an in-kind contribution of expenses.

On June 15, 2011, the company signed a subscription agreement for 1,063,600 shares at $0.02 for cash.  As at July 31, 2011, $7,776 has been recorded as subscriptions received in advance.

On July 12, 2011, the company issued 1,680,000 common shares at $0.02 per share for cash.
 
 
NOTE 6 RELATED PARTY TRANSACTIONS

On November 20, 2007, the Company issued a promissory note in the amount of $60,000 to a related party. On June 10, 2009, this promissory note was settled with 12,000,000 common shares of the Company (Notes 4 and 5). The common shares issued on settlement of the notes were assigned a value of $1,680,000, which was calculated based on the trading value of the Company’s stock on the date the settlement was approved by the Board of Directors. As this transaction was with a related party, the loss on the extinguishment of debt of $1,620,000 has been recorded as a capital transaction.

On August 28, 2007, the Company issued a promissory note in the amount of $10,000 to a related party.  This promissory note is unsecured, bears no interest and is due on demand (Note 4). During fiscal 2008, the officer loaned the Company a further $338. This loan is also unsecured, bears no interest and is due on demand (Note 4).

As of July 31, 2011, $16,158 was owed to former directors and officers of the Company for expenses paid on behalf of the Company in fiscal 2009 and 2010.

As of July 31, 2011, the Company accrued $30,000 (2011 - $30,000) of management fees to the officers of the Company.
 
 
NOTE 7 CONVERTIBLE DEBENTURES

On August 10, 2009, the Company issued a 5% convertible debenture with a principal amount of $10,187 which is due and payable on August 10, 2010. Interest is due at the maturity date payable at the option of the Company in cash or shares. The principal and accrued interest on the debenture may be converted at any time into shares of the Company’s common stock at a price of $0.05 per share, at the option of the holder.

On October 9, 2009, the Company issued a 5% convertible debenture with a principal amount of $4,000 which is due on January 1, 2010. The Company has defaulted on the convertible debenture therefore it is due and payable on demand from the creditor. The debt carries a beneficial conversion feature which resulted in a debt discount of $4,000 which was recorded against the convertible debenture and offset in additional paid in capital during fiscal 2010.
 

 
14

 


On February 3, 2010, the Company issued a 10% convertible debenture with a principal amount of $10,000 which is due and payable on August 1, 2010. The principal and accrued interest on the debenture may be converted at any time, at the option of the holder, into shares of the Company’s common stock at a price that with 50% discount to the market on the day of conversion called by the holder. The debt carries a beneficial conversion feature which resulted in a debt discount of $10,000 which was recorded against the convertible debenture and offset in additional paid in capital. This discount was amortized as interest expense over the life of the debt which resulted in amortization of approximately $6,000 during fiscal 2011.

On May 10, 2010, the Company issued a 5% convertible debenture with a principal amount of $1,790 which is due on October 1, 2010. The debt carries a beneficial conversion feature which resulted in a debt discount of $1,790 which was recorded against the convertible debenture and offset in additional paid in capital. This discount was amortized as interest expense over the life of the debt which resulted in amortization of approximately $1,790 during fiscal 2011.

During fiscal 2011, all four convertible debentures were settled through the issuance of 1,214,816 common shares. As all four debentures were past due at the date of settlement, the common shares issued on settlement of the notes were assigned a value of $60,741, which was calculated based on the trading value of the Company’s stock on the date the settlement was approved by the Board of Directors.  This resulted in a loss of $33,047 on the settlement of $27,694 in principal and accrued interest.
 
 
NOTE 8 SUBSEQUENT EVENTS

There were no subsequent events as at the report date.
 
 
NOTE 9 COMPARATIVE FIGURES

Certain of the comparative figures have been classified to conform to the presentation adopted in the current period.
 
 
NOTE 10 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

During fiscal 2011, the Company settled $120,000 of its debt through issuance of 4,000,000 common shares. (Note 5)

During fiscal 2011, the Company issued 1,000,000 common shares at $0.01 per share for cash. (Note 5)

During fiscal 2011, the Company converted $210,000 management fees owing to the officers of the Company into 7,000,000 common shares. (Note 6)

During fiscal 2011, the Company converted $27,694 of its convertible debentures into 1,214,816 common shares. (Note 5)

During fiscal 2011, the Company recorded accretion interest on beneficial conversion features related to convertible debt of $7,790. (Note 7)

For the three months ended January 31, 2011, the Company issued  2,743,600 common shares at $0.02 per share for cash. (Note 5)
 
 
NOTE 11 CONTINGENCIES

There were no contingencies as at the report date.




 
15

 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Critical Accounting Policies - Mineral Interest

Nilam Resources, Inc. is primarily engaged in the acquisition, exploration and development of mineral properties. Mineral property acquisition costs are initially capitalized when incurred using the guidance in EITF 04-02, “Whether Mineral Rights Are Tangible or Intangible Assets”  The Company assesses the carrying costs for impairment under SFAS 144, “Accounting for Impairment or Disposal of Long Lived Assets”. The Emerging Issues Task Force issued EITF 04-3, Mining Assets: Impairment and Business Combinations requires mining companies to consider cash flows related to the economic value of mining assets (including mineral properties and rights) beyond those assets’ proven and probable reserves, as well as anticipated market price fluctuations, when testing the mining assets for impairment in accordance with SFAS 144.

Pursuant to SFAS No. 144, the recoverability of the acquisition costs associated with the purchase of mineral rights presumes to be insupportable prior to determining the existence of a commercially minable deposit and have to be expensed.

Going Concern and Uncertainties

Nilam Resources, Inc. was incorporated under the laws of Nevada on July 11, 2005.  Our company is in the exploration stage with limited operations.  As reflected in the accompanying financial statements, our Company had loss in the current period of $1,474,977, and a negative cash flows from operations of $17,556. for the current period.  We have not generated any revenues from operations, and further losses are anticipated in the development of the business. This raises substantial doubt about the company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Management plans to seek additional capital funding to implement its business plan through private placement and public offerings of common shares in its capital stock.  Additionally, if necessary, the officers or directors may make loans to enable the Company to meet its minimum cash requirements.

Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide an opportunity for the Company to continue as a going concern.

Our principal office is located at Calle Alcanfores 761 – 1701, Miraflores, Lima 18, Peru. Our fiscal year ends April 30th.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Inflation

The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position.  The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

Item 3.  QUALITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide information under this item.






 
16

 
 
Item 4.  CONTROLS and PROCEDURES OVER FINANCIAL REPORTING

Conclusions of Management Regarding Effectiveness of Disclosure Controls and Procedures.

Our management, which includes our CEO, president and sole director, who is also the principal financial officer of the Company, has further evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-15(e) as of the end of the period covered by this report. Based on that evaluation, the management has concluded that there was a material weakness affecting our internal control over financial reporting and, as a result management concluded that our disclosure controls and procedures were not effective as of July 31, 2011.

Management’s Report on Internal Control over Financial Reporting.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the company. The Company’s internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

The management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of July 31, 2011 based on the criteria for effective internal control over financial reporting established in “Internal Control — Integrated Framework,” issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission.  In its evaluation, Management evaluated whether the Company had sufficient “preventive controls” which are controls that have the objective of preventing the occurrence of errors or fraud that could result in a misstatement of the financial statements, and “detective controls” which have the objective of detecting errors or fraud that has already occurred that could result in a misstatement of the financial statements.   In its evaluation, Management considered whether there were sufficient internal controls over financial reporting, in the context of the Company’s control environment, financial risk assessment, internal control activities, monitoring, and communication to determine whether sufficient controls are present and functioning effectively.  Based upon this assessment, we determined that there was a material weakness affecting our internal control over financial reporting and, as a result of that weakness, our internal control over financial reporting was not effective as of July 31, 2011.  The material weakness has been disclosed to, and reviewed with, our independent auditor.

Management’s Remediation Initiatives

The Company recognizes the importance of implementing and maintaining disclosure controls and procedures and internal controls over financial reporting and is working to implement an effective system of controls.  Management is currently evaluating avenues for mitigating our internal controls weaknesses, but mitigating controls that are practical and cost effective based on the size, structure, and future existence of our organization.  Since the Company has not engaged in any substantive operations since the loss of the right to purchase the Pativilca Mineral Property in Peru, or generated any significant revenues, the Company is limited in its options for remediation efforts. Management, within the confines of its budgetary resources, will engage its outside accounting firm to assist with an assessment of the Company’s internal controls over financial reporting on an on-going basis.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake.  The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Projections of any evaluation of controls effectiveness to future periods are subject to risks.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.


 
17

 

Changes in internal control over financial reporting

Except as noted above, there have been no changes during the quarter ended July 31, 2011 in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.

Inherent Limitations on Effectiveness of Controls

The Company’s management does not expect that our Disclosure Controls or our internal control over financial reporting will prevent or detect all error and all fraud.  A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.  The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake.  Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the controls.  The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Projections of any evaluation of controls effectiveness to future periods are subject to risks.  Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.














 
 
 
 
 

 
 
18

 

PART II  OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

 
As of July 31, 2011, the end of the quarterly period covered by this report, the Company was not subject to any legal proceedings.

Item 1A.  RISK FACTORS

Inherent Risks in Our Business and the Mining Industry

The search for valuable minerals as a business involves substantial risks.  The likelihood of our success and success in the mining industry must be considered in light of the substantial risks, problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that the Company plans to undertake. These potential problems include, but are not limited to, the inherent speculative nature of exploration of mining properties, numerous hazards including pollution, cave-ins and other hazards against which we cannot, or may elect not to, insure, burdensome government regulations and other legal uncertainties, market fluctuations relating to the minerals and metals which we seek to exploit, other unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.

Compliance with Government Regulation

The Company 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 Company will have to sustain the cost of reclamation and environmental mediation for all exploration and development work undertaken.  The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the currently planned work programs.  Because there is presently no information on the size, tenor, or quality of any resource or reserves at this time, it is impossible to assess the impact of any capital expenditures on earnings or our competitive position in the event a potentially economic deposit is discovered.

If the Company enters into production, the cost of complying with permit and regulatory environment laws will be greater than in the exploration phases because the impact on the project area is greater.  Permits and regulations will be required.

 
-
 Water discharge will have to meet water standards;
     
 
-
 Dust generation may have to be minimal or otherwise re-mediated;
     
 
-
 Dumping of material on the surface may have to be re-contoured and re-vegetated;
     
 
-
 An assessment of all material to be left on the surface will need to be environmentally benign;
     
 
-
 Ground water will have to be monitored for any potential contaminants;
     
 
-
 The socio-economic impact of the project will have to be evaluated and if deemed negative, will    have to be re-mediated; and
     
 
-
 There will likely have to be an impact report of the work on the local fauna and flora.

Item 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On August 10, 2009, the Company issued a 5% convertible debenture with a principal amount of $10,187 that is due and payable on August 10, 2010.  The interest and principal is due at maturity at the option of the Company in either cash or shares.  The convertible debenture may be converted into the Company’s common stock at a price of $0.05 per share, at the option of the holder.  As of July 31, 2011, the convertible debenture was not paid and not converted.




 
19

 

On October 9, 2009, the Company issued a 5% convertible debenture with a principal amount of $4,000 which is due on January 1, 2010.  The Company has defaulted on the convertible debenture therefore it is due and payable on demand from the creditor. The debt carries a beneficial conversion feature which resulted in a debt discount of $4,000 which was recorded against the convertible debenture and offset in additional paid in capital during fiscal 2010.

Item 3.  DEFAULTS UPON SENIOR SECURITIES

None.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Item 5.  OTHER INFORMATION

As of July 31, 2011, all warrants were expired.

Item 6.  EXHIBITS AND REPORT ON FORM 8-K

1.
Certification of Mr. Shahin Tabatabaei, Chief Executive Officer and Acting Chief Financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

2.
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes Oxley Act of 2002.












 

 
 
20

 

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on this behalf by the undersigned, thereunto duty authorized.


 
Nilam Resources, Inc.
   
Dated  October 11, 2011
 
 
/s/ Shahin Tabatabaei
 
Shahin Tabatabaei
 
CEO and Acting CFO


























 
21