Attached files
file | filename |
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EXCEL - IDEA: XBRL DOCUMENT - Liberty Gold Corp. | Financial_Report.xls |
EX-32.1 - EXHIBIT 32.1 - Liberty Gold Corp. | ex_321apg.htm |
EX-31.1 - EXHIBIT 31.1 - Liberty Gold Corp. | ex_311apg.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2011
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ____
Commission File No. 333-16135
LIBERTY GOLD CORP.
(Exact name of registrant as specified in its charter)
Delaware | 80-0372385 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
2415 East Camelback Road, Suite 700, Phoenix, AZ 85016
(Address of principal executive offices, zip code)
602-553-1190
(Registrants telephone number, including area code)
___________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the issuer (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 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [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. (check one):
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] | Smaller reporting company [X] |
(Do not check if a smaller reporting company) |
|
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act): Yes [ ] No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
As of February 21, 2012, there were 88,912,500 shares of common stock, $0.0001 par value per share, outstanding.
2
LIBERTY GOLD CORP..
(A Development Stage Company)
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED DECEMBER 31, 2011
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q of Liberty Gold Corp., a Delaware corporation (the Company), contains forward-looking statements, as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as may, will, should, could, expects, plans, intends, anticipates, believes, estimates, predicts, potential or continue or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: the Companys need for and ability to obtain additional financing and that there will be little demand for the Companys services and products, and other factors over which we have little or no control; and other factors discussed in the Companys filings with the Securities and Exchange Commission (SEC).
Our management has included projections and estimates in this Form 10-Q, which are based primarily on managements experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS.
Liberty Gold Corp.
(Formerly IBOS, Inc.)
(An Exploration Stage Company)
December 31, 2011 and 2011
Index to Financial Statements
Contents Page(s)
Balance Sheets at December 31, 2011 (Unaudited) and March 31, 2011 5 Statements of Operations for the Three Months and Nine Months Ended December 31, 2011 and 2010 and for the Period from April 5, 2011 (Date of Entry into Exploration) through December 31, 2011 (Unaudited) 6 Statement of Stockholders Equity (Deficit) for the Period from March 31, 2010 through December 31, 2011 (Unaudited) 7 Statements of Cash Flows for the Nine Months Ended December 31, 2011 and 2010 and for the Period from April 5, 2011 (Date of Entry into Exploration) through December 31, 2011 (Unaudited) 8 Notes to the Financial Statements (Unaudited) 9 |
4
Liberty Gold Corp. | |||||||||||
(Formerly IBOS, Inc.) | |||||||||||
(An Exploration Stage Company) | |||||||||||
Balance Sheets | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2011 |
| March 31, 2011 |
| ||
|
|
|
|
|
| (Unaudited) |
|
|
|
| |
ASSETS |
|
|
|
|
|
|
|
|
| ||
CURRENT ASSETS: |
|
|
|
|
|
|
|
| |||
| Cash |
|
|
| $ | 85,283 |
|
| 7,574 |
| |
| Accounts receivable |
|
|
| - |
|
| 28,585 |
| ||
| Prepaid expenses |
|
|
| 12,901 |
|
| 1,087 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Current Assets |
|
|
| 98,184 |
|
| 37,246 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
MINERAL PROPERTIES |
|
|
| 1,274,272 |
|
| - |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Assets |
|
| $ | 1,372,456 |
|
| 37,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY (DEFICIT) |
|
|
|
|
|
|
|
| |||
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
| |||
| Current portion of mineral property payable |
|
| $ | 315,758 |
|
| 23,679 |
| ||
| Accrued expenses |
|
|
| - |
|
| 5,500 |
| ||
| Advances from former stockholders |
|
|
| - |
|
| 30,544 |
| ||
| Advances from stockholders |
|
|
| 28,356 |
|
| - |
| ||
| Common stock to be issued |
|
|
| 100 |
|
| - |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Current Liabilities |
|
|
| 344,214 |
|
| 59,723 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
MINERAL PROPERTIES PAYABLE, net of current portion |
|
|
| 598,630 |
|
| - |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
LIBERTY GOLD CORP. STOCKHOLDERS' EQUITY (DEFICIT): |
|
|
|
|
|
|
|
| |||
| Preferred stock at $0.0001 par value: 5,000,000 shares authorized; |
|
|
|
|
|
|
|
| ||
|
| none issued or outstanding |
|
|
| - |
|
| - |
| |
| Common stock at $0.0001 par value: 250,000,000 shares authorized, |
|
|
|
|
|
|
|
| ||
|
| 87,155,176 and 124,100,000 shares issued and outstanding, respectively |
|
| 8,716 |
|
| 12,410 |
| ||
| Additional paid-in capital |
|
|
| 1,110,387 |
|
| 45,998 |
| ||
| Accumulated deficit |
|
|
| (88,952) |
|
| (80,885) |
| ||
| Deficit accumulated during the exploration stage |
|
|
| (600,539) |
|
| - |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Liberty Gold Corp. Stockholders' Equity (Deficit) |
|
|
| 429,612 |
|
| (22,477) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
NONCONTROLLING INTEREST |
|
|
| - |
|
| - |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Liabilities and Equity (Deficit) |
|
| $ | 1,372,456 |
|
| 37,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the financial statements |
5
Liberty Gold Corp. | ||||||||||||||||||
(Formerly IBOS, Inc.) | ||||||||||||||||||
(An exploration company) | ||||||||||||||||||
Statements Of Operations | ||||||||||||||||||
|
|
|
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|
|
|
|
|
|
|
|
| For the Period from | |||
|
|
|
|
| For the Three Months |
| For the Three Months |
| For the Nine Months |
| For the Nine Months |
| April 5, 2011 | |||||
|
|
|
|
| Ended |
| Ended |
| Ended |
| Ended |
| (Exploration) through | |||||
|
|
|
|
| December 31, 2011 |
| December 31, 2010 |
| December 31, 2011 |
| December 31, 2010 |
| December 31, 2011 | |||||
|
|
|
|
| (Unaudited) |
| (Unaudited) |
| (Unaudited) |
| (Unaudited) |
| (Unaudited) | |||||
Revenues earned during the exploration stage |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - | |||
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
| Exploration costs |
|
| 70,890 |
|
| - |
|
| 378,890 |
|
| - |
|
| 378,890 | ||
|
| Total cost of revenues |
| 70,890 |
|
| - |
|
| 378,890 |
|
| - |
|
| 378,890 | ||
Gross profit |
|
| (70,890) |
|
| - |
|
| (378,890) |
|
| - |
|
| (378,890) | |||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
| Officers' compensation |
|
| 19,500 |
|
| - |
|
| 45,765 |
|
| - |
|
| 45,765 | ||
| Professional fees |
|
| 58,857 |
|
| - |
|
| 129,715 |
|
| - |
|
| 129,715 | ||
| General and administrative expenses |
|
| 19,422 |
|
| - |
|
| 46,168 |
|
| - |
|
| 46,168 | ||
|
| Total operating expenses |
|
| 96,779 |
|
| - |
|
| 221,648 |
|
| - |
|
| 221,648 | |
Loss from continuing operations before income taxes |
|
| (167,670) |
|
| - |
|
| (600,539) |
|
| - |
|
| (600,539) | |||
Income tax provision |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - | |||
Net loss from continuing operations |
|
| (167,670) |
|
| - |
|
| (600,539) |
|
| - |
|
| (600,539) | |||
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
| Loss from operations of discontinued operations, net of taxes | - |
|
| (12,901) |
|
| - |
|
| (34,613) |
|
| - | ||||
| Loss from disposal of discontinued operations, net of taxes |
| - |
|
| - |
|
| (8,067) |
|
| - |
|
|
| |||
|
| Loss from discontinued operations, net of taxes |
|
| - |
|
| (12,901) |
|
| (8,067) |
|
| (34,613) |
|
| - | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before noncontrolling interest |
|
| (167,670) |
|
| (12,901) |
|
| (608,606) |
|
| (34,613) |
|
| (600,539) | |||
Noncontrolling interest |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - | |||
Net loss |
|
| $ | (167,670) |
| $ | (12,901) |
| $ | (608,606) |
| $ | (34,613) |
| $ | (600,539) | ||
Net loss per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
| - basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Continuing operations |
| $ | (0.00) |
| $ | - |
| $ | (0.01) |
| $ | - |
|
|
| |
|
| Discontinued operations |
|
| - |
|
| (0.00) |
|
| (0.00) |
|
| (0.00) |
|
|
| |
|
|
| Total net loss per common share |
| $ | (0.00) |
| $ | (0.00) |
| $ | (0.01) |
| $ | (0.00) |
|
|
|
| Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| - basic and diluted |
|
| 88,149,577 |
|
| 124,100,000 |
|
| 105,680,836 |
|
| 124,100,000 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the financial statements |
6
Liberty Gold Corp. | ||||||||||||||||||||||||||
(Formerly IBOS, Inc.) | ||||||||||||||||||||||||||
(An Exploration Stage Company) | ||||||||||||||||||||||||||
Statement of Equity (Deficit) | ||||||||||||||||||||||||||
For the period from March 31, 2010 through December 31, 2011 | ||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Deficit |
| Total Liberty |
|
|
|
|
|
|
| |||
|
|
|
| Common Stock, $0.0001 Par Value |
| Additional |
|
|
| Accumulated |
| Gold Corp |
|
|
|
|
|
|
| |||||||
|
|
|
| Number of |
|
|
|
| Paid-in |
| Accumulated |
| during the |
| Shareholders' |
| Noncontrolling |
| Total |
| ||||||
|
|
|
| Shares |
| Amount |
| Capital |
| Deficit |
| Exploration Stage |
| Equity (Deficit) |
| Interest |
| Equity (Deficit) |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2010 |
| 124,100,000 |
| $ | 12,410 |
| $ | 45,998 |
| $ | (38,096) |
| $ | - |
| $ | 20,312 |
| $ | - |
| $ | 20,312 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Net loss |
|
|
|
|
|
|
|
|
|
| (42,789) |
|
| - |
|
| (42,789) |
|
| - |
|
| (42,789) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2011 |
| 124,100,000 |
|
| 12,410 |
|
| 45,998 |
|
| (80,885) |
|
| - |
|
| (22,477) |
|
| - |
|
| (22,477) |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common shares issued for mineral property acquisition in Alaska | 500,000 |
|
| 50 |
|
| - |
|
|
|
|
|
|
|
| 50 |
|
|
|
|
| 50 |
| ||
| Forgiveness of debt by former stockholders |
|
|
|
|
|
| 30,545 |
|
|
|
|
|
|
|
| 30,545 |
|
|
|
|
| 30,545 |
| ||
| Equity units inclusive one common share and one warrant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| issued for cash at $0.80 per unit on June 28, 2011 | 75,000 |
|
| 8 |
|
| 59,992 |
|
|
|
|
|
|
|
| 60,000 |
|
|
|
|
| 60,000 |
| |
| Common shares issued for mineral property acquisition in Arizona | 500,000 |
|
| 50 |
|
| - |
|
|
|
|
|
|
|
| 50 |
|
|
|
|
| 50 |
| ||
| Common shares issued for mineral property acquisition in Mexico | 1,500,000 |
|
| 150 |
|
| - |
|
|
|
|
|
|
|
| 150 |
|
|
|
|
| 150 |
| ||
| Equity units inclusive of one common share and one warrant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| issued for cash at $0.80 per unit between July 28, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| and September 9, 2011 | 712,500 |
|
| 71 |
|
| 569,929 |
|
|
|
|
|
|
|
| 570,000 |
|
|
|
|
| 570,000 |
| |
| Surrender of 40,000,000 common shares at |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| $0.0001 par value on August 10, 2011 | (40,000,000) |
|
| (4,000) |
|
| 4,000 |
|
|
|
|
|
|
|
| - |
|
|
|
|
| - |
| |
| Common shares issued for mineral property acquisition in Alaska | 500,000 |
|
| 50 |
|
| - |
|
|
|
|
|
|
|
| 50 |
|
|
|
|
| 50 |
| ||
| Equity units inclusive of one common share and one warrant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| issued for cash at $0.45 per unit between October 28, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| and November 12, 2011 | 666,666 |
|
| 67 |
|
| 299,933 |
|
|
|
|
|
|
|
| 300,000 |
|
|
|
|
| 300,000 |
| |
| Equity units inclusive of one common share and one warrant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| issued for cash at $0.99 per unit on December 15, 2011 | 101,010 |
|
| 10 |
|
| 99,990 |
|
|
|
|
|
|
|
| 100,000 |
|
|
|
|
| 100,000 |
| |
| Cancellation of common shares issued for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| property acquisitions in Mexico | (1,500,000) |
|
| (150) |
|
| - |
|
|
|
|
|
|
|
| (150) |
|
|
|
|
| (150) |
| |
| Net loss |
|
|
|
|
|
|
|
|
|
| (8,067) |
|
| (600,539) |
|
| (608,606) |
|
|
|
|
| (608,606) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2011 |
| 87,155,176 |
| $ | 8,716 |
| $ | 1,110,387 |
| $ | (88,952) |
| $ | (600,539) |
| $ | 429,612 |
| $ | - |
| $ | 429,612 |
| ||
|
|
|
|
|
|
|
|
|
|
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|
See accompanying notes to the financial statements |
7
Liberty Gold Corp. | |||||||||||||||||||
(Formerly IBOS, Inc.) | |||||||||||||||||||
(An exploration company) | |||||||||||||||||||
Statements Of Cash Flows | |||||||||||||||||||
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| For the Period from |
| |||||
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|
|
|
|
|
| For the Nine Months |
| For the Nine Months |
| April 5, 2011 |
| |||||
|
|
|
|
|
|
|
|
| Ended |
| Ended |
| (Exploration) through |
| |||||
|
|
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|
|
|
|
|
| December 31, 2011 |
| December 31, 2010 |
| December 31, 2011 |
| |||||
|
|
|
|
|
|
|
|
| (Unaudited) |
| (Unaudited) |
| (Unaudited) |
| |||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
|
|
|
|
|
| $ | (608,606) |
| $ | (34,613) |
| $ | (600,539) |
| ||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
| ||
Adjustments to reconcile net loss to net cash used in operating activities |
|
| |||||||||||||||||
| Loss from discontinued operations, net of taxes |
|
|
|
|
|
|
| 8,067 |
|
| - |
|
| - |
| |||
| Changes in operating assets and liabilities: |
|
|
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|
|
|
|
|
|
|
|
|
|
| |||
|
| Accounts receivable |
|
|
|
|
|
|
| - |
|
| (7,562) |
|
| - |
| ||
|
| Prepaid expenses |
|
|
|
|
|
|
| (12,901) |
|
| (4,336) |
|
| - |
| ||
|
| Accrued expenses |
|
|
|
|
|
|
|
|
|
| (5,800) |
|
|
|
| ||
|
| Advances from stockholders |
|
|
|
|
|
|
| - |
|
| |
|
| - |
| ||
|
| Common stockholder to be issued |
|
|
|
|
|
|
| - |
|
| - |
|
| - |
| ||
|
| Mineral property payable |
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| ||
|
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|
|
|
|
|
|
|
| ||
| Net cash used in operating activities |
|
|
|
|
|
|
| (613,440) |
|
| (52,311) |
|
| (613,440) |
| |||
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|
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|
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| ||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
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|
|
|
|
|
|
|
|
|
|
| ||||
| Cash paid in disposal of discontinued operations |
|
|
|
|
|
|
| (7,574) |
|
| - |
|
| (7,574) |
| |||
| Purchase of mineral properties |
|
|
|
|
|
|
| (359,734) |
|
| - |
|
| (359,734) |
| |||
|
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|
|
|
|
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|
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|
|
|
|
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|
| ||
| Net cash used in investing activities |
|
|
|
|
|
|
| (367,308) |
|
| - |
|
| (367,308) |
| |||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Advances from former stockholders |
|
|
|
|
|
|
| - |
|
| 23,558 |
|
| - |
| |||
| Advances from stockholders |
|
|
|
|
|
|
| 28,356 |
|
| - |
|
| 28,356 |
| |||
| Proceeds from sale of common stock |
|
|
|
|
|
|
| 1,030,101 |
|
| - |
|
| 1,030,101 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| Net cash provided by financing activities |
|
|
|
|
|
|
| 1,058,457 |
|
| 23,558 |
|
| 1,058,457 |
| |||
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
| ||
NET CHANGE IN CASH |
|
|
|
|
|
|
| 77,709 |
|
| (28,753) |
|
| 77,709 |
| ||||
Cash at beginning of period |
|
|
|
|
|
|
| 7,574 |
|
| 29,591 |
|
| 7,574 |
| ||||
Cash at end of period |
|
|
|
|
|
| $ | 85,283 |
| $ | 838 |
| $ | 85,283 |
| ||||
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
| ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: |
|
|
|
|
|
|
| ||||||||||||
| Interest paid |
|
|
|
|
|
| $ | - |
| $ | - |
| $ | - |
| |||
| Income tax paid |
|
|
|
|
|
| $ | - |
| $ | 1,600 |
| $ | - |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
NON CASH FINANCING AND INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
| ||||||||
| Common shares issued for acquisition of mineral properties |
|
| $ | 150 |
| $ | - |
| $ | 150 |
| |||||||
| Common shares to be issued for acquisition of mineral properties |
| $ | 100 |
| $ | - |
| $ | 100 |
| ||||||||
| Forgiveness of advances from former stockholders to contributed capital | $ | 30,545 |
| $ | - |
| $ | 30,545 |
| |||||||||
| Mineral properties purchase with debt |
| 914,388 |
|
| - |
|
| 914,388 |
| |||||||||
|
|
|
|
|
|
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|
|
|
| ||
See accompanying notes to the financial statements |
8
Liberty Gold Corp.
(Formerly IBOS Inc.)
(An Exploration Stage Company)
December 31, 2011 and 2010
Notes to the Financial Statements
(Unaudited)
Note 1 Organization and Operations
IBOS, Inc.
IBOS, Inc. (IBOS) was incorporated as a Subchapter S corporation on April 11, 2006 under the laws of the State of California. It was converted into a C corporation, incorporated in the State of Delaware on March 5, 2009, in a transaction in which the newly-formed corporation issued an aggregate of 9,000,000 shares of common stock to the former stockholders of the S corporation for all of the issued and outstanding shares of IBOS. All shares were held by and all shares of common stock were issued to IBOSs stockholders and President and Chief Executive Officer, Chief Technology Officer and Chief Financial Officer. No cash consideration was paid. No value was given to the shares issued by the newly formed corporation. Therefore, the shares were recorded to reflect the $.0001 par value and additional paid-in capital was recorded as a negative amount ($900).
IBOS applied paragraph 505-10-S99-3 of the FASB Accounting Standards Codification (formerly Topic 4B of the Staff Accounting Bulletins (SAB) (SAB Topic 4B) issued by the United States Securities and Exchange Commission (the SEC)), by reclassifying all of IBOSs undistributed earnings and losses to additional paid-in capital as of March 5, 2009.
The accompanying financial statements have been prepared as if IBOS had its corporate capital structure as of the first date of the first period presented.
IBOS provided web-based comprehensive selection of electronic medical claims processing and collection solutions to the healthcare provider industry prior to April 5, 2011. IBOS had minimal operations between April 1, 2011 and April 4, 2011.
Change in Control and Scope of Business
On April 5, 2011, a Stock Purchase Agreement (the SPA) by and among IBOSs three officers and directors Deepak Danavar, Ravi Sharma, and James Villalobos, the Company and Lynn Harrison (LH) was executed and a closing was held under the SPA. Pursuant to the SPA (i) LH purchased an aggregate of 8,280,000 shares of common stock of the Company (87% of the outstanding shares) from Messrs. Danavar, Sharma and Villalobos for an aggregate purchase price of $370,000.00; (ii) the Company disposed of its California subsidiary by transferring its shares to Messrs. Danavar, Sharma and Villalobos; (iii) LH was elected the sole director of the Company; (iv) LH was elected President and CEO of the Company and Frank J. Hariton was elected secretary of the Company; and (v) Messrs Danavar, Sharma and Villalobos each resigned as officers and directors of the Company. Additionally as part of the change in control the former shareholders agreed to forgive debts outstanding to them totaling $30,544 which have been recorded as contributed capital. As part of the Stock Purchase transaction the Company transferred to a newly-formed company controlled by IBOSs three officers and directors Deepak Danavar, Ravi Sharma, and James Villalobos, the Companys three former officers and directors (the Buyers), certain operating assets associated with the operations of IBOSs electronic medical claims processing and collection solutions, subject to related liabilities (the Business). Pursuant to the terms of SPA, the assumption by the Buyer of all liabilities and debts of IBOS which relate to or arise out of the operations of the Business and the indemnification by the Buyer of all losses, liabilities, claims, damages, costs and expenses that may be suffered by IBOS at any time which arise out of the operations of the Business. Loss from disposal of the discontinued operations amounted to $8,067.
Upon acquisition of certain gold mine properties on April 5, 2011 IBOS decided to engage in the business of acquiring, exploring and developing mineral properties.
9
The financial statements for the interim period ended December 31, 2010 have been presented to give retroactive effect to the discontinuance of the discontinued operations.
Surrender of Common Shares from Principal Stockholder upon Change in Control
On April 21, 2011, Lynn Harrison, President, CEO and principal shareholder of the Company, surrendered 351,900,000 shares of common stock owned by her, thus reducing her ownership from 414,000,000 shares to 62,100,000 shares and reducing the Companys issued and outstanding common shares from 476,000,000 shares to 124,100,000 shares.
All shares and per share amounts in the financial statements have been adjusted to give retroactive effect to the surrender of those common shares.
Amendment to the Certificate of Incorporation
On April 26, 2011, IBOS filed a Certificate of Amendment of Certificate of Incorporation, and (i) changed its name to Liberty Gold Corp. (Liberty Gold or the Company) upon the acquisition of certain gold mine properties; (ii) increased its total number of shares of all classes of stock which the Company is authorized to issue from One Hundred and Five Million (105,000,000) shares, inclusive of Five Million (5,000,000) shares of Preferred Stock, par value $.0001 per share, and One Hundred Million (100,000,000) shares of Common Stock, par value $.0001 per share, to Two Hundred Fifty Five Million (255,000,000) shares, inclusive of Five Million (5,000,000) shares of Preferred Stock, par value $.0001 per share, and Two Hundred Fifty Million (250,000,000) shares of Common Stock, par value $.0001 per share; and (iii) effectuated a 50-for-1 (1:50) forward stock split (the Stock Split).
All shares and per share amounts in the financial statements have been adjusted to give retroactive effect to the Stock Split.
Note 2 Summary of Significant Accounting Policies
Basis of Presentation Unaudited Interim Financial Information
The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for the interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (SEC) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read in conjunction with the financial statements of the Company for the fiscal year ended March 31, 2011 and notes thereto contained in the information filed as part of the Companys Annual Report on Form 10-K filed with SEC on July 28, 2011.
Reclassification
Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses.
Exploration Stage Company
Upon acquisition of certain gold mine properties on April 5, 2011 the Company decided to engage in the business of acquiring, exploring and developing mineral properties. Although the Company acquired mineral properties, a substantial portion of the Companys activities has involved establishing the business and the Company has neither started exploring the mineral properties, nor generated any revenue to date. Upon entry into mining
10
exploration business the Company became an exploration stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. All losses accumulated since inception have been considered as part of the Companys exploration stage activities.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reporting amounts of revenues and expenses during the reported period.
The Companys significant estimates and assumptions include the fair value of financial instruments; the carrying value, recoverability and impairment of long-lived assets, including the values assigned to and the estimated reserves, dismantlement, restoration and abandonment costs, which are net of estimated salvage values of mineral properties; income tax rate, income tax provision, deferred tax assets, and valuation allowance of deferred tax assets; and the assumption that the Company will continue as a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (Paragraph 820-10-35-37) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
Level 1 |
| Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
|
|
|
Level 2 |
| Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
|
|
|
Level 3 |
| Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for
11
identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Companys financial assets and liabilities, such as cash, accounts receivable, prepaid expenses, accounts payable and accrued expenses, common stock to be issued and mineral property payable, approximate their fair values because of the short maturity of these instruments.
Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
It is not, however, practical to determine the fair value of advances from stockholders due to their related party nature.
Carrying Value, Recoverability and Impairment of Long-Lived Assets
The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Companys long-lived assets, which include mineral properties, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the assets expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.
The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Companys overall strategy with respect to the manner or use of the acquired assets or changes in the Companys overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; and (v) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
Management periodically reviews the recoverability of the capitalized mineral properties and mining equipment. Management takes into consideration various information including, but not limited to, historical production records taken from previous mine operations, results of exploration activities conducted to date, estimated future prices and reports and opinions of outside consultants. When it is determined that a project or property will be abandoned or its carrying value has been impaired, a provision is made for any expected loss on the project or property.
The impairment charges, if any, is included in operating expenses in the accompanying statements of operations.
Fiscal Year End
The Company elected March 31 as its fiscal year ending date.
Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
12
Mineral Properties
The Company follows Section 930 of the FASB Accounting Standards Codification for its mineral properties. Mineral properties and related mineral rights acquisition costs are capitalized pending determination of whether the drilling has found proved reserves. If a mineral ore body is discovered, capitalized costs will be amortized on a unit-of-production basis following the commencement of production. Otherwise, capitalized acquisition costs are expensed when it is determined that the mineral property has no future economic value. General exploration costs and costs to maintain rights and leases, including rights of access to lands for geophysical work and salaries, equipment, and supplies for geologists and geophysical crews are expensed as incurred. When it is determined that a mining deposit can be economically and legally extracted or produced based on established proven and probable reserves, further exploration costs and development costs as well as interest costs relating to exploration and development projects that require greater than six (6) months to be readied for their intended use incurred after such determination will be capitalized. The establishment of proven and probable reserves is based on results of final feasibility studies which indicate whether a property is economically feasible. Upon commencement of commercial production, capitalized costs will be transferred to the appropriate asset categories and amortized on a unit-of-production basis. Capitalized costs, net of salvage values, relating to a deposit which is abandoned or considered uneconomic for the foreseeable future will be written off. The sale of a partial interest in a proved property is accounted for as a cost recovery and no gain or loss is recognized as long as this treatment does not significantly affect the unit-of-production amortization rate. A gain or loss will be recognized for all other sales of proved properties and will be classified in other operating revenues. Maintenance and repairs are charged to expense, and renewals and betterments are capitalized to the appropriate property and equipment accounts.
The provision for depreciation, depletion and amortization (DD&A) of mineral properties is calculated on a property-by-property basis using the unit-of-production method. Taken into consideration in the calculation of DD&A are estimated future dismantlement, restoration and abandonment costs, which are net of estimated salvage values. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.
To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all general exploration costs, if any, are being expended.
Related Parties
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 8251015, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involvedb) description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of
13
transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. mounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitments and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Companys consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Companys consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Companys business, financial position, and results of operations or cash flows.
Noncontrolling Interest
The Company follows paragraph 810-10-65-1 of the FASB Accounting Standards Codification to report the noncontrolling interest in mineral properties, its majority owned subsidiary in the statements of balance sheets within the equity section, separately from the Companys shareholders equity. Noncontrolling interest represents the noncontrolling interest holders proportionate share of the equity of the Companys majority-owned subsidiary, Noncontrolling interest is adjusted for the noncontrolling interest holders proportionate share of the earnings or losses and the noncontrolling interest continues to be attributed its share of losses even if that attribution results in a deficit noncontrolling interest balance.
Revenue Recognition
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
The Company will derive its revenue from sales contracts with customers with revenues being generated upon the shipment of mineral ores upon the Company commencing exploration operations. Persuasive evidence of an arrangement is demonstrated via invoice, product delivery is evidenced by warehouse shipping log as well as a signed bill of lading from the trucking company or third party carrier and title transfers upon shipment, based on free on board (FOB) warehouse; the sales price to the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate, discount, or volume incentive.
Stock-Based Compensation for Obtaining Employee Services
The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition
14
provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.
The fair value of each option award is estimated on the date of grant using a Black-Scholes Option-Pricing Model. The ranges of assumptions for inputs are as follows:
- | The Company uses historical data to estimate employee termination behavior. The expected life of options granted is derived from paragraph 718-10-S99-1 of the FASB Accounting Standards Codification and represents the period of time the options are expected to be outstanding. |
- | The expected volatility is based on a combination of the historical volatility of the comparable companies stock over the contractual life of the options. |
- | The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option. |
- | The expected dividend yield is based on the Companys current dividend yield as the best estimate of projected dividend yield for periods within the contractual life of the option. |
The Companys policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.
Equity Instruments Issued to Parties other than Employees for Acquiring Goods or Services
The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of section 505-50-30 of the FASB Accounting Standards Codification (Section 505-50-30).
Pursuant to Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.
The fair value of options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows:
- | Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2 of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holders expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holders expected exercise behavior. The contractual term of share options or similar instruments is used as expected term of share options or similar instruments for the Company if it is a newly formed corporation. |
15
- | Expected volatility of the entitys shares and the method used to estimate it. An entity that uses a method that employs different volatilities during the contractual term shall disclose the range of expected volatilities used and the weighted-average expected volatility. A thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for it to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. |
- | Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Companys current dividend yield as the best estimate of projected dividend yield for periods within the expected contractual life of the option and similar instruments. |
- | Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option and similar instruments. |
Pursuant to Paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.
Income Tax Provision
The Company was a Subchapter S corporation, until March 5, 2009 during which time the Company was treated as a pass through entity for federal income tax purposes. Under Subchapter S of the Internal Revenue Code stockholders of an S corporation are taxed separately on their distributive share of the S corporations income whether or not that income is actually distributed.
Effective March 6, 2009, the Company follows paragraph 740-10-30-2 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date.
The Company adopted the provisions of paragraph 740-10-25-13 of the FASB Accounting Standards Codification. Paragraph 740-10-25-13.addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The
16
Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In managements opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the interim period ended December 31, 2011 or 2010.
Limitation on Utilization of NOLs due to Change in Control
Pursuant to the Internal Revenue Code Section 382 (Section 382), certain ownership changes may subject the NOLs to annual limitations which could reduce or defer the NOL. Section 382 imposes limitations on a corporations ability to utilize NOLs if it experiences an ownership change. In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. In the event of an ownership change, utilization of the NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of its stock at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may be carried over to later years. The imposition of this limitation on its ability to use the NOLs to offset future taxable income could cause the Company to pay U.S. federal income taxes earlier than if such limitation were not in effect and could cause such NOLs to expire unused, reducing or eliminating the benefit of such NOLs.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.
The following table shows the potentially outstanding dilutive common shares excluded from the diluted net loss per share calculation for the interim period ended December 31, 2011 and 2010 as they were anti-dilutive:
17
|
| Potentially outstanding dilutive common shares |
| ||||||
|
| For the Interim Period |
|
| For the Interim Period |
| |||
Ended | Ended | ||||||||
December 31, 2011 | December 31, 2010 | ||||||||
Contingent shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000 contingent shares of the Companys common stock issuable provided that mining operations on the property result in the discovery of 1,000,000 ounces of gold and requires the Company to expend at least $300,000 in exploration and mine development work on the property over three (3) years commencing with the closing under the Alaska mineral property purchase Agreement (PPA) entered into on April 5, 2011. |
|
|
| 2,000,000 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
1,500,000 contingent shares of the Companys common stock issuable provided that mining operations on the property result in the discovery of 1,000,000 ounces of gold or 10,000,000 ounces of silver and requires the Company to pay a 5% smelters royalty under the Arizona Asset Purchase Agreement No. 1 (APAAR1) entered into on July 18, 2011. |
|
|
| 1,500,000 |
|
|
| - |
|
|
|
|
|
|
|
|
| ||
Total contingent shares |
|
|
| 3,500,000 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued on June 28, 2011 in connection with the Companys equity financing inclusive of warrants to purchase 75,000 shares to the investor with an exercise price of $1.25 per share expiring three (3) years from date of issuance |
|
|
| 75,000 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
Warrants issued between July 28, 2011 and September 9, 2011 in connection with the Companys equity financing inclusive of warrants to purchase 712,500 shares to the investor with an exercise of $1.25 per share expiring three (3) years from date of issuance |
|
|
| 712,500 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
Warrants issued between October 28, 2011 and November 12, 2011 in connection with the Companys equity financing inclusive of warrants to purchase 222,222 shares to the investor with an exercise of $0.59 per share expiring three (3) years from date of issuance |
|
|
| 666,666 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
Warrants issued on December 15, 2011 in connection with the Companys equity financing inclusive of warrants to purchase 101,010 shares to the investor with an exercise of $1.29 per share expiring three (3) years from date of issuance |
|
|
| 101,010 |
|
|
| - |
|
|
|
|
|
|
|
|
| ||
Total warrants |
|
|
| 1,555,716 |
|
|
| - |
|
|
|
|
|
|
|
|
| ||
Total potentially outstanding dilutive common shares |
|
|
| 5,055,716 |
|
|
| - |
|
Cash Flows Reporting
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (Indirect method) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to
18
report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.
Subsequent Events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
Recently Issued Accounting Pronouncements
In May 2011, the FASB issued the FASB Accounting Standards Update No. 2011-04 Fair Value Measurement (ASU 2011-04). This amendment and guidance are the result of the work by the FASB and the IASB to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and International Financial Reporting Standards (IFRSs).
This update does not modify the requirements for when fair value measurements apply; rather, they generally represent clarifications on how to measure and disclose fair value under ASC 820, Fair Value Measurement, including the following revisions:
·
An entity that holds a group of financial assets and financial liabilities whose market risk (that is, interest rate risk, currency risk, or other price risk) and credit risk are managed on the basis of the entitys net risk exposure may apply an exception to the fair value requirements in ASC 820 if certain criteria are met. The exception allows such financial instruments to be measured on the basis of the reporting entitys net, rather than gross, exposure to those risks.
·
In the absence of a Level 1 input, a reporting entity should apply premiums or discounts when market participants would do so when pricing the asset or liability consistent with the unit of account.
·
Additional disclosures about fair value measurements.
The amendments in this Update are to be applied prospectively and are effective for public entity during interim and annual periods beginning after December 15, 2011.
In June 2011, the FASB issued the FASB Accounting Standards Update No. 2011-05 Comprehensive Income (ASU 2011-05), which was the result of a joint project with the IASB and amends the guidance in ASC 220, Comprehensive Income, by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders equity. Instead, the new guidance now gives entities the option to present all nonowner changes in stockholders equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. Regardless of whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive statements, the amendments require entities to present all reclassification adjustments from OCI to net income on the face of the statement of comprehensive income.
The amendments in this Update should be applied retrospectively and are effective for public entity for fiscal years, and interim periods within those years, beginning after December 15, 2011.
19
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
Note 3 Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the accompanying financial statements, the Company had a deficit accumulated during the exploration stage at December 31, 2011 and a net loss and net cash used in operating activities for the interim period then ended.
While the Company is attempting to commence explorations and generate sufficient revenues, the Companys cash position may not be sufficient enough to support the Companys daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to commence explorations and generate sufficient revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Companys ability to further implement its business plan and generate sufficient revenues.
The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 4 Mineral Properties
Alaska Mineral Properties
On April 5, 2011, the Company entered into a Property Purchase Agreement (PPA) with Precious Metals Exploration Corp., an unaffiliated seller with offices in Sweden (the Seller), to acquire an undivided 60% right title and interest in certain mining claims in Alaska in exchange for (1) 2,000,000 shares of the Companys common stock to be issued as follows: (i) 500,000 shares at the closing; (ii) an additional 500,000 shares on each of the first the business day following the six month, twelve month and 18 month anniversary of the closing date; and (2) the retention by the Seller of a 5% Net Smelter Royalty, as defined in the PPA. The PPA agreement further provides for the issuance to the Seller of additional 2,000,000 shares of the Companys common stock if mining operations on the property result in the discovery of 1,000,000 ounces of gold and requires the Company to expend at least $300,000 in exploration and mine development work on the property over three (3) years commencing with the closing under the PPA.
The Company valued the 2,000,000 common shares, the consideration given for the purchase at par, or $200 in aggregate.
The claims consist of three separate blocks that are partially contiguous and located 2.5 miles west of the Pogo 3.6 million ounce Pogo deposit; the Indian claims (2 square miles 32 state claims); the Aurora claims (1 square mile 4 MTRSC state claims; conversions in- progress by the Alaska Division of Natural Resources): and the Rainbow claims (1 square mile 4 MTRSC state claims). All claims are located on State of Alaska lands and are currently active and in good standing. The Rainbow, Indian and Aurora and collectively referred to as the RAI properties.
The claims are situated 80 air miles southeast of Fairbanks and 2.5 miles west of Teck-Comincos Pogo gold deposit in the Goodpaster Mining District of east central Alaska. Each claim block consists of active State of Alaska mining claims located in the Big Delta B-2 and B-3 1:63,360 Quadrangles. Limited prospecting has found elevated gold and trace elements in a sporadic suite of rock and soil samples on the properties. Quartz vein float
20
samples with up to 2.4 g/t gold and anomalous arsenic and bismuth are found from prospected slopes less than 3 miles from the Pogo mine, on trend to the east.
The Company expended $150,590 in exploration and mine development work for the period from April 4, 2011 (date of acquisition) through December 31, 2011 towards the $300,000 in exploration and mine development work on the property over the three (3) year period as required under the PPA.
Acquisition and Termination of Mexico Mineral Property
Acquisition of Mexico Mineral Property
On July 13, 2011, the Company entered into an Asset Purchase Agreement (APA) with Precious Metals Exploration Corp., (the Seller), to acquire an undivided 75% right title and interest in certain mining claims in Hostotipaquillo, Mexico in exchange for (1) 3,000,000 shares of the Companys common stock to be issued as follows: (i) 50% on closing, (ii) an additional 25% after six months and the final 25% after 12 months. (2) retention by the Seller of a 5% Net Smelter Royalty, as defined in the APA. The APA further provides for the issuance to the Seller of an additional 5,500,000 shares of the Companys common stock if mining operations on the property result in the discovery of 1,000,000 ounces of gold or 10,000,000 ounces of silver and requires the Company to expend at least $850,000 in exploration and mine development work on the property over fifteen (15) months commencing with the closing under the APA (including at least $350,000 in the first three (3) months and $500,000 in the next 12 months, respectively), as the work commitment (Work Commitment). In addition, the Company is required to hire a project manager designated by the Seller to be compensated at $10,000 per month during the period of Work Commitment of fifteen (15) months. Any amounts paid to the consultant will be applied against and reduce the amount of the Work Commitment.
The Company sold 712,500 shares of its common shares for cash at $0.80 per share during the quarterly period ended September 30, 2011, however the management of the Company valued the 3,000,000 common shares, the consideration given for the purchase of the Mexican mineral property, at par, or $300 in aggregate due to the fact that the Company did not obtain an independent third party valuation for the mineral properties acquired.
The property consists of three (3) mining concessions in the project area known as Monte de El Favor, these are El Favor, Exploitation title No. 165974, Guadalupe, Exploitation title No. 183638 and Buenaventura Exploitation title No. 218973, which approximate 217.49 hectares in total located in the Municipality of Hostotipaquillo, State of Jalisco, Mexico.
The Company expended $228,000 and $0 in exploration and mine development work for the period from July 13, 2011 (date of acquisition) through December 23, 2011, the date of termination, respectively towards the $350,000 in the first three (3) months and $500,000 in the next 12 months Work Commitment in exploration and mine development work on the property as required under the PPA. On November 10, 2011, the Seller waived the Companys short fall of the $350,000 Work Commitment in the first three (3) months and agreed to let the Company make up the Work Commitment short-fall in the next 12 month.
Termination of Mexico Mineral Property Purchase Agreement
On December 23, 2011, the Company entered into a termination agreement (the Termination Agreement) with Precious Metals Exploration Corp., an unaffiliated entity with offices in Sweden (the Contra Party) of the Asset Purchase Agreement, dated July 13, 2011 (the APA), between the Company and the Contra Party, for the purchase of an undivided 75% right title and interest in certain mining claims in Hostotipaquillo, Mexico.
Under the Termination Agreement, the Contra Party returned to the Company the 1,500,000 shares that were issued to it and the Company is relieved from all further obligations under the APA. The Company had expended $228,000 inclusive of $60,000 in project management fees and $168,000 in exploration costs under the APA which will not be recovered.
21
Management based its decision to terminate the APA on several factors including its assessment of the political situation and threats of instability in Mexico.
Arizona Mineral Properties
On July 18, 2011, the Company entered into an Asset Purchase Agreement (APAAR1) with Precious Metals Exploration Corp., (the Seller), to acquire a 100% interest in 2 patented claims, 6 federal claims and 25 prospects comprising 660 acres near Kingman, Arizona. Total consideration includes (1) $600,000 in cash payable in installments as follows: (i) $200,000 within one (1) month of the closing of agreement; (ii) $200,000 within four (4) months of the closing of the agreement; (iii) $200,000 within seven months (7) months of the closing of the agreement; (2) 500,000 shares of the Companys common stock; and (3) a 5% smelters royalty. The APAAR1 further provides for the issuance to the Seller of an additional 1,500,000 shares of the Companys common stock if mining operations on the property result in the discovery of 1,000,000 ounces of gold or 10,000,000 ounces of silver. The Seller will have the option to appoint an individual to serve on the Companys advisory board for one (1) year and shall be compensated for the services at the end of the year for One Hundred Thousand (100,000) shares of common stock.
The Company sold 712,500 shares of its common shares for cash at $0.80 per share during the quarterly period ended September 30, 2011, however the management of the Company valued the 500,000 common shares, the consideration given for the purchase at par, or $50 in aggregate due to the fact that the Company did not obtain an independent third party valuation for the mineral properties acquired.
The Property is defined as follows: A) Fountain Head patented (a lode mining claim in the Walapai Mining District, being shown on Mineral Survey No. 1942, as filed in the Bureau of land Management, and as granted by Patent recorded in Book 16 Of Deeds, page 524; situate in section 4, Township 22 North, Range 17 West of the Gila and Salt River Base and Meridian, Mohave County, Arizona.) B) Eagle patented (a lode mining claim in the Walapai Mining District, being shown on Mineral Survey No. 1943, as filed in the Bureau of land Management, and as granted by Patent recorded in Book 16 Of Deeds, page 527; situate in section 4, Township 22 North, Range 17 West of the Gila and Salt River Base and Meridian, Mohave County, Arizona.). Plus 6 federal claims are located in town ship 22 North, Range 17 west of the Gila and Salt River Base and Meridian, as follows: C) Golden Wonder federal D) Holy Smoke federal E) High Grade Vein federal F) Bluebell federal G) Bluebell Extension federal H) Golden Legion federal. Plus 25 Prospects each representing 20 acres adjacent to the claims outlined above.
On July 18, 2011, the Company entered into a third Asset Purchase Agreement (APAAR2) with Precious Metals Exploration Corp., (the Seller), to acquire a 100% interest in 2 patented claims and 5 federal claims comprising roughly 134 acres in Mohave County, Arizona. The total consideration includes (1) $674,022 in cash payable in installments as follows: (i) a cash payment of $4,188.44 within seven (7) days of closing; (ii) an equal monthly cash payment of $4,188.44 every one (1) month for a further seventeen (17) months, ending in December 2012; (iii) a final cash payment of $598,630, due on the nineteenth (19th) month following the closing date, being January 2013; (2) 10% net smelter returns (NSR) royalty on the gross mineral production from the Assets until such time as it no longer owns or operates the Assets. After the full balance is paid, the NSR will reduce to 5% from that day forward.
The Property is defined as follows: A) Alta Patented lode Mining Claim, Parcel No.330-02-009 and the Sirius Patented Mining Claim, Parcel No. 330 02 011 both shown on Mineral Survey MS 2854A, located in Section 4, Range 17W, Township 22N of the Gila and Salt River Base and Meridian, composed of 18 and 16 acres respectively, together with all buildings, tunnels, and shafts and other improvements thereon, and all rents, issues and profits thereof. B) 5 Federal Mining Claims recorded as Copper & Gold, Copper & Gold No.1, Rico I, Rico II, and Rico III, consisting of approx. 20 acres each, located in Sec. 29 & 30, of Mohave County, T23N R17W, G.&S.R.B.&M recorded as FEE# 2010070725- 2010070729 respectively.
22
Note 5 Related Party Transactions
Advances from Stockholders and Former Stockholders
From time to time, stockholders of the Company advance funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on demand.
Advances from stockholders and former stockholders at December 31, 2011 and March 31, 2011 consisted of the following:
|
|
| December 31, 2011 |
|
| March 31, 2011 |
| ||
|
|
|
|
|
|
|
|
| |
Advances from major stockholder and officer |
| $ | 28,356 |
|
| $ | - |
| |
|
|
|
|
|
|
|
|
| |
Advances from former major stockholders and officers |
|
| - |
|
|
| 30,544 |
| |
|
|
|
|
|
|
|
|
| |
|
| $ | 28,356 |
|
| $ | 30,544 |
| |
|
|
|
|
|
|
|
Former stockholders of the Company advanced $83,392 in aggregate to the Company for working capital purposes and the Company repaid $16,740 in aggregate for the year ended March 31, 2011.
On April 5, 2011 as part of the change in control the former major shareholders and officers agreed to forgive debts outstanding to them totaling $30,544 which have been recorded as contributed capital.
The major stockholder and officer advanced $28,356 to the Company and no repayment has been made for the period from April 5, 2011 (Date of change in control) through December 31, 2011.
Note 6 Stockholders Equity (Deficit)
Shares Authorized
Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is One Hundred and Five Million (105,000,000) shares of which Five Million (5,000,000) shares shall be Preferred Stock, par value $.0001 per share, and One Hundred Million (100,000,000) shares shall be Common Stock, par value $.0001 per share.
On April 28, 2011, the Company filed a Certificate of Amendment of Certificate of Incorporation, and increased its total number of shares of all classes of stock which the Company is authorized to issue to Two Hundred Fifty Five Million (255,000,000) shares inclusive of Five Million (5,000,000) shares of Preferred Stock, par value $.0001 per share, and Two Hundred Fifty Million (250,000,000) shares of Common Stock, par value $.0001 per share.
Common Stock
For the period from July 6, 2009 through July 27, 2009, the Company sold 16,000,000 shares of its common stock to 32 individuals at $0.002 per share or $32,000 in aggregate.
On April 21, 2011, Lynn Harrison, President, CEO and principal shareholder of the Company, surrendered 351,900,000 shares of common stock owned by her, thus reducing her ownership from 414,000,000 shares to 62,100,000 shares and reducing the Companys issued and outstanding common shares from 476,000,000 shares to 124,100,000 shares.
23
On June 28, 2011, the Company issued to an individual 75,000 Units (each unit being comprised of one share of the Companys common stock and a warrant exercisable over a three year period for 75,000 shares of common stock exercisable at $1.25 per share). The Units were sold at $.80 per Unit for an aggregate of $60,000.
For the period from July 28, 2011 through September 9, 2011, the Company issued to a foreign institutional investor a total of 712,500 Units consisting (i) one share of the Companys common stock and (ii) a warrant to purchase one share of the Companys common stock exercisable at $1.25 per share expiring three (3) years from the date of issuance. The Units were sold at $.80 per Unit for an aggregate of $570,000.
On August 10, 2011, Lynn Harrison, President, CEO and principal shareholder of the Company, surrendered 40,000,000 shares of common stock.
Equity Financing Agreement
On October 11, 2011, the Company executed a Share Issuance Agreement with American Gold Holdings, Ltd. (AGH) that allows the Company to issue its equity in Units with each unit comprised of one share of common stock and a warrant to purchase one share of common stock. The issue price of the Unit will be the greater of $0.45 or 90% of the volume weighted average of the closing price of common stock, for the five (5) banking days immediately preceding the date of the notice, as quoted on OTC markets, or other source of stock quotes as agreed to by both parties. The exercise price of the Warrants will be 130% of the price of the Unit and the term of the Warrants will be three (3) years from the date of issuance.
The Share Issuance Agreement commits AGH to make Advances to the Company up to $ 15,000,000 in tranches of no more than $1,000,000 each and in multiples of $25,000 until October 11, 2013 (the completion date) or to be extended for an additional term of up to twelve (12) months at the option of the Company or AGH upon written notice on or before the completion date.
On October 28, 2011 and November 12, 2011, the Company issued Advance Notice to and received the funds from AGH of $100,000 and $200,000, respectively. The Company issued 222,222 and 444,444 Units consisting (i) one share of the Companys common stock and (ii) a warrant to purchase one share of the Companys common stock exercisable at $130% of the price of the Unit per share expiring three (3) years from the date of issuance at $0.45 per Unit for the advances.
On December 15, 2011, the Company issued Advance Notice to and received the funds from AGH of $100,000. The Company issued 101,010 Units consisting (i) one share of the Companys common stock and (ii) a warrant to purchase one share of the Companys common stock exercisable at $130% of the price of the Unit per share expiring three (3) years from the date of issuance at $0.99 per Unit for the advance.
Additional Paid-in Capital
On March 31, 2010, the former stockholders and officers of the Company forgave $10,730 of their advances to the Company and contributed the same amount to capital.
On April 5, 2011, as part of the change in control the former major shareholders and officers agreed to forgive debt outstanding to them totaling $30,544 which have been recorded as contributed capital.
Warrants Issued in Connection with Sale of Common Shares
Description of Warrants
(i) Warrants Issued in June, 2011
In connection with the sale of 75,000 shares of its common stock at $0.80 per share or $60,000 in gross proceeds to one investor on June 28, 2011, the Company issued a warrant to purchase 75,000 shares of its common stock exercisable at $1.25 per share earned and exercisable upon issuance expiring three (3) year from the date of issuance.
24
The fair value of the warrant grant estimated on the date of grant uses the Black-Scholes Option-Pricing Model with the following assumptions:
Expected life (year) |
| 3.00 |
|
|
|
|
|
Expected volatility (*) |
| 55.91 | % |
|
|
|
|
Risk-free interest rate |
| 0.75 | % |
|
|
|
|
Dividend yield |
| 0.00 | % |
* As a thinly traded public entity it is not practicable for the Company to estimate the expected volatility of its share price. The Company selected five (5) comparable public traded goldmine companies to calculate the expected volatility. The reason for selecting comparable public traded goldmine companies is that the Company plans to engage in goldmine business. The Company calculated five (5) comparable public traded goldmine companies historical volatility over the expect life of the warrants and averaged the five (5) comparable public traded goldmine companies historical volatility as its expected volatility.
The Company allocated the gross proceeds of $60,000 between common stock and warrants based on their relative fair value, estimated on the date of grant, valued common stock and the warrant at $48,000 and $12,000, respectively, using the Black-Scholes Option-Pricing Model with the above assumptions.
(ii) Warrants Issued for the period from July 28, 2011 through September 9, 2011
For the period from July 28, 2011 through September 9, 2011, in connection with the sale of 712,500 shares of its common stock at $0.80 per share or $570,000 in gross proceeds to the investors, the Company issued warrants to purchase 712,500 shares of its common stock exercisable at $1.25 per share earned and exercisable upon issuance expiring three (3) years from the date of issuance.
The fair value of the warrant grant estimated on the date of grant uses the Black-Scholes Option-Pricing Model with the following assumptions:
Expected life (year) |
| 3.00 |
|
|
|
|
|
Expected volatility (*) |
| 49.48 | % |
|
|
|
|
Risk-free interest rate |
| 0.33 | % |
|
|
|
|
Dividend yield |
| 0.00 | % |
* As a thinly traded public entity it is not practicable for the Company to estimate the expected volatility of its share price. The Company selected five (5) comparable public traded goldmine companies to calculate the expected volatility. The reason for selecting comparable public traded goldmine companies is that the Company plans to engage in the goldmine business. The Company calculated five (5) comparable public traded goldmine companies historical volatility over the expect life of the warrants and averaged the five (5) comparable public traded goldmine companies historical volatility as its expected volatility.
The Company allocated the gross proceeds of $570,000 between common stock and warrants based on their relative fair value, estimated on the date of grant, valued common stock and the warrant at $475,000 and $95,000, respectively, using the Black-Scholes Option-Pricing Model with the above assumptions.
(iii) Warrants Issued for the period from October 28, 2011 through November 12, 2011
25
For the period from October 28, 2011 through November 12, 2011, the Company sold 666,666 Units consisting (i) one share of the Companys common stock and (ii) a warrant to purchase one share of the Companys common stock exercisable at $130% of the price of the Unit per share expiring three (3) years from the date of issuance at $0.45 per Unit for the advances.
The fair value of the warrant grant estimated on the date of grant uses the Black-Scholes Option-Pricing Model with the following assumptions:
Expected life (year) |
| 3.00 |
|
|
|
|
|
Expected volatility (*) |
| 49.48 | % |
|
|
|
|
Risk-free interest rate |
| 0.37 | % |
|
|
|
|
Dividend yield |
| 0.00 | % |
* As a thinly traded public entity it is not practicable for the Company to estimate the expected volatility of its share price. The Company selected five (5) comparable public traded goldmine companies to calculate the expected volatility. The reason for selecting comparable public traded goldmine companies is that the Company plans to engage in the goldmine business. The Company calculated five (5) comparable public traded goldmine companies historical volatility over the expect life of the warrants and averaged the five (5) comparable public traded goldmine companies historical volatility as its expected volatility.
The Company allocated the gross proceeds of $300,000 between common stock and warrants based on their relative fair value, estimated on the date of grant, valued common stock and the warrant at $241,071 and $58,929, respectively, using the Black-Scholes Option-Pricing Model with the above assumptions.
(iv) Warrants Issued on December 15, 2011
On December 15, 2011, the Company sold 101,010 Units consisting (i) one share of the Companys common stock and (ii) a warrant to purchase one share of the Companys common stock exercisable at $130% of the price of the Unit per share expiring three (3) years from the date of issuance at $0.99 per Unit for the advances.
The fair value of the warrant grant estimated on the date of grant uses the Black-Scholes Option-Pricing Model with the following assumptions:
Expected life (year) |
| 3.00 |
|
|
|
|
|
Expected volatility (*) |
| 43.21 | % |
|
|
|
|
Risk-free interest rate |
| 0.37 | % |
|
|
|
|
Dividend yield |
| 0.00 | % |
* As a thinly traded public entity it is not practicable for the Company to estimate the expected volatility of its share price. The Company selected five (5) comparable public traded goldmine companies to calculate the expected volatility. The reason for selecting comparable public traded goldmine companies is that the Company plans to engage in the goldmine business. The Company calculated five (5) comparable public traded goldmine companies historical volatility over the expect life of the warrants and averaged the five (5) comparable public traded goldmine companies historical volatility as its expected volatility.
The Company allocated the gross proceeds of $100,000 between common stock and warrants based on their relative fair value, estimated on the date of grant, valued common stock and the warrant at $82,500 and $17,500, respectively, using the Black-Scholes Option-Pricing Model with the above assumptions.
26
Exercise of Warrants
For the interim period ended December 31, 2011, none of the warrants have been exercised.
Summary of Warrant Activities
The table below summarizes the Companys non-derivative warrant activities through December 31, 2011:
|
| Number of Warrant Shares |
| Exercise Price Range Per Share |
| Weighted Average Exercise Price |
| Fair Value at Date of Issuance |
| Aggregate Intrinsic Value |
| |||||||||||||
Balance, March 31, 2011 |
|
| - |
|
|
| $ | - |
|
|
| $ | - |
|
| $ | - |
|
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
| 1,555,176 |
|
|
| $ | 0.59 - 1.29 |
|
|
| $ | 0.97 |
|
| $ | 183,429 |
|
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled for cashless exercise |
|
| (- | ) |
|
|
| - - |
|
|
|
| - |
|
|
| - |
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised (Cashless) |
|
| (- | ) |
|
|
| - |
|
|
|
| - |
|
|
| - |
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
| (- | ) |
|
|
| - |
|
|
|
| - |
|
|
| - |
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired |
|
| - |
|
|
|
| - |
|
|
|
| - |
|
|
| - |
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2011 |
|
| 1,555,176 |
|
|
| $ | 0.59 - 1.29 |
|
|
| $ | 0.97 |
|
| $ | 183,429 |
|
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned and exercisable, December 31, 2011 |
|
| 1,555,176 |
|
|
| $ | 0.59 - 1.29 |
|
|
| $ | 0.97 |
|
| $ | 183,429 |
|
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested, December 31, 2011 |
|
| - |
|
|
| $ | - |
|
|
| $ | - |
|
| $ | - |
|
|
| $ | - |
|
|
The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2011:
|
| Warrants Outstanding |
| Warrants Exercisable |
| ||||||||||||||
Range of Exercise Prices |
| Number Outstanding |
| Average Remaining Contractual Life (in years) |
| Weighted Average Exercise Price |
| Number Exercisable |
| Average Remaining Contractual Life (in years) |
| Weighted Average Exercise Price |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.25 |
|
| 1,555,176 |
|
| 2.73 |
| $ | 0.97 |
|
| 1,555,176 |
|
| 2.73 |
| $ | 0.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.25 |
|
| 1,555,176 |
|
| 2.73 |
| $ | 0.97 |
|
| 1,555,176 |
|
| 2.73 |
| $ | 0.97 |
|
Note 7 Commitments and Contingencies
Contingent Common Shares Issuable under the Alaska Property Purchase Agreement
On April 5, 2011, the Company entered into a Property Purchase Agreement (PPA) with Precious Metals Exploration Corp., an unaffiliated seller with offices in Sweden (the Seller). The PPA agreement further provides for the issuance to the Seller of 2,000,000 additional shares of the Companys common stock if mining operations
27
on the property result in the discovery of 1,000,000 ounces of gold and requires the Company to expend at least $300,000 in exploration and mine development work on the property over three (3) years commencing with the closing under the PPA.
The Company expended $100,000 in exploration and mine development work for the period from April 4, 2011 (date of acquisition) through December 31, 2011 towards the $300,000 in exploration and mine development work on the property over the three (3) year period as required under the PPA.
Contingent Common Shares Issuable under the Arizona Property Purchase Agreements
On July 18, 2011, the Company entered into an Asset Purchase Agreement (APAAR1) with Precious Metals Exploration Corp., (the Seller). The Purchase Price was $600,000 payable in installments in the seven months following the closing and 500,000 shares of the Companys common stock. The APAAR1 further provides for the issuance to the Seller of 1,500,000 additional shares of the Companys common stock if mining operations on the property result in the discovery of 1,000,000 ounces of gold or 10,000,000 ounces of silver and requires the Company to pay a 5% smelters royalty. The Seller will have the option to appoint an individual to serve on the Companys advisory board for one (1) year and shall be compensated for the services at the end of the year for One Hundred Thousand shares of the common stock.
On July 18, 2011, the Company entered into an Asset Purchase Agreement (APAAR2) with Precious Metals Exploration Corp., (the Seller). The Purchase Price was $674,022 payable in installments in the twenty months following the closing, the company is required to pay 10% net smelter returns (NSR) royalty on the gross mineral production from the Assets until such time as it no longer owns or operates the Assets. After the full balance is paid, the NSR will reduce to 5% from that day forward.
Note 8 Subsequent Events
The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that the following were certain reportable subsequent events to be disclosed as follows:
On February 7, 2012 and February 8, 2012, the Company issued Advance Notice to and received the funds from AGH of $25,000 and $220,000, respectively. The Company issued 55,556 and 500,000 Units consisting (i) one share of the Companys common stock and (ii) a warrant to purchase one share of the Companys common stock exercisable at $130% of the price of the Unit per share expiring three (3) years from the date of issuance at $0.45 per Unit for the advances.
28
PLAN OF OPERATION
On April 5, 2011, we completed a change of control transaction and entered a new line of business. Accordingly, any comparison between the operating results of our quarter last year and this year is not meaningful.
Liquidity and Capital Resources
Our plan is to acquire potential mineral producing properties by paying the bulk of the purchase price in our stock and to fund our operations through the private sale of our stock. We have acquired several properties to date, but cannot give any assurance that we will be able to successfully sell stock at levels to meet our obligations under our property acquisition agreements. We had only cash on hand of $85,283 at December 31, 2011.
On October 11, 2011, we executed a Share Issuance Agreement with American Gold Holdings, Ltd. (AGH) that allows us to sell our shares in Units each unit comprised of a share of our common stock and a common stock purchase warrant. The issue price of the Unit will be the greater of $0.45 or 90% of our share price as determined under the agreement and the exercise price of the Warrants will be 130% of the price of the Unit and the Warrants will be of three years duration. The Share Issuance Agreement commits AGH to purchase up to $15,000,000 of Units in tranches of no more than $1,000,000 each and in multiples of $25,000 on five days notice from us. This description of the Share Issuance Agreement is qualified in its entirety by reference to the Share Issuance Agreement which is an exhibit hereto. Through February 16, 2012 we have received $650,000 under the Share Issuance Agreement and have issued or are obligated to issue a total of 1,323,232 shares.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 3.
ITEM 4. CONTROLS AND PROCEDURES.
DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, our principal executive officer who is also our principal financial officer is responsible for conducting an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the fiscal year covered by this report. Disclosure controls and procedures means that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, including any consolidating subsidiaries, and was made known to us by others within those entities, particularly during the period when this report was being prepared. Based on this evaluation, our principal executive officer concluded as of the evaluation date that our disclosure controls and procedures were not effective as of December 31, 2011 because we do not have sufficient staff to segregate responsibilities. We plan to seek to correct these deficiencies at such time as our operations require additional personnel, but we do not believe this will occur in the foreseeable future.
There were no changes in the Companys internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Companys internal control over financial reporting.
29
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not currently subject to any legal proceedings. From time to time, the Company may become subject to litigation or proceedings in connection with its business, as either a plaintiff or defendant. There are no such pending legal proceedings to which the Company is a party that, in the opinion of management, is likely to have a material adverse effect on the Companys business, financial condition or results of operations.
ITEM 1A. RISK FACTORS
As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 1A.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. (REMOVED AND RESERVED).
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
(a) Exhibits required by Item 601 of Regulation SK.
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
31