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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2012


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


Commission file number: 000-51808


ATHENA SILVER CORPORATION 

(Exact name of registrant as specified in its charter)


Delaware
(State or other jurisdiction of incorporation or organization)

25-1909408
(IRS Employer Identification Number)

2010A Harbison Drive #312, Vacaville, CA

(Address of principal executive offices)

95687

(Zip Code)


Registrant's telephone number, including area code:   (707) 884-3766


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 [   ] No [ X ]


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition 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 ]


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes [   ] No [ X ]


On May 18, 2012, there were 33,846,456 shares of the registrant’s common stock, $.0001 par value, outstanding.








ATHENA SILVER CORPORATION

(An Exploration Stage Company)


CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (Unaudited)

Page

 

 

 

 

Condensed Consolidated Balance Sheets – March 31, 2012 and December 31, 2011

2

 

 

 

 

Condensed Consolidated Statements of Operations – Three Months Ended March 31, 2012 and 2011, and the Period from Inception of Exploration Stage through March 31, 2012

3

 

 

 

 

Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2012 and 2011, and the Period from Inception of Exploration Stage through March 31, 2012

4

 

 

 

 

Notes to Condensed Consolidated Financial Statements – Three Months Ended March 31, 2012

6

 

 

 

Item 2.

Management's Discussion and Analysis of Financial

Condition and Results of Operations

10

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

14

 

 

 

Item 4.

Controls & Procedures

14

 

 

 

PART II - OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

15

 

 

 

Item 1A.

Risk Factors

15

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

15

 

 

 

Item 3.

Defaults Upon Senior Securities

15

 

 

 

Item 4.

Mine Safety Disclosures

15

 

 

 

Item 5.

Other Information

15

 

 

 

Item 6.

Exhibits

15



1






PART I. FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS

 

ATHENA SILVER CORPORATION

(An Exploration Stage Company)


CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


 

 

March 31, 2012

 

December 31, 2011

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

28,681

 

$

4,672

 

Prepaid expenses

 

 

38,456

 

 

40,580

 

Total current assets

 

 

67,137

 

 

45,252

 

 

 

 

 

 

 

 

 

Mineral rights

 

 

472,966

 

 

441,180

 

 

 

 

 

 

 

 

 

Total assets

 

$

540,103

 

$

486,432

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

111,036

 

$

78,996

 

Accrued liabilities

 

 

6,333

 

 

55,416

 

Checks issued in excess of funds available

 

 

4,169

 

 

 

Due to related parties

 

 

8,453

 

 

9,508

 

Advances payable – related parties

 

 

1,125

 

 

750

 

Notes payable – related parties

 

 

280,000

 

 

130,000

 

Total current liabilities

 

 

411,116

 

 

274,670

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock, $.0001 par value, 5,000,000 shares authorized; none outstanding

 

 

 

 

 

Common stock, $.0001 par value, 100,000,000 shares authorized; 32,459,132 and 32,405,286 shares issued and outstanding, respectively

 

 

3,246

 

 

3,241

 

Additional paid-in capital

 

 

5,346,822

 

 

5,291,687

 

Accumulated deficit - prior to exploration stage

 

 

(3,601,431

)

 

(3,601,431

)

Accumulated deficit - exploration stage

 

 

(1,619,650

)

 

(1,481,735

)

Total stockholders’ equity

 

 

128,987

 

 

211,762

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

540,103

 

$

486,432

 

 

 

 

 

 

 

 

 






See notes to unaudited condensed consolidated interim financial statements.



2






ATHENA SILVER CORPORATION

(An Exploration Stage Company)


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

 

Three Months Ended March 31,

 

Inception of Exploration Stage (January 1, 2010) through

 

 

 

2012

 

2011

 

March 31, 2012

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Exploration costs

 

$

63,659

 

$

331,241

 

$

671,276

 

Other operating costs

 

 

 

 

3,536

 

 

111,442

 

General and administrative expenses

 

 

72,312

 

 

91,462

 

 

579,371

 

Total operating expenses

 

 

135,971

 

 

426,239

 

 

1,362,089

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(135,971

)

 

(426,239

)

 

(1,362,089

)

 

 

 

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,945

)

 

(1,317

)

 

(13,061

)

Loss on extinguishment of debt – related parties

 

 

 

 

 

 

(180,000

)

Other income

 

 

1

 

 

6

 

 

966

 

Total other (expense) income

 

 

(1,944

)

 

(1,311

)

 

(192,095

)

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

 

(137,915

)

 

(427,550

)

 

(1,554,184

)

 

 

 

 

 

 

 

 

 

 

 

Net loss from discontinued operations

 

 

 

 

 

 

(65,466

)

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(137,915

)

$

(427,550

)

$

(1,619,650

)

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per common share

 

$

(0.00

)

$

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted weighted-average common shares outstanding

 

 

32,415,345

 

 

29,705,397

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
















See notes to unaudited condensed consolidated interim financial statements.



3






ATHENA SILVER CORPORATION

(An Exploration Stage Company)


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


 

 

Three Months Ended March 31,

 

Inception of Exploration Stage (January 1, 2010) through

 

 

 

2012

 

2011

 

March 31, 2012

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(137,915

)

$

(427,550

)

$

(1,619,650

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

Amortization of deferred financing costs

 

 

 

 

872

 

 

5,000

 

Share-based compensation expense

 

 

6,863

 

 

 

 

44,551

 

Common stock and warrants  issued for services

 

 

14,317

 

 

 

 

70,090

 

Loss on extinguishment of debt – related parties

 

 

 

 

 

 

180,000

 

Loss on sale of assets of discontinued operations

 

 

 

 

 

 

9,892

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

 

 

 

11,104

 

Prepaid expenses

 

 

23,600

 

 

101,000

 

 

(15,980

)

Inventory

 

 

 

 

 

 

46,385

 

Other assets

 

 

 

 

 

 

11,036

 

Accounts payable

 

 

32,040

 

 

(10,813

)

 

137,017

 

Accrued liabilities and other liabilities

 

 

6,114

 

 

3,445

 

 

81,917

 

Net cash used in operating activities

 

 

(54,981

)

 

(333,046

)

 

(1,038,638

)

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

Acquisition of mineral rights

 

 

(71,485

)

 

(59,701

)

 

(230,780

)

Investment in nonmarketable equity securities

 

 

 

 

 

 

(7,348

)

Cash used in disposition of fixed assets, intangibles and other

 

 

 

 

 

 

(82

)

Net cash used in investing activities

 

 

(71,485

)

 

(59,701

)

 

(238,210

)

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

Net change in advances payable  – related parties

 

 

375

 

 

(12,450)

 

 

(12,170

)

Borrowings from notes payable – related parties

 

 

150,000

 

 

 

 

310,000

 

Repayments of notes payable – related parties

 

 

 

 

 

 

(38,750

)

    Proceeds from sale of warrants

 

 

100

 

 

 

 

100

 

Proceeds from sale of common stock, net

 

 

 

 

571,207

 

 

1,046,206

 

Net cash provided by financing activities

 

 

150,475

 

 

558,757

 

 

1,305,386

 

 

 

 

 

 

 

 

 

 

 

 

Net  increase in cash

 

 

24,009

 

 

166,010

 

 

28,538

 

Cash and cash equivalents, beginning of period

 

 

4,672

 

 

111,475

 

 

143

 

Cash and cash equivalents, end of period

 

$

28,861

 

$

277,485

 

$

28,681

 

 

 

 

 

 

 

 

 

 

 

 



See notes to unaudited condensed consolidated interim financial statements.



4






ATHENA SILVER CORPORATION

(An Exploration Stage Company)


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (cont.)

(unaudited)

 

 

Three Months Ended March 31,

 

Inception of Exploration Stage (January 1, 2010) through

 

 

2012

 

2011

 

March 31, 2012

Supplemental schedule of cash flow information:

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

 

$

 

$

6,714

Cash paid for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

 

Increase (decrease) in accrued liabilities applicable to mineral rights

 

$

(52,083

)

$

(44,583

)

$

3,333

Spin-off dividend

 

 

 

 

 

 

7,348

Common stock issued for mineral rights

 

 

12,385

 

 

168,902

 

 

254,687

Common stock issued for accounts payable

 

 

 

 

 

 

93,450

Common stock issued for deferred financing costs

 

 

 

 

 

 

5,000

Common stock issued for notes payable and advances payable - related parties

 

 

 

 

 

 

100,000

Warrants issued for prepaid services, net of cash received

 

 

35,793

 

 

 

 

35,793

Common stock issued for indemnity agreement - related parties:

 

 

 

 

 

 

 

 

 

Indemnification – GWBC accounts payable   

 

 

 

 

 

 

296,953

Indemnification – GWBC accrued liabilities   

 

 

 

 

 

 

262,298

Indemnification – GWBC short-term debt   

 

 

 

 

 

 

435,981






















See notes to unaudited condensed consolidated interim financial statements.



5







ATHENA SILVER CORPORATION

(An Exploration Stage Company)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


Note 1 – Organization, Basis of Presentation and Significant Accounting Policies:

We are an exploration stage company and our principal business is the acquisition and exploration of mineral resources. We were incorporated on December 23, 2003, in Delaware and we became an exploration stage company on January 1, 2010. We have not presently determined whether our mineral properties contain mineral reserves that are economically recoverable.

Basis of Presentation

Athena Silver Corporation (“we,” “our,” or “Athena”) prepared these condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2012, are not necessarily indicative of the results for the full year. While we believe that the disclosures presented herein are adequate and not misleading, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2011.

Going Concern


Our condensed consolidated financial statements have been prepared on a going concern basis which assumes that we will be able to meet our obligations and continue our operations during the next 12 months. Asset realization values may be significantly different from carrying values as shown on our condensed consolidated financial statements and do not give effect to adjustments that would be necessary to the carrying values of assets and liabilities should we be unable to continue as a going concern. At March 31, 2012, we had not yet achieved profitable operations and we have accumulated losses of $5,221,081 since our inception. We expect to incur further losses in the development of our business, all of which casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern depends on our ability to generate future profits and/or to obtain the necessary financing to meet our obligations arising from normal business operations when they come due. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock. We may also seek to obtain loans from officers, directors or significant shareholders.

Recently Adopted Accounting Standards

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



6






Note 2 – Mineral Rights:

On March 15, 2010, we entered into a 20 year Mining Lease with Option to Purchase (the “Langtry Lease” or the “Lease”) granting us the exclusive right to explore, develop and conduct mining operations on a group of 20 patented mining claims that comprise our Langtry Property.


The Lease requires us to pay annual cash lease rental payments, in arrears, of $60,000 to $100,000 on March 15th of each year during the first five years of the Lease. The Lease requires us to pay annual cash lease rental payments, in arrears, of $100,000 to $200,000 (or the market price of 10,000 to 20,000 troy ounces of silver, whichever is higher) on March 15th of each year during the final 15 years of the Lease (i.e. 2016 through 2030).


The Lease also requires us to issue to the lessor, on March 15th of each year 2011 through 2015, additional common shares so that the lessor retains an undiluted 2% equity interest in Athena as additional consideration under the Lease.


On March 15, 2012, in accordance with the terms of the Lease, we issued to the lessor 53,846 common shares valued at $12,385, or $0.23 per share, which was the closing bid price of our common stock on March 14, 2012. We capitalized the $12,385 fair value of common shares issued as an increase to mineral rights in our condensed consolidated balance sheets.


During the three months ended March 31, 2012, we recorded $17,917 of lease rental expense and $1,484 of other lease acquisition costs and capitalized these amounts as an increase to mineral rights.

Note 3 – Notes Payable – Related Parties:

Effective March 18, 2012, John D. Gibbs, a significant investor, made an unsecured, non-interest-bearing loan to us in the amount of $125,000.  The loan is due on demand.

Effective February 2, 2012, Mr. Gibbs made an unsecured, non-interest-bearing loan to us in the amount of $25,000.  The loan is due on demand.

Note 4 - Commitments and Contingencies:


Under the Langtry Lease we declared our intention to expend a minimum of $2.0 million in permitting and other preproduction costs prior to March 15, 2015. If we fail to make these expenditures we will be deemed to be in breach of the Lease and the lessor will have the option to terminate the Lease by giving us 30 days written notice. The Lease also provides us with the right to terminate the Lease without penalty on March 15th of each year during the lease term by giving the lessor 30 days written notice of termination on or before February 13th of each year.


Note 5 – Stockholders’ Equity:


On March 15, 2012, we issued 53,846 common shares valued at $12,385, or $0.23 per share, in accordance with the terms of our Langtry Lease. See also Note 2.


Effective February 7, 2012, and pursuant to an Advisor Agreement with GVC Capital, LLC (“GVC”) dated January 30, 2012, we sold and issued warrants exercisable to purchase an aggregate of 143,000 common shares at an exercise price of $0.25 per share at any time within five years of the date of their issuance in consideration of $100 and prepaid investor relation services with a fair value of $35,793. The warrants had a fair value of approximately $35,893 on the date of issuance.



7






We measure and recognize share-based services expense for all share-based payments made to non-employee consultants based on estimated fair values. We estimate the fair value of warrants on the date of issuance using the Black-Scholes-Merton option pricing model, which includes assumptions for expected dividends, expected share price volatility, risk-free interest rate, and expected life of the warrants. Our expected volatility assumption is based on our historical weekly closing price of our stock over a period equivalent to the expected life of the warrants.


The following table summarizes the assumptions used to value warrants issued:


Fair value assumptions – warrants issued:

 

Three Months Ended March 31, 2012

 

Risk free interest rate

 

0.82%

 

Expected term (years)

 

5.0

 

Expected volatility

 

159%

 

Expected dividends

 

0%

 


Note 6 – Basic and Diluted Net Loss Per Share


All potential common shares outstanding have been excluded from diluted net loss per common share because the impact of such inclusion would be anti-dilutive. Our total potential common shares outstanding at March 31, 2012 and December 31, 2011, were 343,000 and 200,000, respectively, and were comprised of shares underlying outstanding stock options and warrants.


Note 7 – Related Party Transactions:

Conflicts of Interests

Magellan Gold Corporation is a company under common control. Mr. Power is a significant investor, director and CEO of both Athena and Magellan. Mr. Gibbs is a significant investor in both Athena and Magellan. Athena and Magellan are both exploration stage companies involved in the business of acquisition and exploration of mineral resources.


Silver Saddle Resources, LLC is also a company under common control. Mr. Power and Mr. Gibbs are significant investors and managing members of Silver Saddle. Athena and Silver Saddle are both exploration stage companies involved in the business of acquisition and exploration of mineral resources.


The existence of common ownership and common management could result in significantly different operating results or financial position from those that could have resulted had Athena, Magellan and Silver Saddle been autonomous.

 

Management Fees – Related Parties


Effective January 1, 2012, we renewed our management agreement for a period of one year with Mr. Power requiring a monthly payment, in advance, of $2,500 as consideration for the day-to-day management of Magellan. During each of the three month periods ended March 31, 2012 and March 31, 2011, we incurred $7,500 of management fees to Mr. Power and these costs are included in general and administrative expenses in our condensed consolidated statements of operations.




8






Due to Related Parties


Accounts payable and accrued interest payable owed to related parties are included in due to related parties in our condensed consolidated balance sheets as follows:


 

March 31, 2012

 

December 31, 2011

Accounts payable – Mr. Power

$

2,477

 

$

5,476

Accrued interest payable – Mr. Gibbs

 

5,976

 

 

4,032

   Due to related parties - total

$

8,453

 

$

9,508


Advances Payable - Related Parties


Non-interest-bearing advances payable to related parties are as follows:


 

March 31, 2012

 

December 31, 2011

Mr. Power

$

1,125

 

$

750


During the three months ending March 31, 2012, we borrowed and repaid non-interest-bearing advances from/ to related parties as follows:


 

 

Three Months Ended March 31, 2012

 

 

Advances

 

 

Repayments

Mr. Power(1)

 

$

10,125

 

 

$

9,750

Silver Saddle Resources, LLC

 

 

3,600

 

 

 

3,600

 

 

$

13,725

 

 

$

13,350

(1)

Includes entities controlled by Mr. Power

During the three months ended March 31, 2011, we borrowed and repaid non-interest-bearing advances from/ to related parties as follows:


 

 

Three Months Ended March 31, 2011

 

 

Advances

 

 

Repayments

Mr. Power

 

 $

17,400

 

 

 

29,850

Magellan Gold Corporation

 

 

10,000

 

 

 

10,000

 

 

$

27,400

 

 

$

39,850


Notes Payable – Related Parties


Notes payable to related parties was as follows:


 

March 31, 2012

 

December 31, 2011

Mr. Gibbs

$

280,000

 

$

130,000




During the three months ended March 31, 2012, we borrowed and repaid the following notes payable amounts to related parties:


 

Three Months Ended March 31, 2012

 

Borrowings

 

Repayments

Mr. Gibbs

$

150,000

 

$







9






During the three months ended March 31, 2011, we did not borrow or repay notes payable from/ to related parties.

 

Interest Expense – Related Parties:


During the three months ended March 31, 2012 and 2011, we incurred interest expense to related parties in the following amounts:


 

Three Months Ended March 31,

 

2012

 

2011

Mr. Gibbs

$

1,945

 

$

445





During the three months ended March 31, 2012 and 2011, we did not make interest payments to related parties.

Note 8 – Subsequent Events:

Effective April 27, 2012, Mr. Gibbs made an unsecured, non-interest-bearing loan to us in the amount of $25,000.  The loan is due on demand.

Effective May 10, 2012, we issued 1,147,324 common shares with a fair value of $321,251, or $0.28 per share based on the May 9, 2012, closing bid price of our stock in satisfaction of $286,831 of notes payable and accrued interest owed to Mr. Gibbs resulting in a $34,420 loss on extinguishment of debt to related parties.

Effective May 11, 2012, we sold 240,000 common shares to Mr. Gibbs for cash consideration of $60,000, or $0.25 per share.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following discussion and analysis provides information that management believes is relevant for an assessment and understanding of our results of operations and financial condition. This information should be read in conjunction with our audited consolidated financial statements which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, filed with the Commission on April 16, 2012 and our unaudited condensed consolidated financial statements and notes thereto included with this report in Part I. Item 1.


Business Overview:


On March 15, 2010, we entered into a Mining Lease with Option to Purchase (the “Langtry Lease” or the “Lease”) which granted us a 20 year lease to develop and conduct mining operations on a 413 acre group of 20 patented mining claims located in the Calico Mining District (the “Langtry Property”, or the “Property”), also with an option to purchase the Property. This Property is located at the base of the Calico Mountains northeast of Barstow, in San Bernardino County, California.


During the first quarter of 2011, we successfully completed a 13 hole drilling program on our Langtry Property in an effort to validate the results of an earlier drilling program undertaken by a previous owner of the Property during the 1960’s and 1970’s and to further define silver deposits near historic workings on the Property. During the remainder of 2011 and during the first quarter of 2012, we evaluated the results of our drilling program and commissioned independent consultants to prepare a NI 43-101 Technical Report. The NI 43-101 report will follow the guidelines specified by the Canadian Council



10






of Professional Geoscientists and will include property description and location, history, geological setting, deposit types, mineralization, exploration, drilling, sampling method and approach, sample preparation, analyses and security, data verification, mineral resource and mineral reserve estimates, as well as other relevant data and information.

 

Going forward, our primary focus will be to continue our evaluation of the Langtry Property including the possible acquisition of additional mineral rights and additional exploration, development and permitting activities.  Our mineral lease payments, permitting applications and exploration and development efforts will require additional capital.


Results of Operations:


Our analysis presented below is organized to provide the information we believe will be instructive for understanding our historical performance and relevant trends going forward. This discussion should be read in conjunction with our condensed consolidated financial statements in Part I., Item 1. of this report, including the notes thereto.


Results from Continuing Operations


A summary of our results from continuing operations is as follows:


 

 

Three Months Ended March 31,

 

 

 

2012

 

2011

 

Operating expenses:

 

 

 

 

 

 

 

Exploration costs

 

$

63,659

 

$

331,241

 

Other operating costs

 

 

 

 

3,536

 

General and administrative expenses

 

 

72,312

 

 

91,462

 

Total operating expenses

 

 

135,971

 

 

426,239

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(135,971

)

 

(426,239

)

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

Interest expense

 

 

(1,945

)

 

(1,317

)

Loss on extinguishment of debt - related parties

 

 

 

 

 

Other income

 

 

1

 

 

6

 

Total other expense

 

 

(1,944

)

 

(1,311

)

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(137,915

)

$

(427,550

)


Our 2012 first quarter loss from continuing operations was $137,915 as compared to $427,550 in 2011. The decrease in our loss was mainly attributable to the decrease in our mineral exploration activities during the first three months of 2012 as compared to the same period in 2011.


Operating expenses:


Our first quarter 2011 operating expenses were $135,971 as compared to $426,239 during the first quarter of 2011.


During the first quarter of 2012, we incurred $63,659 exploration costs as compared to $331,241 during the first quarter of 2011.  This $267,582 decrease was mainly due to the absence of an exploration drilling program during the first quarter of 2012. During the first quarter of 2011 we incurred $270,411 of



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drilling and sample analysis costs compared to no drilling and sample analysis costs during the first quarter of 2012.


General and administrative expenses decreased $19,150 to $72,312 during the first quarter of 2012 as compared to $91,462 during the first quarter of 2011.This decrease was comprised of a $27,112 decrease in professional fees offset by a $7,963 net increase in all other general and administrative expenses. The decrease in professional fees, which includes accounting, audit, legal, investor relations, management fees and other professional fees, was mainly due to delaying our annual year-end accounting and audit efforts from the first quarter in 2011 until the second quarter in 2012. The net increase in all other general and administrative expenses was mainly due to $9,863 in director compensation during the first quarter 2012 resulting from the addition of a new director in August 2011.


Other (expense) income:


Other nonoperating expense of $1,944 during the first three months of 2012 was slightly higher than the $1,317 of other nonoperating expense during the same period in 2011, mainly due to an increase in interest expense related to increased levels of notes payable to related parties.


Liquidity and Capital Resources:


Liquidity 


 During the first quarter of 2012, we required capital principally for funding of our operating losses; our annual mineral rights lease payment and our working capital. To date, we have financed our capital requirements through the sale of unregistered equity securities and borrowings primarily from related parties. We expect to meet our future financing needs and working capital and capital expenditure requirements through cash on hand, borrowings and offerings of debt or equity securities, although there can be no assurance that our future financing efforts will be successful. The terms of future financings could be highly dilutive to existing shareholders.


On March 31, 2012, we had $28,681 of cash and cash equivalents and negative working capital of $343,979.


We do not have sufficient cash on hand or available credit facilities to continue operations and are dependent upon securing loans or the sale of equity to provide adequate working capital to continue operations. If we are unable to secure additional financing to cover our operating losses until break-even operations can be achieved, we may not be able to continue as a going concern.




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Cash Flows


A summary of our cash provided by and used in operating, investing and financing activities is as follows:


 

 

Three Months Ended March 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

$

(54,981

)

$

(333,046

)

Net cash used in investing activities

 

 

(71,485

)

 

(59,701

)

Net cash provided by financing activities

 

 

150,475

 

 

558,757

 

 

 

 

 

 

 

 

 

Net increase in cash

 

 

24,009

 

 

166,010

 

Cash and cash equivalents, beginning of period

 

 

4,672

 

 

111,475

 

Cash and cash equivalents, end of period

 

$

28,681

 

$

277,485

 


Net cash used in operating activities:


Net cash used in operating activities was $54,981 and $333,046 during the first quarter of 2012 and 2011, respectively.  


Cash used in operating activities during the first quarter of 2012 mainly related to our $137,915 net loss as adjusted for non-cash items and changes in operating assets and liabilities. These adjustments and changes were comprised of $21,180 in non-cash share-based compensation expense, a $38,154 increase in accounts payable and accrued liabilities and a $23,600 decrease in prepaid expenses during the quarter.


Adjustments to our net loss of $427,550 during the first quarter of 2011 to arrive at our $333,046 cash used in operating activities were mainly comprised of a $101,000 decrease in prepaid expenses resulting from our utilization of $100,000 of prepaid drilling costs during the first quarter of 2011.


Net cash used in investing activities:


Cash used in investing activities was $71,485 during the first quarter of 2012 as compared to $59,701 during the first quarter of 2011.  


Our cash used in investing activities during the first quarter of 2012 and 2011 was mainly comprised of our $70,000 and $60,000 annual lease rental payment in March 2012 and March 2011, respectively.


Net cash provided by financing activities:


Cash provided by financing activities during the first quarter of 2012 was $150,475 compared to cash provided by financing activities of $558,757 during the same period in 2011.  


During the first quarter of 2012 we borrowed $150,000 from John D. Gibbs, a significant investor, sold 143,000 warrants for $100 cash and prepaid investor services with a fair value of  $35,793 and incurred a net increase in advances payable to related parties of $375. During the first quarter of 2011 we sold 2,430,000 common shares for net proceeds of $571,207 and incurred a net decrease in advances payable to related parties of $12,450.


Off Balance Sheet Arrangements:


We do not have and never had any off-balance sheet arrangements.



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Recent Accounting Pronouncements


Recently issued Financial Accounting Standards Board Accounting Standards Codification guidance has either been implemented or is not significant to us.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Not applicable.


ITEM 4. CONTROLS AND PROCEDURES

 

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures:

 

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures. Our management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives.


Our management, with the participation of our CEO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, our CEO concluded that our disclosure controls and procedures were not effective as of such date as a result of a material weakness in our internal control over financial reporting due to lack of segregation of duties and a limited corporate governance structure as discussed in Item 9A. of our Form 10-K for the fiscal year ended December 31, 2011.


 While we strive to segregate duties as much as practicable, there is an insufficient volume of transactions at this point in time to justify additional full time staff. We believe that this is typical in many exploration stage companies. We may not be able to fully remediate the material weakness until we commence mining operations at which time we would expect to hire more staff. We will continue to monitor and assess the costs and benefits of additional staffing.


Changes in Internal Control over Financial Reporting:

 

There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART II.  OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS


None.


ITEM 1A.  RISK FACTORS

 

There have been no material changes from the risk factors disclosed in Part I. Item 1A. of our Annual Report on  Form 10-K for the year ended December 31, 2011.

 

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


All sales of unregistered securities were reported on Form 8-K during the period.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES


Promissory notes in favor of John D. Gibbs totaling $30,000 matured on December 31, 2011 and were not repaid. Accrued and unpaid interest on these notes totaled $3,552 as of March 31, 2012.


ITEM 4. MINE SAFETY DISCLOSURES


Not applicable.


ITEM 5. OTHER INFORMATION


None.


ITEM 6.  EXHIBITS


EXHIBIT

NUMBER

 

DESCRIPTION

 

 

 

10.1

 

Promissory Note dated April 27, 2012, in favor of John D. Gibbs (1)

10.2

 

Agreement to Convert Debt dated May 10, 2012, between John D. Gibbs and Athena Silver Corporation (2)

31

 

Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32

 

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101.INS

 

XBRL Instance Document**

101.SCH

 

XBRL Taxonomy Extension Schema**

101.CAL

 

XBRL Taxonomy Extension Calculation**

101.DEF

 

XBRL Taxonomy Extension Definition **

101.LAB

 

XBRL Taxonomy Extension Labels**

101.PRE

 

XBRL Taxonomy Extension Presentation**

____________________

(1)

 

Incorporated by reference to the Company’s Current Report on Form 8-K dated April 27, 2012 and filed with the Commission on May 2, 2012.

(2)

 

Incorporated by reference to the Company’s Current Report on Form 8-K dated May 10, 2012 and filed with the Commission on May 16, 2012.

*

 

Filed herewith

**

 

Furnished, not filed.



15






SIGNATURE

 

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.


 

 

ATHENA SILVER CORPORATION

 

 

 

Dated: May 18, 2012

By:

/s/ JOHN C. POWER 

 

 

 

John C. Power

 

 

Chief Executive Officer, President,

Chief Financial Officer, Secretary & Director

(Principal Executive Officer)

(Principal Accounting Officer)




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