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EXCEL - IDEA: XBRL DOCUMENT - Crown Alliance Capital LtdFinancial_Report.xls
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EX-10.1 - EXHIBIT 10_1 - Crown Alliance Capital Ltdex10_1.htm
EX-31.1 - EXHIBIT 31.1 - Crown Alliance Capital Ltdex31_1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended: September 30, 2012
 
[  ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from __________ to__________
 
Commission File Number: 333-169346

 

Crown Alliance Capital Limited

(Exact name of registrant as specified in its charter)

 

Nevada 27-2089124
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

 

3601 Highway 7 East Suite # 203

Markham, ON L3R 0M3, Canada

(Address of principal executive offices)

 

(905) 604-8873
(Registrant’s telephone number)

 

________________________________

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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 [X] Yes [ ] 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.

 

[   ] Large accelerated filer Accelerated filer [   ] Non-accelerated filer
[X] Smaller reporting company

 

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

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 42,140,724 as of November 12, 2012.

 

 

TABLE OF CONTENTS

  Page
   
PART I – FINANCIAL INFORMATION  
   
Item 1: Financial Statements 3
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations 4
Item 3: Quantitative and Qualitative Disclosures About Market Risk 13
Item 4: Controls and Procedures 13
 
PART II – OTHER INFORMATION  
   
Item 1: Legal Proceedings 14
Item 1A: Risk Factors 14
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 14
Item 3: Defaults Upon Senior Securities 15
Item 4:  Mine Safety Disclosures 16
Item 5: Other Information 16
Item 6: Exhibits 16
2

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Our financial statements included in this Form 10-Q are as follows:

 

F-1 Balance Sheets as of September 30, 2012 (unaudited) and June 30, 2012 (derived from audited financial information);
F-2 Statements of Operations for the three months ended September 30, 2012 and 2011, and from inception on March 4, 2010 through September 30, 2012 (unaudited);
F-3 Statements of Cash Flows for the three months ended September 30, 2012 and 2011, and from inception on March 4, 2010 through September 30, 2012 (unaudited);
F-4 Notes to Financial Statements.

 

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended September 30, 2012 are not necessarily indicative of the results that can be expected for the full year.

 

3

CROWN ALLIANCE CAPITAL LTD

(formerly Kinetic Resources Corp).

(A Development Stage Company)

BALANCE SHEETS

(Stated in US Dollars)

(Unaudited)

 

   September 30,  June 30,
   2012  2012
ASSETS          
           
Current          
     Cash  $206,110   $22,830 
     Prepaid expenses   1,500    —   
           
Total current assets   207,610    22,830 
           
Premiums on life settlement policies – Note 10   347,238    168,189 
Investment in life settlement policies – Note 10   127,726    119,176 
Property and equipment, net – Note 4   19,313    17,784 
Lease deposit   12,000    12,000 
           
Total long term assets   506,277    317,149 
           
Total assets  $713,887   $339,979 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
           
Current          
   Accounts payable  $34,092   $14,913 
   Accrued interest, related party – Note 7   3,057    1,923 
   Notes payable, related party – Note 7   45,000    45,000 
           
Total current liabilities   82,149    61,836 
           
Total liabilities   82,149    61,836 
           
STOCKHOLDERS’ EQUITY          
           
Preferred stock, $0.001 par value 10,000,000 shares authorized, none outstanding   —      —   
Common stock, $0.001 par value – Notes 7 and 8 90,000,000 shares authorized 41,695,778 shares issued and outstanding  (41,089,296 shares as of June 30, 2012)   41,696    41,089 
Additional paid-in capital   995,964    572,071 
Share subscriptions received   59,500    —   
Deficit accumulated during the development stage   (465,422)   (335,017)
           
Total stockholders’ equity   631,738    278,143 
           
Total liabilities and stockholders’ equity  $713,887   $339,979 
F-1

 CROWN ALLIANCE CAPITAL LTD.

(An Exploration Stage Company)

INTERIM STATEMENTS OF OPERATIONS

(Stated in US Dollars)

(Unaudited)

 

 

         From
         inception
         (March 4
   Three Months Ended  2010) to
   September 30,  September 30,
   2012  2011  2012
          
Expenses               
     Audit and accounting fees  $10,710   $7,608   $50,188 
     Bank charges   528    93    2,112 
     Consulting fees   8,435    —      20,435 
     Depreciation   3,040    —      5,453 
     Foreign exchange loss   172    2    368 
     Legal fees   9,041    27,583    101,899 
     Management fees – Note 7   45,000    —      141,750 
     Marketing and promotion   17,850    —      17,850 
     Mineral property option costs   —      4,000    8,000 
     Mineral property exploration costs   —      —      2,500 
     Office expenses   789    1,000    10,656 
     Rent   15,569    5,189    67,466 
     Transfer and filing fees   15,670    3,830    27,709 
     Travel and entertaining   2,467    —      4,050 
                
Operating loss   (129,271)   (49,305)   (460,436)
                
     Interest expense – Note 7   (1,134)   (598)   (4,986)
                
Net loss  $(130,405)  $(49,903)  $(465,422)
                
Basic loss per share  $(0.00)  $(0.00)     
                
Weighted average number of shares outstanding - basic   41,291,873    40,375,011      

F-2

 CROWN ALLIANCE CAPTIAL LTD

(formerly Kinetic Resources Corp).

(A Development Stage Company)

INTERIM STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

(Unaudited)

 

         From
         inception
         (March 4 2010)
   Three Months Ended  to
   September 30,  September 30,
   2012  2011  2012
          
Cash Flows Used in Operating Activities               
    Net loss  $(130,405)  $(49,903)  $(465,422)
                
Adjustments to reconcile net loss to net cash used by operating activities:               
      Non-cash interest expense – capital contribution   —      226    902 
      Accrued interest   1,134    372    4,084 
      Depreciation   3,040    —      5,453 
     Changes in operating assets and liabilities:               
     Prepaid expenses   (1,500)   —      (1,500)
     Lease deposit   —      —      (12,000)
     Accounts payable and accrued liabilities   19,179    33,760    57,510 
Net cash used in operating activities   (108,552)   (15,545)   (410,973)
                
Cash Flows from Investing Activities               
    Purchases of life settlement policies and capitalized premiums   (187,599)   —      (474,964)
Purchase of property and equipment   (4,569)   —      (24,766)
Net cash used in investing activities   (192,168)   —      (499,730)
                
Cash Flows from Financing Activities               
    Proceeds from capital stock issued   424,500    —      952,313 
    Proceeds from share subscriptions received   59,500    —      59,500 
    Due to related party   —      —      —   
    Proceeds from notes payable, related party   —      10,000    105,000 
Net cash provided by financing activities   484,000    10,000    1,116,813 
                
Increase (decrease) in cash during the period   183,280    (5,545)   206,110 
                
Cash, beginning of the period   22,830    5,958    —   
                
Cash, end of the period  $206,110   $413   $206,110 
                
Supplemental information               
                
Interest paid in cash  $—     $—     $—   
                
Taxes paid in cash  $—     $—     $—   
                
Non-cash interest and financing activities               
Accounts payable settled in connection with sale of subsidiary  $—     $21,718   $21,718 
Accrued interest, related party settled in connection with sale of subsidiary  $—     $1,027   $1,027 
Notes payable, related party settled in connection with sale of subsidiary  $—     $60,000   $60,000 
Shares cancelled and note payable reissued  $—     $—     $45,000 

 

 

F-3

CROWN ALLIANCE CAPITAL LTD

(formerly Kinetic Resources Corp).

(A Development Stage Company)

NOTES TO THE INTERIM FINANCIAL STATEMENTS

September 30, 2012

(Stated in US Dollars)

(Unaudited)

 

Note 1 Basis of Presentation

 

While the information presented in the accompanying September 30, 2012 interim financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim period presented in accordance with the accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. These interim financial statements should be read in conjunction with the Company’s June 30, 2012 audited financial statements (notes thereto) included in the Company’s Annual Report on Form 10-K.

 

Operating results for the three months ended September 30, 2012 are not necessarily indicative of the results that can be expected for the year ending June 30, 2013.

 

Note 2 Nature of Operations and Ability to Continue as a Going Concern

 

The Company was incorporated in the state of Nevada, United States of America on March 4, 2010. The Company was an exploration stage company and was formed for the purpose of acquiring exploration and development stage mineral properties. The Company’s year-end is June 30.

 

On June 4, 2010, the Company incorporated a wholly-owned subsidiary, KRC Exploration LLC (“KRC”) in the State of Nevada, United States of America (“USA”) for the purpose of mineral exploration in the USA.

 

On August 31, 2011, the Company changed its business focus to the development of a portfolio of life settlement policies and sold KRC to the former president.

 

On January 30, 2012, the Board of Directors approved a change in name from Kinetic Resources Corp. to Crown Alliance Capital Limited and a forward-split of its Common Stock on the basis of 17.85715 shares of Common Stock for one share of Common Stock held by shareholders of record at the close of business on February 10, 2012. All share and per share data has been retroactively adjusted to reflect the effect of the forward-split.

 

On March 15, 2012, the Company entered into its first contract to acquire life settlement policies. The agreement is expected to close on November 23, 2012.

 

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year.

F-4

Note 2 Nature of Operations and Ability to Continue as a Going Concern - (cont’d)

 

Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. The Company has yet to achieve profitable operations, has accumulated losses of $465,422 since its inception and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they come due.

 

Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if at all. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

 

Note 3 Summary of Significant Accounting Policies

 

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and are stated in US dollars. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates, which may have been made using careful judgment. Actual results may vary from these estimates.

 

The financial statements have, in management’s opinion, been properly prepared within the framework of the significant accounting policies summarized below:

 

Principles of Consolidation

 

These financial statements include the accounts of the Company and KRC until KRC was disposed of by sale to the former president on August 31, 2011. Accordingly, the statements of operations and cash flows presented include the results of KRC from June 4, 2010 to August 31, 2011 and the balance sheets presented at September 30, 2012 and June 30, 2012 are solely that of Crown Alliance Capital Ltd. All significant inter-company transactions and balances have been eliminated.

F-5

Note 3 Summary of Significant Accounting Policies – (cont’d)

 

Development Stage Company

From inception through August 31, 2011, the Company was an exploration stage company. On August 31, 2011, the Company changed business directions from acquiring exploration and development stage mineral properties to development of a portfolio of life settlement policies. The Company is now a development stage company. All losses accumulated since inception have been considered as part of the Company’s development stage activities.

 

Cash and cash equivalents

 

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. There were no cash equivalents held at September 30, 2012 or June 30, 2012.

 

Earnings per share

 

In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,” basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive.

 

Stock-based Compensation

 

The Company is required to record compensation expense, based on the fair value of the awards, for all awards granted after the date of the adoption.

 

Foreign Currency Translation

 

The Company’s functional currency is the United States dollar as substantially all of the Company’s operations are in the USA. The Company uses the United States dollar as its reporting currency for consistency with registrants of the Securities and Exchange Commission (“SEC”).

 

Assets and liabilities denominated in a foreign currency are translated at the exchange rate in effect at the balance sheet date and capital accounts are translated at historical rates. Income statement accounts are translated at the average rates of exchange prevailing during the period. Translation adjustments from the use of different exchange rates from period to period are included in the Accumulated Other Comprehensive Income account in Stockholder’s Equity, if applicable. Transactions undertaken in currencies other than the functional currency of the entity are translated using the exchange rate in effect as of the transaction date. Any exchange gains and losses are included in the Statement of Operations.

F-6

Note 3 Summary of Significant Accounting Policies – (cont’d)

 

Investments in Insurance Contracts

 

The Company adopted FASB ASC Topic 325-30 “Investments in Insurance Contracts.” and accounts for life settlement contracts using the investment method. Life settlement contracts will be initially recognized at the transaction price. Any additional costs, such as premium paid, will be capitalized. In accordance with ASC 230, “Statement of Cash Flows”, cash paid towards acquiring and maintaining life settlement policies will be treated as an investing outflow while the receipt of proceeds over the cash invested will be shown as an operating cash flow with return of investment and premiums shown as investing inflows.

 

Property and equipment

 

Property and equipment is stated at the lower of cost or fair value. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense).

 

The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of its office equipment or whether the remaining balance of office equipment should be evaluated for possible impairment.

 

Depreciation has been charged using the following estimates of useful lives:

 

Computer equipment  2 years straight line
Office equipment and furnishings  3-5 years straight line
Leasehold improvements  Over the remaining term of the lease

  

F-7

Note 3 Summary of Significant Accounting Policies – (cont’d)

 

Income Taxes

 

The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry-forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

 

Newly Issued Accounting Pronouncements

 

The Company has reviewed issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.

 

Note 4 Property and equipment

 

   September 30  June 30,
   2012  2012
Cost          
Computer equipment  $1,409   $1,409 
Office equipment and furnishings   10,705    6,136 
Leasehold improvements   12,652    12,652 
           
Gross cost   24,766    20,197 
Accumulated depreciation   (5,453)   (2,413)
           
Net book value  $19,313   $17,784 

 

Note 5 Sale of Subsidiary

 

On August 31, 2011, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Membership Interests and Assumption of Obligations (the “Agreement”), with the former President of the Company. Pursuant to the Agreement, the Company’s interest in KRC was transferred to the former President and the former president assumed all interests and liabilities of KRC amounting to $82,745 in exchange for the Company’s interest in KRC.

 

The following table summarizes the identifiable assets and liabilities of KRC that were disposed of, the consideration received, and the loss of KRC for the period from July 1, 2011 to August 31, 2011.

F-8

Note 5 Sale of Subsidiary

 

   August 31, 2011
Identifiable Assets and Liabilities   
Amount owed to Kinetic Resources Corp  $(13,220)
Net liabilities of KRC   (13,220)
      
Consideration Received     
Settlement of accounts payable, promissory notes, and accrued interest   61,027 
Assumption of Accounts payable   21,718 
Elimination of accumulated losses of KRC   13,220 
    95,695 
      
Sale of subsidiary- related party  $82,745 
      
Loss for the period from July 1, 2011 to August 31, 2011     
      
Mineral property option costs  $4,000 

 

Subsequently, on November 11, 2011, the former President of the Company and several shareholders entered into a stock cancellation agreement with the Company whereby 824,000 and 465,000, common shares, respectively, were returned to treasury and cancelled.

 

Note 6 Financial Instruments

 

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

 

In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

F-9

Note 6 Financial Instruments – (cont’d)

 

Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

 

Level 2 –inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

 

The carrying value of the Company’s financial assets and liabilities which consist of cash, accounts payable and accrued liabilities in management’s opinion approximate their fair value due to the short maturity of such instruments. These financial assets and liabilities are valued using level 3 inputs, except for cash which is at level 1. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange, or credit risks arising from these financial instruments.

 

Note 7 Related Party Transactions

 

On August 30, 2010, the Company issued a promissory note of $15,000 to the Company’s President and received $15,000 cash in exchange. The note is unsecured, non-interest bearing and matures on September 30, 2012. During the three month period ended September 30, 2012 the Company has recorded an interest expense of $nil three month period ended September 30, 2011 - $226) and capital contribution of $nil. (three month period ended September 30, 2012 - $226) in respect of the imputed interest charge on this note payable.

 

On February 11, 2011, the Company issued a promissory note of $25,000 to the Company’s President and received $25,000 cash in exchange. The promissory note is unsecured, bears interest at 6% per annum, and matures on February 28, 2013. During the three month period ended September 30, 2012 the Company accrued $nil (three month period ended September 30, 2011 - $255) of interest expense in respect of this note payable.

F-10

Note 7 Related Party Transactions – (cont’d)

 

On May 10, 2011, the Company issued a promissory note of $10,000 to the Company’s President and received $10,000 cash in exchange. The promissory note is unsecured, bears interest at 6% per annum, and matures on May 31, 2013. During the three month period ended September 30, 2012, the Company accrued $nil (three month period ended September 30, 2011 - $102) of interest expense in respect of this note payable.

 

On August 22, 2011, the Company issued a promissory note of $10,000 to the Company’s President and received $10,000 cash in exchange. The promissory note is unsecured, bears interest at 6% per annum, and matures on August 31, 2013. During the three month period ended September 30, 2012, the Company accrued $nil (three month period ended September 30, 2011 - $15) of interest expense in respect of this note payable.

 

On August 31, 2011, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Membership Interests and Assumption of Obligations (the “Agreement”), with the former President of the Company. Pursuant to the agreement, the former President of the Company assumed $82,745 of accounts payable, related party notes payable and accrued interest. (Note 5)

 

On October 3, 2011, the Company issued 17,857,150 common shares pursuant to a share subscription agreement at $0.045 per share for total proceeds of $45,000. Shares were issued to a company managed by our President.

 

On January 26, 2012, the Company repurchased and cancelled 17,857,150 shares of its own stock and as consideration issued a $45,000 promissory note to a company managed by our President. The promissory note is unsecured, bears interest at 10% per annum, and is due on or before January 26, 2013. During the three month period ended September 30, 2012, the Company accrued $1,134 (three month period ended September 30, 2011 - $nil) of interest expense in respect of this note payable.

 

On February 8, 2012, the Company entered into an Employment Agreement with the President of the Company. Pursuant to the agreement the President will receive a signing bonus of $25,000 and $180,000 per annum February 8, 2012 until February 8, 2013 (the initial term) for services rendered plus reimbursement of the Company’s expenses. The initial term shall be automatically renewed for up to 3 years successive years in consecutive one year periods. The agreement will continue in force unless either party gives notice of termination not more than 270 days and not less than 30 days prior to the then existing term of employment.

F-11

Note 7 Related Party Transactions – (cont’d)

 

The annual base compensation pursuant to the employment agreement is as follows:

 

$180,000 until February 8, 2013;

$200,000 until February 8, 2014;

$255,000 until February 8, 2015;

$255,000 per annum thereafter, - unless renewal terms are renegotiated

 

The Agreement also allows in addition to the base salary noted above for bonus payments to be made as deemed reasonable at the time by the Board of Directors either as cash, or grants of stock options.

 

As at September 30, 2012, accounts payable includes $3,750 (June 30, 2012 - $3,750) and management fees for the three month period ended September 30, 2012 include $45,000 (three month period to September 31, 2011 -$nil) pursuant to this agreement.

 

Note 8 Capital Stock

 

The authorized common stock of the Company consists of 90,000,000 shares of common stock with par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001. As of September 30, 2012 the Company had 41,695,778 (June 30, 2012 – 41,089,296) common stock and zero (June 30, 2012 – zero) preferred stock outstanding.

 

a) Issued

 

As part of the Company’s non-brokered private placement the Company is offering up to 14,500,000 Stock Units at $0.70 per Unit. Each Unit consists of one share of common stock of the Company and one warrant. Each warrant may be exercised at $1.10 into one common stock of the Company for a period of 48 months subsequent to issuance.

 

Pursuant to this non-brokered private placement the Company issued 130,000 units on August 8, 2012 and 50,000 units on August 28, 2012 for aggregate gross proceeds of $126,000.

 

On August 29, 2012, the Company issued an additional 121,482 common shares pursuant to subscription agreements at $0.70 per share for total share proceeds of $85,000.

 

On September 12, 2012, the Company issued an additional 305,000 common shares pursuant to subscription agreements at $0.70 per share for total share proceeds of $213,500.

 

As of September 30, 2012, the Company has received subscriptions to acquire 85,000 common shares at $0.70 for aggregate proceeds of $59,500.

F-12

Note 8 Capital Stock

 

b) Share Purchase Warrants

 

A summary of changes in share purchase warrants for the three month period ended September 30, 2012 and the year ended June 30, 2012 is presented below:

 

   Three Months Ended  Year Ended
   September 30, 2012  June 30, 2012
   Number  Weighted
Average
Exercise
Price
  Number  Weighted
Average
Exercise
Price
             
 Balance, beginning of period    —     $—      —     $—   
 Issued    180,000    1.10    —      —   
 Exercised    —      —      —      —   
                       
 Balance, end of period    180,000   $1.10    —     $—   

 

As at September 30, 2012, share purchase warrants were outstanding for the purchase of common shares as follows:

 

      Number   
Number     Exercisable   
of  Exercise  at  Expiry
Shares  Price  September 30, 2012  Date
                  
 130,000   $1.10    130,000    August 8, 2016 
 50,000   $1.10    50,000    August 28, 2016 
 180,000         180,000      

 

Note 9 Commitment

 

On September 1, 2011, the Company entered into a lease agreement for a term of two years.

 

As of September 30, 2012, the Company’s commitment for annual minimum future lease payments under office rental agreements are as follows:

 

 Fiscal 2013   $23,828 
 Fiscal 2014    5,295 
 Total   $29,193 

 

Additional fees and taxes of approximately $2,541 per month are due in connection with the lease agreement. Upon acceptance of the lease agreement, a security deposit of $12,000 was paid.

F-13

Note 10 Investment in Life Settlement Policies

 

On March 15, 2012, the Company entered into its first contract to acquire four life settlement policies for the aggregate sum of $570,000, payable on or before April 23, 2012. Pursuant to the agreement the Company is responsible for all premiums payable pursuant to the terms of the policies and are entitled to fifty percent of the death benefits of those policies not formally closed pursuant to the terms of the agreement. The remaining fifty percent of the death benefits of those policies will be paid to Universal Settlements International, Inc., a Company with common shareholders. ASC 325-30, Investments in Insurance Contracts, provides that a purchaser may elect to account for its investments in life settlement contracts based on the initial investment at the purchase price plus all initial direct costs. Continuing costs (e.g., policy premiums, statutory interest and direct external costs, if any) to keep the policy in force are capitalized. The Company has elected to use the investment method and refer to the recorded amount as the carrying value of the policies.

 

On June 19, 2012, the Company acquired one of the four life settlement policies. The face value of the policy is $500,000 with a remaining life expectancy of 3.25 years. As of September 30, 2012, the carrying value of the policy is $127,726.

 

The Company evaluates the carrying value of their investment in life settlement policies on a regular basis and adjusts their total basis in the policies using new or updated information that affects their assumptions about remaining life expectancy, credit worthiness of the policy issuer, funds needed to maintain the asset until maturity, discount rates and potential return. The Company recognizes impairment on individual policies if the expected undiscounted cash flows are less than the carrying amount of the investment, plus anticipated undiscounted future premiums and capitalizable direct external costs, if any. Impairment of policies is generally caused by the insured significantly exceeding the estimate of the original life expectancy, which causes the original policy costs and projected future premiums to exceed the estimated maturity value. The Company does not believe the life settlement policy to be impaired as of September 30, 2012.

 

Estimated premiums to be paid for each of the five succeeding fiscal years to keep all four policies in force as September 30, 2012, are as follows.

 

Year 1  $249,296 
Year 2   332,394 
Year 3   332,394 
Year 4   298,194 
Year 5   298,194 
Total estimated premiums  $1,510,472 

 

As of September 30, 2012, $347,238 of policy premiums has been paid on the remaining three policies and premium payments have been capitalized in the financial statements as of September 30, 2012.

F-14

Note 10 Investment in Life Settlement Policies – (cont’d)

 

On April 27, 2012, the Company amended the original life settlement contract to extend the $570,000 payable due date to May 10, 2012, the contract was further amended on May 23, 2012 to extend the $570,000 payable due date to September 17, 2012, and on September 24, 2012, the contract was amended again to extend the $570,000 payable due date to October 17 2012.

 

As of November 6, 2012, the Company has paid a total of $325,000 towards the $570,000 payable and amended the contract to extend the due date for the remaining payable of $245,000 to November 23, 2012.

 

Note 11 Subsequent Event

 

a) During October 2012, the Company issued an additional 95,000 common shares pursuant to subscription agreements at $0.70 per share for total share proceeds of $66,500.

 

b) On November 2, 2012, the Company issued a total of 350,000 shares of common stock to a total of seven subscribers at a price of $0.70 per share , for total share proceeds of $245,000.

F-15

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

 

Company Overview

 

We are a publicly reporting Nevada corporation formed March 4, 2010. Our business is focused on acquiring an ongoing portfolio of life settlement policies and to eventually build our own portfolio of policy purchases. A life settlement is the purchase of a life insurance policy at a discount from face value from a person who no longer needs or wants the policy. The policy owner receives a lump sum settlement and the title for the policy is transferred to the third party, which pays the future premiums due on the policy and eventually collects the death benefit.

 

Overview of Life Settlements

 

A life settlement (also sometimes known as a "viatical" if the life insured has less than 2 years to live) is the purchase of a life insurance policy at a discount from face value from a person who no longer needs or wants the policy. The policy owner receives a lump sum settlement and the title for the policy is transferred to the third party, which pays the future premiums due on the policy and eventually collects the death benefit.

 

Traditionally, policy owners of a life insurance contract would get access to the value built up in a policy while they are living by surrendering the policy for its cash value, withdrawing some of the accumulated surplus value (if there is any), or borrowing against the cash value. Generally, the actual value that can be accessed through these options is fairly limited. Life settlements are an alternative for those wishing to sell their policy. With a life settlement, the owner of the policy can sell their beneficial interest in a policy for cash - a life settlement. The owner often receives a higher value compared to the traditional options and is relieved from paying future premium obligations.

 

There is a network of licensed brokers throughout the United States through whom an individual or institution may purchase or sell an insured person's life insurance policy. These brokers represent the insured person, and they effectively 'shop' out or list for sale these insurance policies through their networks. Competing bids from life settlement companies or institutional buyers are received by the broker, who in time chooses to whom the policy will be sold. Like the real estate market, the highest offer usually secures the asset. The purchase of a life insurance policy asset is referred to as a life settlement transaction.

 

Life settlements are potentially profitable because the purchaser acquires a policy at a discount from the face value which is based on the insured person's life expectancy and the purchaser’s desired return on capital. The investor then continues to pay the premiums and collects the death benefit when the policy matures. The annual rates of return that purchasers can expect typically vary between 8% and 12%. In the case of an early maturity (i.e death of an insured) the return on investment can be substantially higher. In the case where the insured person lives longer than anticipated, the return on investment will be lower, and can potentially be negative. 

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There are many reasons for policies becoming available for settlement. These include:

 

  • Policy-holder is terminally ill and requires funds to pay medical and/or living expenses
  • Policy-holder no longer needs coverage
  • Change in business ownership makes policy obsolete
  • Key-man leaves the business
  • Policy-holder needs to raise cash
  • Non-profit organization owns a policy insuring the life of a key donor or benefactor who no longer wants to pay premiums
  • Estate tax reform in USA
  • Growing number of sophisticated market participants

Further regulation, demographics and a low national savings rate will drive the expansion of supply to the life settlement market. The demographic of the baby boomer generation, people born in the U.S. between 1945 and 1965, is well known and is moving towards retirement with minimal savings relative to expected post-retirement expenditures.

 

U.S. Life Settlement Industry

 

The life settlement industry began in the late 1980's. The first year of credible data available is from 1989 when about $2 million in life insurance (face amount) was purchased. This figure has grown to approximately $12 billion in 2006. Processes and technologies allowing for more efficient transfer of life policies were established in the late 90's. The life settlements market developed and began to provide liquidity to a growing segment of Americans holding life insurance policies that they no longer needed.

 

Though individuals have many reasons for exiting their policies, few are aware of the life settlements marketplace and either accepts the cash surrender value from the insurance company (often only a fraction of what the policy could be worth in the life settlement market) or let the policy lapse. The fundamental reason for the rapid growth of the life settlements market is consumer value. The life settlements purchaser can pay more than cash surrender value and still expect a competitive rate of return on their investment.

 

A report by Conning Research states that as of 2005, there was approximately US $9 trillion of life insurance in force in the US. Estimates place the US life settlement market potential between USD $240 and USD $600 billion." Bernstein Equity Research indicates that from 1990 to today the life settlement industry has grown from nil to over US $12 Billion and is expected to grow more than 10 fold to over US $125 Billion over the next several years.

 

Plan of Operations

 

Our primary objective will be to build a diversified inventory of life insurance policies both through new investment and the re-investment of the proceeds of matured policies. Initial management and administration of our life settlements portfolio will be provided by Universal Settlements International Inc. (“USI”) under an Administrative Services Agreement. USI is a Canadian company based in Burlington, Ontario. USI was incorporated in 1997 and has been operating in the life settlements sector for over a decade. USI facilitates the sale of interests in the benefits of U.S. life insurance policies to both institutional and individual purchasers and deals in numerous markets with representation across North America, South America, Central America, Asia and Europe. Further information on USI can be found on USI's website, www.universalsettlements.com. The shareholders of USI are Jeffrey Panos of Burlington, Ontario and Christopher Halas of Mississauga, Ontario. The shareholders of USI are also shareholders in Crown Alliance Capital Limited.

 

Pursuant to the Administrative Services Agreement, USI has agreed to provide, on a non-exclusive basis, a number of services relating to the administration of our life settlement contracts and additional services. These services include dealing with change of ownership and change of beneficiary issues, verifying coverage under a policy, monitoring and validating premium payments required to be made, tracking each insured, managing claims, dealing with group insurance plans, maintaining records and reports on all insureds, and such other services as may be requested from time to time by us, including identifying additional policies for purchase. The Services Agreement has a fixed term of five (5) years with a mutual early termination provision of 90 days without cause. Fees for services will be charged by USI on a per policy basis.

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After acquiring an initial portfolio of life settlement contracts with the assistance of USI, we intend to focus on growing our portfolio of life settlement policies going forward. The primary strategy will be to acquire additional life settlement policies that meet certain criteria and pricing guidelines, including the following:

 

  • Policies must be issued in the United States on US lives.
  • Policies must be issued by insurance companies rated at least "A-" or equivalent by AM Best, Moody's or S&P.
  • Policies must be beyond any contestability and suicide period.
  • Policies must allow for irrevocable beneficiary designations and absolute assignment of ownership.
  • Policies must allow for coverage for the whole life of the insured or allow for conversion so that coverage will continue for the whole life of the insured.
  • The cost of each policy acquired will be influenced by five major factors:
    • Face value of the policy upon maturity.
    • Annual premium on the policy.
    • Life expectancy (LE) of the insured.
    • Administration costs associated with the policy.
    • Competitive bids from other potential purchasers.

 Sources for New Portfolio Acquisitions

 

We will use USI's network of licensed providers and brokers throughout the United States to purchase policies. Each U.S. state has different licensing requirements and, consequently, we will only transact with providers and brokers who have demonstrated they have met these licensing requirements and show financial reliability.

 

Process and Procedures for Policy Purchases

 

As detailed in the Administrative Services Agreement between us and USI, USI will assist us in identifying and facilitating the purchase of policies. Each life settlement will be subject to the due diligence process as described below:

 

1. Due Diligence Underlying a Policy Purchase

 

USI will source policies which meet our criteria from Qualified Service Providers (QSP’s). If a policy meets the criteria, USI will conduct due diligence to ensure that the policy is valid and meets the necessary standards. Due diligence will include:

 

  • Obtaining verification of coverage (VOC) from the insurance company. VOC will confirm various policy details such as: face amount, premium, issue date, contestability, loans, withdrawals, lapses of coverage, beneficiary and ownership information, etc.
  • Obtaining and reviewing actual policy or copy of policy.
  • Obtaining a Physician's Statement of Mental Competency for the owner of policy.
  • Analyzing policy illustrations.
  • Obtaining an authorization to procure and subsequent analysis of medical records.

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2. Required Documents for Due Diligence

 

Documents listed below are required as part of the due diligence process:

 

· Consent to Release Medical Information (Notarized)

 

We must be able to receive all medical documentation for at least 5 years from all physicians that an insured person may have in order to obtain an accurate life expectancy evaluation. We must also have the ability to receive updated medical records as the situation requires.

 

· Letter of Competency (Signed by attending Physician)

 

This ensures that an insured person is aware of what they are doing and that they are of sound mind.

 

· Release and Consent to Change Beneficiaries (Notarized)

 

All current beneficiaries must sign off with the acknowledgement that they understand and consent to being removed as beneficiaries.

 

· Authorization to Provide Death Certificate (Notarized)

 

This allows us to acquire a death certificate in a legal and timely manner.

 

· Seller's Premium Indemnification Letter (Notarized)

 

This ensures that all premiums are paid up to the point where ownership and beneficiary rights have been transferred.

 

· Special Power of Attorney (Notarized)

 

This gives us the authority to contact and obtain any required information from doctors or insurance companies.

 

· Personal Information of the Insured and their Contact Information

 

We must be able to monitor and track the insured. Contact is maintained either directly with an insured or through a friend, family member, lawyer, physician or financial planner.

 

· Payment Instructions

 

This details the method of payment to an insured for their rights to ownership and beneficiary status once the closing of a policy purchase occurs.

 

3. Life Expectancy (LE) Evaluations

 

Insured persons who seek to sell their policies on the secondary market usually retain qualified representation to facilitate the sale. These policy brokers typically provide all medical information and LE evaluations to us so that we are able to make an informed bid on a policy. The LE evaluation is completed by independent LE evaluators who have experience in the mortality assessment domain.

 

We will utilize the following LE providers to determine life expectancy:

  • American Viatical Services of Woodstock, Georgia, USA.
  • 21st Services of Minneapolis, Minnesota, USA.
  • Examination Management Services, Inc. of Waco, Texas, USA.
  • Fasano Associates of Washington, DC, USA.
  • ISC Services of Clearwater, Florida, USA.

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USI research indicates that over the last several years, LE evaluators have become more conservative in their reports, largely due to the adoption of updated mortality tables.

 

4. Closing

 

If a policy meets all necessary criteria and the due diligence process has been completed to our satisfaction, the parties enter into a "Policy Funding Agreement" which is the agreement between the policy owner and us as the buyer of the policy. The following documents are required for the closing of each individual transaction:

  • Contract between us and the seller of the policy.
  • LE reports from 2 (two) approved list of LE providers.
  • Original insurance policy (certified true copy if original is lost). Identification for the insured, such as copy of social security card or driver's license. If the owner is a trust or corporation, a copy of the trust or a corporate resolution showing individuals who have signing authority.
  • Completed and signed tax forms for all sellers and brokers.
  • Executed Ownership and Beneficiary Change forms.
  • Funds are not disbursed to the owner or brokers until all changes are reflected in insurance company records.

5. Change of Ownership

 

USI reviews and verifies all policy information to ensure accuracy and to verify that there have been no changes, and submits the Absolute Assignment of Ownership and Beneficiary Change forms to the insurance company. Once the executed change forms are received back from the insurance company verifying that we are the owner and beneficiary of the policy, USI advises us to disburse funds as directed. This agreement with USI will be in place for the next 24 months. At the end of this time, the agreement will be reviewed and management will decide whether or not to extend them.

 

6. Tracking

 

Insured persons whose policies have been purchased by us are tracked by qualified personnel in USI's office and reporting to us occurs on a regular basis. Tracking includes the following:

 

  • Periodic contact with the insured, attending physician of record, or a designated person such as a family member.
  • Weekly social security death index checks.
  • Other database checks on a monthly basis.
  • Health statements of insured from attending physician on an as needed basis.
  • Regularly updated information reports.
  • Updated medical reports from primary physician on an as needed basis.
  • Updated life expectancy reports from qualified providers on an as needed basis.
  • Alerts when premium payments are due.

7. Premiums Management

 

Under the Services Agreement, USI will provide management services for our initial portfolio of life settlement contracts as well as for future acquisitions. Services include:

 

  • Obtaining and analyzing completed VOC (verification of coverage) forms from insurance companies for each policy. VOC forms indicate policy information, cash value figures and premium data.
  • Monitoring and validating premium payments required to be made.
  • Providing us with a premiums due schedule at least 30 days in advance of required payments.
  • Confirming receipt of premium payment by Insurance companies
  • Obtaining and analyzing updated premium illustrations as required.
  • Performing premium optimization analysis as appropriate.
8

8. Claims Management

 

Whenever there is a maturity, USI submits a death claim to the insurance company. This process involves obtaining the death certificate, obtaining necessary claim documents from the insurance company, submitting of completed documentation to the insurance company and following up verbally and in writing with the insurance carrier on the claim status until such time as the death benefit is paid to us. The death benefit check is sent directly to us by the insurance company.

 

As part of our long term growth strategy, we intend to vertically integrate and internalize some of the services which will initially be outsourced. There are cost reductions that could be achieved in policy tracking costs, premium management, claims management, and agent commissions.

 

We can accomplish vertical integration by either buying existing companies that provide the above services or creating an internal employee pool to accomplish these tasks. By integrating the above functions, we could potentially provide these services to other life settlement companies and develop an additional income stream.

 

Results of operations for the three months ended September 30, 2012 and 2011, and for the period from March 4, 2010 (date of inception) through September 30, 2012

 

We have not earned any revenues from inception on March 4, 2010 through the fiscal year ending September 30, 2012. We are presently in the development stage of our business and we can provide no assurance that we will produce significant revenues or, if revenues are earned, that we will be profitable.

 

We have incurred total expenses and net losses in the amount of $465,422 from our inception on March 4, 2010 through the quarter ending September 30, 2012.   Our expenses since our inception have consisted primarily of legal fees, audit and accounting fees, management fees, and rental expenses. During the quarter ended September 30, 2012, we incurred expenses and net losses in the amount of $130,405. During the quarter ended September 30, 2011, we incurred expenses and net losses in the amount of $49,903.

 

Our result of operations for the quarter ended September 30, 2012 relate to our current business of acquiring and holding portfolios of life settlement policies, while our results of operations for the quarter ended September 30, 2011 relate primarily to a discontinued mineral exploration venture. In general, our current business requires more active management and incurs more regular expenses than our former business.

 

We began the acquisition of our initial portfolio of life settlements on March 15, 2012, when we entered into a Policy Purchase agreement (the “Agreement”) with Universal Settlements International, Inc. (“USI”). Pursuant to the Agreement, we agreed to purchase all right, title, and interest in a portfolio of four (4) life insurance policies for a total purchase price of $570,000. The four policies we have agreed to purchase feature death benefits which total $4,500,000.

 

Under the Agreement, we will be required to pay all premiums due under each of the acquired policies until they mature. As detailed in Schedule 1 to the Agreement, the required premiums are expected to be a total of $13,699.54 per month for three of the policies being purchased, and $42,000 per quarter for the fourth policy. In connection with our execution of the agreement, we deposited $38,194.84 toward premiums due under the four policies.

 

The Agreement originally required us to deposit the full purchase price of $570,000 on or before April 23, 2012 in order to close our purchase of the four life insurance policies. Under an Amendment to the Agreement dated April 27, 2012, the termination date was extended to May 23, 2012. Under a Further Amendment to the Agreement, the final payment deadline has been extended to November 23, 2012.

9

On June 19, 2012, we completed acquisition one of the four life settlement policies being purchased under the Agreement. The face value of the policy purchased is $500,000. As of September 30, 2012, the carrying value of the policy is $127,726.

 

To date, we have paid a total of $325,000 toward the purchase price under the Agreement and must pay an additional $245,000 in order to complete our acquisition of the four policies covered by the Agreement.

 

Estimated premiums to be paid for each of the five succeeding fiscal years to keep all four policies being purchased under the Agreement in force as of September 30, 2012, are as follows.

 

Year 1  $249,296 
Year 2   332,394 
Year 3   332,394 
Year 4   298,194 
Year 5   298,194 
Total estimated premiums  $1,510,474 

 

We expect that our ongoing expenses will increase when we complete our acquisition of this initial portfolio and begin making the regular premium payments due under the insurance policies.

 

Liquidity and Capital Resources

 

As of September 30, 2012, we had current assets of $207,610, consisting of cash in the amount of $206,110 and a prepaid expense of $1,500. As of September 30, 2012, we had current liabilities of $82,149, consisting of accounts payable in the amount of $34,092, a note payable to a related party in the amount $45,000, and accrued interest due to a related party in the amount of $3,057. Thus, we had working capital of $15,461 as of September 30, 2012.

 

We will require substantial additional funding in order to continue the development of our business of acquiring a portfolio of life settlement policies. Although we are currently seeking and raising additional equity funding, we have no firm arrangements for financing and can provide no assurance that such funding will be received in an amount sufficient to pursue our planned line of business.

 

Off Balance Sheet Arrangements

 

As of September 30, 2012, there were no off balance sheet arrangements.

 

Going Concern

 

We have yet to achieve profitable operations, have accumulated losses of $465,422 since our inception, and we have no established source of revenue, all of which casts substantial doubt about our ability to continue as a going concern.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

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Item 4. Controls and Procedures

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2012. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, Lorraine Fusco. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2012, our disclosure controls and procedures were not effective. There have been no changes in our internal controls over financial reporting during the quarter ended September 30, 2012.

 

Management determined that the material weaknesses that resulted in controls being ineffective are primarily due to lack of resources and number of employees. Material weaknesses exist in the segregation of duties required for effective controls and various reconciliation and control procedures not regularly performed due to the lack of staff and resources.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Limitations on the Effectiveness of Internal Controls

 

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error.   Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A: Risk Factors

 

A smaller reporting company is not required to include this Item. Risk factors for our current line of business can be found in our Annual Report on Form 10-K for the fiscal year ended June 30, 2012, filed on September 27, 2012.

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

 

  1. On April 25, 2012, we issued a total of 714,285 shares of common stock to a total of five subscribers at a price of $0.70 per share, for total subscription proceeds of $500,000. The offer and sale of these securities was made pursuant to Rule 506 under Regulation D. All purchasers represented and warranted to us that they were “accredited investors” within the meaning of Rule 501, and we did not engage in any general solicitation or advertising.
  2. On August 1, 2012, we issued a total of 130,000 Units to a total of three subscribers at a price of $0.70 per Unit, for total subscription proceeds of $91,000. Each Unit consists of one (1) share of common stock and one (1) warrant to buy one (1) share of common stock ata price of $1.10, exercisable for a period of forty-eight months. The offer and sale of these securities was made pursuant to Rule 506 under Regulation D. All purchasers represented and warranted to us that they were “accredited investors” within the meaning of Rule 501, and we did not engage in any general solicitation or advertising.
  3. On August 28, 2012, we issued 50,000 Units to a single subscriber at a price of $0.70 per Unit, for subscription proceeds of $35,000. Each Unit consists of one (1) share of common stock and one (1) warrant to buy one (1) share of common stock at a price of $1.10, exercisable for a period of forty-eight months. The offer and sale of these securities was made pursuant to Rule 506 under Regulation D. The purchaser represented and warranted to us that they were an “accredited investor” within the meaning of Rule 501, and we did not engage in any general solicitation or advertising.
  4. Also on August 28, 2012, we issued 71,428 shares of common stock to a single subscriber at a price of $0.70 per share, for subscription proceeds of $50,000. The offer and sale of these securities was made pursuant to Rule 506 under Regulation D. The purchaser represented and warranted to us that they were an “accredited investor” within the meaning of Rule 501, and we did not engage in any general solicitation or advertising.
  5. On August 29, 2012, we issued 50,000 shares of common stock to a single subscriber at a price of $0.70 per share, for subscription proceeds of $35,000. The offer and sale of these securities was made pursuant to Rule 506 under Regulation D. The purchaser represented and warranted to us that they were an “accredited investor” within the meaning of Rule 501, and we did not engage in any general solicitation or advertising.
  6. On September 12, 2012, we issued a total of 305,000 shares of common stock to a total of nine subscribers at a price of $0.70 per share, for total subscription proceeds of $213,500. The offer and sale of these securities was made pursuant to Rule 506 under Regulation D. All purchasers represented and warranted to us that they were “accredited investors” within the meaning of Rule 501, and we did not engage in any general solicitation or advertising.
  7. On October 16, 2012, we issued a total of 95,000 shares of common stock to a total of seven subscribers at a price of $0.70 per share, for total subscription proceeds of $66,500. The offer and sale of these securities was made pursuant to Rule 506 under Regulation D. All purchasers represented and warranted to us that they were “accredited investors” within the meaning of Rule 501, and we did not engage in any general solicitation or advertising.
  8. On November 2, 2012, we issued a total of 350,000 shares of common stock to a total of seven subscribers at a price of $0.70 per share, for total subscription proceeds of $245,000. The offer and sale of these securities was made pursuant to Rule 506 under Regulation D. All purchasers represented and warranted to us that they were “accredited investors” within the meaning of Rule 501, and we did not engage in any general solicitation or advertising.

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

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Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

Exhibit Number Description of Exhibit
10.1 Further Amendment to Policy Purchase Agreement
31.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

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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.

 

Crown Alliance Capital Limited
 
Date: November 14, 2012
   
  /s/ Lorraine Fusco
By: Lorraine Fusco
Title: Chief Executive Officer, Chief Financial Officer and Director

 

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