Borneo Resource Investments Ltd. - FORM 10-Q

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - Borneo Resource Investments Ltd.	Financial_Report.xls
EX-31.1 - CERTIFICATION - Borneo Resource Investments Ltd.	brne_ex311.htm
EX-31.2 - CERTIFICATION - Borneo Resource Investments Ltd.	brne_ex312.htm
EX-32.1 - CERTIFICATION - Borneo Resource Investments Ltd.	brne_ex321.htm

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

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

For the fiscal quarter ended September 30, 2013

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _______ to _______

BORNEO RESOURCE INVESTMENTS LTD.

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

Nevada		000-54707		20-3724019
(State of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

19125 North Creek Parkway, Suite 120

Bothell, Washington 98011-8000

(Address of principal executive offices) (Zip code)

(425) 329-2622

(Registrant’s telephone number, including area code)

None

Securities registered under Section 12(g) of the Exchange Act:

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 o

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	oo	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 o No x

There were 73,400,459 shares outstanding of registrant’s common stock, par value $0.001 per share, as of November 14, 2013.

TABLE OF CONTENTS

PART I

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012	1
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012 (Unaudited)	2
	Condensed Consolidated Statement of Stockholder’s Deficit for the period from January 1, 2012 through September 30, 2013 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	27
Item 3	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4	Controls and Procedures	38

PART II

Item 1.	Legal Proceedings	40
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41
SIGNATURES		42

PART I

ITEM 1. FINANCIAL STATEMENTS

BORNEO RESOURCE INVESTMENTS LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2013			December 31, 2012
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalent	$	9,815		$	1,190
Inventory		-			-
Total current assets		9,815			1,190

Property & equipment:
Land and other assets		6,939,361			-
Equipment		55,554			-
Accumulated depreciation		(9,259	)		-
		6,985,656			-
Other assets:
Deposits		2,818			2,818
Other assets:		-			-
Total other assets		2,818			2,818

Total assets	$	6,998,289		$	4,008

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued interest	$	433,492		$	237,196
Accrued liabilities - mine acquisition		6,403,315			-
Accrued liabilities - other		76,440			76,440
Convertible notes payable net of deferred debt discount of $0 as of September 30, 2013 and December 31, 2012 respectively		112,500			75,000
Promissory notes - short-term		79,500			51,382
Total current liabilities		7,105,247			440,018

Promissory notes - long-term		488,094			-

Commitments and contingencies		-			-

Stockholders' Deficit:
Preferred stock; $0.001 par value; 100,000,000 shares authorized, none issued and outstanding as of September 30, 2013 and December 31, 2012		-			-
Common stock; $0.001 par value; 400,000,000 shares authorized, 73,400,459 shares and 73,235,459 shares issued and outstanding as of September 30, 2013, and December 31, 2012 respectively		73,400			73,236
Additional paid in capital		2,478,296			2,428,961
Deficit accumulated during the exploratory stage		(3,184,978	)		(2,938,207	)
Noncontrolling interest		38,230			-
Total stockholders' deficit		(595,052	)		(436,010	)

Total liabilities and stockholders' deficit	$	6,998,289		$	4,008

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

BORNEO RESOURCE INVESTMENTS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2013			2012			2013			2012

Sales	$	507,771		$	-		$	720,410		$	-
Costs and expenses
Costs applicable to sales		215,592			-			310,263			-
Depreciation		6,944			-			9,259			-
General and administrative		204,313			164,540			584,964			723,214

Operating income (loss)		80,922			(164,540	)		(184,076	)		(723,214	)

Other income (expense)
Interest income		35			-			39			6
Interest expense		(13,042	)		(1,899	)		(25,004	)		(37,846	)
Amortization of debt discount		-			(99,186	)		-			(897,456	)

Income (loss) before provision for income taxes		67,915			(265,625	)		(209,041	)		(1,658,510	)

Provision for income taxes:
Current		-			-			-			-
Deferred		-			-			-			-
Total income taxes		-			-			-			-

Net income (loss)		67,915			(265,625	)		(209,041	)		(1,658,510	)

Net income attributable to noncontrolling interests		26,714			-			37,730			-

Net income (loss) attributable to Borneo shareholders	$	41,201		$	(265,625	)	$	(246,771	)	$	(1,658,510	)

Net income (loss) per common share (basic and fully diluted)		73,374,950			72,839,028			73,296,862			70,865,474

Net income (loss) per common share (basic and fully diluted)	$	0.00		$	(0.00	)	$	(0.00	)	$	(0.02	)

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

BORNEO RESOURCE INVESTMENTS LTD.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE PERIOD FROM JANUARY 1, 2012 THROUGH SEPTEMBER 30, 2013

(Unaudited)

					Additional
	Common stock				Paid in		(Deficit)			Noncontrolling
	Shares		Amount		Capital		Accumulated			Interest		Total

Balance, December 31, 2011		69,595,205	$	69,595	$	1,144,525	$	(1,103,766	)	$	-	$	110,354

Issuance of common stock for cash in January 2012 @ $1.00 per share		80,000		80		79,920							80,000

Issuance of common stock in May 2012 @ $0.30 per share on conversion of debt and accrued interest		2,453,532		2,454		733,606							736,060

Issuance of common stock for cash in June 2012 @ $1.00 per share		100,000		100		99,900							100,000

Issuance of common stock in July 2012 @ $0.30 per share on conversion of debt and accrued interest		715,909		716		214,057							214,773

Issuance of common stock for cash in July 2012 @ $1.00 per share		100,000		100		99,900							100,000

Issuance of common stock in August 2012 @ $0.30 per share on conversion of debt and accrued interest		190,813		191		57,053							57,244

Net loss for the period ended December 31, 2012		-		-		-		(1,834,441	)		-		(1,834,441	)

Balance, December 31, 2012		73,235,459	$	73,236	$	2,428,961	$	(2,938,207	)	$	-	$	(436,010	)

Issuance of common stock in April 2013 @ $0.30 per share on conversion of warrants		50,000		50		14,950							15,000

Issuance of common stock in May 2013 @ $0.30 per share on conversion of warrants		67,000		66		19,983							20,049

Noncontrolling interest in purchase of PT Puncak Kalabat											500		500

Issuance of common stock in July 2013 @ $0.30 per share on conversion of warrant		48,000		48		14,402							14,450

Net income (loss) for the period ended September 30, 2013		-		-		-		(246,771	)		37,730		(209,041	)

Balance, September 30, 2013		73,400,459	$	73,400	$	2,478,296	$	(3,184,978	)	$	38,230	$	(595,052	)

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

BORNEO RESOURCE INVESTMENTS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the nine months ended September 30, 2013			For the nine months ended September 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(209,041	)	$	(1,658,510	)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation		9,259			-
Tools acquired in mining acquisition		5,085			-
Amortization of deferred debt discount on convertible notes		-			897,455
Non-cash expenses		5,000			-
Changes in operating assets and liabilities:
Employee advances		-			10,773
Inventory		-			-
Deposits and restricted cash		-			42,578
Accounts payable and accrued interest		166,000			194,605
Accrued liabilities - mine acquisition		(436,685	)		-
Accrued liabilities - other		-			-
Net cash used in operating activities		(460,382	)		(513,099	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid in asset purchase transaction		(55,000	)		-
Net cash provided by investing activities		(55,000	)		-

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes payable		15,000			-
Proceeds from promissory notes		459,507			10,000
Proceeds from the sale of common stock		49,500			280,000
Net cash provided by financing activities		524,007			290,000

Net (decrease) increase in cash and cash equivalents		8,625			(223,099	)
Cash and cash equivalents at beginning of period		1,190			231,565
Cash and cash equivalents at end of period	$	9,815		$	8,466

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	78		$	5,495
Cash paid during the period for income taxes	$	-		$	-

NONCASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for conversion of notes payable and accrued interest	$	-		$	1,008,077
Amount paid by the related party on behalf of the Company for investment in foreign subsidiary	$	4,500		$	-
Amount paid by the related party on behalf of the Company for assets purchase transaction	$	55,000		$	-
Amount of imputed value of non-controlling interest for investment in foreign sub	$	500		$	-
Fixed assets received on assets purchase transaction	$	7,000,000		$	-
Net accrued liabilities assumed on assets purchase transaction	$	6,890,000		$	-
Accrued liabilities paid by unrelated long-term promissory note holder	$	50,000		$	-
Accounts payable paid by convertible note holder	$	22,500		$	-

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

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 1 - NATURE OF OPERATIONS

Borneo Resource Investments Ltd., (“Borneo” or the “Company”) was organized on June 14, 2004 under the laws of the State of Nevada as “Acme Entertainment, Inc.”. On July 21, 2005, the Company changed its name to “INQB8, Inc.” On November 4, 2005, in connection with a merger with Aventura Resorts, Inc., a privately held Washington company, the Company changed its name to “Aventura Resorts, Inc.” (“Aventura”). In connection with the merger with Interich International Limited, (“Interich”) a British Virgin Islands Company, on July 13, 2011, the company changed its name to Borneo Resource Investments Ltd. See discussion in Note 2 Merger and Recapitalization.

Borneo’s mission is to develop a diverse platform of natural resource concession assets in Indonesia. The Company is targeting Borneo, Indonesia, one of the world largest areas of high grade thermal coal reserves, through acquisition of coal mining concessions and licenses with verified reserves and export potential. Currently, the Company holds only one coal mining concession acquired by Interich from PT Chaya Meratus Primecoal. With the exception of this concession, the company has only entered into memorandums of understanding or letters of intent with concession holders that are not legally binding on either the concession holder or the Company until the parties enter into definitive agreements which will require the company to pay fees and conduct due diligence. Indonesia is home to some of the richest deposits of steaming coal in the world. The Indonesian government has, for many years been awarding coal mining exploration and licenses to local indigenous groups. With strong relationships with local licensees, through two of its executive officers, the Company has created preferential access to these concession opportunities. Upon entering into agreements to acquire concessions, the Company will market the properties to mining companies and other interested parties. The Company, when presented with the opportunity to do so, will seek to acquire concessions in other regions of Indonesia. Further, Borneo is creating a trading platform for thermal coal concessions and individual coal deposits through arbitrage between Indonesia supply chains and major energy importing nations including India and China.

Interich acquired in exchange for Interich stock an 80% interest in PT Chaya Meratus Primecoal, an Indonesian limited liability company, which is the holder of the exclusive exploration and development rights concession for up to 6,000 hectares in the Tanjung Area Basin of South East Kalimantan. The Company may, with any available cash, perform geological tests to determine the feasibility of mining the PT Chaya Meratus Primecoal concession.

The Company also entered into a non-binding agreement relating to the rights to an exploration IUP covering approximately 1,300 hectares in Kalimantan through a Memorandum of Understanding, dated October 7, 2011, with the concession holder PT Integra Prima Coal (the “Integra MOU”). Pursuant to the Integra MOU, the Company shall take over the exploration, exploitation and drilling on the IUP. The Company does not have any commitments under the Integra MOU until it decides to continue exploration and mining activities. At that time, the parties will negotiate a price for the IUP. The Company also signed other preliminary agreements with companies to acquire mining concessions.

The Company signed a non-binding Share Sale Purchase Pre-Contract Agreement, dated March 15, 2012 (the “Pre Contract Agreement”) to acquire 75% of PT Batubaraselaruas Sapta (“BSS”), which is the holder of a 93,000 hectare concession in the province of East Kalimantan, Indonesia, with a prospective area of 68,360 hectares. The Pre-Contract Agreement provides that it is only a Memorandum of Understanding prior to due diligence and the negotiation and execution of a Share Sale Purchase Agreement. Under the terms of the Pre-Contract Agreement, the Company will bear all of the costs for the due diligence and development of the BSS concession and, subject to its due diligence and the execution of a Share Sale Purchase Agreement, make a series payments totally US$225,000,000 to acquire 75% of BSS. The initial payment of US$2,250,000, which the Company has not yet made, will provide the Company a 1% interest in BSS and guarantee exclusivity for the Company. The Company shall perform due diligence procedures on this property with any available funds.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 1 - NATURE OF OPERATIONS (Continued)

The Company’s strategy is to acquire coal concessions and develop a “land bank” of assets to maximize the proven and probable reserves under management. It is the Company’s intention to select strategic partners to coordinate construction of coal mining infrastructure for concessions acquired. Ultimately, financing of mine development will be largely achieved through structured, limited recourse project financing.

Stock Purchase Agreement

On June 10, 2013, effective June 1, 2013, Borneo Resource Investments Ltd. (the “Company”), entered into agreements (the Deed of Sale of Shares, the Equity Entrustment Agreement and the Stock Purchase Agreement or collectively, the “Agreements”) to purchase PT Puncak Kalabat, an Indonesia corporation (“Kalabat”). The Deed of Sale of Shares (the “Deed”), is by and among, Nils Ollquist, the Company’s Chief Executive Officer and purchaser for the Company, and Carlo Muaja, a member of the Company’s Board of Directors, Grace Sarendatu, and Masye Solung as sellers. As a result of the Deed, Nils Ollquist purchased 45,000 shares of Kalabat (the “Shares”), equal to 90% of the shares of Kalabat, for IDR 45 million, which is equal to approximately US$4,500. The Deed also directs that after the purchase by Mr. Ollquist, he will deliver the Shares to the Company. Mr. Ollquist, however, cannot deliver the Shares to the Company until the Company receives the approval of the Indonesian Investment Coordinating Board (“BKPM”). Until the time that the Company receives approval from the BKPM, the Company will control the shares through the provisions of the Equity Entrustment Agreement (the “Trust Agreement”), by and between the Company and Mr. Ollquist. Pursuant to the provisions of the Trust Agreement, Mr. Ollquist shall, in accordance with the instructions from the Company, vote as a record shareholder on matters to be decided and sign relevant legal documents. Further, if and when Kalabat declares a dividend or liquidation payment, Mr. Ollquist shall deliver such dividends to the Company within 10 business days after receipt. Upon the Company’s receipt of the approval from the BKPM, pursuant to the terms of the Stock Purchase Agreement, by and between the Company and Mr. Ollquist, the Company shall purchase the Shares from Mr. Ollquist for $4,500.

From its inception, March 28, 2013, until the date of the transaction on June 10, 2013, Kalabat was an inactive dormant corporation with no assets and liabilities. All reference to Common Stock shares and per share amounts have been retroactively restated to effect the acquisition as if the transaction had taken place as of the beginning of the earliest period presented.

Asset Purchase Agreement

Upon the execution of the Agreements, the Company entered into additional agreements to replace and terminate the Purchase Agreement, dated March 5, 2013, with Kalabat for the purchase of 50 hectares of property (the “Talawaan Property”) and replace and terminate the Purchase Agreement, dated March 22, 2013, and with Kalabat for the purchase of 30 hectares of property (the “Ratatotok Property”). The Company entered into new purchase agreements for the Talawaan Property, for an aggregate purchase price of $5,000,000, and the Ratatotok Property, for an aggregate purchase price of $2,000,000, by and among the Company, Kalabat and Sanding Longdong (the “Seller”), the owner of the properties with whom Kalabat had purchase agreements. The total aggregate purchase price for both the Talawaan Property and Ratatotok Property is $7,000,000

For the purchase of the Talawaan Property, the Company paid $105,000 as the initial payment to the Seller through Kalabat. The purchase agreement for the Talawaan Property requires further payments of $395,000, which became due upon the execution of the purchase agreement for the Talawaan Property, an additional $2,500,000 due on or before June 30, 2013 and a final payment of $2,000,000 due on December 31, 2013. The purchase agreement for the Talawaan Property requires that the Seller deliver to Kalabat the Talawaan Property. As a result of this Agreement, the Company recorded a payable of $4,895,000 on its financial statements and began to generate revenues during the month of June 2013.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 1 - NATURE OF OPERATIONS (Continued)

Beginning in May 2013, in anticipation of the closing of transaction enabling the Company to acquire Puncak, the operations on the Talawaan Property began to change. Prior to and through May 2013, the mining activities on the Talawaan Property operated as what could best be described as that of a cooperative. With the approval of the Seller, teams of individuals would be granted areas on the property, and at their own discretion over their activities, mine the site. Whatever ore they recovered was delivered to a central processing point. The ore would then be processed and the costs of processing were shared by the Seller and the miners. Once the gold was recovered and sold to local buyers, the Seller and the miners would then share the profits, after the necessary adjustments for processing costs. In addition, the equipment on the Talawaan Property was used by the miners on site, but by other miners in the area for their activities. Beginning in May 2013, the transition period prior to the closing of the transaction, working with the Seller, miners and the people responsible for processing, the Company began to implement a coordinated operating structure and the tracking all mining and processing activities on the Talawaan Property. In that the Talawaan Property had not been historically operated as a business, the company is treating the acquisition of the Talawaan Property as a purchase of a mining property, mining equipment and tools. Since June 1, 2013, all activities at the Talawaan Property have been administered by the Company as an ongoing mining operation.

For the purchase of the Ratatotok Property, the Company paid $5,000 as the initial payment to the Seller through Kalabat. The purchase agreement for the Ratatotok Property requires further payments of $45,000, which became due upon the execution of the purchase agreement for the Ratatotok Property, an additional $450,000 due on or before June 30, 2013 and a final payment of $1,500,000 due on December 31, 2013. The purchase agreement for the Ratatotok Property requires that the Seller deliver to Kalabat the Ratatotok Property. As a result of this Agreement, the Company recorded a payable of $1,995,000 on its financial statements. There has not been and there is currently no mining activity on the Ratatotok property and therefore the Company is treating acquisition of the Ratatotok Property as a mining property purchase.

The Company’s preliminary allocation of the purchase price on the date of acquisition of the Talawaan and Ratatotok assets acquired and liabilities assumed as of September 30, 2013 is as follows:

	Talawaan			Ratatotok			Total
Land & other assets	$	4,939,361		$	2,000,000		$	6,939,361
Equipment – mining		55,554			-			55,554
Tools		5,085			-			5,085
Accrued liabilities – asset purchase		(5,000,000	)		(2,000,000	)		(7,000,000	)
	$	-		$	-		$	-

The preceding allocations are preliminary and are subject to change based upon management’s further review and analysis of the acquisitions.

On July 26, 2013, effective June 30, 2013, under the terms of an Extension Agreement (the “Extension”), the Company, Kalabat, and the Seller, agreed to defer the due date of all payments due on or before June 30, 2013 under the terms of the above purchase agreements for both Talawaan and Ratatotok to September 30, 2013. Under the terms of the Extension two payments of $50,000 each, to be applied to amount due under the terms of the purchase agreements, will be made to the Seller (the “Extension Payments”). The Extension Payments were made on July 30, 2013 and September 3, 2013. See discussion Note 11 Commitments and Contingencies.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 1 - NATURE OF OPERATIONS (Continued)

On September 30, 2013, under the terms of the Second Extension Agreement (the “Second Extension”), the Company, Kalabat and the Seller, agreed to defer the due date of all outstanding payments due on or before September 30, 2013 under the terms of the above purchase agreements for both Talawaan and Ratatotok to December 31, 2013. Under the terms of the Second Extension one payment of $25,000, to be applied to amount due under the terms of the purchase agreements, will be made to the Seller (the “Second Extension Payment”). The Second payment was made on October 8, 2013. See discussion Note 11 Commitments and Contingencies and Note 14 Subsequent Events. As of September 30, 2013, the Company had paid a total of $596,685 toward the outstanding balance for the asset purchase of Talawaan and Ratatotok, leaving a balance at September 30, 2013 of $6,403,315.

The Company’s year end is December 31. The Company is currently not in an exploratory stage and was in an exploratory stage until June 30, 2013.

NOTE 2 - MERGER AND RECAPITALIZATION

In anticipation of the closing of the Interich transaction, described below, on July 13, 2011, the Company amended its Articles of Incorporation to effect a 100-to-1 reverse stock split of its issued and outstanding shares of common stock. In addition, the authorized number of shares of common stock was amended to authorize the Company to issue a total of 500,000,000 shares of capital stock, each with a par value of $0.001, which consists of 400,000,000 shares of common stock and 100,000,000 shares of preferred stock. Further, the Company changed its name from Aventura Resorts, Inc. to Borneo Resource Investments Ltd.

On August 1, 2011, the Company was merged with Interich via a merger subsidiary of the Company created for this transaction. The transaction has been accounted for as a reverse merger, and Interich is the acquiring company on the basis that Interich’s senior management became the entire senior management of the merged entity and there was a change of control of Borneo. In accordance with Accounting Standards Codification (“ASC”) 805-10-40, Business Combinations – Reverse Acquisitions, Interich was the acquiring entity for accounting purposes. While the transaction is accounted for using the purchase method of accounting, in substance the transaction was a recapitalization of Borneo’s capital structure.

From its inception, on September 22, 2009, until the date of the transaction on August 11, 2011, Interich was an inactive dormant corporation with no significant assets or liabilities. The historical financial statements are those of Interich, the accounting acquirer, immediately following the consummation of the reverse merger.

In connection with the merger, Borneo issued 60,178,073 restricted common shares to stockholders of Interich. The value of the stock that was issued to Interich’s equity holders was $60,178, the then fair value of the Company’s common stock. (See discussion Note 12 Related Party Transactions). In addition, $30,774 of convertible debt was exchanged for 6,154,860 “free trading” common shares of the Company. The issued and outstanding number of common shares subsequent to the closing and the exchange of convertible debt were 69,500,205.

In connection with the merger, existing stockholders retained 3,167,272 common shares. All reference to Common Stock shares and per share amounts have been retroactively restated to effect the reverse acquisition as if the transaction had taken place as of the beginning of the earliest period presented.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 2 - MERGER AND RECAPITALIZATION (Continued)

The total consideration paid was $60,178 and the significant components of the transaction are as follows:

Assets acquired:	$	110
Concession		-
Liabilities assumed:		(31,944	)
Net:	$	(31,834	)

Prior to the merger, the Company planned to develop real estate. The Company entered into several agreements to acquire resort properties but exhausted their assets before they could develop any property and decided to enter into the merger with Interich. The transaction is in substance as a capital transaction or deemed as a reverse recapitalization, rather than a business combination. Thus, no goodwill or other intangible assets have been recorded.

NOTE 3 - CONCESSION ACQUISITION

In compliance with Indonesian regulations the Company, through Indonesian counsel, is filing a foreign investment approval application for all concession acquisitions in Indonesia.

NOTE 4 - BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTIES

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the financial statements of Borneo and its subsidiaries (refer below table) are prepared to conform to accounting principles generally accepted in the United States of America. All significant inter-company accounts and transactions were eliminated in consolidation.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 4 - BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTIES (Continued)

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Accordingly, the results from operations for the period ended September 30, 2013, are not necessarily indicative of the results that may be expected for future periods.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the following entities, all of which the Company maintains control through a majority ownership:

		Form of	State of
Name of Entity	%	Entity	Incorporation	Relationship

Borneo Resource Investments Limited	-	Corporation	Nevada	Parent
Interich International Limited	100%	Corporation	British Virgin Isl.	Holding Sub
PT Puncak Kalabat Limited	90%	Corporation	North Minahasa Regency, Indonesia	Holding Sub

Interich’s operating activities did not begin until July 1, 2011.

PT Puncak was formed on March 28, 2013.

Going Concern Uncertainties

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying unaudited condensed consolidated financial statement, the Company has accumulated a deficit of $3,184,978 and used $460,382 in cash for operating activities for the nine months ended September 30, 2013. The ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations or on the ability of the Company to obtain necessary financing to fund ongoing operations. Management believes that its current and future plans enable it to continue as a going concern for the next twelve months.

To meet these objectives, the Company continues to seek other sources of financing in order to support existing operations and expand the range and scope of its business. However, there are no assurances that any such financing can be obtained on acceptable terms and timely manner, if at all. The failure to obtain the necessary working capital would have a material adverse effect on the business prospects and, depending upon the shortfall, the Company may have to curtail or cease its operations.

The accompanying unaudited condensed consolidated financial statements do not include any adjustment to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable to continue in existence.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The Company will recognize revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company's financial position and results of operations was not significant.

Cost of Revenue

Cost of revenue consists of costs associated with extracting ore from the ground, transportation, production that are directly related to a revenue-generating. The Company becomes obligated to make payments to miners @ 30% of net revenue profit sharing in the period the product are delivered or occur. Such expenses are classified as cost of revenue in the corresponding period in which the revenue is recognized in the accompanying income statement.

Inventories

Inventories are stated at the lower of cost or market value, cost being calculated on the weighted average basis. The cost of inventories comprises all costs of purchases, costs of fixed and variable production overheads and other costs incurred in bringing the inventories to their present location and condition. The Company provided inventory allowances based on excess and obsolete inventories determined principally by customer demand. The inventory on hand was $-0- at September 30, 2013 and December 31, 2012.

Property and Equipment, other than Oil and Gas Properties

Property and equipment are stated at cost. Additions of new equipment and major renewals and replacements of existing equipment are capitalized. Repairs and minor replacements are charged to operations as incurred. Cost and accumulated depreciation and amortization are removed from the accounts when assets are sold or retired, and the resulting gains or losses are included in operations.

Depreciation of property and equipment is provided using the straight-line method applied to the expected useful lives of the assets.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reported period. Actual results could differ materially from the estimates.

Cash and Cash Equivalent

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At September 30, 2013 and December 31, 2012, cash consists of a checking account and money market account held by financial institutions.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Prepaid Project Expenses

The Company accounts for payments made in advance of the transfer of title on mine properties being acquired as project prepayments. When the payment specified by the agreement is made and the property title is transferred to the Company, the costs associated with the property, are accounted for as described below in Mining Properties.

Mine Exploration and Development Costs

The Company accounts for mine exploration costs in accordance with Accounting Standards Codification 932, Extractive Activities. All exploration expenditures are expensed as incurred. Mine development costs are capitalized until production, other than production incidental to the mine development process, commences and are amortized on a units of production method based on the estimated proven and probable reserves. Mine development costs represent costs incurred in establishing access to mineral reserves and include costs associated with sinking or driving shafts and underground drifts, permanent excavations, roads and tunnels. The end of the development phase and the beginning of the production phase takes place when construction of the mine for economic extraction is substantially complete. Coal extracted during the development phase is incidental to the mine’s production capacity and is not considered to shift the mine into the production phase. Amortization of capitalized mine development is computed based on the estimated life of the mine and commences when production, other than production incidental to the mine development process, begins. From September 22, 2009 (date of inception) through September 30, 2013, the Company had not incurred any mine development costs.

Mine Properties

The Company accounts for mine properties in accordance with Accounting Standard Codification 930, Extractive Activities-Mining. Costs of acquiring mine properties are capitalized by project area upon purchase of the associated claims. Mine properties are periodically assessed for impairment of value and any diminution in value. There were no mineral properties as of September 30, 2013.

Income Taxes

The Company has adopted Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes consist primarily of timing differences such as deferred officers’ compensation and stock compensation accounting versus tax differences.

Net Loss Per Share, basic and diluted

The Company has adopted Accounting Standards Codification Subtopic 260-10, Earnings Per Share (“ASC 260-10) specifying the computation, presentation and disclosure requirements of earning per share information. Basic income or loss per share has been computed by dividing the net income or loss available to common shareholders by the weighted average number of common shares outstanding for the period. All of the shares issuable upon conversion of the notes payable and exercise of warrants had exercise prices greater than the average market price of the Company’s common stock during the period ended September 30, 2013 and are excluded from the calculation of diluted net income per share because their effect is anti-dilutive. Shares issuable upon conversion of the notes payable and exercise of warrants has been excluded as a common stock equivalent in the diluted loss per share because their effect is anti-dilutive on the computation.

Derivative Instruments

The Company accounts for derivative instruments in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.

For the periods ended September 30, 2013 and December 31, 2012, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities. The August 6, 2013 convertible promissory note have a variable conversion feature that does not become effective until February 2014.

Fair Value of Financial Instruments

The Company's financial instruments, as defined by Accounting Standard Codification subtopic 825-10, Financial Instrument (“ASC 825-10), include cash, accounts payable and convertible note payable. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at September 30, 2013 and December 31, 2012.

FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions

The Company does not have any assets or liabilities measured at fair value on a recurring basis at September 30, 2013 and December 31, 2012. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the periods ended September 30, 2013 and December 31, 2012.

Foreign Currency Translation and Comprehensive Income (Loss)

The functional currency of Interich is the Hong Kong Dollar (“HKD”). For financial reporting purposes, HKD were translated into United States Dollars (“USD” or “$”) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period.

Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive income”. Gains and losses resulting from foreign currency transactions are included in the consolidated results of operations. There has been no significant fluctuation in the exchange rate for the conversion of HKD to USD or IDR to USD after the balance sheet date.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Company uses Accounting Standard Codification 220 “Comprehensive Income”. Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. Comprehensive income for the three and nine months ended September 30, 2013 and 2012, consisted of net income and foreign currency translation adjustments.

Noncontrolling Interests

Noncontrolling interests in our subsidiary are recorded in accordance with the provisions of ASC 810, “Consolidation” and are reported as a component of equity, separate from the parent company’s equity. Purchase or sale of equity interests that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the noncontrolling interests are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or loss recognized in earnings.

Stock Based Compensation

The Company follows Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) which requires that all share-based payments to both employees and non-employees be recognized in the income statement based on their fair values.

As of September 30, 2013 and December 31, 2012, the Company did not have any issued and outstanding stock options.

Concentration and Credit Risk, Significant Customers and Supplier Risk

The Company’s principal operations are all carried out in Indonesia. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in Indonesia, and by the general state of Indonesia’s economy. The Company’s operations in Indonesia are subject to specific considerations and significant risks not typically associated with companies in North America. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit.

For the three and nine months ended September 30, 2013 two customers accounted for 100% of total revenue. For the three and nine months ended September 30, 2012, the Company has not generated any revenue.

Research and Development

The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company has not incurred any research and development expenses for the three and nine months ended September 30, 2013, and 2012.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Reliance on Key Personnel and Consultants

The Company retains our three officers, namely our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer as independent contractors. The Company is heavily dependent on the continued active participation of these current executive officers, employees and key consultants. The loss of any of the senior management or key consultants could significantly and negatively impact the business until adequate replacements can be identified and put in place.

Impact of New Accounting Standards

The Company has adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”), which was formerly known as SFAS 168. ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the Securities and Exchange Commission (the "SEC") under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards and all other non-grandfathered, non-SEC accounting literature not included in the Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the basis of conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.

The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operation, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its unaudited condensed consolidated financial statements.

Reclassifications

Certain reclassifications have been made to confirm prior period data to the current presentation. These reclassifications had no effect on reported income.

NOTE 6 - PRIVATE PLACEMENT OFFERING FOR CONVERTIBLE NOTES AND WARRANTS

The Notes are secured by all assets of the Company and its subsidiaries. Maturity is one year from the closing of the offering, unless converted by the note holder prior to the maturity date into the Company’s common stock. The interest rate of the notes is 8% per annum, payable on a semi-annual basis, with the interest rate increasing to 14% per annum upon and so long as a default continues. Under the terms of the Notes, effective October 31, 2012, two Notes with principal amounts totaling $75,000 are in default, and as provided for under the terms of the Notes the interest rate increased to 14% per annum. The number of shares of common stock the note holder is entitled to is determined by dividing the aggregate principal amount and all accrued and then unpaid interest thereon by $0.30. In addition, under the terms of the private placement offering, for each dollar of principal amount of the Notes, the subscriber also receive a warrant to purchase shares of the Company’s common stock at an exercise price of $.30 per share that has an exercise date that expires two years from the date of the closing of the private placement offering.

The offering for Notes and Warrants closed in 2011. At the time of the closing of the private placement offering for Notes and Warrants, the Company had received $1,025,000.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 7 - PRIVATE PLACEMENT OFFERING FOR EQUITY

On November 17, 2011, the Company initiated a private placement offering under which it intends to sell 1,000,000 shares of the Company’s common stock for $1 per share. As of December 31, 2011, the company sold and issued 95,000 shares. Between December 31, 2011 and 2012, the Company had sold and issued an additional 280,000 shares, bringing the total sold and issued under the terms of this offering to 375,000 shares.

NOTE 8 - CONVERTIBLE NOTES PAYABLE

Convertible notes payable represents amounts received from unrelated lenders under the terms of the private placement offering for Senior Secured Convertible Notes (“Notes”). See discussion in Note 6 Private Placement Offering For Convertible Notes and Warrants.

At September 30, 2013 and December 31, 2012 convertible notes were comprised of the following:

	September 30, 2013			December 31, 2012
Senior Secured Convertible Promissory Note (net of unamortized debt discount of $0 at September 30, 2013 and December 31, 2012), in default	$	75,000		$	75,000
8% convertible promissory note, due on May 6, 2014	$	37,500		$	-
Total	$	112,500		$	75,000
Less: Current portion	$	(112,500	)	$	-
Long Term portion	$	-		$	-

On August 6, 2013, the Company secured $37,500 in the form of a convertible promissory note. The notes bear interest at the rate of 8% until they mature, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 22% per annum. The notes mature on May 6, 2014, and may be prepaid during the period from issuance to May 6, 2014, in full, at various rates ranging from 115% to 140% of the principal balance plus accrued interest to the date of prepayment. The holder has the option to convert any balance of principal and interest which is unpaid at February 2, 2014 or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 42%. Under the terms of the convertible promissory note, the Company is not in default.

The Notes are secured by all assets of the Company and its subsidiaries. Maturity is one year from the closing of the offering, unless converted by the note holder prior to the maturity date into the Company’s common stock. The interest rate of the notes is 8% per annum, payable on a semi-annual basis, with the interest rate increasing to 14% per annum upon and so long as a default continues. Under the terms of the Notes, effective October 31, 2012, two Notes with principal amounts totaling $75,000 are in default, and as provided for under the terms of the Notes the interest rate increased to 14% per annum. The number of shares of common stock the note holder is entitled to is determined by dividing the aggregate principal amount and all accrued and then unpaid interest thereon by $0.30. In addition, under the terms of the private placement offering, for each dollar of principal amount of the convertible notes, the subscriber to the private placement also received a two year warrant (i.e. 1,025,000 warrants), from the date of the closing of the private placement offering to purchase shares of the Company’s common stock at exercise price of $0.30 per share.

The Notes had a beneficial feature of $375,571 and the fair value of warrants at the date of grant was $649,429. In accordance with ASC 470-20, the Company allocated the proceeds from the issuance of the Notes to the warrants and the Notes based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants was $649,429 and $375,571 was assigned to the beneficial conversion feature on debt. In total, $1,025,000 was recorded as an increase in additional paid-in capital and was netted with the Convertible Note value. The discount was amortized over the original one-year term of the Notes as additional interest expense. For the nine months ended September 30, 2013 and for the year ended December 31, 2012, $0 and $0 respectively was amortized and shown as interest expense.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 8 - CONVERTIBLE NOTES PAYABLE (Continued)

The fair value of the warrants was determined using the Black-Scholes pricing model, which values warrants based on the stock price at the grant date, the expected life of the warrant, the estimated volatility of the stock, the expected dividend payments, and the risk-free interest rate of U.S. Treasuries over the expected life of the warrants.

The assumptions used in the Black-Scholes pricing model for stock warrants granted during the year ended December 31, 2011 were as follows:

Fair Value of Common Stock	$	1.00 – $2.25
Risk-Free Interest Rate		4.01% - 4.52	%
Expected Volatility of Common Stock		317	%
Dividend Yield		0	%
Estimated life of warrants	2 Years

NOTE 9 - CAPITAL STOCK

On July 13, 2011, the Company amended its Articles of Incorporation to effect a 100-to-1 reverse stock split of its issued and outstanding shares of common stock and concurrently increased its authorized shares to 500,000,000 shares of capital stock, each with a par value of $0.001, which consists of 400,000,000 shares of common stock and 100,000,000 shares of preferred stock. All share and per share amounts have been retroactively stated as if the split had occurred September 22, 2009.

Preferred Stock

The Company has authorized the issuance of 100,000,000 shares of preferred stock, with a par value of $0.001 per share. The Company’s Board of Directors has broad discretion to create one or more series of preferred stock and to determine the rights, preferences, and privileges of any such series.

As of September 30, 2013 and December 31, 2012, there were no shares of preferred stock issued and outstanding.

Common stock

The Company authorized the issuance of 400,000,000 shares of common stock, par value $0.001.

As of September 30, 2013 and December 30, 2012 there were 73,400,459 shares and 73,235,459 of common stock issued and outstanding, respectively.

In August 2011, in connection with the reverse merger transaction, the Company issued an aggregate of 60,178,073 shares of its common stock in exchange for 50,000 shares of Interich. See discussion Note 2 Merger and Recapitalization.

In August 2011, in connection with the reverse merger transaction, the Company issued an aggregate of 6,154,860 shares of its common stock in exchange of settlement of old convertible notes payable of $30,775.

In December 2011, in connection with a private placement the Company sold and issued 95,000 shares of its common stock at $1.00 per share. See discussion Note 7 Private Placement Offering For Equity.

In January 2012, in connection with a private placement the Company sold and issued 80,000 shares of its common stock at $1.00 per share. See discussion Note 7 Private Placement Offering For Equity.

In May 2012, $695,000 plus accrued interest of $41,057 was converted to 2,453,532 shares of common stock by the terms of the convertible notes. See discussion Note 8 Convertible Notes Payable.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 9 - CAPITAL STOCK (Continued)

In June 2012, the Company sold and issued 100,000 shares under the terms of this offering. See discussion Note 7 Private Placement Offering For Equity.

In July 2012, the Company sold and issued 100,000 shares under the terms of this offering.

In July 2012, $200,000 plus accrued interest of $14,773 was converted to 715,909 shares of common stock by the terms of the convertible notes. See discussion Note 8 Convertible Notes Payable.

In August 2012, $55,000 plus accrued interest of $2,243 was converted to 190,813 shares of common stock by the terms of the convertible notes. See discussion Note 8 Convertible Notes Payable.

In April 2013, the Company issued 50,000 shares on the exercise of 50,000 common stock warrants at $.30 per share for total consideration of $15,000. See discussion Note 10 Warrants.

In May 2013, the Company issued 67,000 shares on the exercise of 67,000 common stock warrants at $.30 per share for total consideration of $20,050. See discussion Note 10 Warrants.

In July 2013, the Company issued 48,000 shares on the exercise of 48,000 common stock warrants at $.30 per share for total consideration of $14,450. See discussion Note 10 Warrants.

NOTE 10 – WARRANTS

The following table summarizes the changes in warrants outstanding and related prices for the shares of the Company’s common stock issued to shareholders at September 30, 2013 and December 31, 2012:

Exercise Price		Number Outstanding		Warrants Outstanding Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise price		Number Exercisable		Warrants Exercisable Weighted Average Exercise Price

$	0.30		860,000		.01	$	0.30		860,000	$	0.30

Transactions involving the Company’s warrant issuance are summarized as follows:

			Stock Warrants
			Weighted Average
			Exercise
	Shares		Price
Outstanding at December 31, 2012		1,025,000		$	0.30
Granted in 2013		—			—
Cancelled		—			—
Expired		—			—
Exercised		(165,000)		$	0.30
Outstanding at September 30, 2013		860,000		$	0.30

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 10 – WARRANTS (Continued)

During the year ended December 31, 2011, the Company has issued 1,025,000 warrants to the Note holder (see discussion Note 6 Private Placement Offering For Convertible Notes and Warrants). During the periods ended September 30, 2013 and December 31, 2012 no warrants were cancelled or expired, and 165,000 were exercised. The fair value of the issued warrants was determined using the Black-Scholes Option Pricing Model. See discussion Note 6 Private Placement Offering For Convertible Notes and Warrants and Note 8 Convertible Notes Payable.

In April 2013, 50,000 warrants were exercised at $.30 per warrant for a total of $15,000. See discussion Note 9 Capital Stock.

In May 2013, 67,000 warrants were exercised at $.30 per warrant for a total of $20,050. See discussion Note 9 Capital Stock.

In July 2013, 48,000 warrants were exercised at $.30 per warrant for a total of $14,450. See discussion Note 9 Capital Stock.

On October 30, 2013 the 860,000 unexercised warrants expired and as a result as of the date of the issuance of this report there are no warrants issued and outstanding.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Mining Concessions

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

Share Purchase Agreement

Upon the execution of the Agreements, the Company entered into additional agreements to replace and terminate the Purchase Agreement, dated March 5, 2013, with Kalabat for the purchase of 50 hectares of property (the “Talawaan Property”) and replace and terminate the Purchase Agreement, dated March 22, 2013, and with Kalabat for the purchase of 30 hectares of property (the “Ratatotok Property”). The Company entered into new purchase agreements for the Talawaan Property and the Ratatotok Property by and among the Company, Kalabat and Sanding Longdong (the “Seller”), the owner of the properties with whom Kalabat had purchase agreements.

Asset Purchase Agreements

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

On September 30, 2013, under the terms of the Second Extension Agreement (the “Second Extension”), the Company, Kalabat and the Seller, agreed to defer the due date of all outstanding payments due on or before September 30, 2013 under the terms of the above purchase agreements for both Talawaan and Ratatotok to December 31, 2013. Under the terms of the Second Extension one payment of $25,000, to be applied to amount due under the terms of the purchase agreements, will be made to the Seller (the “Second Extension Payment”). The Second payment was made on October 8, 2013. See discussion Note 1 Nature of Operations and Note 14 Subsequent Events.

As of September 30, 2013, the Company had paid a total of $596,685 against the outstanding balance of the asset purchase of Talawaan and Ratatotok, leaving a balance at September 30, 2013 of $6,403,315. The Company will continue to making periodic payments.

Operating leases

On September 14, 2011, the Company signed an office rental agreement for its corporate offices in Bothell, Washington USA. The lease is month-to-month and the monthly rental is $300 per month. In addition the Company paid a deposit of $300.

On May 17, 2012, the Company signed an office rental agreement for offices in Hong Kong. The lease is for six months and the monthly rental is HKD$16,000 which equals approximately $2,100 per month. In addition the Company paid a deposit of HKD$16,000 which equals approximately $2,100. On September 6, 2012, effective December 1, 2012, the office rental agreement for the offices in Hong Kong was extended for an additional six months at the new rental rate of HKD$17,500 per month which equals approximately $2,300.

Loans

From September 21, 2012 through December 31, 2012 the Company secured $51,000 in loans in the form of short-term promissory notes. The promissory notes have a term ranging from thirty days to one year and pay compound interest of five percent per annum. Where applicable the loans with a shorter term have been extended. Under the terms of the short-term promissory notes, the Company is not in default. During the period ended September 30, 2013, $2,500 in principal, plus accrued interest of $78 was repaid.

From January 1, 2013 through February 7, 2013 the Company secured $4,500 in loans in the form of short-term promissory notes. The promissory notes have a term ranging from thirty days to 365 days and pay compound interest of five percent per annum. Where applicable the loans with a shorter term have been extended. Under the terms of the short-term promissory notes, the Company is not in default. See discussion Note 14 Subsequent Events.

On February 15, 2013, the Company secured $250,000 in the form of long-term promissory note from Nils Ollquist the company’s CEO. The promissory note has a term of five years and pays compound interest of five percent per annum. Under the terms of the long-term promissory note, the Company is not in default. See discussion Note 12 Related Party Transactions.

On April 4, 2013, the Company secured $50,000 in the form of long-term promissory note from Nils Ollquist the company’s CEO. The promissory note has a term of five years and pays compound interest of five percent per annum. Under the terms of the long-term promissory note, the Company is not in default. See discussion Note 12 Related Party Transactions.

On June 7, 2013, the Company secured $30,000 in the form of promissory note. The promissory note has an initial term of 90 days, and can be extended an additional 90 days at the sole discretion of the Company in exchange for a one-time fee 10% of the principal. The promissory note pays compound interest of five percent per annum. On September 5, 2013 the Company exercised its right to extend the maturity date of the loan an additional 90 days and in exchange will pay a $3,000 extension fee when the loan is repaid. Under the terms of the promissory note, the Company is not in default.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

On July 3, 2013, the Company secured $5,093.58 in the form of long-term promissory note from Nils Ollquist the company’s CEO. The promissory note has a term of five years and pays compound interest of five percent per annum. Under the terms of the long-term promissory note, the Company is not in default. See discussion Note 12 Related Party Transactions.

On July 30, 2013, the Company secured $50,000 in the form of long-term promissory note from Nils Ollquist the company’s CEO. The promissory note has a term of five years and pays compound interest of five percent per annum. Under the terms of the long-term promissory note, the Company is not in default. See discussion Note 12 Related Party Transaction.

On August 6, 2013, the Company secured $11,000 in the form of long-term promissory note. The promissory note has a term of five years and pays compound interest of five percent per annum. Under the terms of the long-term promissory note, the Company is not in default.

On August 9, 2013, the Company secured $6,000 in the form of long-term promissory note. The promissory note has a term of five years and pays compound interest of five percent per annum. Under the terms of the long-term promissory note, the Company is not in default.

On August 27, 2013, the Company secured $50,000 in the form of long-term promissory note. The promissory note has a term of five years and pays compound interest of five percent per annum. Under the terms of the long-term promissory note, the Company is not in default.

On September 3, 2013, the Company secured $6,000 in the form of long-term promissory note. The promissory note has a term of five years and pays compound interest of five percent per annum. Under the terms of the long-term promissory note, the Company is not in default.

On September 30, 2013, the Company secured $10,000 in the form of long-term promissory note from Nils Ollquist the company’s CEO. The promissory note has a term of five years and pays compound interest of five percent per annum. Under the terms of the long-term promissory note, the Company is not in default. See discussion Note 12 Related Party Transaction.

On October 7, 2013, the Company secured $100,000 in the form of long-term promissory note. The promissory note has a term of five years and pays compound interest of five percent per annum. Under the terms of the long-term promissory note, the Company is not in default. See discussion Note 14 Subsequent Events.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

On October 11, 2013 the Company secured $32,500 in the form of a convertible promissory note. The notes bear interest at the rate of 8% until they mature, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 22% per annum. The notes mature on July 5, 2014, and may be prepaid during the period from issuance to July 5, 2014, in full, at various rates ranging from 115% to 140% of the principal balance plus accrued interest to the date of prepayment. The holder has the option to convert any balance of principal and interest which is unpaid at April 9, 2014 or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 42%. Under the terms of the convertible promissory note, the Company is not in default. See discussion Note 14 Subsequent Events.

Litigation

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Except as described below, we are currently not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

NOTE 12 - RELATED PARTY TRANSACTIONS

Mr. Nils Ollquist, the Company’s Chairman of the Board, Chief Executive Officer and President, was the largest shareholder of Interich prior to the Merger. Under the terms of the Merger, Mr. Ollquist was issued 27,080,133 restricted shares of Common Stock of Borneo. See discussion Note 2 Merger and Recapitalization. In addition, Mr. Ollquist had been a principal of OFS Capital Group (“OFS”), a company that Borneo had retained under a management agreement for which Mr. Ollquist received no compensation. See discussion Note 11 Commitments and Contingencies.

On February 15, 2013, Mr. Ollquist loaned the Company $250,000 in the form of long-term promissory note. The promissory note has a term of five years and pays compound interest of five percent per annum. Under the terms of the long-term promissory note, the Company is not in default. See discussion Note 11 Commitments and Contingencies.

On April 4, 2013, Mr. Ollquist loaned the Company $50,000 in the form of long-term promissory note. The promissory note has a term of five years and pays compound interest of five percent per annum. Under the terms of the long-term promissory note, the Company is not in default. See discussion Note 11 Commitments and Contingencies.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 12 - RELATED PARTY TRANSACTIONS (Continued)

Mr. Carlo Muaja, the Company’s Chief Operating Officer and a Director, was a shareholder of Interich prior to the Merger. Mr. Muaja was the principal shareholder of Meratus prior to Interich’s acquisition of an 80% interest in Meratus, and he received his shares in Interich as part of the transaction. See discussion Note 3 Concession Acquisitions. Under the terms of the Merger, Mr. Muaja was issued 15,044,518 restricted shares of Common Stock of Borneo.

Another former principal of OFS was a shareholder of Interich prior to the Merger. Under the terms of the Merger, this individual was issued 18,053,422 restricted shares of Common Stock of Borneo. On August 1, 2011, the Company entered into a management agreement with OFS. OFS had been retained to assist the Company in planning, managing, and conducting its business operations. The agreement has an initial term of two years, and the Company paid OFS $5,000 per month plus approved expenses. Mr. Nil Ollquist was a principal of OFS, and another former principal of OFS is a significant shareholder in the Company. Mr. Ollquist did not receive compensation under this agreement. The agreement was terminated in July 2012. See discussion Note 11 Commitments and Contingencies.

NOTE 13 – INCOME TAXES

The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes include, but not limited to, accounting for intangibles, debt discounts associated with convertible debt, equity based compensation and depreciation and amortization.

At September 30, 2013 the Company has available for federal income tax purposes a net operating loss carry forward of approximately $3,150,000, which expires in the year 2031, that may be used to offset future taxable income. The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon the earnings history of the Company; it is more likely than not that the benefits will not be realized. Based upon the change in ownership rules under section 382 of the Internal Revenue Code of 1986, if in the future the Company issues common stock or additional equity instruments convertible in common shares which result in an ownership change exceeding the 50% limitation threshold imposed by that section, all of the Company’s net operating losses carry forwards may be significantly limited as to the amount of use in a particular years. All or portion of the remaining valuation allowance may be reduced in future years based on an assessment of earnings sufficient to fully utilize these potential tax benefits.

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 13 – INCOME TAXES (Continued)

At September 30, 2013, the significant components of the deferred tax assets (liabilities) are summarized below:

Net operating loss carry forwards expiring through 2030	$	3,150,000

Tax Asset		1,071,000
Less valuation allowance		(1,071,000)
Balance	$	—

Net operating loss carry forwards September 30, 2013 (estimated)	$	3,150,000
Balance	$	3,150,000

The Company recognizes interest and penalties related to uncertain tax positions in general and administrative expenses. As of September 30, 2013, the Company has no unrecognized tax benefit from uncertain tax positions, including interest and penalties.

The difference between income tax expense computed by applying the federal statutory corporate tax rate and actual income tax expense is as follows:

Statutory federal income tax rate			34.0%
State income taxes and other			0.0%

Effective tax rate			34.0%

Deferred income taxes result from temporary differences in the recognition of income and expenses for the financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax asset and liabilities result principally from the following:

Deferred Tax Asset: (Liability)

Net operating loss carry forward	$	1,071,000
Subtotal		1,071,000
Valuation allowance		(1,071,000)

Net Deferred Tax Asset (Liability)	$	—

BORNEO RESOURCE INVESTMENTS LTD.

Notes to Condensed Consolidated Financial Statements

September 30, 2013

(Unaudited)

NOTE 14 - SUBSEQUENT EVENTS

Loans

Agreements

On September 30, 2013, under the terms of the Second Extension Agreement (the “Second Extension”), the Company, Kalabat and the Seller, agreed to defer the due date of all outstanding payments due on or before September 30, 2013 under the terms of the above purchase agreements for both Talawaan and Ratatotok to December 31, 2013. Under the terms of the Second Extension one payment of $25,000, to be applied to amount due under the terms of the purchase agreements, will be made to the Seller (the “Second Extension Payment”). The Second payment was made on October 8, 2013. See discussion Note 1 Nature of Operations and Note 11 Commitments and Contingencies.

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

Forward Looking Statements

This report contains “forward-looking statements.” Forward-looking statements are based upon our current assumptions, expectations and beliefs concerning future developments and their potential effect on our business. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although the absence of these words does not necessarily mean that a statement is not forward-looking. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements.

Factors that may cause or contribute actual results to differ from these forward-looking statements include, but are not limited to, for example:

·	adverse economic conditions;
·	changes in the price of coal, gold or other minerals;
·	a change in the estimate of minerals on our concessions;
·	an inability to extract minerals from our properties;
·	changes in Indonesian law;
·	risks associated with counterparty default in any of our agreements
·	the ability to acquire funding; and
·	other risks and uncertainties related to mining and our business strategy.

This list is not exhaustive of the factors that may affect our forward-looking statements. All forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements or other information contained herein. Stockholders and potential investors should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements in this report are reasonable, we cannot assure stockholders and potential investors that these plans, intentions or expectations will be achieved. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

Business History

Borneo Resource Investments Ltd., (“Borneo” or the “Company”) was organized on June 14, 2004 under the laws of the State of Nevada as “Acme Entertainment, Inc.” On July 21, 2005, the Company changed its name to “INQB8, Inc.” On November 4, 2005, in connection with a merger with Aventura Resorts, Inc., a privately held Washington company, the Company changed its name to “Aventura Resorts, Inc.” (“Aventura”). Aventura’s business plan was to develop upscale resort communities for motorhome owners. The Company entered into several agreements to acquire resort properties. With the banking crisis in the United States and the downturn in real estate values, however, the Company was unable to complete either the attempted bank financing or equity transaction to complete the contemplated purchases.

On July 13, 2011, in anticipation of the merger, described below, with Interich International Limited (“Interich”), a British Virgin Islands Company, the Company changed its name to Borneo Resource Investments Ltd. On August 1, 2011 (the “Merger Date”), the Company was merged with Interich via a merger subsidiary the Company created for this transaction. From its inception, on September 22, 2009 until the date of the transaction, Interich was an inactive corporation with no significant assets or liabilities. The transaction has been accounted for as a reverse merger, and Interich was the acquiring company on the basis that Interich’s senior management became the entire senior management of the merged entity and there was a change of control of Borneo. While the transaction was accounted for using the purchase method of accounting, in substance the transaction was a recapitalization of Borneo’s capital structure.

In anticipation of the closing of the Interich transaction, on July 13, 2011, the Company effected a 100-to-1 reverse stock split of its issued and outstanding shares of common stock. As a result of the reverse stock split, the Company had 3,167,269 shares outstanding before the merger. In addition, the authorized number of shares of common stock was amended to authorize the Company to issue a total of 500,000,000 shares of capital stock, each with a par value of $0.001, which consists of 400,000,000 shares of common stock and 100,000,000 shares of preferred stock.

In connection with the merger, Borneo issued 60,178,073 restricted common shares to stockholders of Interich. In addition, holders of convertible debt exchanged their notes for 6,154,860 of the Company’s common shares. The issued and outstanding number of common shares subsequent to the merger and the exchange of convertible debt was 69,500,205. As of November 14, 2013, we had 73,400,459 shares of common stock outstanding.

Our principal executive offices are located at 19125 North Creek Parkway, Suite 120, Bothell, Washington, 98011 and our telephone number is (425) 329-2622.

Our Business

Borneo’s mission is to develop a diverse platform of natural resource assets, specifically gold and coal, in Indonesia. The Company’s investment strategy is largely driven by the long term demand for raw materials, particularly precious metals and coal, arising from economic growth in Asia. The value matrix for our business is clear with a longer term, high value investment platform generated by the acquisition of high quality thermal coal concessions, complemented by cash flow producing investments in gold production assets. In order to minimize capital investment requirements, in what is a high capital investment business, the Company’s intention is to expand and “prove” its coal concession platform with the ultimate monetization of these assets through joint ventures with major resource groups, “farming out” or selling the concessions. At the same time, the relatively small scale investment requirements of our gold strategy will generate significant cash flow leverage for our operations as we continue to build production through the upgrading of our existing facilities and acquisition of additional properties.

Gold Mining Properties

For its gold operations, the Company is building a production and development platform in the North Sulawesi area of the Indonesian archipelago, a gold rich area where traditional, small scale mining has yielded high levels of ore concentration from reef structures which were first identified by Newmont Mining over 20 years ago. The Company has already acquired a producing mine through its purchase of a company that owns 50 hectares of property near Manado, the regional capital of Minahasa Regency in the Northeastern part of the island of Sulawesi and is in the process of building its investment in this region.

In June 2013, the Company entered into agreements to purchase PT Puncak Kalabat, an Indonesia corporation (“Kalabat”). Kalabat owns two properties, a 50 hectares of property (the “Talawaan Property”) and 30 hectares of property (the “Ratatotok Property”) in the Manado, Indonesia region. The Company is producing revenue from the mining of gold on the Talawaan Property and is researching the feasibility of the Ratatotok Property. The Company began generating revenues from gold sales during the month of June.

In June 2013, the Company entered into agreements to purchase PT Puncak Kalabat (“Kalabat”), an Indonesian registered corporation. Kalabat owns two properties, comprising a 50 hectare property located in Talawaan City of North Minahasa Regency (“Talawaan”) and a 30 hectare property located in the Southeast Minahasa Regency (“Ratatotok”) both located in the North Sulawesi Province. Beginning in May 2013, in anticipation of the closing of transaction enabling the Company to acquire Puncak, the operations on the Talawaan Property began to change. Prior to and through May 2013, the mining activities on the Talawaan Property operated as what could best be described as a cooperative. With the approval of the Seller, teams of individuals would granted areas on the property, and, at their own discretion, mine the site. Whatever ore they recovered was delivered to a central processing point. The ore would then be processed and the costs of processing were shared by the Seller and the miners. Once the gold was recovered and sold to local buyers, the Seller and the miners would then share the profits, after the necessary adjustments for processing costs. In addition, the equipment on the Talawaan Property was used by the miners on site, but by other miners in the area for their activities. Beginning in May 2013, the transition period prior to the closing of the transaction, working with the Seller, miners and the people responsible for processing, the Company began to implement a coordinated operating structure and the tracking all mining and processing activities on the Talawaan Property. In that the Talawaan Property had not been historically operated as a business, the company is treating the acquisition of the Talawaan Property as a purchase of a mining property, mining equipment and tools. The Company has not conducted any drilling programs or commissioned an NI 43-101 compliant technical report. We plan to develop and conduct small-scale gold mining within certain areas that are currently contained within our properties. The production decision or significant development on these projects will not be based on mineral reserves supported by an NI43-101 compliant technical report.

The region where both the Talawaan and Ratatotok properties are located in is part of an extensive gold formation which was initially surveyed some 20 years ago. Talawaan and Ratatotok concession areas have been granted licenses in perpetuity by North Minahasa Regency and the Southeast Minahasa Regency respectively as a local exploration and production permits. Beginning in June 2013, the Company began producing revenue from the surface mining of gold from Talawaan and is in the process of finalizing a budget to commence mining operations at Ratatotok. The Company is actively assessing opportunities to acquire additional gold properties, both by way of land purchases and exploration and production licenses.

Talawaan

Talawaan is located close to the regional capital, Manado, and lies on a gold reef formation which runs for approximately 20km (12 miles) on an east/west axis. The gold reef which runs through the forested property is extensive and easily accessible from the surface to a depth of 250 meters with little or no overburden along most of its length. The property holds a license in perpetuity from the North Minahasa Regency as an exploration and production permit. In July, a high concentration seam that comprised of loose clay lignite was discovered on the property. Mining operations began on this part of the property at the end of September.

Ratatotok

Ratatotok is located near the village of Ratatotok, approximately 3 hours east of the regional capital of Manado and lies on a gold reef formation which runs east to west from the coast. The acquisition includes a perpetual license from the Southeast Minahasa Regency as an exploration and production permit. Although there are currently no mining operations on the Ratatotok, mining activities are being pursued in the areas immediately adjacent to the Ratatotok.

Coal Concessions

In addition to gold, the Company is pursuing coal concessions. Further, Borneo is creating a trading platform for thermal coal concessions and individual coal deposits through arbitrage between Indonesia supply chains and major energy importing nations including India and China. Indonesia is home to some of the richest deposits of steaming coal in the world. The Indonesian government has, for many years been awarding coal mining exploration and licenses to local indigenous groups. With strong relationships with local licensees, through two of its executive officers, the Company has created preferential access to these concession opportunities. Upon entering into agreements to acquire concessions, the Company will market the properties to mining companies and other interested parties. The Company, when presented with the opportunity to do so, will seek to acquire concessions in other regions of Indonesia.

With respect to development of its thermal coal investment platform, the Company has targeted Kalimantan on the island of Borneo, one of the world’s largest areas of high grade thermal coal deposits, through acquisition of exploration and production licenses with verified reserves and export potential. Currently, the Company holds one coal mining concession near the city of Balikpapan acquired from PT Chaya Meratus Primecoal (“Meratus”). In addition to Meratus, the Company has entered into memoranda of understanding or letters of intent with additional concession holders which will require the company to pay fees and conduct due diligence. The Indonesian government has, for many years, been awarding coal mining exploration and licenses to local indigenous groups. With strong relationships with local licensees, through two of its executive officers and a director, the Company has created preferential access to these concession opportunities. Upon entering into agreements to acquire concessions, the Company will market the properties to mining companies and other interested parties. The Company, when presented with the opportunity to do so, will seek to acquire concessions in other regions of Indonesia. Further, Borneo is creating a trading platform for thermal coal concessions and individual coal deposits through arbitrage between Indonesia supply chains and major energy importing nations including India, China and the Philippines.

Emerging Growth Company” Status under the Jumpstart Our Business Startups Act (“JOBS Act”)

We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

·	have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
·	comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
·	submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and
·	disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive’s compensation to median employee compensation.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period.

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

Competitive Factors

The mining industry is acutely competitive in all of its phases. We face strong competition from other mining companies in connection with the acquisition of exploration stage properties or properties containing reserves of coal and other precious metals. Many of these companies have greater financial resources, operational experience and technical capabilities than us.

RESULTS OF OPERATIONS

Three and Nine Months Ended September 30, 2013 and September 30, 2012

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2013			2012			2013			2012

Sales	$	507,771		$	-		$	720,410		$	-
Cost and expenses
Costs applicable to sales		215,592			-			310,263			-
Depreciation		6,944			-			9,259			-
General and administrative		204,313			164,540			584,964			723,214

Operating income (loss)		80,922			(164,540	)		(184,076	)		(723,214	)

Other income (expense)
Net interest expense		(13,007	)		(1,899	)		(24,965	)		(37,840	)
Amortization of debt discount		-			(99,186	)		-			(897,456	)

Net income (loss)	$	67,915		$	(265,625	)	$	(209,041	)	$	(1,658,510	)

Revenues. The Company generated revenues of $507,771 and $720,410 for the three months and nine months ended September 30, 2013 respectively. We had no revenue for the three or nine months ended September 30, 2012.

Costs Applicable to Sales. The cost applicable to sales is for labor and other costs incurred in mining and processing the gold. Employees are compensated based on the gold produced on the property. General and administrative consisted primarily of compensation for our officers and consultants.

Net Interest Expense and Amortization of debt discount. Net interest expense increased as a result of the utilization of debt to fund operations. Amortization of debt discount and net interest expense were higher in 2012 due to the conversion of our convertible debt described below.

Liquidity and Capital Resources

On June 10, 2013, the Company entered into purchase agreements for the Talawaan Property, for an aggregate purchase price of $5,000,000, and the Ratatotok Property, for an aggregate purchase price of $2,000,000, by and among the Company, Kalabat and Sanding Longdong. These replaced purchase agreements previously entered into by the Company. The aggregate purchase price for the Talawaan Property and Ratatotok Property is $7,000,000. As of September 30, 2013, the Company has paid a total of $596,685 toward the outstanding balance due on these properties, leaving a balance payable at September 30, 2013 of $6,403,315.

Cash Flows for the nine months ended September 30, 2013

On September 30, 2013, we had a working capital deficit of $7,095,432 and stockholders’ deficit of $595,052. We had cash and cash equivalents of $9,815. Our current liabilities increased because of the amount owed to the Seller of the Kalabat property.

Cash used in operating activities was $460,382 for the nine months ended September 30, 2013 which was the result of a net loss of $209,041 and cash used to repay the liabilities on the Talawaan Property and Ratatotok Property. Cash generated from the Talawaan Property and Ratatotok Property will be used to pay down the debt owned on such properties. Cash used in investing activities were used for the purchase of the Talawaan Property and Ratatotok Property. Cash provided by financing activities for the nine months ended September 30, 2013 was $524,007 from the sale of promissory notes and common stock.

Promissory Notes

From September 21, 2012 through December 31, 2012, the Company secured $51,000 in loans in the form of short-term promissory notes. The promissory notes have a term ranging from thirty days to one year and pay compound interest of five percent per annum. During the period ended September 30, 2013, $2,500 in principal, plus accrued interest of $78 was repaid. From January 1, 2013 through February 7, 2013 the Company secured $4,500 in loans in the form of short-term promissory notes. The promissory notes have a term ranging from thirty days to 365 days and pay compound interest of five percent per annum. Where applicable the loans with a shorter term have been extended. Under the terms of the short-term promissory notes, the Company is not in default.

On April 4, 2013, the Company secured $50,000 in the form of long-term promissory note from Nils Ollquist the company’s CEO under the same terms as the February 15, 2013 promissory note. The promissory note has a term of five years and pays compound interest of five percent per annum. Under the terms of the long-term promissory note, the Company is not in default.

Convertible Notes

In July 2011, the Company initiated a private placement offering under which Senior Secured Convertible Notes (“Notes”) and Common Stock Warrants (“Warrants”) will be issued. The Notes are secured by all assets of the Company and its subsidiaries. Maturity is one year from the closing of the offering, unless converted by the note holder prior to the maturity date into the Company’s common stock. The interest rate of the notes is 8% per annum, payable on a semi-annual basis, with the interest rate increasing to 14% per annum upon and so long as a default continues. The number of shares of common stock the note holder is entitled to is determined by dividing the aggregate principal amount and all accrued and then unpaid interest thereon by $0.30. In addition, under the terms of the private placement offering, for each dollar of principal amount of the Notes, the subscriber also receive a warrant to purchase shares of the Company’s common stock at an exercise price of $.30 per share that has an exercise date that expires two years from the date of the closing of the private placement offering. The offering for Notes and Warrants closed in 2011. At the time of the closing of the private placement offering for Notes and Warrants, the Company had received $1,025,000.

As of June 30, 2013, principal of $950,000 plus accrued interest of $58,077 had been converted to common stock by the terms of the notes. Under the terms of the Notes, effective October 31, 2012, two Notes with principal amounts totaling $75,000 are in default, and as provided for under the terms of the Notes the interest rate increased to 14% per annum.

On August 6, 2013, the Company secured $37,500 in the form of a convertible promissory note. The notes bear interest at the rate of 8% until they mature, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 22% per annum. The notes mature on May 6, 2014, and may be prepaid during the period from issuance to May 6, 2014, in full, at various rates ranging from 115% to 140% of the principal balance plus accrued interest to the date of prepayment. The holder has the option to convert any balance of principal and interest which is unpaid at May 6, 2014 or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 42%. Under the terms of the convertible promissory note, the Company is not in default.

Liquidity

The Report of our Independent Registered Public Accounting Firm on the Company’s consolidated financial statements as of and for the year ended December 31, 2012, includes a “going concern” explanatory paragraph which means that the auditors stated that conditions existed that raise substantial doubt about the Company’s ability to continue as a going concern.

Our financial statements have been prepared assuming that we will continue as a going concern. The general business strategy of the Company is to explore and research existing mineral properties and to potentially acquire further claims either directly or through the acquisition of operating entities. The continued operations of the Company depends upon the recoverability of mineral property reserves, confirmation of the Company’s interest in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete the development of these claims and upon the future profitable production of the claims. While the Company has enough cash to pay all expenses for the next three months, there continues to be insufficient funds to provide enough working capital to fund ongoing operations for the next twelve months. Management intends to raise additional capital through promissory note and share issuances to continue its operations and finance its exploration although there can be no assurance that management will be successful in these efforts. Other than the sale of securities, the Company does not have any lines of credit or other arrangements to provide an external source of additional funding at this time.

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying unaudited condensed consolidated financial statement, the Company has accumulated a deficit of $3,184,978 as of September 30, 2013. The ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations or on the ability of the Company to obtain necessary financing to fund ongoing operations. Management believes that its current and future plans enable it to continue as a going concern for the next twelve months.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures.

Critical Accounting Policies

Revenue Recognition

Cost of Revenue

Inventories

Inventories are stated at the lower of cost or market value, cost being calculated on the weighted average basis. The cost of inventories comprises all costs of purchases, costs of fixed and variable production overheads and other costs incurred in bringing the inventories to their present location and condition. The Company provided inventory allowances based on excess and obsolete inventories determined principally by customer demand. There was no inventory on hand at September 30, 2013 and December 31, 2012, respectively.

Property and Equipment, other than Oil and Gas Properties

Use of Estimates

Prepaid Project Expenses

Mine Exploration and Development Costs

The Company accounts for mine exploration costs in accordance with Accounting Standards Codification 932, Extractive Activities. All exploration expenditures are expensed as incurred. Mine development costs are capitalized until production, other than production incidental to the mine development process, commences and are amortized on a units of production method based on the estimated proven and probable reserves. Mine development costs represent costs incurred in establishing access to mineral reserves and include costs associated with sinking or driving shafts and underground drifts, permanent excavations, roads and tunnels. The end of the development phase and the beginning of the production phase takes place when construction of the mine for economic extraction is substantially complete. Coal extracted during the development phase is incidental to the mine’s production capacity and is not considered to shift the mine into the production phase. Amortization of capitalized mine development is computed based on the estimated life of the mine and commences when production, other than production incidental to the mine development process, begins. To date the Company had not incurred any mine development costs.

Mine Properties

Foreign Currency Translation and Comprehensive Income (Loss)

The functional currency of Puncak is the Indonesian Rupiah (“IDR”). For financial reporting purposes, IDR were translated into United States Dollars (“USD” or “$”) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive income”. Gains and losses resulting from foreign currency transactions are included in the consolidated results of operations. There has been no significant fluctuation in the exchange rate for the conversion of HKD to USD or IDR to USD after the balance sheet date.

The Company uses Accounting Standard Codification 220 “Comprehensive Income”. Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. Comprehensive income for the nine months ended September 30, 2013 consisted of net income and foreign currency translation adjustments.

Noncontrolling Interests –

Stock Based Compensation

As of September 30, 2013 and December 31, 2012, the Company did not have any issued and outstanding stock options.

Concentration and Credit Risk, Significant Customers and Supplier Risk

For the three and nine months ended September 30, 2013 two customers accounted for 100% of total revenue. For the three and nine months ended September 30, 2012, the Company had not generated any revenue.

Impact of New Accounting Standards

Reclassifications

Certain reclassifications have been made to confirm prior period data to the current presentation. These reclassifications had no effect on reported income.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

We conducted an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive and principal financial officers concluded as of September 30, 2013 that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses in our internal controls over financial reporting discussed immediately below.

This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits us to provide only management's report in this quarterly report.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

1.	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
2.	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and
3.	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2013. Based on this assessment, management concluded that the Company did not maintain effective internal controls over financial reporting as a result of the identified material weakness in our internal control over financial reporting described below. In making this assessment, management used the framework set forth in the report entitled Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company's internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring.

Identified Material Weakness

A material weakness in our internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.

Management identified the following material weakness during its assessment of internal controls over financial reporting:

Resources: We had one full-time employee in finance and accounting. As a result, there is a lack of proper segregation of duties necessary to insure that all transactions are accounted for accurately and in a timely manner.

Written Policies & Procedures: We need to prepare written policies and procedures for accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions and prepare, review and submit SEC filings in a timely manner. This will be more important in the future when the Company adds operations.

(b) Changes In Internal Control Over Financial Reporting

During the quarter ended September 30, 2013, there were no changes in our internal controls over financial reporting that materially affected, or is reasonably likely to have a materially affect, on our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

We are subject from time to time to litigation, claims and suits arising in the ordinary course of business. As of September 30, 2013, we were not a party to any material litigation, claim or suit whose outcome could have a material effect on our unaudited consolidated financial statements.

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

In July 2013, the Company issued 48,000 shares on the exercise of 48,000 common stock warrants at $.30 per share for total consideration of $14,450. The proceeds were used for working capital and general corporate purposes.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

Not Applicable.

ITEM 6. EXHIBITS

Index to Exhibits

31.1	Certification of Chief Executive Officer under Rule 13(a) — 14(a) of the Exchange Act.

31.2	Certification of Chief Financial Officer under Rule 13(a) — 14(a) of the Exchange Act.

32	Certification of CEO and CFO under 18 U.S.C. Section 1350

EX-101.INS**	XBRL Instance Document

EX-101.SCH**	XBRL Taxonomy Extension Schema Document

EX-101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document

EX-101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document

EX-101.LAB**	XBRL Taxonomy Extension Label Linkbase Document

EX-101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document

__________

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 15th day of November 2013.

	BORNEO RESOURCE INVESTMENTS LTD.

	By:	/s/ Nils A Ollquist
		NILS A. OLLQUIST
		Chief Executive Officer

Attached files

Borneo Resource Investments Ltd. Reports

Also read