Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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(Mark One)
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended September 30, 2013
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from __________ to __________
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333-170096
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Commission File Number
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SOLO INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
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Nevada
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N/A
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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871 Coronado Center Dr. Ste 200, Henderson, NV
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89052
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(Address of principal executive offices)
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(Zip Code)
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(702) 330-3285
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(Registrant’s telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Exchange Act:
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Title of each class
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Name of each exchange on which registered
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n/a
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n/a
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Securities registered pursuant to Section 12(g) of the Exchange Act:
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Common Stock, $0.001 par value
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Title of class
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
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Yes
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No
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[X]
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
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Yes
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No
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[X]
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Yes
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[X]
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No
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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Yes
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[X]
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No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
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Yes
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No
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[X]
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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[X]
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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Yes
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No
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[X]
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The aggregate market value of voting and non-voting common stock held by non-affiliates of the registrant was approximately $573,300 (based on 88,200,000 shares held by non-affiliates and closing market price of $0.0065 per share as of March 29, 2013 (the last business day of the registrant’s most recently completed second quarter)), assuming solely for the purpose of this calculation that all directors, officers and greater than 10% stockholders of the registrant are affiliates. The determination of affiliate status for this purpose is not necessarily conclusive for any other purpose.
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APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST 5 YEARS:
Indicate by check mark whether the issuer has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
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Yes
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No
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APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
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288,200,000 shares of common stock issued and outstanding as of December 20, 2013
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DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g. Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes.
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None
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2
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Page
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PART I
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Business
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Risk Factors
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17 | |
| Item 1B | Unresolved Staff Comments | 23 |
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Properties
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Legal Proceedings
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Mine Safety Disclosures
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PART II
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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Selected Financial Data
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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26 | |
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Quantitative and Qualitative Disclosures About Market Risk
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28 | |
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Financial Statements and Supplementary Data
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28 | |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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30 | |
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Controls and Procedures
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30 | |
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Other Information
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PART III
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Directors, Executive Officers and Corporate Governance
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| Item 11 | Compensation | 35 |
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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Certain Relationships and Related Transactions, and Director Independence
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Principal Accounting Fees and Services
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PART IV
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Exhibits, Financial Statement Schedules
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3
Forward Looking Statements
This Annual Report on Form 10-K (“Annual Report”) contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" and the risks set out below, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
These risks include, by way of example and not in limitation:
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the uncertainty that we will not be able to successfully identify commercially viable resources on our exploration properties;
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risks related to the large number of established and well-financed entities that are actively competing for limited resources within the mineral property exploration field;
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risks related to the failure to successfully manage or achieve growth of our business if we are successful in identify a viable mineral resource, and;
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other risks and uncertainties related to our business strategy.
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This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.
Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
The safe harbors of forward-looking statements provided by Section 21E of the Exchange Act are unavailable to issuers of penny stock. As we issued securities at a price below $5.00 per share, our shares are considered penny stock and such safe harbors set forth under the Private Securities Litigation Reform Act of 1995 are unavailable to us.
Our financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common stock" refer to the common shares in our capital stock.
As used in this Annual Report, the terms "we," "us," “Company,” "our" and "Solo" mean Solo International, Inc., unless otherwise indicated.
Measurement & Currency
Conversion of metric units into imperial equivalents is as follows:
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Metric Units
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Multiply by
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Imperial Units
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hectares
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2.471
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= acres
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meters
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3.281
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= feet
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kilometers
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0.621
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= miles (5,280 feet)
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grams
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0.032
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= ounces (troy)
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tonnes
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1.102
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= tons (short) (2,000 lbs)
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grams/tonne
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0.029
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= ounces (troy)/ton
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Cautionary Note to United States Investors
We caution U.S. investors that the Company may have materials in the public domain that may use terms that are recognized and permitted under Canadian regulations, however the U.S. Securities and Exchange Commission (“S.E.C.”) may not recognize such terms. We have detailed below the differences in the SEC regulations as compared to the Canadian Regulations under National Instrument NI 43-101.
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S.E.C. Industry Code
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National Instrument 43-101 (“NI 43-101”)
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Reserve: That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. The United States Securities and Exchange Commission requires a final or full Feasibility Study to be completed in order to support either Proven or Probable Reserves and does not recognize other classifications of mineralized deposits. Note that for industrial mineral properties, in addition to the Feasibility Study, “sales” contracts or actual sales may be required in order to prove the project’s commerciality and reserve status.
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Mineral Reserve: The economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.
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Proven Reserves: Reserves for which a quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, grade and/or quality are computed from the results of detailed sampling; the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, share, depth and mineral content of reserves are well established.
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Proven Mineral Reserve: The economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.
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Probable Reserves: Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.
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Probable Mineral Reserve: The economically mineable part of an indicated, and in some circumstances, a Measured Mineral Resource, demonstrated by at least a Preliminary Feasibility Study. This study must include adequate information on mining, processing, metallurgical, and economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.
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The address of our principal executive office is 871 Coronado Center Dr., Ste 200, Henderson, NV 89052. Our telephone number is 702-330-3285.
Our common stock is quoted on the OTCBB (“Over-the-Counter- Bulletin-Board”) under the symbol "SLIO".
History of the Company
We were incorporated in the State of Nevada on April 30, 2010. Our original business plan was to operate an interior architectural design business in Poland, including programming and concept design, residential space planning, interior design, kitchen and bath design, decorating and color consultation, furniture and fixture acquisition, lighting design, start-to-finish project management. Due to a lack of revenue from our interior design services, towards the end of September 2011, we abandoned the original business plan and began seeking out potential mineral properties to acquire. We decided to enter the mining business because we were seeking out viable and feasible options to create value for our shareholders.
On October 13, 2011, the Company filed a Certificate of Change (the “Certificate of Change”) with the Nevada Secretary of State effectuating a 100 for 1 forward stock split of the issued and outstanding common stock of the Company. Additionally, as a result of the Certificate of Change, the Company increased the authorized number of common shares from seventy-five million (75,000,000) to nine hundred million (900,000,000) shares, par value $0.001 per share.
After conducting independent research on the feasibility of discovering and exploiting commercially recoverable amounts of ore, we determined that staking and exploring potential mineral claims could be an excellent long-term investment strategy that could potentially lead to lucrative business opportunities. Accordingly, we refocused the Company's business direction to include a new business plan based on the exploration of mineral claims. We are conducting business through our wholly-owned subsidiary, 9252-4768 Quebec Inc., as further described below.
Current Business
On November 15, 2011, the Company through its wholly-owned subsidiary, which was unnamed at the time (the “Optionee”), entered into a Property Option Agreement (the “Option Agreement”) with 9228-6202 Quebec Inc. (the “Optionor”), whereby the Optionee was granted the exclusive option (the “Option”) to acquire an undivided 100% right, title and interest in and to certain mineral claims located in Portland Township, Outaouais, Quebec, which consists of 2 mineral claims (CDC2261871(the “Philadelphia Claim”) and CDC2318741(an unnamed claim, the “Second Claim”)) totaling approximately 120 hectares currently staked and recorded (collectively the "Property"). On December 20, 2011, the Optionee and Optionor executed an Addendum to the Option Agreement (the “Addendum”), which incorporated all of the terms and conditions of the original Option Agreement and identified the Optionee subsidiary by its current name, 9252-4768 Quebec Inc.
To fully exercise the Option and acquire an undivided 100% right, title and interest in and to the Property, the Optionee was required to:
1) pay an aggregate sum of two hundred five thousand dollars ($205,000) to Optionor (the “Cash Payments”); 2) incur an aggregate of at least sixty-five thousand dollars ($65,000) of expenditures on or with respect to the Property (the “Expenditures”); and 3) issue to Optionor an aggregate number of restricted shares of common stock of the Company (the “Stock Issuances”) equal to twenty thousand US dollars ($20,000), as further set forth in the Option Agreement. The Cash Payments, Expenditures and Stock Issuances are herein collectively referred to as the “Option Price” and were to be paid as follows:
Cash Payments: The Optionee was required to pay the Cash Payments to Optionor in the following amounts and by the dates described below:
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$50,000 within 2 business days of the execution of this Option Agreement (the “First Option Payment”);
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ii.
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$70,000 within 30 days following the First Option Payment (the “Second Option Payment”);
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iii.
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$70,000 within 30 days following the Second Option Payment (the “Third Option Payment”);
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iv.
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$15,000 within 30 days following the Third Option Payment (the “Fourth Option Payment”);
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Expenditures: The Optionee was required to incur Expenditures on or with respect to the Property in the following amounts and by the dates described below:
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Incurring exploration expenditures on the Property of not less than $65,000 prior to the first anniversary of the execution of the Option Agreement or November 15, 2012;
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Stock Issuances: The Optionee was required to issue an aggregate number of restricted shares of common stock of the Company equal to twenty thousand US dollars ($20,000) pursuant to the terms and conditions of the Option Agreement.
Upon satisfaction of the foregoing terms and conditions, the Optionee would have fully exercised the Option and acquired an undivided 100% right, title and interest in and to the Property, subject to certain royalties reserved to Optionor per the terms of the Option Agreement, and in and to any resulting mineral permits or leases.
On November 27, 2012, the Option Agreement was further amended to revise the requirement to expend the $65,000 on exploration expenditures to read that the Optionee had earned its 100% right and interest in the Property for the payment of all expenditures to November 27, 2012 and for allowing the Optionor to utilize a portion of the expenditures expended by the Optionee to apply to certain of the Optionor’s claims.
As of the date of this Annual Report on Form 10-K, we have fulfilled all of our requirements under the Option Agreement, as amended and earned our 100% right, title and interest in and to the Property.
As of the date of this Report, we are an exploration stage company engaged in the acquisition and exploration of mineral properties, with a focus on the country of Canada. We have not acquired our first mineral Property and commenced exploration on the Property. We are currently negotiating to acquire further claims in the area. We intend to continue exploration on our already acquired Property.
At this point, we are considered an exploration or exploratory stage company because we are involved in the examination and investigation of land that we believe may contain valuable minerals for discovering the presence of these minerals, and their extent.
Our proposed exploration programs may not result in the discovery of commercially exploitable reserves of valuable minerals. Exploration for minerals is a speculative venture involving substantial risk. The probability of any mineral property ever having commercially exploitable reserves is unlikely, and it is probable that this Property may not contain any commercially exploitable reserves. If we are unable to find reserves of valuable minerals or if we cannot remove the minerals either because we do not have the capital to do so, or because it is not economically feasible to do so, then we will cease operations relating to the Property and we will attempt to seek out alternate properties. In the event that we cease operations relating to the Property, any funds received by the Company will be used to pay our working capital expenses and potential investors likely lose their investment in the Company.
Because we are an exploration stage company, there is no assurance that commercially viable mineral deposits exist on the Property, and a great deal of further exploration will be required before a final evaluation is made as to the economic viability of the Property. To date, we have no known reserves of any type of mineral on the Property and we have not discovered economically viable mineral deposits on the Property, and there is no assurance that we will discover such deposits.
If we decide to stop further exploration of the Property, we may seek to acquire other exploration properties. Any such acquisition(s) will involve due diligence costs in addition to the acquisition costs. We will also have an ongoing obligation to maintain our periodic filings with the appropriate regulatory authorities, which will involve legal and accounting costs. In the event that our available capital is insufficient to acquire an alternative resource property and sustain minimum operations, we will need to secure additional funding or else we will be compelled to discontinue our proposed business.
If commercially marketable quantities of valuable mineral deposits exist on the Property and sufficient funds are available, we will evaluate the technical and financial risks of mineral extraction, including an evaluation of the economically recoverable portion of the deposits, market rates for the minerals, engineering concerns, infrastructure costs, finance and equity requirements, safety concerns, regulatory requirements and an analysis of the Property from initial excavation all the way through to reclamation. After we conduct this analysis and determine that a given mineral deposit is worth recovering, we will begin the development process. Development will require us to obtain a processing plant and other necessary equipment including equipment to extract, transport and store the minerals.
The Property
The Philadelphia Claim is a 59.96 hectare claim with no exploration restriction located 3.6 km NE of Notre Dame-de-la-Salette (45° 46’ 04”N 75° 35’ 07”W), a small village of 745 people located in the Outaouais region of Quebec, and has an easy road access as it is 170 meters off of a main road. The Philadelphia Claim is currently recorded with the Ministere of Natural Resources Quebec. The claim gives the holder an exclusive right to search for mineral substances in the public domain, except sand, gravel, clay and other loose deposits, on the land subjected to the claim.
The Philadelphia Claim was obtained by map designation, henceforth the principal method for acquiring a claim, and the Philadelphia Claim was registered on November 29, 2010. The term of a claim is two years, from the day the claim is registered and it can be renewed indefinitely providing the holder meets all the conditions set out in the Mining Act, including the obligation to invest a minimum amount required in exploration work determined by regulation. The Act includes provisions to allow any amount disbursed to perform work in excess of the prescribed requirements to be applied to subsequent terms of the claim. The Philadelphia Claim registration is set to expire on November 28, 2014. We have met our expenditure requirements on the Claim and have renewed our registration, which will expire on November 28, 2014. Recent assessments of several areas near Notre Dame-de-la-Salette indicate recoverable deposits of apatite in the Philadelphia Claim previously mined in the late 1800’s. There are several other old mines near this location: McLaren, Lac Tamo, Craft, North Star and Chapleau.
Philadelphia Claim
The region surrounding Notre Dame-de-la-Salette, including the Buckingham region is a failed rift zone (aulacogen) corridor, which is a favorable environment for the presence of carbonatite. Apatite and REE’s are associated and often concentrated in carbonatites and associated alkaline rocks. REE’s are also demonstrated by the presence of the Oka pyrochlore-rich carbonatite deposit. Such concentration of REE’s in apatite may be interpreted as an alteration of carbonatite metasomatic ore-fluids.
The Philadelphia Claim is a past apatite (phosphor) producer; the production stage was carried out from 1880 to 1884 and about 2,000 tons of rocks were extracted from the Philadelphia Claim. The main pit is 13 by 5 meters large and 30 meters deep. The apatite is found within pyroxenite, gneiss and quartzite units which are part of the Grenville Group and is in a NE-SW oriented lode. The dimensions of the prospect are unknown. The mineralization is massive and consists of green and red apatite with micas. This apatite deposit seems to originate from an alteration around a pegmatite intrusion. It seems to be caused by the dissolution of phosphor into limestone and its re-concentration in the current deposit.
The Second Claim is currently recorded with the Ministere of Natural Resources Quebec. The Second Claim was also obtained by map designation, henceforth the principal method for acquiring a claim, and the Second Claim was registered on October 19, 2011. The term of the claim is two years, from the day the claim is registered and it can be renewed indefinitely providing the holder meets all the conditions set out in the Mining Act, including the obligation to invest a minimum amount required in exploration work determined by regulation. The Act includes provisions to allow any amount disbursed to perform work in excess of the prescribed requirements to be applied to subsequent terms of the claim. We have undertaken exploration work on this claim and this Claim has been renewed, with a new expiration date of October 18, 2015.
Work done on the Property to date is presented below under “Exploration Programs” on page 12.
Glossary of Technical Geological Terms
The following defined geological terms are used in this Report:
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Term
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Definition
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Alkali:
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A soluble salt consisting largely of potassium or sodium carbonate.
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Alkaline:
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Having the properties of an alkali, or containing alkali; having a pH greater than 7.
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Apatite:
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A mineral consisting of calcium phosphate with some fluorine, chlorine, and other elements.
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Carbonate:
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A salt of carbonic acid, characterized by the presence of the carbonate ion.
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Carbonatite:
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Intrusive or extrusive igneous rocks defined by mineralogic composition consisting of greater than 50 percent carbonate.
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Crystalline:
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Having the structure and form of a crystal; composed of crystals.
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Extrusive:
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Relating to or denoting rock that has been extruded at the earth's surface as lava or other volcanic deposits.
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Igneous Rock:
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A rock relating to, resulting from, or suggestive of the intrusion or extrusion of magma or volcanic activity.
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Intrusive:
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Igneous rocks that crystallize below Earth's surface.
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Gneiss:
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A layered or banded crystalline metamorphic rock the grains of which are aligned or elongated into a roughly parallel arrangement.
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Lode:
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A classic vein, ledge, or other rock in place between definite walls.
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Metallurgical:
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Of or relating to metallurgy.
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Metallurgy:
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A domain of materials science and of materials engineering that studies the physical and chemical behavior of metallic elements and their mixtures, which are called alloys.
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Metamorphic Rock:
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Rock altered by pressure or heat.
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Metasomatism:
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The chemical alteration of a rock by hydrothermal and other fluids.
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Mica:
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Any of a group of chemically and physically related aluminum silicate minerals, common in igneous and metamorphic rocks.
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Mineralization:
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The concentration of metals and their chemical compounds within a body of rock.
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Mafic:
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Describes a silicate mineral or rock that is rich in magnesium and iron.
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Mineralized Material:
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Projection of mineralization in rock based on geological evidence and assumed continuity.
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Ore:
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A type of rock that contains minerals with important elements including metals. The ores are extracted through mining; these are then refined to extract the valuable element(s).
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Pegmatite:
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A coarsely crystalline granite or other igneous rock with crystals several centimeters in length.
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Pyroxene:
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Any of a large class of rock-forming silicate minerals, generally containing calcium, magnesium, and iron.
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Pyroxenite:
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Ultramafic igneous rock consisting essentially of minerals of the pyroxene group.
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Quartz:
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A very hard mineral composed of silica, SiO2, found worldwide in many different types of rocks, including sandstone and granite.
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Quartzite:
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An extremely compact, hard, granular rock consisting essentially of quartz.
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Reserve:
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(For the purposes of this Report): That part of a mineral deposit, which could be economically and legally extracted or produced. Reserves consist of:
Proven (Measured) Reserves: Reserves for which: (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; (b) grade and/or quality are computed from the results of detailed sampling; and (c) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well-defined that size, shape, depth and mineral content of reserves are well-established.
Probable (Indicated) Reserves: Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.
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Rift Zone:
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A large area of the earth in which plates of the earth's crust are moving away from each other, forming an extensive system of fractures and faults.
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Silica:
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A hard, unreactive, colorless compound, SiO2, that occurs as the mineral quartz and as a principal constituent of sandstone and other rocks.
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Silicate:
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Any of numerous compounds containing silicon, oxygen, and one or more metals.
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Ultramafic:
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Relating to or denoting igneous rocks composed chiefly of mafic minerals.
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Vein:
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A fracture that has been filled with mineral material.
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Volcanic:
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Characteristic of, pertaining to, situated in or upon, formed in, or derived from volcanoes.
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Exploration Programs:
Phase I
The Company completed Phase 1 during the month of September, 2012, which was its initial survey consisting of prospecting and locating historic apatite mine sites and sampling of the mine sites located. The Company’s consulting geologist recommended commencing Phase II of the Company’s planned exploration program. The objective of the initial phase of exploration was to locate the historic mine site on the claims and sample the site to evaluate its REE content. Further the objective was to try to define if there is any zoning between heavy and light REE in the skarns. This initial phase was carried on between September 18 and 21, 2012 by a geologist and a technician. The crew was able to locate the old mine site, along with 2 other small open pits and many outcrops in the immediate surroundings. The site is easily accessible by main roads and a small walk through a clear bush road. 26 samples were taken on the main mine site, 11 blocks were sampled and 5 other samples were taken on other outcrops and pits. The samples were bagged on site and then sent to Val D'Or Minerals Lab for preparation by crushing (Split off 1kg and pulverize split to better than 85% passing 75 microns) and REE assaying by inductively coupled plasma mass spectrometry (ICP-MS). Apatite minerals found on site were sent to the University of Quebec's mineral lab to evaluate their REE contents with a scanning electron microscope.
Phase II
The second phase exploration program started on the 16th day of October, 2012. The exploration team was comprised of a senior geophysicist and a technician. Their objective was to find new mining pits in the surrounding area of the main historical pit site and to sample the new sites for REE. The team will also undertake a geophysical reconnaissance survey. A beep mat will be brought on the property to verify the geophysical signals of the skarns zones at surface, which is the host rock of apatite and REE. A Beep Mat BM4+ was used to evaluate if there are any electro magnetism and magnetism signals which will allow us to separate skarns zones and their surroundings close to the surface.
While the Company has received results it does not yet have a NI43-101 compliant report which will allow it to release the results in Canada as the Company is a reporting issuer in both Canada and the U.S. The Company finalized its NI43-101 report on May 9, 2013.
Plan of Operation
We have implemented our initial exploration program and completed our Phase I and Phase II exploration programs. We plan to continue to conduct mineral exploration activities on the Property to assess whether the Property contains mineral reserves capable of commercial extraction. To date, we have not identified any commercially exploitable reserves of minerals on the Property.
Phase III and Phase IV
A Phase III ground geophysical survey should be able to generate drilling targets for apatite in any skarn zones identified or elsewhere on the property. Phase IV will then either drill or mechanically strip the geophysical anomalies. Both third and fourth phases can be done even if the ground is frozen or if snow is present. We expect to begin these phases (Phase III and Phase IV) of the program on the second calendar quarter of 2014, assuming we have adequate funds to continue our operations. Phase III will consist of retaining a consultant(s) to conduct core sampling and analysis. Core sampling is the process of drilling holes to a depth of up to 100 feet in order to extract a sample of earth. Depending on the availability of funds, we intend to drill a minimum of 16 holes to a depth of 100 feet each (totaling 1,600 linear feet) and a maximum of 32 holes to a depth of 100 feet each (totaling 3,200 linear feet). We anticipate that it will take between one to three months to drill 16-32 holes to a depth of 100 feet each. Our estimated costs for drilling is approximately $20.00 per foot; thus to drill 16 holes to a depth of 100 feet, it will cost approximately $31,000 and to drill 32 holes to a depth of 100 feet, it will cost approximately $64,000. Additionally, we will pay a consultant(s) up to a maximum of $5,000 per month for his or her services during Phase III. We anticipate that it will take between one to three months to conduct Phase III; thus, we will pay the consultant(s) a minimum of $5,000 and a maximum of $15,000.
As part of Phase IIII, after core sampling, the consultant(s) will analyze the samples collected from the core drilling. The total estimated cost for analyzing the core samples is $3,500, and we estimate this process will take approximately 30 days. The core samples will be tested to determine if mineralized material is located on the Property. We intend to take our core samples to analytical chemists, geochemists and registered assayers located in Outaouais, Quebec. We have not selected any such persons as of the date of this Report. Based upon the tests of the core samples, we will determine if we will terminate operations, proceed with additional exploration of the Property, or develop the Property. If we do not find mineralized material or we cannot remove mineralized material, either because we do not have the funds or because it is not economically feasible to proceed, we will cease operations.
Total maximum expenditures for the exploration of the Property over the next 12 months are expected to range from approximately $100,000 to $300,000. If sufficient funds are available we will continue with Phase III and Phase IV until funds are no longer available. In the event we have enough money to begin but not to complete one of the Phases, we will cease operations until we raise more money. If we cannot or do not raise sufficient money to complete our planned Phases, or if our exploration activities are not successful, we will discontinue exploration of the Property and any funds spent on exploration will likely be lost.
|
Phase
|
Exploration Activities
|
Anticipated Timeframe
|
Cost
|
|||
|
Phase III & Phase IV
|
Retention of consultant(s) to conduct: Core sampling and analysis of samples derived from core sampling.
|
Expected to begin in the first calendar quarter of 2013 (dependent on funding).
|
$100,000 - $3000,000
(dependent on the number of holes drilled and the duration
of consultant’s services)
|
|||
|
TOTAL
|
$ | 100,000 – 300,000 | ||||
Quality Assurance/Quality Control
The data obtained from our exploration program will consist of survey data, sampling data, and assay results. Quality Assurance / Quality Control (QA/QC) protocols will be in place at the mining site and at the laboratory to test the sampling and analysis procedures.
The Company will utilize statistical methodologies to calculate mineral reserves based on interpolation between and projection beyond sample points. Interpolation and projection are limited by certain factors including geologic boundaries, economic considerations and constraints to safe mining practices. Sample points will consist of variably spaced drill core intervals obtained from drill sites located on the surface and in underground development workings. Results from all sample points within the mineral reserve area will be evaluated and applied in determining the mineral reserves.
Samples will be sent to a laboratory for analyses. The samples will be under a strict monitoring and tracking system from log-in to completion. Samples will be logged-in immediately upon receipt and carefully checked for any special handling that may be needed. All analytical procedures, sample handling, and preservation techniques used will strictly adhere to those approved by the Canadian Environmental Protection Act Environmental Registry (“CEPA Registry”), where applicable. To test assay accuracy and reproducibility, pulps from core samples will be submitted and then resubmitted for analysis and compared. To test for sample errors or cross-contamination, blank core (waste core) samples will be submitted with the mineralized samples and compared. Reference samples from the CEPA Registry or from private sources will also be tested with every set of samples to provide an additional measure of accuracy.
The QA/QC protocols will be practiced on both resource development and production samples. The data will be entered into a 3-dimensional modeling software package and analyzed to produce a 3-dimensional solid block model of the resource. The assay values will be further analyzed by a geostatistical modeling technique to establish a grade distribution within the 3-dimensional block model. Dilution will then be applied to the model and a diluted tonnage and grade will be calculated for each block. Mineral and waste tons, contained ounces and grade will then be calculated and summed for all blocks. A percent mineable factor based on historic geologic unit values will be applied and the final proven reserve tons and grade will be calculated.
The Company will review its methodology for calculating mineral reserves on an annual and as-needed basis. Conversion, an indicator of the success in upgrading probable mineral reserves to proven mineral reserves, will be evaluated as part of the reserve process. The review will examine the effect of new geologic information, changes implemented or planned in mining practices and mine economics on factors used for the estimation of probable mineral reserves. The review will include an evaluation of the Company’s rate of conversion of probable reserves to proven reserves.
The Industry
Quebec has what may be large deposits of apatite, the parent mineral for rare earth elements (“REE”). REE’s are a collection of seventeen (17) chemical elements in the periodic table, namely scandium, yttrium and the fifteen (15) lanthanides. They are commonly used for high tech applications, alternative energy technologies, and defense technologies. For example, REE’s are used in wind power generation, fuel cells, rechargeable batteries, hydrogen storage, radar deflection, stealth detection, night vision and permanent magnets used in electric and electric-hybrid vehicles. Generally, REE’s cannot be replaced by an alternative, making them virtually essential to our technological world. Deposits of REE’s in high concentrations are relatively rare.
REE’s are moderately abundant in the earth’s crust, some even more abundant than copper, lead, gold, and platinum. While more abundant than many other minerals, REE’s are not concentrated enough to make them easily exploitable economically. China is the current global leader in supplying REE’s.
World Mine Production and Reserves
|
Country
|
Mine Production
|
Reserves
|
|
|
2011
|
2012
|
||
|
United States
|
-
|
7,000
|
13,000,000
|
|
Australia
|
2,200
|
4,000
|
1,600,000
|
|
Brazil
|
250
|
300
|
36,000
|
|
China
|
105,000
|
95,000
|
55,000,000
|
|
India
|
2,800
|
2,800
|
3,100,000
|
|
Malaysia
|
280
|
350
|
30,000
|
|
Other countries
|
N/A
|
N/A
|
41,000,000
|
|
World Total
|
111,000
|
110,000
|
110,000,000
|
Source: U.S. Department of the Interior, Mineral Commodity Summaries, USGS, January 2013.
|
1.
|
Reserve Base is defined by the USGS to include reserves (both economic and marginally economic) plus some subeconomic resources (i.e., those that may have potential for becoming economic reserves).
|
China*
China, the predominant supplier. announced regulations on exports and a crackdown on smuggling. On September 1, 2009, China announced plans to reduce its export quota to 35,000 tons per year in 2010–2015, ostensibly to conserve scarce resources and protect the environment. On October 19, 2010 China Daily, citing an unnamed Ministry of Commerce official, reported that China will "further reduce quotas for rare earth exports by 30 percent at most next year to protect the precious metals from over-exploitation". At the end of 2010 China announced that the first round of export quotas in 2011 for rare earths would be 14,446 tons which was a 35% decrease from the previous first round of quotas in 2010. China announced further export quotas on 14 July 2011 for the second half of the year with total allocation at 30,184 tons with total production capped at 93,800 tonnes. In September 2011 China announced the halt in production of three of its eight major rare earth mines, responsible for almost 40% of China's total rare earth production. In March 2012, the U.S., E.U., and Japan confronted China at WTO about these export and production restrictions. China responded with claims that the restrictions had environmental protection in mind. In August 2012, China announced a further 20% reduction in production. These restrictions have damaged industries in other countries and forced producers of rare earth products to relocate their operations to China. The Chinese restrictions on supply failed in 2012 as prices dropped in response to the opening of other sources.
Outside of China*
As a result of the increased demand and tightening restrictions on exports of the metals from China, some countries are stockpiling rare earth resources. Searches for alternative sources in Australia, Brazil, Canada, South Africa, Tanzania, Greenland, and the United States are ongoing. Mines in these countries were closed when China undercut world prices in the 1990s, and it will take a few years to restart production as there are many barriers to entry. One example is the Mountain Pass mine in California, that announced its resumption of operations on a start-up basis on August 27, 2012. Other significant sites under development outside of China include the Nolans Project in Central Australia, the remote Hoidas Lake project in northern Canada, and the Mount Weld project in Australia. The Hoidas Lake project has the potential to supply about 10% of the $1 billion of REE consumption that occurs in North America every year. Vietnam signed an agreement in October 2010 to supply Japan with rare earths from its northwestern Lai Châu Province.
Also under consideration for mining are sites such as Thor Lake in the Northwest Territories, various locations in Vietnam,[14][20][39] and a site in southeast Nebraska in the US, where Quantum Rare Earth Development, a Canadian company, is currently conducting test drilling and economic feasibility studies toward opening a niobium mine. Additionally, a large deposit of rare earth minerals was recently discovered in Kvanefjeld in southern Greenland. Pre-feasibility drilling at this site has confirmed significant quantities of black lujavrite, which contains about 1% rare earth oxides (REO). The European Union has urged Greenland to restrict Chinese development of rare-earth projects there, but as of early 2013, the government of Greenland has said that it has no plans to impose such restrictions. Many Danish politicians have expressed concerns that other nations, including China, could gain influence in thinly populated Greenland, given the number of foreign workers and investment that could come from Chinese companies in the near future because of the law passed December 2012.
Adding to potential mine sites, ASX listed Peak Resources announced in February 2012, that their Tanzanian based Ngualla project contained not only the 6th largest deposit by tonnage outside of China, but also the highest grade of rare earth elements of the 6.
*Source – Wikipedia (http://en.wikipedia.org/wiki/Rare_earth_element)
Current Trends and Information:
China’s virtual monopoly on rare earth elements used in high-technology applications has been loosened, decreasing the risk that supplies to U.S. defense contractors could be disrupted, according to the Pentagon’s latest assessment of the nation’s industrial base.
“Global market forces are leading to positive changes in rare earth supply chains, and a sufficient supply of most of these materials likely will be available to the defense industrial base,” said the Pentagon report by Elana Broitman, the Defense Department’s top official on the U.S. industrial base. “Prices for most rare earth oxides and metals have declined approximately 60 percent from their peaks in the summer of 2011.”
Rare earths are 17 chemically similar elements used in products from Apple Inc.’s iPads and hybrid-electric cars to smart bombs and Tomahawk cruise missiles made by Raytheon Co.
“An increase in supply of material from outside of China” and the substitution of other substances have reduced reliance on China since 2011, when it controlled 95 percent of the world’s supply and imposed export restrictions, said the report, which was sent to Congress last week.
Congress in 2011 required the Pentagon to examine the use of rare earth materials in defense applications, determine if non-U.S. supplies might be disrupted, and suggest ways to ensure long-term availability, as well as secure an assured source of supply by 2015.
Defense Research
The Defense Department is “conducting research in cooperation with a domestic producer to develop an economic and environmentally superior process for producing rare earth metals,” according to the report, which said that defense requirements generally are a small percentage of demand for the materials.
“These conclusions are wishful thinking, not a defense strategy,” Jeff Green, president of J.A. Green & Co. in Washington, who represents miners and users of the elements, said in an e-mailed statement.
“We still have no producers of the more defense-critical heavy rare earths, and significant gaps remain in the domestic production of metal, alloy and magnets, all found in our most critical weapons, with no appreciable investment planned to solve the production problem,” he said.
*Source – Bloomberg Businessweek – December 18, 2013.
Identification of Certain Significant Employees
We have no significant employees other than our sole officer and director described below under “Directors and Executive Officers”. We intend to retain independent geologists and consultants on a contract basis to conduct the work programs on the Property in order to carry our plan of operations.
Government Regulation
We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in Portland Township, Outaouais, Quebec in Canada, including those which govern prospecting, mineral exploration, drilling, mining, production, mineral extraction, transportation of minerals, taxes, labor standards, occupational health, waste disposal, protection of the environment, mine safety, hazardous substances and several other matters. We believe that we are in compliance in all material respects with applicable mining, health, safety and environmental statutes and the regulations promulgated by Quebec and the Canadian Federal Government. Currently, there are no costs associated with our compliance with such regulations and laws. There is presently no need for any government approval of our business or our anticipated mineral products.
Additional approvals and authorizations may be required from other government agencies, depending upon the nature and scope of the proposed exploration program. The amount of these costs is not known as we do not know the size, quality of any resource or reserve at this time. It is impossible to assess the impact of any capital expenditures on earnings or our competitive position.
Environmental Regulations
Our exploration activities are also subject to various federal and local laws and regulations governing protection of the environment. These laws are continually changing and, as a general matter, are becoming more restrictive. Our policy is to conduct business in a way that safeguards public health and the environment and in material compliance with applicable environmental laws and regulations. Changes to current local or federal laws and regulations in the jurisdictions where we operate could require additional capital expenditures and increased operating costs. Although we are unable to predict what additional legislation and the associated costs of such legislation, if any, might be proposed or enacted, additional regulatory requirements could render certain exploration activities uneconomic.
Insurance
We do not maintain any insurance and do not intend to maintain insurance in the future. Because we do not have any insurance, if we are made a party of a legal action, we may not have sufficient funds to defend the litigation. If that occurs a judgment could be rendered against us that could cause us to cease operations.
Competition
We are a junior mineral resource exploration company. We compete with other mineral resource exploration companies for financing and for the acquisition of new mineral properties. Many of the mineral resource exploration companies with whom we compete have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford more geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and development. This competition could adversely impact our ability to achieve the financing necessary for us to conduct further exploration of our mineral properties.
We will also compete with other junior mineral exploration companies for financing from a limited number of investors that are prepared to make investments in junior mineral exploration companies. The presence of competing junior mineral exploration companies may impact our ability to raise additional capital in order to fund our exploration programs if investors are of the view that investments in competitors are more attractive based on the merit of the mineral properties under investigation and the price of the investment offered to investors.
We will also compete with other junior and senior mineral companies for available resources, including, but not limited to, professional geologists, camp staff, helicopter or float planes, mineral exploration supplies and drill rigs.
Subsidiaries
We have one wholly-owned subsidiary incorporated in Quebec, Canada named 9252-4768 Quebec Inc., and we are currently conducting our business through this subsidiary.
Patents and Trademarks
We do not own, either legally or beneficially, any patents or trademarks.
Research and Development Expenditures
We have not incurred any research or development expenditures since our incorporation.
WHERE YOU CAN GET ADDITIONAL INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy our reports or other filings made with the SEC at the SEC’s Public Reference Room, located at 100 F Street, N.E., Washington, DC 20549. You can obtain information on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You can also access these reports and other filings electronically on the SEC’s web site, www.sec.gov.
RISKS RELATING TO OUR COMPANY
We are an exploration stage company and may never be able to carry out our proposed business or achieve any revenues or profitability; at this stage of our business, even with our good faith efforts, potential investors have a high probability of losing their entire investment.
We are subject to all of the risks inherent in the establishment of a new business enterprise. We have just begun the initial stages of exploration of the Property, and thus have no way to evaluate the likelihood that our business will be successful. We were incorporated on April 30, 2010 and after refocusing our operations to mining, we currently have been involved primarily in organizational activities and the acquisition of our mineral claim interests. We have earned no revenues as of the date of this Report. Potential investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.
There is nothing at this time on which to base an assumption that our proposed business operations will prove to be successful or that we will ever be able to operate profitably. We anticipate that we will incur increased operating expenses without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We may not be able to successfully effectuate our business. There can be no assurance that we will ever achieve any revenues or profitability. The revenue and income potential of our proposed business and operations is unproven as the lack of operating history makes it difficult to evaluate the future prospects of our business.
We expect to incur operating losses in the future because we have no revenue.
Since our inception through September 30, 2013, the Company has earned no revenue and has incurred a net loss of $960,853. We do not anticipate earning revenues until such time as we enter into commercial production of the Property. We expect to incur operating losses in future periods. We cannot guarantee that we will ever be successful in generating revenues in the future. We recognize that if we are unable to generate revenues, we will not be able to earn profits or continue operations which will have a significant negative impact on the Company's operations.
Key management personnel may leave the Company, which could adversely affect the ability of the Company to continue operations.
The Company is entirely dependent on the efforts of its President because of the time and effort that he devotes to the Company. Mr. Michael Cooper Smith currently devotes between 5 and 10 hours per week to our business and any additional time when required. He is in charge of supervising all exploration programs that we carry out including supervision of any consultants or contractors that we engage to assist in exploration. The loss of Mr. Cooper Smith could have a material adverse effect on the business and its prospects and there is no guarantee that replacement personnel, if any, will help the Company to operate profitably. The Company does not maintain key person life insurance on its President.
Because our sole director and officer has no experience in mineral exploration and does not have formal training specific to the technicalities of mineral exploration, there is a higher risk our business will fail.
Our sole director and officer has no experience in mineral exploration and does not have formal training as a geologist or in the technical aspects of management of a mineral exploration company. As a result of his inexperience, there is a higher risk of our being unable to complete our business plan for the exploration of the Property. In addition, we will have to rely on the technical services of others with expertise in geological exploration in order for us to carry out our planned exploration program. If we are unable to contract for the services of such individuals, it will make it difficult and maybe impossible to pursue our business plan. There is thus a higher risk that our operations, earnings and ultimate financial success could suffer irreparable harm and our business will likely fail and you will lose your entire investment in our common stock.
Because our sole director and officer has other business interests, he may not be able or willing to devote a sufficient amount of time to our business operation, causing our business to fail.
Our sole director and officer currently devotes between 5 and 10 hours per week to our business. While he presently possesses adequate time to attend to our interests, it is possible that the demands on him from other obligations could increase with the result that he would no longer be able to devote sufficient time to the management of our business. This could negatively impact our business development.
We may not be able to attract and maintain key management personnel to manage the Company or geological consultants to carry out our proposed business operations, which could have a material adverse effect on our business.
Our ability to develop our business depends in large part, on our ability to attract and maintain qualified key management personnel to manage the Company and geological consultants to carry out our exploration activities. Competition for such persons is intense, and we cannot assure you that we will be able to attract and retain them. Our development now and in the future will depend on the efforts of these people, including our sole officer and director, Mr. Plante and the loss or inability to attract these people could have a material adverse effect on our business.
If we are not able to obtain further financing, our proposed business operations may fail.
We do not expect to generate substantial revenues to fund our ongoing operations in the foreseeable future. Accordingly, we will require additional funds, either from equity or debt financing, to maintain our daily operations and to develop the Property. Obtaining additional financing is subject to a number of factors, including market prices for minerals and investor acceptance of our proposed activities. Financing, therefore, may not be available on acceptable terms, if at all. The most likely source of future funds presently available to us is through the sale of equity capital. Any sale of share capital, however, will result in dilution to existing shareholders. If we are unable to raise additional funds when required, we may be forced to delay our plan of operations and our entire business may fail.
Our business could be impaired if we fail to comply with applicable regulations.
Failure to comply with government regulations could subject us to civil and criminal penalties, require us to forfeit our rights to the Property, and affect the value of our assets. We may also be required to take corrective actions for failure to comply with applicable regulations, which could require substantial capital expenditures. We could also be required to indemnify our officers and directors in connection with any expenses or liabilities that they may incur individually in connection with regulatory action against them for non-compliance. As a result, our future business prospects could deteriorate due to regulatory constraints, and our profitability could be impaired by our obligation to provide such indemnification to our employees.
Our Articles of Incorporation exculpate our officers and directors from any liability to our Company or our stockholders.
Our Articles of Incorporation contain a provision limiting the liability of our officers and directors for their acts or failures to act, except for acts involving intentional misconduct, fraud or a knowing violation of law. This limitation on liability may reduce the likelihood of derivative litigation against our officers and directors and may discourage or deter our stockholders from suing our officers and directors based upon breaches of their duties to our Company.
Because we do not have an audit or compensation committee, shareholders will have to rely on our sole officer and director, who is not independent, to perform these functions.
We do not have an audit or compensation committee. The functions of such committees are performed by our sole officer and director, who is not independent. Thus, there is a potential conflict of interest in that our sole officer and director has the authority to determine issues concerning management compensation and audit issues that may affect management decisions.
We have a “going concern” opinion from our auditors, indicating the possibility that we may not be able to continue to operate.
Our independent registered public accountants have expressed substantial doubt about our ability to continue as a going concern. This opinion could materially limit our ability to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital when needed, we will not be able to complete our proposed business. As a result we may have to liquidate our business and investors may lose their investments. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish its plan of operations described herein and eventually attain profitable operations. You should consider our independent registered public accountant’s comments when determining if an investment in the Company is suitable.
RISKS ASSOCIATED WITH OUR PROPOSED BUSINESS
Our exploration activities may not be commercially successful, which could lead us to abandon our plans to develop the mineral Property and our investments in exploration.
Our long-term success depends on our ability to establish commercially recoverable quantities of minerals on the Property. Mineral exploration is highly speculative in nature, involves many risks and is frequently non-productive. Substantial expenditures are required to establish proven and probable reserves through drilling and analysis, to develop metallurgical processes to extract metal, and to develop the mining and processing facilities and infrastructure at any site chosen for mining. Whether a mineral deposit will be commercially viable depends on a number of factors, which include, without limitation, the particular attributes of the deposit, such as size, grade and proximity to infrastructure; metal prices, which fluctuate widely; and government regulations, including, without limitation, regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection.
We may invest significant capital and resources in exploration activities and abandon such investments if they are unable to identify commercially exploitable mineral reserves. The decision to abandon a project may reduce the price of our common stock which is currently quoted on the OTC Bulletin Board, and impair our ability to raise future financing. We cannot provide any assurance to investors that we will discover or acquire any mineralized material in sufficient quantities underlying the Property to justify commercial operations. Further, we will not be able to recover the funds that we spend on exploration if we are not able to establish commercially recoverable quantities of mineral on the Property.
Since we do not have a backup program, if results from our initial work program are negative, anyone purchasing our stock will likely lose their entire investment.
If the results from the initial phase of work are negative and do not warrant additional phases of exploration work, we will need to seek other mineral exploration opportunities. We cannot guarantee that we will have enough funds to purchase an additional property, have a geological report prepared, and complete exploration work on the Property. If the results from the initial phase of work on the Property are negative and we cannot find another feasible exploration opportunity, anyone purchasing our stock will likely lose their entire investment.
Because the probability of an individual mineral claim ever having reserves is extremely remote, any funds spent on exploration will probably be lost.
The probability of an individual mineral claim ever having reserves is extremely remote. Accordingly, if the Property does not contain reserves, we will likely have to cease operations and as a result, our business may fail. As such, any funds spent on exploration will probably be lost, which could result in a loss of your entire investment.
As we undertake exploration of the land underlying the Property, we will be subject to compliance with government regulation that may increase the anticipated time and cost of our exploration program.
We will be subject to the mining laws and regulations of the country of Canada as we carry out our exploration program. We may be required to obtain work permits, post bonds and perform remediation work for any physical disturbance to the land in order to comply with these regulations. While our planned exploration program budgets for regulatory compliance, there is a risk that new regulations could increase our time and costs of doing business and prevent us from carrying out our exploration program.
We are subject to risks inherent in the mining industry, and at present we do not have any insurance against such risks. Any losses we may incur that are associated with such risks may cause us to incur substantial costs which will have a material adverse effect upon our results of operations.
Any mining operations that we may undertake in the future will be subject to risks normally encountered in the mining business. Mining for valuable minerals is generally subject to a number of risks and hazards, including environmental hazards, industrial accidents, labor disputes, unusual or unexpected geological conditions, pressures, cave-ins, changes in the regulatory environment and natural phenomena such as inclement weather conditions. At the present time, we do not intend to obtain insurance coverage and even if we were to do so, no assurance can be given that such insurance will continue to be available or that it will be available at economically feasible premiums. Additionally, insurance coverage may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards as a result of exploration and production is not generally available to companies in the mining industry on acceptable terms. We might also become subject to liability for pollution or other hazards, which may not be insured against or which we may elect not to insure against because of premium costs or other reasons. Losses from these events may cause us to incur significant costs that could have a material adverse effect upon our financial performance and results of operations. Such costs could potentially exceed our asset value and cause us to liquidate all of our assets, resulting in the loss of your entire investment in our common stock.
Estimates of mineralized material are subject to evaluation uncertainties that could result in project failure.
Our exploration and future mining operations, if any, will be subject to risks associated with being able to accurately predict the quantity and quality of mineralized material within the earth using statistical sampling techniques. Estimates of any mineralized material on the Property would be made using samples obtained from appropriately placed underground workings and intelligently designed drilling. There is an inherent variability of assays between check and duplicate samples taken adjacent to each other and between sampling points that cannot be reasonably eliminated. Additionally, there also may be unknown geologic details that have not been identified or correctly appreciated at the current level of accumulated knowledge about the Property. This could result in uncertainties that cannot be reasonably eliminated from the process of estimating mineralized material. If these estimates were to prove to be unreliable, we could implement an exploration plan that may not lead to commercially viable operations in the future.
Because of the fiercely competitive nature of the mining industry, we may be unable to maintain or acquire attractive mining properties on acceptable terms, which will materially affect our financial condition.
The mining industry is competitive in all of its phases. We face strong competition from other mining companies in connection with the acquisition of properties producing, or capable of producing, precious and base metals. Many of these companies have greater financial resources, operational experience and technical capabilities. As a result of this competition, we may be unable to maintain or acquire attractive mining properties on terms we consider acceptable or at all. Consequently, our revenues, operations and financial condition could be materially adversely affected.
We may not be able to obtain, renew or continue to comply with all of the permits necessary to develop and operate the Property, which would force us to discontinue development or operations.
Pursuant to Canadian law, we must obtain various approvals, licenses or permits in connection with the development and operations of the Property including environmental protection and the use of water resources. In addition to requiring permits for the development of and production at the Property, we may need to obtain other permits and approvals during the life of any exploration projects we undertake on the Property. Obtaining, renewing and continuing to comply with the necessary governmental permits and approvals can be a complex, costly, time-consuming process. The failure to obtain or renew the necessary permits or licenses or continue to meet their requirements could delay development, increase our costs or, in some cases, require us to discontinue mining operations.
Our activities are subject to complex laws, significant government regulations and accounting standards that may delay or prevent operations at the Property and can adversely affect our operating and development costs, the timing of our operations, our ability to operate and our financial results.
Our proposed business, mining operations and exploration and development activities are subject to extensive Canadian, United States, and other foreign, federal, state, provincial, territorial and local laws and regulations and also exploration, development, production, exports, taxes, labor standards, waste disposal, protection of the environment, reclamation, historic and cultural resource preservation, mine safety and occupational health, reporting and other matters, as well as accounting standards. Compliance with these laws, regulations and standards or the imposition of new such requirements could adversely affect our operating and development costs, the timing of our operations, our ability to operate and our financial results. These laws and regulations governing various matters include:
|
1.
|
environmental protection;
|
|
2.
|
management of natural resources;
|
|
3.
|
exploration, development of mines, production and post-closure reclamation;
|
|
4.
|
price controls;
|
|
5.
|
taxation;
|
|
6.
|
labor standards and occupational health and safety, including mine safety;
|
|
7.
|
historic and cultural preservation; and
|
|
8.
|
general accepted accounting principles.
|
The costs associated with compliance with these laws and regulations may be substantial and possible future laws and regulations, or more stringent enforcement of current laws and regulations by governmental authorities, could cause additional expense, capital expenditures, restrictions on or suspensions of our operations and delays in the development of the Property. These laws and regulations may allow governmental authorities and private parties to bring lawsuits based upon damages to property and injury to persons resulting from the environmental, health and safety impacts of our future operations, and could lead to the imposition of substantial fines, penalties or other civil or criminal sanctions. In addition, our failure to comply strictly with applicable laws, regulations and local practices relating to permitting applications or reporting requirements could result in loss, reduction or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners. Any such loss, reduction, expropriation or imposition of partners could have a materially adverse effect on our operations or business.
If we do not find a joint venture participant for the development of the Property, we may not be able to advance exploration work.
If the initial results of our mineral exploration program are successful, we may try to enter into a joint venture agreement with a third party for the further exploration and possible production of the Property. We would face competition from other junior mineral resource exploration companies if we attempt to enter into a joint venture agreement with a third party. A prospective joint venture participant could have a limited ability to enter into joint venture agreements with junior exploration companies, and would likely seek junior exploration companies who have the properties that it deems to be the most attractive in terms of potential return and investment cost. In addition, if we entered into a joint venture agreement, we would likely assign a percentage of our interest in the Property to the joint venture participant. If we are unable to enter into a joint venture agreement with a third party, we may fail to develop the Property and you will lose your entire investment in our common stock.
RISKS RELATING TO THE COMMON STOCK
The Company’s stock price may be volatile.
The market price of the Company’s common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond the Company’s control, including the following:
|
(1)
|
the ability of the Company to establish commercially recoverable quantities of minerals;
|
|
(2)
|
competition;
|
|
(3)
|
additions or departures of key personnel;
|
|
(4)
|
the Company’s ability to execute its business plan;
|
|
(5)
|
operating results that fall below expectations;
|
|
(6)
|
industry developments;
|
|
(7)
|
economic and other external factors; and
|
|
(8)
|
period-to-period fluctuations in the Company’s financial results.
|
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of the Company’s common stock.
The Company’s common stock is currently deemed to be “penny stock”, which makes it more difficult for investors to sell their shares.
The Company’s common stock is and will be subject to the “penny stock” rules adopted under section 15(g) of the Exchange Act. The penny stock rules apply to companies whose common stock is not listed on the NASDAQ Stock Market or other national securities exchange and trades at less than $5.00 per share or that have tangible net worth of less than $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If the Company remains subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for the Company’s securities. If the Company’s securities are subject to the penny stock rules, investors will find it more difficult to dispose of the Company’s securities.
FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.
The Financial Industry Regulatory Authority (“FINRA”) has adopted rules that relate to the application of the SEC’s penny stock rules in trading our securities and require that a broker/dealer have reasonable grounds for believing that the investment is suitable for that customer, prior to recommending the investment. Prior to recommending speculative, low priced securities to their non-institutional customers, broker/dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information.
Under interpretations of these rules, the FINRA believes that there is a high probability that speculative, low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker/dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity and liquidity of our common stock. Further, many brokers charge higher transactional fees for penny stock transactions. As a result, fewer broker/dealers may be willing to make a market in our common stock, reducing a shareholder’s ability to resell shares of our common stock.
None.
We currently utilize a corporate office center, which costs approximately $80 per month, located at 871 Coronado Center Drive, Suite 200, Henderson, Nevada 89052 and our telephone number is (702) 330-3285, and additional costs are billed depending on our usage of the corporate office center. These offices provide mail and the use of office facilities as required. As of the date of this filing, we have not sought to move or change our office site. Additional space may be required as we expand our operations. We do not foresee any significant difficulties in obtaining any required additional space. We currently do not own any real property. Our former subsidiary offices located in Montreal, Quebec at Suite 2500, 1155 Boul Rene-Levesque West, Montreal, Quebec, were vacated subsequent to year end. During the fiscal year ended September 30, 2013 we paid fees for these offices of approximately $225 per month.
On November 15, 2011, the Company, through its wholly-owned subsidiary, 9252-4768 Quebec Inc. (the “Optionor”), executed a Property Option Agreement with 9228-6202 Quebec Inc., whereby the Optionor was granted the exclusive option to acquire an undivided 100% right, title and interest in and to certain mineral claims located in Portland Township, Outaouais, Quebec (the "Property"), which consists of 2 mineral claims (CDC2261871(the “Philadelphia Claim”) and CDC2318741(the “Second Claim”)) totaling approximately 120 hectares currently staked and recorded.
The Philadelphia Claim is a 59.96 hectare claim with no exploration restriction located 3.6 km NE of Notre Dame-de-la-Salette (45° 46’ 04”N 75° 35’ 07”W), a small village of 745 people located in the Outaouais region of Quebec, and has an easy road access as it is 170 meters off of a main road. The Philadelphia Claim is currently recorded with the Ministere of Natural Resources Quebec. The claim gives the holder an exclusive right to search for mineral substances in the public domain, except sand, gravel, clay and other loose deposits, on the land subjected to the claim. The Philadelphia Claim was obtained by map designation, henceforth the principal method for acquiring a claim, and the Philadelphia Claim was registered on November 29, 2010. The term of a claim is two years, from the day the claim is registered and it can be renewed indefinitely providing the holder meets all the conditions set out in the Mining Act, including the obligation to invest a minimum amount required in exploration work determined by regulation. The Act includes provisions to allow any amount disbursed to perform work in excess of the prescribed requirements to be applied to subsequent terms of the claim. The Philadelphia Claim registration is set to expire on November 28, 2014, unless it is renewed. The Company can renew this claim by undertaking work on the claim. Recent assessments of several areas near Notre Dame-de-la-Salette indicate recoverable deposits of apatite in the Philadelphia Claim previously mined in the late 1800’s. There are several other old mines near this location: McLaren, Lac Tamo, Craft, North Star and Chapleau.
The Second Claim is currently recorded with the Ministere of Natural Resources Quebec. The Second Claim was also obtained by map designation, henceforth the principal method for acquiring a claim, and the Second Claim was registered on October 19, 2011. The term of the claim is two years, from the day the claim is registered and it can be renewed indefinitely providing the holder meets all the conditions set out in the Mining Act, including the obligation to invest a minimum amount required in exploration work determined by regulation. The Act includes provisions to allow any amount disbursed to perform work in excess of the prescribed requirements to be applied to subsequent terms of the claim. The Second Claim registration is set to expire on October 18, 2015. The Company may renew this claim by continuing to undertake work on the claim.
We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
Not Applicable
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
Market Information
Our common stock has been quoted on the OTC Bulletin Board since December 23, 2010 under the symbol “SLIO” and began trading on December 7, 2011. Because we are quoted on the OTC Bulletin Board, our securities may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be obtained if they were listed on a national securities exchange.
The following table sets forth the high and low bid prices for our Common Stock per quarter as reported by the OTCBB since for the last two fiscal years ended September 30, 2013 and September 30, 2012. These prices represent quotations between dealers without adjustment for retail mark-up, markdown or commission and may not represent actual transactions.
|
Quarter
|
High ($)
|
Low ($)
|
||||||
|
4th Quarter ended 9/30/2013
|
0.0060 | 0.0010 | ||||||
|
3rd Quarter ended 6/30/2013
|
0.0124 | 0.0021 | ||||||
|
2nd Quarter ended 3/31/ 2013
|
0.0225 | 0.0050 | ||||||
|
1st Quarter ended 12/31/2012
|
0.1340 | 0.0085 | ||||||
|
4th Quarter ended 9/30/2012
|
0.10 | 0.03 | ||||||
|
3rd Quarter ended 6/30/2012
|
0.10 | 0.04 | ||||||
|
2nd Quarter ended 3/31/ 2012
|
0.10 | 0.04 | ||||||
|
1st Quarter ended 12/31/2011
|
0.11 | 0.09 | ||||||
The above information was prepared by the Company from data on OTC Markets. The quotations provided may reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
Holders
As of December 20, 2013, there were 26 record holders of the Company’s common stock (which number does not include the number of stockholders whose shares are held by a brokerage house or clearing agency, but does include such brokerage houses or clearing agencies as one record holder).
Dividends
On October 13, 2011, Board of Directors of the Company authorized a forward split (the “Forward Split”) of its issued and outstanding common shares, whereby every one (1) old share of common stock shall be exchanged for one hundred (100) new shares of the Company's common stock. As a result, the issued and outstanding shares of common stock increased from three million eight hundred eighty thousand (3,880,000) prior to the Forward Split to three hundred eighty eight million (388,000,000) following the Forward Split. FINRA confirmed approval of the Forward Split, payable as a dividend to shareholders, and the Forward Split became effective on October 21, 2011. The Forward Split shares were payable upon surrender of certificates to the Company's transfer agent.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
Recent Sales of Unregistered Securities:
On December 18, 2013, we entered into a securities purchase agreement to raise a total of $22,500, through a private offering of a convertible promissory note, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended (the “Act”), and Rule 506 of Regulation D. The investor is an accredited investor pursuant to Rule 501(a) of Regulation D.
The material terms of the Note are as follows:
The Note shall bear interest at 8% per annum until September 20, 2014 (the “Maturity Date”), at which time, unless converted, all principal and accrued interest shall be due and payable. Any amount of principal or interest on the Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. The holder shall have the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of the note (dated December 18, 2013) to convert the Note, in whole or in part, into full paid and non-assessable shares of Common Stock. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price which shall mean shall mean 55% multiplied by the Market Price (as defined herein) (representing a discount rate of 45%) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). “Market Price” means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market.
There were no other issuances of unregistered securities to report which were sold or issued by the Company without the registration of these securities under the Securities Act of 1933 in reliance on exemptions from such registration requirements, within the period covered by this report, which have not been previously included in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
The Company is a smaller reporting company and is not required to provide this information.
Forward Looking Statements
This current report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "intends", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these statements, which speak only as of the date that they were made. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results, later events or circumstances or to reflect the occurrence of unanticipated events.
In this report unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares of our capital stock.
The management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").
Summary
The Company continues to pursue its primary goals of providing internet marketing and business solutions for a variety of international customers.
Liquidity & Capital Resources
We are an exploration stage company engaged in the exploration of mineral properties. To date, we have not generated any revenues.
Cash on hand at September 30, 2013 was $Nil as compared to $49,154 as of September 30, 2012. Our total liabilities on September 30, 2013 were $625,593 as compared to $357,430 at September 30, 2012. This significant change was as a result of our increased borrowing by way of convertible promissory notes which increased to $503,670 on September 30, 2013 from $321,421 on September 30, 2012.
In order to meet all of the current commitments and fund operations for the next twelve months the Company estimates it will require a minimum of $500,000. We intend to undertake exploration on our mineral properties of approximately $300,000 and have allocated an additional $200,000 for operations, which may include the acquisition of additional properties as well as general and administrative costs.
We do not have sufficient funds to meet our next twelve month obligations. Our ability to meet our financial liabilities and commitments is primarily dependent upon the continued issuance of equity to new stockholders, the ability to borrow funds, and ultimately upon our ability to achieve and maintain profitable operations. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. We do not currently have sufficient capital to meet our obligations as they come due and there can be no assurance we will be able to raise sufficient funds to maintain our reporting requirements or to fund our exploration programs on our properties.
The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholder. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
Results of Operations
We recorded an operating loss of $180,514 for the fiscal year ended September 30, 2013 as compared to an operating loss of $395,980 for the fiscal year ended September 30, 2012. The decrease in operating losses results mainly from an impairment of mineral properties in the amount of $225,000 during fiscal 2012 as compared to no impairment during fiscal 2013. All other expenses remained relatively constant with exploration expenses of $17,620 (2013) compared to exploration expenses of $17,815 (2012), professional fees of $65,316 (2013) compared to $63,032 (2012), management fees of $32,500 (2013) from $30,000 (2012) with a slight increase in general and administration to $65,068 (2013) from $60,133 (2012).
From inception we have an operating loss of $602,568.
Net loss for fiscal 2013 was $356,026 as compared to $578,753 for fiscal 2012 and includes interest expenses of $175,512 for fiscal 2013 as compared to $182,773 for 2012.
Our net loss per share remained constant at $0.00 during fiscal 2013 and 2012.
The increase in net losses and operating losses in 2013 over fiscal 2013 is due to the Company commencing operations and acquiring and undertaking exploration on its mineral properties during fiscal 2012 with little exploration undertaken by the Company during fiscal 2013 due to a lack of available funds.
Off-balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments which are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of their evaluation form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions and circumstances. Our significant accounting policies are more fully discussed in the Notes to our Financial Statements.
Contractual Obligations
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
All financial information required by this Item is attached hereto below beginning on page 29.
SOLO INTERNATIONAL, INC.
(An Exploration Stage Company)
REPORT AND FINANCIAL STATEMENTS
September 30, 2013
(Stated in US Dollars)
|
Page
|
|
|
Audited Consolidated Financial Statements
|
|
| F-1 and F-2 | |
| F-3 | |
| F-4 | |
| F-5 | |
| F-6 | |
| F-7 to F-18 |
To the Board of Directors and Stockholders of Solo International, Inc.:
We have audited the accompanying consolidated balance sheet of Solo International, Inc. (“the Company”) as of September 30, 2013, and the related statement of operations, stockholders’ equity (deficit) and cash flows for the period April 30, 2010 (inception) through September 30, 2013. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above present fairly, in all material respects, the financial position of Solo International, Inc., as of September 30, 2013, and the results of its operations and its cash flows for the period April 30, 2010 (inception) through September 30, 2013, in conformity with generally accepted accounting principles in the United States of America.
The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Company's internal control over financial reporting. Accordingly, we express no such opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ B F Borgers CPA PC
B F Borgers CPA PC
Denver, CO
December 30, 2013
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Solo International, Inc.:
We have audited the accompanying balance sheets of Solo International, Inc. (“the Company”) as of September 30, 2012 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Solo International, Inc., as of September 30, 2012, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles in the United States of America.
The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Company's internal control over financial reporting. Accordingly, we express no such opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Borgers & Cutler CPA’s PLLC
Borgers & Cutler CPA’s PLLC
Denver, CO
December 30, 2013
SOLO INTERNATIONAL, INC.
(An Exploration Stage Company)
AUDITED
|
September 30, 2013
|
September 30, 2012
|
|||||||
|
ASSETS
|
||||||||
|
Current
|
||||||||
|
Cash
|
$ | - | $ | 44,561 | ||||
|
Prepaid expense
|
1,097 | 4,593 | ||||||
|
Total Current Assets
|
1,097 | 49,154 | ||||||
|
Total Assets
|
$ | 1,097 | $ | 49,154 | ||||
|
LIABILTIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
|
||||||||
|
Current liabilities
|
||||||||
|
Accounts payable and accrued liabilities
|
$ | 113,006 | $ | 29,592 | ||||
|
Accounts payable and accrued liabilities, related party
|
2,500 | - | ||||||
|
Advances from related parties
|
6,417 | 6,417 | ||||||
|
Convertible promissory notes, net (Note 5)
|
503,670 | 321,421 | ||||||
|
Total Current Liabilities
|
625,593 | 357,430 | ||||||
|
STOCKHOLDERS’ EQUITY (DEFICIENCY)
|
||||||||
|
Common stock: 900,000,000 shares authorized, at $0.001 par value 288,200,000 shares issued and outstanding as at September 30, 2013 and 2012
|
288,200 | 288,200 | ||||||
|
Capital in excess of par value
|
48,157 | 8,351 | ||||||
|
Deficit accumulated during the exploration stage
|
(960,853 | ) | (604,827 | ) | ||||
|
Total Stockholders’ Equity (Deficiency)
|
(624,496 | ) | (308,276 | ) | ||||
|
Total Liabilities and Stockholders’ Equity (Deficiency)
|
$ | 1,097 | $ | 49,154 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
SOLO INTERNATIONAL, INC.
(An Exploration Stage Company)
AUDITED
|
For the year ended September 30,
|
April 30, 2010
(date of inception)
to September 30,
|
|||||||||||
|
2013
|
2012
|
2013
|
||||||||||
|
REVENUE
|
$ | - | $ | - | $ | - | ||||||
|
EXPENSES
|
||||||||||||
|
Exploration expense
|
17,630 | 17,815 | 35,445 | |||||||||
|
Professional fees
|
65,316 | 63,032 | 141,648 | |||||||||
|
Management fees
|
32,500 | 30,000 | 62,500 | |||||||||
|
Impairment on mineral claims
|
- | 225,000 | 225,000 | |||||||||
|
Other general and administrative expenses
|
65,068 | 60,133 | 137,975 | |||||||||
|
OPERATING LOSS
|
(180,514 | ) | (395,980 | ) | (602,568 | |||||||
|
OTHER INCOME (EXPENSES)
|
||||||||||||
|
Interest expenses
|
(175,512 | ) | (182,773 | ) | (358,285 | ) | ||||||
|
NET LOSS
|
$ | (356,026 | ) | $ | (578,753 | ) | (960,853 | ) | ||||
|
Basic and diluted loss per share
|
$ | (0.00 | )* | $ | (0.00 | )* | ||||||
|
Weighted average number of shares outstanding, basic and diluted
|
288,200,000 | 338,625,683 | ||||||||||
|
*
|
Less than $0.01 per share
|
The accompanying notes are an integral part of these consolidated financial statements.
(An Exploration Stage Company)
For the Period from April 30, 2010 (date of inception) to September 30, 2013
|
Accumulated
|
||||||||||||||||||||
|
Deficit
|
||||||||||||||||||||
|
Capital in
|
During the
|
|||||||||||||||||||
|
Common Stock
|
Excess of
|
development
|
||||||||||||||||||
|
Shares
|
Amount
|
Par value
|
Stage
|
Total
|
||||||||||||||||
|
Balance April 30, 2010
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||||
|
Issuance of common shares for cash
|
300,000,000
|
300,000
|
(297,000
|
)
|
-
|
3,000
|
||||||||||||||
|
Issuance of common shares for cash
|
72,000,000
|
72,000
|
(57,600
|
)
|
-
|
14,400
|
||||||||||||||
|
Issuance of common shares for cash
|
16,000,000
|
16,000
|
(11,200
|
)
|
-
|
4,800
|
||||||||||||||
|
Net loss for the period
|
-
|
-
|
-
|
(714
|
)
|
(714
|
)
|
|||||||||||||
|
Balance, September 30, 2010
|
388,000,000
|
388,000
|
(365,800
|
)
|
(714
|
)
|
21,486
|
|||||||||||||
|
Net loss for the year ended September 30, 2011
|
-
|
-
|
-
|
(25,360
|
)
|
(25,360
|
)
|
|||||||||||||
|
Balance, September 30, 2011
|
388,000,000
|
388,000
|
(365,800
|
)
|
(26,074
|
)
|
(3,874
|
)
|
||||||||||||
|
Beneficial conversion features
|
-
|
-
|
197,176
|
-
|
197,176
|
|||||||||||||||
|
Valuation of warrants
|
-
|
-
|
57,175
|
-
|
57,175
|
|||||||||||||||
|
Shares returned
|
(100,000,000
|
)
|
(100,000
|
)
|
100,000
|
-
|
-
|
|||||||||||||
|
Issuance of common shares for property
|
200,000
|
200
|
19,800
|
-
|
20,000
|
|||||||||||||||
|
Net loss for the year ended September 30, 2012
|
-
|
-
|
-
|
(578,753
|
)
|
(578,753
|
)
|
|||||||||||||
|
Balance, September 30, 2012
|
288,200,000
|
288,200
|
8,351
|
(604,827
|
)
|
(308,276
|
)
|
|||||||||||||
|
Beneficial conversion features
|
-
|
-
|
35,736
|
-
|
35,736
|
|||||||||||||||
|
Valuation of warrants
|
-
|
-
|
4,070
|
-
|
4,070
|
|||||||||||||||
|
Net loss for the year ended September 30, 2013
|
-
|
-
|
-
|
(356,026
|
)
|
(356,026
|
)
|
|||||||||||||
|
Balance, September 30, 2013
|
288,200,000
|
$
|
288,200
|
$
|
48,157
|
(960,853
|
)
|
(624,496
|
)
|
|||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
SOLO INTERNATIONAL, INC,
(An Exploration Stage Company)
AUDITED
|
Fiscal Year ended
September 30, 2013
|
Fiscal Year ended
September 30, 2012
|
From inception (April 30, 2010) to September 30, 2013
|
||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
|
Net loss
|
$ | (356,026 | ) | $ | (587,753 | ) | $ | (960,853 | ) | |||
|
Interest expense-Amortization on discount of convertible promissory notes
|
127,055 | 155,772 | 282,827 | |||||||||
|
Impairment on mineral claims
|
- | 225,000 | 225,000 | |||||||||
|
Adjustment to reconcile net loss to net cash (used in) operating activities:
|
||||||||||||
|
(Increase) decrease in prepaid expense
|
3,496 | (3,760 | ) | (1,097 | ) | |||||||
|
Increase (decrease) in accounts payable and accrued liabilities
|
85,914 | 29,492 | 115,506 | |||||||||
|
Net cash provided by (used) in operating activities
|
(139,561 | ) | (172,249 | ) | (338,617 | ) | ||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
|
Purchase mineral claims
|
- | (205,000 | ) | (205,000 | ) | |||||||
|
Net cash used in investing activities
|
- | (205,000 | ) | (205,000 | ) | |||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
|
Advances from related party
|
- | 1,778 | 6,417 | |||||||||
|
Proceeds from convertible notes payable
|
95,000 | 420,000 | 515,000 | |||||||||
|
Proceeds from issuance of common stock
|
- | - | 22,200 | |||||||||
|
Net cash provided by financing activities
|
95,000 | 421,778 | 543,617 | |||||||||
|
Increase (decrease) in cash during the period
|
(44,561 | ) | 44,529 | - | ||||||||
|
Cash, beginning of period
|
44,561 | 32 | - | |||||||||
|
Cash, end of period
|
$ | - | $ | 44,561 | $ | - | ||||||
|
Supplement cash flow information:
|
||||||||||||
|
Cash paid for:
|
||||||||||||
|
Interest
|
$ | - | $ | - | $ | - | ||||||
|
Taxes
|
$ | - | $ | - | $ | - | ||||||
|
Non-cash transactions:
|
||||||||||||
|
Shares issued for acquisition of mineral property
|
$ | - | $ | 20,000 | $ | 20,000 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
SOLO INTERNATIONAL, INC.
(An Exploration Stage Company)
September 30, 2013
(Audited)
1. ORGANIZATION
SOLO INTERNATIONAL, INC. was founded in the State of Nevada on April 30, 2010 as a Poland based corporation intending to provide services in interior architectural design in Poland.
On October 12, 2011, Mr. Michel Plante acquired control of three million (3,000,000) pre-split shares of the Company’s issued and outstanding common stock, representing approximately 77.32% of the Company’s total issued and outstanding common stock, from Mr. Yury Shcharbakou in accordance with a stock purchase agreement by and between Mr. Plante and Mr. Shcharbakou, thus effecting a change in control of the Company.
On October 13, 2011, the Board of Directors of the Company authorized a forward split of its issued and outstanding common shares, whereby every one (1) old share of common stock will be exchanged for one hundred (100) new shares of the Company's common stock.
The effect of the stock split has been recognized retroactively in the stockholders’ deficit accounts as of April 30, 2010, and in all shares and per share data in the financial statements.
With the change in control of the Company, management determined not to pursue its operations in Poland and determined to enter into the mining business in the Province of Quebec and incorporated a wholly-owned Quebec subsidiary, 9252-4768 Quebec Inc. On November 15, 2011, the Company, through its wholly-owned Quebec subsidiary, entered into a Property Option Agreement with 9228-6202 Quebec Inc., a Quebec corporation. Pursuant to the Option Agreement, 9252-4768 Quebec Inc. acquired the exclusive option to acquire an undivided 100% right, title and interest in and to certain mineral claims located in Portland Township, Outaouais, Quebec subject to a royalty reserved to 9228-6202 Quebec Inc.
The Company is an Exploration Stage Company, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") 915, Development Stage Entities. The Company's principal business is the acquisition and exploration of mineral resources. The Company has not presently determined whether its properties contain mineral reserves that are economically recoverable.
Since Inception (April 30, 2010) through September 30, 2013, the Company has not generated any revenue and has an accumulated deficit of $960,853.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim consolidated financial information and pursuant to the rules and regulations of the SEC. Accordingly; they do not include all the information and footnotes required by GAAP for complete consolidated financial statements. However, management believes that the disclosures made are adequate to make the information not misleading. Management has evaluated subsequent events through the date the financial statements were issued.
SOLO INTERNATIONAL, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Audited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Going Concern
The consolidated financial statements have been prepared on a going concern basis that assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses since inception resulting in an accumulated deficit of $960,853 as of September 30, 2013 and further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and/or private placement of common stock. These financials do not include any adjustments relating to the recoverability and reclassification of recorded asset amounts, or amounts and classifications of liabilities that might result from this uncertainty.
Cash and Cash equivalents
For purposes of Statement of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of six months or less to be cash equivalents.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles 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 amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Foreign Currency Translation
The Company's functional currency and its reporting currency is the United States dollar.
Fair Value of Financial Instruments
The carrying value of cash and accounts payable and accrued liabilities approximates their fair value because of the short maturity of these instruments. Unless otherwise noted, it is management’s opinion the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
SOLO INTERNATIONAL, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Audited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Basic and Diluted Loss Per Share
Basic loss per share includes no dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.
The Company had the following potential common stock equivalents at September 30, 2013:
|
Warrants
|
12,000,000
|
Since the Company reflected a net loss in fiscal years 2013 and 2012, respectively, the effect of considering any common stock equivalents, if outstanding, would have been anti-dilutive. A separate computation of diluted earnings (loss) per share is not presented.
Stock-based Compensation
The Company records stock based compensation in accordance with the guidance in ASC Topic 718, which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
Mineral Property Costs
Mineral exploration and development costs are accounted for using the successful efforts method of accounting.
Property acquisition costs - Mineral property acquisition costs are capitalized as mineral exploration properties. Upon achievement of all conditions necessary for reserves to be classified as proved, the associated acquisition costs are reclassified to prove properties
Exploration costs - Geological and geophysical costs and the costs of carrying and retaining undeveloped properties are expensed as incurred.
Impairment of Mineral Properties
Unproved mineral properties are assessed at each reporting period for impairment of value, and a loss is recognized at the time of the impairment by providing an impairment allowance. An asset would be impaired if the undiscounted cash flows were less than its carrying value. Impairments are measured by the amount by which the carrying value exceeds its fair value. Because the Company uses the successful efforts method, the Company assesses its properties individually for impairment, instead of on an aggregate pool of costs. Impairment of unproved properties is based on the facts and circumstances surrounding each lease and is recognized based on management’s evaluation. Management’s evaluation follows a two-step process where (1) recoverability of the carrying value of the asset is reviewed to determine if there is sufficient value recoverable to support the capitalized value at the report date; and, (2) If assets fail the recoverability test, impairment testing is conducted, including the evaluation of various criteria such as: prior history of successful operations; production currently in place and/or future projected cash flows (if any); reserve reports or evaluations from which management can prepare future cash flow analyses; the Company’s ability to monetize the asset(s) under evaluation; and, Management’s intent regarding future development.
SOLO INTERNATIONAL, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Audited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Beneficial Conversion Feature
From time to time, the Company may issue convertible notes that may have conversion prices that create an embedded beneficial conversion feature pursuant to the Emerging Issues Task Force guidance on beneficial conversion features. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt. In accordance with this guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.
3. MINERAL PROPERTY
On November 15, 2011, the Company through its wholly-owned Quebec subsidiary, 9252-4768 Quebec Inc., entered into a Property Option Agreement with 9228-6202 Quebec Inc., a Quebec corporation (the “Optionor”). Pursuant to the option agreement, the Company received the exclusive option to acquire an undivided 100% right, title and interest in and to certain mineral claims located in Portland Township, Outaouais, Quebec subject to a royalty reserved to the Optionor. To fully exercise the option and acquire an undivided 100% right, title and interest in and to the Property, the Company was required to: 1) pay an aggregate sum of two hundred and five thousand dollars ($205,000) to Optionor; 2) incur an aggregate of at least sixty-five thousand dollars ($65,000) of expenditures on or with respect to the Property; and 3) issue to Optionor an aggregate number of restricted shares of common stock of the Company equal to twenty thousand US dollars ($20,000). On, November 27, 2012, the Company’s wholly owned subsidiary, 9252-4768 Quebec Inc. entered into a second addendum to the original property option agreement with 9228-6202 Quebec Inc. whereby the parties acknowledged that 9252-4768 Quebec Inc. had earned its 100% right, title and interest in and to certain mineral claims, located in Portland Township, Outaouais, Quebec. The cash payments, expenditures and stock issuance were scheduled to be completed as follows:
Cash Payments:
The Company is required to pay the cash payments to Optionor, all of which have been paid as of September 30, 2013, in the following amounts and by the dates described below:
| i. |
$50,000 within 2 business days of the execution of the Option Agreement
|
|
ii.
|
$70,000 within 30 days following the First Option Payment
|
|
iii.
|
$70,000 within 30 days following the Second Option Payment
|
|
iv.
|
$15,000 within 30 days following the Third Option Payment
|
Expenditures:
During the fiscal year ended September 30, 2013, the Company expended a total of $17,630 (2012 - $17,815) as exploration expenses.
Stock Issuances:
The Company was required to issue an aggregate number of restricted shares of common stock of the Company equal to twenty thousand US dollars ($20,000) pursuant to the terms and conditions of the Property Option Agreement, The Company was required to issue the shares within 10 days of the completion of the forward split or no later than 90 days of execution of the Property Option Agreement. The Company issued the shares on May 8, 2012 and issued a total of 200,000 shares of common stock at a deemed price of $0.10 per share which was the first trading price of the stock after the completion of the forward split.
SOLO INTERNATIONAL, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Audited)
3. MINERAL PROPERTY – continued
The Company made cash payments in the amount of $205,000 and issued a total of 200,000 shares of common stock at a deemed price of $0.10 per share to 9228-6202 Quebec Inc. pursuant to the cash payment and stock payment schedule noted above, which amount was capitalized as option costs on the mineral property as of September 30, 2012. At the close of the period ended September 30, 2012, the Company evaluated the recoverability of the amount paid for the option and determined to impair the amount in full, as the Company is currently in the exploration phase, with no proven or probable reserves having yet been determined.
On November 27, 2012, the Option Agreement was further amended to revise the requirement to expend the $65,000 on exploration expenditures to read that the Optionee has earned its 100% right and interest in the Property for the payment of all expenditures to November 27, 2012 and for allowing the Optionor to utilize a portion of the expenditures expended by the Optionee to apply to certain of the Optionor’s claims. The Company has transferred the title to the Property to its wholly owned subsidiary, 9252-4768 Quebec Inc.
4. COMMON STOCK
The authorized capital of the Company is 900,000,000 common shares with a par value of $ 0.001 per share.
As of September 30, 2013, 288,200,000 common stock shares were issued and outstanding.
5. CONVERTIBLE PROMISSORY NOTE, NET
|
(i)
|
Craigstone Ltd. (“Craigstone”)
|
On November 4, 2011, the Company entered into a Securities Purchase Agreement with Craigstone pursuant to which the Company received $100,000 as a loan from Craigstone in exchange for one (1) Unit consisting of: a Convertible Promissory Note convertible to common stock in whole or in part, at any time and from time to time before maturity at the option of the holder at seventy-five percent (75%) of the average traded price of the common stock for the thirty (30) trading days immediately preceding the conversion date; and a three (3) year Warrant (the “Warrant”) to purchase two hundred fifty thousand (250,000) shares of the Company’s Common Stock exercisable at the lower of : (i) a price of $0.20 per share or (ii) seventy-five percent (75%) of the average traded price of common stock for the thirty (30) trading days immediately preceding the exercise date. The Note earns simple interest accruing at ten percent (10%) per annum and was due on or before the twelfth month anniversary of the date of execution. The due dates were extended as described further herein.
During the fiscal year ended September 30, 2012, the Company entered into additional Securities Purchase Agreements with Craigstone pursuant to which the Company received collectively $320,000 as loans whereby each funding received one (1) Unit consisting of: a Convertible Promissory Note convertible to common stock in whole or in part, at any time and from time to time before maturity at the option of the holder at seventy-five percent (75%) of the average traded price of the common stock for the thirty (30) trading days immediately preceding the conversion date; and a three (3) year Warrant (the “Warrant”). Collectively under the Securities Purchase Agreements, Craigstone was granted the rights to purchase seven hundred twelve thousand five hundred (712,500) shares of the Company’s Common Stock exercisable at the lower of : (i) a price of $0.20 per share or (ii) seventy-five percent (75%) of the average traded price of common stock for the thirty (30) trading days immediately preceding the exercise date. The Notes earn simple interest accruing at ten percent (10%) per annum and were due on or before the twelfth month anniversary of the date of execution. The due dates were extended as described further herein.
SOLO INTERNATIONAL, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Audited)
5. CONVERTIBLE PROMISSORY NOTE, NET - continued
During the fiscal year ended September 30, 2013, the Company entered into three additional Securities Purchase Agreements with Craigstone pursuant to which the Company received a total of $45,000 as loans in exchange for which each funding received one (1) Unit consisting of a Convertible Promissory Note convertible to common stock in whole or in part, at any time and from time to time before maturity at the option of the holder at seventy-five percent (75%) of the average traded price of the common stock for the thirty (30) trading days immediately preceding the conversion date; and collectively received a three (3) year Warrant (the “Warrant”) to purchase one hundred twelve thousand five hundred (112,500) shares of the Company’s Common Stock exercisable at the lower of: (i) a price of $0.20 per share or (ii) seventy-five percent (75%) of the average traded price of common stock for the thirty (30) trading days immediately preceding the exercise date. The Notes earn simple interest accruing at ten percent (10%) per annum and is due on or before the twelfth month anniversary of the date of execution.
The beneficial conversion feature resulting from the discounted conversion price compared to market price was valued on the dates of grant to be $215,439 on the notes, and $60,439 on the warrants. This value was recorded as a discount on debt and offset to additional paid in capital. Amortization of the discount was $115,587 for the fiscal year ended September 30, 2013 (2012 - $155,772), which amount has been recorded as interest expense.
|
September 30, 2013
|
September 30, 2012
|
Issue Date
|
||||||||||
|
Convertible Promissory Note – face value, due on November 4, 2013
|
$ | 100,000 | $ | 100,000 | $ | 100,000 | ||||||
|
Convertible Promissory Note – face value, due on November 4, 2014
|
115,000 | 115,000 | 115,000 | |||||||||
|
Convertible Promissory Note – face value, due on February 3, 2014
|
85,000 | 85,000 | 85,000 | |||||||||
|
Convertible Promissory Note – face value, due on March 8, 2014
|
35,000 | 35,000 | 35,000 | |||||||||
|
Convertible Promissory Note – face value, due on May 11, 2014
|
25,000 | 25,000 | 25,000 | |||||||||
|
Convertible Promissory Note – face value, due on June 19, 2014
|
25,000 | 25,000 | 25,000 | |||||||||
|
Convertible Promissory Note – face value, due on September 11, 2013
|
35,000 | 35,000 | 35,000 | |||||||||
|
Convertible Promissory Note – face value, due on October 19, 2013
|
15,000 | 15,000 | ||||||||||
|
Convertible Promissory Note – face value, due on October 26, 2013
|
15,000 | 15,000 | ||||||||||
|
Convertible Promissory Note – face value, due on May 30, 2014
|
15,000 | 15,000 | ||||||||||
|
Total convertible promissory note – face value
|
465,000 | 420,000 | 465,000 | |||||||||
|
Less: beneficial conversion feature
|
(4,225 | ) | (74,290 | ) | (215,439 | ) | ||||||
|
Warrant discount
|
(294 | ) | (24,289 | ) | (60,439 | ) | ||||||
| $ | 460,480 | $ | 321,421 | $ | 189,122 | |||||||
Interest expenses:
|
For the fiscal year ended
|
|||||||||
|
September 30,
2013
|
September 30,
2012
|
|
|||||||
|
Amortization of debt discount
|
$ | 115,587 | $ | 155,772 | |||||
|
Interest at contractual rate
|
45,320 | 27,001 | |||||||
|
Totals
|
$ | 160,907 | $ | 182,773 | |||||
SOLO INTERNATIONAL, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Audited)
5. CONVERTIBLE PROMISSORY NOTE, NET - continued
On January 31, 2013, Craigstone agreed to extend the maturity dates of certain notes due and payable on November 4, 2012, January 4, 2012 and February 3, 2013 for a period of one year or greater so that the respective notes are now due and payable on November 4, 2013, November 4, 2014 and February 3, 2014.
On May 31, 2013, Craigstone agreed to extend the maturity dates of certain notes due and payable on March 8, 2013, May 11, 2013 and June 19, 2013 to March 8, 2014, May 11, 2014 and June 19, 2014.
Presently the Company and Craigstone are in negotiation for the extension of notes which came due between September and November 2013.
|
(ii)
|
Adams Ale Inc.
|
Effective February 15, 2013, the Company entered into a Securities Purchase Agreement with Adams Ale Inc. (“Adams”) pursuant to which Adams agreed to undertake a private placement in the amount of $100,000. On May 1, 2013, Adams had not fully funded the private placement, having funded an amount of $50,000 and agreed to convert to a Convertible Promissory Note on the same commercial terms as the Craigstone notes discussed above. The Company agreed to enter into a Securities Purchase Agreement with Adams for the funded amount of $50,000 in exchange for one (1) Unit consisting of: a Convertible Promissory Note convertible to common stock in whole or in part, at any time and from time to time before maturity at the option of the holder at seventy-five percent (75%) of the average traded price of the common stock for the thirty (30) trading days immediately preceding the conversion date; and a three (3) year Warrant (the “Warrant”) to purchase one hundred twenty-five thousand (125,000) shares of the Company’s Common Stock exercisable at the lower of : (i) a price of $0.20 per share or (ii) seventy-five percent (75%) of the average traded price of common stock for the thirty (30) trading days immediately preceding the exercise date. The Note earns simple interest accruing at ten percent (10%) per annum and is due on or before the twelfth month anniversary of the date of execution.
The beneficial conversion feature resulting from the discounted conversion price compared to market price was valued on the date of grant to be $17,473 on the note, and $806 on the warrants. This value was recorded as a discount on debt and offset to additional paid in capital. Amortization of the discount for the fiscal year ended September 30, 2013 was$11,468 (2012 - $nil), which amount has been recorded as interest expense.
|
September 30, 2013
|
Issue Date
|
|||||||
|
Convertible Promissory Note – face value, due on February 15, 2014
|
50,000 | 50,000 | ||||||
|
Total convertible promissory note – face value
|
50,000 | 50,000 | ||||||
|
Less: beneficial conversion feature
|
(6,511 | ) | (17,473 | ) | ||||
|
Warrant discount
|
(300 | ) | (806 | ) | ||||
| $ | 43,189 | $ | 31,721 | |||||
Interest expenses:
|
For the fiscal year period
|
||||||||
|
September 30, 2013
|
September 30, 2012
|
|||||||
|
Amortization of debt discount
|
$ | 11,468 | $ | - | ||||
|
Interest at contractual rate
|
3,137 | - | ||||||
|
Totals
|
$ | 14,605 | $ | - | ||||
SOLO INTERNATIONAL, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Audited)
6. RELATED PARTY TRANSACTIONS
The Company’s prior Director has loans outstanding with the Company as at September 30, 2013 of $6,417. The amount is due on demand, non-interest bearing and unsecured.
The Company entered into a management consulting agreement with Mr. Michel Plante, the prior Company’s sole director and officer, commencing October 1, 2011. Under the terms of the agreement, payments of $2,500 a month, were payable on the 1st of each month. During the fiscal year ended September 30, 2013, the Company’s sole director and officer invoiced the Company for services in the amount of $30,000. The Company paid $22,500 in cash, leaving $7,500 in the balance sheets as accounts payable.
On September 13, 2013, Mr. Michael Jacob Cooper Smith was appointed to the Board of Directors of the Company.
On September 13, 2013, Mr. Michel Plante resigned as an officer and as a member of the Company’s Board of Directors and Mr. Michael Jacob Cooper Smith was appointed as President, Secretary, Treasurer and to fill the position of Chief Executive Office and Chief Financial Officer until such time as the Company can identify other possible candidates for the roles.
On September 30, 2013, the Company entered a three-year employment agreement with Mr. Michael Jacob Cooper Smith. Under the terms of the agreement, the Company shall pay Mr. Smith a base salary of $30,000 per annum, paid monthly. The amount of base salary may be increased from time to time by the Board of Directors of the Company. Mr. Smith shall be eligible for periodic bonus in amounts to be determined by the Board of Directors. During the fiscal year ended September 30, 2013, the Company accrued $2,500 in management fees which are recorded on the balance sheets as accounts payable and accrued liability – related party.
7. WARRANTS
An aggregate of 1,200,000 warrants were issued and outstanding as at September 30, 2013 as required under the terms of a series of Securities Purchase Agreements discussed above in Note 5. The warrants are exercisable for a period of three years from the date of issue, exercisable at the lower of : (i) a price of $0.20 per share or (ii) seventy-five percent (75%) of the average traded price of the Company’s common stock for the thirty (30) trading days immediately preceding the exercise date.
The fair value of the 1,200,000 warrants totaling $61,245 was recorded as a discount on the convertible notes payable upon issuance. This value was calculated using the Black-Scholes model. The key inputs for the calculation are shown below:
|
Stock Price on Measurement Date
|
$ |
0.0068 ~ 0.135
|
||||
|
Exercise Price of Warrants
|
$ |
0.0051 ~ 0.101
|
||||
|
Term of Warrants (years)
|
3.00 | |||||
|
Computed Volatility
|
125.84% ~ 147.91%
|
|||||
|
Annual Dividends
|
0.00 | % | ||||
|
Discount Rate
|
0.33 ~ 0.49 | % | ||||
SOLO INTERNATIONAL, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Audited)
7. WARRANTS (continued)
A summary of the Company’s warrants as of September 30, 2013 and September 30, 2012 as follows:
|
September 30, 2013
|
September 30, 2012
|
|||||||||||||||
|
Warrants
|
Weighted average
exercise price
|
Warrants
|
Weighted average
exercise price
|
|||||||||||||
|
Outstanding at the beginning of the period
|
962,500
|
$
|
0.069
|
-
|
$
|
-
|
||||||||||
|
Granted
|
237,500
|
0.024
|
962,500
|
$
|
0.069
|
|||||||||||
|
Exercised
|
-
|
-
|
-
|
|||||||||||||
|
Cancelled
|
-
|
-
|
$
|
-
|
||||||||||||
|
Outstanding at the end of the period
|
1,200,000
|
$
|
0.060
|
962,500
|
$
|
0.069
|
||||||||||
|
Vested and exercisable at the end of period
|
1,200,000
|
962,500
|
||||||||||||||
|
Weighted average fair value per share of warrants granted during the period
|
$
|
0.060
|
$
|
0.069
|
||||||||||||
The following table summarizes information regarding stock purchase warrants outstanding at September 30, 2013:
|
Warrants Outstanding
|
Warrants Exercisable
|
|||||||||||||
|
Exercise prices
|
Number
Outstanding
|
Weighted average
remaining contractual
life (years)
|
Weighted average
exercise price
|
Number
exercisable
|
Weighted average
remaining contractual
life (years)
|
Weighted average
exercise price
|
||||||||
|
$
|
0.00563- 0.10
|
1,200,000
|
1.55
|
$
|
0.060
|
1,200,000
|
1.55
|
$
|
0.060
|
|||||
SOLO INTERNATIONAL, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Audited)
7. WARRANTS (continued)
As at September 30, 2013, the Company had the following warrants outstanding:
|
Exercise Price
|
Expiry Date
|
Weighted Average Remaining Contractual Life (Years)
|
Outstanding at
September 30, 2012
|
Issued
|
Exercised
|
Expired
|
Outstanding at
September 30, 2013
|
||||||||||||||||||||
| $ | 0.075 |
November 4, 2014
|
1.09 | 250,000 | - | - | - | 250,000 | |||||||||||||||||||
| $ | 0.075 |
November 4, 2014
|
1.09 | 250,000 | - | - | - | 250,000 | |||||||||||||||||||
| $ | 0.101 |
February 3, 2015
|
1.34 | 177,083 | - | - | - | 177,083 | |||||||||||||||||||
| $ | 0.041 |
March 8, 2015
|
1.44 | 72,917 | - | - | - | 72,917 | |||||||||||||||||||
| $ | 0.052 |
May 11, 2015
|
1.61 | 62,500 | - | - | - | 62,500 | |||||||||||||||||||
| $ | 0.03 |
June 19, 2015
|
1.72 | 62,500 | - | - | - | 62,500 | |||||||||||||||||||
| $ | 0.03 |
September 11, 2015
|
1.95 | 87,500 | - | - | - | 87,500 | |||||||||||||||||||
| $ | 0.064 |
October 19, 2015
|
2.05 | 37,500 | - | - | 37,500 | ||||||||||||||||||||
| $ | 0.056 |
October 26, 2015
|
2.07 | 37,500 | - | - | 37,500 | ||||||||||||||||||||
| $ | .008 |
February 15, 2016
|
2.37 | 125,000 | - | - | 125,000 | ||||||||||||||||||||
| $ | 0.005 |
May 30,2016
|
2.66 | 37,500 | - | - | 37,500 | ||||||||||||||||||||
| 1.55 | 962,500 | 237,500 | - | - | 1,200,000 | ||||||||||||||||||||||
8. INCOME TAXES
The Company has losses carried forward for income tax purposes for September 30, 2013. There are no current or deferred tax expenses for the fiscal year ended September 30, 2013 due to the Company’s loss position. The Company has fully reserved for any benefits of these losses. The deferred tax consequences of temporary differences in reporting items for financial statement and income tax purposes are recognized, as appropriate. Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period.
Management has considered these factors in reaching its conclusion as to the valuation allowance for financial reporting purposes.
SOLO INTERNATIONAL, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Audited)
8. INCOME TAXES (continued)
|
September 30, 2013
|
September 30, 2012
|
|||||||
|
Net operating loss carry forward
|
960,853
|
604,827
|
||||||
|
Effective Tax Rate
|
35
|
%
|
35
|
%
|
||||
|
Deferred Tax Assets
|
336,200
|
211,689
|
||||||
|
Less: Valuation Allowance
|
(336,200
|
)
|
(211,689
|
)
|
||||
|
Net deferred tax asset
|
$
|
0
|
$
|
0
|
||||
The valuation allowance for deferred tax assets as of September 30, 2013 and 2012 was $336,200 and $211,689 respectively. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would not be realized as of September 30, 2013 and 2012, and recorded a full valuation allowance.
Reconciliation between the statutory rate and the effective tax rate is as follows at September 30:
|
2013
|
2012
|
|||||||
|
Federal statutory tax rate
|
(35.0
|
)%
|
(35.0
|
)%
|
||||
|
Permanent difference and other
|
35.0
|
%
|
35.0
|
%
|
||||
|
Effective tax rate
|
-
|
%
|
-
|
%
|
||||
The net federal operating loss carry forward will expire between 2030 and 2033. This carry forward may be limited upon the consummation of a business combination under IRC Section 381.
9. SUBSEQUENT EVENTS
On October 3, 2013, we raised $37,500, through a private offering of a convertible promissory note. Under the terms of the Note, interest shall accrue at 8% per annum until June 20, 2014 (the “Maturity Date”), at which time, unless converted, all principal and accrued interest shall be due and payable. Any amount of principal or interest on the Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. The holder shall have the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of the note (dated September 18, 2013) to convert the Note, in whole or in part, into full paid and non-assessable shares of Common Stock. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price which shall mean shall mean 55% multiplied by the Market Price (as defined herein) (representing a discount rate of 45%) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). “Market Price” means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market.
SOLO INTERNATIONAL, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Audited)
9. SUBSEQUENT EVENTS (continued)
On December 18, 2013, we entered into a further securities purchase agreement with Asher Enterprises to raise a total of $22,500, through a private offering of a convertible promissory note on the same terms as the first note detailed above. The financing agreement has not yet closed but is expected to close upon the completion of the filing of the Company’s Form 10-K.
The Company has evaluated subsequent events from the balance sheet date through the date that the financial statements were issued and determined that there were no other events to disclose.
In the fiscal years ended September 30, 2013 and 2012, there have been no changes in the Company’s accounting policies, nor have there been any disagreements with our accountants.
Evaluation of Disclosure Controls and Procedures
Our management, under supervision and with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined under Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon this evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of September 30, 2013, because of the material weakness in our internal control over financial reporting (“ICFR”) described below, our disclosure controls and procedures were not effective.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that required information to be disclosed in our reports filed or submitted under the Securities 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 include, without limitation, controls and procedures designed to ensure that required information to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
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 under Exchange Act Rules 13a-15(f) and 15d-15(f). 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.
Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2013. In making the assessment, management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on its assessment, management concluded that, as of September 30, 2013, our internal control over financial reporting was not effective and that material weaknesses in ICFR existed as more fully described below.
As defined by Auditing Standard No. 5, “An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements” established by the Public Company Accounting Oversight Board (“PCAOB”), a material weakness is a deficiency or combination of deficiencies that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management identified the following control deficiencies that represent material weaknesses as of September 30, 2013:
|
1)
|
Lack of an independent audit committee or audit committee financial expert, and no independent directors. We do not have any members of the Board who are independent directors and we do not have an audit committee. These factors may be counter to corporate governance practices as defined by the various stock exchanges and may lead to less supervision over management;
|
|
2)
|
Inadequate staffing and supervision within our bookkeeping operations. We have one consultant involved in bookkeeping functions, who provides two staff members. The relatively small number of people who are responsible for bookkeeping functions and the fact that they are from the same firm of consultants prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. This may result in a failure to detect errors in spreadsheets, calculations or assumptions used to compile the financial statements and related disclosures as filed with the SEC;
|
|
3)
|
Outsourcing of our accounting operations. Because there are no employees in our administration, we have outsourced all of our accounting functions to an independent firm. The employees of this firm are managed by supervisors within the firm and are not answerable to our management. This is a material weakness because it could result in a disjunction between the accounting policies adopted by our Board of Directors and the accounting practices applied by the independent firm;
|
|
4)
|
Insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements;
|
|
5)
|
Ineffective controls over period end financial disclosure and reporting processes.
|
Management's Remediation Initiatives
As of September 30, 2013, management assessed the effectiveness of our internal control over financial reporting. Based on that evaluation, it was concluded that during the period covered by this report, the internal controls and procedures were not effective due to deficiencies that existed in the design or operation of our internal controls over financial reporting. However, management believes these weaknesses did not have an effect on our financial results. During the course of their evaluation, we did not discover any fraud involving management or any other personnel who play a significant role in our disclosure controls and procedures or internal controls over financial reporting.
Due to a lack of financial and personnel resources, we are not able to, and do not intend to, immediately take any action to remediate these material weaknesses. We will not be able to do so until, if ever, we acquire sufficient financing and staff. We will implement further controls as circumstances, cash flow, and working capital permits. Notwithstanding the assessment that our ICFR was not effective and that there were material weaknesses as identified in this report, we believe that our financial statements contained in our Annual Report on Form 10-K for the period ended September 30, 2013, fairly presents our financial position, results of operations, and cash flows for the periods covered, as identified, in all material respects.
Management believes that the material weaknesses set forth above were the result of the scale of our operations and intrinsic to our small size. Management also believes that these weaknesses did not have an effect on our financial results.
We are committed to improving our financial organization. As part of this commitment, we will, as soon as funds are available to the Company (1) appoint outside directors to our board of directors sufficient to form an audit committee and who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; (2) create a position to segregate duties consistent with control objectives and to increase our personnel resources. We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary, and as funds allow.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Changes in Internal Control over Financial Reporting
During the period covered by this report, there were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
PART III
Identification of Directors and Executive Officers
The following table sets forth the names and ages of our current director(s) and executive officer(s):
|
Name
|
Age
|
Position with the Company
|
Director Since
|
|
Michael Jacob Cooper Smith
|
30
|
CEO, CFO, President, Treasurer, Secretary, & Director
|
September 13, 2013
|
The board of directors has no nominating, audit or compensation committee at this time.
Michael Jacob Cooper Smith
Mr. Smith has 12 years of experience as an excavation professional, both working for large corporations as well as owning his own excavation company. The operation of heavy machinery and site planning are specialties of Mr. Smith. Michael has also consulted for multiple public companies and played a vital role in the execution of business plans and strategic introductions for lending and financing opportunities. He through the years has established extensive contacts in the microcap and financial community with a focus on private and corporate lending. Michael will be able to help achieve our goals in regard to raising ongoing financing, planning with the geological consultants the exploration programs to be undertaken by the Company and working on the day to day activities of the Company.
From January 2013 to present, Mr. Smith has been employed by the City of Richmond, British Columbia in their Fleet department. From 2004 to December 2012, he was employed by Southarm Contracting as a heavy equipment operator. Mr. Smith attended the Real Estate Division of the Sauder School of Business at the University of British Columbia in 2009.
He is not an officer and director of any reporting issuers.
Term of Office
Each of our directors is appointed to hold office until the next annual meeting of our stockholders or until his respective successor is elected and qualified, or until he resigns or is removed in accordance with the provisions of the Nevada Revised Statues. Our officers are appointed by our Board of Directors and hold office until removed by the Board or until their resignation.
Background and Business Experience
The business experience during the past five years of the person presently listed above as an Officer or Director of the Company is as follows:
Identification of Significant Employees
We have no significant employees other than Mr. Michel Plante, our President, Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and Director.
Family Relationship
We currently do not have any officers or directors of our Company who are related to each other.
|
Involvement in Certain Legal Proceedings
|
|
During the past ten years no director, executive officer, promoter or control person of the Company has been involved in the following:
|
● Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
|
||
|
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
|
||
|
Engaging in any type of business practice; or
|
||
|
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
|
|
Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;
|
|
|
Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
|
|
Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
|
|
|
●
|
Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
|
|
Any Federal or State securities or commodities law or regulation; or
|
||
|
Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
|
|
(3)
|
Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
|
||
|
Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
|
|||
Audit Committee and Audit Committee Financial Expert
The Company does not have an audit committee or an audit committee financial expert (as defined in Item 407 of Regulation S-K) serving on its Board of Directors. Mr. Smith has sufficient financial expertise for overseeing financial reporting responsibilities. The Company has not yet employed an audit committee financial expert on its Board due to the fact that Mr. Smith is the sole director and officer.
The Company intends to establish an audit committee of the board of directors, which will consist of independent directors. The audit committee’s duties will be to recommend to the Company’s board of directors the engagement of an independent registered public accounting firm to audit the Company’s financial statements and to review the Company’s accounting and auditing principles. The audit committee will review the scope, timing and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent registered public accounting firm, including their recommendations to improve the system of accounting and internal controls. The audit committee will at all times be composed exclusively of directors who are, in the opinion of the Company’s board of directors, free from any relationship which would interfere with the exercise of independent judgment as a committee member and who possess an understanding of financial statements and generally accepted accounting principles.
Code of Ethics
Our Board of Directors has not adopted a Code of Ethics (the “Code”) due to the fact that we presently only have one director and we are in the exploration stage of our operations. We anticipate that we will adopt a code of ethics when we increase either the number of our directors and officers or the number of our employees.
Family Relationships
There are no family relationships among our officers, directors, or persons nominated for such positions.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our Directors, executive officers, and stockholders holding more than 10% of our outstanding common stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in beneficial ownership of our common stock. Executive officers, directors and greater-than-10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.
Based on a review of Forms 3, 4, and 5 and amendments thereto furnished to the registrant during its most recent fiscal year ending September 30, 2013, the following represents each person who did not file on a timely basis reports required by Section 16(a) of the Exchange Act:
|
Name
|
Reporting Person
|
Form 3/# of transactions
|
Form 4/# of transactions
|
Form 5/# of transactions
|
|
Michael Cooper Smith
|
Sole officer and Director
|
Late/1
|
n/a
|
n/a
|
The particulars of compensation paid to our executive officers during the fiscal period ended September 30, 2013 and 2012 are set out in the summary compensation table below:
|
SUMMARY COMPENSATION TABLE
|
|||||||||||||||||||||||||||||||||
|
Name
|
Fiscal Year Ended September 30,
|
Salary
($)
|
Bonus
($)
|
Stock Awards
($)
|
Option Awards
($)
|
Non-Equity Incentive Plan Compensation
($)
|
Nonqualified Deferred Compensation Earnings
($)
|
All Other Compensation
($)
|
Total
($)
|
||||||||||||||||||||||||
|
Michael Cooper Smith, President, CEO, CFO, Treasurer, Secretary and Director (1)
|
2013
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
2,500
|
2,500
|
||||||||||||||||||||||||
|
Michel Plante, President, CEO, CFO, Treasurer, Secretary and Director (2)
|
2013
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
30,000
|
30,000
|
||||||||||||||||||||||||
|
Michel Plante, President, CEO, CFO, Treasurer, Secretary and Director
|
2012
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
30,000
|
30,000
|
||||||||||||||||||||||||
(1) On September 13, 2013, Mr. Michael Cooper Smith was appointed as the Company’s sole officer and director.
(2) On September 13, 2013, Mr. Plante resigned as the Company’s sole officer and director.
Narrative Disclosure to Summary Compensation Table
There are no employment contracts, compensatory plans or arrangements, including payments to be received from the Company with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company, or its subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company.
Outstanding Equity Awards at Fiscal Year-End
No executive officer received any equity awards, or holds exercisable or unexercisable options, as of the year ended September 30, 2013.
Long-Term Incentive Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.
Compensation Committee
We currently do not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.
Compensation of Directors
Our directors receive no extra compensation for their service on our Board of Directors.
Employment Agreements
The Company does not have any employees.
The Company entered into a management consulting agreement with Mr. Michel Plante, the Company’s prior sole director and officer, commencing October 1, 2011. Under the terms of the agreement, payments of $2,500 a month, were payable on the 1st of each month. During the fiscal year ended September 30, 2013, Mr. Plante invoiced the Company for services in the amount of $30,000. The Company paid $22,500 in cash, leaving $7,500 in the balance sheets as accounts payable.
On September 30, 2013, the Company entered a three-year employment agreement with Mr. Michael Jacob Cooper Smith. Under the terms of the agreement, Mr. Smith is to receive $30,000 per annum, paid monthly. The amount of base salary may be increased from time to time by the Board of Directors of the Company. Mr. Smith shall be eligible for periodic bonus in amounts to be determined by the Board of Directors. During the fiscal year ended September 30, 2013, the Company accrued $2,500 in management fees.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, as of December 20, 2013, with respect to the beneficial ownership of the Company’s Common Stock by each person known by the Company to be the beneficial owner of more than 5% of the outstanding common stock. Information is also provided regarding beneficial ownership of common stock if all outstanding options, warrants, rights and conversion privileges (to which the applicable 5% stockholders have the right to exercise in the next 60 days) are exercised and additional shares of common stock are issued.
|
Title of Class
|
Name and Address of Beneficial Owner
|
Amount and Nature
of Beneficial Ownership
|
Percentage of Class (2)
|
|
Common Stock
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Redoma Investments Inc.
12 Baymen Ave and Calle Al Mar
Belize City, Belize(1)
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200,000,000 shares held directly
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69.4%
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Common Stock
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Michael Cooper Smith
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-0-
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-0-
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All Officers and Directors as a Group
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-0-
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-0-
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(1) Michel Plante is the sole director and officer of Redoma Investments Inc.
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(2) Beneficial ownership is determined in accordance with SEC rules and includes voting or investment power with respect to securities. All shares of common stock subject to options or warrants exercisable within 60 days of December 20, 2013 are deemed to be outstanding and beneficially owned by the persons holding those options or warrants for the purpose of computing the number of shares beneficially owned and the percentage ownership of that person. They are not, however, deemed to be outstanding beneficially owned for the purpose of computing the percentage ownership of any other person. Subject to the paragraph above, the percentage ownership of outstanding shares is based on 288,200,000 shares of common stock outstanding as of December 20, 2013.
Changes in Control
Not Applicable
Securities authorized for issuance under equity compensation plans.
None
Certain Relationships and Related Transactions
The Company entered into a management consulting agreement with the Company’s then sole director and officer, Michel Plante, commencing October 1, 2011. Under the terms of the agreement, payments of $2,500 a month, are payable on the 1st of each month. During the fiscal year ended September 30, 2013, the Company accrued $30,000 and paid a total of $22,500 with $7,500 remaining due and payable.
On April 2, 2012, the Company’s principal and controlling shareholder returned 100,000,000 shares of the Company’s issued shares of common stock held by the shareholder for cancellation by the Company.
The Company’s prior Director has loans outstanding with the Company as at September 30, 2012 of $6,417. The amount is due on demand, non-interest bearing and unsecured.
On September 30, 2013, the Company entered a three-year employment agreement with Mr. Michael Jacob Cooper Smith. Under the terms of the agreement, the Company shall pay Mr. Smith a base salary of $30,000 per annum, paid monthly. The amount of base salary may be increased from time to time by the Board of Directors of the Company. Mr. Smith shall be eligible for periodic bonus in amounts to be determined by the Board of Directors. During the fiscal year ended September 30, 2013, the Company accrued $2,500 in management fees.
Other than as disclosed herein, we have not entered into any transaction since the last fiscal year nor are there any proposed transactions that exceed one percent of the average of our total assets at year end for the last three completed fiscal years in which any of our Directors, executive officers, stockholders or any member of the immediate family of any of the foregoing had or is to have a direct or indirect material interest.
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Review, Approval or Ratification of Transactions with Related Persons
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The Company does not currently have any written policies and procedures for the review, approval or ratification of any transactions with related persons.
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Promoters and Certain Control Persons
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None
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Parents
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There are no parents of the Company.
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Director Independence
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For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTCBB on which shares of common stock are quoted does not have any director independence requirements. The NASDAQ definition of “Independent Officer” means a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company's Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
According to the NASDAQ definition, Michael Cooper Smith is not an independent director because he is also an executive officer of the Company.
Review, Approval or Ratification of Transactions with Related Persons
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Effective February 17, 2012, PLS CPA, a Professional Corporation (“PLS”), the Company’s independent accountant, and the accountant engaged to audit the Registrant’s financial statements, was dismissed by the Registrant’s board of directors and replaced with Borgers & Cutler CPA’s PLLC.
The following table sets forth the fees billed to the Company for professional services rendered by the Company's principal accountant, for the fiscal years ended September 30, 2013 and 2012:
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Services
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$ | 2013 | $ | 2012 | ||||
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Audit fees
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9,400 | 9,288 | ||||||
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Audit related fees
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-0- | -0- | ||||||
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Tax fees
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-0- | -0- | ||||||
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Total fees
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9,400 | 9,288 |
Audit fees consist of fees for the audit of the Company's annual financial statements or the financial statements of the Company’s subsidiaries or services that are normally provided in connection with the statutory and regulatory filings of the annual financial statements.
Audit-related services include the review of the Company's financial statements and quarterly reports that are not reported as Audit fees.
Tax fees included tax planning and various taxation matters.
Pre-Approval Policies and Procedures
We have implemented pre-approval policies and procedures related to the provision of audit and non-audit services. Under these procedures, our board of directors pre-approves all services to be provided by our auditors and the estimated fees related to these services.
PART IV
Exhibits:
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Exhibit Number
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Description of Exhibit
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Filing
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3.01
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Articles of Incorporation
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Filed with the SEC on October 22, 2010 as part of our Registration Statement on Form S-1.
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3.01(a)
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Certificate of Change
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Filed with the SEC on November 7, 2012 as part of our Current Report on Form 8-K.
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3.02
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Bylaws
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Filed with the SEC on October 22, 2010 as part of our Registration Statement on Form S-1.
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10.01
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Service Agreement between Solo International, Inc. and “TIRCARS” Sp. J dated August 30, 2010
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Filed with the SEC on October 22, 2010 as part of our Registration Statement on Form S-1.
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10.02
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Securities Purchase Agreement between Solo International, Inc. and Craigstone Ltd., dated November 4, 2012
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Filed with the SEC on November 15, 2012 as part of our Current Report on Form 8-K.
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10.03
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Option Agreement by and between between Solo International, Inc. and 9228-6202 Quebec Inc., dated November 15, 2012
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Filed with the SEC on November 23, 2012 as part of our Current Report on Form 8-K
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10.04
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Amended Option Agreement by and between 9252-4768 Quebec Inc. and 9228-6202 Quebec Inc. dated December 20, 2012
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Filed with the SEC on January 3, 2013 as part of our Amended Current Report on Form 8-K/A.
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10.05
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Securities Purchase Agreement between Solo International, Inc. and Craigstone Ltd., dated January 10, 2013
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Filed with the SEC on January 12, 2013 as part of our Current Report on Form 8-K.
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10.06
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Employment agreement between the Company and Michael Jacob Cooper Smith dated September 30, 2013
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Filed herewith
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10.07
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Securities Purchase Agreement with Asher Enterprises Inc. dated September 18, 2013
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Filed herewith
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10.08
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Securities Purchase Agreement with Asher Enterprises Inc. dated December 18, 2013
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Filed herewith
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31.01
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Certification of Principal Executive Officer Pursuant to Rule 13a-14
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Filed herewith.
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31.02
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Certification of Principal Financial Officer Pursuant to Rule 13a-14
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Filed herewith.
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32.01
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CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
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Filed herewith.
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101.INS*
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XBRL Instance Document
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Filed herewith.
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101.SCH*
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XBRL Taxonomy Extension Schema Document
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Filed herewith.
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101.CAL*
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XBRL Taxonomy Extension Calculation Linkbase Document
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Filed herewith.
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101.LAB*
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XBRL Taxonomy Extension Labels Linkbase Document
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Filed herewith.
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101.PRE*
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XBRL Taxonomy Extension Presentation Linkbase Document
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Filed herewith.
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101.DEF*
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XBRL Taxonomy Extension Definition Linkbase Document
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Filed herewith.
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*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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SOLO INTERNATIONAL, INC.
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Date:
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December 30, 2013
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By:
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/s/ Michael Jacob Cooper Smith
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Name:
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Michael Jacob Cooper Smith
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Title:
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President, Secretary, Treasurer, Director (Principal Executive, Financial and Accounting Officer)
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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Date:
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December 30, 2013
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By:
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/s/ Michael Jacob Cooper Smith
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Name:
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Michael Jacob Cooper Smith
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Title:
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President, Secretary Treasurer, Director (Principal Executive, Financial and Accounting Officer)
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SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION 15(d) OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS
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1.
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No annual report to security holders covering the Company’s last fiscal year has been sent as of the date of this report.
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2.
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No proxy statement, form of proxy, or other proxy soliciting material relating to the company’s last fiscal year has been sent to any of the Company’s security holders with respect to any annual or other meeting of security holders
.
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3.
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If such report or proxy material is furnished to security holders subsequent to the filing of this Annual Report on Form 10-K, the Company will furnish copies of such material to the Commission at the time it is sent to security holders.
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