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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 
FORM 10-Q
 
(Mark One)
 
x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal quarter ended June 30, 2014
 
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 
For the transition period from _______ to _______
 
BORNEO RESOURCE INVESTMENTS LTD.
(Exact name of small business issuer as specified in its charter)
 
Nevada
 
000-54707
 
20-3724019
(State of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
19125 North Creek Parkway, Suite 120
Bothell, Washington 98011-8000
 (Address of principal executive offices) (Zip code)

(425) 329-2622
(Registrant’s telephone number, including area code)

None
Securities registered under Section 12(g) of the Exchange Act:
 
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
oo
Smaller reporting company
x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
 
There were 74,430,605 shares outstanding of registrant’s common stock, par value $0.001 per share, as of August 18, 2014.
 


 
 

 
TABLE OF CONTENTS
 
PART I
 
 
 
 
 
Item 1.
Financial Statements
 
3
 
 
Condensed Consolidated Balance Sheets as of June 30, 2014 (Unaudited) and December 31, 2013
 
 
3
 
 
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2014 (Unaudited) and June 30, 2013 (Unaudited)
 
 
4
 
 
Condensed Consolidated Statement of Stockholder’s Deficit for the period from January 1, 2014 through June 30, 2014 (Unaudited)
 
 
5
 
 
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2014 (Unaudited) and June 30, 2013 (Unaudited)
 
 
6
 
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
 
7
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
 
 
33
 
Item 3
Quantitative and Qualitative Disclosures About Market Risk
 
 
46
 
Item 4
Controls and Procedures
 
 
46
 
 
 
 
 
 
 
PART II
 
 
 
 
 
 
Item 1.
Legal Proceedings
 
 
48
 
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
48
 
Item 3
Defaults Upon Senior Securities
 
 
48
 
Item 4.
Mine Safety Disclosures
 
 
48
 
Item 5.
Other Information
 
 
48
 
Item 6.
Exhibits
 
 
49
 
SIGNATURES
 
 
50
 
 
 
2

 
 
PART I
ITEM 1. FINANCIAL STATEMENTS
 
BORNEO RESOURCE INVESTMENTS LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
   
June 30,
2014
   
December 31,
2013
 
   
(Unaudited)
       
ASSETS
Current assets:
           
Cash and cash equivalent
  $ 3,312     $ 8,785  
Project deposit
    -       15,000  
Total current assets
    3,312       23,785  
                 
Property & equipment:
               
Mining Property
    7,406,176       7,156,176  
Buildings - net
    10,000       10,000  
Equipment - net
    65,425       62,536  
      7,481,601       7,228,712  
Deposits
    2,818       2,818  
Total assets
  $ 7,487,731     $ 7,255,315  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
               
Accounts payable and accrued interest - related party
  $ 641,526     $ 500,254  
Accounts payable and accrued interest - other
    171,738       85,581  
Accrued liabilities - mine acquisition - affiliate
    1,282,371       1,711,610  
Accrued liabilities - mine acquisition - other
    264,655       110,000  
Income Taxes Payable
    93,250       62,670  
Accrued liabilities - other
    9,739       8,535  
Convertible notes payable net of deferred debt discount of $0 as of June 30, 2014 and December 31, 2013 respectively
    75,000       187,500  
Promissory notes - affiliates
    2,151,425       1,951,425  
Promissory notes - related parties
    22,000       22,000  
Promissory notes - other
    93,939       57,500  
Total current liabilities
    4,805,643       4,697,075  
Promissory notes - long-term - related parties
    794,313       415,094  
Promissory notes - long-term - other
    355,216       355,216  
Total liabilities
    5,955,172       5,467,385  
Commitments and contingencies
    -       -  
                 
Stockholders' Equity (Deficit):
               
Borneo stockholders' equity (deficit):
               
Preferred stock; $0.001 par value; 100,000,000 shares authorized, none issued and outstanding as of June 30, 2014 and December 31, 2013 respectively
    -       -  
Common stock; $0.001 par value; 400,000,000 shares authorized, 74,430,605 and 74,250,605 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively
    74,431       74,250  
Additional paid in capital
    7,126,766       7,090,917  
Accumulated deficit
    (5,734,414 )     (5,421,607 )
Total Borneo stockholders' equity (deficit)
    1,466,783       1,743,560  
Noncontrolling interest
    65,776       44,370  
Total stockholders' equity (deficit)
    1,532,559       1,787,930  
Total liabilities and stockholders' equity (deficit)
  $ 7,487,731     $ 7,255,315  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
3

 
 
BORNEO RESOURCE INVESTMENTS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
   
June 30,
   
June 30,
 
   
2014
   
2013
   
2014
   
2013
 
                         
Sales
  $ 458,129     $ 212,639     $ 782,556     $ 212,639  
Contract Processing
    96,000       -       156,000       -  
      554,129       212,639       938,556       212,639  
Costs and expenses
                               
Costs applicable to sales
    335,563       94,671       570,550       94,671  
Depreciation
    9,684       2,315       18,518       2,315  
General and administrative
    259,321       203,508       523,266       380,651  
                                 
Operating loss
    (50,439 )     (87,855 )     (173,778 )     (264,998 )
                                 
Other income (expense)
                               
Interest income
    4       1       11       4  
Interest expense
    (44,583 )     (7,205 )     (87,052 )     (11,962 )
                                 
                                 
Income (loss) before provision for income taxes
    (95,018 )     (95,059 )     (260,819 )     (276,956 )
                                 
Provision for income taxes:
                               
Current
    (22,836 )     -       (30,580 )     -  
Deferred
    -       -       -       -  
Total income taxes
    (22,836 )     -       (30,580 )     -  
                                 
Net loss
    (117,854 )     (95,059 )     (291,399 )     (276,956 )
                                 
Net income attributable to noncontrolling interests
    15,796       11,016       21,406       11,016  
                                 
Net loss attributable to Borneo shareholders
  $ (133,650 )   $ (106,075 )   $ (312,805 )   $ (287,972 )
                                 
Weighted average number of common shares outstanding (basic and fully diluted)
    74,339,875       73,309,117       74,299,127       73,271,877  
                                 
Net income (loss) per common share (basic and fully diluted)
  $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
4

 
 
BORNEO RESOURCE INVESTMENTS LTD.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
From January 1, 2014 to June 30, 2014
(Unaudited)

               
Additional
                   
   
Common stock
   
Paid in
   
Accumulated
   
Noncontrolling
       
   
Shares
   
Amount
   
Capital
   
(Deficit)
   
Interest
   
Total
 
                                     
Balance, December 31, 2013
    74,250,459     $ 74,250     $ 7,090,917     $ (5,421,607 )   $ 44,370     $ 1,787,930  
Common stock issued for conversion of debt
    180,146       181       35,849                       36,030  
Net loss for the year to date June 30, 2014
                            (312,807 )     21,406       (291,401 )
Balance, June 30, 2014
    74,430,605     $ 74,431     $ 7,126,766     $ (5,734,414 )   $ 65,776     $ 1,532,559  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
5

 
 
BORNEO RESOURCE INVESTMENTS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
   
For the six months ended June 30,
2014
   
For the six months ended June 30,
2013
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (291,399 )   $ (276,956 )
Adjustments to reconcile net loss to net cash (used in) operating activities:
               
Depreciation
    18,518       2,315  
Tools acquired in mining acquisition written off
    -       5,085  
Loss on sale of equipment
    11,796       -  
Changes in operating assets and liabilities:
               
Inventory
    -       (2,224 )
Accounts payable and accrued interest
    226,353       72,446  
Accrued liabilities - mine acquisition
    (486,840 )     (109,974 )
Income Taxes Payable
    30,580       -  
Net cash used in operating activities
    (490,992 )     (309,308 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Cash paid in asset purchase transaction
    (17,640 )     (55,000 )
Net cash provided by investing activities
    (17,640 )     (55,000 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from convertible notes payable
    (112,500 )     -  
Proceeds from promissory notes - long-term - related parties
    379,220       330,991  
Proceeds from promissory notes - short term - affiliate
    200,000       -  
Proceeds from promissory notes - short term - other
    36,439       -  
Proceeds from sale of common stock
    -       35,050  
Net cash provided by financing activities
    503,159       366,041  
                 
Net (decrease) increase in cash and cash equivalents
    (5,473 )     1,733  
Cash and cash equivalents at beginning of period
    8,785       1,190  
Cash and cash equivalents at end of period
  $ 3,312     $ 2,923  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                
Cash paid during the period for interest
  $ 47,599     $ -  
Cash paid during the period for income taxes
  $ -     $ -  
                 
NONCASH INVESTING AND FINANCING ACTIVITIES:                
Common stock issued for conversion of notes payable and accrued interest
  $ 36,029     $ -  
Prepaid account set-off with asset purchase
  $ 15,000     $ -  
Mining equipment exchanged for accrued liability
  $ 5,643     $ -  
Asset purchase on loan
  $ 38,309     $ -  
Amount paid by the related party on behalf of the Company for investment in foreign subsidiary
  $ -     $ 4,500  
Amount paid by the related party on behalf of the Company for assets purchase transaction
  $ -     $ 55,000  
Amount of imputed value of non-controlling interest for investment in foreign sub
  $ -     $ 500  
Fixed assets received on assets purchase transaction
  $ -     $ 7,000,000  
Net accrued liabilities assumed on assets purchase transaction
  $ -     $ 6,890,000  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
6

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 1 - NATURE OF OPERATIONS
 
Borneo Resource Investments Ltd., (“Borneo” or the “Company”) was organized on June 14, 2004 under the laws of the State of Nevada as “Acme Entertainment, Inc.”. On July 21, 2005, the Company changed its name to “INQB8, Inc.” On November 4, 2005, in connection with a merger with Aventura Resorts, Inc., a privately held Washington company, the Company changed its name to “Aventura Resorts, Inc.” (“Aventura”). In connection with the merger with Interich International Limited, (“Interich”) a British Virgin Islands Company, on July 13, 2011, the company changed its name to Borneo Resource Investments Ltd. See discussion in Note 2 Merger and Recapitalization.
 
Borneo’s mission is to develop a diverse platform of natural resource assets, specifically gold and coal, in Indonesia. The Company’s investment strategy is largely driven by the long term demand for raw materials, particularly precious metals and coal, arising from economic growth in Asia. The value matrix for our business is clear with a longer term, high value investment platform generated by the acquisition of high quality thermal coal concessions, complemented by cash flow producing investments in gold production assets. In order to minimize capital investment requirements, in what is a high capital investment business, the Company’s intention is to expand and “prove” its coal concession platform with the ultimate monetization of these assets through joint ventures with major resource groups, “farming out” or selling the concessions. At the same time, the relatively small scale investment requirements of our gold strategy will generate significant cash flow leverage for our operations as we continue to build production through the upgrading of our existing facilities and acquisition of additional properties.
 
Currently, the Company holds only one coal mining concession acquired by Interich from PT Chaya Meratus Primecoal. With the exception of this concession, the company has only entered into memorandums of understanding or letters of intent with concession holders that are not legally binding on either the concession holder or the Company until the parties enter into definitive agreements which will require the company to pay fees and conduct due diligence. Indonesia is home to some of the richest deposits of steaming coal in the world. The Indonesian government has, for many years been awarding coal mining exploration and licenses to local indigenous groups. With strong relationships with local licensees, through two of its executive officers, the Company has created preferential access to these concession opportunities. Upon entering into agreements to acquire concessions, the Company will market the properties to mining companies and other interested parties. The Company, when presented with the opportunity to do so, will seek to acquire concessions in other regions of Indonesia. Further, Borneo is creating a trading platform for thermal coal concessions and individual coal deposits through arbitrage between Indonesia supply chains and major energy importing nations including India and China.
 
Interich acquired in exchange for Interich stock an 80% interest in PT Chaya Meratus Primecoal, an Indonesian limited liability company, which is the holder of the exclusive exploration and development rights concession for up to 6,000 hectares in the Tanjung Area Basin of South East Kalimantan. The Company may, with any available cash, perform geological tests to determine the feasibility of mining the PT Chaya Meratus Primecoal concession.
 
The Company also entered into a non-binding agreement relating to the rights to an exploration IUP covering approximately 1,300 hectares in Kalimantan through a Memorandum of Understanding, dated October 7, 2011, with the concession holder PT Integra Prima Coal (the “Integra MOU”). Pursuant to the Integra MOU, the Company shall take over the exploration, exploitation and drilling on the IUP. The Company does not have any commitments under the Integra MOU until it decides to continue exploration and mining activities. At that time, the parties will negotiate a price for the IUP. The Company also signed other preliminary agreements with companies to acquire mining concessions.
 
The Company signed a non-binding Share Sale Purchase Pre-Contract Agreement, dated March 15, 2012 (the “Pre Contract Agreement”) to acquire 75% of PT Batubaraselaruas Sapta (“BSS”), which is the holder of a 93,000 hectare concession in the province of East Kalimantan, Indonesia, with a prospective area of 68,360 hectares. The Pre-Contract Agreement provides that it is only a Memorandum of Understanding prior to due diligence and the negotiation and execution of a Share Sale Purchase Agreement. Under the terms of the Pre-Contract Agreement, the Company will bear all of the costs for the due diligence and development of the BSS concession and, subject to its due diligence and the execution of a Share Sale Purchase Agreement, make a series payments totally US$225,000,000 to acquire 75% of BSS. The initial payment of US$2,250,000, which the Company has not yet made, will provide the Company a 1% interest in BSS and guarantee exclusivity for the Company. The Company shall perform due diligence procedures on this property with any available funds.
 
The Company’s strategy is to acquire coal concessions and develop a “land bank” of assets to maximize the proven and probable reserves under management. It is the Company’s intention to select strategic partners to coordinate construction of coal mining infrastructure for concessions acquired. Ultimately, financing of mine development will be largely achieved through structured, limited recourse project financing.
 
 
7

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 1 - NATURE OF OPERATIONS (Continued)

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

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

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

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

Beginning in May 2013, in anticipation of the closing of transaction enabling the Company to acquire Puncak, the operations on the Talawaan Property began to change. Prior to and through May 2013, the mining activities on the Talawaan Property operated as what could best be described as that of a cooperative. With the approval of the Seller, teams of individuals would granted areas on the property, and at their own discretion over their activities, mine the site. Whatever ore they recovered was delivered to a central processing point. The ore would then be processed and the costs of processing were shared by the Seller and the miners. Once the gold was recovered and sold to local buyers, the Seller and the miners would then share the profits, after the necessary adjustments for processing costs. In addition, the equipment on the Talawaan Property was used by the miners on site, but by other miners in the area for their activities. Beginning in May 2013, the transition period prior to the closing of the transaction, working with the Seller, miners and the people responsible for processing, the Company began to implement a coordinated operating structure and the tracking all mining and processing activities on the Talawaan Property. In that the Talawaan Property had not been historically operated as a business, the company is treating the acquisition of the Talawaan Property as a purchase of a mining property, mining equipment and tools.
 
 
8

 

BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 1 - NATURE OF OPERATIONS (Continued)

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

The Company’s allocation of the purchase price on the date of acquisition of the Talawaan and Ratatotok assets acquired and liabilities assumed at the time of acquisition are as follows:

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

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

On July 26, 2013, effective June 30, 2013, under the terms of an Extension Agreement (the “Extension”), the Company, Kalabat, and the Seller, agreed to defer the due date of all payments due on or before June 30, 2013 under the terms of the above purchase agreements for both Talawaan and Ratatotok to September 30, 2013. Under the terms of the Extension two payments of $50,000 each, to be applied to amount due under the terms of the purchase agreements, will be made to the Seller (the “Extension Payments”). The Extension Payments were made on July 30, 2013 and September 3, 2013. See discussion Note 10 Commitments and Contingencies and Note 11 Affiliate Transactions.

On September 30, 2013, under the terms of the Second Extension Agreement (the “Second Extension”), the Company, Kalabat and the Seller, agreed to defer the due date of all outstanding payments due on or before September 30, 2013 under the terms of the above purchase agreements for both Talawaan and Ratatotok to December 31, 2013. Under the terms of the Second Extension one payment of $25,000, to be applied to amount due under the terms of the purchase agreements, will be made to the Seller (the “Second Extension Payment”). The Second payment was made on October 8, 2013. See discussion Note 10 Commitments and Contingencies and Note 11 Affiliate Transactions.

On December 17, 2013, under the terms of a Debt Restructuring Agreement (the “Restructuring Agreement”), the Company, Kalabat and the Seller of the "Talawaan Property," agreed to reduce the balance to be paid by $2,500,000 from $4,650,000 to $2,150,000, in exchange for 100,000 shares of Borneo stock and a non-interest bearing promissory note. Under the terms of the promissory note the Company agreed to make a payment of $20,000 on or before December 25, 2013, a payment of $30,000 on or before December 31, 2013, a payment of $500,000 on or before January 31, 2014, and a final payment of $1,600,000 on or before March 31, 2014. The Seller is compensated to oversee operations at the Talawaan Property and as such he is considered an affiliate for the purposes of this transaction. See discussion Note 8 Capital Stock, Note 10 Commitments and Contingencies and Note 11 Affiliate Transactions.

On December 11, 2013, under the terms of an Asset Purchase Agreement, the Company through its subsidiary PT Puncak Kalabat, finalized the purchase of an approximately 8.6 hectare a then non-producing gold mining property (“Ratatotok South”) for $250,000, including an initial $150,000 payment in cash and two subsequent payments of $50,000 each. Ratatotok South, is located near the village of Ratatotok in the Southeast Minahasa Regency of the North Sulawesi Province of Indonesia. The property is adjacent to the southern border of one of Borneo's other gold mining properties, Ratatotok. In that the Ratatotok South had not been historically operated as a business, the company is treating the acquisition of the Ratatotok South as a purchase of a mining property, mining equipment and tools. As of June 30, 2014 and December 31, 2013, the balance outstanding from accrued liabilities – mine acquisition other was $110,000. See discussion Note 10 Commitments and Contingencies.
 
 
9

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 1 - NATURE OF OPERATIONS (Continued)

On January 11, 2014, the Company through its subsidiary PT Puncak Kalabat, finalized the purchase of an approximately 14.7 hectare a non-producing gold mining property (“Ratatotok Southeast”) for $250,000, including an initial $15,000 payment in cash and four subsequent payments of $100,000, $50,000, $50,000 and $35,000 respectively. Ratatotok Southeast, is located near the village of Ratatotok in the Southeast Minahasa Regency of the North Sulawesi Province of Indonesia. The property is adjacent to the border of one of Borneo's other gold mining properties, Ratatotok. In that the Ratatotok Southeast had not been historically operated as a business, the company is treating the acquisition of the Ratatotok Southeast as a purchase of a mining property. See discussion Note 10 Commitments and Contingencies.

On June 6, 2014, the payment terms of the agreement to purchase Ratatotok Southeast were amended for a renegotiation fee of $10,000. Under the terms of the amendment the seller acknowledged the receipt of $45,000, and in addition to the renegotiation fee of $10,000, the Company has agreed to make payments of $65,000 by June 20, 2014 and $150,000 by July 31, 2014. As of June 30, 2014 and to date, the balance outstanding from accrued liabilities- mine acquisition other was $154,655. See discussion Note 10 Commitments and Contingencies.
 
The Company’s allocation of the purchase price on the date of acquisition of the Ratatotok South and Ratatotok Southeast assets acquired and liabilities assumed at the time of acquisition are as follows:

 
 
Ratatotok
South
 
 
Ratatotok
Southeast
 
 
Total
 
Mining Property
 
$
216,815
 
 
$
250,000
 
 
$
466,815
 
Buildings
 
 
10,000
 
 
 
-
 
 
 
10,000
 
Equipment – mining
 
 
23,185
 
 
 
-
 
 
 
23,185
 
Accrued liabilities – asset purchase
 
 
(250,000
)
 
 
(250,000
)
 
 
(500,000
)
 
 
$
-
 
 
$
-
 
 
$
-
 

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

The Company’s year-end is December 31. The Company is currently not in an exploratory stage and was in an exploratory stage until June 30, 2013.
 
NOTE 2 - MERGER AND RECAPITALIZATION

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

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

From its inception, on September 22, 2009, until the date of the transaction on August 11, 2011, Interich was an inactive dormant corporation with no significant assets or liabilities. The historical financial statements are those of Interich, the accounting acquirer, immediately following the consummation of the reverse merger.
 
 
10

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 2 - MERGER AND RECAPITALIZATION (Continued)

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

In connection with the merger, existing stockholders retained 3,167,272 common shares. All reference to Common Stock shares and per share amounts have been retroactively restated to effect the reverse acquisition as if the transaction had taken place as of the beginning of the earliest period presented.
 
The total consideration paid was $60,178 and the significant components of the transaction are as follows:
 
Assets acquired:
 
$
110
 
Concession
   
-
 
Liabilities assumed:
   
(31,944
)
Net:
 
$
(31,834
)

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

NOTE 3 - CONCESSION ACQUISITION

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

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

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

In compliance with Indonesian regulations the Company, through Indonesian counsel, is filing a foreign investment approval application for all concession acquisitions in Indonesia.
 
 
11

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 4 - BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTIES

Principles of Consolidation
The accompanying condensed consolidated financial statements include the financial statements of Borneo and its subsidiaries (refer below table) are prepared to conform to accounting principles generally accepted in the United States of America. All significant inter-company accounts and transactions were eliminated in consolidation.
 
Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of the following entities, all of which the Company maintains control through a majority ownership:
 
       
Form of
 
State of
   
Name of Entity
 
%
 
Entity
 
Incorporation
 
Relationship
                 
Borneo Resource Investments Limited
  -  
Corporation
 
Nevada
 
Parent
Interich International Limited
  100%  
Corporation
 
British Virgin Isl.
 
Holding Sub
PT Puncak Kalabat Limited
  90%  
Corporation
 
North Minahasa Regency, Indonesia
 
Holding Sub

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

PT Puncak was formed on March 28, 2013.

Going Concern Uncertainties
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying condensed consolidated financial statement, the Company has accumulated a deficit of $5,734,414 as of June 30, 2014. The ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations or on the ability of the Company to obtain necessary financing to fund ongoing operations. Management believes that its current and future plans enable it to continue as a going concern for the next twelve months.

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

The accompanying condensed consolidated financial statements do not include any adjustment to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable to continue in existence.
 
NOTE 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies applied in the presentation of condensed consolidated financial statements are as follows:

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

The Company earns revenue from sale of gold as well as contract processing of third party’s gold ore in the Company's production facilities. Revenue from sale of gold is recognized when title and risk of loss is passed on to the customer generally upon manual delivery of product to the customer subject to assurance of collection. Contract processing revenue is recognized when services are performed and collection is assured.
 
 
12

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

Inventories
Product inventories are valued at the lower of average production cost and net realizable value. Work-in-process inventories, including ore stockpiles, are valued at the lower of average production cost and net realizable value, after an allowance for further processing costs. Finished goods inventory, characterized as concentrate, is valued at the lower of average production cost and net realizable value. Materials and supplies are valued at the lower of cost and replacement cost. The inventory on hand was $-0- at June 30, 2014 and December 31, 2013.

Mining properties, plant and equipment
Mining properties, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of mining properties, plant or equipment items consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Mining properties include direct costs of acquiring properties (including option payments) and costs incurred directly in the development of properties once the technical feasibility and commercial viability has been established.

Exploration and evaluation costs are those costs required to find a mining property and determine commercial feasibility. These costs include costs to establish an initial mining resource and determine whether inferred mining resources can be upgraded to measured and indicated mining resources and whether measured and indicated mining resources can be converted to proven and probable reserves. Project costs related to exploration and evaluation activities are expensed as incurred until such time as the Company has defined mining reserves. Thereafter, costs for the project are capitalized prospectively in mining properties, plant and equipment. The Company also recognizes exploration and evaluation costs as assets when acquired as part of a business combination, or asset purchase, with these assets recognized at cost.

Capitalized exploration and evaluation costs for a project are classified as such until the project demonstrates technical feasibility and commercial viability. Upon demonstrating technical feasibility and commercial viability, and subject to an impairment analysis, capitalized exploration and evaluation costs are transferred to capitalized development costs within mining property, plant and equipment. Technical feasibility and commercial viability generally coincide with the establishment of proven and probable reserves; however, this determination may be impacted by management’s assessment of certain modifying factors.

Where an item of plant and equipment comprises major components with different useful lives, the components are accounted for as separate items of plant and equipment and amortized separately over their useful lives.

Plant and equipment is recorded at cost and amortized using the straight-line method. The accumulated costs of mining properties that are developed to the stage of commercial production are amortized using the units of production method, based on proven and probable reserves (as defined by National Instrument 43-101).

The Company conducts an annual assessment of the residual balances, useful lives and depreciation methods being used for mining properties, plant and equipment and any changes arising from the assessment are applied by the Company prospectively.
 
 
13

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Impairment of Long-Lived Assets
The Company’s tangible assets are reviewed for indications of impairment at each financial statement date. If an indicator of impairment exists, the asset’s recoverable amount is estimated. An impairment loss is recognized when the carrying amount of an asset, or its cash-generating unit, exceeds its recoverable amount. A cash-generating unit is the smallest identifiable group of assets that generates cash flows that are largely independent of the cash flows from other assets or groups of assets. Impairment losses are recognized in profit and loss for the period.

The recoverable amount is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
 
Management periodically reviews the carrying value of its exploration and evaluation assets with internal and external mining related professionals. A decision to abandon, reduce or expand a specific project is based upon many factors including general and specific assessments of reserves, forecast future metal prices, forecast future costs of exploring, developing and operating a producing mine, expiration term and ongoing expense of maintaining leased mineral properties and the general likelihood that the Company will continue exploration. The Company does not set a pre- determined holding period for properties with unproven reserves. However, properties which have not demonstrated suitable mineral concentrations at the conclusion of each phase of an exploration program are re-evaluated to determine if future exploration is warranted and their carrying values are recoverable.

If any area of interest is abandoned or it is determined that its carrying value cannot be supported by future production or sale, the related costs are charged against operations in the period of abandonment or determination that the carrying value exceeds its fair value. The amounts recorded as mineral properties represent costs incurred to date and do not necessarily reflect present or future values.

The impairment expenses was $-0- during the periods ended June 30, 2014 and December 31, 2013.

Reclamation and rehabilitation obligations
The Company recognizes provisions for statutory, contractual, constructive or legal obligations associated with the decommissioning and reclamation of mining property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. A liability is recognized at the time environmental disturbance occurs and the resulting costs are capitalized to the corresponding asset. The provision for reclamation and rehabilitation obligations is estimated using expected cash flows based on engineering and environmental reports prepared by third-party industry specialists and is discounted at a pre-tax rate specific to the liability. The capitalized amount is amortized on the same basis as the related asset.

In subsequent periods, the liability is adjusted for any changes in the amount or timing of the estimated future cash costs and for the accretion of discounted underlying future cash flows. The unwinding of the effect of discounting the provision is recorded as a finance cost in profit or loss for the period.

The reclamation expenses was $-0- during the periods ended June 30, 2014 and December 31, 2013.

Use of Estimates
The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in United States requires management to make estimates based on assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities, and the reported amounts of revenues and expenses during the reporting periods. Accordingly, our accounting estimates require the exercise of judgment. While management believes that the estimates and assumptions used in preparation of condensed consolidated financial statements are appropriate, actual results could differ from those estimates. Estimates that may have a significant effect include impairment analysis relating to mineral properties, volatility calculations relating to warrants. The accounting estimates used in the preparation of the condensed consolidated financial statements may change as new events occur, more experience is acquired, additional information is obtained and our operating environment changes.
 
 
14

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash and Cash Equivalent
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At June 30, 2014 and December 31, 2013, cash consists of a checking account and money market account held by financial institutions.
 
Prepaid Project Expenses
The Company accounts for payments made in advance of the transfer of title on mine properties being acquired as project prepayments. When the payment specified by the agreement is made and the property title is transferred to the Company, the costs associated with the property, are accounted for as described above in Mining Properties, Plant and Equipment.

The project deposit $-0- and $15,000 at June 30, 2014 and December 31, 2013, respectively.

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

Net Loss Per Share, basic and diluted
The Company has adopted Accounting Standards Codification Subtopic 260-10, Earnings Per Share (“ASC 260-10) specifying the computation, presentation and disclosure requirements of earning per share information. Basic income or loss per share has been computed by dividing the net income or loss available to common shareholders by the weighted average number of common shares outstanding for the period. All of the shares issuable upon conversion of the notes payable and exercise of warrants had exercise prices greater than the average market price of the Company’s common stock during the periods ended June 30, 2014 and December 31, 2013, and are excluded from the calculation of diluted net income per share because their effect is anti-dilutive. Shares issuable upon conversion of the notes payable and exercise of warrants has been excluded as a common stock equivalent in the diluted loss per share because their effect is anti-dilutive on the computation.

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

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

For the periods ended June 30, 2014 and December 31, 2013, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities.
 
 
15

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value of Financial Instruments
The Company's financial instruments, as defined by Accounting Standard Codification subtopic 825-10, Financial Instrument (“ASC 825-10), include cash, accounts payable and convertible note payable. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at June 30, 2014 and December 31, 2013.

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

Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions
 
The Company does not have any assets or liabilities measured at fair value on a recurring basis at June 30, 2014 and December 31, 2013. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the periods ended June 30, 2014 and December 31, 2013.

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

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

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

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

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

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

As of June 30, 2014 and December 31, 2013, the Company did not have any issued and outstanding stock options.
 
 
16

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

For the periods ended June 30, 2014 and December 31, 2013 two customers accounted for 100% of total revenue.

Research and Development
The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company has not incur any research and development expenses through June 30, 2014.

Reliance on Key Personnel and Consultants
The Company retains our three officers, namely our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer as independent contractors. The Company is heavily dependent on the continued active participation of these current executive officers, employees and key consultants. The loss of any of the senior management or key consultants could significantly and negatively impact the business until adequate replacements can be identified and put in place.
 
Impact of New Accounting Standards
The Company has adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”), which was formerly known as SFAS 168. ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the Securities and Exchange Commission (the "SEC") under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards and all other non-grandfathered, non-SEC accounting literature not included in the Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the basis of conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.

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

Reclassifications
Certain reclassifications have been made to confirm prior period data to the current presentation. These reclassifications had no effect on reported income.
 
 
17

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 6 - MINING PROPERTY, PLANT AND EQUIPMENT
 
Mining property, plant and equipment comprise:
 
 
 
Mining
property
 
 
Machinery & equipment
 
 
Building
 
 
Total
 
Cost
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2012
 
$
-
 
 
$
-
 
 
$
-
 
 
$
-
 
Talawaan property purchase
 
 
4,939,361
 
 
 
60,639
 
 
 
-
 
 
 
5,000,000
 
Ratatotok property purchase
 
 
2,000,000
 
 
 
-
 
 
 
-
 
 
 
2,000,000
 
Ratatotok South property purchase
 
 
216,815
 
 
 
23,185
 
 
 
10,000
 
 
 
250,000
 
Write off
 
 
-
 
 
 
(5,085
)
 
 
-
 
 
 
(5,085
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013
 
$
7,156,176
 
 
$
78,739
 
 
$
10,000
 
 
$
7,244,915
 

Ratatotok Southeast property purchase
   
250,000
     
-
     
-
     
250,000
 
Mining equipment acquired
   
-
     
38,849
     
-
     
38,849
 
Mining equipment sold
   
-
     
(18,200
)
   
-
     
(18,200
)
 
                               
Balance at June 30, 2014
 
$
7,406,176
   
$
99,388
   
$
10,000
   
$
7,515,564
 
 
Accumulated depreciation and impairment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2012
 
$
-
 
 
$
-
 
 
$
-
 
 
$
-
 
Depreciation
 
 
-
 
 
 
16,203
 
 
 
-
 
 
 
16,203
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013
 
$
-
 
 
$
16,203
 
 
$
-
 
 
$
16,203
 
                                 
Depreciation
   
-
     
18,518
     
-
     
18,518
 
Mining equipment sold
   
-
     
(758
)
   
-
     
(758
)
 
                               
Balance at June 30, 2014
 
$
-
   
$
33,963
   
$
-
   
$
33,963
 
                                 
Net book value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                 
At December 31, 2013
 
$
7,156,176
 
 
$
62,536
 
 
$
10,000
 
 
$
7,228,712
 
At June 30, 2014
 
$
7,406,176
   
$
65,425
   
$
10,000
   
$
7,481,601
 
 
Management believes the Company has diligently investigated rights of ownership of all of the mining properties to a level which is acceptable by prevailing industry standards with respect to the current stage of development of each property in which it has an interest and, to the best of its knowledge, all agreements relating to such ownership rights are in good standing. However, all properties may be subject to prior claims, agreements or transfers, and rights of ownership may be affected by undetected defects.
 
 
18

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 7 - CONVERTIBLE NOTES PAYABLE

The Senior Secured Convertible Notes (“Notes”) represents amounts received from unrelated lenders under the terms of the private placement offering.

At June 30, 2014 and December 31, 2013 convertible notes were comprised of the following:

 
 
June 30,
2014
   
December 31,
2013
 
Senior Secured Convertible Promissory Note (net of unamortized debt discount of $0 at June 30, 2014 and December 31, 2013), in default
 
$
75,000
   
$
75,000
 
8% convertible promissory note, due on May 6, 2014
   
-
     
37,500
 
8% convertible promissory note, due on July 5, 2014
   
-
     
32,500
 
8% convertible promissory note, due on August 26, 2014
   
-
     
42,500
 
Total
   
75,000
     
187,500
 
Less: Current portion
 
$
(75,000
)
 
$
(187,500
)
Long Term portion
 
$
-
   
$
-
 

On August 6, 2013, the Company secured $37,500 in the form of a convertible promissory note. The notes bear interest at the rate of 8% until they mature, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 22% per annum. The notes mature on May 6, 2014, and may be prepaid during the period from issuance to May 6, 2014, in full, at various rates ranging from 115% to 140% of the principal balance plus accrued interest to the date of prepayment. The holder has the option to convert any balance of principal and interest which is unpaid at February 2, 2014 or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 42%. Under the terms of the convertible promissory note, the Company is not in default. On January 30, 2014, the Company repaid this convertible note with accrued interest, prepayment charges and principal balance of $37,500.

On October 2, 2013, the Company secured $32,500 in the form of a convertible promissory note. The notes bear interest at the rate of 8% until they mature, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 22% per annum. The notes mature on July 5, 2014, and may be prepaid during the period from issuance to July 5, 2014, in full, at various rates ranging from 115% to 140% of the principal balance plus accrued interest to the date of prepayment. The holder has the option to convert any balance of principal and interest which is unpaid at March 30, 2014 or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 42%. Under the terms of the convertible promissory note, the Company is not in default. On March 28, 2014, the Company repaid this convertible note with accrued interest, prepayment charges and principal balance of $32,500.

On November 22, 2013, the Company secured $42,500 in the form of a convertible promissory note. The notes bear interest at the rate of 8% until they mature, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 22% per annum. The notes mature on August 26, 2014, and may be prepaid during the period from issuance to August 26, 2014, in full, at various rates ranging from 115% to 140% of the principal balance plus accrued interest to the date of prepayment. The holder has the option to convert any balance of principal and interest which is unpaid at February 2, 2014 or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 42%. On June 2, 2014, the Company repaid this convertible note with accrued interest, prepayment charges and principal balance of $42,500.
 
On July 11, 2014, the Company secured a convertible promissory note of $50,000. The note bears interest at the rate of 8% until it matures, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 18% per annum. The notes matures on June 5, 2015, and may not be prepaid without the consent of the holder. The holder has the option to convert any balance of principal and interest which is unpaid after a period of six months or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest price during the five trading days immediately preceding such conversion, discounted by 40%. Under the terms of the convertible promissory note, the Company is not in default. See discussion Note 14 Subsequent Events.
 
 
19

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 7 - CONVERTIBLE NOTES PAYABLE (Continued)

The Notes are secured by all assets of the Company and its subsidiaries. Maturity is one year from the closing of the offering, unless converted by the note holder prior to the maturity date into the Company’s common stock. The interest rate of the notes is 8% per annum, payable on a semi-annual basis, with the interest rate increasing to 14% per annum upon and so long as a default continues. Under the terms of the Notes, effective October 31, 2012, two Notes with principal amounts totaling $75,000 are in default, and as provided for under the terms of the Notes the interest rate increased to 14% per annum. The number of shares of common stock the note holder is entitled to is determined by dividing the aggregate principal amount and all accrued and then unpaid interest thereon by $0.30. In addition, under the terms of the private placement offering, for each dollar of principal amount of the convertible notes, the subscriber to the private placement also received a two year warrant (i.e. 1,025,000 warrants), from the date of the closing of the private placement offering to purchase shares of the Company’s common stock at exercise price of $0.30 per share. The Notes had a beneficial feature of $375,571 and the fair value of warrants at the date of grant was $649,429. In accordance with ASC 470-20, the Company allocated the proceeds from the issuance of the Notes to the warrants and the Notes based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants was $649,429 and $375,571 was assigned to the beneficial conversion feature on debt. In total, $1,025,000 was recorded as an increase in additional paid-in capital and was netted with the Convertible Note value. The discount was amortized over the original one-year term of the Notes as additional interest expense. For the periods ending June 30, 2014 and December 31, 2013 $-0- was amortized and shown as interest expense.

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

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

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

NOTE 8 - CAPITAL STOCK

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

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

As of June 30, 2014 and December 31, 2013, there were no shares of preferred stock issued and outstanding.

Common stock
The Company authorized the issuance of 400,000,000 shares of common stock, par value $0.001.
 
As of June 30, 2014 and December 31, 2013 there were 74,430,605 and 74,250,459 shares respectively of common stock issued and outstanding.

In April 2013, the Company issued 50,000 shares on the exercise of 50,000 common stock warrants at $.30 per share for total consideration of $15,000. See discussion Note 9 Warrants.
 
 
20

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 8 - CAPITAL STOCK (Continued)

In May 2013, the Company issued 67,000 shares on the exercise of 67,000 common stock warrants at $.30 per share for total consideration of $20,050. See discussion Note 9 Warrants.

In July 2013, the Company issued 48,000 shares on the exercise of 48,000 common stock warrants at $.30 per share for total consideration of $14,450. See discussion Note 9 Warrants.

In December 2013, the Company issued 750,000 under the terms of an agreement with investor relations company, dated November 1, 2013, at per share price of $0.47 per share, the market price of the shares as of November 1, 2013.

In December 2013, the Company issued 100,000 shares under the terms of a Debt Restructuring Agreement to an affiliate reducing balance due by $2,500,000 which was credited to additional paid in capital. See discussion Note 1 Nature of Operations, Note 10 Commitments and Contingencies and Note 11 Affiliate Transactions.

In March 2014, the holder of the loan with a principal balance of $30,000 agreed to exchange the principal and interest on the note of $36,029 for 180,146 shares of common stock of the Company at a price of $.20 per share, the market price of the common stock at the close on March 28, 2014. The common stock was issued on April 24, 2014. See discussion Note 10 Commitments and Contingencies.
 
NOTE 9 - WARRANTS

The following table summarizes the changes in warrants outstanding and related prices for the shares of the Company’s common stock issued to shareholders at June 30, 2014 and December 31, 2013:

Exercise
Price
 
 
Number
Outstanding
 
 
Warrants Outstanding
Weighted Average
Remaining Contractual
Life (years)
 
 
Weighted
Average
Exercise price
 
 
Number
Exercisable
 
 
Warrants Exercisable
Weighted
Average
Exercise Price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
0.60
 
 
 
5,100,000
 
 
 
5.00
 
 
$
0.60
 
 
 
5,100,000
 
 
$
0.60
 

Transactions involving the Company’s warrant issuance are summarized as follows:
 
 
 
 
 
 
Stock Warrants
 
 
 
 
 
 
Weighted Average
 
 
 
Shares
 
 
Exercise Price
 
Outstanding at December 31, 2012
 
 
1,025,000
 
 
$
0.30
 
Granted in 2013
 
 
5,100,000
 
 
 
0.60
 
Cancelled
 
 
-
 
 
 
-
 
Expired
 
 
(860,000
 
 
0.30
 
Exercised
 
 
(165,000
)
 
$
0.30
 
Outstanding at June 30, 2014
 
 
5,100,000
 
 
$
0.60
 

During the year ended December 31, 2012, the Company has issued 1,025,000 warrants to the Note holder. The fair value of the issued warrants was determined using the Black-Scholes Option Pricing Model. See discussion Note 7 Convertible Notes Payable.

In April 2013, 50,000 warrants were exercised at $.30 per warrant for a total of $15,000. See discussion Note 8 Capital Stock.

In May 2013, 67,000 warrants were exercised at $.30 per warrant for a total of $20,050. See discussion Note 8 Capital Stock.

In July 2013, 48,000 warrants were exercised at $.30 per warrant for a total of $14,450. See discussion Note 8 Capital Stock.

On October 30, 2013 the 860,000 unexercised warrants expired and as a result as of the date of the issuance of this report there are no warrants issued and outstanding.
 
 
21

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 9 - WARRANTS (Continued)

On December 17, 2013 the Company issued 5,000,000 warrants the Company’s Chief Financial Officer (see discussion Note 12 Related Party Transactions) and 100,000 warrants to a non-affiliated individual in recognition of services to the Company. The warrants have a term of five years, an exercise price of $.60 per share, and vested on grant. The fair value of the issued warrants was determined using the Black-Scholes Option Pricing Model. The value assigned to the warrants was $1,760,971, and was recorded as an increase in additional paid-in capital and offset to stock based compensation.

The assumptions used in the Black-Scholes pricing model for stock warrants granted during the year ended December 31, 2013 were as follows:

Fair Value of Common Stock
 
$
0.60
 
Risk-Free Interest Rate
   
4.73
%
Expected Volatility of Common Stock
   
156.25
%
Dividend Yield
   
0
%
Estimated life of warrants
 
1 Year
 
 
On June 6, 2014, the Common Stock Purchase Warrant for issuance of 5,000,000 warrants to the Company’s Chief Financial Officer was amended to extend the Initial Exercise Date to December 17, 2016 for $15,000 in consideration (the “Warrant Amendment”). The terms of the Warrant Amendment provide for the acceleration of the Initial Exercise Date under certain conditions.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

Mining Concessions
Interich acquired in exchange for Interich stock an 80% interest in PT Chaya Meratus Primecoal, an Indonesian limited liability company, which is the holder of the exclusive exploration and development rights concession for up to 6,000 hectares in the Tanjung Area Basin of South East Kalimantan. The Company may, with any available cash, perform geological tests to determine the feasibility of mining the PT Chaya Meratus Primecoal concession.
 
The Company also entered into a non-binding agreement relating to the rights to an exploration IUP covering approximately 1,300 hectares in Kalimantan through a Memorandum of Understanding, dated October 7, 2011, with the concession holder PT Integra Prima Coal (the “Integra MOU”). Pursuant to the Integra MOU, the Company shall take over the exploration, exploitation and drilling on the IUP. The Company does not have any commitments under the Integra MOU until it decides to continue exploration and mining activities. At that time, the parties will negotiate a price for the IUP.

The Company signed a non-binding Share Sale Purchase Pre-Contract Agreement, dated March 15, 2012 (the “Pre Contract Agreement”) to acquire 75% of PT Batubaraselaruas Sapta (“BSS”), which is the holder of a 93,000 hectare concession in the province of East Kalimantan, Indonesia, with a prospective area of 68,360 hectares. The Pre-Contract Agreement provides that it is only a Memorandum of Understanding prior to due diligence and the negotiation and execution of a Share Sale Purchase Agreement. Under the terms of the Pre-Contract Agreement, the Company will bear all of the costs for the due diligence and development of the BSS concession and, subject to its due diligence and the execution of a Share Sale Purchase Agreement, make a series payments totally US$225,000,000 to acquire 75% of BSS. The initial payment of US$2,250,000, which the Company has not yet made, will provide the Company a 1% interest in BSS and guarantee exclusivity for the Company. The Company shall perform due diligence procedures on this property with any available funds.
 
 
22

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued)

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

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

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

For the purchase of the Ratatotok Property, the Company has paid $5,000 as the initial payment to the Seller through Kalabat. The purchase agreement for the Ratatotok Property requires further payments of $45,000, which became due upon the execution of the purchase agreement for the Ratatotok Property, an additional $450,000 due on or before June 30, 2013 and a final payment of $1,500,000 due on December 31, 2013. The purchase agreement for the Ratatotok Property requires that the Seller deliver to Kalabat the Ratatotok Property. As a result of this Agreement, the Company recorded a payable of $1,995,000 on its financial statements.
 
On July 26, 2013, effective June 30, 2013, under the terms of an Extension Agreement (the “Extension”), the Company, Kalabat, and the Seller, agreed to defer the due date of all payments due on or before June 30, 2013 under the terms of the above purchase agreements for both Talawaan and Ratatotok to September 30, 2013. Under the terms of the Extension two payments of $50,000 each, to be applied to amount due under the terms of the purchase agreements, will be made to the Seller (the “Extension Payments”). The Extension Payments were made on July 30, 2013 and September 3, 2013. See discussion Note 1 Nature of Operations and Note 11 Affiliate Transactions.

On September 30, 2013, under the terms of the Second Extension Agreement (the “Second Extension”), the Company, Kalabat and the Seller, agreed to defer the due date of all outstanding payments due on or before September 30, 2013 under the terms of the above purchase agreements for both Talawaan and Ratatotok to December 31, 2013. Under the terms of the Second Extension one payment of $25,000, to be applied to amount due under the terms of the purchase agreements, will be made to the Seller (the “Second Extension Payment”). The Second payment was made on October 8, 2013. See discussion Note 1 Nature of Operations and Note 11 Affiliate Transactions.
 
 
23

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued)

On December 17, 2013, under the terms of a Debt Restructuring Agreement (the “Restructuring Agreement”), the Company, Kalabat and the Seller of the "Talawaan Property," agreed to reduce the balance to be paid by $2,500,000 from $4,650,000 to $2,150,000, in exchange for 100,000 shares of Borneo stock and a non-interest bearing promissory note. Under the terms of the promissory note the Company agreed to make a payment of $20,000 on or before December 25, 2013, a payment of $30,000 on or before December 31, 2013, a payment of $500,000 on or before January 31, 2014, and a final payment of $1,600,000 on or before March 31, 2013. The Seller is compensated to oversee operations at the Talawaan Property and as such he is considered an affiliate for the purposes of this transaction. See discussion Note 1 Nature of Operations, Note 8 Capital Stock and Note 11 Affiliate Transactions.
 
On December 11, 2013, under the terms of an Asset Purchase Agreement, the Company through its subsidiary PT Puncak Kalabat, finalized the purchase of an approximately 8.6 hectare currently non-producing gold mining property for $250,000, including an initial $150,000 payment in cash and two subsequent payments of $50,000 each. The acquired property, with the project name of Ratatotok South, is located near the village of Ratatotok in the Southeast Minahasa Regency of the North Sulawesi Province of Indonesia. The property is adjacent to the southern border of one of Borneo's other gold mining properties, Ratatotok. As of June 30, 2014 and December 31, 2013, the balance outstanding from accrued liabilities – mine acquisition other was $110,000. See discussion Note 1 Nature of Operations.
 
On January 11, 2014, the Company through its subsidiary PT Puncak Kalabat, finalized the purchase of an approximately 14.7 hectare a non-producing gold mining property for $250,000, including an initial $15,000 payment in cash and four subsequent payments of $100,000, $50,000, $50,000 and $35,000 respectively. The acquired property, with the project name of Ratatotok Southeast, is located near the village of Ratatotok in the Southeast Minahasa Regency of the North Sulawesi Province of Indonesia. The property is adjacent to the border of one of Borneo's other gold mining properties, Ratatotok. See discussion Note 1 Nature of Operations.
 
On June 6, 2014, the payment terms of the agreement to purchase Ratatotok Southeast were amended for a renegotiation fee of $10,000. Under the terms of the amendment the seller acknowledged the receipt of $45,000, and in addition to the renegotiation fee of $10,000, the Company has agreed to make payments of $65,000 by June 20, 2014 and $150,000 by July 31, 2014. As of June 30, 2014 and to date, the balance outstanding from accrued liabilities- mine acquisition other was $154,655. See discussion Note 1 Nature of Operations.
 
Operating leases
On September 14, 2011, the Company signed an office rental agreement for its corporate offices in Bothell, Washington USA. The lease is month-to-month and the monthly rental is $300 per month. In addition the Company paid a deposit of $300.
 
On May 17, 2012, the Company signed an office rental agreement for offices in Hong Kong. The lease is for six months and the monthly rental is HKD$16,000 which equals approximately $2,100 per month. In addition the Company paid a deposit of HKD$16,000 which equals approximately $2,100 per month. The office rental agreement for the offices in Hong Kong has been extended in increments of an additional six months. The current rate rental rate is HKD$19,515 per month which equals approximately $2,600per month.
 
Loans
 
Short term promissory notes- other
During the year ended December 31, 2013, the Company secured $32,500 in loans in the form of short-term promissory notes from non-affiliated third parties. During the same period three loans with principal totaling $6,000 were repaid.
 
On March 28, 2014, the holder of the loan with a principal balance of $30,000 agreed to exchange the principal and interest on the note for shares of common stock of the Company. See discussion Note 8 Capital Stock.
 
From January 1, 2014 through June 30, 2014 the Company secured $58,500 in loans in the form of short-term promissory notes from non-affiliated third parties. The promissory notes have a term ninety days to six months and pay compound interest of five percent per annum. During the same period a loan with a principal balance of $42,500 was repaid. Under the terms of the short-term promissory notes, the Company is not in default. See discussion Note 14 Subsequent Events.
 
During the period ended June 30, 2014, the Company secured a $38,309 loan for a vehicle purchase and during the same period principal of $17,871 was repaid.
 
As of June 30, 2014 and December 31, 2013, the balance outstanding from short term promissory notes- other was $93,939 and $57,500, respectively.
 
On July 15, 2014, the Company repaid a short term promissory note to a non-affiliate with a principal balance of $12,000. See discussion Note 14 Subsequent Events.
 
 
24

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued)
 
On August 11, 2014, the Company secured a $25,000 loan in the form of a short-term promissory note from non-affiliated third party. The promissory note has a term one year and pays compound interest of twelve percent per annum. Under the terms of the short-term promissory note, the Company is not in default. See discussion Note 14 Subsequent Events.
 
Long term promissory notes- other
The following table details loans made by non-affiliated third party to the Company in the form of long-term promissory notes. The promissory notes have a term of five years and pay compound interest of five percent per annum. Under the terms of the promissory notes, the Company is not in default.

Date of Loan
 
Amount
 
8/6/2013
 
$
11,000
 
8/9/2013
 
$
6,000
 
8/27/2013
 
$
50,000
 
9/3/2013
 
$
6,000
 
10/7/2013
 
$
100,000
 
11/25/2013
 
$
150,000
 
12/2/2013
 
$
32,216
 
 
 
$
355,216
 

As of June 30, 2014 and December 31, 2013, the balance outstanding from long term promissory notes- other was $355,216.

Short term promissory notes- related parties
On November 21, 2012, the Company secured $5,000 in the form of a short-term promissory note from Mr. Ollquist. The promissory note has a term of ninety days and pays compound interest of five percent per annum. The term have been extended and the Company is not in default. See discussion Note 12 Related Party Transactions.

The following table details loans made by Mr. Matin to the Company in the form of short-term promissory notes. The promissory notes have a term of thirty to ninety days and pay compound interest of five percent per annum. The term of the notes has been extended and the Company is not in default. See discussion Note 12 Related Party Transactions.

Date of Loan
 
Amount
 
11/9/2012
 
$
5,000
 
12/18/2012
 
$
5,000
 
12/21/2012
 
$
5,000
 
2/7/2013
 
$
2,000
 
 
 
$
17,000
 
 
As of June 30, 2014 and December 31, 2013, the balance outstanding from short term promissory notes- related party was $22,000.
 
 
25

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued)

Short term promissory notes- affiliate
The following table details loans made by the Company’s Managing Director – Asia in the form of short-term promissory notes. The promissory notes have a term of ninety days and pay fixed interest of six and quarter percent when repaid. The Company is not in default. See discussion Note 11 Affiliate Transactions.

Date of Loan
 
Amount
 
4/17/2014
 
$
100,000
 
4/29/2014
 
$
100,000
 
   
$
200,000
 

Long term promissory notes- related parties
The following table details loans made by Mr. Ollquist to the Company in the form of long-term promissory notes. The promissory notes have a term of five years and pay compound interest of five percent per annum. Under the terms of the promissory notes, the Company is not in default. See discussion Note 12 Related Party Transactions.

Date of Loan
 
Amount
 
2/15/2013
 
$
250,000
 
4/4/2013
 
$
50,000
 
7/3/2013
 
$
5,094
 
7/30/2013
 
$
50,000
 
9/30/2013
 
$
10,000
 
1/09/2014
 
$
12,858
 
1/14/2014
 
$
4,466
 
1/14/2014
 
$
4,236
 
1/29/2014
 
$
8,746
 
1/30/2014
 
$
20,000
 
2/24/2014
 
$
19,956
 
2/27/2014
 
$
1,256
 
2/28/2014
 
$
22,089
 
3/11/2014
 
$
14,130
 
3/14/2014
 
$
1,000
 
3/25/2014
 
$
3,500
 
3/29/2014
 
$
21,550
 
4/02/2014
 
$
11,938
 
4/11/2014
 
$
4,500
 
5/30/2014
 
$
71,943
 
6/11/2014
 
$
3,203
 
6/23/2014
 
$
48,848
 
 
 
$
639,313
 
 
 
26

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued)

The following table details loans made by Mr. Matin to the Company in the form of long-term promissory notes. The promissory notes have a term of five years and pay compound interest of five percent per annum. Under the terms of the promissory notes, the Company is not in default. See discussion Note 12 Related Party Transactions.

Date of Loan
 
Amount
 
9/3/2013
 
$
50,000
 
1/30/2014
 
$
4,000
 
2/13/2014
 
$
1,000
 
 
 
$
55,000
 
 
On March 28, 2014, the Company secured $100,000 in the form of long-term promissory note from Mr. Muaja. The promissory note has a term of five years and pays compound interest of five percent per annum. Under the terms of the long-term promissory note, the Company is not in default. See discussion Note 12 Related Party Transactions.

As of June 30, 2014 and December 31, 2013, the balance outstanding from long term promissory notes- related party was $794,313 and $415,094, respectively.

Convertible Notes
On July 11, 2014, the Company secured a convertible promissory note of $50,000. The note bears interest at the rate of 8% until it matures, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 18% per annum. The notes matures on June 5, 2015, and may not be prepaid without the consent of the holder. The holder has the option to convert any balance of principal and interest which is unpaid after a period of six months or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest price during the five trading days immediately preceding such conversion, discounted by 40%. Under the terms of the convertible promissory note, the Company is not in default. See discussion Note 14 Subsequent Events.
 
Litigation
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
 
NOTE 11 - AFFILIATE TRANSACTIONS
 
The Seller from whom the Company purchased both the Talawaan Property and Ratatotok Property continues a significant relationship with the Company and is compensated to oversee operations at the Talawaan Property. As such the Company considers this person to be an affiliate. See discussion Note 1 Nature of Operations, Note 8 Capital Stock, and Note 10 Commitments and Contingencies.
 
As of June 1, 2013, the total accrued liabilities assumed for both mine were $6,890,000 net of down payment of $110,000.
 
Under the terms of an Extension Agreement (the “Extension”) dated June 2013 and September 2013, the repayment of $125,000 and applied to amount due under the terms of the purchase agreements.
 
On December 17, 2013, under the terms of a Debt Restructuring Agreement (the “Restructuring Agreement”), the Company, Kalabat and the Seller of the "Talawaan Property," agreed to reduce the balance to be paid by $2,500,000 from $4,650,000 to $2,150,000, in exchange for 100,000 shares of Borneo stock and a non-interest bearing promissory note.
 
During the periods ended June 30, 2014 and December 31, 2013, by mutual understanding, approximately $454,000 and $600,000, respectively, the excess funds available, after all mining operations expenses are paid, is retained by the Seller and offset against the Company’s obligations to him under the purchase agreements.
 
As of June 30, 2014 and December 31, 2013, the balance outstanding from accrued liabilities- mine acquisition affiliate was $1,300,000 and $1,711,610, respectively. As of June 30, 2014 and December 31, 2013, the balance outstanding from promissory notes affiliate associated with the Debt Restructuring Agreement was $1,951,425.
 
 
27

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 11 - AFFILIATE TRANSACTIONS (Continued)

During the periods ended June 30, 2014 and December 31, 2013, the Company earned $-0- and $9,600, respectively, from the affiliate transaction included in statement of operations under line item “contract processing revenue”.
 
During the periods ended June 30, 2014 and December 31, 2013, the Company incurred and paid approximately $3,000 and $46,000, respectively, to the Seller for operational activities that are included in statement of operations under line item “costs applicable to sales”.
 
The following table details loans made by the Company’s Managing Director – Asia in the form of short-term promissory notes. The promissory notes have a term of ninety days and pay fixed interest of six and quarter percent when repaid. The Company is not in default. See discussion Note 10 Commitments and Contingencies.
 
Date of Loan
 
Amount
 
4/17/2014
 
$
100,000
 
4/29/2014
 
$
100,000
 
   
$
200,000
 

NOTE 12 - RELATED PARTY TRANSACTIONS

Mr. Nils Ollquist, the Company’s Chairman of the Board, Chief Executive Officer and President, was the largest shareholder of Interich prior to the Merger. Under the terms of the Merger, Mr. Ollquist was issued 27,080,133 restricted shares of Common Stock of Borneo. See discussion Note 2 Merger and Recapitalization. In addition, prior to its closing, Mr. Ollquist had been a principal of OFS Capital Group (“OFS”), a company that Borneo had retained under a management agreement for which Mr. Ollquist received no compensation. See discussion Note 10 Commitments and Contingencies.
 
On November 21, 2012, the Company secured $5,000 in the form of a short-term promissory note from Mr. Ollquist. The promissory note has a term of ninety days and pays compound interest of five percent per annum. The term have been extended and the Company is not in default. See discussion Note 10 Commitments and Contingencies.
 
 
28

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 12 - RELATED PARTY TRANSACTIONS (Continued)

The following table details loans made by Mr. Ollquist to the Company in the form of long-term promissory notes. The promissory notes have a term of five years and pay compound interest of five percent per annum. Under the terms of the promissory notes, the Company is not in default. See discussion Note 10 Commitments and Contingencies.

Date of Loan
 
Amount
 
2/15/2013
 
$
250,000
 
4/4/2013
 
$
50,000
 
7/3/2013
 
$
5,094
 
7/30/2013
 
$
50,000
 
9/30/2013
 
$
10,000
 
1/09/2014
 
$
12,858
 
1/14/2014
 
$
4,466
 
1/14/2014
 
$
4,236
 
1/29/2014
 
$
8,746
 
1/30/2014
 
$
20,000
 
2/24/2014
 
$
19,956
 
2/27/2014
 
$
1,256
 
2/28/2014
 
$
22,089
 
3/11/2014
 
$
14,130
 
3/14/2014
 
$
1,000
 
3/25/2014
 
$
3,500
 
3/29/2014
 
$
21,550
 
4/02/2014
 
$
11,938
 
4/11/2014
 
$
4,500
 
5/30/2014
 
$
71,943
 
6/11/2014
 
$
3,203
 
6/23/2014
 
$
48,848
 
 
 
$
639,313
 
 
Mr. Carlo Muaja, the Company’s Chief Operating Officer and a Director, was a shareholder of Interich prior to the Merger. Mr. Muaja was the principal shareholder of Meratus prior to Interich’s acquisition of an 80% interest in Meratus, and he received his shares in Interich as part of the transaction. See discussion Note 3 Concession Acquisitions. Under the terms of the Merger, Mr. Muaja was issued 15,044,518 restricted shares of Common Stock of Borneo.

On March 28, 2014, the Company secured $100,000 in the form of long-term promissory note from Mr. Muaja. The promissory note has a term of five years and pays compound interest of five percent per annum. Under the terms of the long-term promissory note, the Company is not in default. See discussion Note 10 Commitments Contingencies.
 
 
29

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 12 - RELATED PARTY TRANSACTIONS (Continued)

Another former principal of OFS, Mr. George Matin, was a shareholder of Interich prior to the Merger. Under the terms of the Merger Mr. Matin was issued 18,053,422 restricted shares of Common Stock of Borneo. On August 1, 2011, the Company entered into a management agreement with OFS. OFS had been retained to assist the Company in planning, managing, and conducting its business operations. The agreement has an initial term of two years, and the Company paid OFS $5,000 per month plus approved expenses. Mr. Ollquist and Mr. Matin are former principals of OFS. Mr. Ollquist did not receive compensation under this agreement. The agreement was terminated in July 2012. See discussion Note 10 Commitments and Contingencies.
 
The following table details loans made by Mr. Matin to the Company in the form of short-term promissory notes. The promissory notes have a term of thirty to ninety days and pay compound interest of five percent per annum. The term of the notes has been extended and the Company is not in default. See discussion Note 10 Commitments and Contingencies.

Date of Loan
 
Amount
 
11/9/2012
 
$
5,000
 
12/18/2012
 
$
5,000
 
12/21/2012
 
$
5,000
 
2/7/2013
 
$
2,000
 
 
 
$
17,000
 

The following table details loans made by Mr. Matin to the Company in the form of long-term promissory notes. The promissory notes have a term of five years and pay compound interest of five percent per annum. Under the terms of the promissory notes, the Company is not in default. See discussion Note 10 Commitments and Contingencies.

Date of Loan
 
Amount
 
9/3/2013
 
$
50,000
 
1/30/2014
 
$
4,000
 
2/13/2014
 
$
1,000
 
 
 
$
55,000
 

On December 17, 2013 the Company issued 5,000,000 warrants the Company’s Chief Financial Officer in recognition of services to the Company. The warrants have a term of five years, an exercise price of $.60 per share, and vested on grant. On June 6, 2014, the Common Stock Purchase Warrant for issuance of 5,000,000 warrants to the Company’s Chief Financial Officer was amended to extend the Initial Exercise Date to December 17, 2016 for $15,000 in consideration (the “Warrant Amendment”). The terms of the Warrant Amendment provide for the acceleration of the Initial Exercise Date under certain conditions. See discussion Note 9 Warrants.
 
NOTE 13 - INCOME TAXES

We account for income taxes under ASC 740, “Expenses – Income Taxes”. ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry forwards. ASC 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Realization of deferred tax assets, including those related to the U.S. net operating loss carry forwards and to the temporary differences related to the deduction of stock-based compensation for income tax purposes as compared to financial statement purposes, are dependent upon future taxable income during the periods in which those temporary differences become deductible or are utilized.
 
PT Puncak Kalabat is governed by the Income Tax Law of the Indonesia Concerning Foreign Investment Enterprise and Foreign Enterprises and local income tax laws (the “Indonesia Income Tax Law”). Pursuant to the Indonesia Income Tax Law, PT Puncak is subject to tax at a maximum statutory rate of 12.5% (inclusive of state and local income taxes). The income tax provision described in the table below was due to permanent differences.
 
Interich International Limited, (“Interich”) a British Virgin Islands Company, and is not subject to any corporate income taxes in accordance to the laws and regulations of that country. Since Interich is not engaged in operations or sales, and management does not expect to repatriate earnings of Interich for use in US, there would not be potential income tax implications.
 
 
30

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 13 - INCOME TAXES

The Company has cumulative undistributed earnings from its foreign subsidiaries of approximately $214,000 and $439,000 as of June 30, 2014 and December 31, 2013, respectively, which is included in the consolidated retained earnings and will continue to be indefinitely reinvested in the Company’s Indonesia operations. Accordingly, no provision has been made for any deferred taxes related to future repatriation of these earnings, nor is it practicable to estimate the amount of income taxes that would have to be provided if we concluded that such earnings will be remitted in the future.

The components of income (loss) before income tax consist of the following:
 
 
 
Six Months
Ended June 30,
2014
   
Year Ended
December 31,
2013
 
U.S. Operations
 
$
(505,198
)
 
$
(2,876,596
)
Hong Kong Operations (Interich)
   
-
     
(1,625
)
Indonesia Operations (PT Puncak)
   
244,642
     
501,360
 
Total
 
$
(260,819
)
 
$
(2,376,861
)
 
The components of the provision (benefit) for income taxes are as follows (presented to the nearest thousand):
 
 
 
Six Months
Ended June 30,
2014
   
Year Ended
December 31,
2013
 
Federal, State and Local
  $ -     $ -  
Indonesia income tax
    31,000       63,000  
Total
  $ 31,000     $ 63,000  

The table below summarizes the reconciliation of our income tax provision (benefit) computed at the statutory U.S. Federal rate and the actual tax provision (presented to the nearest thousand):
 
 
 
Six Months
Ended June 30,
2014
 
 
Year Ended December 31,
2013
 
Income tax provision at federal statutory rate
 
$
(89,000)
 
 
$
(808,000)
 
State income taxes, net of federal benefit
 
 
 
 
 
-
 
Permanent differences
 
 
 
 
 
600,000 
 
U.S. tax rate in excess of foreign tax rate
 
 
 (53,000)
 
 
 
 (107,000)
 
U.S. valuation allowance
 
 
172,000 
 
 
 
378,000 
 
Tax provision
 
$
30,000 
 
 
$
63,000 
 
 
 
31

 
 
BORNEO RESOURCE INVESTMENTS LTD.
Notes to Condensed Consolidated Financial Statements
June 30, 2014
(Unaudited)
 
NOTE 13 - INCOME TAXES (Continued)

We have a net operating loss (“NOL”) carry forward for U.S. income tax purposes at June 30, 2014 expiring through the year 2034. Management estimates the NOL as of June 30, 2014 to be approximately $4,554,000. The utilization of our NOL’s will be significantly limited because of a change in ownership as defined under Section 382 of Internal Revenue Code of 1986, if in the future the Company issues common stock or additional equity instruments convertible in common shares which result in an ownership change exceeding the 50% limitation threshold imposed by that section, all of the Company’s net operating losses carry forwards may be significantly limited as to the amount of use in a particular years. All or portion of the remaining valuation allowance may be reduced in future years based on an assessment of earnings sufficient to fully utilize these potential tax benefits.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Included in the deferred tax asset is the aforementioned NOL. We are not able to predict if such future taxable income will be more likely than not sufficient to utilize the benefit. As such, we do not believe the benefit is more likely than not to be realized and we recognize a full valuation allowance for those deferred tax assets. Our deferred tax asset as of June 30, 2014 and December 31, 2013 are as follows:

 
 
Six Months
Ended June 30,
2014
   
Year Ended
December 31,
2013
 
Total deferred tax asset - from NOL carry forwards
 
$
1,548,000
   
$
1,378,000
 
Valuation allowance
   
(1,548,000
)
   
(1,378,000
)
Deferred tax asset, net of allowance
 
$
-
   
$
-
 

During the quarter ending June 30, 2014, the valuation allowance was increased by approximately $170,000 from December 31, 2013.
 
NOTE 14 - SUBSEQUENT EVENTS

Loans
On July 11, 2014, the Company secured a convertible promissory note of $50,000. The note bears interest at the rate of 8% until it matures, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 18% per annum. The notes matures on June 5, 2015, and may not be prepaid without the consent of the holder. The holder has the option to convert any balance of principal and interest which is unpaid after a period of six months or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest price during the five trading days immediately preceding such conversion, discounted by 40%. Under the terms of the convertible promissory note, the Company is not in default. See discussion Note 10 Commitments and Contingencies.

On July 15, 2014, the Company repaid a short term promissory note to a non-affiliate with a principal balance of $12,000. See discussion Note 10 Commitments and Contingencies.
 
On August 11, 2014, the Company secured a $25,000 loan in the form of a short-term promissory note from non-affiliated third party. The promissory note has a term one year and pays compound interest of twelve percent per annum. Under the terms of the short-term promissory note, the Company is not in default. See discussion Note 10 Commitments and Contingencies.
 
 
32

 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 
Forward Looking Statements
 
This report contains “forward-looking statements.” Forward-looking statements are based upon our current assumptions, expectations and beliefs concerning future developments and their potential effect on our business. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although the absence of these words does not necessarily mean that a statement is not forward-looking. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements.
 
Factors that may cause or contribute actual results to differ from these forward-looking statements include, but are not limited to, for example:
 
·
adverse economic conditions;
·
changes in the price of gold, coal or other minerals;
·
a change in the estimate of minerals on our concessions;
·
an inability to extract minerals from our properties;
·
changes in Indonesian law;
·
risks associated with counterparty default in any of our agreements
·
the ability to acquire funding;
·
other risks and uncertainties related to mining and our business strategy; and
·
weather conditions in Indonesia.

This list is not exhaustive of the factors that may affect our forward-looking statements. All forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements or other information contained herein. Stockholders and potential investors should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements in this report are reasonable, we cannot assure stockholders and potential investors that these plans, intentions or expectations will be achieved. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
 
Business History
 
Borneo Resource Investments Ltd., (“Borneo” or the “Company”) was organized on June 14, 2004 under the laws of the State of Nevada as “Acme Entertainment, Inc.” On July 21, 2005, the Company changed its name to “INQB8, Inc.” On November 4, 2005, in connection with a merger with Aventura Resorts, Inc., a privately held Washington company, the Company changed its name to “Aventura Resorts, Inc.” (“Aventura”). Aventura’s business plan was to develop upscale resort communities for motorhome owners. The Company entered into several agreements to acquire resort properties. With the banking crisis in the United States and the downturn in real estate values, however, the Company was unable to complete either the attempted bank financing or equity transaction to complete the contemplated purchases.
 
On July 13, 2011, in anticipation of the merger, described below, with Interich International Limited (“Interich”), a British Virgin Islands Company, the Company changed its name to Borneo Resource Investments Ltd. On August 1, 2011 (the “Merger Date”), the Company was merged with Interich via a merger subsidiary the Company created for this transaction. From its inception, on September 22, 2009 until the date of the transaction, Interich was an inactive corporation with no significant assets or liabilities. The transaction has been accounted for as a reverse merger, and Interich was the acquiring company on the basis that Interich’s senior management became the entire senior management of the merged entity and there was a change of control of Borneo. While the transaction was accounted for using the purchase method of accounting, in substance the transaction was a recapitalization of Borneo’s capital structure.
 
 
33

 
 
In anticipation of the closing of the Interich transaction, on July 13, 2011, the Company effected a 100-to-1 reverse stock split of its issued and outstanding shares of common stock. As a result of the reverse stock split, the Company had 3,167,269 shares outstanding before the merger. In addition, the authorized number of shares of common stock was amended to authorize the Company to issue a total of 500,000,000 shares of capital stock, each with a par value of $0.001, which consists of 400,000,000 shares of common stock and 100,000,000 shares of preferred stock.
 
In connection with the merger, Borneo issued 60,178,073 restricted common shares to stockholders of Interich. In addition, holders of convertible debt exchanged their notes for 6,154,860 of the Company’s common shares. The issued and outstanding number of common shares subsequent to the merger and the exchange of convertible debt was 69,500,205. As of May 20, 2014, we had 74,430,605 shares of common stock outstanding.
 
Our principal executive offices are located at 19125 North Creek Parkway, Suite 120, Bothell, Washington, 98011 and our telephone number is (425)329-2622.
 
Our Business
 
Borneo’s mission is to develop a diverse platform of natural resource assets, specifically gold and coal, in Indonesia. The Company’s investment strategy is largely driven by the long term demand for raw materials, particularly precious metals and coal, arising from economic growth in Asia. The value matrix for our business is clear with a longer term, high value investment platform generated by the acquisition of high quality thermal coal concessions, complemented by cash flow producing investments in gold production assets. In order to minimize capital investment requirements, in what is a high capital investment business, the Company’s intention is to expand and “prove” its coal concession platform with the ultimate monetization of these assets through joint ventures with major resource groups, “farming out” or selling the concessions. At the same time, the relatively small scale investment requirements of our gold strategy will generate significant cash flow leverage for our operations as we continue to build production through the upgrading of our existing facilities and acquisition of additional properties.
 
Gold Mining Properties
For its gold operations, the Company is building a production and development platform in the North Sulawesi area of the Indonesian archipelago, a gold rich area where traditional, small scale mining has yielded high levels of ore concentration from reef structures which were first identified by Newmont Mining over 20 years ago. The Company has already acquired a producing mine through its purchase of a company that owns 50 hectares of property near Manado, the regional capital of Minahasa Regency in the Northeastern part of the island of Sulawesi and is in the process of building its investment in this region.
 
In June 2013, the Company entered into agreements to purchase PT Puncak Kalabat (“Kalabat”), an Indonesian registered corporation. Kalabat owns two properties, comprising a 50 hectare property located in Talawaan City of North Minahasa Regency (“Talawaan”) and a 30 hectare property located in the Southeast Minahasa Regency (“Ratatotok”) both located in the North Sulawesi Province. Beginning in May 2013, in anticipation of the closing of transaction enabling the Company to acquire Puncak, the operations on the Talawaan Property began to change. Prior to and through May 2013, the mining activities on the Talawaan Property operated as what could best be described as a cooperative. With the approval of the Seller, teams of individuals would granted areas on the property, and, at their own discretion, mine the site. Whatever ore they recovered was delivered to a central processing point. The ore would then be processed and the costs of processing were shared by the Seller and the miners. Once the gold was recovered and sold to local buyers, the Seller and the miners would then share the profits, after the necessary adjustments for processing costs. In addition, the equipment on the Talawaan Property was used by the miners on site, but by other miners in the area for their activities. Beginning in May 2013, the transition period prior to the closing of the transaction, working with the Seller, miners and the people responsible for processing, the Company began to implement a coordinated operating structure and the tracking all mining and processing activities on the Talawaan Property. In that the Talawaan Property had not been historically operated as a business, the company is treating the acquisition of the Talawaan Property as a purchase of a mining property, mining equipment and tools. The Company has not conducted any drilling programs or commissioned an NI 43-101 compliant technical report. We plan to develop and conduct small-scale gold mining within certain areas that are currently contained within our properties. The production decision or significant development on these projects will not be based on mineral reserves supported by an NI43-101 compliant technical report.
 
 
34

 
 
In December 2013, through Kalabat, the Company finalized the purchase of a gold mining property for $250,000, including an initial $150,000 payment in cash and two subsequent payments of $50,000 each. The acquired property, with the project name of Ratatotok South, is located near the village of Ratatotok in the Southeast Minahasa Regency of the North Sulawesi Province of Indonesia. The property is adjacent to the southern border of one of Borneo’s other gold mining properties, Ratatotok. Ratatotok South was purchased with assets including a stockpile of ore on site ready for processing, as well as significant infrastructure and equipment. Borneo began supplemental excavation and initial production during the first quarter 2014. As of June 30, 2014 and December 31, 2013, the balance outstanding from accrued liabilities- mine acquisition other was $110,000.
 
In January 2014, through Kalabat, finalized the purchase of another producing gold mining property. The 15 hectare property, with the project name Ratatotok Southeast, was acquired for $250,000. The property is located in the central section of a well-established gold reef structure. It is situated adjacent to two other Borneo gold properties, Ratatotok and Ratatotok South, located near the village of Ratatotok in the Southeast Minahasa Regency of the North Sulawesi Province of Indonesia.
 
The region where both the Talawaan and Ratatotok properties are located in is part of an extensive gold formation which was initially surveyed some 20 years ago. Talawaan and Ratatotok concession areas have been granted licenses in perpetuity by North Minahasa Regency and the Southeast Minahasa Regency respectively as a local exploration and production permits. Beginning in June 2013, the Company began producing revenue from the surface mining of gold from Talawaan and is in the process of finalizing a budget to commence mining operations at Ratatotok. The Company is actively assessing opportunities to acquire additional gold properties, both by way of land purchases and exploration and production licenses.
 
Talawaan
Talawaan is located close to the regional capital, Manado, and lies on a gold reef formation which runs for approximately 20km (12 miles) on an east/west axis. The gold reef which runs through the forested property is extensive and easily accessible from the surface to a depth of 250 meters with little or no overburden along most of its length. The property holds a license in perpetuity from the North Minahasa Regency as an exploration and production permit. The Company began mining operations on the Talawaan Property in June 2013. In July, a high concentration seam that comprised of loose clay lignite was discovered on the property. Mining operations began on this part of the property at the end of September 2013.
 
Ratatotok, Ratatotok South, Ratatotok Southeast
Ratatotok is located near the village of Ratatotok, approximately 3 hours east of the regional capital of Manado and lies on a gold reef formation which runs east to west from the coast. The acquisition includes a perpetual license from the Southeast Minahasa Regency as an exploration and production permit. Although there are currently no mining operations on the Ratatotok or Ratatotok Southeast, mining activities are being pursued at Ratatotok South. Borneo began supplemental excavation and initial production at Ratatotok South during the first quarter 2014.

Ratatotok South's current heap leach processing area yields 2 - 3 kilograms of gold per month from approximately 2,500 metric tons of ore. Borneo is now building its second heap leach processing area on its Ratatotok properties which will provide an additional monthly ore processing capacity of 5,000 metric tons. Upon completion of the second heap leach processing area in July, Ratatotok South is expected to have the capacity to process a total of approximately 7,500 metric tons of ore per month, yielding about 7 - 10 kilograms (245 - 350 ounces) of gold per month. We expect that the second heap leach processing area will be completed before the end of the third quarter.
 
 
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Coal Concessions
In addition to gold, the Company is pursuing coal concessions. Further, Borneo is creating a trading platform for thermal coal concessions and individual coal deposits through arbitrage between Indonesia supply chains and major energy importing nations including India and China. Indonesia is home to some of the richest deposits of steaming coal in the world. The Indonesian government has, for many years been awarding coal mining exploration and licenses to local indigenous groups. With strong relationships with local licensees, through two of its executive officers, the Company has created preferential access to these concession opportunities. Upon entering into agreements to acquire concessions, the Company will market the properties to mining companies and other interested parties. The Company, when presented with the opportunity to do so, will seek to acquire concessions in other regions of Indonesia.
 
With respect to development of its thermal coal investment platform, the Company has targeted Kalimantan on the island of Borneo, one of the world’s largest areas of high grade thermal coal deposits, through acquisition of exploration and production licenses with verified reserves and export potential. Currently, the Company holds one coal mining concession near the city of Balikpapan acquired from PT Chaya Meratus Primecoal (“Meratus”). In addition to Meratus, the Company has entered into memoranda of understanding or letters of intent with additional concession holders which will require the company to pay fees and conduct due diligence. The Indonesian government has, for many years, been awarding coal mining exploration and licenses to local indigenous groups. With strong relationships with local licensees, through two of its executive officers and a director, the Company has created preferential access to these concession opportunities. Upon entering into agreements to acquire concessions, the Company will market the properties to mining companies and other interested parties. The Company, when presented with the opportunity to do so, will seek to acquire concessions in other regions of Indonesia. Further, Borneo is creating a trading platform for thermal coal concessions and individual coal deposits through arbitrage between Indonesia supply chains and major energy importing nations including India, China and the Philippines.
 
Seasonality
 
The overall operations and financial performance of our Indonesian operations are impacted by seasonality. The volume of gold tends to be lower from November to March due to heavy rains and muddy conditions that may lead to flooding and an inability to mine and process gold. Our mining operations are also affected by religious holidays that are observed in Indonesia typically during July.
 
Raw Materials, Principal Suppliers and Customers
 
We are not dependent on any principal suppliers nor raw materials in our current business operations. Although there are many available customers, for the quarter ended June 30, 2014 two customers accounted for 100% of total revenue from gold sales.
 
Competitive Factors
 
The mining industry is acutely competitive in all of its phases. We face strong competition from other mining companies in connection with the acquisition of exploration stage properties or properties containing reserves of gold, coal and precious metals. Many of these companies have greater financial resources, operational experience and technical capabilities than us.
 
 
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RESULTS OF OPERATIONS
 
   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
   
June 30,
   
June 30,
 
   
2014
   
2013
   
2014
   
2013
 
                         
Sales
  $ 458,129     $ 212,639     $ 782,556     $ 212,639  
Contract Processing
    96,000       -       156,000       -  
      554,129       212,639       938,556       212,639  
Costs and expenses
                               
Costs applicable to sales
    335,563       94,671       570,550       94,671  
Depreciation
    9,684       2,315       18,518       2,315  
General and administrative
    259,321       203,508       523,266       380,651  
                                 
Operating loss
    (50,439 )     (87,855 )     (173,778 )     (264,998 )
                                 
Other income (expense)
                               
Interest income
    4       1       11       4  
Interest expense
    (44,583 )     (7,205 )     (87,052 )     (11,962 )
                                 
Income (loss) before provision for income taxes
    (95,018 )     (95,059 )     (260,819 )     (276,956 )
                                 
Provision for income taxes:
                               
Current
    (22,836 )     -       (30,580 )     -  
Deferred
    -       -       -       -  
Total income taxes
    (22,836 )     -       (30,580 )     -  
                                 
Net loss
    (117,854 )     (95,059 )     (291,399 )     (276,956 )
                                 
Net income attributable to noncontrolling interests
    15,796       11,016       21,406       11,016  
                                 
Net loss attributable to Borneo shareholders
  $ (133,650 )   $ (106,075 )   $ (312,805 )   $ (287,972 )
 
Revenues. The Company generated revenues of $938,556 for the six months ended June 30, 2014, compared with $212,639 for the six months ended June 30, 2013. Revenues for the three months ended June 30, 2014 increased from the three months ended March 31, 2014.  The increases were a result of production coming online at Ratatotok South. Gross margins were also down from prior quarters as a result of the poor conditions and the initial mining operations and revenue generation beginning at Ratatotok South during the first quarter of 2014. We expect quarterly revenues and operating income to continue increase in the subsequent quarters in 2014 as better weather conditions and improved operations at Ratatotok South will increase revenues and productivity.
 
 
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Costs Applicable to Sales. The cost applicable to sales is for labor and other costs incurred in mining and processing the gold. Miners at Talawaan are compensated based on sales of the gold produced on the property net of processing expenses. Costs applicable to sales increased in both the three and six months ended June 30, 2014 due to the production at Ratatotok South.  Production costs at Ratatotok South included additional costs to cover the initialization of mining operations and production.

General and Administrative Costs and Expenses. General and administrative costs and expenses consisted primarily of compensation for our officers and consultants. The increase in general and administrative costs and expenses for the three and six months ended June 30, 2014 over the three and six months ended June 30, 2013, is primarily due to costs and expenses for Puncak which was acquired in June 2013.

Net Interest Expense. Net interest expense increased in both the three months and six months ended June 2014 over the comparable periods in 2013 as a result of the utilization of debt to fund operations.

Liquidity and Capital Resources

Cash Flows for the six months ended June 30, 2014
 
On June 30, 2014, we had a working capital deficit of $4,802,331 and stockholders’ equity of $1,466,783. We had cash equivalents of $3,312. Cash use in operating activities was $490,992 for the six months ended June 30, 2014 and a net loss of $291,399 for the same period. During the six months ended June 30, 2014, cash used by investing activities was $17,640 as a result of investments in fixed assets. Cash provided by financing activities for the six months ended June 30, 2014 was $503,159 and came primarily from the issuance of promissory notes from related parties.

Commitments

Borneo has entered into agreements to acquire its gold mining properties primarily through asset purchase agreements. Borneo has also entered agreements to acquire coal concessions, primarily letters of intent and agreements of understanding, with concession holders in the Indonesian region. For the coal concessions, it is the Company’s intention to identify and negotiate with strategic partners to coordinate and pay for feasibility studies, construction of coal mining infrastructure and mining operations for the coal concessions acquired. If coal mining is feasible, Borneo may enter into a partnership to mine the coal concession or sell the coal concession to a mining company. Each of the coal agreements call for or may require further negotiations among the parties.

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

On June 10, 2013, the Company entered into purchase agreements for the Talawaan Property, for an aggregate purchase price of $5,000,000, and the Ratatotok Property, for an aggregate purchase price of $2,000,000, by and among the Company, Kalabat and Sanding Longdong, an affiliate. These replaced purchase agreements previously entered into by the Company. The aggregate purchase price for the Talawaan Property and Ratatotok Property is $7,000,000. As of June 30, 2014 and December 31, 2013, the balance outstanding from accrued liabilities- mine acquisition affiliate was $1,300,000 and $1,711,610, respectively. As of June 30, 2014 and December 31, 2013, the balance outstanding from promissory notes affiliate was $1,951,425.

On December 11, 2013, under the terms of an Asset Purchase Agreement, the Company through its subsidiary PT Puncak Kalabat, finalized the purchase of an approximately 8.6 hectare currently non-producing gold mining property for $250,000, including an initial $150,000 payment in cash and two subsequent payments of $50,000 each. The acquired property, with the project name of Ratatotok South, is located near the village of Ratatotok in the Southeast Minahasa Regency of the North Sulawesi Province of Indonesia. The property is adjacent to the southern border of one of Borneo's other gold mining properties, Ratatotok. As of June 30, 2014 and December 31, 2013, the balance outstanding from accrued liabilities- mine acquisition other was $110,000.
 
 
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On January 11, 2014, the Company through its subsidiary PT Puncak Kalabat, finalized the purchase of an approximately 14.7 hectare a non-producing gold mining property for $250,000, including an initial $15,000 payment in cash and four subsequent payments of $100,000, $50,000, $50,000 and $35,000 respectively. The acquired property, with the project name of Ratatotok Southeast, is located near the village of Ratatotok in the Southeast Minahasa Regency of the North Sulawesi Province of Indonesia. The property is adjacent to the border of one of Borneo's other gold mining properties, Ratatotok.

On June 6, 2014, the payment terms of the agreement to purchase Ratatotok Southeast were amended for a renegotiation fee of $10,000. Under the terms of the amendment the seller acknowledged the receipt of $45,000, and in addition to the renegotiation fee of $10,000, the Company has agreed to make payments of $65,000 by June 20, 2014 and $150,000 by July 31, 2014. As of June 30, 2014 and to date, the balance outstanding from accrued liabilities- mine acquisition other was $154,655.

Financing

During the year ended December 31, 2013, the Company secured $32,500 in loans in the form of short-term promissory notes from non-affiliated third parties. During the same period three loans with principal totaling $6,000 was repaid. On March 28, 2014, the holder of the loan with a principal balance of $30,000 agreed to exchange the principal and interest on the note for shares of common stock of the Company. See discussion Note 8 Capital Stock. From January 1, 2014 through June 30, 2014, the Company secured $46,500 in loans in the form of short-term promissory notes from non-affiliated third parties. The promissory notes have a term of ninety days to six months and pay compound interest of five percent per annum and vehicle financing for mining operations of $28,309. As of June 30, 2014 and December 31, 2013, the balance outstanding from short term promissory notes- other was $93,939 and $57,500, respectively.
 
From November 9, 2012 through February 7, 2013 the Company secured $22,000 in loans in the form of short-term promissory notes from related parties. The promissory notes range from thirty days to 90 days and pay compound interest of five percent per annum. Under the terms of the short-term promissory notes, the Company is not in default. See the discussion Note 12 Related Party Transactions. As of June 30, 2014 and December 31, 2013, the balance outstanding from short-term promissory notes-related party was $22,000.

In April 2014, the Company secured two promissory notes of $100,000 each from an affiliated third party in the form of short-term promissory notes. The promissory notes have a term of ninety days and pay fixed interest of six and quarter percent when repaid. The Company is not in default. See discussion Note 10 Commitments Contingencies.

During the year ended December 31, 2013, the Company secured $355,216 in loans from a non-affiliated third party in the form of long-term promissory notes. The promissory notes have a term of five years and pay compound interest of five percent per annum.
 
During the periods ended June 30, 2014 and December 31, 2013, the Company secured $379,220 and $415,094, respectively, in loans from related parties in the form of long-term promissory notes. The promissory notes have a term of five years and pay compound interest of five percent per annum. See the discussion Note 12 Related Party Transactions. As of June 30, 2014 and December 31, 2013, the balance outstanding from long-term promissory notes-other was $355,216.

During the year ended December 31, 2013, the Company secured three convertible promissory notes of $37,500, 32,500, and $42,500. The notes bear interest at the rate of 8% until they mature, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 22% per annum. The notes mature nine months after issuance, and may be prepaid during the period of six months of issuance, in full, at various rates ranging from 115% to 140% of the principal balance plus accrued interest to the date of prepayment. The holder has the option to convert any balance of principal and interest which is unpaid at after a period of 180 days or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest three trading prices during the ten trading days immediately preceding such conversion, discounted by 42%. Under the terms of the convertible promissory note, the Company is not in default. On January 30, 2014 and March 28, 2014, respectively the Company repaid this convertible notes with accrued interest, prepayment charges and principal balances of $37,500 and $32,500. On June 2, 2014, the Company repaid the convertible note with accrued interest, prepayment charges and principal balance of $42,500.
 
 
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On July 11, 2014, the Company secured a convertible promissory note of $50,000. The note bears interest at the rate of 8% until it matures, or until there is an event of default; thereafter, any portion of the principal or interest which has not been settled will be subject to interest at the rate of 18% per annum. The notes matures on June 5, 2015, and may not be prepaid without the consent of the holder. The holder has the option to convert any balance of principal and interest which is unpaid after a period of six months or thereafter, into common stock of the Company. The rate of conversion for these notes is calculated as the average of the lowest price during the five trading days immediately preceding such conversion, discounted by 40%. Under the terms of the convertible promissory note, the Company is not in default.
 
On August 11, 2014, the Company secured a $25,000 loan in the form of a short-term promissory note from non-affiliated third party. The promissory note has a term one year and pays compound interest of twelve percent per annum. Under the terms of the short-term promissory note, the Company is not in default.

Liquidity
 
The Report of our Independent Registered Public Accounting Firm on the Company’s consolidated financial statements as of and for the year ended December 31, 2013, includes a “going concern” explanatory paragraph which means that the auditors stated that conditions existed that raise substantial doubt about the Company’s ability to continue as a going concern.
 
Our financial statements have been prepared assuming that we will continue as a going concern. The general business strategy of the Company is to explore and research existing mineral properties and to potentially acquire further claims either directly or through the acquisition of operating entities. The continued operations of the Company depends upon the recoverability of mineral property reserves, confirmation of the Company’s interest in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete the development of these claims and upon the future profitable production of the claims. While the Company has enough cash to pay all expenses for the next three months, there continues to be insufficient funds to provide enough working capital to fund ongoing operations for the next twelve months. Management intends to raise additional capital through promissory note and share issuances to continue its operations and finance its exploration although there can be no assurance that management will be successful in these efforts. Other than the sale of securities, the Company does not have any lines of credit or other arrangements to provide an external source of additional funding at this time.
 
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying unaudited condensed consolidated financial statement, the Company has accumulated a deficit of $5,734,414 as of June 30, 2014. The ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations or on the ability of the Company to obtain necessary financing to fund ongoing operations. Management believes that its current and future plans enable it to continue as a going concern for the next twelve months.
 
To meet these objectives, the Company continues to seek other sources of financing in order to support existing operations and expand the range and scope of its business. However, there are no assurances that any such financing can be obtained on acceptable terms and timely manner, if at all. The failure to obtain the necessary working capital would have a material adverse effect on the business prospects and, depending upon the shortfall, the Company may have to curtail or cease its operations.
 
Off-Balance Sheet Arrangements

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

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

The Company earns revenue from sale of gold as well as contract processing of third party’s gold ore in the Company’s production facilities. Revenue from sale of gold is recognized when title and risk of loss is passed on to the customer generally upon manual delivery of product to the customer subject to assurance of collection. Contract processing revenue is recognized when services are performed and collection is assured.

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

Inventories
Product inventories are valued at the lower of average production cost and net realizable value. Work-in-process inventories, including ore stockpiles, are valued at the lower of average production cost and net realizable value, after an allowance for further processing costs. Finished goods inventory, characterized as concentrate, is valued at the lower of average production cost and net realizable value. Materials and supplies are valued at the lower of cost and replacement cost. The inventory on hand was $-0- at June 30, 2014 and December 31, 2013.

Mining properties, plant and equipment
Mining properties, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of mining properties, plant or equipment items consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Mining properties include direct costs of acquiring properties (including option payments) and costs incurred directly in the development of properties once the technical feasibility and commercial viability has been established.

Exploration and evaluation costs are those costs required to find a mining property and determine commercial feasibility. These costs include costs to establish an initial mining resource and determine whether inferred mining resources can be upgraded to measured and indicated mining resources and whether measured and indicated mining resources can be converted to proven and probable reserves. Project costs related to exploration and evaluation activities are expensed as incurred until such time as the Company has defined mining reserves. Thereafter, costs for the project are capitalized prospectively in mining properties, plant and equipment. The Company also recognizes exploration and evaluation costs as assets when acquired as part of a business combination, or asset purchase, with these assets recognized at cost.

Capitalized exploration and evaluation costs for a project are classified as such until the project demonstrates technical feasibility and commercial viability. Upon demonstrating technical feasibility and commercial viability, and subject to an impairment analysis, capitalized exploration and evaluation costs are transferred to capitalized development costs within mining property, plant and equipment. Technical feasibility and commercial viability generally coincide with the establishment of proven and probable reserves; however, this determination may be impacted by management’s assessment of certain modifying factors.
 
 
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Where an item of plant and equipment comprises major components with different useful lives, the components are accounted for as separate items of plant and equipment and amortized separately over their useful lives.

Plant and equipment is recorded at cost and amortized using the straight-line method. The accumulated costs of mining properties that are developed to the stage of commercial production are amortized using the units of production method, based on proven and probable reserves (as defined by National Instrument 43-101).

The Company conducts an annual assessment of the residual balances, useful lives and depreciation methods being used for mining properties, plant and equipment and any changes arising from the assessment are applied by the Company prospectively.

Impairment of Long-Lived Assets
The Company’s tangible assets are reviewed for indications of impairment at each financial statement date. If an indicator of impairment exists, the asset’s recoverable amount is estimated. An impairment loss is recognized when the carrying amount of an asset, or its cash-generating unit, exceeds its recoverable amount. A cash-generating unit is the smallest identifiable group of assets that generates cash flows that are largely independent of the cash flows from other assets or groups of assets. Impairment losses are recognized in profit and loss for the period.

The recoverable amount is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Management periodically reviews the carrying value of its exploration and evaluation assets with internal and external mining related professionals. A decision to abandon, reduce or expand a specific project is based upon many factors including general and specific assessments of reserves, forecast future metal prices, forecast future costs of exploring, developing and operating a producing mine, expiration term and ongoing expense of maintaining leased mineral properties and the general likelihood that the Company will continue exploration. The Company does not set a pre- determined holding period for properties with unproven reserves. However, properties which have not demonstrated suitable mineral concentrations at the conclusion of each phase of an exploration program are re-evaluated to determine if future exploration is warranted and their carrying values are recoverable.

If any area of interest is abandoned or it is determined that its carrying value cannot be supported by future production or sale, the related costs are charged against operations in the period of abandonment or determination that the carrying value exceeds its fair value. The amounts recorded as mineral properties represent costs incurred to date and do not necessarily reflect present or future values.

The impairment expenses was $-0- during the periods ended June 30, 2014 and December 31, 2013.
 
Reclamation and rehabilitation obligations
The Company recognizes provisions for statutory, contractual, constructive or legal obligations associated with the decommissioning and reclamation of mining property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. A liability is recognized at the time environmental disturbance occurs and the resulting costs are capitalized to the corresponding asset. The provision for reclamation and rehabilitation obligations is estimated using expected cash flows based on engineering and environmental reports prepared by third-party industry specialists and is discounted at a pre-tax rate specific to the liability. The capitalized amount is amortized on the same basis as the related asset.
 
In subsequent periods, the liability is adjusted for any changes in the amount or timing of the estimated future cash costs and for the accretion of discounted underlying future cash flows. The unwinding of the effect of discounting the provision is recorded as a finance cost in profit or loss for the period.

The reclamation expenses was $-0- during the periods ended June 30, 2014 and December 31, 2013.
 
 
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Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in United States requires management to make estimates based on assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities, and the reported amounts of revenues and expenses during the reporting periods. Accordingly, our accounting estimates require the exercise of judgment. While management believes that the estimates and assumptions used in preparation of consolidated financial statements are appropriate, actual results could differ from those estimates. Estimates that may have a significant effect include impairment analysis relating to material properties, volatility calculations relating to warrants. The accounting estimates used in preparation of the consolidated financial statements may change as new events occur, more experience is acquired, additional information is obtained and our operating environment changes.
 
Cash and Cash Equivalent
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At June 30, 2014 and December 31, 2013, cash consists of a checking account and money market account held by financial institutions.

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

The project deposit $-0- and $15,000 at June 30, 2014 and December 31, 2013, respectively.

Income Taxes
The Company has adopted Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes consist primarily of timing differences such as deferred officers’ compensation and stock compensation accounting versus tax differences.
 
Net Loss Per Share, basic and diluted
The Company has adopted Accounting Standards Codification Subtopic 260-10, Earnings Per Share (“ASC 260-10) specifying the computation, presentation and disclosure requirements of earning per share information. Basic income or loss per share has been computed by dividing the net income or loss available to common shareholders by the weighted average number of common shares outstanding for the period. All of the shares issuable upon conversion of the notes payable and exercise of warrants had exercise prices greater than the average market price of the Company’s common stock during the periods ended June 30, 2014 and December 31, 2013 and are excluded from the calculation of diluted net income per share because their effect is anti-dilutive. Shares issuable upon conversion of the notes payable and exercise of warrants has been excluded as a common stock equivalent in the diluted loss per share because their effect is anti-dilutive on the computation.
 
Derivative Instruments
The Company accounts for derivative instruments in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.
 
 
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If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.

For the periods ended June 30, 2014 and December 31, 2013, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities. The August 6, 2013, November 11, 2013 and November 22, 2013 convertible promissory notes have a variable conversion feature that did not become effective until February 2014, April 2014, and June 2014 respectively. The August 6, 2013, November 11, 2013 and November 22, 2014 convertible promissory notes were repaid on January 30, 2014, March 28, 2014 and June 2, 2014, respectively.

Fair Value of Financial Instruments
The Company's financial instruments, as defined by Accounting Standard Codification subtopic 825-10, Financial Instrument (“ASC 825-10), include cash, accounts payable and convertible note payable. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at June 30, 2014 and December 31, 2013.
 
FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions

The Company does not have any assets or liabilities measured at fair value on a recurring basis at June 30, 2014 and December 31, 2013. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the periods ended June 30, 2014 and December 31, 2013.
 
Foreign Currency Translation and Comprehensive Income (Loss)
The functional currency of Interich is the Hong Kong Dollar (“HKD”). For financial reporting purposes, HKD were translated into United States Dollars (“USD” or “$”) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period.

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

Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive income”. Gains and losses resulting from foreign currency transactions are included in the consolidated results of operations. There has been no significant fluctuation in the exchange rate for the conversion of HKD to USD or IDR to USD during the reporting period and after the balance sheet date.
 
The Company uses Accounting Standard Codification 220 “Comprehensive Income”. Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. Comprehensive income consisted of net income and foreign currency translation adjustments.
 
 
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Noncontrolling Interests
Noncontrolling interests in our subsidiary are recorded in accordance with the provisions of ASC 810, “Consolidation” and are reported as a component of equity, separate from the parent company’s equity. Purchase or sale of equity interests that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the noncontrolling interests are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or loss recognized in earnings.

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

As of June 30, 2014 and December 31, 2013, the Company did not have any issued and outstanding stock options.

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

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

For the periods ended June 30, 2014 and December 31, 2013 two customers accounted for 100% of total revenue.
 
Research and Development
The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company has not incur any research and development expenses through June 30, 2014.

Reliance on Key Personnel and Consultants
The Company retains our three officers, namely our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer as independent contractors. The Company is heavily dependent on the continued active participation of these current executive officers, employees and key consultants. The loss of any of the senior management or key consultants could significantly and negatively impact the business until adequate replacements can be identified and put in place.
 
Impact of New Accounting Standards
The Company has adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”), which was formerly known as SFAS 168. ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the Securities and Exchange Commission (the "SEC") under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards and all other non-grandfathered, non-SEC accounting literature not included in the Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the basis of conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.
 
 
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The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operation, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its consolidated financial statements.

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

Emerging Growth Company
We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:
 
·
have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
·
comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
·
submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and
·
disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive’s compensation to median employee compensation.
 
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period.
 
We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Not applicable
 
ITEM 4. CONTROLS AND PROCEDURES
 
(a) Evaluation of Disclosure Controls and Procedures
 
We conducted an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive and principal financial officers concluded as of June 30, 2014 that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses in our internal controls over financial reporting discussed immediately below.
 
This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits us to provide only management's report in this quarterly report.
 
 
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Management’s Report on Internal Control Over Financial Reporting
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
 
1.
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
2.
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and
3.
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

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

Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2014. Based on this assessment, management concluded that the Company did not maintain effective internal controls over financial reporting as a result of the identified material weakness in our internal control over financial reporting described below. In making this assessment, management used the framework set forth in the report entitled Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company's internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring.
 
Identified Material Weakness
 
A material weakness in our internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.
 
Management identified the following material weakness during its assessment of internal controls over financial reporting:
 
Resources: We had one full-time employee in finance and accounting. As a result, there is a lack of proper segregation of duties necessary to insure that all transactions are accounted for accurately and in a timely manner.
 
Written Policies & Procedures: We need to prepare written policies and procedures for accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions and prepare, review and submit SEC filings in a timely manner. This will be more important in the future when the Company adds operations.
 
(b) Changes In Internal Control Over Financial Reporting
 
During the quarter ended June 30, 2014, there were no changes in our internal controls over financial reporting that materially affected, or is reasonably likely to have a materially affect, on our internal control over financial reporting.
 
 
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PART II
 
ITEM 1. LEGAL PROCEEDINGS
 
We are subject from time to time to litigation, claims and suits arising in the ordinary course of business. As of June 30, 2014, we were not a party to any material litigation, claim or suit whose outcome could have a material effect on our unaudited consolidated financial statements.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
None.
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
None.
 
ITEM 4. MINE SAFETY DISCLOSURES
 
Not Applicable.
 
ITEM 5. OTHER INFORMATION
 
Not Applicable.
 
 
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ITEM 6. EXHIBITS
 
Index to Exhibits
 
31.1
 
Certification of Chief Executive Officer under Rule 13(a) — 14(a) of the Exchange Act.
     
31.2
 
Certification of Chief Financial Officer under Rule 13(a) — 14(a) of the Exchange Act.
     
32.1
 
Certification of CEO and CFO under 18 U.S.C. Section 1350.
     
EX-101.INS**
 
XBRL Instance Document
     
EX-101.SCH**
 
XBRL Taxonomy Extension Schema Document
     
EX-101.CAL**
 
XBRL Taxonomy Extension Calculation Linkbase Document
     
EX-101.DEF**
 
XBRL Taxonomy Extension Definition Linkbase Document
     
EX-101.LAB**
 
XBRL Taxonomy Extension Label Linkbase Document
     
EX-101.PRE**
 
XBRL Taxonomy Extension Presentation Linkbase Document
__________
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
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SIGNATURES
 
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 19th day of August 2014.
 
 
BORNEO RESOURCE INVESTMENTS LTD.
 
 
 
 
 
 
By:
/s/ Nils A. Ollquist
 
 
 
Nils A. Ollquist
 
 
 
Chief Executive Officer
 
 
 
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