UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

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

 

For the quarterly period ended June 30, 2014

 

OR

 

o     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______ to ______.

 

Commission File Number: 001-34996

 

 

SPARTAN GOLD LTD.

(Exact name of registrant as specified in its charter)

 

 

Nevada			27-3726384
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)
122 Fourth Ave., Suite 103 Indialantic, FL			32903
(Address of principal executive offices)			(Zip Code)

 

(480) 477-1585

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes  x  No  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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x  No  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 definition 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  o (Do not check if a smaller reporting company)	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

 

As of August 18, 2014 the registrant had 42,335,944 shares of its Common Stock, $0.001 par value, outstanding.

 

SPARTAN GOLD LTD.

FORM 10-Q

JUNE 30, 2014

INDEX

 

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of June 30, 2014 (unaudited) and December 31, 2013	3
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2014 and 2013	4
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4.	Controls and Procedures	17
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	18
Item 1.A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Mine Safety Disclosures	18
Item 5.	Other Information	18
Item 6.	Exhibits	18
SIGNATURES		19

   

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1.     Financial Statements

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Consolidated Balance Sheets

 

		June 30,				December 31,
		2014				2013
		(unaudited)
ASSETS
Current assets:
Cash		$	2,077			$	328
Total current assets			2,077				328
Property and equipment, net			–				254
Total assets		$	2,077			$	582
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable (Note 3)		$	207,962			$	212,541
Accrued expenses (Note 3)			379,491				271,065
Due to related parties (Note 3)			178,285				143,585
Total current liabilities			765,738				627,191
Commitments (Note 5)
Stockholders' deficit (Note 4):
Common stock $.001 par value 1,000,000,000 shares authorized, 42,335,944 shares issued and outstanding, at June 30, 2014 and December 31, 2013, respectively			42,336				42,336
Common stock issuable, 2,500,000 shares issuable at June 30, 2014 and December 31, 2013, respectively			250,000				250,000
Common stock subscriptions receivable			(250,000	)			(250,000	)
Additional paid-in capital			18,344,364				18,344,364
Deficit accumulated from prior operations			(208,131	)			(208,131	)
Deficit accumulated during the exploration stage			(18,942,230	)			(18,805,178	)
Total stockholders' deficit			(763,661	)			(626,609	)
Total liabilities and stockholders' deficit		$	2,077			$	582

 

See accompanying notes to consolidated financial statements.

 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Consolidated Statements of Operations

(unaudited)

 

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2014				2013				2014				2013
Operating expenses:
General and administrative (Note 3)		$	79,398			$	78,375			$	137,052			$	144,274
Mineral property exploration costs (Note 2)			–				(7,840	)			–				(7,840	)
Total operating expenses			79,398				70,535				137,052				136,434
Net loss		$	(79,398	)		$	(70,535	)		$	(137,052	)		$	(136,434	)
Net loss per share - Basic and diluted		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.00	)
Weighted average number of shares oustanding during the period -
Basic and diluted			42,335,944				42,085,944				42,335,944				42,085,944

 

See accompanying notes to consolidated financial statements.

 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

(unaudited)

 

		For the Six Months Ended
		June 30,
		2014				2013
Cash flows used in operating activities:
Net loss		$	(137,052	)		$	(136,434	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation			254				1,015
Changes in operating assets and liabilities:
Accounts payable			(4,579	)			(24,197	)
Accrued expenses			108,426				95,586
Net cash used in operating activities			(32,951	)			(64,030	)
Cash flows used in investing activities			–				–
Cash flows from financing activities:
Advances from related parties			35,700				61,500
Payments to related parties			(1,000	)			(6,000	)
Net cash provided by financing activities			34,700				55,500
Net increase (decrease) in cash			1,749				(8,530	)
Cash at beginning of period			328				11,137
Cash at end of period		$	2,077			$	2,607
Supplemental disclosure of cash flow information:
Cash paid for interest		$	–			$	–
Cash paid for taxes		$	–			$	–

 

See accompanying notes to consolidated financial statements.

 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

June 30, 2014

(unaudited)

 

Note 1 – Nature of Business, Presentation, and Going Concern

 

Organization

 

Spartan Gold Ltd., (the “Company”), was incorporated in Nevada on September 6, 2007.

 

On May 21, 2010, the Company experienced a change in control and the Company abandoned its original plan of developing and operating biodiesel facilities to concentrate on gold exploration. Concurrent with the change in control transaction, all related party obligations were settled.

 

On July 8, 2010, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Spartan Gold Ltd. The Company now operates as a U.S. based junior gold exploration company. 

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial statement presentation and in accordance with Form 10-Q. Accordingly, they do not include all of the information and footnotes required in annual financial statements. In the opinion of management, the unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

 

These unaudited consolidated financial statements should be read in conjunction with the 2013 annual financial statements included in the Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on April 15, 2014.

 

Exploration Stage Company

 

As of July 8, 2010, the Company became an “exploration stage company” as defined in the SEC Industry Guide 7, and was subject to compliance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 915 “Development Stage Entities”. On June 10, 2014 the FASB issued authoritative guidance which eliminates the concept of a development stage entity. The incremental reporting requirements for presenting the development stage operations and cash flows since inception will no longer apply to development stage entities. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 are to be applied retrospectively and are effective for fiscal years beginning after December 15, 2014. The Company has elected early adoption of this guidance effective with the filing of this quarterly report. Deficits accumulated prior to becoming an “exploration stage company” has been separately presented in the accompanying consolidated balance sheets.  To date, the Company's planned principal operations have not fully commenced.

 

Going Concern

 

The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company has incurred a net loss of $137,052 for the six months ended June 30, 2014 and has incurred cumulative losses since inception of the exploration stage of $18,942,230.  The Company has a stockholders’ deficit of $763,661 at June 30, 2014.  These factors raise substantial doubt about the ability of the Company to continue as a going concern.  The Company’s continuation as a going concern is dependent upon its ability to generate revenues, its ability to continue to raise investment capital, and to implement its business plan.  No assurance can be given that the Company will be successful in these efforts.

 

These unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

June 30, 2014

(unaudited)

   

Note 2 – Mineral Properties

 

For the six months ended June 30, 2014 and 2013, the Company has not incurred any mineral property costs.  A summary by property is as follows:

 

		Poker Flats				Ziggurat				Arbacoochee
		Property				Property				Gold Prospect				Total
Six Months Ended June 30, 2014
Property expenditures		$	–			$	–			$	–			$	–
Exploration costs			–				–				–				–
		$	–			$	–			$	–			$	–
Six Months Ended June 30, 2013
Property expenditures		$	–			$	–			$	–			$	–
Exploration costs			(7,840	)			–				–				(7,840	)
		$	(7,840	)		$	–			$	–			$	(7,840	)

 

Poker Flats Property

 

On December 20, 2010, the Company entered into an Option and Mining Claim Acquisition Agreement (“Option Agreement”) between Mexivada Mining Corp. (“MMC”) and Sphere Resources Inc. (“Sphere”), a company with a common director with the Company. The agreement was amended on March 28, 2011 (the “First Amendment”) and further amended on December 22, 2011 (the “Second Amendment”).

 

MMC is the owner of a 100% interest in certain mining claims located in the Carlin Mining District in Elko County Nevada, known as the “Poker Flats” Property.  Resulting from the Agreement and First and Second Amendments, the Company had the following rights and obligations:

 

·

Issuance of 194,375 shares of common stock (issued and recorded at a fair value of $3,498,750) and 20,625 shares of common stock (issued and recorded at a fair value of $371,250) to Sphere and MMC, respectively on execution of the amended Option Agreement;

·

Issuance of a warrant to purchase 94,375 shares (recorded at a fair value of $906,000) and a warrant to purchase 20,625 shares (recorded at a fair value of $198,000) of common stock to Sphere and MMC, respectively, with an exercise price of $20.00 per share until March 28, 2016;

·

The Company has paid to MMC $25,000 upon executing the Option Agreement;

·

Sphere is required to issue certain shares of common stock to MMC;

·

An initial 51% interest in the property will be earned upon incurring exploration expenditures of $500,000 on or before the third anniversary date of the Option Agreement, all of which will be paid by the Company;

·

An additional 24% interest in the property will be earned upon incurring additional exploration expenditures of $250,000 and completing and delivering to Optionor an industry-standard mining feasibility study on or before the fifth anniversary date of the agreement;

·

Upon exercise of the option, the Company will assume a 75% interest in an existing Production Royalty Agreement which requires the payment of 3% Net Smelter Royalty (“NSR”) for any and all products that are produced from the Poker Flats mining claims to MMC and a 2% NSR to Sphere;

·

If and when the Company elects to sell and convey all or a portion of its interest in the Poker Flats Property, the Company shall have the right to purchase up to 75% and MMC shall have the right to purchase up to 25% of the 3% NSR on mineral production from the Poker Flats Property retained by the owner of the mining claims subject to the Poker Flats Option Agreement, for one million U.S. dollars (U.S. $1,000,000) per NSR percentage point;

 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

June 30, 2014

(unaudited)

 

Note 2 – Mineral Properties (Continued)

 

Poker Flats Property (Continued)

 

·

If and when the Company elects to sell and convey all or a portion of its interest in the Poker Flats Property, the Company shall have the right to purchase up to 100% of the 2% NSR granted, conveyed and assigned by the Company to Sphere on its share of production from the Poker Flats Property, under terms to be agreed upon by the Company and Sphere.

 

Further, the Company paid $57,750 to Sphere and is to pay $8,250 (not paid) to MMC, of which 50% is to be paid within 60 days after the effective date of a S-1 to be filed with the SEC and the remainder after such date of the Company obtaining financing of $2,000,000. As of June 30, 2014, the Company has neither filed an S-1 nor obtained such financing.

 

As of December 20, 2013 (the third anniversary date), the Company had only incurred $304,622 of exploration and property expenditures on the property. On March 29, 2014, the Company received a Notice of Default letter from MMC claiming that the Company did not meet its obligation in meeting the $500,000 exploration expenditure requirement per the Second Amendment and is requesting a payment of $163,600, within 30 days, to cure the claimed default. The payment was not made. The Company is currently negotiating a new agreement for the Poker Flats property under similar terms of the prior agreements; however, the outcome of the negotiations in uncertain.

 

On April 1, 2011, the Company entered into a Mining Lease and Agreement (the “Agreement”) with K & K Tomera Lands, LLC, a Nevada Limited Liability Company (“Tomera”). This Mining Lease and Agreement pertains to the Poker Flats property located within the Carlin Mining District in Elko County, Nevada.

 

Under the terms of this Agreement, the Company agreed to pay Tomera a Production Royalty of 5% of NSR, as defined in the Agreement. In order to maintain this Agreement in effect, the Company shall pay to Tomera Advance Minimum Royalty (“AMR”) payments. AMR payments are calculated based on the net mineral acres leased on an annual basis. The Company paid, at the execution of the Agreement, $30,800 for the first year of the lease based on the 1,760 net mineral acres leased at $17.50 per acre. Future AMR payments, on a per net mineral acre basis, are: $17.50 per acre on the first and second anniversaries of the Agreement, $21.00 per acre on the third and fourth anniversaries, $24.50 per acre on the fifth and sixth anniversaries, and $28.00 per acre on the seventh and any subsequent anniversaries. The Company paid $30,800 each during the years ended December 31, 2013 and 2012, respectively, and $nil during the six months ended June 30, 2014. The term of the Agreement is for a period of ten years. The Company has the option to extend the initial term for an additional ten year period.

 

In connection with the Mining Lease and Agreement, the Company entered into a Surface Access and Use Agreement on April 1, 2011 with Kevin Tomera, a Nevada resident, which grants the Company general rights of ingress and egress over certain surface tracts and the right to use the surface tracts in conduct of its mineral exploration, development and mining activities. Additionally, Tomera has granted the Company an option to purchase portions of the surface tracts. Under the terms of the Surface Access and Use Agreement, the Company agrees to pay Kevin Tomera annual rental of $4.50 per acre for each acre of land included in the surface tracts. The Company paid $7,260 and $5,760 during the years ended December 31, 2013 and 2012, respectively, and $nil during the six months ended June 30, 2014. The term of the Agreement is for ten years.

 

Ziggurat Property

 

On December 27, 2010, the Company entered into an Option and Mining Claim Acquisition Agreement between MMC and Sphere. The agreement was amended on March 28, 2011 (the “First Amendment”) and further amended on December 22, 2011 (the “Second Amendment”).

 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

June 30, 2014

(unaudited)

 

Note 2 – Mineral Properties (Continued)

 

Ziggurat Property (Continued)

 

MMC is the owner of a 100% interest in certain mining claims in Nye County, in the State of Nevada, known as the “Ziggurat” Property. Resulting from the Agreement and First and Second Amendments, the Company had the following rights and obligations:

 

·

Issuance of 393,125 shares of common stock (issued at a fair value of $7,076,250) and 41,875 shares of common stock (issued at a fair value of $753,750) to Sphere and MMC, respectively on execution of the amended Option Agreement;

·

Issuance of a warrant to purchase 193,100 shares (recorded at a fair value of $1,853,760) and a warrant to purchase 41,875 shares (recorded at a fair value of $402,000) to Sphere and MMC, respectively, with an exercise price of $20.00 per share until March 28, 2016;

·

The Company has paid to MMC $25,000 upon executing the Option Agreement;

·

The Company has paid to MMC $35,000 on May 27, 2011;

·

The Company has paid to MMC $25,000 on or before the second anniversary date of the Agreement;

·

The Company shall pay to MMC $25,000 on or before the third anniversary date of the Agreement (unpaid at June 30, 2014);

·

An initial 51% interest in the property will be earned upon incurring exploration expenditures of $1,500,000 on or before the third anniversary date of the agreement, all of which will be paid by the Company;

·

An additional 24% interest in the property will be earned upon incurring additional exploration expenditures of $1,000,000 and completing and delivering to Optionor an industry-standard mining feasibility study on or before the fifth anniversary date of the agreement;

·

Sphere is required to issue certain shares of common stock to MMC;

·

The Company granted a 2.5% NSR for any and all products that are produced from the Ziggurat mining claims to Sphere and a .5% NSR to MMC;

·

If and when the Company elects to sell and convey all or a portion of its interest in the Ziggurat Property, the Company shall have the right to purchase up to 100% of the 2.5% NSR granted, conveyed and assigned by the Company to Sphere on its share of production from the Ziggurat Property, under terms to be agreed upon by the Company and Sphere.

 

Further, the Company paid $117,250 and $16,750 (not paid) to Sphere and MMC, respectively, of which 50% is to be paid within 60 days after the effective date of a S-1 to be filed with the SEC and the remainder after such date of the Company obtaining financing of $2,000,000. As of June 30, 2014, the Company has neither filed the S-1 nor obtained such financing.

 

As of December 27, 2013 (the third anniversary date), the Company had incurred $213,659 of exploration and property expenditures on the property. On December 30, 2013, the Company received a letter from MMC stating that the agreement was in default and thus was terminated. Accordingly, the Company has not earned the initial 51% interest pursuant to the terms of the Option and Claim Acquisition Agreement.

 

Arbacoochee Gold Prospect

 

On October 22, 2010, the Company acquired all of the mineral rights in the Arbacoochee Gold Prospect located in northeastern Alabama. The acquisition includes all legal rights and equitable title to the mineral rights held by deed in the name of Alabama Mineral Properties, LLC (“AMP”).

 

The mineral rights were acquired for cash of $50,000 and 5,563,468 shares of the Company’s issued and outstanding common stock at a fair value of $54,027. The shares were a contribution from shareholders, resulting in a capital contribution. The Company assumed an existing mineral royalty agreement which requires the payment of 6% NSR overriding royalty for any and all precious metals that are mined, processed or recovered from the Arbacoochee Gold Prospect to AMP.

 

At December 31, 2010, the Company impaired the Arbacoochee Gold Prospect and $104,027 was charged to operations.

 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

June 30, 2014

(unaudited)

  

Note 3 – Related Party Transactions

 

As of June 30, 2014 and December 31, 2013, the Company owed a total of $130,585 to Sphere.  The advance is unsecured, has no repayment date, and does not bear interest.

 

As of December 31, 2013, the Company owed its President and Director a total of $13,000. During the six months ended June 30, 2014, the Company received $35,000 of additional advances and repaid $1,000, leaving a balance of $47,000 at June 30, 2014. The advance is unsecured, has no repayment date, and does not bear interest.

 

During the six months ended June 30, 2014, the Company received an advance of $700 from its Chief Financial Officer and Director. The advance is unsecured, has no repayment date, and does not bear interest.

 

During the six months ended June 30, 2014, the Company incurred $102,000 in accrued compensation for officers.

 

Accounts payable at June 30, 2014 includes $37,000 (December 31, 2013 - $31,000) of amounts due to the Company’s Chief Financial Officer for services rendered and $25,170 (December 31, 2013 - $19,139) of amounts due to four of the Company’s directors for reimbursement of rent and travel expenses. Accrued expenses at June 30, 2014 and December 31, 2013 include $357,000 and $255,000, respectively, of accrued compensation for officers.

 

These transactions are in the normal course of business and are recorded at the exchange amount, which is the consideration agreed to by the related parties.

 

Note 4 – Stockholders’ Deficit

 

The Company’s authorized number of common shares is 1,000,000,000 with a $0.001 par value.

 

Warrants

 

The following table summarizes warrant transactions for the year ended December 31, 2013 and the six months ended June 30, 2014:

 

										Weighted
						Weighted				average
						average				remaining				Aggregate
		Number				exercise				contracted				intrinsic
		of warrants				price				term (years)				value
Outstanding at December 31, 2012			2,499,975			$	3.84				3.80			$	–
Granted in 2013			–			$	–				–				–
Outstanding at December 31, 2013			2,499,975			$	3.84				2.80			$	–
Granted in 2014			–			$	–				–				–
Outstanding at June 30, 2014			2,499,975			$	3.84				2.30			$	45,000
Exercisable at June 30, 2014			2,499,975			$	3.84				2.30			$	45,000
Weighted Average Grant Date Fair Value						$	2.09

  

2012 Equity Plan

 

On March 28, 2012, the Company’s Board of Directors approved and adopted the Spartan Gold Ltd. 2012 Equity Incentive Plan (the “2012 Plan”) and reserved 4,750,000 shares of the Company’s common stock for issuance under the 2012 Plan to the Company’s directors, officers, consultants and other service providers.  The Plan allows for two types of grants: 1) options and 2) stock awards and stock purchase offers.

 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

June 30, 2014

(unaudited)

 

Note 4 – Stockholders’ Deficit (Continued)

 

2012 Equity Plan (Continued)

 

The Company has granted stock options to employees. The following summarizes option activity under the 2012 Plan for the year ended December 31, 2013 and the six months ended June 30, 2014:

 

Common

Weighted

Shares

stock

average

available for

options

exercise

grant

outstanding

price

Balance at December 31, 2012

750,000

4,000,000

$

0.10

Options granted in 2013

–

–

–

Balance at December 31, 2013

750,000

4,000,000

$

0.10

Options granted in 2014

–

–

–

Balance at June 30, 2014

750,000

4,000,000

$

0.10

 

The following table summarizes information with respect to stock options outstanding and exercisable by employees under the 2012 Plan at June 30, 2014:

 

Options outstanding

Options vested and exercisable

Weighted

average

Weighted

Weighted

remaining

average

Aggregate

average

Aggregate

Number

contractual

exercise

intrinsic

Number

exercise

intrinsic

Exercise price

outstanding

life (years)

price

value

vested

price

value

$0.10

4,000,000

8.50

$

0.10

$

–

4,000,000

$

0.10

$

–

  

Note 5 – Commitments

 

See Note 2 – Mineral Properties.

 

As of September 1, 2012, the Company’s corporate office is leased from a company owned by its Chief Financial Officer for $1,000 per month on a month-to-month basis.

 

Note 6 – Subsequent Events

 

The Company has evaluated subsequent events through the date the financial statements were issued and filed with the SEC. The Company has determined that there are no other events that warrant disclosure or recognition in the financial statements.

 

 

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

 

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

 

Certain statements made in this Form 10-Q are "forward-looking statements" regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

 

The forward-looking statements included in this Form 10-Q and referred to elsewhere are related to future events or our strategies or future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "believe," "anticipate," "future," "potential," "estimate," "encourage," "opportunity," "growth," "leader," "expect," "intend," "plan," "expand," "focus," "through," "strategy," "provide," "offer," "allow," commitment," "implement," "result," "increase," "establish," "perform," "make," "continue," "can," "ongoing," "include" or the negative of such terms or comparable terminology. All forward-looking statements included in this Form 10-Q are based on information available to us as of the filing date of this report, and the Company assumes no obligation to update any such forward-looking statements. Our actual results could differ materially from the forward-looking statements.

 

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and in our subsequent filings with the Securities and Exchange Commission.  The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.

 

Company Overview

 

Spartan Gold Ltd. (the "Company", “Spartan”, “we”, “us” or “our”) is a U.S. based junior gold exploration company with gold exploration and development activities centered in both the Carlin-Rain and Round Mountain-Northumberland Gold Trends in Nevada.

 

Each of these regions is endowed with major gold deposits operated by many of the world leaders in the mining industry. Major mining projects in the Carlin Trend are currently operated by Newmont Mining Corporation (trading on the NYSE) to the north and west of the Poker Flats prospects. Additionally, some of the major mining projects in the Round Mountain-Northumberland districts are currently operated by Barrick Gold Corporation / Kinross Gold Corporation (NYSE) and also Newmont Mining Corporation which exist in close proximity to the Ziggurat prospect.  The Company also has mining interests in the northeast region of Alabama in the historical Arbacoochee Mining District.  The Company is currently pursuing opportunities for several acquisition targets around the world and focusing on operational plans for current projects. The directors, management and advisers of Spartan Gold have over 90 years of combined experience in the exploration and development of global mining projects.

 

Spartan's commitment to asset growth and increased shareholder value will be sustained by the development of highly prospective projects, accelerated exploration activities and the acquisition of viable resources. Spartan has selected an international board of directors experienced in undertaking exploration, development and funding of numerous energy and minerals projects around the world.

 

Company History

 

Spartan Gold Ltd. was incorporated in Nevada on September 6, 2007 under the name Powergae, Inc. with the purpose of profitably constructing and operating biodiesel production facilities, establishing them in strategic locations, and selling the biodiesel through existing petroleum manufacturers and distributors. On September 24, 2009, the Company changed its name to Algoil, Inc. The central concept of Algoil, Inc. was making the production of biodiesel independent of its traditional sources such as soy bean, rape, sunflower seed or palm oil.

 

 

On May 21, 2010, the Company experienced a change in control. Magic Grace Ltd. (“Magic Grace”) acquired the majority of the issued and outstanding common stock of Algoil, Inc. in accordance with a stock purchase agreement by and between Andriy Kovalenko and Magic Grace. On the closing date, May 21, 2010, pursuant to the terms of the Stock Purchase Agreement, Magic Grace purchased from Mr. Kovalenko 14,290,000 (pre-split) shares of Company’s outstanding common stock for $187,500. In accordance with the agreement, all related party obligations were settled. Also on May 21, 2010, Real Challenge Group, Ltd. (“Real Challenge”) acquired 935,000 (pre-split) free-trading shares of the Company’s outstanding common stock in accordance with a stock purchase agreement by and between Andriy Kovalenko, as a duly authorized representative of the selling shareholders, and Real Challenge for $187,500. As a result of the change in control, the Company abandoned its original plan of developing and operating biodiesel facilities.

 

On July 8, 2010, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Spartan Gold Ltd. The Company has adopted its new strategic plan of gold exploration, development and mining.

 

On July 19, 2010, the Company's Board of Directors declared a forty-to-one forward stock split of all outstanding shares of common stock. Subsequently, on August 12, 2010, Magic Grace contributed to the treasury, and the Company retired, 9,896,250 common shares of stock (395,850,000 as adjusted for the stock split). The effect of the stock split and retirement of shares increased the number of shares of common stock outstanding from 15,225,000 to 213,150,000 as of August 12, 2010.

 

On October 19, 2011, the Company issued 18,952,774 shares of its common stock to Sphere Resources, Inc. (“Sphere”) in conversion of a Secured Convertible Promissory Note totaling $379,055 (including accrued interest of $4,055).  As a result of the share issuance, Sphere became the majority shareholder of the Company.

 

On November 9, 2011, the Company's Board of Directors declared a one-for-twenty reverse stock split of all outstanding shares of common stock. The effect of the reverse stock split decreased the number of shares of common stock outstanding from 632,892,868 to 31,644,658 as of November 9, 2011.

 

Plan of Operation

 

The immediate goal of Spartan’s management is to secure and augment the prospective land holdings under the Mexivada Mining Corporation option agreements located in the Carlin-Rain and Round Mountain-Northumberland Gold Trends in Nevada. We currently do not have any options for the mineral concession rights in this region, but are renegotiating an agreement for one of the properties in the region: Poker Flats, which is located near existing operations of large mining corporations and have available mining and transportation infrastructures in place.

 

The Poker Flats property requires geological and geochemical mapping and analysis, in conjunction with geophysical mapping involving gravity and magnetic survey work, in order to better define future drill and exploration targets.  Our strategy, if an agreement is reached, is to advance this project to the drilling stage as aggressively as prudent financing will allow and to determine the presence of gold, silver or other precious mineral reserves.   

 

If we are successful in doing so, we believe we can attract the attention of the existing mining companies already operating in the area or new mining companies to either enter into development agreements with us or to acquire the project from us outright.

 

Additionally, we are currently identifying other acquisition opportunities.

  

Mineral Properties

 

Currently, we are renegotiating an option and mining claim agreement on the Poker Flats property in the Carlin-Rain Mining District in Nevada and own the mineral rights to one property in the northeast region of Alabama.  A description of each property is summarized below:

 

Poker Flats Property

 

On December 20, 2010, we entered into an Option and Mining Claim Acquisition Agreement between Mexivada Mining Corporation (“MMC” or the “Optionor”) and Sphere.. The agreement was amended on March 28, 2011 (the “First Amendment”) and further amended on December 22, 2011 (the “Second Amendment”).

 

MMC is the owner of a 100% interest in 64 lode mining claims located in the Carlin Mining District in Elko County Nevada, known as the “Poker Flats” Property. Resulting from the Agreement and First and Second Amendments, the Company had the following rights and obligations:

 

·

An initial 51% interest in the property will be earned upon incurring exploration expenditures of $500,000 on or before the third anniversary date of the agreement, all of which will be paid by the Company,

	·	An additional 24% interest in the property will be earned upon incurring additional exploration expenditures of $250,000 and completing and delivering to the Optionor an industry-standard mining feasibility study on or before the fifth anniversary date of the agreement,
	·	The Company has paid to the Optionor $25,000 upon executing the Option Agreement,

·

Sphere has issued to the Optionor 350,000 shares of Sphere Resources, Inc. common stock,

 

 

·

Sphere will issue to the Optionor an additional 150,000 shares of Sphere Resources, Inc. common stock when the Company obtains a 75% in the mineral rights,

·

Upon exercise of the option, the Company will assume a 75% interest in an existing Production Royalty Agreement which requires the payment of 3% Net Smelter Return (“NSR”) production royalty for any and all products that are produced from the Poker Flats mining claims to the lessor of the claims to MMC and a 2% NSR to Sphere,

·

If and when the Company elects to sell and convey all or a portion of its interest in the Poker Flats Property, the Company shall have the right to purchase up to 75% and MMC shall have the right to purchase up to 25% of the 3% NSR on mineral production from the Poker Flats Property retained by the owner of the mining claims subject to the Poker Flats Option Agreement, for one million U.S. dollars (U.S. $1,000,000) per NSR percentage point,

·

If and when the Company elects to sell and convey all or a portion of its interest in the Poker Flats Property, the Company shall have the right to purchase up to 100% of the 2% NSR granted, conveyed and assigned by the Company to Sphere on its share of production from the Poker Flats Property, under terms to be agreed upon by the Company and Sphere.

 

As of December 20, 2013 (the third anniversary date), we have incurred $304,622 of exploration and property expenditures on the property. On March 29, 2014, the Company received a Notice of Default letter from MMC claiming that the Company did not meet its obligation in meeting the $500,000 exploration expenditure requirement per the amended Option and Mining Claim Acquisition Agreement and is requesting a payment of $163,600, within 30 days, to cure the claimed default. This payment was not made. We are currently negotiating a new agreement for the Poker Flats property under similar terms of the prior agreements; however, the outcome of the negotiations in uncertain.

 

On April 1, 2011, the Company entered into a Mining Lease and Agreement (the “Agreement”) with K & K Tomera Lands, LLC, a Nevada Limited Liability Company (“Tomera”). This Mining Lease and Agreement pertains to the Poker Flats property. Under the terms of the Agreement, Tomera grants, lets and leases exclusively to Spartan Gold the property, together will all ores and minerals of every kind, except geothermal resources, coal and oil and gas and other hydrocarbons, water and sand and gravel, in, or under the property, with the exclusive right to prospect and explore for, mine by any method now known or hereafter discovered, process, mill, prepare for market, store, sell, and dispose of the same; and together with all such rights-of-way and easements to the extent owned by Tomera, if any, through, over, on or appertaining to the property. The property initially contains 1,760 net mineral acres and may be modified to increase or decrease over time at the option of the Company.

 

Poker Flats is located approximately 20 miles south-southwest of Elko, Nevada in the Carlin-Rain Trend. Poker Flats began with 500 acres in the Carlin region which is home to some of the world's leaders in the mining industry. Neighboring mining projects north and south of Poker Flats include Newmont Mining Corporation, Gold Standard Ventures Corporation, and Premier Gold Mines Limited. The Company expanded Poker Flats to 3,600 acres in 2011, which was reduced to 3,040 acres in October, 2012. The geological mapping process is under way and an updated NI 43-101 report was completed on November 22, 2011. The new claim blocks and private mineral rights now included in the Poker Flats project are surrounded by Newmont Mining Corporation's Emigrant project on the northern border and several other productive projects including Newmont's Rain-Tess and Emigrant Mines, Premier Gold Mines Limited's Saddle gold prospect and Gold Standard Ventures Corporations' Railroad gold project.  The Company’s team has completed geological mapping and analysis, in conjunction with geophysical mapping involving gravity and magnetic survey work.

 

Additional geophysical, drilling and geological work is planned at Poker Flats under a two-phase exploration program. Since the property is situated adjacent to other current gold mining properties such as Pinon and Railroad, and as the mineralization appears similar to those at Newmont's Emigrant and Rain Mines and at the Railroad deposit, additional exploration expenditures are justified for the Poker Flats property.

 

The exploration goal at the Poker Flats prospect is to identify a 500,000 to 1,000,000 ounce open-pit gold mining resource. A major mining project is currently being developed by Newmont Mining Corporation immediately north of the Poker Flats prospects.

 

Arbacoochee Gold Prospect

 

On October 22, 2010, we acquired the mineral rights to a Gold Prospect which is a tract of approximately 320 acres located in close proximity to the historic Arbacoochee Gold Mining District. This Prospect contains potentially minable placer located in Cleburne County, Alabama, 9 miles southeast of the city of Heflin. The property is located adjacent to the historic Gold Hill and is the central drain point for that hill. Most of the area’s historic gold production came from placer deposits near Gold Hill and Clear Creek. This property has not been worked in over 120 years.

 

The Company assumed an existing mineral royalty agreement which requires the payment of 6% NSR overriding royalty for any and all precious metals that are mined, processed or recovered from the Arbacoochee Gold Prospect.

 

 

Results of Operations

 

For the three months ended June 30, 2014 compared to the three months ended June 30, 2013

 

Revenues

 

The Company had no revenue for the three months ended June 30, 2014 and 2013, respectively as we are still in the exploration stage.

 

Operating Expenses

 

For the three months ended June 30, 2014 our total operating expenses were $79,398 compared to $70,535 for the three months ended June 30, 2013 resulting in an increase of $8,863. The increase is attributable to an increase in general and administrative expenses of $1,023 and a recovery of mineral property exploration costs of $7,840 in 2013.

 

For the six months ended June 30, 2014 compared to the six months ended June 30, 2013

 

Revenues

 

The Company had no revenue for the six months ended June 30, 2014 and 2013, respectively as we are still in the exploration stage.

 

Operating Expenses

 

For the six months ended June 30, 2014 our total operating expenses were $137,052 compared to $136,434 for the six months ended June 30, 2013 resulting in an increase of $618. The increase is attributable to a decrease in general and administrative expenses of $7,222 offset by a recovery of mineral property exploration costs of $7,840 in 2013.

 

Liquidity and Capital Resources

 

Overview

 

For the six months ended June 30, 2014 and June 30, 2013, respectively, we funded our operations through advances from related parties. Our principal use of funds during the six months ended June 30, 2014 has been for general corporate expenses.

 

Liquidity and Capital Resources during the six months ended June 30, 2014 compared to the six months ended June 30, 2013

 

As of June 30, 2014, we had cash of $2,077 and deficit in working capital of $763,661.  The Company generated a negative cash flow from operations of $32,951 for the six months ended June 30, 2014 compared to cash used in operations of $64,030 for the six months ended June 30, 2013. The negative cash flow from operating activities for the six months ended June 30, 2014 is primarily attributable to the Company's net loss from operations of $137,052, offset by depreciation of $254 and net changes in operating assets and liabilities of $103,847.  Cash used in operations for the six months ended June 30, 2013 is primarily attributable to the Company's net loss from operations of $136,434, offset by depreciation of $1,015 and net changes in operating assets and liabilities of $71,389.

 

During the six months ended June 30, 2014 and 2013, the Company had no cash flows from investing activities.

 

During the six months ended June 30, 2014, the Company had cash flows from financing activities of $34,700 compared to cash flows from financing activities of $55,500 for the six months ended June 30, 2013. During the six months ended June 30, 2014, the Company received advances from related parties of $35,700, and made repayments to related parties of $1,000. During the six months ended June 30, 2013, the Company received advances from related parties of $61,500, and made repayments to related parties of $6,000.

 

We anticipate cash needs of approximately $125,000 annually to sustain our current level of operations. We will rely on loans and advances from our majority shareholder to fund our operations until we are able to raise capital via sales of equity or debt securities. Any such sales of equity or debt securities are not certain and may not occur.

 

Should we be able to raise the necessary capital, we plan to spend approximately $1,500,000 in the next twelve months to carry out exploration and administration activities on our anticipated Nevada mineral property. We presently do not have sufficient financing to enable us to complete these activities and will require additional financing to perform future exploration work on all of our mineral properties. Our actual expenditures on these activities will depend on the amount of funds we have available as a result of our financing efforts. There is no assurance that we will be able to raise the necessary financing.

 

 

Going Concern

 

Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the financial statements for the year ended December 31, 2013 regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

 

Our unaudited financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our unaudited financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

 

There is no assurance that our operations will be profitable. Historically, the Company has conducted private placements of its common stock, which have generated funds to satisfy the initial cash requirements of its planned Nevada exploration ventures. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.

 

Off-Balance Sheet Arrangements

 

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Critical Accounting Policies

   

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

 

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2, “Summary of Significant Accounting Policies” in our audited consolidated financial statements for the year ended December 31, 2013, included in our Annual Report on Form 10-K as filed on April 15, 2014, for a discussion of our critical accounting policies and estimates.

 

Item 3.     Quantitative and Qualitative Disclosures About Market Risk.

  

The disclosure required under this item is not required to be reported by smaller reporting companies.

 

 

Item 4.     Controls and Procedures.

  

(a)

Evaluation of Disclosure Controls and Procedures

   

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to chief executive and chief financial officers to allow timely decisions regarding disclosure.

 

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of such date.  

 

(b)

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1.     Legal Proceedings

   

None.

 

Item 1A.     Risk Factors

  

The disclosure required under this item is not required to be reported by smaller reporting companies.

 

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

   

None.

 

Item 3.     Defaults Upon Senior Securities.

  

None.

 

Item 4.     Mine Safety Disclosures.

 

As the Company is its exploration stage, no mining activities have occurred as of the date of this report.  Therefore, this item is not applicable.

 

Item 5.     Other Information.

 

None.

 

Item 6.     Exhibits

  

Exhibit 31.1	Rule 13a-14(a) Certification by the Principal Executive Officer
Exhibit 31.2	Rule 13a-14(a) Certification by the Principal Financial Officer
Exhibit 32.1	Certification by the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2	Certification by the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101.INS	XBRL Instance Document
Exhibit 101.SCH	XBRL Schema Document
Exhibit 101.CAL	XBRL Calculation Linkbase Document
Exhibit 101.DEF	XBRL Definition Linkbase Document
Exhibit 101.LAB	XBRL Label Linkbase Document
Exhibit 101.PRE	XBRL Presentation Linkbase Document

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

Date:  August 19, 2014		By:  /s/ Malcolm Stevens
		Malcolm Stevens
		Chief Executive Officer (Principal Executive Officer)

 

 

Date:  August 19, 2014		By:  /s/ John S. Wittler
		John S. Wittler
		Chief Financial Officer (Principal Financial Officer)