UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K
(Mark one)
[X]
Annual report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal Year
June 30, 2012
,
or
[ ]
Transition report pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
000-52641
Commission File Number
INFRASTRUCTURE MATERIALS
CORP.
(Exact name of registrant as specified in its
charter)
Delaware
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98-0492752
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(State or other jurisdiction of incorporation or
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(I.R.S. Employer Identification Number)
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organization)
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1135 Terminal Way, Suite 207B
Reno, NV 89502
USA
(Address of Principal Executive Offices) (Zip Code)
775-322-4448
(Registrants telephone
number, including area code)
With a copy to:
Jonathan H. Gardner
Kavinoky Cook
LLP
726 Exchange St., Suite 800
Buffalo, NY 14210
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange
Act:
Common Stock, par value $0.0001 per share
Indicate
by check mark if the registrant is a well-known
seasoned issuer as defined by Rule 405 of the Securities Act
Yes [ ] No [X]
Indicate
by check mark if the registrant is not required
to file reports pursuant to Rule 13 or Section 15(d) of the Act
Yes [ ] No
[X]
Indicate
by check mark whether the issuer (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 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 [ ]
1
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 Rule 405 of
Regulation S-T (s 220.405 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 [ ]
Check
if disclosure of delinquent filers in response to
Item 405 of Regulation S-K is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
Indicate
by check mark whether the registrant is a large
accelerated filer, a non-accelerated filer or a smaller reporter.
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Large accelerated filer [ ]
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Accelerated filer [ ]
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Non-accelerated filer [ ]
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Smaller reporting company
[X]
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Indicate by check mark whether registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [X] No
The issuer had no revenue during the year ended June 30,
2012.
The aggregate market value of the Common Stock held by
non-affiliates of the issuer, as of December 31, 2011, was approximately
$4,025,627 based upon a share valuation of $0.085 per share. This share
valuation is based upon the closing price of the Companys shares as of December
28, 2011 (the date of the last sale of the Companys shares closest to the end
of the Companys second fiscal quarter). For purposes of this disclosure, shares
of Common Stock held by persons who the issuer believes beneficially own more
than 5% of the outstanding shares of Common Stock and shares held by officers
and directors of the issuer have been excluded because such persons may be
deemed to be affiliates of the issuer.
As of August 31, 2012, 98,935,486 shares of the issuers Common
Stock were outstanding.
Transitional Small Business Disclosure
Yes [ ] No [X]
2
TABLE OF CONTENTS
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Part I
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Page
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Item 1.
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Business
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4
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Item 1A.
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Risk Factors
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5
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Item 2.
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Properties
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8
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Item 3.
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Legal Proceedings
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34
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Item 4.
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Mine Safety Disclosure
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34
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Part II
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Item 5.
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Market For Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities
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35
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Item 6.
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Selected Financial Data
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38
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Item 7.
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Managements Discussion and
Analysis of Financial Condition and Results of Operations
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39
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Item 7A.
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Quantitative and Qualitative Disclosures About
Market Risk
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49
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Item 8.
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Financial Statements and
Supplementary Data
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49
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Item 9.
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Change in and Disagreements With Accountants on
Accounting and Financial Disclosure
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49
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Item 9A.
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Controls and Procedures
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49
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Item 9B.
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Other Information
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51
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Part III
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Item 10.
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Directors, Executive Officers and Corporate
Governance
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52
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Item 11.
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Executive Compensation
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56
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Item 12.
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Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters
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59
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Item 13.
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Certain Relationships and
Related Transactions
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61
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Item 14.
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Principal Accountant Fees and Services
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61
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PART IV
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Item 15.
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Exhibits, Financial Statement Schedules
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62
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3
PART I
This Annual Report on Form 10-K contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which include, without limitation, statements about our explorations,
development, efforts to raise capital, expected financial performance and other
aspects of our business identified in this Annual Report, as well as other
reports that we file from time to time with the Securities and Exchange
Commission. Any statements about our business, financial results, financial
condition and operations contained in this Annual Report that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words believes, anticipates, expects,
intends, projects, or similar expressions are intended to identify
forward-looking statements. Our actual results could differ materially from
those expressed or implied by these forward-looking statements as a result of
various factors, including the risk factors described in the section entitled,
RISK FACTORS and elsewhere in this report. We undertake no obligation to update
publicly any forward-looking statements for any reason, except as required by
law, even as new information becomes available or other events occur in the
future.
Item 1. Business.
Our name is Infrastructure Materials Corp. and we sometimes
refer to ourselves in this report as Infrastructure Materials or
Infrastructure, the Company or as we, our, or us. We are engaged in
the exploration and development, if warranted, of cement grade limestone
properties located in the states of Nevada and Arizona and the Canadian Province
of Manitoba, and of silver/base metal properties located in Nevada. As of the
date of this report, we hold 1,237 unpatented lode mineral claims and six mill
site claims on land owned or controlled by the United States Department of
Interiors Bureau of Land Management (BLM). The Company also holds mineral
rights or surface rights for 4,940 net acres and holds interests in 18 patented
claims. Our claims cover 25 projects in Nevada. We have six exploration permits
in effect with the State of Arizona covering one project located near the
municipality of Seligman, Arizona. We also own a milling facility located on six
BLM mill site claims in Nevada. The Company also holds 35 quarry leases in
south-central Manitoba, Canada. Our efforts going forward through our current
fiscal year ending June 30, 2013, include further study and accumulation of
information about our Blue Nose Project located in Lincoln County, Nevada. We
will also continue the evaluation of our silver/base metal projects. While
exploratory drilling programs are being developed, we will also consider joint
ventures with third parties to further explore and develop, if warranted, those
projects.
Infrastructure has three wholly owned subsidiaries. They are
(a) Infrastructure Materials Corp US, a Nevada corporation (IMC US) that holds
title to our limestone related claims, permits and leases in the United States,
(b) Silver Reserve Corp., a Delaware corporation (Silver Reserve or SRC)
that holds title to our precious metal claims and leases, and (c) Canadian
Infrastructure Corp, an Alberta, Canada corporation (CIC). In November
2008, the Company re-focused its attention and resources on the acquisition and
exploration of limestone mineral claims. Prior to that date, the Company was
principally focused on the precious metal properties now held by Silver Reserve. The following diagram illustrates
our corporate structure.
4
Our head office is at 1135 Terminal Way, Suite 207B, Reno,
Nevada 89502 and our administrative office is also at this address. Our
telephone number is 775-322-4448. We have three employees, primarily using
consultants and contract personnel to perform various professional and technical
services, including but not limited to management functions, drilling,
construction, site surveillance, environmental assessment, and field and on-site
production operating services.
Item 1A. Risk Factors
The following are certain risk factors that could affect our
business, financial condition, operating results and cash flows. These risk
factors should be considered in connection with evaluating the forward-looking
statements because they could cause actual results to differ materially from
those expressed in any forward-looking statement. The risk factors highlighted
below are not the only ones we face. If any of these events actually occur, our
business, financial condition, operating results or cash flows could be
negatively affected.
1.
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THE COMPANY HAS NO SOURCE OF OPERATING REVENUE AND
EXPECTS TO INCUR SIGNIFICANT EXPENSES BEFORE ESTABLISHING AN OPERATING
COMPANY, IF IT IS ABLE TO ESTABLISH AN OPERATING COMPANY AT ALL.
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Currently, the Company has no source of revenue, limited
working capital and no commitments to obtain additional financing. The
Company will require additional working capital to carry out its
exploration programs and to continue its business. The Company has no
operating history upon which an evaluation of its future success or
failure can be made. The ability to achieve and maintain profitability and
positive cash flow is dependent upon:
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further exploration of our properties and the results of
that exploration.
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raising the capital necessary to conduct this exploration
and preserve the Companys Properties.
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raising capital to develop our properties, establish a
mining operation, and operate this mine in a profitable manner if any of
these activities are warranted by the results of our exploration programs
and a feasibility study.
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Because the Company has no operating revenue, it expects
to incur operating losses in future periods as it continues to spend funds
to explore its properties. Failure to raise the necessary capital to
continue exploration could cause the Company to go out of
business.
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5
2.
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WE WILL NEED TO RAISE ADDITIONAL FINANCING TO COMPLETE
FURTHER EXPLORATION
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We will require significant additional financing in order
to continue our exploration activities and our assessment of the
commercial viability of our properties. There can be no assurance that we
will be successful in our efforts to raise these require funds, or on
terms satisfactory to us. The continued exploration of current and future
mineral properties and the development of our business will depend upon
our ability to establish the commercial viability of our properties and to
ultimately develop cash flow from operations and reach profitable
operations. We currently are in an exploration stage and we have no
revenue from operations and we are experiencing significant cash outflow
from operating activities. If we are unable to obtain additional
financing, we will not be able to continue our exploration activities and
our assessment of the commercial viability of our precious metal and
mineral properties.
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3.
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WE HAVE RECEIVED A “GOING CONCERN” COMMENT FROM OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, WHICH MAY NEGATIVELY IMPACT OUR BUSINESS.
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Due to the fact that we are an exploration stage company and have no established source of revenues, the report from Schwartz Levitsky Feldman llp, our independent registered public accounting firm, regarding our consolidated financial statements for the fiscal year ended June 30, 2012 includes an explanatory paragraph stating that the financial statements were prepared assuming we will continue as a going concern,. The existence of the “going concern” comment in our auditor’s report may make it more difficult for us to obtain additional financing. In the event that we are unable to raise additional capital, as to which there can be no assurance, we may not be able to continue our operations.
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4.
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WE HAVE NO RESERVES AND WE MAY FIND THAT OUR PROPERTIES
ARE NOT COMMERCIALLY VIABLE
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Our properties do not contain reserves in accordance with
the definitions adopted by the Securities and Exchange Commission, and
there is no assurance that any exploration programs that we undertake will
establish reserves. All of our mineral properties are in the exploration
stage as opposed to the development stage and have no known body of
economic mineralization. The known mineralization at these projects has
not yet been determined, and may never be determined to be economic. We
plan to conduct further exploration activities on our properties, which
future exploration may include the completion of feasibility studies
necessary to evaluate whether a commercial mineable mineral exists on any
of our properties. There is a substantial risk that these exploration
activities will not result in discoveries of commercially recoverable
quantities of minerals. Any determination that our properties contain
commercially recoverable quantities of minerals may not be reached until
such time that final comprehensive feasibility studies have been concluded
that establish that a potential mine is likely to be economic. There is a
substantial risk that any preliminary or final feasibility studies carried
out by us will not result in a positive determination that our mineral
properties can be commercially developed.
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5.
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WE HAVE A HISTORY OF OPERATING LOSSES AND THERE CAN BE NO
ASSURANCES WE WILL BE PROFITABLE IN THE FUTURE.
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We have a history of operating losses, expect to continue
to incur losses, and may never be profitable. Further, we have been
dependent on sales of our equity securities and debt financing to meet our
cash requirements. We have incurred losses totalling $20,820,817 from
inception to June 30, 2012, and incurred losses of $1,362,040 during the
fiscal year ended June 30, 2012. Further, we do not expect positive cash
flow from operations in the near term. There is no assurance that actual
cash requirements will not exceed our estimates. In particular, additional
capital may be required in the event that: (i) the costs to acquire
additional mineral exploration claims are more than we currently
anticipate; or (ii) exploration and or future potential mining costs for
additional claims increase beyond our expectations.
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6.
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THE RISKS ASSOCIATED WITH EXPLORATION COULD CAUSE
PERSONAL INJURY OR DEATH, ENVIRONMENTAL DAMAGE AND POSSIBLE LEGAL
LIABILITY.
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We are not currently engaged in mining operations because
we are in the exploration phase. However, our exploration operations could
expose the Company to liability for personal injury or death, property
damage or environmental damage. Although we carry property and liability
insurance, cost effective insurance contains exclusions and limitations on
coverage and may be unavailable in some
circumstances.
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6
7.
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BECAUSE OF THE UNIQUE DIFFICULTIES AND UNCERTAINTIES
INHERENT IN MINERAL EXPLORATION VENTURES AND CURRENT DETERIORATION IN
EQUITY MARKETS, WE FACE A HIGH RISK OF BUSINESS FAILURE.
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Investors should be aware of the difficulties normally
encountered by new mineral exploration companies and the high rate of
failure of such enterprises. Our prospects are further complicated by a
pronounced deterioration in equity markets and constriction in equity
capital available to finance and maintain our exploration activities. Our
likelihood of success must be considered in light of the problems,
expenses, difficulties, complications and delays encountered in connection
with the exploration of the mineral properties that we plan to undertake
and the difficult economy and market volatility that we are experiencing.
Moreover, most exploration projects do not result in the discovery of
commercial mineable deposits.
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8.
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OUR BUSINESS IS AFFECTED BY CHANGES IN COMMODITY
PRICES.
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Our ability to raise capital and explore our properties
and the future profitability of those operations is directly related to
the market price of certain minerals such as silver and limestone as well
as the price and availability of cement. The Company is negatively
affected by the current decline in commodity prices.
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9.
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THE COMPANY COULD ENCOUNTER REGULATORY AND PERMITTING
DELAYS.
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The Company could face delays in obtaining permits to
operate on the property covered by the claims. Such delays could
jeopardize financing, if any is available, which could result in having to
delay or abandon work on some or all of the properties.
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10.
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THERE ARE PENNY STOCK SECURITIES LAW CONSIDERATIONS THAT
COULD LIMIT YOUR ABILITY TO SELL YOUR SHARES.
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Our common stock is considered a "penny stock" and the
sale of our stock by you will be subject to the "penny stock rules" of the
Securities and Exchange Commission. The penny stock rules require
broker-dealers to take steps before making any penny stock trades in
customer accounts. As a result, the market for our shares could be
illiquid and there could be delays in the trading of our stock which would
negatively affect your ability to sell your shares and could negatively
affect the trading price of your shares.
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11.
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CURRENT LEVELS OF MARKET VOLATILITY COULD HAVE ADVERSE
IMPACTS
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The capital and credit markets have been experiencing
volatility and disruption. If the current levels of market disruption and
volatility continue or worsen, there can be no assurance that the Company
will not experience adverse effects, which may be material. These effects
may include, but are not limited to, difficulties in raising additional
capital or debt and a smaller pool of investors and funding sources. There
is thus no assurance the Company will have access to the equity capital
markets to obtain financing when necessary or desirable.
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12.
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WE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE
FUTURE.
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We have never declared or paid a dividend on our common
stock. We intend to retain earnings, if any, for use in the operation and
expansion of our business and, therefore, do not anticipate paying any
dividends in the foreseeable future.
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7
Item 2. Properties
Description of Property held by Infrastructure Materials
Corp US (IMC US), a wholly owned subsidiary of Infrastructure Materials
Corp.
The following claim groups and leased mineral rights are
described below: The Blue Nose Claim Group, Morgan Hill Claim Group, the Rock
Hill Claim Group, the Buffalo Mountain Claim Group, the MM Claim Group, the
Royale Claim Group, the Wood Hills Claim Group, the Pequop Claim Group, the
Ragged Top Claim Group, the Lime Mountain Claim Group, Jumbled Mountain Claim
Group, the Burnt Springs Claim Group and the Blye Canyon Project. The Morgan
Hill Claim Group (other than the leased properties identified below), the Rock
Hill Claim Group, and the Buffalo Mountain Claim Group were acquired as of
November 7, 2008 when the Company purchased its now wholly owned subsidiary, IMC
US.
Property Locations and Descriptions
The following is a map highlighting the counties in the States
of Nevada and Arizona where the properties held by IMC US are located.
8
Blue Nose Claim Group
The Blue Nose Claim Group consists of 255 unpatented, lode
mineral claims located in Lincoln County, Nevada, west of Tule Desert, along the
south edge of the Clover Mountains. The claim group is 8 miles east of the Union
Pacific rail line in the Meadow Valley Wash. Access is via the graded Carp and
Bunker Peak roads. The claim group covers approximately 5,268 acres of land
managed by the BLM and was acquired as a result of IMC US locating and staking
the claims.
On July 12, 2010, the BLM approved the Companys Plan of
Operations for the Blue Nose Claim Group. On July 14, 2010, the Company posted a
reclamation bond in the amount of $240,805 with the BLM in connection with the
Blue Nose Claim Group. The reclamation bond backs the Companys obligations
under the Plan of Operations to restore the site and reclaim disturbance (if
any) caused by the Companys activities on the Blue Nose Claim Group. Under the
Plan of Operations, the Company drilled 28 reverse circulation holes to depths
ranging between 150 and 900 feet for a total of approximately 17,000 feet. When
combined with three earlier drill programs, a total of 63 reverse circulation
holes approximately 30,000 feet have been completed at the Blue Nose Claim
Group.
The Company engaged Mine Development Associates of Reno, Nevada
(MDA) to assess the data from these drill programs. In a report dated January
5, 2011, MDA stated that two basic limestone units were defined by the drilling.
The Lower White limestone unit appeared to contain few impurities and contains
relatively high-grade calcium oxide (CaO). The Lower White unit is overlain by
another limestone unit that is generally lower grade and contains more
impurities. MDAs report concluded that while further study is required to
better define the extent and quality of the units, the Blue Nose Claim Group is
estimated to contain significant levels of fairly high-grade limestone. During
the fiscal year ending June 30, 2013, the Company intends to further study and
accumulate information about the Blue Nose Claim Group.
The 255 Blue Nose lode mineral claims are identified in the BLM
records by Nevada Mining Claim numbers: NMC 1002031 through 1002186, 1002188
through 1002206, 1002208 through 1002226, 1002228 through 1002246, 1002248
through 1002266, 1002268 through 1002286 and 1014085 through 1014088.
IMC US is the registered holder of this claim group. There are
no underlying agreements or royalty interests of third parties that pertain to
the above claims. IMC US will remain as the record holder of the claims as long
as it continues to make all payments required by law to maintain the claims.
These payments include an annual fee of $140 per claim to the BLM. In addition,
a claim holder is required to pay annual County filing fees in most counties
within Nevada.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
9
Morgan Hill Claim Group
The Morgan Hill Claim Group consists of 130 unpatented, lode
mineral claims located in Elko County, Nevada, approximately 20 miles west of
the town of Wells, Nevada. The claims are situated about five miles north of
Interstate 80 and the Union-Pacific rail line. The property is accessed via the
I80 River Ranch Exit. The Morgan Hill claims cover approximately 2,686 acres of
land managed by the BLM. The Morgan Hill claims cover a northeast trending
package of sediments which include a block of favorable massive limestone that
has a 2.5 mile strike length. This limestone exceeds 250 feet in thickness. The
claim area contains very significant amounts of fine grained limestone within
the Devonian Devils Gate and Nevada Formations. The unit thickness appears to
range up to 500 feet and has varying amounts of interbedded magnesium oxide.
There is adjacent sandstone for a silica supply required for cement. Morgan Hill
has topography conducive to open pit mining. Preliminary tonnage estimates are
positive with little to no initial strip ratio. Area topography allows access to
drill areas with a track mounted drill rig. The property lies within 5 miles of
the railhead. It is believed to be situated to competitively reach markets in
Salt Lake City, Reno, Southern Idaho and Northern California. We have completed
a 24-hole drill program on the project identifying three separate cement grade
limestone zones of indeterminate thickness. Further drilling will be required to
verify the thickness and continuity of the cement and high calcium zones.
The 130 Morgan Hill lode mineral claims are identified by
number as Nevada Mining Claims (NMC) in the BLM records as follows:
NMC 989047 through 989130,
NMC
997410 through 997438, and
NMC 1006464 through 1006480
IMC US is the registered holder of this claim group. There are
no underlying agreements or royalty interests of third parties that pertain to
the Morgan Hill claims. IMC US will remain as the record holder of the claims as
long as it continues to make all payments required by law to maintain the
claims. These payments include an annual fee to the BLM of $140 per claim. In
addition, a claim holder is required to pay annual County filing fees in most
counties within Nevada.
Included in the Morgan Hill Claim Group are three groups of
mineral rights known as: (a) the Perdriau Mineral Rights, (b) the Hammond
Mineral and Surface Rights and (c) the Earl Edgar Mineral Trust Mineral
Rights.
The Perdriau Mineral Rights
On November 30, 2009 IMC US entered into a Mineral Rights
Agreement with Perdriau Investment Corp. (Perdriau) to purchase 50% of the
mineral rights, including all easements, rights of way and appurtenant rights of
any type that run with the mineral rights located in the section of Elko County,
Nevada identified below (the Perdriau Property). The purchase price was $10
per net acre. IMC US purchased 340 net acres for a total purchase price of
$3,400. Perdriau will be entitled to receive a royalty of $0.25 per ton for
material mined and removed from the Perdriau Property. Material mined and stored
on the Perdriau Property or adjacent property for reclamation purposes will not
be subject to any royalty. Material removed from the Perdriau Property for the
purposes of testing or bulk sampling, provided it does not exceed 50,000 tons,
will also not be subject to any royalty. The royalty will be calculated and paid
within 45 days after the end of each calendar quarter.
The following description of the Perdriau Property is based
upon reference points used in the Public Land Survey System (the PLSS) that is
maintained by the BLM. The Perdriau Property is located on The National Map at
T37N, R58E Elko County, Nevada in the following sections:
10
Section 9
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SW ¼
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80 acres
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Section 15
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W1/2 W1/2
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80 acres
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Section 19
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SE ¼
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80 acres
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Section 21
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N1/2 NE1/4
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20 acres
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Section 21
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SW ¼
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80 acres
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Total
Net acres
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340 acres
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Hammond Surface Rights Lease and Mineral Rights
Agreement
As of January 15, 2010, the Company entered into a Property
Lease Agreement with Eugene M. Hammond (the Hammond Lease) for surface rights
on 80 acres in Elko County, Nevada described below (the Hammond Surface
Rights). The term of the Hammond Lease is five years and the annual rent is
$500. The lessee is responsible for the payment of all real estate taxes on the
Hammond Surface Rights. During the term of the Hammond Lease, the lessee has the
exclusive right to conduct exploration and development work on the Hammond
Surface Rights. The results of all drilling and exploration are of the property
of the lessee. The lessee is responsible for any environmental damage caused by
the lessee and any reclamation costs required as a result of drilling and
testing. The lessee has an option to purchase the property covered by the
Hammond Lease for $15,000, less the amount paid in rent during the term of the
Hammond Lease. The Hammond Surface Rights are located at the following PLSS
coordinates: T37N, R58E, Section 17, S ½ SE ¼, Elko County, Nevada.
Also as of January 15, 2010, IMC US entered into a Mineral
Rights Agreement with Eugene M. Hammond (the Hammond Mineral Rights Agreement)
pursuant to which the Company purchased a 25% interest in any and all minerals
extracted from the 160 acres covered by the Hammond Mineral Rights Agreement, as
described below (the Hammond Mineral Rights Property). The purchase price was
$400. In addition, the seller is entitled to receive a royalty of $0.125 per ton
on material mined and removed from the Hammond Mineral Rights Property. The
Hammond Mineral Rights Agreement does not cover petroleum. The Hammond Mineral
Rights Property is located at the following PLSS coordinates: T37N, R58E,
Section 17, SE ¼, Elko County, Nevada.
Earl Edgar Mineral Trust Mineral Rights
On December 8, 2008 IMC US entered into a Mineral Rights Lease
Agreement (the Edgar Lease Agreement) with the Earl Edgar Mineral Trust (the
Edgar) to lease certain mineral rights in Elko County, Nevada described below
(the Edgar Property). The term of the Edgar Lease Agreement is ten years and
will automatically renew on the same terms and conditions for additional
ten-year periods, provided the lessee is conducting exploration, development or
mining either on the surface or underground at the property. The rent is to be
paid each year on January 1st. $1.00 per net acre was paid upon execution of the
Edgar Lease Agreement. On January 1 of each year commencing in 2010 and
extending for so long as the Edgar Lease Agreement is in effect, the lessee is
obligated to make the following payments:
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2010
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$1.00 per net acre
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2011
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$2.00 per net acre
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2012
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$2.00 per net acre
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2013
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$3.00 per net acre
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2014
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$3.00 per net acre
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2015
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$4.00 per net acre
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2016
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$4.00 per net acre
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2017
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$5.00 per net acre in each year for the
duration of the Edgar Lease Agreement
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The Edgar Lease Agreement covers 100% of the mineral rights on
1,120 acres of the Edgar Property (Property A) and 50% of the mineral rights
on 6,720 acres of the Edgar Property (Property B). Edgar is entitled to receive a royalty of $0.50 per ton for material
mined and removed from Property A and $0.25 per ton for material mined and
removed from Property B during the term of the Edgar Lease Agreement and any
renewal thereof.
11
On April 9, 2009 the Company and Edgar entered into an
Amendment to the Edgar Lease Agreement (the Amendment), effective as of
December 8, 2008. The Amendment provides for Standard Steam LLC to carry out
exploration for geothermal energy sources on the Edgar Property after obtaining
the written consent of the Company. The Amendment also provides for other
cooperation with Standard Steam LLC regarding mineral rights on Property B of
the Edgar Property.
Property A of the Edgar Property is
located at the following PLSS coordinates: T37N, R58E Elko County, NV in the
following sections:
Section 3
|
W ¼
|
320 acres
|
Section 9
|
SE ¼
|
160 acres
|
Section 15
|
E ½ W ½
|
160 acres
|
Section 21
|
NW ¼
|
|
|
S ½ NE ¼
|
240 acres
|
Section 23
|
S ½ NW ¼
|
|
|
SW ¼
|
240 acres
|
Total Net acres
|
|
1120 acres
|
Property B of the Edgar Property is
located at the following PLSS coordinates in Elko County, NV in the following
townships, ranges and sections:
T37N, R58E
|
|
|
Section 3
|
E ½
|
320 acres
|
Section 9
|
SW ¼
|
160 acres
|
Section 15
|
W ½ W ½
|
|
|
E ½
|
480 acres
|
Section 17
|
all
|
640 acres
|
Section 19
|
SE ¼
|
160 acres
|
Section 21
|
S ½
|
|
|
N ½ NE ¼
|
400 acres
|
Section 23
|
N ½ NW ¼
|
|
|
E ½
|
400 acres
|
Section 27
|
All
|
640 acres
|
Section 29
|
All
|
640 acres
|
Section 31
|
All
|
640 acres
|
Section 33
|
All
|
640 acres
|
Section 35
|
All
|
640 acres
|
|
|
|
|
|
|
T 36 N, R 58 E
|
|
|
Section 1
|
N ½
|
640 acres
|
|
|
|
T 37 N, R 59 E
|
|
|
Section 31
|
All
|
640 acres
|
Total Net Acres
|
|
3360 acres
|
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
12
Rock Hill Claim Group
The Rock Hill Claim Group consists of 7 unpatented, lode
mineral claims located in Pershing County, Nevada, approximately 12 miles
southeast of Mill City, Nevada. Access is along unpaved roads about 25 miles
southwest of Winnemucca, Nevada. The Rock Hill claims cover approximately 145
acres. The property geology indicates two basic units most likely in the rocks
of the Natchez Pass Formation. Each of the two limestone units is up to 300-400
feet thick with siltstone/sandstone interbeds of variable thickness. The
property is approximately 12-14 miles from the current railhead in the Dunn
Glenn area. Due to the topography, access to this project would be
difficult.
The 7 Rock Hill lode mineral claims are identified by Nevada
Mining Claim number in the BLM records as follows:
NMC 1003539, 1003541, 1003543, 1003545,
1003575, 1003577 and 1003579
Subsequent to the period covered by this report, the Company
elected to drop all seven of the claims in this claim group.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Buffalo Mountain Claim Group
The Buffalo Mountain Claim Group consists of 5 unpatented, lode
mineral claims located in Pershing County, Nevada, approximately 20 miles
northeast of the town of Lovelock, Nevada. The Buffalo Mountain claims cover
approximately 103 acres. Access is along unpaved roads after leaving the
interstate 4 miles north of Lovelock. The geology indicates limestone within the
Natchez Pass Formation. Due to the topography, access to this area would be
difficult.
The 5 Buffalo Mountain lode mineral claims are identified in
the BLM records by Nevada Mining Claim numbers NMC 1003510, 1003512, 1003514,
1003516 and 1003518.
Subsequent to the period covered by this report, the Company
elected to drop all five of the claims in this claim group.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
13
MM Claim Group
The MM Claim Group consists of 31 unpatented, lode mineral
claims located in Clark County, Nevada, approximately 10 miles south of Las
Vegas, Nevada. The claim group covers approximately 640 acres. This claim group
was acquired as a result of IMC US locating and staking the claims. Work has
been conducted to define the potential of the claim group. Samples have been
taken with 10% running an acceptable cement grade which may define a specific
rock unit. Surface mapping is completed and on file. Access is by paved and
unpaved roads south from Las Vegas.
The 31 MM lode mineral claims are identified in the BLM records
by Nevada Mining Claim numbers: NMC 1002567, 1002575, 1002585, 1002593, 1002604,
1002596, 1002598, 1002600, 1002603, 1002608 1002610, 1002612, 1002613, 1002629,
1002631, 1002633, 1002635, 1002636, 1002637, 1002639, 1002641, 1002643, 1002644,
1002645, 1002647, 1002649 through 1002654.
IMC US is the registered holder of this claim group. There are
no underlying agreements or royalty interests of third parties that pertain to
the above claims. IMC US will remain as the record holder of the claims as long
as it continues to make all payments required by law to maintain the claims.
These payments include an annual fee of $140 per claim to the BLM. In addition,
a claim holder is required to pay annual County filing fees in most counties
within Nevada.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Royale Claim Group
The Royale Claim Group consists of 4 unpatented, lode mineral
claims located in Clark County, Nevada, approximately 15 miles south of Las
Vegas, Nevada. The claim group covers approximately 83 acres. This claim group
was acquired as a result of IMC US locating and staking the claims.
Reconnaissance exploration indicates good quality carbonates on the surface by
visual inspection of hand samples and geochemistry. Large areas on this group
are accessible by track mounted drilling equipment. Mapping and sampling is
completed and on file. Access is by a paved road located 18 miles south from Las
Vegas and by an unpaved road located 6 miles to the northwest.
The 4 Royale lode mineral claims are identified in the BLM
records by Nevada Mining Claim numbers: NMC 1002680, 1002681, 1002689, and
1002690.
Subsequent to the period covered by this report, the Company
elected to drop all four of the claims in this claim group.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
14
Wood Hills Claim Group
The Wood Hills Claim Group consists of 58 unpatented lode
mineral claims located in Eastern Elko County, Nevada near Wells, Nevada. This
claim group was acquired as a result of IMC US locating and staking the claims.
The claims are about 5 miles southeast of the town. The claim group covers
approximately 1,198 acres. Access is along unpaved roads to the project. Rail
lines and Interstate Highway 80 run through Wells. Limestone beds of the Devils
Gate Formation and the Ely Formation are exposed in gently dipping beds near the
top and the southern extent of the Wood Hills claims. Over 50 surface samples
have been taken that show good cement grade limestone.
The 58 Wood Hills lode mineral claims are identified in the BLM
records by Nevada Mining Claim numbers: NMC 1020023 through 1020026, 1020037,
1020039, 1020049, 1020052, 1020062 through 1020079, 1020089 through 1020106,
1020116, 1020118, 1020120, 1020122, 1020124, 1020126, 1020128, 1020130, 1020132,
1020133, 1020136, 1020138, 1020140, 1020142
IMC US is the registered holder of this claim group. There are
no underlying agreements or royalty interests of third parties that pertain to
the above claims. IMC US will remain as the record holder of the claims as long
as it continues to make all payments required by law to maintain the claims.
These payments include an annual fee of $140 per claim to the BLM. In addition,
a claim holder is required to pay annual County filing fees in most counties
within Nevada.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Pequop Claim Group
The Pequop Claim Group consists of 19 unpatented, lode mineral
claims. This claim group was acquired as a result of IMC US locating and staking
the claims. The Pequop claims are located approximately 35 miles southeast of
Wells, Nevada in Elko County. They are reached by traveling south on Highway 93
about 12 miles and then 20 miles to the east and south along a gravel road to
the central portion of the Pequop Range. The claim group covers approximately
393 acres. Railroad tracks are within a half mile of the southern portion of the
claims. East dipping and northeast striking beds of the Ely Formation are
exposed here. They stretch for over 2 miles to the north from the railroad
tunnel in the Southern Pequops. A number of the samples show good cement grade
limestone with some chert (fine grained silica rich sediments) beds and silicic
limestone beds. These silicic rocks could be used for a silica source in a
limestone operation to make cement.
The 19 Pequop lode mineral claims are identified in the BLM
records by Nevada Mining Claim numbers: NMC 1020152, 1020156, 1020160, 1020164,
1020168, 1020170, 1020176, 1020178, 1020182, 1020186, 1020190, 1020192, 1020198,
1020202, 1020206, 1020210, 1020215, 1020218, and 1020222.
Subsequent to the period covered by this report, the Company
elected to drop all 19 of the claims in this claim group.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
15
Ragged Top Claim Group
The Ragged Top Claim Group consists of 23 unpatented, lode
mineral claims located in both Pershing and Churchill Counties. This claim group
was acquired as a result of IMC US locating and staking the claims. The claim group
covers approximately 475 acres and is located 23 miles southwest of Lovelock,
Nevada and 8 miles northwest of Interstate Highway 80, along an unpaved road
from the Union Pacific Rail corridor. Access is via the unpaved road. These
claims cover 14 exposures of limestone seen in the gently rolling hillsides. The
claims have been mapped and a number of surface samples have been taken.
The 23 Ragged Top lode mineral claims are identified in the BLM
records by Nevada Mining Claim numbers: NMC 1014011, 1014013, 1014015, 1014017,
1014029, 1014031, 1014035, 1014037, 1014041, 1014045, 1014053, 1014055, 1014061,
1014065, 1014072-1014075, 1014077 and 1014080 through 1014083.
Subsequent to the period covered by this report, the Company
elected to drop all 23 of the claims in this claim group.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Lime Mountain Claim Group
The Lime Mountain Claim Group consists of 69 unpatented, lode
mineral claims located in eastern Lincoln County, Nevada, about 35 miles
southeast of Caliente, Nevada and about 90 miles northeast of Las Vegas, Nevada.
This claim group was acquired as a result of IMC US locating and staking the
claims. Access is south from Caliente along state highway 317 to Elgin and then
another 15 miles south on the dirt road to Lyman Crossing where the road goes
east for 15 miles to Lime Mountain. The claim group covers approximately 1,426
acres. A railroad line runs north-south along Meadow Valley Wash through Lyman
Crossing and Elgin. The limestone crops out in a north-south line that is 2
miles long and is approximately 1 mile wide. The project has been mapped and
over 40 surface samples have been taken. Many of the samples show cement grade
limestone.
The 69 Lime Mountain lode mineral claims are identified in the
BLM records by Nevada Mining Claim numbers: NMC 1014092, 1014094, 1014096,
1014102, 1014104 through 1014110, 1014112, 1014114, 1014124 through 1014130,
1014133 through 1014136, 1014139 through 1014153, 1014155, 1014167 through
1014170, 1014174, 1014176 through 1014179, 1014189, 1014191, 1014193, 1014195,
1014197, 1014200, 1014202, 1014204, 1014206, 1014207, 1014209, 1014211, 1014469,
1014214, 1014216, 1014218, 1014220, 1014222, 1014223, 1014225.
IMC US is the registered holder of this claim group. There are
no underlying agreements or royalty interests of third parties that pertain to
the above claims. IMC US will remain as the record holder of the claims as long
as it continues to make all payments required by law to maintain the claims.
These payments include an annual fee of $140 per claim to the BLM. In addition,
a claim holder is required to pay annual County filing fees in most counties
within Nevada.
16
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Jumbled Mountain Claim Group
The Jumbled Mountain Claim Group consists of 44 unpatented,
lode mineral claims that are located in eastern Lincoln County, Nevada, about 90
miles northeast of Las Vegas, Nevada. This claim group was acquired as a result
of IMC US locating and staking the claims. Access is from Mesquite, Nevada along 20
miles of highway and 35 miles of unpaved roads. The claims are located over
three isolated outcroppings of limestone covering approximately 909 acres. These
areas have been mapped and sampled. There were 283 surface rock chip samples
taken.
The 44 Jumbled Mountain lode mineral claims are identified in
the BLM records by Nevada Mining Claim numbers: NMC 1014237, 1014239, 1014241,
1014244, 1014246, 1014248, 1014253, 1014255, 1014257, 1014260, 1014262, 1014264,
1014269, 1014271, 1014273, 1014287, 1014291, 1014293, 1014295, 1014299, 1014303,
1014305, 1014314, 1014316, 1014324, 1014326, 1014332, 1014334, 1014336, 1014338,
1014345, 1014347, 1014349, 1014251, 1014353, 1014360, 1014362, 1014393, 1014395,
1014401, 1014407, 1014421, 1014423, and 1014424
Subsequent to the period covered by this report, the Company
elected to drop all 44 four of the claims in this claim group.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Burnt Springs Claim Group
The Burnt Springs Claim Group consists of 13 unpatented, lode
mineral claims located in the Burnt Springs Range 6 to 10 miles west and
northwest of the Union Pacific railway at Caliente, Nevada. This claim group was
acquired as a result of IMC US locating and staking the claims. Access is along a
paved highway for 7 miles then 6 miles over unpaved roads. The claims are in
three separate blocks in the central part of Lincoln County, Nevada and cover
approximately 269 acres. The Burnt Springs claims are located on thick bedded
limestone sequences of the lower Highland Peak Formation which are thinly
covered by other rocks. A total of 76 rock chips samples have been taken from
the Highland Peak Formation in the area of the claims.
The 13 Burnt Springs lode mineral claims are identified in the
BLM records by Nevada Mining Claim numbers: NMC 1017570, 1017573, 1017575,
1017579, 1017584, 1017589, 1017594, 1017596, 1017598, 1017605, 1017606, 1017609,
and 1017611.
Subsequent to the period covered by this report, the Company
elected to drop all 13 of the claims in this claim group.
17
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Blye Canyon Project
The Blye Canyon Project consists of six State of Arizona
mineral exploration permits numbered 08-114298 through 08-114301, 08-114532 and
08-114533.
The Blye Canyon Project area is about 23 miles west of Seligman
in northwest Arizona. Access is west from Seligman, 25 miles on Highway 66 and
then south of Highway 66 about 8 miles on unpaved roads to the border of Yavapai
and Mohave Counties. IMC US holds mineral exploration permits issued by the
State of Arizona on 5.5 sections of land totaling approximately 3,507 acres. The
basal unit in the rocks in this area is a 300 feet-thick high magnesium
carbonate sediment with minor chert (high silica sediment) and limestone beds.
Overlying this is a clean gray white limestone that may be 100 to 150 feet
thick. The gently north to northeast dipping rocks have little relief in the low
rolling hills. The project area has been mapped and over a hundred samples have
been taken. Many cement grade values were found in the samples.
The interests of IMC US in Arizona consist of mineral
exploration permits that have a duration of one year from the date of issuance.
The permits can be renewed for up to four additional one-year terms for a total
of five years and provide the holder of the permit with an exclusive right to
explore for minerals within the state land covered by the permit and to apply
for mineral leases to such land. The holder of a permit may remove from the land
only the amount of material required for sampling and testing and is responsible
for any damage or destruction caused by the holders exploration activities. The
holder of a permit is entitled to ingress and egress to the covered site along
routes approved by the Arizona State Land Department. IMC US has posted a bond
required by the State of Arizona to back any reclamation required as a result of
work performed. The permit is renewable if the holder has expended not less than
$10.00 per acre during each of the first two year-long periods and $20.00 per
acre during each of the next three year-long periods. Each permit fee is $500
per year plus $2.00 per acre for the first two years and $1.00 per acre per year
for the following three years. Upon termination of a mineral exploration permit,
the State of Arizona is entitled to information collected by the permit holder.
In the event that a permit holder discovers a valuable mineral deposit, the
permit holder may apply to the Arizona State Land Department for a mineral lease
having a term of 20 years and renewable for an additional 20 years. A permit
holder shall be the preferred recipient of the mineral lease, provided that all
applicable requirements are met. A mineral lease entitles the lessee to develop
and establish a mine on the leased premises, provided that a mine plan and all
necessary approvals are obtained.
THERE ARE NO KNOWN RESERVES IN THIS PERMIT GROUP. OUR
OPERATIONS WITH RESPECT TO THIS PERMIT GROUP ARE ENTIRELY EXPLORATORY.
18
Description of Property held by Canadian Infrastructure
Corp. (CIC), a wholly owned subsidiary of Infrastructure Materials
Corp.
Property Location and Description
In December of 2009, the Company expanded its area of
exploration to include areas with a potential for cement stone located in
south-central Manitoba, Canada. The Company acquired Canadian Infrastructure
Corp. (CIC), as a wholly owned subsidiary pursuant to a Share Exchange
Agreement between the Company, CIC and Todd D. Montgomery dated as of December
15, 2009. See Item 5, Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities herein. CIC held 95 quarry
leases granted by the Province of Manitoba on three properties known as the
Dauphin property, the Winnipegosis property and the Spence property. These
leases covered 6,090 hectares or 15,049 acres. Exploration had been done in the
past on all three properties. Based on reviews in January 2011 and May 2011 of
all of CICs quarry leases, the Company decided to forfeit certain quarry leases
held by CIC that it determined were not in the Companys best interests to
retain.
The following is a map highlighting the properties held by CIC
in Manitoba, Canada.
SMD Mining Ltd., which merged with Eldorado Mining to become
Cameco, carried out drilling and sampling on the Dauphin property in 1988 89.
In 1991, Cameco carried out compilation geology, sampling and drilling on the
Winnipegosis property. In 1992 Continental Lime Ltd. carried out outcrop
sampling and drilling on the Spence property. The Dauphin property covers an
area of high calcium shale known as the White Speckled Shale unit of Cretaceous age. This
unit is from 2 to 8 meters in thickness. The Winnipegosis and Spence properties
cover an area of high calcium limestone, part of the Dawson Bay Formation of
Devonian age. CIC drilled the Dauphin property in 2009. The drilling was done to
verify the original Cameco drilling and also to extend the zone.
19
Dauphin Group - The Dauphin Property, the Winnipegosis
Property and the Spence Property
The Dauphin Property currently consists of 28 quarry mineral
leases covering approximately 1,925 hectares (4,757 acres). The 28 quarry
mineral leases are identified by Quarry Lease number in the Manitoba Innovation,
Energy and Mines, Mines Branch records as follows: QL-1958 through 1981, 2055,
2058, 2060 and 2061.
The Winnipegosis Property currently consists of 1 quarry
mineral lease covering approximately 64 hectares (158 acres) and identified by
Quarry Lease number QL-1990 in the Manitoba Innovation, Energy and Mines, Mines
Branch.
The Spence Property currently consists of 6 quarry mineral
leases covering approximately 392 hectares (968 acres) and identified by Quarry
Lease number in the Manitoba Innovation, Energy and Mines, Mines Branch records
as follows: QL-2013, 2026, 2037, and 2043 through 2045.
CIC is the registered lessee of this claim group. There are no
underlying agreements or royalty interests of third parties that pertain to
these claims. CIC will remain as the record holder of the claims as long as it
continues to make all payments required by law to maintain the claims.
Currently, a claim holder is required to pay annual rent of CDN$24 per hectare
or fraction thereof per lease.
THERE ARE NO KNOWN RESERVES IN THIS LEASED GROUP. OUR
OPERATIONS WITH RESPECT TO THIS LEASED GROUP ARE ENTIRELY EXPLORATORY.
20
Description of Property held by Silver Reserve Corp.
(SRC), a wholly owned subsidiary of Infrastructure Materials Corp.
Property Location and Description
The following is a map highlighting the counties in the State
of Nevada where the properties held by SRC are located.
The following claim groups are described below: Silver Queen
Claim Group, NL Extension Claim Group, Klondyke Claim Group, Dyer Claim
Group, Sylvania Claim Group, Montezuma Claim Group, Blue Dick Claim Group,
Weepah Hills Claim Group, Kope Scheelite Claim Group, Santa Fe Claim Group,
Quailey Claim Group and Quailey Patented Claims, Pansy Lee Claim Group, Gold
Point Claim Group and Red Rock Mill. These claims were originally acquired by
the Company and assigned to SRC.
21
Mojave Property Purchase Agreement
On August 1, 2006, the Company entered into a property purchase
agreement (the Mojave Property Purchase Agreement) with the Mojave Silver
Company, Inc. to acquire a 100% interest in claims located in Esmeralda County
and Mineral County, Nevada (as further described below) and known as the Silver
Queen Claim Group, Nivloc Claim Group (now identified as NL Extension Claim Group), Klondyke Claim Group, Dyer Claim Group, Sylvania Claim Group,
Montezuma Claim Group, Blue Dick Claim Group, Weepah Hills Claim Groups, Kope
Scheelite Group, Santa Fe Claim Group, Quailey Claim Group and Quailey Patented
Claims (collectively the Mojave Claims). The Mojave Claims were conveyed in
exchange for 3,540,600 shares of the Companys common stock, then valued at
$885,150. All of the Mojave Claims were subsequently assigned to our wholly
owned subsidiary, SRC.
Silver Queen Claim Group
The Silver Queen Claim Group consists of 178 unpatented, lode
mineral claims located in Esmeralda County, Nevada, approximately nine miles
west of Silver Peak, Nevada on Highway 47. The claim area covers approximately
3,636 acres. The property is accessed by dirt roadways. Eighty-three claims were
acquired pursuant to the Mojave Property Purchase Agreement. SRC subsequently
staked an additional 93 claims and also purchased two claims in 2008.
The claims are located in the Red Mountain District. The Silver
Queen Claim Group covers a northwest trending group of silver deposits that
include the Silver Queen and Mohawk mines. In 1920 a producing mine was
constructed and production continued through the late 1950's at the Mohawk
location.
In June 2008 four drill holes were completed to depths of 400
to 500 feet vertically in the Silver Queen area on surface anomalies noted
during grid sampling. In July 2008 five holes were drilled to intercept unmined
mineralized zones noted by a previous operator within the Mohawk workings.
SRC entered into an option agreement (the MGold Agreement)
dated August 19, 2011 with MGold Resources Inc. (MGold), pursuant to which
MGold would have an option to earn a 50% interest in the Silver Queen Claim
Group. Under the terms of the MGold Option Agreement, none of MGolds 50%
interest in the Silver Queen Claim Group would vest until MGold completed
exploration expenditures totaling CDN$4,000,000 and made total cash payments to
SRC of CDN$2,000,000. MGolds exploration expenditures were to be made over a
period of 30 months, and the cash payments were to be paid over a period of 33
months. On March 15, 2012, MGold issued notice to SRC that MGold was terminating
the MGold Agreement effective April 14, 2012. MGold elected to terminate the
MGold Agreement and to discontinue cash payments and exploration expenditures
ahead of a March 16, 2012 work commitment and cash payment anniversary date. As
a result of the termination of the MGold Agreement, the Company retains its 100%
interest in the Silver Queen Claim Group.
In October 2011, MGold commenced drilling to test
mineralization below the historical Mohawk mine workings. Five reverse
circulation (RC) holes were drilled for a total of 3,490 feet of vertical
drilling. Two RC holes were drilled to intercept the Silver Queen vein system
and three RC holes were drilled to target surface silver anomalies in late 2011
and early 2012 for a total of 3,549 vertical feet.
SRC is the registered holder of this claim group. There are no
underlying agreements or royalty interests of third parties that pertain to
these claims. SRC will remain as the record holder of the claims as long as it
continues to make all payments required by law to maintain the claims. These
payments include an annual fee of $140 per claim to the BLM. In addition, a
claim holder is required to pay annual County filing fees in most counties
within Nevada.
The 178 Silver Queen lode mineral claims are identified in the
BLM records by Nevada Mining Claim numbers: NMC 737071, 737072, 870453 through
870535, 966963 through 966966, 966969 through 966979, 969847 through 969850, 969852, 969853, 966982 through
967017, 986543, 106856, 1068563, 1058732 through 1058744, 1058748 through1058755
and 1058759 through1058770.
22
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
NL Extension Claim Group
The NL Extension Claim Group (the NL Project)
consists of 18 unpatented, lode mineral claims located in Esmeralda County,
Nevada, approximately 6.5 miles southwest of Silver Peak, Nevada on Highway 47.
The claim group covers approximately 372 acres. In previous reports filed by the
Company, this claim group was sometimes referred to as the Nivloc Claim Group.
Fifteen claims were acquired pursuant to the Mojave Property Purchase Agreement.
SRC subsequently staked an additional three claims.
The NL Project is located approximately 6.5 miles southwest of
Silver Peak, Nevada and is accessible along a dirt road 7 miles west of Silver
Peak. Elevations on the property range from 5900 feet to 6400 feet. The NL
Project lies on the eastern flank of Red Mountain and, with the Sixteen-to-One
deposit, forms a mineralized zone which trends northwesterly. The veins trend
northeasterly across the zone. The Nivloc Mine operated from 1937 to 1943. The
Nivloc Mine is adjacent but not within the claim group held by the Company. The
Nivloc mine encountered non-mineralized carbonates at around 900 feet and we
assume that the reserves here are exhausted.
A 5-hole exploratory reverse circulation drill program was
completed by SRC in January 2008. Hole NL5 intersected 30 feet with an average
grade of 2.5 ounce silver and 0.033 ounce gold per ton. The hole also
intersected a second 15-foot zone with five feet grading 21 ounces silver and an
average grade of 8.5 ounce silver per ton but no gold. These intersections
appear to be extension of the Nivloc veins 2800 feet east of the old mine
workings. Hole NL3 also appeared to intercept the vein but was abandoned due to
up-hole collapse. Two additional core holes were drilled to target the veins
intersection in NL5 from different angles to verify if the original intercepts
went through the vein.
SRC is the registered holder of this claim group. On February
25, 2011, SRC entered into an option and joint venture agreement (the Option
Agreement) with International Millennium Mining Inc. (IMMI), a wholly owned
subsidiary of International Millennium Mining Corp. (IMMC), to sell an 85%
interest in the NL Project for total consideration of $350,000 and 1,925,000
shares of IMMCs common stock (the Consideration). Under the terms of the
Option Agreement, the Consideration is payable over a five-year period that ends
on September 15, 2015, with IMMIs interest in the NL Project vesting at the end
of such period. If the NL Project is determined to be economically feasible,
based upon criteria contained in the Option Agreement, SRC will be required to
fund its portion of an operating budget proposed by IMMI in order to retain its
15% interest in the NL Project and to acquire a 15% interest in IMMIs Nivloc
Mine Project (the NL Project and the Nivloc Mine Project, collectively, the
IMMI Project). In the event that SRC decides not to fund its portion of the
budget, its 15% interest would be forfeited, but SRC would be entitled to a 2%
net smelter return royalty if and when the IMMI Project enters the production
phase. Upon funding of the operating budget and SRCs acquisition of a 15%
interest in the IMMI Project, SRC and IMMI would enter into a joint venture
agreement.
In late 2011, IMMI conducted a drill program that consisted of
34 core holes for a sum of 31,423 feet, all directed at infilling an un-mined
portion of the historical Nivloc Mine workings. All 34 holes were drilled from
four pads located on SRCs claim NL6. Thirty of the drill holes intercepted the
target zone. Drill results indicate the existence of two vein structures, the
Main Nivloc vein and an almost vertical splay vein.
23
Subject to the terms of the Option Agreement, SRC will remain
as the record holder of the claims as long as all payments required by law to
maintain the claims are made. These payments include an annual fee of $140 per
claim to the BLM. In addition, a claim holder is required to pay annual County
filing fees in most counties within Nevada.
The 18 NL Project lode mineral claims are identified
in the BLM records by Nevada Mining Claim numbers: NMC 867511 through 867525 and
964719 through 964721.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Klondyke Claim Group
The Klondyke Claim Group consists of 134 unpatented, lode
mineral claims located in Esmeralda County, Nevada. The Klondyke Claim Group is
accessible by road from Tonopah, Nevada. The property lies at elevations ranging
from 5,400 feet to 5,908 feet. The claim group covers approximately 2,768 acres
and is accessed by Nevada Route 93 and dirt road access. Sixty-three claims were
acquired pursuant to the Mojave Property Purchase Agreement. SRC subsequently
staked an additional seventy-one claims.
The Klondyke district, which was discovered in 1899, lies about
10 miles south of Tonopah, Nevada. Most of the deposits occur in veins within
limestone carrying both silver and gold. The claim area hosts numerous prospects
and mine shafts. The property geology was mapped at a scale of 1:12000 in 2007
and 5 separate sample grids were laid out and sampled to cover what appeared to
be anomalous zones outlined during the mapping program.
Mapping and grid sampling to date indicate strong NE/SW bearing
anomalous zones to the south of the old mine working where the structure runs
NW/SE. Surface sampling in this zone carried grades as high as 42.3 oz silver
and 0.1 oz gold per ton.
Grid sampling has identified a large gold-only anomalous zone
in the southern portion of the property. A trenching program is recommended to
expand this anomaly.
Five RC holes were drilled in the spring of 2012 for a total of
1,640 feet. Four of the holes targeted an anomalous vein system in the northwest
portion of the property and one hole was drilled on a gold surface anomaly in
the southeast portion of the property.
SRC entered into an option agreement (the MGold Agreement)
dated August 19, 2011 with MGold Resources Inc. (MGold), pursuant to which
MGold would have an option to earn a 50% interest in the Klondyke Claim Group.
Under the terms of the MGold Option Agreement, none of MGolds 50% interest in
the Klondyke Claim Group would vest until MGold completed exploration
expenditures totaling CDN$1,350,000 and made total cash payments to SRC of
CDN$265,000. MGolds exploration expenditures were to be made over a period of
30 months, and the cash payments were to be paid over a period of 33 months. On
March 15, 2012, MGold issued notice to SRC that MGold was terminating the MGold
Agreement effective April 14, 2012. MGold elected to terminate the MGold
Agreement and to discontinue cash payments and exploration expenditures ahead of
a March 16, 2012 work commitment and cash payment anniversary date. As a result
of the termination of the MGold Agreement, the Company retains its 100% interest
in the Klondyke Claim Group.
The 134 Klondyke lode mineral claims are identified in the BLM
records by Nevada Mining Claim numbers: 867448, 867450, 867452, 867454, 867456,
867458, 867461, 867463, 867465, 867467 through 867469, 867471, 867472, 867474,
867476, 867478, 867480, 867482, 867484, 867487, 867490, 867492, 867494, 867496,
867498, 867500, 867502, 936129, 936131, 964631, 964633, 964635, 964637, 964638,
964641, 964642, 964644, 964646, 964648, 964650, 964652, 964654,
964656, 964665, 964667, 964682, 964699, 1039914 through 1039983 and 1058716 -
1058731.
24
SRC is the registered holder of these unpatented, lode mineral
claims. There are no underlying agreements or royalty interests of third parties
that pertain to these claims. SRC will remain as the record holder of the claims
as long as it continues to make all payments required by law to maintain the
claims. These payments include an annual fee of $140 per claim to the BLM. In
addition, a claim holder is required to pay annual County filing fees in most
counties within Nevada.
In addition, SRC leases four patented claims. Two patented
claims covering approximately 41 acres are leased from Ovidia Harting
(Harting) pursuant to a Lease Agreement dated May 30, 2008. The Lease
Agreement has a renewable term of 10 years and permits SRC to explore the area
covered by the patented claims. The Lease Agreement provides for annual payments
of $1,000 per claim to Harting. The Lease Agreement also provides that SRC pay
the real estate taxes imposed by Esmeralda County. These two patented claims are
subject to a 3% net smelter return royalty to be calculated and paid to Harting
within 45 days after the end of each calendar quarter. These claims are known as
the President and Annex claims, survey No. 4141 in Section 30, T1N, R43E of
Esmeralda County. The Company may terminate this Lease Agreement at any time by
giving 60 days notice in writing to Harting.
Two patented claims covering approximately 37 acres (the
Claims) are leased from Charles and Barbara Saunders (together, Saunders)
pursuant to a Lease Agreement dated April 1, 2012 (the Saunders Agreement).
The Claims are known as the Key Stone and Diploma claims, survey No. 4653 in
Section 30, T1N, R43E of Esmeralda County. Unless terminated earlier by SRC, the
term of the Saunders Agreement is for ten years and will automatically renew on
the same terms and conditions for additional five-year periods. The Saunders
Agreement requires SRC to pay Saunders advance minimum royalty payments of
$2,000 annually. In the event that the Claims become producing claims, SRC will
pay the Saunders a 3% royalty based upon gross revenue less deductions permitted
by the Saunders Agreement. Gross revenue includes the aggregate of revenue
received by SRC from arms length purchasers of all mineral products produced
from the Claims, the fair market value of all products sold by SRC to persons
not dealing with SRC at arms length and SRCs share of the proceeds of
insurance on products. From such revenue, SRC would be permitted to deduct sales
charges levied by any sales agent on the sale of products, all insurance costs
in respect of mineral products, and all costs, expenses and charges of any
nature whatsoever that are either paid or incurred by SRC in connection with the
refinement and beneficiation of products after leaving the Claims. SRC may
terminate the Saunders Agreement at any time by giving 60 days advance written
notice to Saunders.
In the past the Federal government permitted private parties to
obtain title to a claim known as a patented claim if certain conditions were
met. A patented mining claim arises where the Federal Government passes its
title to the claimant, making it private land. A mineral patent gives the owner
exclusive title to the mineral interests and title to the surface and other
resources. Patents for claims are no longer issued. Unpatented lode mineral
claims are created by physically inserting a stake in the ground at each corner
of the claim and filing the location of the claim as so demarcated with a
government BLM recording office. The rights associated with an unpatented claim
are restricted to the extraction and development of mineral deposits. No land
ownership is conveyed with an unpatented claim.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Dyer Claim Group
The Dyer Claim Group consists of 8 unpatented, lode mineral
claims located in Esmeralda County, Nevada, approximately 5 miles east of the
town of Dyer, Nevada on Highway 3A. The Dyer group of claims is accessible from the town of Dyer and cover
approximately 165 acres. The Dyer district consists of several prospects and a
few small mines that were operated by unknown operators. Phelps Dodge Corp
briefly held claims in the area in the 1990s. Mineralization consists of
copper-gold in quartz veins within limestone rocks. All eight claims were
acquired pursuant to the Mojave Property Purchase Agreement.
25
SRC is the registered holder of this claim group. There are no
underlying agreements or royalty interests of third parties that pertain to
these claims. SRC will remain as the record holder of the claims as long as it
continues to make all payments required by law to maintain the claims. These
payments include an annual fee of $140 per claim to the BLM. In addition, a
claim holder is required to pay annual County filing fees in most counties
within Nevada.
The 8 Dyer lode mineral claims are identified in the BLM
records by Nevada Mining Claim numbers: NMC 871091 through 871094 and 871099
through 871102.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Sylvania Claim Group
The Sylvania Claim Group consists of 2 unpatented, lode mineral
claims located in Esmeralda County, Nevada. The Sylvania claims are accessible
from the town of Lida, Nevada. This claim group covers approximately 41 acres.
Both claims were acquired pursuant to the Mojave Property Purchase
Agreement.
The Sylvania District consists of a number of prospects, the
Sylvania Mine and three small open pit mines. Production has occurred in the
past. The deposits occur in a mile-wide northwest-trending belt or zone. Based
upon publicly available records, the deposits are mainly silver-lead but some
gold and tungsten also occurs. Most of the silver-lead deposits are veins in
limestone. SRC held a larger group of claims at this location but decided that
further work was not warranted and allowed all but two claims covering the old
workings to lapse.
SRC is the registered holder of this claim group. There are no
underlying agreements or royalty interests of third parties that pertain to
these claims. SRC will remain as the record holder of the claims as long as it
continues to make all payments required by law to maintain the claims. These
payments include an annual fee of $140 per claim to the BLM. In addition, a
claim holder is required to pay annual County filing fees in most counties
within Nevada.
The 2 Sylvania lode mineral claims are identified in the BLM
records by Nevada Mining Claim numbers: NMC 871136 and 871137
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
26
Montezuma Claim Group
The Montezuma Claim Group consists of 5 unpatented, lode
mineral claims located in Esmeralda County, Nevada approximately 12 miles
southwest of the town of Goldfield, Nevada on Highway 95. Access to the property
is along Highway 95, 6 miles south of Goldfield and then approximately 14 miles
west along a dirt road. The property lies at elevations ranging from 6400 feet
to 6895 feet. This claim group covers approximately 103 acres. All five claims
were acquired pursuant to the Mojave Property Purchase Agreement.
The Montezuma District consists of a number of prospects, some
shafts and tunnels and one small mine. Based upon publicly available records,
the district is predominantly a silver-lead district although small amounts of
copper, gold and bismuth were found in some of the producers. The deposits
consist of quartz veins in limestone and shale. Mapping done in the spring of
2008 indicates the property lies on the southern edge of a caldera, warranting
further exploration work. A caldera is a cauldron-like volcanic feature formed
by the collapse of land following a volcanic eruption.
SRC is the registered holder of this claim group. There are no
underlying agreements or royalty interests of third parties that pertain to
these claims. SRC will remain as the record holder of the claims as long as it
continues to make all payments required by law to maintain the claims. These
payments include an annual fee of $140 per claim to the BLM. In addition, a
claim holder is required to pay annual County filing fees in most counties
within Nevada.
The 5 Montezuma lode mineral claims are identified in the BLM
records by Nevada Mining Claim numbers: NMC 871181, 870083, 871185, 871191, and
871193.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Blue Dick Claim Group
The 19 Blue Dick claims are located in the SE part of the
Palmetto Mining District and cover approximately 393 acres. All 19 claims were
acquired pursuant to the Mojave Property Purchase Agreement. Production occurred
prior to 1960 and the deposits contained silver, gold and lead and occur in
veins, according to available public records. Most of these veins trend west or
northwest. The claim area contains numerous prospects, tunnels, shafts and two
small open pit mines. The Blue Dick mine has two shafts and two tunnels but no
data is available.
Geologic mapping and sampling indicates complex low angle
faulting traced from the historic underground mine workings along strike for a
length of at least 3000 feet. Rock chip sampling underground carried grades of
gold 1.3 opt and silver 69 opt.
SRC is the registered holder of this claim group. There are no
underlying agreements or royalty interests of third parties that pertain to
these claims. SRC will remain as the record holder of the claims as long as it
continues to make all payments required by law to maintain the claims. These
payments include an annual fee of $140 per claim to the BLM. In addition, a
claim holder is required to pay annual County filing fees in most counties
within Nevada.
The 19 Blue Dick lode mineral claims are identified in the BLM
records by Nevada Mining Claim numbers: NMC 868274 through 868278 and 868284
through 868297.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
27
Weepah Hills Claim Group
The one Weepah Hills claim is located in Esmeralda County,
Nevada, approximately 15.5 miles southwest of Tonopah, Nevada on Highways 95/6.
Access to this claim is via a dirt road leading off Highways 95/6. After the
initial examination of this claim group, the Company decided further work was
not warranted and all but one unpatented, lode mineral claim covering the old
workings were allowed to lapse. This claim covers approximately 21 acres and was
acquired pursuant to the Mojave Property Purchase Agreement. There are mine
workings and a large head frame on the claim, which was operated in the early
1960s, according to public records.
SRC is the registered holder of this claim group. There are no
underlying agreements or royalty interests of third parties that pertain to this
claim. SRC will remain as the record holder of the claim as long as it continues
to make all payments required by law to maintain the claim. These payments
include an annual fee of $140 per claim to the BLM. In addition, a claim holder
is required to pay annual County filing fees in most counties within Nevada.
The single Weepah Hills lode mineral claim is identified in the
BLM records by Nevada Mining Claim number: NMC 868319.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Kope Scheelite Claim Group
The Kope Scheelite Claim Group consists of 101 unpatented, lode
mineral claims located in Mineral County, Nevada, approximately 12 miles east of
Mina, Nevada. Access is by dirt road. The elevations on the claim area range
from 6800 feet to 7000 feet. The Kope Scheelite claims are located on the
southernmost part of the Gabbs Valley Range. The workings on the property
consist of numerous shafts and prospects. This claim group covers approximately
2,087 acres. Twenty-five claims were acquired pursuant to the Mojave Property
Purchase Agreement. SRC subsequently staked an additional seventy-six
claims.
Geologic mapping completed in 2007 indicates strong NW/SE
bearing mineralized trends running across the property. Recent mapping indicated
new strong gold, silver and copper mineralization along NW/SE bearing
structures.
The 101 Kope Scheelite lode mineral claims are identified in
the BLM records by Nevada Mining Claim numbers: NMC 871216 through 871223,
871229 through 871240, 871244, 964722 through 964724, 964732, 964733, 1038681
through 1038684, 1070161 through 1070193 and 1071455 through 1071492.
SRC is the registered holder of these unpatented, lode mineral
claims. There are no underlying agreements or royalty interests of third parties
that pertain to these claims. SRC will remain as the record holder of the claims
as long as it continues to make all payments required by law to maintain the
claims. These payments include an annual fee of $140 per claim to the BLM. In
addition, a claim holder is required to pay annual County filing fees in most
counties within Nevada.
28
In addition, SRC entered into an Exploration License with
Option to Purchase (the Buhrman Agreement) with Ralph L. Buhrman and
Jacqueline Buhrman (together, the Owner) for three patented mining claims,
covering approximately 59 acres (the Property) situated in Mineral County,
Nevada. The Property is identified as the claims named Geo F. (also known as
George F.), Commodore and Thrush, survey No. 2593 in Sections 2 and 11, T7N,
R36E of Mineral County, recorded as Patent File #47382, APN 009-170-04. Under
the terms of the Buhrman Agreement, SRC was granted the exclusive right and option to enter and examine the Property (the
Exploration License) in consideration of a $30,000 payment to the Owner (the
License Payment). During the term of the Exploration License, SRC has the
exclusive right to undertake geological, geophysical, and geochemical
examinations of the Property; to sample the Property by means of pits, trenches,
and drilling; and to take bulk samples from the Property for the purpose of
conducting metallurgical and leaching tests. However, SRC may not commence
development or mining activities on the Property unless it exercises the
Purchase Option as defined below. SRC will be responsible for reclamation of its
pits, trenches, drill sites, and other such disturbances arising out of its
activities on the Property. The Exploration License has an initial one-year term
beginning on May 1, 2012 (the Effective Date) and ending on April 30, 2013.
SRC has the right to extend the Exploration License for one additional period of
one year provided SRC makes an additional License Payment of $30,000 in advance
for such extension. SRC was also granted exclusive right and option to purchase
the Owners ownership interest in the Property (the Purchase Option) for the
sum of $90,000 less all License Payments previously made. SRC may exercise the
Purchase Option at any time during the term of the Exploration License by giving
written notice to the Owner. If SRC exercises the Purchase Option, SRC will also
pay the Owner a two percent (2%) royalty based upon gross revenues less
deductions as defined by the Buhrman Agreement, and SRC will also have the
exclusive right and option to purchase such royalty at any time for the sum of
$1,000,000 less any payments previously made by SRC to the Owner pursuant to
such royalty. SRC may terminate the Buhrman Agreement at any time by giving 30
days notice in writing to the Owner.
In the past the Federal government permitted private parties to
obtain title to a claim known as a patented claim if certain conditions were
met. A patented mining claim arises where the Federal Government passes its
title to the claimant, making it private land. A mineral patent gives the owner
exclusive title to the mineral interests and title to the surface and other
resources. Patents for claims are no longer issued. Unpatented lode mineral
claims are created by physically inserting a stake in the ground at each corner
of the claim and filing the location of the claim as so demarcated with a
government BLM recording office. The rights associated with an unpatented claim
are restricted to the extraction and development of mineral deposits. No land
ownership is conveyed with an unpatented claim.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Santa Fe Claim Group
The Santa Fe Claim Group consists of 23 unpatented, lode
mineral claims located in Mineral County, Nevada, approximately five miles north
of Luning, Nevada. This claim group covers approximately 475 acres. All 23
claims were acquired pursuant to the Mojave Property Purchase Agreement. The
Santa Fe claims are accessible from the town of Luning, Nevada.
The Santa Fe district is located in the Gabbs Valley Range
northeast of Luning. The Santa Fe property was first located in 1879 and has
produced silver and lead, according to public records. Workings consist of a 300
ft incline and several hundred feet of tunnels on different levels. Significant
silver and gold values have been obtained from sampling on the vein systems
warranting further exploration. The property was mapped in late 2007 and a
follow up grid sampling program will be developed to define drill targets at a
future date.
SRC is the registered holder of this claim group. There are no
underlying agreements or royalty interests of third parties that pertain to
these claims. SRC will remain as the record holder of the claims as long as it
continues to make all payments required by law to maintain the claims. These
payments include an annual fee of $140 per claim to the BLM. In addition, a
claim holder is required to pay annual County filing fees in most counties
within Nevada.
29
The 23 Santa Fe lode mineral claims are identified in the BLM
records by Nevada Mining Claim numbers: NMC 868205 through 868210, 868214
through 868218, 868224 through 868228 and 1047210 through 1047216.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Quailey Claim Group
The Quailey Claim Group consists of 52 unpatented, lode mineral
claims, 10 owned patented claims and one leased patented claim, all located in
Mineral County, Nevada. This claim group covers approximately 1,281 acres. Four
of the unpatented claims and the 10 owned patented claims were acquired pursuant
to the Mojave Property Purchase Agreement. SRC subsequently staked an additional
forty-eight claims.
The Quailey claims are located approximately 16 miles south,
southeast from the town of Hawthorne, Nevada on the northwest side of Excelsior
Mountains and are accessible from Hawthorne via Nevada Route 359 and dirt
roadways to the claim area. A number of dirt roads provide access to the main
workings of the former mine. Most of the information for the Quailey Mine
Project was obtained from a 1975 report by J. McLaren Forbes. The early work on
the property was done in 1882 when copper ores with silver and gold values were
mined and smelted on the property. Later, between 1907 and 1914, Excelsior
Enterprises Inc. was active on the property. Just prior to this activity, a
number of the claims were surveyed and patented. During the period 1975-76 the
mine was rehabilitated. This work was done by Ladd Enterprises Inc, of Reno,
Nevada.
Historical records indicate that an unknown amount of copper,
gold and silver ores were mined from 4,000 feet of developed mine workings.
The 52 Quailey lode mineral claims are identified in the BLM
records by Nevada Mining Claim numbers: NMC 916095, 916096, 916099, 916103,
935444 through 935446 and 1070194 through 1070238.
The 10 owned patented claims are identified as follows:
Parcel 1: the claim named Nevada known
as Mineral County Parcel APN 008-200-11; PLSS T5N R31E MDM Sections 2 and 3 as
Patent File #141100.
Parcel 2, which includes eight claims
named Butte, Central, Calumet, Red Bank, Bonanza, Great Eastern, Roosevelt and
Bisbee known as Mineral County Parcels APN 009-200-10 and APN 009-200-12; PLSS
T5N R31E MDM Sections 1, 2, 3, 10 & 11 with Patent File #141941.
Parcel 3, which includes the
Northeasterly 750 feet of the San Juan claim designated by Survey No. 3303, PLSS
T5N R31E MDM Section 2, recorded as Patent File #141941 and known as Mineral
County Parcel APN 009-200-05.
SRC is the registered holder of these unpatented, lode mineral
claims and the owned patented claims. There are no underlying agreements or
royalty interests of third parties that pertain to these claims. SRC will remain
as the record holder of the unpatented, lode mineral claims as long as it
continues to make all payments required by law to maintain the claims. These
payments include an annual fee of $140 per claim to the BLM. In addition, a
claim holder is required to pay annual County filing fees in most counties
within Nevada. Also, the patented claims are subject to County real estate
taxes.
30
In addition, SRC entered into a mineral lease agreement
effective February 29, 2012 (the Gumaskas Agreement) with Joseph W. Gumaskas
(Gumaskas) to lease one patented claim covering approximately 10 acres (the
Claim) in Mineral County, Nevada. The Claim is known as San Juan SW 750 feet,
Survey No. 3303, PLSS T5N R31E MDM Section 2, recorded as Patent File #463521,
Mineral County Parcel APN 009-200-02. Unless terminated earlier by SRC, the term
of the Gumaskas Agreement is ten years and will automatically renew on the same
terms and conditions for additional five-year periods. The Gumaskas Agreement
requires SRC to pay Gumaskas advance minimum royalty payments of $500 annually.
In the event that the Claim becomes a producing claim, SRC will pay Gumaskas a
3% royalty based upon gross revenue less deductions permitted by the Gumaskas
Agreement. Gross revenue includes the aggregate of revenue received by SRC from
arms length purchasers of all mineral products produced from the Claim, the
fair market value of all products sold by SRC to persons not dealing with SRC at
arms length and SRCs share of the proceeds of insurance on products. From such
revenue, SRC would be permitted to deduct sales charges levied by any sales
agent on the sale of products, all insurance costs in respect of mineral
products, and all costs, expenses and charges of any nature whatsoever that are
either paid or incurred by SRC in connection with the refinement and
beneficiation of products after leaving the Claim. SRC may terminate the
Gumaskas Agreement at any time by giving 60 days notice in writing to
Gumaskas.
In the past the Federal government permitted private parties to
obtain title to a claim known as a patented claim if certain conditions were
met. A patented mining claim arises where the Federal Government passes its
title to the claimant, making it private land. A mineral patent gives the owner
exclusive title to the mineral interests and title to the surface and other
resources. Patents for claims are no longer issued. Unpatented lode mineral
claims are created by physically inserting a stake in the ground at each corner
of the claim and filing the location of the claim as so demarcated with a
government BLM recording office. The rights associated with an unpatented claim
are restricted to the extraction and development of mineral deposits. No land
ownership is conveyed with an unpatented claim.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Pansy Lee Claim Group
On August 1, 2006, the Company acquired the Pansy Lee Claims
Group from Anglo Gold Mining Inc. in exchange for 1,850,000 shares of the
Companys common stock pursuant to an Asset Purchase Agreement dated August 1,
2006 (the Pansy Lee Purchase Agreement). Pursuant to the Pansy Lee Purchase
Agreement, a 2% net smelter royalty pertains to 8 of the 30 claims in this
group, identified as follows: NMC 879333 through 879335 and NMC 859406 through
895410. In the event that any one or more of the 8 claims becomes a producing
claim, our revenue is subject to a 2% net smelter return royalty where net
smelter returns are based upon gross revenue. Gross revenue would be calculated
after commercial production commences and includes the aggregate of the
following amounts: revenue received by the Company from arms length purchasers
of all mineral products produced from the property, the fair market value of all
products sold by the Company to persons not dealing with the Company at arms
length and the Companys share of the proceeds of insurance on products. From
such revenue, the Company would be permitted to deduct: sales charges levied by
any sales agent on the sale of products; transportation costs for products; all
costs, expenses and charges of any nature whatsoever which are either paid or
incurred by the Company in connection with the refinement and beneficiation of
products after leaving the property and all insurance costs and taxes.
The Pansy Lee Claim Group currently consists of 30 unpatented,
lode mineral claims located in Humboldt County, Nevada, approximately eight
miles northwest of Winnemucca, Nevada. The claim group covers approximately 620
acres. The Pansy Lee claims are accessible by road from Winnemucca, Nevada. A
graded dirt road runs northwesterly for a distance of 12 miles to the property
which lies at elevations ranging from 4600 feet to 5200 feet.
31
A substantial amount of underground work has been done on the
Pansy Lee Claims, as much as 910 feet below surface with over 6000 feet of
horizontal tunneling on several levels. A mine was operated at the Pansy Lee
claim site from 1937 to 1942. Further production occurred in 1964 and 1974. Work
was undertaken again in 1981 and 1982 by Santa Fe Mining Company.
The Nevada Bureau of Mines Bulletin 59 (1964) reported the
following production figures for this claim group:
Date
|
Action
|
Tons
|
Au
|
Ag
|
1936-37
|
Shipped
|
205
|
-
|
-
|
1939-40
|
Shipped
|
1,677
|
-
|
-
|
1939-42
|
Milled
|
39,598
|
0.134
|
11.5
|
1941
|
Shipped
|
407
|
0.385
|
32.5
|
Total
|
|
41,887
|
|
|
In March and April of 2008, SRC drilled three core holes and
completed to depths of 800 feet on angle below the existing workings. It appears
the 'Swede' vein was encountered in all three holes. Work to date indicates the
mineralized zone should extend to depth and along strike on the 2 main veins in
the mine. We believe further drilling of these extensions is warranted.
As described above, SRC holds this claim group subject to the
2% net smelter return royalty rights of Anglo Gold Mining Inc. SRC will remain
as the record holder of the claims as long as it continues to make all payments
required by law to maintain the claims. These payments include an annual fee of
$140 per claim to the BLM. In addition, a claim holder is required to pay annual
County filing fees in most counties within Nevada.
The 30 Pansy Lee lode mineral claims are identified in the BLM
records by Nevada Mining Claim numbers: NMC 859406 through 859432 and 879333
through 879335.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Gold Point Claim Group
On February 15, 2008, the Company entered into an agreement
with Roger Hall, then an officer and director of the Company, to acquire 14
unpatented, lode mineral claims referred to as the Gold Point Claim Group in
consideration of the sum of $5,000 dollars payable in cash and 175,000 common
shares of the Company.
The Gold Point Claim Group now consists of 8 unpatented lode
mineral claims covering approximately 165 acres located in Nye County in the
Gold Point District, about 10 miles north east of Current, Nevada off Nevada
Route 6. Access is via Route 6 and along a dirt road for approximately two
miles.
Mineralization from 0.5 to 10 ppm gold was noted in shaley
rocks adjacent to substantial jasperoids on the property. The jasperoids found
in Nevada are hard, dense purple-black rocks where silica solutions have
replaced limestone.
32
SRC is the registered holder of this claim group. There are no
underlying agreements or royalty interests of third parties that pertain to
these claims. SRC will remain as the record holder of the claims as long as it
continues to make all payments required by law to maintain the claims. These
payments include an annual fee of $140 per claim to the BLM. In addition, a
claim holder is required to pay annual County filing fees in most counties
within Nevada.
The 8 Gold Point lode mineral claims are identified in the BLM
records by Nevada Mining Claim numbers: NMC 975797 through 975802, 975804 and
975806.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Red Rock Mill
On August 1, 2006, the Company entered into an agreement with
International Energy Resources, Inc. (IERI) to purchase a mill building and
related milling equipment located on 28 mill site claims near the town of Mina
in Mineral County, Nevada. The mill building is a corrugated steel structure.
The assets were conveyed in exchange for 6,975,000 Shares of the Company valued
at $1,743,750 pursuant to a property purchase agreement with IERI.
On August 1, 2006 the Company purchased the refinery equipment
from Nevada Refinery Inc. in exchange for 88,500 shares of common stock of the
Company, valued at $22,125. This equipment can be used to refine dore bars or
smelt concentrate produced from the milling process. Doré bars are bars of
precious metal, in this case silver and gold, poured from molten material
recovered in the final processing of the mill.
The milling facility is a custom mill installation located on
Highway 95 near the town of Mina, Nevada, approximately 185 miles south east of
Reno, Nevada. Access is via a dirt road east of Highway 95. The mill has
operated under various configurations to meet specific requirements of prior
operators. Ore from various sources has been custom milled and processed for the
production of concentrate or doré bars.
The mill is nominally designed to process 200 tons of ore per
day. Depending on the ore hardness, the crushing circuit will be able to process
up to about 250 tons of ore per day. The flotation and leach sections are also
capable of running at the 200 tons per day rate. However, other areas of the
processing section do not appear to have sufficient capacity to sustain the
mills nominal design rate and some additions may be required.
On September 14, 2007, the Company engaged Lumos &
Associates, Inc. (Lumos) to complete the regulatory permitting process for the
milling facility. The permitting process is being carried out in twelve stages
and the completion date has not been determined. In December 2010 this contract
was assigned by Lumos to Tetra Tech, Inc. by mutual agreement of the Company,
Lumos, and Tetra Tech, Inc.
In August 2009, 22 of the 28 originally acquired mill site
claims were abandoned. The Red Rock Mill claims now consist of 6 unpatented,
mill site claims covering approximately 30 acres.
SRC is the registered holder of this claim group. There are no
underlying agreements or royalty interests of third parties that pertain to
these claims. SRC will remain as the record holder of the claims as long as it
continues to make all payments required by law to maintain the claims. These
payments include an annual fee of $140 per claim to the BLM. In addition, a
claim holder is required to pay annual County filing fees in most counties
within Nevada.
33
The 6 Red Rock Mill site claims are identified in the BLM
records by Nevada Mining Claim numbers: NMC 417400 through 417403, 417406 and
417407.
THERE ARE NO KNOWN RESERVES IN THIS CLAIM GROUP. OUR
OPERATIONS WITH RESPECT TO THIS CLAIM GROUP ARE ENTIRELY EXPLORATORY.
Regulations Governing Mining Exploration in Nevada and
Arizona
All mining exploration in Nevada and Arizona is subject to
regulations that cover exploration work where the surface is disturbed,
including air and water quality; waste management; protection of the
environment, wildlife, archeological and historical sites; road building; plus
other matters.
Mining exploration in Nevada is subject to regulation by the
Nevada Division of Environmental Protections Bureau of Mining Regulation and
Reclamation (BMRR), and in some circumstances the local county where the claims
are located.
Mining exploration on Arizona state land is subject to
regulation by the Arizona State Lands Department. An exploration permit is
needed to drill or trench and a plan of operations must be submitted and
approved. A reclamation bond is posted when the exploration permit is issued and
additional fees can be added when the plan of operations is approved, if plants
and trees are to be removed or damaged.
All mining exploration on federal lands in Nevada and Arizona
is carried out subject to regulations established by the BLM or the United
States Department of Agricultures United States Forest Service, depending upon
which agency manages the land where the exploration work is performed. Permits
for exploration work on federal lands are issued and supervised by the
respective agency. Notices of Intent and Plans of Operations must be submitted
and approved. Before any drilling or trenching can occur on any claim group on
public lands, the Company is required to post with the respective agency a bond
that backs the Companys obligations to restore the site and correct
environmental damage, if any, caused by the Companys activities.
Item 3. Legal Proceedings.
There is no legal proceeding pending or, to the best of our
knowledge, threatened against the Company.
Item 4. Mine Safety Disclosures
Not applicable.
34
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
As of June 30, 2012, there were 98,935,486 shares of common stock of the Company (a “Common Share” or “Common Shares”) outstanding, held by 628 shareholders of record.
Securities issued during the Year Ended June 30, 2010
The Company entered into an agreement to acquire, as a wholly owned subsidiary, Canadian Infrastructure Corp., a Canadian corporation, pursuant to a Share Exchange Agreement (the “CIC Agreement”) between the Company, CIC and Todd D.
Montgomery, the Company’s Chief Executive Officer and a member of its Board of Directors, dated as of December 15, 2009. Under the terms of the CIC Agreement, the Company acquired all of the issued and outstanding stock of CIC in exchange for
1,021,777 Common Shares. The Company accounted for the acquisition of CIC as a business combination that is accounted for under the acquisition method as discussed in FASB ASC Topic 805. The CIC Agreement closed on February 9, 2010.
On June 25, 2010, the Company completed a private placement of 6,973,180 Common Shares at a price of $0.23 per share for total consideration of $1,603,831. The private placement was exempt from registration under the Securities Act of 1933,
as amended (the “Securities Act”), pursuant to an exemption afforded by Regulation S promulgated thereunder (“Regulation S”). Each investor that participated in the private placement was not a “U.S. Person” as
that term is defined under Regulation S.
Securities issued during the Year Ended June 30, 2011
On September 30, 2010, the Company issued 50,000 Common Shares pursuant to the exercise of options granted in accordance with the 2006 Stock Option Plan. Also see Stock Option Plan, below.
On February 8, 2011, the Company completed a private placement (the “Private Placement”) of 2,083,333 Common Shares at a price of $0.24 per share for total consideration of $500,000. The Private Placement was exempt from
registration under the Securities Act pursuant to an exemption afforded by Regulation S. The sole investor participating in the private placement was a non-U.S. corporation that is owned and controlled by Todd D. Montgomery, the Company’s
Chief Executive Officer and a member of its Board of Directors. The investor and Mr. Montgomery are not “U.S. Person(s)” as that term is defined in Regulation S.
On June 2, 2011, the Company completed a private placement of 2,608,696 shares of its Series A Preferred Stock (the “Series A Shares”) at a price of $0.115 per share (the “Purchase Price”) for total consideration of
$300,000, pursuant to a subscription agreement (the “Subscription Agreement”) between the Company and a sole purchaser (the “Purchaser”). The Purchase Price was based on the weighted average trading price of the
Company’s Common Shares on the OTC Bulletin Board for the fifteen trading days prior to June 1, 2011, the date of the Subscription Agreement. The Purchaser was a non-U.S. corporation that is controlled by Todd D. Montgomery, the
Company’s Chief Executive Officer and a member of its Board of Directors. The issuance of the Series A Shares was exempt from registration under the Securities Act pursuant to an exemption afforded by Regulation S. The Purchaser and Mr.
Montgomery are not “U.S. Person(s)” as that term is defined in Regulation S.
35
The Series A Shares had the following rights and limitations:
|
1.
|
Each Series A Share was convertible into one Common Share at the request of the holder thereof provided that there were sufficient authorized Common Shares available for conversion without breaching the Company’s covenants
to reserve a sufficient number of Common Shares to permit the exercise of all outstanding stock options, warrants and convertible securities;
|
|
|
|
|
2.
|
Each Series A Share carried one vote on all matters coming before the Company’s shareholders for a vote;
|
|
|
|
|
3.
|
In all other respects, the Series A Shares were equal to the Common Shares of the Company; and
|
|
|
|
|
4.
|
On June 2, 2012, the Company could convert the Series A Shares into Common Shares provided that there was an adequate number of Common Shares authorized and available to be issued upon such conversion or, if there were not
adequate Common Shares available for conversion, the Purchaser could tender all or less than all of the Series A Shares to the Company and the Company would purchase such Series A Shares for the original Purchase Price.
|
As also discussed below, on September 29, 2011, all of the Company’s issued Series A Preferred stock were converted to 2,608,696 Common Shares.
Securities issued during the Year Ended June 30, 2012
The Company held an annual meeting of shareholders on July 29, 2011. At the meeting, among other actions, the shareholders of the Company approved and adopted an amendment increasing the number of authorized Common Shares to 500,000,000. On August
1, 2011 the Company filed with the Secretary of State of the State of Delaware a certificate of amendment (the “Amendment”) to the Company’s certificate of incorporation containing the change in the number of authorized Common
Shares approved by shareholders on July 29, 2011. The Amendment increased the number of authorized Common Shares, par value $0.0001, from 100,000,000 to 500,000,000.
On September 29, 2011, 2,608,696 outstanding shares of the Company’s Series A Preferred Stock were converted to 2,608,696 Common Shares, which results in an increase of $261 and $299,739 to common stock and additional paid-in capital,
respectively.
On December 16, 2011, the Company completed the sale of 26,000,000 Common Shares to the public in Canada at a price of $0.096 (CDN$0.10) per share to raise gross proceeds of $2,507,180 (CDN$2,600,000). The shares were sold pursuant
to a long form prospectus filed in the Canadian provinces of Alberta, Saskatchewan, British Columbia and Ontario. PI Financial Corp. (“PI Financial”) acted as lead agent and received a corporate finance fee of $14,464
(CDN$15,000), was reimbursed $127,529 (CDN$132,250) for its expenses, was paid cash commissions of $20,236 (CDN$20,985) and received non-transferable Agent's Warrants valued at $14,644 entitling PI Financial to acquire
209,850 Common Shares at a price of $0.096 (CDN$0.10) per share exercisable for 24 months. The fair value of the Agent’s Warrants was determined using the Black-Scholes option pricing model with the following assumptions: risk-free
rate of 1.63%, expected dividend yield of 0%, annualized volatility of 142.45% and expected life of two years. In connection with the offering, in addition to payments made to PI Financial, the Company incurred legal and other direct expenses, which
resulted in net proceeds from the offering of $2,215,399.
The foregoing sale of securities was made entirely outside the United States pursuant to an exemption afforded by Regulation S promulgated under the Securities Act.
Our common stock is traded on the Over the Counter Bulletin Board (the “OTCBB”) sponsored by the National Association of Securities Dealers, Inc. under the symbol “IFAM”. The OTCBB does not have any quantitative or qualitative standards such as those
required for companies listed on the Nasdaq Small Cap Market or National Market
System. Following the sale of our securities in Canada as discussed above, the
Company's Common Shares were listed for trading on the TSX Venture Exchange
(TSX-V) under the symbol IFM. The high and low sales prices of our common
stock during the fiscal years ended June 30, 2012 and June 30, 2011 are as
follows:
36
|
|
OTCBB:
|
|
TSX-V:
|
Quarter ended
|
|
High
|
|
Low
|
|
High
|
|
Low
|
September 30, 2011
|
|
$0.110
|
|
$0.060
|
|
N/A
|
|
N/A
|
December 31, 2011
|
|
$0.375
|
|
$0.070
|
|
N/A
|
|
N/A
|
March 31, 2012
|
|
$0.110
|
|
$0.020
|
|
$0.120
|
|
$0.040
|
June 30, 2012
|
|
$0.150
|
|
$0.020
|
|
$0.055
|
|
$0.020
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
$0.310
|
|
$0.120
|
|
N/A
|
|
N/A
|
December 31, 2010
|
|
$0.300
|
|
$0.150
|
|
N/A
|
|
N/A
|
March 31, 2011
|
|
$0.260
|
|
$0.180
|
|
N/A
|
|
N/A
|
June 30, 2011
|
|
$0.220
|
|
$0.060
|
|
N/A
|
|
N/A
|
Stock Option Plan
In April 2006, the Board of Directors approved the Companys
2006 Stock Option Plan, the purpose of which was to enhance the Company's
stockholder value and financial performance by attracting, retaining and
motivating the Company's officers, directors, key employees and consultants and
to encourage stock ownership by such individuals by providing them with a means
to acquire a proprietary interest in the Company's success through stock
ownership.
Under the 2006 Stock Option Plan, officers, directors,
employees and consultants who provide services to the Company could be granted
options to acquire shares of the Companys common stock at the fair market value
of the stock on the date of grant. Options could have a term of up to 10 years.
The total number of shares reserved for issuance under the 2006 Stock Option
Plan was 5,000,000. At a meeting of shareholders held on July 29, 2011, the
shareholders of the Company approved a new stock option plan as described below.
No further options will be issued under the 2006 Stock Option Plan.
The Company held an annual meeting of shareholders on July 29,
2011. At the meeting, among other actions, the shareholders of the Company
approved the amendment and restatement of the 2006 Stock Option Plan resulting
in the Companys Amended Stock Option Plan (the Amended Plan). The Amended
Plan replaces the Companys 2006 Stock Option Plan and no further options will
be issued under the 2006 Stock Option Plan. The terms of the Amended Plan
include, among others, that (a) officers, directors, employees and consultants
who provide services to the Company may be granted options to acquire shares of
the Companys Common Shares at the fair market value of the stock on the date of
grant, (b) options may have a term of up to 10 years, (c) the Company may issue
options in a number up to a maximum of 10% of the outstanding Common Shares, and
(d) outstanding stock options previously granted pursuant to the 2006 Stock
Option Plan will remain in effect and be exercisable in accordance with, and be
deemed to be issued under, the terms of the Amended Plan. It is expected that
options issued pursuant to the Amended Plan will not be qualified options
under the provisions of section 422 of the Internal Revenue Code of 1986, as
amended from time to time.
The following tables summarize the options outstanding as of
June 30, 2012 and 2011, and the option activity for the years then ended:
37
|
|
|
|
|
|
Remaining
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
|
|
|
|
contractual
|
|
|
contractual
|
|
|
|
|
|
|
|
|
|
|
Option Price
|
|
|
life (in years)
|
|
|
life (in years)
|
|
|
Number of options:
|
|
Expiry Date
|
|
|
Per
Share
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Aug 30, 2011
|
|
$
|
0.25
|
|
|
-
|
|
|
0.18
|
|
|
-
|
|
|
250,000
|
|
April 9, 2012
|
|
$
|
0.30
|
|
|
-
|
|
|
0.80
|
|
|
-
|
|
|
50,000
|
|
April 16, 2012
|
|
$
|
0.30
|
|
|
-
|
|
|
0.82
|
|
|
-
|
|
|
50,000
|
|
May 31, 2012
|
|
$
|
0.35
|
|
|
-
|
|
|
1.79
|
|
|
-
|
|
|
50,000
|
|
May 31, 2012
|
|
$
|
0.15
|
|
|
-
|
|
|
2.50
|
|
|
-
|
|
|
50,000
|
|
Aug 16, 2012
|
|
$
|
0.31
|
|
|
0.13
|
|
|
2.65
|
|
|
100,000
|
|
|
100,000
|
|
Aug 16, 2012
|
|
$
|
0.25
|
|
|
0.13
|
|
|
3.61
|
|
|
250,000
|
|
|
250,000
|
|
Dec 10, 2013
|
|
$
|
0.15
|
|
|
1.47
|
|
|
2.50
|
|
|
25,000
|
|
|
25,000
|
|
Feb 2, 2014
|
|
$
|
0.31
|
|
|
1.62
|
|
|
2.65
|
|
|
50,000
|
|
|
50,000
|
|
Oct 22, 2014
|
|
$
|
0.33
|
|
|
2.34
|
|
|
3.38
|
|
|
25,000
|
|
|
25,000
|
|
Apr 25, 2015
|
|
$
|
0.23
|
|
|
2.86
|
|
|
3.89
|
|
|
50,000
|
|
|
50,000
|
|
Apr 30, 2013
|
|
$
|
0.10
|
|
|
0.83
|
|
|
-
|
|
|
350,000
|
|
|
-
|
|
Apr 24, 2022
|
|
$
|
0.10
|
|
|
9.82
|
|
|
-
|
|
|
8,375,000
|
|
|
-
|
|
Options outstanding at end of year
|
|
|
|
|
|
|
|
|
9,225,000
|
|
|
950,000
|
|
Weighted average exercise price
at end of year
|
|
|
|
|
$
|
0.11
|
|
$
|
0.26
|
|
Weighted average remaining contractual life (in
years)
|
|
|
|
|
|
8.99
|
|
|
2.07
|
|
|
|
Number of options:
|
|
|
|
2012
|
|
|
2011
|
|
Outstanding, beginning of year
|
|
950,000
|
|
|
4,850,000
|
|
Granted
|
|
8,725,000
|
|
|
400,000
|
|
Expired
|
|
(450,000
|
)
|
|
(550,000
|
)
|
Exercised
|
|
-
|
|
|
(50,000
|
)
|
Forfeited
|
|
-
|
|
|
-
|
|
Cancelled
|
|
-
|
|
|
(3,700,000
|
)
|
Outstanding, end of year
|
|
9,225,000
|
|
|
950,000
|
|
Exercisable, end of year
|
|
1,983,334
|
|
|
950,000
|
|
Item 6. Selected Financial Data
Not applicable
38
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This section should be read in conjunction with the accompanying financial statements and notes included in this report.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Discussion of Operations & Financial Condition
Twelve months ended June 30, 2012
The Company has no source of revenue and we continue to operate at a loss. We expect our operating losses to continue for so long as we remain in an exploration stage and perhaps thereafter. As of June 30, 2012, we had accumulated losses of
$20,820,817 (June 30, 2011 - $19,458,777). Our ability to emerge from the exploration stage and conduct mining operations is dependent, in large part, upon our raising additional equity financing.
As described in greater detail below, the Company’s major financial endeavor over the years has been its effort to raise additional capital to pursue its exploration activities.
In November of 2008, the Company refocused its business to concentrate on the exploration and, if warranted, development of cement grade limestone properties located in the State of Nevada. The Company’s limestone assets are held by its wholly
owned subsidiary, IMC US which was acquired pursuant to a Share Exchange Agreement as of November 7, 2008. IMC US held five limestone properties at the time of purchase, covering a total of 402 mineral claims. These claim groups were; the Morgan
Hill Group, LM Group, Rock Hill Group, Buffalo Mountain Group and the Aspen Group. The LM Group and the Aspen Group were dropped in August 2009 and August 2010, respectively.
In December 2008, the Company amended its Certificate of Incorporation to change its name from “Silver Reserve Corp.” to “Infrastructure Materials Corp.” Also in December 2008, the Company incorporated a second wholly owned
subsidiary under its former name “Silver Reserve Corp.,” and assigned all of its silver/base metal projects to this subsidiary.
In December 2009, the Company further expanded its limestone exploration activities by acquiring CIC, which owns limestone quarry leases located in Manitoba, Canada. The Company purchased CIC, its now wholly owned subsidiary, pursuant to a Share
Exchange Agreement (the “CIC Agreement”) between the Company, CIC and Todd D. Montgomery. Mr. Montgomery was the sole shareholder of CIC. Because Mr. Montgomery is also the Company’s Chief Executive Officer and a member of its
Board of Directors, the CIC Agreement was approved by the disinterested members of the Company’s Board of Directors after obtaining an independent appraisal and market study for the properties. The CIC Agreement closed on February 9, 2010. As
of the date of this report, CIC controls 35 quarry leases issued by the Province of Manitoba, Canada, covering 2,381 hectares (5,883 acres).
The Company continues to look for opportunities to develop other mineral deposits of commodities in high demand or anticipated high demand. We believe that the federal governments in the United States and Canada will embark on major infrastructure
expenditures in the next 10 years creating a demand for cement that exceeds the current sources of supply in certain areas of the United States and Canada. Cement is made from limestone and we believe our acquisitions in this area have significant
potential.
We have continued to raise capital and are moving forward with exploration on our Projects. The Company intends to continue to study and accumulate information about cement grade limestone properties in strategic locations with a view to filling an
anticipated increased demand for cement in the United States and Canada, with a focus on the States of Nevada, California, Utah, Idaho and Arizona as well as the Canadian Provinces of Saskatchewan and Manitoba.
Based on our evaluation of our 16 Limestone Projects, we have determined that
the Blue Nose and Morgan Hill Projects currently provide the best opportunity
for development of resources that could go to production. Our efforts will be
concentrated on our Blue Nose Property which shows the highest potential for
development of a substantial cement grade limestone resource.
39
The Company is also continuing its evaluation of the
silver/base metal projects held by SRC. The Company has determined that the
Silver Queen, Klondyke and Kope Scheelite Projects currently provide the best
opportunity for development of resources that could go to production. While
exploratory drilling programs are being developed, including a 5,000-foot drill
program at our Kope Scheelite Project expected to commence in September 2012,
the Company is also considering joint ventures with third parties to further
explore and develop, if warranted, those properties.
The consolidated financial statements include the accounts of
the Company and its subsidiaries, IMC US, SRC and CIC. All material
inter-company accounts and transactions have been eliminated.
SELECTED ANNUAL INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2012
|
|
|
June
30, 2011
|
|
|
|
|
|
|
|
|
Revenues
|
|
Nil
|
|
|
Nil
|
|
Net (Loss)
|
|
($1,362,040
|
)
|
|
($2,523,079
|
)
|
(Loss) per share-basic and diluted
|
|
($0.02
|
)
|
|
($0.04
|
)
|
Total Assets
|
$
|
3,177,914
|
|
$
|
2,240,487
|
|
Total Liabilities
|
$
|
382,474
|
|
$
|
271,984
|
|
Cash dividends declared per share
|
|
Nil
|
|
|
Nil
|
|
Our total assets for the year ended June 30, 2012, include cash
and cash equivalents of $1,533,139, short-term investments of $33,716,
marketable securities of $45,181, prepaid expenses and other receivables of
$14,479, restricted cash of $82,500, reclamation deposits of $240,805, plant and
equipment of $713,569, net of depreciation, and mineral property interests of
$514,525. Our total assets for the year ended June 30, 2011 include cash and
cash equivalents of $317,912, short-term investments of $83,604, marketable
securities of $68,429, prepaid expenses and other receivables of $103,807,
restricted cash of $82,500, reclamation deposits of $240,805, plant and
equipment of $828,905, net of depreciation, and mineral property interests of
$514,525. Total assets increased from $2,240,487 on June 30, 2011 to $3,177,914
on June 30, 2012. This increase is the result of the proceeds from the December
2011 sale of the Companys Common Shares, offset in part by expenses incurred in
the normal course of business offset.
Net Loss
The Companys expenses are reflected in the Statements of
Operation under the category of Operating Expenses. To meet the criteria of
United States generally accepted accounting principles (GAAP), all mineral
property acquisition and exploration costs are expensed as incurred. Mineral
property acquisition costs are initially capitalized in accordance with ASC
805-20-55-37, previously referenced as the FASB Emerging Issues Task Force
("EITF") Issue 04-2. The Company assesses the carrying costs for impairment
under ASC 930 at each fiscal quarter end. The Company has determined that,
except for the amount capitalized as Mineral Property Interests for $514,525
pursuant to the acquisition of CIC, all property payments are impaired and
accordingly the Company has written off the acquisition costs to project
expenses. When it has been determined that a mineral property can be
economically developed as a result of establishing proven and probable reserves,
the costs incurred to develop such property are capitalized. For the purpose of
preparing financial information, all costs associated with a property that has
the potential to add to the Company's proven and probable reserves are expensed
until a final feasibility study demonstrating the existence of proven and
probable reserve is completed. Except for the Mineral Property Interests
discussed above, no costs have been capitalized in the periods covered by
these financial statements. Once capitalized, such costs will be
amortized using the units-of-production method over the estimated life of the
probable reserve.
40
The significant components of expense that have contributed to
the total operating expense are discussed as follows:
(a)
General and Administration Expense
General and administration expense represents professional,
consulting, office and general and other miscellaneous costs incurred during the
periods covered by this report. General and administration expense for the year
ended June 30, 2012 were $785,416, as compared with $899,059 for the year ended
June 30, 2011. General and administration expense represents approximately 51%
of the total operating expense for the year ended June 30, 2012, and 36% of the
total Operating Expense for the year ended June 30, 2011. General and
administration expense decreased by $113,643 in the current year, compared to
the prior year. Most of the reduction in this category of expense is due to a
foreign exchange gain of approximately $34,000, a decrease in investor relations
costs of approximately $89,000, and a decrease in stock based compensation costs
of approximately $40,000 offset in part by the costs of market and valuation
studies for the Companys Blue Nose limestone property and increased expenses
relating to the Companys Common Shares being traded in both the United States
and Canada.
(b)
Project Expense
Project expense includes costs of acquiring and maintaining
claims, permitting processes, consultants, drilling, assaying and geologists.
Included in operating expenses for the year ended June 30, 2012 is project
expenses for $625,445 as compared with $1,479,229 for the year ended June 30,
2011. Project expense decreased as much of the Companys efforts were focused on
raising additional capital to finance future exploration. Project expense
represents approximately 41% of the total operating expense for the year ended
June 30, 2012, and approximately 59% of the total operating expense for the year
ended June 30, 2011. Approximately 57% of project expenses for the year ended
June 30, 2012, related to acquisition, exploration and maintenance of the
Companys silver/base metal claims.
Liquidity and Capital Resources
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the companys cash
flows and cash in hand:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
June
30, 2012
|
|
|
June
30, 2011
|
|
Cash and cash equivalents
|
$
|
1,533,139
|
|
$
|
317,912
|
|
Working capital
|
$
|
1,462,333
|
|
$
|
417,652
|
|
Cash (used) in operating activities
|
$
|
(1,250,045
|
)
|
$
|
(2,370,399
|
)
|
Cash provided by investing activities
|
$
|
249,873
|
|
$
|
282,563
|
|
Cash provided by financing activities
|
$
|
2,215,399
|
|
$
|
807,500
|
|
As of June 30, 2012, the Company had working capital of
$1,462,333 as compared to $417,652 as of June 30, 2011. Working capital
increased as a result of an increase in capital financing activities and a
decrease in cash used for operating activities during the year ended June 30,
2012, as compared to the previous year.
Off-Balance Sheet Arrangement
The Company had no off-balance sheet arrangements as of June
30, 2012 and June 30, 2011.
41
Contractual Obligations and Commercial Commitments
On August 1, 2006, the Company acquired the Pansy Lee Claims Group from Anglo Gold Mining Inc. in exchange for 1,850,000 Common Shares pursuant to an Asset Purchase Agreement dated August 1, 2006 (the “Pansy Lee Purchase Agreement”).
Pursuant to the Pansy Lee Purchase Agreement, a 2% net smelter royalty pertains to 8 of the 30 claims in this group. In the event that any one or more of the 8 claims becomes a producing claim, our revenue is subject to a 2% net smelter return
royalty where net smelter returns are based upon gross revenue. Gross revenue would be calculated after commercial production commences and includes the aggregate of the following amounts: revenue received by the Company from arm’s length
purchasers of all mineral products produced from the property, the fair market value of all products sold by the Company to persons not dealing with the Company at arm’s length and the Company’s share of the proceeds of insurance on
products. From such revenue, the Company would be permitted to deduct: sales charges levied by any sales agent on the sale of products; transportation costs for products; all costs, expenses and charges of any nature whatsoever that are either paid
or incurred by the Company in connection with the refinement and beneficiation of products after leaving the property and all insurance costs and taxes.
The Company obtained 25 mineral claims (the “Option Claims”), located in Elko County, Nevada pursuant to an option agreement (the “Option Agreement”) dated as of May 1, 2008 (the “Date of Closing”) with Nevada
Eagle Resources, LLC and Steve Sutherland (together, the “Optionees”). The provisions of the Option Agreement included, among others, payments of specified annual amounts ranging from $10,000 to $80,000 by the Company to the
Optionees over a period of ten years. Effective June 1, 2010, the Company and the Optionees agreed to terminate the Company’s interests in the Option Claims pursuant to (1) payment by the Company of $8,750 to each of the Optionees, (2)
performance by the Company of such reclamation and remediation as required to discharge the surface management bond posted by the Company pursuant to a Notice of Intent filed with the BLM prior to undertaking exploration activity on the Option
Claims, and (3) conveyance by the Company to Nevada Eagle Resources, LLC of the 124 mineral claims staked by the Company after the Date of Closing that are within the Area of Interest described in the Option Agreement. As of June 30, 2012, the
undertakings described in (1) and (3) above have been completed and the reclamation and remediation described in (2) above are in progress. The 25 Option Claims together with 124 mineral claims staked by the Company have been referred to by the
Company as the “Medicine Claim Group.”
Effective as of June 23, 2008, the Company appointed Mason Douglas as the President of the Company. Mr. Douglas is also a director of the Company. In connection with the appointment, the Company entered into a consulting services agreement with a
Canadian corporation that is controlled by Mr. Douglas (the “Consulting Agreement”). The Consulting Agreement has a term of one year and is then automatically renewable. Either party may terminate the Consulting Agreement upon 90 days
notice to the other party. According to the terms of the Consulting Agreement as amended effective March 1, 2012, the Company will pay a fee of $10,417 per month and reimburse related business expenses. The Consulting Agreement permits Mr.
Douglas to fulfill his duties for the Company from his office in Canada. Mr. Douglas does not receive a salary from the Company.
On December 8, 2008 IMC US entered into a Mineral Rights Lease Agreement (the “Edgar Lease Agreement”) with the Earl Edgar Mineral Trust (“Edgar”) to lease certain mineral rights in Elko County, Nevada described below (the
“Edgar Property”). The term of the Edgar Lease Agreement is ten years and will automatically renew on the same terms and conditions for additional ten-year periods, provided IMC US is conducting exploration, development or mining either
on the surface or underground at the property. The rent is to be paid each year on January 1st. $1.00 per net acre was paid upon execution of the Edgar Lease Agreement. On January 1 of each year commencing in 2010 and extending for so long as
the Edgar Lease Agreement is in effect, IMC US is obligated to make the following payments:
42
|
2010
|
$1.00 per net acre
|
|
2011
|
$2.00 per net acre
|
|
2012
|
$2.00 per net acre
|
|
2013
|
$3.00 per net acre
|
|
2014
|
$3.00 per net acre
|
|
2015
|
$4.00 per net acre
|
|
2016
|
$4.00 per net acre
|
|
2017
|
$5.00 per net acre in each year for the duration of
the Edgar Lease Agreement.
|
The Edgar Lease Agreement covers 100% of the mineral rights on
1,120 acres of the Edgar Property (Property A) and 50% of the mineral rights
on 6,720 acres of the Edgar Property (Property B). Edgar is entitled to
receive a royalty of $0.50 per ton for material mined and removed from Property
A and $0.25 per ton for material mined and removed from Property B during the
term of the Edgar Lease Agreement and any renewal thereof.
On April 9, 2009, the Company and Edgar entered into an
Amendment to the Edgar Lease Agreement (the Amendment), effective as of
December 8, 2008. The Amendment provides for Standard Steam LLC to carry out
exploration for geothermal energy sources on the Edgar Property after obtaining
the written consent of the Company. The Amendment also provides for other
cooperation with Standard Steam LLC regarding mineral rights on Property B of
the Edgar Property.
On November 30, 2009, IMC US entered into a Mineral Rights
Agreement with Perdriau Investment Corp. (Perdriau) to purchase 50% of the
mineral rights, including all easements, rights of way and appurtenant rights of
any type that run with the mineral rights in certain sections of Elko County,
Nevada (the Perdriau Property). The purchase price was $10 per net acre. IMC
US purchased 340 net acres for a total purchase price of $3,400. Perdriau will
be entitled to receive a royalty of $0.25 per ton for material mined and removed
from the Perdriau Property. Material mined and stored on the Perdriau Property
or adjacent property for reclamation purposes will not be subject to any
royalty. Material removed from the Perdriau Property for the purposes of testing
or bulk sampling, provided it does not exceed 50,000 tons, will also not be
subject to any royalty. The royalty will be calculated and paid within 45 days
after the end of each calendar quarter.
As of January 15, 2010, the Company entered into a Property
Lease Agreement with Eugene M. Hammond (the Hammond Lease) for surface rights
on 80 acres in Elko County, Nevada (the Hammond Surface Rights). The term of
the Hammond Lease is five years and the annual rent is $500. The Company is
responsible for the payment of all real estate taxes on the Hammond Surface
Rights. During the term of the Hammond Lease, the Company has the exclusive
right to conduct exploration and development work on the Hammond Surface Rights.
The results of all drilling and exploration are the property of the Company. The
Company is responsible for any environmental damage caused by the Company and
any reclamation costs required as a result of drilling and testing. The Company
has an option to purchase the property covered by the Hammond Lease for $15,000,
less the amount paid in rent during the term of the Hammond Lease.
Also as of January 15, 2010, IMC US entered into a Mineral
Rights Agreement with Eugene M. Hammond (the Hammond Mineral Rights Agreement)
pursuant to which the Company purchased a 25% interest in any and all minerals
extracted from 160 acres (the Hammond Mineral Rights Property) covered by the
Hammond Mineral Rights Agreement. The purchase price was $400. In addition, the
seller is entitled to receive a royalty of $0.125 per ton on material mined and
removed from the Hammond Mineral Rights Property. The Hammond Mineral Rights
Agreement does not cover petroleum.
43
Effective July 1, 2010, the Company entered into an employment agreement with an individual to provide business and administrative services. The employment agreement has a term of one year and is automatically renewable thereafter. Either party may
terminate the employment agreement upon 60 days notice. According to the terms of the employment agreement as amended effective March 1, 2012, the Company will pay the individual no less than $8,333 per month and reimburse related business
expenses.
Effective July 1, 2010, the Company entered into an employment agreement with an individual to provide receptionist and administrative services at its Reno, Nevada corporate headquarters. The employment agreement has a term of one year and is
automatically renewable thereafter. Either party may terminate the employment agreement upon 30 days notice. Pursuant to this employment agreement, the Company will pay no less than $51,000 per year for such services.
On February 25, 2011, SRC entered into an option and joint venture agreement (the “IMMI Option Agreement”) with International Millennium Mining Inc. (“IMMI”), a wholly owned subsidiary of International Millennium Mining Corp.
(“IMMC”), to sell an 85% interest in SRC’s NL Extension Project Claim Group (the “NL Project”) for total consideration of $350,000 and 1,925,000 shares of IMMC’s common stock (the “Consideration”).
The NL Project consists of 18 mineral claims located in Esmeralda County, Nevada, approximately 6 miles southwest of Silver Peak, Nevada on Highway 47. Under the terms of the IMMI Option Agreement, the Consideration is payable over a five-year
period that ends on September 15, 2015, with IMMI’s interest in the NL Project vesting at the end of such period. In the event of early termination, IMMI is not entitled to the return of Consideration previously paid to SRC. If the NL Project
is determined to be economically feasible, based upon criteria contained in the IMMI Option Agreement, SRC will be required to fund its portion of an operating budget proposed by IMMI in order to retain its 15% interest in the NL Project and to
acquire a 15% interest in IMMI’s Nivloc Mine Project (the NL Project and the Nivloc Mine Project, collectively, the “IMMI Project”). In the event that SRC decides not to fund its portion of the budget, its 15% interest would be
forfeited, but SRC would be entitled to a 2% net smelter return royalty if and when the IMMI Project enters the production phase. Upon funding of the operating budget and SRC’s acquisition of a 15% interest in the IMMI Project, SRC and IMMI
would enter into a joint venture agreement.
On September 1, 2011, SRC engaged Tetra Tech, Inc. to complete the exploration permitting activities for its Silver Queen property near Silver Peak, Nevada. The Company is to authorize each phase of work before the work proceeds. The estimated total
consideration to be paid under the agreement is $68,900. As of June 30, 2012, the Company had recorded total expenses of $15,789 for this contract.
Effective February 29, 2012, SRC entered into a mineral lease agreement (the “Gumaskas Agreement”) with Joseph W Gumaskas (“Gumaskas”) to lease a patented claim covering approximately 10 acres (the “Claim”) in
Mineral County, Nevada. Unless terminated earlier by SRC, the term of the Gumaskas Agreement is ten years and will automatically renew on the same terms and conditions for additional five-year periods. The Gumaskas Agreement requires SRC to pay
Gumaskas advance minimum royalty payments of $500 annually. In the event that the Claim becomes a producing claim, SRC will pay Gumaskas a 3% royalty based upon gross revenue less deductions permitted by the Gumaskas Agreement. Gross revenue
includes the aggregate of revenue received by SRC from arm’s length purchasers of all mineral products produced from the Claim, the fair market value of all products sold by SRC to persons not dealing with SRC at arm’s length and
SRC’s share of the proceeds of insurance on products. From such revenue, SRC would be permitted to deduct sales charges levied by any sales agent on the sale of products, all insurance costs in respect of mineral products, and all costs,
expenses and charges of any nature whatsoever that are either paid or incurred by SRC in connection with the refinement and beneficiation of products after leaving the Claim. SRC may terminate the Gumaskas Agreement at any time by giving 60 days
advance written notice to Gumaskas.
Effective April 1, 2012, the Company entered into a consulting agreement (the “Teatyn Agreement”) with Teatyn Enterprises, Inc. (“Teatyn”) for Teatyn to provide the Company with certain investor relation services to the
Company for a period of one year. The Teatyn Agreement can be terminated at any time
upon 30-days prior written notice by either the Company or Teatyn or upon the occurrence of certain events as defined in the Teatyn Agreement. Under the terms of the Teatyn Agreement, Teatyn will receive a monthly fee of CDN$5,000 and options
(the “Options”) to purchase up to 350,000 Common Shares at an exercise price of CDN$0.10 per share. The Options will vest at a rate of one twelfth (1/12) per month during the term of the Teatyn Agreement, such vesting subject to the
terms of the Company’s Stock Option Plan and the policies of the TSX Venture Exchange. Unexercised Options, if any, will terminate thirty (30) days following the expiry or termination of the Teatyn Agreement.
44
Effective April 1, 2012, SRC entered into a mineral lease agreement (the “Saunders Agreement”) with Charles and Barbara Saunders (the “Lessors”) to lease patented claims covering approximately 37 acres (the
“Claims”) in Esmeralda County, Nevada. Unless terminated earlier by SRC, the term of the Saunders Agreement is ten years and will automatically renew on the same terms and conditions for additional five-year periods. The Saunders
Agreement requires SRC to pay the Lessors advance minimum royalty payments of $2,000 annually. In the event that the Claims become producing claims, SRC will pay the Lessors a 3% royalty based upon gross revenue less deductions permitted by the
Saunders Agreement. Gross revenue includes the aggregate of revenue received by SRC from arm’s length purchasers of all mineral products produced from the Claims, the fair market value of all products sold by SRC to persons not dealing with
SRC at arm’s length and SRC’s share of the proceeds of insurance on products. From such revenue, SRC would be permitted to deduct sales charges levied by any sales agent on the sale of products, all insurance costs in respect of mineral
products, and all costs, expenses and charges of any nature whatsoever that are either paid or incurred by SRC in connection with the refinement and beneficiation of products after leaving the Claims. SRC may terminate the Saunders Agreement at any
time by giving 60 days advance written notice to the Lessors.
On May 15, 2012, SRC entered into an Exploration License with Option to Purchase (the “Buhrman Agreement”) with Ralph L. Buhrman and Jacqueline Buhrman (together, the “Owner”) for three patented claims, covering approximately
59 acres (the “Property”) situated in Mineral County, Nevada. Under the terms of the Buhrman Agreement, SRC was granted the exclusive right and option to enter and examine the Property (the “Exploration License”) in
consideration of a $30,000 payment to the Owner (the License Payment”). During the term of the Exploration License, SRC has the exclusive right to undertake geological, geophysical, and geochemical examinations of the Property; to sample
the Property by means of pits, trenches, and drilling; and to take bulk samples from the Property for the purpose of conducting metallurgical and leaching tests. However, SRC may not commence development or mining activities on the Property unless
it exercises the Purchase Option as defined below. SRC will be responsible for reclamation of its pits, trenches, drill sites, and other such disturbances arising out of its activities on the Property. The Exploration License has an initial one-year
term beginning on May 1, 2012 (the “Effective Date”) and ending on April 30, 2013. SRC has the right to extend the Exploration License for one additional period of one year provided SRC makes an additional License Payment of $30,000
in advance for such extension. SRC was also granted exclusive right and option to purchase the Owner’s ownership interest in the Property (the “Purchase Option”) for the sum of $90,000 less all License Payments previously made.
SRC may exercise the Purchase Option at any time during the term of the Exploration License by giving written notice to the Owner. If SRC exercises the Purchase Option, SRC will also pay the Owner a two percent (2%) royalty based upon gross revenues
less deductions as defined by the Buhrman Agreement, and SRC will also have the exclusive right and option to purchase such royalty at any time for the sum of $1,000,000 less any payments previously made by SRC to the Owner pursuant to such
royalty. SRC may terminate the Buhrman Agreement at any time by giving 30 days’ notice in writing to the Owner.
The Company has entered into operating leases for its office space and certain office furniture and equipment. Rent payments associated with those leases for the years ended June 30, 2012, and June 30, 2011, were $28,356 and $31,549,
respectively. As of June 30, 2012, the Company’s estimated future minimum cash payments under non-cancelable operating leases for the years ending June 30, 2013, June 30, 2014, and June 30, 2015, are $23,138, $9,500, and $0,
respectively.
45
Maintaining Claims in Good Standing
The Company is required to pay to the BLM on or before September 1
st
of each year, a fee in the amount of $140 per mineral claim held by the Company. The total amount paid in August 2012, was $155,400 for 1,110 claims held by the
Company at that date. The BLM fee for the 18 NL Project claims held by the Company were paid by IMMI pursuant to the IMMI Option Agreement described above.
The Company is also required to pay on or before November 1
st
of each year, annual fees to counties in Nevada in which the claims are held. In September 2011, the Company paid $11,190 to nine counties in Nevada for annual
claims-related fees.
The Company also holds certain patented claims and leases other patented claims in Nevada. A patented claim is fee simple title to the property. Patented claims are subject to taxes assessed by the local community based on assessment rates set
annually.
The Company holds certain exploration permits in the state of Arizona, which have a duration of one year from the date of issuance. The permits may be renewed for up to four additional one-year terms for a total of five years and provide the holder
of the permit with an exclusive right to explore for minerals within the state land covered by the permit and to apply for mineral leases to such land. The holder of a permit may remove from the land only the amount of material required for sampling
and testing and is responsible for any damage or destruction caused by the holder’s exploration activities. The holder of a permit is entitled to ingress and egress to the covered site along routes approved by the Arizona State Land
Department. IMC US has posted a bond required by the state of Arizona to back any reclamation required as a result of work performed. The permit is renewable if the holder has expended not less than $10.00 per acre during each of the first two
year-long periods and $20.00 per acre during each of the next three year-long periods. Each permit fee is $500 per year plus $2.00 per acre for the first two years and $1.00 per acre per year for the following three years. Upon
termination of a mineral exploration permit, the state of Arizona is entitled to information collected by the permit holder. In the event that a permit holder discovers a valuable mineral deposit, the permit holder may apply to the Arizona State
Land Department for a mineral lease having a term of 20 years and renewable for an additional 20 years. A permit holder shall be the preferred recipient of the mineral lease, provided that all applicable requirements are met. A mineral lease
entitles the lessee to develop and establish a mine on the leased premises, provided that a mine plan and all necessary approvals are obtained.
Each of the Company’s quarry leases located in Manitoba, Canada is renewable annually upon payment of rent to the province of Manitoba in the amount of CDN$24 per hectare or fraction thereof. During the fiscal year ended June 30, 2012, the
Company paid CDN$57,504 in rent for these leases.
CASH REQUIREMENTS
At June 30, 2012, the Company had cash and cash equivalents of $1,533,139, short-term investments of $33,716, marketable securities of $45,181 and prepaid expenses and other receivables of $14,479 for a Current Assets total of
$1,626,515
During the twelve month period ending June 30, 2013, the Company expects to incur approximately $200,000 of expenses in connection with its Blue Nose limestone project and plans to incur additional expenses related to other limestone projects.
The Company also expects to incur approximately $300,000 of project expenses in connection with its Kope Scheelite precious metals project. Our ability to incur Project expenses is subject to permitting programs with the Bureau of Land
Management and results of drilling as it progresses. The Company has no firm commitment for additional financing and may not be able to incur all of the Project and General and administration expenses planned in the next fiscal year unless further
capital is raised.
46
SUBSEQUENT EVENTS
Based on a review of all of the Company’s mineral claims, On August 31, 2012 the Company elected to drop certain limestone mineral claims held by IMC US that it has determined are not in the Company’s best interests to retain.
-
All 7 mineral claims of the Rock Hill Claim Group were dropped.
-
All 5 mineral claims of the Buffalo Mountain Claim Group were dropped.
-
All 4 mineral claims of the Royale Claim Group were dropped.
-
All 19 mineral claims of the Pequop Claim Group were dropped.
-
All 23 mineral claims of the Ragged Top Claim Group were dropped.
-
All 44 mineral claims of the Jumbled Mountain Claim Group were dropped.
-
All 13 mineral claims of the Burnt Springs Claim Group were dropped.
On July 26, 2012, the Company engaged Harris Exploration Drilling and Associates Inc. to conduct professional drilling services and related activities at SRC’s Kope Scheelite project at an estimated cost of $175,000.
On August 16, 2012, 350,000 options that were granted pursuant to the Company’s 2006 Stock Option Plan expired.
On September 6, 2012, the Company received $50,000 cash and 300,000 shares of IMMC’s common stock pursuant to the option agreement between SRC and IMMI, IMMC’s wholly owned subsidiary.
Recent Accounting Pronouncements
In December 2011, the FASB issued ASU 2011-11 (ASU 2011-11),
Disclosures about Offsetting Assets and Liabilities,
which requires certain additional disclosure requirements about financial instruments and derivatives instruments that are
subject to netting arrangements. The new disclosures are required for annual reporting periods beginning on or after January 1, 2013, and interim periods within those periods. The adoption of this update will not have an impact on the financial
statements of the Company.
In June 2011, the FASB issued ASU 2011-05,
Presentation of Comprehensive Income
(ASU 2011-05)
,
which eliminates the option to present components of other comprehensive income (OCI) as part of the statement of changes in
stockholders’ equity. The amendments in this standard require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.
The standard does not change the current option for presenting components of OCI gross or net of the effect of income taxes, provided that such tax effects are presented in the statement in which OCI is presented or disclosed in the notes to the
financial statements. Additionally, the standard does not affect the calculation or reporting of earnings per share. Subsequently, in December 2011, the FASB issued ASU 2011-12,
Deferral of the Effective Date for Amendments to the Presentation of
Reclassifications of Items Out of Accumulated Other Comprehensive Income
(ASU 2011-12), which indefinitely defers the requirement in ASU 2011-05 to present on the face of the financial statements reclassification adjustments for items that are
reclassified from OCI to net income in the statement(s) where the components of net income and the components of OCI are presented. The amendments in these standards do not change the items that must be reported in OCI, when an item of OCI must be
reclassified to net income, or change the option for an entity to present components of OCI gross or net of the effect of income taxes. The amendments in ASU 2011-05 and ASU 2011-12 are effective for fiscal years, and interim periods within those
years, beginning after December 15, 2011 and are to be applied retrospectively. The Company is currently evaluating the impact of the pending adoption of ASU 2011-05 and ASU 2011-12 on its financial statements.
47
In May 2011, the FASB issued ASU 2011-04,
Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs
(ASU 2011-04)
.
ASU 2011-04 amended ASC 820,
Fair Value Measurements and
Disclosures
, to converge the fair value measurement guidance in U.S. GAAP and International Financial Reporting Standards (IFRSs). ASU 2011-04 changes the wording used to describe many requirements in U.S. GAAP for measuring fair value and for
disclosing information about fair value measurements. Disclosure requirements have been expanded to include additional information about transfers between level 1 and level 2 of the fair value hierarchy and level 3 measurements regarding the
sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs Additionally, ASU 2011-04 clarifies the FASB’s intent about the application of existing fair value measurements including: (a) the
application of the highest and best use valuation premise concepts; (b) measuring the fair value of an instrument classified in a reporting entity's stockholders' equity; and (c) quantitative information required for fair value measurements
categorized within level 3. The amendments are to be applied prospectively and are effective for annual periods beginning after December 15, 2011. The Company is currently evaluating the effect that the provisions of ASU 2011-04 will have on the
disclosures within the financial statements of the Company.
In July 2012, the FASB issued ASU 2012-02, "Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment," (ASU 2012-02). ASU 2012-02 amends the guidance in ASC 350-302 on testing indefinite-lived
intangible assets, other than goodwill, for impairment by allowing an entity to perform a qualitative impairment assessment before proceeding to the two-step impairment test. If the entity determines, on the basis of qualitative factors, that the
fair value of the indefinite-lived intangible asset is not more likely than not (i.e., a likelihood of more than 50 percent) impaired, the entity would not need to calculate the fair value of the asset. In addition, the ASU does not amend the
requirement to test these assets for impairment between annual tests if there is a change in events or circumstances; however, it does revise the examples of events and circumstances that an entity should consider in interim periods. ASU 2012-02 is
effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption being permitted. The Company is currently evaluating the effect that the provisions of ASU 2011-02 will have on the
consolidated financial statements of the Company.
Critical Accounting Policies
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the
financial statements, the reported amount of revenues and expenses during the reporting period and related disclosure of contingent assets and liabilities. These estimates are based on our best knowledge of current events and actions the Company may
undertake in the future. On an ongoing basis, we evaluate our estimates and judgments. To the extent actual results differ from those estimates, our future results of operations may be affected.
48
Besides this critical accounting policy on use of estimates, we
believe the following critical accounting policy affects the preparation of our
financial statements.
Acquisition, Exploration and Evaluation Expenditures
The Company is an exploration stage company and has not yet
realized any revenue from its operations. It is primarily engaged in the
acquisition and exploration of mineral properties. Mineral property acquisition
costs are initially capitalized in accordance with ASC 805-20-55-37, previously
referenced as the Financial Accounting Standards Board (FASB) Emerging Issues
Task Force ("EITF") Issue 04-2. The Company assesses the carrying costs for
impairment under ASC 360 and evaluates its carrying value under ASC 930 at each
fiscal quarter end. When it has been determined that a mineral property can be
economically developed as a result of establishing proven and probable reserves,
the costs incurred to develop such property will be capitalized. The Company has
capitalized $514,525 as Mineral Property Interests, and written off all other
property payments to project expenses as impaired costs. Once capitalized, such
costs will be amortized using the units-of-production method over the estimated
life of the probable reserve. To date, mineral property exploration costs have
been expensed as incurred. To date the Company has not established any proven or
probable reserves on its mineral properties.
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk
Not applicable
Item 8. Financial Statements and Supplementary Data
See the Companys financial statements and the report of
Schwartz Levitsky Feldman, LLP following the signature page of this report,
which are included as a part of this report.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
Based on an evaluation, conducted by our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as required by Exchange Act
Rule 13a-15(e), they concluded that our disclosure controls and procedures were
effective as of June 30, 2012, to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act
are:
|
1.
|
recorded, processed, summarized and reported within the
time periods specified by the SEC's rules and forms, and
|
|
|
|
|
2.
|
accumulated and communicated to management, including the
Chief Executive Officer and Chief Financial Officer, as appropriate to
allow timely decisions regarding required
disclosure.
|
Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting. Internal control
over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated
under the Securities Exchange Act of 1934 as a process designed by, or under the
supervision of, the company's principal executive and principal financial
officers and effected by the company's board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the United States and includes those policies and procedures that:
49
* Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
* Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and
* Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
In making its assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these
inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce this risk.
Management believes that potential weaknesses in the Company’s internal controls may arise as a result of a lack of segregation of duties and the existence of related party transactions. Management has added compensating controls to address
the lack of segregation of duties and plans to add further controls in the future. In connection with related party transactions, management and the Board have required independent valuations prior to engaging in related party transactions that are
not in the ordinary course of business. However, only one member of the Board, Randal Ludwar, may be considered independent. Mr. Ludwar was the Company’s Chief Financial Officer until October 22, 2009. Since that time, he has remained on the
Board, but receives no remuneration from the Company and has no family affiliation with other members of the Board. Management has no evidence of any breakdown in its internal controls and continues to explore methods of reducing and minimizing the
risk of a material misstatement in the Company’s financial statements.
Based on its assessment, management has concluded that the Company's disclosure controls and procedures and internal control over financial reporting is effective based on the above criteria.
Changes in Internal Controls
During the quarter ended June 30, 2012, there have been no changes to the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
Audit Committee
The Audit Committee is comprised of three directors, Randal Ludwar, Brent Walter and Joseph Montgomery, and meets regularly with the Company’s Chief Financial Officer. Mr. Ludwar was the Company’s Chief Financial Officer until October
22, 2009. Mr. Ludwar does not receive any compensation form the Company and has no family affiliation with the other members of the Board or with members of management. As of the end of the period covered by this report, the Company believes
Mr. Ludwar can be considered an independent director. The Audit Committee has reviewed the financial statements of the Company included with this report on Form 10-K for the year ended June 30, 2012.
50
Item 9B. Other Information
None.
51
Part III
Item 10. Directors, Executive Officers and Corporate
Governance
The following individuals comprise the Companys Board of
Directors and executive officers as of June 30, 2012. Each director will serve
until the next meeting of shareholders or until replaced.
Todd D. Montgomery
|
CEO and Director
|
Mason Douglas
|
President and Director
|
Randal Ludwar
|
Director
|
Joseph Montgomery
|
Director and Chairman of the Board
|
Brent Walter
|
Director
|
Rakesh Malhotra
|
Chief Financial Officer
|
Anne Macko
|
Corporate Secretary
|
Todd D. Montgomery Chief Executive Officer, Director
Mr. Montgomery was the founder and former President of Anglo
Potash Ltd. (TSX-V), a Canadian mining company, formerly Anglo Minerals Ltd.
This company was purchased by BHP in 2008. In 1999, Mr. Montgomery founded and
served as President and Chief Operating Officer of SynEnco Energy Inc., an oil
sands development corporation. Prior to 1999, he identified and secured oil
sands properties for Oil Sands Quest, an AMEX listed company. Mr. Montgomery has
provided independent mining consulting services for a number of private and
public corporations. Mr. Montgomery is also currently serving as CEO and a
Director of Anglo Canadian Oil Corp. (TSX-V); President, CEO and Director of
Canadian Platinum Corp. (TSX-V); and as CEO, President and Director of Pacific
Iron Ore Corporation (TSX-V). He has previously served as CEO and a Director of
Anglo Aluminum Corp. (TSX-V); CEO, President and Director of Klondike Capital
Corp. (TSX-V); Director, President, CEO and CFO of McGregor Capital Corp.
(TSX-V); and as Chairman of PanWestern Energy Ltd. (TSX-V). Mr. Montgomery is 46
years old. Todd D. Montgomery is the nephew of Joseph Montgomery, who also
serves as Chairman of the Companys Board of Directors.
Mason Douglas - President, Director
Mr. Douglas is currently President and a Director of
Infrastructure Materials Corp. Mr. Douglas received an MBA from the University
of Saskatchewan in 2000. He received his Bachelor of Law (LL.B) from the
University of Calgary in 2007. Mr. Douglas is presently an inactive member of
the Law Society of Alberta. Between 2001 and 2004 Mr. Douglas was Vice President
of Operations of Western Petrochemicals Corp. a privately owned oil development
company. Between 2001 and 2006 he also was an independent consultant providing
business plans, economic modeling and project management for a variety of mining
projects. Mr. Douglas is currently serving as a Director of Anglo Canadian Oil
Corp. (TSX-V) and Canadian Platinum Corp. (TSX-V) and previously served as Chief
Operating Officer and a Director of Anglo Aluminum Corp. (TSX-V). Mr. Douglas is
37 years old.
Randal Ludwar - Director
Mr. Ludwar received a B.Sc. (1977) in Business Administration
from Yale University. Mr. Ludwar has been a private consultant to the Montgomery
Group of Companies for the past seventeen years. He currently serves as a
Director of Canadian Platinum Corp. (TSX-V) and previously served as a Director
of McGregor Capital Corp. (TSX-V), Anglo Potash Ltd. (TSX-V) and Klondike
Capital Corp. (TSX-V). Mr. Ludwar is 58 years old.
52
Joseph Montgomery - Chairman of the Board of Directors
Dr. Montgomery is a geological engineer. He holds a B.Sc. (1959) in Geology, a M.Sc. (1960) in Geology and a Ph.D. (1967) in Geology. Dr. Montgomery has been practicing since 1959 and maintains his professional status as a member of the Association
of Professional Engineers and Earth Sciences of British Columbia. He is also a member of the advisory board of the Canadian Institute of Gemology and is currently serving as a Director of Cosigo Resources Ltd. (TSX-V). Dr. Montgomery has previously
served as a Director of Abitibi Mining Corp. (TSX-V), Amador Gold Corp. (TSX-V), Klondike Silver Corp. (TSX-V), Golden Chalice Resources Inc. (TSX-V), Kalahari Resources Inc. (TSX-V), Klondike Gold Corp. (TSX-V), Anglo Potash Ltd. (TSX-V). Sedex
Mining Corp. (TSX-V), Chalice Diamond Corp. (TSX), Zincorp Resources Corp. (TSX), Pacific Iron Ore Corp. (TSX-V) and Almaden Minerals Ltd. (TSX). Dr. Montgomery is 85 years old. Joseph Montgomery is the uncle of Todd D. Montgomery, who also serves
as a member of the Company’s Board of Directors and as the Company’s Chief Executive Officer.
Brent Walter - Director
Mr. Walter received a LL.B degree from the University of Saskatchewan in 1990. He is a lawyer with the firm, ProVenture Law LLP in Calgary, Alberta, and practices primarily in the areas of securities and corporate/commercial law. Mr. Walter
currently serves as a director and officer of a number of public and private corporations, including Anglo Canadian Oil Corp. (TSX-V), Red Rock Energy Inc. (TSX-V), Canadian Platinum Corp. (TSX-V) and Pacific Iron Ore Corp. (TSX-V). During the five
years preceding the period covered by this report, Mr. Walter was Managing Director of Anglo Potash Ltd. (TSX-V), and a Director of AgriTec Systems, Inc. (TSX-V), Klondike Capital Corp. (TSX-V), Mystique Energy Inc. (TSX-V), PanWestern Energy Ltd.
(TSX-V), Fair Sky Resources (TSX-V), and Maskal Energy Ltd. (TSX-V). He is a member of the Law Societies of Alberta and Saskatchewan (inactive), as well as the Canadian Bar Association. Mr. Walter is 46 years old.
Rakesh Malhotra - Chief Financial Officer
Mr. Malhotra is a United States certified public accountant and a Canadian chartered accountant with more than 20 years of experience in accounting and finance, including consolidations, treasury management and financial statement audits. Mr.
Malhotra graduated with a Bachelor of Commerce (Honours) from the University of Delhi (India), worked for the accounting firm, A.F. Ferguson & Co. (KPMG correspondent), and obtained his CA designation in India. His subsequent experience includes
five years with the International Bahwan Group of Companies and working for a mid-sized chartered accounting firm in Toronto performing audits of public companies. Mr. Malhotra has worked for over four years as Vice President of Finance for a
private group of service companies in Toronto, Ontario, and is currently serving as CFO for Pacific Copper Corp. (OTCBB), Security Devices International Inc. (OTCBB), Infrastructure Materials Corp. (OTCBB / TSX-V) and Yukon Gold Corp. (OTCBB / TSX).
He previously served as CFO for Uranium Hunter Corp. (OTCBB). Mr. Malhotra is 55 years old.
Anne Macko – Corporate Secretary
Ms. Macko has over 25 years of experience in administration and holds a Bachelor of Arts degree from Western Illinois University. From October of 2007 to February of 2010 she was affiliated with Lance Capital Ltd., a Canadian management consulting
firm that provided the Company with management consulting, administrative and accounting services. Ms. Macko previously held positions with George T. Hall Company, AppleOne, Inc. and Yamas Controls Company. In February of 2010, Ms. Macko was
retained by the Company as a consultant and became an employee in July of 2010. Ms. Macko is 59 years old.
53
Reorganization of Officers and Directors
Not applicable.
Family Relationships
There are no family relationships between or among the
directors or executive officers except for the following: Joseph Montgomery,
Chairman of the Companys Board of Directors, is the uncle of Todd D.
Montgomery, also a director and the Companys Chief Executive Officer.
Involvement in Certain Legal Proceedings
During the past ten years none of
the following events have occurred with respect to any of our directors or
executive officers or any of the persons nominated by our board to become a
director of the Company.
1. A petition under the Federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal agent or similar
officer was appointed by a court for the business or property of such person, or
any partnership in which he was a general partner at or within two years before
the time of such filing, or any corporation or business association of which he
was an executive officer at or within two years before the time of such filing;
2. Such person was convicted in a criminal proceeding or is a
named subject of a pending criminal proceeding (excluding traffic violations and
other minor offenses);
3. Such person was the subject of any order, judgment, or
decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him from, or
otherwise limiting, the following activities:
|
i.
|
Acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the Commodity Futures
Trading Commission, or an associated person of any of the foregoing, or as
an investment adviser, underwriter, broker or dealer in securities, or as
an affiliated person, director or employee of any investment company,
bank, savings and loan association or insurance company, or engaging in or
continuing any conduct or practice in connection with such activity;
|
|
|
|
|
ii.
|
Engaging in any type of business practice; or
|
|
|
|
|
iii.
|
Engaging in any activity in connection with the purchase
or sale of any security or commodity or in connection with any violation
of Federal or State securities laws or Federal commodities
laws;
|
4. Such person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any Federal or State
authority barring, suspending or otherwise limiting for more than 60 days the
right of such person to engage in any activity described in paragraph (3)(i)
above, or to be associated with persons engaged in any such activity;
5. Such person was found by a court of competent jurisdiction
in a civil action or by the Commission to have violated any Federal or State
securities law, and the judgment in such civil action or finding by the
Commission has not been subsequently reversed, suspended, or vacated;
6. Such person was found by a court of competent jurisdiction
in a civil action or by the Commodity Futures Trading Commission to have
violated any Federal commodities law, and the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been subsequently
reversed, suspended or vacated;
54
7. Such person was the subject of, or a party to, any Federal
or State judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged violation
of:
|
i.
|
Any Federal or State securities or commodities law or
regulation; or
|
|
|
|
|
ii.
|
Any law or regulation respecting financial institutions
or insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil money
penalty or temporary or permanent cease- and-desist order, or removal or
prohibition order; or
|
|
|
|
|
iii.
|
Any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or
|
8. Such person was the subject of, or a party to, any
sanction or order, not subsequently reversed, suspended or vacated, of any
self-regulatory organization (as defined in Section 3(a)(26) of the Exchange
Act), any registered entity (as defined in Section 1(a)(29) of the Commodity
Exchange Act), or any equivalent exchange, association, entity or organization
that has disciplinary authority over its members or persons associated with a
member.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as
amended, (the Exchange Act), requires the Companys directors and officers,
and persons who own more than 10% of the registered class of the Companys
equity securities (Section 16 Persons), to file with the Securities and
Exchange Commission (the SEC), initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Section 16 Persons are required by SEC regulation to furnish the Company with
copies of all Section 16(a) reports they filed. Based on the Companys review of
the forms it has received, on reports filed by Section 16 Persons with the SEC
and on the Companys records, the Company believes that during the twelve month
period ended June 30, 2012, the following reports were filed late:
Name
|
Form Type
|
Number of
|
Number of
|
|
|
Forms
|
Transactions Reported
|
Randal Ludwar
|
Form 4
|
1
|
1
|
Rakesh Malhotra
|
Form 3
|
1
|
2
|
Joseph Montgomery
|
Form 4
|
1
|
1
|
Brent Walter
|
Form 4
|
2
|
2
|
Mason Douglas
|
Form 4
|
1
|
1
|
Todd Montgomery
|
Form 4
|
2
|
2
|
Code of Ethics
The Company adopted a formal written Code of Business Conduct
& Ethics for all officers, directors and senior employees, available at:
http://www.infrastructurematerialscorp.com/Corporate_Profile/code_of_ethics.html
55
Item 11. Executive Compensation
Except for services provided by entities owned by some of our
Officers and Directors as more particularly set out in CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE, below, no officer or director
has received any other remuneration from us, directly or indirectly, since our
inception. We have a stock option plan only, as described herein. Although we
have no other retirement incentive, defined benefit, actuarial, pension or
profit-sharing programs for the benefit of directors, officers or other
employees, it is possible that we will adopt such a plan in the future.
(a) Compensation of Officers
The following table shows the compensation paid to the
Companys executive officers during the fiscal years ended June 30, 2012 and
2011:
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-equity
|
Nonqualified
|
|
|
|
Year
|
|
|
Stock
|
Option
|
incentive plan
|
deferred
|
All other
|
|
Name and principal
|
Ended
|
Salary
|
Bonus
|
Awards
|
Awards
|
compensation
|
compensation
|
compensation
|
Total
|
position
|
June 30,
|
($)
|
($)
|
($)
|
($)
|
($)
|
earnings ($)
|
($)
|
($)
|
|
|
|
|
|
|
|
|
|
|
Todd D. Montgomery
|
2012
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
0
|
CEO and Director
|
2011
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
0
|
|
|
|
|
|
|
|
|
|
|
Mason Douglas
|
2012
|
NIL
|
NIL
|
NIL
|
9,729
|
NIL
|
NIL
|
109,668
|
119,397
|
President and Director
|
2011
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
102,000
|
102,000
|
|
|
|
|
|
|
|
|
|
|
Rakesh Malhotra
|
2012
|
NIL
|
NIL
|
NIL
|
3,063
|
NIL
|
NIL
|
15,581
|
18,644
|
CFO
|
2011
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
13,974
|
13,974
|
|
|
|
|
|
|
|
|
|
|
Anne Macko
|
2012
|
54,667
|
1,500
|
NIL
|
3,603
|
NIL
|
NIL
|
NIL
|
59,770
|
Corporate Secretary
|
2011
|
53,375
|
1,200
|
NIL
|
10,954
|
NIL
|
NIL
|
NIL
|
65,529
|
(b) Long Term Incentive Plan (LTIP Awards)
The Company does not have a long term incentive plan, pursuant
to which cash or non-cash compensation intended to serve as an incentive for
performance (whereby performance is measured by reference to financial
performance or the price of the Companys securities), was paid or distributed
to any executive officers during the three most recent completed years.
56
(c) Options and Stock Appreciation Rights (SARs)
The following table shows the stock options and stock
appreciation rights, if any, granted to the Companys executive officers as of
June 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
plan
|
|
|
awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
awards:
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Number
|
|
|
payout
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
value of
|
|
|
of
|
|
|
value of
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
Number of
|
|
|
shares of
|
|
|
unearned
|
|
|
unearned
|
|
|
|
|
|
|
|
|
|
plan
|
|
|
|
|
|
|
|
|
shares
|
|
|
units
|
|
|
shares,
|
|
|
shares, or
|
|
|
|
Number of
|
|
|
Number of
|
|
|
awards:
|
|
|
|
|
|
|
|
|
or units
|
|
|
of stock
|
|
|
units or
|
|
|
units or
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Number of
|
|
|
|
|
|
|
|
|
of stock
|
|
|
that
|
|
|
other
|
|
|
other
|
|
|
|
underlying
|
|
|
underlying
|
|
|
Securities
|
|
|
Option
|
|
|
|
|
|
that
|
|
|
have
|
|
|
rights
|
|
|
rights
|
|
|
|
unexercised
|
|
|
unexercised
|
|
|
underlying
|
|
|
exercise
|
|
|
Option
|
|
|
have not
|
|
|
not
|
|
|
that have
|
|
|
that have
|
|
|
|
options (#)
|
|
|
options (#)
|
|
|
unearned
|
|
|
price
|
|
|
expiration
|
|
|
vested
|
|
|
vested
|
|
|
not
|
|
|
not
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
options (#)
|
|
|
($)
|
|
|
date
|
|
|
(#)
|
|
|
($)
|
|
|
vested (#)
|
|
|
vested ($)
|
|
Mason Douglas
|
|
225,000
|
|
|
1,125,000
|
|
|
Nil
|
|
|
0.10
|
|
|
24-Apr-2022
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
Anne Macko
|
|
83,333
|
|
|
416,667
|
|
|
Nil
|
|
|
0.10
|
|
|
24-Apr-2022
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
Rakesh Malhotra
|
|
25,000
|
|
|
Nil
|
|
|
Nil
|
|
|
0.15
|
|
|
10-Dec-2013
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
70,833
|
|
|
354,167
|
|
|
|
|
0.10
|
|
|
24-Apr-2022
|
|
|
|
|
|
|
|
|
|
57
(d) Compensation of Directors
Directors are not paid any fees in their capacity as directors
of the Company. The directors are entitled to participate in the Companys stock
option plan. For information regarding the compensation of our directors who are
also officers of the Company see the SUMMARY COMPENSATION TABLE above.
DIRECTOR COMPENSATION TABLE
Name
|
Year
ended
June 30,
|
Fees
earned
or paid
in cash
|
Stock
Awards ($)
|
Option
Awards ($)
|
Non-equity
incentive plan
compensation
($)
|
All
other
compensation
($)
|
Total
($)
|
Joseph
Montgomery
Chairman of the
Board of
Directors (1)
|
2012
|
NIL
|
NIL
|
$4,324
|
NIL
|
NIL
|
$4,324
|
Brent Walter
Director (2)
|
2012
|
NIL
|
NIL
|
$9,729
|
NIL
|
NIL
|
$9,729
|
Randal Ludwar
Director (3)
|
2012
|
NIL
|
NIL
|
$4,324
|
NIL
|
NIL
|
$4,324
|
|
(1)
|
On April 25, 2012, Mr. Montgomery was granted the option
to purchase 600,000 Common Shares at a price of CDN$0.10 per share. As of
the fiscal year ended June 30, 2012, 100,000 options were
exercisable.
|
|
|
|
|
(2)
|
On April 25, 2012, Mr. Walter was granted the option to
purchase 1,350,000 Common Shares at a price of CDN$0.10 per share. As of
the fiscal year ended June 30, 2012, 225,000 options were
exercisable.
|
|
|
|
|
(3)
|
On April 25, 2012, Mr. Ludwar was granted the option to
purchase 600,000 Common Shares at a price of CDN$0.10 per share. As of the
fiscal year ended June 30, 2012, 100,000 options were
exercisable.
|
No stock options were exercised by executive officers or
directors during the fiscal year ended June 30, 2012.
Other Arrangements
None.
Indebtedness of Directors and Executive Officers
None.
58
Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters
As of August 31, 2012, we have 98,935,486 Common Shares issued
and outstanding. We have included in the tables below the number of Common
Shares of the Company held by the officers and directors of the Company as well
as the beneficial owners of more than 5% of shares of the Companys common
stock.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Subject to Options
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of
|
|
|
|
Number of Shares of
|
|
|
|
|
|
|
|
|
August 31, 2012 or
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
Which will
|
|
|
|
Beneficially
|
|
|
|
|
|
|
|
|
become Exercisable
|
|
Name and Address
|
|
Owned as of
|
|
|
Nature of
|
|
|
Percentage of
|
|
|
within 60 days
|
|
of Beneficial Owner
|
|
August 31, 2012
|
|
|
Ownership
|
|
|
Class Held
|
|
|
of this Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pinetree Capital Ltd.
|
|
8,177,174
|
|
|
Record
|
|
|
8.27% of Common shares
|
|
|
Nil
|
|
150 King St. W., Ste 2500
|
|
|
|
|
|
|
|
|
|
|
|
|
Toronto, ON M5X 1A9
|
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Subject to Options
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of
|
|
|
|
Number of Shares
of
|
|
|
|
|
|
|
|
|
August 31, 2012 or
|
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
Which will
|
|
|
|
Beneficially
|
|
|
|
|
|
|
|
|
become Exercisable
|
|
Name and Address
|
|
Owned as of
|
|
|
Nature of
|
|
|
|
|
|
within 60 days
|
|
of Beneficial Owner
|
|
August 31,
2012
|
|
|
Ownership
|
|
|
Percentage of Class Held
|
|
|
of this Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Todd D. Montgomery, CEO
|
|
39,731,330 (1)
|
|
|
Record
|
|
|
40.16% of Common
shares
|
|
|
Nil
|
|
1413-43rd Street SW
|
|
|
|
|
|
|
|
|
|
|
|
|
Calgary, AB T3C 2A3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Montgomery, Chairman
|
|
500,000 (2)
|
|
|
Record
|
|
|
0.51% of Common
shares
|
|
|
200,000
|
|
878 W. 27th Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Vancouver, BC V5Z 2G7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Randal Ludwar, Director
|
|
500,000
|
|
|
Record
|
|
|
0.51% of Common
shares
|
|
|
200,000
|
|
1215 Mayberry Crescent
|
|
|
|
|
|
|
|
|
|
|
|
|
Moose Jaw, SK S6H 6X7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brent Walter, Director
|
|
2,100,000 (3)
|
|
|
Record
|
|
|
2.12% of Common
shares
|
|
|
533,333(5)
|
|
2417 - 32nd Avenue SW
|
|
|
|
|
|
|
|
|
|
|
|
|
Calgary, AB T2T 1X4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mason Douglas, President
|
|
550,000
|
|
|
Record
|
|
|
0.56% of Common
shares
|
|
|
450,000
|
|
311 Saskatchewan Cr. W.
|
|
|
|
|
|
|
|
|
|
|
|
|
Saskatoon, SK S7M 0A2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anne Macko, Corporate Secretary
|
|
Nil
|
|
|
|
|
|
Nil
|
|
|
166,667
|
|
3300 Kauai Court
|
|
|
|
|
|
|
|
|
|
|
|
|
Reno, NV 89509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rakesh Malhotra, CFO
|
|
16,664 (4)
|
|
|
Record
|
|
|
0.02% of Common shares
|
|
|
166,667
|
|
4580 Beaufort Terrace
|
|
|
|
|
|
|
|
|
|
|
|
|
Mississauga, ON L5M 3H7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
43,397,994
|
|
|
|
|
|
43.88%
|
|
|
1,716,667
|
|
(1)
|
All of Todd D. Montgomerys Common Shares are held by
companies that are owned or controlled by Mr. Montgomery.
|
|
|
(2)
|
400,000 of Joseph Montgomerys Common Shares are held by
family members.
|
|
|
(3)
|
800,000 of Brent Walters Common Shares are held by a
family member.
|
|
|
(4)
|
All of Rakesh Malhotras Common Shares are held by a
family member.
|
|
|
(5)
|
83,333 of Brent Walters Common Shares subject to options
are held by a family member.
|
As a group, management and the directors own or control 43.88%
of the issued and outstanding Common Shares of Infrastructure Materials
Corp.
60
Item 13. Certain Relationships and Related Transactions, and Director Independence
A corporation owned and operated by the Company’s President who is also a member of the Company’s Board of Directors, received $109,668 for the President’s services.
The Company recorded expenses of $27,538 for legal services rendered and expenses incurred on behalf of the Company by a law firm, a partner of which is also a member of the Company’s Board of Directors. In addition the same law firm was
paid $70,853 for legal services rendered and expenses incurred on behalf of the Company that were capitalized as costs for raising capital.
The Company’s Chief Financial Officer received $15,581 for consulting services provided to the Company.
The Company’s Corporate Secretary received $56,167 for administrative services provided to the Company.
The Company recorded interest expense of $1,381 pursuant to a promissory note issued to a corporation that is owned and controlled by the Company’s Chief Executive Officer who is also a member of its Board of Directors.
On April 25, 2012, the Company granted options to certain of its officers and directors to purchase up to an aggregate of 4,825,000 Common Shares at an exercise price of CDN$0.10 per share. On the same date, the Company also granted options to a
consultant who is a family member of a director to purchase up to 250,000 Common Shares at the same exercise price. The options were granted in accordance with the Company’s Amended Plan and vest at the rate of one twelfth (1/12) each month
until fully vested. The options granted have a term of ten years. The Company expensed stock based compensation costs of $34,772 for options granted to officers and directors, and $1,802 for options granted to the director’s family
member.
Director Independence
We currently have one independent director, as the term “independent” is defined by the rules of the NYSE-MKT. (Note-our Common Shares are not currently listed on the NYSE-MKT or any other national securities exchange and this
reference is used for definitional purposes only.)
Item 14. Principal Accountant Fees and Expenses
The Company appointed Schwartz Levitsky Feldman, LLP as independent auditors to audit the financial statements of the Company for the fiscal years ended June 30, 2011 and June 30, 2012.
Audit Fees. The Company paid Schwartz Levitsky Feldman LLP audit and audit related fees of approximately $37,205 and $26,514 for the fiscal years ended June 30, 2011 and June 30, 2012, respectively.
All Other Fees. During the fiscal year ended June 30, 2012, the Company paid Schwartz Levitsky Feldman LLP fees of approximately $24,048 related to the Company’s December 2011 Canadian registered public offering. During the fiscal year
ended June 30, 2011, the Company did not pay its principal accountant any additional fees.
61
PART IV
Item 15. Exhibits, Financial Statement
Schedules
The Companys Financial Statements and the Report of Schwartz
Levitsky Feldman, LLP for the year ended June 30, 2012 and for the year ended
June 30, 2011 are filed as part of this report.
Index to Exhibits
3.1
|
Certificate of Incorporation filed on June 3, 1999 with
the Delaware Secretary of State (previously filed as part of the Companys
registration statement filed on December 22, 2006)
|
|
|
3.2
|
By Laws (previously filed as part of the Companys
registration statement filed on December 22, 2006)
|
|
|
3.3
|
Certificate of Amendment of the Certificate of
Incorporation of the Company dated June 5, 1999, changing the
capitalization of the Company (previously filed as part of the Companys
registration statement filed on December 22, 2006)
|
|
|
3.4
|
Certificate of Amendment of the Certificate of
Incorporation of the Company dated April 11, 2006, and filed with the
Delaware Secretary of State on April 11, 2006 changing the capitalization
of the Company (previously filed as part of the Companys registration
statement filed on December 22, 2006)
|
|
|
3.5
|
Certificate of Ownership and Merger of the Company dated
November 8, 2008 and filed with the Delaware Secretary of State on
December 1, 2008 (previously filed as part of the Companys report on Form
8-K filed on December 1, 2008)
|
|
|
3.6
|
Certificate of Amendment of the Certificate of
Incorporation of the Company dated July 29, 2011 and filed with the
Delaware Secretary of State on August 1, 2011 (previously filed as part of
the Companys report on Form 8-K filed on August 4, 2011)
|
|
|
21.1
|
Subsidiaries of the Registrant
|
|
|
23.1
|
Consent of Schwartz Levitsky Feldman LLP Independent Auditors dated September 26, 2012
|
|
|
31.1
|
Certification by the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
31.2
|
Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
32.1
|
Certification by the Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
F-2
|
Report of Schwartz Levitsky Feldman, LLP
dated September 21, 2012
|
In addition, the following reports are incorporated by
reference.
Current Report on Form 8-K Item 5.03 Amendment to Articles of
Incorporation, dated July 29, 2011
62
Current Report on Form 8-K “Item 1.01 Entry into a Material Definitive Agreement”, dated August 24, 2011
Current Report on Form 8-K “Item 3.02 Unregistered Sales of Securities”, dated December 16, 2011
Current Report on Form 8-K “Item 1.02 Termination of a Material Definitive Agreement”, dated March 23, 2012
Current Report on Form 8-K “Item 8.01 Other Events”, dated April 19, 2012
63
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 26
th
day of September, 2012.
SIGNATURE
|
TITLE
|
DATE
|
|
|
|
|
|
|
/s/Todd D. Montgomery
|
Chief Executive Officer
|
September 26, 2012
|
Todd D. Montgomery
|
|
|
|
|
|
|
|
|
/s/Mason Douglas
|
President
|
September 26, 2012
|
Mason Douglas
|
|
|
|
|
|
|
|
|
/s/Rakesh Malhotra
|
Chief Financial Officer
|
September 26, 2012
|
Rakesh Malhotra
|
|
|
SIGNATURE
|
TITLE
|
DATE
|
|
|
|
|
|
|
/s/Todd D. Montgomery
|
Chief Executive Officer and
|
September 26, 2012
|
Todd D. Montgomery
|
Director
|
|
|
|
|
|
|
|
/s/Mason Douglas
|
President and Director
|
September 26, 2012
|
Mason Douglas
|
|
|
|
|
|
|
|
|
/s/ Randal Ludwar
|
Director
|
September 26, 2012
|
Randal Ludwar
|
|
|
|
|
|
|
|
|
/s/ Joseph Montgomery
|
Chairman of the Board of Directors
|
September 26, 2012
|
Joseph Montgomery
|
|
|
|
|
|
|
|
|
/s/ Brent Walter
|
Director
|
September 26, 2012
|
Brent Walter
|
|
|
64
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2012 AND 2011
(Amounts expressed in US
Dollars)
CONTENTS
|
|
|
|
Report of Independent
Registered Public Accounting Firm
|
F2
|
|
|
Consolidated Balance
Sheets as of June 30, 2012 and June 30, 2011
|
F3
|
|
|
Consolidated Statements
of Operations and Comprehensive Loss for the years ended June 30, 2012 and
June 30, 2011 and for the period from inception (June 3, 1999) to June 30,
2012
|
F4
|
|
|
Consolidated Statements
of Changes in Stockholders' Equity for the years ended June 30, 2012 and
June 30, 2011 and for the period from inception (June 3, 1999) to June 30,
2012
|
F5
|
|
|
Consolidated Statements
of Cash Flows for the years ended June 30, 2012 and June 30, 2011 and for
the period from inception (June 3, 1999) to June 30, 2012
|
F6
|
|
|
Notes to Consolidated
Financial Statements
|
F7
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Infrastructure Materials Corp.
(An Exploration Stage Company)
We have audited the accompanying consolidated balance sheets of Infrastructure Materials Corp. (the “Company”) as at June 30, 2012 and 2011 and the related consolidated statements of operations and comprehensive loss, cash flows and stockholders’ equity for the years ended June 30, 2012 and 2011 and for the period from inception (June 3, 1999) to June 30, 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Infrastructure Materials Corp. as at June 30, 2012 and 2011 and the results of its operations and its cash flows for the years ended June 30, 2012 and 2011 and for the period from inception (June 3, 1999) to June 30, 2012 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company is an exploration stage company and has no established source of revenues. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in the notes to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
|
SCHWARTZ LEVITSKY FELDMAN LLP
|
|
|
Toronto, Ontario, Canada
|
Chartered Accountants
|
September 21, 2012
|
Licensed Public Accountants
|
2300 Yonge Street
Toronto, Ontario M4P 1E4
Tel: 416 785 5353
Fax: 416 785 5663
F2
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Consolidated Balance Sheets as at
June 30, 2012 and
2011
(Amounts expressed in US Dollars)
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
$
|
|
|
$
|
|
ASSETS
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
1,533,139
|
|
|
317,912
|
|
Short term investments
|
|
33,716
|
|
|
83,604
|
|
Marketable securities (Note
11)
|
|
45,181
|
|
|
68,429
|
|
Prepaid expenses and other receivables
|
|
14,479
|
|
|
103,807
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
1,626,515
|
|
|
573,752
|
|
|
|
|
|
|
|
|
Restricted Cash
(Note 5)
|
|
82,500
|
|
|
82,500
|
|
Reclamation Deposit
(Note 6)
|
|
240,805
|
|
|
240,805
|
|
|
|
|
|
|
|
|
Plant and Equipment, net
(Note 7)
|
|
713,569
|
|
|
828,905
|
|
Mineral Property Interests
(Note 8)
|
|
514,525
|
|
|
514,525
|
|
|
|
|
|
|
|
|
Total Assets
|
|
3,177,914
|
|
|
2,240,487
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable
|
|
105,219
|
|
|
52,197
|
|
Accrued liabilities (Note 9)
|
|
58,963
|
|
|
103,903
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
164,182
|
|
|
156,100
|
|
|
|
|
|
|
|
|
Deferred Revenue
(Note 11)
|
|
193,593
|
|
|
93,429
|
|
Asset Retirement Obligation
(Note 12)
|
|
24,699
|
|
|
22,455
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
382,474
|
|
|
271,984
|
|
|
|
|
|
|
|
|
Exploration Stage Activities
(Note 2)
|
|
|
|
|
|
|
Commitments and Contingencies
(Note
19)
|
|
|
|
|
|
|
Related Party Transactions
(Note 20)
|
|
|
|
|
|
|
Subsequent Events
(Note 21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Preferred Stock
(Note 13)
|
|
-
|
|
|
300,000
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Capital Stock
(Note 14)
|
|
|
|
|
|
|
Preferred stock, $0.0001
par value, 50,000,000 shares authorized,
none
issued
and outstanding (2011 2,608,696) (Note 13)
|
|
-
|
|
|
-
|
|
Common stock, $0.0001 par value,
500,000,000 shares
authorized,
98,935,486
issued and outstanding (2011 70,326,790)
|
|
9,894
|
|
|
7,033
|
|
Additional Paid
-
in Capital
|
|
23,694,775
|
|
|
21,120,247
|
|
Accumulated Other Comprehensive Loss
|
|
(88,412
|
)
|
|
-
|
|
Deficit Accumulated During the
Exploration Stage
|
|
(20,820,817
|
)
|
|
(19,458,777
|
)
|
|
|
|
|
|
|
|
Total Stockholders' Equity
|
|
2,795,440
|
|
|
1,668,503
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders'
Equity
|
|
3,177,914
|
|
|
2,240,487
|
|
(The accompanying notes are an integral part of these
consolidated financial statements.)
F3
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Consolidated Statements of Operations and Comprehensive
Loss for the
Years Ended June 30, 2012 and 2011 and the Period from
Inception (June 3, 1999) to June 30, 2012
(Amounts expressed in US Dollars)
|
|
Cumulative
|
|
|
For the
|
|
|
For the
|
|
|
|
since
|
|
|
year ended
|
|
|
year ended
|
|
|
|
inception
|
|
|
June 30, 2012
|
|
|
June 30, 2011
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administration
|
|
9,863,554
|
|
|
785,416
|
|
|
899,059
|
|
Project expenses
|
|
10,504,930
|
|
|
625,445
|
|
|
1,479,229
|
|
Depreciation
|
|
1,161,263
|
|
|
125,401
|
|
|
147,148
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
21,529,747
|
|
|
1,536,262
|
|
|
2,525,436
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
(21,529,747
|
)
|
|
(1,536,262
|
)
|
|
(2,525,436
|
)
|
Other income-interest
|
|
387,069
|
|
|
553
|
|
|
2,357
|
|
Other
income-gain on termination of option agreement (Note 16)
|
|
175,050
|
|
|
175,050
|
|
|
-
|
|
Other income-gain on bargain
purchase (Note 8)
|
|
238,645
|
|
|
-
|
|
|
-
|
|
Interest Expense
|
|
(91,834
|
)
|
|
(1,381
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Loss before Income Taxes
|
|
(20,820,817
|
)
|
|
(1,362,040
|
)
|
|
(2,523,079
|
)
|
|
|
|
|
|
|
|
|
|
|
Provision for
income taxes
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
(20,820,817
|
)
|
|
(1,362,040
|
)
|
|
(2,523,079
|
)
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss
on marketable securities (Note 11)
|
|
|
|
|
(88,412
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss
|
|
|
|
|
(1,450,452
|
)
|
|
(2,523,079
|
)
|
|
|
|
|
|
|
|
|
|
|
Loss per Weighted Average Number
of Shares Outstanding
-Basic and Fully Diluted
|
|
|
|
|
(0.02
|
)
|
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of
Shares
Outstanding During the Periods
-Basic and Fully Diluted
|
|
|
|
|
86,359,577
|
|
|
69,047,201
|
|
(The accompanying notes are an integral part of these
consolidated financial statements.)
F4
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Consolidated Statements of Changes in Stockholders
Equity for the
Years Ended June 30, 2012 and 2011 and the Period from
Inception (June 3, 1999) to June 30, 2012
(Amounts expressed in US Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
Deferred
|
|
|
during the
|
|
|
Other
|
|
|
Total
|
|
|
|
Number
|
|
|
|
|
|
Paid-in
|
|
|
Stock
|
|
|
Exploration
|
|
|
Comprehensive
|
|
|
Stockholders'
|
|
|
|
of Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Compensation
|
|
|
Stage
|
|
|
Loss
|
|
|
Equity
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
For the period from inception (June 3, 1999)
through July 1, 2004
|
|
1
|
|
|
-
|
|
|
5,895
|
|
|
|
|
|
(5,895
|
)
|
|
|
|
|
-
|
|
Net (loss)
|
|
-
|
|
|
-
|
|
|
910
|
|
|
|
|
|
(910
|
)
|
|
|
|
|
-
|
|
Balance, June 30, 2005
|
|
1
|
|
|
-
|
|
|
6,805
|
|
|
-
|
|
|
(6,805
|
)
|
|
|
|
|
-
|
|
Contribution to additional paid-in capital
|
|
-
|
|
|
-
|
|
|
3,024
|
|
|
|
|
|
|
|
|
|
|
|
3,024
|
|
Cancelled shares
|
|
(1
|
)
|
|
-
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Common shares issued for nil consideration
|
|
14,360,000
|
|
|
1,436
|
|
|
(1,436
|
)
|
|
|
|
|
-
|
|
|
|
|
|
-
|
|
Common shares issued for cash
|
|
2,050,000
|
|
|
205
|
|
|
414,795
|
|
|
|
|
|
-
|
|
|
|
|
|
415,000
|
|
Subscription for stock
|
|
|
|
|
|
|
|
300,000
|
|
|
|
|
|
-
|
|
|
|
|
|
300,000
|
|
Stock issuance cost
|
|
-
|
|
|
-
|
|
|
(24,500
|
)
|
|
|
|
|
-
|
|
|
|
|
|
(24,500
|
)
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
(87,574
|
)
|
|
|
|
|
(87,574
|
)
|
Balance, June 30, 2006
|
|
16,410,000
|
|
|
1,641
|
|
|
698,687
|
|
|
-
|
|
|
(94,379
|
)
|
|
|
|
|
605,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for cash
|
|
3,395,739
|
|
|
340
|
|
|
548,595
|
|
|
|
|
|
-
|
|
|
|
|
|
548,935
|
|
Common shares issued to agents in
lieu
of commission for placement of
common shares and
convertible debentures
|
|
1,064,000
|
|
|
106
|
|
|
265,894
|
|
|
|
|
|
-
|
|
|
|
|
|
266,000
|
|
Common shares issued for acquisition
of interests in mineral claims
|
|
3,540,600
|
|
|
354
|
|
|
884,796
|
|
|
|
|
|
-
|
|
|
|
|
|
885,150
|
|
Common shares issued for acquisition
of interests in mineral claims
|
|
1,850,000
|
|
|
185
|
|
|
462,315
|
|
|
|
|
|
-
|
|
|
|
|
|
462,500
|
|
Common shares issued for acquisition
interests in a refinery
|
|
88,500
|
|
|
9
|
|
|
22,116
|
|
|
|
|
|
-
|
|
|
|
|
|
22,125
|
|
Common shares issued for purchase of
a mill with capital equipments
|
|
6,975,000
|
|
|
697
|
|
|
1,743,053
|
|
|
|
|
|
-
|
|
|
|
|
|
1,743,750
|
|
Stock issuance cost
|
|
|
|
|
|
|
|
(59,426
|
)
|
|
|
|
|
|
|
|
|
|
|
(59,426
|
)
|
Stock based compensation
|
|
|
|
|
|
|
|
30,026
|
|
|
|
|
|
|
|
|
|
|
|
30,026
|
|
Net loss for the year ended June 30,
2007
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,845,424
|
)
|
|
|
|
|
(2,845,424
|
)
|
Balance, June 30, 2007
|
|
33,323,839
|
|
|
3,332
|
|
|
4,596,056
|
|
|
-
|
|
|
(2,939,803
|
)
|
|
|
|
|
1,659,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to consultants
|
|
3,000,000
|
|
|
300
|
|
|
2,249,700
|
|
|
(1,875,000
|
)
|
|
-
|
|
|
|
|
|
375,000
|
|
Stock based compensation
|
|
|
|
|
-
|
|
|
139,272
|
|
|
|
|
|
-
|
|
|
|
|
|
139,272
|
|
Warrant modification expense
|
|
|
|
|
|
|
|
844,423
|
|
|
|
|
|
|
|
|
|
|
|
844,423
|
|
Conversion of convertible debentures
with accrued interest
|
|
7,186,730
|
|
|
719
|
|
|
3,590,801
|
|
|
-
|
|
|
-
|
|
|
|
|
|
3,591,520
|
|
Common shares issued for acquisition
of interests in mineral claims
|
|
175,000
|
|
|
18
|
|
|
104,982
|
|
|
|
|
|
|
|
|
|
|
|
105,000
|
|
Common stock issued to a consultant
|
|
100,000
|
|
|
10
|
|
|
57,990
|
|
|
|
|
|
|
|
|
|
|
|
58,000
|
|
Amortization of deferred stock
compensation
|
|
|
|
|
|
|
|
|
|
|
562,500
|
|
|
|
|
|
|
|
|
562,500
|
|
Net loss for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,635,465
|
)
|
|
|
|
|
(4,635,465
|
)
|
Balance June 30, 2008
|
|
43,785,569
|
|
|
4,379
|
|
|
11,583,224
|
|
|
(1,312,500
|
)
|
|
(7,575,268
|
)
|
|
|
|
|
2,699,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for cash (net)
|
|
7,040,000
|
|
|
704
|
|
|
3,372,296
|
|
|
-
|
|
|
-
|
|
|
|
|
|
3,373,000
|
|
Common stock issued to a consultant
|
|
75,000
|
|
|
7
|
|
|
43,493
|
|
|
-
|
|
|
-
|
|
|
|
|
|
43,500
|
|
Common stock issued on acquisition of
a subsidiary
|
|
397,024
|
|
|
40
|
|
|
31,722
|
|
|
-
|
|
|
-
|
|
|
|
|
|
31,762
|
|
Common shares issued on warrant
exercises
|
|
8,900,907
|
|
|
890
|
|
|
2,224,337
|
|
|
-
|
|
|
-
|
|
|
|
|
|
2,225,227
|
|
Stock based compensation
|
|
|
|
|
|
|
|
814,050
|
|
|
|
|
|
|
|
|
|
|
|
814,050
|
|
Warrant modification expense
|
|
|
|
|
|
|
|
346,673
|
|
|
|
|
|
|
|
|
|
|
|
346,673
|
|
Amortization of deferred stock
compensation
|
|
|
|
|
|
|
|
|
|
|
1,125,000
|
|
|
|
|
|
|
|
|
1,125,000
|
|
Net loss for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,045,477
|
)
|
|
|
|
|
(6,045,477
|
)
|
Balance June 30, 2009
|
|
60,198,500
|
|
|
6,020
|
|
|
18,415,795
|
|
|
(187,500
|
)
|
|
(13,620,745
|
)
|
|
|
|
|
4,613,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for cash
|
|
6,973,180
|
|
|
697
|
|
|
1,603,134
|
|
|
|
|
|
|
|
|
|
|
|
1,603,831
|
|
Common stock issued on acquisition of
a
subsidiary
|
|
1,021,777
|
|
|
102
|
|
|
275,778
|
|
|
|
|
|
|
|
|
|
|
|
275,880
|
|
Stock based compensation
|
|
|
|
|
|
|
|
216,751
|
|
|
|
|
|
-
|
|
|
|
|
|
216,751
|
|
Amortization of deferred stock
compensation
|
|
|
|
|
|
|
|
|
|
|
187,500
|
|
|
|
|
|
|
|
|
187,500
|
|
Net loss for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,314,953
|
)
|
|
|
|
|
(3,314,953
|
)
|
Balance June 30, 2010
|
|
68,193,457
|
|
|
6,819
|
|
|
20,511,458
|
|
|
-
|
|
|
(16,935,698
|
)
|
|
|
|
|
3,582,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for cash
|
|
2,083,333
|
|
|
209
|
|
|
499,791
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
Stock based compensation
|
|
|
|
|
|
|
|
101,503
|
|
|
|
|
|
-
|
|
|
|
|
|
101,503
|
|
Common stock options exercised
|
|
50,000
|
|
|
5
|
|
|
7,495
|
|
|
|
|
|
-
|
|
|
|
|
|
7,500
|
|
Net loss for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,523,079
|
)
|
|
|
|
|
(2,523,079
|
)
|
Balance June 30, 2011
|
|
70,326,790
|
|
|
7,033
|
|
|
21,120,247
|
|
|
-
|
|
|
(19,458,777
|
)
|
|
|
|
|
1,668,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for cash (net)
|
|
26,000,000
|
|
|
2,600
|
|
|
2,212,799
|
|
|
|
|
|
|
|
|
|
|
|
2,215,399
|
|
Stock based compensation
|
|
|
|
|
|
|
|
61,990
|
|
|
|
|
|
-
|
|
|
|
|
|
61,990
|
|
Preferred shares converted to common
shares
|
|
2,608,696
|
|
|
261
|
|
|
299,739
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
Unrealized loss on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
(88,412
|
)
|
|
(88,412
|
)
|
Net loss for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,362,040
|
)
|
|
|
|
|
(1,362,040
|
)
|
Balance June 30, 2012
|
|
98,935,486
|
|
|
9,894
|
|
|
23,694,775
|
|
|
-
|
|
|
(20,820,817
|
)
|
|
(88,412
|
)
|
|
2,795,440
|
|
(The accompanying notes are an integral part of these
consolidated financial statements.)
F5
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Consolidated Statements of Cash Flows for the
Years
Ended June 30, 2012 and 2011 and the Period from Inception (June 3, 1999) to
June 30, 2012
(Amounts expressed in US Dollars)
|
|
Cumulative
|
|
|
For the
|
|
|
For the
|
|
|
|
Since
|
|
|
year ended
|
|
|
year ended
|
|
|
|
Inception
|
|
|
June 30, 2012
|
|
|
June 30, 2011
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
(20,820,817
|
)
|
|
(1,362,040
|
)
|
|
(2,523,079
|
)
|
Adjustment to reconcile net loss to cash used
in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
1,161,263
|
|
|
125,401
|
|
|
147,148
|
|
Amortization of debt issuance
cost
|
|
247,490
|
|
|
-
|
|
|
-
|
|
Loss on disposal
of plant and equipment
|
|
10,524
|
|
|
-
|
|
|
-
|
|
Gain on Bargain Purchase (Note
8)
|
|
(238,645
|
)
|
|
-
|
|
|
-
|
|
Gain on
termination of option agreement (Note 16)
|
|
(175,050
|
)
|
|
(175,050
|
)
|
|
-
|
|
Stock based compensation
|
|
1,363,592
|
|
|
61,990
|
|
|
101,503
|
|
Warrant
modification expense
|
|
1,191,096
|
|
|
-
|
|
|
-
|
|
Shares issued for mineral
claims, as part of project expenses
|
|
1,452,650
|
|
|
-
|
|
|
-
|
|
Shares issued
for consultant services expensed
|
|
2,351,500
|
|
|
-
|
|
|
-
|
|
Shares issued on acquisition of
subsidiary
|
|
31,762
|
|
|
-
|
|
|
-
|
|
Accretion of
Asset Retirement Obligation (Note 12)
|
|
24,699
|
|
|
2,244
|
|
|
22,455
|
|
Interest on convertible
debentures
|
|
90,453
|
|
|
-
|
|
|
-
|
|
Cash flow from changes in
certain assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other
receivables
|
|
(14,479
|
)
|
|
89,328
|
|
|
(63,964
|
)
|
Accounts payable
|
|
105,219
|
|
|
53,022
|
|
|
(41,213
|
)
|
Accrued liabilities
|
|
59,404
|
|
|
(44,940
|
)
|
|
(13,249
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
(13,159,339
|
)
|
|
(1,250,045
|
)
|
|
(2,370,399
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
Decrease
(Increase) in Short-term investments
|
|
(33,716
|
)
|
|
49,888
|
|
|
503,141
|
|
Increase in Reclamation Deposit
(Note 6)
|
|
(240,805
|
)
|
|
-
|
|
|
(240,805
|
)
|
Increase in
Restricted Cash
|
|
(82,500
|
)
|
|
-
|
|
|
-
|
|
Cash received for option on
claims and included in Deferred revenue (Note 11)*
|
|
60,000
|
|
|
35,000
|
|
|
25,000
|
|
Cash received
for termination of option agreement (Note 16)
|
|
175,050
|
|
|
175,050
|
|
|
-
|
|
Acquisition of plant and
equipment for cash
|
|
(121,815
|
)
|
|
(10,065
|
)
|
|
(4,773
|
)
|
Proceeds from
sale of plant and equipment
|
|
2,500
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) in
investing activities
|
|
(241,286
|
)
|
|
249,873
|
|
|
282,563
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
Issuance of common shares for
cash (net)
|
|
9,109,970
|
|
|
2,215,399
|
|
|
500,000
|
|
Issuance of
preferred shares for cash
|
|
300,000
|
|
|
-
|
|
|
300,000
|
|
Issuance of common shares for
option exercise
|
|
7,500
|
|
|
-
|
|
|
7,500
|
|
Issuance of
common shares for warrant exercises
|
|
2,225,227
|
|
|
-
|
|
|
-
|
|
Issuance of promissory note
(Note 10)
|
|
100,000
|
|
|
100,000
|
|
|
|
|
Repayment of
promissory note (Note 10)
|
|
(100,000
|
)
|
|
(100,000
|
)
|
|
|
|
Issuance of convertible
debentures subsequently converted to cash
|
|
3,501,067
|
|
|
-
|
|
|
-
|
|
Stock and
debenture placement commissions paid in cash
|
|
(210,000
|
)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing
activities
|
|
14,933,764
|
|
|
2,215,399
|
|
|
807,500
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and cash equivalents
|
|
1,533,139
|
|
|
1,215,227
|
|
|
(1,280,336
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - beginning of
period
|
|
-
|
|
|
317,912
|
|
|
1,598,248
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - end of period
|
|
1,533,139
|
|
|
1,533,139
|
|
|
317,912
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
|
Interest Paid (Note 10)
|
|
1,381
|
|
|
1,381
|
|
|
-
|
|
Income taxes paid
|
|
-
|
|
|
-
|
|
|
-
|
|
* Excludes receipt of marketable securities for $133,593, being a
non-cash item included in Deferred Revenue
(The accompanying notes are an integral part of these
consolidated financial statements.)
F6
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
1.
Nature of Business and Operations
The focus of Infrastructure Materials Corp. (the Company) is
on the exploration and development, if feasible, of limestone, silver and other
metals from its claims in the States of Nevada and Arizona and the Canadian
province of Manitoba.
The Companys limestone assets are held by its wholly owned
subsidiary, Infrastructure Materials Corp US (IMC US), a Nevada corporation,
which was acquired as of November 7, 2008. As of the date of the financial
statements, IMC US controls 12 limestone Projects in Nevada, made up of 658
mineral claims covering approximately 13,594 acres on land owned or controlled
by the United States Department of Interior Bureau of Land Management (BLM).
IMC US has acquired 100% of the Mineral Rights on an additional 1,120 acres, 50%
of the Mineral Rights on 7,400 acres, and 25% of the Mineral Rights on 160
acres. IMC US also holds 6 mineral exploration permits covering approximately
3,507 acres at two projects in the state of Arizona. Subsequent to the date of
the financial statements, 115 mineral claims in Nevada were dropped. Please see
Note 21, Subsequent Events.
On December 18, 2008, the Company incorporated a second wholly
owned subsidiary in the State of Delaware under its former name, Silver Reserve
Corp. referred to herein as SRC. The Company assigned all fourteen of its
silver/base metal projects in Nevada to this subsidiary. As of June 1, 2010, SRC
terminated its interests in one of the projects. As of the date of the financial
statements, the remaining thirteen claim groups contain 579 mineral claims
covering approximately 11,921 acres and 10 patented claims and 8 leased patented
claims covering approximately 345 acres. SRC also has a milling facility located
in Mina, Nevada on six mill site claims covering 30 acres.
In December 2009, the Company further expanded its limestone
exploration activities by acquiring Canadian Infrastructure Corp. (CIC), a
Canadian corporation, which controlled 95 limestone quarry leases issued by the
province of Manitoba, Canada, covering 6,090 hectares (15,049 acres). The
Company acquired CIC pursuant to a Share Exchange Agreement (the CIC
Agreement) between the Company, CIC and Todd D. Montgomery dated as of December
15, 2009. Mr. Montgomery was the sole shareholder of CIC. Because Mr. Montgomery
is also the Companys Chief Executive Officer and a member of its Board of
Directors, the CIC Agreement was approved by the disinterested members of the
Companys Board of Directors on November 27, 2009, after obtaining an
independent appraisal and market study for the properties. Under the terms of
the CIC Agreement, the Company acquired all of the issued and outstanding stock
of CIC in exchange for 1,021,777 shares of common stock of the Company (a
Common Share or Common Shares). The CIC Agreement closed on February 9,
2010. In January 2011 and May 2011, the Company decided to forfeit a total of 60
quarry leases covering approximately 3,709 hectares (9,166 acres). As of the
date of the financial statements, CIC controls 35 quarry leases, covering
approximately 2,381 hectares (5,883 acres). Also see Note 8, Mineral Property
Interests.
The Company has not yet determined that any of its claims,
mineral rights, mineral exploration permits or quarry leases can be economically
developed and has expensed related costs to project expense. The Companys
assessment of the claims, mineral exploration permits, mineral rights and quarry
leases may change after further exploration.
The consolidated financial statements include the accounts of
the Company and its subsidiaries, IMC US, SRC, and CIC. All material
inter-company accounts and transactions have been eliminated.
F7
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
2.
Exploration Stage Activities
The Company's financial statements have been prepared in
accordance with United States generally accepted accounting principles and are
presented on a going concern basis, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business.
The Company is in the exploration stage and has not yet
realized revenues from its planned operations. The Company has incurred a
cumulative loss of $20,820,817 from inception to June 30, 2012. The Company has
no source of operating revenue and expects to incur significant expenses before
establishing operating revenue. Due to continuing operating losses and cash
outflows from continuing operations, the Companys continuation as a going
concern is dependent upon its ability to obtain adequate financing and to reach
profitable levels of operation. In the event that the Company is unable to raise
additional capital, as to which there is no assurance, the Company will not be
able to continue doing business. The Companys future success is dependent upon
its continued ability to raise sufficient capital, not only to finance its
operating expenses, but to continue its exploration activities and its
assessments of the commercial viability of its claims. There is no assurance
that such capital will be available on acceptable terms, if at all, or that the
Company will attain profitable levels of operation.
The Company has funded operations through the issuance of
capital stock, convertible debentures and redeemable preferred stock. In May and
June of 2006, the Company closed a private placement of its Common Shares for
gross proceeds of $415,000. During the year ended June 30, 2007 the Company
raised $848,935 (including $300,000 received in the prior year as stock
subscriptions) through a private placement of Common Shares for cash. The
Company also issued Convertible Debentures in the amount of $1,020,862 during
the year ended June 30, 2006 and issued Convertible Debentures in the amount of
$2,480,205 during the year ended June 30, 2007. During the fiscal year ended
June 30, 2009, the Company completed private placements of Common Shares for
proceeds of $3,373,000 net of cash expenses and issued Common Shares as a result
of warrant exercises for proceeds of $2,225,227. In June 2010 and February 2011
the Company completed private placements of Common Shares for gross proceeds of
$1,603,831 and $500,000, respectively. In June 2011 the Company completed a
private placement of redeemable preferred stock for gross proceeds of $300,000.
In December 2011 the Company completed a public offering in Canada of Common
Shares for gross proceeds of $2,507,180 (CDN$2,600,000). Management's plan is to
continue raising additional funds through future equity or debt financing until
it achieves profitable operations from production of minerals or metals on its
properties, if feasible.
F8
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
3.
Summary of Significant Accounting Policies
The accounting policies of the Company are in accordance with
accounting principles generally accepted in the United States of America and
their basis of application is consistent with that of the previous year.
Outlined below are the significant accounting policies:
Basis of Presentation
a)
Cash
and Cash Equivalents
Cash consists of cash and cash equivalents, which are
short-term, highly liquid investments with original terms to maturity of 90 days
or less.
b)
Short-Term
Investments and Marketable Securities
Short-term investments represent bank deposits with maturities
greater than three months and less than one year. These deposits are classified
as held-for-trading and, due to the short-term maturity of these instruments,
are reflected at carrying value, which is equivalent to their fair value.
The Companys marketable securities are classified as
available for sale. The Company includes these investments in current assets
at fair value. Realized gains and losses are included in income when the
securities are sold.
c)
Acquisition,
Exploration and Evaluation Expenditures
The Company is an exploration stage company and has not yet
realized any revenue from its operations. It is primarily engaged in the
acquisition and exploration of mineral properties. Mineral property acquisition
costs are initially capitalized in accordance with ASC 805-20-55-37, previously
referenced as the Financial Accounting Standards Board (FASB) Emerging Issues
Task Force ("EITF") Issue 04-2. The Company assesses the carrying costs for
impairment under ASC 360 and evaluates its carrying value under ASC 930 at each
fiscal quarter end. When it has been determined that a mineral property can be
economically developed as a result of establishing proven and probable reserves,
the costs incurred to develop such property will be capitalized. The Company has
capitalized $514,525 as Mineral Property Interests (See Note 8, Mineral Property
Interests), and written off all other property payments to project expenses as
impaired costs. Once capitalized, such costs will be amortized using the
units-of-production method over the estimated life of the probable reserve.
To date, mineral property exploration costs have been expensed
as incurred. To date the Company has not established any proven or probable
reserves on its mineral properties.
F9
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
3.
Summary of Significant Accounting Policies - Contd
d)
Plant and Equipment
Plant and equipment are recorded at cost less accumulated
depreciation. Depreciation is provided commencing in the month following
acquisition using the following annual rate and method:
Computer equipment
|
30%
|
declining balance method
|
Office furniture and fixtures
|
20%
|
declining balance method
|
Plant and Machinery
|
15%
|
declining balance method
|
Tools
|
25%
|
declining balance method
|
Vehicles
|
20%
|
declining balance method
|
Consumables
|
50%
|
declining balance method
|
Moulds
|
30%
|
declining balance method
|
Mobile Equipment
|
20%
|
declining balance method
|
Factory Buildings
|
5%
|
declining balance method
|
e)
Financial Instruments
The fair market value of the Companys financial instruments
comprising cash and cash equivalents, short term investments, marketable
securities and restricted cash were estimated to approximate their carrying
values due to the short-term maturity of these financial instruments. The
Company maintains cash balances at financial institutions. The Company has not
experienced any material losses in such accounts.
FASB defines fair value as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. Valuation
techniques used to measure fair value must maximize the use of observable inputs
and minimize the use of unobservable inputs. The standard describes a fair value
hierarchy based on three levels of inputs, of which the first two are considered
observable and the last unobservable, that may be used to measure fair value,
which are the following:
Level 1 Quoted prices in active
markets for identical assets or liabilities
Level 2 Inputs other than Level 1
that are observable, either directly or indirectly, such as quoted prices for
similar assets or liabilities; quoted prices in markets that are not active; or
other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
Level 3 Unobservable inputs that
are supported by little or no market activity and that are significant to the
fair value of the assets or liabilities.
Commodity Price Risk:
The ability of the Company to develop its properties and the
future profitability of the Company is directly related to the market price of
certain minerals.
F10
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
3. Summary
of Significant Accounting Policies - Contd
Foreign Exchange Risk:
The Company conducts some of its operating activities in
Canadian dollars. The Company is therefore subject to gains or losses due to
fluctuations in Canadian currency relative to the US dollar.
f)
Impairment
of Long-lived Assets
Long-lived assets to be held and used are analyzed for
impairment whenever events or changes in circumstances indicate that the related
carrying amounts may not be recoverable. The Company evaluates at each balance
sheet date whether events and circumstances have occurred that indicate possible
impairment. If there are indications of impairment, the Company uses future
undiscounted cash flows of the related asset or asset grouping over the
remaining life in measuring whether the assets are recoverable. In the event
such cash flows are not expected to be sufficient to recover the recorded asset
values, the assets are written down to their estimated fair value. Long-lived
assets to be disposed of are reported at the lower of carrying amount or fair
value of asset less cost to sell.
g)
Asset
Retirement Obligation
The Company follows ASC 410-20 (Pre-Codification SFAS No. 143)
"Accounting for Asset Retirement Obligations"
, that addresses financial
accounting and reporting for reclamation obligations. ASC 410-20 requires
recognition of the present value of obligations associated with the obligation
for site reclamation and similar activities relating to its mining interests.
Over time, accretion of the liability is recognized as an operating expense. See
Note 12.
h)
Revenue Recognition
Revenue is recognized when the limestone, silver or other
metals are extracted, processed, and sold. The Company will record revenues from
the sale of limestone, silver or other metals when delivery to the customer has
occurred, collectability is reasonably assured and title has transferred.
i)
Income
Taxes
Deferred tax assets and liabilities are recorded for
differences between the financial statement and tax basis of the assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
Income tax expense is recorded for the amount of income tax payable or
refundable for the period increased or decreased by the change in deferred tax
assets and liabilities during the period.
F11
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
3. Summary
of Significant Accounting Policies - Contd
j)
Earnings
(Loss) Per Share
Basic earnings (loss) per share are computed by dividing net
income (loss) by the weighted average number of common shares outstanding for
the year. Diluted earnings (loss) per share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding plus common
stock equivalents (if dilutive) related to convertible preferred stock, stock
options and warrants for each year. There were no common equivalent shares
outstanding at June 30, 2012 and 2011 that have been included in the diluted
loss per share calculation as the effects would have been anti-dilutive.
k)
Stock
Based Compensation
All awards granted to employees and non-employees after June
30, 2005 are valued at fair value by using the Black-Scholes option pricing
model and recognized on a straight line basis over the service periods of each
award. The Company accounts for equity instruments issued in exchange for the
receipt of goods or services from other than employees using the estimated fair
market value of the consideration received or the estimated fair value of the
equity instruments issued, whichever is more reliably measurable. The value of
equity instruments issued for consideration other than employee services is
determined on the earlier of a performance commitment or completion of
performance by the provider of goods or services.
l)
Concentration
of Credit Risk
The Company does not have significant off-balance sheet risk or
credit risk concentration.
m)
Use
of Estimates
Preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and related notes to financial statements.
These estimates are based on management's best knowledge of current events and
actions the Company may undertake in the future. Actual results may ultimately
differ from such estimates. Significant estimates include the carrying value of
mineral property interests, estimated useful lives of plant and equipment,
accruals for liabilities, calculations of stock based compensation, the
determination of asset retirement obligations and the provision for income
taxes.
n)
Comprehensive Income or Loss
The Company reports comprehensive income or loss in its
consolidated financial statements. In addition to items included in net income
or loss, comprehensive income or loss includes items currently charged or
credited directly to stockholders equity, such as foreign currency translation
adjustments and unrealized gains or losses on available for sale marketable
securities.
F12
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
3.
Summary of Significant Accounting Policies - Contd
o)
Redeemable
Preferred Stock
Redeemable preferred stock (and, if ever, any other redeemable
financial instrument the Company may enter into) is initially evaluated for
possible classification as liabilities in instances where redemption is certain
to occur. Redeemable preferred stock classified as liabilities is recorded and
carried at fair value. Redeemable preferred stock that does not, in its
entirety, require liability classification is evaluated for embedded features
that may require bifurcation and separate classification as derivative
liabilities. In all instances, the classification of the redeemable preferred
stock host contract that does not require liability classification is evaluated
for equity or mezzanine classification based upon the nature of the redemption
features. Generally, any feature that could require cash redemption for matters
not within the Companys control, irrespective of probability of the event
occurring, requires classification outside of stockholders equity. Redeemable
preferred stock that is recorded in the mezzanine section is accreted to its
redemption value through charges to stockholders equity when redemption is
probable using the effective interest method. See Note 13 for further
disclosures about the Companys redeemable preferred stock.
p)
Recent
Accounting Pronouncements
In December 2011, the FASB issued ASU 2011-11 (ASU 2011-11),
Disclosures about Offsetting Assets and Liabilities,
which requires
certain additional disclosure requirements about financial instruments and
derivatives instruments that are subject to netting arrangements. The new
disclosures are required for annual reporting periods beginning on or after
January 1, 2013, and interim periods within those periods. The adoption of this
update will not have an impact on the financial statements of the Company.
In June 2011, the FASB issued ASU 2011-05,
Presentation of
Comprehensive Income
(ASU 2011-05)
,
which eliminates the option to
present components of other comprehensive income (OCI) as part of the statement
of changes in stockholders equity. The amendments in this standard require that
all non-owner changes in stockholders equity be presented either in a single
continuous statement of comprehensive income or in two separate but consecutive
statements. The standard does not change the current option for presenting
components of OCI gross or net of the effect of income taxes, provided that such
tax effects are presented in the statement in which OCI is presented or
disclosed in the notes to the financial statements. Additionally, the standard
does not affect the calculation or reporting of earnings per share.
Subsequently, in December 2011, the FASB issued ASU 2011-12,
Deferral of the
Effective Date for Amendments to the Presentation of Reclassifications of Items
Out of Accumulated Other Comprehensive Income
(ASU 2011-12), which
indefinitely defers the requirement in ASU 2011-05 to present on the face of the
financial statements reclassification adjustments for items that are
reclassified from OCI to net income in the statement(s) where the components of
net income and the components of OCI are presented. The amendments in these
standards do not change the items that must be reported in OCI, when an item of
OCI must be reclassified to net income, or change the option for an entity to
present components of OCI gross or net of the effect of income taxes. The
amendments in ASU 2011-05 and ASU 2011-12 are effective for fiscal years, and
interim periods within those years, beginning after December 15, 2011 and are to
be applied retrospectively. The Company is currently evaluating the impact of
the pending adoption of ASU 2011-05 and ASU 2011-12 on its financial statements.
F13
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
3.
Summary of Significant Accounting Policies - Contd
p)
Recent
Accounting Pronouncements Contd
In May 2011, the FASB issued ASU 2011-04,
Amendments to
Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP
and IFRSs
(ASU 2011-04)
.
ASU 2011-04 amended ASC 820,
Fair Value Measurements and Disclosures
, to converge the
fair value measurement guidance in U.S. GAAP and International Financial
Reporting Standards (IFRSs). ASU 2011-04 changes the wording used to describe
many requirements in U.S. GAAP for measuring fair value and for disclosing
information about fair value measurements. Disclosure requirements have been
expanded to include additional information about transfers between level 1 and
level 2 of the fair value hierarchy and level 3 measurements regarding the
sensitivity of fair value to changes in unobservable inputs and any
interrelationships between those inputs Additionally, ASU 2011-04 clarifies the
FASBs intent about the application of existing fair value measurements
including: (a) the application of the highest and best use valuation premise
concepts; (b) measuring the fair value of an instrument classified in a
reporting entity's stockholders' equity; and (c) quantitative information
required for fair value measurements categorized within level 3. The amendments
are to be applied prospectively and are effective for annual periods beginning
after December 15, 2011. The Company is currently evaluating the effect that the
provisions of ASU 2011-04 will have on the disclosures within the financial
statements of the Company.
In July 2012, the FASB issued ASU 2012-02,
"IntangiblesGoodwill and Other (Topic 350): Testing Indefinite-Lived Intangible
Assets for Impairment," (ASU 2012-02). ASU 2012-02 amends the guidance in ASC
350-302 on testing indefinite-lived intangible assets, other than goodwill, for
impairment by allowing an entity to perform a qualitative impairment assessment
before proceeding to the two-step impairment test. If the entity determines, on
the basis of qualitative factors, that the fair value of the indefinite-lived
intangible asset is not more likely than not (i.e., a likelihood of more than 50
percent) impaired, the entity would not need to calculate the fair value of the
asset. In addition, the ASU does not amend the requirement to test these assets
for impairment between annual tests if there is a change in events or
circumstances; however, it does revise the examples of events and circumstances
that an entity should consider in interim periods. ASU 2012-02 is effective for
annual and interim impairment tests performed for fiscal years beginning after
September 15, 2012, with early adoption being permitted. The Company is
currently evaluating the effect that the provisions of ASU 2011-02 will have on
the consolidated financial statements of the Company.
F14
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
4. Fair
Value of Financial Instruments
The fair values of financial assets measured in the balance
sheet as of June 30, 2012 are as follows:
|
|
|
|
|
Quoted prices
|
|
|
|
|
|
|
|
|
|
|
|
|
in active
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
markets for
|
|
|
observable
|
|
|
Unobservable
|
|
|
|
Carrying
|
|
|
identical assets
|
|
|
inputs
|
|
|
inputs
|
|
Balance sheet
|
|
Amount
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
classification and nature
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
1,533,139
|
|
|
1,533,139
|
|
|
|
|
|
|
|
Short term investments
|
|
33,716
|
|
|
33,716
|
|
|
|
|
|
|
|
Marketable securities
|
|
45,181
|
|
|
45,181
|
|
|
|
|
|
|
|
Restricted Cash
|
|
82,500
|
|
|
82,500
|
|
|
|
|
|
|
|
The fair values of financial assets measured in the balance
sheet as of June 30, 2011 are as follows:
|
|
|
|
|
Quoted prices
|
|
|
|
|
|
|
|
|
|
|
|
|
in active
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
markets for
|
|
|
observable
|
|
|
Unobservable
|
|
|
|
Carrying
|
|
|
identical assets
|
|
|
inputs
|
|
|
inputs
|
|
Balance sheet
|
|
Amount
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
classification and nature
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
317,912
|
|
|
317,912
|
|
|
|
|
|
|
|
Short term investments
|
|
83,604
|
|
|
83,604
|
|
|
|
|
|
|
|
Marketable securities
|
|
68,429
|
|
|
68,429
|
|
|
|
|
|
|
|
Restricted Cash
|
|
82,500
|
|
|
82,500
|
|
|
|
|
|
|
|
5. Restricted
Cash
Amounts reflected as Restricted Cash represent either cash held
as collateral or certificates of deposits pledged toward reclamation liabilities
assessed by the BLM. Periodically, the BLM may require the Company to pledge
additional cash as collateral or the Company may be allowed to remove
restrictions on this cash by completing its reclamation obligations, as the case
may be.
6. Reclamation
Deposit
The Company posted a reclamation bond of $240,805 pursuant to
the Plan of Operations for its Blue Nose limestone project, as required by the
BLM to secure remediation costs if the project is abandoned or closed. The
Company must complete certain reclamation work for these funds to be released,
but may leave the bond in place for future exploration programs, even if such
reclamation work is completed.
F15
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
7. Plant
and Equipment, Net
|
|
|
June 30, 2012
|
|
|
June 30, 2011
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Accumulated
|
|
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Cost
|
|
|
Depreciation
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office, furniture and fixtures
|
|
3,623
|
|
|
2,358
|
|
|
3,623
|
|
|
2,041
|
|
|
Computer equipment
|
|
24,513
|
|
|
9,308
|
|
|
14,448
|
|
|
5,615
|
|
|
Plant and Machinery
|
|
1,514,511
|
|
|
926,387
|
|
|
1,514,511
|
|
|
822,601
|
|
|
Tools
|
|
11,498
|
|
|
6,474
|
|
|
11,498
|
|
|
4,799
|
|
|
Vehicles
|
|
76,928
|
|
|
50,082
|
|
|
76,928
|
|
|
43,371
|
|
|
Consumables
|
|
64,197
|
|
|
63,027
|
|
|
64,197
|
|
|
61,857
|
|
|
Moulds
|
|
900
|
|
|
787
|
|
|
900
|
|
|
738
|
|
|
Mobile Equipment
|
|
73,927
|
|
|
53,609
|
|
|
73,927
|
|
|
48,530
|
|
|
Factory Buildings
|
|
74,849
|
|
|
19,345
|
|
|
74,849
|
|
|
16,424
|
|
|
|
|
1,844,946
|
|
|
1,131,377
|
|
|
1,834,881
|
|
|
1,005,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
|
713,569
|
|
|
|
|
|
828,905
|
|
|
|
|
|
Depreciation charges
|
|
125,401
|
|
|
|
|
|
147,148
|
|
|
|
|
8. Mineral
Property Interests
The Company entered into an agreement to acquire, as a wholly
owned subsidiary, Canadian Infrastructure Corp., a Canadian corporation,
pursuant to a Share Exchange Agreement (the CIC Agreement) dated as of
December 15, 2009, between the Company, CIC and Todd D. Montgomery. Under the
terms of the CIC Agreement, the Company acquired all of the issued and
outstanding stock of CIC in exchange for 1,021,777 Common Shares of the Company.
The CIC Agreement closed on February 9, 2010.
The Company accounted for the acquisition of CIC as a business
combination under the acquisition method as discussed in FASB ASC Topic 805. ASC
805 requires acquisition-date fair value measurement of identifiable assets,
liabilities assumed and non-controlling interests in the acquiree. The only
assets acquired were CICS quarry leases having a fair value of $514,525 (CDN
$550,000) that were recorded as an asset, Mineral Property Interests, on the
date of acquisition. The Company obtained an independent appraisal and market
study to determine the fair value of the quarry leases acquired. The stock of
the Company traded at $0.27 per share on February 9, 2010, and the Company
recorded a $275,880 increase in shareholders equity reflecting the issuance of
1,021,777 Common Shares of the Company in exchange for all issued and
outstanding shares of CIC. There were no liabilities recorded in the financial
records of CIC as of the date of acquisition. Further, the Company acquired all
the issued and outstanding shares of CIC, resulting in the absence of
non-controlling interests in the acquiree yielding a bargain purchase price of
$238,645 that has been recorded as Other Income in the Companys Consolidated
Statements of Operations and Comprehensive Loss. Costs incurred in connection
with the acquisition were expensed.
F16
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
8. Mineral
Property Interests - Contd
Amounts recognized as assets as of the acquisition date:
Mineral Property Interests, being quarry
leases in the province of Manitoba, Canada at fair value (CDN $ 550,000)
|
$
|
514,525
|
|
|
|
|
|
Total consideration transferred included
the following:
|
|
|
|
|
|
|
|
Fair value as of the acquisition date of
1,021,777 common shares of the Company issued in exchange for all issued
and outstanding shares of CIC
|
$
|
275,880
|
|
|
|
|
|
Gain on bargain purchase, being the excess
of the fair value of net assets acquired over the purchase price, and
recognized as Other Income in the Statements of Operations and
Comprehensive Loss
|
$
|
238,645
|
|
An update of the independent appraisal indicated the fair value
of the quarry leases was unchanged as of the date of the financial statements.
9. Accrued
Liabilities
Accrued liabilities are comprised of the following:
|
|
2012
|
|
|
2011
|
|
|
|
$
|
|
|
$
|
|
Professional fees for
year-end reporting and and audit
|
|
31,500
|
|
|
30,000
|
|
Reclamation Bonding
|
|
27,463
|
|
|
19,818
|
|
Unbilled fees for legal
services
|
|
-
|
|
|
53,914
|
|
Other
|
|
-
|
|
|
171
|
|
Total
|
|
58,963
|
|
|
103,903
|
|
10. Note
Payable
As of August 24, 2011, the Company borrowed $100,000 from Mont
Strategies Inc., a corporation that is owned and controlled by Todd D.
Montgomery, the Companys Chief Executive Officer and a member of its Board of
Directors. The loan was made pursuant to a demand promissory note that bore
interest at a rate of four percent (4%) per annum and had a maturity date of
August 24, 2013, the second anniversary of such promissory note. On December 27,
2011, the Company retired the promissory note by paying Mont Strategies Inc. the
principal amount of the note along with accrued interest. For the year ended
June 30, 2012, the Company recorded interest expense of $1,381 for the
promissory note.
F17
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
11. Deferred
Revenue and Marketable Securities
On February 25, 2011, SRC entered into an option and joint
venture agreement (the Option Agreement) with International Millennium Mining
Inc. (IMMI), a wholly owned subsidiary of International Millennium Mining
Corp. (IMMC), to sell an 85% interest in SRCs NL Extension Project Claim
Group (the NL Project) for total consideration of $350,000 cash and 1,925,000
shares of IMMCs common stock (the Consideration). The NL Project consists of
18 mineral claims located in Esmeralda County, Nevada, approximately 6 miles
southwest of Silver Peak, Nevada on Highway 47. Under the terms of the Option
Agreement, the Consideration is payable over a five-year period that ends on
September 15, 2015, with IMMIs interest in the NL Project vesting at the end of
such period. As of the date of the financial statements, the Company had
received Consideration of $193,593, consisting of 575,000 shares of IMMC with a
fair market value of $133,593 that is recorded as Marketable Securities in the
Companys Consolidated Balance Sheets and $60,000 in cash. Because IMMIs
interest in the NL Project vests at the end of the five-year period, this
Consideration is accounted for in the Consolidated Balance Sheets as Deferred
Revenue, a non-current liability. The unrealized loss of $88,412 arising from
the reduction in the market value of the Companys shares of IMMCs common stock
as of June 30, 2012, is accounted for in the Stockholders Equity section of the
Consolidated Balance Sheets as Accumulated Other Comprehensive Loss.
12. Asset
Retirement Obligation
The Company is required to recognize a liability for its legal
obligation to perform reclamation and disturbance monitoring activities once any
of its projects are abandoned or closed. Although these activities are
conditional upon future events, the Company is required to make a reasonable
estimate of the fair value of the liability. Based on the existing level of
ground disturbance and monitoring requirements, the discounted asset retirement
obligations ("ARO's") were estimated to be $24,699 as of June 30, 2012, assuming
payments made over a three-year period. Determination of the undiscounted ARO
and the timing of these obligations were based on internal estimates using
information currently available and existing regulations.
At the end of each
reporting
period,
AROs are equal to the present value of all estimated future costs required to
remediate any ground disturbances that exist as of the end of the period, using
discount rates applicable at the time of initial recognition of each component
of the liability.
A liability for an asset retirement
obligation may be incurred over more than one reporting period if the events
that create the obligation occur over more than one reporting period. Any
incremental liability incurred in a subsequent reporting period shall be
considered to be an additional layer of the original liability. Each layer shall
be initially measured at fair value.
Included in this liability are the
costs of reclamation and monitoring and maintenance costs. Discount rates
typically range between 10% and 12%. The Companys entire ARO as of June 30,
2012 and June 30, 2011 relates to the Blue Nose project.
Balance as of June 30, 2011
|
$
|
22,455
|
|
Increase in Asset Retirement Obligation
|
|
-
|
|
Accretion for the year ended
|
|
|
|
June 30, 2012
|
|
2,244
|
|
|
|
|
|
Balance as of June 30, 2012
|
$
|
24,699
|
|
F18
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
13.
Redeemable Preferred Stock
Redeemable preferred stock represents preferred stock that is
either redeemable for cash on a specific date or contingently redeemable for
cash for events that are not within the control of management. Preferred stock
where redemption for cash is certain to occur is classified in liabilities. The
Company currently has no preferred stock classified in liabilities. The
Companys Series A Convertible Preferred Stock was redeemable preferred stock
and was required to be classified outside of stockholders equity (in the
mezzanine section). Redeemable preferred stock as of June 30, 2011 equaled
$300,000.
Terms, Features and Conditions of the Companys Series A
Redeemable Preferred Stock:
|
Date of
|
Number of
|
Par
|
Stated
|
|
Date of
|
Series
|
Designation
|
Shares
|
Value
|
Value
|
Conversion
|
Conversion
|
A
|
6/1/2011
|
2,608,696
|
$ 0.0001
|
$ 0.115
|
$ 0.115
|
9/29/2011
|
The Companys Series A Convertible Preferred Stock had voting
rights equal to the if-converted number of common shares.
Series A Convertible Preferred Stock
On June 1, 2011, the Company entered into a subscription
agreement pursuant to which 2,608,696 shares of the Companys newly designated
Series A Convertible Preferred Stock (the Series A Preferred Stock), par value
$0.0001, were purchased at a price of $0.115 per share (the Purchase Price)
for an aggregate purchase price of $300,000. The Series A Preferred Stock
provided for dividends only if and when declared by the Board. Each holder of
Series A Preferred Stock had the right to vote equal to the number of conversion
shares issuable upon conversion of the Preferred Stock in all matters as to
which shareholders were required or permitted to vote.
The Purchase Price was based on the weighted average trading
price of the Companys Common Shares on the OTC Bulletin Board for the fifteen
trading days prior to June 1, 2011, the date of the Subscription Agreement. The
sole purchaser (the Purchaser) participating in the subscription agreement was
a non-U.S. corporation that is controlled by Todd D. Montgomery, the Companys
Chief Executive Officer and a member of its Board of Directors. The issuance of
the Series A Preferred Stock was exempt from registration under the Securities
Act of 1933, as amended (the Securities Act) pursuant to an exemption afforded
by Regulation S promulgated thereunder (Regulation S). The Purchaser and Mr.
Montgomery are not U.S. Person(s) as that term is defined in Regulation S.
The Company evaluated the Series A Preferred Stock for
classification. The Series A Preferred Stock were redeemable at any time on or
after the first anniversary of the closing absent the Companys ability to net
share settle. This term and feature does not rise to the level of
unconditionally redeemable for purposes of liability classification. The
Company then evaluated the conversion feature embedded in the Series A Preferred
Stock, and certain other features (i.e. the contingent redemption elements) for
classification and measurement. Generally, embedded terms and features that both
(i) meet the definition of derivatives and (ii) are clearly and closely related
to the host contract in terms of risks, do not require bifurcation and separate
measurement. In order to develop these conclusions, the Company first evaluated
the hybrid contract to determine if the hybrid contract, with all features
included, was more akin to an equity instrument or a debt instrument.
Significant indicators of equity were that the instrument does not have a term
or a maturity date; it
F19
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
13.
Redeemable Preferred Stock Contd
is a perpetual financial instrument, the non-existence of a
cumulative dividend feature and the existence of voting rights based upon the
if-converted number of common shares. The sole indicator of debt was the
Holders ability to redeem the preferred stock upon the occurrence of a specific
event. The weight of these indicators led the Company to the conclusion that the
hybrid contract was more akin to an equity instrument. Accordingly, the
conversion option does not require bifurcation because its risks and the risks
of the hybrid are clearly and closely related.
Further consideration of the classification of the Series A
Preferred Stock as either equity or mezzanine was required. Generally,
redeemable instruments, where redemption is either stated or outside the control
of management, require classification outside of stockholders equity. Because
the instrument is redeemable at any time on or after the first anniversary of
the closing absent the Companys ability to net share settle, the instrument is
required to be classified outside of stockholders equity in the mezzanine.
On September 29, 2011, all of the Companys Series A Preferred
stock were converted to Common Shares.
14. Issuance
of Common Shares and Warrants
Year ended June 30, 2012
The Company held an annual meeting of shareholders on July 29,
2011. At the meeting, among other actions, the shareholders of the Company
approved and adopted an amendment increasing the number of authorized Common
Shares to 500,000,000. On August 1, 2011 the Company filed with the Secretary of
State of the State of Delaware a certificate of amendment (the Amendment) to
the Companys certificate of incorporation containing the change in the number
of authorized Common Shares approved by shareholders on July 29, 2011. The
Amendment increased the number of authorized Common Shares, par value $0.0001,
from 100,000,000 to 500,000,000.
On September 29, 2011, 2,608,696 outstanding shares of the
Companys Series A Preferred Stock were converted to 2,608,696 Common Shares,
which results in an increase of $261 and $299,739 to common stock and additional
paid-in capital, respectively. Also see Note 13, Redeemable Preferred Stock.
On December 16, 2011, the Company completed the sale of
26,000,000 Common Shares to the public in Canada at a price of $0.096 (CDN$0.10)
per share to raise gross proceeds of $2,507,180 (CDN$2,600,000). The shares were
sold pursuant to a long form prospectus filed in the Canadian provinces of
Alberta, Saskatchewan, British Columbia and Ontario. PI Financial Corp. (PI
Financial) acted as lead agent and received a corporate finance fee of $14,464
(CDN$15,000), was reimbursed $127,529 (CDN$132,250) for its expenses, was paid
cash commissions of $20,236 (CDN$20,985) and received non-transferable Agent's
Warrants valued at $14,644 entitling PI Financial to acquire 209,850 Common
Shares at a price of $0.096 (CDN$0.10) per share exercisable for 24 months. The
fair value of the Agents Warrants was determined using the Black-Scholes option
pricing model with the following assumptions: risk-free rate of 1.63%, expected
dividend yield of 0%, annualized volatility of 142.45% and expected life of two
years. In connection with the offering, in addition to payments made to PI
Financial, the Company incurred legal and other direct expenses, which resulted
in net proceeds from the offering of $2,215,399.
The foregoing sale of securities was made entirely outside the
United States pursuant to an exemption afforded by Regulation S promulgated
under the Securities Act. Following the sale of our securities in Canada, the Company's Common Shares were listed for trading on
the TSX Venture Exchange under the symbols IFM and IFM.S. The Company's
Common Shares continue to be traded in the United States on the OTC Bulletin
Board under the symbol IFAM.
F20
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
14. Issuance
of Common Shares and Warrants Contd
Year ended June 30, 2011
On September 30, 2010, the Company issued 50,000 shares of its
common stock (Common Shares or a Common Share) pursuant to the exercise of
options granted in accordance with its employee stock option plan (the 2006
Stock Option Plan). Also see Note 15, Stock Based Compensation.
On February 8, 2011, the Company completed a private placement
(the Private Placement) of 2,083,333 Common Shares at a price of $0.24 per
share for total consideration of $500,000. The Private Placement was exempt from
registration under the Securities Act of 1933, as amended (the Securities Act)
pursuant to an exemption afforded by Regulation S promulgated thereunder
(Regulation S). The sole investor (the Investor) participating in the
private placement was a non-U.S. corporation that is owned and controlled by
Todd D. Montgomery, the Companys Chief Executive Officer and a member of its
Board of Directors. The Investor and Mr. Montgomery are not U.S. Person(s) as
that term is defined in Regulation S.
15. Stock
Based Compensation
In April 2006, the Board of Directors approved the Companys
2006 Stock Option Plan, the purpose of which was to enhance the Company's
stockholder value and financial performance by attracting, retaining and
motivating the Company's officers, directors, key employees and consultants and
to encourage stock ownership by such individuals by providing them with a means
to acquire a proprietary interest in the Company's success through stock
ownership.
Under the 2006 Stock Option Plan, officers, directors,
employees and consultants who provide services to the Company could be granted
options to acquire shares of the Companys common stock at the fair market value
of the stock on the date of grant. Options could have a term of up to 10 years.
The total number of shares reserved for issuance under the 2006 Stock Option
Plan was 5,000,000. At a meeting of shareholders held on July 29, 2011, the
shareholders of the Company approved a new stock option plan as described below.
No further options will be issued under the 2006 Stock Option Plan.
The Company held an annual meeting of shareholders on July 29,
2011. At the meeting, among other actions, the shareholders of the Company
approved the amendment and restatement of the 2006 Stock Option Plan resulting
in the Companys Amended Stock Option Plan (the Amended Plan). The Amended
Plan replaces the Companys 2006 Stock Option Plan and no further options will
be issued under the 2006 Stock Option Plan. The terms of the Amended Plan
include, among others, that (a) officers, directors, employees and consultants
who provide services to the Company may be granted options to acquire shares of
the Companys Common Shares at the fair market value of the stock on the date of
grant, (b) options may have a term of up to 10 years, (c) the Company may issue
options in a number up to a maximum of 10% of the outstanding Common Shares, and
(d) outstanding stock options previously granted pursuant to the 2006 Stock
Option Plan will remain in effect and be exercisable in accordance with, and be
deemed to be issued under, the terms of the Amended Plan. It is expected that
options issued pursuant to the Amended Plan will not be qualified options
under the provisions of section 422 of the Internal Revenue Code of 1986 as
amended from time to time.
F21
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
15. Stock
Based Compensation
Contd
Year ended June 30, 2012
On August 31, 2011, 250,000 options that were not granted
pursuant to the Companys 2006 Stock Option Plan or the Amended Plan expired.
Effective April 1, 2012, the Company granted options to a
consultant to purchase up to 350,000 common shares at an exercise price of
CDN$0.10 per share. The term of the option grant is tied to the term of the
consulting agreement pursuant to which the options were granted so as to expire
on the date that is 30 days after the termination of the consulting agreement.
The consulting agreement has an initial one-year term, but can be terminated at
any time upon 30-days prior written notice by the Company or the consultant or
upon the occurrence of certain events defined in the consulting agreement. The
options vest at the rate of 1/12 each month until fully vested. These options
were granted pursuant to the Companys Amended Plan.
On April 9, 2012, 50,000 options issued in accordance with the
Companys 2006 Stock Option Plan expired.
On April 16, 2012, 50,000 options issued in accordance with the
Companys 2006 Stock Option Plan expired.
On April 25, 2012, the Company granted options to certain of
its officers, directors, employees and consultants to purchase up to an
aggregate of 8,375,000 Common Shares at an exercise price of CDN$0.10 per share.
The options were granted in accordance with the Companys Amended Plan and vest
at the rate of one twelfth (1/12) each month until fully vested. The options
granted have a term of ten years.
On May 31, 2012, 100,000 options issued in accordance with the
Companys 2006 Stock Option Plan expired.
Year ended June 30, 2011
On September 30, 2010, 50,000 options issued in accordance with
the Companys 2006 Stock Option Plan were exercised and 200,000 options expired.
On October 15, 2010, 300,000 options issued in accordance with
the Companys 2006 Stock Option Plan expired.
On November 18, 2010, the Company granted options to an
employee to purchase up to 250,000 common shares at an exercise price of $0.16
per share. These options were granted in accordance with the terms of the
Companys 2006 Stock Option Plan and vested at a rate of 1/12 each month until
fully vested. The options were granted with a term of 5 years.
On November 24, 2010, the Company granted options to an
employee to purchase up to 150,000 common shares at an exercise price of $0.16
per share. These options were granted in accordance with the terms of the
Companys 2006 Stock Option Plan and vested at a rate of 1/12 each month until
fully vested. The options were granted with a term of 5 years.
In June 2011, 3,700,000 options were terminated by mutual
agreement of the Company and the option holders. In each case, the option price
exceeded the price at which the Companys shares were traded.
On June 30, 2011, 50,000 options issued in accordance with the
Companys 2006 Stock Option Plan expired.
F22
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
15. Stock
Based Compensation - Contd
For the year ended June 30, 2012, the Company recognized in the
financial statements, stock-based compensation costs as per the following
details. The fair value of each option used for the purpose of estimating the
stock compensation is based on the grant date using the Black-Scholes option
pricing model with the following weighted average assumptions:
The expected term calculation is based upon the expected term
the option is to be held, which is the full term of the option. The risk-free
interest rate is based upon the U.S. Treasury yield in effect at the time of
grant for an instrument with a maturity that is commensurate with the expected
term of the stock options. The dividend yield of zero is based on the fact that
the Company has never paid cash dividends on our common stock and has no present
intention to pay cash dividends. The expected forfeiture rate of 0% is based on
the vesting of stock options in a short period of time.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
|
|
|
Unexpended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation
|
|
|
Stock-based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cost expensed
|
|
|
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
during the year
|
|
|
cost deferred
|
|
|
|
Risk free
|
|
|
Volatility
|
|
|
Expected
|
|
|
Forfeiture
|
|
|
Expected
|
|
|
Exercise
|
|
|
Total number of
|
|
|
Grant date
|
|
|
ended June 30,
|
|
|
over the vesting
|
|
Date of grant
|
|
rate
|
|
|
factor
|
|
|
Dividends
|
|
|
rate
|
|
|
life
|
|
|
price
|
|
|
options granted
|
|
|
fair
value
|
|
|
2012
|
|
|
period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apr-1-12
|
|
1.10%
|
|
|
180.37%
|
|
|
0%
|
|
|
0%
|
|
|
1 year
|
|
$
|
0.10
|
|
|
350,000
|
|
$
|
0.02
|
|
$
|
1,633
|
|
$
|
4,897
|
|
Apr-25-12
|
|
3.63%
|
|
|
155.72%
|
|
|
0%
|
|
|
0%
|
|
|
10 years
|
|
$
|
0.10
|
|
|
8,375,000
|
|
$
|
0.04
|
|
$
|
60,357
|
|
$
|
268,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
61,990
|
|
$
|
273,347
|
|
As of June 30, 2012, there was $273,347 of unrecognized
expenses related to non-vested stock-based compensation arrangements granted.
The stock-based compensation expense for the years ended June 30, 2012 and June
30, 2011, was $61,990 and $101,503, respectively.
F23
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
15. Stock
Based Compensation - Contd
The following tables summarize the options outstanding as of
June 30, 2012 and 2011, and the option activity for the years then ended:
|
|
|
|
Remaining
|
|
Remaining
|
|
|
|
|
|
|
|
|
contractual
|
|
contractual
|
|
|
|
|
|
|
Option Price
|
|
life (in years)
|
|
life (in years)
|
|
Number of options:
|
|
|
Expiry Date
|
|
Per
Share
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Aug 30, 2011
|
|
$0.25
|
|
-
|
|
0.18
|
|
-
|
|
250,000
|
April 9, 2012
|
|
$0.30
|
|
-
|
|
0.80
|
|
-
|
|
50,000
|
April 16, 2012
|
|
$0.30
|
|
-
|
|
0.82
|
|
-
|
|
50,000
|
May 31, 2012
|
|
$0.35
|
|
-
|
|
1.79
|
|
-
|
|
50,000
|
May 31, 2012
|
|
$0.15
|
|
-
|
|
2.50
|
|
-
|
|
50,000
|
Aug 16, 2012
|
|
$0.31
|
|
0.13
|
|
2.65
|
|
100,000
|
|
100,000
|
Aug 16, 2012
|
|
$0.25
|
|
0.13
|
|
3.61
|
|
250,000
|
|
250,000
|
Dec 10, 2013
|
|
$0.15
|
|
1.47
|
|
2.50
|
|
25,000
|
|
25,000
|
Feb 2, 2014
|
|
$0.31
|
|
1.62
|
|
2.65
|
|
50,000
|
|
50,000
|
Oct 22, 2014
|
|
$0.33
|
|
2.34
|
|
3.38
|
|
25,000
|
|
25,000
|
Apr 25, 2015
|
|
$0.23
|
|
2.86
|
|
3.89
|
|
50,000
|
|
50,000
|
Apr 30, 2013
|
|
$0.10
|
|
0.83
|
|
-
|
|
350,000
|
|
-
|
Apr 24, 2022
|
|
$0.10
|
|
9.82
|
|
-
|
|
8,375,000
|
|
-
|
Options outstanding at end of year
|
|
9,225,000
|
|
950,000
|
Weighted average exercise price
at end of year
|
|
$0.11
|
|
$0.26
|
Weighted average remaining contractual life (in
years)
|
|
8.99
|
|
2.07
|
|
|
Number of options:
|
|
|
|
2012
|
|
|
2011
|
|
Outstanding, beginning of year
|
|
950,000
|
|
|
4,850,000
|
|
Granted
|
|
8,725,000
|
|
|
400,000
|
|
Expired
|
|
(450,000
|
)
|
|
(550,000
|
)
|
Exercised
|
|
-
|
|
|
(50,000
|
)
|
Forfeited
|
|
-
|
|
|
-
|
|
Cancelled
|
|
-
|
|
|
(3,700,000
|
)
|
Outstanding, end of year
|
|
9,225,000
|
|
|
950,000
|
|
Exercisable, end of year
|
|
1,983,334
|
|
|
950,000
|
|
F24
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
16.
Termination of Option Agreement
On August 24, 2011, the Companys wholly owned subsidiary,
Silver Reserve Corp. (SRC), entered into an option agreement dated as of
August 19, 2011 (the MGold Option Agreement) with MGold Resources Inc.
(MGold), pursuant to which MGold had an option (the Option) to earn a 50%
interest in each of SRCs Silver Queen Claim Group (the Silver Queen Property)
and Klondyke Claim Group (the Klondyke Property) after expenditure of certain
Option Costs and the full payment of the Cash Consideration, as defined below.
Under the terms of the MGold Option Agreement, MGold was required to incur
exploration expenditures totaling CDN$4,000,000 with regards to the Silver Queen
Property and CDN$1,350,000 with regards to the Klondyke Property (together, the
Option Costs). MGold also would make total cash payments to SRC of
CDN$2,000,000 for the Silver Queen Property and CDN$265,000 for the Klondyke
Property (together, the Cash Consideration). The Option Costs were to be made
over a period of 30 months, and the Cash Consideration was to be paid over a
period of 33 months. Upon full expenditure of the Option Costs and payment of
the total Cash Consideration, the Option could be exercised and MGold would hold
a 50% equity interest in each of the Silver Queen Property and Klondyke
Property. Following exercise of the Option, SRC and MGold would enter into a
joint venture with regards to the operation of the properties. During the period
prior to the exercise of the Option, MGold had the right to terminate the MGold
Option Agreement with 30 days notice to SRC or to
discontinue its Option with respect to either property and retain its
Option with respect to the other property. On September 26, 2011, the Company
received $145,875 (CDN$150,000) and $29,175 (CDN$30,000) from MGold representing
the first Cash Consideration payments for the Silver Queen Property and the
Klondyke Property, respectively, for total Cash Consideration of $175,050.
Because MGolds interests in the Silver Queen and Klondyke Properties were to
vest at the end of the 33-month period, this Cash Consideration was accounted
for in the Consolidated Balance Sheets as Deferred Revenue, a non-current
liability.
On March 15, 2012,
MGold issued
notice to
SRC that MGold was terminating the
MGold
Option Agreement effective April 14, 2012. Upon the
termination of the
MGold
Option Agreement, the
Company recognized $175,050 as a Gain from termination of option agreement,
which was the amount included in Deferred Revenue for the periods ended December
31, 2011, and March 31, 2012.
17.
Geographic Location of Assets
All assets in the financial statements are located in the State
of Nevada, United States of America except for Cash and Cash equivalents of
$102,541 and Mineral Property Interests of $514,525, which are located in
Canada.
F25
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
18
.
Income Taxes
The Company's current and deferred income taxes are as follows:
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
$
|
(1,362,040
|
)
|
$
|
(2,523,079
|
)
|
|
|
|
|
|
|
|
|
|
Expected income tax recovery at the
statutory rate of 29.5%
|
$
|
(401,802
|
)
|
$
|
(744,308
|
)
|
|
Increase in income taxes resulting from:
|
|
|
|
|
|
|
|
Permanent differences
|
|
18,287
|
|
|
29,943
|
|
|
Valuation allowance
|
|
383,515
|
|
|
714,365
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
$
|
-
|
|
$
|
-
|
|
The Company has deferred income tax assets as follows:
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carry forward
|
$
|
17,103,576
|
|
$
|
15,750,751
|
|
|
|
|
|
|
|
|
|
|
Deferred Income tax on loss carry forward
|
$
|
5,045,555
|
|
$
|
4,646,471
|
|
|
Temporary differences (due to timing difference between tax
value and book value)
|
|
3,941
|
|
|
90,536
|
|
|
Valuation allowance for deferred income tax
assets
|
|
(5,049,496
|
)
|
|
(4,737,007
|
)
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
$
|
-
|
|
$
|
-
|
|
As of June 30, 2012, the Company has non-capital losses of
approximately $17,103,576 available to offset future taxable incomes which
expire as follows:
2026
|
$
|
64,024
|
|
2027
|
$
|
2,324,117
|
|
2028
|
$
|
3,474,713
|
|
2029
|
$
|
4,536,752
|
|
2030
|
$
|
2,868,022
|
|
2031
|
$
|
2,483,123
|
|
2032
|
$
|
1,352,825
|
|
|
$
|
17,103,576
|
|
F26
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
19.
Commitments and Contingencies
On August 1, 2006, the Company acquired the Pansy Lee Claims
Group from Anglo Gold Mining Inc. in exchange for 1,850,000 Common Shares
pursuant to an Asset Purchase Agreement dated August 1, 2006 (the Pansy Lee
Purchase Agreement). Pursuant to the Pansy Lee Purchase Agreement, a 2% net
smelter royalty pertains to 8 of the 30 claims in this group. In the event that
any one or more of the 8 claims becomes a producing claim, our revenue is
subject to a 2% net smelter return royalty where net smelter returns are based
upon gross revenue. Gross revenue would be calculated after commercial
production commences and includes the aggregate of the following amounts:
revenue received by the Company from arms length purchasers of all mineral
products produced from the property, the fair market value of all products sold
by the Company to persons not dealing with the Company at arms length and the
Companys share of the proceeds of insurance on products. From such revenue, the
Company would be permitted to deduct: sales charges levied by any sales agent on
the sale of products; transportation costs for products; all costs, expenses and
charges of any nature whatsoever that are either paid or incurred by the Company
in connection with the refinement and beneficiation of products after leaving
the property and all insurance costs and taxes.
The Company obtained 25 mineral claims (the Option Claims),
located in Elko County, Nevada pursuant to an option agreement (the Option
Agreement) dated as of May 1, 2008 (the Date of Closing) with Nevada Eagle
Resources, LLC and Steve Sutherland (together, the Optionees). The provisions
of the Option Agreement included, among others, payments of specified annual
amounts ranging from $10,000 to $80,000 by the Company to the Optionees over a
period of ten years. Effective June 1, 2010, the Company and the Optionees
agreed to terminate the Companys interests in the Option Claims pursuant to (1)
payment by the Company of $8,750 to each of the Optionees, (2) performance by
the Company of such reclamation and remediation as required to discharge the
surface management bond posted by the Company pursuant to a Notice of Intent
filed with the BLM prior to undertaking exploration activity on the Option
Claims, and (3) conveyance by the Company to Nevada Eagle Resources, LLC of the
124 mineral claims staked by the Company after the Date of Closing that are
within the Area of Interest described in the Option Agreement. As of June 30,
2012, the undertakings described in (1) and (3) above have been completed and
the reclamation and remediation described in (2) above are in progress. The 25
Option Claims together with 124 mineral claims staked by the Company have been
referred to by the Company as the Medicine Claim Group.
Effective as of June 23, 2008, the Company appointed Mason
Douglas as the President of the Company. Mr. Douglas is also a director of the
Company. In connection with the appointment, the Company entered into a
consulting services agreement with a Canadian corporation that is controlled by
Mr. Douglas (the Consulting Agreement). The Consulting Agreement has a term of
one year and is then automatically renewable. Either party may terminate the
Consulting Agreement upon 90 days notice to the other party. According to the
terms of the Consulting Agreement as amended effective March 1, 2012, the
Company will pay a fee of $10,417 per month and reimburse related business
expenses. The Consulting Agreement permits Mr. Douglas to fulfill his duties for
the Company from his office in Canada. Mr. Douglas does not receive a salary
from the Company.
On December 8, 2008 IMC US entered into a Mineral Rights Lease
Agreement (the Edgar Lease Agreement) with the Earl Edgar Mineral Trust
(Edgar) to lease certain mineral rights in Elko County, Nevada described below
(the Edgar Property). The term of the Edgar Lease Agreement is ten years and
will automatically renew on the same terms and conditions for additional
ten-year periods, provided IMC US is conducting exploration, development or
mining either on the surface or underground at the property. The rent is to be
paid each year on January 1st. $1.00 per net acre was paid upon execution of the
Edgar Lease
F27
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
19.
Commitments and Contingencies - Contd
Agreement. On January 1 of each year commencing in 2010 and
extending for so long as the Edgar Lease Agreement is in effect, IMC US is
obligated to make the following payments:
2010 $1.00 per net acre
2011 $2.00
per net acre
2012 $2.00 per net acre
2013 $3.00 per net acre
2014
$3.00 per net acre
2015 $4.00 per net acre
2016 $4.00 per net acre
2017 $5.00 per net acre in each year for the duration of the Edgar Lease
Agreement.
The Edgar Lease Agreement covers 100% of the mineral rights on
1,120 acres of the Edgar Property (Property A) and 50% of the mineral rights
on 6,720 acres of the Edgar Property (Property B). Edgar is entitled to
receive a royalty of $0.50 per ton for material mined and removed from Property
A and $0.25 per ton for material mined and removed from Property B during the
term of the Edgar Lease Agreement and any renewal thereof.
On April 9, 2009, the Company and Edgar entered into an
Amendment to the Edgar Lease Agreement (the Amendment), effective as of
December 8, 2008. The Amendment provides for Standard Steam LLC to carry out
exploration for geothermal energy sources on the Edgar Property after obtaining
the written consent of the Company. The Amendment also provides for other
cooperation with Standard Steam LLC regarding mineral rights on Property B of
the Edgar Property.
On November 30, 2009, IMC US entered into a Mineral Rights
Agreement with Perdriau Investment Corp. (Perdriau) to purchase 50% of the
mineral rights, including all easements, rights of way and appurtenant rights of
any type that run with the mineral rights in certain sections of Elko County,
Nevada (the Perdriau Property). The purchase price was $10 per net acre. IMC
US purchased 340 net acres for a total purchase price of $3,400. Perdriau will
be entitled to receive a royalty of $0.25 per ton for material mined and removed
from the Perdriau Property. Material mined and stored on the Perdriau Property
or adjacent property for reclamation purposes will not be subject to any
royalty. Material removed from the Perdriau Property for the purposes of testing
or bulk sampling, provided it does not exceed 50,000 tons, will also not be
subject to any royalty. The royalty will be calculated and paid within 45 days
after the end of each calendar quarter.
As of January 15, 2010, the Company entered into a Property
Lease Agreement with Eugene M. Hammond (the Hammond Lease) for surface rights
on 80 acres in Elko County, Nevada (the Hammond Surface Rights). The term of
the Hammond Lease is five years and the annual rent is $500. The Company is
responsible for the payment of all real estate taxes on the Hammond Surface
Rights. During the term of the Hammond Lease, the Company has the exclusive
right to conduct exploration and development work on the Hammond Surface Rights.
The results of all drilling and exploration are the property of the Company. The
Company is responsible for any environmental damage caused by the Company and
any reclamation costs required as a result of drilling and testing. The Company
has an option to purchase the property covered by the Hammond Lease for $15,000,
less the amount paid in rent during the term of the Hammond Lease.
F28
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
19.
Commitments and Contingencies - Contd
Also as of January 15, 2010, IMC US entered into a Mineral
Rights Agreement with Eugene M. Hammond (the Hammond Mineral Rights Agreement)
pursuant to which the Company purchased a 25% interest in any and all minerals
extracted from 160 acres (the Hammond Mineral Rights Property) covered by the
Hammond Mineral Rights Agreement. The purchase price was $400. In addition, the
seller is entitled to receive a royalty of $0.125 per ton on material mined and
removed from the Hammond Mineral Rights Property. The Hammond Mineral Rights
Agreement does not cover petroleum.
Effective July 1, 2010, the Company entered into an employment
agreement with an individual to provide business and administrative services.
The employment agreement has a term of one year and is automatically renewable
thereafter. Either party may terminate the employment agreement upon 60 days
notice. According to the terms of the employment agreement as amended effective
March 1, 2012, the Company will pay the individual no less than $8,333 per month
and reimburse related business expenses.
Effective July 1, 2010, the Company entered into an employment
agreement with an individual to provide receptionist and administrative services
at its Reno, Nevada corporate headquarters. The employment agreement has a term
of one year and is automatically renewable thereafter. Either party may
terminate the employment agreement upon 30 days notice. Pursuant to this
employment agreement, the Company will pay no less than $51,000 per year for
such services.
On February 25, 2011, SRC entered into an option and joint
venture agreement (the IMMI Option Agreement) with International Millennium
Mining Inc. (IMMI), a wholly owned subsidiary of International Millennium
Mining Corp. (IMMC), to sell an 85% interest in SRCs NL Extension Project
Claim Group (the NL Project) for total consideration of $350,000 and 1,925,000
shares of IMMCs common stock (the Consideration). The NL Project consists of
18 mineral claims located in Esmeralda County, Nevada, approximately 6 miles
southwest of Silver Peak, Nevada on Highway 47. Under the terms of the IMMI
Option Agreement, the Consideration is payable over a five-year period that ends
on September 15, 2015, with IMMIs interest in the NL Project vesting at the end
of such period. In the event of early termination, IMMI is not entitled to the
return of Consideration previously paid to SRC. If the NL Project is determined
to be economically feasible, based upon criteria contained in the IMMI Option
Agreement, SRC will be required to fund its portion of an operating budget
proposed by IMMI in order to retain its 15% interest in the NL Project and to
acquire a 15% interest in IMMIs Nivloc Mine Project (the NL Project and the
Nivloc Mine Project, collectively, the IMMI Project). In the event that SRC
decides not to fund its portion of the budget, its 15% interest would be
forfeited, but SRC would be entitled to a 2% net smelter return royalty if and
when the IMMI Project enters the production phase. Upon funding of the operating
budget and SRCs acquisition of a 15% interest in the IMMI Project, SRC and IMMI
would enter into a joint venture agreement.
On September 1, 2011, SRC engaged Tetra Tech, Inc. to complete
the exploration permitting activities for its Silver Queen property near Silver
Peak, Nevada. The Company is to authorize each phase of work before the work
proceeds. The estimated total consideration to be paid under the agreement is
$68,900. As of June 30, 2012, the Company had recorded total expenses of $15,789
for this contract.
F29
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
19.
Commitments and Contingencies - Contd
Effective February 29, 2012, SRC entered into a mineral lease
agreement (the Gumaskas Agreement) with Joseph W Gumaskas (Gumaskas) to
lease a patented claim covering approximately 10 acres (the Claim) in Mineral
County, Nevada. Unless terminated earlier by SRC, the term of the Gumaskas
Agreement is ten years and will automatically renew on the same terms and
conditions for additional five-year periods. The Gumaskas Agreement requires SRC
to pay Gumaskas advance minimum royalty payments of $500 annually. In the event
that the Claim becomes a producing claim, SRC will pay Gumaskas a 3% royalty
based upon gross revenue less deductions permitted by the Gumaskas Agreement.
Gross revenue includes the aggregate of revenue received by SRC from arms
length purchasers of all mineral products produced from the Claim, the fair
market value of all products sold by SRC to persons not dealing with SRC at
arms length and SRCs share of the proceeds of insurance on products. From such
revenue, SRC would be permitted to deduct sales charges levied by any sales
agent on the sale of products, all insurance costs in respect of mineral
products, and all costs, expenses and charges of any nature whatsoever that are
either paid or incurred by SRC in connection with the refinement and
beneficiation of products after leaving the Claim. SRC may terminate the
Gumaskas Agreement at any time by giving 60 days advance written notice to
Gumaskas.
Effective April 1, 2012, the Company entered into a consulting
agreement (the Teatyn Agreement) with Teatyn Enterprises, Inc. (Teatyn) for
Teatyn to provide the Company with certain investor relation services to the
Company for a period of one year. The Teatyn Agreement can be terminated at any
time upon 30-days prior written notice by either the Company or Teatyn or upon
the occurrence of certain events as defined in the Teatyn Agreement. Under the
terms of the Teatyn Agreement, Teatyn will receive a monthly fee of CDN$5,000
and options (the Options) to purchase up to 350,000 Common Shares at an
exercise price of CDN$0.10 per share. The Options will vest at a rate of one
twelfth (1/12) per month during the term of the Teatyn Agreement, such vesting
subject to the terms of the Companys Stock Option Plan and the policies of the
TSX Venture Exchange. Unexercised Options, if any, will terminate thirty (30)
days following the expiry or termination of the Teatyn Agreement.
Effective April 1, 2012, SRC entered into a mineral lease
agreement (the Saunders Agreement) with Charles and Barbara Saunders (the
Lessors) to lease patented claims covering approximately 37 acres (the
Claims) in Esmeralda County, Nevada. Unless terminated earlier by SRC, the
term of the Saunders Agreement is ten years and will automatically renew on the
same terms and conditions for additional five-year periods. The Saunders
Agreement requires SRC to pay the Lessors advance minimum royalty payments of
$2,000 annually. In the event that the Claims become producing claims, SRC will
pay the Lessors a 3% royalty based upon gross revenue less deductions permitted
by the Saunders Agreement. Gross revenue includes the aggregate of revenue
received by SRC from arms length purchasers of all mineral products produced
from the Claims, the fair market value of all products sold by SRC to persons
not dealing with SRC at arms length and SRCs share of the proceeds of
insurance on products. From such revenue, SRC would be permitted to deduct sales
charges levied by any sales agent on the sale of products, all insurance costs
in respect of mineral products, and all costs, expenses and charges of any
nature whatsoever that are either paid or incurred by SRC in connection with the
refinement and beneficiation of products after leaving the Claims. SRC may
terminate the Saunders Agreement at any time by giving 60 days advance written
notice to the Lessors.
On May 15, 2012, SRC entered into an Exploration License with
Option to Purchase (the Buhrman Agreement) with Ralph L. Buhrman and
Jacqueline Buhrman (together, the Owner) for three patented claims, covering
approximately 59 acres (the Property) situated in Mineral County, Nevada.
F30
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
19.
Commitments and Contingencies - Contd
Under the terms of the Buhrman Agreement, SRC was granted the
exclusive right and option to enter and examine the Property (the Exploration
License) in consideration of a $30,000 payment to the Owner (the License
Payment). During the term of the Exploration License, SRC has the exclusive
right to undertake geological, geophysical, and geochemical examinations of the
Property; to sample the Property by means of pits, trenches, and drilling; and
to take bulk samples from the Property for the purpose of conducting
metallurgical and leaching tests. However, SRC may not commence development or
mining activities on the Property unless it exercises the Purchase Option as
defined below. SRC will be responsible for reclamation of its pits, trenches,
drill sites, and other such disturbances arising out of its activities on the
Property. The Exploration License has an initial one-year term beginning on May
1, 2012 (the Effective Date) and ending on April 30, 2013. SRC has the right
to extend the Exploration License for one additional period of one year provided
SRC makes an additional License Payment of $30,000 in advance for such
extension. SRC was also granted exclusive right and option to purchase the
Owners ownership interest in the Property (the Purchase Option) for the sum
of $90,000 less all License Payments previously made. SRC may exercise the
Purchase Option at any time during the term of the Exploration License by giving
written notice to the Owner. If SRC exercises the Purchase Option, SRC will also
pay the Owner a two percent (2%) royalty based upon gross revenues less
deductions as defined by the Buhrman Agreement, and SRC will also have the
exclusive right and option to purchase such royalty at any time for the sum of
$1,000,000 less any payments previously made by SRC to the Owner pursuant to
such royalty. SRC may terminate the Buhrman Agreement at any time by giving 30
days notice in writing to the Owner.
The Company has entered into operating leases for its office
space and certain office furniture and equipment. Rent payments associated with
those leases for the years ended June 30, 2012, and June 30, 2011, were $28,356
and $31,549, respectively. As of June 30, 2012, the Companys estimated future
minimum cash payments under non-cancelable operating leases for the years ending
June 30, 2013, June 30, 2014, and June 30, 2015, are $23,138, $9,500, and $0,
respectively.
Maintaining Claims in Good Standing
The Company is required to pay to the BLM on or before
September 1
st
of each year, a fee in the amount of $140 per mineral
claim held by the Company. The total amount paid in August 2012, was $155,400
for 1,110 claims held by the Company at that date. The BLM fee for the 18 NL
Project claims held by the Company were paid by IMMI pursuant to the IMMI Option
Agreement described above.
The Company is also required to pay on or before November
1
st
of each year, annual fees to counties in Nevada in which the
claims are held. In September 2011, the Company paid $11,190 to nine counties in
Nevada for annual claims-related fees.
The Company also holds certain patented claims and leases other
patented claims in Nevada. A patented claim is fee simple title to the property.
Patented claims are subject to taxes assessed by the local community based on
assessment rates set annually.
F31
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
19.
Commitments and Contingencies - Contd
The Company holds certain exploration permits in the state of
Arizona, which have a duration of one year from the date of issuance. The
permits may be renewed for up to four additional one-year terms for a total of
five years and provide the holder of the permit with an exclusive right to
explore for minerals within the state land covered by the permit and to apply
for mineral leases to such land. The holder of a permit may remove from the land only the amount of material required for sampling
and testing and is responsible for any damage or destruction caused by the
holders exploration activities. The holder of a permit is entitled to ingress
and egress to the covered site along routes approved by the Arizona State Land
Department. IMC US has posted a bond required by the state of Arizona to back
any reclamation required as a result of work performed. The permit is renewable
if the holder has expended not less than $10.00 per acre during each of the
first two year-long periods and $20.00 per acre during each of the next three
year-long periods. Each permit fee is $500 per year plus $2.00 per acre for the
first two years and $1.00 per acre per year for the following three years. Upon
termination of a mineral exploration permit, the state of Arizona is entitled to
information collected by the permit holder. In the event that a permit holder
discovers a valuable mineral deposit, the permit holder may apply to the Arizona
State Land Department for a mineral lease having a term of 20 years and
renewable for an additional 20 years. A permit holder shall be the preferred
recipient of the mineral lease, provided that all applicable requirements are
met. A mineral lease entitles the lessee to develop and establish a mine on the
leased premises, provided that a mine plan and all necessary approvals are
obtained.
Each of the Companys quarry leases located in Manitoba, Canada
is renewable annually upon payment of rent to the province of Manitoba in the
amount of CDN$24 per hectare or fraction thereof. During the fiscal year ended
June 30, 2012, the Company paid CDN$57,504 in rent for these leases.
20. Related
Party Transactions
There are no amounts owed to or from related parties as of June
30, 2012, and June 30, 2011.
The following transactions were undertaken in the normal course
of operations and are measured at the exchange amount, which is the amount of
consideration established and agreed to by the Company and the related parties.
Year ended June 30, 2012
A corporation owned and operated by the Companys President who
is also a member of the Companys Board of Directors, received $109,668 for the
Presidents services.
The Company recorded expenses of $27,538 for legal services
rendered and expenses incurred on behalf of the Company by a law firm, a partner
of which is also a member of the Companys Board of Directors. In addition the
same law firm was paid $70,853 for legal services rendered and expenses incurred
on behalf of the Company that were capitalized as costs for raising capital.
The Companys Chief Financial Officer received $15,581 for
consulting services provided to the Company.
The Companys Corporate Secretary received $56,167 for
administrative services provided to the Company.
The Company recorded interest expense of $1,381 pursuant to a
promissory note issued to a corporation that is owned and controlled by the
Companys Chief Executive Officer who is also a member of its Board of
Directors. Also see Note 10, Note Payable.
F32
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
20. Related
Party Transactions Contd
On April 25, 2012, the Company granted options to certain of
its officers and directors to purchase up to an aggregate of 4,825,000 Common
Shares at an exercise price of CDN$0.10 per share. On the same date, the Company
also granted options to a consultant who is a family member of a director to
purchase up to 250,000 Common Shares at the same exercise price. The options
were granted in accordance with the Companys Amended Plan and vest at the rate
of one twelfth (1/12) each month until fully vested. The options granted have a
term of ten years. The Company expensed stock based compensation costs of
$34,772 for options granted to officers and directors, and $1,802 for options
granted to the directors family member.
Year ended June 30, 2011
A corporation owned and operated by the Companys President who
is also a member of the Companys Board of Directors, received $102,000 for the
Presidents services.
The Company recorded expenses of $57,704 for legal services
rendered and expenses incurred on behalf of the Company by a law firm, a partner
of which is also a member of the Companys Board of Directors.
The Companys Chief Financial Officer received $13,974 for
consulting services provided to the Company.
The Companys Corporate Secretary received $54,575 for
administrative services provided to the Company
On February 8, 2011, the Company completed a private placement
of 2,083,333 Common Shares at a price of $0.24 per share for total consideration
of $500,000 with an entity that is owned and controlled by the Companys Chief
Executive Officer, who is also a member of the Companys Board of Directors.
On June 1, 2011, the Company completed a private placement of
2,608,696 shares of Series A Preferred Stock at a price of $0.115 per share for
total consideration of $300,000 with an entity owned and controlled by the
Companys Chief Executive Officer, who is also a member of the Companys Board
of Directors. See Note 13, Redeemable Preferred Stock.
In June 2011, 2,450,000 options that were held by directors and
officers of the Company were terminated by mutual agreement of the Company and
the option holders. In each case, the option price exceeded the price at which
the Companys shares were traded.
F33
INFRASTRUCTURE MATERIALS CORP.
(AN EXPLORATION
STAGE COMPANY)
Notes to the Consolidated Financial Statements
June 30, 2012 and 2011
(Amounts expressed in US Dollars)
21.
Subsequent Events
Based on a review of all of the Companys mineral claims, On
August 31, 2012 the Company elected to drop certain limestone mineral claims
held by IMC US that it has determined are not in the Companys best interests to
retain.
-
All 7 mineral claims of the Rock Hill Claim Group were dropped.
-
All 5 mineral claims of the Buffalo Mountain Claim Group were dropped.
-
All 4 mineral claims of the Royale Claim Group were dropped.
-
All 19 mineral claims of the Pequop Claim Group were dropped.
-
All 23 mineral claims of the Ragged Top Claim Group were dropped.
-
All 44 mineral claims of the Jumbled Mountain Claim Group were dropped.
-
All 13 mineral claims of the Burnt Springs Claim Group were dropped.
On July 26, 2012, the Company engaged Harris Exploration
Drilling and Associates Inc. to conduct professional drilling services and
related activities at SRCs Kope Scheelite project at an estimated cost of
$175,000.
On August 16, 2012, 350,000 options that were granted pursuant
to the Companys 2006 Stock Option Plan expired.
On September 6, 2012, the Company received $50,000 cash and
300,000 shares of IMMCs common stock pursuant to the option agreement between
SRC and IMMI, IMMCs wholly owned subsidiary, as further described in Note 19,
Commitments and Contingencies.
F34
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