The accompanying notes are an integral part of these financial statements
F-3
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
NOTE 1 – NATURE OF OPERATIONS
Potash America, Inc. (formerly Adtomize Inc.) (“the Company” or “PTAM”), was incorporated in the state of Nevada on July 31, 2007. PTAM’s primary focus is the development of fertilizer and agri-business assets. Such assets may include Potash, Montmorillonite, Bentonite and Gypsum. The Company seeks to acquire known deposits whose economic value has recently changed with market pricing levels, and develop these assets into agri-products.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Exploration Stage Company
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles related to accounting and reporting by exploration stage companies. An exploration stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from.
Basis of Presentation
The accompanying interim unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, stockholders’ deficit or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The interim unaudited financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, which contains the annual audited financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the year ended March 31, 2012. The interim results for the period ended September 30, 2012 are not necessarily indicative of the results for the full fiscal year. The interim unaudited financial statements are presented in USD.
Accounting Basis
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a March 31 fiscal year end.
Financial Instrument
The Company's financial instrument consists of cash, prepaid expenses, deposits, accrued expenses, deferred compensation, amounts due to stockholders and a line of credit.
The amounts due to stockholders are non-interest bearing. It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from its other financial instruments and that their fair values approximate their carrying values except where separately disclosed.
Cash and Cash Equivalents
PTAM considers all highly liquid investments with maturities of three months or less to be cash equivalents. At September 30, 2012 and March 31, 2012, respectively, the Company had $13,461 and $69,323 of cash.
F-4
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Mineral rights, property and acquisition costs
Since March 31, 2011, the Company is primarily engaged in the acquisition and exploration of mining properties. The Company has not yet realized any revenues from its planned operations.
The Company capitalizes acquisition and option costs of mineral rights as tangible assets. Upon commencement of commercial production, the mineral rights will be amortized using the unit-of-production method over the life of the mineral rights. If the Company does not continue with exploration after the completion of the feasibility study, the mineral rights will be expensed at that time.
The costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred to develop and expand the capacity of mines, or to develop mine areas in advance of production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current exploration or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates the carrying value of capitalized mining costs and related property and equipment costs, to determine if these costs are in excess of their recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Evaluation of the carrying value of capitalized costs and any related property and equipment costs are based upon expected future cash flows and/or estimated salvage value in accordance with Accounting Standards Codification (ASC) 360-10-35-15,
Impairment or Disposal of Long-Lived Assets
.
Impairment of long-lived assets
The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17,
Measurement of an Impairment Loss
, if events or circumstances indicate that their carrying amount might not be recoverable. As of September 30, 2012, exploration progress is on target with the Company’s exploration and evaluation plan and no events or circumstances have happened to indicate that the related carrying values of the properties may not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules of FASB ASC 930-360-35,
Asset Impairment
, and 360-10-15-3 through 15-5,
Impairment or Disposal of Long-Lived Assets
.
Advertising
The Company expenses advertising costs as incurred. The Company has had no advertising activity since inception.
Revenue Recognition
The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles of the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The more significant areas requiring the use of estimates include asset impairment, stock-based compensation, and future income tax amounts. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.
F-5
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of September 30, 2012.
During the year ended March 31, 2011, the Company enacted an 80 to 1 forward stock split. All share and per share data has been adjusted to reflect such stock split.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. On March 31, 2011, the Company instituted a Stock Option Plan which allows for the issuance of 3,000,000 shares of common stock to the Company’s management, employees and consultants. As of September 30, 2012, in lieu of compensation the Company issued 465,000 common stock shares and 1,305,000 in stock options.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Recent Accounting Pronouncements
PTAM does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
NOTE 3 – MINING PROPERTY
On June 6, 2011, we entered into and closed a property acquisition agreement with Habitants Minerals Ltd. Pursuant to the terms of the agreement; we acquired an undivided 100% interest in certain unpatented mining claims located in Western Newfoundland, Canada which we refer to as the “Newfoundland Property”. Pursuant to the terms of the agreement, we agreed to provide the following payments to Habitants:
The aggregate consideration of $50,000 consisting of the following:
·
$30,000 which was previously provided to Habitants, and
·
the balance of $20,000 which was provided on the closing of the agreement.
If we identify any material defect in Habitant’s title to the Newfoundland Property, we shall give Habitants notice of such defect. If the defect has not been cured within 30 days of receipt of such notice, we shall be entitled to take such curative action as is reasonably necessary, and shall be entitled to deduct the costs and expenses incurred in taking such action from the payments then otherwise due or accruing due to Habitants. If there are no such payments, we shall be entitled to a refund in the amount of said costs and expenses.
F-6
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
NOTE 3 – MINING PROPERTY (CONTINUED)
If any third party asserts any right or claim to the Newfoundland Property or to any amounts payable to Habitants, we may deposit any amounts otherwise due to Habitants in escrow with a suitable agent until the validity of such right or claim has been finally resolved. If we deposit said amounts in escrow, we shall be deemed not in default under this agreement for failure to pay such amounts to Habitants.
On August 31, 2011, we entered into a purchase and sale agreement with Ms. Kim Diaz and Sonseeahry related to the acquisition of the 100% interest in the Sodaville Claims. Under the terms of the purchase and sale agreement our company issued a pre-closing advance of $200,000 (paid on August 29, 2011).
As additional consideration our company will pay compensation as follows:
1.
$200,000 on November 31, 2011 (paid);
2. $50,000 on July 1, 2012 (paid);
3. $1,500,000, which will be paid in equal payments of $500,000 on or before January 1st of 2013, 2014 and 2015;
4. 2,500,000 shares of our company’s common stock based on the pro-rata interest in the claims and a total of 500,000 shares to those parties designated by the sellers on or before July 1st of 2012, 2013 and 2014 (1,000,000 shares were issued to the Sellers effective June 30, 2012);
We have also agreed to pay a royalty of $10 per short ton of product produced from the Sodaville Claims and sold by our company.
Our company has also located an additional 48 unpatented lode mining claims in the area in which the Sodaville Claims are located. As part of the consideration our company will also pay the sellers a royalty of $10 per short ton of product produced from the Additional Claims and sold by our company. In addition to granting the royalty in the Additional Claims our company will issue 50,000 shares of restricted stock to the sellers on or before January 1, 2015.
Our company shall also reserve a NSR Royalty on certain metallic products produced from the Sodaville Claims equal to 2% of the net smelter returns. The NSR Royalty shall not apply to and no NSR Royalty payments shall be due for any product produced from the Sodaville Claims sold by our company.
Additionally, our company will pay the sellers a guaranteed minimum annual royalty of $50,000 for a period of 5 years with the first payment due on December 31, 2015 and the last payment due on December 31, 2020.
There has been no mining of resources to date.
NOTE 4 – PREPAID EXPENSES
Prepaid expenses consisted of $10,406 of prepaid insurance and rent, and $107,639 of stock compensation as of September 30, 2012.
NOTE 5 – DEPOSITS
The current deposit of $500 consist of a rent deposit near the mining site.
F-7
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
NOTE 6 – ACCRUED EXPENSES
Accrued expenses and liabilities consisted of the following as of September 30, 2012 and March 31, 2012:
|
|
|
|
|
September 30,
2012
|
March 31, 2012
|
|
Accounting fees
|
$ 2,250
|
$ -
|
|
Legal fees
|
-
|
5,588
|
|
Filing fees
|
-
|
173
|
|
Total Accrued Expenses
|
$ 2,250
|
$ 5,761
|
NOTE 7 – NOTES PAYABLE – RELATED PARTIES
A shareholder and current director of the Company advanced funds at various times during the year ended March 31, 2011 in order to support operations. The loans are unsecured, non-interest bearing and due on demand. The amount due to the shareholder and director was $35,500 as of September 30, 2012.
NOTE 8 – LINES OF CREDIT
The Company entered into a Credit Facility Agreement during the year ended March 31, 2011 in the amount of $200,000. The line of credit is secured by the assets of the Company, bears 5% interest and is due on demand.
On June 22, 2011, the Company’s credit line was increased from $200,000 to $1,000,000 under the same terms. The line of credit was drawn to $630,000 as of September 30, 2012. Accrued interest related to the line of credit was $35,574 as of September 30, 2012.
On November 22, 2011, the Company entered into a second Credit Facility Agreement in which the lender agreed to provide the Company with a line of credit in the amount of up to $500,000. Pursuant to the terms of the Credit Facility Agreement, the Company shall pay any outstanding amounts to the lender on demand. The Company may also repay the loan and accrued interest at any time without penalty. Amounts outstanding shall bear interest at the rate of 10% per annum. The line of credit was drawn to $0 as of September 30, 2012. Accrued interest related to the line of credit was $21,246 as of September 30, 2012.
NOTE 9 – CONVERTIBLE LINE OF CREDIT
On April 12, 2012, the Company entered into a US$1,000,000 Letter of Credit Agreement dated March 27, 2012. Pursuant to the terms outlined in the Letter of Credit, at any time the Company may require any and all funds outstanding under the Letter of Credit, except for accrued interest which is to be paid in cash, to be converted into units of the Company at a price of $0.80 per unit (the “Unit”). Each Unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at $1.50 US for a period of five (5) years. The Company will pay annual interest of 5% until the loan is repaid or converted into Units. The Company will issue 1,250,000 Units when the exercise provision is enacted. In association with conversion feature of the line of credit with warrants the Company had $916,335 in derivative liability as of September 30, 2012. Additional, the Company incurred derivative expense of $184,044, change in derivative expense of $22,291 and amortization of debt discount of $257,881 as of September 30, 2012. The line of credit was drawn to $710,000 which is partial offset by the debt discount $452,119, totaling to $257,881 as of September 30, 2012. Accrued interest related to the line of credit was $11,477 as of September 30, 2012.
F-8
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
NOTE 10 – RELATED PARTY TRANSACTIONS
On November 7, 2011, the Company entered into an employment agreement with Barry Wattenberg, our president, chief executive officer, chief financial officer, secretary, treasurer and a member of our board of directors. The employment agreement was effective on December 1, 2011.
Pursuant to the terms of the employment agreement Mr. Wattenberg will receive a base salary of $10,000 per month, payments of which will accrue, and a key man life insurance policy of $1,000,000 payable half to the Company and half to Mr. Wattenberg’s estate. The Company shall also reimburse all reasonable and necessary business expenses incurred by Mr. Wattenberg in performance of his duties. When established, the Company will compensate Mr. Wattenberg with group health insurance benefits and will allow for standard executive benefits such as vacation, holidays, sick leave and the granting of stock options when deemed appropriate by the Company.
The total amounts of $125,500 and $65,500 as of September 30, 2012 and March 31, 2012, respectively, have been recorded as deferred compensation.
NOTE 11 – CAPITAL STOCK
The Company has 200,000,000 common shares authorized at a par value of $0.0001 per share.
During the period ended March 31, 2008, the Company issued 80,000,000 common shares at to founders for total proceeds of $8,000. Additionally, the Company issued 67,200,000 shares during the period ended March 31, 2008 for total proceeds of $42,000.
On July 9, 2010, a former shareholder and director of the Company agreed to forgive debt in the amount of $14,244. This amount has been recorded as contributed capital.
Effective September 8, 2010 the Company increased the authorized shares of common stock from 100,000,000 to 200,000,000 and enacted a forward stock split of 80 to 1. All share and per share data has been adjusted to reflect such stock split.
In May 2011 the Company issued 150,000 common shares in lieu of compensation along with stock options.
On November 10, 2011, the Company issued 25,000 shares of common stock at a value of $0.0001 per share as compensation for a finder’s fee related to the Sodaville, Nevada property.
On December 31, 2011, the Company issued an aggregate of 190,000 restricted shares of our common stock at a value of $0.0001 per share to our directors, advisors and consultants to the Company.
On June 30, 2012, the Company issued 1,000,000 restricted shares of our common stock at a value of approximately $0.20 per share to Kim Diaz of BLM Claims located in Mineral County Nevada in connection with the acquisition of mineral properties. (See note 3 for further details).
The Company purchased back 40,000 shares of common stock for cash totaling $10,000 during the period ended September 30, 2012. The stock is currently being held in treasury.
Stock-based compensation expense for the period ending September 30, 2012 was $157,754.
There were 148,665,000 shares of common stock issued and outstanding as of September 30, 2012. As September 30, 2012, the Company has no warrants outstanding. There are 1,305,000 stock options outstanding.
F-9
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
NOTE 11 – CAPITAL STOCK (CONTINUED)
Stock options
In April 2011, the Company issued 600,000 stock options to directors of the Company per the Stock Option Plan with an exercise price of $0.60 per share for a 5 year term. In May 2011, the Company entered into two consulting agreements which granted a total of 75,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $1.00 per share for a 5 year term. In December 2011, the Company granted a total of 115,000 stock options to advisors and consultants. All these stock options are exercisable at $1.00 per share for a 3 year term.
In April 2012, the Company issued 35,000 stock options to advisors and consultants of the Company per the Stock Option Plan with an exercise price of $1.00 per share for a 5 year term.
In May 2012, the Company issued 25,000 stock options to consultants of the Company per the Stock Option Plan with an exercise price of $1.00 per share for a 5 year term.
In June 2012, the Company issued 25,000 stock options to consultants of the Company per the Stock Option Plan with an exercise price of $1.00 per share for a 5 year term.
In July 2012, the Company issued 35,000 stock options to advisors and consultants of the Company per the Stock Option Plan with an exercise price of 5% above market price ($0.29) per share for a 5 year term
Stock option compensation expense for the period ending September 30, 2012 was $157,754. The expense was calculated using the Black-Scholes pricing model. The following table summarizes information about options as of September 30, 2012:
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "could", "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable laws, including the securities laws of the United States, we do not intend to update any of the forward-looking statements so as to conform these statements to actual results.
Our unaudited financial statements are stated in U.S. dollars and are prepared in accordance with generally accepted accounting principles in the United States. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "common shares" refer to the common shares in our capital stock.
As used in this quarterly report and unless otherwise indicated, the terms "we", "us", "our" and "our company" mean Potash America, Inc., a Nevada corporation, unless otherwise indicated.
General Overview
We were incorporated in the state of Nevada on July 31, 2007 as Adtomize Inc. On June 29, 2010, we underwent a change of control. On September 8, 2010, we affected a split of our authorized capital and our issued and outstanding common shares on an 80 for 1 basis. On March 3, 2011 we changed our name to Potash America, Inc., and began looking for opportunities to acquire exploration stage mineral properties. We maintain our business offices at 200 South Virginia Street, 8th Floor, Reno, Nevada, 89501 and our telephone number is (775) 398-3019.
Before we went through a change of control and business focus, we engaged in the business of developing an online advertising brokerage service to bring together high traffic web site publishers with companies wishing to place ads on them in order to drive traffic to their own internet sites. Since our inception, we had been attempting to raise money to operate our business, but have not been able to secure the funds necessary to do so. The lack of funds and the present economy have prevented that from happening. As we have been unable to raise the capital necessary to develop and market our service, we began a search for other business opportunities which may benefit our shareholders and allow us to raise capital and operate.
Current Business
Shortly after changing our business focus to exploration stage properties, we identified an opportunity to acquire the Newfoundland Property from Habitants Minerals Ltd. We entered into a letter of intent on March 15, 2011 and subsequently a mining property acquisition agreement on June 6, 2011. We now plan to undertake further evaluation of the Newfoundland Property.
5
On March 15, 2011 we entered into a credit facility agreement. The lender agreed to provide us with a line of credit in the amount of up to $200,000 wherein, within three business days after receipt of notice from us, the lender will advance amounts requested to our company. On June 22, 2011, the credit facility agreement was amended to increase the size of the line of credit to a total of $1,000,000. We shall use the advances to fund working capital and general corporate activities. Pursuant to the terms of the credit facility agreement, our company shall pay any outstanding amounts to the lender on demand. We may also repay the loan and accrued interest at any time without penalty. Amounts outstanding shall bear interest at the rate of 5% per annum.
We entered into a letter of intent on March 15, 2011 with Habitants Minerals Ltd with respect to an acquisition of a property in Newfoundland, Canada.
On June 6, 2011 we entered into and closed a property acquisition agreement with Habitants. Pursuant to the terms of the agreement, we acquired an undivided 100% interest in certain unpatented mining claims located in Western Newfoundland, Canada which we refer to as the “Newfoundland Property”. Pursuant to the terms of the agreement, we agreed to provide the following payments to Habitants:
The aggregate consideration of $50,000 consisting of the following:
-
$30,000 which was previously provided to Habitants, and
-
the balance of $20,000 which was provided on the closing of the agreement.
If any third party asserts any right or claim to the Newfoundland Property or to any amounts payable to Habitants, we may deposit any amounts otherwise due to Habitants in escrow with a suitable agent until the validity of such right or claim has been finally resolved. If we deposit said amounts in escrow, we shall be deemed not in default under this agreement for failure to pay such amounts to Habitants.
On May 11, 2011 we entered into a letter of intent to acquire a 100% interest in 39 Bureau of Land Management claims in Mineral County, Nevada (the “BLM Claims”). Pursuant to the terms of the letter of intent our company advanced the following payments to the administrator of the claims, Ms. Kim Diaz:
(a)
$20,000.00, of which $5,000.00 was disbursed to Ms. Diaz, contemporaneously with the execution of the letter of intent; and
(b)
$5,000.00, upon the execution of the letter of intent, to enable Ms. Diaz and Elwayne E. Everett to commence the bentonite project on the adjacent property;
Under the terms of the letter of intent our company and Ms. Diaz would be required to enter into an option agreement on or before August 31, 2011. Pursuant to the option agreement our company would be required advance $10,000 to Ms. Diaz to cover reimbursement on the 39 BLM Claims which would be deducted from the required payment of $210,000 to Ms. Diaz upon execution of the option agreement.
On August 31, 2011 we entered into a purchase and sale agreement related to the acquisition of the 100% interest in the BLM Claims. Under the terms of the purchase and sale agreement our company issued a pre-closing advance of $200,000 to Ms. Kim Diaz and Sonseeahray Diaz (the “Sellers”).
As additional consideration our company will pay compensation to the Sellers as follows:
(a)
$200,000 on November 31, 2011 (paid);
(b)
$50,000 on July 1, 2012; (paid on June 30, 2012)
(c)
$1,500,000, which will be paid in equal payments of $500,000 on or before January 1st of 2013, 2014 and 2015;
(d)
2,500,000 shares of our company’s common stock based on the Sellers’ pro-rata interest in the claims and a total of 500,000 shares to those parties designated by the Sellers on or before July 1st of 2012, 2013 and 2014 (1,000,000 shares were issued to the Sellers effective June 30, 2012);
We have also agreed to pay a royalty of $10 per short ton of product produced from the BLM Claims and sold by our company.
6
Our company has also located 48 unpatented lode mining claims (the “Additional Claims”) in the area in which the BLM Claims are located. As part of the consideration our company will also pay the Sellers a royalty of $10 per short ton of product produced from the Additional Claims and sold by our company. In addition to granting the royalty in the Additional Claims our company will issue 50,000 shares of restricted stock to the Sellers on or before January 1, 2015.
Our company shall also reserve a net smelter returns royalty (the “NSR Royalty”) on certain metallic products produced from the BLM Claims equal to 2% of the net smelter returns. The NSR Royalty shall not apply to and no NSR Royalty payments shall be due for any product produced from the BLM Claims sold by our company.
Additionally, our company will pay the Sellers a guaranteed minimum annual royalty of $50,000 for a period of 5 years with the first payment due on December 31, 2015 and the last payment due on December 31, 2020.
On November 22, 2011, we entered a second credit facility agreement in which the lender agreed to provide our company with a line of credit in the amount of up to $500,000. Pursuant to the terms of the credit facility agreement, our company shall pay any outstanding amounts to the lender on demand. Our company may also repay the loan and accrued interest at any time without penalty. Amounts outstanding shall bear interest at the rate of 10% per annum.
Effective December 1, 2011 we entered into an employment agreement with our president, Barry Wattenberg, under which Mr. Wattenberg will receive a base salary of $10,000 per month, payments of which will accrue, and a key man life insurance policy of $1,000,000 payable half to our company and half to Mr. Wattenberg’s estate.
Purchase of Significant Equipment
We do not intend to purchase any significant equipment over the next twelve months.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Employees
We do not expect any material changes in the number of employees over the next 12 month period (although we may enter into employment or consulting agreements with our officers or directors). We do and will continue to outsource contract employment as needed.
Results of Operations
The following unaudited summary of our results of operations should be read in conjunction with our financial statements for the three month periods ended September 30, 2012 and 2011.
We have not generated any revenue since inception and are dependent upon obtaining financing to pursue our business activities. For these reasons, our auditors believe that there is substantial doubt that we will be able to continue as a going concern.
Results of Operations for the Three Months Ended September 30, 2012 and 2011
Our operating results for the three month periods ended September 30, 2012 and 2011 and the changes between those periods for the respective items are summarized as follows:
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Month
Period Ended
September 30,
2012
|
|
|
Three Month
Period Ended
September 30,
2011
|
|
|
Change Between
Three Month
Periods Ended
September 30, 2012 and September 30, 2011
|
|
|
Revenue
|
$
|
Nil
|
|
$
|
Nil
|
|
$
|
Nil
|
|
|
Professional fees
|
$
|
64,836
|
|
$
|
24,724
|
|
$
|
40,112
|
|
|
Transfer agent and filing fees
|
$
|
5,498
|
|
$
|
10,290
|
|
$
|
(4,792)
|
|
|
Consulting fees
|
$
|
30,282
|
|
$
|
38,450
|
|
$
|
(8,168)
|
|
|
Web development
|
$
|
1,396
|
|
$
|
8,969
|
|
$
|
(7,573)
|
|
|
Stock compensation
|
$
|
8,699
|
|
$
|
95,416
|
|
$
|
(86,717)
|
|
|
Exploration costs
|
$
|
68,148
|
|
$
|
24,200
|
|
$
|
43,948
|
|
|
General and administrative
|
$
|
34,341
|
|
$
|
14,580
|
|
$
|
19,761
|
|
|
Interest Expense
|
$
|
17,660
|
|
$
|
3,773
|
|
$
|
13,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative expense
|
$
|
75,420
|
|
$
|
Nil
|
|
$
|
75,420
|
|
|
Change in derivative
|
$
|
8,083
|
|
$
|
Nil
|
|
$
|
8,083
|
|
|
Amortization of debt discount
|
$
|
156,785
|
|
$
|
Nil
|
|
$
|
156,785
|
|
|
Net loss
|
$
|
(471,148
|
)
|
$
|
(220,402
|
)
|
$
|
(250,746)
|
|
Our expenses increased during the three month period ended September 30, 2012 compared to the same period in 2011 primarily as a result of increases in professional fees, exploration costs, general and administrative expenses, interest expenses, change in derivative expense and amortization of debt discount.
Results of Operations for the Six Months Ended September 30, 2012 and 2011
Our operating results for the six month periods ended September 30, 2012 and 2011 and the changes between those periods for the respective items are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Month
Period Ended
September 30,
2012
|
|
|
Six Month
Period Ended
September 30,
2011
|
|
|
Change Between
Six Month
Periods Ended
September 30, 2012 and September 30, 2011
|
|
|
Revenue
|
$
|
Nil
|
|
$
|
Nil
|
|
$
|
Nil
|
|
|
Professional fees
|
$
|
120,245
|
|
$
|
38,854
|
|
$
|
81,391
|
|
|
Transfer agent and filing fees
|
$
|
6,870
|
|
$
|
12,238
|
|
$
|
(5,368)
|
|
|
Consulting fees
|
$
|
71,997
|
|
$
|
50,150
|
|
$
|
21,847
|
|
|
Web development
|
$
|
2,571
|
|
$
|
19,514
|
|
$
|
(16,943)
|
|
|
Stock compensation
|
$
|
157, 754
|
|
$
|
398,531
|
|
$
|
(240,777)
|
|
|
Exploration costs
|
$
|
174,331
|
|
$
|
24,200
|
|
$
|
150,131
|
|
|
General and administrative
|
$
|
50,610
|
|
$
|
28,705
|
|
$
|
21,905
|
|
|
Interest Expense
|
$
|
39,970
|
|
$
|
4,906
|
|
$
|
35,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative expense
|
$
|
184,044
|
|
$
|
Nil
|
|
$
|
184,044
|
|
|
Change in derivative
|
$
|
22,291
|
|
$
|
Nil
|
|
$
|
22,291
|
|
|
Amortization of debt discount
|
$
|
257,880
|
|
$
|
Nil
|
|
$
|
257,880
|
|
|
Net loss
|
$
|
(1,088,563
|
)
|
$
|
(577,098
|
)
|
$
|
(511,465)
|
|