UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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x
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ANNUAL
REPORT
PURSUANT
TO
SECTION
13
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934
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For the fiscal year ended
April
30, 2012
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¨
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TRANSITION
REPORT
PURSUANT
TO
SECTION
13
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934
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For the transition period from _____ to
_____
COMMISSION FILE NUMBER
000-50569
TERRACE
VENTURES INC.
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(Exact name of registrant as specified in its charter)
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NEVADA
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91-2147101
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State or other jurisdiction of incorporation or organization
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(I.R.S. Employer Identification No.)
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Suite 201, 810 Peace Portal Drive,
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Blaine, WA
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98230
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including area code
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(360) 220-5218
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Securities registered under Section 12(b) of the Exchange Act:
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NONE.
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Securities registered under Section 12(g) of the Exchange Act:
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Common Stock, $0.001
Par Value Per Share.
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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 Section 13 or Section 15(d) of the Act.
Yes
¨
No
x
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes
x
No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (s. 229.405 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
¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (s229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.
Large accelerated filer
¨
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Accelerated filer
¨
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Non-accelerated filer
¨
(Do
not check if a smaller reporting company)
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Smaller reporting
company
x
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
¨
No
x
State the aggregate market value of the
voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold,
or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently
completed second fiscal quarter:
$3,882,830 based on a price of $0.125, being the price at which our common equity was last
sold as of the last business day of our second fiscal quarter.
Indicate the number of shares outstanding
of each of the registrant’s classes of common stock, as of the latest practicable date.
As of August 13, 2012, the
Registrant had 33,160,660 shares of common stock outstanding.
TERRACE VENTURES INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED APRIL 30, 2012
TABLE OF CONTENTS
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PAGE
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PART I
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3
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ITEM 1.
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BUSINESS
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3
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ITEM 1A.
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RISK FACTORS
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11
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ITEM 2.
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PROPERTIES
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14
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ITEM 3.
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LEGAL PROCEEDINGS
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14
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PART II
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15
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ITEM 5.
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MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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15
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ITEM 7.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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16
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ITEM 8.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
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20
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ITEM 9.
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CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
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38
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ITEM 9AT.
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CONTROLS AND PROCEDURES
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38
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ITEM 9B.
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OTHER INFORMATION
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39
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PART III
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40
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ITEM 10.
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DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE
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40
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ITEM 11.
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EXECUTIVE COMPENSATION
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41
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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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42
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ITEM 13.
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CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE
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44
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ITEM 14.
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PRINCIPAL ACCOUNTING FEES AND SERVICES
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46
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PART IV
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46
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ITEM 15.
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EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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46
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SIGNATURES
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48
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PART I
The information in this discussion contains
forward-looking statements. These forward-looking statements involve risks and uncertainties, including statements regarding the
Company's capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical
facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expect," "plan," "intend," "anticipate,"
"believe," "estimate,” "predict," "potential" or "continue", the negative of
such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you
should consider various factors, including the risks described below, and, from time to time, in other reports the Company files
with the United States Securities and Exchange Commission (the “SEC”). These factors may cause the Company's actual
results to differ materially from any forward-looking statement. The Company disclaims any obligation to publicly update these
statements, or disclose any difference between its actual results and those reflected in these statements.
As used in this Annual Report, the terms
“we,” “us,” “our,” “Terrace,” and the “Company” mean Terrace Ventures
Inc. and its subsidiaries, unless otherwise indicated. All dollar amounts in this Annual Report are expressed in U.S. dollars,
unless otherwise indicated.
Overview
We were incorporated on February 20, 2001
under the laws of the State of Nevada.
Our business plan is to assemble a portfolio
of mineral properties with gold potential and to engage in the exploration and development of these properties. We currently have
an earn-in agreement to acquire 75% interest in Pengram Corporation's agreement with Scoonover Exploration LLC and JR Exploration
LLC (the “Underlying Agreement”) to acquire the Golden Snow Property (as described below).
Golden Snow Project
Earn-in Agreement
On April 26, 2011, we entered into an
agreement with Pengram Corporation ("Pengram") as amended on June 29, 2011 and July 31, 2012 (the "Earn-In Agreement")
whereby we will earn up to a 75% interest in Pengram's agreement with Scoonover Exploration LLC and JR Exploration LLC (the “Underlying
Agreement”) to acquire the Golden Snow Property by issuing a promissory note to Pengram of $25,000, paying to Pengram up
to $150,000 and expending up to $1,750,000 of exploration work on the Golden Snow Property. Under the terms of the Earn-In Agreement,
we will exercise our interest in the Underlying Agreement as follows:
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(i)
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The first 25% interest in the Underlying
Agreement upon us:
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a.
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issuing Pengram a $25,000 promissory
note, bearing interest at a rate of 10% per annum, due on September
27, 2011 (which was issued); and
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b.
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completing cumulative exploration
expenditures on the Golden Snow Property totalling $250,000 by December
31, 2012.
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(ii)
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An additional 25% interest in
the Underlying Agreement upon us:
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a.
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paying Pengram $50,000 on or before
May 31, 2013; and
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b.
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completing cumulative exploration
expenditures on the Golden Snow Property totalling $500,000 by December
31, 2013;
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(iii)
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An additional 25% interest in
the Underlying Agreement upon us:
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a.
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paying Pengram $100,000 on or
before May 31, 2014; and
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b.
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completing cumulative exploration
expenditures on the Golden Snow Property totalling $1,000,000
by December 31, 2014.
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We are also obligated to pay all advance
royalties, county and BLM claim fees and Nevada state taxes during the currency of the Earn-In Agreement. There is no assurance
that we be able to perform our obligations under the Earn-In Agreement.
On December 31, 2011, Pengram, in consideration
of $5,000 (which has been paid), agreed to accept, in substitution for the $25,000 promissory note set out above, a series of
non-interest bearing promissory notes totaling $30,000 payable on the following dates:
Payment Due Date
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Amount
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March 31, 2012
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$
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5,000.00
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June 30, 2012
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5,000.00
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September 30, 2012
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10,000.00
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December 31, 2012
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10,000.00
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Total
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$
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30,000.00
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Description of Property
The Golden Snow Project consists of 111
unpatented mining claims covering approximately 3.5 square miles. The titles to the property will expire on September 1, 2012
if we do not renew the claims.
Location, Access, and Physiography
The Golden Snow Project is contiguous
to the southern end of Staccato Gold’s Lookout Mountain property, which has identified several mineralized areas. The Golden
Snow Project is located in the Battle Mountain-Eureka Trend, approximately eight miles south of the East Archimedes gold deposit
where Barrick Gold Corporation is currently mining a Carlin- type sediment hosted gold deposit. The Eureka district is at the
south end of a northerly trending series of intrusives.
Figure 2
Location of Golden Snow Project
Property History
Exploration in the Eureka District commenced
in the 1860s. The Company does not have any records of exploration work conducted on the Golden Snow Project prior to 2006.
In 2006, Minterra Resources acquired the
Golden Snow Project. After its acquisition, Minterra Resources commenced a gravity survey and a 95 line kilometer ground magnetic
survey across the Golden Snow Project. The gravity data identified two up-thrown (horst) blocks and the magnetic data indicate
a prominent circular high that is approximately 2,782 feet in diameter and has a similar signature to Eocene age intrusive and
extrusive rocks throughout the Eureka District. Processing of the gravity data by Wright Geophysics identified a number of geophysical
linears and Wright also interpreted the magnetic data which shows a prominent circular high that is approximately 2,800 feet in
diameter; this has a signature similar to Eocene age intrusive and extrusive rocks associated with mineralization throughout the
Eureka District.
In 2007, Minterra Resources completed
a 932 sample soil geochemistry program designed to further refine and evaluate the prominent horst-bounding faults. Analysis of
the data produced numerous large, coherent, multipoint clusters of anomalous gold, arsenic, antimony, mercury, lead, zinc and
barite. Anomalous gold, silver and trace element values from the 2006 soil geochemical program coincided with fault zones outlined
by the geophysical-gravity data.
Geology
Many of the sediment-hosted gold deposits
in Nevada appear to have developed at or near platform margin/basin margin sites where mineralization is found to be disseminated
along the “low-stands” or karsted zone separated different stratigraphic units. The Golden Snow Project is positioned
along this major platform margin that extends northwards to Cortez Hills, Pipeline and beyond. Future study of the location of
these platform margins may result in the discovery of additional world-class gold deposits in Nevada.
Gold mineralization has come up along
the host margin where Devonian age rocks are in contract with the Cambrian age rocks. The mineralization is not only found within
the feeder fault, but it is also disseminated out along these “low-stand zones” which are commonly the break between
different rock formations. Another example of the same host margin mineralization can be seen in a cross section of the mineralization
at Lone Tree. Mineralization has also been discovered along the Wayne Zone Fault, which forms the western edge of the horst, and
spreads out along favorable host rocks. Both styles of mineralization appear to potentially exist at the Golden Snow Project.
The geology of the Golden Snow Project
has been interpreted to consist of Devonian age rocks striking north/south and trending southward under pediment cover. It has
also been interpreted that the Cambrian section is possibly in fault contact with the Devonian section. Both rock types are favorable
host rocks for Carlin-style mineralization throughout Nevada, especially in the Eureka Area.
The following sets out the geological
units exposed on the Golden Snow Project:
Bay State Dolomite
– The
Bay State Dolomite is a massive dark grey to black to purplish dolomite which is reported to be 600-850 feet thick in the Eureka
Area. The lower portion of this unit is made up of irregular bedded light-grey, dolomite sandstone. The upper portion is in gradational
contact with the overlying Devils Gate Limestone.
Sentinel Mountain Dolomite
–
The Sentinel Mountain Dolomite gradationally overlies Oxyoke Canyon. It is composed of alternating, thick-bedded, coarse-grained,
light-gray dolomite and motted, finely laminated, chocolate brown dolomites with a strong petroliferous odor when broken. It ranges
in thickness from 410 feet to 600 feet.
Oxyoke Canyon
– The Oxyoke
is predominantly light gray to brown weathering, fine to medium-grained, quartz sandstone with a dolomatic matrix. It ranges in
thickness of less than 20 feet up to 400 feet thick throughout the Eureka Area.
Sadler Ranch
– The Sadler
Ranch locally has been divided up into an upper and lower dolomite and a middle crinoidal dolomite. The lower dolomite is a medium
to thick-bedded, very finely grained, light gray to yellowish-gray dolomite. The middle crinoidal dolomite is a light to medium-gray,
poorly bedded, laminated to cross-laminated, crinoidal packstone with thin lenses of mudstone and packstone. The upper dolomite
is a medium to thick-bedded, very fine-grained, light-gray laminated dolomite. The thickness of this unit varies from 90 feet
to 450 feet.
McColley Canyon/Bartine Member
– The McColley Canyon is dominantly a medium to thick bedded gray limestone with interbedded light brown-gray fossiliferous
and organic-rich dolomite. The Bartine is composed of thin to medium-bedded, medium-gray, fine grained limestone and yellowish
argillaceous limestone with abundant brachiopods. Some people combine these units whereas others map them as separate units. These
rocks vary from 330 feet to 650 feet thick.
Beacon Peak Dolomite
– This
unit is a massive, light gray to brown, finely laminated dolomite, with local thin beds of finely laminated dolomite and thin
lenses of well rounded, quartz-rich sandstones with a dolomitic matrix. The average thickness is 328 feet.
Mineralization
Two major target zones exist on the Golden
Snow Project. These primary targets would be eastern and western boundary of the horst block. Both the eastern and western edge
extends for over 15,000 feet as shown by gravity geophysics. Only drill hole ELP-8 drilled close enough to the eastern edge of
the gravity high to test for possible mineralization. The remaining holes were either far to east and out into the abyss, or too
far west of the eastern horst fault and on top of the gravity high.
A magnetic survey run over the eastern
portion of the claim block shows a magnetic high and has been interpreted to be an intrusive as opposed to volcanics. This area
is also a potential favorable target area for gold and base-metal mineralization.
Numerous anomalous zones with large, coherent
clusters of anomalous gold, arsenic, antimony, mercury, lead and barite have been identified on the Golden Snow Project. The majority
of the anomalies appear to be located in the northeastern and eastern and eastern portion of the claim block because of surface
or near surface bedrock. These values are probably related to mineralization associated with the buried intrusive. Anomalous arsenic,
antimony and mercury are present in the area of the Ratto Fault. Since these minerals are usually formed distal to gold in Carlin-style
systems the geochemistry may indicate gold mineralization at depth.
Soil and Rock Geochemistry
Soil and Rock Geochemistry
Previous
lessors completed a widespread soil geochemical sampling program on the Golden Snow Project (Minterra Resource Corp./Britannia
Gold). The 2006 program was designed as a follow-up to their gravity and ground magnetic geophysical programs.
932 soils were collected on the west half
of the property on lines spaced 800 feet apart with samples taken every 200 feet along each line. The lines were located to bracket
the gravity linears; interpreted by Wright as bounding features of north-south trending “horst” and “graben”
blocks. The linears are also interpreted as southward continuation(s) of the Ratto Ridge Fault zone which localized the mineralization
drilled by Timberline Resources in the Lookout Pit and South Adit areas.
Reconnaissance geology and rock chip sampling
during late 2011 and early 2012 identified “collapse breccia” features within the central portion of the claim block
where it wraps around the Timberline claims. These contact and fault zones are located in areas not previously sampled and project
under colluvial cover into areas targeted for exploration by the geophysical and 2006 geochemistry.
Seventy-two follow up soils were collected
using the same layout as the 2006 samples to fill in the un-sampled prospective gap where the collapse brecciation was note.
The samples were analyzed using the same protocol as the 2006 sample program.
Key data was contoured and incorporated
with the previous property- wide dataset. The most significant results are shown by arsenic and gold. These are significant because
the NE trends are parallel to both the favorable Bay State Dolomite (Dbp)/Oxyoke (Doc) contact along which distinct collapse zones
were mapped.
Additionally, the NE trending faults appear
to control these collapse zones as well as disrupt and offset the favorable host rocks.
There is a narrow zone of detectable gold
which also parallels that trend and is similar to other gold- bearing contour zones in the north.
Barium shows a distinct anomalous zone
in the new data that lies along the east side of the arsenic values and suggests zoning. This is what would be expected due to
the barite associated with the gold deposits at Archimedes (Barrick-Ruby Hill) and the Lookout Pit (Timberline).
Silver and antimony do not appear to be
significant relative to the collapse breccia features. However, recontouring the silver and antimony did indicate some distinct
zoning peripheral to the magnetic high which Wright interpreted as a shallow intrusive on the east side of the project.
Gold in rock chip sampling also is correlative
with the magnetically indicated intrusive margin. Although not spectacular in their magnitude, the data are very encouraging because
all of the samples had detectable gold with a high value of 0.052 ppm Au. Most of the samples were collected from areas with a
preponderance of jasperoid as subcrop or large boulders. These data are interpreted as representative of nearby bedrock rather
than transported boulders or colluvium.
Current Exploration Activities
Mapping and reconnaissance work was conducted
in late 2011 and early 2012 and identified collapse breccia features which have been recently identified in association with major
Carlin-type sediment hosted gold deposits at Cortez Hills. Previous work by Timberline Resources mineralization was within collapse
breccia zones. Gold is also associated with collapse breccia at the:
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·
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Railroad district
in the southern
Carlin Trend
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An additional 72 soil samples were collected
to help delineate the possible extension of the collapse breccia zones on the Golden Snow Project. Fourteen rock samples were
collected to help characterize the area around the magnetically indicated intrusive.
Our consulting geologist
recommends three reverse circulation drill holes for a total of 3,000 feet are proposed based on the compilation and evaluation
of the data. Two of these holes will test likely locations for gold-bearing collapse breccias. The third hole will test adjacent
to the probable intrusive indicated by the ground magnetic data.
The proposed drill program would cost
approximately $175,000, summarized as follows:
Exploration Program Costs
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Estimate
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Rate ($)
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Cost ($)
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Geology-Senior
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10
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$
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650.00
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$
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6,500
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Geology-Junior
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10
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$
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350.00
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$
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4,000
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Travel and Related Expenses (includes mileage)
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$
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2,700
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Subtotal
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$
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13,200
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Drilling
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$
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115,472
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Drill Sample Assaying
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$
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27,030
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Drill Supervision (Senior)
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2
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$
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650
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$
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1,300
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Drill Geologist
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13
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$
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400
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$
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5,200
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Review of Results
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$
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0
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Travel and Related Expenses (includes mileage)
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$
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2,700
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Drill Site Preparation and Reclamation
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$
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10,200
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Subtotal
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$
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161,902
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Total
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$
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175,102
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Compliance with Government Regulations
Exploration and development activities
are all subject to stringent national, state and local regulations. All permits for exploration and testing must be obtained through
the local Bureau of Land Management (“BLM”) offices of the Department of Interior in the State of Nevada. The granting
of permits requires detailed applications and filing of a bond to cover the reclamation of areas of exploration. From time to
time, an archaeological clearance may need to be obtained prior to proceeding with any exploration programs.We plan to secure
all necessary permits for any future exploration.
We have to apply for and receive permits
from the BLM to conduct drilling activities on BLM administered lands. Mining operations are regulated by the Mine and Safety
Health Administration (“MSHA”). MSHA inspectors periodically visit projects to monitor health and safety for the workers,
and to inspect equipment and installations for code requirements. Workers must have completed MSHA safety training and must take
refresher courses annually when working on a project. A safety officer for the project should also on site.
Other regulatory requirements monitor
the following:
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(i)
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Explosives and
explosives handling.
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(ii)
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Use and occupancy
of site structures associated with mining.
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(iii)
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Hazardous
materials and waste disposal.
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(iv)
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State Historic
site preservation.
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(v)
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Archaeological
and paleontological finds associated with mining.
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We believe that we are in compliance with
all laws and plan to continue to comply with the laws in the future. We believe that compliance with the laws will not adversely
affect its business operations. There is however no assurance that any change in government regulation in the future will not
adversely affect our business operations.
Each year we must pay a maintenance fee
of $140 per claim to the Nevada State Office of the Bureau of Land Management and on September 1 of each year we must file an
affidavit and Notice of Intent to Hold the claims in Mineral County. With respect to the Golden Snow Project, we have paid the
required maintenance fees and filed the affidavits required in order to extend the claims to August 31, 2012.
Compliance with Environmental Regulation
We will have to sustain the cost of reclamation
and environmental remediation for all exploration work undertaken. Both reclamation and environmental remediation refer to putting
disturbed ground back as close to its original state as possible. Other potential pollution or damage must be cleaned up and renewed
along standard guidelines outlined in the usual permits. Reclamation is the process of bringing the land back to its natural state
after completion of exploration activities. Environmental remediation refers to the physical activity of taking steps to remediate,
or remedy, any environmental damage caused. The amount of these costs is not known at this time as we do not know the extent of
the exploration program that will be undertaken beyond completion of the recommended work program. Because there is presently
no information on the size, tenor, or quality of any resource or reserve at this time, it is impossible to assess the impact of
any capital expenditures on earnings, our competitive position or us in the event that a potentially economic deposit is discovered.
Prior to undertaking mineral exploration
activities, we must make application for a permit, if we anticipate disturbing land. A permit is issued after review of a complete
and satisfactory application. We do not anticipate any difficulties in obtaining a permit, if needed. If we enter the production
phase, the cost of complying with permit and regulatory environment laws will be greater because the impact on the project area
is greater. Permits and regulations will control all aspects of the production program if the project continues to that stage.
Examples of regulatory requirements include:
|
(i)
|
Water discharge will have to meet
drinking water standards;
|
|
(ii)
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Dust generation will have to
be minimal or otherwise re-mediated;
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|
(iii)
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Dumping of material on the surface
will have to be re-contoured and re-vegetated with natural vegetation;
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(iv)
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An assessment of all material
to be left on the surface will need to be environmentally benign;
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(v)
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Ground water will have to be monitored
for any potential contaminants;
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|
(vi)
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The socio-economic impact of
the project will have to be evaluated and if deemed negative,
will have to be re-mediated; and
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(vii)
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There will have to be an impact
report of the work on the local fauna and flora including a
study of potentially endangered species.
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Competition
We are an exploration stage company. We
compete with other mineral resource exploration and development companies for financing and for the acquisition of new mineral
properties. Many of the mineral resource exploration and development companies with whom we compete have greater financial and
technical resources than we do. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral
properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they
may be able to afford greater geological expertise in the targeting and exploration of mineral properties. This competition could
result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional
exploration and development. This competition could adversely impact our ability to finance further exploration and to achieve
the financing necessary for us to develop our mineral properties.
Employees
We have no employees as of the date of
this Annual Report on Form 10-K other than our sole executive officer and director. We conduct our business largely through agreements
with consultants and arms-length third parties.
Research And Development Expenditures
We have not incurred any research expenditures
since our incorporation.
Patents And Trademarks
We do not own, either legally or beneficially,
any patent or trademark.
The following are some of the important
factors that could affect our financial performance or could cause actual results to differ materially from estimates contained
in our forward-looking statements. We may encounter risks in addition to those described below. Additional risks and uncertainties
not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, financial
condition or results of operation.
If we do not obtain additional financing, our business will
fail.
As of April 30, 2012, we had $69,157 cash
on hand and a working capital deficit of $223,480. Our plan of operation calls for significant expenses in order to meet our obligations
under the Earn-In Agreement. There is no guarantee that we will exercise our option.
We do not have other financing arrangements
in place. We will require additional financing to meet out our obligations under the Earn-in Agreement. Obtaining financing would
be subject to a number of factors outside of our control, including market conditions and additional costs and expenses that might
exceed current estimates. These factors may make the timing, amount, terms or conditions of financing unavailable to us in which
case we will be unable to complete our plan of operation on our mineral property and to meet our obligations under our Earn-In
Agreement
We have yet to earn revenue and our
ability to sustain our operations is dependent on our ability to raise financing. As a result, our accountants believe there is
substantial doubt about our ability to continue as a going concern.
We have a cumulative net loss of $2,221,875
for the period from our inception to April 30, 2012, and have no revenues to date. Our future is dependent upon our ability to
obtain financing. Our auditors have expressed substantial doubt about our ability to continue as a going concern given our accumulated
losses. This opinion could materially limit our ability to raise additional funds by issuing new debt or equity securities or
otherwise. If we fail to raise sufficient capital, we will not be able to complete our business plan. As a result, we may have
to liquidate our business and investors may lose their investment. Investors should consider our former auditor's comments when
determining if an investment in us is suitable.
Because of the unique difficulties
and uncertainties inherent in mineral exploration ventures, we face a high risk of business failure.
Investors should be aware of the difficulties
normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of
success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection
with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited
to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.
We have no known mineral reserves and
if we cannot find any, we will have to cease operations.
We have no mineral reserves. If we do
not find a mineral reserve containing gold or if we cannot explore the mineral reserve, either because we do not have the money
to do it or because it will not be economically feasible to do it, we will have to cease operations and you will lose your investment.
Mineral exploration, particularly for gold, is highly speculative. It involves many risks and is often non-productive. Even if
we are able to find mineral reserves on our properties, our production capability is subject to further risks including:
|
-
|
Costs of bringing the property into production
including exploration work, preparation of production feasibility studies,
and construction of production facilities, all of which we have not budgeted
for;
|
|
-
|
Availability and costs of financing;
|
|
-
|
Ongoing costs of production; and
|
|
-
|
Environmental compliance regulations
and restraints.
|
The marketability of any minerals acquired
or discovered may be affected by numerous factors which are beyond our control and which cannot be accurately predicted, such
as market fluctuations, the lack of milling facilities and processing equipment near our mineral properties, and such other factors
as government regulations, including regulations relating to allowable production, importing and exporting of minerals, and environmental
protection.
Given the above noted risks, the chances
of finding reserves on our mineral properties are remote and funds expended on exploration will likely be lost.
Even if we discover proven reserves
of precious metals on our mineral properties, we may not be able to successfully commence commercial production.
Our mineral properties do not contain
any known bodies of ore. If our exploration programs are successful in discovering proven reserves on our mineral properties,
we will require additional funds in order to place the mineral properties into commercial production. The expenditures to be made
by us in the exploration of mineral properties in all probability will be lost as it is an extremely remote possibility that the
mineral claims will contain proven reserves. If our exploration programs are successful in discovering proven reserves, we will
require additional funds in order to place the mineral properties into commercial production. The funds required for commercial
mineral production can range from several millions to hundreds of millions. We currently do not have sufficient funds to place
our mineral claims into commercial production. Obtaining additional financing would be subject to a number of factors, including
the market price for gold and the costs of exploring for or mining these materials. These factors may make the timing, amount,
terms or conditions of additional financing unavailable to us. Because we will need additional financing to fund our exploration
activities there is substantial doubt about our ability to continue as a going concern. At this time, there is a risk that we
will not be able to obtain such financing as and when needed.
We face significant competition in
the mineral exploration industry.
We compete with other mining and exploration
companies possessing greater financial resources and technical facilities than we do in connection with the acquisition of mineral
exploration claims and leases on precious metal prospects and in connection with the recruitment and retention of qualified personnel.
There is significant competition for precious metals and, as a result, we may be unable to acquire an interest in attractive mineral
exploration properties on terms we consider acceptable on a continuing basis.
There is no assurance that we will
be able to comply with our obligations under the Earn-In Agreement.
In order comply with our obligations under
the Earn-In Agreement we are required to make a series of cash payments and meet the annual claim maintenance fees. In order to
meet these payments we will need to obtain substantial financing. If we are unable to meet these payments, we will lose our options
to acquire these properties.
Because our sole director and executive
officer does not have formal training specific to the technicalities of mineral exploration, there is a higher risk that our business
will fail.
Howard Thomson, our sole director and
executive officer, does not have any formal training as a geologist or in the technical aspects of managing a mineral exploration
company. Mr. Thomson’s lack of expertise could cause irreparable harm to our operations, earnings, and ultimate financial
success could suffer irreparable harm due to management's lack of experience in this industry.
Because the prices of metals fluctuate,
if the price of metals for which we are exploring decreases below a specified level, it may no longer be profitable to explore
for those metals and we will cease operations.
Prices of metals are determined by such
factors as expectations for inflation, the strength of the United States dollar, global and regional supply and demand, and political
and economic conditions and production costs in metals producing regions of the world. The aggregate effect of these factors on
metal prices is impossible for us to predict. In addition, the prices of precious metals are sometimes subject to rapid short-term
and/or prolonged changes because of speculative activities. The current demand for and supply of these metals affect the metal
prices, but not necessarily in the same manner as current supply and demand affect the prices of other commodities. The supply
of these metals primarily consists of new production from mining. If the prices of the metals are, for a substantial period, below
our foreseeable cost of production, we could cease operations and investors could lose their entire investment.
We may conduct further offerings in
the future in which case investors’ shareholdings will be diluted.
Since our inception, we have relied on
equity sales of our common stock to fund our operations. We may conduct further equity offerings in the future to finance our
current projects or to finance subsequent projects that we decide to undertake. If common stock is issued in return for additional
funds, the price per share could be lower than that paid by our current stockholders. We anticipate continuing to rely on equity
sales of our common stock in order to fund our business operations. If we issue additional stock, the interests of existing shareholders
will be diluted.
The quotation price of our common stock
may be volatile, with the result that an investor may not be able to sell any shares acquired at a price equal to or greater than
the price paid by the investor.
Our common shares are quoted on the OTCBB
under the symbol "TVER”. Companies quoted on the OTCBB have traditionally experienced extreme price and volume fluctuations.
In addition, our stock price may be adversely affected by factors that are unrelated or disproportionate to our operating performance.
Market fluctuations, as well as general economic, political and market conditions such as recessions, interest rates or international
currency fluctuations may adversely affect the market price of our common stock. As a result of this potential volatility and
potential lack of a trading market, an investor may not be able to sell any of our common stock that they acquire at a price equal
or greater than the price paid by the investor.
Because our stock is a penny stock,
shareholders will be more limited in their ability to sell their stock.
The SEC has adopted rules that regulate
broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price
of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the Nasdaq system,
provided that current price and volume information with respect to transactions in such securities is provided by the exchange
or quotation system. Because our securities constitute “penny stocks” within the meaning of the rules, the rules apply
to us and to our securities. The rules may further affect the ability of owners of shares to sell our securities in any market
that might develop for them. As long as the trading price of our common stock is less than $5.00 per share, the common stock will
be subject to Rule 15g-9 under the Exchange Act. The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock, to deliver a standardized risk disclosure document prepared by the SEC, that:
|
1.
|
contains a description of the nature
and level of risk in the market for penny stocks in both public offerings
and secondary trading;
|
|
2.
|
contains a description of the broker’s
or dealer’s duties to the customer and of the rights and remedies
available to the customer with respect to a violation to such duties
or other requirements of securities laws;
|
|
3.
|
contains a brief, clear, narrative description
of a dealer market, including bid and ask prices for penny stocks and
the significance of the spread between the bid and ask price;
|
|
4.
|
contains a toll-free telephone number
for inquiries on disciplinary actions;
|
|
5.
|
defines significant terms in the disclosure
document or in the conduct of trading in penny stocks; and
|
|
6.
|
contains such other information and
is in such form, including language, type, size and format, as the SEC
shall require by rule or regulation.
|
The broker-dealer also must provide, prior
to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation
of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply,
or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statements
showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require
that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment
of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated
copy of a written suitably statement. These disclosure requirements may have the effect of reducing the trading activity in the
secondary market for our stock.
We rent office space at Suite 201, 810
Peace Portal Drive, Blaine, WA 98230, at a cost of $1,500 per year. This rental is on a month-to-month basis without a formal
contract.
Our mineral property is discussed in detail
above under the heading “ITEM 1. BUSINESS”.
|
ITEM 3.
|
LEGAL PROCEEDINGS.
|
We are not a party to any other legal
proceedings and, to our knowledge, no other legal proceedings are pending, threatened or contemplated.
PART II
|
ITEM 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
|
MARKET INFORMATION
Our shares are quoted on the OTC Bulletin
Board under the symbol “TVER”. The high and the low prices for our shares for each quarter of our last two fiscal
years of actual trading were:
Quarter Ended
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
Fiscal Year 2012
|
|
|
|
|
|
|
|
|
April 30, 2012
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
January 31, 2012
|
|
$
|
0.06
|
|
|
$
|
0.023
|
|
October 31, 2011
|
|
$
|
0.125
|
|
|
$
|
0.03
|
|
July 31, 2011
|
|
$
|
0.09
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2011
|
|
|
|
|
|
|
|
|
April 30, 2011
|
|
$
|
0.13
|
|
|
$
|
0.0142
|
|
January 31, 2011
|
|
$
|
0.02
|
|
|
$
|
0.013
|
|
October 31, 2010
|
|
$
|
0.015
|
|
|
$
|
0.015
|
|
July 31, 2010
|
|
$
|
0.05
|
|
|
$
|
0.021
|
|
Quotations provided by the OTC Bulletin
Board reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions. The
high and low price information provided above was obtained from Stockwatch. The market quotations provided reflect inter-dealer
prices, without retail mark-up, markdown or commission and may not represent actual transactions.
REGISTERED HOLDERS OF OUR COMMON STOCK
As of August 13, 2012, there were one
hundred and forty one (141)
registered holders of our common stock. We believe that a large number of stockholders hold
stock on deposit with their brokers or investment bankers registered in the name of stock depositories.
DIVIDENDS
We have not declared any dividends on
our common stock since our inception. There are no dividend restrictions that limit our ability to pay dividends on our common
stock in our Articles of Incorporation or bylaws. Chapter 78 of the Nevada Revised Statutes (the “NRS”), does provide
certain limitations on our ability to declare dividends. Section 78.288 of Chapter 78 of the NRS prohibits us from declaring dividends
where, after giving effect to the distribution of the dividend:
|
(a)
|
we would not be able to pay our debts as they become
due in the usual course of business; or
|
|
(b)
|
except as may be allowed by our Articles
of Incorporation, our total assets would be less than the sum of our
total liabilities plus the amount that would be needed, if we were
to be dissolved at the time of the distribution, to satisfy the preferential
rights upon dissolution of stockholders who may have preferential rights
and whose preferential rights are superior to those receiving the distribution.
|
We have neither declared nor paid any
cash dividends on our capital stock and do not anticipate paying cash dividends in the foreseeable future. Our current policy
is to retain any earnings in order to finance the expansion of our operations. Our board of directors will determine future declaration
and payment of dividends, if any, in light of the then-current conditions they deem relevant and in accordance with the Nevada
Revised Statutes.
RECENT SALES OF UNREGISTERED SECURITIES
Other than as disclosed in our Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, we did not complete any sales of unregistered securities during the year
ended April 30, 2012.
|
ITEM 7.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
|
PLAN OF OPERATION
Over the next twelve months, our plan
of operation is to focus our resources on the exploration of the Gold Snow Property. Subject to obtaining sufficient financing,
we plan to conduct a drill program on the Golden Snow Property. The proposed drill program would cost approximately $175,000,
summarized as follows:
Exploration Program Costs
|
|
Estimate
|
|
|
Rate ($)
|
|
|
Cost ($)
|
|
|
|
|
|
|
|
|
|
|
|
Geology-Senior
|
|
|
10
|
|
|
$
|
650.00
|
|
|
$
|
6,500
|
|
Geology-Junior
|
|
|
10
|
|
|
$
|
350.00
|
|
|
$
|
4,000
|
|
Travel and Related Expenses (includes mileage)
|
|
|
|
|
|
|
|
|
|
$
|
2,700
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
$
|
13,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drilling
|
|
|
|
|
|
|
|
|
|
$
|
115,472
|
|
Drill Sample Assaying
|
|
|
|
|
|
|
|
|
|
$
|
27,030
|
|
Drill Supervision (Senior)
|
|
|
2
|
|
|
$
|
650
|
|
|
$
|
1,300
|
|
Drill Geologist
|
|
|
13
|
|
|
$
|
400
|
|
|
$
|
5,200
|
|
Review of Results
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
Travel and Related Expenses (includes mileage)
|
|
|
|
|
|
|
|
|
|
$
|
2,700
|
|
Drill Site Preparation and Reclamation
|
|
|
|
|
|
|
|
|
|
$
|
10,200
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
$
|
161,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
175,102
|
|
During the next twelve months, we must
complete the following in order to maintain our interest under the Earn-In Agreement and keep the Golden Snow Property in good
standing:
|
(a)
|
complete cumulative exploration expenditures on the Golden
Snow Property totaling $250,000 by December 31, 2012; and
|
|
(b)
|
pay the Bureau of Land Management maintenance and claim
fees of approximately $17,165 by September 1, 2012.
|
As the agreement is an option, we may
decide at any time not to proceed in which case we would not be liable to pay any funds beyond the amounts due at the time we
provide notice that we are not proceeding. There is no assurance that we will exercise the option.
As at April 30, 2012, we had $69,157 cash
on hand. Accordingly, we have insufficient cash on hand to satisfy the exploration expenditure requirements under the Earn-In
Agreement and meet our ongoing operating costs. As such, we will require substantial financing in order to meet our obligations.
There is no assurance that we will be able to acquire such financing on terms that are acceptable to us, or at all.
RESULTS OF OPERATIONS
Summary of Year End Results
|
|
Year Ended April 30,
|
|
|
Percentage
|
|
|
|
2012
|
|
|
2011
|
|
|
Increase / (Decrease)
|
|
Revenue
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
n/a
|
|
Expenses
|
|
|
(145,622
|
)
|
|
|
(97,195
|
)
|
|
|
49.8
|
%
|
Net Loss
|
|
$
|
(145,622
|
)
|
|
$
|
(97,195
|
)
|
|
|
49.8
|
%
|
Revenues
We have not earned any revenues since
our inception. We do not anticipate earning revenues until such time as we enter into commercial production of our mineral properties.
We are presently in the exploration stage of our business and we can provide no assurance that we will discover commercially exploitable
levels of mineral resources on our properties or if such deposits are discovered, that we will enter into further substantial
exploration programs.
Operating Expenses
The major components of our expenses for
the year ended April 30, 2012 and 2011 are outlined in the table below:
|
|
Year Ended April 30
|
|
|
Percentage
|
|
|
|
2012
|
|
|
2011
|
|
|
Increase / (Decrease)
|
|
Accounting
|
|
$
|
24,830
|
|
|
$
|
24,570
|
|
|
|
1.1
|
%
|
Amortization
|
|
|
1,481
|
|
|
|
-
|
|
|
|
100.0
|
%
|
Bank Charges
|
|
|
220
|
|
|
|
456
|
|
|
|
(51.8
|
)%
|
Consulting
|
|
|
1,500
|
|
|
|
5,500
|
|
|
|
(72.7
|
)%
|
Exploration Expense
|
|
|
3,850
|
|
|
|
-
|
|
|
|
100.0
|
%
|
Foreign Exchange Loss
|
|
|
905
|
|
|
|
-
|
|
|
|
100.0
|
%
|
Impairment Expense
|
|
|
2,500
|
|
|
|
-
|
|
|
|
100.0
|
%
|
Interest Expense
|
|
|
2,656
|
|
|
|
-
|
|
|
|
100.0
|
%
|
Legal
|
|
|
36,917
|
|
|
|
27,597
|
|
|
|
33.8
|
%
|
Office Administration
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
0.0
|
%
|
Property Maintenance
|
|
|
29,572
|
|
|
|
-
|
|
|
|
100.0
|
%
|
Regulatory Expenses/Fees
|
|
|
8,598
|
|
|
|
6,672
|
|
|
|
28.9
|
%
|
Rent
|
|
|
1,500
|
|
|
|
1,500
|
|
|
|
0.0
|
%
|
Telephone
|
|
|
900
|
|
|
|
900
|
|
|
|
0.0
|
%
|
Travel and Entertainment
|
|
|
193
|
|
|
|
-
|
|
|
|
100.0
|
%
|
Total Operating Expenses
|
|
$
|
145,622
|
|
|
$
|
97,195
|
|
|
|
49.8
|
%
|
Our operating expenses increased from
$97,195, during the year ended April 30, 2011, to $145,622, during the year ended April 30, 2012. The increase in our operating
expenses is due to increases in accounting expenses, amortization, exploration expense, impairment expense, interest expense,
legal fees, property maintenance expenses, regulatory expenses, travel and entertainment expenses, and the recording of a foreign
exchange loss. The increase in our operating expenses was partially offset by decreases in bank charges, and consulting.
Accounting and legal expenses primarily
relate to expenses incurred in connection with meeting our ongoing reporting obligations under the Exchange Act.
Amortization, exploration, impairment
and property maintenance expenses primarily relate to expenses incurred in connection with the Earn-In Agreement with Pengram.
Office administration expenses consist
of amounts incurred to our sole executive officer and director for his management consulting services.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
|
|
Year Ended April 30
|
|
|
|
2012
|
|
|
2011
|
|
Net Cash used in Operating Activities
|
|
$
|
(117,802
|
)
|
|
$
|
(198,710
|
)
|
Net Cash used in Investing Activities
|
|
|
-
|
|
|
|
(25,000
|
)
|
Net Cash from Financing Activities
|
|
|
184,500
|
|
|
|
225,000
|
|
Net Increase in Cash During Period
|
|
$
|
66,698
|
|
|
$
|
1,290
|
|
Working Capital
|
|
At April 30, 2012
|
|
|
At April 30, 2011
|
|
|
Percentage
Increase / (Decrease)
|
|
Current Assets
|
|
$
|
77,676
|
|
|
$
|
2,459
|
|
|
|
3,058.8
|
%
|
Current Liabilities
|
|
|
(301,156
|
)
|
|
|
(82,817
|
)
|
|
|
263.6
|
%
|
Working Capital Deficit
|
|
$
|
(223,480
|
)
|
|
$
|
(80,358
|
)
|
|
|
178.1
|
%
|
We had cash on hand of $69,157 and a working
capital deficit of $223,480 as of April 30, 2012 compared to a working capital deficit of $80,350 as of April 30, 2011. The increase
in our working capital deficit is due to: (i) an increase in accounts payable and accrued expenses as a result of our lack of
capital to meet ongoing costs; and (ii) the fact that we recorded stock subscriptions payable of $184,500.
Financing Requirements
Currently, we do not have sufficient financial
resources to meet our ongoing operating expenditures. As such, our ability to complete our plan of operation is dependent upon
our ability to obtain additional financing in the near term.
On May 22, 2012, we issued 3,290,000 shares
of our common stock at a price of $0.05 per share for proceeds of $164,500 pursuant to Regulation S of the Securities Act. Each
subscriber represented that they were not a “U.S. Person” as that term is defined in Regulation S of the Act.
On May 22, 2012, we issued 400,000 shares
of our common stock a price of $0.05 per share for proceeds of $20,000 pursuant to Regulation D of the Securities Act. The subscriber
represented that it was an “accredited investor” as defined in Regulation D of the Securities Act.
The proceeds of the private placement
offerings will be used to retire corporate indebtedness, complete work on our mineral properties and for general corporate purposes.
We anticipate continuing to rely on equity
sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in
dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities
or arrange for debt or other financing to fund our business operations.
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 is material
to stockholders.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements
in conformity with United States generally accepted accounting principles requires our management to make estimates and assumptions
that affect the reported amount 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 reporting period. Actual results could differ
from those estimates. Our management routinely makes judgments and estimates about the effects of matters that are inherently
uncertain.
Our significant accounting policies are
disclosed in Note 1 to the audited financial statements included in this Annual Report.
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
|
Audited Financial Statements for the Years Ended April 30,
2012 and 2011, including:
1.
|
Report of Independent Registered Public Accounting Firm;
|
|
|
2.
|
Balance Sheets as at April 30, 2012 and 2011;
|
|
|
3.
|
Statements of Operations and Accumulated Deficit for the years ended
April 30, 2012 and 2011 and the period from inception on February 20, 2001 to April 30, 2012;
|
|
|
4.
|
Statements of Changes in Stockholders’ Equity/Deficit for the
period from inception through April 30, 2012;
|
|
|
5.
|
Statements of Cash Flows for the years ended April 30, 2012 and 2011
and the period from inception to April 30, 2012;
|
|
|
6.
|
Notes to the Financial Statements; and
|
|
|
7.
|
Supplemental Statement: Statements of Operating Expenses for the years
ended April 30, 2012 and 2011 and the period from inception to April 30, 2012.
|
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors
Terrace Ventures Inc.
Blaine, Washington
We have audited the accompanying balance sheets of Terrace Ventures
Inc., an exploration stage company, as of April 30, 2012 and April 30, 2011, and the related statements of operations and accumulated
deficit, changes in stockholders’ deficit, and cash flows for the years then ended, and for the period February 20, 2001
(date of inception) to April 30, 2012. These financial statements are the responsibility of Terrace Ventures Inc.’s management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also 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, the financial statements referred to above present
fairly, in all material respects, the financial position of Terrace Ventures Inc., an exploration stage company, as of April 30,
2012 and April 30, 2011, and the results of its operations, changes in stockholders’ deficit and cash flows for the years
then ended, and for the period February 20, 2001 (date of inception) to April 30, 2012, in conformity with accounting principles
generally accepted in The United States of America.
Our audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The supplemental statement of operating expenses is presented for the purposes
of additional analysis and is not a required part of the basic financial statements, and in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a whole.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 10 to the financial statements, the Company has suffered
recurring losses from operations, which raise substantial doubt about its ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Sarna & Company,
Certified Public Accountants
Westlake Village, California
August 10, 2012
TERRACE VENTURES INC.
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEET
|
|
APRIL 30,
|
|
|
APRIL 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
69,157
|
|
|
$
|
2,459
|
|
Prepaid Expense
|
|
|
8,519
|
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
77,676
|
|
|
|
2,459
|
|
|
|
|
|
|
|
|
|
|
Investment in Mineral Rights
|
|
|
22,500
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
100,176
|
|
|
$
|
27,459
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts Payable and
|
|
|
|
|
|
|
|
|
Accrued Expenses
|
|
$
|
84,656
|
|
|
$
|
50,817
|
|
Loans Payable
|
|
|
7,000
|
|
|
|
6,000
|
|
Loans Payable – Related Parties
|
|
|
-0-
|
|
|
|
1,000
|
|
Note Payable
|
|
|
25,000
|
|
|
|
25,000
|
|
Stock Subscriptions Outstanding
|
|
|
184,500
|
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
301,156
|
|
|
|
82,817
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
|
|
|
Common Stock, $0.001 par value 400,000,000 shares authorized, 29,470,660 shares issued
|
|
|
29,471
|
|
|
|
29,471
|
|
Additional Paid in Capital
|
|
|
1,991,424
|
|
|
|
1,991,424
|
|
Deficit Accumulated During the Exploration Stage
|
|
|
(2,221,875
|
)
|
|
|
(2,076,253
|
)
|
|
|
|
|
|
|
|
|
|
Total Stockholders' (Deficit)
|
|
|
(200,980
|
)
|
|
|
(55,358
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'(DEFICIT)
|
|
$
|
100,176
|
|
|
$
|
27,459
|
|
See Notes to Financial Statements.
TERRACE VENTURES INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS AND ACCUMULATED
DEFICIT
|
|
YEAR ENDED
|
|
|
YEAR ENDED
|
|
|
INCEPTION to
|
|
|
|
APRIL 30, 2012
|
|
|
APRIL 30, 2011
|
|
|
APRIL 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
(145,622
|
)
|
|
|
(97,195
|
)
|
|
|
(1,207,386
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss Before Other Income And Expenses
|
|
|
(145,622
|
)
|
|
|
(97,195
|
)
|
|
|
(1,207,386
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
14,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on Investment
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
(1,028,980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss Before Provision for Income Taxes
|
|
|
(145,622
|
)
|
|
|
(97,195
|
)
|
|
|
(2,221,875
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
(145,622
|
)
|
|
|
(97,195
|
)
|
|
|
(2,221,875
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Deficit, Beginning of Period
|
|
|
(2,076,253
|
)
|
|
|
(1,979,058
|
)
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Deficit,End of Period
|
|
$
|
(2,221,875
|
)
|
|
$
|
(2,076,253
|
)
|
|
$
|
(2,221,875
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss per Share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding
|
|
|
32,106,374
|
|
|
|
11,970,660
|
|
|
|
9,614,845
|
|
See Notes to Financial Statements.
TERRACE VENTURES INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
During the
|
|
|
Total
|
|
|
|
|
|
|
Dollar
|
|
|
Paid in
|
|
|
Exploration
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Equity (Deficit)
|
|
Inception, February 20, 2001
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued $0.001 per share April 9, 2001
|
|
|
4,000,000
|
|
|
|
400
|
|
|
|
3,600
|
|
|
|
—
|
|
|
|
4,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss, Period Ended April 30, 2001
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,410
|
)
|
|
|
(1,410
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, April 30, 2001
|
|
|
4,000,000
|
|
|
|
400
|
|
|
|
3,600
|
|
|
|
(1,410
|
)
|
|
|
2,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued $0.01 per share August 15, 2001
|
|
|
2,500,000
|
|
|
|
250
|
|
|
|
24,750
|
|
|
|
—
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss, Period Ended April 30, 2002
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(19,196
|
)
|
|
|
(19,196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, April 30, 2002
|
|
|
6,500,000
|
|
|
|
650
|
|
|
|
28,350
|
|
|
|
(20,606
|
)
|
|
|
8,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued $0.10 per share September 30, 2002
|
|
|
142,500
|
|
|
|
14
|
|
|
|
14,236
|
|
|
|
—
|
|
|
|
14,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss, Period Ended April 30, 2003
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(17,632
|
)
|
|
|
(17,632
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, April 30, 2003
|
|
|
6,642,500
|
|
|
|
664
|
|
|
|
42,586
|
|
|
|
(38,238
|
)
|
|
|
5,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued $0.10 per share November 6, 2003
|
|
|
400,000
|
|
|
|
40
|
|
|
|
39,960
|
|
|
|
—
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss, Period Ended April 30, 2004
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(58,708
|
)
|
|
|
(58,708
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, April 30, 2004
|
|
|
7,042,500
|
|
|
|
704
|
|
|
|
82,546
|
|
|
|
(96,946
|
)
|
|
|
(13,696
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss, Period Ended April 30, 2005
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(37,532
|
)
|
|
|
(37,532
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, April 30, 2005
|
|
|
7,042,500
|
|
|
|
704
|
|
|
|
82,546
|
|
|
|
(134,478
|
)
|
|
|
(51,228
|
)
|
See Notes to Financial Statements.
TERRACE VENTURES INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY (DEFICIT) - CONTINUED
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
During the
|
|
|
Total
|
|
|
|
|
|
|
Dollar
|
|
|
Paid in
|
|
|
Exploration
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, April 30, 2005
|
|
|
7,042,500
|
|
|
|
704
|
|
|
|
82,546
|
|
|
|
(134,478
|
)
|
|
|
(51,228
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued $1.00 per share November 23, 2005
|
|
|
500,000
|
|
|
|
50
|
|
|
|
499,950
|
|
|
|
—
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-for-1 Stock Split, December 19, 2005
|
|
|
22,627,500
|
|
|
|
29,416
|
|
|
|
(29,416
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued $0.25 per share February 3, 2006
|
|
|
400,000
|
|
|
|
400
|
|
|
|
99,600
|
|
|
|
—
|
|
|
|
100,000
|
|
Common Stock Issued $0.25 per share March 13, 2006
|
|
|
380,000
|
|
|
|
380
|
|
|
|
94,620
|
|
|
|
—
|
|
|
|
95,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued $0.25 per share March 31, 2006
|
|
|
999,920
|
|
|
|
1,000
|
|
|
|
248,980
|
|
|
|
—
|
|
|
|
249,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss, Period Ended April 30, 2006
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(987,633
|
)
|
|
|
(987,633
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances April 30, 2006
|
|
|
31,949,920
|
|
|
|
31,950
|
|
|
|
996,280
|
|
|
|
(1,122,111
|
)
|
|
|
(93,881
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued $0.25 per share May 24, 2006
|
|
|
220,080
|
|
|
|
220
|
|
|
|
54,800
|
|
|
|
—
|
|
|
|
55,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued $0.30 per share June 5, 2006
|
|
|
335,000
|
|
|
|
335
|
|
|
|
100,165
|
|
|
|
—
|
|
|
|
100,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued $0.10 per share January 23, 2007
|
|
|
1,678,200
|
|
|
|
1,678
|
|
|
|
166,142
|
|
|
|
—
|
|
|
|
167,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss, Period Ended April 30, 2007
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(301,060
|
)
|
|
|
(301,060
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances April 30, 2007
|
|
|
34,183,200
|
|
|
$
|
34,183
|
|
|
$
|
1,317,387
|
|
|
$
|
(1,423,171
|
)
|
|
$
|
(71,601
|
)
|
See Notes to Financial Statements.
TERRACE VENTURES INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY (DEFICIT) - CONTINUED
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
During the
|
|
|
Total
|
|
|
|
|
|
|
Dollar
|
|
|
Paid in
|
|
|
Exploration
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances April 30, 2007
|
|
|
34,183,200
|
|
|
$
|
34,183
|
|
|
$
|
1,317,387
|
|
|
$
|
(1,423,171
|
)
|
|
$
|
(71,601
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued $0.10 per share July 12, 2007
|
|
|
2,570,000
|
|
|
|
2,570
|
|
|
|
254,755
|
|
|
|
—
|
|
|
|
257,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss, Period Ended April 30, 2008
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(100,450
|
)
|
|
|
(100,450
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances April 30, 2008
|
|
|
36,753,200
|
|
|
$
|
36,753
|
|
|
$
|
1,572,142
|
|
|
$
|
(1,523,621
|
)
|
|
$
|
85,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued $0.10 per share October 10, 2008
|
|
|
10,000,000
|
|
|
|
10,000
|
|
|
|
190,000
|
|
|
|
—
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued $0.20 per share April 8, 2009
|
|
|
600,000
|
|
|
|
600
|
|
|
|
11,400
|
|
|
|
—
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss, Period Ended April 30, 2009
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(355,923
|
)
|
|
|
(355,923
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances April 30, 2009
|
|
|
47,353,200
|
|
|
|
47,353
|
|
|
|
1,773,542
|
|
|
|
(1,879,544
|
)
|
|
|
(58,649
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-for-5 Reverse Stock Split, October 1, 2009
|
|
|
(37,882,540
|
)
|
|
|
(37,882
|
)
|
|
|
37,882
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss, Period Ended April 30, 2010
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(99,514
|
)
|
|
|
(99,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances April 30, 2010
|
|
|
9,470,660
|
|
|
|
9,471
|
|
|
|
1,811,424
|
|
|
|
(1,979,058
|
)
|
|
|
(158,163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued $0.01 per share March 24, 2011
|
|
|
20,000,000
|
|
|
|
20,000
|
|
|
|
180,000
|
|
|
|
—
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss, Period Ended April 30, 2011
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(97,195
|
)
|
|
|
(97,195
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances April 30, 2011
|
|
|
29,470,660
|
|
|
|
29,471
|
|
|
|
1,991,424
|
|
|
|
(2,076,253
|
)
|
|
|
(55,358
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss, Period Ended April 30, 2012
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(145,622
|
)
|
|
|
(145,622
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances April 30, 2012
|
|
|
29,470,660
|
|
|
|
29,471
|
|
|
|
1,991,424
|
|
|
|
(2,221,875
|
)
|
|
|
(200,980
|
)
|
See Notes to Financial Statements.
TERRACE VENTURES INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
|
|
YEAR ENDED
|
|
|
YEAR ENDED
|
|
|
INCEPTION to
|
|
|
|
APRIL 30, 2012
|
|
|
APRIL 30, 2011
|
|
|
APRIL 30, 2012
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(145,622
|
)
|
|
$
|
(97,195
|
)
|
|
$
|
(2,221,875
|
)
|
Adjustments to Reconcile Net Loss To Net Cash Provided/<Used> by Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization Expense
|
|
|
1,481
|
|
|
|
-0-
|
|
|
|
1,481
|
|
Impairment Expense
|
|
|
2,500
|
|
|
|
-0-
|
|
|
|
2,500
|
|
Prepaid Expense
|
|
|
(10,000
|
)
|
|
|
-0-
|
|
|
|
(10,000
|
)
|
Unrealized Loss on Investment
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
1,028,980
|
|
<Increase>/Decrease in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes Receivable
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
Increase/<Decrease> in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
|
33,839
|
|
|
|
(67,315
|
)
|
|
|
84,656
|
|
Loans Payable
|
|
|
1,000
|
|
|
|
(21,000
|
)
|
|
|
7,000
|
|
Loans Payable – Related Parties
|
|
|
(1,000
|
)
|
|
|
(13,200
|
)
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used by Operating Activities
|
|
|
(117,802
|
)
|
|
|
(198,710
|
)
|
|
|
(1,107,258
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Stock
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
(1,028,980
|
)
|
Investment in Mineral Rights
|
|
|
-0-
|
|
|
|
(25,000
|
)
|
|
|
(25,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used by Investing Activities
|
|
|
-0-
|
|
|
|
(25,000
|
)
|
|
|
(1,053,980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note Payable
|
|
|
-0-
|
|
|
|
25,000
|
|
|
|
25,000
|
|
Loans from Shareholders
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
157,395
|
|
Payments on Loans
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
(157,395
|
)
|
Stock Subscriptions Outstanding
|
|
|
184,500
|
|
|
|
-0-
|
|
|
|
184,500
|
|
Proceeds from Issuance of Common Stock
|
|
|
-0-
|
|
|
|
200,000
|
|
|
|
2,020,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
|
184,500
|
|
|
|
225,000
|
|
|
|
2,230,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash
|
|
|
66,698
|
|
|
|
1,290
|
|
|
|
69,157
|
|
Cash at Beginning of Period
|
|
|
2,459
|
|
|
|
1,169
|
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at End of Period
|
|
$
|
69,157
|
|
|
$
|
2,459
|
|
|
$
|
69,157
|
|
See Notes to Financial Statements.
TERRACE VENTURES INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Terrace Ventures Inc. was incorporated
on February 20, 2001 in the state of Nevada. The Company acquires and develops certain mineral rights in Canada.
Basis of Presentation
The Company reports revenue and expenses
using the accrual method of accounting for financial and tax reporting purposes.
Use of Estimates
Management uses estimates and assumptions
in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions
affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues
and expenses.
Exploration Stage Company
In accordance with FASB ASC 915, the Company
has been in the exploration stage since its formation and has not yet realized any revenues from its planned operations.
Stock-Based Compensation
Stock-based compensation is accounted for
using the Equity-Based Payments to Non-Employees Topic of the FASB ASC (FASB ASC Topic 718), which establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions
in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s
equity instruments or that may be settled by the issuance of those equity instruments. The Company determines the value of stock
issued at the date of grant. It also determines at the date of grant, the value of stock at fair market value or the value of services
rendered (based on contract or otherwise) whichever is more readily determinable.
Shares issued to employees are expensed upon issuance.
TERRACE VENTURES INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Stock-Based Compensation - CONTINUED
The Company uses the fair value method for equity instruments
granted to employees and will use the Black Scholes model for measuring the fair value of options, if issued. The stock based fair
value compensation is determined as of the date of the grant or the date at which the performance of the services is completed
(measurement date) and is recognized over the vesting periods.
No stock options have been issued by Terrace Ventures, Inc.
Depreciation, Amortization and Capitalization
The Company records depreciation and amortization
when appropriate using both straight-line and declining balance methods over the estimated useful life of the assets (five to seven
years).
Expenditures for maintenance and repairs
are charged to expense as incurred. Additions, major renewals and replacements that increase the property's useful life are capitalized.
Property sold or retired, together with the related accumulated depreciation, is removed from the appropriate accounts and the
resultant gain or loss is included in net income.
Income Taxes
The Company accounts for its income taxes
in accordance with FASB ASC 740, “Accounting for Income Taxes". Under this statement, a liability method is used whereby
deferred tax assets and liabilities are determined based on temporary differences between basis used for financial reporting and
income tax reporting purposes. Income taxes are provided based on tax rates in effect at the time such temporary differences are
expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not, that the
Company will not realize the tax assets through future operations.
Fair Value of Financial Instruments
FASB ASC 825, “Financial Instruments”,
requires the Company to disclose, when reasonably attainable, the fair market values of its assets and liabilities which are deemed
to be financial instruments. The Company's financial instruments consist primarily of cash and certain investments.
TERRACE VENTURES INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Investments
Investments that are purchased in other
companies are valued at cost less any impairment in the value that is other than temporary in nature.
Per Share Information
The Company follows FASB ASC 260 “Earnings
Per Share” which establishes standards for the computation, presentation and disclosure requirements for basic and diluted
earnings per share for entities with publicly-held common shares and potential common stock issuances. Basic earnings (loss) per
share are computed by dividing net income by the weighted average number of common shares outstanding. In computing diluted earnings
per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities,
such as convertible notes, stock options, and warrants. Common stock equivalent shares are excluded from the computation if their
effect is antidilutive.
NOTE 2 – PREPAID EXPENSE
Prepaid expense at April 30, 2012 consists
of the remainder of the unamortized amount of the original $10,000 paid to renegotiate the Pengram notes. These prepaid fees are
fully amortized at December 31, 2012.
NOTE 3 – INVESTMENT IN MINERAL
RIGHTS
On April 26, 2011, we entered into an agreement
with Pengram Corporation (“Pengram”) dated April 26, 2011, as amended on June 29, 2011, (the “Earn-In Agreement”).
Under the terms of the Earn-In Agreement, the Company will earn up to a 75% interest in Pengram’s agreement with Scoonover
Exploration LLC and JR Exploration LLC (the “Underlying Agreement”) to acquire the Golden Snow Property, by paying
to Pengram up to $175,000 in a promissory note and direct payments, and expending up to $1,750,000 in exploration work. The Golden
Snow project consists of 111 mineral claims located in the Eureka Mining District in Eureka County, Nevada.
NOTE 4 – LOANS PAYABLE
Loans payable consist of short term monies
advanced. These loans are unsecured; bear no interest rate and no specified maturity date.
TERRACE VENTURES INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 – LOANS PAYABLE –
RELATED PARTIES
Loans payable related parties consist of
various short term monies advanced by shareholders. These loans are unsecured; bear no interest rate and no specified maturity
date.
NOTE 6 – NOTE PAYABLE
Note payable consists of short term monies
due to Pengram Corporation. The company has agreed to pay Pengram Corporation by way of a series of promissory notes (see Note
2), bearing no interest, payable per schedule detailed in Note 7.
NOTE 7 - PROVISION FOR INCOME TAXES
The provision for income taxes for the
periods ended April 30, 2012 and April 30, 2011 represents the minimum state income tax expense of the Company, which is not considered
significant.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Pengram Corporation Agreement –
Golden Snow Project
The Company is obligated to Pengram Corporation
for up to $175,000 in a promissory note and direct payments, and $1,750,000 in exploration expenses as follows:
(i) The
first 25% interest in the Underlying Agreement upon the Company:
a. Paying
Pengram $25,000 by way of a promissory note, bearing interest at a rate of 10% per annum, due on September 27, 2011;
b. Completing
exploration expenditures on the Property totaling $250,000 by December 31, 2012.
(ii) An additional 25% interest in the Underlying Agreement upon the Company:
a. Paying
Pengram $50,000 on or before May 31, 2013;
b. Completing
additional exploration expenditures on the Property totaling $500,000 by December 31, 2013:
(iii)
An additional 25% interest in the Underlying Agreement upon the
Company:
c. Paying
Pengram $100,000 on or before May 31, 2014;
d. Completing
additional exploration expenditures on the Property totaling $1,000,000 by December 31, 2014.
TERRACE VENTURES INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 - COMMITMENTS AND CONTINGENCIES
- CONTINUED
Pengram Corporation Agreement –
Golden Snow Project - Continued
The Company is also obligated to pay all
advance royalties, county and BLM claim fees and Nevada state taxes during the currency of the Earn-In Agreement.
On December 31, 2011, Pengram, in consideration
of $5,000 (which has been paid), agreed to accept, in substitution for the $25,000 promissory note set out above, a series of non-interest
bearing promissory notes totaling $30,000 payable on the following dates:
March 31, 2012
|
|
$
|
5,000
|
|
June 30, 2012
|
|
|
5,000
|
|
September 30, 2012
|
|
|
10,000
|
|
December 31, 2012
|
|
|
10,000
|
|
TOTAL
|
|
|
30,000
|
|
Less: Amount Paid
|
|
|
<5,000
|
>
|
Note Payable,
|
|
|
|
|
Balance at April 30, 2012
|
|
$
|
25,000
|
|
Operating Leases
The Company currently rents administrative
office space under a monthly renewable contract.
Litigation
The Company is not presently involved in
any litigation.
NOTE 9 - RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS
Recently issued accounting pronouncements
will have no significant impact on the Company and its reporting methods.
NOTE 10 – GOING CONCERN
Future issuances of the Company’s
equity or debt securities will be required in order for the Company to continue to finance its operations and continue as a going
concern. The Company’s present revenues are insufficient to meet operating expenses.
TERRACE VENTURES INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 – GOING CONCERN - Continued
The financial statements of the Company
have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization
of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred cumulative net losses
of $2,221,875 since its inception and requires capital for its contemplated operational and marketing activities to take place.
The Company's ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional
financing, the successful development of the Company's contemplated plan of operations, and its transition, ultimately, to the
attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these
factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements of the Company
do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
NOTE 11 – REVERSE STOCK SPLIT
On September 2, 2009, the Board of Directors
approved a one-for-five reverse split of the Company’s common stock. Upon the completion of the reverse stock split, which
was effective on October 1, 2009, the Company’s authorized shares of common stock was decreased from 400,000,000 shares,
par value $0.001 per share, to 80,000,000 shares, par value $0.001 per share. Issued and outstanding common stock was reduced from
47,353,200 shares to approximately 9,470,660 shares. Weighted Average Shares Outstanding and Net Loss per Share have been restated
on the Statements of Operations and Accumulated Deficit for the effect of the reverse stock split.
NOTE 12 – STOCK ISSUANCES
On June 8, 2010 our Board of Directors
terminated the convertible notes offering approved on March 16, 2010 and approved two private placement offerings for up to an
aggregate of 10,000,000 Units for proceeds of up to $100,000 as follows:
TERRACE VENTURES INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 – STOCK ISSUANCES - CONTINUED
Foreign Private Placement
On June 8, 2010, our Board of Directors
approved a private placement offering of up to 5,000,000 Units at a price of $0.01 US per unit, with each Unit consisting of one
share of our common stock and one share purchase warrant (the Foreign Private Placement”). Each share purchase warrant entitled
the holder to purchase an additional share of common stock exercisable for a period of two years at a price of $0.01 US per share.
The private placement offering was made to persons who are not “U.S. Persons” as defined in Regulation S. Subsequent
to the offering, the corporation received subscriptions for an aggregate of 14,700,000 shares and payment in full of the subscription
proceeds. In order to allow for the oversubscriptions to the Foreign Offering, on March 24, 2011, the Corporation increased the
number of Shares being issued under the Offering to 14,700,000 Shares. Upon the issuance of the Shares, the Corporation terminated
this Foreign Offering.
U.S. Private Placement
Also, on June 8, 2010, our Board of Directors
approved a private placement offering of up to 5,000,000 Units at a price of $0.01 US per Unit, with each Unit consisting of one
share of our common stock and one share purchase warrant (the “U.S. Private Placement”). Each share purchase warrant
entitled the holder to purchase an additional share of common stock exercisable for a period of two years at a price of $.01 US
per share. The private placement offering was made to persons who are “Accredited Investors” as defined in Regulation
D. Subsequent to the offering, the corporation received subscriptions for an aggregate of 5,300,000 shares and payment in full
of the subscription proceeds. In order to allow for the oversubscriptions to the US Offering, on March 24, 2011, the Corporation
increased the number of Shares being issued under the Offering to 5,300,000 Shares. Upon the issuance of the Shares, the Corporation
terminated this US Offering.
On April 26, 2011 our Board of Directors
approved two concurrent private placements as follows:
Foreign Private Placement
On April 26, 2011, our Board of Directors
approved a private placement offering of up to 2,500,000 shares of our common stock at a price of $0.10 US per share to persons
who are not “US Persons” as defined in Regulation S if the Securities Act of 1933.
TERRACE VENTURES INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 – STOCK ISSUANCES - CONTINUED
U.S. Private Placement
Also, on April 26, 2011, our Board of Directors
approved a private placement offering of up to 2,500,000 shares of our common stock at a price of $0.10 US per share. The offering
will be made in the United States to persons who are accredited investors as defined in Regulation D of the Securities Act of 1933.
NOTE 13 – SUBSEQUENT EVENTS
As of August 10, 2012, all stock had been issued in accordance
with the stock subscription agreements in effect at April 30, 2012.
SUPPLEMENTAL STATEMENT
TERRACE VENTURES INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF OPERATING EXPENSES
|
|
YEAR ENDED
|
|
|
YEAR ENDED
|
|
|
INCEPTION to
|
|
|
|
APRIL 30,2012
|
|
|
APRIL 30,2011
|
|
|
APRIL 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting
|
|
$
|
24,830
|
|
|
$
|
24,570
|
|
|
$
|
181,500
|
|
Amortization
|
|
|
1,481
|
|
|
|
-0-
|
|
|
|
1,481
|
|
Bad Debt Expense
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
214,892
|
|
Bank Charges
|
|
|
220
|
|
|
|
456
|
|
|
|
1,420
|
|
Cancelled Merger Costs
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
8,300
|
|
Consulting
|
|
|
1,500
|
|
|
|
5,500
|
|
|
|
121,150
|
|
Exploration Expense
|
|
|
3,850
|
|
|
|
-0-
|
|
|
|
28,116
|
|
Foreign Exchange Loss
|
|
|
905
|
|
|
|
-0-
|
|
|
|
905
|
|
Impairment Expense
|
|
|
2,500
|
|
|
|
-0-
|
|
|
|
2,500
|
|
Interest Expense
|
|
|
2,656
|
|
|
|
-0-
|
|
|
|
2,656
|
|
Legal
|
|
|
36,917
|
|
|
|
27,597
|
|
|
|
320,231
|
|
Office Administration
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
204,600
|
|
Office Expenses
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
4,271
|
|
Property Maintenance
|
|
|
29,572
|
|
|
|
-0-
|
|
|
|
29,572
|
|
Regulatory Expenses/Fees
|
|
|
8,598
|
|
|
|
6,672
|
|
|
|
45,435
|
|
Rent
|
|
|
1,500
|
|
|
|
1,500
|
|
|
|
27,825
|
|
Telephone
|
|
|
900
|
|
|
|
900
|
|
|
|
7,631
|
|
Travel & Entertainment
|
|
|
193
|
|
|
|
-0-
|
|
|
|
4,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
$
|
145,622
|
|
|
$
|
97,195
|
|
|
$
|
1,207,386
|
|
See Notes to Financial Statements.
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
|
None.
|
ITEM 9A.
|
CONTROLS AND PROCEDURES.
|
Disclosure Controls and Procedures
We carried out
an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
as of April 30,
2012
(the “Evaluation Date”). This evaluation was carried out under
the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective
as of the Evaluation Date as a result of the material weaknesses in internal control over financial reporting discussed below.
Notwithstanding
the assessment that our internal control over financial reporting was not effective and that there were material weaknesses as
identified in this report, we believe that our financial statements contained in our Annual Report on Form 10-K for the year ended
April 30,
2012
fairly present our financial condition, results of operations and cash flows in
all material respects.
Management's Annual Report on Internal
Control Over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act, for the Company.
Internal control over financial reporting
includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.
Management recognizes that there are inherent
limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide
only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements.
In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions
or due to deterioration in the degree of compliance with our established policies and procedures.
A material weakness is a significant deficiency,
or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement
of the annual or interim financial statements will not be prevented or detected.
Under the supervision and with the participation
of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal
control over financial reporting, as of the Evaluation Date, based on the framework set forth in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this
framework, management concluded that our internal control over financial reporting was not effective as of the Evaluation Date.
Management assessed the effectiveness of
the Company’s internal control over financial reporting as of Evaluation Date and identified the following material weaknesses:
Insufficient Resources:
We have
an inadequate number of personnel with requisite expertise in the key functional areas of finance and accounting.
Inadequate Segregation of Duties
:
We have an inadequate number of personnel to properly implement control procedures.
Insufficient Written Policies &
Procedures:
We have insufficient written policies and procedures for accounting and financial reporting.
Inadequate Financial Statement Closing
Process:
We have an inadequate financial statement closing process.
Lack of Audit Committee & Outside
Directors on the Company’s Board of Directors:
We do not have a functioning audit committee and outside directors on
the Company’s Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal
controls and procedures.
Management is committed to improving its
internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company
with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts
which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) prepare and implement sufficient
written policies and checklists for financial reporting and closing processes and (4) may consider appointing outside directors
and audit committee members in the future.
Management, including
our
Chief Executive Officer and the Chief Financial Officer,
has discussed the material weakness noted above with our independent
registered public accounting firm. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements
which could be material to the annual or interim financial statements could occur that would not be prevented or detected.
This Annual Report does not include an
attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's
report was not subject to attestation by the our registered public accounting firm pursuant to temporary rules of the SEC that
permit us to provide only management's report in this Annual Report.
Changes in Internal Control over Financial Reporting
There were no
changes in our internal control over financial reporting that occurred during the fiscal quarter ended April 30,
2012
that
have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of
Controls and Procedures
Our management, including our Chief Executive
Officer and the Chief Financial Officer, do not expect that the our controls and procedures will prevent all potential errors or
fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met.
|
ITEM 9B.
|
OTHER INFORMATION.
|
None.
PART III
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
|
The following table sets forth the name and positions of our sole executive officer and director.
Name
|
|
Age
|
|
Positions
|
Howard Thomson
|
|
66
|
|
President, Secretary, Treasurer,
Chief Executive Officer, Chief Financial
Officer
and Sole Director
|
Set forth below is a brief description
of the background and business experience of our sole executive officer and director:
Howard Thomson
is our President,
Secretary, Treasurer, Chief Executive Officer, Chief Financial Officer, and the sole member of our Board of Directors. Mr. Thomson
was appointed a director on January 16, 2006 and has served as our President, Secretary, Treasurer, Chief Executive Officer and
Chief Financial Officer since January 16, 2006. Mr. Thomson was employed from 1981 to 1998 in senior management positions with
the Bank of Montreal, including five years as Branch Manager, four years as Regional Marketing Manager and five years as Senior
Private Banker. Mr. Thomson retired from the Bank of Montreal in 1998.
From February 1999 to August 2006, Mr. Thomson served
as a director and officer of Royalite Petroleum Company Inc. (formerly Worldbid Corporation), a public company quoted on the OTC
Bulletin Board, engaged in the acquisition and exploration of oil and gas properties. Since February 16, 2008, Mr. Thomson has
served as the sole executive officer and sole director of Greenlite Ventures Inc., a public company quoted on the OTC Bulletin
Board, engaged in the exploration of mineral properties.
Mr. Thomson provides his services on a
part-time basis as required for our business. Mr. Thomson presently commits approximately 6 to 8 hours a week of his business time
to our business. On March 21, 2006, we entered into a management agreement with Howard Thomson. See “Employment Contracts”
below.
Terms of Office
Our directors are appointed for one year
terms to hold office until the next annual general meeting of the holders of the our common stock, as provided by Article 330 of
Chapter 78 “Private Corporations” of the Nevada Revised Statutes, or until removed from office in accordance with our
by-laws. Our officers are appointed by our board of directors and hold office until removed by our board.
We do not pay to our directors any compensation
for each director serving as a director on our board of directors. We anticipate that compensation may be paid to officers in the
event that we determine to proceed with additional exploration programs beyond the fourth phase of our exploration program.
Significant Employees
We have no significant employees other
than our sole officer and director. We conduct our business through agreements with consultants and arms-length third parties.
Committees of the Board Of Directors
Our audit committee presently consists
of our sole director. We do not have a compensation committee, nominating committee, an executive committee of our board of directors,
stock plan committee or any other committees. Our sole director performs the functions of a nominating committee and oversees the
process by which individuals may be nominated to our board of directors. The current size of our board of directors does not facilitate
the establishment of a separate committee. We hope to establish a separate nominating committee consisting of independent directors,
if the number of our directors is expanded.
Audit Committee Financial Expert
We have no audit committee financial expert
serving on our audit committee. We believe the cost related to retaining a financial expert at this time is prohibitive. Further,
because of our stage of development, we believe the services of a financial expert are not warranted.
Code Of Ethics
We adopted a Code of Ethics applicable
to our Chief Executive Officer, Chief Financial Officer, Corporate Controller and certain other finance executives, which is a
"code of ethics" as defined by applicable rules of the SEC. Our Code of Ethics was attached as an exhibit to our Annual
Report on Form 10-KSB for the year ended April 30, 2004. If we make any amendments to our Code of Ethics other than technical,
administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our
Code of Ethics to our Chief Executive Officer, Chief Financial Officer, or certain other finance executives, we will disclose the
nature of the amendment or waiver, its effective date and to whom it applies in a Current Report on Form 8-K filed with the SEC.
Compliance with Section 16(a) of the Securities Exchange
Act
Section 16(a) of the Exchange Act requires
our executive officers and directors, and persons who own more than 10% of a registered class of our securities (“Reporting
Persons”), to file reports of ownership and changes in ownership with the SEC. Reporting Persons are required by SEC regulations
to furnish us with copies of all forms they file pursuant to Section 16(a). Based solely on our review of such reports received
by the Company, the Company has determined that the following persons have failed to file, on a timely basis, the identified reports
required by Section 16(a) of the Exchange Act:
Name and Principal Position
|
|
Number of Late
Insider
Reports
|
|
Transactions Not
Timely Reported
|
|
Known Failures to
File a Required
Form
|
Howard Thomson
Sole Executive Officer and Director
|
|
One
|
|
One
|
|
None
|
|
ITEM 11.
|
EXECUTIVE COMPENSATION.
|
Summary Compensation Table
The following table sets forth total compensation
paid to or earned by our named executive officers, as that term is defined in Item 402(m)(2) of Regulation S-K, during the fiscal
years ended April 30, 2012 and 2011.
SUMMARY COMPENSATION TABLE
|
|
Name & Principal
Position
|
|
|
Year
End
April 30,
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive
Plan
Compen-
sation ($)
|
|
|
Nonqualified
Deferred
Compen-
sation
Earnings
($)
|
|
|
All Other
Compen-
sation
($)
|
|
|
Total
($)
|
|
Howard
Thomson
|
|
|
2012
|
|
|
$
|
30,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
30,000
|
|
President, Secretary, Treasurer,
CEO & CFO
|
|
|
2011
|
|
|
$
|
30,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
30,000
|
|
Outstanding Equity Awards at Fiscal Year End
As at April 30, 2012, we had no outstanding
equity awards.
Employment Contracts
Other than as described below, we are
not party to any employment contracts.
On March 21, 2006, we entered into a management
consulting agreement with Mr. Thomson, pursuant to which he agreed to act as our President, Secretary, Treasurer, Chief Executive
Officer and Chief Financial Officer and provide certain management consulting services in consideration of which we agreed to
pay a fee of $2,500 per month and make a payment of $2,500 for prior services provided in the month of February, 2006. Pursuant
to the terms of the agreement, Mr. Thomson may also be granted incentive stock options from time to time as the board of Terrace
may determine in their discretion. The agreement may be terminated by Terrace at any time on three months notice to Mr. Thomson
and Mr. Thomson may terminate on 30 days notice. The management consulting agreement with Mr. Thomson expired effective March
21, 2008. Although this agreement has expired, we have agreed to continue to pay Mr. Thomson $2,500 for his management services.
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.
|
EQUITY COMPENSATION PLANS
On March 21, 2006, our Board of Directors
approved the 2006 Stock Incentive Plan (the "2006 Option Plan"). The 2006 Option Plan provides that the option price
be the fair market value of the stock at the date of grant as determined by our Board of Directors. Options granted become exercisable
and expire as determined by our Board of Directors.
The
following table sets forth certain information concerning all equity compensation plans previously approved by stockholders and
all previous equity compensation plans not previously approved by stockholders, as of the most recently completed fiscal year
.
|
|
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
|
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
|
|
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in column (a))
|
|
|
|
|
|
|
|
Plan Category
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
|
|
|
|
|
Equity Compensation Plans Approved By Security Holders
|
|
Nil
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
Equity Compensation Plans Not Approved By Security Holders
|
|
Nil
|
|
N/A
|
|
4,000,000
|
2006 Stock Incentive Plan
On March 21, 2006, we established our 2006
Stock Incentive Plan. The purpose of the 2006 Option Plan is to enhance the long-term stockholder value of Terrace by offering
opportunities to our directors, officers, employees and eligible consultants and any entity that directly or indirectly is in control
of or is controlled by Terrace (a “Related Company”) to acquire and maintain stock ownership in Terrace in order to
give these persons the opportunity to participate in our growth and success, and to encourage them to remain in our service or
a Related Company.
The 2006 Option Plan is administered by
our Board of Directors or by a committee of two or more non-employee directors appointed by our Board of Directors (the "Plan
Administrator"). Subject to the provisions of the 2006 Option Plan, the Plan Administrator has full and final authority to
grant the awards of stock options and to determine the terms and conditions of the awards and the number of shares to be issued
pursuant thereto. Options granted under the 2006 Option Plan may be either "incentive stock options," which qualify for
special tax treatment under the Internal Revenue Code of 1986, as amended, (the "Code"), non-qualified stock options
or restricted shares.
All of our employees and members of our
Board of Directors are eligible to be granted options. Individuals who have rendered or are expected to render advisory or consulting
services to us are also eligible to receive options. The maximum number of shares of our Common Stock with respect to which options
or rights may be granted under the 2006 Option Plan to any participant is 1,000,000 shares with the number of authorized shares
under the 2006 Option Plan increasing on the first day of each quarter beginning with the fiscal quarter commencing May 1, 2006
by the lesser of the following amounts: (1) 15% of the total increase in the number of shares of Common Stock outstanding during
the previous fiscal quarter; or (2) a lesser number of shares of Common Stock as may be determined by the Board, subject to certain
adjustments to prevent dilution.
The exact terms of the option granted are
contained in an option agreement between us and the person to whom such option is granted. Eligible employees are not required
to pay anything to receive options. The exercise price for incentive stock options must be no less than 75% of the fair market
value of the Common Stock on the date of grant. The exercise price for non-qualified stock options is determined by the Plan Administrator
in its sole and complete discretion. An option holder may exercise options from time to time, subject to vesting. Options will
vest immediately upon death or disability of a participant and upon certain change of control events.
The Plan Administrator may amend the 2006
Option Plan at any time and in any manner, subject to the following: (1) no recipient of any award may, without his or her consent,
be deprived thereof or of any of his or her rights thereunder or with respect thereto as a result of such amendment or termination;
and (2) any outstanding incentive stock option that is modified, extended, renewed, or otherwise altered must be treated in accordance
with Section 424(h) of the Code.
The 2006 Option Plan terminates on March
21, 2016 unless sooner terminated by action of our Board of Directors. All awards granted under the 2006 Option Plan expire ten
years from the date of grant, or such shorter period as is determined by the Plan Administrator. No option is exercisable by any
person after such expiration. If an award expires, terminates or is canceled, the shares of our Common Stock not purchased thereunder
may again be available for issuance under the 2006 Option Plan.
We have not yet filed a registration statement
under the Securities Act to register the shares of our Common Stock reserved for issuance under the 2006 Option Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain
information concerning the number of shares of our common stock owned beneficially as of
August 13,
2012
by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our
voting securities, (ii) each of our directors and each of our named executive officers (as defined under Item 402(m)(2) of Regulation
S-K), and (iii) officers and directors as a group. Unless otherwise indicated, the shareholders listed possess sole voting and
investment power with respect to the shares shown.
Title of Class
|
|
Name and Address
of Beneficial Owner
|
|
Number of Shares
of Common Stock
(1)
|
|
Percentage of
Common
Stock
(1)
|
|
|
|
|
|
|
|
|
|
DIRECTORS AND OFFICERS
|
|
|
|
|
|
|
|
Common Stock
|
|
Howard Thomson
CEO, CFO, President, Secretary,
Treasurer
& Director
|
|
450,000 Shares
(direct)
|
|
1.4
|
%
|
Common Stock
|
|
All Officers and Directors
as a Group (1 person)
|
|
450,000 Shares
|
|
1.4
|
%
|
|
|
|
|
|
|
|
|
5% SHAREHOLDERS
|
|
Common Stock
|
|
George Hatch
5% Holder
18555 2
nd
Avenue,
Surrey, BC, Canada
|
|
2,128,016 Shares
(direct)
|
|
6.4
|
%
|
|
(1)
|
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the
power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the
disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons
share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person
if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which
the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to
include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As
a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s
actual ownership or voting power with respect to the number of shares of common stock actually outstanding on August 13, 2012.
As of August 13, 2012, there were 33,160,660 shares of our common stock issued and outstanding.
|
CHANGES IN CONTROL
We are not aware of any arrangement that
might result in a change in control in the future.
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
|
RELATED TRANSACTIONS
None of the following parties has, during
our last two fiscal years, had any material interest, direct or indirect, in any transaction with us or in any presently proposed
transaction that has or will materially affect us, in which the Company is a participant:
|
(i)
|
Any of our directors or officers;
|
|
(ii)
|
Any person proposed as a nominee for election as a director;
|
|
(iii)
|
Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the
voting rights attached to our outstanding shares of common stock;
|
|
(iv)
|
Any of our promoters; and
|
|
(v)
|
Any relative or spouse of any of the foregoing persons who has the same house as such person.
|
DIRECTOR INDEPENDENCE
Our common stock is quoted on the OTC Bulletin
Board inter-dealer quotation system, which does not have director independence requirements. Under NASDAQ Rule 5605(a)(2), a director
is not considered to be independent if he or she is also an executive officer or employee of the corporation. Our sole director,
Howard Thomson, is also our sole executive officer. As a result, we do not have any independent directors.
As a result of our limited operating history
and minimal resources, our management believes that it will have difficulty in attracting independent directors. In addition, we
would likely be required to obtain directors and officers insurance coverage in order to attract and retain independent directors.
Our management believes that the costs associated with maintaining such insurance is prohibitive at this time.
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES.
|
During the fiscal years ended April 30,
2012 and 2011, we retained our independent auditor, Sarna & Company, Certified Public Accountants, to provide services in the
following categories and amounts:
|
|
Year Ended April 30, 2012
|
|
|
Year Ended April 30, 2011
|
|
Audit Fees
|
|
$
|
12,900
|
|
|
$
|
12,800
|
|
Audit-Related Fees
|
|
$
|
NIL
|
|
|
$
|
NIL
|
|
Tax Fees
|
|
$
|
NIL
|
|
|
$
|
NIL
|
|
All Other Fees
|
|
$
|
9,700
|
|
|
$
|
NIL
|
|
Total
|
|
$
|
22,600
|
|
|
$
|
12,800
|
|
Our Audit Committee has considered whether
the provision of non-audit services is compatible with maintaining the independence of Sarna & Company, and has concluded that
it is.
Policy on Pre-Approval by Audit Committee of Services Performed by Independent Auditors
The policy of our Audit Committee is to
pre-approve all audit and permissible non-audit services to be performed by our independent auditors during the fiscal year.
No services related to
Audit-Related
Fees
,
Tax Fees
or
All Other Fees
described above that were approved by the Audit Committee pursuant to the waiver
of pre-approval provisions set forth in the applicable rules of the SEC.
PART IV
|
ITEM 15.
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
|
Exhibit
Number
|
|
Description of Exhibit
|
|
|
|
3.1
|
|
Articles of Incorporation.
(1)
|
3.2
|
|
Certificate of Change to Authorized Capital effective December 19, 2005.
(2)
|
|
|
Certificate of Change Pursuant to NRS 78.209 decreasing the authorized capital of common stock to 80,000,000 shares, par value $0.001 per share.
(9)
|
3.3
|
|
Bylaws.
(1)
|
10.1
|
|
2006 Stock Incentive Plan.
(4)
|
10.2
|
|
Stock Option Agreement between the Company and Howard Thomson dated March 31, 2006.
(4)
|
10.3
|
|
Management Consulting Agreement dated March 21, 2006 between the Company and Howard Thomson.
(4)
|
10.4
|
|
Interim Agreement dated July 9, 2008 between the Company and Pyro Pharmaceuticals, Inc.
(5)
|
10.5
|
|
Amendment Agreement dated September 26, 2008 to the Interim Agreement dated July 9, 2008 between the Company and Pyro Pharmaceuticals, Inc.
(6)
|
10.6
|
|
Share Purchase Agreement dated April 29, 2009 among Terrace Ventures Inc., Marktech Acquisition Corp., Worldbid International Inc. and Geobiz Systems Inc.
(7)
|
10.7
|
|
Amendment Agreement to Share Purchase Agreement dated August 12, 2009 among Terrace Ventures Inc., Marktech Acquisition Corp., Worldbid International Inc. and Geobiz Systems Inc.
(8)
|
10.8
|
|
Earn-In Agreement (Golden Snow) dated April 26, 2011 between Pengram Corporation and Terrace Ventures Inc.
(10)
|
10.9
|
|
Earn-In Extension Agreement (Golden Snow) dated June 29, 2011 between Pengram Corporation and Terrace Ventures Inc.
(11)
|
Exhibit
Number
|
|
Description of Exhibit
|
10.10
|
|
Amendment Agreement dated July 31, 2012 between Pengram Corporation and Terrace Ventures Inc.
|
14.1
|
|
Code of Ethics.
(3)
|
31.1
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
Notes:
|
|
|
(1)
|
|
Filed with the SEC as an exhibit to our Registration Statement on Form 10-SB originally filed on February 2, 2004.
|
(2)
|
|
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on December 27, 2005.
|
(3)
|
|
Filed with the SEC as an exhibit to our Annual Report on Form 10-KSB filed on September 8, 2004.
|
(4)
|
|
Filed with the SEC as an exhibit to our Quarterly Report on Form 10-QSB filed on March 22, 2006.
|
(5)
|
|
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on July 15, 2008.
|
(6)
|
|
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on October 2, 2008.
|
(7)
|
|
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on April 29, 2009.
|
(8)
|
|
Filed with the SEC as an exhibit to our Annual Report on Form 10-K filed on August 13, 2009.
|
(9)
|
|
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on October 2, 2009.
|
(10)
|
|
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on April 28, 2011.
|
(11)
|
|
Filed with the SEC as an exhibit to our Annual Report on Form 10-K filed on August 15, 2011.
|
SIGNATURES
Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
|
|
|
TERRACE VENTURES INC.
|
|
|
|
|
|
Date:
|
August 14, 2012
|
|
By:
|
/s/ Howard Thomson
|
|
|
|
|
HOWARD THOMSON
|
|
|
|
|
Chief Executive Officer, Chief Financial Officer ,
|
|
|
|
|
President, Secretary and Treasurer
|
|
|
|
|
(Principal Executive Officer & Principal Accounting Officer)
|
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
Date:
|
August 14, 2012
|
|
By:
|
/s/ Howard Thomson
|
|
|
|
|
HOWARD THOMSON
|
|
|
|
|
Chief Executive Officer, Chief Financial Officer ,
|
|
|
|
|
President, Secretary, Treasurer and
|
|
|
|
|
Director
|
Terrace Ventures (CE) (USOTC:TVER)
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