White Mountain Titanium (WMTM) 10-Q 2010 Q1 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2010

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

For the transition period from to

Commission File Number 333-129347

WHITE MOUNTAIN TITANIUM CORPORATION

(Name of small business issuer in its charter)

NEVADA	87-0577390
(State of incorporation or	(IRS Identification No.)
organization)

Augusto Leguia 100, Oficina 812

Las Condes, Santiago

Chile

(Address of principal executive offices)

(56 2) 657-1800

(Issuer’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed under Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x    No  ¨

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 Accelerate Filer ¨	Accelerated Filer ¨
Non-Accelerated Filer ¨ (Do not check if a smaller reporting company)	Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨       No x

37,120,972 shares of the issuer’s common stock, $.001 par value, were outstanding at May 6, 2010.

 

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Consolidated Balance Sheets

(US Funds)

	March 31, 2010			December 31, 2009
	(Unaudited)
Assets
Current
Cash and cash equivalents	$	799,833		$	1,343,994
Prepaid expenses		171,404			57,546
Receivables		55,552			50,443
Total Current Assets		1,026,789			1,451,983
Property and Equipment (Note 2)		68,502			73,927
Mineral Properties		651,950			651,950
Total Assets	$	1,747,241		$	2,177,860
Liabilities
Current
Accounts payable and accrued liabilities	$	53,994		$	188,534
Total Current Liabilities		53,994			188,534
Other Liabilities – Warrants (Note 3(d))		1,986,025			2,956,725
Total Liabilities		2,040,019			3,145,259
Stockholders’ Deficit
Preferred Stock and Paid-in Capital in Excess of $0.001 Par Value (Note 3(a))
20,000,000 Shares authorized
625,000 (December 31, 2009 – 625,000) shares issued and outstanding		500,000			500,000
Common Stock and Paid-in Capital in Excess of $0.001 Par Value (Note 3(a))
100,000,000 Shares authorized
37,120,972 (December 31, 2009 – 36,400,972) shares issued and outstanding		22,488,100			21,660,100
Obligation to Issue Shares (Note 3(e))		60,000			-
Deficit Accumulated During the Exploration Stage		(23,340,878	)		(23,127,499	)
Total Stockholders’ Deficit		(292,778	)		(967,399	)
Total Liabilities and Stockholders’ Deficit	$	1,747,241		$	2,177,860

See notes to unaudited consolidated financial statements.

 

2

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Consolidated Condensed Statements of Operations

(US Funds)

							Cumulative Period
							from Inception
							(November 13,
							2001) through
	Three months ended March 31,						March 31,
	2010			2009			2010
	(Unaudited)			(Unaudited)			(Unaudited)
Expenses
Advertising and promotion	$	4,587		$	15,096		$	231,251
Amortization		6,896			6,388			148,001
Bank charges and interest		2,468			1,084			30,036
Consulting fees (Note 3(c))		102,829			38,491			2,084,614
Consulting fees – directors and officers (Notes 3(c)		521,130			253,035			4,580,949
Engineering consulting		-			-			694,836
Exploration		75,288			133,628			4,595,812
Filing fees		4,892			1,397			57,769
Insurance		10,477			8,688			256,699
Investor relations, net		-			-			769,989
Licenses, taxes and filing fees, net		(2,415	)		9,587			377,532
Management fees (Note 3(c))		329,820			34,800			1,865,410
Office (Note 3(c))		48,218			4,633			234,753
Professional fees		24,971			24,727			1,569,885
Rent		20,716			16,579			411,813
Telephone		3,414			3,010			93,220
Transfer agent fees		921			640			15,439
Travel and vehicle		23,692			36,626			1,027,321
Loss Before Other Items		(1,177,904	)		(588,409	)		(19,045,329	)
Gain on Sale of Marketable Securities		-			-			87,217
Loss on Sale of Assets		-			(7,465	)		(19,176	)
Adjustment to Market for Marketable Securities		-			-			(67,922	)
Foreign Exchange Gain (Loss)		(9,189	)		6,953			(232,289	)
Interest Income		3,014			374			350,157
Dividend Income		-			-			4,597
Change in Fair Value of Warrants (Note 3(d))		970,700			-			(2,185,024	)
Financing Agreement Penalty		-			-			(330,000	)
Net Loss and Comprehensive Loss for Period		(213,379	)		(588,547	)		(21,437,769	)
Preferred stock dividends		-			-			(1,537,500	)
Net Loss Available for Distribution	$	(213,379	)	$	(588,547	)	$	(22,975,269	)
Basic and Diluted Loss Per Common Share (Note 4)	$	(0.01	)	$	(0.02	)
Weighted Average Number of Shares of Common Stock Outstanding		36,752,972			32,324,133

See notes to unaudited consolidated financial statements.

3

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Consolidated Condensed Statements of Cash Flows

(US Funds)

							Cumulative Period
							from Inception
							(November 13,
							2001) through
	Three months ended March 31,						March 31,
	2010			2009			2010
	(Unaudited)			(Unaudited)			(Unaudited)
Operating Activities
Net loss for period	$	(213,379	)	$	(588,547	)	$	(21,437,769	)
Items not involving cash
Amortization		6,896			6,388			136,290
Stock-based compensation		-			11,335			3,188,211
Loss on sale of assets		-			7,465			19,176
Common stock issued for services		828,000			164,000			3,345,630
Change in value of warrants		(970,700	)		-			2,185,025
Financing agreement penalty		-			-			330,000
Adjustment to market on marketable securities		-			-			67,922
Gain on sale of marketable securities		-			-			(87,217	)
Non-cash resource property expenditures		-			-			600,000
Changes in non-cash working capital
Receivables		(5,109	)		(2,731	)		(55,552	)
Marketable securities		-			-			19,295
Accounts payable and accrued liabilities		(134,540	)		14,928			(192,087	)
Prepaid expenses		(113,858	)		(15,660	)		74,676
Cash Used in Operating Activities		(602,690	)		(402,822	)		(11,806,400	)
Investing Activities
Proceeds on sale of surplus assets		-			6,630			6,630
Addition to property and equipment		(1,471	)		-			(230,598	)
Addition to mineral property		-			-			(651,950	)
Cash Provided by (Used in) Investing Activities		(1,471	)		6,630			(875,918	)
Financing Activities
Repayment of long-term debt		-			-			(100,000	)
Issuance of preferred stock for cash		-			-			5,000,000
Issuance of common stock for cash		-			-			8,290,980
Stock subscriptions received		60,000			-			180,000
Stock subscriptions receivable		-			-			111,000
Working capital acquired on acquisition		-			-			171
Cash Provided by Financing Activities		60,000			-			13,482,151
Inflow (Outflow) of Cash and Cash Equivalents		(544,161	)		(396,192	)		799,833
Cash and Cash Equivalents, Beginning of Period		1,343,994			1,475,460			-
Cash and Cash Equivalents, End of Period	$	799,833		$	1,079,268		$	799,833
Supplemental Cash Flow Information
Income tax paid	$	-		$	-		$	-
Interest paid	$	-		$	-		$	-
Shares Issued for
Settlement of debt	$	-		$	-		$	830,000
Services	$	828,000		$	164,000		$	2,785,630

See notes to unaudited consolidated financial statements.

 

4

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Consolidated Statements of Stockholders’ Equity (Deficit)

(US Funds)

	Shares of Common Stock		Common Stock and Paid-In Capital in Excess of Par Value		Shares of Preferred Stock		Preferred Stock and Paid-in Capital in Excess of Par Value		Share Subscriptions Received/ Obligation to issue shares		Accumulated Deficit			Total Stockholders’ Equity (Deficit)
Balance, December 31, 2008		32,004,042	$	17,930,947		625,000	$	500,000	$	-	$	(16,183,119	)	$	2,247,828
Stock-based compensation (Note 3(c))		-		1,024,122		-		-		-		-			1,024,122
Warrants exercised (Note3(d))		2,100,000		1,045,340		-		-		-		-			1,045,340
Private placement (Note 3(b))		1,496,930		900,691		-		-		-		-			900,691
Reduction in warrant liability on exercise of 2,000,000 warrants		-		199,000		-		-		-		-			199,000
Common stock issued for services (Note 3(c))		800,000		560,000		-		-		-		-			560,000
Cumulative effect of change in accounting principle (Note 5)		-		-		-		-		-		(1,084,375	)		(1,084,375	)
Net loss for the year		-		-		-		-		-		(5,860,005	)		(5,860,005	)
Balance, December 31, 2009		36,400,972		21,660,100		625,000		500,000		-		(23,127,499	)		(967,399	)
Shares issued for services (Note 3(c))		720,000		828,000		-		-		-		-			828,000
Share subscriptions received/obligation to issue shares		-		-		-		-		60,000		-			60,000
Net loss for the period		-		-		-		-		-		(213,379	)		(213,379	)
Balance, March  31, 2010		37,120,972	$	22,488,100		625,000	$	500,000	$	60,000	$	(23,340,878	)	$	(292,778	)

See notes to unaudited consolidated financial statements.

5

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Three Months Ended March 31, 2010 and 2009

(US Funds)

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

White Mountain Titanium Corporation (the “Company”) currently has no ongoing operations.  Its principal business is to advance exploration and development activities on the Cerro Blanco rutile (titanium dioxide) property (“Cerro Blanco”) located in Region III of northern Chile.  The Company is considered an exploration stage company and its financial statements are presented in a manner similar to a development stage company as defined in Accounting Standards Codification Topic 915 "Development Stage Entities".

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2010 and for the period then ended have been made.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s December 31, 2009 audited consolidated financial statements included in the Company’s 2009 annual report on Form 10-K filed with the Securities Exchange Commission (“SEC”).  The results of operations for the period ended March 31 2010 are not necessarily indicative of the operating results for the full year.

2. PROPERTY AND EQUIPMENT

	March 31, 2010
			Accumulated
	Cost		Amortization		Net
			(Unaudited)
Vehicles	$	54,167	$	39,726	$	14,441
Office furniture		18,287		4,204		14,083
Office equipment		11,311		4,666		6,645
Computer equipment		8,197		5,600		2,597
Computer software		1,541		721		820
Field equipment		62,814		32,898		29,916
	$	156,317	$	87,815	$	68,502

	December 31, 2009
			Accumulated
	Cost		Amortization		Net
Vehicles	$	54,153	$	38,031	$	16,122
Office furniture		17,712		3,189		14,523
Office equipment		10,828		4,139		6,689
Computer equipment		8,197		5,192		3,005
Computer software		1,142		664		478
Field equipment		62,814		29,704		33,110
	$	154,846	$	80,919	$	73,927

 

6

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Three Months Ended March 31, 2010 and 2009

(US Funds)

3. CAPITAL STOCK

(a) Common stock

The Company’s authorized:

i) Common stock with a par value of $0.001 is 100,000,000 shares.

ii) Preferred stock with a par value of $0.001 is 20,000,000 shares.

In February 2010, the Company filed an S-1 registration statement related to the offering of common shares with the SEC to raise up to $6,000,000.  The pricing and final amount of the offering are not yet determined.  The offering will consist of units, each unit consisting of three shares of common stock and one three-year warrant to purchase an additional share of common stock at 125% of the price per share allocated to the common shares in the units.  The units will separate immediately and the common stock and the warrants will be issued separately.  Source Capital Group, Inc. will act as the placement agent for the units, on a “best efforts” basis, and will receive a selling commission of 8% on gross proceeds raised.

(b) Stock options

During the quarter ended March 31, 2010, no stock options were granted.  The following table represents service based stock option activity during the first three months of 2010.

	March 31, 2010				December 31, 2009
	Number of Shares		Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
	(Unaudited)
Outstanding - beginning of period		2,790,000	$	0.53		3,140,000		$	0.57
Expired		-		-		(100,000	)	$	2.00
Forfeited		-		-		(250,000	)	$	0.50
Outstanding – end of period		2,790,000	$	0.53		2,790,000		$	0.53
Exercisable – end of period		2,790,000	$	0.53		2,790,000		$	0.53

 

7

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Three Months Ended March 31, 2010 and 2009

(US Funds)

3. CAPITAL STOCK (continued)

(b) Stock options (continued)

As at March 31, 2010 and December 31, 2009, the following director and consultant stock options were outstanding:

	Exercise		March 31,		December 31,
Expiry Date	Price		2010		2009
			(Unaudited)
January 31, 2011	$	0.50		400,000		400,000
May 31, 2011	$	0.50		600,000		600,000
August 1, 2011	$	0.50		200,000		200,000
August 31, 2011	$	0.50		350,000		350,000
August 31, 2012	$	0.50		1,075,000		1,075,000
June 23, 2013	$	1.00		165,000		165,000
				2,790,000		2,790,000

The shares under option at March 31, 2010 were in the following exercise price ranges:

		Options Exercisable and Outstanding
Exercise Price		Weighted Average Exercise Price		Number of Shares under Option		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life in Years
$	0.50	$	0.50		2,625,000	$	1,155,000		1.68
$	1.00	$	1.00		165,000		-		3.23
		$	0.53		2,790,000	$	1,155,000		1.77

(c) Stock-based compensation

During the quarter ended March 31, 2010, the total stock-based compensation recognized under the fair value method was $nil.

Stock-based compensation was reported in the first quarter of 2009 with respect to 400,000 shares issued to two officers and directors of the Company upon attaining previously determined milestones as established by the Compensation committee.  A fair value of $164,000 (2008: $nil) was attributed to these shares based on a fair market value of $0.41 per share and was charged to Consulting fees – directors and officers.

In February 2010, the Company granted 720,000 shares of common stock at a fair value of $828,000 to management, employees and consultants.  The shares were granted under the 2010 Management Compensation Plan.  The shares were issued without registration under the Securities Act by reason of the exemptions from registration afforded by the provisions of Section 4(2) of the Securities Act and regulations promulgated by the SEC.  Each person acknowledged appropriate investment representations with respect to the issuance and consented to the imposition of restrictive legends upon the certificates.

8

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Three Months Ended March 31, 2010 and 2009

(US Funds)

3. CAPITAL STOCK (continued)

(c) Stock-based compensation (continued)

The total stock-based compensation recognized under the fair value method for shares issued for services was as follows:

	March 31,				December 31
	2010		2009		2009		2008
	(Unaudited)
Consulting fees	$	62,100	$	-	$	77,130	$	-
Consulting fees - directors and officers		434,700		175,335		252,117		45,339
Investor relations		-		-		694,875		-
Management fees		289,800		-		-		-
Office		41,400		-		-		-
Compensation	$	828,000	$	175,335	$	1,024,122	$	45,339

(d) Warrants

Details of stock purchase warrant activity is as follows:

	March 31, 2010					December 31, 2009
	Number of Warrants			Weighted Average Exercise Price		Number of Warrants			Weighted Average Exercise Price
	(Unaudited)
Outstanding - beginning of period		10,587,385		$	0.56		13,022,600		$	0.54
Issued		-			-		589,785		$	0.63
Exercised		(100,000	)		0.60		(2,100,000	)	$	0.50
Expired		-			-		(925,000	)	$	0.50
Outstanding - end of period		10,487,385		$	0.56		10,587,385		$	0.56

As at March 31, 2010 the following share purchase warrants were outstanding:

Expiry Date	Exercise Price		March 31, 2010		December 31, 2009
			(Unaudited)
August 10, 2010	$	0.60		5,747,600		5,847,600
April 1, 2011	$	0.50		4,250,000		4,250,000
June 30, 2011	$	0.75		150,000		150,000
June 30, 2012	$	0.50		235,000		235,000
June 30, 2013	$	0.90		104,785		104,785
				10,487,385		10,587,385

 

9

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Three Months Ended March 31, 2010 and 2009

(US Funds)

3. CAPITAL STOCK (continued)

(d) Warrants (continued)

Effective January 1, 2009, the Company adopted the provisions of Emerging Issues Task Force (“EITF”) 07-05, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock, which was primarily codified into ASC Topic 815, Derivatives and Hedging.  ASC 815 applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative and to any freestanding financial instruments that are potentially settled in an entity’s own common stock.

As a result of adopting ASC 815, warrants to purchase 6,875,000 shares of common stock previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment. The warrants had an exercise price of $0.50 per warrant and expire in July and September 2009, of which 4,250,000 warrants were extended to April 2011.  As such, effective January 1, 2009, the Company reclassified the fair value of these warrants to purchase common stock, which had exercise price reset features, from equity to liability status as if these warrants were treated as a derivative liability since their date of issue.   On January 1, 2009, the Company reclassified $1,084,375 to beginning deficit and $1,084,375 to other liabilities - - warrants to recognize the fair value of such warrants on such date.

As of March 31, 2010, the remaining 4,250,000 warrants were fair valued using the Black-Scholes option pricing model with the following weighted average assumptions:  risk-free interest rate of 1.63%, expected life of 1 year, an expected volatility factor of 53.19% and a dividend yield of 0.0%. The fair value of these warrants to purchase common stock decreased to $1,986,025 as of March 31, 2010. As such, the Company recognized a $970,700 non-cash income from the change in fair value of these warrants for the period ended March 31, 2010.

(e) Obligation to issue shares

On March 30, 2010, a warrant holder forwarded funds to exercise 100,000 warrants at an exercise price of $0.60 per unit.  As of the quarter-end, the issuance of shares was in process but had not been completed and has been recorded as an obligation to issue shares in these consolidated financial statements.

4. LOSS PER SHARE

Basic and diluted loss per share is computed using the weighted average number of common shares outstanding as follows:

	March 31,
	2010			2009
	(Unaudited)			(Unaudited)
Net loss for period	$	(213,379	)	$	(588,547	)
Preferred stock dividends		-			-
Net loss available for distribution	$	(213,379	)	$	(588,547	)
Allocation of undistributed loss
Preferred shares (1.67%, 2009 - 1.80%; 2008 - 1.92%	$	(3,568	)	$	(11,137	)
Common shares (98.33%,  2009 - 98.20%; 2008 - 98.08%)		(209,811	)		(577,410	)
	$	(213,379	)	$	(588,547	)
Basic loss per share amounts
Undistributed amounts
Loss per preferred share	$	(0.005	)	$	(0.02	)
Loss per common share	$	(0.005	)	$	(0.02	)

10

 

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Three Months Ended March 31, 2010 and 2009

(US Funds)

4.           LOSS PER SHARE (continued)

Weighted average number of shares:

	March 31,
	2010		2009
	(Unaudited)		(Unaudited)
Weighted average number of shares for undistributed amounts
Preferred stock (common stock equivalent)		625,000		625,000
Common stock		36,752,972		32,324,133

Potentially dilutive securities not included in diluted weighted average shares outstanding include shares underlying 2,790,000 in outstanding options, 10,487,385 warrants and 625,000 shares of convertible preferred stock.

5. FAIR VALUE MEASUREMENTS

The Company’s financial instruments consist of cash and cash equivalents, receivables, and accounts payable and accrued liabilities.  The carrying amounts of these instruments approximate their respective fair values because of the short maturities of those instruments.

The Company follows the accounting guidance, which is now part of ASC 820-10 (formerly Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157), Fair Value Measurements (“SFAS 157”).  SFAS 157 does not require any new fair value measurements; instead it defines fair value, establishes a framework for measuring fair value in accordance with existing generally accepted accounting principles and expands disclosure about fair value measurements.  The adoption of SFAS 157 for the Company’s financial assets and liabilities did not have an impact on the Company’s financial position or operating results.  Beginning January 1, 2008, assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure fair value.  Level inputs, as defined by SFAS 157, are as follows:

· Level 1 - quoted prices in active markets for identical assets or liabilities

· Level 2 - other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date

· Level 3 - significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

The following table (unaudited) summarizes fair value measurement by level at March 31, 2010 for assets and liabilities measured at fair value on a recurring basis.

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	799,833	$	-	$	-	$	799,833
Receivables	$	55,552	$	-	$	-	$	55,552
Accounts payable and accrued liabilities	$	53,994	$	-	$	-	$	53,994
Other liabilities - warrants	$	-	$	1,986,025	$	-	$	1,986,025

6. SUBSEQUENT EVENTS

The Company has evaluated its activities subsequent to March 31, 2010 and has concluded that no subsequent events have occurred that would require recognition or disclosure in the consolidated condensed financial statements.

 

11

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

The following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes thereto as filed with this report.

Forward Looking Statements

The statements contained in this report that are not historical facts are forward-looking statements that represent management’s beliefs and assumptions based on currently available information.  Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, need for financing, competitive position, potential growth opportunities, potential operating performance improvements, ability to retain and recruit personnel, the effects of competition and the effects of future legislation or regulations.  Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believes,” “intends,” “may,” “will,” “should,” “anticipates,” “expects,” “could,” “plans,” or comparable terminology or by discussions of strategy or trends.  Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct.  Such statements by their nature involve risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such forward-looking statements.

Among the factors that could cause actual future results to differ materially are the risks and uncertainties discussed in this report.  While it is not possible to identify all factors, we continue to face many risks and uncertainties including, but not limited to, the cyclicality of the titanium dioxide industry, global economic and political conditions, global productive capacity, customer inventory levels, changes in product pricing, changes in product costing, changes in foreign currency exchange rates, competitive technology positions and operating interruptions (including, but not limited to, labor disputes, leaks, fires, explosions, unscheduled downtime, transportation interruptions, war and terrorist activities).  Mining operations are subject to a variety of existing laws and regulations relating to exploration and development, permitting procedures, safety precautions, property reclamation, employee health and safety, air and water quality standards, pollution and other environmental protection controls, all of which are subject to change and are becoming more stringent and costly to comply with.  Should one or more of these risks materialize (or the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those expected.  We disclaim any intention or obligation to update publicly or revise such statements whether as a result of new information, future events or otherwise.

There may also be other risks and uncertainties that we are unable to predict at this time or that we do not now expect to have a material adverse impact on our business.

Background

We are a mineral exploration company.  We hold mining concessions composed of 33 registered mining exploitation concessions, and 5 exploration concessions, over approximately 8,225 hectares located approximately 39 kilometers west of the City of Vallenar in the Atacama, or Region III, geographic region of northern Chile (hereinafter referred to as “Cerro Blanco”).  We are in the exploration stage, which means we are engaged in the search for mineral deposits or reserves which could be economically and legally extracted or recovered.  Our primary expenditures at this stage consist of acquisition and exploration costs and general and administration expenses.  We have produced no revenues, have achieved losses since inception, have no operations, and currently rely upon the sale of our securities to fund our operations.

Plan of Operation and Financial Condition

We completed the acquisition of an undivided interest in Cerro Blanco in September 2005.  Exploration drilling by us and the previous owner has defined rutile mineralization.  Metallurgical test work performed by Lakefield Research has demonstrated that this mineralization can be concentrated to a level meeting buyer specifications and can be produced using a conventional milling and flotation process.

Over the next twelve to twenty-four months we have two principal objectives: to advance the project towards a final engineering feasibility level and to secure off-take contracts for the planned rutile concentrate output.  We also continue to investigate the commercial viability of producing a feldspar co-product.  The feldspar could find applications in the glass and ceramics industries.

 

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We now have a considerable body of engineering design and process engineering work completed, both by us and previous owners, for the development of a large open pit mine and milling operation.  The extent to which this engineering work could be incorporated into a feasibility study will depend on factors such as optimal plant sizing and configuration based on product volumes and specifications set out in off-take contracts and process design, the latter to be determined by refinements coming out of the metallurgical test work and pilot scale testing completed last year.  With a portion of the funds from this offering, and contemporaneous with commencement of our marketing plan to seek suitable off-take contracts, we intend to undertake a program of drilling to provide data for mine planning and design, for an environmental impact assessment and permitting program, and to commission a feasibility study.  As some of these activities would be undertaken in tandem, we believe a feasibility study could be completed by fourth quarter 2010 or first quarter 2011, subject to the availability of funds, personnel and equipment.  We estimate the cost to take the project to the point of completing a final engineering feasibility study at approximately $3,810,000, including general and administrative and marketing expenses.  As of March 31, 2010, our cash position was $799,833. We currently do not have sufficient capital to complete this plan and estimate that we will require additional financing to do so.

Results of Operations

We recorded a loss for the quarter ended March 31, 2010 of $213,379 ($0.01 per weighted average common share outstanding) compared to a loss of $588,547 ($0.02) per share) for the comparable interim period in 2009.

There were two significant factors affecting the loss during this quarter

i) Due to the change in valuation of the warrant liability in the quarter we recorded a gain of $970,700 (2009 $nil).; and

ii) During 2009 the Board of Directors approved an employee benefit plan for officers, directors, and employees to increase stockholder value and the success of the company by motivating members of management to provide services to the company and perform to the best of their abilities, to achieve the company’s objectives, and to allow us to minimize the cash component of compensation.  The pool consists of up to 1% of the outstanding shares at the end of each year.  During the quarter we issued 720,000 shares at a fair value of $828,000.  This expense was allocated to Consulting fees, Consulting fees – directors and officers, Management fees and office (see note 3(c) of the quarterly financial statements).

Generally most expenses continue to be comparable or lower this quarter than in the comparable quarter of 2009, as the company was concentrating on its proposed financing, and had a reduced level of activity at the site.  The most significant items are:

· Consulting expense, excluding $62,100 of stock based compensation was $40,729 (2009: $38,491).

· Consulting fees – directors and officers, again excluding $434,700 of stock based compensation was $86,430 (2009: $77,700 after excluding stock based compensation of $175,335).

· Management fees, excluding stock based compensation of $289,800 were $40,020 (2009: $34,800).

· Office expense, excluding stock based compensation of $41,400 was $6,818 (2009: $4,633).

· Rent was $20,716 (2009 $16,579) reflecting the move to new offices in Santiago in late 2009.

· Travel expense was $23,692 (2009: $36,626) due to decreased travel to Chile and to potential investors.

Recent Accounting Pronouncements

Codification

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of SFAS No. 162 (the “Codification”).  The Codification will be the single source of authoritative non-governmental US accounting and reporting standards, superseding existing FASB, AICPA, EITF and related literature. The Codification eliminates the hierarchy of GAAP contained in SFAS No. 162 and establishes one level of authoritative GAAP. All other literature is considered non-authoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009, which for the Company was September 30, 2009.  All accounting references have been updated with Accounting Standard Codification (“ASC”) references.

Fair value measurements

In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends ASC Topic 820, Measuring Liabilities at Fair Value, which provides additional guidance on the measurement of liabilities at fair value. These amended standards clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, the Company is required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, the Company is required to use another valuation technique, such as an income approach or a market approach. These amended standards were effective on October 1, 2009 and did not have a material impact on the consolidated financial statements.

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In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures, which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of purchases, sales, issuances and settlements relating to Level 3 measurements and clarification of existing fair value disclosures.

ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010 (the Company’s fiscal year 2011); early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2009-14 on its consolidated financial statements.

In June 2008, the FASB ratified the consensus reached on ASC 815-40 Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock. ASC 815-40 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which would qualify as a scope exception under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The Company adopted ASC 815-40 as of January 1, 2009 (Note 11).

In May 2009, the FASB issued ASC 855.  ASC 855 is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date—that is, whether that date represents the date the financial statements were issued or were available to be issued.  In February 2010, the FASB amended ASC 855 to remove the requirement for an SEC registrant to disclose the date through which subsequent events were evaluated as this requirement would have potentially conflicted with SEC requirements. Removal of this disclosure requirement is not expected to affect the nature or timing of subsequent events evaluations performed by the Company.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we have elected not to provide the disclosure required by this item.

Item 4T. Controls and Procedures

Disclosure Controls and Procedures

Our President and our CFO, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in the Rule 15d-15 (e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), have concluded that as of the Evaluation Date, our disclosure controls and procedures were effective to provide assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 15d-15(f) under the Exchange Act) that occurred during our most recent quarter ended March 31, 2010, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.  Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their stated goals under all potential future conditions.

PART II.  OTHER INFORMATION

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

In February 2010 we granted bonuses of 720,000 fully vested shares of common stock to management for past services performed in 2008 and 2009.  The shares were granted under our 2010 Management Compensation Plan.  We granted 252,000 shares to Mr. Kurtanjek, 252,000 shares to an entity owned by Mr. Flower, 72,000 shares to Mr. Jenkins, 54,000 shares to an entity owned by Mr. Crosby, 54,000 shares to Christian Feddersen, an employee in Chile, and 36,000 shares to Maria Eugenia Moscosco, an employee in Chile.  The shares were issued without registration under the Securities Act by reason of the exemptions from registration afforded by the provisions of Section 4(2) of the Securities Act and Regulation S promulgated by the SEC.  Each person acknowledged appropriate investment representations with respect to the issuance and consented to the imposition of restrictive legends upon the certificates representing the shares.  They did not enter into the transaction with us as a result of or subsequent to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented at any seminar or meeting.  Each recipient of the bonuses was afforded the opportunity to ask questions of our management and to receive answers concerning the terms and conditions of the issuance.  No selling commissions were paid in connection with the grant of the shares.

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Item 6. Exhibits

The following exhibits are furnished with this report:

31.1           Rule 15d-14(a) Certification by Principal Executive Officer

31.2           Rule 15d-14(a) Certification by Chief Financial Officer

32.1           Section 1350 Certification of Principal Executive Officer

32.2           Section 1350 Certification of Chief Financial Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	White Mountain Titanium Corporation
Date: May 14, 2010	By	/s/  Michael P. Kurtanjek
		Michael P. Kurtanjek, President
		(Principal Executive Officer)
Date: May 14, 2010	By	/s/ Charles E. Jenkins
		Charles E. Jenkins, Chief Financial Officer
		(Principal Financial Officer)

 

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