|
| Dynamic Gold Corp. |
| (An Exploration Stage Company) |
| Notes to the Interim Consolidated Financial Statements |
| (Expressed in U.S. Dollars) |
| (Unaudited – Prepared by Management) |
| 31 December 2012 |
If the Canadian dollar had weakened (strengthened) against the U.S. dollar, with all other variables held constant, by 100 basis points (1%) at year end, the impact on net loss and other comprehensive loss would have been $101 higher ($101 lower).
Interest Rate Risk
The Company has cash balances and an interest-bearing debt. It is management’s opinion that the Company is not exposed to significant interest risk arising from these financial instruments.
Liquidity Risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with its financial liabilities. The Company is reliant upon a related party as its sole source of cash. The Company has received financing from a related party in the past; however, there is no assurance that it will be able to do so in the future.
The following events occurred from the date of the six month period ended 31 December 2012 to the date the interim consolidated financial statements were available to be issued on 8 February 2013:
| | |
| i. | On 8 January 2013, the Company entered into the Sixth Amending Agreement with an officer, director and shareholder of the Company. The Sixth Amending Agreement extended the repayment date on the amount due from 8 January 2013 to 8 January 2014 (Notes 5 and 9). |
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ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The terms “Dynamic Gold”, “Company”, “we”, “our”, and “us” refer to Dynamic Gold Corp. and its subsidiary, as a consolidated entity, unless the context suggests otherwise.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking statements” as defined by the Securities and Exchange Commission, or SEC. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this Form 10-Q that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These forward-looking statements are based on assumptions which we believe are reasonable based on current expectations and projections about future events and industry conditions and trends affecting our business. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties that, among other things, could cause actual results to differ materially from those contained in the forward-looking statements, including without limitation the Risk Factors set forth in our Annual Report on Form 10-K for the year ended June 30, 2012 including the following:
our failure to obtain additional financing;
our inability to continue as a going concern;
the unique difficulties and uncertainties inherent in the mineral exploration business;
the inherent dangers involved in mineral exploration;
our President’s and Secretary/Treasurer’s inability to devote a significant amount of time toour business operations;
environmental, health and safety laws in British Columbia;
local and multi-national economic and political conditions;
natural hazards on the Coast of British Columbia, Canada; and
our common stock.
General
On January 8, 2008, we acquired, through our wholly owned subsidiary, a 100% interest in two gravel claims called the Northern Gravel Claims and Super Mammoth Gravel Claims (the “Super Mammoth Gravel Project”) situated on tidewater for $25,000. The Super Mammoth Gravel Project consists of two mineral claim tenures that are approximately 124.1 each hectares (“ha”) in size (total 248.2 ha). A detailed report used in obtaining aggregate samples has been filed and accepted by the British Columbia’s Gold commissioner’s office in September 2007. The claims are currently in good standing until their respective anniversary dates of November 6, 2014 (Northern Gravel Claim) and January 19, 2015 (Super Mammoth Claim).
On June 5, 2008, a comprehensive National Instrument 43-101 compliant report (the “report”) on the Super Mammoth Gravel Project was completed. The report was prepared in accordance with the guidelines of National Instrument 43-101 “Standards of Disclosure for Mineral Projects” and is based on data and geological information gathered from public sources, assessment files, historical information, British Columbia provincial government maps and reports. The source information of data presented in the report discusses the geology and mineral potential of the Super Mammoth Gravel Project and is believed to be reliable and accurate.
The Super Mammoth Gravel Project is located at Lloyd Point on the east arm of Toba Inlet situated 50 kilometers east of Campbell River, British Columbia, Canada and 28 kilometers north of Powell River on the British Columbia mainland. The existence of the Super Mammoth gravel deposit has been identified by Lands and Water British Columbia Inc. and has been the subject of numerous preliminary investigations over the years, with the potential to host a year round future sand and gravel aggregate operation with tidewater access that could supply growing demand for a range of raw materials to both British Columbia, Washington State, California and other United States and Pacific Rim coastal construction markets.
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The Super Mammoth Gravel Project is situated between sea level to about 300 meters in elevation that comprises a sorted accumulation of sand and gravel.
Plan of Operations
Our intention for the next year is to determine the Super Mammoth Gravel Project drill targets for future mineral exploration and development. Our 43-101 Report, which was finalized June 5, 2008, recommended a two-phase program. Phase One of the two-phase program outlines a three-stage program which covers a period of one month and will cost approximately $100,000. The three-stage program includes detailed mapping and sampling, clearing of the old road and north-south line cutting, which will facilitate further geological work and provide the requirements of a proposed seismic survey. The seismic survey would be carried out as stage three of the first phase of the exploration program recommended in the report. The stage three seismic survey of up to 5km total length will assist in order to establishing a three dimensional modeling and shape of the deposit. Once complete, and subject to the results of the report obtained in Phase 1, the Company will continue to Phase 2. Phase 2 is expected to take one month to complete and cost up to $200,000. Phase 2 will consist of 1,200 meters of drilling to determine shape (volume) of the deposit and the quality of the aggregate material.
The recoverability of amounts from the property will be dependent upon discovering economically recoverable reserves with specifications which are suitable for commercial products as defined by ASTM and CSA. Considerable further investigation will be required to establish the size of the deposit towards understanding its economic viability, the environmental concerns of the area and the social impact on various stakeholders.
The Company continues to review potential opportunities, but none have offered the potential returns attractive enough to offset the level of risk and capital required.
Our cash reserves are not sufficient to meet our obligations for the next twelve-month period. As a result, we will need to seek additional funding in the near future. We currently do not have a specific plan of how we will obtain such funding. However, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock. As well, our management is prepared to provide us with short-term loans. During the six month period ended December 31, 2012, the Company borrowed an additional $10,000 (December 31, 2011 - $8,500) from an officer, director and shareholder of the Company. This promissory note payable bears interest at 10% per annum. During the six month period ended December 31, 2012, $9,557 (December 31, 2011 - $7,819) interest has been accrued and is secured by a general agreement over all the assets of the Company and is due and repayable January 8, 2014.
We cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months. We do not have any arrangements in place for any future equity financing.
If we do not secure additional funding for exploration expenditures, we may consider seeking an arrangement with a joint venture partner that would provide the required funding in exchange for receiving a part interest in the Super Mammoth Gravel Project. We have not undertaken any efforts to locate a joint venture partner. There is no guarantee that we will be able to locate a joint venture partner who will assist us in funding exploration expenditures upon acceptable terms.
If we are unable to arrange additional financing or find a joint venture partner for the Super Mammoth Gravel Project, our business plan will fail and operations will cease.
Results of Operations for the Six Month Period Ending December 31, 2012
We have not earned any revenues from our incorporation on January 21, 2004 to December 31, 2012. We have not commenced the exploration stage of our business and can provide no assurance that we will discover economic mineralization on the property.
The Company’s net loss for the six month period ended December 31, 2012 was $60,306 compared to a net loss of $47,286 for the six month period ended December 31, 2011. The increase in net loss for the six
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month period ended December 31, 2012 is mainly attributed to filing and financing fees, bank charges and interest and legal and accounting fees.
There were no mineral property expenditures related to the Super Mammoth Gravel Project for the six month periods ended December 31, 2012 and December 31, 2011. The Company did not conduct exploration activities during these periods.
Filing and financing fees increased $6,833 to $12,698 for the six month period ended December 31, 2012 from $5,865 for the six month period ended December 31, 2011. The filing and financing fees period over period increased due to the United States Securities and Exchange Commission requirement to have the financial statements in XBRL format and other fees incurred to file our regulatory quarterly and annual filings with the British Columbia Securities Commission.
Bank charges and interest have increased $1,945 to $9,909 for the six month period ended December 31, 2012 from $7,964 for the six month period ended December 31, 2011. The increase in bank charges and interest period over period is due mainly to the interest accrued on the loan of $195,000 from our President, Mr. Tim Coupland.
Legal and accounting fees increased $3,507 to $4,891 for the six month period ended December 31, 2012 from $1,384 for the six month period ended December 31, 2011. The increase in legal and accounting fees period over period is due mainly to increased professional fees incurred to prepare and file our regulatory quarterly and annual filings with the British Columbia Securities Commission and the United States Securities and Exchange Commission.
During the six month period ended December 31, 2012, an officer and director of the Company made contributions to capital for management fees in the amount of $30,000 (December 31, 2011 - $30,000) and for rent in the amount of $1,800 (December 31, 2011 - $1,800).
We have not attained profitable operations and are dependent upon obtaining financing to pursue exploration activities. For these reasons our auditors believe that there is substantial doubt that we will be able to continue as a going concern.
Liquidity and Capital Resources
At December 31, 2012, we had cash on hand of $3,132 and liabilities of $284,999 consisting of accounts payable and accrued liabilities of $17,878 and cash advances from our president, Tim Coupland, for $266,521.
Our cash reserves are not sufficient to meet our obligations for the next twelve-month period. We will require additional funding in order to cover all anticipated administration costs and to proceed with the recommendations of the National Instruments 43-101 report on the Super Mammoth Gravel Project, estimated to cost a minimum of $300,000. We do not have any arrangements in place for any future equity financing and there is no guarantee we will be able to obtain the funding necessary to continue as a going concern.
Capital Expenditures
The Company expended no amounts on capital expenditures for the period from inception to December 31, 2012. At present there are no transactions being contemplated by management or the board that would affect the financial condition, results of operations and cash flows of any asset of the Company.
Employees
At present, we have no employees, other than our current officers and directors, who devote their time as required to our business operations.
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Research and Development Expenditures
We have incurred a total of $1,000 in connection with a geological report concerning the Sobeski Lake Gold property. We have not incurred any other research and development expenditures since our incorporation.
An additional $Nil (December 31, 2011 - $Nil) has been incurred in connection with the preparation and completion of the Comprehensive National Instrument 43-101 compliant report on the Super Mammoth Gravel Project.
Off-balance Sheet Arrangements
The Company has no off-balance sheet arrangements that would require disclosure.
Subsequent Events
There were no subsequent events.
Critical Accounting Policies
Our interim consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Preparing financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet dates, and the recognition of revenues and expenses for the reporting periods. These estimates and assumptions are affected by management's application of accounting policies.
Mineral property costs
The Company is primarily engaged in the acquisition, exploration and development of mineral properties.
Mineral property acquisition costs are initially capitalized as tangible assets when purchased. At the end of each fiscal quarter end, the Company assesses the carrying costs for impairment. If proven and probable reserves are established for a property and it has been determined that a mineral property can be economically developed, costs will be amortized using the units-of-production method over the estimated life of the probable reserve.
Mineral property exploration costs are expensed as incurred.
Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis. Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards. Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.
As of the date of these interim consolidated financial statements, the Company has not established any proven or probable reserves on its mineral properties and incurred only acquisition and exploration costs.
Although the Company has taken steps to verify title to mineral properties in which it has an interest, according to the usual industry standards for the stage of exploration of such properties, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.
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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are engaged in the acquisition of mineral and gravel projects and related activities including exploration engineering, permitting and the preparation of feasibility studies. The value of our properties is related to mineral and gravel commodity prices and changes in the price of these commodities could affect our ability to generate revenue from our portfolio of projects.
Commodity prices may fluctuate widely from time to time and are affected by numerous factors, including the following: expectations with respect to the rate of inflation, exchange rates, interest rates, global and regional political and economic circumstances and governmental policies. Mineral prices and the price for gravel has been extremely volatile over the last year. The demand for, and supply of, gravel affect gravel prices, but not necessarily in the same manner as demand and supply affect the prices of other commodities. The supply and demand for gravel is determined primarily by construction and road building activity.
As of December 31, 2012, we do not consider the risks associated with changes in foreign exchange rates between the U.S. dollar and the Canadian dollar to be material to our financial condition or results of operations as a result of our primary projects being located in Canada and the majority of funds raised and paid to the majority of our vendors are in Canadian dollars.
ITEM 4 – CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Based on the management’s evaluation (with the participation of our President and Chief Financial Officer), our President and Chief Financial Officer have concluded that as of December 31, 2012, the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange of 1934 (the "Exchange Act")) are effective to provide reasonable assurance that the information required to be disclosed in this quarterly report on Form 10-Q is recorded, processed, summarized and reported within the time period specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
(b) Internal control over financial reporting
Management's annual report on internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting should include those policies and procedures that: pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with applicable GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and 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.
Under the supervision and with the participation of our management, including Tim Coupland, our President and Chief Executive Officer, and Rob Hall, our Chief Financial Officer, we have evaluated the effectiveness of our internal control over financial reporting and preparation of our quarterly financial statements as of December 31, 2012 and believe they are effective.
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Based upon their evaluation of our controls, Tim Coupland, our President and Chief Executive Officer, and Rob Hall, our Chief Financial Officer, has concluded that, there were no significant changes in our internal control over financial reporting or in other factors during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Attestation report of the registered public accounting firm
This quarterly report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.
Changes in internal control over financial reporting
There were no changes in our internal controls that occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls.
Changes in Internal Controls
Based on the evaluation as of December 31, 2012, Tim Coupland, our President and Chief Executive Officer, and Rob Hall, our Chief Financial Officer have concluded that there were no significant changes in our internal controls over financial reporting or in any other areas that could significantly affect our internal controls subsequent to the date of their most recent evaluation, including corrective actions with regard to significant deficiencies and material weaknesses.
PART II – OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding. Management is not aware of any threatened litigation, claims or assessments.
ITEM 1A. RISK FACTORS
Not Applicable
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 – OTHER INFORMATION
None
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ITEM 6 – EXHIBITS
The following exhibits are furnished as required by Item 601 of Regulation S-B.
* Included in our original SB-2 Registration Statement filed on December 9, 2004.
** Included in our SB-2 Amended Registration Statement filed on October 19, 2005.
SIGNATURE
Pursuant to the requirements 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.
| | | |
| | | | DYNAMIC GOLD CORP. |
| | | |
| | | |
| February 8, 2013 | | BY: | /s/ Tim Coupland |
| Date | | | Tim Coupland, President and Chief Executive Officer |
| | | |
| February 8, 2013 | | BY: | /s/ Rob Hall |
| Date | | | Rob Hall, Chief Financial Officer |
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Exhibit 21
SUBSIDIARY COMPANIES
We have one subsidiary company:
Dynamic Gravel Holdings Ltd.
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Exhibit 31.a
CERTIFICATION
I, Tim Coupland, certify that:
1. I have reviewed this Form 10-Q of Dynamic Gold Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
| | (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| | | |
| | (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| | | |
| | (c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| | | |
| | (d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
| | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: February 8, 2013
/ s / Tim Coupland
Tim Coupland, President and CEO
(Principal Executive Officer)
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Exhibit 31.b
CERTIFICATION
I, Rob Hall, certify that:
1. I have reviewed this Form 10-Q of Dynamic Gold Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| | |
| (c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| | |
| (d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
| | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: February 8, 2013
/ s / Rob Hall
Rob Hall, CFO
(Principal Accounting Officer)
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Exhibit 32.a
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q (the “Report”) of Dynamic Gold Corp. (the “Company”) for the quarter ended December 31, 2012, each of Tim Coupland, the Chief Executive Officer, and Rob Hall, the Chief Financial Officer, of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of the undersigned’s knowledge and belief: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/ s / Tim Coupland
Tim Coupland, Principal Executive Officer
February 8, 2013
/ s / Rob Hall
Rob Hall, Principal Financial Officer
February 8, 2013
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