Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | |||
Aug. 31, 2013 | Feb. 28, 2013 | Dec. 12, 2013 | Dec. 12, 2013 | |
Class A Common Stock | Class B Common Stock | |||
Entity Registrant Name | 'COLORADO GOLDFIELDS INC. | ' | ' | ' |
Entity Central Index Key | '0001344394 | ' | ' | ' |
Document Type | '10-K | ' | ' | ' |
Document Period End Date | 31-Aug-13 | ' | ' | ' |
Amendment Flag | 'false | ' | ' | ' |
Current Fiscal Year End Date | '--08-31 | ' | ' | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' | ' | ' |
Is Entity a Voluntary Filer? | 'No | ' | ' | ' |
Is Entity's Reporting Status Current? | 'Yes | ' | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' | ' |
Entity Public Float | ' | $457,747 | ' | ' |
Entity Common Stock, Shares Outstanding | ' | ' | 356,662,566 | 490,371,533 |
Document Fiscal Period Focus | 'FY | ' | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' | ' |
Balance_Sheets_Unaudited
Balance Sheets (Unaudited) (USD $) | Aug. 31, 2013 | Aug. 31, 2012 |
ASSETS | ' | ' |
Cash | $15,092 | $6,093 |
Prepaid expenses and other | 48,558 | 18,550 |
Total Current Assets | 63,650 | 24,643 |
Non-Current Assets | ' | ' |
Property, plant and equipment, net (Note 3) | 1,436,206 | 1,396,414 |
Mining rights and claims (Note 4) | 152,604 | 158,889 |
Restricted cash (Note 3) | 515,428 | 515,428 |
Deferred financing costs | 43,790 | 15,580 |
Other | 4,743 | 4,743 |
Total Non-Current Assets | 2,152,771 | 2,091,054 |
Total Assets | 2,216,421 | 2,115,697 |
LIABILITIES AND STOCKHOLDERS' DEFICIT | ' | ' |
Accounts payable | 379,474 | 330,519 |
Accrued liabilities | 655,075 | 859,488 |
Convertible notes, less unamortized discount of $386,601 and $214,059 (Note 7) | 284,856 | 141,082 |
Derivative liabilities (Note 8) | 1,424,115 | 469,370 |
Promissory note payable, including accrued interest (Note 6) | 119,248 | 25,081 |
Notes payable, including accrued interest - related parties (Note 5) | 357,258 | 338,914 |
Mortgage notes payable, including accrued interest (Note 3) | 200,578 | 456,900 |
Total Current Liabilities | 3,420,604 | 2,621,354 |
Non-Current Liabilities | ' | ' |
Promissory note payable, including accrued interest (Note 6) | ' | 86,207 |
Asset retirement obligation | 515,500 | 515,500 |
Total Non-Current Liabilities | 515,500 | 601,707 |
Total Liabilities | 3,936,104 | 3,223,061 |
Commitments and Contingencies (Note 10) | ' | ' |
Stockholders' Deficit (Note 9) | ' | ' |
Common stock Class A common stock, 1,000,000,000 shares authorized, $0.001 par value; 47,366,656 and 11,295 issued and outstanding, respectively | 47,367 | 10 |
Class B common stock, 500,000,000 shares authorized, $0.001 par value; 490,371,533 shares issued and outstanding, respectively | ' | ' |
Additional paid in capital | 28,050,044 | 22,367,200 |
Donated capital | 29,250 | 29,250 |
Deficit accumulated during the exploration stage | -29,846,344 | -23,503,824 |
Total Stockholders' Deficit | -1,719,683 | -1,107,364 |
Total Liabilities and Stockholders' Deficit | 2,216,421 | 2,115,697 |
Class A Common Stock | ' | ' |
Stockholders' Deficit (Note 9) | ' | ' |
Common stock Class A common stock, 1,000,000,000 shares authorized, $0.001 par value; 47,366,656 and 11,295 issued and outstanding, respectively | 47,367 | 10 |
Class B Common Stock | ' | ' |
Stockholders' Deficit (Note 9) | ' | ' |
Common stock Class A common stock, 1,000,000,000 shares authorized, $0.001 par value; 47,366,656 and 11,295 issued and outstanding, respectively | ' | ' |
Balance_Sheets_Unaudited_Paren
Balance Sheets (Unaudited) (Parenthetical) (USD $) | Aug. 31, 2013 | Aug. 31, 2012 |
Convertible notes, unamortized discount | $386,601 | $214,059 |
Class A Common Stock | ' | ' |
Common stock, par value per share | $0.00 | $0.00 |
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued | 47,366,656 | 5,647,989 |
Common stock, shares outstanding | 11,295 | 5,647,989 |
Class B Common Stock | ' | ' |
Common stock, par value per share | $0.00 | $0.00 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 490,371,533 | 490,371,533 |
Common stock, shares outstanding | 490,371,533 | 490,371,533 |
Statements_of_Operations_Unaud
Statements of Operations (Unaudited) (USD $) | 12 Months Ended | 115 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2013 | |
Income Statement [Abstract] | ' | ' | ' |
Revenue | $0 | $0 | $0 |
Operating expenses | ' | ' | ' |
Donated rent | 0 | 0 | 9,750 |
Donated services | 0 | 0 | 19,500 |
General and administrative | 2,509,541 | 1,873,586 | 16,885,687 |
Mineral property and exploration costs | 1,305,564 | 666,516 | 4,569,148 |
Professional fees | 309,078 | 314,996 | 2,145,072 |
Total operating expenses | -4,124,183 | -2,855,098 | -23,629,157 |
Other income (expense) | ' | ' | ' |
Other income | 6,784 | 85,045 | 194,770 |
Interest income | 0 | 0 | 33,781 |
Gain (Loss) gain on derivative liabilities | 496,605 | -309,021 | 564,108 |
Interest expense | -2,721,726 | -1,220,502 | -7,009,846 |
Total other expense | -2,218,337 | -1,444,478 | -6,217,187 |
Net Loss | ($6,342,520) | ($4,299,576) | ($29,846,344) |
Net Loss Per Common Share - Basic and Diluted | ($2.07) | ($635.09) | ' |
Weighted Average Number of Common Shares Outstanding | 3,062,319 | 6,770 | ' |
Statements_of_Stockholders_Def
Statements of Stockholders (Deficit) Equity (Unaudited) (USD $) | Class A Common Stock | Class B Common Stock | Additional Paid-In Capital | Additional Donated Capital | Deficit Accumulated During the Exploration Stage | Total |
Beginning balance, Amount at Feb. 10, 2004 | $0 | $0 | $0 | $0 | $0 | $0 |
Beginning balance, Shares at Feb. 10, 2004 | 0 | 0 | ' | ' | ' | ' |
Issuance of common stock for cash, shares | 21 | ' | ' | ' | ' | ' |
Issuance of common stock for cash, amount | 0 | ' | 2,500 | ' | ' | 2,500 |
Donated services and rent | ' | ' | ' | 4,500 | ' | 4,500 |
Net loss | ' | ' | ' | ' | -5,898 | -5,898 |
Ending balance, Amount at Aug. 31, 2004 | 0 | 0 | 2,500 | 4,500 | -5,898 | 1,102 |
Ending balance, Shares at Aug. 31, 2004 | 21 | 0 | ' | ' | ' | ' |
Issuance of common stock for cash, shares | 25 | ' | ' | ' | ' | ' |
Issuance of common stock for cash, amount | 0 | ' | 53,750 | ' | ' | 53,750 |
Donated services and rent | ' | ' | ' | 9,000 | ' | 9,000 |
Net loss | ' | ' | ' | ' | -35,319 | -35,319 |
Ending balance, Amount at Aug. 31, 2005 | 0 | 0 | 56,250 | 13,500 | -41,217 | 28,533 |
Ending balance, Shares at Aug. 31, 2005 | 46 | 0 | ' | ' | ' | ' |
Donated services and rent | ' | ' | ' | 9,000 | ' | 9,000 |
Net loss | ' | ' | ' | ' | -36,148 | -36,148 |
Ending balance, Amount at Aug. 31, 2006 | 0 | 0 | 56,250 | 22,500 | -77,365 | 1,385 |
Ending balance, Shares at Aug. 31, 2006 | 46 | 0 | ' | ' | ' | ' |
Donated services and rent | ' | ' | ' | 6,750 | ' | 6,750 |
Net loss | ' | ' | ' | ' | -300,193 | -300,193 |
Ending balance, Amount at Aug. 31, 2007 | 0 | 0 | 56,250 | 29,250 | -377,558 | -292,058 |
Ending balance, Shares at Aug. 31, 2007 | 46 | ' | ' | ' | ' | ' |
Issuance of common stock for cash, shares | 4 | ' | ' | ' | ' | ' |
Issuance of common stock for cash, amount | 0 | ' | 3,002,244 | ' | ' | 3,002,244 |
Shares issued for services, shares | 4 | ' | ' | ' | ' | ' |
Shares issued for services, amount | 0 | ' | 869,739 | ' | ' | 869,739 |
Stock-based compensation - options | ' | ' | 895,209 | ' | ' | 895,209 |
Net loss | ' | ' | ' | ' | -3,721,021 | -3,721,021 |
Ending balance, Amount at Aug. 31, 2008 | 0 | ' | 4,823,442 | 29,250 | -4,098,579 | 754,113 |
Ending balance, Shares at Aug. 31, 2008 | 54 | ' | ' | ' | ' | ' |
Shares issued for services, shares | 148 | ' | ' | ' | ' | ' |
Shares issued for services, amount | 0 | ' | 4,241,283 | ' | ' | 4,241,283 |
Stock-based compensation - options | ' | ' | 4,094 | ' | ' | 4,094 |
Issuance of common stock to satisfy accounts payable, shares | 12 | ' | ' | ' | ' | ' |
Issuance of common stock to satisfy accounts payable, amount | 0 | ' | 370,015 | ' | ' | 370,015 |
Stock issued to beneficial owners of Class A Common Stock, shares | ' | 35,732,285 | ' | ' | ' | ' |
Stock issued to beneficial owners of Class A Common Stock, amount | ' | ' | ' | ' | ' | ' |
Forgiveness of related party debt and accrued interest | ' | ' | 288,361 | ' | ' | 288,361 |
Net loss | ' | ' | ' | ' | -5,281,857 | -5,281,857 |
Ending balance, Amount at Aug. 31, 2009 | 0 | 0 | 9,727,195 | 29,250 | -9,380,436 | 376,009 |
Ending balance, Shares at Aug. 31, 2009 | 214 | 35,732,285 | ' | ' | ' | ' |
Shares issued for services, shares | 368 | ' | ' | ' | ' | ' |
Shares issued for services, amount | 0 | ' | 1,950,760 | ' | ' | 1,950,760 |
Issuance of common stock to satisfy accounts payable, shares | 58 | ' | ' | ' | ' | ' |
Issuance of common stock to satisfy accounts payable, amount | 0 | ' | 343,828 | ' | ' | 343,828 |
Stock issued to beneficial owners of Class A Common Stock, shares | ' | 5,012,068 | ' | ' | ' | ' |
Stock issued to beneficial owners of Class A Common Stock, amount | ' | ' | ' | ' | ' | ' |
Shares issued for mining rights, shares | 50 | ' | ' | ' | ' | ' |
Shares issued for mining rights, amount | 0 | ' | 407,500 | ' | ' | 407,500 |
Shares issued for convertible debt, shares | 19 | ' | ' | ' | ' | ' |
Shares issued for convertible debt, amount | 0 | ' | 107,127 | ' | ' | 107,136 |
Net loss | ' | ' | ' | ' | -3,660,418 | -3,660,418 |
Ending balance, Amount at Aug. 31, 2010 | 0 | 0 | 12,536,419 | 29,250 | -13,040,854 | -475,185 |
Ending balance, Shares at Aug. 31, 2010 | 709 | 40,744,353 | ' | ' | ' | ' |
Shares issued for services, shares | 1,207 | ' | ' | ' | ' | ' |
Shares issued for services, amount | 1 | ' | 2,424,286 | ' | ' | 2,424,287 |
Issuance of common stock to satisfy accounts payable, shares | 233 | ' | ' | ' | ' | ' |
Issuance of common stock to satisfy accounts payable, amount | 0 | ' | 459,024 | ' | ' | 459,024 |
Shares issued for mining rights, shares | 100 | ' | ' | ' | ' | ' |
Shares issued for mining rights, amount | ' | ' | 150,000 | ' | ' | 150,000 |
Shares issued for convertible debt, shares | 859 | ' | ' | ' | ' | ' |
Shares issued for convertible debt, amount | 1 | ' | 2,771,501 | ' | ' | 2,771,502 |
Stock issued to officers, shares | ' | 449,623,244 | ' | ' | ' | ' |
Stock issued to officers, amount | ' | ' | ' | ' | ' | ' |
Class B warrants exercised and shares issued, shares | ' | 3,936 | ' | ' | ' | ' |
Class B warrants exercised and shares issued, amount | ' | ' | 570 | ' | ' | 570 |
Net loss | ' | ' | ' | ' | -6,163,394 | -6,163,394 |
Ending balance, Amount at Aug. 31, 2011 | 2 | 0 | 18,341,800 | 29,250 | -19,204,248 | -833,196 |
Ending balance, Shares at Aug. 31, 2011 | 3,108 | 490,371,533 | ' | ' | ' | ' |
Shares issued for services, shares | 2,236 | ' | ' | ' | ' | ' |
Shares issued for services, amount | 2 | ' | 999,795 | ' | ' | 999,797 |
Issuance of common stock to satisfy accounts payable, shares | 1,026 | ' | ' | ' | ' | ' |
Issuance of common stock to satisfy accounts payable, amount | 1 | ' | 450,206 | ' | ' | 450,207 |
Shares issued for Champion and Silver Wing Mines, Amount | ' | ' | ' | ' | ' | 0 |
Shares issued for convertible debt, shares | 3,660 | ' | ' | ' | ' | ' |
Shares issued for convertible debt, amount | 4 | ' | 1,892,840 | ' | ' | 1,892,844 |
Issuance of common stock to satisfy accrued liabilities, shares | 1,265 | ' | ' | ' | ' | ' |
Issuance of common stock to satisfy accrued liabilities, amount | 1 | ' | 682,559 | ' | ' | 682,560 |
Net loss | ' | ' | ' | ' | -4,299,576 | -4,299,576 |
Ending balance, Amount at Aug. 31, 2012 | 10 | 0 | 22,367,200 | 29,250 | -23,503,824 | -1,107,364 |
Ending balance, Shares at Aug. 31, 2012 | 11,295 | 490,371,533 | ' | ' | ' | ' |
Shares issued to round fractional shares due to stock split, Shares | 361 | ' | ' | ' | ' | ' |
Shares issued for services, shares | 4,967,177 | ' | ' | ' | ' | ' |
Shares issued for services, amount | 4,967 | ' | 969,039 | ' | ' | 974,006 |
Issuance of common stock to satisfy accounts payable, shares | 2,077,602 | ' | ' | ' | ' | ' |
Issuance of common stock to satisfy accounts payable, amount | 2,078 | ' | 555,116 | ' | ' | 557,194 |
Shares issued for mining rights, shares | 500 | ' | ' | ' | ' | ' |
Shares issued for mining rights, amount | 1 | ' | 62,499 | ' | ' | 62,500 |
Shares issued for Champion and Silver Wing Mines, Shares | 172,000 | ' | ' | ' | ' | ' |
Shares issued for Champion and Silver Wing Mines, Amount | 172 | ' | 184,828 | ' | ' | -185,000 |
Shares issued for convertible debt, shares | 12,136,178 | ' | ' | ' | ' | ' |
Shares issued for convertible debt, amount | 12,137 | ' | 1,858,408 | ' | ' | 1,870,545 |
Issuance of common stock to satisfy accrued liabilities, shares | 27,988,748 | ' | ' | ' | ' | ' |
Issuance of common stock to satisfy accrued liabilities, amount | 27,989 | ' | 1,392,133 | ' | ' | 1,420,122 |
Issuance of common stock for work commitment, Shares | 12,795 | ' | ' | ' | ' | ' |
Issuance of common stock for work commitment, Amount | 13 | ' | 660,821 | ' | ' | 660,834 |
Net loss | ' | ' | ' | ' | -6,342,520 | -6,342,520 |
Ending balance, Amount at Aug. 31, 2013 | $47,367 | $0 | $28,050,044 | $29,250 | ($29,846,344) | ($1,719,683) |
Ending balance, Shares at Aug. 31, 2013 | 47,366,656 | 490,371,533 | ' | ' | ' | ' |
Statements_of_Cash_Flows_Unaud
Statements of Cash Flows (Unaudited) (USD $) | 12 Months Ended | 115 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2013 | |
Cash Flows Used in Operating Activities: | ' | ' | ' |
Net loss | ($6,342,520) | ($4,299,576) | ($29,846,344) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' | ' |
Donated services and rent | 0 | 0 | 29,250 |
Amortization of debt discount and deferred financing costs | 2,599,650 | 1,088,310 | 6,289,129 |
Depreciation and amortization | 3,796 | 17,410 | 151,670 |
(Gain) loss on derivative liabilities | -496,605 | 309,021 | -564,108 |
Impairment of mining rights | 68,785 | 135,833 | 467,396 |
Stock issued for services | 1,031,297 | 1,059,619 | 11,502,377 |
Stock issued for Champion and Silver Wing Mines | 185,000 | 0 | 185,000 |
Stock-based compensation - options | 0 | ' | 899,303 |
Accrued interest | 125,993 | 129,566 | 565,938 |
Accretion expense on asset retirement obligation | 0 | 35,065 | 191,635 |
Loss (gain) on sale of property, plant and equipment | 217 | -19,252 | -92,792 |
Change in operating assets and liabilities: | ' | ' | ' |
Increase in restricted cash | 0 | 0 | -515,428 |
(Increase) decrease in prepaid expenses and other | -87,299 | 10,451 | -91,062 |
Increase in accounts payable | 1,266,983 | 527,273 | 3,393,344 |
Increase in accrued liabilities | 1,170,945 | 566,974 | 2,757,027 |
(Increase) decrease in other assets | 0 | 6,777 | -4,743 |
Net cash used in operating activities | -473,758 | -432,529 | -4,682,408 |
Cash Flows from Investing Activities: | ' | ' | ' |
Proceeds from sale of property, plant and equipment | 0 | 38,232 | 240,632 |
Acquisition of property, plant and equipment | -43,805 | -3,061 | -764,602 |
Net cash (used in) provided by investing activities | -43,805 | 35,171 | -523,970 |
Cash Flows from Financing Activities: | ' | ' | ' |
Advances received | 0 | 0 | 405,733 |
Repayment of advances | 0 | 0 | -405,733 |
Proceeds from notes from related parties | 0 | 0 | 581,452 |
Repayment of advances from related party | 0 | 0 | -20,596 |
Proceeds from note payable | 0 | 24,000 | 124,000 |
Repayment of notes payable | -6,328 | -7,787 | -702,819 |
Proceeds from issuance of convertible debt | 628,320 | 427,000 | 2,474,297 |
Loan acquisition costs | -95,430 | -51,600 | -293,928 |
Proceeds from exercise of warrants | 0 | 0 | 570 |
Net proceeds from issuance of common stock | 0 | 0 | 3,058,494 |
Net cash provided by financing activities | 526,562 | 391,613 | 5,221,470 |
Increase (decrease) in cash | 8,999 | -5,745 | 15,092 |
Cash - Beginning of Period | 6,093 | 11,838 | 0 |
Cash - End of Period | 15,092 | 6,093 | 15,092 |
Supplemental Disclosures: | ' | ' | ' |
Interest paid | 3,759 | 3,645 | 102,185 |
Non-cash investing and financing activities: | ' | ' | ' |
Exchange of accounts payable and accrued liabilities for debt | 0 | 80,000 | 246,036 |
Issuance of common stock to satisfy accounts payable | 557,194 | 450,207 | 2,180,268 |
Issuance of common stock to satisfy accrued liabilities | 1,420,122 | 682,560 | 2,102,682 |
Issuance of common stock for prepaid expenses | 0 | 21,580 | 550,159 |
Issuance of common stock for mining rights | 62,500 | 0 | 620,000 |
Issuance of common stock for work commitment | 660,834 | 0 | 660,834 |
Exchange of convertible debt for common shares | 1,870,545 | 1,892,844 | 6,642,027 |
Exchange of mortgage payable for convertible debt | 295,984 | 50,000 | 345,984 |
Exchange of property, plant and equipment for accounts payable | 0 | 0 | 2,750 |
Forgiveness of related party debt and accrued interest | 0 | 0 | 288,361 |
Change in estimate of asset retirement obligation | 0 | 176,135 | 176,135 |
Acquisition of land and building: | ' | ' | ' |
Cash paid | 0 | 0 | 250,677 |
Mortgage note given to seller | 0 | 0 | 650,000 |
Asset retirement obligation assumed | 0 | 0 | 500,000 |
Assets acquired | $0 | $0 | $1,400,677 |
1_Organization_Nature_of_Busin
1. Organization, Nature of Business, Going Concern and Managements Plans | 12 Months Ended |
Aug. 31, 2013 | |
Accounting Policies [Abstract] | ' |
1. Organization, Nature of Business, Going Concern and Managementbs Plans | ' |
Organization and Nature of Business | |
Colorado Goldfields Inc. (the “Company”) was incorporated in the State of Nevada on February 11, 2004. The Company is considered to be an Exploration Stage Company. The Company’s principal business is the reactivation of a mill facility, and acquisition and exploration of mineral resources. The Company has not presently determined whether the properties it has acquired and intends to acquire contain mineral reserves that are economically recoverable. | |
Going Concern and Management’s Plans | |
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Since its inception in February 2004, the Company has not generated revenue and has incurred net losses. The Company has a working capital deficit of $3,356,954 at August 31, 2013, has incurred net losses of $6,342,520 and $4,299,576 for the years ended August 31, 2013 and 2012, respectively, and has an accumulated deficit during the exploration stage of $29,846,344 for the period from February 11, 2004 (inception) through August 31, 2013. Accordingly, it has not generated cash flows from operations and has primarily relied upon equity financing, advances from stockholders, promissory notes, and advances from unrelated parties to fund its operations. | |
The Company is dependent upon the State of Colorado Division of Reclamation, Mining and Safety (“DRMS”) and State of Colorado Mined Land Reclamation Board (“MLRB”), approving an amendment to the existing reclamation permit for the Company’s Pride of the West Mill (“the Mill”). The amendment would cure a current cease and desist order, which was issued in 2005, and allow the Mill to become operational. | |
In December 2010, the Company presented a proposed permit amendment (“AM-02”) to the MLRB. While portions of that permit amendment were approved, there remained deficiencies that required additional work. | |
The Company prepared additional material for consideration by the DRMS and the MLRB. Management submitted a new permit amendment application (“AM-03”), to the DRMS on January 27, 2012 and April 23, 2012. On August 9, 2012, the DRMS approved, with conditions, AM-03. | |
The core of the permit consists of nine Environmental Protection Facilities (“EPFs”), which are: 1) Mill Building, 2) Ore Stockpile Area, 3) Laboratory Facility, 4) Leach Plant Building, 5) Flood Protection Dike, 6) Plant Waste Water Disposal, 7) Groundwater intercept Drain, 8) Upland Stormwater Intercept Ditch, and 9) Mill Tailings Repository. The DRMS approved the first eight EPFs, and work has commenced in these areas. | |
The conditions specified by the DRMS regard the ninth EPF, which is the Mill Tailings Repository. The DRMS requested 1) additional geotechnical substrate stability analysis, 2) structure specific engineering designs for the cover of the repository, 3) analysis of the repository’s reserve capacity, 4) recalculation of financial warranty. The Company estimates that the conditions will be satisfied by May 2014. | |
The Company currently faces a severe working capital shortage and is not presently generating any revenues. The Company will need to obtain additional capital to fund its operations, continue mining exploration activities, fulfill its obligations under its mineral property lease/option agreements, and satisfy existing creditors. In addition, the Company's ability to continue as a going concern is subject to the successful resolution of outstanding litigation (Note 10). | |
These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts or classification of liabilities that may result from the possible inability of the Company to continue as a going concern. Management’s plans with regards to these conditions are described below. | |
The Company continues to explore sources of additional financing to satisfy its current operating requirements. | |
During the year ended August 31, 2013, the Company entered into various convertible debt funding arrangements described below that provided a total of $939,304 in capital. | |
During the years ended August 31, 2012 and 2013, the Company entered into funding arrangements with an institutional investor (the “Delaware Partnership Investor”), under which the Delaware Partnership Investor has provided convertible debt financing to the Company of $690,000 ($397,000 during the year ended August 31, 2013) (Note 7). | |
During the years ended August 31, 2012 and 2013, the Company also entered into funding arrangements for a total of $320,820 ($220,820 during the year ended August 31, 2013), with a group of New York private investors in the form of convertible notes (Note 7). | |
During the year ended August 31, 2013, the Company entered into funding arrangements with a New York Alternative Investment Firm, under which the investors have provided convertible debt financing to the Company of $246,484 (Note 7). | |
During the year ended August 31, 2013, the Company entered into funding arrangements with a San Diego private investor, under which the investor has provided convertible debt financing to the Company of $75,000 (Note 7). | |
Considering the difficult U.S. and global economic conditions, along with the substantial stability problems in the capital and credit markets, there is a significant possibility that the Company will be unable to obtain financing to continue its operations. | |
There is no assurance that required funds during the next twelve months or thereafter will be generated from operations, or that those funds will be available from external sources, such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Further, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significantly dilutive effect on the Company's existing shareholders. All of these factors have been exacerbated by the extremely unsettled credit and capital markets presently existing. | |
2_Summary_of_Significant_Accou
2. Summary of Significant Account Policies | 12 Months Ended | ||||||||||||
Aug. 31, 2013 | |||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||
2. Summary of Significant Account Policies | ' | ||||||||||||
Basis of Presentation | |||||||||||||
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and are expressed in US dollars. The Company’s fiscal year-end is August 31. | |||||||||||||
Basic and Diluted Net Loss per Share | |||||||||||||
Basic earnings (loss) per share (“EPS”) is computed by dividing net loss attributable to common stockholders (numerator) by the weighted average number of shares of the Class A Common Stock outstanding (denominator) during the period. During the year ended August 31, 2011, the Company issued shares of Class B Common Stock, which are not publicly-traded. The Class B Common Stock share dividends equally with Class A Common Stock, and are defined as participating securities under US GAAP; however, they have no contractual obligation to share in losses of the Company. The Company has therefore not included the Class B Common Stock in determining basic EPS. Diluted EPS gives effect to all potential dilutive common shares outstanding during the periods using the treasury stock method (for options and warrants) and the two-class method (for Class B common stock). In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. For the years ended August 31, 2013 and 2012, the effect of the conversion of outstanding debt and Class B common shares would have been anti-dilutive. | |||||||||||||
The following table represents the potential dilutive securities excluded from the calculation of diluted loss per share. | |||||||||||||
August 31, | August 31, | ||||||||||||
2013 | 2012 | ||||||||||||
Class B Common Stock | 490,371,533 | 490,371,533 | |||||||||||
Convertible debt | 159,264,106 | 2,206 | |||||||||||
Effective September 12, 2012, the Financial Regulatory Authority, Inc. (“FINRA”), approved a 1 for 5,000 reverse stock split. All references to Class A common stock in these financial statements have been adjusted to reflect the post-reverse split amounts. | |||||||||||||
Effective May 13, 2013 FINRA approved a further 1 for 500 reverse stock split. All references to Class A common stock in these financial statements have been adjusted to reflect the post-reverse split amounts. | |||||||||||||
Cash | |||||||||||||
Cash, excluding restricted cash, includes deposits in banks that are unrestricted as to withdrawal or use. | |||||||||||||
Mineral Property and Exploration Costs | |||||||||||||
The Company has been in the exploration stage since its formation on February 11, 2004, and has not yet realized any revenues from its planned operations. It is primarily engaged in the reactivation of a precious metal processing mill and acquisition and exploration of mining properties. | |||||||||||||
Before mineralization is classified as “proven and probable” reserves; costs are expensed and classified as Mineral property and exploration costs. Capitalization of mine development project costs, that meet the definition of an asset, begins once mineralization is classified as “proven and probable reserves.” | |||||||||||||
When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to acquire and develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations. | |||||||||||||
Mining Rights and Claims | |||||||||||||
The Company has determined that its mining rights and claims meet the definition of mineral rights, as defined by accounting standards, and are tangible assets. As a result, the costs of mining rights are initially capitalized as tangible assets when purchased. 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 reserves. The Company’s rights to extract minerals are contractually limited by time. However, the Company has the ability to extend the leases (Note 4). For mining rights in which proven and probable reserves have not yet been established, the Company assesses the carrying value for impairment at the end of each reporting period. The Company recorded impairment charges of approximately $68,785 and $135,800 during the years ended August 31, 2013 and 2012, respectively. | |||||||||||||
Long-Lived Assets | |||||||||||||
The Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed before the end of its estimated useful life. | |||||||||||||
Recoverability is assessed based on the carrying amount of the asset and its fair value which is determined based on a variety of factors expected to result from the use and the eventual disposal of the asset, as well as specific appraisals in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. Management believes no impairment exists as of August 31, 2013. | |||||||||||||
Fair Value Measurements | |||||||||||||
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The Company uses a fair value hierarchy that has three levels of inputs, both observable and unobservable, with use of the lowest possible level of input to determine fair value. | |||||||||||||
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities; | |||||||||||||
Level 2 – observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and | |||||||||||||
Level 3 – assets and liabilities whose significant value drivers are unobservable. | |||||||||||||
Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment. | |||||||||||||
As of August 31, 2013, the Company had the following financial assets and liabilities that are measured at fair value: | |||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||
Restricted cash | - | $ | 515,428 | - | |||||||||
Derivative liabilities | - | $ | 1,424,115 | - | |||||||||
The fair values of financial instruments, which include cash, accounts payable, short-term notes payable, and convertible debt, were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. The fair value of amounts due to related parties are not practicable to estimate, due to the related party nature of the underlying transactions. | |||||||||||||
Income Taxes | |||||||||||||
Potential benefits of income tax losses are not recognized in the accounts until realization is determined to be more likely than not. The potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured that it is more likely than not it will utilize the net operating losses carried forward in future years. | |||||||||||||
The Company has no unrecognized tax benefits. The Company files income tax returns in the U.S. federal jurisdiction and in the state of Colorado. Management does not believe there will be any significant changes in the Company’s tax positions over the next 12 months. | |||||||||||||
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. There was no income tax expense recognized during the years ended August 31, 2013 or 2012, for interest and penalties. | |||||||||||||
Asset Retirement Obligation | |||||||||||||
The fair value of a liability for an asset retirement obligation is required to be recognized in the period that it is incurred if a reasonable estimate of fair value can be made. In connection with the Company’s acquisition of the Mill in June 2007, an asset retirement obligation of $500,000 was estimated and recorded. The associated asset retirement costs were capitalized as part of the carrying amount of the Mill (See Note 3). Accretion expense is recorded in each subsequent period to recognize the estimated changes in the liability resulting from the passage of time. During the years ended August 31, 2013 and 2012, the Company recorded accretion expense of nil and $35,065, respectively. Changes resulting from revisions to the original fair value of the liability are recognized as an increase or decrease in the carrying amount of the liability and the related asset retirement costs capitalized as part of the carrying amount of the long-lived asset. | |||||||||||||
During fiscal year 2012, the Company re-evaluated the original fair value of the asset retirement obligation as it relates to the Mill. Unique to this asset, the reclamation permit for the Mill requires that the cost of retirement (reclamation), be calculated by the DRMS on a continuing basis, and a financial warranty be provided to guarantee that obligation. | |||||||||||||
As of August 31, 2013, the State of Colorado Division of Reclamation, Mining, and Safety has determined that $515,130 would be required to close and reclaim the asset and the Company has placed those funds as cash held as a restricted cash deposit with the State of Colorado. | |||||||||||||
Recent Accounting Pronouncements | |||||||||||||
Management has evaluated recently issued accounting pronouncements to determine their applicability and does not believe that any of these pronouncements will have a significant impact on the Company's financial statements. | |||||||||||||
3_Property_Plant_and_Equipment
3. Property, Plant and Equipment | 12 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
3. Property, Plant and Equipment | ' | ||||||||
On June 29, 2007, the Company acquired the Mill located in Howardsville, Colorado. The cost of the Mill was $1,400,677. In connection with the acquisition, the Company entered into a $650,000 mortgage with the seller, which is collateralized by the mill property and bears interest at 12% per year. All unpaid principal was originally due June 29, 2009. The due date on the mortgage was extended and was due in full on December 1, 2013, and is currently in default. During the year ended August 31, 2013, $295,984 of the mortgage was paid through the issuance of convertible notes (Note 7). | |||||||||
Interest expense in connection with the Mill mortgage for the years ended August 31, 2013 and 2012 was $39,663 and $53,324, respectively. | |||||||||
In connection with the acquisition of the Mill, the Company replaced a financial warranty that the seller had provided to the DRMS in the amount $318,654. During the 2011 fiscal year, the DRMS required and the Company provided an additional $196,476 of financial warranty. As of August 31, 2013, the total funds, which are held as a restricted cash deposit with the State of Colorado, related to the Mill financial warranty is $515,130. | |||||||||
Property, plant and equipment consist of the following as of August 31, 2013 and August 31, 2012: | |||||||||
August 31, | August 31, | ||||||||
2013 | 2012 | ||||||||
Computer equipment | $ | 5,179 | $ | 5,179 | |||||
Mine and drilling equipment | - | 4,650 | |||||||
Mobile mining equipment | 5,000 | 13,300 | |||||||
Land and mill | 1,434,846 | 1,391,041 | |||||||
1,445,025 | 1,414,170 | ||||||||
Less accumulated depreciation | (8,819 | ) | (17,756 | ) | |||||
$ | 1,436,206 | $ | 1,396,414 | ||||||
Depreciation expense was $3,796 and $17,410 for the years ended August 31, 2013 and 2012, respectively. Property, plant and equipment are depreciated on a straight line basis over their estimated useful lives ranging from three to five years. However, a significant portion of the Company’s property, plant and equipment has not yet been placed in service and accordingly is not being depreciated. |
4_Mining_Rights_and_Claims
4. Mining Rights and Claims | 12 Months Ended | |
Aug. 31, 2013 | ||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | |
4. Mining Rights and Claims | ' | |
Silver Wing and Champion Mine | ||
On October 31, 2012, the Company entered into a contract for purchase of the Silver Wing Mine. In conjunction with this contract the Company issued to Jo Grant Mining Company, Inc. (“Jo Grant”), 12,000,000 pre-split (24,000 post-split) four-year restricted shares of Class A Common Stock on November 1, 2012. This contract expired, unexecuted in May 2013, however the Company entered into a modified extension to the original agreement in July 2013, whereby the Company was to payoff an existing note Jo Grant having a balance of approximately $60,400 on or before October 31, 2013 and was to pay Jo Grant $50,000 no later than October 31, 2013. | ||
On November 2, 2012, the Company entered into a contract for purchase of the Champion Mine. In conjunction with this contract the Company issued 24,000,000 pre-split (48,000 post-split) four-year restricted shares of Class A Common Stock on November 2, 2012. | ||
The Company entered into an extension and modification with Jo Grant for the Champion Mine purchase agreement on May 6, 2013 whereby the Company issued 50,000,000 pre-split (100,000 post-split) four-year restricted Class A shares, the value of which was recorded as expense within mineral property and exploration costs, in exchange for modifications to the purchase contract dated November 2, 2012. The terms of the contract were further extended in July 2013. The modified remaining terms of the contract are as follows: | ||
1. | Pay $3,000,000 to Jo Grant, only for the purpose of consummating the contract to buy and sell real estate (Land), between Jo Grant Mining, Inc. (as the Buyer), and a Texas limited liability company, (as the Seller), dated October 9, 2012, no later than October 31, 2013. . | |
2. | Pay to Jo Grant a sum of $100,000, no later than October 31, 2013. | |
3. | Provide Jo Grant for a period of 99 years a 5% Net Smelter Royalty (“NSR”), on the Champion Mining Claims. The payment of the NSR shall be made not more than 45 days after the close of the month during which the payment is received from the smelter or buyer on which such NSR is calculated. Additional mineral rights were included in the modification for which Jo Grant will be provided for a period of 99 years a 5% NSR. | |
4. | The Company and Jo Grant will enter into a contract for milling to process and mill up to 100,000 tons of ore from the Silver Wing Mine at a cost not greater than $75.00 per ton, on or before July 31, 2013. The execution of this contract has been suspended pending the results of fund raising activities. | |
The Champion Mine, including the additional 237 acres of mineral rights added in May 2013, consists of approximately 591 acres located in the San Juan Mountains at Silverton, Colorado. The Mine is located within the rim of the Silverton Caldera complex at the southwestern extremity of the Colorado Mineral Belt. | ||
On October 31, 2013, the contracts for purchase of the Champion and Silver Wing Mines expired unconsummated. We currently anticipate that these contracts may be subject to renegotiation. Therefore, until this occurs, the Company does not own the mines. As of August 31, 2013, as noted above, the Company has issued a total of 86 million pre-split (172,000 post-split) shares of its Class A common stock to Jo Grant in connection with these purchase transactions. The shares issued are nonrefundable, and represent less than 1% of the Company's total shares of Class A common stock outstanding as of August 31, 2013. In addition, these shares are restricted for four years from the dates of issuance. | ||
The Silver Wing Mine was acquired by Jo Grant on October 17, 2012 for cash consideration of approximately $20,000 and the assumption of a note payable totaling approximately $60,000. The right to acquire the Champion Mine was obtained by Jo Grant on October 9, 2012 for cash consideration of approximately $20,000, which represents a non-refundable payment made in connection with the $3 million contract to purchase the Champion Mine discussed above. | ||
Management estimated the fair value of the 36 million pre-split (72,000 post-split) 4-year restricted, non-refundable shares issued with the original purchase contracts was approximately $100,000, based on the assets acquired. Therefore, the shares of common stock issued by the Company in November 2012 were initially recorded on the balance sheet as “Deferred acquisition costs”. Due to the expiration of the contracts this $100,000 was expensed as mineral property and exploration costs during the fourth quarter of fiscal year 2013. | ||
King Solomon Mine | ||
On September 18, 2009, the Company entered into a lease with an option to purchase the King Solomon Mine, in consideration for which the Company issued 10,000 pre-split (20 post-split) shares of restricted Class A Common Stock valued at $17.50 pre-split ($8,750 post-split) per share (the quoted market price on the date the Company entered into the agreement and obtained the mining rights) totaling $175,000. The lease/option was for a period of three years. The stock was restricted from sale during the initial term of the lease. The lease/option automatically renewed and continued so long as ores, minerals, or metals are produced or sold. The lease granted the Company the exclusive right to perform exploration, mining, development, production, processing or any other activity that benefits the leased premises and required a minimum work commitment of $50,000 to be expended by the Company for each successive three year term during the term of the lease/option. The lease also required the Company to pay the lessor a 3.5% NSR on all mineral bearing ores. In addition, before royalties are computed, 5% of the value of NSR on all materials produced and sold from the mining property must be deducted for the purpose of a contingency reclamation reserve fund for paying potential reclamation costs, up to $200,000. The Company has the sole and exclusive option to purchase all of lessor's right, title and interest in the property for a total purchase price of $1,250,000, payable in cash or other cash equivalents as mutually agreed by the lessor and the Company. | ||
On October 11, 2012, the Company entered into a three-year extension and renewal of mining lease with option to purchase, effective September 18, 2012, for which the Company issued 250,000 pre-split (500 post-split) shares of restricted Class A Common Stock, with an additional 25,000 pre-split (50 post-split) shares to be issued upon each yearly anniversary. The mining lease with an option to purchase expires on September 18, 2015. The Company recorded $62,500 as mining rights and claims based upon the share price on the date of the transaction of $0.25 pre-split ($125 post-split) per share. The stock is restricted for two years. The original work commitment outlined above is considered fulfilled. All other terms and conditions of the original lease remain in effect. | ||
Pay Day and Rage Uranium Claim Group | ||
On June 13, 2011, the Company purchased mineral rights to 63 mining claims in the state of Utah. The claims are referred to as The Pay Day and Rage Uranium Claim Group and are located in San Juan County northeast of Monticello, Utah. In consideration for the acquisition of these claims, the Company issued 50,000 pre-split (100 post-split) shares of restricted Class A Common Stock, which had a value of $150,000 on the purchase date, (based on the quoted market price on the date the Company entered into the agreement and obtained the mineral rights). The shares were issued in two blocks of 25,000 pre-split (50 post-split) shares each and were subject to lock-up provisions for periods of one and two years respectively, during which no sales or other conveyances of the shares could be undertaken. | ||
Brooklyn Mine | ||
On September 30, 2009, the Company entered into a lease with an option to purchase the Brooklyn Mine, in consideration for which the Company issued 15,000 pre-split (30 post-split) ( shares of restricted Class A Common Stock valued at $15.50 pre-split ($7,750 post-split) per share (the quoted market price on the date of the Company entered into the agreement and obtained the mining rights) totaling $232,500. The lease/option was for a period of three years. The stock was restricted from sale during the initial term of the lease. The lease/option automatically renewed and continued so long as ores, minerals, or metals are produced or sold. The lease granted the Company the exclusive right to perform exploration, mining, development, production, processing or any other activity that benefits the leased premises and required a minimum work commitment of $150,000 for the first year, $200,000 for the second year and $250,000 for the third year to be expended by the Company. The lease also required the Company to pay the lessor a 5% NSR on all mineral bearing ores. In addition, before royalties are computed, 5% of the value of NSR on all materials produced and sold from the mining property must be deducted for the purpose of a contingency reclamation reserve fund for paying potential reclamation costs, up to $500,000. The Company had the sole and exclusive option to purchase all of lessor's right, title and interest in the property for a total purchase price of $4,000,000, plus a perpetual 2% NSR. This amount was to be paid in cash or other cash equivalents as mutually agreed by the Company and the lessor. | ||
The lease with an option to purchase for the Brooklyn Mine was terminated on September 6, 2012. After extensive analysis of potential acid mine drainage problems, the Company decided not to seek to renew the lease. Pursuant to the lease, work commitment expenses not spent on the properties were due to the lessors in cash or cash equivalents, including additional shares of Company stock. Failing to negotiate the anticipated lease renewal, on November 1, 2012 the Company issued 6,397,300 pre-split (12,795 post-split) shares of restricted Class A Common Stock, valued at $660,834 on the date of issue to satisfy all terms of the lease. | ||
5_Notes_payable_related_partie
5. Notes payable related parties | 12 Months Ended |
Aug. 31, 2013 | |
Related Party Transactions [Abstract] | ' |
5. Notes payable b related parties | ' |
As of August 31, 2013, the Company has notes payable to related parties, including accrued interest, of $95,818 and $261,440 with its chief executive officer (“CEO”) and its chief financial officer (“CFO”), respectively. In connection with the borrowings, the Company executed unsecured promissory notes (“Notes”) which accrue interest at 6.5% per annum (or 18% per annum, if the Notes are in default). The funds received in exchange for the Notes have primarily been used by the Company to finance working capital requirements. | |
On April 8, 2011, the Company secured the amounts owed to the CEO and CFO, with the Mill, and filed Second Deeds of Trust in San Juan County, Colorado. In connection with the Deeds of Trust, all of the individual Notes were combined into two promissory Notes, and are due in their entirety on December 31, 2013. None of the Notes are currently in default. During the years months ended August 31, 2013 and 2012 the Company recorded interest expense of $18,343, and $18,393, respectively. |
6_Promissory_notes_payable
6. Promissory notes payable | 12 Months Ended |
Aug. 31, 2013 | |
Notes to Financial Statements | ' |
6. Promissory notes payable | ' |
On September 12, 2011, the Company entered into a settlement agreement and mutual general release with an individual that had originally filed a breach of contract complaint against the Company in November 2009 (the “Plaintiff”) and the Company agreed to pay the Plaintiff $80,000 with interest of 8.00% per annum due in full on September 12, 2013. The Company has recorded interest expense of $6,400 and $6,207 for the years ended August 31, 2013 and 2012, respectively. The Company did not pay the note when it was due and interest is now being accrued at the default rate of 18%. | |
On December 22, 2011, the Company entered into a promissory note with one of its vendors in exchange for $24,000. The promissory note bears interest at 6.5% per annum and was due on June 22, 2012. In June 2012, the note was extended, and was extended again on December 30, 2012 and is now due on December 31, 2013. All other terms remain the same. In exchange for extension of the due date, the note is now secured by a Deed of Trust on the Company's Pride of the West Mill. If the Company fails to pay off the note on its due date, the entire principal and accrued interest will bear interest at 18% per annum. The Company recorded interest expense of $1,560 and $1,081 for the years ended August 31, 2013 and 2012, respectively. |
7_Convertible_notes
7. Convertible notes | 12 Months Ended |
Aug. 31, 2013 | |
Notes to Financial Statements | ' |
7. Convertible notes | ' |
Delaware Partnership Investor | |
At September 1, 2012, the Company owed the Delaware Partnership Investor $60,536 (net of unamortized discounts of $136,465), under multiple funding arrangements. During the year ended August 31, 2013, the Company issued 13 convertible notes under funding arrangements with the Delaware Partnership Investor, totaling $397,000 which bear interest at 6.25% to 10% per annum with maturities from October 3, 2013 through August 30, 2014. Proceeds from six of the notes, totaling $120,000 were used to reduce the mill mortgage. The notes are convertible at any time, at the option of the holder, into shares of Class A common stock of the Company at conversion rates of 40% of the average of the two lowest volume-weighted average closing prices of the Company’s Class A common stock for the ten trading days immediately prior to the date a conversion notice is received by the Company. The Company recorded discounts in the amount of $397,000 related to the conversion features on the notes issued during the year ended August 31, 2013 (Note 8). During the year ended August 31, 2013, $297,092 of the convertible notes were converted into common stock (any unamortized debt discount related to the converted notes was immediately charged to interest expense on the day the notes were converted). During the year ended August 31, 2013, the Company recorded $188,585 of debt discount amortization and the carrying value of the notes was $113,195 (net of unamortized discounts of $183,712) as of August 31, 2013. On June 18, 2013, the Company secured $278,802 of the amounts owed to the Delaware Partnership Investor, with the Mill. On September 12, 2013, a third Deed of Trust on the Mill was filed in San Juan County, Colorado. | |
New York Private Investors | |
At September 1, 2012, the Company owed the New York Private Investors $69,913 (net of unamortized discount of $12,087), under multiple funding arrangements. During the year ended August 31, 2013, the Company issued five convertible notes for $220,820 under funding arrangements with the group of New York Private Investors, bearing interest at 8% per annum and with maturities between July 29, 2013 and May 29, 2014. The notes are convertible at any time after 180 days from the date of the note’s execution, at the option of the holder, into shares of Class A common stock of the Company at conversion rates of 35%, 45% and 51% of the average of the three lowest volume-weighted average closing prices of the Company’s Class A common stock for the ten or thirty trading days immediately prior to the date a conversion notice is received by the Company. The Company recorded a debt discount of $220,820 relating to the conversion features of the notes. During the year ended August 31, 2013, $116,200 of the convertible notes were converted into Class A common stock (any unamortized debt discount related to the converted notes was immediately charged to interest expense on the day the notes were converted). For the year ended August 31, 2013, the Company recorded debt discount amortization of $137,659 and the carrying value of the notes as of August 31, 2013 was $92,517 (net of unamortized discounts of $94,103). | |
New York Alternative Investment Firm | |
During the year ended August 31, 2013, the Company issued four convertible notes for $246,484 under funding arrangements with a New York Alternative Investment Firm, bearing interest at 12% per annum with maturities between December 13, 2013 and April 8, 2014. Proceeds from two of the notes were used to reduce the mill mortgage by $175,984, are convertible into shares of Class A common stock. The remaining two notes mature on February 8, 2014. The four notes are convertible at any time from the date of the note’s execution, at the option of the holder, into shares of Class A common stock of the Company at a conversion rate of 45% of the lowest volume-weighted average closing prices of the Company’s Class A common stock for the five trading days immediately prior to the date a conversion notice is received by the Company. The Company recorded a debt discount of $246,484 relating to the conversion features of the notes. During the year ended August 31, 2013, $133,555 of the convertible notes were converted into Class A common stock (any unamortized debt discount related to the converted notes was immediately charged to interest expense on the day the notes were converted). For the year ended August 31, 2013, the Company recorded debt discount amortization of $102,118 and the carrying value of the notes as of August 31, 2013 was $63,117 (net of unamortized discounts of $49,813). | |
San Diego Private Investor | |
During the year ended August 31, 2013, the Company issued three convertible notes for $75,000 under a funding arrangement with a San Diego Private Investor. The notes are interest free for the first three months, then a one-time interest charge of 12% is applied to the principal balance. The notes mature on April 10, 2014, June 4, 2014 and August 28, 2014 and are convertible at any time from the date of the note’s execution, at the option of the holder, into shares of Class A common stock of the Company at a conversion rate of the lesser of $0.0025 pre-split ($1.25 post-split) or 60% of the lowest closing price of the Company’s Class A common stock for 25 trading days immediately prior to the date a conversion notice is received by the Company. The Company recorded a debt discount of $75,000 relating to the conversion features of the notes. During the year ended August 31, 2013, none of the convertible notes were converted into Class A common stock. For the year ended August 31, 2013, the Company recorded debt discount amortization of $16,027 and the carrying value of the notes as of August 31, 2013 was $16,027 (net of unamortized discounts of $58,973). | |
8_Derivative_Liabilities
8. Derivative Liabilities | 12 Months Ended | ||||||
Aug. 31, 2013 | |||||||
Notes to Financial Statements | ' | ||||||
8. Derivative Liabilities | ' | ||||||
In accordance with ASC 815-15, Embedded Derivatives, the Company determined that the conversion features of the convertible notes described in Note 7 meet the criteria of an embedded derivative, and therefore the conversion features of the debt have been bifurcated and accounted for as derivatives. The debt does not meet the definition of “conventional convertible debt” because the number of shares which may be issued upon the conversion of the debt is not fixed. Therefore, the conversion features, pursuant to ASC 815-40, Contracts in Entity’s Own Equity, have been accounted for as derivative liabilities. The Company adjusts the fair value of these derivative liabilities to fair value at each reporting date. | |||||||
The Company uses a valuation pricing model to calculate the fair value of its derivative liabilities. Key assumptions used to apply this model were as follows: | |||||||
Year ended | Year ended | ||||||
August 31, | August 31, | ||||||
2013 | 2012 | ||||||
Expected term | 0 to 12 months | 1 to 12 months | |||||
Volatility | 232%-922% | 186% - 570% | |||||
Risk-free interest rate | 0.02 - 0.19% | 0.01 - 0.20% | |||||
Dividend yield | 0% | 0% | |||||
The following table represents the Company’s derivative liability activity for the embedded conversion features for the year ended August 31, 2013: | |||||||
Balance at September 1, 2012 | $ | 469,370 | |||||
Issuance of derivative liabilities | 2,759,830 | ||||||
Derecognition of derivative liabilities related to conversion of convertible debt | (1,308,480 | ) | |||||
Gain on derivative liabilities | (496,605 | ) | |||||
Balance at August 31, 2013 | $ | 1,424,115 | |||||
9_Stockholders_Deficit
9. Stockholders Deficit | 12 Months Ended |
Aug. 31, 2013 | |
Equity [Abstract] | ' |
Stockholders Deficit | ' |
Class A Common Stock | |
As a result of the rounding provision of the reverse stock splits, which stated that fractional shares always be rounded up to the nearest whole share, 361 new Class A common shares were issued during the year ended August 31, 2013. | |
During the year ended August 31, 2012, the Company converted debt and derecognized derivative liabilities totaling $1,892,844 into 1,829,997 pre-split (3,660 post-split), shares of restricted Class A Common Stock. | |
During the year ended August 31, 2012, the Company issued 9,131 pre-split (18 post-split), shares of restricted Class A Common Stock in partial satisfaction of costs associated with the King Solomon mining lease. | |
As of August 31, 2012, the Company was authorized to grant up to 3,322,160 pre-split (6,645 post-split), shares under the 2008 Stock Compensation Plan (formerly the 2008 Employee Stock Compensation Plan), of which 2,430,820 pre-split (4,862 post-split) had been issued as of August 31, 2012. During the year ended August 31, 2012, 2,254,706 pre-split (4,509 post-split), shares of Class A Common Stock valued at $0.0001 to $0.0005 per share (the quoted market prices at the dates of the respective stock grants), were issued to employees and consultants for services rendered, which resulted in $978,217 being recorded as expense, $21,580 as prepaid expense, $450,207 as a reduction in accounts payable and $682,560 as a reduction in accrued liabilities. | |
On October 22, 2012, the Company amended its Articles of Incorporation in part to establish and fix the total number of post-split authorized shares of Class A Common Stock, par value $0.001 per share, that the Company is authorized to issue, at one billion (1,000,000,000). | |
On June 19, 2013, the Company filed a revised DEF 14C with the SEC amending its Articles of Incorporation in part to establish and fix the total number of post-split authorized shares of Class A Common Stock, par value $0.001 per share, that the Company is authorized to issue, at one billion (1,000,000,000). The Amendment became effective on July 9, 2013. | |
During the year ended August 31, 2013, the Company converted debt and derecognized derivative liabilities totaling $1,870,545 into 12,136,178 post-split shares of restricted Class A Common Stock. | |
During the year ended August 31, 2013, the Company issued 86,250,000 pre-split (172,500 post-split) non-refundable shares of restricted Class A Common Stock in partial satisfaction of costs associated with the King Solomon mining lease renewal and in partial satisfaction of the acquisition of the Silver Wing and Champion properties. The Company also issued 6,397,300 pre-split (12,795 post-split) shares of restricted Class A Common Stock in satisfaction of costs associated with the Brooklyn work commitment. | |
During the year ended August 31, 2013, 35,033,527 post-split shares of Class A Common Stock valued at $0.0005 to $230 per share (the quoted market prices at the dates of the respective stock grants), were issued to employees and consultants for services rendered, which resulted in $935,266 being recorded as expense, $38,740 as prepaid expenses, $557,194 as a reduction in accounts payable, and $1,420,122 as a reduction in accrued liabilities. | |
On April 18, 2013 the Company filed amendments to its two stock compensation plans. The amendments provided for an additional 50,000,000 pre-split (100,000 post-split), Class A common stock shares to be available for issuance under each of the 2008 Non-qualified Consultants and Advisors Stock Compensation Plan and the 2008 Stock Compensation Plan. On August 5, 2013, the Company filed additional amendments which provided for an additional 20,000,000 post-split shares to be issued under each plan. As of August 31, 2013, the Company is authorized to grant up to 20,146,644 shares under the 2008 Stock Compensation Plan (formerly the 2008 Employee Stock Compensation Plan), and 20,140,746 shares under the 2008 Non-qualified Consultants and Advisors Stock Compensation Plan of which 7,038,378 have been issued as of August 31, 2013. | |
Common Stock Transactions Subsequent to August 31, 2013 | |
Subsequent to August 31, 2013, the Company issued 309,295,910 shares of Class A Common Stock pursuant to the conversion of debt totaling $252,293. |
10_Litigation
10. Litigation | 12 Months Ended |
Aug. 31, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
10. Litigation | ' |
San Juan Properties and Hennis Proceedings | |
On April 6, 2009, Todd C. Hennis (the former President and CEO of the Company), and entities San Juan Corp., and Salem Minerals Inc. (which are substantially owned by Mr. Hennis), served upon the Company a Complaint seeking among other things, a $100,000 payment pursuant to the option agreement, and release from his shareholder lock-up agreement and from Rule 144 trading restrictions on approximately 10,300 shares of Class A Common Stock held by Mr. Hennis. On May 12, 2009, a counter-claim with jury demand was filed against Mr. Hennis and his entities for wrongful conversion, breach of duty of loyalty, lack of good faith, breach of fiduciary duty, and significant conflicts of interest. | |
Hennis filed a Motion for Summary Judgment on October 16, 2009. On September 2, 2010, the court granted partial summary judgment in favor of Mr. Hennis and awarded him damages of $230,707. On September 22, 2010, the court awarded additional damages in the amount of $114,896 to Mr. Hennis for a total of $345,603, which has been recorded as an accrued liability by the Company as of August 31, 2012 and August 31, 2013. On March 25, 2011, the court awarded an additional $58,989 to Hennis for attorney’s fees, which was accrued as of August 31, 2012. However, in April 2012, the Court of Appeals remanded the award of attorney’s fees and therefore the accrual has been reduced by $58,989. | |
The Company filed motions for (a) a new trial on all or part of the issues; (b) an amendment of findings; and (c) an amendment of judgment pursuant to C.R.C.P. Rule 58(a). On March 25, 2011, the court evoked C.R.C.P. 59(j) and denied the post-trial motions by not ruling on them. | |
The Company filed a Notice of Appeal with the Colorado Court of Appeals on January 7, 2011. On April 5, 2012, the Colorado Court of Appeals affirmed the judgment ($345,603), however the order awarding plaintiffs their trial attorney fees ($58,989) and costs was vacated, and the case was remanded to the district court for further proceedings. The Company filed a Petition for Rehearing in the Court of Appeals on April 9, 2012, which was denied on May 17, 2012. On December 6, 2013, the Court ordered a hearing be held to address the attorney fee issue. | |
On August 31, 2012, The Company filed a Petition of Certiorari with the Colorado Supreme Court. On May 23, 2013, the Supreme Court denied the Company’s Petition of Certiorari. The judgment ($345,603) is affirmed, the order awarding plaintiffs their trial attorney fees ($58,989) and costs is vacated, and the case is remanded for further proceedings. | |
On June 5, 2013, Hennis filed a motion to release funds of approximately $85,300, from the San Juan County court registry. These funds were placed into the court registry as a result of a garnishment order on April 18, 2011. | |
Post Judgment Collection Actions by Hennis | |
On August 23, 2013, Hennis attempted to have a receiver appointed to take control over the Company by means of an Ex Parte Motion for the Appointment of a Receiver filed in Jefferson County, Colorado. This motion was denied by the court on September 4, 2013. The court’s order stated, “Should plaintiffs wish to pursue their Rule 66 motion, they should serve their complaint and motion upon defendant and, after service is effected, contact the court to request a forthwith hearing.” | |
On September 6, 2013, the Company was served, through its registered agent, with 1) Renewed Motion for Appointment of Receiver, and 2) Verified Complaint, seeking a judicial foreclosure, declaratory judgment, breach of fiduciary duties. | |
A hearing on the motion to appoint a receiver was held on November 12 and 15, 2013. The motion to appoint a receiver was denied. The Company has filed its answer and initial disclosures regarding the complaint regarding judicial foreclosure, declaratory judgment, breach of fiduciary duties, and awaits the court’s scheduling of a case management conference. | |
Recreation Properties, Thomas A. Warlick | |
On December 5, 2013, Recreation Properties, Thomas A. Warlick, President, served upon the Company, C. Stephen Guyer, and Lee R. Rice a Complaint alleging; 1) Default Upon a Promissory Note Payable, 2) Breach of Contract, Breach of Fiduciary Duty (Guyer and Rice), and Fraudulent Transfer Under CRS §§ 38-8-105(1)(b) & 106(1). The Complaint seeks a judgment in favor of Recreation Properties, recovery of funds transferred to Guyer and Rice during the last four years preceding the complaint, and avoidance of the Deeds of Trust granted to Guyer and Rice. The Company is preparing its answer to the Complaint, which is due on December 25, 2013. | |
11_Income_Taxes
11. Income Taxes | 12 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
11. Income Taxes | ' | ||||||||
The reconciliation between the expected federal income tax benefit computed by applying the Federal statutory rate to loss before income taxes and the actual benefit for taxes on loss for the years ended August 31, 2013 and 2012 is as follows: | |||||||||
2013 | 2012 | ||||||||
Expected income tax benefit at statutory rate | $ | 2,184,882 | $ | 1,504,851 | |||||
State taxes | 156,063 | 107,489 | |||||||
Permanent differences | (758,330 | ) | (503,458 | ) | |||||
Other | (1,367 | ) | (6,529 | ) | |||||
Change in valuation allowance | (1,581,248 | ) | (1,102,353 | ) | |||||
Income tax benefit | $ | - | $ | - | |||||
The Company has net operating loss carry-forwards (“NOLs”) for tax purposes of approximately $16,558,000 as of August 31, 2013. These NOLs expire in the years 2023 through 2032. On June 17, 2007, a change in control occurred which may substantially limit utilization of net operating losses incurred prior to that date. | |||||||||
The Company’s deferred tax assets as of August 31, 2013 and 2012 are estimated as follows: | |||||||||
2013 | 2012 | ||||||||
Net operating losses | $ | 6,209,065 | $ | 5,409,030 | |||||
Property, plant and equipment | 1,064,994 | 762,024 | |||||||
Stock-based compensation | 1,777,530 | 1,299,287 | |||||||
Deferred tax assets | 9,051,589 | 7,470,341 | |||||||
Valuation allowance | (9,051,589 | ) | (7,470,341 | ) | |||||
Net deferred tax assets | $ | - | $ | - | |||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company has provided a valuation allowance of 100% of its net deferred tax asset due to the uncertainty of generating future profits that would allow for the realization of such deferred tax assets. | |||||||||
2_Summary_of_Significant_Accou1
2. Summary of Significant Account Policies (Policies) | 12 Months Ended | ||||||||||||
Aug. 31, 2013 | |||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||
Basis of Presentation | ' | ||||||||||||
Basis of Presentation | |||||||||||||
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and are expressed in US dollars. The Company’s fiscal year-end is August 31. | |||||||||||||
Basic and Diluted Net Loss per Share | ' | ||||||||||||
Basic and Diluted Net Loss per Share | |||||||||||||
Basic earnings (loss) per share (“EPS”) is computed by dividing net loss attributable to common stockholders (numerator) by the weighted average number of shares of the Class A Common Stock outstanding (denominator) during the period. During the year ended August 31, 2011, the Company issued shares of Class B Common Stock, which are not publicly-traded. The Class B Common Stock share dividends equally with Class A Common Stock, and are defined as participating securities under US GAAP; however, they have no contractual obligation to share in losses of the Company. The Company has therefore not included the Class B Common Stock in determining basic EPS. Diluted EPS gives effect to all potential dilutive common shares outstanding during the periods using the treasury stock method (for options and warrants) and the two-class method (for Class B common stock). In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. For the years ended August 31, 2013 and 2012, the effect of the conversion of outstanding debt and Class B common shares would have been anti-dilutive. | |||||||||||||
The following table represents the potential dilutive securities excluded from the calculation of diluted loss per share. | |||||||||||||
August 31, | August 31, | ||||||||||||
2013 | 2012 | ||||||||||||
Class B Common Stock | 490,371,533 | 490,371,533 | |||||||||||
Convertible debt | 159,264,106 | 2,206 | |||||||||||
Effective September 12, 2012, the Financial Regulatory Authority, Inc. (“FINRA”), approved a 1 for 5,000 reverse stock split. All references to Class A common stock in these financial statements have been adjusted to reflect the post-reverse split amounts. | |||||||||||||
Effective May 13, 2013 FINRA approved a further 1 for 500 reverse stock split. All references to Class A common stock in these financial statements have been adjusted to reflect the post-reverse split amounts. | |||||||||||||
Cash | ' | ||||||||||||
Cash | |||||||||||||
Cash, excluding restricted cash, includes deposits in banks that are unrestricted as to withdrawal or use. | |||||||||||||
Mineral Property and Exploration Costs | ' | ||||||||||||
Mineral Property and Exploration Costs | |||||||||||||
The Company has been in the exploration stage since its formation on February 11, 2004, and has not yet realized any revenues from its planned operations. It is primarily engaged in the reactivation of a precious metal processing mill and acquisition and exploration of mining properties. | |||||||||||||
Before mineralization is classified as “proven and probable” reserves; costs are expensed and classified as Mineral property and exploration costs. Capitalization of mine development project costs, that meet the definition of an asset, begins once mineralization is classified as “proven and probable reserves.” | |||||||||||||
When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to acquire and develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations. | |||||||||||||
Mining Rights and Claims | ' | ||||||||||||
Mining Rights and Claims | |||||||||||||
The Company has determined that its mining rights and claims meet the definition of mineral rights, as defined by accounting standards, and are tangible assets. As a result, the costs of mining rights are initially capitalized as tangible assets when purchased. 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 reserves. The Company’s rights to extract minerals are contractually limited by time. However, the Company has the ability to extend the leases (Note 4). For mining rights in which proven and probable reserves have not yet been established, the Company assesses the carrying value for impairment at the end of each reporting period. The Company recorded impairment charges of approximately $68,785 and $135,800 during the years ended August 31, 2013 and 2012, respectively. | |||||||||||||
Long Lived Assets | ' | ||||||||||||
Long-Lived Assets | |||||||||||||
The Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed before the end of its estimated useful life. | |||||||||||||
Recoverability is assessed based on the carrying amount of the asset and its fair value which is determined based on a variety of factors expected to result from the use and the eventual disposal of the asset, as well as specific appraisals in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. Management believes no impairment exists as of August 31, 2013. | |||||||||||||
Fair Value Measurements | ' | ||||||||||||
Fair Value Measurements | |||||||||||||
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The Company uses a fair value hierarchy that has three levels of inputs, both observable and unobservable, with use of the lowest possible level of input to determine fair value. | |||||||||||||
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities; | |||||||||||||
Level 2 – observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and | |||||||||||||
Level 3 – assets and liabilities whose significant value drivers are unobservable. | |||||||||||||
Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment. | |||||||||||||
As of August 31, 2013, the Company had the following financial assets and liabilities that are measured at fair value: | |||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||
Restricted cash | - | $ | 515,428 | - | |||||||||
Derivative liabilities | - | $ | 1,424,115 | - | |||||||||
The fair values of financial instruments, which include cash, accounts payable, short-term notes payable, and convertible debt, were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. The fair value of amounts due to related parties are not practicable to estimate, due to the related party nature of the underlying transactions. | |||||||||||||
Income Taxes | ' | ||||||||||||
Income Taxes | |||||||||||||
Potential benefits of income tax losses are not recognized in the accounts until realization is determined to be more likely than not. The potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured that it is more likely than not it will utilize the net operating losses carried forward in future years. | |||||||||||||
The Company has no unrecognized tax benefits. The Company files income tax returns in the U.S. federal jurisdiction and in the state of Colorado. Management does not believe there will be any significant changes in the Company’s tax positions over the next 12 months. | |||||||||||||
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. There was no income tax expense recognized during the years ended August 31, 2013 or 2012, for interest and penalties. | |||||||||||||
Asset Retirement Obligation | ' | ||||||||||||
Asset Retirement Obligation | |||||||||||||
The fair value of a liability for an asset retirement obligation is required to be recognized in the period that it is incurred if a reasonable estimate of fair value can be made. In connection with the Company’s acquisition of the Mill in June 2007, an asset retirement obligation of $500,000 was estimated and recorded. The associated asset retirement costs were capitalized as part of the carrying amount of the Mill (See Note 3). Accretion expense is recorded in each subsequent period to recognize the estimated changes in the liability resulting from the passage of time. During the years ended August 31, 2013 and 2012, the Company recorded accretion expense of nil and $35,065, respectively. Changes resulting from revisions to the original fair value of the liability are recognized as an increase or decrease in the carrying amount of the liability and the related asset retirement costs capitalized as part of the carrying amount of the long-lived asset. | |||||||||||||
During fiscal year 2012, the Company re-evaluated the original fair value of the asset retirement obligation as it relates to the Mill. Unique to this asset, the reclamation permit for the Mill requires that the cost of retirement (reclamation), be calculated by the DRMS on a continuing basis, and a financial warranty be provided to guarantee that obligation. | |||||||||||||
As of August 31, 2013, the State of Colorado Division of Reclamation, Mining, and Safety has determined that $515,130 would be required to close and reclaim the asset and the Company has placed those funds as cash held as a restricted cash deposit with the State of Colorado. | |||||||||||||
Recent accounting pronouncements | ' | ||||||||||||
Recent Accounting Pronouncements | |||||||||||||
Management has evaluated recently issued accounting pronouncements to determine their applicability and does not believe that any of these pronouncements will have a significant impact on the Company's financial statements. |
2_Summary_of_Significant_Accou2
2. Summary of Significant Account Policies (Tables) | 12 Months Ended | ||||||||||||
Aug. 31, 2013 | |||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||
Potential dilutive securities excluded from diluted loss per share | ' | ||||||||||||
August 31, | August 31, | ||||||||||||
2013 | 2012 | ||||||||||||
Class B Common Stock | 490,371,533 | 490,371,533 | |||||||||||
Convertible debt | 159,264,106 | 2,206 | |||||||||||
Financial assets and liabilities that are measured at fair value | ' | ||||||||||||
As of August 31, 2013, the Company had the following financial assets and liabilities that are measured at fair value: | |||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||
Restricted cash | - | $ | 515,428 | - | |||||||||
Derivative liabilities | - | $ | 1,424,115 | - |
3_Property_Plant_and_Equipment1
3. Property, Plant and Equipment (Tables) | 12 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property, plant and equipment | ' | ||||||||
August 31, | August 31, | ||||||||
2013 | 2012 | ||||||||
Computer equipment | $ | 5,179 | $ | 5,179 | |||||
Mine and drilling equipment | - | 4,650 | |||||||
Mobile mining equipment | 5,000 | 13,300 | |||||||
Land and mill | 1,434,846 | 1,391,041 | |||||||
1,445,025 | 1,414,170 | ||||||||
Less accumulated depreciation | (8,819 | ) | (17,756 | ) | |||||
$ | 1,436,206 | $ | 1,396,414 |
8_Derivative_Liabilities_Table
8. Derivative Liabilities (Tables) | 12 Months Ended | ||||||
Aug. 31, 2013 | |||||||
Notes to Financial Statements | ' | ||||||
Key assumptions used to apply valuation pricing model to calculate the fair value | ' | ||||||
Year ended | Year ended | ||||||
August 31, | August 31, | ||||||
2013 | 2012 | ||||||
Expected term | 0 to 12 months | 1 to 12 months | |||||
Volatility | 232%-922% | 186% - 570% | |||||
Risk-free interest rate | 0.02 - 0.19% | 0.01 - 0.20% | |||||
Dividend yield | 0% | 0% | |||||
Derivative liability activity | ' | ||||||
Balance at September 1, 2012 | $ | 469,370 | |||||
Issuance of derivative liabilities | 2,759,830 | ||||||
Derecognition of derivative liabilities related to conversion of convertible debt | (1,308,480 | ) | |||||
Gain on derivative liabilities | (496,605 | ) | |||||
Balance at August 31, 2013 | $ | 1,424,115 | |||||
11_Income_Taxes_Tables
11. Income Taxes (Tables) | 12 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
Schedule of Income Tax Reconciliation | ' | ||||||||
2013 | 2012 | ||||||||
Expected income tax benefit at statutory rate | $ | 2,184,882 | $ | 1,504,851 | |||||
State taxes | 156,063 | 107,489 | |||||||
Permanent differences | (758,330 | ) | (503,458 | ) | |||||
Other | (1,367 | ) | (6,529 | ) | |||||
Change in valuation allowance | (1,581,248 | ) | (1,102,353 | ) | |||||
Income tax benefit | $ | - | $ | - | |||||
Schedule Deferred Tax Assets | ' | ||||||||
2013 | 2012 | ||||||||
Net operating losses | $ | 6,209,065 | $ | 5,409,030 | |||||
Property, plant and equipment | 1,064,994 | 762,024 | |||||||
Stock-based compensation | 1,777,530 | 1,299,287 | |||||||
Deferred tax assets | 9,051,589 | 7,470,341 | |||||||
Valuation allowance | (9,051,589 | ) | (7,470,341 | ) | |||||
Net deferred tax assets | $ | - | $ | - |
1_Organization_Nature_of_Busin1
1. Organization, Nature of Business, Going Concern and Managements Plans (Details Narrative) (USD $) | 12 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
Organization Nature Of Business Going Concern And Managements Plans Details Narrative | ' | ' |
Working capital deficit | ($3,356,954) | ' |
Convertible debt financing provided by Delaware Partnership Investor | 397,000 | 690,000 |
Convertible debt financing provided by New York private investors | 220,820 | 320,820 |
Convertible debt financing provided by New York Alternative Investment Firm | 246,484 | ' |
Convertible debt financing provided by a San Diego private investor | $75,000 | ' |
2_Summary_of_Significant_Accou3
2. Summary of Significant Account Policies (Details) | 12 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
Convertible debt | ' | ' |
Shares excluded from earnings | 159,264,106 | 2,206 |
Class B Common Stock | ' | ' |
Shares excluded from earnings | 490,371,533 | 490,371,533 |
2_Summary_of_Significant_Accou4
2. Summary of Significant Account Policies (Details 1) (USD $) | Aug. 31, 2013 |
Restricted cash | $515,130 |
Level 1 | ' |
Restricted cash | 0 |
Derivative liabilities | 0 |
Level 2 | ' |
Restricted cash | 515,428 |
Derivative liabilities | 1,424,115 |
Level 3 | ' |
Restricted cash | 0 |
Derivative liabilities | $0 |
2_Summary_of_Significant_Accou5
2. Summary of Significant Account Policies (Details Narrative) (USD $) | 12 Months Ended | 115 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2013 | |
Mining Rights and Claims | ' | ' | ' |
Impairment charges | $68,785 | $135,800 | ' |
Impairment loss for long-lived assets | 0 | ' | ' |
Income Taxes | ' | ' | ' |
Income tax expense recognized for interest and penalties | 0 | 0 | ' |
Asset Retirement Obligation | ' | ' | ' |
Required to close and reclaim the Mill as determined by State of Colorado Division of Reclamation, Mining, and Safety | 515,130 | ' | 515,130 |
Accretion expense | $0 | $35,065 | $191,635 |
3_Property_Plant_and_Equipment2
3. Property, Plant and Equipment (Details) (USD $) | Aug. 31, 2013 | Aug. 31, 2012 |
Property, Plant and Equipment, Net [Abstract] | ' | ' |
Computer equipment | $5,179 | $5,179 |
Mine and drilling equipment | 0 | 4,650 |
Mobile mining equipment | 5,000 | 13,300 |
Land and mill | 1,434,846 | 1,391,041 |
Gross | 1,445,025 | 1,414,170 |
Less accumulated depreciation | -8,819 | -17,756 |
Net | $1,436,206 | $1,396,414 |
3_Property_Plant_and_Equipment3
3. Property, Plant and Equipment (Details Narrative) (USD $) | 12 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
Property Plant And Equipment Details Narrative | ' | ' |
Interest expense in connection with the Mill mortgage | $39,663 | $53,324 |
Mortgage paid through issuance of convetible notes | 295,984 | ' |
Total funds, which are held as a restricted cash deposit with the State of Colorado, related to the Mill financial warranty | 515,130 | ' |
Depreciation expense | $3,796 | $17,410 |
5_Notes_payable_related_partie1
5. Notes payable related parties (Details Narrative) (USD $) | 12 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
Notes payable to related parties | $357,258 | $338,914 |
Interest expense related party payables | 18,343 | 18,393 |
CEO | ' | ' |
Notes payable to related parties | 95,818 | ' |
CFO | ' | ' |
Notes payable to related parties | $261,440 | ' |
8_Derivative_Liabilities_Detai
8. Derivative Liabilities (Details) (USD $) | 12 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
Minimum | ' | ' |
Expected term | '0 years | '1 month |
Volatility | 232.00% | 186.00% |
Risk-free interest rate | 0.02% | 0.01% |
Dividend yield | $0 | $0 |
Maximum | ' | ' |
Expected term | '12 months | '12 months |
Volatility | 922.00% | 570.00% |
Risk-free interest rate | 0.19% | 0.20% |
Dividend yield | $0 | $0 |
8_Derivative_Liabilities_Detai1
8. Derivative Liabilities (Details 1) (USD $) | 12 Months Ended |
Aug. 31, 2013 | |
Derivative Liabilities Details 1 | ' |
Balance at September 1, 2012 | $469,370 |
Issuance of derivative liabilities | 2,759,830 |
Derecognition of derivative liabilities related to conversion of convertible debt | -1,308,480 |
Gain on derivative liabilities | -496,605 |
Balance at August 31, 2013 | $1,424,115 |
11_Income_Taxes_Schedule_of_In
11. Income Taxes Schedule of Income Tax Reconciliation (Details) (USD $) | 12 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
Income Tax Disclosure [Abstract] | ' | ' |
Expected income tax benefit at statutory rate | $2,184,882 | $1,504,851 |
State taxes | 156,063 | 107,489 |
Permanent differences | -758,330 | -503,458 |
Other | -1,367 | -6,529 |
Change in valuation allowance | -1,581,248 | -1,102,353 |
Income tax benefit | $0 | $0 |
11_Income_Taxes_Schedule_Defer
11. Income Taxes Schedule Deferred Tax Assets (Details) (USD $) | Aug. 31, 2013 | Aug. 31, 2012 |
Income Tax Disclosure [Abstract] | ' | ' |
Net operating losses | $6,209,065 | $5,409,030 |
Property, plant and equipment | 1,064,994 | 762,024 |
Stock-based compensation | 1,777,530 | 1,299,287 |
Deferred tax assets | 9,051,589 | 7,470,341 |
Valuation allowance | -9,051,589 | -7,470,341 |
Net deferred tax assets | $0 | $0 |
11_Income_Taxes_Details_Narrat
11. Income Taxes (Details Narrative) (USD $) | 12 Months Ended |
Aug. 31, 2013 | |
Income Taxes Details Narrative | ' |
Net operating loss carry-forwards | $16,558,000 |
Expiration date carryforwards begin to expire | 1-Jan-23 |