Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | ||
Nov. 30, 2013 | Jan. 29, 2014 | Jan. 29, 2014 | |
Class A Common Stock | Class B Common Stock | ||
Entity Registrant Name | 'COLORADO GOLDFIELDS INC. | ' | ' |
Entity Central Index Key | '0001344394 | ' | ' |
Document Type | '10-Q | ' | ' |
Document Period End Date | 30-Nov-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 Common Stock, Shares Outstanding | ' | 356,662,566 | 490,371,533 |
Document Fiscal Period Focus | 'Q1 | ' | ' |
Document Fiscal Year Focus | '2014 | ' | ' |
Balance_Sheets_Unaudited
Balance Sheets (Unaudited) (USD $) | Nov. 30, 2013 | Aug. 31, 2013 |
ASSETS | ' | ' |
Cash | $2,124 | $15,092 |
Prepaid expenses and other | 0 | 48,558 |
Total Current Assets | 2,124 | 63,650 |
Non-Current Assets | ' | ' |
Property, plant and equipment, net (Note 3) | 1,435,951 | 1,436,206 |
Mining rights and claims (Note 4) | 150,000 | 152,604 |
Restricted cash (Note 3) | 515,428 | 515,428 |
Deferred financing costs | 23,996 | 43,790 |
Other | 4,743 | 4,743 |
Total Non-Current Assets | 2,130,118 | 2,152,771 |
Total Assets | 2,132,242 | 2,216,421 |
LIABILITIES AND STOCKHOLDERS' DEFICIT | ' | ' |
Accounts payable | 601,540 | 379,474 |
Accrued liabilities | 844,998 | 655,075 |
Convertible notes, less unamortized discount of $262,868 and $386,601 (Note 7) | 392,525 | 284,856 |
Derivative liabilities (Note 8) | 1,188,336 | 1,424,115 |
Promissory note payable, including accrued interest (Note 6) | 122,930 | 119,248 |
Notes payable, including accrued interest - related parties (Note 5) | 361,831 | 357,258 |
Mortgage notes payable, including accrued interest (Note 3) | 191,317 | 200,578 |
Total Current Liabilities | 3,703,477 | 3,420,604 |
Non-Current Liabilities | ' | ' |
Asset retirement obligation | 515,500 | 515,500 |
Total Non-Current Liabilities | 515,500 | 515,500 |
Total Liabilities | 4,218,977 | 3,936,104 |
Stockholders' Deficit (Note 9) | ' | ' |
Additional paid in capital | 28,010,100 | 28,050,044 |
Donated capital | 29,250 | 29,250 |
Deficit accumulated during the exploration stage | -30,482,748 | -29,846,344 |
Total Stockholders' Deficit | -2,086,735 | -1,719,683 |
Total Liabilities and Stockholders' Deficit | 2,132,242 | 2,216,421 |
Class A Common Stock | ' | ' |
Stockholders' Deficit (Note 9) | ' | ' |
Class A common stock, 1,000,000,000 shares authorized, $0.001 par value; 356,662,566 and 47,366,656 issued and outstanding, respectively; Class B common stock, 500,000,000 shares authorized, $0.001 par value; 490,371,533 shares issued and outstanding, respectively | 356,663 | 47,367 |
Class B Common Stock | ' | ' |
Stockholders' Deficit (Note 9) | ' | ' |
Class A common stock, 1,000,000,000 shares authorized, $0.001 par value; 356,662,566 and 47,366,656 issued and outstanding, respectively; Class B common stock, 500,000,000 shares authorized, $0.001 par value; 490,371,533 shares issued and outstanding, respectively | $0 | $0 |
Balance_Sheets_Unaudited_Paren
Balance Sheets (Unaudited) (Parenthetical) (USD $) | Nov. 30, 2013 | Aug. 31, 2013 |
Convertible notes, unamortized discount | $262,868 | $386,601 |
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 | 356,662,566 | 47,366,656 |
Common stock, shares outstanding | 356,662,566 | 47,366,656 |
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 $) | 3 Months Ended | 118 Months Ended | ||
Nov. 30, 2013 | Nov. 30, 2012 | Nov. 30, 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 | 248,608 | 418,968 | 17,134,295 | |
Mineral property and exploration costs | 77,618 | 782,342 | 4,646,766 | |
Professional fees | 124,089 | 41,468 | 2,269,161 | |
Total operating expenses | -450,315 | -1,242,778 | -24,079,472 | |
Other income (expense) | ' | ' | ' | |
Other income | 1,350 | 2,950 | 196,120 | |
Interest income | 0 | 0 | 33,781 | |
Gain (loss) gain on derivative liabilities | 83,333 | 98,310 | 647,441 | |
Interest expense | -270,772 | -361,169 | -7,280,618 | |
Total other expense | -186,089 | -259,909 | -6,403,276 | |
Net Loss | ($636,404) | ($1,502,687) | ($30,482,748) | |
Net Loss Per Common Share - Basic and Diluted | ' | [1] | ($40.95) | ' |
Weighted Average Number of Common Shares Outstanding | 184,865,298 | 36,695 | ' | |
[1] | *Amount is less than $(0.01) per share. |
Statements_of_Cash_Flows_Unaud
Statements of Cash Flows (Unaudited) (USD $) | 3 Months Ended | 118 Months Ended | |
Nov. 30, 2013 | Nov. 30, 2012 | Nov. 30, 2013 | |
Cash Flows Used in Operating Activities: | ' | ' | ' |
Net loss | ($636,404) | ($1,502,687) | ($30,482,748) |
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 | 207,455 | 336,529 | 6,496,584 |
Depreciation and amortization | 255 | 1,153 | 151,925 |
Gain on derivative liabilities | -83,333 | -98,310 | -647,441 |
Impairment of mining rights | 2,604 | 21,910 | 470,000 |
Stock issued for services | 48,558 | 251,110 | 11,550,935 |
Stock issued for Champion and Silver Wing Mines | 0 | 0 | 185,000 |
Stock-based compensation - options | 0 | 0 | 899,303 |
Accrued interest | 62,062 | 23,411 | 628,000 |
Accretion expense on asset retirement obligation | 0 | 0 | 191,635 |
Gain on sale of property, plant and equipment | 0 | 0 | -92,792 |
Change in operating assets and liabilities: | ' | ' | ' |
Increase in restricted cash | 0 | 0 | -515,428 |
Increase in prepaid expenses and other | 0 | 0 | -91,062 |
Increase in accounts payable | 222,066 | 771,552 | 3,615,410 |
Increase in accrued liabilities | 166,769 | 149,250 | 2,923,796 |
Increase in other assets | 0 | 0 | -4,743 |
Net cash used in operating activities | -9,968 | -46,082 | -4,692,376 |
Cash Flows from Investing Activities: | ' | ' | ' |
Proceeds from sale of property, plant and equipment | 0 | 0 | 240,632 |
Acquisition of property, plant and equipment | 0 | -43,805 | -764,602 |
Net cash used in investing activities | 0 | -43,805 | -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 | 0 | 124,000 |
Repayment of notes payable | 0 | -3,166 | -702,819 |
(Cost) proceeds from issuance of convertible debt | -3,000 | 105,000 | 2,471,297 |
Loan acquisition costs | ' | -13,500 | -293,928 |
Proceeds from exercise of warrants | 0 | 0 | 570 |
Net proceeds from issuance of common stock | 0 | 0 | 3,058,494 |
Net cash (used in) provided by financing activities | -3,000 | 88,334 | 5,218,470 |
(Decrease) increase in cash | -12,968 | -1,553 | 2,124 |
Cash - Beginning of Period | 15,092 | 6,093 | 0 |
Cash - End of Period | 2,124 | 4,540 | 2,124 |
Supplemental Disclosures: | ' | ' | ' |
Interest paid | 909 | 999 | 103,094 |
Non-cash investing and financing activities: | ' | ' | ' |
Exchange of accounts payable and accrued liabilities for debt | 0 | 0 | 246,036 |
Issuance of common stock to satisfy accounts payable | 0 | 80,493 | 2,180,268 |
Issuance of common stock to satisfy accrued liabilities | 0 | 125,400 | 2,102,682 |
Issuance of common stock for prepaid expenses | 0 | 0 | 550,159 |
Issuance of common stock for mining rights | 0 | 62,500 | 620,000 |
Issuance of common stock for work commitment | 0 | 660,834 | 660,834 |
Exchange of convertible debt for common shares | 269,352 | 414,721 | 6,911,379 |
Exchange of mortgage payable for convertible debt | 15,000 | 0 | 360,984 |
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 | 0 | 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 |
Statements_of_Stockholders_Equ
Statements of Stockholders' Equity (Deficit) (Unaudited) (USD $) | Class A Common Stock | Class B Common Stock | Additional Paid-In Capital | 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 | ' | ' | ' | ' |
Shares issued for convertible debt, shares | 309,295,910 | ' | ' | ' | ' | ' |
Shares issued for convertible debt, amount | 309,296 | ' | -39,944 | ' | ' | 269,352 |
Net loss | ' | ' | ' | ' | -636,404 | -636,404 |
Ending balance, Amount at Nov. 30, 2013 | $356,663 | $0 | $28,010,100 | $29,250 | ($30,482,748) | ($2,086,735) |
Ending balance, Shares at Nov. 30, 2013 | 356,662,566 | 490,371,533 | ' | ' | ' | ' |
1_Organization_Nature_of_Busin
1. Organization, Nature of Business, Going Concern and Managements Plans | 3 Months Ended |
Nov. 30, 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, under the name of Garpa Resources, Inc. On June 18, 2007, the Company changed its name to Colorado Goldfields Inc. (the “Company”). The Company is an Exploration Stage Company, as defined by Statement of Financial Accounting Standard (“SFAS”) No. 7 “Accounting and Reporting for Development Stage Enterprises.” 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 $3,701,353 at November 30, 2013, has incurred net losses of $636,404 and $1,502,687 for the three months ended November 30, 2013 and 2012, respectively, and has an accumulated deficit during the exploration stage of $30,482,748 for the period from February 11, 2004 (inception) through November 30, 2013. Accordingly, it has not generated cash flows from operations and has primarily relied upon equity financing, advances from officers, 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 June 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 and through November 30, 2013, the Company entered into various convertible debt funding arrangements described below that provided a total of $954,304 in capital. | |
During the year ended August 31, 2013 and through November 30, 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 $412,000 ($15,000 during the three months ended November 30, 2013) (Note 7). | |
During the years ended August 31, 2013 and through November 30, 2013, the Company also entered into funding arrangements for a total of $220,820 (nil during the three months ended November 30, 2013), with a group of New York private investors in the form of convertible notes (Note 7). | |
During the year ended August 31, 2013 and through November 30, 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 (nil during the three months ended November 30, 2013) (Note 7). | |
During the year ended August 31, 2013 and through November 30, 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 (nil during the three months ended November 30, 2013) (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 | 3 Months Ended | ||||||||||||
Nov. 30, 2013 | |||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||
2. Summary of Significant Account Policies | ' | ||||||||||||
Basis of Presentation | |||||||||||||
The accompanying interim financial statements have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial statements reflect all adjustments (consisting of only normal recurring entries) that, in the opinion of management, are necessary to present fairly the financial position at November 30, 2013 and the results of operations and cash flows of the Company for the three months ended November 30, 2013 and 2012, respectively. Operating results for the three months ended November 30, 2013, are not necessarily indicative of the results that may be expected for the fiscal year ending August 31, 2014. | |||||||||||||
These unaudited financial statements should be read in conjunction with the Company’s audited financial statements and footnotes thereto included in its Annual Report on Form 10-K for the year ended August 31, 2013, which may be retrieved from the SEC. | |||||||||||||
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 three months ended November 30, 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. | |||||||||||||
November 30, | November 30, | ||||||||||||
2013 | 2012 | ||||||||||||
Class B Common Stock | 490,371,533 | 490,371,533 | |||||||||||
Convertible debt | 14,265,953,226 | 14,570 | |||||||||||
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 the 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. | |||||||||||||
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 $2,604 and $21,910 during the three months ended November 30, 2013 and 2012, respectively. | |||||||||||||
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 November 30, 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 | - | $ | 1,188,336 | - | |||||||||
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. | |||||||||||||
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. The Company recorded no accretion expense for either the three months ended November 30, 2013 or 2012, 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 November 30, 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 | 3 Months Ended | ||||||||
Nov. 30, 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 three months ended November 30, 2013, $15,000 of the mortgage was paid through the issuance of convertible notes (Note 7). | |||||||||
Interest expense in connection with the Mill mortgage for the three months ended November 30, 2013 and 2012 was $5,739 and $13,295, 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 November 30, 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 November 30, 2013 and August 31, 2013: | |||||||||
November 30, | August 31, | ||||||||
2013 | 2013 | ||||||||
Computer equipment | $ | 5,179 | $ | 5,179 | |||||
Mobile mining equipment | 5,000 | 5,000 | |||||||
Land and mill | 1,434,846 | 1,434,846 | |||||||
1,445,025 | 1,445,025 | ||||||||
Less accumulated depreciation | (9,074 | ) | (8,819 | ) | |||||
$ | 1,435,951 | $ | 1,436,206 | ||||||
Depreciation expense was $255 and $1,153 for the three months ended November 30, 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 | 3 Months Ended |
Nov. 30, 2013 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ' |
4. Mining Rights and Claims | ' |
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. |
5_Notes_payable_related_partie
5. Notes payable related parties | 3 Months Ended |
Nov. 30, 2013 | |
Related Party Transactions [Abstract] | ' |
5. Notes payable b related parties | ' |
As of November 30, 2013, the Company has notes payable to related parties, including accrued interest, of $96,993 and $264,838 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 are due six months from the dates of issue and 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. These notes are currently in default. During the three months ended November 30, 2013 and 2012 the Company recorded interest expense of $4,573 for both periods, respectively. |
6_Promissory_notes_payable
6. Promissory notes payable | 3 Months Ended |
Nov. 30, 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 $3,288 and $1,596 for the three months ended November 30, 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 remained 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 note is currently in default. The Company recorded interest expense of $394 and $389 for the three months ended November 30, 2013 and 2012, respectively. |
7_Convertible_notes
7. Convertible notes | 3 Months Ended |
Nov. 30, 2013 | |
Notes to Financial Statements | ' |
7. Convertible notes | ' |
Delaware Partnership Investor | |
At September 1, 2013, the Company owed the Delaware Partnership Investor $113,195 (net of unamortized discounts of $183,712), under multiple funding arrangements. During the three months ended November 30, 2013, the Company issued 1 convertible note under a funding arrangement with the Delaware Partnership Investor, totaling $15,000 which bears interest at 10% per annum and matures on September 30, 2014. Proceeds from the note were used to reduce the mill mortgage. The note is 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, or single, 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 a discount in the amount of $15,000 related to the conversion features on the note issued during the three months ended November 30, 2013 (Note 8). During the three months ended November 30, 2013, $29,976 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 three months ended November 30, 2013, the Company recorded $69,527 of debt discount amortization and the carrying value of the notes was $168,479 (net of unamortized discounts of $114,121) as of November 30, 2013. On June 18, 2013, the Company secured $278,802 of the amounts owed to the Delaware Partnership Investor, with the Mill, which was filed in San Juan County on September 12, 2013. | |
New York Private Investors | |
At September 1, 2013, the Company owed the New York Private Investors $92,517 (net of unamortized discount of $94,103), under multiple funding arrangements. The notes are under funding arrangements with the group of New York Private Investors, bearing interest at 8% per annum and with maturities between October 25, 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. During the three months ended November 30, 2013, $18,800 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 three months ended November 30, 2013, the Company recorded debt discount amortization of $48,643 and the carrying value of the notes as of November 30, 2013 was $122,359 (net of unamortized discounts of $45,461). | |
New York Alternative Investment Firm | |
At September 1, 2013, the Company owed the New York Alternative Investment Firm $63,117 (net of unamortized discount of $49,813), under multiple funding arrangements, 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, and 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. During the three months ended November 30, 2013, $24,585 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 three months ended November 30, 2013, the Company recorded debt discount amortization of $24,555 and the carrying value of the notes as of November 30, 2013 was $71,401 (net of unamortized discounts of $65,498). | |
San Diego Private Investor | |
At September 1, 2013, the Company owed the San Diego Private Investor $16,027 (net of unamortized discount of $58,973). 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 $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. During the three months ended November 30, 2013, $6,925 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 three months ended November 30, 2013, the Company recorded debt discount amortization of $18,009 and the carrying value of the notes as of November 30, 2013 was $30,286 (net of unamortized discounts of $37,789). |
8_Derivative_Liabilities
8. Derivative Liabilities | 3 Months Ended | ||||||||||||||||
Nov. 30, 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: | |||||||||||||||||
Three months ended | Year ended | ||||||||||||||||
November 30, | August 31, | ||||||||||||||||
2013 | 2013 | ||||||||||||||||
Expected term | 0 to 12 months | 0 to 12 months | |||||||||||||||
Volatility | 494%-631 | % | 232% - 922 | % | |||||||||||||
Risk-free interest rate | 0.02 - 0.16 | % | 0.02 - 0.19 | % | |||||||||||||
Dividend yield | 0 | % | 0 | % | |||||||||||||
The following table represents the Company’s derivative liability activity for the embedded conversion features for the three months ended November 30, 2013: | |||||||||||||||||
Balance at September 1, 2013 | $ | 1,424,115 | |||||||||||||||
Issuance of derivative liabilities | 34,500 | ||||||||||||||||
Derecognition of derivative liabilities related to conversion of convertible debt | (186,946 | ) | |||||||||||||||
Gain on derivative liabilities | (83,333 | ) | |||||||||||||||
Balance at November 30, 2013 | $ | 1,188,336 |
9_Stockholders_Deficit
9. Stockholders Deficit | 3 Months Ended |
Nov. 30, 2013 | |
Equity [Abstract] | ' |
9. Stockholders' Deficit | ' |
Class A Common Stock | |
During the three months ended November 30, 2013, the Company converted debt and derecognized derivative liabilities totaling $269,352 into 309,295,910 shares of restricted Class A Common Stock. | |
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 November 30, 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 November 30, 2013. |
10_Litigation
10. Litigation | 3 Months Ended |
Nov. 30, 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, 2013 and November 30, 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 on November 19, 2013. The Company has filed its answer and initial disclosures regarding the underlying complaint regarding judicial foreclosure, declaratory judgment, breach of fiduciary duties, and awaits the court’s scheduling of a case management conference. | |
On December 20, 2013, Hennis filed a Motion with the Court seeking Judgment on the Pleadings, Alternatively for Summary Judgment, as to Plaintiffs’ First Claim for Relief, that claim being a judicial foreclosure of Defendant’s assets. | |
On January 6, 2014, Hennis filed a Notice of Appeal with the Colorado Court of Appeals appealing the Court’s November 19, 2013, denial of Hennis’ Renewed Motion for Appointment of Receiver. | |
Recreation Properties, Thomas A. Warlick | |
On December 5, 2013, Recreation Properties, Thomas A. Warlick, President, served upon the Company, C. Stephen Guyer (“Guyer”), and Lee R. Rice (“Rice”) a Complaint alleging; 1) Default Upon a Promissory Note Payable, 2) Breach of Contract, Breach of Fiduciary Duty (Guyer and Rice), and 3) 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 filed its answer on December 26, 2013. On the same date, the Company filed a Motion to Consolidate this case with the Hennis action described above. On January 24, 2014, the court granted the Company's Motion to Consolidate. |
2_Summary_of_Significant_Accou1
2. Summary of Significant Account Policies (Policies) | 3 Months Ended | ||||||||||||
Nov. 30, 2013 | |||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||
Basis of Presentation | ' | ||||||||||||
Basis of Presentation | |||||||||||||
The accompanying interim financial statements have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial statements reflect all adjustments (consisting of only normal recurring entries) that, in the opinion of management, are necessary to present fairly the financial position at November 30, 2013 and the results of operations and cash flows of the Company for the three months ended November 30, 2013 and 2012, respectively. Operating results for the three months ended November 30, 2013, are not necessarily indicative of the results that may be expected for the fiscal year ending August 31, 2014. | |||||||||||||
These unaudited financial statements should be read in conjunction with the Company’s audited financial statements and footnotes thereto included in its Annual Report on Form 10-K for the year ended August 31, 2013, which may be retrieved from the SEC. | |||||||||||||
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 three months ended November 30, 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. | |||||||||||||
November 30, | November 30, | ||||||||||||
2013 | 2012 | ||||||||||||
Class B Common Stock | 490,371,533 | 490,371,533 | |||||||||||
Convertible debt | 14,265,953,226 | 14,570 | |||||||||||
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 the 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. | |||||||||||||
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 $2,604 and $21,910 during the three months ended November 30, 2013 and 2012, respectively. | |||||||||||||
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 November 30, 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 | - | $ | 1,188,336 | - | |||||||||
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. | |||||||||||||
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. The Company recorded no accretion expense for either the three months ended November 30, 2013 or 2012, 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 November 30, 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) | 3 Months Ended | ||||||||||||
Nov. 30, 2013 | |||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||
Potential dilutive securities excluded from diluted loss per share | ' | ||||||||||||
November 30, | November 30, | ||||||||||||
2013 | 2012 | ||||||||||||
Class B Common Stock | 490,371,533 | 490,371,533 | |||||||||||
Convertible debt | 14,265,953,226 | 14,570 | |||||||||||
Financial assets and liabilities that are measured at fair value | ' | ||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||
Restricted cash | - | $ | 515,428 | - | |||||||||
Derivative liabilities | - | $ | 1,188,336 | - |
3_Property_Plant_and_Equipment1
3. Property, Plant and Equipment (Tables) | 3 Months Ended | ||||||||
Nov. 30, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property, plant and equipment | ' | ||||||||
November 30, | August 31, | ||||||||
2013 | 2013 | ||||||||
Computer equipment | $ | 5,179 | $ | 5,179 | |||||
Mobile mining equipment | 5,000 | 5,000 | |||||||
Land and mill | 1,434,846 | 1,434,846 | |||||||
1,445,025 | 1,445,025 | ||||||||
Less accumulated depreciation | (9,074 | ) | (8,819 | ) | |||||
$ | 1,435,951 | $ | 1,436,206 |
8_Derivative_Liabilities_Table
8. Derivative Liabilities (Tables) | 3 Months Ended | ||||||||||||||||
Nov. 30, 2013 | |||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||
Key assumptions used to apply valuation pricing model to calculate the fair value | ' | ||||||||||||||||
Three months ended | Year ended | ||||||||||||||||
November 30, | August 31, | ||||||||||||||||
2013 | 2013 | ||||||||||||||||
Expected term | 0 to 12 months | 0 to 12 months | |||||||||||||||
Volatility | 494%-631 | % | 232% - 922 | % | |||||||||||||
Risk-free interest rate | 0.02 - 0.16 | % | 0.02 - 0.19 | % | |||||||||||||
Dividend yield | 0 | % | 0 | % | |||||||||||||
Derivative liability activity | ' | ||||||||||||||||
Balance at September 1, 2013 | $ | 1,424,115 | |||||||||||||||
Issuance of derivative liabilities | 34,500 | ||||||||||||||||
Derecognition of derivative liabilities related to conversion of convertible debt | (186,946 | ) | |||||||||||||||
Gain on derivative liabilities | (83,333 | ) | |||||||||||||||
Balance at November 30, 2013 | $ | 1,188,336 |
1_Organization_Nature_of_Busin1
1. Organization, Nature of Business, Going Concern and Managements Plans (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | 15 Months Ended |
Nov. 30, 2013 | Aug. 31, 2013 | Nov. 30, 2013 | |
Organization Nature Of Business Going Concern And Managements Plans Details Narrative | ' | ' | ' |
Working capital deficit | ($3,701,353) | ' | ($3,701,353) |
Deficit accumulated during the exploration stage | -30,482,748 | -29,846,344 | -30,482,748 |
Funding provided by convertible debt funding arrangements | ' | ' | 954,304 |
Convertible debt financing provided by Delaware Partnership Investor | 15,000 | 412,000 | ' |
Convertible debt financing provided by New York private investors | 0 | 220,820 | ' |
Convertible debt financing provided by a New York Alternative Investment Firm | 0 | 246,484 | ' |
Convertible debt financing provided by a San Diego private investor | $0 | $75,000 | ' |
2_Summary_of_Significant_Accou3
2. Summary of Significant Account Policies (Details) | 3 Months Ended | |
Nov. 30, 2013 | Nov. 30, 2012 | |
Class B Common Stock | ' | ' |
Potential dilutive securities excluded from the calculation of diluted loss per share | 490,371,533 | 490,371,533 |
Convertible debt | ' | ' |
Potential dilutive securities excluded from the calculation of diluted loss per share | 14,265,953,226 | 14,570 |
2_Summary_of_Significant_Accou4
2. Summary of Significant Account Policies (Details 1) (USD $) | Nov. 30, 2013 |
Level 1 | ' |
Restricted cash | $0 |
Derivative liabilities | 0 |
Level 2 | ' |
Restricted cash | 515,428 |
Derivative liabilities | 1,188,336 |
Level 3 | ' |
Restricted cash | 0 |
Derivative liabilities | $0 |
2_Summary_of_Significant_Accou5
2. Summary of Significant Account Policies (Details Narrative) (USD $) | 3 Months Ended | ||
Nov. 30, 2013 | Nov. 30, 2012 | Aug. 31, 2013 | |
Impairment charges | $2,604 | $21,910 | ' |
Restricted cash | 515,428 | ' | 515,428 |
Held by State of Colorado for asset retirement obligation | ' | ' | ' |
Restricted cash | $515,130 | ' | ' |
3_Property_Plant_and_Equipment2
3. Property, Plant and Equipment (Details) (USD $) | Nov. 30, 2013 | Aug. 31, 2013 |
Property Plant And Equipment Details | ' | ' |
Computer equipment | $5,179 | $5,179 |
Mobile mining equipment | 5,000 | 5,000 |
Land and mill | 1,434,846 | 1,434,846 |
Gross | 1,445,025 | 1,445,025 |
Less accumulated depreciation | -9,074 | -8,819 |
Net | $1,435,951 | $1,436,206 |
3_Property_Plant_and_Equipment3
3. Property, Plant and Equipment (Details Narrative) (USD $) | 3 Months Ended | |
Nov. 30, 2013 | Nov. 30, 2012 | |
Depreciation expense | $255 | $1,153 |
Minimum | ' | ' |
Estimated useful lives | '3 years | ' |
Maximum | ' | ' |
Estimated useful lives | '5 years | ' |
5_Notes_payable_related_partie1
5. Notes payable related parties (Details Narrative) (USD $) | 3 Months Ended | ||
Nov. 30, 2013 | Nov. 30, 2012 | Aug. 31, 2013 | |
Notes payable to related parties | $361,831 | ' | $357,258 |
Interest expense related party payables | 4,573 | 4,573 | ' |
CEO | ' | ' | ' |
Notes payable to related parties | 96,993 | ' | ' |
CFO | ' | ' | ' |
Notes payable to related parties | $264,838 | ' | ' |
6_Promissory_notes_payable_Det
6. Promissory notes payable (Details Narrative) (USD $) | 3 Months Ended | |
Nov. 30, 2013 | Nov. 30, 2012 | |
September 12, 2011 Note | ' | ' |
Interest Expense | $3,288 | $1,596 |
December 22, 2011 Note | ' | ' |
Interest Expense | $394 | $389 |
7_Convertible_notes_Details_Na
7. Convertible notes (Details Narrative) (USD $) | Nov. 30, 2013 | Aug. 31, 2013 | Nov. 30, 2013 | Nov. 30, 2013 | Nov. 30, 2013 | Nov. 30, 2013 |
Delaware Partnership Investor | New York Private Investors | San Diego Private Investor | New York Alternative Investment Firm | |||
Discount recorded for convertible notes | ' | ' | $15,000 | ' | ' | ' |
Convertible notes were converted into common stock | ' | ' | 29,976 | 18,800 | 6,925 | 24,585 |
Discount amortization | ' | ' | 69,527 | 48,643 | 18,009 | 24,555 |
Note carrying value | ' | ' | 168,479 | 122,359 | 30,286 | 71,401 |
Unamortized discount | $262,868 | $386,601 | $114,121 | $45,461 | $37,789 | $65,498 |
8_Derivative_Liabilities_Detai
8. Derivative Liabilities (Details) (USD $) | 3 Months Ended | 12 Months Ended |
Nov. 30, 2013 | Aug. 31, 2012 | |
Minimum | ' | ' |
Expected term | '0 months | '0 months |
Volatility, Min | 494.00% | 232.00% |
Risk-free interest rate | 0.02% | 0.02% |
Dividend yield | $0 | $0 |
Maximum | ' | ' |
Expected term | '12 months | '12 months |
Volatility, Min | 631.00% | 922.00% |
Risk-free interest rate | 0.16% | 0.19% |
Dividend yield | $0 | $0 |
8_Derivative_Liabilities_Detai1
8. Derivative Liabilities (Details 1) (USD $) | 3 Months Ended |
Nov. 30, 2013 | |
Derivative Liabilities Details 1 | ' |
Beginning Balance | $1,424,115 |
Issuance of derivative liabilities | 34,500 |
Derecognition of derivative liabilities related to conversion of convertible debt | -186,946 |
Gain on derivative liabilities | -83,333 |
Ending Balance | $1,188,336 |
9_Stockholders_Deficit_Details
9. Stockholdersb Deficit (Details Narrative) (USD $) | 3 Months Ended |
Nov. 30, 2013 | |
Stockholders Deficit Details Narrative | ' |
Debt and derivative liabilities converted into shares of restricted Class A Common Stock | $269,352 |
Shares of restricted Class A Common Stock issued for conversion of debt and derivative liabilities | 309,295,910 |