UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
x Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal period ended: September 30, 2008
o Transition Report under Section 13 or 15(d) of the Exchange Act of 1934
For the transition period from _____________ to ______________
Commission File Number: 0 - 52280
SCOUT EXPLORATION, INC.
(Exact name of registrant as specified in its charter)
| Nevada | | 98-0504670 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Number) |
| 609-475 Howe Street, Vancouver, BC V6C 2B3 |
| (Address of principal executive offices) |
| (949) 265-7717 |
| (Issuer’s telephone number) |
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, par value $.001 per share
Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No x
Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes o No x
Indicate by checkmark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes o No x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No x
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| | Large accelerated filer | o | Accelerated filer | o |
| | Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.
Yes o No x
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed fiscal quarter: $783,700 based on the last sale price of our common stock of $0.10 on December 31, 2008.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes o No o N/A
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 13,947,000 shares of Common Stock, par value $.001, as of August 1, 2012.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). Not Applicable
Explanatory Note: The purpose of this Amendment to the report on Form 10-K for the year ended September 30, 2008, is to disclose the company’s financial statements which have been restated to reflect the Company’s investment in Kerrisdale Resources Limited (“KRL”), which was originally accounted for as a controlled subsidiary, but on review of the terms of the purchase agreement, we have determined that KRL was not controlled and is accounted for herein using the equity method.
PART I
Item 1. Business
General
We were incorporated in the State of Nevada on February 1, 1999 as “Virtual Curricula Corp.” On April 10, 2006, we changed our name to “Scout Exploration, Inc.” We were originally engaged in the business of developing interactive educational products for children, adults, business people and new language learners. On March 4, 2006, we abandoned that business to pursue the business of mineral exploration.
On March 4, 2006, we entered into a mineral property purchase agreement with Iscis Holdings Ltd., whereby they sold to us 100% right, title and interest in the mineral title “AAV 1-9 Claims” (also known as the “Wheaton River Property”) in the Whitehorse Mining District of the Yukon Territory. For the foreseeable future, we plan to defer any further exploration work programs on Wheaton River Property.
Our principal executive office is located at 609-475 Howe Street, Vancouver, BC V6C 2B3. Our phone number is (949) 265-7717. Our Internet address is http://www.scoutexploration.com. Information on our website is not, however, part of this report.
Purchase of Kerrisdale Resources Ltd.
On June 18, 2008, and subsequently amended, the Company entered into a Share Purchase Agreement with Brian Mahood, (the “Vendor”), whereby the Vendor agreed to sell 100% of the issued and outstanding Class A Voting Shares of Kerrisdale Resources Ltd. (“KRL”), an Alberta corporation, to the Company (the “Agreement”) with an effective date of January 1, 2008.
The purchase price for the shares was $760,849 ($775,000 CDN) (the “Purchase Price”) comprised of $24,543 ($25,000 CDN) paid in cash to the Vendor at the time of signing the January 28, 2008 Letter of Intent, $392,696 ($400,000 CDN) paid to the Vendor on Closing Date of June 18, 2008, and the issuance by KRL of a $343,610 ($350,000 CDN) debenture (the “Debenture”) to the Vendor with a maturity date of December 31, 2010, bearing interest at 6.75%. The Debenture was secured by a first charge on all of KRL’s assets. The agreement was subsequently amended such that the Debenture was increased to $360,000 CDN, of which $28,109 ($35,000 CDN) has been paid subsequent to June 30, 2008.
Subsequent to June 30, 2008, the Vendor notified the Company that in the Vendor’s opinion, the Company was in default of the Agreement, and demanded payment of $325,000.00 CDN plus interest and legal fees and expenses. Due to declines in the market price of petroleum and natural gas that have occurred since the acquisition of KRL, the cash flow from operations of KRL has not been sufficient to meet the payments required under the Agreement.
As a result of these factors, pursuant to a Settlement, Share Sale and Release Agreement, the Company agreed to sell 100% of its interest in KRL back to the Vendor for consideration of $1 and release both parties from all obligations under the original and amended share purchase agreements, with an effective date of April 1, 2009 and a closing date of June 30, 2009.
Employees
We have no employees, other than our executive officers, as of the time of this report. We intend to retain geologists and consultants on a contract basis to conduct the work programs on our properties to carry out our plan of operations.
Competition
We are a junior mineral resource exploration company. We compete with other mineral resource exploration companies for financing and for the acquisition of new mineral properties. Many of the mineral resource exploration companies with whom we compete have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford more geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and development. This competition could adversely impact on our ability to achieve the financing necessary for us to conduct further exploration of our mineral properties.
We also compete with other junior mineral resource exploration companies for financing from a limited number of investors that are prepared to make investments in junior mineral resource exploration companies. The presence of competing junior mineral resource exploration companies may impact on our ability to raise additional capital in order to fund our exploration programs if investors are of the view that investments in competitors are more attractive based on the merit of the mineral properties under investigation and the price of the investment offered to investors. We also compete with other junior and senior mineral resource exploration companies for available resources, including, but not limited to, professional geologists, camp staff, helicopter or float planes, mineral exploration supplies and drill rigs.
Governmental Regulations
Mineral resource exploration operations are subject to various federal, provincial and local governmental regulations. Matters subject to regulation include discharge permits for drilling operations, drilling and abandonment bonds and taxation. The requirements imposed by such laws and regulations are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations.
Patents and Trademarks
We do not own, either legally or beneficially, any patents or trademarks.
Item 2. Properties
Our executive offices are located at 609-475 Howe Street, Vancouver, BC V6C 2B3. We also have 9 mineral claims in the Yukon Territory described above under Description of Business.
Item 3. Legal Proceedings
We are not, and have not been during the period covered by this report, a party to any legal proceedings.
Item 4. (Removed and Reserved)
PART II
Item 5. Market for Common Equity and related Stockholder Matters
Market Information
We are a reporting company with the SEC. We participate in the Over-the-Counter Bulletin Board Quotation Service maintained by the Financial Industry Regulatory Authority (“FINRA”) (“OTCBB”). The OTCBB is an electronic quotation medium for securities traded outside of the Nasdaq Stock Market, and prices for our common stock are published on the OTC Bulletin Board under the trading symbol “SCXN.OB.” The OTCBB market is extremely limited and the prices quoted are not a reliable indication of the value of our common stock.
The first trade of our common stock on the Bulletin Board occurred on December 6, 2006. The following table sets forth the quarterly high and low closing sale prices for our common stock for the periods indicated below, based upon quotations between dealers, without adjustments for stock splits, dividends, retail mark-ups, mark-downs or commissions and, therefore, may not represent actual transactions:
| Date | | High | | | Low | |
| | | | | | | |
| December 6, 2006 to December 31, 2006 | | $ | 0.25 | | | $ | 0.02 | |
| January 1, 2007 to March 31, 2007 | | $ | 0.91 | | | $ | 0.11 | |
| April 1, 2007 to June 30, 2007 | | $ | 0.72 | | | $ | 0.35 | |
| July 1, 2007 to September 30, 2007 | | $ | 0.58 | | | $ | 0.23 | |
| October 1, 2007 to December 31, 2007 | | $ | 0.51 | | | $ | 0.31 | |
| January 1, 2008 to March 31, 2008 | | $ | 0.60 | | | $ | 0.32 | |
| April 1, 2008 to June 30, 2008 | | $ | 0.59 | | | $ | 0.40 | |
| July 1, 2008 to September 30, 2008 | | $ | 0.58 | | | $ | 0.20 | |
| October 1, 2008 to December 31, 2008 | | $ | 0.20 | | | $ | 0.10 | |
Holders of Our Common Stock
As of the date of this report, we have approximately 66 registered shareholders.
Dividends
There are no restrictions in our Articles of Incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends when, after giving effect to the distribution of the dividend:
| | ● | We would not be able to pay our debts as they become due in the usual course of business; or |
| | ● | Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution. |
As of the date of this report, we have not declared any dividends, and we do not plan to declare any dividends in the foreseeable future.
Securities Authorized for Issuance under Equity Compensation Plans
Our 2007 Stock Option and Incentive Plan was approved by the unanimous written consent of our Board of Directors and by the written consent of a majority of our shareholders on July 23, 2007. One million (1,000,000) shares of our common stock are reserved for issuance pursuant to that plan. No options have been issued under the plan as of the date of this report.
Recent Sales of Unregistered Securities
On April 1, 2008, our Board of Directors approved a private placement of up to 2,000,000 units, with each unit consisting of one share of our common stock at a purchase price of $0.40 per share and one warrant entitling the holder thereof the right to purchase one additional share of our common stock at a purchase price of $0.75 per share, at any time up to one year from the closing date of the private placement. During May 2008, we completed the sale of 1,349,500 units and raised net proceeds of $538,451.
We used most of the proceeds from the private placement offering to fund the acquisition of Kerrisdale with $392,696 ($400,000 CDN) in cash, with an additional $343,610 ($350,000 CDN) evidenced by and secured by the Security Agreement. Pursuant to the provisions of the Security Agreement, the secured amount was due and payable in installments during the period January 2, 2009, through January 3, 2011. The amount secured by the Security Agreement accrued interest at 6.75% per annum, and interest was payable quarterly commencing June 30, 2008. The balance of the proceeds from the private placement was used to fund ongoing general and administrative expenses and to supplement working capital.
Item 6. Selected Financial Data
Not Applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward Looking Statements
This report contains forward-looking statements that involve risks and uncertainties, including statements regarding our capital needs, business plans and expectations. Such forward-looking statements involve risks and uncertainties regarding the market price of precious and base metals, oil and gas, availability of funds, government regulations, operating costs, exploration costs, outcomes of exploration programs and other factors. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”,
“anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. Our actual results may differ materially. In evaluating these statements, you should consider various factors. These factors may cause actual results to differ materially from any forward-looking statement. While these forward-looking statements are made in good faith and reflect our current judgment regarding our business plans, actual results from our operations will almost always vary, sometimes materially, from any future performance suggested herein.
General
The following discussion and analysis should be read in conjunction with our financial statements (and notes related thereto) appearing elsewhere in this report.
Plan of Operations
During the fiscal year ended September 30, 2012 our plan of operations is to review our existing mineral property, evaluate potential acquisitions of additional mineral properties, and secure financing for the Company to carry out its operations.
As of September 30, 2008, we had cash on hand of $31,560 and negative working capital of $101,652.
On April 1, 2008, our Board of Directors approved a private placement of up to 2,000,000 Units, with each Unit consisting of one share of our common stock at a purchase price of $0.40 per share and one warrant entitling the holder thereof the right to purchase one additional share of our common stock at a purchase price of $0.75 per share, at any time up to one year from the closing date of the private placement.. During May 2008, we completed the sale of 1,397,000 Units and raised aggregate proceeds of $558,800, of which $23,000 was receivable from subscribers as of September 30, 2008. In addition, we received $4,000 in subscriptions received in advance for 10,000 units which have not been issued as of September 30, 2008.
We used most of the proceeds from the private placement offering to fund the acquisition of Kerrisdale Resources Ltd. with $ 392,696 ($400,000 CDN ) in cash, with an additional $343,610 ($350,000 CDN) evidenced by and secured by a General Security Agreement by and among Kerrisdale Resources Ltd. (“KRL”) and the vendor of KRL, Mr. Brian Mahood. The balance of the proceeds from the private placement was used to fund ongoing general and administrative expenses and to supplement working capital.
We will need to obtain additional financing in order to continue our plan of operations.
We believe that debt financing will not be a feasible alternative, as we do not have sufficient unencumbered tangible assets to secure any debt financing. We anticipate that additional financing will be equity financing from the sale of our common stock. However, we do not have any financing arranged and nor can we provide investors with any assurance that we will be able to raise sufficient funding from such potential equity financings. In the absence of such financing, we will not be able to continue exploration or development of our mineral claims and our business plan will then fail. Even if we are successful in obtaining equity financing to fund exploration of our mineral claims and acquisition of additional mineral properties as well as other operational costs, there is no assurance of success from such exploration activities. In the event we do not continue to obtain additional financing, we will be forced to abandon our mineral claims.
Going Concern
We have not attained profitable operations and are dependant upon obtaining financing to pursue any extensive exploration activities or acquisitions. For these reasons, our auditors stated in their report that they are concerned that we will not be able to continue as a going concern.
Future Financing
We anticipate continuing to rely on sales of our common stock to finance our business operations. Issuances of additional shares of our common stock will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned exploration activities.
Results of Operations
General and administrative expenses have increased from $131,869 for the year ended September 30, 2007 to $395,618 for the year ended September 30, 2008, mainly due to consulting fees, audit and accounting fees, and travel expenses incurred in connection with our acquisition of KRL.
Our loss for the year ended September 30, 2008 was $792,378 as compared to $131,869 for the year ended September 30, 2007. The increase was due to increased general and administrative expenses as discussed above, and a loss on impairment of investment in the amount of $396,760 arising from our acquisition of KRL.
Off-Balance Sheet Arrangements. We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Item 8. Financial Statements
See Index to Financial Statements immediately following the signature page of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There have been no disagreements with our accountants since our formation required to be disclosed pursuant to Item 304(b) of Regulation S-B.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As required by Rule 13a-15 of the Exchange Act, our principal executive officer and principal financial officer evaluated our company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, these officers concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and include controls and procedures designed to ensure that such information is accumulated and communicated to our company's management, including our company's principal executive officer
and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.
��
We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending September 30, 2011: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Changes in Internal Control over Financial Reporting
During the year ended September 30, 2008, there were no changes in our internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The following table sets forth certain information regarding our executive officers and directors as of the date of this report:
| NAME OF DIRECTOR | AGE | TERM SERVED | POSITIONS WITH COMPANY |
| John Roozendaal | 45 | Since December 13, 2007 | President and Director |
| Jason Walsh | 39 | Since March 3, 2006 | Secretary, Treasurer and Director |
| Shane Ivancoe | 56 | Since March 3, 2006 | Director |
On December 13, 2007, our Board of Directors increased the number of its members to three. On that same date, Kathleen Scalzo resigned as our President and Treasurer and as a director. Our remaining director, Shane Ivancoe, appointed Jason Walsh and John Roozendaal as directors to fill the vacancies on the Board of Directors and, also, appointed John Roozendaal as our President and Jason Walsh as our Treasurer.
All our directors hold office until the next annual meeting of our stockholders or until their successors are elected and qualified. Executive officers hold offices until their successors are elected and qualified, subject to earlier removal by the Board of Directors.
Set forth below is a biographical description of each director and executive officer based upon information supplied by him:
Biographical Information
John Roozendaal has served as our President and as one of our directors since December 13, 2007. Mr. Roozendaal has been involved with the mineral exploration industry for over 15 years, focusing on precious, base and specialty metal exploration projects in North America. Mr. Roozendaal is the President and a director of VMS Ventures Inc. and Harvest Gold Corp., and a director of Thelon Ventures Ltd., which are all publicly traded companies on the TSX Venture exchange. Mr. Roozendaal helped found VMS Ventures in 1996, and Harvest Gold was spun off from VMS Ventures in 2005. He became a director of Thelon Ventures Ltd. in October 2005. Mr. Roozendaal holds a Bachelor of Science degree in Geology received from Brandon University in 1996.
Jason Walsh has served as our Secretary since March 3, 2006. He has served as our Treasurer and as one of our directors since December 13, 2007. Since April 15, 2003, he has also served as the President and a director of Thelon Ventures Ltd. (TSX Venture: THV). He has also served as an officer of International Ranger Corp. (Pink Sheets: IRNG) since February 19, 2006. From October 1997 to April 2003, he served as a registered representative with Global Securities in Vancouver, British Columbia.
Shane Ivancoe has served as one of our directors since March 3, 2006. For over the past five years, he has also served as a self-employed corporate consultant. From 1976 to 1995, he served as the president of Galway Holdings, a food importer and exporter based in Vancouver, British Columbia.
Significant Employees
We have no significant employees, other than the officers and directors described above.
Committees of the Board of Directors We presently do not have an audit committee, compensation committee, nominating committee, an executive committee of our Board of Directors, stock plan committee or any other committees.
Audit Committee Financial Expert We have no financial expert on our Board of Directors. We believe the cost related to retaining a financial expert at this time is prohibitive.
Section 16(a) Compliance. Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and holders of more than 10% of our common stock to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock. It appears that Kathleen Scalzo, Shane Ivancoe, Jason Walsh, Kassel Enterprises Inc. and Iscis Holdings Ltd. filed Form 3s during the year ended September 30, 2007, that were properly filed during the year ended September 30, 2006. It also appears that Shane Ivancoe, one of our directors, filed one Form 4 regarding one transaction on February 13, 2007, which was not timely filed.
The Company has not yet adopted a written Code of Ethics, but management intends to do so in the next year.
Item 11. Executive Compensation
We paid Jason Walsh, our Secretary and Treasurer and one of our directors, $12,000 in the year ended September 30, 2008, as a director’s fee. We also paid a company controlled by Jason Walsh office and administration fees of $58,894 in the in the year ended September 30, 2008. We paid Shane Ivancoe, one of our directors, $12,000 in the year ended September 30, 2008 as a director’s fee.
Stock Option Grants
We have not granted any stock options to our executive officers since our inception.
Consulting Agreements
We are a party to an agreement for services with Bua Group Holdings Ltd. dated October 1, 2006. Pursuant to this agreement, we are obligated to pay Bua Group Holdings Cdn$1,000 per month for services and Cdn$1,400 per month for expenses. The principals of Bua Group Holdings are Jason Walsh, our Secretary and Treasurer and one of our directors, and Ralf Hillebrand.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding stock as of December 31, 2008, and by the officers and directors, individually or as a group. Except as otherwise indicated, all shares are owned directly.
| Title of Class | | Name and Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership | | | Percent of Class | |
| | | | | | | | | |
| $0.001 Par Value Common Stock | | Shane Ivancoe Director c/o Scout Exploration, Inc. 15707 Rockfield Boulevard, Suite 101 Irvine, California 92618 | | | 900,000 | | | | 10.1 | % |
| $0.001 Par Value Common Stock | | Jason Walsh Secretary, Treasurer and Director c/o Scout Exploration, Inc. 15707 Rockfield Boulevard, Suite 101 Irvine, California 92618 | | | 235,000 | | | | 2.6 | % |
| $0.001 Par Value Common Stock | | John Roozendaal President and Director c/o Scout Exploration, Inc. 15707 Rockfield Boulevard, Suite 101 Irvine, California 92618 | | | 320,000 | (1) | | | 3.6 | % |
| $0.001 Par Value Common Stock | | All officers and directors as a group | | | 1,455,000 | | | | 16.3 | % |
| $0.001 Par Value Common Stock | | Iscis Holdings Ltd. 102-9323 Gallant Ave. North Vancouver, British Columbia Canada V7G 2C1 (2) | | | 500,000 | | | | 5.6 | % |
| | | | | | | | | | | |
| 1. These shares are held by 667981 BC Ltd., a company controlled by Mr. Roozendaal. |
| 2. Iscis Holdings Ltd. is owned by Ivan Walsh, the brother of Jason Walsh, our Secretary and Treasurer and one of our directors. |
The percentage of class is based upon 8,947,000 shares of our common stock and no shares of our preferred stock issued and outstanding as of the date of this report.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. In accordance with Securities and Exchange Commission rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the table are deemed beneficially owned by the optionees. Subject to community property laws, where applicable, the persons or entities named in the table above have sole voting and investment power with respect to all shares of our common stock indicated as beneficially owned by them.
Item 13. Certain Relationships and Related Transactions
Except as described below, none of the following parties has, in the last two years, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:
| | ● | Any of our directors or officers; |
| | ● | Any person proposed as a nominee for election as a director; |
| | ● | Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock; or |
| | ● | Any member of the immediate family of any of the above person. |
Office Space Arrangement
We paid Jason Walsh, our Secretary and Treasurer and one of our directors, office and administration fees of $58,894 in the in the year ended September 30, 2008.
Agreement with Iscis Holdings Ltd.
On March 4, 2006, we entered into a mineral property purchase agreement with Iscis Holdings Ltd., whereby it sold to us 100% right, title and interest in the mineral title “AAV 1-9 Claims” in the Whitehorse Mining District of the Yukon Territory. Iscis Holdings Ltd. is owned by Ivan Walsh, who is one of our shareholders and the brother of Jason Walsh, our Secretary and Treasurer and one of our directors. Iscis Holdings Ltd. also beneficially owns over 10% of our common stock.
As a part of our purchase agreement with Iscis Holdings Ltd., we entered into a net smelter return royalty agreement. The terms of this agreement specify that Iscis Holdings Ltd. is entitled to a royalty payment equal to 3% of the net smelter returns.
Agreement with Bua Group Holdings Ltd.
We are a party to an agreement for services with Bua Group Holdings Ltd. dated October 1, 2006. Pursuant to this agreement, we are obligated to pay Bua Group Holdings Cdn$1,000 per month for services and Cdn$1,400 per month for expenses. The principals of Bua Group Holdings are Jason Walsh, our Secretary and Treasurer and one of our directors, and Ralf Hillebrand.
Private Placement Transaction
We completed an offering for 1,700,000 units in March 2006, to 8 shareholders. Each “unit” consisted of one share of our common stock and one warrant to purchase an additional share of our common stock for $0.15 prior to March 31, 2007. The units were issued at a price of $0.05per unit and the total amount received was $85,000.
Shane Ivancoe, one of our directors, purchased 400,000 units in this offering. During the year ended September 30, 2007, Mr. Ivancoe also exercised his warrants and purchased 400,000 shares of our common stock for $60,000.
Director Independence
We participate in the Over-the-Counter Bulletin Board Quotation Service maintained by FINRA. As such, we are not currently subject to corporate governance standards of listed companies, which require, among other things, that the majority of our Board of Directors be independent.
Since we are not currently subject to corporate governance standards relating to the independence of our directors, we choose to define an “independent” director in accord with the NASDAQ Global Market’s requirements for independent directors (NASDAQ Marketplace Rule 4200). The NASDAQ independence definition includes a series of objective tests, such as that the director is not our and has not engaged in various types of business dealings with us.
Shane Ivancoe is considered an independent director under the above definition. We do not list that definition on our Internet website.
We presently do not have an audit committee, compensation committee, nominating committee, an executive committee of our Board of Directors, stock plan committee or any other committees.
Item 14. Principal Accountant Fees and Services
The following is a summary of the aggregate fees billed to us by our principal accountant, MacKay LLP, for professional services rendered for the fiscal years ended September 30, 2008 and 2007.
1. Audit Fees. Consists of fees billed for professional services rendered for the audits of our financial statements for the fiscal years ended September 30, 2008 and 2007, and for review of the financial statements included in our Quarterly Reports on Form 10-QSB for those fiscal years. Fees billed in 2007 were $5,521. Fees billed in 2008 are $24,039.
2. Audit-Related Fees. Consists of fees billed for services rendered to us for audit-related services, which generally include fees for audit and review services in connection with a proposed spin-off transaction, separate audits of employee benefit and pension plans, and ad hoc fees for consultation on financial accounting and reporting standards. Fees billed: None.
3. Tax Fees. Consists of fees billed for services rendered to us for tax services, which generally include fees for corporate tax planning, consultation and compliance. Fees billed in 2007 were $5,005. Fees billed in 2008 are $1,487.
4. All Other Fees. Consists of fees billed for all other services rendered to us, which generally include fees for consultation regarding computer system controls and human capital consultations. Fees Billed: None.
Pre-Approval of Services of Principal Accounting Firm
We do not have an audit committee, and the tasks generally undertaken by an audit committee are undertaken by our Board of Directors. Our board’s policy is to pre-approve all audit and permissible non-audit services provided by our principal accounting firm. These services may include audit services, audit-related services, tax services and other permissible non-audit services. Any service incorporated within the independent auditor's engagement letter, which is approved by our Board of Directors, is deemed pre-approved. Any service identified as to type and estimated fee in the independent auditor's written annual service plan, which is approved by our Board of Directors, is deemed pre-approved up to the dollar amount provided in such annual service plan.
During the year, the principal accounting firm may also provide additional accounting research and consultation services required by, and incident to, the audit of our financial statements and related reporting compliance. These additional audit-related services are pre-approved up to the amount approved in the annual service plan approved by our Board of Directors. Our Board of Directors may, also, pre-approve services on a case-by-case basis during the year.
The approval by our Board of Directors of proposed services and fees are noted in the meeting minutes of our Board of Directors and/or by signature of the appropriate members of our Board of Directors on the engagement letter. Our principal accounting firm and management are periodically requested to summarize the principal accounting firm services and fees paid to date, and management is required to report whether the principal accounting firm's services and fees have been pre-approved in accordance with the required pre-approval process of our Board of Directors.
Item 15. Exhibits
The following documents have been filed as a part of this annual report:
Exhibit No.
| 3.1 | * Articles of Incorporation (Charter Document) |
| 3.2 | * Certificate of Amendment |
| 3.3 | * Bylaws |
| 10.1 | * Iscis Holdings Ltd. Mineral Property Purchase Agreement |
| 10.2 | ** Contract for services with Bua Group Holdings Ltd. dated October 1, 2006. |
| 10.3 | *** Share Purchase Agreement with Brian Mahood and Kerrisdale Resources Ltd. |
| 10.4 | *** Management Agreement with Kerrisdale Consulting Inc. |
| 10.5 | *** General Security Agreement by and among Kerrisdale Resources Ltd. and Brian Mahood. |
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| 31.2 | |
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* Previously filed with the Securities and Exchange Commission on August 10, 2006 as exhibits to our Registration Statement on Form SB-2.
** Previously filed with the Securities and Exchange Commission on February 13, 2007 as an exhibit to our Quarterly Report on Form 10-QSB.
*** Previously filed with the Securities and Exchange Commission on August 21, 2008 as an exhibit to our Quarterly Report on Form 10-Q.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SCOUT EXPLORATION, INC.
Dated: August 14, 2012
By: /s/ John Roozendaal
Name: John Roozendaal
Title: President and Chief Executive Officer
By: /s/ Jason Walsh
Name: Jason Walsh
Treasurer and Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Dated: August 14, 2012
By: /s/ John Roozendaal
Name: John Roozendaal
Title: President and Chief Executive Officer
Director
By: /s/ Jason Walsh
Name: Jason Walsh
Title: Secretary, Treasurer and Principal Accounting Officer
Director
By: /s/ Shane Ivancoe
Name: Shane Ivancoe
Title: Director
