UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
(Amendment No. 1)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedSeptember 30, 2013
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-54405
JAMESON STANFORD RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
| Nevada | 90-0963619 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 605 W. Knox Rd., Suite 202, Tempe, AZ 85284 | 85284 | |
| (Address of principal executive offices) | (Zip Code) |
(702) 933-0808
(Registrant’s telephone number, including area code)
Not applicable.
(Former Name, former address and former fiscal year, if changed since last report)
Copies of Communications to:
Laura Anthony, Esq.
Legal& Compliance, LLC
330 Clematis Street, Suite 217
West Palm Beach, FL 33401
(561) 514-0936
Fax (561) 514-0832
Indicate by check mark whether the issuer (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 [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] |
| Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
The number of shares of Common Stock, $0.001 par value, issued and outstanding on November 15, 2013, was 37,150,426 shares.
EXPLANATORY NOTE
This Amendment No. 1 to the Quarterly Report on Form 10-Q of Jameson Stanford Resources Corporation for the period ended September 30, 2013 (the “Form 10-Q/A”) is amending the Quarterly Report on Form 10-Q originally filed with the Securities and Exchange Commission on November 19, 2013 (the “Original Report”). We are filing this Form 10-Q/A to reflect the restatement of our Unaudited Condensed Consolidated Financial Statements as of September 30, 2013 (the “Financial Statements”). As disclosed in our Current Report on Form 8-K as filed on April 28, 2014 and as amended on Form 8-K/A as filed with the SEC on May 23, 2014, we have determined that the Financial Statements contained an error related to the failure to record the receipt of funds for sales of the Company’s common stock and the accounting for the use of the proceeds from these sales in the period covered by the Original Report. The Financial Statements also contained errors relating to the incorrect classification of our former sole Director, Chief Executive Officer and majority shareholder’s personal expenses as expenses of our Company and issuance of common stock for professional fees. The Financial Statements, in addition, did not properly reflect the convertible debt provisions due to a retroactive provision of an amendment signed on December 30, 2013.
Please see Note 4 - Summary of Significant Accounting Policies - Restatement of Financial Statements contained in the Notes to our Financial Statements appearing later in this Form 10-Q/A which further describes the effect of this restatement. In addition, we have amended the following sections of this report:
Part I – Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 4. Controls and Procedures.
Part II – Other Information
Item 1. Legal Proceedings.
Item 2. Unregistered Sales of Equity Securities and use of Proceeds.
This Form 10-Q/A also contains currently dated certifications as Exhibits 31.1, 31.2, 32.1 and 32.2 by the Company’s current President who is the Company’s principal executive officer and by the Company’s current interim Chief Financial Officer. This Form 10-Q/A does not reflect events occurring after the filing of the Original Report, and no attempt has been made herein to modify or update the other disclosures that may have been affected by subsequent events. Accordingly, this Form 10-Q/A should be read in conjunction with our other filings with the SEC.
| 2 |
TABLE OF CONTENTS
| 3 |
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report include forward-looking statements. These forward looking statements are based on our management’s current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “proposed,” “intended,” or “continue” or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully, because they discuss our expectations about our future operating results or our future financial condition or state other “forward-looking” information. Many factors could cause our actual results to differ materially from those projected in these forward-looking statements, including but not limited to: variability of our future revenues and financial performance; risks associated with product development and technological changes; the acceptance of our products in the marketplace by potential future customers; general economic conditions. You should be aware that the occurrence of any of the events described in this Quarterly Report could substantially harm our business, results of operations and financial condition, and that upon the occurrence of any of these events, the trading price of our securities could decline. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, growth rates, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this Quarterly Report to conform these statements to actual results.
CAUTIONARY STATEMENT REGARDING MINERALIZED MATERIAL
“Mineralized material” as used in this quarterly report on Form 10-Q, although permissible under the United States Securities and Exchange Commission’s (“SEC”) Industry Guide 7, does not indicate “reserves” by SEC standards. We cannot be certain that any deposits from the Star Mountain/Chopar Mine, (b) Spor Mountain/Dugway Minerals Claim and Ogden Bay Wildlife Management Area in Weber County, Utah will ever be confirmed or converted into SEC Industry Guide 7 compliant “reserves”. Investors are cautioned not to assume that all or any part of the disclosed mineralized material estimates will ever be confirmed or converted into reserves or that mineralized material can be economically or legally extracted.
| 4 |
PART I - FINANCIAL INFORMATION
JAMESON STANFORD RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
| Restated September 30, 2013 | December 31, 2012 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 90,642 | $ | - | ||||
| Prepaid Expenses | 17,815 | - | ||||||
| Deposits | 77,800 | - | ||||||
| Total current assets | 186,257 | |||||||
| Property & equipment, net | 39,549 | 40,367 | ||||||
| Advances to related party shareholder | 263,074 | - | ||||||
| Surety Bond | 24,325 | - | ||||||
| Mineral Rights | 25,869 | 25,869 | ||||||
| TOTAL ASSETS | $ | 539,074 | $ | 66,236 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | 396,850 | 330,298 | |||||
| Accrued compensation | 12,000 | 180,000 | ||||||
| Convertible debt, related party | 135,000 | 185,000 | ||||||
| Stipulated agreement liability, related party | 112,772 | - | ||||||
| Loans payable | - | 45,342 | ||||||
| Advances from related party shareholders, including accrued interest | - | 49,993 | ||||||
| Total current liabilities | 656,622 | 790,633 | ||||||
| Convertible debt | 74,685 | - | ||||||
| Total Liabilities | 731,307 | 790,633 | ||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Common stock, authorized 350,000,000 shares, $.001 par value, 37,150,426 and 31,300,000 issued and outstanding, respectively | $ | 37,150 | $ | 31,300 | ||||
| Add’l paid in capital (deficit in par value) | 1,853,284 | (53,168 | ) | |||||
| Accumulated deficit during exploration stage | (2,082,667 | ) | (702,529 | ) | ||||
| Total Stockholders’ Deficit | (192,233 | ) | (724,397 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 539,074 | $ | 66,236 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements
| F-1 |
JAMESON STANFORD RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Three Months Ended | Nine Months Ended | Restated Period from Inception | ||||||||||||||||||
| Restated September 30, 2013 | September 30, 2012 | Restated September 30, 2013 | �� | September 30, 2012 | (Oct 12, 2010) to September 30, 2013 | |||||||||||||||
| Revenue | $ | - | $ | - | $ | - | $ | - | $ | 89,994 | ||||||||||
| Cost of Revenue | - | - | - | - | 66,227 | |||||||||||||||
| Gross Profit | - | - | - | - | 23,767 | |||||||||||||||
| Operating Expenses | ||||||||||||||||||||
| Executive Compensation | 57,000 | 75,000 | 147,000 | 125,000 | 327,000 | |||||||||||||||
| Exploration and development costs | 214,282 | 19,484 | 347,277 | 31,864 | 502,258 | |||||||||||||||
| Exploration and development costs - related party | - | - | - | 70,272 | 109,922 | |||||||||||||||
| General and administrative | 309,997 | 105,165 | 762,106 | 164,902 | 993,773 | |||||||||||||||
| General and administrative - related party | - | - | 10,783 | - | 38,283 | |||||||||||||||
| Total Operating Expenses | 581,279 | 199,649 | 1,267,166 | 392,038 | 1,971,236 | |||||||||||||||
| Net Loss from Operations | (581,279 | ) | (199,649 | ) | (1,267,166 | ) | (392,038 | ) | (1,947,469 | ) | ||||||||||
| Other Expenses | ||||||||||||||||||||
| Extinguishment of debt | - | - | (60,000 | ) | - | (60,000 | ) | |||||||||||||
| Interest expense, related parties | (4,998 | ) | (6,794 | ) | (15,957 | ) | (14,441 | ) | (38,183 | ) | ||||||||||
| Interest expense | (34,125 | ) | - | (37,015 | ) | - | (37,015 | ) | ||||||||||||
| Net Loss before Income Taxes | (620,402 | ) | (206,443 | ) | (1,380,138 | ) | (406,479 | ) | (2,082,667 | ) | ||||||||||
| Income tax provision | - | - | - | - | - | |||||||||||||||
| Net Loss | $ | (620,402 | ) | $ | (206,443 | ) | $ | (1,380,138 | ) | $ | (406,479 | ) | $ | (2,082,667 | ) | |||||
| Basic and diluted (loss) per share | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.04 | ) | $ | (0.01 | ) | ||||||||
| Basic and diluted weighted average shares outstanding | 34,323,307 | 25,000,000 | 32,315,986 | 25,000,000 | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
| F-2 |
JAMESON STANFORD RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
| Restated Period | ||||||||||||
| For Nine Months Ended | from Inception | |||||||||||
| Restated | (October 12, 2010) to | |||||||||||
| September 30, 2013 | September 30, 2012 | September 30, 2013 | ||||||||||
| Cash flows from operating activities | ||||||||||||
| Net loss | $ | (1,380,138 | ) | $ | (406,479 | ) | $ | (2,082,667 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation | 7,346 | 5,077 | 15,348 | |||||||||
| Imputed interest | 15,957 | 14,441 | 33,571 | |||||||||
| Shares Issued for Services | 586,207 | - | 586,207 | |||||||||
| Shares Issued for Debt Extinguishment | 60,000 | - | 60,000 | |||||||||
| Amortization of debt discount | 24,823 | - | 24,823 | |||||||||
| Changes in operating assets and liabilities | ||||||||||||
| Prepaid Expenses | (17,815 | ) | - | (17,815 | ) | |||||||
| Deposits | (77,800 | ) | - | (77,800 | ) | |||||||
| Surety Bond | (24,325 | ) | (24,325 | ) | ||||||||
| Accounts payable and accrued expenses | 58,052 | 139,278 | 348,768 | |||||||||
| Accrued interest | 5,158 | - | 9,770 | |||||||||
| Accrued compensation | (168,000 | ) | 125,000 | 12,000 | ||||||||
| Stipulated agreement liability, related party | 112,772 | - | 112,772 | |||||||||
| Net cash used in operating activities | (797,763 | ) | (122,683 | ) | (999,348 | ) | ||||||
| Cash flows from investing activities | ||||||||||||
| Acquisition of mineral rights | - | (25,869 | ) | (25,869 | ) | |||||||
| Advances to related party shareholders | (263,074 | ) | - | (263,074 | ) | |||||||
| Purchase of property and equipment | (6,528 | ) | - | (54,897 | ) | |||||||
| Net cash used in investing activities | (269,602 | ) | (25,869 | ) | (343,840 | ) | ||||||
| Cash flows from financing activities | ||||||||||||
| Proceeds from issuance of convertible debt, related party | - | 100,000 | 185,000 | |||||||||
| Proceeds from issuance of convertible debt | 500,000 | - | 500,000 | |||||||||
| Proceeds from issuance of common stock | 750,000 | - | 750,000 | |||||||||
| Advances from related party shareholders | (49,993 | ) | 41,561 | (1,270 | ) | |||||||
| Members contributions | - | - | 100 | |||||||||
| Loan payable | (42,000 | ) | - | - | ||||||||
| Net cash provided by financing activities | 1,158,007 | 141,561 | 1,433,830 | |||||||||
| Net increase (decrease) in cash | 90,642 | (6,991 | ) | 90,642 | ||||||||
| Cash, beginning of period | - | 6,991 | - | |||||||||
| Cash, end of period | $ | 90,642 | $ | - | $ | 90,642 | ||||||
| Supplemental Information: | ||||||||||||
| Cash paid for: | ||||||||||||
| Taxes | $ | - | $ | - | $ | - | ||||||
| Interest Expense | $ | - | $ | - | $ | - | ||||||
| Liabilities assumed in merger | $ | - | $ | - | $ | 39,582 | ||||||
| Settlement of debt with contributed capital | $ | 110,000 | $ | - | $ | 110,000 | ||||||
| Warrants issued with convertible debt | $ | 450,138 | $ | - | $ | 450,138 | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
| F-3 |
JAMESON STANFORD RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
On October 29, 2012, Jameson Stanford Resources Corporation (the “Company”) merged with Bolcán Mining Corporation (Note 2). Prior to the Merger, the Company was a publically traded shell company with no business operations. The shell company was originally incorporated under the laws of the state of Nevada in June 2009 as MyOtherCountryClub.com for the purpose of developing a website that would offer reciprocal golf privileges, and other related services, to members of private country clubs throughout the United States. As a result of the Merger, the Company is no longer considered a shell company.
The current operating activities of the Company include exploration and pre-extraction activities related to certain mining claims, mineral leases and excavation rights (collectively referred to herein as “mineral rights”) for mining projects located in (a) Star Mining District in Beaver County, Utah, (b) Spor Mountain Mining District in Juab County, Utah, and (c) Ogden Bay Wildlife Management Area in Weber County, Utah. We have not established proven or probable reserves, as defined by the SEC under Industry Guide 7, through the completion of a “final” or “bankable” feasibility study for our mineral rights. Furthermore, we have no plans to establish proven or probable reserves for any of our mineral rights.
NOTE 2 – MERGER
Effective May 7, 2012, the Company entered into an Agreement and Plan of Merger with Jameson Stanford Resources Corporation, (“Jameson Stanford”), and JSR Sub Co, (“JSR”), both unrelated parties. On July 24, 2012, the above parties entered into an Extension Agreement in order to extend the effective time of the merger to August 3, 2012. On October 24, 2012, the parties entered into a second Extension Agreement extending the closing date for the Merger to October 29, 2012. On October 29, 2012, the Merger was closed. Effective as of the closing of the Merger, the CEO and Director of Jameson Stanford resigned from all positions with the Company and he returned, for cancellation, 52,500,000 shares of the Jameson Stanford’s common stock held in his name. Also at closing, the shareholder of Bolcán Mining was issued 25,000,000 shares of Jameson Stanford’s common stock. As of the end of September 30, 2013 there were 37,150,426 shares of Jameson Stanford common stock outstanding as restated, of which approximately 80% is held by the former shareholders of Bolcán. The merger has been treated as a reverse acquisition and recapitalization of a public company. Accordingly, the historic financial statements of the Company are the historical statements of Bolcán Mining Corporation, which was incorporated on April 11, 2012 in the State of Nevada.
NOTE 3 – GOING CONCERN
The Company is an exploration stage enterprise as defined under generally accepted accounting principles in the United States (“GAAP”). The financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses since inception resulting in a restated deficit accumulated during exploration stage of $2,082,667 as of the period ended September 30, 2013. Further losses are anticipated in the development of its business.
The Company’s ability to continue as a going concern is dependent upon the Company generating profitable operations and cash flows in the near-term future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations. Management plans to finance the Company’s operating costs as necessary over the next twelve months with advances from owners and directors, and the private placement of the Company’s equity ownership. If management is unsuccessful in these efforts, discontinuance of operations is possible. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| F-4 |
JAMESON STANFORD RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Restatement of Financial Statements
The financial statements for the period ended September 30, 2013 filed with the SEC on November 19, 2013 contained errors and omissions related to the failure to record the receipt of funds for sales of the Company’s common stock and the accounting for the use of the proceeds from those sales. The financial statements also contained errors relating to the treatment of the retroactive application of the December 2013 amended agreement. The financial statements also contained errors relating to the incorrect classification of Michael Stanford, our former sole Director, Chief Executive Officer and majority shareholder’s personal expenses as expenses of our company and issuance of common stock for professional fees. Accordingly, the condensed consolidated balance sheets, condensed consolidated statements of operations, and condensed consolidated statement of cash flows for the period ended September 30, 2013 and from inception (October 10, 2010) to the period ended September 30, 2013, have been restated to correct these errors and omission.
The proper recording of the receipt of proceeds from the sale of the Company’s common stock resulted in an increase of issued common of $750,000, reduction in accrued compensation of $255,000, reduction in advances from related party shareholders of $483,398, reduction in interest expense due to related party shareholders and interest expense of $23,200 (reduction in net loss of the same amount) and increase of advances to related party shareholders of $34,802. The proper recording of the convertible note resulted in a reduction of derivative expense of $416,117 (reduction in net loss of the same amount), reduction in interest expense of $2,954 (reduction in net loss of the same amount), reduction in derivative liability of $916,117, increase in convertible debt of $46,908 and increase in additional paid in capital of $450,138. The proper recording of the issuance of common stock for professional fees resulted in an increase of common stock of $274,207, increase in net loss of $137,028, increase in surety bond of $24,325, reduction in mineral rights of $16,380, increase in advances to related party shareholders of $129,234, The incorrect classification of personal expenses as company expenses and deposits resulted in reduction of deposits of $12,876, reduction in net loss of $101,178, increase in prepaid expense of $15,015 and increase in advances to related party shareholders of $99,038.
The net effects of these corrections are noted below by line item for each financial statement that is impacted. The adjustments included in the table below do not reflect, however, any claims or recovery the Company may realize from a lawsuit the Company filed against Mr. Stanford as a result of his improper conduct involving the Company. See Note 10 – Subsequent Events – Michael Stanford Litigation.
| F-5 |
JAMESON STANFORD RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| As Previously | ||||||||||||
| Reported | As Restated | |||||||||||
| Line Items Affected | September 30, 2013 | Adjustments | September 30, 2013 | |||||||||
| Condensed Consolidated Balance Sheets | ||||||||||||
| Assets | ||||||||||||
| Prepaid expenses | $ | 2,800 | $ | 15,015 | $ | 17,815 | ||||||
| Deposits | $ | 90,676 | $ | (12,876 | ) | $ | 77,800 | |||||
| Total Current Assets | $ | 184,118 | $ | 2,139 | $ | 186,257 | ||||||
| Advances to related party shareholders | $ | - | $ | 263,074 | $ | 263,074 | ||||||
| Mineral rights | $ | 42,249 | $ | (16,380 | ) | $ | 25,869 | |||||
| Surety Bond | $ | - | $ | 24,325 | $ | 24,325 | ||||||
| Total Assets | $ | 265,916 | $ | 273,158 | $ | 539,074 | ||||||
| Liabilities | ||||||||||||
| Accrued compensation | $ | 267,000 | $ | (255,000 | ) | $ | 12,000 | |||||
| Advances from related party shareholders | $ | 483,398 | $ | (483,398 | ) | $ | - | |||||
| Derivative liability | $ | 916,117 | $ | (916,117 | ) | $ | - | |||||
| Total Current Liabilities | $ | 2,311,137 | $ | (1,654,515 | ) | $ | 656,622 | |||||
| Convertible debt | $ | 27,777 | $ | 46,908 | $ | 74,685 | ||||||
| Total Liabilities | $ | 2,338,914 | $ | (1,607,607 | ) | $ | 731,307 | |||||
| Stockholders’ Deficit | ||||||||||||
| Common stock | $ | 31,560 | $ | 5,590 | $ | 37,150 | ||||||
| Add’l paid in capital | $ | 384,530 | $ | 1,468,754 | $ | 1,853,284 | ||||||
| Accumulated deficit during exploration stage | $ | (2,489,088 | ) | $ | 406,421 | $ | (2,082,667 | ) | ||||
| Total Stockholders’ Deficit | $ | (2,072,998 | ) | $ | 1,880,765 | $ | (192,233 | ) | ||||
| As Previously | ||||||||||||
| Reported | As Restated | |||||||||||
| Three Months Ended | Three Months Ended | |||||||||||
| September 30, 2013 | Adjustments | September 30, 2013 | ||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||
| Executive compensation | $ | 59,771 | $ | (2,771 | ) | $ | 57,000 | |||||
| Exploration and development costs | $ | 242,084 | $ | (27,802 | ) | $ | 214,282 | |||||
| General and administrative | $ | 176,033 | $ | 133,964 | $ | 309,997 | ||||||
| Total Operating Expenses | $ | 477,888 | $ | 103,391 | $ | 581,279 | ||||||
| Interest expense, related parties | $ | (17,138 | ) | $ | 12,140 | $ | (4,998 | ) | ||||
| Interest expense | $ | (37,079 | ) | $ | 2,954 | $ | (34,125 | ) | ||||
| Derivative expense | $ | (416,117 | ) | $ | 416,117 | $ | - | |||||
| Net Loss Before Income Taxes | $ | (948,222 | ) | $ | 327,820 | $ | (620,402 | ) | ||||
| Net Loss | $ | (948,222 | ) | $ | 327,820 | $ | (620,402 | ) | ||||
| F-6 |
JAMESON STANFORD RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| As Previously | As Restated | |||||||||||||||
| Reported | As Restated | From Inception | ||||||||||||||
| Nine Months Ended | Nine Months Ended | (October 10, 2010) to | ||||||||||||||
| September 30, 2013 | Adjustments | September 30, 2013 | September 30, 2013 | |||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||||
| Executive compensation | $ | 154,014 | $ | (7,014 | ) | $ | 147,000 | $ | 327,000 | |||||||
| Exploration and development costs | $ | 371,708 | $ | (24,431 | ) | $ | 347,277 | $ | 502,258 | |||||||
| General and administrative | $ | 694,811 | $ | 67,295 | $ | 762,106 | $ | 993,773 | ||||||||
| Total Operating Expenses | $ | 1,231,316 | $ | 35,850 | $ | 1,267,166 | $ | 1,971,236 | ||||||||
| Net Loss from Operations | $ | (1,231,316 | ) | $ | (35,850 | ) | $ | (1,267,166 | ) | $ | (1,947,469 | ) | ||||
| Interest expense | $ | (39,969 | ) | $ | 2,954 | $ | (37,015 | ) | $ | (37,015 | ) | |||||
| Interest expense, related parties | $ | (39,157 | ) | $ | 23,200 | $ | (15,957 | ) | $ | (38,183 | ) | |||||
| Derivative expense | $ | (416,117 | ) | $ | 416,117 | $ | - | $ | - | |||||||
| Net Loss Before Income Taxes | $ | (1,786,559 | ) | $ | 406,421 | $ | (1,380,138 | ) | $ | (2,082,667 | ) | |||||
| Net Loss | $ | (1,786,559 | ) | $ | 406,421 | $ | (1,380,138 | ) | $ | (2,082,667 | ) | |||||
| Condensed Consolidated Cash Flows | ||||||||||||||||
| Net loss | $ | (1,786,559 | ) | $ | 406,421 | $ | (1,380,138 | ) | $ | (2,082,667 | ) | |||||
| Imputed interest | $ | 15,960 | $ | (3 | ) | $ | 15,957 | $ | 33,571 | |||||||
| Shares issued for services | $ | 312,000 | $ | 274,207 | $ | 586,207 | $ | 586,207 | ||||||||
| Amortization of debt discount | $ | 27,777 | $ | (2,954 | ) | $ | 24,823 | $ | 24,823 | |||||||
| Derivative expense | $ | 416,117 | $ | (416,117 | ) | $ | - | $ | - | |||||||
| Prepaid expense | $ | (2,800 | ) | $ | (15,015 | ) | $ | (17,815 | ) | $ | (17,815 | ) | ||||
| Deposits | $ | (90,676 | ) | $ | 12,876 | $ | (77,800 | ) | $ | (77,800 | ) | |||||
| Surety bond | $ | - | $ | (24,325 | ) | $ | (24,325 | ) | $ | (24,325 | ) | |||||
| Accrued interest | $ | 33,993 | $ | (28,835 | ) | $ | 5,158 | $ | 9,770 | |||||||
| Accrued compensation | $ | 87,000 | $ | (255,000 | ) | $ | (168,000 | ) | $ | 12,000 | ||||||
| Net cash used in operations | $ | (749,018 | ) | $ | (48,745 | ) | $ | (797,763 | ) | $ | (999,348 | ) | ||||
| Acquisition of mineral rights | $ | (16,380 | ) | $ | 16,380 | $ | - | $ | (25,869 | ) | ||||||
| Advances to related party shareholders | $ | - | $ | (263,074 | ) | $ | (263,074 | ) | $ | (263,074 | ) | |||||
| Net cash used in investing activities | $ | (22,908 | ) | $ | (246,694 | ) | $ | (269,602 | ) | $ | (343,840 | ) | ||||
| Advances from related party shareholders | $ | 410,205 | $ | (460,198 | ) | $ | (49,993 | ) | $ | (1,270 | ) | |||||
| Loans payable | $ | (47,637 | ) | $ | 5,637 | $ | (42,000 | ) | $ | - | ||||||
| Proceeds from issuance of common stock | $ | - | $ | 750,000 | $ | 750,000 | $ | 750,000 | ||||||||
| Net cash provided by financing activities | $ | 862,568 | $ | 295,439 | $ | 1,158,007 | $ | 1,433,830 | ||||||||
Basis of Accounting and Presentation
The accompanying financial statements have been prepared in accordance with GAAP for interim financial statements. Accordingly, they omit or condense footnotes and certain other information normally included in financial statements prepared in accordance with GAAP. The accounting policies followed for quarterly financial reporting conform with the accounting policies disclosed in Note 4 to the Notes to Condensed Consolidated Financial Statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2012. In the opinion of management, all adjustments that are necessary for a fair presentation of the financial information for the interim periods reported have been made. All such adjustments are of a normal recurring nature. The restated results of operations for the nine months ended September 30, 2013 are not necessarily indicative of the results that can be expected for the entire year ending December 31, 2013. The unaudited financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2012.
| F-7 |
JAMESON STANFORD RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 – TRANSACTIONS WITH MAJORITY OWNER AND OFFICER
Michael Stanford, the Company’s former Chief Executive Officer and its majority shareholder (the “Majority Owner”) has made periodic advances to the Company to fund operations, which are unsecured and payable on demand. Interest is charged at the rate of 12%. The balance in Advances From Related Party Shareholder at December 31, 2012 of $49,993 was eliminated in the restated first quarter of 2013 by advances made to the majority shareholder. At the end of the restated period ended September 30, 2013, the advances to the majority shareholder totaled $263,074.
On August 19, 2014 the Company filed a complaint against Michael Stanford, its former sole director, CEO and largest shareholder based upon the alleged wrongful, fraudulent and tortuous acts involving the Company. The financial statements do not reflect, however, any claims or recovery the Company may realize from this lawsuit against Mr. Stanford as a result of his improper conduct. See Note 10 – Subsequent Events – Michael Stanford Litigation.
The Company has contracted for minerals testing, laboratory services, project management and materials supply from several entities that are operated by common management or are otherwise controlled by the Majority Owner. Payments to such related party totaled $0 for the nine-month period ended September 30, 2013.
NOTE 6 – MINERAL RIGHTS
At September 30, 2013, the Company had certain mining claims, mineral leases and excavation rights for mining projects located in (a) Star Mining District in Beaver County, Utah, (b) Spor Mountain Mining District in Juab County, Utah, and (c) Ogden Bay Wildlife Management Area in Weber County, Utah. These mineral rights were acquired through staking and purchase, lease or option agreements and are subject to varying royalty interests, some of which are indexed to the sale price of minerals excavated from these properties. The Company has not established proven or probable reserves on any of its mineral projects and no minerals have been extracted from these properties as of September 30, 2013. As of September 30, 2013 the restated mineral rights are $25,869 and property and equipment, net are $39,549.
NOTE 7 – CONVERTIBLE NOTE-RELATED PARTY
In connection with a memorandum of understanding dated October 27, 2011, the Company received certain cash advances totaling $105,000 from a related party. The advances were unsecured, did not bear interest and were payable on demand. Additional advances were made in 2011 and 2012, bringing the total borrowed to $135,000, which was rolled into a convertible note dated June 11, 2012. The unpaid balance is convertible at the option of the related party or the Company into common stock shares of the Company at the rate of one share of common stock for every two dollars of loan reduction. These conversion rights were extended to December 31, 2013 by verbal agreement. Interest expense has been imputed at 12%. The imputed interest incurred for the period was $4,998 and cumulative interest totaled $33,571 at September 30, 2013.
| F-8 |
JAMESON STANFORD RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
note 8 – stipulated Agreement LIABILITY, RELATED PARTY
The Company entered into an agreement with Michael Christiansen, an officer of the Company (“Christiansen”) on August 13, 2013 (the “Stipulated Agreement”) to pay Christiansen $123,272 (the “Amount Due”) relating to a promissory note, accrued compensation and out-of-pocket expenses incurred on behalf of the Company. The Amount Due was agreed to be paid as follows: $10,500 on or before August 15, 2013; $10,500 on or before September 15, 2013; $10,500 on or before October 15, 2013; and the balance in installments of $15,000 beginning on the earlier of (a) the first day of the month following the date on which the company receive at least three million dollars ($3,000,000) of equity funding, or (b) December 31, 2014. At September 30, 2013, the Company’s remaining liability of $112,772 has been recorded as Stipulated Agreement Liability, Related Party in the accompanying financial statements. The Company has the right to prepay any part of this amount without any prepayment penalty. In no event, however, shall the balance due be paid later than December 31, 2014. In the event of a change of control, the Company is obligated to pay in full the portion of the Amount Due that remains unpaid. Subject to completion of the payments due under the agreement, the parties agreed to release certain claims against each other related to or arising in connection with the matters that gave rise to our agreement to pay the Amount Due.
NOTE 9 – NOTE PAYABLE
On May 11, 2012, Christiansen loaned the Company $42,000. The loan was guaranteed by the Majority Owner, called for interest at 12% per annum and was extended to a due date of August 24, 2012. Effective July 1, 2013, the entire balance of $48,598, including accrued interest of $6,598, was incorporated into the Stipulated Agreement settlement with Christiansen and is included in the Amount Due. See NOTE 8.
NOTE 10 – CONVERTIBLE NOTE
On August 19, 2013 the Company issued a $500,000 convertible promissory note (the “Note”) and warrants to purchase shares of common stock to an individual investor. The overall terms of the Note are as follows:
| ● | Interest rate: 12% per annum. | |
| ● | Due date: September 14, 2015. The Company is to pay the principal amount and all accrued and unpaid interest on or before the due date. | |
| ● | Redemption right: Any time the closing price of the Company’s common stock has been at or above $2.00 for 20 consecutive trading days, the Company has the right to redeem all or any part of the principal and accrued interest of the Note, following written notice to the holder of the Note. | |
| ● | Optional Conversion: At the option of the holder, the Note may be converted into shares of the Company’s common stock at a conversion price equal to $0.50 per share | |
| ● | Additionally, if the Company elects to exercise the redemption right, the holder has the opportunity to elect to take the cash payment or to convert all or any portion of the Note into shares of the Company’s common stock. | |
| ● | The conversion price is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events. | |
| ● | The Note is senior in rank to any other debt held by our officers, directors or affiliates and may not be subordinated to any other debt issued by us without the written consent of the holder. | |
| ● | Warrants: The holder of the Note is granted the right through September 30, 2015 to purchase 500,000 additional shares of common stock at $1.00 per share. |
| F-9 |
JAMESON STANFORD RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| ● | The Company’s Condensed Consolidated Balance Sheets report the following related to the convertible promissory note: |
| September 30, 2013 | ||||
| Principal amount | $ | 500,000 | ||
| Unamortized debt discount | (425,315 | ) | ||
| Net carrying amount | $ | 74,685 | ||
| ● | The Note is secured by all of the mineral ownership and mining rights held by the Company in the Star Mountain Mining District and proceeds and distributions from such assets. | |
| ● | During the time that any portion of this Note is outstanding, if any Event of Default occurs and such Default is not cured by the Company within sixty (60) days of the occurrence of the Event of Default (the “Cure Period”), the amount equal to one hundred fifty percent (150%) of the outstanding principal amount of this Note, together with accrued interest and other amounts owing shall become at the holder’s election, immediately due and payable in cash. The holder at its option has the right, with three (3) business days advance written notice to the Company after the expiration of the Cure Period, to elect to convert the Note into shares of the Company’s common stock pursuant to the Optional Conversion rights disclosed above. |
For the nine months ended September 30, 2013, the Company recorded $8,500 of accrued interest expense for the contractual interest related to the convertible promissory note and additional interest expense of $24,823 as amortization of the debt discount. At September 30, 2013, none of the debt had been converted and no warrants to purchase common stock had been exercised.
Under the guidance of ASC 470-20 Debt With Conversion and Other Options, the Company recorded the value of the above warrants to purchase 500,000 shares of its common stock.
Using the Black-Scholes method, such warrants were valued at $160,138. The following weighted-average assumptions were used in the Black-Scholes calculation:
| September 30, 2013 | ||||
| Expected term (years) | 2.1 | |||
| Expected volatility | 125.5 | % | ||
| Risk-free interest rate | 0.36 | % | ||
| Dividend yield | 0 | % | ||
Aggregate maturities of Convertible Notes in each of the next five years ending December 31st are as follows:
| 2014 | $ | - | ||
| 2015 | 500,000 | |||
| 2016 | - | |||
| 2017 | - | |||
| 2018 | - | |||
| $ | 500,000 |
On December 30, 2013, an amendment to the original note agreement was signed that retroactively eliminated the variability in conversion terms and the related derivative liability. Based on this amendment, the Company is retroactively accounting for the convertible note based on the terms of the amended note agreement.
| F-10 |
JAMESON STANFORD RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – CONTRACTS AND LEASE COMMITMENTS
Office Leases
Commencing February 1, 2013 and continuing to January 31, 2014, the Company is renting residential office space from an entity controlled by the Majority Owner. The monthly lease payment is comparable to rents paid by non-related parties for similar office space in the area.
Commencing October 1, 2013 and continuing to March 31, 2014, the Company is leasing executive office space totaling 280 square feet, increasing to 430 square feet on November 1, 2013. The lease required an initial setup fee of $500 and a security deposit equal to one month’s rent. The Company is obligated to monthly lease payments of $3,000 for October, increasing to $5,300 on November 1, 2013. The agreement is renewable at the option of the Company.
Service Contracts
In February 2013, the Company contracted with a consulting group to receive consulting, investor relations and development services. This consulting agreement called for the issuance of 200,000 shares of our unregistered common stock. The value of the services was based on the closing common share value on the share issuance date of April 2, 2013 which was $1.20 per share. For the nine months ended September 30, 2013, the entire $240,000 value of the contract has been recorded as an expense.
Also in February 2013, the Company contracted with a public relations company to provide the Company investor relations and development services, video production and distribution, public relations as well as various social media outreach and promotion services. This service contract required the issuance of 60,000 shares of our unregistered common stock and minimum quarterly fees totaling $20,000 to be paid over a six month service period. The value of the services was based on the share value of the Company’s common stock on the closing common share issuance date of April 2, 2013 which was $1.20 per share. For the nine months ended September 30, 2013, the entire $72,000 value of the contract has been recorded as an expense.
Effective July 31, 2013, the Company entered into an agreement with Michael Christiansen (“Christiansen”) to serve as Executive Vice President, Corporate Development. The initial term of six months calls for monthly compensation of $6,000 increasing to $10,000 per month once the company has raised $1,000,000 in new equity funding, $15,000 per month once the company has raised $3,000,000 and $20,000 per month once the company has raised $5,000,000. The Company is further obligated to reimburse Christiansen for usual and customary business related expenses.
NOTE 12 – EQUITY TRANSACTIONS
Under a memorandum of understanding dated January 3, 2013, the Company is obligated to issue 5,360,000 shares of common stock for cash consideration of $750,000. At restated September 30, 2013, the shares have been issued.
On April 2, 2013, the Company issued 200,000 shares of restricted common stock to a consulting company. The contract calls for various consulting and investor relations services to be performed over six months.
| F-11 |
JAMESON STANFORD RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On April 2, 2013, the Company issued 60,000 shares of restricted common stock to a marketing company. The contract calls for various social media and public relations services to be performed over six months.
On September 20, 2013, the Company issued 230,426 shares of common stock for consulting services for the value of $274,207.
NOTE 13 – SUBSEQUENT EVENTS
Convertible Note
On October 18, 2013 the Company issued a $500,000 convertible promissory note (the “Note”) and warrants to purchase shares of common stock to an individual investor. The overall terms of the Note are as follows:
| ● | Interest rate: 12% per annum. | |
| ● | Due date: October 31, 2015. The Company is to pay the principal amount and all accrued and unpaid interest on or before the due date. | |
| ● | Redemption right: Any time the closing price of the Company’s common stock has been at or above $2.00 for 20 consecutive trading days, the Company has the right to redeem all or any part of the principal and accrued interest of the Note, following written notice to the holder of the Note. | |
| ● | Optional Conversion: At the option of the holder, the Note may be converted into shares of the Company’s common stock at a conversion price equal to $0.50 per share | |
| ● | Additionally, if the Company elects to exercise the redemption right, the holder has the opportunity to elect to take the cash payment or to convert all or any portion of the Note into shares of the Company’s common stock. | |
| ● | The conversion price is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events. | |
| ● | The Note is senior in rank to any other debt held by our officers, directors or affiliates and may not be subordinated to any other debt issued by us without the written consent of the holder. | |
| ● | Warrants: The holder of the Note is granted the right through September 30, 2015 to purchase 500,000 additional shares of common stock at $1.00 per share. | |
| ● | The Note is secured by all of the mineral ownership and mining rights held by the Company in the Star Mountain Mining District and proceeds and distributions from such assets. The Note rankspari passuin right of payment with the convertible promissory note issued on August 19, 2013. See NOTE 10. | |
| ● | During the time that any portion of this Note is outstanding, if any Event of Default occurs and such Default is not cured by the Company within sixty (60) days of the occurrence of the Event of Default (the “Cure Period”), the amount equal to one hundred fifty percent (150%) of the outstanding principal amount of this Note, together with accrued interest and other amounts owing shall become at the holder’s election, immediately due and payable in cash. The holder at its option has the right, with three (3) business days advance written notice to the Company after the expiration of the Cure Period, to elect to convert the Note into shares of the Company’s common stock pursuant to the Optional Conversion rights disclosed above. |
Executive Office Lease
Commencing November 1, 2013 and continuing to March 31, 2014, the Company is leasing additional executive office space totaling 150 square feet. The lease obligates the Company to an additional monthly lease payment of $2,300 and is renewable at the option of the Company.
| F-12 |
JAMESON STANFORD RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Michael Stanford Litigation
On August 19, 2014 the Company filed a complaint in the Fifth Judicial District Court, Beaver County, Utah (Civil Case No. 140500023) against Michael Stanford, its former sole director, CEO and its largest shareholder based upon the alleged wrongful, fraudulent and tortuous acts whereby Mr. Stanford committed the pervasive, profound, continuous, repeated, and ongoing wrongful and fraudulent acts and omissions resulting in at least $2,591,359 in losses for the Company, $1,272,321 in fraudulent claimed business expenses, $1,319,038 representing investment monies diverted from the Company and monies deposited directly into Mr. Stanford’s personal accounts and the improper issuance to Mr. Stanford of 25,000,000 shares of the Company’s common stock in exchange for the stock of Bolcán Mining Corporation in May 2012 whose assets were highly inflated at the time the Company completed this acquisition. The complaint also alleges that Mr. Stanford misappropriated for his own personal uses $750,000 of investment capital that was to be invested in the Company, the failure to disclose his history of litigation, his general fraudulent conduct in dealing with the Company and threats of violence against the Company’s officers and other persons related to the Company.
Based on this conduct, the complaint includes a claim for an accounting, conversion, fraudulent misrepresentation and fraudulent nondisclosure, interference with present and prospective economic relations, declaratory judgment, and injunctive relief. The complaint seeks, among other things, monetary damages of $5,873,675, injunctive relief and punitive damages, cancellation of 25,000,000 shares of the Company’s common stock and the Company’s costs, expenses and attorney’s fees associated with the this lawsuit.
On May 27, 2014, Mr. Stanford resigned as an officer and director of the Company. Our current management had no knowledge of Mr. Stanford’s improper conduct as alleged in the complaint which relate to his actions prior to his resignation.
The Company believes that its claims in the above case are substantial for the reasons discussed above. Litigation is, however, inherently unpredictable. The outcome of this lawsuit is subject to significant uncertainties and, therefore, determining the likelihood of a recovery and/or the measurement of any recovery is complex. Consequently, we are unable to estimate the range of reasonably possible recovery. Our assessment is based on an estimate and assumption that has been deemed reasonable by management, but the assessment process relies heavily on an estimate and assumption that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change that estimate and assumption.
| F-13 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE COMPANY
Overview
We are a minerals exploration company focused on acquiring and consolidating mining claims, mineral leases and excavation rights (collectively referred to herein as “mineral rights”). We are currently engaged in exploration and pre-extraction activities for mineral rights for mining projects located in (a) Star Mining District in Beaver County, Utah, (b) Spor Mountain Mining District in Juab County, Utah, and (c) Ogden Bay Wildlife Management Area in Weber County, Utah discussed below. We have not established proven or probable reserves, as defined by the SEC under Industry Guide 7, through the completion of a “final” or “bankable” feasibility study for our mineral rights. Furthermore, we have no plans to establish proven or probable reserves for any of our mineral rights.
History
We were originally incorporated under the laws of the state of Nevada in June 2009 as MyOtherCountryClub.com for the purpose of developing a website that would offer reciprocal golf privileges, and other related services, to members of private country clubs throughout the United States.
On May 7, 2012, we entered into an Acquisition Agreement and Plan of Merger, as amended on July 24, 2012 and on October 24, 2012 (collectively referred to as the “Merger Agreement”), with our wholly-owned subsidiary, JSR Sub Co, a Nevada corporation (“Sub Co”), and Bolcán Mining Corporation, a Nevada corporation (“Bolcán Mining”). Pursuant to the Merger Agreement, we issued 25,000,000 shares of our Rule 144 restricted common stock in exchange for 100% of Bolcán Mining’s issued and outstanding capital stock.
On May 2, 2012, we completed a 7-for-1 forward split of all outstanding shares of our common stock and a corresponding increase in our authorized common stock. The effect of the forward split was to increase the number of our common shares issued and outstanding from 8,400,000 to 58,800,000 and to increase our authorized common shares from 50,000,000 shares, par value $0.001, to 350,000,000 shares, par value $0.001.
Pursuant to the terms of the Merger Agreement, on October 29, 2012 Sub Co merged with and into Bolcán Mining (the “Merger”) with Bolcán Mining surviving the Merger as our wholly owned subsidiary. After the Merger, there were 31,300,000 shares of our common stock outstanding, of which approximately 80% were held by the former shareholders of Bolcán Mining. Prior to the Merger, we were a shell company with no business operations. As a result of the Merger, we are no longer considered a shell company.
Michael Stanford Litigation
On August 19, 2014 the Company filed a complaint against Michael Stanford, its former sole director, CEO and largest shareholder based upon the alleged wrongful, fraudulent and tortuous acts involving the Company. The financial statements do not reflect, however, any claims or recovery the Company may realize from a lawsuit the Company filed against Mr. Stanford as a result of his improper conduct. See Part II, Item 1. Legal Proceedings – Michael Stanford Litigation.
Description of Bolcán Mining Corporation’s Business
Bolcán Mining was incorporated on April 11, 2012 to pursue the exploration of certain mining claims, mineral leases and excavation rights for mining projects located in (a) Star Mining District in Beaver County, Utah, (b) Spor Mountain Mining District in Juab County, Utah, and (c) Ogden Bay Wildlife Management Area in Weber County, Utah. On April 23, 2012, Bolcán Mining acquired certain lode mining claims and mineral leases related to the Star Mining District and Spor Mountain Mining District projects.
| 5 |
Effective as of June 30, 2012, pursuant to an Asset Purchase Agreement between Bolcán Mining and the Bolcán Group LLC (“Bolcán Group”) which was formed in October 12, 2010 by Mr. Stanford, Bolcán Mining purchased all of the assets and assumed certain liabilities of the Bolcán Group resulting in a combination of the two companies.
The operating activities of the Bolcán Group were inconsequential until October 2011 and consisted primarily of historical site research performed by Mr. Stanford. Mr. Stanford has other mining interests and provides services to the mining industry that are not part of Bolcán Mining.
Projects
Our current active projects include:
Star Mountain (Star Mining District) - The Star Mountain/Chopar Mine project consists of 117 lode-mining claims and four metalliferous mineral lease sections located in the Star Mountain range, Star Mining District, in Beaver County, Utah, approximately five miles west of Milford, Utah. The Star Mountain project involves total area of 3,740 acres. Based on the Company’s geological analysis, magnetometry studies and reverse circulation drilling samples, it is estimated that total inferred reserves at the Star Mountain site may ultimately involve more than 100,000,000 metric tons of copper ore plus additional precious and base metals.
Spor Mountain (Spor Mountain Mining District) - The Spor Mountain project consists of nine mining claims and three metalifferous mineral lease sections located in Juab County, Utah. The Company’s Spor Mountain/Dugway Minerals project involves a total area of 2,098 acres. Based on the Company’s preliminary geological analysis and two prospect pit excavations, it is estimated that total inferred reserves at the Dugway Minerals site may ultimately involve more than 4,000,000 ounces of silver, commercial concentrations of beryllium and other precious and base metals. Planned project activities at Spor Mountain in 2013 include prospecting, exploration and development
Ogden Bay Minerals- Ogden Bay Minerals is a developing mineral excavation project on federal protected wetlands, canals and river systems across 25 square miles of land area known as North Delta, located in West Ogden, Utah. The Company was commissioned by the State of Utah Division of Natural Resources, USDA Natural Resources Conservation Service and Weber County Emergency Management to restore habitat, repair damage, dredge silt and sand and remove debris from the Weber River. Our excavation and harvesting rights are maintained through easement rights obtained from Weber County and a special use river/stream alteration permit as part of a State of Utah/Weber County flood mitigation project. The project contains deposits of alluvial mineral deposits that are created and replenished from 125 miles of river low from the nearby Wasatch Mountin Range. These alluvial mineral deposits have commercial grades of ziron, usable silica, and other heavy mineral ore.
Products
We intend to develop our project mining claims, mineral leases and excavation rights to produce the following specialized mining products:
Copper Ore with Precious Metals Component - Hard rock mineralized material will be drilled, blasted, excavated and hauled, then crushed and classified to customer specifications. We will deliver this product on-demand or just in time to customers on a 24/7 schedule, utilizing truck and pup combos for local deliveries, and rail for regional deliveries. The Union Pacific Railroad main line from Los Angeles to Ogden, Utah, is routed through Milford, Utah, approximately five miles east of our Star Mountain project site.
Mined Mineral Concentrates - Finely divided particles from hard rock mining and recovery operations containing significant enrichments of silver and gold will be upgraded by gravity concentrating methods to contain a minimum 3,000 grams of precious metals per ton of concentrate. Mineral concentrate products are dried, bagged, and shipped to customers.
Refined Precious Metals - During 2013-2014, we plan to develop a refining capacity for up to two tons per day of selected precious metals concentrates from our mining and recovery operations. Precious metals concentrates containing greater than 50% combined silver/gold mixture will be further concentrated, refined, separated and manufactured into bar and ingot product.
| 6 |
Results of Operations for the three and nine months ended September 30, 2013 and 2012.
The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this Quarterly Report.
Revenue.No revenue was generated for the three and nine months ended September 30, 2013 and the three and nine months ended September 30, 2012.
Cost of revenue.The cost of revenue for the three and nine months ended September 30, 2013 and the three and nine months ended September 30, 2012 was zero.
Operating Expenses.Operating expenses were $581,279 and $199,649 for the three months ended September 30, 2013 and September 30, 2012, respectively. The operating expenses were $1,267,166 and $392,038 for the nine months ended September 30, 2013 and September 30, 2012, respectively. The increase is due to increased costs for executive compensation, legal and professional fees related to public filings and compliance as well as increased exploration costs at our Star Mountain project.
Operating Loss.The operating loss was $581,279 and $199,649 for the three months ended September 30, 2013 and September 30, 2012, respectively. The operating loss was $1,267,166 and $392,038 for the nine months ended September 30, 2013 and September 30, 2012, respectively. The increase is due to increased costs for executivecompensation, legal and professional fees related to public filings and compliance as well as increased exploration costs at our Star Mountain project.
Interest Expense.Interest expense, including interest expense–related parties and amortization of debt discount, was $39,123 and $6,794 for the three months ended September 30, 2013 and September 30, 2012, respectively. Interest expense, including interest expense related parties and amortization of debt discount, was $52,972 and $14,441 for the nine months ended September 30, 2013 and September 30, 2012, respectively.
Net Loss.Our net loss was $620,402 and $206,443 for the three months ended September 30, 2013 and September 30, 2012, respectively. Our net loss was $1,380,138 and $406,479 for the nine months ended September 30, 2013 and September 30, 2012, respectively. The increase in net loss was a result of the increases in operating and interest expense discussed above.
Liquidity and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. The Company had cash of $90,642 and $0 of cash as of September 30, 2013 and December 31, 2012, respectively.
At September 30, 2013 and December 31, 2012, current liabilities exceeded current assets creating negative working capital balances of $470,365 and $790,633, respectively.
Net cash used in operating activities was $797,763 and $122,683 for the nine months ended September 30, 2013 and September 30, 2012, respectively.
Net cash provided by financing activities was $1,158,007 and $141,561 for the nine months ended September 30, 2013 and September 30, 2012, respectively. The Company had total assets at September 30, 2013 of $539,074.
| 7 |
Cash Requirements
Our future capital requirements will depend on numerous factors, including the extent we continue exploration activities, the profitability of operations and our ability to control costs. We will be reliant upon shareholder loans, private placements or public offerings of equity to fund any kind of operations.
We do not currently have any contractual restrictions (other than the provisions related to Convertible Note, see NOTE 10) on our ability to incur debt, and, accordingly, we could incur significant amounts of indebtedness to finance operations. Any such indebtedness could contain covenants which would restrict our operations.
Related Party Transactions
At September 30, 2013 and December 31, 2012, we had outstanding net advances and loans from related parties of $0 and $49,993, respectively. At September 30, 2013, we have net advances to related parties of $263,074 and $0, respectively.
At September 30, 2013 and December 31, 2012, we had outstanding convertible debt from a related party of $135,000 and $185,000, respectively.
On August 19, 2014 the Company filed a complaint against Michael Stanford, its former sole director, CEO and largest shareholder based upon the alleged wrongful, fraudulent and tortuous acts involving the Company. The financial statements do not reflect, however, any claims or recovery the Company may realize from a lawsuit the Company filed against Mr. Stanford as a result of his improper conduct. See Part II, Item 1. Legal Proceedings – Michael Stanford Litigation
Off-Balance Sheet Arrangements
There are no 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 investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company”, we are not required to provide the information under Item 3.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls as of the end of the period covered by this report, September 30, 2013. This evaluation was carried out under the supervision and with the participation of our president and chief operating officer, Joseph Marchal, and interim chief financial officer, Donna S. Moore, (the “Certifying Officers”). Based upon that evaluation, our Certifying Officers concluded that as of the end of the period covered by this report, September 30, 2013, our disclosure controls and procedures are ineffective in timely alerting management to material information relating to us and required to be included in our periodic filings with the Securities and Exchange Commission (the “Commission”).
Our certifying officers further concluded that our disclosure controls and procedures are ineffective to ensure that information required to be disclosed by the issuer in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and are also ineffective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow time for decisions regarding required disclosure.
| 8 |
Subsequent to the filing of our initial Form 10-Q for the period ended September 30, 2013, we discovered that as of September 30, 2013, the following material weaknesses existed:
| ● | The Company did not maintain effective controls over the accounting for cash receipts and disbursements. Specifically the lack of these controls permitted our former Chief Executive Officer to use cash for certain related party transaction. The Company discovered that some of these transactions took place without sufficient externally prepared documentation or approvals. Also, certain aspects of the financial reporting process were materially deficient because it lacked a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with the Company’s financial reporting requirements. This material weakness resulted in the Company failing to record the receipt of funds for sales of the Company’s common stock and the accounting for the use of the proceeds from those sales, the incorrect classification of personal expenses of our former Chief Executive Officer and majority shareholder’s personal expenses as expenses of our company resulting in the restatement of its financial statements for the period ended September 30, 2013. |
We expect to be materially dependent upon a third party to provide us with accounting consulting services for the foreseeable future. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses in our disclosure controls and procedures and internal control over financial reporting will not result in errors in our financial statements which could lead to a restatement of those financial statements.
Our management, including our President and Chief Operating Officer and our Interim Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
Changes in Internal Controls Over Financial Reporting
There were no changes in the Company’s internal controls over financial reporting identified in connection with the evaluation of our controls performed during the period ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Michael Stanford Litigation
On August 19, 2014 the Company filed a complaint in the Fifth Judicial District Court, Beaver County, Utah (Civil Case No. 140500023) against Michael Stanford, its former sole director, CEO and its largest shareholder based upon the alleged wrongful, fraudulent and tortuous acts whereby Mr. Stanford committed the pervasive, profound, continuous, repeated, and ongoing wrongful and fraudulent acts and omissions resulting in at least $2,591,359 in losses for the Company, $1,272,321 in fraudulent claimed business expenses, $1,319,038 representing investment monies diverted from the Company and monies deposited directly into Mr. Stanford’s personal accounts and the improper issuance to Mr. Stanford of 25,000,000 shares of the Company’s common stock in exchange for the stock of Bolcán Mining Corporation in May 2012 whose assets were highly inflated at the time the Company completed this acquisition. The complaint also alleges that Mr. Stanford misappropriated for his own personal uses $750,000 of investment capital that was to be invested in the Company, the failure to disclose his history of litigation, his general fraudulent conduct in dealing with the Company and threats of violence against the Company’s officers and other persons related to the Company.
| 9 |
Based on this conduct, the complaint includes a claim for an accounting, conversion, fraudulent misrepresentation and fraudulent nondisclosure, interference with present and prospective economic relations, declaratory judgment, and injunctive relief. The complaint seeks, among other things, monetary damages of $5,873,675, injunctive relief and punitive damages, cancellation of 25,000,000 shares of the Company’s common stock and the Company’s costs, expenses and attorney’s fees associated with the this lawsuit.
On May 27, 2014, Mr. Stanford resigned as an officer and director of the Company. Our current management had no knowledge of Mr. Stanford’s improper conduct as alleged in the complaint which relate to his actions prior to his resignation.
The Company believes that its claims in the above case are substantial for the reasons discussed above. Litigation is, however, inherently unpredictable. The outcome of this lawsuit is subject to significant uncertainties and, therefore, determining the likelihood of a recovery and/or the measurement of any recovery is complex. Consequently, we are unable to estimate the range of reasonably possible recovery. Our assessment is based on an estimate and assumption that has been deemed reasonable by management, but the assessment process relies heavily on an estimate and assumption that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change that estimate and assumption.
As a “smaller reporting company”, we are not required to provide disclosure under this Item 1A.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On August 12, 2013, the Company issued 5,360,000 shares of common stock for $750,000 received during the period ending September 30, 2013.
On September 20, 2013, the Company issued 230,426 shares of common stock for professional services valued at $1.19 per share.
The recipients are accredited or otherwise sophisticated investors who had access to business and financial information on the Company. The issuances were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on an exemption provided by Section 4(2) of that act.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4.MINE SAFETY DISCLOSURES.
Pursuant to Section 1503(a) of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. At this time, we have no safety violations, orders, citations, related assessments or legal actions, or mining-related fatalities to report.
None.
| 10 |
| No. | Description | |
| 10.2 | 12% Convertible Redeemable Promissory Note dated August 19, 2013 between Jameson Stanford Resources Corporation and Joseph Marchal (Incorporated by reference to Exhibit 10.1 in the Company’s Form 8-K filed with the SEC on August 29, 2013). | |
| 10.3 | Pledge and Security Agreement dated August 19, 2013 between Jameson Stanford Resources Corporation and Joseph Marchal (Incorporated by reference to Exhibit 10.2 in the Company’s Form 8-K filed with the SEC on August 29, 2013). | |
| 10.4 | Common Stock Purchase Warrant dated August 19, 2013 between Jameson Stanford Resources Corporation and Joseph Marchal (Incorporated by reference to Exhibit 10.3 in the Company’s Form 8-K filed with the SEC on August 29, 2013). | |
| 10.5 | 12% Convertible Redeemable Promissory Note dated August 19, 2013 between Jameson Stanford Resources Corporation and Joseph Marchal (Incorporated by reference to Exhibit 10.1 in the Company’s Form 8-K filed with the SEC on August 29, 2013). | |
| 10.6 | Pledge and Security Agreement dated August 19, 2013 between Jameson Stanford Resources Corporation and Joseph Marchal (Incorporated by reference to Exhibit 10.2 in the Company’s Form 8-K filed with the SEC on August 29, 2013). | |
| 10.7 | Common Stock Purchase Warrant dated August 19, 2013 between Jameson Stanford Resources Corporation and Joseph Marchal (Incorporated by reference to Exhibit 10.3 in the Company’s Form 8-K filed with the SEC on August 29, 2013). | |
| 31.1 | Section 302 Certificate of President and Chief Operating Officer.* | |
| 31.2 | Section 302 Certificate of Principal Financial and Accounting Officer.* | |
| 32.1 | Section 906 Certificate of President and Chief Operating Officer.* | |
| 32.2 | Section 906 Certificate of Principal Financial and Accounting Officer.* | |
| 101.INS | XBRL INSTANCE DOCUMENT ** | |
| 101.SCH | XBRL TAXONOMY EXTENSION SCHEMA ** | |
| 101.CAL | XBRL TAXONOMY EXTENSION CALCULATION LINKBASE ** | |
| 101.DEF | XBRL TAXONOMY EXTENSION DEFINITION LINKBASE ** | |
| 101.LAB | XBRL TAXONOMY EXTENSION LABEL LINKBASE ** | |
| 101.PRE | XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE ** |
| * | Filed herewith. |
| ** | In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed”. |
| 11 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this restated report to be signed on its behalf by the undersigned thereunto duly authorized.
| Jameson Stanford Resources Corporation | ||
| Date: September 22, 2014 | By: | /s/ Joseph Marchal |
| Joseph Marchal | ||
| President and Chief Operating Officer | ||
| (Principal Executive Officer) | ||
| Date: September 22, 2014 | By: | /s/ Donna S Moore |
| Donna S. Moore | ||
| Interim Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
| 12 |