U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Mark One
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the period ended August 31, 2009
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to _______
COMMISSION FILE NUMBER: 000-51583
GENEVA RESOURCES, INC.
______________________________________________
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 98-0441019
_______________________________ ___________________
(STATE OR OTHER JURISDICTION OF I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2533 N. CARSON STREET, SUITE 125
CARSON CITY, NEVADA 89706
________________________________________
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(775) 348-9330
___________________________
(ISSUER'S TELEPHONE NUMBER)
SECURITIES REGISTERED PURSUANT TO SECTION NAME OF EACH EXCHANGE ON WHICH
12(b) OF THE ACT: REGISTERED:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.001PAR VALUE
(TITLE OF CLASS)
Indicate by checkmark whether the issuer: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 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 is a large accelerated filed, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by checkmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO ISSUER INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS.
N/A
Indicate by checkmark whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act
of 1934 after the distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding Outstanding as of October 12, 2009
of each of the issuer's classes of common
stock, as of the most practicable date:
Class
Common Stock, $0.001 par value 38,536,862
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
2
GENEVA RESOURCES, INC.
FORM 10-Q
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Balance Sheets 4
Statements of Operations (unaudited) 5
Statements of Cash Flows (unaudited) 6
Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
Item 4. Controls and Procedures 23
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
Item 3. Defaults Upon Senior Securities 27
Item 4 Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 27
Item 6. Exhibits 27
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENEVA RESOURCES, INC.
FINANCIAL STATEMENTS
AUGUST 31, 2009
(Unaudited)
4
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
August 31, May 31,
2009 2009
_____________________________________________________________________________________________________________________________
(unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash $ 794 $ 2,075
Available for sale securities (Notes 2 and 3 (b)) 45,000 55,000
_____________________________________________________________________________________________________________________________
TOTAL CURRENT ASSETS 45,794 57,075
Deposit on property 165,010 165,010
_____________________________________________________________________________________________________________________________
TOTAL ASSETS $ 210,804 $ 222,085
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 234,040 $ 215,591
Shareholder's loan and accrued interest (Note 7) 2,031,719 1,987,899
_____________________________________________________________________________________________________________________________
TOTAL CURRENT LIABILITIES 2,265,759 2,203,490
_____________________________________________________________________________________________________________________________
GOING CONCERN CONTINGENCY AND COMMITMENTS (Note 1)
STOCKHOLDERS' DEFICIT
Capital stock (Note 4)
Authorized
200,000,000 shares of common stock, $0.001 par value,
Issued and outstanding
38,536,862 shares of common stock (May 31, 2009 -38,536,862) 38,537 38,537
Additional paid-in capital 5,025,879 5,025,879
Accumulated other comprehensive loss (225,000) (215,000)
Deficit accumulated during the exploration stage (6,894,371) (6,830,821)
_____________________________________________________________________________________________________________________________
TOTAL STOCKHOLDERS' DEFICIT (2,054,955) (1,981,405)
_____________________________________________________________________________________________________________________________
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 210,804 $ 222,085
=============================================================================================================================
The accompanying notes are an integral part of these financial statements
5
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS
Three months Three months April 5, 2004
ended ended (inception) to
August 31, 2009 August 31, 2008 August 31, 2009
__________________________________________________________________________________________________________________________________
REVENUE $ - $ - $ 46,974
__________________________________________________________________________________________________________________________________
DIRECT COSTS - - 56,481
__________________________________________________________________________________________________________________________________
GROSS MARGIN (LOSS) - - (9,507)
__________________________________________________________________________________________________________________________________
GENERAL AND ADMINISTRATIVE EXPENSES
Office and general 1,828 7,130 145,523
Consulting fees 5,000 83,688 701,934
Marketing expenses - - 894,738
Management fees - - 1,241,406
Mineral property expenditures (Note 3) - 100,000 8,258,312
Professional fees 12,902 67,871 970,516
__________________________________________________________________________________________________________________________________
TOTAL GENERAL & ADMINISTRATION EXPENSES (19,730) (258,689) (12,212,429)
__________________________________________________________________________________________________________________________________
NET OPERATING LOSS (19,730) (258,689) (12,221,936)
__________________________________________________________________________________________________________________________________
OTHER INCOME (EXPENSE)
Gain on extinguishment of accrued liability - - 30,000
Net gain on settlements - - 5,590,784
Interest expense (43,820) (34,683) (293,219)
__________________________________________________________________________________________________________________________________
TOTAL OTHER INCOME (EXPENSE) (43,820) (34,683) 5,327,565
__________________________________________________________________________________________________________________________________
NET LOSS (63,550) (293,372) (6,894,371)
__________________________________________________________________________________________________________________________________
COMPREHENSIVE LOSS
Change in market value of available for sale securities (10,000) - (225,000)
__________________________________________________________________________________________________________________________________
COMPREHENSIVE LOSS $ (73,550) $ (293,372) $ (7,119,371)
==================================================================================================================================
LOSS PER COMMON SHARE - BASIC $ (0.00) $ (0.01)
================================================================================================================
COMPREHENSIVE LOSS PER COMMON SHARE - BASIC $ (0.00) $ (0.01)
================================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 38,536,862 38,136,862
- BASIC
================================================================================================================
The accompanying notes are an integral part of these financial statements
6
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Three months Three months April 5, 2004
ended ended (inception) to
August 31, 2009 August 31, 2008 August 31, 2009
_________________________________________________________________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (63,550) $ (293,372) $ (6,894,371)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash mineral property expenditures (recoveries) - - 7,415,000
Non-cash net gain on settlement - - (5,490,784)
Non-cash gain on extinguishment of accrued liability - - (30,000)
Stock-based compensation - - 1,354,171
Changes in operating assets and liabilities:
Increase in deposits - (430) (100,010)
Accrued interest on shareholder's loan 43,820 34,683 293,219
Due to related parties - - 116,500
Accounts payable and accrued liabilities 18,449 (48,633) 1,024,402
_________________________________________________________________________________________________________________________________
NET CASH USED IN OPERATING ACTIVITIES (1,281) (307,752) (2,311,873)
_________________________________________________________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on sale and subscriptions of common stock - - 574,167
Proceeds from shareholder advances - 300,000 1,738,500
_________________________________________________________________________________________________________________________________
NET CASH PROVIDED BY FINANCING ACTIVITIES - 300,000 2,312,667
_________________________________________________________________________________________________________________________________
NET INCREASE (DECREASE) IN CASH (1,281) (7,752) 794
CASH, BEGINNING 2,075 9,356 -
_________________________________________________________________________________________________________________________________
CASH, ENDING $ 794 $ 1,604 $ 794
=================================================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH INVESTING AND FINANCING ACTIVITIES
Cash paid during the period for:
Interest $ - $ - $ -
=================================================================================================================================
Income taxes $ - $ - $ -
=================================================================================================================================
Shares issued for settlement of liability $ - $ - $ 1,096,078
=================================================================================================================================
Shares issued as deposit on option to purchase in mineral properties $ - $ - $ 65,000
=================================================================================================================================
The accompanying notes are an integral part of these financial statements
7
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2009 (UNAUDITED)
________________________________________________________________________________
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
________________________________________________________________________________
The Company was incorporated in the State of Nevada on April 5, 2004. The
Company was initially formed to engage in the business of reclaiming and
stabilizing land in preparation for construction in the United States of
America. On November 27, 2006, the Company filed Articles of Merger with the
Secretary of State of Nevada in order to effectuate a merger whereby the Company
(as Revelstoke Industries, Inc.) would merge with its wholly-owned subsidiary,
Geneva Gold Corp. This merger became effective as of December 1, 2006 and the
Company changed its name to Geneva Gold Corp. On March 1, 2007, the Company
(Geneva Gold Corp.) merged with its wholly-owned subsidiary, Geneva Resources,
Inc., pursuant to Articles of Merger that the Company filed with the Nevada
Secretary of State. This merger became effective March 1, 2007 and the Company
changed its name to Geneva Resources, Inc.
During 2007, the Company entered the business of exploration of precious metals
with a focus on the exploration and development of gold deposits in North
America and Internationally. During this period the Company entered into Option
Agreements to obtain mineral leases in Canada, Panama, Peru and Nigeria.
The Company has a fiscal year of May 31. On May 5, 2006, the Company completed a
forward stock split by the issuance of 42 new shares for each 1 outstanding
share of the Company's common stock. On October 13, 2006, the Company completed
a forward stock split by the issuance of 4 new shares for each 1 outstanding
share of the Company's stock.
GOING CONCERN
To date the Company has generated minimal revenues from its business operations
and has incurred operating losses since inception of $6,894,371. As at August
31, 2009, the Company has a working capital deficit of $2,219,965. The Company
requires additional funding to meet its ongoing obligations and to fund
anticipated operating losses. The ability of the Company to continue as a going
concern is dependant on raising capital to fund its initial business plan and
ultimately to attain profitable operations. Accordingly, these factors raise
substantial doubt as to the Company's ability to continue as a going concern.
The Company intends to continue to fund its mineral exploration business by way
of private placements and advances from related parties as may be required.
These financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts, or amounts and
classification of liabilities that might result from this uncertainty.
UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for financial information and with
the instructions to Form 10-Q. They do not include all information and footnotes
required by United States generally accepted accounting principles for complete
financial statements. However, except as disclosed herein, there have been no
material changes in the information disclosed in the notes to the financial
statements for the year ended May 31, 2009 included in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission. The
unaudited financial statements should be read in conjunction with those
financial statements included in the Form 10-K. In the opinion of Management,
all adjustments considered necessary for a fair presentation, consisting solely
of normal recurring adjustments, have been made. Operating results for the three
months ended August 31, 2009 are not necessarily indicative of the results that
may be expected for the year ending May 31, 2010.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
________________________________________________________________________________
RECLASSIFICATION- DUE TO RELATED PARTY
Certain reclassifications have been made in the prior year's financial
statements.
BASIS OF PRESENTATION
These financial statements are presented in United States dollars and have been
prepared in accordance with generally accepted accounting principles in the
United States of America.
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of expenses during the period. Accordingly, actual results
could differ from those estimates.
8
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2009 (UNAUDITED)
________________________________________________________________________________
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
________________________________________________________________________________
MINERAL PROPERTY EXPENDITURES
The Company is primarily engaged in the acquisition, exploration and development
of mineral properties.
Mineral property acquisition costs are capitalized in accordance with EITF 04-2
when management has determined that probable future benefits consisting of a
contribution to future cash inflows have been identified and adequate financial
resources are available or are expected to be available as required to meet the
terms of property acquisition and budgeted exploration and development
expenditures. Mineral property acquisition costs are expensed as incurred if the
criteria for capitalization are not met. In the event that mineral property
acquisition costs are paid with Company shares, those shares are recorded at the
estimated fair value at the time the shares are due in accordance with the terms
of the property agreements.
Mineral property exploration costs are expensed as incurred.
When it has been determined that a mineral property can be economically
developed as a result of establishing proven and probable reserves and
pre-feasibility, the costs incurred to develop such property are capitalized.
Estimated future removal and site restoration costs, when determinable are
provided over the life of proven reserves on a units-of-production basis. Costs,
which include production equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards. Any charge is included
in exploration expense or the provision for depletion and depreciation during
the period and the actual restoration expenditures are charged to the
accumulated provision amounts as incurred.
As of the date of these financial statements, the Company has incurred only
property option payments and exploration costs which have been expensed.
To date the Company has not established any proven or probable reserves on its
mineral properties.
ASSET RETIREMENT OBLIGATIONS
The Company has adopted the provisions of SFAS No. 143 "Accounting for Asset
Retirement Obligations," which establishes standards for the initial measurement
and subsequent accounting for obligations associated with the sale, abandonment
or other disposal of long-lived tangible assets arising from the acquisition,
construction or development and for normal operations of such assets. The
adoption of this standard has had no effect on the Company's financial position
or results of operations. As of August 31, 2009, any potential costs relating to
the ultimate disposition of the Company's mineral property interests are not yet
determinable.
INCOME TAXES
The Company follows the liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
balances. Deferred tax assets and liabilities are measured using enacted or
substantially enacted tax rates expected to apply to the taxable income in the
years in which those differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the date of enactment or
substantive enactment. As at August 31, 2009, the Company had net operating loss
carryforwards, however, due to the uncertainty of realization, the Company has
provided a full valuation allowance for the deferred tax assets resulting from
these loss carryforwards. Deferred income taxes are reported for timing
differences between items of income or expense reported in the financial
statements and those reported for income tax purposes in accordance with SFAS
No. 109, "Accounting for Income Taxes," which requires the use of the
asset/liability method of accounting for income taxes. Deferred income taxes and
tax benefits are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases, and for tax loss and credit
carry-forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The Company
provides for deferred taxes for the estimated future tax effects attributable to
temporary differences and carry-forwards when realization is more likely than
not.
9
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2009 (UNAUDITED)
________________________________________________________________________________
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
________________________________________________________________________________
AVAILABLE FOR SALE SECURITIES
The Company holdings in marketable securities classified as available-for-sale
are carried at fair value. The carrying value of marketable securities is
reviewed each reporting period for declines in value that are considered to be
other-than temporary and, if appropriate, the investments are written down to
their estimated fair value. Realized gains and losses and declines in value
judged to be other-than-temporary on available for sale securities are included
in the Company's statements of operations. Unrealized gains and unrealized
losses deemed temporary are included in accumulated other comprehensive income
(loss).
The following disclosures are required by SFAS No. 157, "Fair Value
Measurements" in connection with assets and liabilities whose carrying amounts
are subject to fair value measures:
Fair Value Measurements at August 31, 2009
Quoted Prices in Significant Other Significant Other
August 31, 2009 Active Market Observable Inputs Unobservable Inputs May 31, 2009
(Level 1) (Level 2) (Level 3)
______________________________________________________________________________________________________________________________
Available for sale securities $ 45,000 $ 45,000 $ - $ - $ 55,000
______________________________________________________________________________________________________________________________
Total $ 45,000 $ 45,000 $ - $ - $ 55,000
==============================================================================================================================
In connection with the Company's available for sale securities, to August 31,
2009 and May 31, 2009, no realized or unrealized gains and losses have been
recorded in operations and all unrealized gains and losses have been recorded as
components of accumulated other comprehensive income (loss).
NET INCOME (LOSS) PER SHARE
The Company computes income (loss) per share in accordance with SFAS No. 128,
"Earnings per Share" which requires presentation of both basic and diluted
earnings per share on the face of the statement of operations. Basic income
(loss) per share is computed by dividing net income (loss) available to common
shareholders by the weighted average number of outstanding common shares during
the period. Diluted income (loss) per share gives effect to all dilutive
potential common shares outstanding during the period. Dilutive loss per share
excludes all potential common shares if their effect is anti-dilutive.
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in United States dollars. In accordance
with SFAS No. 52, "Foreign Currency Translation", foreign denominated monetary
assets and liabilities are translated to their United States dollar equivalents
using foreign exchange rates which prevailed at the balance sheet date. Revenue
and expenses are translated at average rates of exchange during the period.
Related translation adjustments are reported as a separate component of
stockholders' equity, whereas gains or losses resulting from foreign currency
transactions are included in results of operations. To August 31, 2009, the
Company has not recorded any translation adjustments into stockholders' equity.
STOCK-BASED COMPENSATION
On June 1, 2006, the Company adopted the fair value recognition provisions of
Financial Accounting Standards Board ("FASB") Statement No. 123(R), SHARE-BASED
PAYMENT, ("SFAS 123(R)"). The Company adopted SFAS 123(R) using the
modified-prospective-transition method. Under this method, compensation cost
recognized for the year ended May 31, 2007 includes: a) compensation cost for
all share-based payments granted prior to, but not yet vested as of May 31,
2006, based on the grant-date fair value estimated in accordance with the
original provisions of SFAS 123, and b) compensation cost for all share-based
payments granted subsequent to May 31, 2006, based on the grant-date fair value
estimated in accordance with the provisions of SFAS 123(R). In addition,
deferred stock compensation related to non-vested options is required to be
eliminated against additional paid-in capital upon adoption of SFAS 123(R). The
results for the prior periods were not restated.
10
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2009 (UNAUDITED)
________________________________________________________________________________
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
________________________________________________________________________________
STOCK-BASED COMPENSATION (CONTINUED)
The Company accounts for equity instruments issued in exchange for the receipt
of goods or services from other than employees in accordance with SFAS No.
123(R) and the conclusions reached by the Emerging Issues Task Force ("EITF") in
Issue No. 96-18. Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity instruments
issued for consideration other than employee services is determined on the
earliest of a performance commitment or completion of performance by the
provider of goods or services as defined by EITF 96-18.
FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the requirements of SFAS No. 107, the Company has determined
the estimated fair value of financial instruments using available market
information and appropriate valuation methodologies. The fair value of financial
instruments classified as current assets or liabilities approximate their
carrying value due to the short-term maturity of the instruments.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles--a
replacement of FASB Statement No. 162" ("SFAS 168"). SFAS 168 replaces SFAS No.
162, THE HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, and establishes
the FASB Accounting Standards Codification ("Codification") as the source of
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with GAAP. Rules and interpretive releases of the Securities and
Exchange Commission ("SEC") under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. The FASB will no longer issue
new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead the FASB will issue Accounting Standards
Updates. Accounting Standards Updates will not be authoritative in their own
right as they will only serve to update the Codification. The issuance of SFAS
168 and the Codification does not change GAAP. SFAS 168 becomes effective for
interim and annual periods ending after September 15, 2009. Management does not
expect the adoption of SFAS 168 to have a material impact on the Company's
financial position, cash flows and results of operations
In June 2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation
No. 46(R)," ("SFAS 167"). The amendments include: (1) the elimination of the
exemption for qualifying special purpose entities, (2) a new approach for
determining who should consolidate a variable-interest entity, and (3) changes
to when it is necessary to reassess who should consolidate a variable-interest
entity. SFAS 167 is effective for the first annual reporting period beginning
after November 15, 2009 and for interim periods within that first annual
reporting period. The Company will adopt SFAS 167 in fiscal 2010. The Company
does not expect that the adoption of SFAS 167 will have a material impact on the
financial statements.
In June 2009, the FASB issued SFAS No. 166, "Accounting for Transfers of
Financial Assets, an amendment to SFAS No. 140," ("SFAS 166"). SFAS 166
eliminates the concept of a "qualifying special-purpose entity," changes the
requirements for derecognizing financial assets, and requires additional
disclosures in order to enhance information reported to users of financial
statements by providing greater transparency about transfers of financial
assets, including securitization transactions, and an entity's continuing
involvement in and exposure to the risks related to transferred financial
assets. SFAS 166 is effective for fiscal years beginning after November 15,
2009. The Company will adopt SFAS 166 in fiscal 2010. The Company does not
expect that the adoption of SFAS 166 will have a material impact on the
financial statements.
In June 2009, the FASB issued SFAS No. 165, "Subsequent Events," ("SFAS No.
165"). SFAS 165 establishes general standards of accounting for and disclosure
of events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. SFAS 165 applies to both
interim financial statements and annual financial statements. SFAS 165 is
effective for interim or annual financial periods ending after June 15, 2009.
SFAS 165 does not have a material impact on our financial statements.
In May 2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts" ("SFAS 163"). SFAS 163 clarifies how SFAS 60, ACCOUNTING
AND REPORTING BY INSURANCE ENTERPRISES applies to financial guarantee insurance
contracts issued by insurance enterprises, including the recognition and
measurement of premium revenue and claim liabilities. It also requires expanded
disclosures about financial guarantee insurance contracts. SFAS 163 is effective
for the Company's
11
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2009 (UNAUDITED)
________________________________________________________________________________
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
________________________________________________________________________________
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
interim period commencing June 1, 2009, except for disclosures about an
insurance enterprise's risk-management activities, which were effective for the
Company's interim period commencing June 1, 2008. The adoption of SFAS 163 did
not have a material impact on the Company's financial position, cash flows and
results of operations.
NOTE 3 -MINERAL EXPLORATION PROPERTIES
________________________________________________________________________________
(A) VILCORO GOLD PROPERTY
On February 23, 2007, the Company entered into a Property Option Agreement with
St. Elias Mines Ltd., ("St. Elias") a publicly traded company on the TSX-V
exchange, to acquire not less than an undivided 66% legal, beneficial and
registerable interest in certain mining leases in Peru comprised of
approximately 600 hectares in Peru.
On December 1, 2007, the Company entered into an extension agreement with St.
Elias (the "December Extension Agreement"). The December Extension Agreement (i)
acknowledges that in accordance with the terms and provisions of the Property
Option Agreement, the Company must incur and pay exploration expenditures of not
less than $500,000 prior to January 17, 2008, and (ii) provides an extension
until March 31, 2008 to incur and pay such Exploration Expenditures. On June 4,
2008, an indefinite extension was granted by St. Elias to pay such Exploration
Expenditures, based on the Operator's work on schedule.
Under the terms of the Property Option Agreement, and in order to exercise its
Option to acquire the properties, the Company is required to make the following
non-refundable cash payments to St. Elias totaling $350,000 in the following
manner:
1. Payment of $50,000 in cash (paid).
2. The second payment of $100,000 cash and 50,000 shares of the
Company's common stock are due on or before the twelve-month
anniversary of the signing of the Property Option Agreement
(paid).
3. The third payment of $200,000 cash is due on or before the
twenty-fourth-month anniversary of the signing of the Property
Option Agreement.
The Company is also required to incur costs totaling $2,500,000 as follows:
1. expenditures of $500,000 are to be incurred on or before the
twelve month anniversary (subsequently indefinitely extended
as described above) of the signing of the Property Option
Agreement. ($551,000 was incurred from the inception of the
agreement through May 31, 2009)
2. expenditures of $750,000 are to be incurred on or before the
twenty-fourth-month anniversary of the signing of the Property
Option Agreement; and
3. expenditures of $1,250,000 are to be incurred on or before the
thirty-sixth-month anniversary of the signing of the Property
Option Agreement.
Also under the terms of the Property Option Agreement, St. Elias will be the
operator of the properties and will receive an 8% operator fee on all
exploration expenditures. Once the Company exercises the Option, the Company
agrees to pay 100% of all ongoing exploration, development and production costs
until commercial production and the Company has the right to receive 100% of any
cash flow from commercial production of the properties until it has recouped its
production costs, after which the cash flow will be allocated 66% to the Company
and 34% to St. Elias.
On November 10, 2008, the Company commenced legal proceedings in the Supreme
Court of British Columbia, Canada against each of St. Elias and John Brophy P.
Geol. The Company is seeking rescission of the property option agreement and the
return of all funds and shares advanced by the Company to St. Elias. The Company
alleges that St. Elias failed to properly discharge its duty as an operator of
the Vilcoro Property and also alleges that each of St. Elias and John Brophy
failed to provide the Company complete and accurate information relating to the
ownership of the Vilcoro Property and to the ownership of the adjacent property,
including failing to disclose that John Brophy and his wife had an interest in
the Vilcoro Property and the adjacent property. The Company also has alleged
that St. Elias used some of the exploration funds provided by the Company to
fund the exploration of the adjoining property.
12
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2009 (UNAUDITED)
________________________________________________________________________________
NOTE 3 -MINERAL EXPLORATION PROPERTIES (CONTINUED)
________________________________________________________________________________
(A) VILCORO GOLD PROPERTY (CONTINUED)
A statement of Defense was filed by St. Elias and John Brophy on December 23,
2008, denying the majority of the allegations made by Geneva Resources. In
addition St. Elias and John Brophy also filed a counter claim against Geneva for
abuse of process and punitive damages. All allegations of Geneva, St. Elias and
John Brophy remain to be proved in Court.
During fiscal 2009, the Company recorded a mineral property recovery of $50,000
in connection with the return of funds originally paid into trust to fund
exploration activities.
(B) SAN JUAN PROPERTY
On November 16, 2006, the Company entered into a Property Option Agreement with
Petaquilla Minerals Ltd ("Petaquilla"). Petaquilla therein granted the Company
the sole and exclusive option to acquire up to a 70% undivided interest in and
to five exploration concessions situated in the Republic of Panama owned and
controlled by Petaquilla's wholly-owned subsidiary.
During 2007, certain disputes arose between the Company and Petaquilla which
were resolved during 2008 by way of a settlement agreement (the "Settlement"),
mutual release and the ultimate termination of the original option agreement.
Pursuant to the terms of the Settlement: (i) Petaquilla shall issue 100,000
shares of its common stock to the Company, subject to pooling and release in
four equal monthly tranches commencing no later than December 31, 2008 and
certain other conditions, (ii) the 4,000,000 shares of the restricted common
stock previously issued by the Company to Petaquilla shall be returned to the
Company; and (iii) the $100,000 previously paid by the Company in order to
exercise the initial portion of the Option shall be returned to the Company.
As of May 31, 2008, the Company had received $100,000 and the return of the
4,000,000 restricted shares of the Company's common stock with an estimated fair
value of $5,440,000. In addition, the Company recorded the 100,000 common shares
of Petaquilla, with an estimated fair value of $270,000, as accounts receivable
as of May 31, 2008. The total proceeds of $5,810,000 was included in amounts
recorded as gain on settlements during 2008.
During fiscal 2009, the Company received the 100,000 common shares receivable
from Petaquilla, previously valued at $270,000. As of August 31, 2009 the
100,000 shares received had an estimated fair value of $45,000 ($0.45 per share)
(May 31, 2009 - $55,000; $0.55 per share).
NOTE 4 - STOCKHOLDERS' DEFICIT
________________________________________________________________________________
The Company's capitalization is 200,000,000 common shares with a par value of
$0.001 per share. On January 12, 2007, shareholders consented to increase the
authorized share capital of the Company from 50,000,000 shares of common stock
to 200,000,000 shares of common stock with the same par value of $0.001 per
share.
On May 1, 2006, a majority of shareholders and the directors of the Company
approved a special resolution to undertake a forward stock split of the common
stock of the Company on a 42 new shares for 1 old share basis whereby 16,400,000
common shares were issued pro-rata to shareholders of the Company as of the
record date on May 1, 2006.
On September 27, 2006, four founding shareholders returned 30,000,000 of their
restricted founders' shares, previously issued at prices ranging from $0.0004 -
$0.00225 per share, to treasury and the shares were subsequently cancelled by
the Company. The shares were returned to treasury for no consideration to the
founding shareholders.
On October 13, 2006, a majority of the Board of Directors approved by way of a
stock dividend to undertake a forward stock split of the common stock of the
Company on a 4 new shares for 1 old share basis whereby 27,900,000 common shares
were issued pro-rata to shareholders of the Company as of October 13, 2006.
13
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2009 (UNAUDITED)
________________________________________________________________________________
NOTE 4 - STOCKHOLDERS' DEFICIT (CONTINUED)
________________________________________________________________________________
All references in these financial statements to number of common shares, price
per share and weighted average number of common shares outstanding prior to the
42:1 forward split and the 4:1 forward split have been adjusted to reflect these
stock splits on a retroactive basis, unless otherwise noted.
On December 1, 2006, the Company issued 4,000,000 common shares valued at
$7,400,000 in connection with the San Juan Property Option Agreement
In August 2007, the Company received $400,000 towards a planned private
placement of Units to be offered at $1.00 per unit with each unit consisting of
one common share and one warrant to acquire an additional common share,
exercisable at $1.50 for twelve months. On February 29, 2008, the Company
changed the terms of the planned private placement of Units now to be offered at
$1.00 per unit with each unit consisting of one common share only. The 400,000
shares were issued on September 9, 2008.
On October 15, 2007, the Company issued 10,000 common shares with a fair value
of $15,000 as a finder's fee payment in connection with the Vilcoro Gold
Property Option Agreement.
On January 31, 2008, the Company issued 50,000 common shares to St. Elias Mines
Ltd. with a fair value of $65,000 in connection with the Vilcoro Gold Property
Option Agreement (Refer Note 3a).
On March 14, 2008, the Company returned to treasury the 4,000,000 common shares
with a fair value of $5,440,000 in connection with the settlement with
Petaquilla (Refer to Note 3b).
On May 29, 2008, the Company issued 86,500 common shares at $1.25 per share
totaling $108,125, in settlement of $86,500 in debt owed by the Company to the
president of the Company (Refer to Note 6), resulting in a $21,625 loss on the
debt settlement.
On May 29, 2008, the Company issued 790,362 common shares at $1.25 per share
totaling $987,953, in settlement of $790,362 in debt owed by the Company to a
supplier of the Company, resulting in a $197,591 loss on the debt settlement.
On September 9, 2008, the Company issued 400,000 common shares at $1.00 per
share for proceeds of $400,000 which were received during the year ended May 31,
2008.
Subsequent to August 31, 2009, the Company received $350,000 towards a planned
private placement of Units to be offered at $0.05 per unit with each unit
consisting of one common share and one warrant to acquire an additional common
share, exercisable at $0.25 for twelve months.
NOTE 5 - STOCK OPTION PLAN
________________________________________________________________________________
On May 9, 2007, the Board of Directors of the Company ratified, approved and
adopted a Stock Option Plan for the Company in the amount of 5,000,000 shares
with an exercisable period up to 10 years. In the event an optionee ceases to be
employed by or to provide services to the Company for reasons other than cause,
any Stock Option that is vested and held by such optionee may be exercisable
within up to ninety calendar days after the effective date that his position
ceases. No Stock Option granted under the Stock Option Plan is transferable. Any
Stock Option held by an optionee at the time of his death may be exercised by
his estate within one year of his death or such longer period as the Board of
Directors may determine. On May 9, 2007, the Board of Directors of the Company
ratified and approved under the Company's existing Stock Option Plan the
issuance of 1,500,000 shares for ten years at $1.00 per share.
14
GENEVA RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2009 (UNAUDITED)
________________________________________________________________________________
NOTE 5 - STOCK OPTION PLAN (CONTINUED)
________________________________________________________________________________
On May 9, 2007, the Company granted 1,500,000 stock options to officers,
directors and consultants of the Company at $1.00 per share. The term of these
options are ten years. The total fair value of these options at the date of
grant was $965,671, and was estimated using the Black-Scholes option pricing
model with an expected life of 10 years, a risk free interest rate of 4.49%, a
dividend yield of 0% and expected volatility of 164% and was recorded as a stock
based compensation expense in the year ended May 31, 2007.
On April 28, 2008, the Company granted 350,000 stock options to a director of
the Company at $1.20 per share. The term of these options are ten years. The
total fair value of these options at the date of grant was $388,500 and was
estimated using the Black-Scholes option pricing model with an expected life of
10 years, a risk free interest rate of 3.86%, a dividend yield of 0% and
expected volatility of 126% and has been recorded as a stock based compensation
expense in the year ended May 31, 2008.
A summary of the Company's stock options as of August 31, 2009, and changes
during the year then ended is presented below:
Number of Options Weighted average exercise Weighted average remaining
Price per share Contractual life (in years)
__________________________________________________________________________________________________________________________
OUTSTANDING AT MAY 31, 2008 1,850,000 $ 1.04 9.12
Granted during the year - - -
Exercised during the year - - -
__________________________________________________________________________________________________________________________
OUTSTANDING AT MAY 31, 2009 1,850,000 1.04 8.12
Granted during the period - - -
Exercised during the period - - -
__________________________________________________________________________________________________________________________
OUTSTANDING AT AUGUST 31, 2009 1,850,000 $ 1.04 7.87
==========================================================================================================================
NOTE 6 - RELATED PARTY TRANSACTIONS
________________________________________________________________________________
During the three month period ended August 31, 2009, the Company incurred $Nil
in management fees to officers and directors (Three months ended August 31, 2008
- - $Nil). Any transactions with related parties are in the normal course of
operations and, in management's opinion, undertaken with similar terms and
conditions as transactions with unrelated parties.
NOTE 7 - SHAREHOLDER'S LOAN
________________________________________________________________________________
On November 14, 2006, a significant shareholder of the Company advanced $100,000
on behalf of the Company regarding a previous property option agreement.
Additional advances of $303,500 and $795,000 were received during the years
ended May 31, 2007 and May 31, 2008, respectively. During the year ended May 31,
2009, an additional $540,000 was advanced by the same shareholder under the same
terms and conditions. These amounts are unsecured, bear interest at 10% per
annum, and have no set terms of repayment. The total amount outstanding as of
August 31, 2009 including accrued interest is $2,031,719 (May 31, 2009 -
$1,987,899). Subsequent to August 31, 2009, $325,000 was paid in principal and
accrued interest to the lender by the Company.
NOTE 8 - SUBSEQUENT EVENTS
________________________________________________________________________________
Subsequent to August 31, 2009, the Company received $350,000 towards a planned
private placement of Units to be offered at $0.05 per unit with each unit
consisting of one common share and one warrant to acquire an additional common
share, exercisable at $0.25 for twelve months.
15
FORWARD LOOKING STATEMENTS
Statements made in this Form 10-Q that are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of
Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the
Securities Exchange Act of 1934. These statements often can be identified by the
use of terms such as "may," "will," "expect," "believe," "anticipate,"
"estimate," "approximate," or "continue," or the negative thereof. We intend
that such forward-looking statements be subject to the safe harbors for such
statements. We wish to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Any
forward-looking statements represent management's best judgment as to what may
occur in the future. However, forward-looking statements are subject to risks,
uncertainties and important factors beyond our control that could cause actual
results and events to differ materially from historical results of operations
and events and those presently anticipated or projected. We disclaim any
obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statement or to reflect the
occurrence of anticipated or unanticipated events.
AVAILABLE INFORMATION
Geneva Resources, Inc. files annual, quarterly, current reports, proxy
statements, and other information with the Securities and Exchange Commission
(the "Commission"). You may read and copy documents referred to in this
Quarterly Report on Form 10-Q that have been filed with the Commission at the
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. You
may obtain information on the operation of the Public Reference Room by calling
the Commission at 1-800-SEC-0330. You can also obtain copies of our Commission
filings by going to the Commission's website at http://www.sec.gov.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
GENERAL
Geneva Resources, Inc. was incorporated under the laws of the State of Nevada on
April 5, 2004 under the name "Revelstoke Industries, Inc." for the purpose of
reclaiming and stabilizing land in preparation for construction in Canada.
Effective November 27, 2006, we changed our name to "Geneva Gold Corp.".
Subsequently, effective March 1, 2007, we changed our name to "Geneva Resources,
Inc.".
CURRENT BUSINESS OPERATIONS
We are currently engaged in the business of exploration of precious metals with
a focus on the exploration and development of gold deposits in North America and
internationally. As of the date of this Annual Report, our mineral interests
consist mainly of option agreements on exploration stage properties as discussed
below. We have not established any proven or probable reserves on our mineral
property interests.
16
MINERAL PROPERTIES
VILCORO GOLD PROPERTY
On January 22, 2007, we entered into a letter of intent with St. Elias Mines
Ltd. ("St Elias"), pursuant to which St. Elias proposed to grant to us an option
to acquire not less than an undivided 66% legal, beneficial and registerable
interest in certain mining leases in Peru including St. Elias' option to earn a
95% interest in the Vilcoro Gold Property project comprised of approximately 600
hectares in Peru (collectively, the "Vilcoro Properties"). On February 23, 2007,
we entered into a formal property option agreement (the "Vilcoro Option
Agreement") with St. Elias pursuant to which St. Elias granted to us an option
to acquire not less than the undivided 66% legal, beneficial and registerable
interest in the Vilcoro Properties (the "Vilcoro Option").
On December 1, 2007, we entered into an extension agreement with St. Elias (the
"December 2007 Extension Agreement"). The December 2007 Extension Agreement
acknowledged that in accordance with the terms and provisions of the Vilcoro
Option Agreement, we must incur and pay exploration expenditures of not less
than $500,000 prior to January 17, 2008 (the "Exploration Expenditures"), and
provided us an extension until March 31, 2008 to incur and pay such Exploration
Expenditures. On March 28, 2008, we entered into a second extension agreement
with St. Elias (the "March 2008 Extension Agreement"), which provided us with an
extension until June 30, 2008 to incur and pay such Exploration Expenditures. On
June 4, 2008, we entered into a third extension with St. Elias (the "June 2008
Extension Agreement"), which provided us with an indefinite extension to pay
such Exploration Expenditures based on the Operator's work schedule.
Under the terms of the Vilcoro Option Agreement and in order to exercise the
Vilcoro Option, we were required to make the following non-refundable cash
payments to St. Elias aggregating $350,000 as follows: (i) $50,000 within five
business days from the execution of the Vilcoro Option Agreement, which as of
the date of this Quarterly Report, was paid; (ii) $100,000 due on or before the
12-month anniversary of execution of the Vilcoro Option Agreement (which was
paid); and (iii) $200,000 due on or before the 24-month anniversary of execution
of the Vilcoro Option Agreement.
In accordance with the terms and provisions of the Vilcoro Option Agreement, we
were further required to: (i) issue to St. Elias 50,000 shares of our restricted
common stock on or before the 12-month anniversary of execution of the Vilcoro
Option Agreement (which as of the date of this Quarterly Report have been
issued); and (ii) incur costs totaling $2,5000,000 as follows: (a) expenditures
of $500,000 were to be incurred on or before the 12-month anniversary of
execution of the Vilcoro Option Agreement of which $551,000 had been advanced
from inception of the agreement until the date of this Quarterly Report (which
date was subsequently extended indefinitely based on the June 2008 Extension
Agreement); (b) second expenditure of $750,000 was to be incurred on or before
the 24-month anniversary of execution of the Vilcoro Option Agreement; and (iii)
third expenditure of $1,250,000 was to be incurred on or before the 36-month
anniversary of execution of the Vilcoro Option Agreement.
Under further terms of the Vilcoro Option Agreement: (i) St. Elias would have
been the operator (the "Operator") of the Vilcoro Properties and would have
received an 8% operator fee on all exploration expenditures; (ii) once we
17
exercised the Vilcoro Option, we agreed to pay 100% of all on-going exploration,
development and production costs until commercial production (the "Production
Costs"); and (iii) we would have had the right to receive 100% of any cash flow
from commercial production of the Vilcoro Properties until we recouped the
Production Costs after which the cash flow would have been allocated 66% to us
and 34% to St. Elias.
PHASE I EXPLORATION PROGRAM. We were previously engaged in our Phase I
exploration program. The Vilcoro Property comprised approximately 1,600 hectares
and lay along the game geological belt of Tertiary rocks that host deposits in
northern Peru, such as Newmont's Yanacocha Mine and Barrick's Pierina deposit. A
total of 256 channel samples and 28 check samples had been collected from
outcrops, trenches and underground workings, which sample preparation and
analytical work was undertaken at ALS Chemex SA Laboratory (an ISO-certified
facility) in Lima Peru, using standard industry practice fire assay with an
atomic absorption finish. Most of the channel samples were three to five meters
long. This work defined two mineralized trends referred to as the Main Trend and
the South Trend. Six individual mineralized zones (Zones 1 through 6) had been
identified within the Main Trend and three individual mineralized zones (Zones A
through C) had been identified within the South Trend. The South Trend laid
approximately 200 meters to the south of the Main Trend and comprised an
east-west alignment (parallel to the Main Trend) of mineralized hydrobreccia
occurrences in three zones.
On approximately April 9, 2008, we received a technical report (the "Technical
Report") in accordance with the provisions of National Instrument 43-101 of the
Canadian Securities Administrators on the Vilcoro Properties. The Technical
Report was authored by John A. Brophy, P.Geo., who has thirty-two years of
continuous geological experience on exploring for a variety of commodities
including gold, copper, zinc, lead, uranium and silver. Based on the contents of
the Technical Report, management was pleased with the evidence of disseminated
mineralization on the Vilcoro Properties with average ore grades of 0.8 g/t, and
previously continued fieldwork at Vilcoro Properties with emphasis on additional
trenching between the individual zones on the Main Trend. The Technical Report
is available on our website at WWW.GENEVARESOURCESINC.COM.
LITIGATION AND STATEMENT OF CLAIM. On November 6, 2008, we filed a Writ of
Summons and Statement of Claim (collectively, the "Statement of Claim") against
St. Elias and John A. Brophy ("Brophy") in the Supreme Court of British
Columbia. The Statement of Claim relates to the Property Option Agreement.
The Statement of Claim alleges the following claims: (i) in tort against Brophy
alleging non-disclosure of material facts and complete and accurate information
relating to the ownership of the Vilcoro Property and to the ownership of the
adjacent property, including failing to disclose that Brophy and his wife had an
interest in the Vilcoro Property and the adjacent property, which entitles us to
rescind the Property Option Agreement and return of an aggregate of $150,000
paid to St. Elias under the Property Option Agreement, an aggregate of $486,000
paid in exploration expenditures, and 50,000 shares of our common stock issued
to St. Elias; (ii) breach of the Property Option Agreement relating to the
failure by St. Elias to provide to us all data and information in its possession
or under its control relating to St. Elias' exploration activities on and in the
vicinity of the Vilcoro Properties; and (iii) breach of the Technical Services
Agreement by failure of St. Elias to timely prepare and provide a budget or work
18
programs or to expeditiously advance the work on the Vilcoro Properties and
diversion by St. Elias of money, time and resources.
On December 23, 2008, a statement of defense was filed by St. Elias and Brophy
denying the majority of the allegations made by us in our Statement of Claim. In
addition, St. Elias and Brophy also filed a counter claim against us for abuse
of process and punitive damages. All allegations of by us, St. Elias and Brophy
remain to be proved in court. See "Part II. Item 1. Legal Proceedings."
During the three-month period ended August 31, 2009, we recorded a mineral
property recovery of $50,000 in connection with the return of funds originally
paid by us into trust to fund the exploration activities.
SAN JUAN PROPERTY
On approximately November 16, 2006, we entered into a property option agreement
(the "Petaquilla Option Agreement") with Petaquilla Minerals Ltd.
("Petaquilla"). In accordance with the terms and provisions of the Petaquilla
Option Agreement, Petaquilla granted to us the sole and exclusive option (the
"Option") to acquire up to a 70% undivided interest in and to five exploration
concessions situated in the Republic of Panama (the "San Juan Property"), which
are owned and controlled by Petaquilla's wholly-owned Panamanian subsidiary.
During 2007, certain disputes arose between us and Petaquilla which were
resolved during 2008 by way of a settlement agreement (the "Settlement"), mutual
release and the ultimate termination of the Petaquilla Option Agreement.
Pursuant to the terms of the Settlement: (i) Petaquilla shall issue 100,000
shares of its common stock to us, subject to pooling and release in four equal
monthly tranches commencing no later than December 31, 2008 and certain other
conditions, (ii) the 4,000,000 shares of the restricted common stock previously
issued by us to Petaquilla shall be returned to us; and (iii) the $100,000
previously paid by us in order to exercise the initial portion of the Option
shall be returned to us.
As of May 31, 2008, we received $100,000 and the return of the 4,000,000
restricted shares of our common stock with an estimated fair value of
$5,440,000. In addition, we recorded the 100,000 common shares of Petaquilla,
with an estimated fair value of $270,000, as accounts receivable as of May 31,
2008. The total proceeds of $5,810,000 was included in amounts recorded as gain
on settlements during 2008.
During fiscal year ended May 31, 2009, we received the 100,000 common shares
from Petaquilla, which were previously valued at $270,000. As of August 31,
2009, the 100,000 shares received had an estimated value of $45,000 ($0.45 per
share).
PROPOSED FUTURE BUSINESS OPERATIONS
Our current strategy is to complete further acquisition of other mineral
property opportunities which fall within the criteria of providing a geological
basis for development of mining initiatives that can provide near term revenue
potential and production cash flows to create expanding reserves. We anticipate
that our ongoing efforts, subject to adequate funding being available, will
19
continue to be focused on successfully concluding negotiations for additional
interests in mineral properties. We plan to build a strategic base of producing
mineral properties.
Our ability to continue to complete planned exploration activities and expand
acquisitions and explore mining opportunities is dependent on adequate capital
resources being available and further sources of debt and equity being obtained.
RESULTS OF OPERATION
THREE MONTH PERIOD ENDED AUGUST 31, 2009 COMPARED TO THREE MONTH PERIOD ENDED
AUGUST 31, 2008.
The summarized consolidated financial data set forth in the tables below and
discussed in this section should be read in conjunction with our financial
statements and related notes for the three month period ended August 31, 2009
and August 31, 2008, which financial statements are included elsewhere in this
Quarterly Report.
THREE MONTH THREE MONTH
PERIOD ENDED PERIOD ENDED APRIL 5, 2004 (INCEPTION)
AUGUST 31, 2009 AUGUST 31, 2008 TO AUGUST 31, 2009
REVENUE -0- -0- $46,974
DIRECT COSTS -0- -0- 56,481
GROSS MARGIN (LOSS) -0- -0- (9,507)
GENERAL AND ADMINISTRATIVE EXPENSES
Office and general 1,828 7,130 145,523
Consulting fees 5,000 83,688 701,934
Marketing expenses -0- -0- 894,738
Management fees -0- -0- 1,241,406
Mineral property expenditures -0- 100,000 8,258,312
Professional fees 12,902 67,871 970,516
_________________________________________________________________________
NET OPERATING LOSS ($19,730) ($258,689) (12,221,936)
OTHER INCOME(EXPENSE)
Gain on extinguishment of debt -0- -0- 30,000
Interest expense (43,820) (34,683) (293,219)
Net gain on settlements -0- -0- 5,590,784
_________________________________________________________________________
TOTAL OTHER INCOME(EXPENSE) (43,820) (34,683) 5,327,565
NET LOSS ($63,550) ($293,372) ($6,894,371)
_________________________________________________________________________
Change in market value of available
for sale securities (10,000) -0- ($225,000)
COMPREHENSIVE LOSS ($73,550) ($293,372) (7,119,371)
_________________________________________________________________________
Our comprehensive loss during the three month period ended August 31, 2009 was
approximately ($73,550) compared to a comprehensive loss of ($293,372) for the
three month period ended August 31, 2008 (a decrease of $219,822).
During the three month period ended August 31, 2009 and August 31, 2008,
respectively, we did not generate any revenue. During the three month period
ended August 31, 2009, we incurred general and administrative expenses in the
aggregate amount of $19,730 compared to $258,689 incurred during the three month
period ended August 31, 2008 (a decrease of $238,959). The operating expenses
incurred during the three month period ended August 31, 2009 consisted of: (i)
office and general of $1,828 (2008: $7,130); (ii) consulting fees of $5,000
(2008: $83,688); (iii) mineral property expenditures of $-0- (2008: $100,000);
and (iv) professional fees of $12,902 (2008: $67,871). The decrease in general
and administrative expenses incurred during the three month period ended August
31, 2009 compared to the three month period ended August 31, 2008 resulted
primarily from a decrease in consulting fees and a decrease in mineral property
expenditures based upon the decrease in acquisition and development of our
mineral properties and current status of the scale and scope of exploratory
programs. General and administrative expenses generally include corporate
overhead, financial and administrative contracted services, marketing and
consulting costs.
The incurrence of general and administrative expenses resulted in a net
operating loss of ($19,730) during the three month period ended August 31, 2009
compared to a net operating loss of ($258,689) during the three month period
ended August 31, 2008. Net operating loss was further increased by the recording
of interest expense of $43,820 (2008: $34,683) and a change in market value of
available for sale securities of $10,000 (2008: $-0-).
Thus, our comprehensive loss during the three month period ended August 31, 2009
was ($73,550) or ($0.00) per share compared to a comprehensive loss of
($293,372) or ($0.01) per share for the three month period ended August 31,
2008. The weighted average number of shares outstanding was 38,536,862 at August
31, 2009 compared to 38,136,862 at August 31, 2008.
LIQUIDITY AND CAPITAL RESOURCES
THREE MONTH PERIOD ENDED AUGUST 31, 2009
Our financial statements have been prepared assuming that we will continue as a
going concern and, accordingly, do not include adjustments relating to the
recoverability and realization of assets and classification of liabilities that
might be necessary should we be unable to continue in operation.
As at August 31, 2009 our current assets were $45,794 and our current
liabilities were $2,265,759, resulting in a working capital deficit of
$2,219,965. As at August 31, 2009, our total assets were $210,804 compared to
total assets of $222,085 as at May 31, 2009. Total assets as at August 31, 2009
consisted of: (i) $794 in cash; (ii) $45,000 available for sale securities; and
(iii) $165,010 in deposit on property. As at August 31, 2009, our current
liabilities were $2,265,759 compared to current liabilities of $2,203,490 as at
20
May 31, 2009. Our current liabilities consisted of: (i) $234,040 in accounts
payable and accrued liabilities; and (ii) $2,031,719 in shareholder's loan and
accrued interest. The slight increase in current liabilities was primarily due
to the increase in shareholder's loan and accrued interest relating to the scale
and scope of business activity.
Stockholders' deficit increased from ($1,981,405) as at May 31, 2009 to
($2,054,955) as at August 31, 2009.
We have not generated positive cash flows from operating activities. For the
three month period ended August 31, 2009, net cash flow used in operating
activities was ($1,281) compared to net cash flow used in operating activities
of ($307,752) for the three month period ended August 31, 2008. Net cash flow
used in operating activities during the three month period ended August 31, 2009
consisted primarily of a net loss of ($63,550) changed by $18,449 in accounts
payable and accrued liabilities and $43,820 in accrued interest on shareholder's
loan. Net cash flow used in operating activities during the three month period
ended August 31, 2008 consisted primarily of a net loss of ($293,372) changed by
($430) in increase in deposits, ($48,633) in accounts payable and accrued
liabilities and $34,683 in accrued interest on shareholder's loan.
During the three month period ended August 31, 2009, net cash flow provided by
financing activities was $0 compared to net cash flow from financing activities
of $300,000 for the three month period ended August 31, 2008. Net cash flow
provided from financing activities during the three month period ended August
31, 2008 pertained to $300,000 received as proceeds from shareholder advances.
PLAN OF OPERATION
Existing working capital, further advances and possible debt instruments,
anticipated warrant exercises, further private placements, and anticipated cash
flow are expected to be adequate to fund our operations over the next six
months. We have no lines of credit or other bank financing arrangements.
Generally, we have financed operations to date through the proceeds of the
private placement of equity and debt securities. In connection with our business
plan, management anticipates that administrative expenses will decrease as a
percentage of revenue as our revenue increases over the next twelve months.
Additional issuances of equity or convertible debt securities will result in
dilution to our current shareholders. Further, such securities might have
rights, preferences or privileges senior to our common stock. Additional
financing may not be available upon acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be
able to take advantage of prospective new business endeavors or opportunities,
which could significantly and materially restrict our business operations.
Subsequent to August 31, 2009, we received $350,000 towards a planned private
placement of units to be offered at $0.05 per unit. Each unit is to consist of
one share of our restricted common stock and one warrant to acquire an
additional share of common stock at an exercise price of $0.25 for twelve months
(the "Units(s)"). The private placement offering is under Regulation S of the
Securities Act. See "Part II. Item 2. Unregistered Sales of Equity Securities."
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The report of the independent registered public accounting firm that accompanies
our fiscal year end May 31, 2009 and May 31, 2008 audited financial statements
contains an explanatory paragraph expressing substantial doubt about our ability
to continue as a going concern. The financial statements have been prepared
"assuming that we will continue as a going concern," which contemplates that we
will realize our assets and satisfy our liabilities and commitments in the
ordinary course of business.
MATERIAL COMMITMENTS
As of the date of this Quarterly Report and other than as disclosed below, we do
not have any material commitments for fiscal year
2009/2010.
SHAREHOLDER LOAN
On November 14, 2006, one of our shareholders advanced to Petaquilla an
aggregate of $100,000 on our behalf. Additional advances of $303,500 and
$795,000 were received during fiscal years ended May 31, 2007 and May 31, 2008,
respectively. During fiscal year ended May 31, 2009, an additional $540,000 was
advanced by the same shareholder under the same terms and conditions. These
amounts are unsecured, accrue interest at 10% per annum and have no established
terms of repayment. As at August 31, 2009, we owe an aggregate of $2,031,719 in
principal and accrued interest. Subsequent to August 31, 2009, $325,000 was paid
in principal and accrued interest by us to the lender.
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment during the next twelve
months.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Quarterly Report, we do not have any 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 are material to investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk represents the risk of loss that may impact our financial position,
results of operations or cash flows due to adverse changes in foreign currency
and interest rates.
EXCHANGE RATE
Our reporting currency is United States Dollars ("USD"). Since we have acquired
properties outside of the United States, the fluctuation of exchange rates may
have positive or negative impacts on our results of operations. However, any
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potential revenue and expenses will be denominated in U.S. Dollars, and the net
income effect of appreciation and devaluation of the currency against the U.S.
Dollar would be limited to our costs of acquisition of property.
INTEREST RATE
Interest rates in the United States are generally controlled. Any potential
future loans will relate mainly to acquisition of properties and will be mainly
short-term. However our debt may be likely to rise in connection with expansion
and if interest rates were to rise at the same time, this could have a
significant impact on our operating and financing activities. We have not
entered into derivative contracts to hedge existing risks for speculative
purposes.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of August 31, 2009 which is the end of the three month quarterly period
covered by this Quarterly Report, our Chief Executive Officer and Chief
Financial Officer reviewed and evaluated the effectiveness of our disclosure
controls and procedures, as defined in Exchange Act Rule 13a-15(e) and
15d-15(e). As of the end of the quarterly period covered by this Quarterly
Report, based on that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that the disclosure controls and procedures were
effective in ensuring that material information that we must disclose in our
reports that we file or submit under the Securities Exchange Act of 1934, as
amended, the "Exchange Act", is recorded, processed, summarized, and reported on
a timely basis, and that information required to be disclosed by us in our
reports that we file or submit under the Exchange Act is accumulated and
communicated to our Chief Executive Officer and Chief Financial Officer as
appropriate to allow timely decisions regarding required disclosure.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act). Under the supervision and with the participation of our
management, including the chief executive officer and chief financial officer,
we evaluated the effectiveness of our internal control over financial reporting
as of August 31, 2009. In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO") in Internal Control-Integrated Framework.
This Quarterly Report does not include an attestation report of our registered
public accounting firm De Joya Griffith & Company, LLC., Certified Public
Accountants regarding internal control over financial reporting. Management's
report was not subject to attestation by our registered public accounting firm
pursuant to temporary rules of the SEC that permit us to provide only
management's report in this Quarterly Report on Form 10-Q.
INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS
We believe that a control system, no matter how well designed and operated,
cannot provide absolute assurance that the objectives of the controls system are
met, and no evaluation of controls can provide absolute assurance that all
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control issues and instances of fraud, if any, within a company have been
detected. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving their objectives, and our Chief Executive
Officer and our Chief Financial Officer have concluded that these controls and
procedures are effective at the "reasonable assurance" level.
CHANGES IN INTERNAL CONTROLS
There was no change in our internal control over financial reporting that
occurred during this fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
AUDIT COMMITTEE REPORT
The Board of Directors has established an audit committee. The members of the
audit committee are Mr. Marcus Johnson and Mr. Betrand Taquet, One of the two
members of the audit committee is "independent" within the meaning of Rule 10A-3
under the Exchange Act. The audit committee was organized on April 25, 2006 and
operates under a written charter adopted by our Board of Directors.
The audit committee has reviewed and discussed with management our audited
financial statements as of and for the three month period ended August 31, 2009.
The audit committee has received and reviewed the written disclosures and the
letter from De Joya Griffith & Company, LLC., Certified Public Accountants
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, as amended.
Based on the reviews and discussions referred to above, the audit committee has
recommended to the Board of Directors that the reviewed financial statements
referred to above be included in our Quarterly Report on Form 10-Q for the three
month period ended August 31, 2009 filed with the Securities and Exchange
Commission.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
STATEMENT OF CLAIM
On November 6, 2008, we filed a Writ of Summons and Statement of Claim
(collectively, the "Statement of Claim") against St. Elias and John A. Brophy
("Brophy") in the Supreme Court of British Columbia. The Statement of Claim
relates to the Property Option Agreement.
The Statement of Claim alleges the following claims: (i) in tort against Brophy
alleging non-disclosure of material facts and complete and accurate information
relating to the ownership of the Vilcoro Property and to the ownership of the
adjacent property, including failing to disclose that Brophy and his wife had an
interest in the Vilcoro Property and the adjacent property, which entitles us to
rescind the Property Option Agreement and return of an aggregate of $150,000
paid to St. Elias under
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the Property Option Agreement, an aggregate of $486,000 paid in exploration
expenditures, and 50,000 shares of our common stock issued to St. Elias; (ii)
breach of the Property Option Agreement relating to the failure by St. Elias to
provide to us all data and information in its possession or under its control
relating to St. Elias' exploration activities on and in the vicinity of the
Vilcoro Properties; and (iii) breach of the Technical Services Agreement by
failure of St. Elias to timely prepare and provide a budget or work programs or
to expeditiously advance the work on the Vilcoro Properties and diversion by St.
Elias of money, time and resources.
On December 23, 2008, a statement of defense was filed by St. Elias and Brophy
denying the majority of the allegations made by us in our Statement of Claim. In
addition, St. Elias and Brophy also filed a counter claim against us for abuse
of process and punitive damages. All allegations of by us, St. Elias and Brophy
remain to be proved in court.
PETAQUILLA OPTION AGREEMENT
On February 27, 2007, we received notice pursuant to a news release from
Petaquilla that the board of directors of Petaquilla resolved to rescind the
Petaquilla Option Agreement. We are current in our obligations under the
Petaquilla Option Agreement and dispute the alleged rescission and have advised
Petaquilla that the Option is in good standing.
Therefore, in accordance with the terms and provisions of the Petaquilla Option
Agreement, we filed a notice with the British Columbia International Commercial
Arbitration Centre (the "BCICAC") seeking arbitration. On March 5, 2007, we
filed a Statement of Claim with the BCICAC seeking specific performance of the
Petaquilla Option Agreement and damages. On April 10, 2007, Petaquilla filed a
Statement of Defense.
On March 14, 2008, we entered into the Settlement. Pursuant to the terms and
provisions of the Settlement: (i) Petaquilla shall issue 100,000 shares of its
common stock to us, which shares shall be released from pool in four equal
monthly tranches beginning on the first commercial pour of gold at the Molejon
Gold Mine or December 31, 2008, whichever comes first, and which shares shall be
subject to a two business day right of first refusal for Petaquilla to find a
buyer or five business days if the sale is private; (ii) the 4,000,000 shares of
the restricted common stock previously issued by us to Petaquilla in accordance
with the terms and provisions of the First Option shall be returned to us (which
as of the date of this Quarterly Report has been returned); and (iii) the
$100,000 paid by us on approximately November 17, 2006 in order to exercise the
initial portion of the Option was returned to us.
On April 11, 2008, we entered into the Release pursuant to which the terms of
the Settlement were acknowledged. In accordance with the terms and provisions of
the Release, the parties agreed to release each other and their respective
directors, officers, employees, agents and assigns from any and all causes of
action, claims and demands of any nature or kind whatsoever arising up to the
present date relating to the Petaquilla Option Agreement and to any of the
subject matter of the arbitration proceedings. It is anticipated that the
pending arbitration proceedings will be dismissed with the British Columbia
International Commercial Arbitration Center.
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As of May 31, 2008, we received $100,000 and the return of the 4,000,000
restricted shares of our common stock with an estimated fair value of
$5,440,000. As of the date of this Quarterly Report, we have received all of the
100,000 common shares receivable from Petaquilla, previously valued at $270,000.
As of August 31, 2009, the 100,000 shares received had an estimated fair value
of $45,000 ($0.45 per share).
CEASE TRADE ORDER OF THE BRITISH COLUMBIA SECURITIES COMMISSION
Our shares of common stock are registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended. We, therefore, file annual and other reports
with the Securities and Exchange Commission. On November 29, 2007, we received a
cease trade order (the "CTO") from the British Columbia Securities Commission
(the "BCSC"), which is limited to the Province of British Columbia, for not
filing a technical report under Canadian National Instrument 43-101 STANDARDS OF
DISCLOSURE FOR MINERAL PROJECTS ("NI 43-101") respecting certain previous
disclosure respecting certain of our material property interests. As a
consequence of the CTO, we are now seeking legal advice in connection with this
matter and expect to be in communication with the BCSC promptly in order to
determine the exact manner in which we will be able to satisfy the requirements
of NI 43-101, as required by the parameters as set forth for foreign issuers
under Canadian National Instrument 71-102 CONTINUOUS DISCLOSURE AND OTHER
EXEMPTIONS RELATING TO FOREIGN ISSUERS.
Management is not aware of any other legal proceedings contemplated by any
governmental authority or any other party involving us or our properties. As of
the date of this Quarterly Report, no director, officer or affiliate is (i) a
party adverse to us in any legal proceeding, or (ii) has an adverse interest to
us in any legal proceedings. Management is not aware of any other legal
proceedings pending or that have been threatened against us or our properties.
ITEM 1A. RISK FACTORS
No report required.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
As of the date of this Quarterly Report, we have received an aggregate of
$350,000 towards a planned private placement of units to be offered at $0.05 per
unit (the "2009 Private Placement Offering"). Each unit consists of one share of
our restricted common stock and one non-transferable share purchase warrant
exercisable at $0.25 per share for a period of twelve months from the date of
share issuance (the "Unit"). The 2009 Private Placement Offering will be
completed in reliance on Regulation S of the Securities Act. It is anticipated
that sales will be made to only non-U.S. residents. The 2009 Private Placement
Offering will not be registered under the Securities Act or under any state
securities laws and may not be offered or sold without registration with the
Securities and Exchange Commission or an applicable exemption from the
registration requirements. The per share price of the 2009 Private Placement
Offering was arbitrarily determined by our Board of Directors based upon
analysis of certain factors including, but not limited to, stage of development,
industry status, investment climate, perceived investment risks, our assets and
net estimated worth.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No report required.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE TO SECURITY HOLDERS
No report required.
ITEM 5. OTHER INFORMATION
No report required.
ITEM 6. EXHIBITS
The following exhibits are filed with this Quarterly Report on Form 10-Q:
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
31.1 Certification of the registrant's Principal Executive Officer
under the Exchange Act Rules 13a-14(a) or 15d-14(a) as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act 2002.
31.2 Certification of the registrant's Principal Financial Officer
under the Exchange Act Rules 13a-14(a) or 15d-14(a) as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act 2002.
32.1 Certification of the registrant's Principal Executive Officer
and Principal Financial Officer under 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
2002.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
GENEVA RESOURCES, INC.
Dated: October 15, 2009 By: /s/ MARCUS JOHNSON
_______________________________________
Marcus Johnson, President/Chief
Executive Officer
Dated: October 15, 2009 By: /s/ D. BRUCE HORTON
________________________________________
D. Bruce Horton, Chief Financial 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: October 15, 2009 By: /s/ MARCUS JOHNSON
________________________________________
Director
Dated: October 15, 2009 By: /s/ D. BRUCE HORTON
________________________________________
Director
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