UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURUTIES EXCHANGE
ACT OF 1934
For the fiscal year ended August 31, 2010
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from [ ] to [ ]
Commission file number 333-138148
AMERICAN PARAMOUNT GOLD CORP.
(Exact name of registrant as specified in its charter)
Nevada 20-5243308
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
130 King Street West, Suite 3670 Toronto, Ontario, Canada M5X 1A9
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 416.214.5640 ext. 222
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange On Which Registered
N/A N/A
Securities registered pursuant to Section 12(g) of the Act:
N/A
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act Yes [ ] No [X]
Indicate by check mark whether the registrant: (1) has 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 last 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Website, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-K (ss.229.405 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 [ ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
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
definition 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 [ ] 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]
State the aggregate market value of voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and ask price of such common equity, as of the
last business day of the registrant's most recently completed second fiscal
quarter.
The aggregate market value of Common Stock held by non-affiliates of the
Registrant on February 28, 2010 was $145,250 based on the $0.005 sale price at
which the common stock was last sold on December 20, 2006. The number of shares
held by non-affiliates as at February 28, 2010 was 29,050,000. The common stock
did not trade prior to completion of the second fiscal quarter on February 28,
2010. For purposes of this computation, all executive officers and directors
have been deemed to be affiliates. Such determination should not be deemed to be
an admission that such executive officers and directors are, in fact, affiliates
of the Registrant.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date.
64,000,000 shares of common stock issued & outstanding as of November 23, 2010
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
Item 1. Business........................................................... 3
Item 1A. Risk Factors....................................................... 7
Item 1B. Unresolved Staff Comments.......................................... 11
Item 2. Properties......................................................... 11
Item 3. Legal Proceedings.................................................. 13
Item 4. [Removed and Reserved]............................................. 13
Item 5. Market for Common Equity and Related Stockholder Matters and
Issuer Purchases of Equity Securities.............................. 14
Item 6. Selected Financial Data............................................ 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk......... 21
Item 8. Financial Statements and Supplementary Data........................ 22
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................... 41
Item 9A. Controls and Procedures............................................ 41
Item 9B. Other Information.................................................. 42
Item 10. Directors, Executive Officers and Corporate Governance............. 42
Item 11. Executive Compensation............................................. 47
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.................................... 50
Item 13. Certain Relationships and Related Transactions, and Director
Independence....................................................... 53
Item 14. Principal Accountants Fees and Services............................ 53
Item 15. Exhibits, Financial Statement Schedules............................ 54
2
PART I
ITEM 1. BUSINESS
This annual report contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may", "should",
"expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled "Risk Factors, that may cause our or our industry's actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
In this annual report, unless otherwise specified, all dollar amounts are
expressed in United States Dollars and all references to "common shares" refer
to the common shares in our capital stock.
As used in this annual report, the terms "we", "us", "our company", mean
American Paramount Gold Corp. a Nevada corporation, unless otherwise indicated.
CORPORATE HISTORY
The address of our principal executive office is 130 King St. West, Suite 3670,
Toronto, Ontario, Canada M5X 1A9. Our telephone number is 416.214.5640, ext.
222.
We were incorporated under the laws of the State of Nevada on July 20, 2006
under the name "Zebra Resources, Inc." At inception, we were an exploration
stage company engaged in the acquisition, exploration and development of mineral
properties. On July 26, 2006, we entered into a mineral property option
agreement to earn an interest in a mineral claim known as the Astro 2006 claim.
Based on the information available to us, we determined that the Astro 2006
claim did not, in all likelihood, contain a commercially viable mineral deposit,
and we therefore abandoned any further exploration on the property.
As a result, we investigated several other business opportunities to enhance
shareholder value.
On February 26, 2010, Monaco Capital Inc. acquired a controlling interest in our
company by purchasing 20,000,000 shares of our common stock in a private
transaction.
Effective March 17, 2010, we effected a one (1) old for two (2) new forward
stock split of our issued and outstanding common stock. As a result, our
authorized capital increased from 75,000,000 to 150,000,000 shares of common
stock and our issued and outstanding increased from 32,000,000 shares of common
stock to 64,000,000 shares of common stock, all with a par value of $0.001.
Also effective March 17, 2010, we changed our name from "Zebra Resources, Inc."
to "American Paramount Gold Corp.", by way of a merger with our wholly owned
subsidiary American Paramount Gold Corp., which was formed solely for the change
of name.
The name change and forward stock split became effective with the
Over-the-Counter Bulletin Board at the opening for trading on April 12, 2010
under the new stock symbol "APGA". Our CUSIP number is 02882T 105.
3
On April 14, 2010, we entered into a consulting agreement with Wayne Parsons
whereby Mr. Parsons agreed to provide our company with various consulting
services as the president, chief executive officer, chief financial officer,
secretary and treasurer. In consideration of his services, we agreed to provide
Mr. Parsons with a monthly payment of CDN$1,500 and a one-time grant of
1,000,000 non-transferable options with each option to acquire one (1) share of
our common stock at a purchase price of US$1.00 per share, exercisable for five
(5) years. The aforementioned 1,000,000 options were issued on April 14, 2010
but were subsequently cancelled on November 18, 2010 in consideration of the
issuance to Mr. Parsons of 1,000,000 options under our 2010 Stock Plan as part
of the below described issuance.
On April 16, 2010, we entered into an agreement with Royce L. Hackworth and
Belva L. Tomany in respect of an option to acquire 189 unpatented mining claims
situated in the Walker Lane Structural Belt in Nye County, Nevada known as the
Cap Gold Project. In order to complete the transactions contemplated by the
agreement, we are required to pay $25,000 upon the closing of the agreement and
pay an additional $100,000 upon satisfaction of our due diligence. The agreement
gives our company the option to acquire a 100% long-term lease interest in the
Cap Gold Project by (i) making ongoing yearly advance production royalty cash
payments during the term of the agreement of $125,000 in years two (2) through
five (5), $150,000 in years six (6) through twelve (12), $200,000 in years 13
through 20 and $300,000 in years 21 through 30; (ii) incurring expenditures on
exploration of the Cap Gold Project of not less than an aggregate of $1,250,000
over five (5) years; and (iii) making production royalty payments from
production from the property after the advance production royalty cash payments
described above have been repaid to our company from production from the
property. The production royalty is based on, at our company's election, a
sliding scale or fixed production royalty basis, which in either case ranges
from 1% to a maximum of 3%. Pursuant to the agreement, we have paid an aggregate
of $125,000 to Royce L. Hackworth and Belva L. Tomany.
On April 22, 2010, we entered into a convertible loan agreement with Monaco
Capital Inc., wherein Monaco Capital Inc. has agreed to loan our company up to
$500,000. The loan (and accrued interest) is convertible in whole or in part
into common shares of our company at a conversion price of $1.05 and will bear
interest at 10% per annum. The principal amount of the loan and accrued interest
is due and payable one year from the advancement date. We may at any time during
the term of the loan prepay any sum up to the full amount of the loan and
accrued interest then outstanding for an additional 10% of such amount. At
August 31, 2010, Monaco Capital Inc has advanced $259,679. The balance sheet at
August 31, 2010 records the loan value at $240,142 due to the unamortized
beneficial conversion feature on the convertible debt totaling $10,791. The
initial beneficial conversion feature was valued at $16,833 of which $6,042 was
amortized. Accrued interest relating to the loan totaling $8,746 as at August
31, 2010 was recorded in accounts payable and accrued liabilities.
Effective April 27, 2010, we appointed John Goodwin as a member of our board of
directors.
On July 19, 2010, we increased the numbers of directors on our board of
directors from three to four and appointed J. Trevor Eyton to fill the ensuing
vacancy.
On July 30, 2010, our directors approved the adoption of the 2010 Stock Option
Plan which permits our Company to issue up to 6,500,000 shares of our common
stock to directors, officers, employees and consultants of our company upon the
exercise of stock options granted under the 2010 Plan.
On July 28, 2010, we obtained an extra-provincial license to carry on business
in the Province of Ontario, Canada. Our Ontario Corporation Number is 1827852.
On August 30, 2010, Wayne Parsons resigned as our secretary and treasurer. On
September 29, 2010 Mr. Parsons resigned as our president, chief financial
officer and chief executive. His resignation was not the result of any
disagreement regarding our operations, policies, practices or other
disagreements, and he will remain as a member of our board of directors.
On September 27, 2010, Peter Jenks and John Goodwin each resigned as members of
our board of directors. Mr. Jenks' and Mr. Goodwin's resignations were not the
result of any disagreements regarding our operations, policies, practices or
other disagreements.
4
To fill the vacancies created by the resignations of Mr. Parsons, Mr. Jenks and
Mr. Goodwin, our Company appointed the following individuals:
* Hugh Aird as a member of our board of directors, effective August 30,
2010;
* Hugh Aird as our president and chief executive, effective September
29, 2010;
* Ann Dumyn as our secretary and treasurer, effective August 30, 2010;
* Ann Dumyn as our chief financial officer, effective September 29,
2010;
* Dr. H. Neville Rhoden as a member of our board of directors, effective
August 30, 2010; and
* Leland Verner as a member of our board of directors, effective August
30, 2010.
Since September 27, 2010 our board of directors has consisted of 5 directors
including J. Trevor Eyton, Wayne Parsons, Hugh Aird, Dr. H. Neville Rhoden, and
Leland Verner.
On October 6, 2010, we granted an aggregate of 5,400,000 stock options to ten
individuals, including directors, officers, consultants and employees, pursuant
to our 2010 Stock Plan, at an exercise price of $0.68 per share. Of the
5,400,000 stock options, 400,000 options are exercisable until October 6, 2012
and 5,000,000 options are exercisable until October 6, 2015. All the stock
options vested upon issuance. We issued the stock options to seven (7) non-U.S.
persons (as that term is defined in Regulation S of the Securities Act of 1933),
in an offshore transaction relying on Regulation S and/or Section 4(2) of the
Securities Act of 1933 and to three (3) U.S. persons (as that term is defined in
Regulation S of the Securities Act of 1933) relying upon Rule 506 of Regulation
D of the Securities Act of 1933.
On November 9, 2010, we announced by press release our entry into a letter of
intent to acquire the Kisita Gold Mine Property, an operational gold property
four hours northwest of the capital city of Kampala, Uganda. The acquisition is
subject to further negotiation and due diligence of the project satisfactory to
us. As of the date of this Prospectus we have commenced corporate due diligence
on the project and anticipate placing a team of geological consultants on the
property in December to conduct onsite due diligence.
Other than as set out herein, we have not been involved in any bankruptcy,
receivership or similar proceedings, nor have we been a party to any material
reclassification, merger, consolidation or purchase or sale of a significant
amount of assets not in the ordinary course of our business.
OUR CURRENT BUSINESS
We are an exploration stage mining company engaged in the identification,
acquisition, and exploration of metals and minerals with a focus on gold
mineralization on our property located in Nevada.
Since we are an exploration stage company, there is no assurance that a
commercially viable mineral reserve exists on any of our current or future
properties. To date, we do not know if an economically viable mineral reserve
exists on our property and there is no assurance that we will discover one. Even
if we do eventually discover a mineral reserve on our property, there can be no
assurance that we will be able to develop our property into a producing mine and
extract those resources. Both mineral exploration and development involve a high
degree of risk and few properties which are explored are ultimately developed
into producing mines.
Our current operational focus is to conduct exploration activities on the Cap
Gold Project and to complete the terms of the Cap Gold option agreement.
5
COMPETITION
We are a mineral resource exploration company. We compete with other mineral
resource exploration companies for financing and for the acquisition of new
mineral properties. Many of the mineral resource exploration companies with whom
we compete have greater financial and technical resources than those available
to us. Accordingly, these competitors may be able to spend greater amounts on
acquisitions of mineral properties of merit, on exploration of their mineral
properties and on development of their mineral properties. In addition, they may
be able to afford more geological expertise in the targeting and exploration of
mineral properties. This competition could result in competitors having mineral
properties of greater quality and interest to prospective investors who may
finance additional exploration. This competition could adversely impact on our
ability to finance further exploration and to achieve the financing necessary
for us to develop our mineral properties.
COMPLIANCE WITH GOVERNMENT REGULATION
Mining operations and exploration activities are subject to various national,
state, provincial and local laws and regulations, as well as other
jurisdictions, which govern prospecting, development, mining, production,
exports, taxes, labor standards, occupational health, waste disposal, protection
of the environment, mine safety, hazardous substances and other matters.
We are committed to complying with and are, to our knowledge, in compliance with
all governmental and environmental regulations applicable to our company and our
properties. Permits from a variety of regulatory authorities are required for
many aspects of mine operation and reclamation. We cannot predict the extent to
which these requirements will affect our company or our properties if we
identify the existence of minerals in commercially exploitable quantities. In
addition, future legislation and regulation could cause additional expense,
capital expenditure, restrictions and delays in the exploration of our
properties.
EMPLOYEES
Currently, we do not have any employees. Additionally, we have not entered into
any consulting or employment agreements with our president, chief executive
officer, treasurer, secretary or chief financial officer. Our directors,
executive officers and certain contracted individuals play an important role in
the running of our company. We do not expect any material changes in the number
of employees over the next 12 month period. We do and will continue to outsource
contract employment as needed.
We engage contractors from time to time to consult with us on specific corporate
affairs or to perform specific tasks in connection with our exploration
programs.
RESEARCH AND DEVELOPMENT
We have not spent any amounts on which has been classified as research and
development activities in our financial statements since our inception.
GOING CONCERN
We anticipate that additional funding will be required in the form of equity
financing from the sale of our common stock. At this time, we cannot provide
investors with any assurance that we will be able to raise sufficient funding
from the sale of our common stock or through a loan from our directors to meet
our obligations over the next twelve months. We do not have any arrangements in
place for any future equity financing.
SUBSIDIARIES
We do not have any subsidiaries.
6
INTELLECTUAL PROPERTY
We do not own, either legally or beneficially, any patent or trademark.
REPORTS TO SECURITY HOLDERS
We are not required to deliver an annual report to our stockholders but will
voluntarily send an annual report, together with our annual audited financial
statements upon request. We are required to file annual, quarterly and current
reports, proxy statements, and other information with the Securities and
Exchange Commission. Our Securities and Exchange Commission filings are
available to the public over the Internet at the SEC's website at
http://www.sec.gov.
The public may read and copy any materials filed by us with the SEC at the SEC's
Public Reference Room at 100 F Street, NE, Washington DC 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. We are an electronic filer. The SEC maintains an Internet
site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC. The
Internet address of the site is http://www.sec.gov.
ITEM 1A. RISK FACTORS
Much of the information included in this annual report includes or is based upon
estimates, projections or other "forward looking statements". Such forward
looking statements include any projections and estimates made by us and our
management in connection with our business operations. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions or other future performance
suggested herein.
Such estimates, projections or other "forward looking statements" involve
various risks and uncertainties as outlined below. We caution the reader that
important factors in some cases have affected and, in the future, could
materially affect actual results and cause actual results to differ materially
from the results expressed in any such estimates, projections or other "forward
looking statements".
RISKS ASSOCIATED WITH MINING
OUR PROPERTY IS IN THE EXPLORATION STAGE. THERE IS NO ASSURANCE THAT WE CAN
ESTABLISH THE EXISTENCE OF ANY MINERAL RESOURCE ON OUR PROPERTY IN COMMERCIALLY
EXPLOITABLE QUANTITIES. UNTIL WE CAN DO SO, WE CANNOT EARN ANY REVENUES FROM
OPERATIONS AND IF WE DO NOT DO SO WE WILL LOSE ALL OF THE FUNDS THAT WE EXPEND
ON EXPLORATION. IF WE DO NOT DISCOVER ANY MINERAL RESOURCE IN A COMMERCIALLY
EXPLOITABLE QUANTITY, OUR BUSINESS COULD FAIL.
Despite exploration work on our mineral property, we have not established that
it contains any mineral reserve, and there can be no assurance that we will be
able to do so. If we do not, our business could fail.
A mineral reserve is defined by the Securities and Exchange Commission in its
Industry Guide 7 (which can be viewed over the Internet
athttp://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7) as that
part of a mineral deposit which could be economically and legally extracted or
produced at the time of the reserve determination. The probability of an
individual prospect ever having a "reserve" that meets the requirements of the
Securities and Exchange Commission's Industry Guide 7 is extremely remote; in
all probability our mineral resource property does not contain any 'reserve' and
any funds that we spend on exploration will probably be lost.
Even if we do eventually discover a mineral reserve on our property, there can
be no assurance that we will be able to develop our property into a producing
mine and extract those resources. Both mineral exploration and development
involve a high degree of risk and few properties which are explored are
ultimately developed into producing mines.
7
The commercial viability of an established mineral deposit will depend on a
number of factors including, by way of example, the size, grade and other
attributes of the mineral deposit, the proximity of the resource to
infrastructure such as a smelter, roads and a point for shipping, government
regulation and market prices. Most of these factors will be beyond our control,
and any of them could increase costs and make extraction of any identified
mineral resource unprofitable.
MINERAL OPERATIONS ARE SUBJECT TO APPLICABLE LAW AND GOVERNMENT REGULATION. EVEN
IF WE DISCOVER A MINERAL RESOURCE IN A COMMERCIALLY EXPLOITABLE QUANTITY, THESE
LAWS AND REGULATIONS COULD RESTRICT OR PROHIBIT THE EXPLOITATION OF THAT MINERAL
RESOURCE. IF WE CANNOT EXPLOIT ANY MINERAL RESOURCE THAT WE MIGHT DISCOVER ON
OUR PROPERTIES, OUR BUSINESS MAY FAIL.
Both mineral exploration and extraction require permits from various foreign,
federal, state, provincial and local governmental authorities and are governed
by laws and regulations, including those with respect to prospecting, mine
development, mineral production, transport, export, taxation, labour standards,
occupational health, waste disposal, toxic substances, land use, environmental
protection, mine safety and other matters. There can be no assurance that we
will be able to obtain or maintain any of the permits required for the continued
exploration of our mineral properties or for the construction and operation of a
mine on our properties at economically viable costs. If we cannot accomplish
these objectives, our business could fail.
We believe that we are in compliance with all material laws and regulations that
currently apply to our activities but there can be no assurance that we can
continue to remain in compliance. Current laws and regulations could be amended
and we might not be able to comply with them, as amended. Further, there can be
no assurance that we will be able to obtain or maintain all permits necessary
for our future operations, or that we will be able to obtain them on reasonable
terms. To the extent such approvals are required and are not obtained, we may be
delayed or prohibited from proceeding with planned exploration or development of
our mineral properties.
IF WE ESTABLISH THE EXISTENCE OF A MINERAL RESOURCE ON A PROPERTY IN A
COMMERCIALLY EXPLOITABLE QUANTITY, WE WILL REQUIRE ADDITIONAL CAPITAL IN ORDER
TO DEVELOP THE PROPERTY INTO A PRODUCING MINE. IF WE CANNOT RAISE THIS
ADDITIONAL CAPITAL, WE WILL NOT BE ABLE TO EXPLOIT THE RESOURCE, AND OUR
BUSINESS COULD FAIL.
If we do discover mineral resources in commercially exploitable quantities on a
property, we will be required to expend substantial sums of money to establish
the extent of the resource, develop processes to extract it and develop
extraction and processing facilities and infrastructure. Although we may derive
substantial benefits from the discovery of a major deposit, there can be no
assurance that such a resource will be large enough to justify commercial
operations, nor can there be any assurance that we will be able to raise the
funds required for development on a timely basis. If we cannot raise the
necessary capital or complete the necessary facilities and infrastructure, our
business may fail.
MINERAL EXPLORATION AND DEVELOPMENT IS SUBJECT TO EXTRAORDINARY OPERATING RISKS.
WE DO NOT CURRENTLY INSURE AGAINST THESE RISKS. IN THE EVENT OF A CAVE-IN OR
SIMILAR OCCURRENCE, OUR LIABILITY MAY EXCEED OUR RESOURCES, WHICH WOULD HAVE AN
ADVERSE IMPACT ON OUR COMPANY.
Mineral exploration, development and production involves many risks which even a
combination of experience, knowledge and careful evaluation may not be able to
overcome. Our operations will be subject to all the hazards and risks inherent
in the exploration for mineral resources and, if we discover a mineral resource
in commercially exploitable quantity, our operations could be subject to all of
the hazards and risks inherent in the development and production of resources,
including liability for pollution, cave-ins or similar hazards against which we
cannot insure or against which we may elect not to insure. Any such event could
result in work stoppages and damage to property, including damage to the
environment. We do not currently maintain any insurance coverage against these
operating hazards. The payment of any liabilities that arise from any such
occurrence would have a material adverse impact on our company.
8
MINERAL PRICES ARE SUBJECT TO DRAMATIC AND UNPREDICTABLE FLUCTUATIONS.
We expect to derive revenues, if any, either from the sale of our mineral
resource properties or from the extraction and sale of lithium ore. The price of
those commodities has fluctuated widely in recent years, and is affected by
numerous factors beyond our control, including international, economic and
political trends, expectations of inflation, currency exchange fluctuations,
interest rates, global or regional consumptive patterns, speculative activities
and increased production due to new extraction developments and improved
extraction and production methods. The effect of these factors on the price of
base and precious metals, and therefore the economic viability of any of our
exploration properties and projects, cannot accurately be predicted.
THE MINING INDUSTRY IS HIGHLY COMPETITIVE AND THERE IS NO ASSURANCE THAT WE WILL
CONTINUE TO BE SUCCESSFUL IN ACQUIRING MINERAL CLAIMS. IF WE CANNOT CONTINUE TO
ACQUIRE PROPERTIES TO EXPLORE FOR MINERAL RESOURCES, WE MAY BE REQUIRED TO
REDUCE OR CEASE OPERATIONS.
The mineral exploration, development, and production industry is largely
un-integrated. We compete with other exploration companies looking for mineral
resource properties. While we compete with other exploration companies in the
effort to locate and acquire mineral resource properties, we will not compete
with them for the removal or sales of mineral products from our properties if we
should eventually discover the presence of them in quantities sufficient to make
production economically feasible. Readily available markets exist worldwide for
the sale of mineral products. Therefore, we will likely be able to sell any
mineral products that we identify and produce.
In identifying and acquiring mineral resource properties, we compete with many
companies possessing greater financial resources and technical facilities. This
competition could adversely affect our ability to acquire suitable prospects for
exploration in the future. Accordingly, there can be no assurance that we will
acquire any interest in additional mineral resource properties that might yield
reserves or result in commercial mining operations.
RISKS RELATED TO OUR COMPANY
THE FACT THAT WE HAVE NOT GENERATED REVENUES RAISES SUBSTANTIAL DOUBT ABOUT OUR
ABILITY TO CONTINUE TO AS A GOING CONCERN.
We anticipate that we will continue to incur operating expenses that will exceed
revenues for the foreseeable future. We had cash in the amount of $2,146 as of
August 31, 2010. At August 31, 2010, we had working capital deficit of $307,203.
We incurred a net loss of $689,292 for the year ended August 31, 2010 and
$760,847 since inception. We estimate our average monthly operating expenses to
be approximately $158,000, including exploration costs, management services and
administrative costs. Our business plan calls for substantial investment and
cost in connection with exploration of our mineral properties currently under
lease and option. Any direct acquisition of the claim under lease or option is
subject to our ability to obtain the financing necessary for us to fund and
carry out exploration programs on the properties. The requirements are
substantial. We do not currently have any arrangements for additional financing
and we can provide no assurance to investors that we will be able to find such
financing if required. Obtaining additional financing would be subject to a
number of factors, including market prices for minerals, investor acceptance of
our properties, and investor sentiment. These factors may make the timing,
amount, terms or conditions of additional financing unavailable to us. The most
likely source of future funds presently available to us is through the sale of
equity capital and loans. Any sale of share capital will result in dilution to
existing shareholders.
These circumstances lead our independent public auditing firm, in their report
dated November 29, 2010 to comment about our company's ability to continue as a
going concern.
9
RISKS ASSOCIATED WITH OUR COMMON STOCK
TRADING ON THE OTC BULLETIN BOARD MAY BE VOLATILE AND SPORADIC, WHICH COULD
DEPRESS THE MARKET PRICE OF OUR COMMON STOCK AND MAKE IT DIFFICULT FOR OUR
STOCKHOLDERS TO RESELL THEIR SHARES.
Our common stock is quoted on the OTC Bulletin Board service of the Financial
Industry Regulatory Authority. Trading in stock quoted on the OTC Bulletin Board
is often thin and characterized by wide fluctuations in trading prices, due to
many factors that may have little to do with our operations or business
prospects. This volatility could depress the market price of our common stock
for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board
is not a stock exchange, and trading of securities on the OTC Bulletin Board is
often more sporadic than the trading of securities listed on a quotation system
like NASDAQ or a stock exchange like Amex. Accordingly, shareholders may have
difficulty reselling any of their shares.
OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S
PENNY STOCK REGULATIONS AND FINRA'S SALES PRACTICE REQUIREMENTS, WHICH MAY LIMIT
A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.
Our stock is a penny stock. The Securities and Exchange Commission has adopted
Rule 15g-9 which generally defines "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established
customers and "accredited investors". The term "accredited investor" refers
generally to institutions with assets in excess of $5,000,000 or individuals
with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document in a form prepared
by the SEC which provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in, and limit the marketability of, our common stock.
In addition to the "penny stock" rules promulgated by the Securities and
Exchange Commission, the Financial Industry Regulatory Authority has adopted
rules that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the Financial Industry Regulatory Authority believes that there
is a high probability that speculative low-priced securities will not be
suitable for at least some customers. The Financial Industry Regulatory
Authority ' requirements make it more difficult for broker-dealers to recommend
that their customers buy our common stock, which may limit your ability to buy
and sell our stock.
OTHER RISKS
TRENDS, RISKS AND UNCERTAINTIES
We have sought to identify what we believe to be the most significant risks to
our business, but we cannot predict whether, or to what extent, any of such
risks may be realized nor can we guarantee that we have identified all possible
risks that might arise. Investors should carefully consider all of such risk
factors before making an investment decision with respect to our common stock.
10
ITEM 1B. UNRESOLVED STAFF COMMENTS
As a "smaller reporting company", we are not required to provide the information
required by this Item.
ITEM 2. PROPERTIES
We do not own any real property. Our principal business offices are located at
130 King St. West, Suite 3670, Toronto, Ontario, Canada M5X 1A9. The offices are
provided to us free of charge on an interim basis by American Lithium Minerals,
Inc. and we believe they are adequate for our current needs. Our President, CEO
and director, Hugh Aird is chairman of the board and former president of
American Lithium Minerals, Inc. and our director J. Trevor Eyton is a former
director of American Lithium Minerals, Inc. We have not entered into any formal
agreement with American Lithium Minerals, Inc. regarding our use of the offices.
CAP GOLD PROJECT
LOCATION AND ACCESS
The Cap Gold Project consists of the CAP (14 claims), KAP (2 claims), and the
CAPX (173 claims) unpatented mining claims forming a contiguous block of
approximately 3,960 acres (1,602 hectares). The claims are located in sections
25, 26, 27, 34, 35, and 36, Township 1 South, Range 51 East, MDB&M, in Nye
County, Nevada. The geographic coordinates are 37(degree)49' North Latitude,
116(degree)15' West Longitude. The property is in the Reveille Valley on the
pediment east of the Kawich Range on lands administered by the U.S. Department
of the Interior, Bureau of Land Management ("BLM"), Tonopah District.
Access to the center of the property is by paved, gravel, and dirt roads. Follow
U.S. Highway 6 easterly from Tonopah for 50 miles (80 km) to a junction with
U.S. Highway 375 at Warm Springs. From Warm Springs turn right (southerly) on
Highway 375 for 0.5 mile (0.8 km), thence turn right onto a graded gravel county
road which trends southerly along the southern part of Reveille Valley for 27
miles (43.5 km). Turn right (westerly) 0.25 miles (0.4 km) south of Willow Witch
Well and continue for 3 miles (4.8 km) on a dirt road into the center of the
claim block. From Rachel, Nevada, follow Nevada State Highway 375 for
approximately 15 miles (24.1 km) northwesterly to the eastern edge of Railroad
Valley, turn left and go westerly on a paved road approximately 10 miles (6.2
km). Turn right onto a graded gravel county road that trends northerly up the
Revielle Valley and go approximately 9 miles (14.5 km). Turn left on the dirt
road 0.25 miles (0.4 km) south of the Willow Witch Well and proceed 3 miles (4.8
km) to the claim block. 4- wheel drive vehicles or ATVs can access most areas of
the property.
OPTION AGREEMENT
Our company has an option to earn an interest in the Cap Gold Project through an
agreement entered into between our company and Royce L. Hackworth and Belva L.
Tomany. In order to complete the transactions contemplated by the agreement, we
are required to pay $25,000 upon the closing of the agreement and pay an
additional $100,000 upon satisfaction of our due diligence. The agreement gives
our company the option to acquire a 100% long-term lease interest in the Cap
Gold Project by (i) making ongoing yearly advance production royalty cash
payments during the term of the agreement of $125,000 in years two (2) through
five (5), $150,000 in years six (6) through twelve (12), $200,000 in years 13
through 20 and $300,000 in years 21 through 30; (ii) incurring expenditures on
exploration of the Cap Gold Project of not less than an aggregate of $1,250,000
over five (5) years; and (iii) making production royalty payments from
production from the property after the advance production royalty cash payments
described above have been repaid to our company from production from the
property. The production royalty is based on, at our company's election, a
sliding scale or fixed production royalty basis, which in either case ranges
from 1% to a maximum of 3%.
HISTORY
Ownership of the property is not known prior to 1987 when Production Exploration
Resources staked 14 CAP claims over several outcrops containing elevated amounts
of mercury and antimony. From 1990 to August 1992 Pegasus Gold Corporation held
11
the property under option. Subsequently Kennecott Exploration optioned the
property in the period of 1994-1996. Redhawk Resources Inc. leased the property
starting October 3, 2003.
Four small prospect pits, dug by unknown persons, had explored outcroppings
prior to the staking of the CAP claims in 1987. During 1988, Production
Exploration Resources drilled 5 reverse circulation (RC) holes (T-88-1 to
T-88-5), totaling 1845 feet (557 meters) on mercury-antimony anomalies.
Pegasus Gold Corporation completed soil geochemistry and drilled 29 reverse
circulation holes (C1-29) for a total of 12,855 feet (3918 meters). A 5-foot
interval (1.5 meters) of 24.4 ppm Au (0.712 oz Au/ton) was intersected in hole
C-6 and a 5-foot interval (1.5 meters) of 11.0 ppm (0.321 oz Au/ton) in hole
C-8. Otherwise only low gold values were obtained. Drill logs and assay sheets
are incomplete, chips for C1 through C5 were not available After the drilling
was completed, Pegasus Gold Corporation performed an induced polarization and
resistivity survey over the central part of the target area. A magnetic survey,
also perhaps done after the drilling, suggests magnetic low patterns near and
parallel to the high resistivity trends.
In 1993, Production Exploration Resources drilled an additional 8 reverse
circulation holes (T-93-6 to T-93-13) totaling 6270 feet (1912 meters).
Significant intersections were cut in holes T-93-8, 6.2 ppm Au (0.181 oz Au/ton)
across 10 feet (3 meters), and in hole T-93-9, 6.5 ppm Au (0.190 oz Au/ton)
across 5 feet (1.5 meters).
In 1994-1996, Kennecott drilled 11 reverse circulation holes (CG-1 to CG-11) for
a total of 7905 feet (2411 meters). No high-grade intersections were obtained,
although hole CG-1 intercepted long intervals of low-grade gold and silver,
similar to those found in the Cap Structure, enclosing six separate 5 foot
intervals of >0.4 g/t gold. A soil geochemical survey was also completed.
In 1996 Newmont Exploration carried out a limited gravity survey over the
central portion of the property.
Production Exploration Resources drilled a further 5 reverse circulation holes
(T-00-14 to T-00-18) in 2000 totaling 6470 feet (1972 meters). Intersections
were cut in hole T-00-15 of 15.4 ppm Au (0.449 oz Au/ton) across 5.0 feet (1.5
meters) and in hole T-00-18 of 31.0 ppm Au (0.904 oz Au/ton) across 5.0 feet
(1.5 meters).
In total 35,345 feet (10,773 meters) of reverse circulation drilling in 58 holes
has been completed since 1988.
In 2004 Redhawk Resources Inc. commissioned a gradient array resistivity (GAR)
survey to cover approximately one square mile centered on the CAP Zone and the
area of high gold and silver values encountered in RC drilling. Spontaneous
Potential Gradient (SPG) readings were also recorded during the GAR survey. Also
in June-July 2004, Redhawk drilled five angle, large diameter (HQ 2.5 inch
core), core holes across the CAP Zone in the area of the RC drilling with high
precious metal values. The core drill holes were designed to test below and/or
laterally from the previous RC drilling. Drilling in the five core holes totaled
5,645 feet (1,720 meters) along approximately 1200 feet (365 meters) strike
length of the CAP Zone.
There is no known mineral resource or mineral reserve estimates and there is no
known mineral production from the property.
PROPOSED PROGRAM OF EXPLORATION
The ongoing exploration program will encompass expanded and detailed geology,
identify alteration envelopes, expand the gravity, GAR and SPG geophysical
surveys to delineate potential targets within the structure to be tested
initially by RC with follow-up core drilling, and to delineate potential
precious metals targets within other parallel structures identified by the
geophysical studies.
Five core drill holes have intersected the Cap Zone based on results of the
exploratory RC drilling and geophysical surveys which has confirmed and enhanced
the interpretation of the deposit by previous operators. To further delineate
the structure and mineralization distribution, large diameter core drilling
program would provide more information on the configuration and mineralization
of the vein systems.
12
The knowledge gained from the Cap Zone will be applied to other potential
clusters of epithermal deposits in this structural belt covered by our company's
land position.
There is no known mineral resource or mineral reserve estimates and there is no
known mineral production from the property.
ROCK FORMATIONS AND MINERALIZATION
The Cap Gold Project is situated in the Toiyabe-Kawich Structural Zone of the
Walker Lane Structural Belt. The Walker Lane is a terrane dominated by a series
of parallel to sub-parallel, northwest trending, right lateral transcurrent
faults that cross central and western Nevada. This belt hosts numerous precious
metal districts and deposits; including Bullfrog, Goldfield, Tonopah, and
Comstock Districts, and the Midway, Paradise Peak, and Rawhide deposits.
Estimated production from the volcanic-hosted epithermal gold and silver
deposits within this belt has exceeded 40 million ounces of gold and 540 million
ounces of silver.
Mining Districts along the approximately 10 miles wide by 50 miles long
Toiyabe-Kawich Structural Zone include (from north to south): Paradise Peak,
Fairplay, Athens, Bell, Republic, Cloverdale, San Antonio, Baxter-Willow
Springs, Midway, Hannapah, Ellendale, Golden Arrow, Silver Bow, and Eden Creek.
The tertiary volcanic-hosted epithermal Cap Gold Project is on the southern
projection of this Zone approximately 12 miles southeast of the Eden District.
The host rocks are rhyolite to rhyo-dacite to dacite in composition and of
mid-Tertiary age. Precious metal values are hosted in silicified zones,
stockworks, veins, and breccias developed along WNW, ENE, and E-W structures.
Mineralized zones are enveloped by successive argillic and propylitic alteration
haloes.
In 2004 a five hole core drill hole drill program program was undertaken by
Redhawk Resources Inc. at Cap Gold. This program confirmed the presence of high
gold grades (15.5 g/t gold over 4 feet in hole AC-2), and confirmed the presence
of long intervals of low grade gold mineralization intersected in earlier RC
drilling programs and increased the knowledge of the aurific epithermal system
at Cap Gold. This program also confirmed the presence of a large,
multi-episodic, precious metal bearing hydrothermal system. In addition strong
argillic and strong silicification zones encountered in drilling appears to
correspond well with the low and high resistivity trends, respectively,
interpreted from the GAR/SPG survey.
There is no known mineral resource or mineral reserve estimates and there is no
known mineral production from the property.
ITEM 3. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against us, nor
are we involved as a plaintiff in any material proceeding or pending litigation.
There are no proceedings in which any of our directors, officers or affiliates,
or any registered or beneficial shareholder, is an adverse party or has a
material interest adverse to our company.
ITEM 4. [REMOVED AND RESERVED]
13
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
The high and low bid prices of our common stock for the periods indicated below
are as follows:
National Association of Securities Dealers OTC Bulletin Board(1)
Quarter Ended High Low
------------- ---- ---
August 31, 2010 1.18 0.58
May 31, 2010 1.20 1.01
February 28, 2010 N/A(2) N/A(2)
November 30, 2009 N/A(2) N/A(2)
August 31, 2009 N/A(2) N/A(2)
May 31, 2009 N/A(2) N/A(2)
February 28, 2009 N/A(2) N/A(2)
November 30, 2008 N/A(2) N/A(2)
- ----------
(1) Over-the-counter market quotations reflect inter-dealer prices without
retail mark-up, mark-down or commission, and may not represent actual
transactions.
(2) Our first trade occurred on March 4, 2010.
Our common shares are issued in registered form. Nevada Agency and Transfer
Company, 50 West Liberty Street, Suite 880, Reno, NV 89501 (Telephone:
775.322.0626; Facsimile: 775.322.5623) is the registrar and transfer agent for
our common shares
On November 17, 2010, the list of stockholders for our shares of common stock
showed 37 registered stockholders and 64,000,000 shares of common stock
outstanding.
DIVIDENDS
We have not declared any dividends on our common stock since the inception of
our company on July 20, 2006. There is no restriction in our Articles of
Incorporation and Bylaws that will limit our ability to pay dividends on our
common stock. However, we do not anticipate declaring and paying dividends to
our shareholders in the near future.
EQUITY COMPENSATION PLAN INFORMATION
On July 30, 2010 our directors approved the adoption of the 2010 Stock Option
Plan which permits our Company to issue up to 6,500,000 shares of our common
stock to directors, officers, employees and consultants of our company upon the
exercise of stock options granted under the 2010 Plan.
The following table provides a summary of the securities authorized for issuance
under Equity Compensation Plans, the weighted average price and number of
securities remaining available for issuance, all as at August 31, 2010.
14
Number of Securities
Number of Securities to be Remaining Available for
Issued Upon Exercise of Weighted-Average Exercise Future Issuance Under
Outstanding Options, Price of Outstanding Options, Equity Compensation Plans
Plan Category Warrants and Rights Warrants and Rights (excluding column (a))
(a) (b) (c)
------------- ------------------- ------------------- -------------------------
Equity Compensation Plans to N/A N/A N/A
be Approved by Security
Holders
Equity Compensation Plans Not
Approved by Security Holders 6,500,000 N/A 6,500,000(1)
--------- -----------
TOTAL 6,500,000 N/A 6,500,000(1)
========= ===========
- ----------
(1) Subsequent to the period, on October 6, 2010, we granted an aggregate of
5,400,000 stock options to ten individuals, including directors, officers,
consultants and employees, pursuant to our 2010 Stock Plan, at an exercise
price of $0.68 per share. Of the 5,400,000 stock options, 400,000 options
are exercisable until October 5, 2012 and 5,000,000 options are exercisable
until October 6, 2015. We issued the stock options to seven (7) non-U.S.
persons (as that term is defined in Regulation S of the Securities Act of
1933), in an offshore transaction relying on Regulation S and/or Section
4(2) of the Securities Act of 1933 and to three (3) U.S. persons (as that
term is defined in Regulation S of the Securities Act of 1933) relying upon
Rule 506 of Regulation D of the Securities Act of 1933.
PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
We did not purchase any of our shares of common stock or other securities during
the year ended August 31, 2010.
RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEM 6. SELECTED FINANCIAL DATA
As a "smaller reporting company", we are not required to provide the information
required by this Item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with our audited
financial statements and the related notes for the years ended August 31, 2010
and August 31, 2009 that appear elsewhere in this annual report. The following
discussion contains forward-looking statements that reflect our plans, estimates
and beliefs. Our actual results could differ materially from those discussed in
the forward looking statements. Factors that could cause or contribute to such
differences include, but are not limited to those discussed below and elsewhere
in this registration statement, particularly in the section entitled "Risk
Factors" beginning on page 7 of this annual report.
Our audited financial statements are stated in United States Dollars and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
15
PLAN OF OPERATION
We endeavor to conduct exploration activities on our newly optioned property
during the twelve month period beginning September 1, 2010. We estimate our
operating expenses and working capital requirements for the twelve month period
beginning September 1, 2010 to be as follows:
Estimated Expenses For the Twelve Month Period Beginning
September 1, 2010
General and Administrative Expenses $ 200,000
Other Operating Expenses $ 200,000
Exploration Expenses $1,500,000
----------
TOTAL $1,900,000
==========
At present, our cash requirements for the next 12 months (beginning September 1,
2010) outweigh the funds available to maintain or develop our properties. Of the
$1,900,000 that we require for the next 12 months, we had $2,146 in cash as of
August 31, 2010 and a working capital deficit of $307,203. As we do not have the
funds necessary to cover our projected operating expenses for the next twelve
month period, we will be required to raise additional funds through the issuance
of equity securities, through loans or through debt financing. To improve our
liquidity, we currently intend to pursue additional equity financing from
private investors or possibly a registered public offering. However, there can
be no assurance that we will be successful in raising the required capital or
that our actual cash requirements will not exceed our estimates. If we are
unable to achieve the necessary additional financing, then we plan to reduce the
amounts that we spend on our exploration activities and administrative expenses
in order to be within the amount of capital resources that are available to us.
CAPITAL EXPENDITURES
On November 9, 2010, we announced by press release our entry into a letter of
intent to acquire the Kisita Gold Mine Property, an operational gold property
four hours northwest of the capital city of Kampala, Uganda. The acquisition is
subject to further negotiation and due diligence of the project satisfactory to
us. As of the date of this Prospectus we have commenced corporate due diligence
on the project and anticipate placing a team of geological consultants on the
property in December to conduct onsite due diligence. However, there is no
guarantee that we will proceed with an acquisition of the Kisita Gold Mine
Property. Other than a potential investment toward the acquisition of the Kisita
Gold Mine Property, we do not intend to invest in capital expenditures during
the twelve-month period ending August 31, 2011.
GENERAL AND ADMINISTRATIVE EXPENSES
We expect to spend $200,000 during the twelve-month period ending August 31,
2011 on general and administrative expenses including website costs, loan
amortization, rent, office equipment and other administrative related expenses.
OTHER OPERATING EXPENSES
We expect to spend $200,000 during the twelve-month period ending August 31,
2011 on operating expenses including consulting fees, exploration expenses,
rent, and professional fees.
16
PRODUCT RESEARCH AND DEVELOPMENT
We do not anticipate expending any funds on research and development,
manufacturing and engineering over the twelve months ending August 31, 2011.
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment over the twelve months
ending August 31, 2011.
PERSONNEL PLAN
We do not expect any material changes in the number of employees over the next
12 month period (although we may enter into employment or consulting agreements
with our officers or directors). We do and will continue to outsource contract
employment as needed.
RESULTS OF OPERATIONS FOR THE YEARS ENDED AUGUST 31, 2010 AND 2009 AND FOR THE
PERIOD FROM INCEPTION (JULY 20, 2006) TO AUGUST 31. 2010.
The following summary of our results of operations should be read in conjunction
with our audited financial statements for the years ended August 31, 2010 and
2009.
Our operating results for the years ended August 31, 2010 and 2009 and for the
period from Inception (July 20, 2006) to August 31, 2010 are summarized as
follows:
Inception
(July 20, 2006) to
Year Ended August 31, August 31,
2010 2009 2010
-------- -------- -------
Revenue $ 0 $ 0 $ 0
Operating Expenses $674,503 $ 17,820 $746,058
Net Loss $689,292 $ 17,820 $760,847
REVENUES
We did not earn any revenues from our inception through year ended August 31,
2010 and have not subsequently earned any revenues.
EXPENSES
Our expenses for the years ended August 31, 2010 and 2009 and for the period
from Inception (July 20, 2006) to August 31, 2010 are outlined in the table
below:
17
OPERATING EXPENSES
Inception
(July 20, 2006) to
Year Ended August 31, August 31,
2010 2009 2010
-------- -------- --------
Consulting Fees $537,230 $ 0 $537,230
Exploration Expenses $ 0 $ 0 $ 17,500
General administrative expenses $ 28,381 $ 2,165 $ 43,242
Rent Expense-Related Party $ 2,000 $ 5,500 $ 7,500
Professional Fees $106,892 $ 10,155 $140,586
The increase in expenses for the year ended August 31, 2010, compared to the
same period in fiscal 2009, was mainly due to an increase in consulting fees
payable to our president and chief executive officer in the form of options to
purchase our common stock and an increase in general and administrative and
professional fees resulting from payments made by us in respect of the Cap Gold
Project.
LIQUIDITY AND FINANCIAL CONDITION AS AT AUGUST 31, 2010 AND AUGUST 31, 2009
Our financial position as at August 31, 2010 and 2009 was as follows:
WORKING CAPITAL
As at As at
August 31, August 31,
2010 2009
-------- --------
$ $
Current Assets 72,869 9,095
Current Liabilities 380,072 650
Working Capital (Deficiency) (307,203) 8,445
Our working capital deficit decreased from $8,845 at August 31, 2009 to
($307,203) at August 31, 2010 primarily as a result of our convertible loan from
Monaco Capital whereby Monaco Capital Inc. has agreed to loan our company up to
$500,000. The loan (and accrued interest) is convertible in whole or in part
into common shares of our company at a conversion price of $1.05 and will bear
interest at 10% per annum. The principal amount of the loan and accrued interest
is due and payable one year from the advancement date. We may at any time during
the term of the loan prepay any sum up to the full amount of the loan and
accrued interest then outstanding for an additional 10% of such amount. At
August 31, 2010, Monaco Capital Inc has advanced $259,679. The balance sheet at
August 31, 2010 records the loan value at $240,142 due to the unamortized
beneficial conversion feature on the convertible debt totaling $10,791. The
initial beneficial conversion feature was valued at $16,833 of which $6,042 was
amortized. Accrued interest relating to the loan totaled $8,746 as at August 31,
2010 and was recorded in accounts payable and accrued liabilities.
18
CASH FLOWS
Inception
Year Ended Year Ended (July 20, 2006) to
August 31, August 31, August 31,
2010 2009 2010
-------- -------- --------
$ $ $
Net cash provided by (used in) Operating Activities (176,546) (20,822) (249,127)
Net cash provided by (used in) Investing Activities (151,313) -- (151,313)
Net cash provided by (used in) Financing Activities 322,586 -- 402,586
-------- -------- --------
Increase (Decrease) in Cash during the Year (5,273) (20,882) 2,146
Cash, Beginning of Year 7,419 28,241 --
Cash, End of Year 2,146 7,419 2,146
Our principal source of funds has been from our loan from Monaco Capital Inc.
CONTRACTUAL OBLIGATIONS
As a "smaller reporting company", we are not required to provide tabular
disclosure obligations.
GOING CONCERN
We incurred a net loss for the years ending August 31, 2010 and 2009 of $689,292
and $17,820 respectively and at August 31, 2010 had a deficit accumulated during
the exploration stage of $780,847. Since Inception (July 20, 2006) to August 31,
2010, we had commenced limited operations, raising substantial doubt about our
ability to continue as a going concern. We will seek additional sources of
capital through the issuance of debt or equity financing, but there can be no
assurance that we will be successful in accomplishing our objectives.
Our ability to continue as a going concern is dependent on additional sources of
capital and the success of our plan. The 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 the
outcome of this uncertainty.
OFF-BALANCE SHEET ARRANGEMENTS
We have 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 stockholders.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, our Company considers highly liquid
financial instruments purchased with a maturity of three months or less to be
cash equivalents.
19
INCOME TAXES
Our Company accounts for its income taxes in accordance with Accounting Standard
Codification (ASC) 740, which requires recognition of deferred tax assets and
liabilities for future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and our
respective tax basis and tax 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 effect on deferred tax assets and liabilities of a
change in tax rates is recognized in operations in the period that includes the
enactment date.
Our Company has a net operating loss carry-forward to be used in future years.
Our Company has established a valuation allowance for the full tax benefit of
the operating loss carry-forwards due to the uncertainty regarding realization.
FAIR VALUE OF FINANCIAL INSTRUMENTS
ASC 825 "Financial Instruments", requires our Company to disclose, when
reasonably attainable, the fair market value of its assets and liabilities which
are deemed to be financial instruments. The carrying amount and estimated fair
values of our Company's financial instruments approximated their fair value due
to their short-term nature.
NET LOSS PER COMMON SHARE
Our Company computes net loss per share in accordance with ASC 260, "Earnings
per Share" and SEC Staff Accounting Bulletin No. 98 (SAB 98). Under the
provisions of ASC 260 and SAB 98, basic net loss per share is computed by
dividing the net loss available to common stockholders for the period by the
weighted average number of shares of common stock outstanding during the period.
The calculation of diluted net loss per share gives effect to common stock
equivalents; however, potential common shares are excluded if their effect is
anti-dilutive. For the period from our inception on July 20, 2006) through
August 31, 2010, our Company had no potentially dilutive securities.
STOCK-BASED COMPENSATION
On August 1, 2009, our Company adopted the fair value recognition provisions of
FASB ASC 718-10. Our Company accounts for equity instruments issued in exchange
for the receipt of goods or services from other than employees in accordance
with FASB ASC 718-10 and the conclusions reached in FASB ASC 505-10. 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 FASB ASC 505-10.
The Company records stock based compensation in accordance with the guidance in
ASC 718. ASC Topic 718 requires the Company to recognize expense related to the
fair value of its employee stock option awards. This eliminates accounting for
share-based compensation transactions using the intrinsic value and requires
instead that such transactions be accounted for using a fair-value-based method.
The Company recognizes the cost of all share-based awards on a graded vesting
basis over the vesting period of the award.
RECENT ACCOUNTING PRONOUNCEMENTS
In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting
Standard Updated (ASC) 2010-13 related to Stock Compensation, Topic 718. ASC
2010-13 addresses the classification of an employee share-based payment award
with an exercise price denominated in the currency of a market in which the
underlying equity security trades. Awards of equity share options granted to an
employee of an entity's foreign operation that provide a fixed exercise price
denominated in (1) the foreign operation's functional currency or (2) the
currency in which the employee's pay is denominated should not be considered to
20
contain a condition that is not a market, performance, or service condition.
However, U.S. generally accepted accounting principles (GAAP) do not specify
whether a share-based payment award with an exercise price denominated in the
currency of a market in which the underlying equity security trades has a
market, performance, or service condition. Diversity in practice has developed
on the interpretation of whether such an award should be classified as a
liability when the exercise price is not denominated in either the foreign
operation's functional currency or the currency in which the employee's pay is
denominated. The amendments in this Update are effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2010. The amendments in this Update should be applied by recording a
cumulative-effect adjustment to the opening balance of retained earnings. The
cumulative-effect adjustment should be calculated for all awards outstanding as
of the beginning of the fiscal year in which the amendments are initially
applied, as if the amendments had been applied consistently since the inception
of the award. The cumulative-effect adjustment should be presented separately.
Earlier application is permitted. We do not expect the provisions of ASU 2010-03
to have a material effect on the financial position, results of operations or
cash flows of our Company.
In January 2010, the FASB issued ASU 2010-03, Extractive Activities--Oil and Gas
(Topic 932): Oil and Gas Reserve Estimation and Disclosures. This amendment to
Topic 932 has improved the reserve estimation and disclosure requirements by (1)
updating the reserve estimation requirements for changes in practice and
technology that have occurred over the last several decades and (2) expanding
the disclosure requirements for equity method investments. This is effective for
annual reporting periods ending on or after December 31, 2009. However, an
entity that becomes subject to the disclosures because of the change to the
definition oil- and gas- producing activities may elect to provide those
disclosures in annual periods beginning after December 31, 2009. Early adoption
is not permitted. We do not expect the provisions of ASU 2010-03 to have a
material effect on the financial position, results of operations or cash flows
of our Company.
In January 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-06 (ASU 2010-06), Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.
This is effective for interim and annual reporting periods beginning after
December 15, 2009, except for the disclosures about purchases, sales, issuances,
and settlements in the roll forward of activity in Level 3 fair value
measurements. Those disclosures are effective for fiscal years beginning after
December 15, 2010, and for interim periods within those fiscal years. Early
adoption is permitted. The Company does not expect the provisions of ASU 2010-06
to have a material effect on the financial position, results of operations or
cash flows of the Company.
In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity
(Topic 505): Accounting for Distributions to Shareholders with Components of
Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This
amendment to Topic 505 clarifies the stock portion of a distribution to
shareholders that allows them to elect to receive cash or stock with a limit on
the amount of cash that all shareholders can elect to receive in the aggregate
is considered a share issuance that is reflected in EPS prospectively and is not
a stock dividend for purposes of applying Topics 505 and 260. Effective for
interim and annual periods ending on or after December 15, 2009, and would be
applied on a retrospective basis. We do not expect the provisions of ASU 2010-01
to have a material effect on the financial position, results of operations or
cash flows of our Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a "smaller reporting company", we are not required to provide the information
required by this Item.
21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our audited financial statements are stated in United States dollars (US$) and
are prepared in accordance with United States Generally Accepted Accounting
Principles.
The following audited financial statements are filed as part of this annual
report beginning on page 23:
Report of Independent Registered Public Accounting Firm, dated November 24,
2010.
Audited Balance Sheets as at August 31, 2010 and 2009.
Audited Statements of Operations for the years ended August 31, 2010 and
2009 and from inception (July 20, 2006) to August 31, 2010.
Audited Statement of Changes in Stockholders' Equity (Deficit) from
inception (July 20, 2006) to August 31, 2010.
Audited Statements of Cash Flows for the years ended August 31, 2010 and
2009 and from inception (July 20, 2006) to August 31, 2010.
Notes to the Financial Statements.
22
[LETTERHEAD OF DE JOYA GRIFFITH & COMPANY, LLC]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
American Paramount Gold Corp.
Toronto, Ontario, Canada
We have audited the accompanying balance sheets of American Paramount Gold Corp.
(An Exploration Stage Company) as of August 31, 2010 and 2009, and the related
statements of operations, stockholders' equity (deficit), and cash flows for the
years then ended and from inception (July 20, 2006) through August 31, 2010.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Paramount Gold. (An
Exploration Stage Company) as of August 31, 2010 and 2009, and the results of
its operations and cash flows for the years then ended and from inception (July
20, 2006) through August 31, 2010 in conformity with generally accepted
accounting principles in the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has suffered recurring losses from operations, which
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ De Joya Griffith & Company, LLC
- ------------------------------------------
Henderson, Nevada
November 24, 2010
23
AMERICAN PARAMOUNT GOLD CORP
(fka ZEBRA RESOURCES INC.)
(An Exploration Stage Company)
Balance Sheets
(Stated in U.S. Dollars)
August 31, August 31,
2010 2009
-------- --------
(Audited) (Audited)
$ $
ASSETS
CURRENT
Cash 2,146 7,419
Prepaid and deposit 70,723 1,676
-------- --------
TOTAL CURRENT ASSETS 72,869 9,095
MINING CLAIM 125,000 --
WEBSITE (NET) 23,389 --
-------- --------
TOTAL ASSETS 221,258 9,095
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 76,023 150
Accounts payable - related party 1,000 500
Notes payable 62,907 --
Convertible loans payable - related party,
net of unamortized discount of $10,791 240,142 --
-------- --------
TOTAL CURRENT LIABILITIES 380,072 650
-------- --------
TOTAL LIABILITIES 380,072 650
-------- --------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock
150,000,000 authorized shares, par value $0.001
64,000,000 shares issued and outstanding 64,000 64,000
Additional paid-in-capital 558,033 36,000
Deficit accumulated during exploration stage (780,847) (91,555)
-------- --------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (158,814) 8,445
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 221,258 9,095
======== ========
See accompanying notes to financial statements.
24
AMERICAN PARAMOUNT GOLD CORP
(fka ZEBRA RESOURCES INC.)
(An Exploration Stage Company)
Statements of Operations
(Stated in U.S. Dollars)
From Inception
Twelve Months Ended (July 20, 2006) to
August 31, August 31, August 31,
2010 2009 2010
------------ ------------ ------------
$ $ $
REVENUES
Revenues -- -- --
------------ ------------ ------------
Total revenues -- -- --
------------ ------------ ------------
EXPENSES
Operating expenses
Consulting expense 537,230 -- 537,230
Exploration expenses -- -- 17,500
General and adminstrative 28,381 2,165 43,242
Rent expenses - related party 2,000 5,500 7,500
Professional fees 106,892 10,155 140,586
------------ ------------ ------------
Total operating expenses 674,503 17,820 746,058
------------ ------------ ------------
NET LOSS FROM OPERATIONS (674,503) (17,820) (746,058)
------------ ------------ ------------
OTHER EXPENSE
Amortization of debt discount (6,042) -- (6,042)
Interest expense (8,747) -- (8,747)
------------ ------------ ------------
Total other expense (14,789) -- (14,789)
------------ ------------ ------------
Net loss (689,292) (17,820) (760,847)
============ ============ ============
BASIC EARNINGS PER COMMON SHARE $ (0.01) $ (0.00)
------------ ------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - BASIC 64,000,000 64,000,000
============ ============
See accompanying notes to financial statements.
25
AMERICAN PARAMOUNT GOLD CORP
(fka ZEBRA RESOURCES INC.)
(An Exploration Stage Company)
Statement of Stockholders' Equity (Deficit)
from Inception (July 20, 2006) to August 31, 2010
(Stated in U.S. Dollars)
Deficit
Accumulated
Additional During the
Common Shares Paid In Exploration
Number Amount Capital Stage Total
------ ------ ------- ----- -----
Balance, July 20, 2006 -- $ -- $ -- $ -- $ --
Issued for cash at $0.0005 per share 40,000,000 40,000 -- (20,000) 20,000
on July 25, 2006
Net loss -- -- -- (18,575) (18,575)
---------- ------- -------- --------- ---------
Balance, August 31, 2006 40,000,000 40,000 -- (38,575) 1,425
Issued for cash at $0.0025 per share 24,000,000 24,000 36,000 -- 60,000
on December 20, 2006
Net loss -- -- -- (15,058) (15,058)
---------- ------- -------- --------- ---------
Balance, August 31, 2007 64,000,000 64,000 36,000 (53,633) 46,367
Net loss -- -- -- (20,102) (20,102)
---------- ------- -------- --------- ---------
Balance, August 31, 2008 64,000,000 64,000 36,000 (73,735) 26,265
Net loss -- -- -- (17,820) (17,820)
---------- ------- -------- --------- ---------
Balance, August 31, 2009 64,000,000 64,000 36,000 (91,555) 8,445
Beneficial conversion feature -- -- 16,833 -- 16,833
Stock options granted -- -- 505,200 -- 505,200
Net loss -- -- -- (689,292) (689,292)
---------- ------- -------- --------- ---------
Balance, August 31, 2010 64,000,000 $64,000 $558,033 $(780,847) $(158,814)
========== ======= ======== ========= =========
See accompanying notes to financial statements.
26
AMERICAN PARAMOUNT GOLD CORP
(fka ZEBRA RESOURCES INC.)
(An Exploration Stage Company)
Statements of Cash Flows
(Stated in U.S. Dollars)
Twelve Months Twelve Months From Inception
Ended Ended (July 20, 2006) to
August 31, August 31, August 31,
2010 2009 2010
-------- -------- --------
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (689,292) (17,820) (760,847)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Amortization of website 2,924 -- 2,924
Stock issued for services 505,200 -- 505,200
Amortized debt discount 6,042 -- 6,042
Change in operating assets and liabilities:
Increase (decrease) in accounts payable and accrued liabilities 67,127 (1,826) 67,277
Increase in accounts payable- related party 500 500 1,000
(Increase) in prepaids (69,047) (1,676) (70,723)
-------- -------- --------
NET CASH FLOWS USED IN OPERATING ACTIVITIES (176,546) (20,822) (249,127)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Mining claims (125,000) -- (125,000)
Website (26,313) -- (26,313)
-------- -------- --------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (151,313) -- (151,313)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Convertible loan proceeds - related party 259,679 -- 259,679
Notes payable proceeds 62,907 -- 62,907
Proceeds on sale of common stock -- -- 80,000
-------- -------- --------
NET CASH FLOWS FROM FINANCING ACTIVITIES 322,586 -- 402,586
-------- -------- --------
NET INCREASE (DECREASE) IN CASH (5,273) (20,822) 2,146
CASH, BEGINNING OF THE PERIOD 7,419 28,241 --
-------- -------- --------
CASH, END OF THE PERIOD 2,146 7,419 2,146
======== ======== ========
NON CASH FINANCING ACTIVITIES
Beneficial conversion feature 16,833 -- 16,833
-------- -------- --------
See accompanying notes to financial statements.
27
1. DESCRIPTION OF THE BUSINESS AND HISTORY
American Paramount Gold Corp., a Nevada corporation, (hereinafter referred to as
the "Company" or "APGC") was incorporated in the State of Nevada on July 20,
2006. The Company was formed to engage in the acquisition, exploration and
development of natural resource properties of merit. The Company acquired a
mineral claims option located in the Province of British Columbia, Canada during
the period ending August 31, 2006 for $15,000. The Company entered into a
Mineral Property Options Agreement (the "MPOA") with a private British Columbia
company, whereby the Company obtained an option to acquire mineral claims known
as "Astro 2006" located in British Columbia. During the period ending August 31,
2009, the Company terminated the MPOA and relieved itself from any further
obligations there under.
On September 12, 2008, Karl Kottmeier resigned as our President, Chief Executive
Officer, Treasurer, and Chief Financial Officer. As a result, on September 12,
2008, we appointed Dan Gravelle as President, Chief Executive Officer,
Treasurer, and Chief Financial Officer of the Company. Additionally, Mr.
Gravelle was appointed a director of the Company.
On December 1, 2008, Karl Kotmeier resigned as a director of the Company.
On November 30, 2009, we appointed Mr. Peter Jenks as a member of our board of
directors.
On February 26, 2010, Monaco Capital Inc. acquired a controlling interest in our
Company by purchasing 20,000,000 shares of our common stock in a private
transaction.
On March 17, 2010, the Company filed a Plan of Merger, Merger Agreement and
Certificate of Change with the Nevada Secretary of State to affect a forward
stock split of its common shares on a 2 new for 1 old basis and to change its
name to American Paramount Gold Corp. These changes were approved by FINRA
effective April 12, 2010. As a result, our authorized capital increased from
75,000,000 to 150,000,000 shares of common stock and our issued and outstanding
increased from 32,000,000 shares of common stock to 64,000,000 shares of common
stock, all with a par value of $0.001.
On April 14, 2010, we appointed Wayne Parsons as a member of the board of
directors and as our President, Chief Executive Officer, Treasurer, Secretary
and Chief Financial Officer.
On April 14, 2010, Dan Gravelle resigned as our President, Chief Executive
Officer, Treasurer, Secretary and Chief Financial Officer.
On April 14, 2010, we entered into a consulting agreement with Wayne Parsons
whereby the Company agreed to make monthly payments of Cdn $1,500 and to grant
1,000,000 options to acquire 1,000,000 shares of our common stock at a purchase
price of US$1.00 per share. (Note 9 Stock Options)
On April 16, 2010, the Company entered into an agreement with Royce L. Hackworth
and Belva L. Tomany in respect of 189 unpatented mining claims situated in the
Walker Lane Structural Belt in Nye County, Nevada (the "Cap Gold Project"). In
order to complete the transactions contemplated by the Agreement, the Company
paid $125,000 to secure the option. (Note 4 Mineral Properties)
28
1. DESCRIPTION OF THE BUSINESS AND HISTORY (CONT'D)
On April 22, 2010, we entered into a convertible loan agreement with Monaco
Capital Inc., wherein Monaco Capital Inc. has agreed to loan our Company up to
$500,000. The loan (including accrued interest) is convertible into common
shares of our Company at a conversion price of $1.05 and will bear interest of
10% per annum. The principal amount of the loan and accrued interest is due and
payable one year from the advancement date. At August 31, 2010, Monaco Capital
Inc. has advanced $250,933. The balance sheet at August 31, 2010 records the
loan value at $240,142 due to the unamortized beneficial conversion feature of
$10,791 (Note 7 Convertible Loan- Related Party).
On April 27, 2010, we appointed Mr. John Goodwin to the board of directors.
On July 19, 2010 we increased the numbers of directors on our board of directors
from three to four and appointed J. Trevor Eyton to fill the ensuing vacancy.
On July 30, 2010 our directors approved the adoption of the 2010 Stock Option
Plan which permits our Company to issue up to 6,500,000 shares of our common
stock to directors, officers, employees and consultants of our Company upon the
exercise of stock options granted under the 2010 Plan. (Note 9 Stock Options)
On August 30, 2010, Wayne Parsons resigned as our secretary and treasurer. His
resignation was not the result of any disagreement regarding our operations,
policies, practices or other disagreements, and he will remain as a member of
our board of directors. As a result on August 30, 2010, we appointed Ann Dumyn
as our secretary and treasurer.
On August 30, 2010 we increased the number of directors on our board of
directors from four to seven and appointed Hugh Aird, Dr. H. Neville Rhoden and
Leland Venner to fill the ensuing vacancies.
At August 31, 2010 our board of directors consists of 7 directors including
Peter Jenks, Wayne Parsons, John Goodwin, J. Trevor Eyton, Hugh Aird, Dr. H.
Neville Rhoden, and Leland Verner.
THE COMPANY TODAY -The Company is an exploration stage enterprise, as defined in
FASB ASC 915-10 "Development Stage Entities".
As an exploration stage mining company we are engaged in the identification,
acquisition, and exploration of metals and minerals with a focus on gold
mineralization. Our current operational focus is to conduct exploration
activities on the Cap Gold Project and to complete the terms of the Cap Gold
option agreement (Note 4 Mineral Properties).
2. BASIS OF PRESENTATION AND GOING CONCERN
The balance sheet presented is that of the Company for the year ended August 31,
2010 and 2009. The statements of operations, cash flows and stockholders equity
(deficit) reflect the changes in stockholders equity (deficit), the results of
operations and the changes in cash flows of the Company for the year ended
August 31, 2010 and 2009 and from inception (July 20, 2006) to August 31, 2010.
These accompanying financial statements have been prepared by management, who is
responsible for their content, in accordance with accounting principles
generally accepted in the United States of America.
29
2. BASIS OF PRESENTATION AND GOING CONCERN - (CONT'D)
The Company has not generated any revenue in the current year and has
accumulated substantial losses, and require additional funds to maintain its
operations. Management's plans in this regard are to raise equity and/or debt
financing as required.
GOING CONCERN
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States applicable to a going
concern, which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. The Company has
incurred a net loss of $689,292 and $17,820 for the years ended August 31, 2010
and 2009. At August 31, 2010 and 2009, the Company had a deficit accumulated of
$780,847 and $91,555, respectively. Since Inception (July 20, 2006) to August
31, 2010, the Company has commenced limited operations, raising substantial
doubt about the Company's ability to continue as a going concern. The Company
will seek additional sources of capital through the issuance of debt or equity
financing, but there can be no assurance the Company will be successful in
accomplishing its objectives.
The ability of the Company to continue as a going concern is dependent on
additional sources of capital and the success of the Company's plan. The
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 the outcome of this
uncertainty.
3. SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers highly liquid
financial instruments purchased with a maturity of three months or less to be
cash equivalents.
CAPITALIZED INTEREST
The Company capitalizes interest (Nil in 2010) on expenditures made in
connection with exploration and development projects that are not subject to
current amortization. Interest is capitalized only for the period that
activities are in progress to bring the projects to their intended use.
30
3. SIGNIFICANT ACCOUNTING POLICIES - (CONT'D)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The table below presents the carrying value and fair value of the Company's
financial instruments.
The fair value represents management's best estimates based on a range of
methodologies and assumptions. The carrying value of receivables and payables
arising in the ordinary course of business and the receivable from taxing
authorities, approximate fair value because of the relatively short period of
time between their origination and expected realization.
Quoted Significant Significant
Carrying value Prices in Other Unobservable
31-Aug-10 (Level 1) (Level 2) (Level 3)
--------- --------- --------- ---------
FINANCIAL ASSETS
Cash and cash equivalents $ 2,146 $ 2,146 $ -- $ --
Prepaid and deposits 70,723 -- 70,723 --
Website (net) 23,389 -- 23,389 --
Mining claims 125,000 -- 125,000 --
FINANCIAL LIABILITIES
Accounts payable and accrued expenses 76,023 -- 76,023 --
Accounts payable- related parties 1,000 -- 1,000 --
Convertible notes -related party 240,142 -- 240,142 --
Notes payable 62,907 -- 62,907 --
-------- -------- -------- --------
31-Aug-09
---------
FINANCIAL ASSETS
Cash and cash equivalents $ 7,419 $ 7,419 $ -- $ --
Prepaid and deposits 1,676 -- 1,676 --
Website (net) -- -- -- --
Mining claims -- -- -- --
FINANCIAL LIABILITIES
Accounts payable and accrued expenses 150 -- 150 --
Accounts payable- related parties 500 -- 500 --
Convertible notes -related party -- -- -- --
Notes payable -- -- -- --
-------- -------- -------- --------
31
3. SIGNIFICANT ACCOUNTING POLICIES - (CONT'D)
INCOME TAXES
The Company accounts for its income taxes in accordance with FASB ASC 740
"Income Taxes", which requires recognition of deferred tax assets and
liabilities for future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax basis and tax 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 effect on deferred tax assets and liabilities of a
change in tax rates is recognized in operations in the period that includes the
enactment date.
The Company has a net operating loss carry-forward to be used in future years.
The Company has established a valuation allowance for the full tax benefit of
the operating loss carry-forwards due to the uncertainty regarding realization.
NET LOSS PER COMMON SHARE
The Company computes net loss per share in accordance with FASB ASC 260
"Earnings per Share". Under the provisions of FASB ASC 260 "Earnings per Share",
basic net loss per share is computed by dividing the net loss available to
common stockholders for the period by the weighted average number of shares of
common stock outstanding during the period. The calculation of diluted net loss
per share gives effect to common stock equivalents; however, potential common
shares are excluded if their effect is anti-dilutive. For the period from
Inception (July 20, 2006) through August 31, 2010, common stock equivalents are
the rights conferred upon Monaco Capital Inc. pursuant to the convertible loan
agreement (Note 7) and those arising from the 2010 Stock Option Plan (Note 9).
These stock equivalents were not included as their effect was anti-dilutive for
the periods presented.
STOCK-BASED COMPENSATION
On August 1, 2009, the Company adopted the fair value recognition provisions of
FASB ASC 718-10 and 505-10. The Company accounts for equity instruments issued
in exchange for the receipt of goods or services from other than employees in
accordance with FASB ASC 718-10 and the conclusions reached in FASB ASC 505-10.
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 FASB ASC 505-10.
The Company records stock based compensation in accordance with the guidance in
ASC 718. ASC Topic 718 requires the Company to recognize expense related to the
fair value of its employee stock option awards. This eliminates accounting for
share-based compensation transactions using the intrinsic value and requires
instead that such transactions be accounted for using a fair-value-based method.
The Company recognizes the cost of all share-based awards on a graded vesting
basis over the vesting period of the award.
CONCENTRATION OF CREDIT RISK
The Company places its cash and cash equivalents with high credit quality
financial institutions. The Company obtained financing during the year from
Monaco Capital Inc. which holds 52% of the Company's common shares. The balance
of the loan as at August 31, 2010 was $240,142.
32
4. MINERAL PROPERTIES AND WEBSITE DEVELOPMENT
On April 16, 2010, the Company entered into an option agreement to acquire a
100% long-term lease interest in 189 unpatented mining claims situated in the
Walker Lane Structural Belt in Nye County, Nevada (the "Cap Gold Project"). The
189 claims making up the Cap Gold Project form a contiguous block of
approximately 3,960 acres (1,602 hectares). The Company paid $125,000 to secure
the option, giving it the right to acquire a 100% long-term lease interest in
the Cap Gold Project. To exercise the option the Company must: (i) make ongoing
yearly advance production royalty cash payments during the term of the agreement
of $125,000 in years two (2) through five (5), $150,000 in years six (6) through
twelve (12), $200,000 in years 13 through 20 and $300,000 in years 21 through
30; (ii) incur expenditures on exploration of the Cap Gold Project of not less
than an aggregate of $1,250,000 over five (5) years; and (iii) make production
royalty payments from production from the property after the advance production
royalty cash payments described above have been repaid to our Company from
production from the property. At our Company's election, the production royalty
may be calculated either on a sliding scale or on a fixed production royalty
basis, and must range from 1% to a maximum of 3%.
The Company capitalizes the costs associated with the development of the
Company's website pursuant to ASC Topic 350. Other costs related to the
maintenance of the website are expensed as incurred. Amortization is provided
over the estimated useful life of 3 years using the straight-line method for
financial statement purposes. The Company will commence amortization once the
economic benefits of the assets begin to be realized. The Company capitalized
$26,313 in Website development in the year. The net book value at August 31,
2010 was $23,389.
5. NEW ACCOUNTING PRONOUNCEMENTS
In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting
Standard Updated (ASC) 2010-13 related to Stock Compensation, Topic 718. ASC
2010-13 addresses the classification of an employee share-based payment award
with an exercise price denominated in the currency of a market in which the
underlying equity security trades. Awards of equity share options granted to an
employee of an entity's foreign operation that provide a fixed exercise price
denominated in (1) the foreign operation's functional currency or (2) the
currency in which the employee's pay is denominated should not be considered to
contain a condition that is not a market, performance, or service condition.
However, U.S. generally accepted accounting principles (GAAP) do not specify
whether a share-based payment award with an exercise price denominated in the
currency of a market in which the underlying equity security trades has a
market, performance, or service condition. Diversity in practice has developed
on the interpretation of whether such an award should be classified as a
liability when the exercise price is not denominated in either the foreign
operation's functional currency or the currency in which the employee's pay is
denominated. The amendments in this Update are effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2010. The amendments in this Update should
33
5. NEW ACCOUNTING PRONOUNCEMENTS - (CONT'D)
be applied by recording a cumulative-effect adjustment to the opening balance of
retained earnings. The cumulative-effect adjustment should be calculated for all
awards outstanding as of the beginning of the fiscal year in which the
amendments are initially applied, as if the amendments had been applied
consistently since the inception of the award. The cumulative-effect adjustment
should be presented separately.
Earlier application is permitted. The Company does not expect the provisions of
ASU 2010-13 to have a material effect on the financial position, results of
operations or cash flows of the Company.
In January 2010, the FASB issued ASU 2010-03, Extractive Activities--Oil and Gas
(Topic 932): Oil and Gas Reserve Estimation and Disclosures. This amendment to
Topic 932 has improved the reserve estimation and disclosure requirements by (1)
updating the reserve estimation requirements for changes in practice and
technology that have occurred over the last several decades and (2) expanding
the disclosure requirements for equity method investments. This is effective for
annual reporting periods ending on or after December 31, 2009. However, an
entity that becomes subject to the disclosures because of the change to the
definition oil- and gas- producing activities may elect to provide those
disclosures in annual periods beginning after December 31, 2009. Early adoption
is not permitted. We do not expect the provisions of ASU 2010-03 to have a
material effect on the financial position, results of operations or cash flows
of our Company.
In January 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-06 (ASU 2010-06), Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.
This is effective for interim and annual reporting periods beginning after
December 15, 2009, except for the disclosures about purchases, sales, issuances,
and settlements in the roll forward of activity in Level 3 fair value
measurements. Those disclosures are effective for fiscal years beginning after
December 15, 2010, and for interim periods within those fiscal years. Early
adoption is permitted. The Company does not expect the provisions of ASU 2010-06
to have a material effect on the financial position, results of operations or
cash flows of the Company.
In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity
(Topic 505): Accounting for Distributions to Shareholders with Components of
Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This
amendment to Topic 505 clarifies the stock portion of a distribution to
shareholders that allows them to elect to receive cash or stock with a limit on
the amount of cash that all shareholders can elect to receive in the aggregate
is considered a share issuance that is reflected in EPS prospectively and is not
a stock dividend for purposes of applying Topics 505 and 260. This is effective
for interim and annual periods ending on or after December 15, 2009, and would
be applied on a retrospective basis. The Company does not expect the provisions
of ASU 2010-01 to have a material effect on the financial position, results of
operations or cash flows of the Company.
6. NOTES PAYABLE
On August 27, 2010 the Company obtained a loan from an individual in the
principal amount of $32,077. Due to its short term nature the Company agreed to
pay the individual $6,493 as a premium. The note payable totalling $38,569 was
due and payable on or before September 15, 2010. The note was paid in full on
September 10, 2010.
Effective June 1, 2010 the Company obtained liability insurance for its
directors and entered into a commercial premium finance agreement - promissory
note for $30,720. At August 31, 2010 the balance owing AFCO was $24,338.
34
7. CONVERTIBLE LOAN - RELATED PARTY
On April 22, 2010, the Company entered into a convertible loan agreement with
Monaco Capital Inc., majority shareholder, for a principal amount of up to
$500,000 for a term of one year from any applicable advancement date. The loan
is unsecured and shall bear interest at the rate of 10% per annum payable on the
due date. The Company may at any time during the term of the loan prepay any sum
up to the full amount of the loan and accrued interest then outstanding at any
time for an additional 10% of such amount.
The loan (including accrued interest) is convertible into securities of the
Company at a conversion price of $1.05 per share. At any time after the
advancement date, if the Company has not paid the loan and accrued interest in
full, the Lender may, by providing written notice to the Company, exercise its
rights of conversion in respect of either a portion of the total outstanding
amount of the loan as of that date into shares of the Company.
At August 31, 2010, Monaco Capital Inc has advanced to the Company $259,679. The
balance sheets at August 31, 2010 and 2009 recorded the loan value at $240,142
and $Nil due to the unamortized beneficial conversion feature on the convertible
debt totalling $10,791 and $Nil. The initial beneficial conversion feature was
valued at $16,833 of which $6,042 was amortized. The beneficial conversion
feature amount has been accounted for as a debt discount which is being
amortized and treated as interest expense over the term of the convertible
debentures. Accrued interest at August 31, 2010 and 2009 relating to the loan
totalling $8,746 and $Nil was recorded in accounts payable and accrued
liabilities, respectively.
8. STOCKHOLDERS' EQUITY (DEFICIT)
The Company has 150,000,000 (75,000,000 pre-forward stock split) shares
authorized with a par value of $0.001 per share.
Effective July 25, 2006, the Company issued 40,000,000 (20,000,000 pre-forward
stock split) to the founding and sole director of the Company pursuant to a
stock subscription agreement at $0.0005 per share for total proceeds of $20,000,
the shares were issued below par thus $20,000 was applied to accumulated
deficit.
Effective December 20, 2006, the Company issued 24,000,000 (12,000,000
pre-forward stock split) shares of the Company's common stock pursuant to the
Company's SB-2 prospectus offering at $0.0025 per share for total proceeds of
$60,000.
35
8. STOCKHOLDERS' EQUITY (DEFICIT) - (CONT'D)
On February 26, 2010, Monaco Capital Inc. acquired a controlling interest in the
Company by purchasing 40,000,000 (20,000,000 pre-forward stock split) shares of
our common stock in a private transaction.
On March 17, 2010, the Company filed a Plan of Merger, Merger Agreement and
Certificate of Change with the Nevada Secretary of State to affect a forward
stock split of its common shares on a 2 new for 1 old basis. The change was
approved by FINRA effective April 12, 2010. As a result, our authorized capital
increased from 75,000,000 to 150,000,000 shares of common stock and our issued
and outstanding increased from 32,000,000 shares of common stock to 64,000,000
shares of common stock, all with a par value of $0.001. All references in these
financial statements and notes to the financial statements to the number of
shares, price per share and weighted average number of shares outstanding of
common stock prior to this stock split have been adjusted to reflect the stock
split on a retroactive basis unless otherwise noted.
On April 22, 2010, the Company entered into a convertible loan agreement with
Monaco Capital Inc., a majority shareholder, resulting in a beneficial
conversion feature valued at $16,833 which was applied to additional paid in
capital.
9. STOCK OPTIONS
On April 14, 2010, the Company entered into a consulting agreement with Wayne
Parsons, to act as President, CEO, CFO, Secretary and Treasurer of the Company.
As part of the compensation package he was granted 1,000,000 fully vested,
non-transferable stock options with an exercise price of $1.00.
Under SFAS 123 (R) (ASC 718 and 505), the fair value of options is estimated at
the date of grant using a Black-Scholes-Merton ("Black-Scholes") option-pricing
model, which requires the input of highly subjective assumptions including the
expected stock price volatility. Volatility is determined using historical stock
prices over a period consistent with the expected term of the option. The
Company utilizes the guidelines of staff Accounting Bulletin No. 107 (SAB 107)
of the Securities and Exchange Commission relative to "plain vanilla" options in
determining the expected term of option grants. SAB 107 permits the expected
term of "plain vanilla" options to be calculated as the average of the options's
vesting term and contractual period.
The fair value of the options using the Black-Scholes option pricing model with
the following weighted-average assumptions was recorded in the statement of
operations as consulting expenses at a value of $505,200:
Risk Free Interest Rate 1.07%
Expected life 913 days
Expected volatility 72%
Dividend per share $Nil
On July 30, 2010, the Company adopted the 2010 Stock Option Plan which permits
the Company to issue up to 6,500,000 shares of common stock to directors,
officers, employees and consultants of the Company upon the exercise of stock
options granted under the 2010 Plan. At the time of the grant of the option, the
36
9. STOCK OPTIONS - (CONT'D)
Plan Administrator shall designate the expiration date of the option, which date
shall not be later than five (5) years from the date of grant. The vesting
schedule for each option shall be specified by the Plan Administrator at the
time of grant of the Option. Effective September 29, 2010 the Plan provides for
an exercise price to be established based on the Fair Market Value of a common
share of the Company being the average of the high and low sales prices (or bid
and ask prices, if sales prices are not reported) for the common stock for the
last trading day immediately preceding the date with respect to which Fair
Market Value is being determined, as reported for the principal trading market
for the Common Stock.
A summary of the status of the Company's stock option plan as of August 31, 2010
and 2009 and changes during the years is presented below:
2010 2009
------------------------ ------------------------
Weighted Weighted
Average Average
Number of Exercise Number of Exercise
Shares # Price $ Shares # Price $
-------- ------- -------- -------
Outstanding at beginning of year -- -- -- --
Granted 1,000,000 1.00 -- --
Exercised -- -- -- --
Forfeited or cancelled -- -- -- --
--------- ----- ----- -----
Outstanding at end of year 1,000,000 1.00 -- --
========= ===== ===== =====
Exercisable 1,000,000 1.00 -- --
--------- ----- ----- -----
10. INCOME TAXES
The Company accounts for income taxes using the liability method, under which
deferred tax liabilities and assets are determined based on the difference
between the financial statement carrying amounts and the tax basis of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.
As of August 31, 2010, the Company had net operating loss carry-forwards of
approximately $255,646 which expire in varying amounts between 2026 and 2030.
Realization of this potential future tax benefit is dependent on generating
sufficient taxable income prior to expiration of the loss carry-forward. The
deferred tax asset related to this potential future tax benefit has been offset
by a valuation allowance in the same amount. The amount of the deferred tax
asset ultimately realizable could be increased in the near term if estimates of
future taxable income during the carry-forward period are revised.
37
10. INCOME TAXES - (CONT'D)
2010 2009
-------- --------
Federal net operating loss carryforward $ 760,846 $ 71,555
Less stock compensation (505,200) --
Net operating loss carryforward 255,646 --
Deferred Tax Assets:
Net operating loss carryforward - 35% 89,476 25,044
Less: Valuation allowance (89,476) (25,044)
--------- ---------
Net Deferred Tax Assets $ -- $ --
========= =========
Effective Tax Rate Reconciliation:
Federal statutory tax rate -35.0% -35.0%
Change in valuation allowance 35.0% 35.0%
--------- ---------
Effective tax rate 0.0% 0.0%
========= =========
11. RELATED PARTY TRANSACTIONS
The Company paid Dan Gravelle a rent payment of $2,000 for the period up to and
including April 14, 2010 at which time Mr. Gravelle resigned as the director and
officer of the Company. As of August 31, 2010 and 2009, the Company recorded
$2,000 and $5,500 in rent expense to Mr. Gravelle, respectively. The balance
owing totalling $1,000 at August 31, 2010 was paid in full on September 16,
2010.
At August 31, 2010, Monaco Capital Inc., a majority shareholder has advanced
$259,679. The balance sheets at August 31, 2010 and 2009 recorded the loan value
at $240,142 and $Nil due to the unamortized beneficial conversion feature on the
convertible debt totalling $10,791 and $Nil. The initial beneficial conversion
feature was valued at $16,833 of which $6,042 was amortized. The beneficial
conversion feature amount has been accounted for as a debt discount which is
being amortized and treated as interest expense over the term of the convertible
debentures. Accrued interest at August 31, 2010 and 2009 relating to the loan
totalling $8,746 and $Nil was recorded in accounts payable and accrued
liabilities, respectively.
12. COMMITMENTS AND CONTINGENCIES
On April 23, 2010 the Company entered into a consulting agreement with a
consultant. The agreement can be terminated by either party upon thirty (30)
days written notice to the other party. As compensation for the services, the
Company agreed to pay to the consultant a monthly fee payable on the 15th day of
each month for the term of the agreement. A further compensation was agreed upon
whereby the Company will pay the consultant, within ten (10) days of the Company
receiving, collectively since January 1, 2010, private placement funds equal to
$500,000, an amount of $10,500. No further compensation is due as at September
30, 2010.
38
13. SUBSEQUENT EVENTS
On September 7, 2010, and October 13, 2010 Monaco Capital Inc. advanced $100,000
and $50,000 respectively. The total advanced under the Convertible Loan is
$400,932.
On September 27, 2010, Peter Jenks and John Goodwin each resigned as members of
our board of directors. Mr. Jenks' and Mr. Goodwin's resignations were not the
result of any disagreements regarding our operations, policies, practices or
other disagreements.
Since September 27, 2010, our board of directors has consisted of 5 directors
including J. Trevor Eyton, Wayne Parsons, Hugh Aird, Dr. H. Neville Rhoden, and
Leland Verner.
On September 29, 2010, Wayne Parsons resigned as our president, chief executive
officer and chief financial officer. Mr. Parsons' resignation was not the result
of any disagreements regarding the Company's operations, policies, practices or
other disagreements and he remains a member of our board of directors. As a
result on September 29, 2010, we appointed Hugh Aird as our president and chief
executive officer and Ann Dumyn as our chief financial officer.
On April 14, 2010, we entered into a consulting agreement with Wayne Parsons
whereby Mr. Parsons agreed to provide our Company with various consulting
services as the president, chief executive officer, chief financial officer,
secretary and treasurer. In consideration of his services, we agreed to provide
Mr. Parsons with a monthly payment of CDN$1,500 and a one-time grant of
1,000,000 non-transferable options with each option to acquire one share of our
common stock at a purchase price of US$1.00 per share, exercisable for five (5)
years. The aforementioned 1,000,000 options were issued, and subsequently
re-issued on October 6, 2010 at a renegotiated purchase price of $0.68 as part
of the below described issuance under our 2010 Stock Plan.
On October 6, 2010, we granted an aggregate of 5,400,000 stock options to ten
individuals, including directors, officers, consultants and employees, pursuant
to our 2010 Stock Plan, at an exercise price of $0.68 per share. Of the
5,400,000 stock options, 400,000 options are exercisable until October 5, 2012
and 5,000,000 options are exercisable until October 6, 2015. We issued the stock
options to seven (7) non-U.S. persons (as that term is defined in Regulation S
of the Securities Act of 1933), in an offshore transaction relying on Regulation
S and/or Section 4(2) of the Securities Act of 1933 and to three (3) U.S.
persons (as that term is defined in Regulation S of the Securities Act of 1933)
relying upon Rule 506 of Regulation D of the Securities Act of 1933.
On August 30, 2010, Wayne Parsons resigned as secretary and treasurer of the
Company. On September 29, 2010 Mr. Parsons resigned as president, chief
financial officer and chief executive officer of the Company. Concurrently on
September 29, 2010, the consulting agreement dated April 14, 2010 between Mr.
Parsons and the Company was terminated. In connection with the termination of
the consulting agreement the Company agreed to cancel 1,000,000 fully vested
stock options with an exercise price of $1.00 that were issued to Mr. Parsons on
April 14, 2010 as compensation under the consulting agreement, and to issue to
Mr. Parsons 1,000,000 fully vested stock options under the 2010 Stock Plan. The
1,000,000 options under the 2010 Stock Plan were issued on October 6, 2010 and
are exercisable at a price of $0.68 until October 6, 2015. The 1,000,000 options
issued on April 14, 2010 were cancelled effective November 18, 2010.
39
13. SUBSEQUENT EVENTS - (CONT'D)
On November 8, 2010, we entered into a letter of intent with Lonsdale
Acquisitions Corp. to acquire the Kisita Gold Mine Property, an operational gold
property four hours northwest of the capital city of Kampala in Uganda. The
Company has commenced onsite and corporate due diligence.
40
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
We have not changed our auditors since our last year end and we have not had any
disagreements with our auditors.
ITEM 9A. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed under the SECURITIES
EXCHANGE ACT OF 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and
communicated to our management, including our president (who is acting as our
principal executive officer and our principal financial officer and principle
accounting officer) to allow for timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, our
management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and our management is required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and procedures.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
As of August 31, 2010, the end of our fiscal year covered by this report, we
carried out an evaluation, under the supervision and with the participation of
our president (who is acting as our principal executive officer and our
principal financial officer and principle accounting officer), of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based on the foregoing, our president (who is acting as our
principal executive officer and our principal financial officer and principle
accounting officer) concluded that our disclosure controls and procedures were
effective as of the end of the period covered by this annual report.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting. Responsibility, estimates and judgments by
management are required to assess the expected benefits and related costs of
control procedures. The objectives of internal control include providing
management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition, and that
transactions are executed in accordance with management's authorization and
recorded properly to permit the preparation of financial statements in
conformity with accounting principles generally accepted in the United States.
Our management assessed the effectiveness of our internal control over financial
reporting as of August 31, 2010. In making this assessment, our management used
the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission ("COSO") in INTERNAL CONTROL-INTEGRATED FRAMEWORK. Our
management has concluded that, as of August 31, 2010, our internal control over
financial reporting is effective in providing reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with US generally accepted accounting
principles. Our management reviewed the results of their assessment with our
Board of Directors.
INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS
Internal control over financial reporting has inherent limitations which include
but is not limited to the use of independent professionals for advice and
guidance, interpretation of existing and/or changing rules and principles,
segregation of management duties, scale of organization, and personnel factors.
Internal control over financial reporting is a process which involves human
diligence and compliance and is subject to lapses in judgment and breakdowns
41
resulting from human failures. Internal control over financial reporting also
can be circumvented by collusion or improper management override. Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements on a timely basis, however these inherent limitations
are known features of the financial reporting process and it is possible to
design into the process safeguards to reduce, though not eliminate, this risk.
Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and
presentation. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal controls over financial reporting
that occurred during the three month period ended August 31, 2010 that have
materially or are reasonably likely to materially affect, our internal controls
over financial reporting.
ITEM 9B. OTHER INFORMATION
None
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
All of the directors of our company hold office until the next annual meeting of
the stockholders or until their successors have been elected and qualified. Our
officers are appointed by our board of directors and hold office until their
death, resignation or removal from office. Our directors and executive officers,
their ages, positions held, and duration as such, are as follows:
Position Held
Name with the Company Age Date First Elected or Appointed
---- ---------------- --- -------------------------------
Hugh Aird President, Chief Executive 56 August 30, 2010 (as director) and September 29,
Officer, Director 2010 (as President and Chief Executive Officer
Ann Dumyn Chief Financial Officer, 61 August 30, 2010 (as Secretary and Treasurer)
Secretary and Treasurer and September 29, 2010 (as Chief Financial Officer)
John Trevor Eyton Director 76 July 19, 2010
Wayne Parsons Director 48 April 14, 2010
Dr. Henry Neville Rhoden Director 81 August 30, 2010
Leland Verner Director 65 August 30, 2010
BUSINESS EXPERIENCE
The following is a brief account of the education and business experience during
at least the past five years of our directors and executive officers, indicating
their principal occupation during that period, and the name and principal
business of the organization in which such occupation and employment were
carried out.
42
HUGH AIRD--PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
Since graduating from Harvard University, Hugh Aird has held numerous top level
executive positions throughout the financial industry. From 1998 to 2002 he was
the Managing Director at Berenson, Mineralla LTD, a firm providing Mergers &
Acquisitions advisory services, and from 1994 to 1998 he was Vice-Chairman of
Merrill Lynch Canada. From 2002 to 2004, Mr. Aird was President of DRIA Capital,
a financial consulting firm. Since 2004, Mr. Aird has been the Vice-Chairman,
North America, and Business Development for Edelman Public Relations.
Mr. Aird served as President of American Lithium Minerals, Inc. from September
29, 2009 until September 29, 2010, when he was appointed Chairman of the Board
of Directors.
Mr. Aird resides in Toronto, Ontario, Canada.
ANN DUMYN--CHIEF FINANCIAL OFFICER, SECRETARY AND TREASURER
Since 2005 to present, Ann Dumyn has been the chief financial officer and
corporate secretary of Exploration Syndicate, Inc., a private mineral
exploration company based in Caledon, Ontario, Canada. She is responsible for
the functions of financial reporting, planning, practices, financial stability
and liquidity as well as managed all corporate records and filings.
Since April of 2010, Ms. Dumyn has also been the corporate director and a member
of the audit committee of Kaskattama Inc., a renewable energy and mineral
resources investment and development company based in Toronto, Ontario, Canada.
From April 2010 through November 15, 2010, Ms. Dumyn served as acting corporate
secretary of American Lithium Minerals, Inc., a U.S. based mineral explorations
company focused on the development of lithium and boron resources in Nevada. Her
responsibilities included maintaining the company's books and records and filing
of reports in accordance with the requirements of the Securities Exchange
Commission.
Ms. Dumyn resides in Caledon, Ontario, Canada.
THE HONORABLE JOHN TREVOR EYTON, OC, QC - DIRECTOR
Over the years, J. Trevor Eyton has been a Director of a number of public and
private companies. These include a number of communications companies in the
1970s, with financial and resource-based corporations subsequently dominating
his attention.
These include Noranda Inc. (1981-2005), Norcen Energy Resources (1986-1996)
including a year as Chairman), Barrick Gold Corporation (1990-2000) and Royal
Trust Company Ltd. (1983-1993). He also served as a Director of General Motors
of Canada Ltd. (1987-2004) and of Coca-Cola Enterprises Inc. (1998-2007).
Currently Mr. Eyton continues to serve as an officer and director of a number of
public companies, including Ivernia Inc. (as Chairman and a director) since
2000, Brookfield Asset Management Inc. (as a director) since 1979 and Magna
International Inc. (as a director) since 2010.
Appointed to the Senate of Canada in 1990, Mr. Eyton served on a number of
committees during his 19 year tenure. Amongst these he was a member of the
Standing Committee on Energy, the Environment and Natural Resources from 1999 to
2004; the Transport and Communications Committee from 2002-2009; the Banking,
Trade and Commerce Committee from 2006-2009; and the Standing Joint Committee on
Scrutiny of Regulations from 2006-2009, finishing as Co-Chair.
Mr. Eyton is both an Officer of the Order of Canada and Queen's Counsel for
Ontario, as well as the recipient of honorary Doctors of Laws from both the
University of Waterloo and the University of King's College at Dalhousie (where
he served as Chancellor from 1996 to 2001). In 2000 he was awarded Mexico's
Aguila Azteca or "Aztec Eagle" - the highest award given to foreigners by the
government of Mexico.
43
Mr. Eyton resides in Caledon, Ontario, Canada
WAYNE PARSONS--DIRECTOR
Wayne Parsons graduated University of Western Ontario 1985, Richard Ivey School
of Business, and HBA. He began his career as an investment advisor in Toronto
with Nesbitt Thomson Bongard, moving to RBC Dominion Securities in 1994 as
Senior Investment Advisor. Mr. Parson's then joined National Bank Financial in
2003 as Senior Investment Advisor, working in London until 2008. He has been
involved in many mining deals over the years and helped fund a number of junior
mining projects in North America and abroad.
Mr. Parson resides in London, Ontario, Canada.
DR. HENRY NEVILLE RHODEN--DIRECTOR
Dr. H. Nevile Rhoden has experience in both exploration and mine development for
base and precious metals. In his extensive career he has worked for Rio Tinto
Minera (Spain) as exploration manager, South America regional manager for BP
Minerals, and general manager for BP Minerals International in Mexico. Dr.
Rhoden was Vice-President of Minerex Resources (US) and oversaw the development
and operation of their open pit heap-leach mine in Nevada.
Dr. Rhoden has worked in many countries in North and South America as well as
Africa and Asia, and visited many mines in Australia. As a consulting geologist
he engaged in preparing resource evaluations, exploration programs,
pre-feasibility studies and reports for stock exchanges. Dr. Rhoden's clients
included Anglo American, Placer Dome, Newmont Overseas Exploration, Kazakhstan
Minerals, Ecuadorian Minerals and others.
Dr. Rhoden was a founding Director of Exploration Syndicate, Inc. to August 2010
and served as Chair of the Board of Directors between July 2006 and November
2009.
Dr. Rhoden received a PhD (Mining Geology) at the Royal School of Mines,
Imperial College, London UK. Dr. Rhoden is a certified member of the American
Institution of Professional Geologists, and a member of the Society of Mining
Engineers among other professional associations.
Dr. Rhoden resides in Reno, Nevada, USA.
LELAND VERNER--DIRECTOR
Since 1982, Leland Verner has been president of Illyria Inc., an independent
advisory firm based in Toronto, Ontario, responsible for the activities of the
company. Illyria Inc. integrates business strategy into corporate and
shareholder value for clients with an emphasis on industry intelligence,
business model analysis and a singular focus on creating shareholder value from
events and transactions.
Mr. Verner is also a director and chairman of Avante Security Corp. Mr. Verner
was chairman and chief executive officer of Invesprint Corporation and chairman
of Vincor International Inc., both Toronto Stock Exchange listed companies. Mr.
Verner is a graduate of Ryerson Polytechnical Institute, Faculty of Business
(1968).
Mr. Verner resides in Toronto, Ontario, Canada.
FAMILY RELATIONSHIPS
There are no family relationships among our directors or executive officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
None of our directors, executive officers, promoters or control persons has been
involved in any of the following events during the past ten years:
44
1. A petition under the Federal bankruptcy laws or any state insolvency law
was filed by or against, or a receiver, fiscal agent or similar officer was
appointed by a court for the business or property of such person, or any
partnership in which he was a general partner at or within two years before
the time of such filing, or any corporation or business association of
which he was an executive officer at or within two years before the time of
such filing;
2. Such person was convicted in a criminal proceeding or is a named subject of
a pending criminal proceeding (excluding traffic violations and other minor
offenses);
3. Such person was the subject of any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from, or otherwise
limiting, the following activities:
i. Acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the Commodity
Futures Trading Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter, broker or dealer
in securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance
company, or engaging in or continuing any conduct or practice in
connection with such activity
ii. Engaging in any type of business practice; or
iii. Engaging in any activity in connection with the purchase or sale of
any security or commodity or in connection with any violation of
Federal or State securities laws or Federal commodities laws;
4. Such person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any Federal or State
authority barring, suspending or otherwise limiting for more than 60 days
the right of such person to engage in any activity described in paragraph
(f)(3)(i) of this section, or to be associated with persons engaged in any
such activity;
5. Such person was found by a court of competent jurisdiction in a civil
action or by the Commission to have violated any Federal or State
securities law, and the judgment in such civil action or finding by the
Commission has not been subsequently reversed, suspended, or vacated;
6. Such person was found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have violated any
Federal commodities law, and the judgment in such civil action or finding
by the Commodity Futures Trading Commission has not been subsequently
reversed, suspended or vacated;
7. Such person was the subject of, or a party to, any Federal or State
judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of:
i. Any Federal or State securities or commodities law or regulation; or
ii. Any law or regulation respecting financial institutions or insurance
companies including, but not limited to, a temporary or permanent
injunction, order of disgorgement or restitution, civil money penalty
or temporary or permanent cease-and-desist order, or removal or
prohibition order; or
iii. Any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or
45
8. Such person was the subject of, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C.
78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the
Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange,
association, entity or organization that has disciplinary authority over
its members or persons associated with a member.
OTHER DIRECTORSHIPS
None of our directors hold any other directorships in any company with a class
of securities registered pursuant to section 12 of the Exchange Act or subject
to the requirements of section 15(d) of such Act or any company registered as an
investment company under the Investment Company Act of 1940.
BOARD OF DIRECTORS AND DIRECTOR NOMINEES
The Board will consider candidates for directors proposed by security holders,
although no formal procedures for submitting candidates have been adopted.
Unless otherwise determined, at any time not less than 90 days prior to the next
annual Board meeting at which a slate of director nominees is adopted, the Board
will accept written submissions from proposed nominees that include the name,
address and telephone number of the proposed nominee; a brief statement of the
nominee's qualifications to serve as a director; and a statement as to why the
security holder submitting the proposed nominee believes that the nomination
would be in the best interests of our security holders. If the proposed nominee
is not the same person as the security holder submitting the name of the
nominee, a letter from the nominee agreeing to the submission of his or her name
for consideration should be provided at the time of submission. The letter
should be accompanied by a resume supporting the nominee's qualifications to
serve on the Board, as well as a list of references.
The Board identifies director nominees through a combination of referrals from
different people, including management, existing Board members and security
holders. Once a candidate has been identified, the Board reviews the
individual's experience and background and may discuss the proposed nominee with
the source of the recommendation. If the Board believes it to be appropriate,
Board members may meet with the proposed nominee before making a final
determination whether to include the proposed nominee as a member of the slate
of director nominees submitted to security holders for election to the Board.
Some of the factors which the Board considers when evaluating proposed nominees
include their knowledge of and experience in business matters, finance, capital
markets and mergers and acquisitions. The Board may request additional
information from each candidate prior to reaching a determination, and it is
under no obligation to formally respond to all recommendations, although as a
matter of practice, it will endeavor to do so.
CONFLICTS OF INTEREST
Our directors are not obligated to commit their full time and attention to our
business and, accordingly, they may encounter a conflict of interest in
allocating their time between our operations and those of other businesses. In
the course of their other business activities, they may become aware of
investment and business opportunities which may be appropriate for presentation
to us as well as other entities to which they owe a fiduciary duty. As a result,
they may have conflicts of interest in determining to which entity a particular
business opportunity should be presented. They may also in the future become
affiliated with entities, engaged in business activities similar to those we
intend to conduct.
In general, officers and directors of a corporation are required to present
business opportunities to a corporation if:
* the corporation could financially undertake the opportunity;
* the opportunity is within the corporation's line of business; and
* it would be unfair to the corporation and its stockholders not to
bring the opportunity to the attention of the corporation.
46
We plan to adopt a code of ethics that obligates our directors, officers and
employees to disclose potential conflicts of interest and prohibits those
persons from engaging in such transactions without our consent.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act requires our executive officers and
directors, and persons who own more than 10% of our common stock, to file
reports regarding ownership of, and transactions in, our securities with the
Securities and Exchange Commission and to provide us with copies of those
filings. Based solely on our review of the copies of such forms received by us,
or written representations from certain reporting persons, we believe that
during the year ended August 31, 2010, all filing requirements applicable to its
officers, directors and greater than 10% percent beneficial owners were complied
with.
AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT
On August 30, 2010 our board of directors appointed an audit committee
consisting of our directors J. Trevor Eyton, Leland Verner and Hugh Aird. J.
Trevor Eyton will serve as committee chair. Due to his subsequent appointment on
September 29, 2010 as our President and Chief Executive Officer, Mr. Aird
resigned from the audit committee on November 8, 2010. Wayne Parsons was
concurrently appointed to fill the ensuing vacancy on the committee.
CODE OF ETHICS
We have not adopted a code of ethics that applies to our officers, directors and
employees. When we do adopt a code of ethics, we will disclose it in a Current
Report on Form 8-K.
ITEM 11. EXECUTIVE COMPENSATION
The particulars of the compensation paid to the following persons:
* our principal executive officer;
* each of our two most highly compensated executive officers who were
serving as executive officers at the end of the years ended August 31,
2010 and 2009; and
* up to two additional individuals for whom disclosure would have been
provided under (b) but for the fact that the individual was not
serving as our executive officer at the end of the years ended August
31, 2010 and 2009,
who we will collectively refer to as the named executive officers of our
company, are set out in the following summary compensation table, except that no
disclosure is provided for any named executive officer, other than our principal
executive officers, whose total compensation did not exceed $100,000 for the
respective fiscal year:
47
SUMMARY COMPENSATION TABLE
Change in
Pension
Value and
Non-Equity Nonqualified
Name and Incentive Deferred
Principal Stock Option Plan Compensation All Other
Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Totals($)
-------- ---- --------- -------- --------- --------- --------------- ----------- --------------- ---------
HUGH AIRD(1) 2010 Nil Nil Nil Nil Nil Nil Nil Nil
President, 2009 N/A N/A N/A N/A N/A N/A N/A N/A
Chief Executive
Officer and
Director (1)
ANN DUMYN(2) 2010 Nil Nil Nil Nil Nil Nil Nil Nil
Chief Financial 2009 N/A N/A N/A N/A N/A N/A N/A N/A
Officer,
Secretary
and Treasurer
WAYNE PARSONS(3), 2010 Nil Nil Nil 505,200(4) Nil Nil Nil Nil
Former President, 2009 N/A N/A N/A N/A N/A N/A N/A N/A
Former Chief
Executive Officer,
Former Treasurer,
Former Chief
Financial Officer,
Former
Secretary, and
Director
DAN GRAVELLE(5), 2010 Nil Nil Nil Nil Nil Nil Nil Nil
Former President, 2009 Nil Nil Nil Nil Nil Nil Nil Nil
Chief Executive
Officer, Treasurer,
Chief Financial
Officer, Secretary
and Director
- ----------
(1) Hugh Aird became a member of our board of directors on August 30, 2010 and
was appointed our president and chief executive officer on September 29,
2010.
(2) Ann Dumyn was appointed our secretary and treasurer on August 30, 2010, and
has served as our chief financial officer since September 29, 2010.
(3) Wayne Parsons served as our secretary and treasurer from April 14, 2010
until August 30, 2010. He also served as our president, chief financial
officer and chief executive from April 14, 2010 to September 29, 2010. Mr.
Parsons has been a member of our board of directors since April 14, 2010.
(4) Includes 1,000,000 shares of our common stock underlying options
exercisable by Mr. Parsons at a price of US$1.00 per share. The options
vested upon issuance on April, 14 2010 and were subsequently cancelled on
November 18, 2010 in consideration of the issuance to Mr. Parsons of
1,000,000 options under our 2010 Stock Plan. The fair value of the options
using the Black-Scholes option pricing model was recorded in the statement
of operations as consulting expenses at a value of $505,200.
(5) Mr. Gravelle was appointed the President, Chief Executive Officer,
Treasurer, Chief Financial Officer, Secretary and a director of our company
on September 12, 2008. Mr. Gravelle resigned as President, Chief Executive
Officer, Treasurer, Chief Financial Officer, Secretary and a director of
our company on April 14, 2010.
48
STOCK OPTIONS/SAR GRANTS
During the period from inception (July 20, 2006) to August 31, 2010, we granted
1,000,000 non-transferable options to Wayne Parsons in consideration of his
services as president, chief executive officer, chief financial officer,
secretary and treasurer. The one-time grant was made on April 14, 2010 with each
option to acquire one (1) share of our common stock at a purchase price of
US$1.00 per share, exercisable for five (5) years. The aforementioned 1,000,000
options were issued on April 14, 2010 but were subsequently cancelled on
November 18, 2010 in consideration of the issuance to Mr. Parsons of 1,000,000
options under our 2010 Stock Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
There were no options exercised during our fiscal year ended August 31, 2010 or
August 31, 2009 by any officer or director of our company.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
No equity awards were outstanding as of the year ended August 31, 2010.
COMPENSATION OF DIRECTORS
Directors of our company may be paid for their expenses incurred in attending
each meeting of the directors. In addition to expenses, directors may be paid a
sum for attending each meeting of the directors or may receive a stated salary
as director. No payment precludes any director from serving our company in any
other capacity and being compensated for such service. Members of special or
standing committees may be allowed similar reimbursement and compensation for
attending committee meetings. During the year ended August 31, 2010, we did not
pay any compensation or grant any stock options to our directors. However, on
October 6, 2010 our board of directors set a fee of $250 per meeting whether
held by telephone or in person. The fee will be payable quarterly, in arrears,
beginning on November 30, 2010, to all directors not concurrently serving as
officers of our company.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Other than as disclosed below, there are no compensatory plans or arrangements
with respect to our executive officers resulting from their resignation,
retirement or other termination of employment or from a change of control.
On April 14, 2010, we entered into a consulting agreement with Wayne Parsons
whereby Mr. Parsons agreed to provide our company with various consulting
services as the president, chief executive officer, chief financial officer,
secretary and treasurer. In consideration of his services, we agreed to provide
Mr. Parsons with a monthly payment of CDN$1,500 and a one-time grant of
1,000,000 non-transferable options with each option to acquire 1,000,000 shares
of our common stock at a purchase price of US$1.00 per share, exercisable for
five (5) years The aforementioned 1,000,000 options were issued on April 14,
2010 but were subsequently cancelled on November 18, 2010 in consideration for
the issuance to Mr. Parsons of 1,000,000 options under our 2010 Stock Plan on
October 6, 2010. Those options are exercisable at a price of $0.68 per share
until October 6, 2015. The consulting agreement with Mr. Parsons was terminated
upon his resignation as president and chief executive officer on September 29,
2010. No further compensation is payable under the agreement.
We have no plans or arrangements with respect to remuneration received or that
may be received by our executive officers to compensate such officers in the
event of termination of employment (as a result of resignation, retirement,
change of control) or a change of responsibilities following a change of
control, where the value of such compensation exceeds $60,000 per executive
officer.
49
PENSION, RETIREMENT OR SIMILAR BENEFIT PLANS
There are no arrangements or plans in which we provide pension, retirement or
similar benefits for directors or executive officers. We have no material bonus
or profit sharing plans pursuant to which cash or non-cash compensation is or
may be paid to our directors or executive officers, except that stock options
may be granted at the discretion of the board of directors or a committee
thereof.
INDEBTEDNESS OF DIRECTORS, SENIOR OFFICERS, EXECUTIVE OFFICERS AND OTHER
MANAGEMENT
None of our directors or executive officers or any associate or affiliate of our
company during the last two fiscal years is or has been indebted to our company
by way of guarantee, support agreement, letter of credit or other similar
agreement or understanding currently outstanding.
COMPENSATION COMMITTEE
On August 30, 2010, our Board of Directors appointed a compensation committee of
the Board of Directors consisting of Neville Rhoden, Hugh Aird, and J. Trevor
Eyton. Mr. Eyton will serve as Chair of the committee. Due to his subsequent
appointment on September 29, 2010 as our President and Chief Executive Officer,
Mr. Aird resigned from the compensation committee on November 8, 2010. Leland
Verner was concurrently appointed to fill the ensuing vacancy on the committee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth, as of November 18, 2010, certain information
with respect to the beneficial ownership of our common stock by each stockholder
known by us to be the beneficial owner of more than 5% of our common stock and
by each of our current directors and executive officers. Each person has sole
voting and investment power with respect to the shares of common stock.
Beneficial ownership consists of a direct interest in the shares of common
stock, except as otherwise indicated.
Amount and Nature of Percentage
Name and Address of Beneficial Owner Beneficial Ownership of Class %(1)
- ------------------------------------ -------------------- -------------
Hugh Aird (2) 1,000,000 (3) 1.5
President, Chief Executive Officer, Director
148 A Balmoral Ave
Toronto, ON
Canada M4V 1J4
J. Trevor Eyton (4) 1,000,000 (5) 1.5
Director
130 Adelaide St. West Suite 3303
Toronto, ON
Canada M5H 3P5
Wayne Parsons (6) 1,000,000 (7) 1.5
Director and former President,
Chief Executive Officer, Treasurer,
Secretary, Chief Financial Officer
1455 Corley Drive
London, ON
Canada N6G 2K4
50
Ann Dumyn (8) 500,000 (9) * (10)
Chief Financial Officer, Secretary
and Treasurer
1325 Olde Base Line
Caledon, ON
Canada L7C 0K5
H. Neville Rhoden (11) 500,000 (12) * (10)
Director
7024 Heatherwood Dr
Reno, NV
USA 89523
Leland Verner (13) 500,000 (14) * (10)
Director
5A Thornwood Road
Toronto, ON
Canada M4W 2R8
John Goodwin (15) 250,000 (16) * (10)
Former Director
# 128, 2833 Broadmoor Blvd.
Sherwood Park, AB
Canada T8H 2H3
Dan Gravelle (17) 75,000 (18) * (10)
Former President, Chief Executive
Officer, Treasurer, Chief Financial
Officer, Secretary and Director
29773 Niguel Road, Suite A
Laguna Niguel, CA 92677
Peter Jenks (19) 75,000 (20) * (10)
Former Director
3 - 408 12th Avenue
Estevan SK S4A 1E5
Directors and Executive Officers
as a Group (1) 5,400,000 8.43%
Monaco Capital Inc. (21)
7 New Road, FL 2#6
Belize City, Belize 35,950,000 56.17%
- ----------
(1) Under Rule 13d-3, a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares: (i) voting power, which includes
the power to vote, or to direct the voting of shares; and (ii) investment
power, which includes the power to dispose or direct the disposition of
shares. Certain shares may be deemed to be beneficially owned by more than
one person (if, for example, persons share the power to vote or the power
to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire the
shares (for example, upon exercise of an option) within 60 days of the date
as of which the information is provided. In computing the percentage
ownership of any person, the amount of shares outstanding is deemed to
include the amount of shares beneficially owned by such person (and only
such person) by reason of these acquisition rights. As a result, the
percentage of outstanding shares of any person as shown in this table does
not necessarily reflect the person's actual ownership or voting power with
respect to the number of shares of common stock actually outstanding on
November 18, 2010. As of November 18, 2010, there were 64,000,000 shares of
our company's common stock issued and outstanding.
(2) Hugh Aird became a member of our board of directors on August 30, 2010 and
was appointed our president and chief executive officer on September 29,
2010.
51
(3) Includes 1,000,000 shares of our common stock underlying options
exercisable by Mr. Aird at a price of US$0.68 per share. The options vested
upon issuance on October 6, 2010, are non-transferrable, and expire on
October 6, 2015.
(4) J. Trevor Eyton became a member of our board of directors on July 19, 2010.
(5) Includes 1,000,000 shares of our common stock underlying options
exercisable by Mr. Eyton at a price of US$0.68 per share. The options
vested upon issuance on October 6, 2010, are non-transferrable, and expire
on October 6, 2015.
(6) Wayne Parsons served as our secretary and treasurer from April 14, 2010
until August 30, 2010. He also served as our president, chief financial
officer and chief executive from April 14, 2010 to September 29, 2010. Mr.
Parsons has been a member of our board of directors since April 14, 2010.
(7) Includes 1,000,000 shares of our common stock underlying options
exercisable by Mr. Parsons at a price of US$0.68 per share. The options
vested upon issuance on October 6, 2010, are non-transferrable, and expire
on October 6, 2015.
(8) Ann Dumyn was appointed our secretary and treasurer on August 30, 2010, and
has served as our chief financial officer since September 29, 2010.
(9) Includes 500,000 shares of our common stock underlying options exercisable
by Ms. Dumyn at a price of US$0.68 per share. The options vested upon
issuance on October 6, 2010, are non-transferrable, and expire on October
6, 2015.
(10) Less than 1%
(11) H. Neville Rhoden became a member of our board of directors on August 30,
2010.
(12) Includes 500,000 shares of our common stock underlying options exercisable
by Dr. Rhoden at a price of US$0.68 per share. The options vested upon
issuance on October 6, 2010, are non-transferrable, and expire on October
6, 2015.
(13) Leland Verner became a member of our board of directors on August 30, 2010.
(14) Includes 500,000 shares of our common stock underlying options exercisable
by Mr. Verner at a price of US$0.68 per share. The options vested upon
issuance on October 6, 2010, are non-transferrable, and expire on October
6, 2015.
(15) John Goodwin served as a member of our board of directors from April 28,
2010 to September 27, 2010.
(16) Includes 250,000 shares of our common stock underlying options exercisable
by Mr. Goodwin at a price of US$0.68 per share. The options vested upon
issuance on October 6, 2010, are non-transferrable, and expire on October
6, 2012.
(17) Dan Gravelle was appointed the President, Chief Executive Officer,
Treasurer, Chief Financial Officer, Secretary and a director of our company
on September 12, 2008. Mr. Gravelle resigned as President, Chief Executive
Officer, Treasurer, Chief Financial Officer, Secretary and a director of
our company on April 14, 2010.
(18) Includes 75,000 shares of our common stock underlying options exercisable
by Mr. Gravelle at a price of US$0.68 per share. The options vested upon
issuance on October 6, 2010, are non-transferrable, and expire on October
6, 2012.
52
(19) Peter Jenks served as a member of our board of directors from November 30,
2009 to September 27, 2010.
(20) Includes 75,000 shares of our common stock underlying options exercisable
by Mr. Jenks at a price of US$0.68 per share. The options vested upon
issuance on October 6, 2010, are non-transferrable, and expire on October
6, 2012.
(21) K. Kaffa has voting and dispositive control over securities held by Monaco
Capital Inc.
CHANGES IN CONTROL
We are unaware of any contract or other arrangement or provisions of our
Articles or Bylaws the operation of which may at a subsequent date result in a
change of control of our company. There are not any provisions in our Articles
or Bylaws, the operation of which would delay, defer, or prevent a change in
control of our company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Except as disclosed herein, there have been no transactions or proposed
transactions in which the amount involved exceeds the lesser of $120,000 or one
percent of the average of our total assets at year-end for the last three
completed fiscal years in which any of our directors, executive officers or
beneficial holders of more than 5% of the outstanding shares of our common
stock, or any of their respective relatives, spouses, associates or affiliates,
has had or will have any direct or material indirect interest.
The promoters of our company are our directors and officers.
CORPORATE GOVERNANCE
We currently act with five directors, consisting of Wayne Parsons, Hugh Aird, H.
Neville Rhoden, Leland Verner and J. Trevor Eyton.
As of August 30, 2010, we have a standing audit committee and a standing
compensation committee. We do not have a standing nominating committee, but our
entire board of directors acts in that capacity. We believe that our audit
committee and our board of directors is capable of analyzing and evaluating our
financial statements and understanding internal controls and procedures for
financial reporting. The board of directors of our company does not believe that
it is necessary at this time to have a standing nominating committee because we
believe that the functions of such committees can be adequately performed by the
board of directors.
ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES
The aggregate fees billed for the most recently completed fiscal year ended
August 31, 2010 and for fiscal year ended August 31, 2009 for professional
services rendered by the principal accountant for the audit of our annual
financial statements and review of the financial statements included in our
quarterly reports on Form 10-Q and services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for these fiscal periods were as follows:
53
Year Ended August 31,
2010 2009
------ ------
($) ($)
Audit Fees 7,000 9,000
Audit Related Fees Nil Nil
Tax Fees Nil Nil
All Other Fees Nil Nil
------ ------
Total 7,000 9,000
====== ======
Our board of directors pre-approves all services provided by our independent
auditors. All of the above services and fees were reviewed and approved by the
board of directors either before or after the respective services were rendered.
Our board of directors has considered the nature and amount of fees billed by
our independent auditors and believes that the provision of services for
activities unrelated to the audit is compatible with maintaining our independent
auditors' independence.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibits required by Item 601 of Regulation S-K
Exhibit Exhibit
Number Description
- ------ -----------
3.1 Articles of Incorporation (incorporated by reference from our
Registration Statement on Form SB-2 filed on October 23, 2006).
3.2 By-laws (incorporated by reference from our Registration Statement on
Form SB-2 filed on October 23, 2006).
3.3 Articles of Merger (incorporated by reference from our Current Report
on Form 8-K filed on April 12, 2010).
3.4 Certificate of Change (incorporated by reference from our Current
Report on Form 8-K filed on April 12, 2010).
10.1 Mineral Lease Agreement between Royce L. Hackworth and Belva L. Tomany
and Zebra Resources (now know as American Paramount Gold Corp.) dated
April 16, 2010. (incorporated by reference from our Current Report on
Form 8-K filed on April 19, 2010).
10.2 Consulting Agreement between our company and Wayne Parsons, dated April
14, 2010. (incorporated by reference from our Current Report on Form
8-K filed on April 27, 2010).
10.3 Convertible Loan Agreement between our company and Monaco Capital Inc.
dated April 22, 2010. (incorporated by reference from our Current
Report on Form 8-K filed on April 27, 2010).
54
10.4 Option Cancellation Agreement between our company and Wayne Parsons
dated November 18, 2010.
(31) SECTION 302 CERTIFICATION
31.1* Certification of Principal Executive Officer filed pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Principal Financial Officer filed pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
(32) SECTION 906 CERTIFICATION
32.1* Certification of Principal Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
- ----------
* Filed herewith.
55
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN PARAMOUNT GOLD CORP.
/s/ Hugh Aird
-------------------------------------------------
Hugh Aird
President, Chief Executive Officer and Director
(Principal Executive Officer, Principal Financial
Officer and Principal Accounting Officer)
Date: November 29, 2010
/s/ Ann Dumyn
-------------------------------------------------
Ann Dumyn
Secretary Treasurer, Principal Financial Officer
and Principal Accounting Officer
Date: November 29, 2010
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.
Signature Title Date
--------- ----- ----
/s/ Hugh Aird President, Chief Executive November 29, 2010
- ------------------------------- Officer and Director
Hugh Aird
/s/ Wayne Parsons Director November 29, 2010
- -------------------------------
Wayne Parsons
/s/ J. Trevor Eyton Director November 29, 2010
- -------------------------------
J. Trevor Eyton
/s/ Dr. H. Neville Rhoden Director November 29, 2010
- -------------------------------
Dr. H. Neville Rhoden
/s/ Leland Vemer Director November 29, 2010
- -------------------------------
Leland Verner
56