XOTC:NGRC Annual Report 10-K Filing - 5/31/2012

Effective Date 5/31/2012

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended May 31, 2012

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to _______

 

Commission file number: 000-53284

 

National Graphite Corp.

(formerly Lucky Boy Silver Corp.)

(Exact name of registrant as specified in its charter)

 

Nevada 26-0665441

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification No.)
   
5466 Canvasback Rd.,  
Blaine, Washington 98230
(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (702) 839-4029

 

Securities registered under Section 12(b) of the Act:

 

Title of each class   Name of each exchange on which registered
None   N/A

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock
(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act

Yes [  ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Rule 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 past 90 days.

Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant Rule 405 of Regulation S-T (§220.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.

Yes [X] No [  ] Not applicable.

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

 

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 the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if a smaller reporting company) Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes [  ] No [X]

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed third fiscal quarter.

 

74,653,215 common shares at $0.65 on February 29, 2012, which is the quotation posted on the Over-the-Counter Bulletin Board (“OTC-BB” under the symbol “NGRC”).  

 

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date 75,669,881 common  shares issued and outstanding as of August 27, 2012.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). Not applicable.

 

 

  

 
 

 

TABLE OF CONTENTS

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 3
   
GLOSSARY OF EXPLORATION TERMS 4
   
PART I 8
   
Item 1. Business 8
   
Item 1A Risk Factors 12
   
Item 1B. Unresolved Staff Comments 17
   
Item 2 Properties 17
   
Item 3. Legal Proceedings 31
   
Item 4. (Removed and Reserved) 31
   
PART II 31
   
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 31
   
Item 6. Selected Financial Data 32
   
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32
   
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 36
   
Item 8. Financial Statements and Supplementary Data 36
   
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 39
   
Item 9A(T). Controls and Procedures 39
   
Item 9B. Other Information 40
   
PART III 41
   
Item 10. Directors, Executive Officers and Corporate Governance 41
   
Item 11. Executive Compensation 44
   
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 46
   
Item 13. Certain Relationships and Related Transactions, and Director Independence 47
   
Item 14. Principal Accounting Fees and Services 47
   
PART IV 48
   
Item 15. Exhibits, Financial Statement Schedules 48
   
SIGNATURES 49

 

2
 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. Forward-looking statements are often identified by words like: “believe”, “expect”, “estimate”, “anticipate”, “intend”, “project” and similar expressions or words which, by their nature, refer to future events. In some cases, you can also identify forward-looking statements by terminology such as “may”, “should”, “plan”, “predict”, “potential” or “continue” or the negative of these terms or other comparable terminology. Examples of forward-looking statements made in this annual report on Form 10-K include statements about:

 

Our future exploration programs and results,

 

Our future capital expenditures, and

 

Our future investments in and acquisitions of mineral resource properties.

 

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including

 

risks and uncertainties relating to the interpretation of sampling results, the geology, grade and continuity of mineral deposits;
  
risks and uncertainties that results of initial sampling and mapping will not be consistent with our expectations;
  
mining and development risks, including risks related to accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with or interruptions in production;
  
the potential for delays in exploration activities;
  
risks related to the inherent uncertainty of cost estimates and the potential for unexpected costs and expenses;
  
risks related to commodity price fluctuations;
  
the uncertainty of profitability based upon our limited history;
  
risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our planned exploration project;
  
risks related to environmental regulation and liability;
  
risks that the amounts reserved or allocated for environmental compliance, reclamation, post-closure control measures, monitoring and on-going maintenance may not be sufficient to cover such costs;
  
risks related to tax assessments;
  
political and regulatory risks associated with mining development and exploration; and
  
the risks in the section entitled “Risk Factors”,

 

any of which may cause our company’s 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 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. References to common shares refer to common shares in our capital stock.

 

As used in this annual report, the terms “we”, “us”, “our” and “Lucky Boy” mean National Graphite Corp. unless otherwise indicated.

 

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GLOSSARY OF EXPLORATION TERMS

 

The following terms, when used in this report, have the respective meanings specified below:

 

Amortization - The gradual and systematic writing off of a balance in an account over an appropriate period.

 

Amphibolite - A gneiss or schist largely made up of amphibole and plagioclase minerals.

 

Anomaly - Any departure from the norm which may indicate the presence of mineralization in the underlying bedrock.

 

Assay - A chemical test performed on a sample of ores or minerals to determine the amount of valuable metals contained.

 

Assessment work - The amount of work, specified by mining law, that must be performed each year in order to retain legal control of mining claims.

 

Base metal - Any non-precious metal (e.g. copper, lead, zinc, nickel, etc.).

 

Bedding - The arrangement of sedimentary rocks in layers.

 

Biotite - A platy magnesium-iron mica, common in igneous rocks.

 

Chalcopyrite - A sulphide mineral of copper and iron; the most important ore mineral of copper.

 

Chip sample - A method of sampling a rock exposure whereby a regular series of small chips of rock is broken off along a line across the face.

 

Claim - A portion of land held either by a prospector or a mining company. In Canada, the common size is 1,320 ft. (about 400 m) square, or 40 acres (about 16 ha).

 

Clay - A fine-grained material composed of hydrous aluminum silicates.

 

Cleavage - The tendency of a mineral to split along crystallographic planes.

 

Contact - A geological term used to describe the line or plane along which two different rock formations meet.

 

Contact metamorphism - Metamorphism of country rocks adjacent to an intrusion, caused by heat from the intrusion.

 

Country rock - Loosely used to describe the general mass of rock adjacent to an orebody. Also known as the host rock.

 

Crosscut - A horizontal opening driven from a shaft and (or near) right angles to the strike of a vein or other orebody.

 

Development - Underground work carried out for the purpose of opening up a mineral deposit. Includes shaft sinking, crosscutting, drifting and raising.

 

Diorite - An intrusive igneous rock composed chiefly of sodic plagioclase, hornblende, biotite or pyroxene.

 

Drift - A horizontal underground opening that follows along the length of a vein or rock formation as opposed to a crosscut which crosses the rock formation.

 

4
 

  

Exploration - Prospecting, sampling, mapping, diamond drilling and other work involved in searching for ore.

 

Face - The end of a drift, crosscut or stope in which work is taking place.

 

Felsic - Term used to describe light-colored rocks containing feldspar, feldspathoids and silica.

 

Fracture - A break in the rock, the opening of which allows mineral-bearing solutions to enter. A "cross-fracture" is a minor break extending at more-or-less right angles to the direction of the principal fractures.

 

Geochemistry - The study of the chemical properties of rocks.

 

Geology - The science concerned with the study of the rocks which compose the Earth.

 

Gneiss - A layered or banded crystalline metamorphic rock, the grains of which are aligned or elongated into a roughly parallel arrangement.

 

Greenstone belt - An area underlain by metamorphosed volcanic and sedimentary rocks, usually in a continental shield.

 

Host rock - The rock surrounding an ore deposit.

 

Igneous rocks - Rocks formed by the solidification of molten material from far below the earth's surface.

 

Intrusive - A body of igneous rock formed by the consolidation of magma intruded into other rocks, in contrast to lavas, which are extruded upon the surface.

 

Lava - A general name for the molten rock ejected by volcanoes.

 

Lens - Generally used to describe a body of ore that is thick in the middle and tapers towards the ends.

 

Limestone - A bedded, sedimentary deposit consisting chiefly of calcium carbonate.

 

Lode - A mineral deposit in solid rock.

 

Mafic - Igneous rocks composed mostly of dark, iron- and magnesium-rich minerals.

 

Magma - The molten material deep in the Earth from which rocks are formed.

 

Magnetic survey - A geophysical survey that measures the intensity of the Earth's magnetic field.

 

Metamorphic rocks - Rocks which have undergone a change in texture or composition as the result of heat and/or pressure.

 

Metamorphism - The process by which the form or structure of rocks is changed by heat and pressure.

 

Mineral - A naturally occurring homogeneous substance having definite physical properties and chemical composition and, if formed under favorable conditions, a definite crystal form.

 

Net smelter return - A share of the net revenues generated from the sale of metal produced by a mine.

 

Option - An agreement to purchase a property reached between the property vendor and some other party who wishes to explore the property further.

 

Ore - A mixture of ore minerals and gangue from which at least one of the metals can be extracted at a profit.

 

5
 

  

Orebody - A natural concentration of valuable material that can be extracted and sold at a profit.

 

Outcrop - An exposure of rock or mineral deposit that can be seen on surface, that is, not covered by soil or water.

 

Plug - A common name for a small offshoot from a large body of molten rock.

 

Plutonic - Refers to rocks of igneous origin that have come from great depth.

 

Pyrite - A yellow iron sulphide mineral, normally of little value. It is sometimes referred to as "fool's gold".

 

Pyrrhotite - A bronze-colored, magnetic iron sulphide mineral.

 

Quartz - Common rock-forming mineral consisting of silicon and oxygen.

 

Quartzite - A metamorphic rock formed by the transformation of a sandstone by heat and pressure.

 

Reclamation - The restoration of a site after mining or exploration activity is completed.

 

Resource - The calculated amount of material in a mineral deposit, based on limited drill information.

 

Rock - Any natural combination of minerals; part of the earth's crust.

 

Royalty - An amount of money paid at regular intervals by the lessee or operator of an exploration or mining property to the owner of the ground. Generally based on a certain amount per ton or a percentage of the total production or profits. Also, the fee paid for the right to use a patented process.

 

Sample - A small portion of rock or a mineral deposit taken so that the metal content can be determined by assaying.

 

Sampling - Selecting a fractional but representative part of a mineral deposit for analysis.

 

Sandstone - A sedimentary rock consisting of grains of sand cemented together.

 

Schist - A foliated metamorphic rock the grains of which have a roughly parallel arrangement; generally developed by shearing.

 

Sedimentary rocks - Secondary rocks formed from material derived from other rocks and laid down under water. Examples are limestone, shale and sandstone.

 

Shaft - A vertical or inclined excavation in rock for the purpose of providing access to an orebody. Usually equipped with a hoist at the top, which lowers and raises a conveyance for handling workers and materials.

 

Shale - Sedimentary rock formed by the consolidation of mud or silt.

 

Shear or shearing - The deformation of rocks by lateral movement along innumerable parallel planes, generally resulting from pressure and producing such metamorphic structures as cleavage and schistosity.

 

Shear zone - A zone in which shearing has occurred on a large scale.

 

Silica - Silicon dioxide. Quartz is a common example.

 

Siliceous - A rock containing an abundance of quartz.

 

6
 

  

Sill - An intrusive sheet of igneous rock of roughly uniform thickness that has been forced between the bedding planes of existing rock.

 

Silt - Muddy deposits of fine sediment usually found on the bottoms of lakes.

 

Spot price - Current delivery price of a commodity traded in the spot market.

 

Stope - An excavation in a mine from which ore is, or has been, extracted.

 

Strike - The direction, or bearing from true north, of a vein or rock formation measure

 

on a horizontal surface.

 

Sulphide - A compound of sulphur and some other element.

 

Trench - A long, narrow excavation dug through overburden, or blasted out of rock, to expose a vein or ore structure.

 

Tuff - Rock composed of fine volcanic ash.

 

Vein - A fissure, fault or crack in a rock filled by minerals that have travelled upwards from some deep source.

 

Volcanic rocks - Igneous rocks formed from magma that has flowed out or has been violently ejected from a volcano.

 

Zone - An area of distinct mineralization.

 

7
 

 

PART I

 

Item 1. Business.

 

Overview

 

We were incorporated in the State of Wyoming on October 19, 2006, as Sierra Ventures, Inc. and established a fiscal year end of May 31. Our statutory registered agent's office is located at 1620 Central Avenue, Suite 202, Cheyenne, Wyoming 82001 and our business office is located at 5466 Canvasback Rd., Blaine, Washington 98230. Our telephone number is (702) 839-4029. On February 5, 2010 we filed an Amendment to Articles with the Wyoming Secretary of State and changed our name from “Sierra Ventures Inc.” to “Lucky Boy Silver Corp.” On May 9, 2012 we changed the name of our Company to National Graphite Corp. We changed the name of our company to better reflect the direction and business of our company.

 

On March 22, 2011, the corporation converted from a Wyoming corporation to a Nevada corporation pursuant to Wyoming Statutes Title 17, ch. 16, Sect.(s) 820, 821 and 1114 and Nevada Revised Statutes 92A.205. This conversion did not alter the number of authorized shares, or the number of issued and outstanding shares, of the corporation. The voting and other rights of the common and preferred shares of the company’s capital stock remain substantially similar under Nevada law. The powers of the company’s officers, directors and shareholders also remain substantially the same. Our authorized capital stock continues to consist of 499,000,000 shares of common stock, par value $0.001 per share and 1,000,000 shares of preferred stock, par value $0.001 per share. Our statutory registered agent's office is located at 701 N. Green Valley Pkwy, Ste 200-238, Henderson, NV 89074. Our telephone number is (702) 839-4029.

 

We are a start-up, exploration-stage company engaged in the search for gold, silver, graphite and related minerals. Our mineral properties are without known reserves and our proposed program is explanatory in nature. There is no assurance that commercially viable mineral deposits exist on our mineral properties. Further exploration and/or drilling will be required before a final evaluation as to the economic and legal feasibility of our projects is determined.

 

Effective April 6, 2010, we conducted a 15:1 forward stock split of our common stock. The split was approved by FINRA for taking effect on the OTC-BB at the open of business on March 31, 2010. The transfer agent effected the forward split on their records as of April 6, 2010. Our statements of stockholder’s equity have been retroactively restated to reflect the split.

 

Our Current Business – Mineral Exploration

 

On March 22, 2007, as amended on May 15, 2009, we optioned a 25 percent interest in a gold exploration property referred to as the Zhangjiafan Mining Property located in Jiangxi Province, People’s Republic of China, 13 kilometres northwest of Dexing City which is approximately 8 hours by aircraft and ground transportation west of Shanghai by entering into an Option to Purchase and Royalty Agreement with Jiujiang Gao Feng Mining Industry Limited Company of Jiangxi City, Jiangxi Province, China (“Jiujiang”), the beneficial owner of the property, an arms-length Chinese corporation, to acquire an interest in the property by making certain expenditures and carrying out exploration work. Work commenced on the phase I exploration program on our optioned Zhangjiafan mineral property on April 27 and concluded on June 04, 2009. Our portion of the phase I geological exploration program on the property cost $30,000 (paid) (25% of the totally budgeted cost of $120,000) which was a reflection of local costs for the specified type of work. Costs for phase I were made up of wages, fees, geological and geochemical supplies, assaying, equipment, diamond drilling and costs of operation. At the completion of the field work on this property, management has determined that further expenditures or issuance of stock for this property is not in the best interest of the Company and the project has been abandoned.

 

On October 11, 2007, a registration statement relating to our initial public offering of common stock was filed with the SEC. A total of 2,900,000 shares of common stock were sold to the public for $0.05 per share (consisting of 2,000,000 sold by us for gross proceeds of $100,000 and 900,000 shares sold by the selling stockholders) prior to the declaration of an effective date of the registration statement under our mistaken assumption that the registration statement had become effective through the passage of time after its filing. Selling shares prior to the establishment of an effective date can result in potential violations of federal and state securities laws. As a result, these stock issuances and re-sales may have violated the Securities Act of 1933. Rescission offers for such potential violations are commonly made by companies in these situations and the filing of a registration statement is a normal part of the rescission offer process. We have previously disclosed in our regulatory filings that all of the subscribers had been informed of this situation. As a result, we were prepared to refund part or all associated monies and to cancel part or all associated common shares that could have been tendered for rescission.

 

8
 

  

On February 27, 2009, we filed an S-1 rescission offering registration statement which became effective on March 5, 2009, and which addressed federal and state securities laws compliance issues by allowing the holders of the shares covered by the rescission offer to rescind the underlying securities transactions and sell those securities back to us or the selling shareholders. In addition, we conducted the offering in order to be able to reduce our contingent liabilities.

 

The rescission offer process closed on April 24, 2009, with no shares being submitted for rescission. When the rescission offer expired, any person who did not accept the offer received freely tradable stock.

 

During the year ended May 31, 2010, the Company issued for cash 425,000 pre-split (6,375,000 post-split) shares of its par value $0.001 common stock for $170,000.

 

On January 24, 2010 the Company issued 290,000 and 150,000 (10,000 pre-split) shares of the Company’s common stock to a consultant and two board members for services provided to the Company. The shares were valued at $0.40 per share based on the recent cash sales price. The Company recorded $120,000 of expense in professional fees.

 

During February 2010 the Company entered into two lease agreements for mineral leases located in the Mineral County, Nevada. On February 8, 2010, we acquired 38 unpatented BLM claims including those known as the Silver Summit and Silver Strike claims and two historic, silver mine leases (“AG Properties”) known as Lucky Boy Silver Mine and the Black Butte Silver Mine. The Company issued 150,000 post-split shares of common stock for the mining claims. These shares were valued at $0.40 per share based on the recent cash sale price.

 

Under these agreements the Company committed $17,500 in non-refundable upfront lease payments, $10,000 in future payments to be made every nine months and $7,500 in future payments to be made annually as long as the lease is in force. In a geological report compiled by Hunsaker dated May 2010, Hunsaker opined that further work on the Lucky Boy project was not recommended while further exploration on the Black Butte project was justified. The lease for the Lucky Boy mineral property was not renewed.

 

On May 25, 2011 we expanded our claims in the Silver Strike area to 62 unpatented claims renaming them the LAG claims.

 

On April 20, 2012, the Company entered into an agreement with Habitants Minerals Ltd. (“Habitants”) granting the Company the sole and exclusive right to purchase 100% right, title and interest in and to the applications and subsequent claims to be issued by Quebec Ministry of Resources and Fauna for the following applications:

 

The Quebec applications cover ground referred to in reports GM19842, GM35169, GM35267, GM19844, GM20308, GM13866, reports which report historic graphite occurrences on Lot 32 and Lot 33 Range 11 in Low Township, Lot 1 Range 2 in Suffolk Township, Lot 9 and Lot 16 Range 3 and Lot 10 Range 9 all in Clarendon Township, Lot 46 Range 11 in Low Township, and ground in Lochaber Township covering historic mag anomalies.

 

APPLICATION 1186716 (29 claims)

APPLICATION 1187995 (14 claims)

APPLICATION 1187994 (12 claims)

APPLICATION 1187992 (10 claims)

65 claims approx., 60 hectares each = 3900 hectares

 

The consideration for the transaction was payment by the Company to Habitants a total of Fifty Thousand United States Dollars (US$50,000.00) consisting of Twenty Five Thousand United States Dollars ($25,000.00) on the date of execution of this Agreement and Twenty Five Thousand United States Dollars ($25,000.00) upon the issuance of the claims in the Company’s name, and the issuance of 100,000 shares of the Company’s common stock within 15 days of the date of the closing of the transaction described in the Agreement or within 15 days of any Regulatory Approvals required for the issuance of the shares.

 

9
 

  

On April 24, 2012, the Company entered into an agreement with GeoXplor Corporation to purchase a 100% interest in and to the Chedic Graphite Property consisting of 20 Mineral Lode Claims in Township, 15 North, Range 19 East, Sections 25 & 26 Carson City, NV mining claims compromising approximately 400 acres.

 

The purchase price for the Property is a total of $425,000 in cash, an issuance of 2,500,000 shares of the Company’s Restricted Common Stock, and a work commitment on the Property of up to $1,000,000 over four years as follows:

 

a.) Cash Consideration: Purchaser will pay Seller $425,000 USD in cash consideration as follows :

 

i)USD $50,000 upon the signing of the Agreement ( the “Effective Date” ),
ii)an additional USD $25,000 on or before 6 months from the Effective Date ,
iii)an additional USD $25,000 on or before 12 months from the Effective Date,
iv)an additional USD $50,000 on or before 18 months from the Effective Date,
v)an additional USD $75,000 on or before 24 Months from the Effective Date,
vi)an additional USD $50,000 on or before 30 months from the Effective Date,
vii)an additional USD $50,000 on or before 36 months from the Effective Date,
viii)an additional USD $50,000 on or before 42 months from the Effective Date,
ix)an additional USD $50,000 on or before 48 months from the Effective Date ( for a total cash consideration of $425,000 on or before 48 months from and after the Effective Date. )

 

b) Stock Consideration: (restricted common shares)

 

i)500,000 shares upon the signing of the Agreement (the “Effective Date“),
ii)500,000 shares on or before 6 months from the Effective Date,
iii)500,000 shares on or before 18 months from the Effective Date,
iv)500,000 shares on or before 24 months from the Effective Date,
v)500,000 shares on or before 48 months from the Effective Date,

 

c) Work Commitment:

 

Purchaser will provide funds for the conduct of a program of work to be undertaken by the Seller for the benefit of the Property of not less than USD $1,000,000 over 4 years as follows:

 

i)$100,000 on or before 12 months from the Effective Date,
ii)$300,000 on or before 24 months from the Effective Date,
iii)$300,000 on or before 36 months from the Effective date ,
iv)$300,000 on or before 48 months from the Effective Date.

 

Our Proposed Exploration Program – Plan of Operation

 

Our business plan is to abandon exploration of the Zhangjiafan property and proceed with exploration on the Black Butte and Lucky Boy projects to determine if there are commercially exploitable deposits of gold and silver, and if we decide not to proceed, to seek other mineral exploration properties.

 

We do not have any ores or reserves whatsoever at this time on our optioned property or other mineral properties.

 

Gao Fenglin, Senior Engineer, originally recommended a two-phase exploration program for the Zhangjiafan property to properly evaluate the potential of the property. However, management has determined that further exploration on this property is not warranted.

 

During February 2010 the Company entered into two additional lease agreements for mineral leases located in the Mineral County, Nevada, including the Black Butte and Lucky Boy projects. Under these agreements the Company has committed $17,500 in non-refundable up-front lease payments, $10,000 in future payments to be made every nine months and $7,500 in future payments to be made annually as long as the lease is in force. Additionally, the Company has committed to spend a minimum of $100,000 over the first three years of the lease on exploration and property development. The Company also has agreed to pay a total of 3% for each lease net smelter return production royalty which can be bought out for $2,000,000/ per cent NSR ($1,000,000 per lease) with approval and consent of the lessor. If payments are in default for 30 days or the work commitment is not completed as agreed, the lessor must vacate the property immediately and settle all accounts related to the property.

 

10
 

  

We retained the services of the Hunsaker Inc., a geological company, to assess the results of our program. In a report compiled by Hunsaker dated February 2011, Hunsaker concluded that the Silver Strike claims warranted additional exploration whereas the Silver Summit claims did not. Our mineral properties are currently without known reserves and our proposed programs are exploratory in nature. On May 25, 2011 we expanded our claims in the Silver Strike area to 66 unpatented claims by staking the LAG claims.

 

Our business plan for the Black Butte and Lucky Boy projects is to proceed with the initial exploration of the gold and silver properties to determine if there are commercially exploitable deposits of gold and silver. We retained the services of the Hunsaker Inc., a geological company, to assess the results of our program.In a geological report compiled by Hunsaker dated May 2010, Hunsaker opined that further work on the Lucky Boy project is not recommended while further exploration on the Black Butte project is justified. We did not renew the Lucky Boy Silver Mine lease.

 

As per the purchase agreement of the Nevada graphite property, the Company is committed to anexpenditure of at least $100,000 on the property over the next twelve months.

 

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 and development. This competition could adversely impact on our ability to achieve the financing necessary for us to conduct further exploration of our mineral properties.

 

We also compete with other mineral resource exploration companies for financing from a limited number of investors that are prepared to make investments in mineral resource exploration companies. The presence of competing mineral resource exploration companies may impact on our ability to raise additional capital in order to fund our exploration programs if investors are of the view that investments in competitors are more attractive based on the merit of the mineral properties under investigation and the price of the investment offered to investors. We also compete with other mineral resource exploration companies for available resources, including, but not limited to, professional geologists, camp staff, helicopter or float planes, mineral exploration supplies and drill rigs.

 

Government Regulations

 

Any operations at the our mineral properties will be subject to various federal and state laws and regulations in the United States and laws and regulations in Canada 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 will be required to obtain those licenses, permits or other authorizations currently required to conduct exploration and other programs. There are no current orders or directions relating to us or our properties with respect to the foregoing laws and regulations. Such compliance may include feasibility studies on the surface impact of our proposed operations, costs associated with minimizing surface impact, water treatment and protection, reclamation activities, including rehabilitation of various sites, on-going efforts at alleviating the mining impact on wildlife and permits or bonds as may be required to ensure our compliance with applicable regulations. It is possible that the costs and delays associated with such compliance could become so prohibitive that we may decide to not proceed with exploration, development, or mining operations on any of our mineral properties. We are not presently aware of any specific material environmental constraints affecting our properties that would preclude the economic development or operation of property in the United States and in Canada.

 

The U.S. Forest Service requires that mining operations on lands subject to its regulation obtain an approved plan of operations subject to environmental impact evaluation under the National Environmental Policy Act. Any significant modifications to the plan of operations may require the completion of an environmental assessment or Environmental Impact Statement prior to approval. Mining companies must post a bond or other surety to guarantee the cost of post-mining reclamation. These requirements could add significant additional cost and delays to any mining project undertaken by us.

 

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Under the U.S. Resource Conservation and Recovery Act, mining companies may incur costs for generating, transporting, treating, storing, or disposing of hazardous waste, as well as for closure and post-closure maintenance once they have completed mining activities on a property. Any future mining operations at our mineral properties may produce air emissions, including fugitive dust and other air pollutants, from stationary equipment, storage facilities, and the use of mobile sources such as trucks and heavy construction equipment which are subject to review, monitoring and/or control requirements under the Federal Clean Air Act and state air quality laws. Permitting rules may impose limitations on our production levels or create additional capital expenditures for pollution control in order to comply with the rules.

 

The U.S. Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended ("CERCLA"), imposes strict joint and several liability on parties associated with releases or threats of releases of hazardous substances. Those liable groups include, among others, the current owners and operators of facilities which release hazardous substances into the environment and past owners and operators of properties who owned such properties at the time the disposal of the hazardous substances occurred. This liability could include the cost of removal or remediation of the release and damages for injury to the surrounding property. We cannot predict the potential for future CERCLA liability with respect to our mineral properties or surrounding areas.

 

Employees

 

At present, we have no employees. We currently operate with two executive officers, who devote their time as required to our business operations. Our executive officers are not presently compensated for their services and do not have an employment agreement with us.

 

Item 1A Risk Factors

 

Risks Associated with our Business

 

We are an exploration stage company, lack a business history and have losses that we expect to continue into the future. If the losses continue we will have to suspend operations or cease functioning.

 

We were incorporated in the State of Wyoming on October 19, 2006, and have only started our proposed business but have not realized any revenues. We have no business history upon which an evaluation of our future success or failure can be made. Our net loss since inception is $1,411,956.

 

Our ability to achieve and maintain profitability and positive cash flow is dependent upon:

 

our ability to find a profitable exploration property;
our ability to generate revenues; and
our ability to reduce exploration costs.

 

Because of the speculative nature of exploration of mineral properties, we may never discover a commercially exploitable quantity of minerals, our business may fail and investors may lose their entire investment.

 

We are in the very early exploration stage and cannot guarantee that our exploration work will be successful or that any minerals will be found or that any production of minerals will be realized. The search for valuable minerals as a business is extremely risky. We can provide investors with no assurance that exploration on our properties will establish that commercially exploitable reserves of minerals exist on our property. Additional potential problems that may prevent us from discovering any reserves of minerals on our property include, but are not limited to, unanticipated problems relating to exploration and additional costs and expenses that may exceed current estimates. If we are unable to establish the presence of commercially exploitable reserves of minerals on our property our ability to fund future exploration activities will be impeded, we will not be able to operate profitably and investors may lose all of their investment in our company.

 

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Because of the unique difficulties and uncertainties inherent in mineral exploration ventures, we face a high risk of business failure.

 

Potential investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates. The expenditures to be made by us in the exploration of the mineral claim may not result in the discovery of mineral deposits. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. If the results of our exploration do not reveal viable commercial mineralization, we may decide to abandon our claims. If this happens, our business will likely fail.

 

Because of the inherent dangers involved in mineral exploration, there is a risk that we may incur liability or damages as we conduct our business.

 

The search for valuable minerals involves numerous hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or against which we may elect not to insure. At the present time we have no coverage to insure against these hazards. The payment of such liabilities may have a material adverse effect on our financial position.

 

We have no known mineral reserves and we may not find any gold, silver or graphite if we find gold, silver or graphite it may not be in economic quantities. If we fail to find any gold, silver or graphite or if we are unable to find gold, silver or graphite in economic quantities, we will have to suspend operations.

 

We have no known mineral reserves. Even if we find gold, silver or graphite, it may not be of sufficient quantity so as to warrant recovery. Additionally, even if we find gold, silver or graphite in sufficient quantity to warrant recovery it ultimately may not be recoverable. Finally, even if any gold, silver or graphite is recoverable, we do not know that this can be done at a profit. Failure to locate gold, silver or graphite in economically recoverable quantities will cause us to suspend operations.

 

The potential profitability of mineral ventures depends in part upon factors beyond the control of our company and even if we discover and exploit mineral deposits, we may never become commercially viable and we may be forced to cease operations.

 

The commercial feasibility of mineral properties is dependent upon many factors beyond our control, including the existence and size of mineral deposits in the properties we explore, the proximity and capacity of processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental regulation. These factors cannot be accurately predicted and any one or a combination of these factors may result in our company not receiving an adequate return on invested capital. These factors may have material and negative effects on our financial performance and our ability to continue operations.

 

We may be adversely affected by fluctuations in ore and precious metal prices.

 

The value and price of our shares of common stock, our financial results, and our exploration, development and mining activities, if any, may be significantly adversely affected by declines in the price of precious metals and ore. Mineral prices fluctuate widely and are affected by numerous factors beyond our control such as interest rates, exchange rates, inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, global and regional supply and demand, and the political and economic conditions of mineral producing countries throughout the world.

 

The prices used in making resource estimates for mineral projects are disclosed, and generally use significantly lower metal prices than daily metals prices quoted in the news media. The percentage change in the price of a metal cannot be directly related to the estimated resource quantities, which are affected by a number of additional factors. For example, a 10% change in price may have little impact on the estimated resource quantities, or it may result in a significant change in the amount of resources.

 

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Transportation difficulties and weather interruptions may affect and delay proposed mining operations and impact our proposed business.

 

Our mineral properties are accessible by road. The climate in the area is hot and dry in the summer but cold and subject to snow in the winter, which could at times hamper accessibility depending on the winter season precipitation levels. As a result, our exploration plans could be delayed for several months each year.

 

Supplies needed for exploration may not always be available.

 

Competition and unforeseen limited sources of supplies needed for our proposed exploration work could result in occasional spot shortages of supplies of certain products, equipment or materials. There is no guarantee we will be able to obtain certain products, equipment and/or materials as and when needed, without interruption, or on favorable terms. Such delays could affect our proposed business plans.

 

Management will devote only a limited amount of time to National Graphite’s business. Failure of our management to devote a sufficient amount of time to our business plans may adversely affect the success of our business.

 

Mr. Kenneth B. Liebscher will be devoting approximately 20 hours per week to National Graphite’s business. Failure of our management to devote a sufficient amount of time to our business plans may adversely affect the success of our business.

 

Management lacks formal training in mineral exploration.

 

Our officers and directors have no professional accreditation or formal training in the business of exploration. With no direct training or experience in these areas our management may not be fully aware of many of the specific requirements related to working within this industry. Decisions so made without this knowledge may not take into account standard engineering management approaches that experienced exploration corporations commonly make. Consequently, our business, earnings and ultimate financial success could suffer irreparable harm as a result of management’s lack of experience in the industry. Thus, we will retain such technical experts as are required to provide professional and technical guidance.

 

We require substantial funds merely to determine if mineral reserves exist on our mineral properties.

 

Any potential development and production of our exploration properties depends upon the results of exploration programs and/or feasibility studies and the recommendations of duly qualified engineers and geologists. Such programs require substantial additional funds. Any decision to further expand our plans on these exploration properties will involve the consideration and evaluation of several significant factors including, but not limited to:

 

Costs of bringing the property into production including exploration work, preparation of production feasibility studies and construction of production facilities;

 

Availability and costs of financing;

 

Ongoing costs of production;

 

Market prices for the products to be produced;

 

Environmental compliance regulations and restraints; and

 

Political climate and/or governmental regulation and control.

 

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Risks Associated with our Common Stock

 

There is no active trading market for our common stock and if a market for our common stock does not develop, our investors will be unable to sell their shares.

 

Few shares of our common stock have been traded on the OTC Bulletin Board. As a result, our stockholders may find it difficult to dispose of, or to obtain accurate quotations of the price of, shares of our common stock. This severely limits the liquidity of shares of our common stock and has a material adverse effect on the market price for shares of our common stock and on our ability to raise additional capital. An active public market for shares of our common stock may not develop, or if one should develop, it may not be sustained, and as a result, investors may not be able to resell shares of our common stock that they have purchased and may lose all of their investment.

 

We do not intend to pay dividends on any investment in the shares of stock of our company.

 

We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock’s price. This may never happen and investors may lose all of their investment in our company.

 

Because we can issue additional shares of common stock, purchasers of our common stock may incur immediate dilution and may experience further dilution.

 

We are authorized to issue up to 499,000,000 shares of common stock, of which 75,669,881 shares are issued and outstanding as of August 27, 2012. We have 1,000,000 preferred shares authorized of which 675,000 are issued and outstanding and held by Kenneth B. Liebscher, our President and CEO. Our board of directors has the authority to cause us to issue additional shares of common stock, and to determine the rights, preferences and privileges of such shares, without consent of any of our stockholders. Consequently, the stockholders may experience more dilution in their ownership of our stock in the future.

 

A decline in the price of our common stock could affect our ability to raise further working capital, it may adversely impact our ability to continue operations and we may go out of business.

 

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because we may attempt to acquire a significant portion of the funds we need in order to conduct our planned operations through the sale of equity securities, a decline in the price of our common stock could be detrimental to our liquidity and our operations because the decline may cause investors to not choose to invest in our stock. If we are unable to raise the funds we require for all our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. As a result, our business may suffer, and not be successful and we may go out of business. We also might not be able to meet our financial obligations if we cannot raise enough funds through the sale of our common stock and we may be forced to go out of business.

 

Our stock is a penny stock. Trading of our stock may be restricted by the Securities and Exchange Commission’s penny stock regulations 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.

 

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FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock.

 

In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority (FINRA) 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 FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA 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.

 

Risks Related to our Financial Results and Need for Additional Financing

 

Our auditors’ reports contain a statement that our net loss and limited working capital raise substantial doubt about our ability to continue as a going concern.

 

Our independent registered public accountants have stated in their report, included in this annual report that our significant operating losses and working capital deficiency raise substantial doubt about our ability to continue as a going concern. We had net losses of $375,546 and $658,714, respectively, for the fiscal years ended May 31, 2012 and 2011. We will be required to raise substantial capital to fund our capital expenditures, working capital and other cash requirements since our current cash assets are exhausted. We are currently searching for sources of additional funding, including potential joint venture partners, while we continue the initial exploration phase on our mining claims. The successful outcome of future financing activities cannot be determined at this time and there are no assurances that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operational results.

 

We will need additional capital to achieve our current business strategy and our inability to obtain additional financing will inhibit our ability to expand or even maintain our research, exploration and development efforts.

 

In addition to our current accumulated deficit, we expect to incur additional losses in the foreseeable future. Until we are able to determine if there are mineral deposits available for extraction on our properties, we are unlikely to be profitable. Consequently, we will require substantial additional capital to continue our exploration and development activities. There is no assurance that we will not incur additional and unplanned expenses during our continuing exploration and development activities. When additional funding is required, we intend to raise funds either through private placements or public offerings of our equity securities. There is no assurance that we will be able to obtain additional financing through private placements and/or public offerings necessary to support our working capital requirements. To the extent that funds generated from any private placements and/or public offerings are insufficient, we will have to raise additional working capital through other sources, such as bank loans and/or financings. No assurance can be given that additional financing will be available, or if available, will be on acceptable terms.

 

If we are unable to secure adequate sources of funds, we may be forced to delay or postpone the exploration, development and research of our properties, and as a result, we might be required to diminish or suspend our business plans. These delays in development would have an adverse effect on our ability to generate revenues and could require us to possibly cease operations. In addition, such inability to obtain financing on reasonable terms could have a negative effect on our business, operating results or financial condition to such extent that we are forced to restructure, file for bankruptcy protection, sell assets or cease operations, any of which could put your investment dollars at significant risk.

 

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We are incurring increased costs as a result of being a publicly-traded company.

 

As a public company, we incur significant legal, accounting and other expenses that we would not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission, has required changes in corporate governance practices of public companies. These new rules and regulations have increased our legal and financial compliance costs and have made some activities more time-consuming and costly. For example, as a result of becoming a public company, we have adopted policies regarding internal controls and disclosure controls and procedures. In addition, we have incurred additional costs associated with our public company reporting requirements. These new rules and regulations have made it more difficult and more expensive for us to obtain director and officer liability insurance, which we currently cannot afford to do. As a result of the new rules, it may become more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. We cannot predict or estimate the amount of additional costs we may incur as a result of being a public company or the timing of such costs and/or whether we will be able to raise the funds necessary to meet the cash requirements for these costs.

 

Because we may never earn revenues from our operations, our business may fail and then investors may lose all of their investment in our company.

 

We have no history of revenues from operations. We have never had significant operations and have no significant assets. We have yet to generate positive earnings and there can be no assurance that we will ever operate profitably. Our company has a limited operating history and is in the exploration stage. The success of our company is significantly dependent on the uncertain events of the discovery and exploitation of mineral reserves on our properties or selling the rights to exploit those mineral reserves. If our business plan is not successful and we are not able to operate profitably, then our stock may become worthless and investors may lose all of their investment in our company.

 

Prior to completion of the exploration stage, we anticipate that we will incur increased operating expenses without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from the exploration of our mineral claims in the future, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide no assurance that we will generate any revenues or ever achieve profitability. If we are unsuccessful in addressing these risks, our business will fail and investors may lose all of their investment in our company.

 

Item 1B. Unresolved Staff Comments.

 

Not applicable.

 

Item 2 Properties.

 

Principal Office

 

Our principal office is located at 7230 Indian Creek Lane, Las Vegas, Nevada 89149. Our telephone number is (702) 849-4029. On January 1, 2012 our office rental agreement was adjusted to a $500 per month rental fee for office space in Nevada. The term of the agreement is on a month-to-month basis starting from January 1, 2012.

 

Our Mineral Properties

 

The Black Butte and Lucky Boy Projects

 

On February 8, 2010, we acquired 38 unpatented BLM claims including those known as Silver Summit and Candelaria and 2 historic silver mine leases ("Ag Properties") known as Lucky Boy Silver Mine and the Black Butte Silver Mine. As part of the mining lease proposal for the Lucky Boy Silver Mine, the Company agreed to pay a $10,000 non-refundable lease payment and an additional $10,000 lease payment every nine months commencing on November 17, 2010, and every nine months thereafter as long as the lease is in force. The Company deposited $50,000 in an escrow account to be drawn against invoices for work done on the property including access upgrading, exploration activities and geological expenses. Upon the recommendation of our consulting geologist, we did not renew the lease of the Lucky Boy Silver Mine.

 

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On May 25, 2011 we expanded our claims in the Candelaria area to 66 unpatented claims by staking the LAG claims.

 

These mineral properties are without known reserves and the proposed program is explanatory in nature.

 

The Graphite Prospects

 

On April 20, 2012, Lucky Boy Silver Corp. entered into an agreement with Habitants Minerals Ltd. granting Lucky Boy the sole and exclusive right to purchase 100% right, title and interest in and to the applications and subsequent claims to be issued by Quebec Ministry of Resources and Fauna for the following applications:

 

The Quebec applications cover ground referred to in reports GM19842, GM35169, GM35267, GM19844, GM20308, GM13866, reports which report historic graphite occurrences on Lot 32 and Lot 33 Range 11 in Low Township, Lot 1 Range 2 in Suffolk Township, Lot 9 and Lot 16 Range 3 and Lot 10 Range 9 all in Clarendon Township, Lot 46 Range 11 in Low Township, and ground in Lochaber Township covering historic mag anomalies.

 

APPLICATION 1186716 (29 claims)

APPLICATION 1187995 (14 claims)

APPLICATION 1187994 (12 claims)

APPLICATION 1187992 (10 claims)

65 claims approx., 60 hectares each = 3900 hectares

 

On April 24, 2012, Lucky Boy Silver Corp. entered into an agreement with GeoXplor Corporation to purchase a 100% interest in and to the Chedic Graphite Property consisting of 20 Mineral Lode Claims in Township, 15 North, Range 19 East, Sections 25 & 26 Carson City, NV mining claims compromising approximately 400 acres.

 

Location and Means and Access

 

We have acquired an interest in the Black Butte and Lucky Boy projects in the Mineral County, Nevada. Black Butte is in T7N/R34E sections 25 and 26.Candelaria is in T3N/R35E sections 1,2, and 3; T4N/R35E sections 25, 35, and 36.

 

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Figure 1: Black Butte and Candelaria Location Map

 

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Black Butte

 

The Black Butte Project is approximately 30 miles east of Hawthorne on the east flank of Black Dyke Mountain at the eastern end of the Garfield Hills. The project can be reached by traveling 29.5 miles east on U.S. Highway 95 to a well-graded dirt road into the project area. Further access by vehicle is limited to several steep, primitive 4-wheel drive tracks.

 

The land position initially consisted of the Black Butte unpatented lode mining claims (Table 1 and Figure 2). Additional lode claims (BB-1 to6) were staked on August 12, 2010 to cover the interpreted extensions of the mineralized zone.

 

Owner/Claimant   Claim Name   Land Tenure   Tenure Number
G. L. Buffington   Black Butte   Unpatented Lode Mining Claim   NMC 95801
G. L. Buffington   Black Butte #1   Unpatented Lode Mining Claim   NMC 95802
G. L. Buffington   Black Butte #2   Unpatented Lode Mining Claim   NMC 95803
G. L. Buffington   Black Butte #3   Unpatented Lode Mining Claim   NMC 95804
Lucky Boy Silver Corp.   BB-1   Unpatented Lode Mining Claim   NMC 1026931
Lucky Boy Silver Corp.   BB-2   Unpatented Lode Mining Claim   NMC 1026932
Lucky Boy Silver Corp.   BB-3   Unpatented Lode Mining Claim   NMC 1026933
Lucky Boy Silver Corp.   BB-4   Unpatented Lode Mining Claim   NMC 1026934
Lucky Boy Silver Corp.   BB-5   Unpatented Lode Mining Claim   NMC 1026935
Lucky Boy Silver Corp.   BB-6   Unpatented Lode Mining Claim   NMC 1026936

 

Table 1: Black Butte and Lucky Boy Land Description

 

The claims Black Butte, Black Butte #1 to #3, BB-1 to BB-6 , and LAG 1 to 66 are valid until September 1, 2012.

 

Lucky Boy Silver Corp.

LAG 1 to

LAG 38

Unpatented Lode Mining Claim

NMC 1047475 to

NMC 1047512

       
Lucky Boy Silver Corp.

LAG 39 to

LAG 66

Unpatented Lode Mining Claim

NMC 1051010 to

NMC 1051037

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Figure 2: Black Butte Project Land Map

 

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GEOLOGY

 

Regional Geology

 

The Black Butte project area is located in the Walker Lane Mineral Belt in western Nevada (Figure 1). Rocks in the region encompassing the project areas range from Triassic age sediments to recent alluvium filling the basins. The western side of the region is dominated by Cretaceous age intrusive rocks forming the Wassuk Range.

 

The Walker Lane is a major northwest-southeast-trending fault zone which displays right lateral movement that ranges from 30 to 40 miles in its central portion, and hosts a variety of precious metal and base metal mineral deposits (as well as geothermal activity) along its length. Late Cenozoic faults of the central Walker Lane form a complex array of variably oriented structures characterized by coeval strike-slip and dip-slip motions.

 

The rock formations for the project areas fit into the regional setting described for Mineral County (Figure 6, and Ross, 1961):

 

“About 30,000 feet of structurally complex calcareous, clastic, and volcanic rocks of Triassic and Jurassic age exposed in the central part of the county are flanked on the south by a few thousand feet of calcareous and clastic rocks of Cambrian, Ordovician, and Permian age. Intrusive into this sequence are granitic rocks, chiefly quartz monzonite, which are probably satellitic to the composite Sierra Nevada Batholith of Cretaceous age.”

 

Black Butte Project Geology

 

The Black Butte Project area lithology is mapped as Triassic Excelsior Formation which is summarized as a sequence of felsic volcanic rocks, clastic rocks, and tuffs (Figure 7). To the south of the project area the Excelsior is in fault contact with the Triassic Luning Formation described as a sequence of limestone, dolomite, and shale.

 

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Figure 3: Legend for all Geological Maps

 

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Figure 4: Black Butte Project Geology Map

 

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Figure 5: Looking west at Black Butte Project Area

 

 

Figure 6: Looking at Black Butte Vein Zone

 

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MINERALIZATION

 

Black Butte Project Mineralization

 

No historical data was found for the Black Butte Project area. There are at least four adits that collar on the vein and drive along the strike. These adits appear to be interconnected by raises and winzes. The lowermost adit (near samples LBR-14 and 21, Figure 11) has power and lights behind a locked door which services the seismograph equipment located within.

 

The mineralization is a quartz vein zone trending northeast-southwest and exposed at the surface for approximately 800 feet in a series of adits and prospect pits (Figure 7, Figure 8, and Figure 9). To the northeast the vein appears to go under alluvial cover. Going to the southwest along the strike of the vein the hill becomes higher and beyond the last exposed part of the vein strong, pervasive zones of iron oxidation are much more prominent as well as a zone of carbonate alteration (calcite veining). These alteration zones are typical of the uppermost extent of the alteration associated with an epithermal quartz vein system.

 

The vein zone is poly-phase, with multiple bands of silica that are sulfide bearing. The vein zone is from two to ten feet wide; within the wider parts of the zone there are distinct anastomosing quartz veins separated by orange and brown clay/gouge (frontispiece-note pencil for scale). Sulfides of iron, copper, lead, and silver were obvious on some of the dumps.

 

Gold values along the vein are anomalous (2.59, 3.4, and 6.22 ppm gold) to strongly anomalous (46.7 ppm gold) (Figure 12). The 46.7 ppm gold (1.36 opt) sample was a 10 inch channel sample across the quartz vein. Most of the higher grade gold values appear to be in the quartz; however the clay/gouge within the vein zone between the quartz does also carry some lesser gold values.

 

Silver values along the vein are also highly anomalous (316, 403, 630, 684 ppm silver) (Figure 13). The silver is highly correlative to the gold. Overall the system appears to be silver dominant with silver to gold ratio equal to 43:1.

 

Lead, copper, and zinc values are also anomalous; as might be expected in a silver dominated epithermal vein system (Figure 14 and Table 2).

 

 

Black Butte Rock Geochemical Summary
  Gold ppm   Silver ppm   Lead ppm   Copper ppm   Zinc ppm
High 46.7 (1.36 opt)   684 (19.94 opt)   43,000 (4.3%)   9,590   2,120
Low 0.098   3.3   31   177   170
Average 5.525 (0.161 opt)   204.4   9,529   1,916   707
No. Samples 11   11   11   11   11

 

Table 2: Black Butte Geochemical Summary Table

 

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Figure 7: Black Butte Rock Sample Location Map

 

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Figure 8: Black Butte Gold in Rock Map

 

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Figure 9: Black Butte Silver in Rock Map

 

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Figure 10: Black Butte Lead in Rock

 

30
 

 

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 National Graphite.

 

Item 4. (Removed and Reserved).

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Market Information

 

Our shares of common stock are quoted on the OTC Bulletin Board under the symbol “NGRC”. Our CUSIP number is 631268 104. The quotation was first posted at the opening on May 29, 2009 with an opening bid of $0.05 ($0.0033 post-split) and offer at $0.10 ($0.0067 post-split).

 

Holders of our Common Stock

 

As of the date of this report the shareholders' list of our common shares showed 22 registered shareholders. There are 75,669,881 shares outstanding.

 

Dividends

 

We have not declared any dividends since incorporation and do not anticipate that we will do so in the foreseeable future. Although there are no restrictions that limit the ability to pay dividends on our common shares, our intention is to retain future earnings for use in our operations and the expansion of our business.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

We do not have any equity compensation plans in place.

 

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

 

On October 25, 2010 the Company issued 356,154 units consisting of one share of common stock and one warrant for cash at $0.63 per share. The attached warrants are exercisable for two years from issuance and have an exercise price of $0.85 per share for one year from issuance which increased to $1.05 in the second year. The Company used the Black-Scholes option pricing model to value the warrants based on the terms of the warrant, a volatility of 350%risk free rate of 0.37%, and a stock price and issuance of $0.65. Based on this calculation, the Company determined that the relative fair value of the warrants is $113,148 and allocated this amount of the additional paid-in capital to the warrants

 

On December 15, 2010 the Company issued 47,060 shares of its restricted common stock issued to 20 shareholders subscribed for at a price of $0.85 per share in private placements for $40,000 cash.

 

During the year ended May 31, 2012 the Company issued 500,000 shares of its restricted common stock issued to non-afilliated shareholders subscribed for at a price of $0.60 per share in private placements for $300,000 cash.

 

31
 

  

During the year ended May 31, 2012 the Company issued 500,000 shares of its restricted common stock as consideration for the purchase of certain mineral interests in Carson City, Nevada. These shares were valued at $0.60 per share, resulting in an aggregate value of $300,000.

 

All of these shares were issued to accredited investors under the exemption from Section 5 of the Securities Act of 1933 (the “Act”) contained in Section 4(6) of the Act.

 

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

None.

 

Item 6. Selected Financial Data.

 

Not applicable.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Overview

 

You should read the following discussion of our financial condition and results of operations together with the audited financial statements and the notes to audited financial statements included elsewhere in this report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those anticipated in these forward-looking statements.

 

We are a start-up, exploration stage company engaged in the search for gold, silver, graphite and related minerals. Our mineral properties are without known reserves and our proposed program is explanatory in nature. There is no assurance that commercially viable mineral deposits exist on our mineral properties. Further exploration and/or drilling will be required before a final evaluation as to the economic and legal feasibility of our projects is determined.

 

Our business plan is to proceed with exploration of the Black Butte and our unpatented LAG claims to determine if there are commercially exploitable deposits of gold and silver, and if we decide not to proceed, to seek other mineral exploration properties. As per our purchase agreement, the Company is obligated to spend a minimum of $100,000 over the next twelve months on its Chedic graphite claims in Nevada.

 

The Black Butte Project – Our Proposed Exploration Program

 

Our business plan for the Black Butte Project is to proceed with the initial exploration of the gold and silver properties to determine if there are commercially exploitable deposits of gold and silver. We retained the services of the Hunsaker Inc., a geological company, to assess the results of our program.In a geological report compiled by Hunsaker dated May 2010, Hunsaker opined that further exploration on the Black Butte project is justified.

 

Over the twelve months ending May 31, 2013 we intend to use almost all available funds to commence exploration of our mineral properties in Nevada. We anticipate that phase II will not be carried out until 2013 or 2014 and will be contingent upon favorable results from phase I and specific recommendations in the resulting report. Specifics of the work to be carried out have not yet been determined and will be delineated as recommendations in the reporting of the results of phase I. The second phase may require up to six weeks work. Four months may be required for analysis and the preparation of a report and evaluation on the work accomplished.

 

32
 

  

Employees

 

We intend to continue to use the services of subcontractors for manual labor exploration work and an engineer or geologist to manage the exploration program. In regards to phase I of the planned exploration program, we have retained Buster Hunsaker as senior geological consultant.

 

At present, we have no employees. We currently operate with two executive officers, who devote their time as required to our business operations. Our executive officers are not presently compensated for their services and do not have an employment agreement with us.

 

We presently do not have pension, health, annuity, insurance, stock options, profit sharing or similar benefit plans; however, we may adopt such plans in the future. There are presently no personal benefits available to employees.

 

Results of Operations

 

   Year Ended 
   May 31, 
   2012   2011 
Revenue  $-   $- 
Operating Expenses  $375,546   $658,714 
Net Profit (Loss)  $(375,546)  $(658,714)

 

Revenue

 

We have not earned any revenues since our inception.

 

Expenses

 

Our operating expenses for the years ended May 31, 2012 and 2011 are outlined in the table below:

 

   Year Ended 
   May 31, 
   2012   2011 
Professional fees  $256,566   $538,333 
Exploration of resource property   27,316    28,829 
Depreciation   808    270 
Impairment of mining claims   -    57,500 
General and administrative expenses   90,856    33,782 
Total Operating Expenses  $375,546   $658,714 

 

33
 

  

Operating expenses for the year ended May 31, 2012, increased by 283,168 as compared to 2011, primarily as a result of the commencement of our business plan.

 

During the year ended May 31, 2012, National Graphite incurred operating expenses of $375,546 as compared to $658,714 for 2011 and a total of $1,411,956 for the period from inception on October 19, 2006, to May 31, 2012. The costs incurred can be further subdivided into the following categories.

 

PROFESSIONAL FEES: National Graphite incurred $256,566 in professional fees for the fiscal year ended on May 31, 2012, as compared to $538,333 for the previous fiscal year. Decreased costs were incurred in the past year as the result of the completion of the filing of an S-1 rescission offering registration statement and the attendant legal, accounting and filing expenses. From inception to October 19, 2006, we have incurred $996,085 in professional fees mainly spent on legal and accounting matters. This expense category will vary annually depending on corporate capital raising activities.

 

EXPLORATION OF RESOURCE PROPERTIES COSTS: We incurred $27,316 in mineral interest acquisition and exploration costs for the year ended May 31, 2012 compared to $28,829 for the year ended May 31, 2011. For the period October 19, 2006 (inception) through May 31, 2012, $91,145 was recorded for exploration work on our optioned projects. This category will vary from year to year dependent on the exploration activities of the Company.

 

IMPAIRMENT OF MINING CLAIMS: During May of 2010 the Company had a preliminary geology study performed to assess the potential reserves of its newly acquired claims. Based on this report and managements future expectations of additional capital expenditures and future cash flows of the claims, management determined that the carrying value of the claims be impaired to a net book value of $57,500. This resulted in the Company recognizing a $57,500 impairment charge recorded in operating expenses for the year ended May 31, 2011. No such impairments were recorded in the 2012 fiscal year.

 

GENERAL AND ADMINISTRATIVE EXPENSES: National Graphite incurred $90,856 in general and administrative expenses during the fiscal year ended May 31, 2012 as compared to $33,782 in 2011. Since inception through May 31, 2012 the Company has incurred a total of $208,648. The Company spent less on office and travel expenses during 2011 which contributed to the decrease in expenses.

 

RESEARCH AND DEVELOPMENT: National Graphite has not incurred any expenses for research and development since inception on October 19, 2006.

 

COMPENSATION: No compensation costs were incurred for the fiscal year ended on May 31, 2012, and none were incurred in the previous fiscal year which ended on May 31, 2011. From inception to May 31, 2012, there have been no charges to the compensation account.

 

INCOME TAX PROVISION: As a result of operating losses, there has been no provision for the payment of income taxes to date in 2008 – 2012 or from the date of inception.

 

At the end of the fiscal year under review, May 31, 2012, and as of the date of this report, National Graphite had 75,153,214 common shares issued and outstanding.

 

Liquidity and Financial Condition

 

Working Capital

 

   May 31, 
   2012   2011 
Current Assets  $111,709   $314,525 
Current Liabilities   (1,595)   (5,984)
Working Capital  $110,114   $308,541 

 

34
 

  

Cash Flows

 

   Year Ended 
   May 31, 
   2012   2011 
Net Cash Used in Operating Activities  $(239,891)  $(159,476)
Net Cash Used In Investing Activities   (98,489)   (5,328)
Net Cash Provided by Financing Activities   300,000    265,000 
Effect of Exchange Rate Changes   -    - 
Increase In Cash During The Period  $(38,380)  $100,196 

 

Since inception we have used common stock to raise money for our optioned mineral acquisition and corporate expenses. Net cash provided by financing activities in the most recent fiscal year ended May 31, 2012 was $300,000, compared to $ 265,000 during the fiscal year ended May 31, 2011. Net cash provided by financing activities from inception on October 19, 2006 was $910,000.

 

Presently, our revenues are not sufficient to meet operating and capital expenses. We have incurred operating losses since inception, and this is likely to continue through fiscal 2012 - 2013. Management projects that we may require $1,730,000 to fund our ongoing operating expenses and working capital requirements for the next twelve months, broken down as follows:

 

General and administrative expenses  $150,000 
Operating expenses   - 
Future property acquisitions   430,000 
Working capital   150,000 
Development of properties   1,000,000 
   $1,730,000 

 

As at May 31, 2012, we had a working capital surplus of $110,114. We plan to raise the additional capital required to meet the balance of our estimated funding requirements for the next twelve months primarily through the sale of equity based securities or loans from related parties. We do not anticipate that we will be able to satisfy any of these funding requirements internally until we significantly generate revenues.

 

Going Concern

 

We are in the exploration stage, have not yet achieved profitable operations and are dependent on our ability to raise capital from stockholders or other sources to meet obligations arising from normal business operations when they become due. Therefore, in their report on our audited financial statements for the year ended May 31, 2012, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosure describing the circumstances that lead to this disclosure.

 

Future Financings

 

We will require additional financing in order to enable us to proceed with our plan of operations. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due. We are pursuing various alternatives to meet our immediate and long-term financial requirements.

 

35
 

  

On October 29, 2010 we announced that the Company had entered into an equity financing agreement for up to $2,500,000 from Cardinal Capital Holdings, Limited. Under the terms of the agreement, the Company may from time to time request a purchase of up to $250,000 per request. On October 28, 2010 we received our first draw of $225,000. Under the terms of the agreement, we may draw up to a total of $1,500,000 through October 19th, 2011. The investment group, at its discretion, may invest an additional $1,000,000 at $.65 when the total first round has been completed.

 

Based on our current plan of operations, we have sufficient funds for the next 6 months, after which time we will require additional funds to continue our exploration operations.

 

Presently, our revenues are not sufficient to meet operating and capital expenses. We have incurred operating losses since inception, and this is likely to continue through fiscal 2012-2013. Management projects that we will require up to $1,730,000 to fund ongoing operating expenses and working capital requirements for the next 12 months, broken down as follows:

 

General and administrative expenses  $150,000 
Future property acquisitions   430,000 
Working capital   150,000 
Development of properties   1,000,000 
   $1,730,000 

 

We anticipate continuing to rely on equity sales of our common stock in order to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of equity securities or arrange for debt or other financing to fund our planned business activities.

 

We presently do not have any arrangements for additional financing and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations.

 

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.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

Item 8. Financial Statements and Supplementary Data.

 

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

The Reports of the Independent Registered Public Accounting firm by Sadler, Gibb & Associates LLC for the audited financial statements for the year ended May 31, 2012,

 

36
 

 

NATIONAL GRAPHITE CORP.

 

AUDIT REPORT OF INDEPENDENT ACCOUNTANTS

AND

FINANCIAL STATEMENTS

 

For the Fiscal Years Ended May 31, 2012 and 2011

and from inception on October 19, 2006 through May 31, 2012

 

37
 

   

NATIONAL GRAPHITE CORP.

Table of Contents

 

    Page
     
Report of Independent Registered Public Accounting Firm   F-1
     
Balance Sheets – May 31, 2012 and 2011   F-2
     
Statements of Operations for the fiscal years ended May 31, 2012 and 2011 and from inception on October 19, 2006 through May 31, 2012   F-3
     
Statement of Stockholders’ Equity from inception on October 19, 2006 through May 31, 2012   F-4
     
Statements of Cash Flows for the fiscal years ended May 31, 2012 and 2011 and from inception on October 19, 2006 through May 31, 2012   F-6
     
Notes to Financial Statements   F-8

  

38
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors

National Graphite Corp.

(An Exploration Stage Company)

 

We have audited the accompanying balance sheets of National Graphite Corp. as of May 31, 2012 and 2011, and from inception on October 19, 2009 through May 31, 2012 and the related statements of operations, stockholders’ equity and cash flows for the periods then ended. 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 National Graphite Corp. as of May 31, 2012 and 2011 and from inception on October 19, 2009 through May 31, 2012, and the results of their operations and their cash flows for the periods then ended, in conformity with U.S. generally accepted accounting principles.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has not yet established an ongoing source of revenue sufficient to cover its operating costs which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning 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/ Sadler, Gibb & Associates, LLC  
Sadler, Gibb & Associates, LLC  
Farmington, UT  
August 28, 2012  

 

  

F-1
 

 

NATIONAL GRAPHITE CORP.

(FKA LUCKY BOY SILVER CORPORATION)

(An Exploration Stage Company)

Balance Sheets

 

   May 31, 2012   May 31, 2011 
         
ASSETS          
CURRENT ASSETS          
           
Cash  $108,209   $146,589 
Restricted cash   -    12,786 
Prepaid expenses   3,500    155,150 
           
Total Current Assets   111,709    314,525 
           
PROPERTY AND EQUIPMENT, net   1,350    2,158 
           
OTHER ASSETS          
           
Deposits   26,400    1,200 
Mineral interests   401,389    2,900 
           
Total Other Assets   427,789    4,100 
           
TOTAL ASSETS  $540,848   $320,783 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
          
CURRENT LIABILITIES          
           
Accounts payable and accrued expenses  $1,595   $5,984 
           
Total Current Liabilities   1,595    5,984 
           
STOCKHOLDERS' EQUITY          
           
Preferred stock, 1,000,000 shares authorized at par value of $0.001; 675,000 and 675,000 shares issued and outstanding, respectively   675    675 
Common stock, 499,000,000 shares authorized at par value of $0.001; 75,153,214 and 74,153,214 shares issued and outstanding, respectively   75,153    74,153 
Additional paid-in capital   1,875,322    1,276,322 
Other comprehensive income   59    59 
Deficit accumulated during the exploration stage   (1,411,956)   (1,036,410)
           
Total Stockholders' Equity   539,253    314,799 
           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $540,848   $320,783 

 

The accompanying notes are an integral part of these financial statements.

F-2
 

 

NATIONAL GRAPHITE CORP.

(FKA LUCKY BOY SILVER CORPORATION)

(An Exploration Stage Company)

Statements of Operations

 

   For the Years Ended
May 31,
   From Inception
on October 19,
2006 Through
  May 31,
 
   2012   2011   2012 
             
REVENUES  $-   $-   $- 
                
OPERATING EXPENSES               
                
Exploration of resource properties   27,316    28,829    91,145 
Impairment of mineral interests   -    57,500    115,000 
Depreciation expense   808    270    1,078 
Professional fees   256,566    538,333    996,085 
General and administrative expenses   90,856    33,782    208,648 
                
Total Operating Expenses   375,546    658,714    1,411,956 
                
LOSS FROM OPERATIONS   (375,546)   (658,714)   (1,411,956)
                
PROVISION FOR INCOME TAXES   -    -    - 
                
NET LOSS  $(375,546)  $(658,714)  $(1,411,956)
                
BASIC AND DILUTED LOSS PER SHARE  $(0.01)  $(0.01)     
                
BASIC AND DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING
   74,308,694    113,518,887      

 

The accompanying notes are an integral part of these financial statements

 

F-3
 

 

NATIONAL GRAPHITE CORP.

(FKA LUCKY BOY SILVER CORPORATION)

(An Exploration Stage Company)

Statements of Stockholders’ Equity

 

           Additional   Stock   Other   Deficit Accumulated
During the
   Total 
   Preferred Stock   Common Stock   Paid-in   Subscriptions   Comprehensive   Exploration   Stockholders' 
   Shares   Amount   Shares   Amount   Capital   Payable   Income   Stage   Equity 
                                     
Balance, October 19, 2006   -   $-    -   $-   $-   $-   $-   $-   $- 
Common shares issued for cash   -    -    103,500,000    103,500    (88,500)   -    -    -    15,000 
Currency exchange loss   -    -    -    -    -    -    (2)   -    (2)
Contributed Administrative Support & other services rendered by officers   -    -    -    -    100    -    -    -    100 
Net loss for the year ended                                             
May 31, 2007   -    -    -    -    -    -    -    (5,816)   (5,816)
Balance, May 31, 2007   -    -    103,500,000    103,500    (88,400)   -    (2)   (5,816)   9,282 
Common shares issued for cash   -    -    -    -    -    -    -    -    - 
Contributed Administrative Support & other services rendered by officers   -    -    -    -    50    -    -    -    50 
Currency exchange gain   -    -    -    -    -    -    61    -    61 
Net loss for the year ended May 31, 2008   -    -    -    -    -    -    -    (56,311)   (56,311)
Balance, May 31, 2008   -    -    103,500,000    103,500    (88,350)   -    59    (62,127)   (46,918)
Common shares issued for cash   -    -    30,000,000    30,000    70,000    -    -    -    100,000 
Net loss for the year ended May 31, 2009   -    -    -    -    -    -    -    (51,056)   (51,056)
Balance, May 31, 2009   -    -    133,500,000    133,500    (18,350)   -    59    (113,183)   2,026 
Capital contribution   -    -    -    -    10,000    -    -    -    10,000 
Common stock issued for cash at $0.40 per common share   -    -    6,375,000    6,375    163,625    50,000    -    -    220,000 
Common stock issued for services   -    -    440,000    440    119,560    -    -    -    120,000 
Common stock issued for mining claims   -    -    150,000    150    59,850    -    -    -    60,000 
Net loss for the year ended May 31, 2010   -    -    -    -    -    -    -    (264,513)   (264,513)
Balance, May 31, 2010   -   $-    140,465,000   $140,465   $334,685   $50,000   $59   $(377,696)  $147,513 

  

The accompanying notes are an integral part of these financial statements.

 

F-4
 

 

NATIONAL GRAPHITE CORP.

(FKA LUCKY BOY SILVER CORPORATION)

(An Exploration Stage Company)

Statements of Stockholders' Equity

  

           Additional   Stock    Other   Deficit
Accumulated
During the
   Total 
   Preferred Stock   Common Stock   Paid-in   Subscription   Comprehensive   Exploration   Stockholders' 
   Shares   Amount   Shares   Amount   Capital   Payable   Income   Stage   Equity 
                                     
Balance, May 31, 2010   -   $-    140,465,000   $140,465   $334,685   $50,000   $59   $(377,696)  $147,513 
Common stock issued pursuant to stock subscription payable   -    -    125,000    125    49,875    (50,000)   -    -    - 
Common stock issued for cash and warrants at $0.63 per common share   -    -    356,154    356    224,644    -    -    -    225,000 
Common stock issued for cash at $0.85 per common share   -    -    47,060    47    39,953    -    -    -    40,000 
Common stock issued for prepaid services at $0.85 per common share   -    -    660,000    660    560,340    -    -    -    561,000 
Common stock exchanged for preferred stock   675,000    675    (67,500,000)   (67,500)   66,825    -    -    -    - 
Net loss for the year ended May 31, 2011   -    -    -    -    -    -    -    (658,714)   (658,714)
Balance, May 31, 2011   675,000    675    74,153,214    74,153    1,276,322    -    59    (1,036,410)   314,799 
Common stock issued for cash at $0.60 per common share   -    -    500,000    500    299,500    -    -    -    300,000 
Common stock issued for acquisition of mineral claims   -    -    500,000    500    299,500    -    -    -    300,000 
Net loss for the year ended May 31, 2012   -    -    -    -    -    -    -    (375,546)   (375,546)
Balance, May 31, 2012   675,000   $675    75,153,214   $75,153   $1,875,322   $-   $59   $(1,411,956)  $539,253 

 

The accompanying notes are an integral part of these financial statements.

 

F-5
 

 

NATIONAL GRAPHITE CORP.

(FKA LUCKY BOY SILVER CORPORATION)

(An Exploration Stage Company)

Statements of Cash Flows

 

   For the Years Ended   From Inception
on October 19, 2006 Through
 
   May 31,   May 31, 
   2012   2011  2012 
             
CASH FLOWS FROM OPERATING ACTIVITIES               
                
Net loss  $(375,546)  $(658,714)  $(1,411,956)
Adjustments to reconcile net loss to net cash used in operating activities:               
Depreciation expense   808    270    1,078 
Contributed services by an officer   -    -    150 
Other comprehensive loss   -    -    59 
Amortization of prepaid expense   137,849    412,250    561,000 
Common stock issued for services   -    -    120,000 
Impairment of mineral interests   -    57,500    112,101 
Changes to operating assets and liabilities:               
Restricted cash   12,786    30,714    - 
Prepaid expenses   13,801    (6,400)   (3,500)
Deposits   (25,200)   -    (26,400)
Accounts payable   (4,389)   4,904    1,595 
                
Net Cash Used in Operating Activities   (239,891)   (159,476)   (645,873)
                
CASH FLOWS FROM INVESTING ACTIVITIES               
Purchase of computer equipment   -    (2,428)   (2,428)
Purchase of mineral interests   (98,489)   (2,900)   (153,490)
                
Net Cash Used in Investing Activities   (98,489)   (5,328)   (155,918)
                
CASH FLOWS FROM FINANCING ACTIVITIES               
Capital contributions   -    -    10,000 
Common stock issued for cash   300,000    265,000    900,000 
                
Net Cash Provided by Financing Activities   300,000    265,000    910,000 
                
NET INCREASE (DECREASE) IN CASH   (38,380)   100,196    108,209 
CASH AT BEGINNING OF PERIOD   146,589    46,393    - 
                
CASH AT END OF PERIOD  $108,209   $146,589   $108,209 

 

The accompanying notes are an integral part of these financial statements.

 

F-6
 

 

NATIONAL GRAPHITE CORP.

(FKA LUCKY BOY SILVER CORPORATION)

(An Exploration Stage Company)

Statements of Cash Flows

 

   For the Years Ended   From Inception
on October 19,
2006 Through
 
   May 31,   May 31, 
   2012   2011   2012 
                
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION 
               
                
CASH PAID FOR:               
Interest  $-   $-   $- 
Income Taxes  $-   $-   $- 
                
NON CASH FINANCING ACTIVITIES:               
Preferred stock issued in conversion of common stock  $-   $67,500   $67,500 
Common stock issued for prepaid expenses  $-   $561,000   $561,000 
Common stock issued for mineral interests  $300,000   $-   $360,000 

 

The accompanying notes are an integral part of these financial statements.

 

F-7
 

  

NATIONAL GRAPHITE CORP.

(FKA Lucky Boy Silver Corporation)

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2012 and 2011

 

NOTE 1 – NATURE OF OPERATIONS

 

National Graphite Corporation formerly known as Lucky Boy Silver Corporation, which was formerly known as Sierra Ventures, Inc. (“the Company”) was incorporated under the laws of the State of Wyoming on October 19, 2006. On May 8, 2012 the Company filed an Amendment to Articles with and changes its name from “Lucky Boy Silver Corporation” to “National Graphite Corporation.” On February 5, 2010 the Company filed an Amendment to Articles with the Wyoming Secretary of State and changed its name from “Sierra Ventures Inc.” to “Lucky Boy Silver Corporation.” On March 22, 2011, the Company pursuant to Wyoming and Nevada law converted from a Wyoming corporation to a Nevada corporation.

 

The Company is an “exploration stage company” as defined in the ASC Topic Accounting and Reporting by Development Stage Companies. The Company is devoting its resources to establishing the new business, and its planned operations have not yet commenced, accordingly, no revenues have been earned during the period from October 19, 2006 (date of inception) to May 31, 2012.

 

NOTE 2 – GOING CONCERN

 

The Company’s financial statements at May 31, 2012 and 2011 and for the period October 19, 2006 (inception) through May 31, 2012 have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The Company incurred a loss of $1,411,956 for the period from October 19, 2006 (inception) through May 31, 2012. In addition, the Company has not generated any revenues and no revenues are anticipated until the Company begins extracting and selling ore, and there is no assurance that commercially viable deposits exist on the mineral claims that the Company has under option. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern.

 

Management’s plan to support the Company in its operations and to maintain its business strategy is to raise funds through public offerings and to rely on officers and directors to perform essential functions with minimal compensation. If the Company does not raise all of the money it needs from public offerings, it will have to find alternative sources, such as a second public offering, a private placement of securities, or loans from its officers, directors or others. If the Company requires additional cash and can’t raise it, it will either have to suspend operations until the cash is raised, or cease business entirely.

 

The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

The Company’s accounting and reporting policies conform to accounting principles generally accepted in the United States of America applicable to exploration stage enterprises. The Company has elected a May 31 fiscal year end.

 

Use of Estimates

In preparing financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses in the statement of operations. Actual results could differ from those estimates.

 

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and cash equivalents. The Company places its cash with high quality financial institutions and at times may exceed the FDIC insurance limit.

 

F-8
 

 

NATIONAL GRAPHITE CORP.

(FKA Lucky Boy Silver Corporation)

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2012 and 2011

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

 

The Company has established and escrow account wherein $50,000 was deposited in accordance with the mining lease entered into on January 28, 2008. These funds are to be drawn down against work done on the mineral properties including access upgrading, exploration activities and geologist expense related to completing a NI 43-101 report. The balance of this account is recorded as restricted cash on the balance sheet. As of May 31, 2012 and 2011 there was $-0- and $12,786 in restricted cash, respectively.

 

Impairment or Disposal of Long Lived Assets

In August 2001, ASC Topic, “Accounting for the Impairment or Disposal of Long-Lived Assets” was issued. It clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to their estimated fair value based on the best information available.

 

Fair Value of Financial Instruments

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company’s financial instruments consist principally of cash, amounts receivable, accounts payable, accrued liabilities, notes payable, and amounts due to related parties. Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

F-9
 

 

NATIONAL GRAPHITE CORP.

(FKA Lucky Boy Silver Corporation)

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2012 and 2011

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Mineral Property Acquisition Costs

The costs of acquiring mineral properties are capitalized and amortized over their estimated useful lives following the commencement of production or expensed if it is determined that the mineral property has no future economic value or the properties are sold or abandoned.

 

Cost includes cash consideration and the fair market value of shares issued on the acquisition of mineral properties. Properties acquired under option agreements, whereby payments are made at the sole discretion of the Company, are recorded in the accounts at such time as the payments are made.

 

The recoverable amounts for mineral properties is dependent upon the existence of economically recoverable reserves; the acquisition and maintenance of appropriate permits, licenses and rights; the ability of the Company to obtain financing to complete the exploration and development of the properties; and upon future profitable production or alternatively upon the Company's ability to recover its spent costs from the sale of its interests. The amounts recorded as mineral properties reflect actual costs incurred and are not intended to express present or future values.

 

The capitalized amounts may be written down if potential future cash flows, including potential sales proceeds, related to the property are estimated to be less than the carrying value of the property. Management of the Company reviews the carrying value of each mineral property interest quarterly, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Reductions in the carrying value of each property would be recorded to the extent the carrying value of the investment exceeds the estimated future net cash flows.

 

Exploration and Development Costs

Exploration costs are expensed as incurred. When it is determined that a mining deposit can be economically and legally extracted or produced based on established proven (measured) and probable (indicated) reserves, further exploration costs and development costs incurred after such determination will be capitalized. The establishment of proven and probable reserves is based on results of final feasibility studies which indicate whether a property is economically feasible. Upon commencement of commercial production, capitalized costs will be transferred to the appropriate asset category and amortized over their estimated useful lives. Capitalized costs, net of salvage values, relating to a deposit which is abandoned or considered uneconomic for the foreseeable future, will be written off.

 

Impairment of Mineral Rights

The Company reviews mineral rights for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the review indicates that the carrying amount of the asset may not be recoverable, the potential impairment is measured based on a projected discounted cash flow method using a discount rate that is considered to be commensurate with the risk inherent in the company's current business model. During the years ended May 31, 2012 and 2011, the Company recorded impairment to mineral rights of $-0- and $57,500, respectively.

 

Asset Retirement Obligations

The Company has adopted the provisions of SFAS No. 143 "Accounting for Asset Retirement Obligations," which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets. The adoption of this standard has had no effect on the Company's financial position or results of operations. As of May 31, 2012 any potential costs relating to the ultimate disposition of the Company's mineral property interests have not yet been determinable.

 

F-10
 

 

NATIONAL GRAPHITE CORP.

(FKA Lucky Boy Silver Corporation)

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2012 and 2011

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Stock-Based Compensation

The Company accounts for its stock-based compensation in accordance with ASC 718 “Stock Compensation.” The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.

 

Income Taxes

The Company has adopted the ASC 740 “Income Taxes” as of its inception. The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.

 

Basic and Diluted Net Loss Per Share

The Company computes net income (loss) per share in accordance with ASC 260 “Earnings per Share”. The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per share gives effect to all dilutive potential common shares outstanding during the period using the “as if converted” basis. As of May 31, 2012 and 2011, there were 356,154 common stock warrants outstanding, none of which were considered “in the money” at May 31, 2012.

 

Recent Accounting Pronouncements

The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position, or statements.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

The Company’s property and equipment consist of the following amounts as of May 31, 2012 and 2011:

 

   May 31, 2012   May 31, 2011 
Computer equipment  $2,428   $2,428 
Accumulated depreciation   (1,078)   (270)
Total  $1,350   $2,158 

 

Depreciation expense was $808 and $270, for the years ended May 31, 2012 and 2011, respectively.

 

NOTE 5 – MINERAL INTERESTS

 

On February 23, 2010 the Company entered into an agreement to purchase 38 unpatented BLM claims and two historic silver mine leases located in Mineral County, Nevada. As consideration for options on the mineral properties, the Company paid $55,000 in cash and issued 150,000 shares at $0.40 for $60,000 for a total purchase price of $115,000 of the Company’s common stock. During 2010 the Company had a preliminary geology study performed to assess the potential reserves of these newly acquired claims. Based on this report and managements future expectations of additional capital expenditures and future cash flows of the claims, management determined that the carrying value of the claims be fully impaired to a net book value of $-0-. This resulted in the Company recognizing a $-0- and $57,500 of impairment charges recorded in operating expenses during the years ended May 31, 2012 and 2011, respectively.

 

F-11
 

 

NATIONAL GRAPHITE CORP.

(FKA Lucky Boy Silver Corporation)

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2012 and 2011

 

NOTE 5 – MINERAL INTERESTS (CONTINUED)

 

During the year ended May 31, 2012 the Company incurred various costs of exploration and development on mining claims owned by the Company located in the Candelaria region of Nevada. The ongoing acquisition costs incurred with respect to these claims have been capitalized as mineral interests and total $48,490 as of May 31, 2012.

 

On April 20, 2012, the Company entered into an agreement to purchase mineral claims in Quebec, Canada. The purchase is not complete due to the fact that the Company is waiting for registration approval from the Quebec government. As consideration for the acquisition, the Company agreed to pay $50,000 in cash and issue 100,000 shares of common stock. The Company has paid $25,000 in cash, which is held in a deposit until the purchase is closed. As of May 31, 2012, the Company has not issued the agreed upon shares of common stock as it is awaiting registration approval of the mineral claims by the Quebec government to do so.

 

On April 24, 2012, the Company entered into an agreement to purchase mineral claims in Carson City, Nevada. As consideration for the purchase, the Company agreed to pay a total $425,000 in cash and to issue a total 2,500,000 shares of common stock. The Company has also agreed to a work commitment of no less than $1,000,000 in exploration and development costs over the next 48 months. As of May 31, 2012, the Company has paid $50,000 in cash and has issued 500,000 shares of common stock under the following payment structure:

 

a) Cash Consideration:

 

i)   USD $50,000 upon the signing of the Agreement (the “Effective Date” ),
ii)   an additional USD $25,000 on or before 6 months from the Effective Date ,
iii)   an additional USD $25,000 on or before 12 months from the Effective Date,
iv)   an additional USD $50,000 on or before 18 months from the Effective Date,
v)   an additional USD $75,000 on or before 24 Months from the Effective Date,
vi)   an additional USD $50,000 on or before 30 months from the Effective Date,
vii)   an additional USD $50,000 on or before 36 months from the Effective Date,
viii)   an additional USD $50,000 on or before 42 months from the Effective Date,
ix)  

an additional USD $50,000 on or before 48 months from the Effective Date

(for a total cash consideration of $425,000).

 

b) Stock Consideration:

 

i)   500,000 shares upon the signing of the Agreement (the “Effective Date“),
ii)   500,000 shares on or before 6 months from the Effective Date,
iii)   500,000 shares on or before 18 months from the Effective Date,
iv)   500,000 shares on or before 24 months from the Effective Date,
v)  

500,000 shares on or before 48 months from the Effective Date, (for a total

stock consideration of 2,500,000 common shares).

 

c) Work Commitment:

 

The Company has agreed to provide funds for the conduct of a program of work to be undertaken by the seller for the benefit of the property of not less than USD $1,000,000 over 4 years as follows:

 

 i)   $100,000 on or before 12 months from the Effective Date,
ii)   $300,000 on or before 24 months from the Effective Date,
iii)   $300,000 on or before 36 months from the Effective Date,
iv)   $300,000 on or before 48 months from the Effective Date.  

 

F-12
 

 

NATIONAL GRAPHITE CORP.

(FKA Lucky Boy Silver Corporation)

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2012 and 2011

 

NOTE 6 – STOCKHOLDERS’ EQUITY

 

The Company’s authorized capital consists of 1,000,000 preferred shares with 675,000 preferred shares issued and outstanding at a par value of $0.001 per preferred share. Common stock consists of 499,000,000 authorized shares of $0.001 par value common stock. As of May 31, 2012 and 2011 there were 75,153,214 and 74,153,214 shares issued and outstanding, respectively.

 

Effective April 6, 2010, the Company conducted a 15:1 forward stock split of its common stock. The split was approved by FINRA for taking effect on the OTC-BB at the open of business on March 31, 2010. The transfer agent effected the forward split on their records as of April 6, 2010. The Company’s statements of stockholders’ equity have been retroactively restated to reflect the split.

 

Common Stock Activity, Fiscal Year Ended May 31, 2012

 

The Company issued 500,000 shares of its common stock at $0.60 per share for $300,000 cash. The shares issued were valued at the cash price per share received. The Company also issued 500,000 shares of its common stock at $0.60 for acquisition of mineral interests in Carson City, NV. The shares issued were valued at the value of the most recent issuance of common stock for cash.

 

Common Stock Activity, Fiscal Year Ended May 31, 2011

 

On January 3, 2011 the Company exchanged 67,500,000 common shares for 675,000 preferred shares with 1 to 100 voting and conversion ratio preferred to common shares. On December 29, 2010, the Company issued 360,000 common shares for consulting services to be rendered from the date of issuance to March 31, 2011. On the same date the Company issued 300,000 common shares for services to be performed from the date of issuance for a twelve month period with automatic renewal for another twelve month period unless notice of termination is received by either party 30 days in advance. The consulting services have been recorded as a prepaid expense and are being amortized over the life of the contracts. On December 15, 2010, the Company issued 47,060 common shares for $40,000 cash.

 

On October 25, 2010 the Company issued 356,154 units consisting of one share of common stock and one warrant for cash at $0.63 per share. The attached warrants are exercisable for two years from issuance and have an exercise price of $0.85 per share for one year from issuance which increased to $1.05 in the second year. The Company used the Black-Scholes option pricing model to value the warrants based on the terms of the warrant, a volatility of 350 percent, risk free rate of 0.37 percent, and a stock price and issuance of $0.65. Based on this calculation, the Company determined that the relative fair value of the warrants is $136,699 and allocated this amount of the additional paid-in capital to the warrants.

 

NOTE 7 – STOCK OPTIONS AND WARRANTS

 

The Company utilizes the Black-Scholes option-pricing model for calculating the fair value of the options granted as defined by ASC Topic 718, which is an acceptable valuation approach under ASC 718. This model requires the input of subjective assumptions, including the expected price volatility of the underlying stock.

 

Projected data related to the expected volatility and expected life of stock options is based upon historical and other information, and notably, the Company's common stock has limited trading history. Changes in these subjective assumptions can materially affect the fair value of the estimate, and therefore, the existing valuation models do not provide a precise measure of the fair value of the Company's employee stock options.

 

F-13
 

 

NATIONAL GRAPHITE CORP.

(FKA Lucky Boy Silver Corporation)

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2012 and 2011

 

NOTE 7 – STOCK OPTIONS AND WARRANTS (CONTINUED)

 

On October 25, 2010 the Company issued 356,154 units consisting of one share of common stock and one warrant for cash at $0.63 per share. The attached warrants are exercisable for two years from issuance and have an exercise price of $0.85 per share for one year from issuance which increased to $1.05 in the second year. The Company used the Black-Scholes option pricing model to value the warrants based on the terms of the warrant, a volatility of 350 percent, risk free rate of 0.37 percent, and a stock price and issuance of $0.63. Based on this calculation, the Company determined that the relative fair value of the warrants is $136,699 and allocated this amount of the additional paid-in capital to the warrants.

 

A summary of all warrants outstanding and exercisable as of May 31, 2012 and changes during the year then ended is set forth below:

 

Options  Shares   Weighted
Average
Exercise
Price
   Weighted
Average
Remaining
Contractual
Life (Years)
   Aggregate
Intrinsic
Value
 
Outstanding at the beginning of period   356,154   $0.38    1.41   $136,699 
Granted   -    -    -    - 
Expired   -    -    -    - 
Exercised   -    -    -    - 
Forfeited   -    -    -    - 
Outstanding at the end of Period   356,154    0.38    0.40    136,699 
Exercisable at the end of Period   356,154   $0.38    0.40   $136,699 

 

A summary of all employee options outstanding and exercisable under the plan as of May 31, 2011 and changes during the year then ended is set forth below:

 

Options  Shares   Weighted
Average
Exercise
Price
   Weighted
Average
Remaining
Contractual
Life (Years)
   Aggregate
Intrinsic
Value
 
Outstanding at the beginning of period   -   $-    -   $- 
Granted   356,154    0.38    1.41    136,699 
Expired   -    -    -    - 
Forfeited   -    -    -    - 
Outstanding at the end of Period   356,154    0.38    1.41    136,699 
Exercisable at the end of Period   356,154   $0.38    1.41   $136,699 

 

NOTE 8 – INCOME TAXES

 

The Company follows ASC 740, under which deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry-forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has been recognized, as it is not deemed likely to be realized.

 

F-14
 

 

NATIONAL GRAPHITE CORP.

(FKA Lucky Boy Silver Corporation)

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2012 and 2011

 

NOTE 8 – INCOME TAXES (CONTINUED)

 

The cumulative tax effect at the expected rate of 34 percent of significant items comprising our net deferred tax amount is as follows:

 

    May 31, 2012   May 31, 2011 
Income tax benefit attributable to:          
Net operating loss  $25,686   $64,248)
Change in valuation allowance   (25,686)   (64,248)
Net refundable amount  $-   $- 

 

The cumulative tax effect at the expected rate of 34 percent of significant items comprising our net deferred tax amount is as follows:

 

   May 31, 2012   May 31, 2011 
Deferred tax asset attributable to:          
Net operating loss carryover  $79,568   $53,882)
Valuation allowance   (79,568)   (53,882)
Net deferred tax asset  $-   $- 

 

NOTE 9 – SUBSEQUENT EVENTS

 

On July 18, 2012, the Company issued 416,667 shares of common stock at $0.60 per share for cash proceeds of $250,000. On July 27, 2012, the Company paid the remaining $25,000 and on July 23, 2012 the Company issued the remaining 100,000 shares of common stock required for the transfer of mineral claims located in Quebec, Canada which were acquired during the fiscal year ended May 31, 2012.

 

In accordance with ASC 855 Company management reviewed all material events through filing of these financial statements and there are no material subsequent events to report.

 

F-15
 

 

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

 

On April 15, 2010 our Board of Directors approved of the engagement of Sadler Gibb & Associates LLC, PO Box 411, Farmington UT, 84025, as its independent auditor. None of the reports of Sadler Gibb & Associates LLC on the Company’s financial statements for either of the two most recent fiscal years, contain an adverse opinion or disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles, except that the Registrant’s audited financial statements contained in its Form 10-K for the fiscal year ended May 31, 2011, a going concern qualification in the registrant’s audited financial statements. There were no disagreements related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the past two fiscal years and interim periods.

 

Item 9A(T). Controls and Procedures.

 

As of May 31, 2012, under the direction of the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a — 15(e) under the Securities Exchange Act of 1934, as amended.  Based on the evaluation of these controls and procedures required by paragraph (b) of Sec. 240.13a-15 or 240.15d-15 the disclosure controls and procedures have been found to be ineffective.

 

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in our reports filed under the securities Exchange Act, is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms.  Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Evaluation of Internal Control Over Financial Reporting

 

Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of May 31, 2012.  In making this assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. In management’s assessment of the effectiveness of internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) as required by Exchange Act Rule 13a-15(c), our management concluded as of the end of the fiscal year covered by this Annual Report on Form 10-K that our internal control over financial reporting has not been effective.

 

As defined by Auditing Standard No. 5, “An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements and Related Independence Rule and Conforming Amendments,” established by the Public Company Accounting Oversight Board (“PCAOB”), a material weakness is a deficiency or combination of deficiencies that results more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management identified the following control deficiencies that represent material weaknesses as of May 31, 2012:

 

i)Lack of segregation of duties.  At this time, our resources and size prevent us from being able to employ sufficient resources to enable us to have adequate segregation of duties within our internal control system.  Management will periodically reevaluate this situation.

 

ii)Lack of an independent audit committee. Although we have an audit committee it is not comprised solely of independent directors. We may establish an audit committee comprised solely of independent directors when we have sufficient capital resources and working capital to attract qualified independent directors and to maintain such a committee.

 

iii)Insufficient number of independent directors. At the present time, our Board of Directors does not consist of a majority of independent directors, a factor that is counter to corporate governance practices as set forth by the rules of various stock exchanges.

 

39
 

 

Our management determined that these deficiencies constituted material weaknesses.  Due to a lack of financial resources, we are not able to, and do not intend to, immediately take any action to remediate these material weaknesses. We will not be able to do so until we acquire sufficient financing to do so.  We will implement further controls as circumstances, cash flow, and working capital permit.  Notwithstanding the assessment that our ICFR was not effective and that there were material weaknesses as identified in this report, we believe that our financial statements fairly present our financial position, results of operations and cash flows for the years covered thereby in all material respects.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal controls over financial reporting that occurred during the period covered by this report, that has materially affected, or is reasonable likely to materially affect, our internal controls over financial reporting.

 

The Company has not taken any steps at this time to address these weaknesses but will formulate a plan before fiscal year ending May 31, 2013.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter ended May 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information.

 

At a shareholders meeting held in December 2009, the stockholders approved the election of director, Kenneth B. Liebscher, to serve until the next Annual General Meeting of Shareholders or until his respective successor is elected or appointed;

 

At a shareholders meeting held in January 2010, the stockholders approved the name change of the corporation from Sierra Ventures Inc to Lucky Boy Silver Corp. and the forward split of our company stock of 15:1. On May 9, 2012 the stockholders approved the name change of our Company to National Graphite Corp.

 

Change of Jurisdiction

 

On March 22, 2011, the corporation converted from a Wyoming corporation to a Nevada corporation pursuant to Wyoming Statutes Title 17, ch. 16, Sect.(s) 820, 821 and 1114  and Nevada Revised Statutes 92A.205. This conversion did not alter the number of authorized shares, or the number of issued and outstanding shares, of the corporation. The voting and other rights of the common and preferred shares of the company’s capital stock remain substantially similar under Nevada law. The powers of the company’s officers, directors and shareholders also remain substantially the same. Our authorized capital stock continues to consist of 499,000,000 shares of common stock, par value $0.001 per share and 1,000,000 shares of preferred stock, par value $0.001per share.

 

Name Change

 

On February 5, 2010 we filed an Amendment to Articles with the Wyoming Secretary of State and changed our name from “Sierra Ventures Inc.” to “Lucky Boy Silver Corp.” On May 9, 2012 we changed the name of our Company to National Graphite Corp. Our shares of common stock are quoted on the OTC Bulletin Board under the symbol “NGRC”.  Our CUSIP number is 631268 104. The quotation was first posted at the opening on May 29, 2009 with an opening bid of $0.05 ($0.0033 post-split) and offer at $0.10 ($0.0067 post-split).

 

Letter Agreement

 

On February 8, 2010, Ken Liebscher, our President, Chief Executive Officer, signed a letter agreement with Monte Cristo Projects LLC and Alan Chambers, whereby Mr. Liebscher has agreed to acquire 38 unpatented BLM claims including those known as Silver Summit and Silver Strike and two historic silver mine leases known as Lucky Boy Silver Mine and the Black Butte Silver Mine (“AG Properties”), all located in Mineral County, State of Nevada.

 

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In consideration for the claims, Mr. Liebscher has agreed to pay US$55,000 to Monte Cristo Projects LLC and issue 75,000 shares of common stock of our company to Monte Cristo Projects LLC and 75,000 shares of common stock of our company to Alan Chambers.

  

On February 23, 2010, Mr. Liebscher assigned all of his right, title and interest in and to the letter agreement and the AG Properties to our company in consideration for $1.00.  Our company will carry out the obligations and take the benefit of the letter agreement.

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

The following individuals serve as the directors and executive officers of our company as of the date of this annual report. All directors of our company hold office until the next annual meeting of our shareholders or until their successors have been elected and qualified. The executive officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office.

 

    Position Held with Our       Date First Elected
Name   Company   Age   or Appointed
Kenneth B. Liebscher    Chief Executive Officer
President/Director 
  69   December 15, 2009
Fortunato Villamagna    Chief Financial Officer
Director 
  53   January 5, 2010

 

  

None of the directors or officers has professional or technical accreditation in the exploration, development or operations of mining or mining related projects. During the past year, our president, Mr. Liebscher, spent approximately 50% of his time (approximately 20 hours per week) on the affairs of National Graphite. For the coming year, it is anticipated that time commitment and requirement will remain approximately the same.

Business Experience

 

The following is a brief account of the education and business experience during at least the past five years of each director and executive officer of our company, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.

 

Kenneth B. Liebscher, Chief Executive Officer, President, Director

 

Ken Liebscher was appointed as our President, Chief Executive Officer and a director of our company on December 14, 2009. Mr. Liebscher was our Chief Financial Officer and Secretary from December 14, 2009 to January 5, 2010.

 

Mr. Liebscher is a seasoned international businessman with over 35 years of securities and executive management experience. Mr. Liebscher is a graduate of St. George’s School, Vancouver, British Columbia and also attended the University of British Columbia.

 

Mr. Liebscher held executive level positions while at the world’s largest dental products manufacturer, Dentsply International Inc., where he spent over 22 years in positions culminating as the Manager of their West Coast Division, headquartered in San Francisco, California. Mr. Liebscher was recruited by a major Europe-based competitor, Ivoclar Liechtenstein in 1990 to lead their entry into the North American market and, from 1990 to 1992, became Executive Vice President of Sales and Marketing and helped expand this company’s sales to $300M US.

 

Mr. Liebscher became a director of a publicly held company called E.T.C. Industries Ltd. in 1992 and became President of its wholly owned subsidiary, THE ELECTRIC CAR COMPANY and, in 1994, led a team that developed the MI-6 prototype electric car from the ground up.

 

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Mr. Liebscher served as a director on Belmont Resources Inc (TSX BEA), a mining exploration company from 1992 until November 2009. He served as an officer and director of Highbank Resources Inc (TSX HBK) from 1992 through 2002. This experience has resulted in his involvement in mineral exploration projects in Peru, Eastern Europe (Slovak Republic), and British Columbia, Ontario, Quebec and New Brunswick (Canada).

 

Mr. Liebscher currently also serves on the Board of Directors of Tiger Oil & Energy, Inc. (TGRO.OTC BB).

 

We believe Mr. Liebscher is qualified to serve on our board of directors because of his knowledge of our company’s history and current operations in addition to his education and business experiences as described above.

 

Dr. Fortunato Villamagna, Chief Financial Officer, Director

 

Dr. Fortunato Villamagna was appointed as our Chief Financial Officer, Secretary and a director of our company on January 5, 2010.

 

Dr. Villamagna has over 25 years of domestic and international experience in the mining services, specialty and bulk chemicals, capital equipment, bioenergy, aerospace and energetic materials businesses used in the mining industry. Dr. Villamagna holds a PhD in Chemistry and MBA in Global Management, and has worked throughout North America, Europe, Australia and West Africa. In addition to joining National Graphite, Dr. Villamagna also served as CEO of UTEC Inc. Prior to the role Dr. Villamagna served as President of BioEnergy Systems, a technology company serving the biofuels industry. Prior to that Dr. Villamagna was Vice President – Business Development for American Pacific Corporation (AMPAC), a publically listed company with divisions and subsidiaries that manufacture active pharmaceutical ingredients and registered intermediates, energetic products used primarily in space flight, aerospace and defense systems, clean fire- extinguishing agents and water treatment equipment. Prior to that Dr. Villamagna was the Vice President Technology, Americas and Europe for Orica Inc., an Australian-owned, publicly-listed global company, and global leader in mining products and services. Prior to that Dr. Villamagna was the Director of Bulk Delivered Products for Energetic Solutions, Inc., a part of UK Based ICI Explosive.

 

Dr. Villamagna currently also serves on the Board of Directors of Northumberland Resources Inc. (NHUR.OTC BB).

 

We believe Dr. Villamagna is qualified to serve on our board of directors because of his knowledge of our company’s history and current operations in addition to his education and business experiences as described above.

 

Family Relationships

 

There are no family relationships between any of our directors or executive officers.

 

Involvement in Certain Legal Proceedings

 

During the past ten years, none of our executive officers or directors have had any of the following events occur:

 

a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
   
conviction in a criminal proceeding or being subject to a pending criminal proceeding, excluding traffic violations and other minor offenses;
   
being subject to any order, judgment or decree, not substantially reversed, suspended or vacated, of any court of competent jurisdiction, permanently enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking business;
   
being found by a court of competent jurisdiction, in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated;
   
Being 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
   
being 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 Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

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Compliance with Section 16(a) of the Securities Exchange Act of 1934

 

Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of our common stock to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file.

 

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 fiscal year ended May 31, 2012, all filing requirements applicable to our officers, directors and greater than 10% percent beneficial owners were complied with, with the exception of the following:

 

Name   Number of Late Reports   Number of Transactions Not Reported on a Timely Basis   Failure to File
Requested Forms
Kenneth B. Liebscher   1   3   2
Fortunato Villamagna   None   1   1
Ian Jackson   None   1   1

 

Code of Ethics

 

Our board of directors on March 22, 2007, adopted a formal written Code of Business Conduct and Ethics and Compliance Program for all officers, directors and senior employees. Our Code of Business Conduct and Ethics and Compliance Program was filed as an exhibit to our Form SB-2 filed with the SEC on October 12, 2007.

 

Audit Committee and Audit Committee Financial Expert

 

Our board of directors has determined that we do not have an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K under the Exchange Act.

 

We believe that the members of our board of directors are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any material revenues to date. In addition, we currently do not have an audit committee or committee performing similar functions nor do we have a written audit committee charter. Our board of directors does not believe that it is necessary to have such committees because it believes the functions of such committee can be adequately performed by our board of directors.

 

Nominating and Compensation Committees

 

We do not have nominating or compensation committees, or committees performing similar functions. Our board of directors believe that it is not necessary to have a compensation committee at this time because the functions of such committee are adequately performed by our board of directors. Our board of directors has not adopted a charter for the compensation committee.

 

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Our board of directors also is of the view that it is appropriate for us not to have a nominating committee because our board of directors has performed and will perform adequately the functions of a nominating committee. Our board of directors has not adopted a charter for the nomination committee. There has not been any defined policy or procedure requirements for shareholders to submit recommendations or nomination for directors. Our board of directors does not believe that a defined policy with regard to the consideration of candidates recommended by shareholders is necessary at this time because we believe that, given the early stages of our development, a specific nominating policy would be premature and of little assistance until our business operations are at a more advanced level. There are no specific, minimum qualifications that our board of directors believes must be met by a candidate recommended by our board of directors. The process of identifying and evaluating nominees for director typically begins with our board of directors soliciting professional firms with whom we have an existing business relationship, such as law firms, accounting firms or financial advisory firms, for suitable candidates to serve as directors. It is followed by our board of directors’ review of the candidates’ resumes and interview of candidates. Based on the information gathered, our board of directors then makes a decision on whether to recommend the candidates as nominees for director. We do not pay any fee to any third party or parties to identify or evaluate or assist in identifying or evaluating potential nominee.

 

Item 11. Executive Compensation.

 

General

 

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 May 31, 2012, and 2011; 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 May 31, 2012, and 2011,
   

whom 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.

 

SUMMARY COMPENSATION TABLE  

Name

and Principal Position

  Year  

Salary

($)

 

Bonus

($)

 

Stock

Awards

($)

 

Option

Awards

($)

 

Non-Equity

Incentive Plan

Compensation

($)

 

Nonqualified

Deferred

Compensation

Earnings

($)

 

All

Other Compensation

($)

 

Total

($)

 
Ken Liebscher(1)   2012   Nil   Nil   Nil   Nil   Nil   Nil   Nil   Nil  
President, Chief Executive Officer, and Director   2011   Nil   Nil   Nil   Nil   Nil   Nil   Nil   Nil  
                                       
Fortunato Villamagna(2)   2011   Nil   Nil   Nil   Nil   Nil   Nil   Nil   Nil  
Chief Financial Officer, Secretary and Director   2010   Nil   Nil   Nil   Nil   Nil   Nil   Nil   Nil  

 

Notes:

 

(1)Mr. Liebscher was appointed as our President, Chief Executive Officer and a director of our company on December 14, 2009. Mr. Liebscher was our Chief Financial Officer and Secretary from December 14, 2009 to January 5, 2011.
(2)Dr. Villamagna was appointed as our Chief Financial Officer, Secretary and a Director on January 5, 2010.

 

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Options Grants During the Last Fiscal Year / Stock Option Plans

 

We do not currently have a stock option plan in favor of any director, officer, consultant or employee of our company. No individual grants of stock options, whether or not in tandem with stock appreciation rights known as SARs or freestanding SARs have been made to any executive officer or director since our inception; accordingly, no stock options have been granted or exercised by any of the officers or directors since we were founded.

 

Aggregated Options Exercises in Last Fiscal Year

 

No individual grants of stock options, whether or not in tandem with stock appreciation rights known as SARs or freestanding SARs have been made to any executive officer or any director since our inception; accordingly, no stock options have been granted or exercised by any of the officers or directors since we were founded.

 

Long-Tem Incentive Plans and Awards

 

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance. No individual grants or agreements regarding future payouts under non-stock price-based plans have been made to any executive officer or any director or any employee or consultant since our inception; accordingly, no future payouts under non-stock price-based plans or agreements have been granted or entered into or exercised by any of the officers or directors or employees or consultants since we were founded.

 

Compensation of Directors

 

On January 24, 2010, we issued 150,000 post-split (10,000 pre-split) shares of our common stock to Ken Liebscher and 30,000 post-split (2,000 pre-split) shares of our common stock to Fortunato Villamgna as director compensation.

 

Except as disclosed above, the members of the Board of Directors are not compensated by National Graphite for acting as such. Directors are reimbursed for reasonable out-of-pocket expenses incurred. There are no arrangements pursuant to which directors are or will be compensated in the future for any services provided as a director.

 

We do not have any agreements for compensating our directors for their services in their capacity as directors, although such directors are expected in the future to receive stock options to purchase shares of our common stock as awarded by our board of directors.

 

Employment Contracts, Termination of Employment, Change-in-Control Arrangements

 

There are no employment contracts or other contracts or arrangements with our officers or directors other than those disclosed in this report. There are no compensation plans or arrangements, including payments to be made by National Graphite, with respect to the officers, directors, employees or consultants of National Graphite that would result from the resignation, retirement or any other termination of such directors, officers, employees or consultants. There are no arrangements for directors, officers or employees that would result from a change-in-control.

 

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.

 

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

Security Ownership of Certain Beneficial Owners and Management

 

The following table sets forth, as of the date of this report, the total number of shares owned beneficially by each of our directors, named executive officers and current executive officers, individually and our directors and current executive officers as a group, and the present owners of 5% or more of our total outstanding shares. The shareholder listed below has direct ownership of his shares and possesses sole voting and dispositive power with respect to the shares.

 

Title of Class   Name and Address of Beneficial Owner   Amount and Nature of Beneficial Ownership (1)   Percentage of Class (2)
Common  

Kenneth B. Liebscher

5466 Canvasback Rd,

Blaine, WA 98230

 

22,650,000(5)

560,000(3)

Direct

Indirect

  31.30%
Preferred  

Kenneth B. Liebscher

5466 Canvasback Rd,

Blaine, WA 98230

  675,000 Direct   100%
Common  

Fortunato Villamagna

10805 Bernini Dr.,

Las Vegas, NV 89141

  30,000(6) Direct   *
Common  

Ian Jackson

1685 H Street, No. 155

Blaine, WA 98230

  Nil Direct   *
Common  

Directors and Executive Officers as a Group

(2 persons)(4)

  23,240,000 Direct   31.34%

 

Notes:

 

*Less than 1%.

 

(1)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 the date of this report as of which there were 75,669,881 shares of our common stock issued and outstanding.
   
(2)Based on 75,669,881 number of shares of common stock issued and outstanding as of the date of this report.
   
(3)These shares are held of record by Wannigan Consulting Corp., a private company of which Mr Liebscher is also President and CEO.
   
(4)Does not include Ian Jackson who resigned as our President, Chief Executive Officer, Chief Financial Officer and Secretary on December 14, 2009 and as a director of our company on January 5, 2010.
   
(5)Includes 10,000 pre-split (150,000 post-split) shares issued to Mr. Liebscher for compensation.
   
(6)Consists of 2,000 pre-split (30,000 post-split) shares issued to Mr. Villamagna for compensation.

 

46
 

 

Changes in Control

 

We do not anticipate at this time any changes in control of National Graphite. There are no arrangements either in place or contemplated which may result in a change of control of National Graphite. There are no provisions within our Articles or Bylaws that would delay or prevent a change of control.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

Transactions with Related Persons

 

Except as disclosed herein, there has been no transaction, since June 1, 2008, or currently proposed transaction, in which we were or are to be a participant and 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 two completed fiscal years, and in which any of the following persons had or will have a direct or indirect material interest.

 

any director or executive officer of our company;

 

any beneficial owner of shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; and

 

any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons.

 

Director Independence

 

Our board of directors consists of Kenneth B. Liebscher and Dr. Fortunato Villamagna. Our securities are quoted on the OTC Bulletin Board which does not have any director independence requirements. According to the definition of “independent director” used in NASDAQ rule 5605(a)(2), Mr. Liebscher and Dr. Villamagna are not independent directors as Mr. Liebscher is our President and Chief Executive Officer and Dr. Villamagna is our Chief Financial Officer and Secretary.

 

Item 14. Principal Accounting Fees and Services.

 

The aggregate fees billed for the most recently completed fiscal year ended May 31, 2012, and for fiscal year ended May 31, 2011, for professional services rendered by the principal accountants 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 accountants in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows: Sadler, Gibb & Associates LLC.

 

   Year Ended 
   May 31, 
   2012   2011 
Audit Fees  $9,500   $9,500 
Audit Related Fees   -    - 
Tax Fees   -    - 
All Other Fees   -    - 
Total  $5,500   $9,500 

  

Policy on Pre-Approval by Audit Committee of Services Performed by Independent Registered Public Accounting Firm

 

Our board of directors, which acts as our audit committee, pre-approves all services provided by our independent registered public accounting firms. All of the above services and fees were reviewed and approved by our board of directors before the respective services were rendered.

 

Our board of directors has considered the nature and amount of fees billed by our independent registered public accounting firms and believes that the provision of services for activities unrelated to the audit is compatible with maintaining their independence.

 

47
 

  

PART IV

 

Item 15. Exhibits, Financial Statement Schedules.

 

Exhibit Number   Description
(3)   Articles of Incorporation and By-laws
     
3.1   Articles of Incorporation (incorporated by reference to an exhibit to our registration statement on Form SB-2 filed on October 12, 2007).
     
3.2   Bylaws (incorporated by reference to an exhibit to our registration statement on Form SB-2 filed on October 12, 2007).
     
3.3   Amendment to Articles filed with the WY Secretary of State on February 5, 2010 (incorporated by reference to an exhibit to our current report on Form 8-K/A filed on April 2, 2010).
     
3.4   Certificate of Name Change filed with the WY Secretary of State on February 5, 2010 (incorporated by reference to an exhibit to our current report on Form 8-K/A filed on April 2, 2010).
     
99.1   Certificate of Change of domicile with the Nevada Secretary of State March 22, 2011 (filed herewith).

  

(10)   Material Contracts
     
10.1   Option To Purchase And Royalty Agreement between National Graphite Silver Corp. (formerly Sierra Ventures, Inc.) and Jiujiang Gao Feng Mining Industry Limited Company (incorporated by reference to an exhibit to our registration statement on Form SB-2 filed on October 12, 2007).
     
10.2   First Amendment to Option to Purchase and Royalty Agreement between National Graphite Silver Corp. (formerly Sierra Ventures, Inc.) and Jiujiang Gao Feng Mining Industry Limited Company dated May 15, 2009 (incorporated by reference to an exhibit to our annual report on Form 10-K filed on September 8, 2009).
     
10.3   Escrow Agreement dated November 25, 2008 between Ian Jackson, Lucky Boy Silver Corp. (formerly Sierra Ventures, Inc.) and Harcourt Chan (incorporated by reference to an exhibit to our registration statement on Form S-1/A filed on January 14, 2009).
     
10.4   First Amendment to Option to Purchase and Royalty Agreement between Lucky Boy Silver Corp. (formerly Sierra Ventures, Inc.) and Jiujiang Gao Feng Mining Industry Limited Company dated May 15, 2009 (incorporated by reference to an exhibit to our annual report on Form 10-K filed on September 8, 2009).
     
10.5   Form of Private Placement Subscription Agreement (incorporated by reference to an exhibit to our current report on Form 8-K filed on December 31, 2009).
     
10.6   Letter Agreement dated February 8, 2010 between Ken Liebscher, Monte Cristo Projects LLC and Alan Chambers (incorporated by reference to an exhibit to our current report on Form 8-K filed on March 1, 2010).
     
10.7   Assignment Agreement dated February 23, 2010 with Ken Liebscher (incorporated by reference to an exhibit to our current report on Form 8-K filed on March 1, 2010).
     
10.8   Purchase Agreement dated 4/20/12 with Habitants Minerals Ltd. (incorporated by reference to an exhibit to our current report on Form 8-K filed on April 23, 2012).
     
10.9   Purchase Agreement dated 4/20/12 with GeoXplor Corp. (incorporated by reference to an exhibit to our current report on Form 8-K filed on May 2, 2012).
     
(14)   Code of Ethics
     
14.1   Code of Business Conduct and Ethics & Compliance Program (incorporated by reference to an exhibit to our registration statement on Form SB-2 filed on October 12, 2007).
     
(31)   Section 302 Certifications
     
31.1*   Section 302 Certification of Kenneth B. Liebscher
     
31.2*   Section 302 Certification of Fortunato Villamagna
     
(32)   Section 906 Certifications
     
32.1*   Section 906 Certification of Kenneth B. Liebscher
     
32.2*   Section 906 Certification of Fortunato Villamagna

 

* Filed herewith

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

NATIONAL GRAPHITE CORP.

 

/s/ Kenneth B. Liebscher  
By: Kenneth B. Liebscher  
President, Chief Executive Officer and Director  
(Principal Executive Officer)  
Date: August 29, 2012  

 

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.

 

/s/ Kenneth B. Liebscher  
By: Kenneth B. Liebscher  
President, Chief Executive Officer and Director  
(Principal Executive Officer)  
Date: August 29, 2012  
   
/s/ Fortunato Villamagna  
By: Fortunato Villamagna  
Chief Financial Officer, Secretary and Director  
(Principal Financial Officer and Principal Accounting Officer)  
Date: August 29, 2012  

 

49
 

 

XOTC:NGRC Annual Report 10-K Filling

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