|• ANNUAL REPORT • CERTIFICATION • CERTIFICATION • EX-101.INS • EX-101.SCH • EX-101.CAL • EX-101.DEF • EX-101.LAB • EX-101.PRE|
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2012
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from May 1, 2011 to April 30, 2012
Commission File Number: 333-135980
NILAM RESOURCES INC.
(Exact name of registrant as specified in its charter)
1480 Benevides Street, Sixth Floor "B"
Miraflores, Lima 18, Peru
Issuers telephone number, including area code 1-604-639-6250
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ]
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.[x]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [x]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) No [x]
Aggregate market value of the voting stock of the registrant held by non-affiliates of the registrant at July 23, 2012 (computed by reference to the latest price at which the common equity was sold $0.07: $3,924,364.15.
Number of common shares outstanding at 56,062,345 as of June 26, 2012.
Item 1. Description of Business
Nilam Resources, Inc. is an exploration stage mining company that is engaged in the acquisition and exploration of mineral properties with the objective of exploiting any mineral deposits the company discovers. The Company owns properties in Peru. The Company has formed a wholly owned Peruvian subsidiary to hold title to these claims and any other claims which the company may acquire in the future. There is no assurance that a commercially viable mineral deposits exist on any of the properties.
Mineral property exploration is typically conducted in phases. Each subsequent phase of exploration work is recommended by a geologist based on the results from the most recent phase of exploration. Although the Company has some geological information on the Llipa properties, the Company has not yet commenced systematic exploration on those claims. Once an exploration phase is completed, the Company will decide as to whether or not we proceed with each successive phase based upon the analysis of the results of that program. Our directors will make this decision based upon the recommendations of the geologists who oversee the exploration programs and records the results.
Our plan of operation is to conduct exploration work on the Peruvian claims in order to ascertain whether they host economic quantities of copper, gold, or other metals. There can be no assurance that an economic mineral deposit exists on the Peruvian properties until appropriate exploration work has been completed.
Even if the company completes its proposed exploration programs on the Peruvian properties, and the company is successful in identifying a mineral deposit, the Company will have to spend substantial funds on further drilling and engineering studies before the company will know if the deposit is commercially viable.
The Company is actively seeking additional mineral properties, and it is continually evaluating other opportunities in South and Central America. The Company can make no assurances that it will be able to successfully locate any properties for acquisition. In addition, the company cannot make any assurance that it will be able to locate a property, that it will be able to fund its acquisition.
Research and Development Expenditures
The Company has not incurred any research or development expenditures since our incorporation other than those incurred during in our development program on the Lucky Strike claim.
On or about November 23, 2007 the Company established, Nilam Resources Peru SA, a wholly owned subsidiary. The purpose of the new subsidiary is to hold the Companys Peruvian properties and to carry on such business in Peru as is necessary to maintain, explore and develop the Companys properties. Nilam Resources Peru SA, holds the Companys material asset consisting of its rights in respect of the Llipa properties.
Patents and Trademarks
The Company does not own, either legally or beneficially, any patents or trademarks.
Reports to Security Holders
Although the company is not required to deliver a copy of our annual report to our security holders, we will voluntarily send a copy of our annual report, including audited financial statements, to any registered shareholder who requests it. The Company undertook to file reports with the U.S. Securities and Exchange Commission when our registration statement on Form SB-2 was declared effective.
Item 1A. Risk Factors
Inherent Risks in Our Business and the Mining Industry
The search for valuable minerals as a business involves substantial risks. The likelihood of our success and success in the mining industry must be considered in light of the substantial risks, problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that the Company plans to undertake. These potential problems include, but are not limited to, the inherent speculative nature of exploration of mining properties, numerous hazards including pollution, cave-ins and other hazards against which the company cannot, or may elect not to, insure, burdensome government regulations and other legal uncertainties, market fluctuations relating to the minerals and metals which we seek to exploit, other unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.
Compliance with Government Regulation
The Company will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in Peru.
The Company will have to sustain the cost of reclamation and environmental mediation for all exploration and development work undertaken. The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the currently planned work programs. Because there is presently no information on the size, tenor, or quality of any resource or reserves at this time, it is impossible to assess the impact of any capital expenditures on earnings or our competitive position in the event a potentially economic deposit is discovered.
If the Company enters into production, the cost of complying with permit and regulatory environment laws will be greater than in the exploration phases because the impact on the project area is greater. Permits and regulations will be required.
Water discharge will have to meet water standards;
Dust generation may have to be minimal or otherwise re-mediated;
Dumping of material on the surface may have to be re-contoured and re-vegetated;
An assessment of all material to be left on the surface will need to be environmentally benign;
Ground water will have to be monitored for any potential contaminants;
The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be re-mediated; and
There will likely have to be an impact report of the work on the local fauna and flora.
Item 1B. Unresolved Staff Comments
The Company does not have any unresolved staff comments.
Item 2. Description of Properties
Mining Claims - Description, Location, Access and Mineralization
Llipa Claim - Peru
On November 28, 2007, the Company acquired the Llipa mineral concessions at a cost of $100,000 from MRC1 Explorations, ERIL. The title to the Llipa claim was transferred to the Companys wholly owned subsidiary, Nilam Resources Peru, SA.
The cash paid to the seller, MRC1 Explorations, EIRL, was raised by the sale of restricted equity securities to unrelated parties in reliance upon Regulation S under the Securities Act of 1933, as amended. MRC1 Explorations, EIRL, the seller of the Llipa property, is not a related party.
The Llipa Project is located in the Llipa District, Ocros Province, Ancash Department approximately 380 kilometers northeast of Lima, Peru by paved and gravel roads. The property is located within the following coordinates, UTM;
E 254,000, N 8853,000
E 257,000, N 8855,000
The property has access to water for both human consumption and mining operations. Further, the nearby Quebrada Shinbacoca waters could provide a source for hydroelectric power generation. Llipa Project property has been in production from 1988 to 1992 by Compania Minera Millotingo which have produced approximately 1 million tons of copper ore with gold as by product. Production was abandoned for social reasons.History of Llipa Claim.
The Llipa property was previously owned by the Milliotingo Mining Company, a Peruvian corporation, which was controlled by the Sacarias family. The mine was operated from approximately 1988 to 1992. The Llipa mine, like most others in that region, was closed in 1992 due to a combination of market forces and social reasons. During the early 1990s, the Túpac Amaru Revolutionary Movement, a left-wing anti-government guerrilla rebel group, (herein terrorists) were over running the country of Peru. This civil unrest was occurring at the same time that international prices for precious metals were rapidly declining. It was common practice in the Ancash mining region for the terrorists to cut the power lines, invade the mining camps and steal the explosives for their rebellion. In some cases, those that resisted the invasion were killed. In the Gran Britanica Mine, located in the same region as the Llipa property, the terrorists executed the senior management of that mining company when they attempted to stop them.
During this time of social unrest, the labor unions in the area became increasingly difficult to negotiate with because the unions were demanding higher wages, dramatically increased security and the implementation of expensive safety procedures. Ultimately, the Sacarias family was forced to close the Llipa mine due to the increased costs of Union demands, falling metal prices, safety concerns and to avoid the risk of terrorist invasion.
Claim details are as follows:
The terrorist activity in the country ended rather in 1997 after the internationally publicized incident where the terrorists held 72 people hostage in the Japanese Embassy in Lima, Peru for 126 days. Ultimately, military commandos stormed the embassy and ended the standoff. Most of the rebel forces were killed or imprisoned after that event.
Today, the international community considers Peru a stable country with a robust economy. According to a Wall Street Article, Leftist Win in Peru Revives Market Debate, from 2005 to 2010, Perus per capita gross rose 82%, to about $5,200. The country had also reduced its poverty rate by one-half from 60% to 30% over the past decade. Moffet, Matt, Wall Street Journal, Leftist Win in Peru Revives Market Debate, June 7, 2011.
Additionally, the United States Congress ratified the US-Peru Trade Promotion Agreement in December of 2007. The Companys management believes that Perus unique history, combined with the surging prices for gold, silver and copper creates a unique business opportunity for the Company and investors.
Pativilca Claim - Peru
On January 13, 2008 the Companys wholly owned subsidiary, Nilam Resources Peru SA, entered into a letter of intent with MC1 Exploration EIRL to purchase the Pativilca property. Under the terms of that agreement, the Company agreed to purchase the Pativilca property and the gold production plant on the property for $1,500,000 to be paid as follows: $250,000 at the signing of the transference of the deed(s) of mining concessions; $500,000 four months from the date of transference of the public deed(s); and $750,000 ten months from the transference of the public deed(s). Additionally, the Company agreed to grant MRC1 Exploration a three percent royalty from mineral production. The Company made a $10,000 deposit toward the purchase price.
The Pativilca property (also known as Baco project) is located in the last western reinforcement of the western of central Andes of Peru, about 235 kilometers NNW of Lima. The property consisted of 6 mining concessions that were a total of 2,100 hectares. The Baco project included a fully functioning gold production operation with cyanidation plant capable of 50 tons of ore per day. The Company was in the process of applying for the necessary water usage and explosive permits but has since stopped that process.
Due to the recent instability of the global capital markets, the Companys finance team was unable to raise the capital necessary to complete the acquisition of the Pativilca property. In early June of 2008, MRC1 Exploration, EIRL, the seller of that property, revoked the offer to sell and declared the January 13, 2008 Letter of Intent null and void. The seller has refused to refund the initial deposit. The seller has indicated that they may be open to further negotiations should the Company raise the capital adequate to acquire and operate the property.
Item 3. Legal Proceedings
The company has no current legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Market Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
There is a limited public market for our common shares. Our common shares are quoted for trading on the OTC Bulletin Board under the symbol NILA. The market for our stock is highly volatile. We cannot assure you that there will be a market in the future for our common stock. OTC Bulletin Board stocks are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.
We have not declared or paid any cash dividends since inception. We intend to retain future earnings, if any, for use in the operation and expansion of our business and do not intend to pay any cash dividends in the foreseeable future.
Recent Purchases of Equity Securities by us and our Affiliated Purchases
We have not repurchased any of our common stock and have not publicly announced repurchase plans or programs as of April 30, 2012.
The Board of Directors of Nilam Resources, Inc. had determined that the number of common shares in the float is far too large given the size of the Company, which caused our Common Stock being priced at pennies per share. The low share price has hampered the Companys ability to acquire new mineral properties, attract quality management and raise capital to develop our assets. For that reason, the Board of Directors and majority of our shareholders approved a one for fifty (1 for 50) reverse stock split to reduce the number of shares of Common Stock outstanding to approximately 1,160,800 shares. The Board of Directors is hopeful that the smaller number of shares outstanding will help the Company to develop an improved trading market and elevate the image of our Company.
Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
We are an exploration stage company with limited operations and no revenue from our business operations. This means there is substantial doubt that we can continue as an on going business for the next twelve months unless we obtain additional financing to fund our operations. Our only source of cash at this time is investments by others in our company.
Results of Operations
Lack of Revenues
We have not earned any revenues and have sustained operational losses since inception from July 11, 2005 to April 30, 2012. We anticipate that we will not earn any revenues during the current fiscal year or in the foreseeable future, as we plan to undertake the exploration of our mineral properties. We may not generate significant revenues even if our future exploration program indicates that mineral deposits may exist on our mineral claims. We anticipate that we will incur substantial losses over the next year, and our ability to earn any revenues at this time continues to be uncertain.
Our total expenses from operations since inception from July 11, 2005 to April 30, 2012 were $9,193,047. The total expenses from operations increased by $355,324 to $524,875 for the year ended April 30, 2012 from $169,641 for the year ended April 30, 2011. The increase in operating expenses was mainly due to increased consulting fees and an impairment of mineral properties of $100,000.
As of April 30, 2012, we had an accumulated loss since inception of $9,990,684.00. In the year ended April 30, 2012, our net income increased to $919,720.00 from a net loss of $632,688.00 for the year ended April 30, 2011. The increase in income was due to the sale of mineral property interest.
We have not had profitable revenues from operations, and we are dependent upon obtaining financing to pursue exploration activities. For these reasons, our auditors stated in their report hat they have substantial doubts we will be able to continue as a going concern.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Item 8. Financial Statements and Supplementary Data
Our fiscal year end is April 30th. We will provide audited financial statements to our stockholders on an annual basis. Our audited financial statements as of April 30, 2012 follow as pages 9 through 34.
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2012
(Stated in US Dollars)
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Nilam Resources Inc. (An Exploration Stage Company):
We have audited the accompanying balance sheet of Nilam Resources Inc. (the Company) as at April 30, 2012 and 2011, and the related consolidated statements of operations, stockholders equity, and cash flows for the years then ended. We have also audited the consolidated statement of operations, stockholders equity, and cash flows for the period from the date of inception on July 11, 2005 to April 30, 2012, except that we did not audit the financial statements for the period from inception on July 11, 2005 to April 30, 2007. Those statements were audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Company, is based on the report of those auditors. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.
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 an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at April 30, 2012 and 2011, and the results of its operations and its cash flows for the years then ended and for the period from the date of inception on July 11, 2005 to April 30, 2012 in conformity with generally accepted accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company has not generated revenues since its inception, has incurred annual losses, and further losses are anticipated. The Company requires additional funds to meet its obligations and ongoing operations. Management's plans in this regard are described in Note 1. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ MNP LLP
July 26, 2012
Vancouver, BC Chartered Accountants
ACCOUNTING > CONSULTING > TAX
2300 - 1055 DUNSMUIR STREET, BOX 49148, VANCOUVER, BC V7X 1J1
1.877.688.8408 P: 604.685.8408 F: 604.685.8594 mnp.com
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
(STATED IN U.S. DOLLARS)
Nature of Operations (Note 1)
Subsequent Events (Note 12)
Approved on Behalf of the Board:
/s/ Shahin Tabatabaei, Director
See accompanying notes to consolidated financial statements.
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(STATED IN U.S. DOLLARS)
See accompanying notes to consolidated financial statements.
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE PERIOD FROM JULY 11, 2005 (INCEPTION) TO APRIL 30, 2012
(STATED IN U.S. DOLLARS)
See accompanying notes to consolidated financial statements.
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(STATED IN U.S. DOLLARS)
See accompanying notes to consolidated financial statements.
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF APRIL 30, 2012
NOTE 1. NATURE OF OPERATIONS
These consolidated financial statements inclusive of the accounts of the Nilam Resources Inc. and its Peruvian subsidiary Nilam Resources Peru SAC. Nilam Resources Inc. (an exploration stage company) (the Company) was incorporated under the laws of the State of Nevada on July 11, 2005. The Company is a natural resource exploration company with an objective of acquiring, exploring and if warranted and feasible, developing natural resource properties. On November 23, 2007, the Company incorporated Nilam Resources Peru SAC, in Peru, as a wholly-owned subsidiary. The purpose of the new subsidiary is to hold the Companys Peruvian properties and to carry on such business in Peru as is necessary to maintain, explore and develop the Companys properties. The continuation of the Company is in the exploration stage of its mineral property development and to date has not yet established any proven mineral reserves on its existing properties. The continued operations of the Company and the recoverability of the carrying value of its assets are ultimately dependent upon the ability of the Company to achieve profitable operations.
These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. If the Company is unable to raise additional capital in the near future, due to the Companys liquidity problems, management expects that the Company will need to liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission.
(B) Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Nilam Resources Peru SAC. Intercompany accounts and transactions have been eliminated in consolidation.
(C) Use of Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and revenues and expenses during the year reported. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be significant. Significant areas requiring managements estimates and assumptions are determining the fair value of transactions involving common stock, valuation and impairment losses on mineral property acquisitions and valuation of convertible debentures.
(D) Cash and Cash Equivalents
For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
(E) Mineral Properties
The Company is primarily engaged in the acquisition, exploration and development of mineral properties. Mineral property acquisition costs are initially capitalized when incurred. The Company assesses the carrying costs for impairment under Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) 360-10, Property Plant and Equipment. The ASC requires mining companies to consider cash flows related to the economic value of mining assets (including mineral properties and rights) beyond those assets proven and probable reserves, as well as anticipated market price fluctuations, when testing the mining assets for impairment in accordance with FASB ASC 360-10.
The Company classifies Investment as available-for-sale in its Consolidated Balance Sheets. Securities held for indefinite periods of time, including any securities that may be sold to assist in the clearing of payment service obligations or in the management of the investment portfolio, are classified as available-for-sale securities. These securities are recorded at fair value, with the net after-tax unrealized gain or loss recorded as a separate component of stockholder deficit. Realized gains and losses and other than-temporary impairments are recorded in the Consolidated Statements of Income (Loss).
(G) Loss Per Share
Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC 260, Earnings Per Share. Basic loss per share includes no dilution and it`s computed by dividing loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings (loss) of the Company. The common shares potentially issuable on conversion of outstanding warrants were not included in the calculation of weighted average number of shares outstanding because the effect would be anti-dilutive.
(H) Income Taxes
The Company accounts for income taxes under FASB ASC 740, Income Taxes. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
(I) Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance with FASB ASC 830-30, Translation of Financial Statements, foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the year
Related translation adjustments are reported as a separate component of stockholders equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations.
(J) Business Segments
The Company operates in one industry segment within two geographical areas, Canada and Peru. The mineral property is held solely in the Peru segment.
(K) Concentration of Credit Risk
Cash includes deposits at a Canadian financial institution in US currency which is not covered by either the US FDIC limits or the Canadian CDI limits. The Company has placed its cash in a high credit quality financial institution.
(L) Fair Value of Financial Instruments
FASB ASC 820, Fair Value Measurements and Disclosures requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB 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 instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. FASB ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
The Companys financial instruments consist principally of cash, investments, short-term loan and amounts due to related parties.
Pursuant to FASB ASC 820, the fair value of the Companys cash equivalents, investments, short term loan and amounts due to related parties are 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 its other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
(M) Comprehensive Income
FASB ASC 220, Comprehensive Income establishes standards for the reporting and display of comprehensive income and its components in the financial statements. During the year ended April 30, 2012, the Company has other comprehensive income related to its investments in marketable securities (Note 4).
(N) Recent Accounting Pronouncements
In December 2011, the FASB issued Accounting Standards Update (ASU) 2011-10, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate-a Scope Clarification. The amendments in this Update affect entities that cease to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiarys nonrecourse debt. Under the amendments in this Update, when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiarys nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness.
That is, even if the reporting entity ceases to have a controlling financial interest under Subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiarys operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. The amendments in this Update should be applied on a prospective basis to deconsolidation events occurring after the effective date. Prior periods should not be adjusted even if the reporting entity has continuing involvement with previously derecognized in substance real estate entities. For public entities, the amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2013, and interim and annual periods thereafter. Early adoption is permitted. This ASU is not expected to have a significant impact on the Companys financial statements
In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in this Update affect all entities that have financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement. The requirements amend the disclosure requirements on offsetting in Section 210-20-50. This information will enable users of an entitys financial statements to evaluate the effect or potential effect of netting arrangements on an entitys financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments in the scope of this Update. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. This ASU is not expected to have a significant impact on the Companys financial statements.
In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. Entities should continue to report reclassifications out of AOCI consistent with the presentation requirements in effect before Update 2011-05. All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. Nonpublic entities should begin applying these requirements for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The Company is currently evaluating the impact the adoption of the standard will have on the Companys financial position or results of operations.
In September 2011, the FASB issued ASU 2011-08, Intangibles - Goodwill and Other Topics (Topic 350), Testing Goodwill for Impairment. The objective of this update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent.
Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments in this Update apply to all entities, both public and nonpublic, that have goodwill reported in their financial statements and are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entitys financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. This ASU did not have a significant impact on the Companys financial statements.
In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The amendments in this Update improve the comparability, clarity, consistency, and transparency of financial reporting and increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. GAAP and IFRS, the option to present components of other comprehensive income as part of the statement of changes in stockholders equity was eliminated. The amendments require that all non-owner changes in stockholders equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. All entities that report items of comprehensive income, in any period presented, will be affected by the changes in this Update. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The amendments in this Update should be applied retrospectively, and early adoption is permitted. The Company is currently evaluating the impact the adoption of the standard will have on the Companys financial position or results of operations.
In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. For nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The Company is currently evaluating the impact the adoption of the standard will have on the Companys financial position or results of operations.
NOTE 3. MINERAL PROPERTIES
On December 10, 2007, the Company, through its wholly owned Peruvian subsidiary, entered into an agreement with MRC 1 Exploraciones EIRL of Peru, to purchase the Llippa Project, Peru, for $100,000. Llippa is a mineral claim consisting of two major mining concessions, the Prospera mine and La Prospera XXI. During the year ended April 30, 2012 the Company recorded an impairment on the property of $100,000 as there are no plans to continue exploration of the concessions.
During the year ended April 30, 2012 , the Company entered into two agreements with Portage Resources Inc. to sell all rights, title and interest for the Linderos 4 and 5 mining concessions, located in the Tabaconas District, San Ignacio Province, Department of Cajamarca, Peru. The Company had previously recognized an impairment loss of $200,000 related to these concessions during the year ended April 30, 2010.
Total consideration for the sale of the Linderos 4 concessions is 10,000,000 common shares of Portage Resources Inc. and total consideration for the sale of the Linderos 5 concessions is 8,000,000 common shares of Portage Resources Inc. Due to the impairment loss recognized in 2010, these concessions had a carrying value of $nil at the sale agreement dates. Consequently, the Company recognized a gain of $1,260,000 on the sale of these concessions, based on the market value of the shares received on the agreement dates.
On July 22, 2011, the Company entered into an agreement to develop the Rocas mining concession in the province of Bolognesi, Department of Ancash, Peru for $10,000. The Company must make a minimum investment of $100,000 in the project within 24 months of the agreement and must share 45% of any resultant profits with the seller of the project. On September 26, 2011, the Company entered into an agreement with Portage Minerais Peru S.A. to sell 55% of its ownership of the project for seven million shares of Portage Resources Inc. The additional 45% of its ownership can be acquired by Portage Minerais Peru S.A. at any time for $0.675 per each ounce of silver on the total silver resource.
On July 22, 2011, the Company entered into an agreement to develop the Rocas I mining concession in the province of Bolognesi, Department of Ancash, Peru for $5,000. The Company must make a minimum investment of $50,000 in the project within 24 months of the agreement and must share 45% of any resultant profits with the seller of the project. On September 30, 2011, the Company entered into an agreement with Portage Minerais Peru S.A. to sell 55% of its ownership of the project for three and a half million shares of Portage Resources Inc. The additional 45% of its ownership can be acquired by Portage Minerais Peru S.A. at any time for $0.675 per each ounce of silver on the total silver resource.
The Company recognized a gain of $184,500 on the sale of these mineral property interests, based on the market value of the shares received.
NOTE 4. INVESTMENTS AND DEPOSITS
The Companys investments consist of 28,500,000 shares of Portage Resources Inc. which were acquired in the sales of the Linderos and Rocas mining concessions (Note 3). The shares are carried at their market value at April 30, 2012, with any changes in value being recorded as other comprehensive income.
The Company also paid $24,540 as a share subscription deposit to Portage Resource Inc. for 559,900 shares. The securities receivable have been adjusted to their market value at April 30, 2012, with any changes in value being recorded as other comprehensive income.
NOTE 5. STOCKHOLDERS DEFICIT
For the year ended April 30, 2012, the Company calculated imputed interest of $724 and fair value of a Director's fee of $3,600, which are all reflected as an in-kind contribution of expenses.
On July 12, 2011, the Company signed a subscription agreement for 1,680,000 common shares at $0.02 per share for cash. The common shares have not yet been issued, resulting in a share subscription liability of $33,600.
On June 15, 2011, the Company settled accounts payable of $21,272 through the issuance of 1,063,600 common shares with market value of $85,088. The difference between the carrying amount of the accounts payable and the market value of the common shares has been recorded as compensation expense. As the shares had not been issued from treasury at April 30, 2012, the Company has recorded a liability to issue common stock of $85,088(Note 6).
On December 1, 2011, the Company settled accounts payable of $28,038 through the issuance of 1,401,900 common shares with market value of $98,133. The difference between the carrying amount of the accounts payable and the market value of the common shares has been recorded as compensation expense. As the shares had not been issued from treasury at April 30, 2012, the Company has recorded a liability to issue common stock of $98,133(Note 6).
On February 1, 2012, the Company settled accounts payable of $19,800 through the issuance of 990,000 common shares with market value of $69,300. The difference between the carrying amount of the accounts payable and the market value of the common shares has been recorded as compensation expense.
As the shares had not been issued from treasury at April 30, 2012, the Company has recorded a liability to issue common stock of $69,300(Note 6).
On December 1, 2011, the Company settled accounts payable of $31,485 through the issuance of 1,574,250 common shares with market value of $110,198. The difference between the carrying amount of the accounts payable and the market value of the common shares has been recorded as compensation expense. As the shares had not been issued from treasury at April 30, 2012, the Company has recorded a liability to issue common stock of $110,198 (Note 6).
NOTE 6. RELATED PARTY TRANSACTIONS
On August 28, 2007, the Company issued a promissory note in the amount of $10,000 to a former director and officer of the Company. This promissory note is unsecured, bears no interest and is due on demand (Note 4). During fiscal 2008, the former director and officer loaned the Company a further $338. This loan is also unsecured, bears no interest and is due on demand.
As of April 30, 2012, $16,158 was owed to former directors and officers of the Company for expenses paid on behalf of the Company in fiscal 2009 and 2010.
As of April 30, 2012, the Company accrued $60,000 (2011 - $90,000) of management fees to the officers of the Company.
During the year ended April 30, 2012, the Company settled accounts payable of $100,595 due to a consultant and shareholder of the Company through the issuance of 5,029,750 common shares with market value of $362,719. The difference between the carrying amount of the accounts payable and the market value of the common shares has been recorded as compensation expense (Note 5).
NOTE 7. COMPARATIVE FIGURES
Certain of the comparative figures have been classified to conform to the presentation adopted in the current period.
NOTE 8. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the year ended April 30, 2012, the Company settled accounts payable of $100,595 through the issuance of 5,029,750 common shares with market value of $362,719 (Notes 5 and 6).
During the year ended April 30, 2012, the Company sold its Linderos 4, Linderos 5, Rocas and Rocas I mineral property interests to Portage Resources Inc. in return for 28,500,000 common shares of Portage Resources Inc. valued at $1,459,500.
NOTE 9. INCOME TAXES
The following table reconciles the expected income taxes expense (recovery) at the United States federal statutory income tax rates to the amounts recognized in the consolidated statements of operations for the years ended April 30, 2012 and 2011:
Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes. Deferred tax assets (liabilities) at April 30, 2012 and 2011 are comprised of the following:
The Company has net operating loss carry forwards of approximately $1,958,036 which may be carried forward to apply against future year income tax for United States income tax purposes, subject to the final determination by taxation authorities, expiring in the following years:
The Company has net operating loss carryforwards of approximately $5,932,011 which may be carried forward to apply against future year income tax for Peruvian tax purposes. The losses have an unlimited carryforward period, but their use is restricted to 50% of net income in the year of use. These losses are subject to final determination by the taxation authorities.
Effective January 1, 2009, the Company adopted the interpretation for accounting for uncertainty in income taxes which was an interpretation of the accounting standard accounting for income taxes. This interpretation created a single model to address accounting for uncertainty in tax positions. This interpretation clarifies the accounting for income taxes, by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.
We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. As at April 30, 2012 the operating losses noted above are based on estimates. The actual operating losses could differ from these estimates. We do not have any unrecognized tax benefits or loss contingencies. Unrecognized tax benefits are not expected to increase or decrease within the next twelve months.
NOTE 10. CONTINGENCIES
There were no contingencies as at the report date.
NOTE 11. SEGMENTED INFORMATION
The Company operates in one segment, which is the exploration and development of mineral properties. The Company has compiled segmented information based on the geographic regions in which the Company has acquired mineral properties and performs exploration activities.
Income for the year ended April 30, 2012 by geographical segment:
Loss for the year ended April 30, 2011 by geographical segment:
Assets by geographical segment:
NOTE 12. SUBSEQUENT EVENTS
Subsequent to April 30, 2012 the Company issued 4,039,750 common shares related to its liability to issue common stock (Note 5).
NOTE 13. RESTATEMENT
On November 20, 2007, the Company issued a promissory note in the amount of $60,000 to a related party. On June 10, 2009, this promissory note was settled with 12,000,000 common shares of the Company. The common shares issued on settlement of the notes were assigned a value of $1,680,000, which was calculated based on the trading value of the Companys stock on the date the settlement was approved by the Board of Directors. The Company presented this transaction as a capital transaction in its financial statements for the year ended April 30, 2010; however the Company has determined that the difference between the carrying amount of the debt and the value of the common shares issued should have been recorded as a loss on extinguishment.
On February 10, 2009, the Company, through its wholly owned Peruvian subsidiary, acquired the right, title and interest in and to Linderos mining concessions, Peru. In consideration for the property, the Company issued 20,000,000 of its common shares, which it valued at $200,000. The Company has determined that common shares issued should have been valued at their then trading price of $0.36 per share, resulting in a valuation of the Linderos property of $7,200,000. Subsequent to recording the property at $7,200,000 the company wrote the property down to the fair value of $200,000.
The Company has restated the financial statements as follows:
Consolidated Statement of Operations:
Consolidated Statement of Changes in Stockholders Equity:
Consolidated Statement of Cash Flows:
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
We have had no changes in or disagreements with our accountants. Our audited financial statements for the period ended April 30, 2012 have been included in this form 10-K in reliance upon MNP LLP, Chartered Accountants, as experts in accounting and auditing.
Item 9A. Controls and Procedures
Item 9A (T). Controls and Procedures
Conclusions of Management Regarding Effectiveness of Disclosure Controls and Procedures.
The Companys Chief Executive Officer/President is also as the chief financial officer/principal accounting officer (the Certifying Officer) of the Company, and this officer is responsible for establishing and maintaining disclosure controls and procedures for the Company. Our management has evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-15(e) as of the end of the period covered by this report. Based on that evaluation, the management has concluded that there was a material weakness affecting our internal control over financial reporting, and as a result, our disclosure controls and procedures were not effective as of April 30, 2012.
Managements Report on Internal Control over Financial Reporting
The Companys management is responsible for establishing and maintaining adequate internal control over financial reporting for the company. The Companys internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal controls over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
We are required by the Sarbanes-Oxley Act to include an assessment of our internal control over financial reporting in our Annual Report on Form 10-KSB beginning with our filing for our fiscal year ended April 30, 2009 and attestation from an independent registered public accounting firm in our Annual Report on Form 10-K.
The management conducted an assessment of the effectiveness of the Companys internal control over financial reporting as of April 30, 2012 based on the criteria for effective internal control over financial reporting established in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. In its evaluation, Management evaluated whether the Company had sufficient preventative controls which are controls that have the objective of preventing the occurrence of errors or fraud that could result in a misstatement of the financial statements. In its evaluation, Management considered whether there were sufficient internal controls over financial reporting, in the context of the Companys control environment, financial risk assessment, internal control activities, monitoring, and communication to determine whether sufficient controls are present and functioning effectively.
Based upon this assessment, we have determined that there was a material weakness affecting our internal control over financial reporting and, as a result of that weakness, our internal control over financial reporting procedures was not effective as of April 30, 2012. The material weakness which has been disclosed to and reviewed with, our independent auditor, is as follows:
The Company initially filed a Form 10-K for the year ended April 30, 2009, without a disclosure of Managements assessment of the effectiveness of the Companys internal control over financial reporting as of April 30, 2009. Such failure to disclose its report on internal control over financial reporting impacted its conclusions regarding the effectiveness of internal controls and procedures as of the end of fiscal year 2009, with a resulting weakness. The failure to disclose Managements assessment became apparent to the Company, since the Company does not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience and training in the application of generally accepted accounting principles commensurate with our financial reporting requirements. Mr. Vare Grewall, the former treasurer of the Company, had performed all financial reporting and disclosure functions, however, he resigned. The Company intends to hire a new Chief Financial Officer.
Managements Remediation Initiatives
The Company recognizes the importance of implementing and maintaining disclosure controls and procedures and internal controls over financial reporting and is working to implement an effective system of controls. Management is currently evaluating avenues for mitigating our internal controls weaknesses, but mitigating controls that are practical and cost effective based on the size, structure, and future existence of our organization. Since the Company has not engaged in any substantive operations since the loss of the right to purchase Pativlca Mineral Property in Peru, or generated any significant revenues, the Company is limited in its options for remediation efforts. Management, within the confines of its budgetary resources, will engage its outside accounting firm to assist with an assessment of the Companys internal controls over financial reporting on an on-going basis.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. This annual report does not include an attestation report of the Companys registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only managements report in this annual report.
Changes in internal control over financial reporting
There have been no changes during the quarter that ended April 30, 2012 in the Companys internal controls over financial reporting hat have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.
The Company does not have an audit committee or a financial expert serving on the Board of Directors. During the coming fiscal year the Company plans to form and implement an audit committee and hire a Chief Financial Officer who also may serve on the Board of Directors.
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Directors and Officers
According to our bylaws, the authorized number of directors of the corporation shall not be less than one and may be as many as set by resolution of the Board of Directors.
Mr. Shahin Tabatabaei is serving the Company as the Chairman of the Board of Directors, Chief Executive Officer, Acting Chief Financial Officer, Acting Chief Principal Accounting Officer and Director.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
The Company has no significant employees other than the executive employee described above.
No Audit Committee or Financial Expert
The Company does not have an audit committee or a financial expert serving on the Board of Directors. The Company plans to form and implement an audit committee and hire a Chief Financial Officer who also may serve on the Board of Directors.
Code of Ethics
The Company does not have a code of ethics for our principal executive and financial officers. The Company's management intends to promote honest and ethical conduct, full and fair disclosure in our reports to the SEC, and compliance with applicable governmental laws and regulations.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, all executive officers, directors, and each person who is the beneficial owner of more than 10% of the common stock of a company that files reports pursuant to Section 12 of the Exchange Act of 1934, are required to report the ownership of such common stock, options, and stock appreciation rights (other than certain cash only rights) and any changes in that ownership with the Securities and Exchange Commission. The Company has not registered as a public company under Section 12 of the Securities Exchange Act of 1934, and therefore no reports have been filed under Section 16(a) there under.
Item 11. Executive Compensation
Currently, the company is not paying Shahin Tabatabaei a salary. The company is currently negotiating a contract for executive compensation for Shahin Tabatabaei. At this time, no bonus, stock awards and option awards have been paid to Shahin Tabatabaei for the period ended April 30, 2012.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table provides the names and addresses of each person known to us that owns more than 5% of our outstanding Common Stock as of April 30, 2009, and by the officers and directors of the Company, individually and as a group. Except as otherwise indicated, all shares are owned directly.
Item 13. Certain Relationships, Related Transactions, and Director Independence.
As of April 30, 2012, the amount of $16,158 was still owed to former directors and officers of the company for expenses paid on behalf of the Company in fiscal 2009 and 2010.
The Company issued an unsecured promissory note in the amount of $10,000 to a related party. This subject unsecured promissory note bears no interest and is due upon demand. This officer also loaned the company an additional $338 which is also unsecured, bears no interest and is due upon demand.
During fiscal 2012, the Company calculated imputed interest of $724 (2010 - $1,217) on the related parties notes.
During fiscal 2012, the officers of the Company incurred $nil (2010 - $10,454) for the expenses paid on behalf of the Company.
During fiscal 2012, the Company accrued $nil (2010 - $120,000) of management fees to the officers of the Company.
On November 20, 2007, the Company issued a promissory note in the amount of $60,000 to a related party. On June 10, 2009, this promissory note was settled with 12,000,000 common shares of the Company (Notes 4 and 5). The common shares issued on settlement of the notes were assigned a value of $1,680,000, which was calculated based on the trading value of the Companys stock on the date the settlement was approved by the Board of Directors. The company recorded a loss on the extinguishment of debt of $1,620,000.
On November 2, 2007, Ms. Sandy Sandhu, the Companys Director, President, Treasurer, and Secretary, upon her resignation, transferred 15,000,000 shares of common stock to Mr. Len DeMelt the incoming Director.
On November 8, 2007, Mr. Karmjit Gill, the past president of the Company transferred 15,000,000 shares to Mr. Vare Grewal, the incoming Director, Treasurer and Secretary.
Note to Related Party for Mineral Claim
Prior to Mr. Len DeMelt joining the Company as a Director, Mr. DeMelt was in the process of acquiring the Llipa property for his personal portfolio of mineral interests. He had placed a $50,000 deposit toward the $100,000 sale price of the property. Once Mr. DeMelt was appointed as a director, he agreed to transfer the sale contract to the Llipa property to the Company and, as a term of that conveyance, the Company committed to invest in exploration on the property. The Company paid to the seller the remaining balance of $50,000 in cash and executed a promissory note to Mr. DeMelt for the $50,000 deposit to fully acquire the Llipa mineral property.
Assignment of Mineral Claim
During the fiscal 2008, a director of the Company transferred the title of the El Baron property to the Companys name without consideration. The value of $5,000 was assigned to the property.
On August 28, 2007, the Company issued a promissory note in the amount of $10,000 to a related party. This promissory note is unsecured, bears no interest and is due on demand.
During the fiscal 2008, an officer loaned the Company $338. This loan is unsecured, bears no interest and is due on demand.
During the fiscal 2008, an officer loaned the Company $1,440. This loan is unsecured, bears no interest and is due on demand.
Assignment of Convertible Note and Issuance of Treasury Shares
On March 1, 2009, an officer of the company assigned a $60,000 convertible note. The assigned note is unsecured and bears no interest.
On June 10, 2009, the note holders converted the note to common stock, and the company issued 20,000,000 shares of treasury shares to eight separate shareholders.
Purchase of Common Stock by Officers and Directors
On December 2007 and January 2008, a total of 234,831 units were sold to Officers and Directors of the Company in connection with a private placement.
Item 14. Principal Accountant Fees and Services
Audit, Audit-Related and Non-Audit Fees
The following table represents fees for the professional audit services and fees billed for other services rendered by our current auditors, MNP LLP, Chartered Accountants, for the audit of our annual financial statements for the years ended April 30, 2012. For the year ended April 30, 2009, the table represent fees for the professional services and fees billed for other services rendered by are former auditors, Cinnamon Jang Willoughby & Company, Chartered Accountants which was acquired by MNP LLP. For the year ended April 30, 2008, the table represents fees for the professional services and fees billed by both Cinnamon Jang Willoughby & Company, Chartered Accountants and Webb & Company, P.A., Certified Public Accountants.
Item 15. Exhibits and Financial Statement Schedules
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunto duly authorized.
Pursuant to the requirements of the Exchange Act this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.