| • QUARTERLY REPORT • CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER • CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER • SECTION 1350 CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER • SECTION 1350 CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER • XBRL INSTANCE DOCUMENT • XBRL TAXONOMY EXTENSION SCHEMA • XBRL TAXONOMY EXTENSION CALCULATION LINKBASE • XBRL TAXONOMY EXTENSION DEFINITION LINKBASE • XBRL TAXONOMY EXTENSION LABEL LINKBASE • XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UNITED STATES Form 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2012 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT For the transition period from _________ to __________________ 0-21777 GOLDEN QUEEN MINING CO.
LTD.
6411 Imperial Avenue Issuer’s telephone number, including area code: (604) 921-7570 Former name, former address and former fiscal year, if changed since last report: N/A Check whether the registrant (1) filed all reports required to
be filed by sections 13 or 15(d) of the Securities and 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. Check whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Check whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. Check whether the registrant is a shell company, as defined in
Rule 12b-2 of the Exchange Act. State the number of shares outstanding of each of the issuer’s
classes of common equity, as of the latest practicable date: PART I. FINANCIAL INFORMATION Item 1. Financial Statements
1
Approved by the Directors:
See Notes to Unaudited Interim Consolidated Financial Statements. 2
See Notes to Unaudited Interim Consolidated Financial Statements. 3
See Notes to Unaudited Interim Consolidated Financial Statements. 4
See Notes to Unaudited Interim Consolidated Financial Statements. 5
The ability of the Company to obtain financing for its ongoing activities and thus maintain solvency, or to fund construction of the operating facility at Soledad, is dependent on equity market conditions, the market for precious metals, the willingness of other parties to lend the Company money or the ability to find a joint venture or a merger partner. While the Company has been successful at certain of these efforts in the past, there can be no assurance that future efforts will be successful. This raises substantial doubt about the Company’s ability to continue as a going concern. These unaudited interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for the fair presentation of the information contained therein. The results for the three months ended March 31, 2012 are not necessarily indicative of the results expected for any subsequent quarter or for the year ending December 31, 2012.
6
7
The following table summarizes information about stock options outstanding at March 31, 2012:
As at March 31, 2012, the aggregate intrinsic value of the outstanding exercisable options was $4,119,298 (March 31, 2011 - $6,680,074). No options were exercised during the three months ended March 31, 2012. The total intrinsic value of 150,000 options exercised during the period ended March 31, 2011 was $273,300. There is no unamortized compensation expense as at March 31, 2012 as all the outstanding options vested at the grant date. 8
9
10
Since all of the warrants originally included as part of derivative liability were exercised as at December 31, 2011, there were no further adjustments to the derivative liability for warrants as at March 31, 2012. As of March 31, 2012 and December 31, 2011, the changes in derivative liability for options and warrants are as follows:
11
12 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation The following discussion of the operating results and financial condition of Golden Queen Mining Co. Ltd. (the “Company”) is as at May 9, 2012 and should be read in conjunction with the unaudited interim consolidated financial statements of the Company for the quarter ended March 31, 2012 and the notes thereto. The information in this Management Discussion and Analysis and Plan of Operations is prepared in accordance with U.S. generally accepted accounting principles and all amounts herein are in U.S. dollars unless otherwise noted. The Soledad Mountain Project Overview The Company plans to develop a gold-silver, open pit, heap leach operation on its Soledad Mountain property (the “Project”), located just outside the town of Mojave in Kern County in southern California. The Project will use conventional open pit mining methods and the cyanide heap leach and Merrill-Crowe processes to recover gold and silver from crushed, agglomerated ore. The planned, average ore and waste mining rates are 4.9 million tons and 9.1 million tons per year with a waste to ore mining ratio of 1.85:1 for a combined mining rate of ore and waste of 14 million tons per year. Gold and silver production is projected to average 75,000 oz and 950,000 oz respectively per year although this is expected to fluctuate considerably from year to year depending upon the ore head grades. Gold and silver production is projected to be 936,300 oz of gold and 10,426,700 oz of silver over a period of approximately 13 years. The Company presented the results of the updated feasibility study and economic analysis for its Project in a news release on April 6, 2011. The updated feasibility study and economic analysis was prepared by Norwest Corporation, Vancouver with input from independent consulting engineers and management. Infill Drill Program The Company announced that it had initiated an infill drill program in a news release on October 21, 2010. The drill program commenced in April 2011 and was completed in early May 2011. An independent consulting engineering firm based in Sparks, Nevada has integrated the results from the infill drill program with a lower cutoff grade (the cutoff grade to date had been based upon gold and silver prices, operating cost estimates and gold and silver recoveries from the late 1990s). The consulting engineers have completed a detailed analysis of the geological model and the block model. The past mineral resource and mineral reserve estimates for the Project are being updated and will be released once available, in accordance with the provisions of NI 43-101. Permitting Update A detailed review of approvals and permits required for the Project is provided in the Company’s latest Form 10-K filing with the U.S. Securities and Exchange Commission (the “SEC”), dated March 31, 2011. The following is therefore only a brief update. Land Use - Conditional Use Permits The Kern County Planning Commission unanimously approved the Project at its regularly scheduled meeting in Bakersfield on April 8, 2010. All appeals that were subsequently filed against the Commission’s decision were withdrawn and the decision made by the Planning Commission is now final. The Planning Commission certified the SEIR, amended three Conditional Use Permits “(CUPs”) with a Mitigation Measures Monitoring Program and Conditions of Approval for the Project. The Mitigation Measures Monitoring Program and Conditions of Approval for the Project were amended by Kern County Planning Commission Resolution No. 171-10 adopted on October 28, 2010. The State of California introduced backfilling requirements for open pit metal mines in December 2002. Norwest Corporation prepared a life-of-mine waste rock management plan and this plan incorporates sequential backfilling of mined-out phases of the open pit with limited double-handling of waste rock at the end of the mine life. This plan was incorporated in the Planning Commission’s approvals for the Project. The Bureau of Land Management confirmed that its Record of Decision approving the Plan of Operations under NEPA in November 1997 remains valid. There are 114 mitigation measures and conditions of approval in the Conditional Use Permits. The Company is currently addressing Condition 107 in the Conditional Use Permits that apply to closure and closing reclamation. Site inspections are conducted annually to verify that the Company is in compliance with the conditions of approval. The Kern County Planning Department granted the Company an extension of time of three years to April 21, 2014 during which the Company can proceed with the Project. The extension was granted at a meeting held in the offices of the Planning Department on April 21, 2011. A non-summary vacation of New Eagle Road was approved by the Kern County Board of Supervisors at a general public meeting held in Bakersfield on March 20, 2012. This was a further condition in the CUPs that has now been satisfied. Water Quality – Waste Discharge Requirements The Lahontan Regional Water Quality Control Board unanimously approved Waste Discharge Requirements and a Monitoring and Reporting Program for the Project at a public hearing held in South Lake Tahoe on July 14, 2010. The board order was subsequently signed by the Executive Officer of the Regional Board and is now in effect. The Company’s consulting engineers have prepared a Stage I, Surface Water, Sediment and Erosion Control Plan for the construction and early mining phases of the Project. Storm Water discharges will be regulated by the State Water Resources Control Board under the State’s NPDES General Construction Storm Water Permit during the initial construction and early mining phases of the Project and under the NPDES General Industrial Storm Water Permit during mine operations. The Company’s consulting engineers, ARCADIS-U.S., Inc., a Qualified SWPPP Developer in California, have therefore prepared the designs and the Company has filed Permit Registration Documents electronically through the Storm Water Multiple Application and Report Tracking System (SMARTS). The Documents include a Notice of Intent, Storm Water Pollution Prevention Plan (SWPPP), Risk Assessment, a Site Map and a signed certification statement by the Legally Responsible Person. The Company has also paid the first annual fee. Note that the SWPPP alone is a 200-page document. Note further that the Documents filed through SMARTS meet applicable NPDES Storm Water Program requirements of the Kern County Engineering, Surveying & Permit Services Department. The Notice of Intent is now active. Air Quality – Authority to Construct and Permit to Operate The Air Quality and Health Risk Assessment for the Project was completed and submitted to the Kern County Planning Department and the Eastern Kern Air Pollution Control District (“EKAPCD”) on July 21, 2009. This study was approved by Kern County Planning Commission on April 8, 2010, as part of the certification of the Supplemental Environmental Impact Report. Ten applications for Authority to Construct permits were submitted to the EKAPCD in February 2011. The EKAPCD confirmed that the information required to support the applications was complete. The draft Authority to Construct permits were received in September 2011. The Company’s consulting engineers and legal counsel completed their review of the draft Authority to Construct permits in January 2012. The Authority to Construct permits were issued by EKAPCD on February 8, 2012. The Authority to Construct permits will be converted to a Permit to Operate after construction has been completed and subject to inspection by EKAPCD. Results of Operations The following are the results of operations for the three months ended March 31, 2012, and the corresponding period ended March 31, 2011. The Company had no revenue from operations. The Company incurred general and administrative expenses of $680,545 (2011 - $484,910) during the three months ended March 31, 2012, and the corresponding period ended March 31, 2011. Costs were higher by $195,635 for the three months ended March 31, 2012 when compared with the same period in 2011. The following significant general and administrative expenses were incurred during the quarter ended March 31, 2012 with a comparison to costs incurred during the same quarter in 2011:
The Company recorded a change in fair value of a derivative liability including a change in foreign exchange of $402,276 for the quarter compared to $126,779 for the same quarter in 2011. This item is a non-cash item and was recorded in accordance with accounting pronouncement ASC 850-40-15. Refer to Note 6 Derivative Liability of the Interim Consolidated Financial Statements for a detailed analysis of the changes in fair value of the derivative liability. Interest income of $15,851 (2011 - $12,574) was higher by $3,277 as there was more cash on deposit during the first quarter of 2012. Interest rates remained low during the quarter and are projected to remain low for the remainder of 2012 at least. There was no interest expense during the quarter. The Company incurred a net loss of $432,606 (or $0.00 per share) during the quarter as compared to a net loss of $720,868 (or $0.01 per share) during the same quarter of 2011. Summary of Quarterly Results Results for the eight most recent quarters are set out in the table below:
The results of operations can vary from quarter to quarter depending upon the nature, timing and cost of activities undertaken during the quarter and whether or not the Company incurs gains or losses on foreign exchange or grants stock options. Reclamation Financial Assurance and Asset Retirement Obligation The Company provided reclamation financial assurance in the form of a Payment Bond Certificate backed by a Certificate Of Deposit with Union Bank of California in the amount of $296,180 effective October 2011. The estimate for reclamation financial assurance is $314,712 for 2012 and this estimate has been submitted to the Kern County Engineering, Surveying & Permit Services Department for review and approval. The asset retirement obligation is estimated at $235,628 and this is shown as a liability on the Interim Consolidated Balance Sheet. The actual obligation could differ materially from these estimates. Advance Minimum Royalties The Company continues to pay advance minimum royalties to landholders and paid $14,220 in the first quarter of 2012. Off-balance Sheet Arrangements The Company has no off-balance sheet arrangements. Stock Option Plan The Company’s current stock option plan (the “Plan”) was adopted by management of the Company in 2008 and approved by shareholders of the Company in 2009. The Plan provides a fixed number of 7,200,000 common shares of the Company that may be issued pursuant to the grant of stock options. The exercise price of stock options granted under the Plan shall be determined by the Company’s Board of Directors, but shall not be less than the volume weighted average trading price of the Company’s shares on the Toronto Stock Exchange for the five trading days immediately prior to the date of the grant. The expiry date of a stock option shall be the date so fixed by the Board subject to a maximum term of five years. The Plan provides that stock options will terminate on the earlier of the expiry of the term and (i) 12 months from the date an option holder dies, (ii) 90 days from the date from the date the option holder ceases to act as a director or officer of the Company, or (iii) 60 days from the date the option holder ceases to be employed, or engaged as a consultant, by the Company. The Company granted 1,950,000 stock options to directors, officers and consultants of the Company pursuant to the Plan on January 28, 2009. The options are exercisable at a price of C$0.26 per share for a period of 5 years from the date of grant. The Company also granted 50,000 stock options to a consultant of the Company pursuant to the Plan on April 19, 2010. The options are exercisable at a price of C$1.24 per share for a period of 5 years from the date of grant. Transactions with Related Parties For the three months ended March 31, 2012, $35,800 (2011 – $36,100) was paid to Mr. H.L. Klingmann for services as president of the Company, of which $Nil was payable as at March 31, 2012 (December 2011 - $Nil), $6,700 (2011 - $4,600) was paid to Mr. C. Shynkaryk for consulting services to the Company, of which $Nil was payable as at March 31, 2012 (December 2011 - $Nil), and $7,500 (2011 -$Nil) was paid to Mr. G.R. McDonald for consulting services to the Company, of which $2,800 was payable as at March 31, 2012 (December 2011 - $2,800). The Company amended a consulting services agreement originally entered into in 2004 with Mr. H.L. Klingmann, the President of the Company, in May of 2010. Under the original agreement, upon receipt by the Company of a feasibility study and a production decision made by the Company, a bonus of 150,000 common shares would be issued and upon commencement of commercial production on the Property, a bonus of 150,000 common shares would be issued. Pursuant to the amended agreement, an alternative 300,000 bonus shares would be issuable upon a change of control transaction or upon a sale of all or substantially all of the Company’s assets, having a value at or above C$1.00 per share of the Company, with a further 300,000 bonus shares being issuable in the event the change of control transaction or asset sale occurred at a value at or above C$1.50 per share. As at March 31, 2012, the milestones had not been reached and no accrual was made in connection with these arrangements. There were no other transactions with related parties during the quarter ended March 31, 2012. Fair Value of Financial Instruments The carrying amount reported in the balance sheets for cash and cash equivalents, receivables, accounts payable and accrued liabilities approximates fair value because of the immediate or short-term maturity of these financial instruments. The Company does not hold any bank or non-bank asset-backed commercial paper. The fair value of the reclamation financial assurance approximates carrying value because the stated interest rate reflects recent market conditions. It is the opinion of management that the Company is not exposed to significant interest, currency or credit risk arising from the use of these financial instruments. Liquidity and Capital Resources The Company held $7,106,414 in cash and cash equivalents on March 31, 2012. Cash used in Operating Activities: Cash was used mainly for the ongoing development of the Project with major expenditures in four areas:
Cash from Financing Activities: No cash was received from financing activities during the three months ended March 31, 2012 (2011 -$116,816). Cash used in Investing Activities: The Company purchased fee land for approximately $162,000 (2011 - $371,000) during the quarter. Cash used in investing activities will vary from quarter to quarter as willing sellers are found and acceptable prices can be negotiated during the quarter. Further purchases of fee land are being considered to provide room for a possible future expansion of heap leach pads and future expansion of the area required for the construction of facilities for the aggregate production component of the Project. Working Capital: As at March 31, 2012, the Company had current assets of $7,247,536 and current liabilities of $264,506 or working capital of $6,983,030. Management does not expect that additional cash will be required beyond cash currently on hand for ongoing work on approvals and permits for the Project, for paying advance minimum royalties, for detailed engineering of facilities for the Project, for ongoing work on site, for additional land purchases and for general corporate purposes to the end of 2012. Refer also to Outlook below. Outstanding Share Data The number of shares issued and outstanding and the fully diluted share position are set out in the table below.
The company's authorized share capital is 150,000,000 common shares with no par value. Outlook If the remaining approvals and permits are secured for the Project and a production decision is made, the Company will need significant additional financing to develop the Project into an operating mine. This is currently estimated at $106million and this includes working capital. The Company believes that financing for the Project can be secured if gold and silver prices remain at or near $1,457.00/oz and $39.63/oz respectively, the London a.m. fix for precious metals on April 6, 2011 and the prices used for the updated cash flow analyses referred to under . Gold and silver prices averaged $1,224.53/oz and $20.19/oz in 2010, $1,563.93 and $36.61 in 2011 and the London pm fix for gold and silver was $1,582.50/oz and $28.77/oz respectively on May 9, 2012. The Company is evaluating various financing options for the Project and these may be combined:
It is not expected that the Company will hedge any of its gold or silver production. The ability of the Company to develop a mine on the Property is subject to numerous risks, certain of which are disclosed in the Company’s latest Form 10-K filing with the SEC, dated March 29, 2012. Readers should evaluate the Company’s prospects in light of these and other risk factors. Subsequent Event There are no subsequent events. Application of Critical Accounting Estimates The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment. The financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below: Mineral Property and Exploration Costs Exploration costs are expensed as incurred. Development costs are expensed until it has been established that a mineral deposit is commercially mineable and a production decision has been made, at which point the costs subsequently incurred to develop the mine on the property before to the start of mining operations are capitalized. The Company capitalizes the cost of acquiring mineral property interests, including undeveloped mineral property interests, until the viability of the mineral interest is determined. Capitalized acquisition costs are expensed if it is determined that the mineral property has no future economic value. Mineral property interests are interests in properties that are believed to potentially contain (i) measured, indicated or inferred resources with insufficient drill hole spacing to qualify as proven and probable mineral reserves or (ii) other mine-related or green field exploration potential that cannot be classified as a mineral resource. Capitalized amounts (including capitalized development costs) are also written down if future cash flows, including potential sales proceeds, related to the mineral property are estimated to be less than the property’s total carrying value. Management reviews the carrying value of each mineral property periodically, and, whenever events or changes in circumstances indicate that the carrying value may not be recoverable makes the necessary adjustments. Reductions in the carrying value of a property would be recorded to the extent that the total carrying value of the mineral property exceeds its estimated fair value. There was a $161,772 asset impairment loss related to property interests recorded for the quarter ended March 31, 2012 (2011 - $370,956). Asset Retirement Obligations The Company’s liability for reclamation of the property is estimated each year by an independent civil engineer. This estimate, once approved by federal, state and county authorities, forms the basis for a cash deposit of reclamation financial assurance. In the absence of final approvals and permits for the Project, this estimate is the current obligation of the Company to reclaim its lands. As at December 31, 2011, the Company had provided reclamation financial assurance to the Bureau of Land Management, the State and Kern County of $296,180 (2010 - $286,653). This deposit earns interest at 0.1% per annum and is not available for working capital purposes. The asset retirement obligation recorded as a liability on the Interim Consolidated Balance Sheet is $235,628 (December 31, 2011 - $227,212). Derivative Liabilities Our stock options and warrants are denominated in a currency other than our reporting currency and the instruments were required to be accounted for as separate derivative liabilities. These liabilities were required to be measured at fair value. These instruments were adjusted to reflect fair value at each period end. Any increase or decrease in the fair value was recorded in results of operations as change in fair value of derivative liabilities. In determining the appropriate fair value, we used the Black-Scholes pricing model. Recently Issued Accounting Standards A summary of Recently Issued Accounting Standards is provided under the Significant Accounting Policies header of the Notes to the Interim Consolidated Financial Statements for the quarter ended March 31, 2012. Qualified Person and Caution With Respect to Forward-looking Statements Mr. H.L. Klingmann, P.Eng., the President of the Company, is a qualified person for the purposes of National Instrument 43-101 and has reviewed and approved the technical information in this report. This Form 10-Q contains certain forward-looking statements, which relate to the intent, belief and current expectations of the Company’s management. These forward-looking statements are based upon numerous assumptions that involve risks and uncertainties and other factors that may cause actual results to differ materially from those indicated by such forward-looking statements. Such factors include among other things the receipt of required approvals and permits, the costs of and availability of sufficient capital to fund the projects to be undertaken by the Company and commodity prices. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date the statements were made. Caution to U.S. Investors Management advises U.S. investors that while the terms “measured resources”, “indicated resources” and “inferred resources” are recognized and required by Canadian regulations, the SEC does not recognize these terms. U.S. investors are cautioned not to assume that any part or all of the material in the mineral resource categories will be converted into mineral reserves. References to such terms are contained in the Company’s Form 10-K and other publicly available filings. We further advise U.S. investors that the mineral reserve estimates disclosed in this report have been prepared in accordance with Canadian regulations and may not qualify as “reserves” under the SEC Industry Guide 7. Accordingly, information concerning mineral resources and reserves set forth herein may not be comparable with information presented by companies using only U.S. standards in their public disclosure. Additional Information Further information on Golden Queen Mining Co. Ltd. is available on the SEDAR web site at www.sedar.com and on the Company’s web site at www.goldenqueen.com. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk We hold all of our cash in bank deposits with a single major Canadian financial institution. Based on the average cash balances during the three months ended March 31, 2012, a 1% decrease in interest rates would have reduced the interest income for the quarter ended March 31, 2012 to $Nil. Foreign Currency Exchange Risk Currency exchange fluctuations may impact the costs of our operations. Specifically, the appreciation of the C$ against the U.S.$ may result in an increase in our Canadian operating costs in U.S. dollar terms. We typically maintain approximately 98% of our cash balances in C$. We currently do not engage in any currency hedging activities. Commodity Price Risk Our primary business activity is the development of a gold-silver, open pit,, heap leach operation on the Soledad Mountain property. Decreases in the price of either gold or silver from current levels has the potential to negatively impact our ability to secure the significant additional financing required to develop the Project into an operating mine. We do not currently engage in hedging transactions and we have no hedged mineral resources. Item 4. Controls and Procedures. Timely Disclosure The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the “Exchange Act.” These rules refer to the controls and other procedures of a company that are designed to ensure that the information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the required time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our Exchange Act reports is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. It is management’s responsibility to establish and maintain adequate internal control over financial reporting for the Company. As of December 31, 2011 our Chief Executive Officer and Chief Financial Officer, and our external SOX consultants carried out an evaluation of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, and the material weaknesses outlined below, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Internal Control over Financial Reporting Our management is responsible for establishing and maintaining effective internal control over financial reporting. Under the supervision of our Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2011 using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of March 31, 2012, the Company determined that there were deficiencies that constituted material weaknesses, as described below:
Management is currently evaluating and implementing remediation plans for any control deficiencies. In light of the existence of these control deficiencies, management concluded that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls. As a result, management has concluded that the Company did not maintain effective internal control over financial reporting as of March 31, 2012 based on criteria established in Internal Control—Integrated Framework issued by COSO. Changes in Internal Control There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II – OTHER INFORMATION Item 6. Exhibits
SIGNATURES Pursuant to the requirements 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.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||