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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2012
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
Commission File Number 000-52499
DEL TORO SILVER CORP.
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.
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant 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
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
Check whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Our unaudited interim financial statements for the three and six month periods ended April 30, 2012 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.
DEL TORO SILVER CORP.
CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED APRIL 30, 2012 (UNAUDITED) AND OCTOBER 31, 2011
See accompanying notes to financial statements.
See accompanying notes to financial statements.
See accompanying notes to financial statements.
NOTE 1 NATURE OF OPERATIONS AND CONTINUANCE OF BUSINESS
Del Toro Silver Corp. (the Company) was incorporated on January 9, 2006 as Candev Resource Exploration, Inc. under the laws of the State of Nevada and extra-provincially registered under the laws of the Province of British Columbia on August 15, 2006. Effective July 28, 2009, the Company completed a merger with its wholly owned subsidiary, Del Toro Silver Corp., a Nevada corporation which was incorporated on July 7, 2009 solely to change the Companys name to Del Toro Silver Corp. The Company is an exploration stage company engaged in the acquisition, exploration and development of mineral properties.
These financial statements have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. As of April 30, 2012, the Company has not earned any revenue, has a working capital deficit of $81,240, and an accumulated deficit of $1,180,351. The continued operations of the Company are dependent on its ability to generate future cash flows or obtain additional financing. These factors raise substantial doubt about the Companys ability to continue as a going concern. These financial statements do not include any adjustments to the recorded assets or liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation The financial statements and the related notes of the Company are prepared in accordance with generally accepted accounting principles in the United States and are expressed in US dollars. The Companys fiscal year end is October 31.
Interim Financial Statements These interim unaudited financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the Companys audited financial statements and notes thereto for the year ended October 31, 2011
The financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Companys financial position at April 30, 2012, and the results of its operations and cash flows for the six month period ended April 30, 2012 and 2011. The results of operations for the period ended April 30, 2012 is not necessarily indicative of the results to be expected for future quarters or the full year.
Recent Accounting Pronouncements The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Cash and Cash Equivalents The Company considers all highly liquid investments with maturity of three months or less at the date of acquisition to be cash equivalents.
Receivable Receivables consist principally of input sale tax credit due from Canada.
Prepaid Expenses Prepaid expenses are expenses paid by the Company in cash or stock before they are used or consumed.
Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist principally of amounts due to suppliers.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Mineral Property Exploration and Development The Company has been in the exploration stage since its inception and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized. The Company assesses the carrying costs for impairment under ASC 360 Property, Plant and Equipment at each fiscal quarter end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.
Due to Related Parties Due to related parties consist principally of amounts due to officers and directors of the Company, in respect of expenditures paid by officers and directors on behalf of the Company.
NOTE 3 MINERAL PROPERTIES
On July 7, 2009, and as amended on June 25, 2010 and October 21, 2010, the Company entered into an option agreement (the Agreement) to acquire a 50% undivided interest in the Dos Naciones Property located in Sonora, Mexico. Under the terms of the Agreement, the Company paid a purchase price of $29,658 (Cdn $35,000) and has an option to acquire a further 20% interest in the property subject to the following terms:
If the Company exercises the option, the Company will be deemed to enter into a joint venture agreement in accordance with the terms of the Option Agreement.
During the six months ended April 30, 2012, the Company incurred $34,163 in drilling costs on the property.
NOTE 4 COMMON SHARES
Year Ended October 31, 2011
NOTE 4 COMMON SHARES (CONTINUED)
Quarter Ended January 31, 2012
Quarter Ended April 30, 2012
NOTE 5 SHARE PURCHASE WARRANTS
The following table summarizes the continuity of share purchase warrants:
As at April 30, 2012, the following share purchase warrants were outstanding:
NOTE 6 STOCK OPTIONS
On September 7, 2010, the Company adopted a stock option plan allowing for the issuance of stock options to acquire up to 5,000,000 common shares. As at April 30, 2012, there were 4,000,000 shares available for issuance under the Companys stock option plan.
NOTE 6 STOCK OPTIONS (CONTINUED)
The following table summarizes the continuity of the Companys stock options:
Additional information regarding stock options as of April 30, 2012, is as follows:
As of April 30, 2012, the Company had no unrecognized compensation expense relating to unvested options.
NOTE 7 RELATED PARTY TRANSACTIONS
On April 30, 2012, the Company owed $56,649 to officers and directors of the Company (October 31, 2011 - $200). The amounts owing are unsecured, non-interest bearing, and due on demand.
NOTE 8 COMMITMENTS
The Company entered into an investor relations agreement with a consulting company on January 26, 2012. Pursuant to the agreement, the Company agreed to pay $1,000 and issue an aggregate of 140,000 common shares during the next six months. As of April 30, 2012 40,000 shares have been issued relative to this agreement. During the quarter ended April 30, 2012, both parties have agreed to temporarily delay the agreement.
NOTE 9 CONVERTIBLE DEBENTURE
On February 29, 2012, the Company issued a convertible debenture with a non-related party for $40,000. Under the terms of the debenture, the amount is unsecured, with a stated interest rate of 8% per annum, and is due on or before December 2, 2012. Any amount of principal or interest on this debenture which is not paid when due will bear interest at the rate of 22% per annum from the due date thereof. The debenture is convertible into common shares of the Company commencing August 27, 2012 (180 days from the issuance date), at a conversion price equal to 58% of the market price on conversion date, where the market price is equal to the average of the lowest three trading prices
NOTE 9 CONVERTIBLE DEBENTURE (CONTINUED)
in the prior ten trading days as of the conversion date. The conversion feature limits issuing shares of stock to 4.99% of the total issued and outstanding shares.
NOTE 10 SUBSEQUENT EVENTS
On May 26, 2012, the Company formalized a convertible loan agreement with officers and directors described in Note 7. Under the terms of the convertible loan agreement, the officers and directors agreed to loan the Company the sum of $104,000, of which $56,649 was advanced to the Company as of April 30, 2012. The principal amount of the loan plus any accrued and unpaid interest shall be due and payable in full one year from the advancement date. The officers and directors may provide the Company with written notice of conversion at any time to exercise their rights of conversion in respect of either a portion of or the total outstanding amount of the loan plus accrued interest as of that date into shares of the Company at the price of $0.06 per share. The loan shall bear interest at a rate of 8% per annum.
Management has evaluated subsequent events through the date of the report, the date which the financial statements were available to be issued. Other than what has been disclosed above, management noted no significant events subsequent to the balance sheet date.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our consolidated unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "US$" refer to United States dollars and all references to "common stock" refer to the common shares in our capital stock.
As used in this quarterly report, the terms we, us, our and our company mean Del Toro Silver Corp., unless otherwise indicated.
Our company was incorporated on January 9, 2006 as Candev Resource Exploration, Inc. under the laws of the State of Nevada and extra-provincially registered under the laws of the Province of British Columbia on August 15, 2006. Effective July 28, 2009, our company completed a merger with our wholly owned subsidiary, Del Toro Silver Corp., a Nevada corporation, which was incorporated on July 7, 2009 solely to change our companys name to Del Toro Silver Corp.
Our head office is located at 320 North Carson Street, Carson City, Nevada 89701.
Our Current Business
We are presently an exploration stage company focused on conducting exploration activities on our Dos Naciones property in Mexico. In November 2011, our management announced that our company will begin to change our corporate strategy to target high grade precious metals properties, located in the western US, with the potential for near-term production and positive cash flow. In keeping with this strategy on November 14, 2011, we entered into an asset sale agreement with Bowerman Holdings LLC to acquire up to 75% of Bowermans 100% right, title and interest in and to 31 KM mining claims and 17 Raddlefinger mining claims located in Siskiyou County, California. Closing of the acquisition is scheduled to occur by August 10, 2012, unless otherwise agreed by the parties, and is subject to satisfactory completion of due diligence by our company.
While our corporate strategy has changed we remain focused on exercising our option under an option agreement with Yale Resources Ltd. dated July 7, 2009, as amended June 25, 2010 and October 21, 2010. The Dos Naciones property is located approximately 140 km north northeast of the city of Hermosillo, in north-central Sonora, Mexico and is approximately 75 km southwest of the important Cananea mining district. The Dos Naciones property is comprised of one mineral concession that covers approximately 2,391 hectares.
Plan of Operation
Our plan of operation is to carry out exploration work on our Dos Naciones property in order to ascertain whether it possesses commercially exploitable quantities of gold, silver, and other metals. We intend to primarily explore for gold, silver, and copper but if we discover that our mineral property holds potential for other minerals that our management determines are worth exploring further, then we intend to explore for those other minerals. We will not be able to determine whether or not the Dos Naciones property contains a commercially exploitable mineral deposit, or reserve, until appropriate exploratory work is done and an economic evaluation based on that work indicates economic viability.
The three phase exploration program on the Dos Naciones property carries an aggregate estimated cost of $448,250. The first phase of our exploration program was completed during the quarter ended October 31, 2010 and consisted of detailed geological mapping, sampling, hand trenching and prospecting. In July, 2010 our companys operator on the Dos Naciones property engaged geological consultants to conduct mapping and sampling on the property. Our company commenced the second phase of its exploration program in September 2011. The results of the first work comprising the second phase of our exploration program warrant the continuation into the second phase of the program. The timing and scale of the next work program has yet to be determined but the company is working with Yale to determine how best to advance the exploration at Dos Naciones.
We anticipate that we will incur the following expenses over the next twelve months:
As of April 30, 2012 we had cash of $6,235.
Based on the above estimated annual expenses of $235,000, we do not have enough funds to proceed with our plan of operation over the next twelve months. We plan to rely on equity financing in order to raise any additional funds necessary to pursue our plan of operation and to fund our working capital deficit in order to enable us to pay our accounts payable and accrued liabilities. We currently do not have any arrangements in place for the completion of any equity financings and there is no assurance that we will be successful in completing any equity financings.
Results of Operations
The following discussion of our results of operations should be read in conjunction with our unaudited financial statements for the three and six month periods ended April 30, 2012 which are included herein.
Our operating results for the three and six month periods ended April 30, 2012 and 2011 are summarized as follows:
General and Administrative
The $28,187 decrease in our general and administrative expenses for the three month period ended April 30, 2012 compared to the three month period ended April 30, 2011 was primarily due to a decrease in professional fees.
The $29,153 increase in our general and administrative expenses for the six month period ended April 30, 2012 compared to the six month period ended April 30, 2011 was primarily due to an overall increase in legal and accounting expenses and an increase in shareholder communication and promotional expenses.
Other Income/ Expenses
Our interest expenses decreased by $14,032 during the three month period ended April 30, 2012 compared to the three month period ended April 30, 2011 primarily due to accrued interest on debt debentures in the prior period.
Our interest expenses decreased by $36,949 during the six month period ended April 30, 2012 compared to the six month period ended April 30, 2011 primarily due to accrued interest on debt debentures and interest on corporate income tax in the prior period.
Liquidity and Capital Resources
We anticipate that we will incur approximately $235,000 for operating expenses, including professional, legal and accounting expenses associated with our reporting requirements under the Exchange Act during the next twelve months. As of April 30, 2012 we had cash of $6,235, accordingly, we will need to obtain additional financing in order to complete our business plan.
Cash Used For Operating Activities
We used cash in operating activities in the amount of $111,356 during the six month period ended April 30, 2012 and $119,877 during the six month period ended April 30, 2011. Cash used in operating activities for both periods was funded by cash from financing activities. The $8,521 decrease compared to the six month period end April 30, 2011 was due to timing differences between the ongoing needs for general and administrative expenses.
Cash Provided by Financing Activities
We generated cash of $93,503 from financing activities during the six month period ended April 30, 2012 compared to cash generated of $64,704 from financing activities during the six month period ended April 30, 2011. The increase was also due to timing differences between the ongoing needs for general and administrative expenses.
The financial statements accompanying this report have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has not generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As of April 30, 2012, our company has accumulated losses of $1,180,351 since inception. We do not have sufficient working capital to enable us to carry out our stated plan of operation for the next twelve months.
Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above in their report on the financial statements for the year ended October 31, 2011, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Managements Report on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer) and chief financial officer (our principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.
As the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer) and chief financial officer (our principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer) and chief financial officer (our principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective in providing reasonable assurance in the reliability of our reports as of the end of the period covered by this quarterly report.
Changes in Internal Control over Financial Reporting
During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We know of no material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
Item 1A. Risk Factors
In addition to the risk and uncertainties discussed herein, particularly those in the Safe Harbor Cautionary Statement and the other sections of Managements Discussion and Analysis of Financial Conditions and Results of Operations in Part I, Item 2, see the risk factors set forth in Part I, Item 1A of our annual report on Form 10-K for the fiscal year ended October 31, 2011.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mining Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.