Delaware
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0-51600
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20-3690109
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||
(State or Other Jurisdiction of Incorporation)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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665 Anderson Street, Winnemucca, Nevada, 89445 | ||
(Address of Principal Executive Office) (Zip Code)
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(775) 625-3600
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||
(Issuer’s telephone number, including area code)
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N/A
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||
(Former name, former address and former fiscal year, if changed since last report)
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Large accelerated filer
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o
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Accelerated filer
|
o
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Non-accelerated filer
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o
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Smaller reporting company
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þ
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1.
|
Consolidated Statement of Operations: Allocated stock based compensation to type of expense incurred
|
2.
|
Consolidated Statement of Operations: Recomputed Basic and Diluted Loss per Share to reflect shares issued that are held in escrow
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3.
|
Consolidated Balance Sheets and Consolidated Statement of Operations: Recorded the fair value of an earned option to receive shares in an arms-length company.
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4.
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Consolidated Balance Sheets, Consolidated Statement of Operations, Consolidated Statement of Cash Flows and Consolidated Statement of of Stockholder’s Equity: Adopted amended provisions of ASC 815. Warrants and Options issued with exercise prices denominated in Canadian dollars are now recorded as liabilities whereas they were previously recorded as equity.
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5.
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Corresponding Management Discussion and Analysis has been amended to reflect the changes to the Company’s Financial Statements that have been amended by this Form 10-Q/A.
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PART I. – FINANCIAL INFORMATION
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|||
Item 1.
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Financial Statements
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1
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Consolidated Balance Sheets at December 31, 2009 (unaudited) and June 30, 2009 (audited)
|
2
|
||
Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2009 and for the Three and Six Months Ended December 31, 2008 (unaudited) and Cumulative Since
Inception, (March 29, 2005 to December 31, 2009)
|
3
|
||
Consolidated Statements of Cash Flows for the Period Ended December 31, 2009 and December 31, 2008 and Cumulative Since Inception to December 31, 2008 (unaudited)
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4
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||
Consolidated Statement of Stockholders’ Equity for the Period Ended December 31, 2009 (unaudited)
|
5
|
||
Notes to Interim Financial Statements as of December 31, 2009
|
7
|
||
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operation
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34
|
|
Item 3.
|
Quantitative and Qualitative Disclosure About Market Risk
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42
|
|
Item 4.
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Controls and Procedures
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42
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Item 4T.
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The information required by Item 4t is contained in Item 4.
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42
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PART II. – OTHER INFORMATION
|
34
|
||
Item 1
|
Legal Proceedings.
|
43
|
|
Item 1A.
|
Risk Factors
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43
|
|
Item 2.
|
Unregistered Sales of Equity Securities.
|
43
|
|
Item 3.
|
Defaults upon senior securities.
|
43
|
|
Item 4.
|
Submission of matters to a vote of security holders.
|
43
|
|
Item 5.
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Other information
|
43
|
|
Item 6.
|
Exhibits
|
44
|
As at December 31,
2009 (Unaudited)
(Restated)
|
As at June 30,
2009 (Audited)
|
|||||||
Assets
|
||||||||
Current Assets
|
||||||||
Cash and cash equivalents
|
$ | 19,095,311 | $ | 7,040,999 | ||||
Amounts receivable
|
473,052 | 221,267 | ||||||
Notes Receivable (Note 9)
|
- | 91,365 | ||||||
Equity conversion right (Note 13)
|
1,337,700 | |||||||
Prepaid and Deposits
|
51,971 | 82,583 | ||||||
Term deposit
|
1,053,811 | 1,063,772 | ||||||
22,011,845 | 8,499,986 | |||||||
Long Term Assets
|
||||||||
Mineral properties (Note 7)
|
22,111,203 | 18,436,951 | ||||||
Fixed assets (Note 8)
|
517,661 | 520,858 | ||||||
22,628,864 | 18,957,809 | |||||||
$ | 44,640,709 | $ | 27,457,795 | |||||
Liabilities and Stockholders’ Equity
|
||||||||
Liabilities
|
||||||||
Current Liabilities
|
||||||||
Accounts payable
|
$ | 287,240 | $ | 383,445 | ||||
Warrant Liability (Note 2)
|
13,333,127 | - | ||||||
13,620,367 | 383,445 | |||||||
Stockholders’ Equity
|
||||||||
Capital stock (Note 5)
|
102,392 | 83,018 | ||||||
Additional paid in capital
|
74,596,812 | 52,506,278 | ||||||
Contributed surplus
|
14,591,970 | 17,969,510 | ||||||
Deficit accumulated during the exploration stage
|
(58,041,906 | ) | (43,197,264 | ) | ||||
Cumulative translation adjustment
|
(228,926 | ) | (287,192 | ) | ||||
31,020,342 | 27,074,350 | |||||||
$ | 44,640,709 | $ | 27,457,795 |
Three Month
Period Ended
December 31,
2009
|
Six Month
Period Ended
December 31,
2009
|
Three Month
Period Ended
December 31,
2008
|
Six Month
Period Ended
December 31,
2008
|
Cumulative Since Inception March 29, 2005 to
December 31, 2009
|
||||||||||||||||
(Restated)
|
(Restated)
|
(Restated)
|
(Restated)
|
(Restated)
|
||||||||||||||||
Revenue
|
||||||||||||||||||||
Interest Income
|
$ | - | $ | 66,309 | $ | 52,930 | $ | 150,207 | $ | 1,036,623 | ||||||||||
Expenses:
|
||||||||||||||||||||
Incorporation Costs
|
- | - | - | - | 1,773 | |||||||||||||||
Exploration
|
1,538,070 | 2,616,569 | 486,295 | 2,335,334 | 20,370,042 | |||||||||||||||
Professional Fees
|
167,442 | 407,374 | 173,597 | 408,573 | 5,701,023 | |||||||||||||||
Travel & Lodging
|
64,986 | 87,110 | 41,385 | 114,338 | 943,716 | |||||||||||||||
Corporate Communications
|
46,564 | 86,190 | 202,839 | 458,125 | 2,871,148 | |||||||||||||||
Consulting Fees
|
111,816 | 345,998 | 224,708 | 552,879 | 13,732,381 | |||||||||||||||
Office & Administration
|
71,827 | 152,764 | 266,245 | 582,634 | 2,079,447 | |||||||||||||||
Interest & Service Charges
|
32,115 | 50,347 | 1,452 | 3,991 | 77,751 | |||||||||||||||
Loss on disposal of Fixed Assets
|
- | - | - | 44,669 | 44,669 | |||||||||||||||
Insurance
|
11,367 | 25,511 | 20,626 | 48,819 | 253,579 | |||||||||||||||
Depreciation
|
16,614 | 31,265 | 24,930 | 52,278 | 261,177 | |||||||||||||||
Miscellaneous
|
(30,118 | ) | (25,103 | ) | (990 | ) | (2,738 | ) | 159,873 | |||||||||||
Financing & Listing Fees
|
77,484 | 77,484 | 12,525 | 12,525 | 55,460 | |||||||||||||||
Acquisition Expenses
|
695,721 | 1,060,180 | - | - | 1,060,179 | |||||||||||||||
Write Down of Mineral Property
|
275,000 | 275,000 | - | - | 1,746,049 | |||||||||||||||
Total Expense
|
3,078,888 | 5,190,689 | 1,453,612 | 4,611,427 | 49,358,267 | |||||||||||||||
Net Loss before other item
|
3,078,888 | 5,124,380 | 1,400,682 | 4,461,220 | 48,321,644 | |||||||||||||||
Other item
|
||||||||||||||||||||
Change in fair value of warrant liability
|
170,674 | (2,917,613 | ) | - | - | 9,720,262 | ||||||||||||||
Net Loss
|
3,249,562 | 2,206,767 | 1,400,682 | 4,461,220 | 58,041,906 | |||||||||||||||
Other comprehensive loss (income)
|
||||||||||||||||||||
Foreign Currency Translation Adjustment
|
(47,603 | ) | (58,266 | ) | 192,598 | 224,892 | 228,926 | |||||||||||||
Total Comprehensive Loss for the Period
|
$ | 3,201,959 | $ | 2,148,501 | $ | 1,593,280 | $ | 4,686,112 | $ | 58,270,832 | ||||||||||
Loss per Common Share
|
||||||||||||||||||||
Basic
|
$ | 0.03 | $ | 0.02 | $ | 0.02 | $ | 0.08 | ||||||||||||
Diluted
|
$ | 0.03 | $ | 0.02 | $ | 0.02 | $ | 0.08 | ||||||||||||
Weighted Average Number of Common Shares Used in Per Share Calculations
|
||||||||||||||||||||
Basic
|
94,264,765 | 86,394,206 | 57,674,756 | 55,148,086 | ||||||||||||||||
Diluted
|
98,764,765 | 90,894,206 | 57,674,756 | 55,148,086 |
For the Six Month
Period Ended
December 31, 2009
|
For the Six Month
Period Ended
December 31, 2008
|
Cumulative Since
Inception to
December 31, 2009
|
||||||||||
(Restated)
|
(Restated)
|
|||||||||||
Operating Activities:
|
||||||||||||
Net Loss
|
$ | (2,206,767 | ) | $ | (4,462,220 | ) | $ | (58,041,906 | ) | |||
Adjustment for:
|
||||||||||||
Depreciation
|
31,265 | 53,278 | 261,177 | |||||||||
Allowance for doubtful accounts
|
- | 172,170 | 172,170 | |||||||||
Loss on disposal of assets
|
- | 44,669 | 44,669 | |||||||||
Write down on mineral property
|
275,000 | - | 275,000 | |||||||||
Stock based compensation
|
209,191 | 547,153 | 17,827,923 | |||||||||
Accrued interest
|
- | (21,364 | ) | (58,875 | ) | |||||||
Change in fair value of warrant liability
|
(2,917,613 | ) | - | 9,720,262 | ||||||||
(Increase) Decrease in accounts receivable
|
(251,785 | ) | 946,537 | (620,394 | ) | |||||||
(Increase) Decrease in prepaid expenses
|
30,612 | 196,075 | 129,451 | |||||||||
Increase (Decrease) in accounts payable
|
(96,205 | ) | (391,563 | ) | 55,219 | |||||||
Cash used in Operating Activities
|
(4,926,302 | ) | (2,915,265 | ) | (30,235,304 | ) | ||||||
Investing Activities:
|
||||||||||||
Purchase of GIC receivable
|
- | (16,384 | ) | (1,004,897 | ) | |||||||
Note receivable
|
91,365 | (500,000 | ) | (3,253,192 | ) | |||||||
Purchase of equity conversion right
|
(1,337,700 | ) | - | (1,337,700 | ) | |||||||
Purchase of Mineral Properties
|
(3,574,251 | ) | (112,000 | ) | (4,400,168 | ) | ||||||
Purchase of Equipment
|
(28,068 | ) | (343,443 | ) | (98,068 | ) | ||||||
Cash used in Investing Activities
|
(4,848,654 | ) | (971,827 | ) | (10,094,025 | ) | ||||||
Financing Activities:
|
||||||||||||
Increase (decrease) in demand notes payable
|
- | - | 105,580 | |||||||||
Issuance of capital stock
|
21,761,042 | 2,859,676 | 59,557,202 | |||||||||
Cash from Financing Activities:
|
21,761,042 | 2,859,676 | 59,662,782 | |||||||||
Effect of exchange rate changes on cash
|
68,226 | (88,954 | ) | (238,142 | ) | |||||||
Increase (Decrease) in Cash
|
12,054,312 | (1,116,370 | ) | 19,095,311 | ||||||||
Cash, beginning
|
7,040,999 | 3,199,848 | - | |||||||||
Cash, ending
|
$ | 19,095,311 | $ | 2,083,478 | $ | 19,095,311 | ||||||
Supplemental Cash Flow Disclosure:
|
||||||||||||
Interest Received
|
$ | 7,642 | $ | 36,994 | 7,642 | |||||||
Taxes Paid
|
- | - | - | |||||||||
Cash
|
2,066,115 | 1,687,439 | 2,066,115 | |||||||||
Short term investments
|
17,021,554 | 394,883 | 17,021,554 |
Shares
|
Par Value
|
Capital in
Excess of Par Value
|
Accumulated
Earnings (Deficiency)
|
Contributed
Surplus
|
Cumulative Translation Adjustment
|
Total Stockholders Equity
|
||||||||||||||||||||||
Balance at June 30, 2007
|
46,502,478 | 46,502 | 28,742,381 | (17,546,124 | ) | 10,159,322 | 8,412 | 21,410,493 | ||||||||||||||||||||
Capital issued for financing
|
1,000,000 | 1,000 | 1,778,590 | - | - | - | 1,779,590 | |||||||||||||||||||||
Capital issued for services
|
770,000 | 770 | 1,593,582 | - | - | - | 1,594,352 | |||||||||||||||||||||
Capital issued for mineral properties
|
268,519 | 269 | 489,731 | - | - | - | 490,000 | |||||||||||||||||||||
Fair Value of warrants
|
- | - | - | - | 470,410 | 470,410 | ||||||||||||||||||||||
Stock based compensation
|
- | - | - | - | 2,911,213 | - | 2,911,213 | |||||||||||||||||||||
Foreign currency translation
|
- | - | - | - | - | (28,389 | ) | (28,389 | ) | |||||||||||||||||||
Net Income (loss)
|
- | - | - | (18,409,961 | ) | - | - | (18,409,961 | ) | |||||||||||||||||||
Balance at June 30, 2008
|
48,540,997 | 48,541 | 32,604,284 | (35,956,085 | ) | 13,540,945 | (19,977 | ) | 10,217,708 | |||||||||||||||||||
Capital issued for financing
|
16,707,791 | 16,707 | 5,828,684 | - | - | - | 5,845,391 | |||||||||||||||||||||
Capital issued for services
|
1,184,804 | 1,185 | 683,437 | - | - | - | 684,622 | |||||||||||||||||||||
Capital issued from stock options exercised
|
384,627 | 385 | 249,623 | - | (237,008 | ) | - | 13,000 | ||||||||||||||||||||
Capital issued for mineral properties
|
16,200,000 | 16,200 | 13,140,250 | - | - | - | 13,156,450 | |||||||||||||||||||||
Fair Value of warrants
|
- | - | - | - | 3,612,864 | - | 3,612,864 | |||||||||||||||||||||
Stock based compensation
|
- | - | - | - | 1,052,709 | - | 1,052,709 | |||||||||||||||||||||
Foreign currency translation
|
- | - | - | - | - | (267,215 | ) | (267,215 | ) | |||||||||||||||||||
Net Income (loss)
|
- | - | - | (7,241,179 | ) | - | - | (7,241,179 | ) | |||||||||||||||||||
Balance at June 30, 2009
|
83,018,219 | 83,018 | 52,506,278 | (43,197,264 | ) | 17,969,510 | (287,192 | ) | 27,074,350 |
Shares
|
Par Value
|
Capital in Excess
of Par Value
|
Accumulated
Earnings (Deficiency)
|
Contributed
Surplus
|
Cumulative
Translation Adjustment
|
Total Stockholders’ Equity
|
||||||||||||||||||||||
(Restated)
|
(Restated)
|
(Restated)
|
||||||||||||||||||||||||||
Balance at June 30, 2009
|
83,018,219 | 83,018 | 52,506,278 | (43,197,264 | ) | 17,969,510 | (287,192 | ) | 27,074,350 | |||||||||||||||||||
Capital issued from stock options exercised
|
5,429 | 5 | 3,524 | - | (3,529 | ) | - | - | ||||||||||||||||||||
Stock based compensation
|
- | - | - | - | 161,975 | - | 161,975 | |||||||||||||||||||||
Transition Adjustment (Note 2)
|
- | - | - | (12,637,875 | ) | (3,612,865 | ) | (16,250,740 | ) | |||||||||||||||||||
Foreign currency translation
|
- | - | - | - | - | 10,663 | 10,663 | |||||||||||||||||||||
Net Income (loss)
|
- | - | - | 1,042,795 | - | - | 1,042,795 | |||||||||||||||||||||
Balance at September 30, 2009
|
83,023,648 | 83,023 | 52,509,802 | (54,792,344 | ) | 14,515,091 | (276,529 | ) | 12,039,043 | |||||||||||||||||||
Capital issued for financing
|
18,400,000 | 18,400 | 21,371,043 | - | - | 21,389,443 | ||||||||||||||||||||||
Capital issued for mineral properties
|
300,000 | 300 | 374,700 | - | - | 375,000 | ||||||||||||||||||||||
Capital issued from stock options and warrants exercised
|
668,979 | 669 | 341,267 | - | 29,663 | - | 371,599 | |||||||||||||||||||||
Stock based compensation
|
- | - | - | - | 47,216 | - | 47,216 | |||||||||||||||||||||
Foreign currency translation
|
- | - | - | - | - | 47,603 | 47,603 | |||||||||||||||||||||
Net Income (loss)
|
- | - | - | (3,249,562 | ) | - | - | (3,249,563 | ) | |||||||||||||||||||
Balance at December 31, 2009
|
102,392,627 | 102,392 | 74,596,812 | (58,041,906 | ) | 14,591,970 | (228,926 | ) | 31,020,342 |
a)
|
The Company, incorporated under the General Corporation Law of the State of Delaware, is a natural resource company engaged in the acquisition, exploration and development of gold, silver and precious metal properties. The unaudited consolidated financial statements of Paramount Gold and Silver Corp. (“The Company”) include the accounts of its wholly owned subsidiaries, Paramount Gold de Mexico S.A. de C.V., Magnetic Resources Ltd, and Compania Minera Paramount SAC. On August 23, 2007 the board of directors and stockholders’ approved the name change from Paramount Gold Mining Corp. to Paramount Gold & Silver Corp.
These unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. These financial statements are condensed and do not include all disclosures required for annual financial statements. The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to the Company’s audited consolidated financial statements filed as part of the Company’s June 30, 2009 Annual Report on Form 10-K. This quarterly report should be read in conjunction with the annual report.
In the opinion of the Company’s management, these consolidated financial statements reflect all adjustments necessary to present fairly the Company’s consolidated financial position at December 31, 2009, and the consolidated results of operations and the consolidated statements of cash flows for the six months ended December 31, 2009 and 2008. The results of operations for the three and six months ended December 31, 2009 are not necessarily indicative of the results to be expected for the entire fiscal year.
|
b)
|
Use of Estimates
The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
|
c)
|
Exploration Stage Enterprise
The Company’s consolidated financial statements are prepared using the accrual method of accounting and according to the provision of FASB ASC 915, “Accounting and Reporting for Development Stage Enterprises”, as it were devoting substantially all of its efforts to acquiring and exploring mineral properties. It is industry practice that mining companies in the development stage are classified under Generally Accepted Accounting Principles as exploration stage companies. Until such properties are acquired and developed, the Company will continue to prepare its consolidated financial statements and related disclosures in accordance with entities in the exploration or development stage.
|
|
The consolidated financial statements are prepared by management in accordance with generally accepted accounting principles of the United States of America. The principal accounting policies followed by the Company are as follows:
Cash and Cash Equivalents
Cash and cash equivalents include cash and highly liquid investments with an original maturity of three months or less.
Fair Value of Financial Instruments
The fair market value of the Company’s financial instruments comprising cash, accounts receivable and accounts payable and accrued liabilities were estimated to approximate their carrying values due to immediate or short-term maturity of these financial instruments. The Company maintains cash balances at financial institutions which at times, exceed federally insured amounts. The Company has not experienced any material losses in such accounts.
Term Deposit
The GIC is non-redeemable until May 7, 2010 and bears an interest rate of 3.25% and has been pledged as collateral to support a letter of credit issued by a secured lender.
Notes Receivable
Notes receivable are classified as available-for-sale or held-to-maturity, depending on the Company’s intent with respect to holding such investments. If it is readily determinable, notes receivable classified as available-for-sale are accounted for at fair value. Unrealized gains and losses on available-for-sale securities are excluded from earnings and reported net of tax as a component of other comprehensive income within stockholders’ equity. Interest income is recognized when earned.
Stock Based Compensation
The Company has adopted the provisions of FASB ASC 718, “Stock Compensation” (“ ASC 718”), which establishes accounting for equity instruments exchanged for employee services. Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employees’ requisite service period (generally the vesting period of the equity grant).
Comprehensive Income
FASB ASC 220“Reporting Comprehensive Income” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As of December 31, 2009, the Company’s only component of comprehensive income is foreign currency translation adjustments.
|
Contributed
surplus
|
Warrant
liability
|
Accumulated
deficit
|
||||||||||
Grant date fair value of previously issued warrants outstanding as of July 1, 2009
|
3,612,865 | (3,612,865 | ) | — | ||||||||
Change in fair value of previously issued warrants outstanding as of July 1, 2009
|
— | (12,637,875 | ) | 12,637,875 | ||||||||
Cumulative effect of change in accounting principal
|
3,612,865 | (16,250,740 | ) | 12,637,875 |
Level 1
|
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
|
Level 2
|
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
Level 3
|
Inputs that are both significant to the fair value measurement and unobservable.
|
Fair Value at December 31, 2009
|
June 30, 2009
|
|||||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||||||
Assets
|
$ | $ | $ | $ | $ | |||||||||||||||
Cash equivalents
|
19,095,311 | 19,095,311 | 7,040,999 | |||||||||||||||||
Accounts receivable
|
473,052 | 473,052 | - | 221,267 | ||||||||||||||||
Notes receivable | - | 91,365 | ||||||||||||||||||
GIC | 1,053,811 | 1,053,811 | 1,063,772 | |||||||||||||||||
Equity conversion right
|
1,337,700 | 1,337,700 | − | |||||||||||||||||
Liabilities
|
||||||||||||||||||||
Warrant liability
|
13,333,127 | 13,333,127 | − |
December 31, 2009
|
|
Risk free interest rate
|
0.93%
|
Expected life of warrants and options
|
1-2 years
|
Expected stock price volatility
|
60% to 111%
|
Expected dividend yield
|
0%
|
Balance at September 30, 2009
|
13,162,453
|
Issuance of warrants and options
|
-
|
Change in fair value recorded in earnings
|
170,674
|
Transferred to equity upon exercise
|
-
|
Balance at December 31, 2009
|
13,333,127
|
(i)
|
Business Combinations
In December 2007, the FASB issued FASB ASC 805(revised 2007), Business Combinations (ASC 805). ASC 805 significantly changes the accounting for business combinations in a number of areas including the treatment of contingent consideration, pre acquisition contingencies, transaction costs, in-process research and development, and restructuring costs. In addition, under ASC 805, changes in an acquired entity's deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. ASC 805 is effective for fiscal periods beginning after December 15, 2008. The Company has adopted ASC 805 on July 1, 2009. This standard will change the accounting treatment for business combinations on a prospective basis.
In December 2007, the FASB issued ASC 810, “No controlling Interests in Consolidated Financial Statements – an amendment of Accounting Research Bulletin No. 51” (“ASC 810”), which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the non controlling interest, changes in a parent’s ownership interest and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. ASC 810 is effective for fiscal periods beginning after December 15, 2008. The Company has adopted ASC 810 on July 1, 2009. Adoption of this standard did not have a material impact on the Company’s financial position, results of operations, or cash flows.
|
(ii)
(iii)
|
ASC 815
In March 2008, the FASB issued ASC 815, Disclosures about Derivative Instruments and Hedging Activities (ASC 815). ASC 815 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This statement is effective for financial statements issued for fiscal periods beginning after November 15, 2008. The Company has adopted ASC 815 on July 1, 2009. Adoption of this standard did not have a material impact on the Company’s financial position, results of operations, or cash flows.
ASC 460
In May 2008, the FASB issued ASC 460, "Accounting for Financial Guarantee Insurance Contracts - an interpretation of FASB Statement No. 60." ASC 460 requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. ASC 460 will be effective for financial statements issued for fiscal years beginning after December 15, 2008.
|
(iv)
|
ASC 855
In May 2009, the FASB issued ASC 855, "Subsequent Events," which establishes general standards for accounting for, and disclosures of, events that occur after the balance sheet date, but before the financial statements are issued or are available to be issued. The pronouncement requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date and whether that date represents the date the financial statements were issued or were available to be issued. ASC 855 is effective with interim and annual financial periods ending after June 15, 2009. The Company adopted ASC 855on July 1, 2009. Adoption of this standard did not have an impact on the Company's results of operations, financial position, or cash flows.
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(v)
|
ASC 860
In June 2009, the FASB issued ASC 860, “Accounting for Transfers of Financial Assets—an amendment of FASB Statement” (“ASC 860”). ASC 860 is intended to establish standards of financial reporting for the transfer of assets to improve the relevance, representational faithfulness, and comparability. ASC 860 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2009. The Company will adopt ASC 860 on July 1, 2010. The Company has determined that the adoption of ASC 860 will have no impact will have on its consolidated financial statements.
|
(vi)
|
ASC 810
In June 2009, the FASB issued ASC 810, “Amendments to FASB Interpretation No. 46(R)” (“ASC 810”). ASC 810 eliminates the exception to consolidate a qualifying special-purpose entity, changes the approach to determining the primary beneficiary of a variable interest entity, and requires companies to more frequently re-assess whether they must consolidate variable interest entities. Under the new guidance, the primary beneficiary of a variable interest entity is identified qualitatively as the enterprise that has both (a) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance, and (b) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. ASC 810 becomes effective for the Company’s fiscal 2011 year-end and interim reporting periods thereafter. The Company does not expect ASC 810 to have a material impact on its financial statements.
|
(vii)
|
ASC 105-10-05
In July 2009, the FASB issued ASC 105-20-05, "FASB Accounting Standards Codification" ("ASC 105-10-05"), as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards are superseded as described in ASC 105-10-05. All other accounting literature not included in the Codification is non-authoritative. Management is currently evaluating the impact of the adoption of ASC 105-10-05 but does not expect the adoption of ASC 105-10-05 to impact the Company's results of operations, financial position, or cash flows.
|
|
(viii)
|
ASC 470-20
In May 2008, the FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP 14-1”). FSP 14-1 applies to convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement, unless the embedded conversion option is required to be separately accounted for as a derivative under FASB Statement No. 133. Convertible debt instruments within the scope of FSP 14-1 are not addressed by the existing APB 14. FSP 14-1 would require that the liability and equity components of convertible debt instruments within the scope of FSP 14-1 be separately accounted for in a manner that reflects the entity’s nonconvertible debt borrowing rate. This will require an allocation of the convertible debt proceeds between the liability component and the embedded conversion option (i.e., the equity component). The difference between the principal amount of the debt and the amount of the proceeds allocated to the liability component would be reported as a debt discount and subsequently amortized to earnings over the instrument’s expected life using the effective interest method. FSP APB 14-1 is effective for the Company’s fiscal year beginning July 1, 2009 and will be applied retrospectively to all periods presented. Adoption of this standard is not expected to have a material impact on the Company’s financial position, results of operations, or cash flows.
|
2009
|
2008
|
|||||||
Operating and Financing Activities
|
||||||||
From issuance of shares for consulting and geological services
|
$ | - | $ | 210,988 | ||||
From issuance of shares for cashless exercise of options
|
$ | 142,462 | $ | - | ||||
From issuance of shares for mineral property
|
$ | 375,000 | $ | 8,828,450 |
|
Authorized capital stock consists of 200,000,000 common shares with par value of $0.001 each. During the six month period ending December 31, 2009, the Company issued a total of 19,374,408 common shares which are summarized as follows:
|
2009 | 2008 | |||||||
Common Shares | ||||||||
Financing | 18,400,000 | 1,071,429 | ||||||
Acquisition of mineral properties | 300,000 | 7,350,000 | ||||||
For exercise of warrants and options | 674,408 | 551,206 | ||||||
19,374,408 | 8,972,635 |
Exercise
price
|
Number
of warrants
|
Remaining
contractual
life (years)
|
||||||||||
Warrants
|
.90 | 12,000,000 | 3.16 | |||||||||
Agent compensation warrants
|
.90 | 840,000 | 3.16 | |||||||||
Warrants
|
.85 | 3,636,362 | 1.00 | |||||||||
Warrants
|
2.15 | 35,715 | 1.10 | |||||||||
Outstanding and exercisable at December 31, 2009
|
16,512,077 |
December 31, 2009
|
December 31, 2008
|
|
Risk free interest rate
|
N/A
|
0.40%
|
Expected life of warrants
|
N/A
|
1 year
|
Expected stock price volatility
|
N/A
|
110%
|
Expected dividend yield
|
N/A
|
0%
|
December 31 ,
2009
|
June 30,
2009
|
|||||||
Vidette Lake – Canada
|
$ | - | $ | 275,000 | ||||
Temoris
|
4,074,754 | 4,074,754 | ||||||
Iris Royalty
|
50,000 | 50,000 | ||||||
Morelos
|
100,000 | 100,000 | ||||||
San Miguel Project
|
17,855,824 | 13,906,572 | ||||||
Andrea
|
20,625 | 20,625 | ||||||
Peru
|
10,000 | 10,000 | ||||||
$ | 22,111,203 | $ | 18,436,951 |
a.
|
San Miguel Project
The Company has an option to acquire a 100% in the La Blanca property located in Guazaparez, Chihuahua, Mexico. Pursuant to the option agreement, payments of $180,000 have been made. Furthermore, the company must pay a royalty of $1.00 for each ounce proven or probable gold reserves. No gold reserves have been established as at December 31, 2009. The Company has incurred $500,000 in exploration expenses.
The Company has a 100% interest in the Santa Cruz mining concession located in the San Miguel Project, subject to satisfactory title transfer. The terms of the agreement called for a payment of $50,000 prior to March 7, 2006 and the required payment was made by the Company. The option also includes a 3% NSR payable to optioner. This concession was acquired as part of the San Miguel asset project purchased from Tara Gold.
|
b.
|
Temoris
On March 19, 2009 the Company closed an agreement with Garibaldi Resources Corp. in which the company acquired the outstanding option on the Temoris project. The option covers an area of approximately 54,000 hectares adjacent to the San Miguel groupings and Andrea project. In consideration for the acquisition, the company paid Garibaldi $400,000 and issued six million shares of the Company’s common stock.
The shares of common stock were delivered to an escrow agent who released 500,000 shares of common stock six months from the date of closing and will release an additional 500,000 shares of common stock every three months thereafter.
On February 12, 2009, the company acquired all of the issued and outstanding shares of common stock of Magnetic Resources Ltd. (“Magnetic”). Magnetic is the sole beneficial stockholder of Minera Gama, S.A. de C.V. which holds interests in various mineral concessions in Mexico known as the Temoris Project and the Morelos Project and also holds a royalty in the Iris Project.
|
Total purchase price
|
$ | 775,000 | ||
Garibaldi mineral property
|
604,754 | |||
Irish mineral property
|
50,000 | |||
Moralos mineral property
|
100,000 | |||
Other asset
|
20,246 | |||
$ | 775,000 |
c.
|
Andrea
|
d.
|
Vidette Lake, Canada
|
Net Book Value
|
||||||||||||||||
Cost
|
Accumulated
Amortization |
December 31,
2009
|
June 30,
2009
|
|||||||||||||
Property and Equipment
|
$ | 729,454 | $ | 211,793 | $ | 517,661 | $ | 520,858 |
Maturity
Date
|
Interest
Rate
|
December 31,
2009
|
June 30,
2009
|
|||||||||||||
Note Receivable – Mexoro Minerals
|
September 18, 2009
|
8% per annum
|
$ | - | $ | 70,000 | ||||||||||
Note Receivable – Mexoro Minerals
|
May 7, 2009
|
8% per annum
|
- | - | ||||||||||||
July 10, 2009
|
8% per annum
|
- | - | |||||||||||||
Accrued Interest
|
- | - | - | 21,365 | ||||||||||||
$ | - | $ | 91,365 |
United
States
|
Mexico / Latin
America
|
Total
|
||||||||||
Interest income
|
$ | 66,244 | $ | 65 | $ | 66,309 | ||||||
Expenses:
|
||||||||||||
Exploration
|
(5,527 | ) | 2,160,625 | 2,155,098 | ||||||||
Professional fees
|
407,374 | - | 407,374 | |||||||||
Travel and lodging
|
87,110 | - | 87,110 | |||||||||
Geologist fees and expenses
|
372,725 | 88,746 | 461,471 | |||||||||
Corporate communications
|
86,190 | - | 86,190 | |||||||||
Consulting fees
|
345,998 | - | 345,998 | |||||||||
Office and administration
|
79,384 | 30,384 | 109,768 | |||||||||
Interest and service charges
|
48,416 | 1,931 | 50,347 | |||||||||
Loss on Disposal of Assets
|
- | - | - | |||||||||
Insurance
|
25,511 | - | 25,511 | |||||||||
Amortization
|
11,421 | 19,844 | 31,265 | |||||||||
Office
|
42,996 | - | 42,996 | |||||||||
Acquisition Expenses
|
1,060,180 | - | 1,060,180 | |||||||||
Miscellaneous
|
(25,103 | ) | - | (25,103 | ) | |||||||
Write off of mineral property
|
275,000 | - | 275,000 | |||||||||
Financing & listing fees
|
77,484 | - | 77,484 | |||||||||
Total Expenses
|
2,889,159 | 2,301,530 | 5,190,689 | |||||||||
Change in fair value of warrant liability
|
(2,917,613 | ) | - | (2,917,613 | ) | |||||||
Net loss
|
$ | (94,698 | ) | $ | 2,301,465 | $ | 2,206,767 |
United
States
|
Mexico / Latin
America
|
Total
|
||||||||||
Interest income
|
$ | 96,954 | $ | 53,253 | $ | 150,207 | ||||||
Expenses:
|
||||||||||||
Exploration (note 15)
|
685,007 | 1,170,448 | 1,855,455 | |||||||||
Professional fees
|
381,595 | 26,978 | 408,573 | |||||||||
Travel and lodging
|
114,338 | - | 114,338 | |||||||||
Geologist fees and expenses
|
258,395 | 221,484 | 479,879 | |||||||||
Corporate communications
|
138,698 | - | 138,698 | |||||||||
Consulting fees
|
552,879 | - | 552,879 | |||||||||
Marketing
|
319,427 | - | 319,427 | |||||||||
Office and administration
|
136,853 | 401,895 | 538,748 | |||||||||
Interest and service charges
|
3,018 | 973 | 3,991 | |||||||||
Loss on Disposal of Assets
|
- | 44,669 | 44,669 | |||||||||
Insurance
|
31,010 | 17,809 | 48,819 | |||||||||
Amortization
|
27,103 | 25,175 | 52,278 | |||||||||
Rent
|
43,886 | - | 43,886 | |||||||||
Financing
|
12,525 | - | 12,525 | |||||||||
Miscellaneous
|
(2,738 | ) | - | (2,738 | ) | |||||||
Total Expenses
|
2,701,996 | 1,909,431 | 4,611,427 | |||||||||
Net loss
|
$ | 2,605,042 | $ | 1,856,178 | $ | 4,461,220 |
United
States
|
Mexico / Latin
America
|
Total
|
||||||||||
December 31, 2009
|
||||||||||||
Mineral properties
|
$ | - | $ | 22,111,203 | $ | 22,111,203 | ||||||
Equipment
|
114,489 | 403,172 | 517,661 | |||||||||
December 31, 2008
|
||||||||||||
Mineral properties
|
$ | - | $ | 14,054,197 | $ | 14,054,197 | ||||||
Equipment
|
144,306 | 423,109 | $ | 567,415 |
Number
|
Weighted Avg.
Exercise Price
|
|||||||
Balance, beginning of period
|
4,612,000 | $ | 0.98 | |||||
Issued
|
- | - | ||||||
Cancelled / Expired
|
85,000 | 1.46 | ||||||
Exercised
|
232,000 | 0.65 | ||||||
Granted
|
- | - | ||||||
Balance, end of period
|
4,295,000 | $ | 0.98 |
December 31, 2009
|
December 31, 2008
|
|
Risk free interest rate
|
.040% - .47%
|
0.40%
|
Expected dividend yield
|
0%
|
0%
|
Expected stock price volatility
|
114% - 116%
|
110%
|
Expected life of options
|
3 years
|
2 to 5 years
|
Statement of Loss
|
Period ended
December 31,
2009
|
Period ended
December 31,
2008
|
||||||
Net loss based on US GAAP
|
$ | (2,206,767 | ) | $ | (4,461,220 | ) | ||
Deferred exploration costs prior to the establishment of proven and probable reserves
|
3,954,269 | 2,207,134 | ||||||
Net loss for the period based on Canadian GAAP
|
1,747,502 | (2,750,003 | ) |
December 31,
2009
|
December 31,
2008
|
|||||||
Stockholders’ Equity | ||||||||
Stockholders’ Equity based on US GAAP
|
$ | 31,020,342 | $ | 18,144,913 | ||||
Deferred exploration costs prior to the establishment of proven and probable reserves
|
20,555,886 | 13,131,097 | ||||||
Stockholders’ Equity based on Canadian GAAP
|
51,576,228 | 31,276,010 |
Mineral Properties
|
December 31,
2009
|
December 31,
2008
|
||||||
US GAAP
|
$ | 22,111,203 | $ | 14,054,197 | ||||
Deferred exploration costs prior to the establishment of proven and probable reserves
|
20,555,886 | 13,131,097 | ||||||
Canadian GAAP
|
42,667,089 | 27,185,294 |
December 31,
2009
|
December 31,
2008
|
|||||||
Cash used in operating activities
|
$ | (4,926,302 | ) | $ | ( 708,131 | ) | ||
Cash used in investing activities
|
(4,848,654 | ) | (3,178,961 | ) |
Period Ended
December 31, 2009
$
|
||||
Net loss, as previously reported
|
4,416,588 | |||
Adjustment for change in fair value of warrant liability (pre-tax)
|
170,674 | |||
Adjustment to record equity conversion right
|
(1,337,700 | ) | ||
Tax effect of restatement adjustment
|
- | |||
Net loss (gain), as restated
|
3,249,562 | |||
Basic net loss per share, as restated
|
0.03 | |||
Diluted net loss per share, as restated
|
0.03 |