Attached files
| file | filename |
|---|---|
| EX-31.1 - GRYPHON RESOURCES 10Q, CERTIFICATION 302, CEO - Ameritrust Corp | gryphonexh31_1.htm |
| EX-31.2 - GRYPHON RESOURCES 10Q, CERTIFICATION 302, CFO - Ameritrust Corp | gryphonexh31_2.htm |
| EX-32.1 - GRYPHON RESOURCES 10Q, CERTIFICATION 906, CEO/CFO - Ameritrust Corp | gryphonexh32_1.htm |
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 2009
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________________ TO _______________________
Commission File # 000-53371
GRYPHON RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
98-0465540
(IRS Employer Identification Number)
1313 East Maple Street, Suite 201-462
Bellingham, Washington 98225
(Address of principal executive offices) (Zip Code)
(360) 685-4238
(Registrant’s telephone no., including area code)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x
No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated file, or a smaller reporting company.
| Large accelerated filer | o | Accelerated filer | o |
| Non-accelerated filer | o | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o No x
The issuer had 96,525,000 shares of common stock issued and outstanding as of February 5, 2010.
GRYPHON RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Period Ended December 31, 2009
GRYPHON RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Consolidated Balance Sheets
|
December 31,
2009
(unaudited) |
September 30,
2009
(See Note 1) |
|||||||
|
ASSETS |
||||||||
|
CURRENT ASSETS |
||||||||
|
Cash |
$ | 18,479 | $ | 1,572 | ||||
|
Prepaid expenses |
1,713 | 1,782 | ||||||
|
Total current assets |
20,192 | 3,354 | ||||||
|
Total assets |
$ | 20,192 | $ | 3,354 | ||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
||||||||
|
CURRENT LIABILITIES |
||||||||
|
Accounts payable |
$ | 869 | $ | 7,550 | ||||
|
Loans payable (Note 8) |
83,020 | 81,654 | ||||||
|
Shareholder loans (Note 7) |
139,830 | 113,216 | ||||||
|
Total current liabilities |
223,719 | 202,420 | ||||||
|
Total liabilities |
223,719 | 202,420 | ||||||
|
STOCKHOLDERS’ EQUITY (DEFICIT) |
||||||||
|
Stockholders’ Equity (Deficit) (Note 4): |
||||||||
|
Common shares, 400,000,000 shares with par value $0.001 authorized, 96,525,000 shares issued and outstanding |
$ | 4,950 | $ | 4,950 | ||||
|
Paid-in Capital |
46,550 | 46,550 | ||||||
|
Accumulated deficit in the exploration stage |
(254,241 | ) | (249,796 | ) | ||||
|
Total Gryphon Resources, Inc. and Subsidiary equity |
(202,741 | ) | (198,296 | ) | ||||
|
Non-Controlling Interest (Note 6) |
(786 | ) | (770 | ) | ||||
|
Total stockholders’ equity (deficit) |
(203,527 | ) | (199,066 | ) | ||||
|
Total liabilities and stockholders’ equity (deficit) |
$ | 20,192 | $ | 3,354 | ||||
The accompanying notes to financial statements are an integral part of these consolidated financial statements
GRYPHON RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Consolidated Statements of Operations
(Unaudited)
|
Three months
ended
December 31,
2009 |
Three months
ended
December 31,
2008 |
January 16, 2006 (inception) through
December 31,
2009 |
||||||||||
|
EXPENSES: |
||||||||||||
|
Exploration expenses |
$ | - | $ | 652 | $ | 26,682 | ||||||
|
Salaries and wages |
70 | 3,308 | 47,480 | |||||||||
|
Professional and consultant fees |
228 | 3,000 | 94,628 | |||||||||
|
Administrative expenses |
1,482 | 7,636 | 50,249 | |||||||||
|
Investor relations |
- | - | 4,653 | |||||||||
|
Mineral properties impairment |
- | - | 18,998 | |||||||||
|
Total expenses |
1,780 | 14,596 | 242,690 | |||||||||
|
Net (loss) from Operations |
$ | (1,780 | ) | $ | (14,596 | ) | $ | (242,690 | ) | |||
|
Interest expense |
(2,681 | ) | (1,395 | ) | (12,337 | ) | ||||||
|
Net (Loss) |
$ | (4,461 | ) | $ | (15,991 | ) | $ | (255,027 | ) | |||
|
Less: Net Loss attributable to Non-Controlling Interest (Note 6) |
16 | 74 | 786 | |||||||||
|
Net Income (loss) attributable to Gryphon Resources, Inc. and Subsidiary (Note 6) |
(4,445 | ) | (15,917 | ) | (254,241 | ) | ||||||
|
Loss per common share, basic and diluted attributable to Gryphon Resources, Inc. and Subsidiary (Note 2 and 4) |
$ | Nil | $ | Nil | ||||||||
|
Weighted average shares outstanding, basic and diluted |
96,525,000 | 96,525,000 | ||||||||||
The accompanying notes to financial statements are an integral part of these consolidated financial statements
GRYPHON RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
|
Three months
ended
December 31,
2009 |
Three months
ended
December 31,
2008 |
January 16, 2006
(inception)
through
December 31,
2009 |
||||||||||
|
Cash flows from operating activities: |
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|
Net loss for the period |
$ | (4,461 | ) | $ | (15,991 | ) | $ | (255,027 | ) | |||
|
Reconciling adjustments: |
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|
Adjustments to reconcile net loss |
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to net cash used in operating activities: |
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|
Accrued interest on shareholder loans |
1,649 | 1,283 | 9,277 | |||||||||
|
Accrued interest on loans |
1,032 | 113 | 3,060 | |||||||||
|
Mineral properties impairment |
— | — | 18,998 | |||||||||
|
Net change in operating assets and liabilities |
||||||||||||
|
Prepaid expenses |
69 | (1,760 | ) | (1,713 | ) | |||||||
|
Accounts payable and accrued liabilities |
(6,681 | ) | (1,457 | ) | 869 | |||||||
|
Net cash provided (used) by operating activities |
(8,392 | ) | (17,812 | ) | (224,536 | ) | ||||||
|
Cash flows from investing activities: |
||||||||||||
|
Purchase of mineral properties |
— | — | (18,998 | ) | ||||||||
|
Net cash provided (used) by investing activities |
— | — | (18,998 | ) | ||||||||
|
Cash flows from financing activities: |
||||||||||||
|
Common stock issued for cash |
— | — | 51,500 | |||||||||
|
Loans payable |
334 | 7,810 | 79,960 | |||||||||
|
Shareholder loans |
24,965 | — | 130,553 | |||||||||
|
Net cash provided by financing activities |
25,299 | 7,810 | 262,013 | |||||||||
|
Net increase (decrease) in cash |
16,907 | (10,002 | ) | 18,479 | ||||||||
|
Cash, beginning of period |
1,572 | 33,895 | — | |||||||||
|
Cash, end of period |
$ | 18,479 | $ | 23,893 | $ | 18,479 | ||||||
The accompanying notes to financial statements are an integral part of these consolidated financial statements
GRYPHON RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 – Basis of Presentation
The consolidated unaudited financial statements included herein have been prepared by Gryphon Resources, Inc. and Subsidiary (collectively the “Company”) in accordance with accounting principles generally accepted in the United States for interim financial information. Certain information and footnote disclosures normally included
in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by such rules and regulations, and the Company believes that the disclosures are adequate to make the information presented not misleading. On April 28, 2008 the Company incorporated a Turkish company named APM Madencilik Limited (“APM”) as a 99% owned subsidiary. The consolidated unaudited financial statements of the Company as of December 31, 2009 have been prepared
without audit pursuant to the rules and regulations of the Securities Exchange Commission. These financial statements are presented on a consolidated basis and include all accounts of both the Company and its subsidiary. The remaining 1% interest in APM is held by our President, who is a Turkish citizen.
It is suggested that these financial statements be read in conjunction with the September 30, 2009 audited financial statements and the accompanying notes included in the Company’s Form 10-K filed with the Securities and Exchange Commission. The results of operations for the interim periods are not necessarily indicative of the results
for the full year. In management’s opinion all adjustments necessary for a fair presentation of the Company’s financial statements are of a normal recurring nature and are reflected in the interim periods included.
Amounts shown for September 30, 2009 are based upon the audited financial statements of that date.
Note 2 – Summary of Significant Accounting Policies
This summary of significant accounting policies is presented to assist in understanding Gryphon Resources Inc.’s financial statements. The financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to generally accepted
accounting principles in the United States of America and have been consistently applied in the preparation of the financial statements, which are stated in U.S. Dollars.
The financial statements reflect the following significant accounting policies:
Exploration Stage Company
The Company is an exploration stage company as defined by SEC Industry Guide 7. The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. As an exploration stage enterprise, the Company discloses the deficit accumulated during the exploration
stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date.
GRYPHON RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
Exploration Costs and Mineral Property Right Acquisitions
The Company 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 when incurred. The Company assesses the carrying costs for impairment
under Accounting Standards 930 Extractive Activities – Mining (AS 930) at each fiscal quarter end. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral property. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral property over its estimated fair value. 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 proven and probable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.
Consolidation of Financial Statements
The consolidated financial statements include the accounts of the Company and its 99% owned subsidiary APM Madencilik Limited on a consolidated basis. All inter-company accounts have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Basic and Diluted Net Loss per Share
Basic loss per share is calculated by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss available to common stockholders by common stock equivalents. At December 31, 2009, the Company did not have
any common stock equivalents outstanding.
Fair Value of Financial Instruments
The carrying value of accounts payable, and other financial instruments reflected in the financial statements approximates fair value due to the
short-term maturity of the instruments. It is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
GRYPHON RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial
statement carrying amounts and tax bases of assets and liabilities using enacted rates in effect in the years during which the differences are expected to reverse and upon the possible realization of net operating loss carry-forwards. Additionally, the Company has not recognized any amount for a tax position taken or expected to be taken on its tax return, or for any interest or penalties.
Valuation of Long-Lived Assets
The Company periodically analyzes its long-lived assets for potential impairment, assessing the appropriateness of lives and recoverability of un-depreciated balances through measurement of undiscounted operation cash flows on a basis consistent with accounting principles generally accepted in the United States of America.
Foreign Currency
The books of the Company are maintained in United States dollars and this is the Company’s functional and reporting currency. Transactions denominated in other than the United States dollar are translated as follows with the related transaction gains and losses being recorded in the Statements of Operations:
|
|
(i) |
Monetary items are recorded at the rate of exchange prevailing as at the balance sheet date; |
|
|
(ii) |
Non-Monetary items including equity are recorded at the historical rate of exchange; and |
|
|
(iii) |
Revenues and expenses are recorded at the period average in which the transaction occurred |
Foreign currency transactions are primarily undertaken in Turkish Lira. The Company has not to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
Cash and Cash Equivalents
The Company considers cash and cash equivalents to consist of cash on hand and demand deposits in banks with an initial maturity of 90 days or less.
GRYPHON RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
Recent Accounting Pronouncements
Various accounting pronouncements have been issued during 2010, 2009 and 2008, none of which are expected to have a material effect on the financial statements of the Company.
Reclassifications
Certain prior period amounts have been reclassified to conform to current year presentation.
Note 3 – Going Concern
Generally accepted accounting principles in the United States of America contemplate the continuation of the Company as a going concern. However, the Company has accumulated operating losses since its inception and has limited business operations, which raises substantial doubt about the Company’s ability to continue as a going concern.
During the three month period ended December 31, 2009, the net loss attributable to Gryphon Resources, Inc. and Subsidiary was $(4,445). The continuation of the Company is dependent upon the continuing financial support of investors and stockholders of the Company. As of December 31, 2009 we projected the Company would need additional cash resources to operate during the upcoming 12 months and would raise this capital through shareholder loans from our President. The Company intends to attempt to acquire additional
operating capital through private equity offerings to the public and existing investors to fund its business plan. However, there is no assurance that equity or debt offerings will be successful in raising sufficient funds to assure the eventual profitability of the Company. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue
in existence.
Note 4 – Common Stock
On June 23, 2008, the Company declared an 18.5 for 1 stock dividend. The Record and Payment date for this stock dividend were July 3, 2008 and July 7, 2008 respectively. The Company instructed its Transfer Agent to round up to one for any fractional interest which resulted in the calculation of the dividend. This dividend had the effect of
increasing the issued and outstanding share capital of the Company from 4,950,000 shares to 96,525,000 shares. All references to stock issued and stock outstanding have been retroactively adjusted as if the stock dividend had taken place on January 16, 2006 (inception).
On May 15, 2009, the Company increased its authorized common shares limit from 100,000,000 to 400,000,000. Shareholder approval for this change was received April 3, 2009 and a Definitive 14C was filed with the Securities Exchange Commission on May 15, 2009 and recorded with the Nevada Secretary of State Corporate Registry.
GRYPHON RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
Note 5 – Impairment of Mineral Properties
During fiscal 2008, the Company undertook a review of the Company’s exploration projects and determined the Company should not proceed with the exploration of three gold property claims in the Province of Saskatchewan. As a result, an impairment charge was recorded and the related mineral property assets were removed from the accounting
records of the Company.
Note 6 – Non-Controlling Interest
On April 28, 2008, the Company incorporated a Turkish company named APM Madencilik Limited (“APM”) as a 99% owned subsidiary. The remaining 1% interest in APM is held by our President. To report the non-controlling interest in these financial statements, we show the portion of equity in our subsidiary not attributable to Gryphon
Resources, Inc. as separate line items in the consolidated balance sheet and consolidated statements of operations.
The purpose of reporting ‘non-controlling interest’ is to show the ownership interests in subsidiaries held by parties other than a parent company so that these outside ownership interests can be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent’s
equity. And, so that the amount of consolidated net income attributable to the parent and to the non-controlling interest be clearly identified and presented on the face of the consolidated statement of operations.
Note 7 – Shareholder Loan
As at December 31, 2009, the Company had one related party shareholder loan outstanding of $139,830 which includes $1,649 of accrued interest for the three month period ended December 31, 2009. This loan accrues simple interest at 5% per annum, is uncollateralized, and has no fixed repayment date.
Note 8 – Loan Payable
As at December 31, 2009, the Company had an outstanding loan payable of $83,020 which includes $1,032 of accrued interest for the three month period ended December 31, 2009. This loan is owed to a private company in Turkey, accrues interest at 5% per annum, is uncollateralized, and has no fixed repayment date.
Note 9 – Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through February 5, 2010, which is the date these consolidated financial statements were issued.
ITEM 2. MANAGEMENTS’ DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This quarterly report on Form 10-Q contains "forward-looking statements" relating to the registrant which represent the registrant's current expectations or beliefs including, statements concerning registrant’s operations, performance, financial condition and growth. For this purpose, any statement contained in this quarterly report
on Form 10-Q that are not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such as "may", "anticipation", "intend", "could", "estimate", or "continue" or the negative or other comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, such as credit losses, dependence on management and key personnel and variability of quarterly results, ability of
registrant to continue its growth strategy and competition, certain of which are beyond the registrant's control. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual outcomes and results could differ materially from those indicated in the forward-looking statements.
Overview
Gryphon Resources, Inc. (“Gryphon”, “We”, or the “Company”) was incorporated in the State of Nevada on January 16, 2006. On April 28, 2008 we incorporated a Turkish company named APM Madencilik Limited. (“APM”) as a 99% owned subsidiary. Our financial statements are presented on a consolidated
basis and include all accounts of both the Company and Subsidiary. We are a mineral exploration company and are seeking mineral exploration opportunities in Turkey. Since inception the Company has not been involved in any bankruptcy, receivership or similar proceedings nor has it been involved in any reclassification, consolidation, or merger arrangements.
The Company’s common stock is traded in the NASD Over-The-Counter market under the symbol “GRYO.”
Results of Operations for the Three Month Periods Ended December 31, 2009 and December 31, 2008 and the period from January 16, 2006 (inception) to December 31, 2009 (the “Exploration Stage Period”)
Revenues
Since inception we have earned $nil in revenues.
Operating Expenses
Our operating expenses are classified into six categories:
- Exploration expenses
- Salaries and wages
- Professional and consultant fees
- Administrative expenses
- Investor Relations
- Mineral Properties Impairment
Exploration Expenses
Exploration expenses have been composed of fees for geological services and assays. Exploration expenses were $nil versus $652 for the three month periods ending December 31, 2009 versus December 31, 2008. For the Exploration Stage Period exploration expenses totaled $26,682. We cannot currently project exploration expenses for upcoming quarters.
Salaries and Wages
Salaries and Wages are composed of wage costs for our CEO, a geological specialist, office staff and contracted administrative support. Salaries and Wages were $70 versus $3,308 for the three month periods ending December 31, 2009 versus December 31, 2008. For the Exploration Stage Period salaries and wages totaled $47,480. We cannot currently
project salaries and wages expenses for upcoming quarters.
Professional and Consultant Fees
Professional and consultant fees were $228 versus $3,000 for the three month periods ending December 31, 2009 versus December 31, 2008. For the Exploration Stage Period professional and consultant fees totaled $94,628. During the current period professional fees were composed of auditor, accounting and legal fees. During upcoming quarters,
we project professional fees will remain at current levels.
Administrative Expenses
Administrative expenses were $1,482 versus $7,636 for the three month periods ended December 31, 2009 versus December 31, 2008. For the Exploration Stage Period administrative expenses totaled $50,249. Administrative fees were primarily composed of office expenses for our subsidiary in Turkey and filing costs related to our financial statements.
During upcoming quarters, we project administration expenses will remain at current levels.
Investor Relations
Investor relations expenses were $nil versus $nil for the three month periods ended December 31, 2009 versus December 31, 2008. For the Exploration Stage Period investor relations expenses totaled $4,653. Investor relations expenses are composed of fees for press releases, website maintenance and investor communication initiatives. During
upcoming quarters, we cannot currently project our level of investor relations expenses.
Mineral Properties Impairment
The mineral property impairment related to the abandonment of property claims totaling $18,998.
Net Losses
We incurred net losses of $(4,461) versus $(15,991) for the three month periods ended December 31, 2009 versus December 31, 2008. For the Exploration Stage Period net losses totaled $(255,027). For the three month period ended December 31, 2009, the non-controlling interest share of these losses totaled $(16) and for the Exploration Stage
Period, the non-controlling interest share of net losses totaled $(786).
Material Events and Uncertainties
Our operating results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly encountered by comparable early stage companies in mineral resource markets. There can be no assurance that we will successfully address such risks, expenses and difficulties and cannot assure you
that we will become profitable in the future.
Liquidity and Capital Resources
Since the date of our incorporation, we have raised $51,500 though private placements of our common shares; $130,553 (excluding accrued interest) through shareholder loans, and $79,960 (excluding accrued interest) via other loans. As of December 31, 2009 we had cash on hand of $18,479 and a prepaid expense balance of $1,713. We project we
will need to raise additional funds during the coming twelve months and expect we will receive sufficient shareholder loans from our President to cover our operating requirements. However, we also project we will need to attempt to raise additional equity to provide the funds necessary to explore and develop our current property and have plans to pursue further sales of common shares to existing shareholders and the public.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
EXCHANGE RATE FLUCTUATION RISK
Our reporting currency is United States Dollars. Our transactions are primarily conducted in US$ but also include transactions in other currencies, notably the Turkish Lira and Canadian Dollar. Foreign currency rate fluctuations may have a material impact on the Company’s financial reporting. These fluctuations may have
positive or negative impacts on the results of operations of the Company.
We have not entered into derivative contracts either to hedge existing risk or for speculative purposes.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-15(e). The Company's disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company's desired disclosure control objectives. In designing periods specified in the SEC's rules and forms, and that such information is accumulated and evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company's certifying officer has concluded that the Company's disclosure controls and procedures are not effective in reaching that level of assurance.
At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and
procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.
Management's Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting
(as defined in Section 13a-15(f) of the Securities Exchange Act of 1934, as amended). Internal control over financial reporting is a process designed by, or under the supervision of, the Company's CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external reporting purposes in conformity with
U.S. generally accepted accounting principles and include those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance
with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
As of December 31, 2009, management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the criteria established by COSO
management concluded that the Company's internal control over financial reporting was not effective as of December 31, 2009, as a result of the identification of the material weaknesses described below.
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 annual or interim financial statements will not be prevented or detected on a timely basis.
Specifically, management identified the following control weaknesses: (1) The Company has not properly segregated duties as one or two individuals initiate, authorize, and complete all transactions. The Company has not implemented measures that would prevent the individuals from overriding the internal control system. The Company
does not believe that this control weakness has resulted in deficient financial reporting because the Chief Financial Officer is aware of his responsibilities under the SEC's reporting requirements and personally certifies the financial reports; and (2) The Company has installed accounting software that does not prevent erroneous or unauthorized changes to previous reporting periods and does not provide an adequate audit trail of entries made in the accounting software.
Accordingly, while the Company has identified certain material weaknesses in its system of internal control over financial reporting, it believes that it has taken reasonable steps to ascertain that the financial information contained in this report is in accordance with generally accepted accounting principles. Management has determined that
current resources would be appropriately applied elsewhere and when resources permit, they will alleviate material weaknesses through various steps.
Changes in Internal Control over Financial Reporting
During the first quarter of the Company’s fiscal year ended September 30, 2010, no material changes were made to the Company’s internal control over financial reporting
Remediation Plan
Addition of staff
We have identified that additional staff will be required to properly segment the accounting duties of the Company. However, we do not currently have resources to fulfill this part of our plan and will be addressing this matter once sufficient resources are available.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There is no litigation pending or threatened by or against us.
ITEM 1A. RISK FACTORS
The following risk factors should be considered in connection with an evaluation of our business:
THE COMPANY'S LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR YOU TO JUDGE ITS PROSPECTS.
The Company has a limited operating history upon which an evaluation of the Company, its current business and its prospects can be based. You should consider any purchase of the Company's shares in light of the risks, expenses and problems frequently encountered by all companies in the early stages of its corporate development.
LIQUIDITY AND CAPITAL RESOURCES ARE UNCERTAIN.
For the three months ended December 31, 2009, the Company had a Net Loss of $(4,461). The Company may need to raise additional capital by way of an offering of equity securities, an offering of debt securities, or by obtaining financing through a bank or other entity. The Company has not established a limit as to the amount of debt it may
incur nor has it adopted a ratio of its equity to debt allowance. If the Company needs to obtain additional financing, there is no assurance that financing will be available from any source, that it will be available on terms acceptable to us, or that any future offering of securities will be successful. If additional funds are raised through the issuance of equity securities, there may be a significant dilution in the value of the Company’s outstanding common stock. The Company could suffer adverse consequences
if it is unable to obtain additional capital which would cast substantial doubt on its ability to continue its operations and growth.
THE VALUE AND TRANSFERABILITY OF THE COMPANY'S SHARES MAY BE ADVERSELY IMPACTED BY THE LIMITED TRADING MARKET FOR ITS SHARES AND THE PENNY STOCK RULES.
There is only a limited trading market for the Company's shares. The Company's common stock is traded in the over-the-counter market and "bid" and "asked" quotations regularly appear on the OTC Bulletin Board under the symbol "GRYO". There can be no assurance that the Company's common stock will trade at prices at or above its present level
and an inactive or illiquid trading market may have an adverse impact on the market price. In addition, holders of the Company's common stock may experience substantial difficulty in selling their securities as a result of the "penny stock rules" which restrict the ability of brokers to sell certain securities of companies whose assets or revenues fall below the thresholds established by those rules.
FUTURE SALES OF SHARES MAY ADVERSELY IMPACT THE VALUE OF THE COMPANY'S STOCK.
If required, the Company may seek to raise additional capital through the sale of common stock. Future sales of shares by the Company or its stockholders could cause the market price of its common stock to decline.
MINERAL EXPLORATION AND DEVELOPMENT ACTIVITIES ARE SPECULATIVE IN NATURE.
Resource exploration and development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit
from production. The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection, the
combination of which factors may result in the Company not receiving an adequate return of investment capital.
Substantial expenditures are required to establish ore reserves through drilling, to develop metallurgical processes to extract the metal from the ore and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery
of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities and grades to justify commercial operations or that funds required for development can be obtained on a timely basis. Estimates of reserves, mineral deposits and production costs can also be affected by such factors as environmental permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations and work interruptions.
In addition, the grade of ore ultimately mined may differ from that indicated by drilling results. Short term factors relating to reserves, such as the need for orderly development of ore bodies or the processing of new or different grades, may also have an adverse effect on mining operations and on the results of operations. Material changes in ore reserves, grades, stripping ratios or recovery rates may affect the economic viability of any project.
THE COMPANY WILL BE SUBJECT TO OPERATING HAZARDS AND RISKS WHICH MAY ADVERSELY AFFECT THE COMPANY'S FINANCIAL CONDITION.
Mineral exploration involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. The Company's operations will be subject to all the hazards and risks normally incidental to exploration, development and production of metals, such as unusual or unexpected formations, cave-ins or
pollution, all of which could result in work stoppages, damage to property and possible environmental damage. The Company does not have general liability insurance covering its operations and does not presently intend to obtain liability insurance as to such hazards and liabilities. Payment of any liabilities as a result could have a materially adverse effect upon the Company's financial condition.
THE COMPANY'S ACTIVITIES WILL BE SUBJECT TO ENVIRONMENTAL AND OTHER INDUSTRY REGULATIONS WHICH COULD HAVE AN ADVERSE EFFECT ON THE FINANCIAL CONDITION OF THE COMPANY.
The Company's activities are subject to environmental regulations promulgated by government agencies from time to time. Environmental legislation generally provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailing
disposal areas, which would result in environmental pollution. A breach of such legislation may result in imposition of fines and penalties. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner which means stricter standards and
enforcement, fines and penalties for non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations could have an adverse effect on the financial condition of the
Company.
The operations of the Company include exploration and development activities and commencement of production on its properties, require permits from various federal, state, provincial and local governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production,
exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in the development and operation of mines and related facilities generally experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits.
Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial
actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations and, in particular, environmental laws.
COMPETITION MAY HAVE AN IMPACT ON THE COMPANY'S ABILITY TO ACQUIRE ATTRACTIVE PRECIOUS METALS PROPERTIES, WHICH MAY HAVE AN ADVERSE IMPACT ON THE COMPANY'S OPERATIONS.
Significant and increasing competition exists for the limited number of precious metals acquisition opportunities available. As a result of this competition, some of which is with large established mining companies with substantial capabilities and greater financial and technical resources than the Company, the Company may be unable to acquire
attractive precious metals properties on terms it considers acceptable. Accordingly, there can be no assurance that any exploration program intended by the Company on properties it intends to acquire will yield any reserves or result in any commercial mining operation.
DOWNWARD FLUCTUATIONS IN METAL PRICES MAY SEVERELY REDUCE THE VALUE OF THE COMPANY.
The Company has no control over the fluctuations in the prices of the metals for which it is exploring. A significant decline in such prices would severely reduce the value of the Company.
THE COMPANY CURRENTLY RELIES ON CERTAIN KEY INDIVIDUALS AND THE LOSS OF ONE OF THESE CERTAIN KEY INDIVIDUALS COULD HAVE AN ADVERSE EFFECT ON THE COMPANY.
The Company's success depends to a certain degree upon certain key members of the management. These individuals are a significant factor in the Company's growth and success. The loss of the service of members of the management and advisory board could have a material adverse effect on the Company. In particular, the success of the Company
is highly dependent upon the efforts of the President & CEO, CFO, PAO, Treasurer & Secretary, Chair & Director of the Company, the loss of whose services would have a material adverse effect on the success and development of the Company.
THE COMPANY DOES NOT MAINTAIN KEY MAN INSURANCE TO COMPENSATE THE COMPANY FOR THE LOSS OF CERTAIN KEY INDIVIDUALS.
The Company does not anticipate having key man insurance in place in respect of its senior officers or personnel, although the Board has discussed and investigated the prospect of obtaining key man insurance for our CEO.
WE ARE AN EXPLORATION STAGE COMPANY, AND THERE IS NO ASSURANCE THAT A COMMERCIALLY VIABLE DEPOSIT OR "RESERVE" EXISTS ON ANY PROPERTIES FOR WHICH THE COMPANY HAS, OR MIGHT OBTAIN, AN INTEREST.
The Company is an exploration stage company and cannot give assurance that a commercially viable deposit, or “reserve,” exists on any properties for which the Company currently has (through an option) or may have (through potential future joint venture agreements or acquisitions) an interest. Therefore, determination of the existence
of a reserve depends on appropriate and sufficient exploration work and the evaluation of legal, economic, and environmental factors. If the Company fails to find a commercially viable deposit on any of its properties, its financial condition and results of operations will be materially adversely affected.
WE REQUIRE SUBSTANTIAL FUNDS MERELY TO DETERMINE WHETHER COMMERCIAL PRECIOUS METAL DEPOSITS EXIST ON OUR PROPERTIES.
Any potential development and production of the Company’s exploration properties depends upon the results of exploration programs and/or feasibility studies and the recommendations of duly qualified engineers and geologists. Such programs require substantial additional funds. Any decision to further expand the Company’s operations
on these exploration properties is anticipated to involve consideration and evaluation of several significant factors including, but not limited to:
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§ |
Costs of bringing each property into production, including exploration work, preparation of production feasibility studies, and construction of production facilities; |
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§ |
Availability and costs of financing; |
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Ongoing costs of production; |
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§ |
Market prices for the precious metals to be produced; |
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Environmental compliance regulations and restraints; and |
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Political climate and/or governmental regulation and control. |
GENERAL MINING RISKS
Factors beyond our control may affect the marketability of any substances discovered from any resource properties the Company may acquire. Metal prices, in particular gold and silver prices, have fluctuated widely in recent years. Government regulations relating to price, royalties, and allowable production and importing and exporting of precious
metals can adversely affect the Company. There can be no certainty that the Company will be able to obtain all necessary licenses and permits that may be required to carry out exploration, development and operations on any projects it may acquire and environmental concerns about mining in general continue to be a significant challenge for all mining companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company did not make any sales of equity securities during the quarter.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has no senior securities outstanding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
(a) During the quarter there was no information which would have been required to be filed via a report on Form 8-K which was not filed as such.
(b) During the quarter there were no material changes to the procedures by which security holders may recommend nominees to the registrant’s board of directors.
EXHIBIT INDEX
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Number |
Exhibit Description |
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3.1 |
Articles of Incorporation* |
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3.2 |
Certificate of Amendment of Articles of Incorporation* |
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3.3 |
Bylaws* |
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14.1 |
Code of Ethics* |
* Filed as an exhibit to our registration statement on Form SB-2 filed February 26, 2006 and incorporated herein by this reference
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GRYPHON RESOURCES, INC.
/s/ Serdar Kirmizioglu
Serdar Kirmizioglu
President & CEO, CFO, PAO,
Director, and Board Chair
/s/David Walker
David Walker
Secretary and Treasurer
Dated: February 5, 2010
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