Attached files
file | filename |
---|---|
EX-31 - Eco-Tek Group, Inc. | ex31.htm |
EX-32 - Eco-Tek Group, Inc. | ex32.htm |
EX-10.2 - Eco-Tek Group, Inc. | ex10-2.htm |
EX-10.3 - Eco-Tek Group, Inc. | ex10-3.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
[X]
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended December 31,
2009
|
[
]
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
|
For the
transition period from ____________ to ______________
Commission
file number: 333-162557
SANDALWOOD VENTURES,
LTD.
(Name of
registrant in its charter)
Nevada
|
1000
|
68-0679096
|
(State
or jurisdiction of incorporation or organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(IRS
Employer Identification No.)
|
15
Park
Lossiemouth,
Morayshire 1V30 5SE
Scotland
(Address
of principal executive offices)
+01343830382
(Registrant's
telephone number)
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. Yes x No ¨
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
files). Yes ¨ No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, and
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act. Yes x
No ¨
At
February 16, 2010, there were 42,707,850 shares of the Issuer's common stock
outstanding.
PART
I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
(An
Exploration Stage Company)
|
||||||||
BALANCE
SHEETS
|
||||||||
December
31,
|
June
30,
|
|||||||
2009
|
2009
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$ | 9,464 | $ | 39,081 | ||||
Prepaid
expenses
|
402 | 11,206 | ||||||
Total
current assets
|
9,866 | 50,287 | ||||||
Total
assets
|
$ | 9,866 | $ | 50,287 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
$ | 279 | $ | 15,052 | ||||
Total
current liabilities
|
279 | 15,052 | ||||||
Commitments
and contingencies
|
- | - | ||||||
Stockholders'
equity
|
||||||||
Preferred
stock, $.001 par value, 50,000,000 shares authorized,
|
||||||||
none
issued and outstanding
|
- | - | ||||||
Common
stock, $.001 par value, 250,000,000 shares authorized,
|
||||||||
42,707,850
shares issued and outstanding
|
42,708 | 42,708 | ||||||
Additional
paid in capital
|
31,449 | 31,449 | ||||||
Deficit
accumulated during the exploration stage
|
(64,570 | ) | (38,922 | ) | ||||
Total
stockholders' equity
|
9,587 | 35,235 | ||||||
Total
liabilities and stockholders' equity
|
$ | 9,866 | $ | 50,287 |
The
accompanying notes are an integral part of these financial
statements.
F-1
SANDALWOOD
VENTURES, LTD.
|
||||||||||||||||||||
(An
Exploration Stage Company)
|
||||||||||||||||||||
STATEMENTS
OF EXPENSES
|
||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||
April
10, 2007
|
||||||||||||||||||||
For
the three months ended
|
For
the six months ended
|
(Inception)
to
|
||||||||||||||||||
December
31,
|
December
31,
|
December
31,
|
||||||||||||||||||
2009
|
2008
|
2009
|
2008
|
2009
|
||||||||||||||||
Costs
and Expenses
|
||||||||||||||||||||
General
and administrative expenses
|
$ | 19,939 | $ | 919 | $ | 24,660 | $ | 6,627 | $ | 51,762 | ||||||||||
Exploration
costs
|
- | - | 988 | - | 12,808 | |||||||||||||||
Total
costs and expenses
|
19,939 | 919 | 25,648 | 6,627 | 64,570 | |||||||||||||||
Net
loss
|
$ | (19,939 | ) | $ | (919 | ) | $ | (25,648 | ) | $ | (6,627 | ) | $ | (64,570 | ) | |||||
Basic
and diluted net loss per share
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||||||
Weighted
average common shares
|
||||||||||||||||||||
outstanding,
basic and diluted
|
42,707,850 | 42,364,273 | 42,707,850 | 42,057,137 |
The
accompanying notes are an integral part of these financial
statements.
F-2
SANDALWOOD
VENTURES, LTD.
|
||||||||||||||||||||
(An
Exploration Stage Company)
|
||||||||||||||||||||
STATEMENTS
OF CHANGES IN STOCKHOLDERS' DEFICIT
|
||||||||||||||||||||
Period
from April 10, 2007 (Inception) to December 31, 2009
|
||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||
Number
of Common Shares Issued
|
Common
Stock at Par Value
|
Additional
Paid-in Capital
|
Deficit
accumulated during the development stage
|
Total
|
||||||||||||||||
Inception
|
- | $ | - | $ | - | $ | - | $ | - | |||||||||||
Stock
issued for cash
|
40,000,000 | 40,000 | - | - | 40,000 | |||||||||||||||
Net
loss
|
(7,960 | ) | (7,960 | ) | ||||||||||||||||
Balances,
June 30, 2007
|
40,000,000 | 40,000 | - | (7,960 | ) | 32,040 | ||||||||||||||
Issuance
of shares for cash , net of
|
||||||||||||||||||||
direct
issuance costs of $20,000
|
1,750,000 | 1,750 | 13,250 | - | 15,000 | |||||||||||||||
Net
loss
|
- | - | (18,782 | ) | (18,782 | ) | ||||||||||||||
Balances,
June 30, 2008
|
41,750,000 | 41,750 | 13,250 | (26,742 | ) | 28,258 | ||||||||||||||
Issuance
of shares for cash
|
957,850 | 958 | 18,199 | - | 19,157 | |||||||||||||||
Net
loss
|
- | - | - | (12,180 | ) | (12,180 | ) | |||||||||||||
Balances,
June 30, 2009
|
42,707,850 | 42,708 | 31,449 | (38,922 | ) | 35,235 | ||||||||||||||
Net
loss
|
- | - | - | (25,648 | ) | (25,648 | ) | |||||||||||||
Balances,
December 31, 2009
|
42,707,850 | $ | 42,708 | $ | 31,449 | $ | (64,570 | ) | $ | 9,587 |
The
accompanying notes are an integral part of these financial
statements.
F-3
SANDALWOOD
VENTURES, LTD.
|
||||||||||||
(An
Exploration Stage Company)
|
||||||||||||
STATEMENTS
OF CASH FLOWS
|
||||||||||||
(Unaudited)
|
||||||||||||
April
10, 2007
|
||||||||||||
Six
months ended
|
(Inception)
to
|
|||||||||||
December
31,
|
December
31,
|
|||||||||||
2009
|
2008
|
2009
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net
loss
|
$ | (25,648 | ) | $ | (6,627 | ) | $ | (64,570 | ) | |||
Adjustments
to reconcile net loss to cash used in operating
activities:
|
||||||||||||
Prepaid
expenses
|
10,804 | 1,600 | (402 | ) | ||||||||
Accounts
payable
|
(14,773 | ) | 188 | 279 | ||||||||
Net
cash used in operating activities
|
(29,617 | ) | (4,839 | ) | (64,693 | ) | ||||||
Cash
flows from financing activities:
|
||||||||||||
Issuance
of stock for cash
|
- | 19,157 | 74,157 | |||||||||
Net
cash provided by financing activities
|
- | 19,157 | 74,157 | |||||||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
(29,617 | ) | 14,318 | 9,464 | ||||||||
CASH
AND CASH EQUIVALENTS, beginning of period
|
39,081 | 30,722 | - | |||||||||
CASH
AND CASH EQUIVALENTS, end of period
|
$ | 9,464 | $ | 45,040 | $ | 9,464 | ||||||
Supplemental
cash flow disclosures:
|
||||||||||||
Cash
paid for income taxes
|
$ | - | $ | - | $ | - | ||||||
Cash
paid for interest
|
- | - | - |
The
accompanying notes are an integral part of these financial
statements.
F-4
NOTE
1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Sandalwood
Ventures, Ltd. (the "Company") was incorporated on April 10, 2007 under the laws
of the State of Nevada for the purpose of acquiring, exploring and developing
mining properties. The Company's fiscal year end is June 30. The Company is an
Exploration Stage Company.
The
accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at December 31, 2009 and for all
periods presented have been made.
Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. It is suggested that
these financial statements be read in conjunction with the financial statements
and notes thereto included in the Company's June 30, 2009 financial
statements. The results of operations for the periods ended December
31, 2009 and December 31, 2008 are not necessarily indicative of the operating
results for the full year.
Use
of Estimates.
The
preparation of financial statements in accordance with generally accepted
accounting principles in the United States of America requires the use of
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities known to exist as
of the date the financial statements are published, and the reported amounts of
revenues and expenses during the reporting period. Uncertainties with respect to
such estimates and assumptions are inherent in the preparation of the Company's
financial statements; accordingly, it is possible that the actual results could
differ from these estimates and assumptions and could have a material effect on
the reported amounts of the Company's financial position and results of
operations.
Basic
and Diluted Net Income (Loss) Per Share.
Basic EPS
is computed by dividing net income (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury stock method and
convertible preferred stock using the if-converted method. In computing Diluted
EPS, the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is
anti-dilutive.
At December 31, 2009 and 2008, there were 957,850 and 2,707,850, respectively,
potential common shares that were anti-dilutive.
F-5
Recent Accounting
Pronouncements.
In
June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles
(“SFAS 168” or ASC 105-10). SFAS 168 (ASC 105-10) establishes the Codification
as the sole source of authoritative accounting principles recognized by the FASB
to be applied by all nongovernmental entities in the preparation of financial
statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively
effective for financial statements issued for fiscal years ending on or after
September 15, 2009, and interim periods within those fiscal years. The
adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact the
Company’s results of operations or financial condition. The
Codification did not change GAAP; however, it did change the way GAAP is
organized and presented. As a result, these changes impact how companies
reference GAAP in their financial statements and in their significant accounting
policies. The Company implemented the Codification in this Report by providing
references to the Codification topics alongside references to the corresponding
standards.
In May
2009, the FASB issued SFAS No. 165 (ASC 855-10) entitled “Subsequent
Events”. Companies are now required to disclose the date through which
subsequent events have been evaluated by management. Public entities (as
defined) must conduct the evaluation as of the date the financial statements are
issued, and provide disclosure that such date was used for this
evaluation. SFAS No. 165 (ASC 855-10) provides that financial
statements are considered “issued” when they are widely distributed for general
use and reliance in a form and format that complies with GAAP. SFAS
No. 165 (ASC 855-10) is effective for interim or annual periods ending
after June 15, 2009, and must be applied prospectively. The adoption
of SFAS No. 165 (ASC 855-10) during the quarter ended September 30, 2009
did not have a significant effect on the Company’s financial statements as of
that date or for the quarter period then ended. In connection with
preparing the accompanying unaudited financial statements as of December 31,
2009 and for the quarterly period ended December 31, 2009, management evaluated
subsequent events through the date that the financial statements were issued
(filed with the SEC).
With the
exception of the pronouncements noted above, no other accounting standards or
interpretations issued or recently adopted are expected to a have a material
impact on the Company’s financial position, operations or cash
flows.
NOTE
2 - GOING CONCERN
These
financial statements have been prepared on a going concern basis, which implies
the Company will continue to realize its assets and discharge its liabilities in
the normal course of business. As shown in the accompanying financial
statements, the Company has no revenues and has accumulated losses since
inception. These factors raise substantial doubt regarding the Company's ability
to continue as a going concern. The continuation of the Company as a going
concern is dependent upon the continued financial support from its shareholders,
the ability of the Company to obtain necessary equity financing to continue
operations, and the attainment of profitable operations. These financial
statements do not include any adjustments related to the recoverability and
classification of recorded assets, or the amounts and classification of
liabilities that might be necessary in the event the Company cannot continue as
a going concern.
NOTE
3 – COMMON STOCK AND WARRANTS
The
Company is authorized to issue 250,000,000 shares of $0.001 par value common
stock.
In April
2007, the Company issued 40,000,000 shares of common stock to the president of
the Company at $0.001 per share for cash proceeds of $40,000.
In
September 2007, the Company issued 375,000 shares of common stock at $0.02 per
share for cash proceeds of $7,500. The Company granted warrants to purchase
375,000 shares of the Company’s common stock at an exercise price of $0.05 per
share of common stock issuable in connection with the exercise of the warrants.
Warrants to purchase 375,000 shares of common stock expired in September
2009.
F-6
In
November 2007, the Company issued 1,065,000 shares of common stock at $0.02 per
share for cash proceeds of $21,300. The Company granted warrants to purchase
1,065,000 shares of the Company’s common stock at an exercise price of $0.05 per
share of common stock issuable in connection with the exercise of the warrants.
Warrants to purchase 1,065,000 shares of common stock expired in December
2009.
In
December 2007, the Company issued 310,000 shares of common stock at $0.02 per
share for cash proceeds of $6,200. The Company granted warrants to purchase
310,000 shares of the Company’s common stock at an exercise price of $0.05 per
share of common stock issuable in connection with the exercise of the warrants.
Warrants to purchase 310,000 shares of common stock expired in December
2009.
In
November 2008, the Company issued 957,850 shares of common stock at $0.02 per
share for cash proceeds of $19,157. The Company granted warrants to purchase
957,850 shares of the Company’s common stock at an exercise price of $0.05 per
share of common stock issuable in connection with the exercise of the
warrants.
The
following table is an analysis of warrants for the purchase of the
Company's stock as of December 31, 2009 and 2008:
|
||||||||
Weighted
|
||||||||
Average
|
||||||||
Warrants
|
Exercise
Price
|
|||||||
Outstanding,
June 30, 2008
|
1,750,000 | $ | 0.05 | |||||
Granted
|
957,850 | $ | 0.05 | |||||
Outstanding,
December 31,2008
|
2,707,850 | $ | 0.05 | |||||
Outstanding,
June 30, 2009
|
2,707,850 | $ | 0.05 | |||||
Expired/Cancelled
|
(1,750,000 | ) | $ | 0.05 | ||||
Outstanding,
December 31, 2009
|
957,850 | $ | 0.05 |
NOTE
4 – SUBSEQUENT EVENT
In
February 2010, the Company issued two convertible promissory notes (the
“Convertible Notes”). Each of the Convertible Notes has a principal amount of
$12,500. The Convertible Notes mature February 2011 and bear interest at the
rate of 8% per annum. At any time prior to the payment in full of the entire
balance, the holders have the option of converting all or any portion of the
unpaid balance of the Notes into shares of Sandalwood common stock at a
conversion price equal to $0.01 per share, subject to adjustment upon certain
events. The conversion price was based on the stock purchased during the private
placement and near non-liquidity of our common stock, the number of shares that
would be issued and the effect that the sale of such shares would have on the
market for our common stock, and the legal constraints on the sale of such
shares. Assuming no adjustment to the conversion price, if the holders convert
the entire principal balance of the Convertible Notes, they would be issued
2,500,000 shares of Sandalwood common stock.
The
Company evaluated the terms of the Convertible Notes in accordance with ASC
815-40, Contracts in Entity’s
Own Equity, and concluded that the Convertible Notes did not result in a
derivative. The Company evaluated the terms of the Convertible Notes and
concluded that there was a beneficial conversion feature since the Convertible
Notes were convertible into shares of common stock at a discount to the market
value of the common stock. The discount related to the beneficial conversion
feature was valued at $25,000 based on its intrinsic value.
F-7
ITEM 2. MANAGEMENT'S
DISCUSSION AND ANALYSIS
CERTAIN
STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q (THIS "FORM 10-Q"), CONSTITUTE
"FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1934, AS AMENDED, AND THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 (COLLECTIVELY, THE "REFORM ACT"). CERTAIN, BUT NOT NECESSARILY ALL, OF SUCH
FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY SUCH AS "BELIEVES", "EXPECTS", "MAY", "SHOULD", OR "ANTICIPATES", OR
THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR
BY DISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
SANDALWOOD VENTURES, LTD. ("THE COMPANY", "SANDALWOOD", "WE", "US" OR "OUR") TO
BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM
10-Q, UNLESS ANOTHER DATE IS STATED, ARE TO DECEMBER 31, 2009.
DESCRIPTION
OF BUSINESS
Overview
We were
incorporated as Sandalwood Ventures, Ltd. in Nevada in April 2007. We chose to
incorporate in Nevada for numerous reasons including the fact that we plan to
raise capital in the future in the United States and we believe that we are more
attractive to United States investors due to the fact that we are incorporated
in the United States. In addition, we believe certain provisions of Nevada law
provide favorable treatment for officers and Directors, including Nevada Revised
Statutes ("NRS") Section 78.335. NRS Section 78.335 mandates that Directors in
Nevada companies must be removed by "not less than two-thirds of the voting
power of the issued and outstanding stock entitled to vote." This is in contrast
to many of the more popular states where companies choose to incorporate, which
require only majority vote to remove Directors, including Delaware, which
pursuant to Delaware General Corporation Law, Section 141(k) only requires a
vote of "a majority of the shares then entitled to vote."
We have
300,000,000 shares of stock authorized, representing 250,000,000 shares of
common stock, $0.001 par value and 50,000,000 shares of preferred stock, $0.001
par value.
We are an
exploration stage company engaged in the acquisition and exploration of mineral
properties. We acquired a 100% undivided interest in one mineral claim known as
the "Sandalwood 1 Lode Claim,” totaling 20 acres located in the Goodsprings
(Yellow Pine) Mining District situated within the southwestern corner of the
State of Nevada, U.S.A. Our plan of operation is to conduct mineral exploration
activities on the Sandalwood 1 Lode Claim in order to assess whether it
possesses mineral deposits of lead, zinc, copper or silver in commercial
quantities, capable of commercial extraction.
In April
2009, we engaged Laurence Sookochoff, Professional Geoscientist, who is familiar
with the Goodsprings (Yellow Pine) Mining District in Nevada, to develop a
report about our Sandalwood 1 Lode Claim. The report entitled “Geological Evaluation Report on the
Sandalwood 1 Lode Claim” dated June 30, 2007 (the “Report”) describes the
mineral claim, the regional geology, the mineral potential of the claim and
recommendations on how we should explore the claim. We paid $3,000
for the Report.
The
Sandalwood 1 Lode Claim was acquired by us in April 2007, for a total of $6,000
US from Mr. Larry Sostad. Subsequent to the purchase of the claim from Mr.
Sostad, we contracted with Mr. Sostad's company, Diamond S. Holdings, Ltd.
("Diamond") to perform any necessary exploration work on the Sandalwood 1 Lode
Claim. Diamond subsequently contracted with Laurence Sookochoff, who along with
Diamond, has conducted all exploration activities on our property to date, and
who will conduct the following planned activities described below, subsequent to
the date of this report, funding permitting.
The
Sandalwood 1 Lode Claim currently has an expiration date of September 1, 2010
and in order to maintain the claim in good standing it will be necessary for us
to coordinate an agent to perform and record an Affidavit of Annual Assessment
Work for the claim with a minimum expenditure of $100 per claim, or
alternatively, to file an Affidavit and Notice of Intent to Hold Mining Claim
and Site, together with an annual maintenance fee to the U.S. Bureau of Land
Management in the sum of $125 per claim, and a county recorders fee of between
$8.50 to $10.50 per claim. Failure to perform and record valid
exploration work or pay the equivalent maintenance fees on the anniversary dates
will result in forfeiture of title to the claim.
-2-
In the
Report, Mr. Sookochoff recommended the following exploration program on the
Sandalwood 1 Lode Claim, which we have not begun to date and which will require
us to raise additional funding to complete:
Phase
I
Trenching
and sampling over known mineralized zones (estimated to take three weeks
to complete).
|
|
Total
estimated cost: $ 5,500
|
Phase
II
a)
VLF-EM (as defined below) and soil geochemical surveys;
and
|
Estimated
cost: $ 9,500
|
b)
After the VLF-EM surveying is completed, we will perform sampling and
geological mapping of the veins within anomalous zones.
|
Estimated
cost: $ 14,000
|
Total
estimated cost $23,500
|
Phase
III
Test
diamond drilling of the prime targets. Diamond drilling is
required to test the extent of mineralization to depth. We anticipate the
drill hole locations being determined based on the results of, and the
interpretation of, the previous exploration we plan to conduct in Phases I
through III.
|
|
Total
estimated cost: $ 40,000
|
Total
estimated costs of
Phases I
through III:
$
69,000.
|
A
Vertical Loop Electro Magnetic Survey ("VLF-EM") is completed by walking over
the property or flying over the property in an airplane using a specially
equipped receiver to pick up the possible location of precious
minerals.
The
VLF-EM survey of our claim will be used to prepare a map of abnormal magnetic
fields from the claim, which abnormalities may be associated with mineral
deposits. These abnormal readings are then compared, with the results correlated
to determine the structural significance of the VLF-EM anomalies.
While we
currently plan to conduct the exploration activities listed above, beginning
with Phase I and continuing through Phase III as soon as we have sufficient
funds to begin Phase I, our management will make a decision whether to proceed
with each successive phase of the exploration program upon completion of the
previous phase and upon analysis of the results of that program. Additionally,
we are waiting for the results from Phases I-III before deciding whether any
additional exploration activities would be appropriate on the claim, as we
believe that we will know whether or not our claim has any commercially viable
mineral deposits upon the completion of our Phase III exploration
activities.
-3-
Employees
We
currently have no employees other than our sole officer and Director, Edwin
Slater. We plan to use contractors in the future if the need arises during the
course of our exploration and/or development activities, in the
future.
Exploration
Work
All
exploration work to be completed by us on our claim will be conducted by or
under the supervision of Laurence Sookochoof.
Competition
Mines
have limited lives and as a result, we may seek to expand our reserves, if any,
through the acquisition of new properties in the future. There is a limited
supply of desirable mineral lands available in the United States, Canada and
other areas where we may consider conducting exploration and/or production
activities. We will face strong competition for new properties from other mining
companies, most of which have greater financial resources than we do and as a
result, we may be unable to acquire new mining properties on terms that we
consider acceptable.
There is
a global market for lead, zinc, copper and silver, which we plan to sell, if we
are successful in our exploration and mining activities, at prevailing market
prices. We do not believe that any single company or other institution has
sufficient market power to significantly affect the price or supply of these
metals.
Dependence
On One Or A Few Major Customers
We do not
depend on one or a small number of customers, as we have not successfully
discovered or extracted any commercial quantities of minerals. We have no
customers and have not generated any revenues to date.
Patents,
Trademarks And Licenses
We have
no patents, trademarks or licenses. We do own the mineral rights to Sandalwood 1
Lode Claim, described above.
Need
For Government Approval
In
connection with our planned exploration activities, we may be required to comply
with certain environmental laws and regulations which may require us to obtain
permits issued by regulatory agencies and to file various reports and keep
records of our operations affecting the environment. While we will not need any
permits for Phases I through II (described above), we may require a permit to
conduct diamond drilling pursuant to Phase III above. We plan to conduct our
Phase III exploration activities only if the results from Phases I and II are
encouraging.
-4-
Costs
And Effects Of Compliance With Environmental Laws
All of
our exploration, development and production activities which we may undertake in
the future on our property in Nevada will be subject to regulation by
governmental agencies under various environmental laws. These laws address
emissions to the air, discharges to water, management of wastes, management of
hazardous substances, protection of natural resources, antiquities and
endangered species, and reclamation of lands disturbed by mining
operations.
Additionally,
depending on the results of our exploration activities, if completed, and what
mining activities we may undertake, certain regulations may also require us to
obtain permits for our activities. These permits normally may be subject to
public review processes resulting in public approval of the activity. While
these laws and regulations may govern how we conduct many aspects of our
business, we do not believe that they will have a material adverse effect on our
results of operations or financial condition. We plan to evaluate our operations
in light of the cost and impact of environmental regulations on those
operations. We also plan to evaluate new laws and regulations as they develop to
determine the impact on, and changes necessary to, our planned operations.
Additionally, it is possible that future changes in these laws or regulations
could have a significant impact on some portion of our business, causing us to
reevaluate those activities at that time.
Recent
Events:
On or
around February 10, 2010, the Company entered into (1) a Convertible Promissory
Note with Morgarlan Limited (“Morgarlan”), in the amount of $12,500, to evidence
amounts loaned to the Company by Morgarlan; and (2) a Convertible Promissory
Note with Little Bay Consulting SA (“Little Bay” and together with the
Morgarlan, the “Note Holders”), in the amount of $12,500, to evidence amounts
loaned to the Company by Little Bay (collectively the “Convertible
Notes”). The Convertible Notes bear interest at the rate of 8% per
annum, are due and payable on February 10, 2011, and the principal and accrued
interest due under the Convertible Notes is convertible into shares of the
Company’s common stock at a conversion price of $0.01 per share at the option of
the respective Note Holder as provided in the Convertible Notes.
BLANK
CHECK COMPANY ISSUES
Rule 419
of the Securities Act of 1933, as amended (the “Act”) governs offerings by
“blank check companies.” Rule 419 defines a “blank check company” as
a development stage company that has no specific business plan or purpose or has
indicated that its business plan is to engage in a merger or acquisition with an
unidentified company or companies, or other entity or person; and issuing “penny
stock,” as defined in Rule 3a51-1 under the Securities Exchange Act of
1934.
Our
management believes that the Company does not meet the definition of a “blank
check company,” because, while we are in the development stage, we do have a
specific business plan and purpose as described above, and our current purpose
is not to engage in a merger or acquisition, and as such, we should not
therefore be characterized as a “blank check company.”
Critical
Accounting Policies:
Mineral
Property Acquisition, Exploration and Development Costs
Mineral
property acquisition, exploration and related costs are expensed as incurred
unless proven and probable reserves exist and the property may commercially be
mined. When it has been determined that a mineral property can be economically
developed, the costs incurred to develop such property, including costs to
further delineate the ore body and develop the property for production, may be
capitalized. Interest costs, if any, allocable to the cost of developing mining
properties and to constructing new facilities are capitalized until operations
commence. Mine development costs incurred either to develop new ore deposits,
expand the capacity of operating mines, or to develop mine areas substantially
in advance of current production are also capitalized. All such capitalized
costs, and estimated future development costs, are then amortized using the
units-of-production method over the estimated life of the ore body. Costs
incurred to maintain current production or to maintain assets on a standby basis
are charged to operations. Costs of abandoned projects are charged to operations
upon abandonment. The Company evaluates, at least quarterly, the carrying value
of capitalized mining costs and related property, plant and equipment costs, if
any, to determine if these costs are in excess of their net realizable value and
if a permanent impairment needs to be recorded. The periodic evaluation of
carrying value of capitalized costs and any related property, plant and
equipment costs are based upon expected future cash flows and/or estimated
salvage value. The Company currently does not have any capitalized
mining costs and therefore no adjustments are needed.
-5-
COMPARISON
OF OPERATING RESULTS
COMPARISON
OF EXPENSES FOR THE THREE MONTHS ENDED DECEMBER 31, 2009 COMPARED TO THE THREE
MONTHS ENDED DECEMBER 31, 2008
We
generated no revenues for the three months ended December 31, 2009 or the three
months ended December 31, 2008, and do not anticipate generating any revenues
until such time, if ever, as we are able to successfully complete the
exploration of our Sandalwood 1 Lode Claim, as detailed above; are successful in
locating commercial quantities of minerals; and are able to extract and sell
such minerals.
We had
total expenses, consisting solely of general and administrative expenses, of
$19,939 for the three months ended December 31, 2009, compared to total expenses
of $919 for the three months ended December 31, 2008, an increase in total
expenses of $19,020 from the prior period. Total expenses increased
mainly as a result of legal, accounting and filing fees associated with the
preparation, revision, review and amendment of our Registration Statement on
Form S-1, and audited and unaudited financial statements included therein, which
we filed with the Securities and Exchange Commission which were present during
the three months ended December 31, 2009, but not during the three months ended
December 31, 2008.
We had a
net loss of $19,939 for the three months ended December 31, 2009, compared to a
net loss of $919 for the three months ended December 31, 2008.
COMPARISON
OF EXPENSES FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 COMPARED TO THE SIX
MONTHS ENDED DECEMBER 31, 2008
We
generated no revenues for the six months ended December 31, 2009 or the six
months ended December 31, 2008, and do not anticipate generating any revenues
until such time, if ever, as we are able to successfully complete the
exploration of our Sandalwood 1 Lode Claim, as detailed above; are successful in
locating commercial quantities of minerals; and are able to extract and sell
such minerals.
We had
total expenses of $25,648 for the six months ended December 31, 2009, compared
to total expenses of $6,627 for the six months ended December 31, 2008, an
increase of $19,021 from the prior period. Total expenses for
the six months ended December 31, 2009 included $24,660 of general and
administrative expenses, compared to $6,627 of general and administrative
expenses for the six months ended December 31, 2008, an increase of $18,033 from
the prior period, and exploration costs of $988, which were not represented
during the six months ended December 31, 2008. Total expenses
increased mainly as a result of increased general and administrative expenses in
connection with legal, accounting and filing fees associated with the
preparation, revision, review and amendment of our Registration Statement on
Form S-1, and audited and unaudited financial statements included therein, which
we filed with the Securities and Exchange Commission which were present during
the three months ended December 31, 2009, but not during the three months ended
December 31, 2008.
We had a
net loss of $25,648 for the six months ended December 31, 2009, compared to a
net loss of $6,627 for the six months ended December 31, 2008.
-6-
LIQUIDITY
AND CAPITAL RESOURCES
We had
current assets of $9,866, which included $402 of prepaid expenses and cash and
cash equivalents of $9,464 as of December 31, 2009.
We had
total liabilities consisting solely of accounts payable of $279 as of December
31, 2009.
We had
working capital of $9,587 and a deficit accumulated during the exploration stage
of $64,570 as of December 31, 2009.
We had
net cash used in operating activities of $29,617 for the six months ended
December 31, 2009, which consisted of net loss of $25,648 and decrease in
accounts payable of $14,773 partially offset by $10,804 of decrease in prepaid
expenses.
From
September 2007 to November 2008, we sold an aggregate of 2,707,850 units, each
consisting of one (1) share of common stock, and one (1) two year Class A
Warrant with an exercise price of $0.05 per share (each a “Warrant,” and
collectively with the shares, referred to hereinafter as the "Units"), for
aggregate consideration of approximately $54,157 or $0.02 per Unit in offshore
transactions pursuant to Regulation S of the Securities Act of 1933, as amended,
to an aggregate of 32 shareholders. An aggregate of Warrants to
purchase 375,000 shares expired unexercised in September 2009, additional
Warrants to purchase 1,065,000 shares expired unexercised in November 2009 and
Warrants to purchase an additional 310,000 shares expired unexercised in
December 2009.
On or
around February 10, 2010, the Company entered into (1) a Convertible Promissory
Note with Morgarlan Limited (“Morgarlan”), in the amount of $12,500, to evidence
amounts loaned to the Company by Morgarlan; and (2) a Convertible Promissory
Note with Little Bay Consulting SA (“Little Bay” and together with the
Morgarlan, the “Note Holders”), in the amount of $12,500, to evidence amounts
loaned to the Company by Little Bay (collectively the “Convertible
Notes”). The Convertible Notes bear interest at the rate of 8% per
annum, are due and payable on February 10, 2011, and the principal and accrued
interest due under the Convertible Notes is convertible into shares of the
Company’s common stock at a conversion price of $0.01 per share at the option of
the respective Note Holder as provided in the Convertible Notes.
We have
budgeted the need for approximately $100,000 of additional funding during the
next 12 months to continue our business operations, pay costs and expenses
associated with our filing requirements with the Securities and Exchange
Commission and conduct our exploration activities as planned which funding may
not be available on favorable terms, if at all. If we are unable to raise
adequate working capital for the remainder of fiscal 2010 and throughout 2011,
we will be restricted in the implementation of our exploration
plan.
These
financial statements have been prepared on a going concern basis, which implies
the Company will continue to realize its assets and discharge its liabilities in
the normal course of business. As shown in the accompanying financial
statements, the Company has no revenues and has accumulated losses since
inception. These factors raise substantial doubt regarding the Company's ability
to continue as a going concern. The continuation of the Company as a going
concern is dependent upon the continued financial support from its shareholders,
the ability of the Company to obtain necessary equity financing to continue
operations, and the attainment of profitable operations. These financial
statements do not include any adjustments related to the recoverability and
classification of recorded assets, or the amounts and classification of
liabilities that might be necessary in the event the Company cannot continue as
a going concern.
Moving
forward, we plan to seek out additional debt and/or equity financing (similar to
the Convertible Notes) to pay costs and expenses associated with our filing
requirements with the Securities and Exchange Commission and conduct our
exploration activities (as described herein); however, we do not currently have
any specific plans to raise such additional financing at this
time. We believe that by becoming a reporting company and becoming
subject to the filing requirements of Section 15(d) of the Securities Exchange
Act of 1934, as amended, as well as by engaging a market maker to quote our
common stock on the OTCBB we will be able to make an investment in the Company
more attractive to potential investors, which will help facilitate our ability
to raise capital. The sale of additional equity securities, if undertaken by the
Company and if accomplished, may result in dilution to our shareholders. We
cannot assure you, however, that future financing will be available in amounts
or on terms acceptable to us, or at all.
-7-
ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant
to Item 305(e) of Regulation S-K (§ 229.305(e)), we are not required to provide
the information required by this Item as it is a “smaller reporting company,” as
defined by Rule 229.10(f)(1).
ITEM 4T. CONTROLS AND
PROCEDURES
(a) Evaluation of disclosure
controls and procedures. Our Chief Executive Officer and Principal
Financial Officer, after evaluating the effectiveness of our "disclosure
controls and procedures" (as defined in the Securities Exchange Act of 1934
Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this
Quarterly Report on Form 10-Q (the "Evaluation Date"), has concluded that as of
the Evaluation Date, our disclosure controls and procedures were not effective
to provide reasonable assurance that information we are required to disclose in
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. This conclusion was based on the existence of the
material weaknesses in our
internal control over financial
reporting previously disclosed and discussed below.
A
material weakness is a deficiency, or a combination of deficiencies, in
internal control over financial
reporting, such that there is a reasonable possibility that a material
misstatement of the Company’s annual or interim financial statements will not be
prevented or detected on a timely basis. We identified and continue to have the
following material weakness in our internal controls over financial
reporting:
We
currently do not have an internal audit group, and we will need to hire
additional accounting and financial staff with appropriate public company
experience and technical accounting knowledge. Additionally, due to the fact
that we only have one officer and Director, who has no experience as an officer
or Director of a reporting company, such lack of experienced personnel may
impair our ability to maintain effective internal controls over financial
reporting and disclosure controls and procedures, which may result in material
misstatements to our financial statements and an inability to provide accurate
financial information to our stockholders.
To
address the need for more effective internal controls, management has plans to
improve the existing controls and implement new controls as our financial
position and capital availability improves.
(b) Changes in internal control
over financial reporting. There were no changes in our internal control
over financial reporting during our most recent fiscal quarter that materially
affected, or were reasonably likely to materially affect, our internal control
over financial reporting.
Limitations
on the Effectiveness of Internal Controls
Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving our objectives and our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures are effective at that reasonable assurance level. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
internal control. The design of any system of controls also is based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate.
-8-
PART II - OTHER
INFORMATION
ITEM 1. LEGAL
PROCEEDINGS
From time
to time, we may become party to litigation or other legal proceedings that we
consider to be a part of the ordinary course of our business. We are not
currently involved in legal proceedings that could reasonably be expected to
have a material adverse effect on our business, prospects, financial condition
or results of operations. We may become involved in material legal proceedings
in the future.
ITEM 1A. RISK
FACTORS
An
investment in our common stock is highly speculative, and should only be made by
persons who can afford to lose their entire investment in us. You should
carefully consider the following risk factors and other information in this
quarterly report before deciding to become a holder of our common stock. If any
of the following risks actually occur, our business and financial results could
be negatively affected to a significant extent.
WE HAVE FUTURE CAPITAL NEEDS
AND WITHOUT ADEQUATE CAPITAL WE MAY BE FORCED TO CEASE OR CURTAIL OUR BUSINESS
OPERATIONS.
Our
growth and continued operations could be impaired by limitations on our access
to capital markets. Furthermore, the limited capital we have raised,
and the capital we hope will be available to us from our principals, if any, may
not be adequate for our long-term growth. If financing is available,
it may involve issuing securities senior to our common stock or equity
financings, which are dilutive to holders of our common stock. In
addition, in the event we do not raise additional capital from conventional
sources, such as our existing investors or commercial banks, there is every
likelihood that our growth will be restricted and we may be forced to scale back
or curtail implementing our business plan.
Even if
we are successful in raising capital in the future, we will likely need to raise
additional capital to continue and/or expand our operations. If we do
not raise the additional capital, the value of any investment in our Company may
become worthless. In the event we do not raise additional capital from
conventional sources, it is likely that we may need to scale back or curtail
implementing our business plan.
WE HAVE NOT GENERATED ANY
REVENUES SINCE OUR INCEPTION IN APRIL 2007.
Since our
inception in April 2007, we have yet to generate any revenues, and currently
have only limited operations, as we are presently in the planning stage of our
business development as an exploration stage company. We may not be
able to generate any revenues in the future and as a result the value of our
common stock may become worthless.
SHAREHOLDERS WHO HOLD
UNREGISTERED SHARES OF OUR COMMON STOCK ARE SUBJECT TO RESALE RESTRICTIONS
PURSUANT TO RULE 144, DUE TO OUR STATUS AS A “SHELL
COMPANY.”
Pursuant
to Rule 144 of the Securities Act of 1933, as amended (“Rule 144”), a “shell
company” is defined as a company that has no or nominal operations; and, either
no or nominal assets; assets consisting solely of cash and cash equivalents; or
assets consisting of any amount of cash and cash equivalents and nominal other
assets. As such, we are a “shell company” pursuant to Rule 144, and
as such, sales of our securities pursuant to Rule 144 are not able to be made
until 1) we have ceased to be a “shell company; 2) we are subject to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended, and have filed all
of our required periodic reports for at least the previous one year period prior
to any sale pursuant to Rule 144; and a period of at least twelve months has
elapsed from the date “Form 10 information” (i.e., information similar to that
which would be found in a Form 10 Registration Statement filing wit the SEC) has
been filed with the Commission reflecting the Company’s status as a non-“shell
company.” Because none of our non-registered securities can be sold
pursuant to Rule 144, until at least a year after we cease to be a “shell
company”, any non-registered securities we sell in the future or issue to
consultants or employees, in consideration for services rendered or for any
other purpose will have no liquidity until and unless such securities are
registered with the Commission and/or until a year after we cease to be a “shell
company” and have complied with the other requirements of Rule 144, as described
above. As a result, it may be harder for us to fund our operations
and pay our consultants with our securities instead of
cash. Furthermore, it will be harder for us to raise funding through
the sale of debt or equity securities unless we agree to register such
securities with the Commission, which could cause us to expend additional
resources in the future. Our status as a “shell company” could
prevent us from raising additional funds, engaging consultants, and using our
securities to pay for any acquisitions (although none are currently planned),
which could cause the value of our securities, if any, to decline in value or
become worthless.
-9-
THERE IS SUBSTANTIAL DOUBT
AS TO WHETHER WE CAN CONTINUE AS A GOING CONCERN.
We have
generated no revenues since our inception in April 2007, had working capital of
$9,587 as of December 31, 2009, had a net loss of $12,180 for the year ended
June 30, 2009, a net loss of $19,939 for the three months ended December 31,
2009, a net loss of $25,648 for the six months ended December 31, 2009, and a
net loss of $64,570 for the period from inception until December 31,
2009. We had a deficit accumulated during the exploration stage of
$64,570 as of December 31, 2009. These factors among others indicate
that we may be unable to continue as a going concern, particularly in the event
that we cannot obtain additional financing and/or attain profitable
operations. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty and if we
cannot continue as a going concern, your investment could become devalued or
even worthless.
THE SUCCESS OF THE COMPANY
DEPENDS HEAVILY ON EDWIN SLATER, OUR SOLE OFFICER AND
DIRECTOR.
The
success of the Company will depend on the ability of Edwin Slater, the Chief
Executive Officer and sole Director of the Company. The loss of Mr.
Slater will have a material adverse effect on the business, results of
operations (if any) and financial condition of the Company. In
addition, the loss of Mr. Slater may force the Company to seek a replacement who
may have less experience, fewer contacts, or less understanding of the
business. Further, we may not be able to find a suitable replacement
for Mr. Slater, which could force the Company to curtail its operations and/or
cause any investment in the Company to become worthless. The Company
does not have an employment agreement with Mr. Slater.
MR. SLATER, OUR SOLE OFFICER
AND DIRECTOR EXERCISES MAJORITY VOTING CONTROL OVER THE COMPANY AND THEREFORE
WILL EXERCISE CONTROL OVER CORPORATE DECISIONS INCLUDING THE APPOINTMENT OF NEW
DIRECTORS.
Edwin
Slater, our sole officer and Director, can vote an aggregate of 40,000,000
shares of common stock, currently equal to 93.7% of our outstanding common
stock. Mr. Slater therefore exercises control in determining the
outcome of all corporate transactions or other matters, including the election
of Directors, mergers, consolidations, the sale of all or substantially all of
our assets, and also the power to prevent or cause a change in control. Any
investor who purchases shares in the Company will be a minority shareholder and
as such will have little to no say in the direction of the Company and the
election of Directors. Additionally, it will be difficult if not impossible for
investors to remove Mr. Slater as a Director of the Company, which will mean he
will remain in control of who serves as officers of the Company as well as
whether any changes are made in the Board of Directors. As a potential investor
in the Company, you should keep in mind that even if you own shares of the
Company's common stock and wish to vote them at annual or special shareholder
meetings, your shares will likely have little effect on the outcome of corporate
decisions.
OUR SOLE OFFICER AND
DIRECTOR HAS OTHER EMPLOYMENT OUTSIDE OF THE COMPANY, AND AS SUCH, MAY NOT BE
ABLE TO DEVOTE SUFFICIENT TIME TO OUR OPERATIONS.
Edwin
Slater, our President, Chief Executive Officer and sole Director is currently
our only employee. Further, Mr. Slater currently has employment outside of the
Company. As such, Mr. Slater only spends approximately 15 hours per
week on Company matters; and as such, he may not be able to devote a sufficient
amount of time to our operations. This may be exacerbated by the fact
that Mr. Slater is currently our only officer. If Mr. Slater is not
able to spend a sufficient amount of his available time on our operations, we
may not ever generate any revenue and/or any investment in the Company could
become worthless.
-10-
WE LACK AN OPERATING HISTORY
WHICH YOU CAN USE TO EVALUATE US, MAKING ANY INVESTMENT IN OUR COMPANY
RISKY.
We lack
an operating history which investors can use to evaluate our previous earnings,
as we were only incorporated in April 2007. Therefore, an investment in us is
risky because we have no business history and it is hard to predict what the
outcome of our business operations will be in the future.
OUR GROWTH WILL PLACE
SIGNIFICANT STRAINS ON OUR RESOURCES.
The
Company is currently in the exploration stage, with only limited operations, and
has not generated any revenues since inception in April 2007. The Company's
growth, if any, is expected to place a significant strain on the Company's
managerial, operational and financial resources as Edwin Slater is our only
officer or Director; and the Company will likely continue to have limited
employees in the future. Moving forward, the Company's systems, procedures or
controls may not be adequate to support the Company's operations and/or the
Company may be unable to achieve the rapid execution necessary to successfully
implement its business plan. The Company's future operating results, if any,
will also depend on its ability to add additional personnel commensurate with
the growth of its operations, if any. If the Company is unable to manage growth
effectively, the Company's business, results of operations and financial
condition will be adversely affected.
OUR ARTICLES OF
INCORPORATION, AND BYLAWS, AS AMENDED, LIMIT THE LIABILITY OF, AND PROVIDE
INDEMNIFICATION FOR, OUR OFFICERS AND DIRECTORS.
Our
Articles of Incorporation, generally limit our officer’s and Director’s personal
liability to the Company and its stockholders for breach of fiduciary duty as an
officer or Director except for breach of the duty of loyalty or acts or
omissions not made in good faith or which involve intentional misconduct or a
knowing violation of law. Our Articles of Incorporation, as amended, and Bylaws,
as amended, provide indemnification for our officers and Directors to the
fullest extent authorized by the Nevada General Corporation Law against all
expense, liability, and loss, including attorney's fees, judgments, fines excise
taxes or penalties and amounts to be paid in settlement reasonably incurred or
suffered by an officer or Director in connection with any action, suit or
proceeding, whether civil or criminal, administrative or investigative
(hereinafter a "Proceeding") to which the officer or Director is made a party or
is threatened to be made a party, or in which the officer or Director is
involved by reason of the fact that he is or was an officer or Director of the
Company, or is or was serving at the request of the Company as an officer or
director of another corporation or of a partnership, joint venture, trust or
other enterprise whether the basis of the Proceeding is an alleged action in an
official capacity as an officer or Director, or in any other capacity while
serving as an officer or Director. Thus, the Company may be prevented from
recovering damages for certain alleged errors or omissions by the officers and
Directors for liabilities incurred in connection with their good faith acts for
the Company. Such an indemnification payment might deplete the
Company's assets. Stockholders who have questions regarding the fiduciary
obligations of the officers and Directors of the Company should consult with
independent legal counsel. It is the position of the Securities and Exchange
Commission that exculpation from and indemnification for liabilities arising
under the Securities Act of 1933, as amended, and the rules and regulations
thereunder is against public policy and therefore unenforceable.
AS WE ARE A PUBLIC REPORTING
COMPANY, WE WILL INCUR SIGNIFICANT COSTS IN CONNECTION WITH COMPLIANCE WITH
SECTION 404 OF THE SARBANES OXLEY ACT, AND OUR MANAGEMENT WILL BE REQUIRED TO
DEVOTE SUBSTANTIAL TIME TO NEW COMPLIANCE INITIATIVES.
As our
Registration Statement has become effective, we are subject to among other
things, the periodic reporting requirements of Section 15(d) of the Securities
Exchange Act of 1934, as amended, and will incur significant legal, accounting
and other expenses in connection with such requirements. The
Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and new rules subsequently
implemented by the SEC have imposed various new requirements on public
companies, including requiring changes in corporate governance practices. As
such, our management and other personnel will need to devote a substantial
amount of time to these new compliance initiatives. Moreover, these rules and
regulations will increase our legal and financial compliance costs and will make
some activities more time-consuming and costly. In addition, the Sarbanes-Oxley
Act requires, among other things, that we maintain effective internal controls
for financial reporting and disclosure of controls and procedures. Our
compliance with Section 404 will require that we incur substantial accounting
expense and expend significant management efforts. We currently do not have an
internal audit group, and we will need to hire additional accounting and
financial staff with appropriate public company experience and technical
accounting knowledge. Additionally, due to the fact that we only have one
officer and Director, who has no experience as an officer or Director of a
reporting company, such lack of experienced personnel may impair our ability to
maintain effective internal controls over financial reporting and disclosure
controls and procedures, which may result in material misstatements to our
financial statements and an inability to provide accurate financial information
to our stockholders. Moreover, if we are not able to comply with the
requirements of Section 404 in a timely manner, or if we or our independent
registered public accounting firm identify deficiencies in our internal controls
over financial reporting that are deemed to be material weaknesses, the market
price of our stock could decline, and we could be subject to sanctions or
investigations by the SEC or other regulatory authorities, which would require
additional financial and management resources.
-11-
WE MAY NOT FIND ANY
COMMERCIAL QUANTITIES OF MINERALS IN THE FUTURE, AND MAY NOT GENERATE ANY
PROFITS, WHICH MAY FORCE US TO CURTAIL OUR BUSINESS PLAN.
As an
exploration stage company, we have no revenues or profits to date. We have
generated no revenues since our inception in April 2007; had a net loss of
$12,180 for the year ended June 30, 2009, and a net loss of $19,939 for the
three months ended December 31, 2009, a net loss of $25,648 for the six months
ended December 31, 2009 and a net loss of $64,570 for the period from inception
until December 31, 2009. We had a deficit accumulated during the
exploration stage of $64,570 as of December 31, 2009. We have
budgeted the need for approximately $100,000 of additional funding during the
next 12 months to continue our business operations, pay costs and expenses
associated with our filing requirements with the Securities and Exchange
Commission and conduct our exploration activities as planned, and such required
funding may not be able to be raised on favorable terms, if at all.
However, if we do not begin exploration and/or do not have enough money to
continue exploration activities it is likely that we will never generate any
revenues. Additionally, if we are unsuccessful in mining attempts we may choose
to attempt in the future, it is likely that we will never generate any revenues.
Additionally, the exploration of minerals is highly speculative, and if
throughout our mineral exploration we do not find commercial quantities of
minerals, we will likely be forced to curtail or abandon our business plan. If
this happens, you could lose your investment in us. If we are unable to generate
profits, we will be forced to rely on external financing, of which there is no
guarantee, to continue with our business plan.
OUR SOLE OFFICER AND
DIRECTOR LACKS TECHNICAL AND/OR EXPLORATION EXPERIENCE IN AND WITH COMPANIES
WITH MINING ACTIVITIES AND WITH THE REPORTING AND DISCLOSURE OBLIGATIONS OF
PUBLICLY-TRADED COMPANIES.
While we
rely heavily on Mr. Slater, our Chief Executive Officer and Director, he lacks
technical training and experience exploring for, starting and/or operating a
mine. As a result of Mr. Slater's lack of experience in exploration and/or
development of mines, he may not be fully aware of many of the specific
requirements related to working within our industry. As a result of
Mr. Slater's lack of experience, his decisions may not take into account
standard engineering or managerial approaches mineral companies commonly
use. Additionally, due to Mr. Slater currently being located in
Scotland; only being able to devote 15 hours per week to the Company’s
activities; having employment outside of the Company; and lacking experience
with mining operations in general, we may be unable to successfully implement
our business plan, and/or manage our future growth if any. The
Company also currently relies on its geologist and plans to rely on outside
consultants (as funding permits) in the United States on an as needed basis for
advice and guidance regarding the Company’s planned exploration activities, in
addition to Mr. Slater. Mr. Slater does not currently believe that
his outside employment affects the day to day operations of the Company;
however, Mr. Slater is prepared to relinquish his outside employment in the
event the Company’s operations grow and he is required to spend additional time
on Company matters, and the Company may also employ more accomplished officers
and Directors in the future, funding permitting. While the Company
believes that the time and resources that Mr. Slater is able to provide to the
Company, and/or may be willing to provide to us in the future, as well as our
outside consultants and geologist are adequate to support the Company’s business
plan and exploration activities, our operations and growth (if any) may be
adversely affected by Mr. Slater being located on another continent than our
mining claims, only being able to provide a limited number of hours of service
to the Company per week and/or his outside employment. Consequently,
we may never complete our planned mining activities and any investment in the
Company may become devalued or worthless.
Furthermore,
Mr. Slater has no experience serving as an officer or Director of a
publicly-traded company, or experience with the reporting or financial
disclosure requirements which public companies are subject to. Such lack of
experience may impair our ability to maintain effective internal controls over
financial reporting and disclosure controls and procedures, which may result in
material misstatements to our financial statements and an inability to provide
accurate financial information to our stockholders. Consequently, our
operations, future earnings and ultimate financial success could suffer
irreparable harm due to his ultimate lack of experience in our industry and with
publicly-traded companies and their reporting requirements in
general.
-12-
THERE IS UNCERTAINTY AS TO
OUR ABILITY TO ENFORCE CIVIL LIABILITIES BOTH IN AND OUTSIDE OF THE UNITED
STATES DUE TO THE FACT THAT OUR OFFICER, DIRECTOR AND CERTAIN OF OUR ASSETS ARE
NOT LOCATED IN THE UNITED STATES.
Our
office is not located in the United States. Our sole officer and Director is
located in the United Kingdom. As a result, it may be difficult for shareholders
to effect service of process within the United States on our sole officer and
Director. In addition, investors may have difficulty enforcing judgments based
upon the civil liability provisions of the securities laws of the Unites States
or any state thereof, both in and outside of the United States.
OUR PLANNED EXPLORATION AND
DEVELOPMENT ACTIVITIES MAY BE ADVERSELY EFFECTED BY INCLEMENT WEATHER IN AND
AROUND OUR CLAIM.
The
temperatures on our claim are typical of a desert climate, with relative high
temperatures and low participation. Inclement weather at out claim or the
airports in and around our claim may make it more difficult for us to obtain the
materials we will require for any of our planned exploration activities, and/or
for our personnel to visit our claim. As a result, if there is an abnormal
amount of rain, a lack of rain, and/or inclement weather on our claim or
particularly bad winter weather at the airports surrounding our claim, we could
be forced to expend additional finances dealing with such rainfall or drought on
our claim and with the delays such abnormal rainfall could have on our then
operations, if any. The expense of additional monies could cause our revenues,
if any to decline and/or cause us to curtail or abandon our business
operations.
OUR PLANNED MINERAL
EXPLORATION EFFORTS ARE HIGHLY SPECULATIVE.
Mineral
exploration is highly speculative. It involves many risks and is often
nonproductive. Even if we believe we have found a valuable mineral deposit, it
may be several years before production is possible. During that time, it may
become no longer feasible to produce those minerals for economic, regulatory,
political, or other reasons. Additionally, we may be required to make
substantial capital expenditures and to construct mining and processing
facilities. As a result of these costs and uncertainties, we may be unable to
start, or if started, to finish our exploration activities.
OUR FAILURE TO MAKE REQUIRED
WORK EXPENDITURES OR PAY THE ANNUAL FEES IN LIEU THEREOF COULD CAUSE US TO LOSE
TITLE TO OUR MINERAL CLAIM, WHICH COULD PREVENT US FROM CARRYING OUT OUR
BUSINESS PLAN.
Our
mineral claim currently has an expiration date of September 1, 2010 and in order
to maintain the claim in good standing it will be necessary for us to coordinate
an agent to perform and record an Affidavit of Annual Assessment Work for the
claim with a minimum expenditure of $100 per claim, or alternatively, to file an
Affidavit and Notice of Intent to Hold Mining Claim and Site, together with an
annual maintenance fee to the U.S. Bureau of Land Management in the sum of $125
per claim, and a county recorders fee of between $8.50 to $10.50 per
claim. Failure to perform and record valid exploration work or pay
the equivalent maintenance fees on the anniversary dates will result in
forfeiture of title to the claim, which could prevent us from carrying out our
business plan and would likely cause any investment in us to become
worthless.
-13-
OUR PROPERTY HAS NOT
PRODUCED ANY COMMERCIAL RESERVES OR ORE BODY, AND THE PROBABILITY OF SUCH
PROPERTY PRODUCING ANY COMMERCIALLY VIABLE RESERVES IN THE FUTURE IS
REMOTE.
Our
mineral project is in the exploration stage as opposed to the development stage
and we have no known body of economic mineralization. The known mineralization
at these projects has not been determined to be economic ore. Until further
exploration activities can be conducted, we will be unable to determine whether
a commercially mineable ore body exists on any of our properties. In order to
carry out exploration and development programs of any economic ore body and
place it into commercial production, we will be required to raise substantial
additional funding, and even if we are successful in completing our exploration
activities on our property, we may not be successful in finding commercial
quantities of minerals. Furthermore, the probability of an individual prospect
ever having reserves or being commercially viable is extremely remote. As a
result, there is only a small probability that any of our properties contain any
reserves and that any funds spent on exploration activities will ever be
recovered.
MINING OPERATIONS IN GENERAL
INVOLVE A HIGH DEGREE OF RISK, WHICH WE MAY BE UNABLE, OR MAY NOT CHOOSE TO INSURE
AGAINST, MAKING EXPLORATION AND/OR DEVELOPMENT ACTIVITIES WE MAY PURSUE SUBJECT
TO POTENTIAL LEGAL LIABILITY FOR CERTAIN CLAIMS.
Our
operations will be subject to all of the hazards and risks normally encountered
in the exploration, development and production of minerals. These include
unusual and unexpected geological formations, rock falls, flooding and other
conditions involved in the drilling and removal of material, any of which could
result in damage to, or destruction of, mines and other producing facilities,
damage to life or property, environmental damage and possible legal liability.
Although we plan to take adequate precautions to minimize these risks, and risks
associated with equipment failure or failure of retaining dams which may result
in environmental pollution, even with our precautions, damage or loss may occur
and we may be subject to liability which will have a material adverse effect on
our business, results of operation and/or financial condition. If this were to
happen, we could be forced to curtail or abandon our business
activities.
WE WILL BE SUBJECT TO
NUMEROUS RISKS IF WE COMMENCE MINING OPERATIONS.
The
mineral exploration and mining business is competitive in all of its phases. We
currently have no mining operations of any kind; however, if we do commence
mining activities in the future, we will be subject to numerous risks,
including:
o
|
competitors
with greater financial, technical and other resources, in the search for
and the acquisition of attractive mineral properties;
|
o
|
our
ability to select and acquire suitable producing properties or prospects
for mineral exploration;
|
o
|
the
accuracy of our reserve estimates, if any, which may be affected by the
following factors beyond our
control:
|
-
|
declines
in the market price of the various metals we mine;
|
-
|
increased
production or capital costs;
|
-
|
reduction
in the grade or tonnage of the deposit;
|
-
|
increase
in the dilution of the ore; or
|
-
|
reduced
recovery rates;
|
o
|
risks
and hazards associated with environmental hazards, political and country
risks, civil unrest or terrorism, industrial accidents, labor disputes,
unusual or unexpected geologic formations, cave-ins, explosive rock
failures; and flooding and periodic interruptions due to inclement or
hazardous weather conditions; and
|
o
|
our
failure to maintain insurance on certain risks associated with any
exploration activities we may undertake in the
future.
|
-14-
If we do
begin exploration activities in the future, we will be subject to the above
risks. If any of the above risks occur, we may be forced to curtail or abandon
our operations and/or exploration and development activities, if any. As a
result, any investment in us could decrease in value and/or become
worthless.
OUR DETERMINATIONS OF
PLANNED ACTIVITIES AND ESTIMATES OF POTENTIAL RESERVES, IF ANY, MAY BE
INACCURATE.
We are
currently in the exploration stage. Before we can begin a development project,
if ever, we must first determine whether it is economically feasible to do so.
This determination is based on estimates of several factors,
including:
o
|
expected
recovery rates of metals from the ore;
|
o
|
facility
and equipment costs;
|
o
|
capital
and operating costs of a development project;
|
o
|
future
metals prices;
|
o
|
tax
rates;
|
o
|
inflation
rates;
|
o
|
political
risks and regulatory climate in Canada; and
|
o
|
availability
of credit.
|
Any
development projects we may undertake in the future will likely not have an
operating history upon which to base these estimates and as a result, actual
cash operating costs and returns from a development project, if any, may differ
substantially from our estimates. Consequently, it may not be economically
feasible to continue with a development project, if one is started.
AS WE UNDERTAKE EXPLORATION
OF OUR MINING CLAIM, WE WILL BE SUBJECT TO COMPLIANCE OF GOVERNMENT REGULATION
THAT MAY INCREASE THE ANTICIPATED TIME AND COST OF OUR EXPLORATION
PROGRAM.
There are
several governmental regulations that materially restrict the exploration of
minerals. We will be subject to the mining laws and regulations as contained in
the Chapter 519A of the Nevada Revised Statutes as we carry out our exploration
program. We may be required to obtain work permits and perform remediation work
for any physical disturbance to the land in order to comply with these
regulations. While our planned exploration program budgets for regulatory
compliance in connection with such exploration activities, there is a risk that
new regulations could increase our time and costs of doing business and prevent
us from carrying out our exploration program.
-15-
Risks Relating To the
Company’s Securities
WE HAVE NEVER PAID CASH
DIVIDENDS IN CONNECTION WITH OUR COMMON STOCK AND HAVE NO PLANS TO PAY DIVIDENDS
IN THE FUTURE.
We have
paid no cash dividends on our common stock to date and it is not anticipated
that any cash dividends will be paid to holders of our common stock in the
foreseeable future. While our dividend policy will be based on the
operating results and capital needs of our business, it is anticipated that any
earnings will be retained to finance our future expansion.
INVESTORS MAY FACE
SIGNIFICANT RESTRICTIONS ON THE RESALE OF OUR COMMON STOCK DUE TO FEDERAL
REGULATIONS OF PENNY STOCKS.
Our
common stock will be subject to the requirements of Rule 15(g)9, promulgated
under the Securities Exchange Act as long as the price of our common stock is
below $5.00 per share. Under such rule, broker-dealers who recommend low-priced
securities to persons other than established customers and accredited investors
must satisfy special sales practice requirements, including a requirement that
they make an individualized written suitability determination for the purchaser
and receive the purchaser's consent prior to the transaction. The Securities
Enforcement Remedies and Penny Stock Reform Act of 1990, also requires
additional disclosure in connection with any trades involving a stock defined as
a penny stock. Generally, the Commission defines a penny stock as any equity
security not traded on an exchange or quoted on NASDAQ that has a market price
of less than $5.00 per share. The required penny stock disclosures include the
delivery, prior to any transaction, of a disclosure schedule explaining the
penny stock market and the risks associated with it. Such requirements could
severely limit the market liquidity of the securities and the ability of
purchasers to sell their securities in the secondary market.
In
addition, various state securities laws impose restrictions on transferring
"penny stocks" and as a result, investors in the common stock may have their
ability to sell their shares of the common stock impaired.
SHAREHOLDERS MAY BE DILUTED
SIGNIFICANTLY THROUGH OUR EFFORTS TO OBTAIN FINANCING AND SATISFY OBLIGATIONS
THROUGH THE ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON
STOCK.
We have
no committed source of financing. Wherever possible, our Board of Directors will
attempt to use non-cash consideration to satisfy obligations. In many instances,
we believe that the non-cash consideration will consist of restricted shares of
our common stock. Our Board of Directors has authority, without action or vote
of the shareholders, to issue all or part of the authorized but unissued shares
of common stock. In addition, if a trading market develops for our common stock,
we may attempt to raise capital by selling shares of our common stock, possibly
at a discount to market. These actions will result in dilution of the ownership
interests of existing shareholders, may further dilute common stock book value,
and that dilution may be material. Such issuances may also serve to enhance
existing management’s ability to maintain control of the Company because the
shares may be issued to parties or entities committed to supporting existing
management.
STATE SECURITIES LAWS MAY
LIMIT SECONDARY TRADING, WHICH MAY RESTRICT THE STATES IN WHICH AND CONDITIONS
UNDER WHICH YOU CAN SELL SHARES.
Secondary
trading in our common stock may not be possible in any state until the common
stock is qualified for sale under the applicable securities laws of the state or
there is confirmation that an exemption, such as listing in certain recognized
securities manuals, is available for secondary trading in the state. If we fail
to register or qualify, or to obtain or verify an exemption for the secondary
trading of, the common stock in any particular state, the common stock cannot be
offered or sold to, or purchased by, a resident of that state. In the event that
a significant number of states refuse to permit secondary trading in our common
stock, the liquidity for the common stock could be significantly
impacted.
-16-
BECAUSE WE ARE NOT SUBJECT
TO COMPLIANCE WITH RULES REQUIRING THE ADOPTION OF CERTAIN CORPORATE GOVERNANCE
MEASURES, OUR STOCKHOLDERS HAVE LIMITED PROTECTIONS AGAINST INTERESTED DIRECTOR
TRANSACTIONS, CONFLICTS OF INTEREST AND SIMILAR MATTERS.
The
Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the
SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market, as a
result of Sarbanes-Oxley, require the implementation of various measures
relating to corporate governance. These measures are designed to enhance the
integrity of corporate management and the securities markets and apply to
securities that are listed on those exchanges or the Nasdaq Stock Market.
Because we are not presently required to comply with many of the corporate
governance provisions and because we chose to avoid incurring the substantial
additional costs associated with such compliance any sooner than legally
required, we have not yet adopted these measures.
Because
our Directors are not independent directors, we do not currently have
independent audit or compensation committees. As a result, our Directors have
the ability to, among other things, determine their own level of compensation.
Until we comply with such corporate governance measures, regardless of whether
such compliance is required, the absence of such standards of corporate
governance may leave our stockholders without protections against interested
director transactions, conflicts of interest, if any, and similar matters and
any potential investors may be reluctant to provide us with funds necessary to
expand our operations.
We intend
to comply with all corporate governance measures relating to director
independence as and when required. However, we may find it very difficult or be
unable to attract and retain qualified officers, Directors and members of board
committees required to provide for our effective management as a result of the
Sarbanes-Oxley Act of 2002. The enactment of the Sarbanes-Oxley Act of 2002 has
resulted in a series of rules and regulations by the SEC that increase
responsibilities and liabilities of Directors and executive officers. The
perceived increased personal risk associated with these recent changes may make
it more costly or deter qualified individuals from accepting these
roles.
WE DO NOT CURRENTLY HAVE A
PUBLIC MARKET FOR OUR SECURITIES. IF THERE IS A MARKET FOR OUR SECURITIES IN THE
FUTURE, SUCH MARKET MAY BE VOLATILE AND ILLIQUID.
There is
currently no public market for our common stock. In the future, we hope to quote
our securities on the Over-The-Counter Bulletin Board (“OTCBB”). There may not
be a public market for our common stock in the future. If there is a market for
our common stock in the future, we anticipate that such market would be illiquid
and would be subject to wide fluctuations in response to several factors,
including, but not limited to:
(1)
|
actual
or anticipated variations in our results of operations;
|
|
(2)
|
our
ability or inability to generate new revenues;
|
|
(3)
|
the
number of shares in our public float;
|
|
(4)
|
increased
competition; and
|
|
(5)
|
conditions
and trends in the market for precious
metals.
|
Furthermore,
if our common stock becomes quoted on the OTCBB in the future, our stock price
may be impacted by factors that are unrelated or disproportionate to our
operating performance. These market fluctuations, as well as general economic,
political and market conditions, such as recessions, interest rates or
international currency fluctuations may adversely affect the market price of our
common stock. Additionally, moving forward we anticipate having a
limited number of shares in our public float, and as a result, there could be
extreme fluctuations in the price of our common stock. Further, due
to the limited volume of our shares which trade and our limited public float, we
believe that our stock prices (bid, ask and closing prices) will be entirely
arbitrary, will not relate to the actual value of the Company, and will not
reflect the actual value of our common stock. Shareholders and
potential investors in our common stock should exercise caution before making an
investment in the Company, and should not rely on the publicly quoted or traded
stock prices in determining our common stock value, but should instead determine
the value of our common stock based on the information contained in the
Company's public reports, industry information, and those business valuation
methods commonly used to value private companies.
-17-
NEVADA LAW AND OUR ARTICLES
OF INCORPORATION AUTHORIZE US TO ISSUE SHARES OF STOCK, WHICH SHARES MAY CAUSE
SUBSTANTIAL DILUTION TO OUR EXISTING SHAREHOLDERS.
We have
authorized capital stock consisting of 250,000,000 shares of common stock,
$0.001 par value per share and 50,000,000 shares of preferred stock, $0.001 par
value per share. As of the date of this filing, we have 42,707,850 shares of
common stock issued and outstanding and – 0 – shares of Preferred Stock issued
and outstanding. As a result, our Board of Directors has the ability
to issue a large number of additional shares of common stock without shareholder
approval, which if issued could cause substantial dilution to our then
shareholders. Additionally, shares of Preferred Stock may be issued
by our Board of Directors without shareholder approval with voting powers, and
such preferences and relative, participating, optional or other special rights
and powers as determined by our Board of Directors, which may be greater than
the shares of common stock currently outstanding. As a result, shares
of Preferred Stock may be issued by our Board of Directors which cause the
holders to have super majority voting power over our shares, provide the holders
of the Preferred Stock the right to convert the shares of Preferred Stock they
hold into shares of our common stock, which may cause substantial dilution to
our then common stock shareholders and/or have other rights and preferences
greater than those of our common stock shareholders. Investors should keep in
mind that the Board of Directors has the authority to issue additional shares of
common stock and Preferred Stock, which could cause substantial dilution to our
existing shareholders. Additionally, the dilutive effect of any
Preferred Stock, which we may issue may be exacerbated given the fact that such
Preferred Stock may have super majority voting rights and/or other rights or
preferences which could provide the preferred shareholders with voting control
over us subsequent to this Offering and/or give those holders the power to
prevent or cause a change in control. As a result, the issuance of
shares of common stock and/or Preferred Stock may cause the value of our
securities to decrease and/or become worthless.
ITEM 2. UNREGISTERED SALES
OF EQUITY SECURITIES AND USE OF PROCEEDS
On or
around February 10, 2010, the Company entered into (1) a Convertible Promissory
Note with Morgarlan Limited (“Morgarlan”), in the amount of $12,500, to evidence
amounts loaned to the Company by Morgarlan; and (2) a Convertible Promissory
Note with Little Bay Consulting SA (“Little Bay” and together with the
Morgarlan, the “Note Holders”), in the amount of $12,500, to evidence amounts
loaned to the Company by Little Bay (collectively the “Convertible
Notes”). The Convertible Notes bear interest at the rate of 8% per
annum, are due and payable on February 10, 2011, and the principal and accrued
interest due under the Convertible Notes is convertible into shares of the
Company’s common stock at a conversion price of $0.01 per share at the option of
the respective Note Holder as provided in the Convertible Notes. If
fully converted, each Convertible Note would convert into 1,250,000 shares of
the Company’s common stock (not including the conversion of any accrued and
unpaid interest on such Convertible Note. We claim an exemption from
registration afforded by Regulation S of the Act ("Regulation S") for the above
sales since the sales of the Convertible Notes were made to non-U.S. persons (as
defined under Rule 902 section (k)(2)(i) of Regulation S), pursuant to an
offshore transaction, and no directed selling efforts were made in the United
States by the issuer, a distributor, any of their respective affiliates, or any
person acting on behalf of any of the foregoing.
ITEM 3. DEFAULTS UPON SENIOR
SECURITIES.
None.
-18-
ITEM 4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER
INFORMATION
None.
ITEM 6.
EXHIBITS
Exhibit Number
|
Description of Exhibit
|
Exhibit
3.1(1)
|
Articles
of Incorporation
|
Exhibit
3.2(1)
|
Bylaws
|
Exhibit
10.1(1)
|
Mineral
Property Acquisition Agreement
|
Exhibit
10.2*
|
Convertible
Promissory Note with Morgarlan Limited
|
Exhibit
10.3*
|
Convertible
Promissory Note with Little Bay Consulting SA
|
Exhibit
31*
|
Certificate
of the Chief Executive Officer and Principal Accounting Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
|
Exhibit
32*
|
Certificate
of the Chief Executive Officer and Principal Accounting Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
|
* Attached
hereto.
(1) Filed
as an exhibit to the Company’s Form S-1 Registration Statement, filed with the
Commission on October 19, 2009, and incorporated by reference
herein.
-19-
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SANDALWOOD
VENTURES, LTD.
|
|
DATED:
February 22, 2010
|
By: /s/ Edwin Slater
|
Edwin
Slater
|
|
Chief
Executive Officer (Principal Executive Officer)
|
|
And
Principal Financial Officer/Principal Accounting Officer, Treasurer,
Secretary and Director
|
-20-